Operations Management Pizza Hut Standards- Project Report

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Operations Management Project Report

Pizza Hut Operation Standards Research by: Zahoor Soomro

University of East London INDEX Sr No

CONTENTS

Page

No. 1.

Executive Summary

2

2.

Methodology

3

3.

Limitations

4

4.

Aims and Objectives

5

5.

Company Profile

6

6.

Introduction: Operations Management

7

7.

Operation Standards

8

8.

Main Work Stations

8

9.

Preparation

9

10.

Make table

9

11.

Cut Table

9

12.

Dispatching

10

13.

Process Mapping Table

11

14.

Fishbone diagram table

12

15.

Product Standards

13

16.

Quality Assurance

15

17.

Cost Variance

16

18.

Forecasting

18

19.

Employee Performance

19

20.

Importance of Customer Experience

19

21.

Moment of truth

20

22.

Champs Excellence

21

23.

Marketing

22

24.

Product development

23

25.

Conclusion

24

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Executive Summary The operations standards are the key path defining elements in any business. Without set procedures optimal results can not be obtained. The operations standards at pizza hut have multifaceted challenges and opportunities. The standards and procedures for doing business are well defined but some of the possible factors can cause to the deviations and variances. Those possible factors can be eradicated through extra efforts into the process. However the small chances of variance will remain the same because the real business scenarios may vary some times than the forecasted one. This report is an attempt to investigate the operational standards and the possible causes of variance in standards and how does it affect customer satisfaction.

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Methodology 1. The study of Pizza Hut (512) is carried out. 2. Geographical location is the Woodford Green 3. Process Mapping Tools 4. Primary Data Collection •

Interviews

5. Secondary Data collection •

Journals

•

Articles

•

Online sources available; websites

•

News Clippings

•

Published

resources

available

at

Pizza

hut

Home

service

Restaurant(HSR)

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Limitations 1. Time was major constraint. 2. Limited information was available. 3. The limited access on the data was available.

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Aims and Objectives

To find out the prevailing operations standards at pizza hut.

Investigate the variance or deviations in overall productivity due to non compliance of the operations standards.

Investigate the customer experience with pizza hut.

Investigate the cause and effects of variances in operations standards and its impacts on customer experience.

Investigate the factors responsible for product success.

Investigate impacts of the training and development of each unit on over all business productivity.

Investigate the possible external factors that can have impacts on the business productivity.

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Company Profile Pizza hut started on 1958. The dream of Frank and Dan Carney turned into the reality when he opened the first Hut in Wichita, Kansas. The website of pizza hut states that in very beginning the restaurant was as too small. It had just 25 seats available for customers. The inspirations for the name as ‘Hut’ came into thoughts through the design of the building. It looked like a hut. Therefore it geared the idea to carry on with name as ‘Pizza Hut’.

The Pizza has superior place in the market, particularly for the Pizza business. Through the time it has scattered in to the markets of the world. The numbers of the growth depicts that it Pizza hut has more than 600 outlets in the UK only. The Pizza hut is a part of Yum, which is another big company. The Yum own several big companies like KFC, Long John Silver's, A & W Taco Bell The Pizza hut was formerly owned by Whitbread and Yum as a joint venture. But in the year 2006 Whitbread sold out their shares to Yum. Presently the Pizza Hut UK Ltd is now 100% owned by Yum! ( http://www.pizzahut.co.uk/restaurant/history.html) Accessed on 18/05/08

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Introduction

Operations management Traditionally it is believed that the operations management is as a transformation process that takes set of inputs and transforms them into the out put. The output can be the goods or services. This includes the effective planning, scheduling and control of the activities that produce the required outcomes. (Cecil C. Bozarth, Robert B. Handfield, 2008)

Operations management plays a key role in determining the success or failure of an organization. To carry forwards the inputs of each unit all together and getting turned it into the outputs is the real synergy, which helps organization to set the directions towards climbing the heights of success.

According to the William J. Stevenson as he state in his operations management book ‘Operations management is the management of the system or process that create goods and/or provide services’ this involves various inputs, he add, ‘ the creation of goods or services involves the transformation or conversion of inputs into outputs. Such as capital, labour and information are used to create goods or services using one or more transformation processes’. Zahoor Soomro | Project Report

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University of East London Although the goods and services go hand in hand, there are some very basic differences between the two.

This can be determined through its nature of the

business. Some organizations can have higher degree of tangibility or intangibility. This can be determined through its nature of business. For instance, if the organization is selling goods, it can be determined high level of tangibility and otherwise if its selling services then level of intangibility will be high. (William J. Stevenson 2005)

Operation standards at Pizza Hut

Functional Units The activities of business organizations are mostly divided according to the functionality, the management of the personnel and the responsibilities. (Joseph S. Martinich, 1997)

The operations at Pizza hut can not be highlighted for any of the single functional unit. Rather it is the collection of several set of the activities that take place with in the unit and make things possible by turning customer expectations into the reality. The success or the failure of the product depends on the performance of several functional units. Those functional units operate separately but connected with each other through the job activities. The unit’s operation standards are discussed further down.

Main Work Stations

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University of East London  Preparations The preparations is the process of getting things ready, that will help to carry the out the operations in store. This involves activities like defrosting of dough, starters and cheese. So that can be used for the next day operations. If preparations for the following day operations is not up to the mark then that will cause difficulty or shortages of items that are necessary for the conversion process. The preparation is done on the basis of the next business day forecast. If the forecasted goods will not be made ready for the next day operations that will be virtually difficult for the next day shift manager to carry out the business operations. (Source: Source: Pizza hut/ Manual /Business Dates 14/04/2008/location: Hut 512)  Make table The job of the make table is to make orders that are received from customers and appears on the micros system. Order work on FIFO system, unless there is any collection customer. It is because the collection time is 10 to 15 minutes as compare to the delivery which is 30 to 35 minutes. The preparation of make table is a critical part of the operations at pizza hut. The right level of products, ingredients condiments and sauces are prepared to the specifications. That is to be considered vitally that the make table items character, aroma, freshness, and taste are appropriate and kept at right make table temperature between 2 and 5 degree centigrade.( See Appendix 1 & 1a) According to the set bench marks for the topping rules it should be implemented in the same manors as mentioned in the pizza hut manual guide. (Source: Source: Pizza hut/ Manual/make table guidelines /Business Dates 14/04/2008/location: Hut 512)

Make Table Standards:

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University of East London There are set rules for the pizza saucing and cheesing, if not followed then it can result in soggy or salty pizza. This will cause dissatisfaction of the customer. (see appendix 3a)  Cut Table The job of cut table is to receive the pizza and cut them according to the order guest check, and pouch them accordingly. The special consideration is to be paid when pouching that the right order should go with right guest check. If it goes with wrong order then it breaks down the flow of the cut table and can cause the mess up of the customer. (source: Source: Pizza hut/ Manual/Cut table guidelines /Business Dates 14/04/2008/location: Hut 512)

 Dispatching The dispatching is tricky and critical work specially when there are more orders on the shelves and less drivers. The geographical are is divided in to the zones according to the post codes. The Guest checks print with address and the post code. So the shift manager’s sharpness is to dispatch the deliveries that can be take two at a time. This effort saves time and effort. Usually it take less than 30 minute to deliver the order to the customer on his/her door, but the timing standards may vary according to the availability of work force and the level of peak that business receive in particular moment of time.

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Process Map The flow of Order making and delivery to the customer Pizza Hut

Cutomer Place order

Is it collection or Delivery

Delivery Promise time:30 min

Order on Make table screen

order made on make table Time:3min

Oven baking process time: 6min

Cut Table Cut the Pizza time: 1min

Collection

Customer take a seat : wait time 10 minutes

Team member handover the order to customer

Is it collection or Delivery

Collection

Delivery

Customer pays money or recieve card reciept

Customer recieve delivery with in promise time : 30 min

15 min

Driver Cashed up- pays money to the shift manager

Delivery dispatched to driver

Source: Adapted from ‘Mapping Business Process’ Cecil C. Bozarth, Robert B. Handfield (2008)

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Product quality SalesTargets and bench marks for standards

Product Innovation Product standards

Profit rate Unit Development cost

Product development cost

Achieving targets through customer satisfaction

New customer development/ leafletting/ advertising staff loyal Sales Workplace envoirenment/ Social interaction

Staff Training & Development shift manager ability

The customer is satisfied

Competetor

Market image

Source: Continuous improvement Tools, ‘Fish bone Diagram adapted from ‘Supply Chain Excellence’ by Peter Bolstroff, Robert Rosenbaum (2203)

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Product Standards The aim of the business unit is to achieve the complete operational standards practices. The interview with Restaurant General Manager (RGM) of hut 512, revealed the fact that optimal strength is always utilized into the process to get the maximum results and maintain 100% product quality standards. The manager added, ‘All dough should be identified with an accurate timing system, as it is very critical to good dough management, good quality and wastage management’. (See Appendix 2), he adds, ‘the wastage control is very important to save overall cost of doing business. He believes that the wastage at the end of the day gives a big off set to the profits.’

 Defrosting The quality without waste is the driving force behind dough shelf lives and timing system in pizza hut. If not followed, leads to the variance of operations that ultimately take to the bad quality and dissatisfied customers as a result and can likely to decrease the customer base. (Source:

Source:

Pizza

hut/

Manual/Preparations

/Business

Dates

14/04/2008/location: Hut 512)

 Topping Standards Overlapping: Overlapping of the toppings, give a bad taste of the pizza and damages the expectations of the customer. There is the 2 finger rule that is applied for topping. (See appendix3 & appendix 3a)

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 Dating standards The dating standards are set for every ingredient used in the business. The items are labelled with correct MRD (Made, ready, discard) label. These labels must have either date made, date ready, date discard and time details or colour dating system. (source:

Source:

Pizza

hut/

Manual/General

Standards/Business

Dates

14/04/2008/location: Hut 512)

 Product Shelf life

In order to maintain the product quality up to the standard, that is very important to follow the set rules for the product shelf life. Different ingredients used in the pizza making process, carry different shelf life. (see appendix 4) (Source:

Source:

Pizza

hut/

Manual/Shelf

life

table/Business

Dates

14/04/2008/location: Hut 512)

The taste and the quality highly determine on the freshness of the ingredients, and the resultant the happiness of the customers. According to the Deputy Manager of Pizza hut, ‘If, there is variance observed in the product quality that will overall affect productivity and finally the customer satisfaction level. This is not acceptable at all’. He added, ‘if company is spending a huge amount of money on the product promotions and marketing activities that is for the business. And also company provides the training to the employee to how to maintain the product quality. So every single person should have to ensure the quality of the product and happy customer makes more return in the future’.

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In this regard, company has got set procedures and guideline to maintain the standards for the specified interactions between the employees and customers. If the deviations occur that will likely to lead to the unhappy customers.

Food temperatures To keep products safe storage the temperature of freezers should be in between -18 to + or – 5 degree centigrade. The seals must be intact so that the temperature can be maintained.

Quality Assurance The quality throughout the supply chain rests with the overall team. This is done by setting rigorous standards during product development. In order to ensure the standards, there is regular auditing and monitoring system in place. The one of the regular system to check quality is CHAMPS Excellence Review. Quality assurance is achieved through the complaints monitoring system and their corrections through available remedial methods.

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Core Competence Organizational strength or abilities, developed over a long period, that customers find valuable and competitors find difficult or even impossible to copy. (Cecil C. Bozarth, Robert B. Handfield, 2008) The pizza hut has got high degree of core competence in the basic product. The pizza hut’s dough is treated as core competence of the business. This makes pizza hut different then the competitors.

Cost & variance The cost of sales and the sales revenue are the actual things that support the managers to run the business on track. If the numbers seems going out of the track they need be highlighted and called as variance. The variance is the difference between the Actual cost and Theoretical Cost. Head office set forecast and provide targets to the business stores. The targets are set with the help of previous year business performance and the expected events. That is called as theoretical cost. On the other hand the cost occurred in the business dates is the actual cost. So if there is any difference occurs that will be treate as variance. The cost of sales of the store for the current period shows the variance of 36.38 •

The theoretical cost set by management was £2203.22 and in percentage 22.46% where as the actual cost for the period occurred was £2239.60 in percentage 22.83%. The results indicate the variance remained £36.38.

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University of East London The variance in costing is the actual indicator of the performance. Higher the variance depicts higher the concerns persist with in the business unit. In present case in hand, the above depicted variance treated to be normal. The business operations can not work on the absolute set tracks because the forecasted things can not happen on the absolute behaviours as predicted. (See appendix 5)

Reasons of variances

 Miscount The chance of miscounting always prevails during the operations. In the case of miscount the chances of wrong order increase and finally will increase the variance.  Wastage The several reasons for wastage may occur during the operations. However if forecast made is not effective then the chances of unexpected results may increase. That applies with the product forecast as well. If product is defrosted without realizing the demand for the product then this may cause to one of potential wastage. In other case the wastage can increase if no proper product forecast is being made and or staff make mistakes while making orders or at the time of dispatching orders. In any case if wrong delivered to customer the customer will complaint against it and in order to make customer happy the order is to be resent. This will certainly increase the cost. Higher the number of complaints more is the cost. These two factors are directly proportional.  Shrink

The shrink may occur if inventory reduced without record. Zahoor Soomro | Project Report

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University of East London The variance shows the real picture of the business operations. Happy customers return back to business and become repeat customers and cause to increases in the sales revenue of the business. However, If sales revenue is running on the increasing trend or above of the forecasted track then it clearly indicates the successful operations of the business activities. And this will likely to decrease the percentage of variance as overall.

Forecasting Forecasting the estimated demand is the real start of every single operational activity in the business unit. This involves every thing from human resource planning to the product planning. In this every single factor get into the touch of planning, organizing, and leading and control of the operational activities. This ultimately leads to the overall productivity of the unit. Forecasting product and customers demand is the most important activity for the b business organizations. (Derek L Waller 2003) Forecasting is very important element to carry forwards the business on the set line successfully up to the mark in efficient manners. (Joseph S. Martinich, 1997) The same goes true for the pizza hut business. According to the RGM ‘forecasting at pizza hut plays critical part for the success of the business’.(appendix 6) The manager, prior to develop any plans for HR deployment or the food ordering, they observes the forecast of sales and expected upcoming events in the calendar. As per say, the usual shift requires two to three drivers and plus kitchen staff and the shift manager. Where as the number of drivers can increase on weekends, as high as 7 to 10 and 4 to 5 in store staff plus shift manager and support manager. This works fine when every thing works according to plans. However, if any of the external factors come into play then that can potentially affect the service delivery and the speed. This happens when for example the whether conditions. The road hazards in shape of blockades, accidents. All of these factors can slow down the serviceability.

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University of East London The unexpected orders can cause more demand of the product where as the availability of the ready to use product may be limited according to the expected demand for the shift. Therefore the variance in expected demand and actual demand can cause the shortage of the products and ultimately this can play around the one of the possible factors of the unhappy customer and can cause the variance in the productivity of the unit as over all. The demand can also increase because of the good weather, special occasions like sports, rituals, festivals, and purchasing power. According to the RGM of the unit, the demand for the food is high in the start of the month but that usually slow down in the end of the month due to the less availability of the funds with customers.

Employee performance/training The training data base available at store and the views gathered from management team reveals the fact that the importance of the training in store is directly linked with the operations standards and productivity. The team member working on make table should have to be trained according to the specified requirements of the make table. The lack of training will cause the variances in operations activities. This directly results the variances in the customer satisfaction. (See Appendix 7) Source: Pizza hut/ Training database /Business Dates 14/04/2008/location: Hut 512

Importance of Customer Experience Customer care is the core point of concentration behind the business. The business treats customers as king. The most important fact is to find out the ways through the customer want can be fulfilled effectively. Therefore there are some procedures and standards set by top management in order to interact with customer. (Cecil C. Bozarth, Robert B. Hand field, 2008) Customers don't really want relationships. At least not in the same way the brand does. They want to be treated well, respected, understood and to get what they want, Zahoor Soomro | Project Report

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University of East London when they want it. In other words, they simply want a good experience and the reassurance of knowing that they will have the same good experience every time they come into contact with the brand. So, if we the team get to the experience right, the opportunity to build meaningful relationships should follow. (Asbjorn Rolstadas, 1995 & Alan Mitchell Issue 5, Summer 1999)

Pizza hut is selling pizzas but this is what other competitors have been doing. So what makes it really special about it? Who recognise that product alone? The product alone is nothing but the service is also important. That is the factor which make customers as ‘repeat customers’ The attitudes, values make key differentiations. The operational standards, the quality of food all of them are key factors. (Mary Say et all 2003, Issue 440)

In order to achieve desired results the team members at Pizza hut are provided with set guidelines for the interaction with customers. The guide line called ‘moment of truth’ or ‘customer mania plus’.

Moment of Truth The most important key elements to are set in this guidelines. (See Appendix 8)  Order taker The order taker is the key person who works as a bridge between the company and the customer. If he/she makes customer happy, the business will likely to repeat other wise can drain to the competitors. This results not only the loss of customer but also the loss of several networks of the lost customer.

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CHAMPS Excellence The order delivered to the customer should followed by the set procedures. The delivery person has provided particular guideline that he/she will have to follow when interacting with customers. This results in increase customer satisfaction. (source: Source: Pizza hut/ Champs Guide /General Standards/Business Dates 18/05/2008/location: Hut 512) The other most important factors that the management follows are; •

Delivered on time

•

Delivered completely.

•

Invoiced correctly.

•

Undamaged

However, If any of the above factors missing from the cycle process of order making, then it start again from the make table. This  Response. (repeat customer/happy customer)  Complaints Resolving complaint  Offering service delivery  Offering hot food delivery  Beat the phone capture in busy times.  Beat the web orders

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University of East London There should be every reason for the return of the customer. Without fulfilment of the expectation that will not be possible. However the team at Pizza hut follows the guidelines and makes customers happy, but there may be several factors that may cause to the dissatisfaction. In general, the possible factors may be for instance, rush of customers and not enough staff available to take orders or to pick up a phone, bad quality, late delivery or the rude attitude. According to the pizza hut manual almost 2/3 of unhappy customers never return because of poor service. The RGM at store revealed the fact as ‘Customers don’t come pizza hut just for the food, they can get food anywhere. What most customers want when they visit or call us is a good time’. He adds, ‘when they order on phone they expect order takers to treat them well and make their time great. How do you do this? By having a service attitude and making customers feel welcome and important’.

Marketing The Marketing plays very important role for the business. The customers actually receive message through marketing, thus it become very critical that the company should highlight the customer expectations in the marketing message. There are several set standards that are to be followed for the marketing purposes. (Francis J. Mulhern, 2004) The company invest considerable resources to find out the exact wishes of customers. For the Pizza hut’s delivery branches the segment of customers includes from families, to the teens. According to the Pizza hut database the primary customer are teens and young adults.

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Product Development

The pizza hut success is not the matter of isolated activities. But it is the company’s restless efforts to put innovations into the realities by turning needs and wants in to the shape of products. Product development team run focus group to study the consumer behaviours towards product choices. Some time products are launched after having selected study of the chosen sample, but it does not survive for long time. This may cause occurrence of cost or the wastages to the stores. For instance the four for all, cheesy bread, Bombay wings, Indian pizza are all the examples of failed products. However the company has launched successful products as well. For instance cheesy bite pizza, which has cause around 24% increases in pizza sales over all.

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Conclusion The operations management depicts the performance of each and individual unit that is participating in over all acceleration of the engine of business. The business may have some times low speed and high speeds. It highly depends on the strategies that the top management set for the business and the way the strategies are followed by the key components that run the actual business. The operations at Pizza hut have multifaceted situations. The each component working in the process cycle of business plays equally important role to win the customer. However, if any one of the units deviating from the set standards will cause a variance in the performances as overall. Thus it is concluded that the success of the business is possible through collections of inputs from all the units participating in the conversion process

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References Alan Mitchell Issue 5, summer (1999), when the customer is finally king, published on Warc. Asbjorn Rolstadas (1995), Performance Management: A business process benchmarking approach, Performance planning to ensure achievements, published by chapman and hall, p 118-119 Cecil C. Bozarth, Robert B. Handfield (2008), ‘Introduction to operations and supply chain management’, second edition, ‘Operations Management’, Ch: 1, pp5 Cecil C. Bozarth, Robert B. Handfield (2008), ‘Introduction to operations and supply chain management’, second edition, ‘Operations Management’, ch: 1, pp5 Cecil C. Bozarth, Robert B. Handfield (2008), ‘Introduction to operations and supply chain management’, second edition, ‘Process Maps’, Ch: 3, p 44-52 Source: Cecil C. Bozarth, Robert B. Hand field, 2008, Introduction to operations and supply chain management, Ch 12, p 378

Peter Bolstroff, Robert Rosenbaum (2003), Supply Chain Excellence, Initiating the opportunity analysis, Fish bone diagram, , Ch: 10, p 124-128

Mary Say, et all (2003) ‘The Importance of the Customer Experience’ Admap Magazine, June 2003, Issue 440

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University of East London Joseph S. Martinich (1997), ‘Production and operations Management, An applied modern approach’ ch: 1, pp7-9 Joseph S. Martinich (1997), ‘Production and operations Management, An applied modern approach’ published by John Wiley & sons, Inc. ch: 2, pp42-43 Sources: Joseph S. Martinich, 1997, Production and operations management, chapter no 4 forecasting, p 102-112

Roberta S. Russell, Ernard W. Taylor III (2000), ‘Operations Management’ Third Edition, ch: 1, pp17 Derek L Waller (2003), ‘Operations Management A supply Chain Approach’ Second Edition, Ch: 10, pp261-262 William J. Stevenson (2005), Operations Management, 8th Edition, ‘Introduction to operations management’ published by McGraw-Hill, Ch: 1, p.5-9 Francis J. Mulhern (2004), ‘Marketing at Retail and Marketing Management Today’, Medill School of Journalism, Northwestern University

Pizza Hut manual guide (this guide is available in the store) (source: Source:Pizza hut/ Manual / Preparations/Business Dates 14/04/2008/location: Hut 512) (source: Source:Pizza hut/ Manual/make

table guidelines

/Business Dates

14/04/2008/location: Hut 512) (source: Source: Pizza hut/ Manual/Cut table guidelines /Business Dates 14/04/2008/location: Hut 512) (source:

Source:

Pizza

hut/

Manual/General

Standards/Business

Dates

14/04/2008/location: Hut 512) Zahoor Soomro | Project Report

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(source: Source: Pizza hut/ Champs Guide /General Standards/Business Dates 18/05/2008/location: Hut 512)

(Source:

Source:

Pizza

hut/

Manual/Preparations

/Business

Dates

table/Business

Dates

14/04/2008/location: Hut 512) (Source:

Source:

Pizza

hut/

Manual/Shelf

life

14/04/2008/location: Hut 512)

http://www.pizzahut.co.uk/restaurant/history.html, Accessed on 18/05/08 others Gerry Johnson et al, (2006), ‘Exploring Corporate Strategy’ 7th edition, Ch 9, P. 468-474

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