XLRI BM 2011-13 GROUP 4B

ORM-II Project Report

Appetite Restaurant, JK Residency

Group 4 Section B Name Vrajesh Shah Manik Raina Chinmay Kamat Ankit Jain Ajay Rajan Roll Number B11121 B11090 B11075 B11069 B11065

This project report has been submitted for the fulfillment of Operations Management II course under the guidance of Prof. Trishit Bandyopadhyay. We thank Mr. Amiya Paul, Captain, F&B (Services), Appetite Restaurant for helping us out with details about operations of Appetite. ContactPerson:MrAmiyaPaulMobileNumber:+919204550981

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Executive Summary
This project report is based on our study of Operations Management at JK Residencys Appetite Restaurant in Jamshedpur. Started in November 2010, JK Residency can be classified as a 3 Star Business Hotel located ten minutes from Tatanagar railway station. We explored different concepts in Operations Management such as forecasting, aggregate planning, inventory control, scheduling, materials requirement planning, quality control in discussions with the captains at Appetite. The report contains our findings of our study. We have tried to analyse the operations both from a theoretical and an on-ground perspective. The operational processes at Appetite are quite different from those of a manufacturing firm primarily because it is a services business. The report begins with an introduction to the hotel industry in India and an introduction to JK Residency as a hotel. We have also looked at the Organizational Structure of JK Residency particularly the F&B Services section which controls the Appetite restaurant. Appetite currently uses qualitative methods for forecasting. We have explored the possibility of using quantitative methods. The sales and occupancy forecasts have been studied using regression analysis to arrive at FITS (Forecast adjusted for trend and seasonality). The study of aggregate planning consists of how the restaurant follows a subcontracting strategy to meet the fluctuations in demand rather than a hiring/layoff policy. The scheduling methods have been examined for both personnel scheduling and job sequencing. First hour basis method and linear programming techniques have been tried to ensure optimum workforce allotment. Job sequencing of orders in the kitchen has been studied through FCFS and Johnsons Flow Model. Being a well-known name in the city, we have observed that the restaurant has considerable bargaining power and good relationships with its suppliers and that allows it to have control its inventory to its advantage. The restaurant used both P-systems and Q-systems for inventory control for different food raw materials. Materials Requirement Planning is done so as to ensure that there is no short-fall at any point in time. Quality standards are an area for alarm, though. Our study reveals that the restaurant could do much better if quality and maintenance standards are followed in a more standardized form. We recommend looking at quality issues through the ISO lens. Maintenance and supply chain management have been studied using frameworks for the services industry. What happens inside the hotel and the kitchen? How is your order served? We have tried to answer all these questions by studying the Kitchen Order Taking (KOT) process. Recommendations have been given by us at every stage in the report wherever an improvement was deemed necessary.

Acknowledgements
We extend our sincere thanks to Prof. Trishit Bandyopadhay, instructor of our Operations Management II course for providing us with this opportunity to study the detailed operations of JK Residency. We are also thankful to Mr. Amiya Paul (Mobile: +91 9204550981), one of the captains at Appetite for listening to us patiently and providing us with detailed information during our numerous visits to the restaurant. We also acknowledge the efforts of Mr. Sunil Kumar, another captain at Appetite for helping us during one of our visits.

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Table of Contents
Page Topic Number 1. Hotel Industry in India 2. JK Residency: An Introduction 3. JK Residency: Organizational Chart 4. Forecasting 5. Aggregate Planning 6. Scheduling 7. Inventory Management 8. Materials Requirement Planning 9. Quality Management 10. Maintenance Management and Reliability 11. Theory of Constraints 12. Logistics and Supply Chain Management 13. What happens inside the hotel? The KOT Process 14. Recommendations 3 4 5 6 8 10 14 17 18 20 22 23 24 27

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1. Hotel Industry in India

It is boom time for Indias Tourism and Hospitality sector. The Department of Tourism has recognized the potential of tourism in the India and resolved to strengthen Indias reputation as a prime tourist location. Tourism is the third highest foreign exchange revenue source, contributing up to 2.5% to the countrys GDP. The emergence of India as a global financial market has attracted a new breed of business travellers as well over the past few years. The Hotel Industry comprises a major part of the Tourism industry and contributes directly to the employment of around 1.5 million people and indirectly facilitates tourism and commerce. 1.1 Structure of the Industry1

HotelsinIndia

5StarDeluxe

5Star

4Star

3Star

2Star

1Star

HeritageHotels

Premium and Luxury Segment This consists of the 5 Star Deluxe and 5 Star hotels which cater to the needs of business travellers and upmarket foreign leisure travellers. These hotels offer a wide variety of services and facilities. Mid-Market Segment This segment consists of 3 Star and 4 Star hotels which offer the essential services of the luxury hotels without the high costs. Budget Segment This segment consists of 1 Star and 2 Star hotels. These provide inexpensive accommodation to price-conscious travellers. Heritage Hotels Architecturally distinctive properties such as forts and palaces are featured in this category. 1.2 Functional Classification Based on the purpose they serve hotels are also classified functionally as follows

HotelsinIndia

BusinessHotels

Residential Hotels

Resorts

Motels,Fotelsetc

TourismandHotelIndustryinIndiahttp://www.cci.in/pdf/surveys_reports/tourismhotelindustry.pdf

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2. JK Residency: An Introduction
JK Residency is a lavish hotel that offers travellers a heightened level of luxury, accommodation, dining and entertainment services2. Started in November 2010, it can be classified as a 3 Star Business Hotel as defined above. The salient features of the hotel can be noted down as 37 fully furnished state-of-the-art rooms High speed Wi-Fi connectivity Comfortable, modern and pleasurable ambience Exciting mix of fine dining, leisure activities and comprehensive business facilities 140 kms from the Birsa Munda Airport Tariffs ranging from Rs.2399 to Rs.5999 per night Checkout time of 12:00 noon

JK Residency also contains a fully functional hotel named Appetite with the tagline feed your desire. Appetite is open not only to the incumbents of the hotel but also to outside patrons. The restaurant is well equipped with capacity of 120 seats and offers Continental, Chinese, Oriental, Indian and Tandoor cuisines. JK also contains a conference hall with a capacity of 60 people called Concurrence. The hotel also offers a roof top, beautifully decorated terrace for open air gatherings, parties and banquets. The setting is called Steelscapes and hosts about 200 people. As is the case with any premium hotel, tasks are divided into departments which work independently of one another and need to be integrated to ensure smooth functioning of the hotels. The departments as identified in the interaction with the managers at JK Residency are as follows Main Departments Front Office Food and Beverage (Service) Food and Beverage (Production) Housekeeping Supporting Departments Maintenance Rooms Division Finance and Accounts Safety and Security

Food and Beverage (Service) and Food and Beverage (Production) are the two main departments that are responsible for the functioning of Appetite JK Residencys multicuisine restaurant. Over the course of our project, we will focus on these two departments and try to apply all the concepts of Operations Management on the activities undertaken by these departments. Most the information regarding the project has been obtained in discussions with Mr. Amiya Paul and Mr.Sunil Kumar both captains in the F&B (Service) department with the consent of Mr. Saikat Chatterjee GM of F&B (Service).

http://www.jkresidency.co.in/default.html

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3. JK Res ncy: O nizatio siden Organ onal Chart

3.1 Main Departme ents
MainDepts.

F&BServices (GM)

FrontO Office

Hou usekeeping

F&B Production (Head)

Captains

ExecutiveChef

Senior Stewards

SousChef

Stewards

ChefdeP Partie

Cook

Trainee Stewards

The F&B Services d B department is headed by Mr. Saikat Chaterjee. Th are five captains wo s C here e orking in the F&B Services de B epartment. Mr.Amiya Pa and Mr. Sunil Kumar are the lead M aul S ding captains working towards the daily operations of th restaurant he t. 3.2 Supp porting Dep partments
Supp porting Dept. D

Maint tenance Man nager

Rooms Division (head)

Finance e (head)

Safe etyand Se ecurity

Electrician n

Carpentary

Plumbers

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4. Forecasting
Forecasting is the basis of corporate long-run planning. Forecasts also provide the basis for budgetary planning and cost control. Operations personnel use forecasts to make periodic decisions involving process decisions involving process selection, capacity planning as well as decisions involving production planning, scheduling and inventory. The two basic sources of demand that JK Residencys restaurant appetite faces are 1. Independent Demand: Customers arriving at the restaurant 2. Dependent Demand: Demand for vegetables, meat, spices etc. With respect to independent demand, the firm can manage it using: 1. Active Demand Management: JK residency has actively tried to influence independent demand through the following initiatives: a. Running promotions around Jamshedpur in the form of food festivals b. Offering students of XLRI a discount c. Offering discounts on its new banquet hall, Steelscape 2. Passive Demand Management: Here the company simply accepts what happens and does not try to manage demand. This is not done at JK residency. 4.1 Forecasting Methodology JK residencys Appetite restaurant needs to first forecast the independent demand in terms of number of guests arriving per day/week/month. It can then convert the independent demand into component dependent demand for raw materials such as grain, meat, vegetables and fruits. Being a relatively simple operation, JK residency uses Qualitative Techniques that are subjective or judgemental and are based on estimates and past opinions. They do not make use of a mathematical model to forecast demand. They use a Historical Analogy method to forecast demand where they rely on past history to develop forward looking estimates without the use of any statistical model. As can be expected, this can lead to significant errors in the forecast. We have therefore applied other forecasting methods to improve the accuracy of the forecast. The company was not able to provide us with exact sales data, but they obliged us with approximate sales data.

Sales(InRsLakhs)
20 15 10 5 0 1 2 3 4 5 6 7 8 Sales(InRsLakhs) y=0.824x+1.3838 R=0.9723 9 10 11 12 13 14 15 16 17 Linear(Sales(InRsLakhs))

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Month

Sales (In Average Daily Rs Number of Lakhs) customers Ratio of Actual to Trend 3.5 3.8 4 4.1 5.2 5.8 6.1 7.8 8 8.9 10.1 11.3 13.2 13.8 14.3 14.7 15 41.66666667 45.23809524 47.61904762 48.80952381 61.9047619 69.04761905 72.61904762 92.85714286 95.23809524 105.952381 120.2380952 134.5238095 157.1428571 164.2857143 170.2380952 175 178.5714286 1.585288523 1.25338083 1.037398205 0.876105816 0.944801773 0.916590284 0.852932129 0.977958324 0.909111571 0.924790623 0.966710695 1.002501819 1.091287885 1.06812799 1.040469157 1.009074809 0.974544888

Seasonal Factor(Average of same month in both years) 1.338288 1.160754 1.038934 0.94259 0.959673 0.91659 0.852932 0.977958 0.909112 0.924791 0.966711 1.002502 1.091288 1.068128 1.040469 1.009075 0.974545

Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12

Using a linear regression technique3, we have found the projected demand for the next three months and multiplied it by the seasonal factors to obtain a forecast that was adjusted for trend and seasonality. Month Apr-12 May-12 Jun-12 Trend 16.2158 17.0398 17.8638 Seasonal Factor 0.91659 0.852932 0.977958 FITS 14.86324 14.53379 17.47005 Average Daily Customers 159.8198 156.2773 187.85 No. of

FITS: Forecast adjusted for trend and seasonality. The equation for the trend line was found to be Y=.824X + 1.3838 Note: This model cannot be used to forecast indefinitely into the future. This is because the restaurant has a seating capacity limit of 150. Therefore, including lunch and dinner they can serve a maximum of 300 (assuming no waiting lines). Thus 300 would be the theoretical upper cap on the forecast.

Chapter15,OperationsandSupplyManagement,ChaseShankaretal

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5. Aggregate Planning
Aggregate planning is a process to help give better customer service, shorten lead times and give the management a handle on the business. Since demand is dynamic, it is important to monitor the expected needs for the future. Some industries face cyclical demand fluctuations and with services, cycles are more often measured in hours than months. Appetite has a very strong demand during lunch and dinner and hence they have added a breakfast menu (though it caters only to the guests who are staying at the hotel) to increase demand during the morning hours. Appetite employs a subcontracting strategy instead of frequent layoff and hiring or a level strategy to accommodate demand fluctuations. Lets look at the aggregate planning for two quarters: Months Days Full-time employees Full-time days Peak Demand (days) Subcontracted employees FTE subcontracted employees Total FTE days October 26 30 780 6 4 24 November 26 33 858 9 5 45 December 27 34 918 13 5 65 January 26 34 884 11 4 44 February 25 35 875 10 5 50 March 27 35 945 7 3 21

804

903

983

928

925

966

1000 950 900 850 800 750 Fulltimedays TotalFTEdays

Monthly requirement for Full-time Employees (in FTE days)

ORMProjectReportAppetiteRestaurant,JKResidency 5.1 Yield Management Systems4 Some interesting issues that can be addressed hereby are: Pricing: The capacity is insufficient during peak demand and hence offering deals to customers who arrive during nonpeak periods may enhance revenue generation. However, Appetite does not make use of this strategy currently. Handling variability: The restaurant should employ coordinated policies on overbooking and no-show or cancellation and well-designed service processes that are reliable and consistent. Managing service processes: The restaurant utilizes its strategy of scheduling additional personnel to meet peak demand to its advantage. Also, it utilizes idle capacity for complementary services like banquet halls and gatherings.

The essence of yield management is the ability to manage demand. The two strategic levers that can be used to accomplish this goal are pricing and duration control. These can be represented in a matrix form which provides the framework for the firm to identify its position and the necessary actions to manage yield. PRICE FIXED Movies Stadium/Arenas Convention Centres VARIABLE Hotels Airlines Rental cars Cruise lines care

PREDICTABLE

DURATION

Restaurants Golf courses UNPREDICTABLE Internet providers

Continuing Service hospitals

Chapter16,OperationsandSupplyManagement,ChaseShankaretal

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6. S Sched duling g
Service industries l like hotels and restaura ants require two catego ories of sch heduling. Th hese two categories are broadl classified asly

Scheduling

Person nnel

Job Se equencing

6.1 Pers sonnel Sched duling This rev volves aroun setting we nd eekly, daily or hourly pe ersonnel schedules. In th section, we study his w personne schedulin practices of the hote and present simple analytical a el ng el approaches for these f schedule and check their efficie es, k ency. a) Firs hour prin st nciple We assu ume that eac worker works on an eight-hour shift continuously. We assign a nu ch w n umber of workers equal to the requiremen of that peri e nt iod. For each subsequent period, assi the exact number h t ign of additi ional worker to meet the requiremen rs e nt. 11 pm 4 4 4 12 am m 4 0 4 1 am 4 0 4 2 am 4 0 4 3 am 4 0 4 4 am 4 0 4 5 am 4 0 4 6 am 4 0 4 7 am 6 6 6 8 am 6 0 6 9 am 6 0 6 10 am 6 0 6 11 am 12 6 12 12 pm 12 0 12

Require ement Assigne ed On-Dut ty

Requirem ment Assigned d On-Duty y

1 pm 12 0 12

2 pm 12 0 12

3 pm 16 10 16

4 pm 16 0 16

5 pm 16 0 16

6 pm 16 0 16

7 pm 34 24 34

8 pm 34 0 34

9 pm 34 0 34

10 pm 34 0 34

Using th first hour p he principle, we notice that the schedule for arrival of workers ch e e o hanges as follows: Nu umber of Wo orkers 4 6 6 10 24 W Working Tim me 11PM-7AM M 7AM-3PM 11AM-7PM M 3PM-11PM M 7PM-11PM M Remarks Ful 8 hour shif ll ft Ful 8 hour shif ll ft Ful 8 hour shif ll ft Ful 8 hour shif ll ft Half shift (4 hour f rs)

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ORMProjectReportAppetiteRestaurant,JKResidency b) Linear Programming Based Solution 11PM-3AM Chef + Staff Needed 4 3AM7AM 4 7AM-11AM 6 11AM-3PM 12 3PM-7PM 16 7PM-11PM 34

Let the number of workers starting work at 11PM, 3AM, 7AM, 11AM, 3PM and 7PM be X1, X2, X3, X4, X5 and X6 respectively. Assuming eight hour shifts. Then our objective is to: Minimize: X1+X2+X3+X4+X5+X6 Subject to: 1. 2. 3. 4. 5. 6. 7. X1+X2 >= 4 X2+X3 >= 6 X3+X4 >= 12 X4+X5 >= 16 X5+X6 >= 34 X6+X1>=4 X1,X2,X3,X4,X5,X6>=0

Solving the problem using Microsoft Excels Solver, we get the following results X1=4, X2=0, X3=12, X4=0, X5=34, X6=0 Number of workers starting at 11PM Number of workers starting at 3AM Number of workers starting at 7AM Number of workers starting at 11AM Number of workers starting at 3PM Number of workers starting at 7PM 4 0 12 0 34 0

Both the analytical methods suggested require 50 personnel to meet the manpower requirement. c) Scheduling: An Innovative Approach An improvement in the number of personnel needed can be made by breaking down 8-hour shifts to two 4-hour shifts during certain periods of the day. The hotel has four basic shifts as follows: Name of the Shift Morning with break Lunch and Dinner Shift Evening Night Number of people (Chefs + Services) 6 12 16 4 Timings 7AM-11AM 11AM-3PM 3PM-11PM 11PM-7AM 7PM-11PM 7PM- 11PM

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ORMProjectReportAppetiteRestaurant,JKResidency In all four shifts, workers work for 8 hours. Two shifts work continuously while two shifts are staggered. The only disadvantage of four hour shifts is that when the workers have to start working, they have to log in, change uniforms and probably get necessary information from workers in the previous shift. As a result there is a lot of non-value added time if the shifts are staggered. This time lost is similar to the setup costs in manufacturing. Both the analytical methods suggested require 50 personnel to meet the manpower requirement. The hotel is aware of this and hence has improvised with two 4-hour shifts. This has reduced the total manpower requirement to 38, still meeting all the desired constraints! 6.2 Job Sequencing In the context of the restaurant, jobs correspond to the orders that are given from the different tables. Machines correspond to the different lines within a particular cuisine. Different lines would include starters, main course and dessert. Traditional FCFS scheduling Currently, all the orders are taken and processed on a FCFS basis. The only constraint is that food should be served to the guests in the order of starters, main course and desserts. One cannot jumble up the order and present dessert before starters and so on. On consultation with the captains, we have generated three orders that are likely to be found on any given day along with the preparation time. Assume that the orders have arrived in the same chronological order and belong to same cuisine Indian. Table Number 1 2 3 Starters 20 mins 15 mins 18 mins Main Course 45 mins 30 mins 50 mins Desserts 10 mins 12 mins 7 mins

Johnsons Method On inspecting closely, we realize that every order has to flow through a common sequence of starters, main course and desserts. Hence, this problem can be modelled on Johnsons Flow Shop with three

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ORMProjectReportAppetiteRestaurant,JKResidency machines. To be eligible to be scheduled using Johnsons flow shop the condition is that min(main course) > max(starters) or min(main course) > max(desserts). Logically, this condition is also sound as it can be safely assumed that a main course takes more time for preparation than starters or desserts. In the data we have gathered, min(main course) = 30; max(starters)=20; max(desserts)=12. Thus the condition is satisfied and we can apply Johnsons Method. Combining the above data into two pseudo machines Table Number 1 2 3 Pseudo1 65 mins 45 mins 68 mins Pseudo2 55 mins 42 mins 57 mins

Applying Johsnons Rule, we get that the correct sequence of orders is T3, T1 and then T2.

Time taken with normal FCFS scheduling Time taken with Johnsons method

152 mins 145 mins

Thus we propose that the kitchen department should use Johnsons method whenever possible. Some practical difficulties that the kitchen might encounter are as follows: Higher number of calculations and scheduling overheads Orders might not arrive at the same time, and hence a waiting window would be needed to be adopted. Ideally, a waiting window of about 5-10 minutes can be applied during peak hours to collect all orders and then apply Johnsons rule to determine order. All orders might not have all three components starters, main course, dessert All order might not belong to the same cuisine Time saving benefits would be worth the complexity of process

Although we still feel that Johnsons method may be employed in case of highly standardized and stable environments and during peak hours to save on the overall delivery time and increase guest satisfaction.

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7. Inventory Management
Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory. Balancing the various tasks of inventory management involves paying attention to three key aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for inclusion in the total inventory, this means understanding how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid understanding of how long it will take for those materials to transfer out of the inventory, be established. Knowing these two important lead times makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly. Calculating what is known as buffer stock is a key to effective inventory management. Essentially, buffer stock is additional units above and beyond the minimum number required to maintain production levels. By holding buffer stock, a restaurant has the ability to meet unexpected higher customer demand. The various costs involved that affects the size of inventory order are: 1. Holding/Carrying costs which include the costs for storage facilities, handling, insurance, breakage, depreciation, opportunity cost of capital etc. 2. Ordering Costs which include managerial and clerical costs to prepare the purchase or production order. 3. Shortage costs which occurs when an item is depleted, an order to replenish the resource takes time. The costs resulting from this stockout are called shortage costs. 7.1 Inventory Systems5 Appetite follows a multi-period inventory system as opposed to a single period inventory system. This involves periodic purchases where the inventory is kept in stock to be used as and when the need arises. The quantity and the timing of the order are dictated by logic inherent in the system. There are two types of multi-period inventory systems: 1. Fixed-order quantity models (Economic Order Quantity or Q-model): In this model, the quantity ordered is fixed, and ordered each time the inventory level drops to the reorder level. Reordering may take place anytime (event triggered), depending on the demand for the items considered. This requires continuous monitoring of the inventory. The size of inventory is comparatively smaller as compared to fixed-time period model. 2. Fixed-time period models (Fixed Order Interval or P-models): In this model the quantity ordered is variable, and ordered after a fixed time period (time triggered). Here, counting only takes
5

Chapter17,OperationsandSupplyManagement,ChaseShankaretal

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ORMProjectReportAppetiteRestaurant,JKResidency place at the review period. Here the size of inventory is comparatively larger as compared to fixedorder quantity period model, to protect against stockout during the review period. 3. Lot for Lot Ordering: This model involves ordering exactly what is required in each period and is used, in case there is variation in the demand every period. This allows flexibility in ordering whenever there are perishable and non-perishable goods involved. 7.2 Inventory Control at Appetite Inventory of Utensils: Appetite has a capacity of 125 people. To service full capacity, they maintain an inventory of 375 cutlery - 3 plates/spoons/glasses for each customer. This is because the same customer may eat snacks, main course and desserts, for which different plates etc. may be required. Inventory of Grocery: Grocery is maintained by undergoing an agreement with private contractors. These contracts are renewed annually with the term of contract which includes the price rate of each item if refreshed. The main caveat to the agreement is the price of the items described in the contract being fixed even if price fluctuates in the market. The following exhibit shows the fixed order quantity model followed for Rice/Wheat in JK Residency.

The inventory system followed in Appetite is a mixture of the Fixed-order quantity models (Qmodel), Fixed Time Period models (P model) and Lot for Lot. This can be seen in the following table:

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ORMProjectReportAppetiteRestaurant,JKResidency Item Quantity ordered (kg.) 100 100 13 Expected usage per day (kg.) 20 20 13 No. of days stock lasts 5 5 1 Type of order system Q model Q model P model Lead Time (days) 1 1 0 Reorder Level (kg.) 40 40 -Safety Stock (kg.) 20 20 -Comments

Rice Wheat Chicken

Reorder on the 4th day to meet demand Reorder on the 4th day to meet demand Perishable items Must be consumed the same day Perishable items Must be consumed the same day Lot for lot ordering to meet the varying demand

Mutton

P model

--

--

Perishable Vegetables

Non Perishable Vegetables Paneer

10 kg usually, varies acc. to day of the week 50

Varies

Lot for Lot

2 kg.

10

Q model

40

20

Reorder on the 4th day to meet demand Lot for lot ordering to meet the varying demand

15 kg. normally, varies acc. to day of the week

Varies

Lot for Lot

1 kg.

Inventory of Beverages: Beverages are procured through a local distributor. Here, the inventory system followed is Fixed-order quantity models (Q-model) because the level of beverages is constantly monitored and after the quantity falls below a certain level, an order is made.

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ORMProjectReportAppetiteRestaurant,JKResidency

8. Material Resource Planning

A MRP6 is a very simple and logical approach to determine the number of parts and components needed to produce each end item. It also provides the schedule specifying when each of these materials should be ordered. MRP is based on dependent demand which is caused by demand for the final goods that the customer wants. Although MRP systems have been installed almost universally in manufacturing firm its requirement in an industry like the restaurant/ dinning industry cannot be underestimated. A restaurant menu essentially serves a wide range of dishes but the basic raw material for most of these dishes comes from a very limited pool. For e.g. talking of JK Residency the number of items (including soup &starters) which had chicken as there base would easily be more than twenty five. If the restaurant cannot properly schedule its receipt of chicken according to the forecasted demand it will lose a lot of revenue on these items besides the bad reputation.

8.1 Performing MRP Calculations We tried to collect the data about two food items i.e. chicken and mutton. Since these two items are perishables they need to be consumed the same day they arrive. The lead time is 1 day so the order has to be done 1 day before. From the talk we had with the managers at JK we came to the conclusion that following is the daily demand for the two types of food: Chicken- 13kgs/day Mutton- 8kgs/day

However, on special occasion days i.e days when both the banquets hall are booked and the restaurant is full too the managers plan for three times as much chicken and mutton. Let us assume one week from now (day 7) the managers are expecting a special occasion day.

Item Chicken (LT= 1 day) Gross Requirement Scheduled Receipts Net Requirement Planned order receipts Planned order releases Gross Requirement Scheduled Receipts Net Requirement Planned order receipts Planned order releases

Day 1 13 13 0 0 13 8 8 0 0 8

Day 2 13 0 13 13 13 8 0 8 8 8

Day 3 13 0 13 13 13 8 0 8 8 8

Day 4 13 0 13 13 13 8 0 8 8 8

Day 5 13 0 13 13 13 8 0 8 8 8

Day 6 13 0 13 13 39 8 0 8 8 24

Day 7 39 0 39 39

Mutton (LT = 1day

24 0 24 24

Chapter18,OperationsandSupplyManagement,ChaseShankaretal

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ORMProjectReportAppetiteRestaurant,JKResidency

9. Quality Management
Quality Management in JK Residency is one area which requires a lot of work. Even though the hotel has a three star reputation, the quality processes that it follows are not standardized but ad-hoc. Quality measurement in all areas including procurement, production of food and service are based on subjective parameters. Some of the quality measures that JK Residencys Appetite undertakes are as follows: Tasting of food by the executive chef before being served to the guests Internal linkage between the executive chef and store manager of the procurement department to ensure quality delivery of raw materials like vegetables, grains and meat products Testing of raw materials at the source Long Term contract with suppliers, subject to frequent quality scrutiny which allows the restaurant to reduce uncertainty by fixing monthly price contracts Comments and complaint box to act on the feedback provided by customers Regular cleaning of the kitchen to ensure hygienic preparation. Chefs wearing protective caps to avoid hair falling into food; gloves and so on. Automated Inventory Software Collection of written standard recipes

As you can see above, almost all measures adopted by Appetite are qualitative (subjective) in nature. No effort is made to quantify quality standards. Appetite lacks total quality management. We suggest that the restaurant look closely at the two fundamental operational goals careful design of product and service and consistency in producing the design. 9.1 ISO Certifications -9000 and 22000 We believe that if JK Residency has to establish itself as a prominent business hotel, then it should seriously think towards getting relevant ISO Certifications for international quality and assurance. First, we look at the various practices followed by JK and suggest changes based on the ISO model. Principles of the Comments/Suggestions ISO 9000 model7 1. Customer A feedback form given to customers with the bill amount. Responses should be evaluated on a daily/weekly basis. Changes made should be notified publicly to Focus the patrons. Currently, feedback from customer is evaluated once every month and menu changes happen yearly. Mr. Saikat Chaterjee can make the staff aware of the implications of quality for a 2. Leadership modern restaurant. The need of standards and quality has been ignored conveniently till date. There is no awareness for standardization. 3. Involvement of The quality process should be followed throughout the organizations right from the cleaners to the executive chef. To involve all people, the restaurant can frame a People quality policy and make guidelines for workers at all level with regard to quality. Behaviour of people is based on norms. It would be much better if all the workers work towards measureable objectives documented in writing. 4. Process Process approaches are used distinctively for procurement of raw material,
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http://www.iso.org/iso/qmp

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ORMProjectReportAppetiteRestaurant,JKResidency Approach ordering and inventory control. But there is no written documentation. All expertise is transferred over word of mouth, thus making the success dependent on particular individuals capabilities. These processes should be documented using text or even videos and explained to new employees. There is absolutely no process used for serving the guests. A standardized way to serve guests should be employed. (Input, Key Steps, Output, Measure, Owner, Trigger, A&R, Improve) Processes should be predictable, repeatable and measurable. The delivery times and service levels of different food products should be standardized and maintained at all costs. Continual improvement can be targeted towards preparation time and consistency of service. This can be done by evaluating the employees frequently with respect to the measurable deliverables. Appetite scores quite high in this regard. All the decisions about procurement are made after analysing the daily demand data obtained through the tracking/billing software. The software is also used to identify the amount billed per person, the best-selling items on the menu and this information is used for pricing purposes. Appetite protects both itself and suppliers from risk by negotiating price contracts for the entire month in advance. So either party is not affected by abrupt market variations and it helps maintain long term relationships. Appetite should also strive to integrate its systems with the suppliers. The feasibility of this happening is not known.

5. System Approach to Management 6. Continual Improvement 7. Factual Approach to Decision Making 8. Mutually beneficial supplier relationships

Another derivative of the ISO 9000 standards which applies specifically for the food industry is the ISO 22000 Standard8. Appetite should implement this standard to differentiate itself from the other players in the industry. The four broad areas covered under the ISO 220009 standards: a) Interactive communication10 - To effectively communicate food safety issues to their suppliers, customers and relevant interested parties in the food chain. b) System management - To plan, implement, operate, maintain and update a food safety management system aimed at providing products that, according to their intended use, are safe for the consumer c) Prerequisite programmes - The most effective food safety systems are established, operated and updated within the framework of a structured management system and incorporated into the overall management activities of the organization. This provides maximum benefit for the organization and interested parties. d) HACCP Principles11 - HACCP is used in the food industry to identify potential food safety hazards, so that key actions can be taken to reduce or eliminate the risk of the hazards being realized. Critical control points need to be identified to measure critical factors such as food, acidity, time, temperature, oxygen, moisture, water activity and pH. Appetite should also force it suppliers to adopt these principles as they are likely to affect raw food as well.
8 9

http://www.praxiom.com/iso22000.htm http://en.wikipedia.org/wiki/ISO_22000 10 http://www.iso.org/iso/catalogue_detail?csnumber=35466 11 http://en.wikipedia.org/wiki/HACCP

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ORMProjectReport tAppetite eRestauran nt,JKReside ency

10. Main ance M ageme & ntena Mana ent Reliabili ity
The ma aintenance f function12 acts as a su a upporting fu unction to th quality c he control role to keep equipme operating effectively to maintain quality sta ent g y n andards as well as to ma w aintain qua antitative and cost standards of output. ts s There ar 2 alternativ when it comes to ma re ves c aintenance. They are: T 1. Have routine preventive maintenance e e e pair 2. Wait for machines and equipment to breakdown and then rep them. ision concern ning the appropriate leve of preventi maintena el ive ance rests on the balance of costs. n The deci Manager will selec a policy th minimize the sum of preventiv maintenan costs plu repair, rs ct hat es ve nce us downtim and quality related co me osts. With hi igher levels of preventiv maintenan we shoul expect ve nce ld fewer ac ctual breakdo owns and the erefore positi impacts on other cost ive o ts. At JK r residency, th follow a policy gea hey ared highly towards preventive ma aintenance. We can analyse this decision using the fo n ollowing fram mework

Fac ctorCosts s

Bre eakDown n Distribution n

Do owntime Costs

Quality Q related r costs

Appetite rest taurants dec cision using this framewo t ork. Let us now analyse A ts 1. Factor Cost a. Cost of Repair: The cost of repair is quite high for JK residen t f q ncy, as most of their t equi ipment is sta andard equip pment such as fridges, ov a vens etc. man of which are now any h no l longer cover by the m red manufacturer warranty. Those that are under warranty rs t pose lesser risk because the r e b restaurant do not bear the repair co oes t osts.
12

Chapte er12,Moder rnProduction/ /Operations Management t,BuffaSarinetal

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ORMProjectReportAppetiteRestaurant,JKResidency b. Cost of preventive maintenance: The primary preventive maintenance that JK residency does is a thorough cleaning cycle(details of which are provided below) and regular oiling to keep the machines functioning smoothly. As such there is very little replacement of parts etc., because of which preventive maintenance costs are kept very low. 2. Breakdown Probability Distribution a. There was no information available regarding this feature as there were not enough breakdowns to form a distribution 3. Downtime Costs a. Downtime costs can modify the conclusions of an economic analysis and should be included in the analysis. Sometimes this cost is very large and can cause shutdown of the entire production process. In the case of Appetite restaurant downtime forces the restaurant to stop serving certain items which not only affects profit, but has longer term implications in terms of the restaurants reputation.PM here is especially desirable because in happens in between major shifts, during which time the machine is idle anyway. 4. Quality-related Costs a. Quality related costs can also modify the conclusions of the economic balance between repair and PM costs. If equipment has been maintained in good condition, quality control is better, fewer defects occur and experience has shown that productivity is improved. High food quality has implications for the restaurants competitiveness of the restaurants and can also positively impact profits. Therefore quality related costs also dictate a preventive maintenance schedule at the restaurant. 9.1 Maintenance Schedule

1. SERVICE AREA Electrician

Number of Employees 2

Carpentry

Plumber Floor Cleaners

1 2

Type of Maintenance Preventive and Repair Maintenance Preventive and Repair Maintenance Repair Maintenance Preventive Maintenance

Timing Available as required 24X7 8 AM to 5 PM

8 AM to 5 PM 5 times a day

2. KITCHEN AREA Oven Maintenance Fridge Cleaners

1 1

Preventive Maintenance Preventive Maintenance

3-4 PM 3-4 PM

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ORMProjectReportAppetiteRestaurant,JKResidency

11. Theory of Constraints

The Theory of Constraints13 assumes that there always is a manageable system which is limited in achieving more of its goals by a very small number of constraints, and there is always at least one constraint. The TOC process seeks to identify the constraint and restructure the rest of the organization around it, through the use of five focusing steps14: Identify the constraint Decide how to exploit the constraint Subordinate all other processes to that decision Elevate the constraints If, as a result of these steps, the constraint has been broken, go back to Step 1, but do not let inertia become the system constraint

We identify a problem that Appetite faces and apply the five steps of the Theory of Constraints to solve these problems. Step 1: Identify the system constraints One of the problems that the restaurant faces is the absence or leave of an employee (cook/captain/waiter) whose job is critical to running the operations at times of high demand. These problems put a strain on the restaurants ability to serve the customers in the shortest possible time. Step 2: Decide how to exploit the system constraints In case of absence of an employee, another employee specializing in the same role can be assigned the job, so that the services get affected to the minimum. Step 3: Subordinate everything else to that decision The job which was being taken care of by the employee, who is now assigned to the more critical job, is either left vacant or is transferred to some other employee whose workload is less. Step 4: Elevate the system constraints If the absence of the employee becomes more frequent or the restaurant is unable to keep customers satisfied during peak hours, then more cooks/waiters should be recruited. Step 5: If, in the previous steps, the constraints have been broken, go back to Step 1, but do not let inertia become the system constraint Now if this constraint is overcome, Appetite should look towards uncovering other factors/constraints which are affecting its ability to provide top class service to its customers.

13 14

http://www.goldratt.com/pdfs/toctpwp.pdf http://en.wikipedia.org/wiki/Theory_of_constraints

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ORMProjectReportAppetiteRestaurant,JKResidency

12. Logistics and Supply Chain Management

For any organization, procuring raw materials through the value chain is important mainly because of two reasons- cost and quality. For a restaurant, major part of the logistics and supply chain consist of its suppliers of raw materials. Most of the raw materials are locally procured. Sea food and Dry fruits are procured from other cities through intermediaries. Assured & continuous flow of raw material is required as inventory cannot be maintained due to the perishable nature of raw materials. Procurement of materials is usually done from fixed vendors to maintain the quality of raw material and to avoid violation of input quality specifications. Appetite has fixed prices of items on its menu on a cost-plus based pricing scheme. However, prices of the inputs may change on a day-to-day basis. To avoid this, it enters into contracts which last for a fixed time period and prices of the goods remain constant for that time-period. This keeps the restaurant shielded from frequent price fluctuations. For example, it has a monthly contract of buying chicken and mutton from its suppliers at a fixed price. If the prices go up during this period, the supplier bears the cost and if the prices go down, it is the restaurant that is at a disadvantage. The store that houses the inventory of raw materials for the restaurant is located within the same building which makes it easy to acquire them on a day-to-day basis (or as planned)

Raw Material Vegetables and other vegetarian items Non-vegetarian items

Contract Period Monthly

Contract selection Lowest bid

Price-fixing At the start of each month At the start of each month At the beginning of the year with interim reviews At the beginning of the year

Monthly

Lowest bid Lowest bid with suppliers allowed to review on an interim basis if price fluctuations are more Lowest bid

Grocery

Yearly

Beverages

Yearly

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ORMProjectReport tAppetite eRestauran nt,JKReside ency

13. Appe etite: Wha hap at ppens insi th s ide he hot T KO pr ss tel? The OT roces
The KO Process: KOT or the kitchen ord ticketing process is an in house p OT e der g a process deve eloped by the JK R Residency m managers to manage info m ormation flow right from taking the food order from the w m custome to placing the prepared items on hi table. The process invo er d is olves real tim synchroni me ization of the orde data amon the stewards, the che and the bi er ngst ef illing clerk. The process has been so efficient T and fool proof that the JK Resi l idency mana agement has used this data to make estimates about the s d e a average demand per person for various foo items and the averag money sp r r od ge pent/ worth of order placed p table. per The vari ious steps inv volved in the process are e e: Step1: O Order Takin ng The proc cess begins w the stew with ward taking d down the ord on his Ki der itchen Order Ticket (KO Each r OT). steward is assigned some tables and he is r s responsible for serving th guests se f he eated on thos tables. se The KOT is an order filling form where the s r m steward fills in the follow details: wing

Sr No. 1 2 3 4 5

Details fille ed Date & Tim me Table Num mber No. of peop ple Food order & Qty red Waiters na ame

Requireme nt/Advantage To schedule orders acco e ording to the time To bill the o order to a tab ble Calculate th total numb of people Data used t estimate for future he ber e. to f To serve the guests e To know the steward res e sponsible for the table r

Step 2: Copies & Colour Codes s He uses 2 carbon papers to mak three cop ke pies. Hence, we get a total of 3 pag one goes to the ges kitchen, the other go to the bil oes lling and the third remain with the steward. To further smoo e ns s othen the operatio and remo any confu ons ove usion the rest taurant uses a system of colour codes The colour codes: s. r

Wh hiteKOT Yell lowKOT Re edKOT

Goesto okitchen Goesto obillingcler rk Remain nswithstew ward

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ORMProjectReportAppetiteRestaurant,JKResidency Step 3: Synchronization with Kitchen The white KOT reaches the kitchen where they are transferred to the barker. The barker is a person responsible for conveying the information about the orders placed by the guests to the chef. The work amongst the chefs have be divided according to the cuisine and there are two barkers 1) Indian cuisine barker 2) Chinese cuisine barker Each barker looks for the food relevant to his cuisine and orders the cook to prepare accordingly. The barker schedules the various orders coming from different tables on a First Come First Serve(FCFS) basis and ticks off items on his KOT as they leave kitchen to ensure no duplicity in preparation takes place. The barker also ensures the starters in the KOT are prepared first followed by the main course and then the desserts. Roles of a barker can be summarized as: 1) Divide the order amongst according to the various cuisines. 2) Order the cook to prepare the food according to the schedule. This takes off any scheduling responsibilities from the head of the cook who can singly focus on preparing good food. 3) Put the prepared food in a hot case and check the KOT for the steward responsible for taking that food and synchronizing with the steward. 4) Tick off food taken out from the KOT Step 4: Synchronization with the billing All the yellow KOTs of a table go to the billing clerk who prepares the bill per table. Step 5: Data entry The data is entered in a computer which uses the IDS software, a special software used by the Hotel Industry. This data Is then analyzed to find the trends in demand, value and quantity of food sold, patterns in demand variation both daily and seasonal etc.

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ORMProjectReport tAppetite eRestauran nt,JKReside ency an arized in the f following diagram: The KOT process ca be summa

Arr rival of cus stomer

The custom is allocat a table mer ted The stewar responsibl for that tab attends to the custom rd le ble o mer

Orde Taking er

Steward ta akes the order on the KOT r T Simultaneo ously three c carbon copies on different coloured pa s apers are ma ade Copies go to kitchen, b billing and on remains with the stewa ne w ward

Synchr ronization with kitchen h

Barker takes the kitche copy of th KOT en he n Schedules the KOTs on a FCFS basis e od me hef e Shouts the relevant foo item's nam for the ch to prepare r Shouts the relevant ste e ewards name found from the KOT for the steward to e d take away the food

Synchr ronization with billing h

The billing copy of the KOT comes to the billin clerk g e s ng If multiple KOTs have been generated from a table all are summed up e e t Cumulative bill for a ta able is prepar red

Dat entry ta

IDS softwa is used by the hotel are y All data fro KOT is m om manually ent tered Data analy yzed to look for trends an forecast fo future nd or

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ORMProjectReportAppetiteRestaurant,JKResidency

14. Recommendations
Specific recommendations pertaining to each topic have been given at the end of each section in the report. We would like to consolidate and summarize the recommendations as follows: Forecasting: We suggest that better forecasting of independent demand (number of guests, revenue) can be done using regression analysis with adjustments for trend and seasonality. Currently, the forecasting mechanisms are not in place and even though orders and billing data is captured in the system, it is not actively used for forecasting future demand. Demand Management: We suggest that better demand management be done by offering schemes to patrons such as happy hours. As of now, almost all of the demand of the restaurant is concentrated in the 7PM-11PM time slot. The number of working staff needed is also heavily skewed towards this time slot. To ensure more utilization of hotel resources in non-peak times such as afternoon, better demand management is necessary. Another way to manage demand is by table reservations and policies on over-booking and cancellations. Scheduling: The scheduling of workers and staff is done on an improvised shift basis without using any traditional scheduling methods. This works well for the restaurant since the demand pattern is skewed towards the 7PM-11PM slot. Once the demand matures and patrons arrive at hotel regularly, we suggest that Appetite uses either the Fixed Hour Method or Linear Programming. Quality: A lot of improvements are possible in this area. Total Quality Management philosophy should be practiced. The principles of ISO 9000 and ISO 22000 which have been blissfully ignored should be followed to add credibility to the hotels reputation. Use of IT systems and procedures: We suggest implementing a FIT system on the billing system that already exists to extract trends in customer demand and preferences. A CRM system can also be used to engage with the customer. IT systems have not been completely exploited by the organization. A formal MRP system can also be institutionalized.

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