Instructor: Dr. Rupak Rauniar

Executive Summary
Based on instruction of Jonah from “The Goals”, the report is concentrating on analyzing human
resources capacity problems at Sally Nails. This is a new established salon with a very good
start. The sales revenue is increasing rapidly after opening. However, its profit is limited and not
increases recently. That’s the problem.
Three keys of money making goal including increasing sales, decreasing inventory and
operational expenses are being used as a model. Sally Nails mainly provides services. It doesn’t
make inventory. So the inventory key has been omitted. Analyses are going around decreasing
operational expenses, which is payroll expenses in this case.
Human resource capacity analysis, waiting time analysis, and personnel scheduling tools have
been used to identify flaws in the process, and propose necessary changes. It has been found that
if working schedule and human resource management are changed the company can turn 18% of
its payroll into profit of the company, which is equal to 11.7% of its sales revenue.

Background Information
The case to be analyzed in this report is the real case of my own business. I started my own
business for the first time ever in my life. Due to limited experience, there are many problems
that need to be fixed in order to direct the business on the right direction to achieve the ultimate
goal of making money.
In September 2011, based on saving and some financing, I managed to open a nail salon in
Harrisburg, Pennsylvania named after my wife Sally. My wife and her sister are very good in
nails, while I possess some managerial skills. Sally Nails provides services related to nails such
as manicure, pedicure, and acrylic nails. The shop was built with a capacity to serve up to 20
customers at the same time. Compared to other nail salons in the area, Sally Nails is a medium
size shop. Our target customers are women who live within 3 miles radius from our shop. The
business started very well thank to a good marketing campaign in local area. Sales increase
unexpectedly. We actually kicked our main competitor, LA nails, out of business after only 4
months of operation. At the time LA nails was in trouble, our sales increase almost 100%. We
kept hiring employees. Right now, Sally Nails employed 15 full-time employees, who work 10
hours a day and four to five days a week.
Problem Description
The business is in its ninth month of operation. It’s very young, but numbers of problems are
even more than its month life. First, we have to deal with customer complaints every other day
for poor services. Second, there are already some cracks in relationships among employees, but I
couldn’t find an effective communication method with them yet. Thirds, I hired some unskilled
employees and trainees through family relationships. These employees indirectly affected the
image of Sally Nails. We lost a lot of customers because my employees cannot understand
English. I can list a lot more problems that happen every day in the shop. However, due to
limitation of the paper, I would like point out the one big operational problem in the following
The biggest problem to be analyzed is using human resources correctly to optimize profits. As
stated, the shop employs full-time 15 employees. They all work 10 hours a day and four days a
week. The shop is opened at 10 am and closed at 8 pm seven days a week. Total working hours
are 15x40= 600 hours. Details are in table 1.
Table 1
Mon Tues Wed Thu Fri Sat Sun
Number of employees working 7 7 7 9 10 10 10
Total working hours 70 70 70 90 100 100 100

Since we are busy over the weekend, this distribution seems to be perfect at the beginning.
The shop is famous for serving customer right after their signing in. Waiting time is minimal
because we always have available technicians to serve. However, during some certain periods of
the day, all employees just sit still and do nothing, but we have to pay for them hourly. During
weekdays, the shop starts getting busy after 3pm. During weekend, we are busy in the morning,
and slow down in the afternoon.
I noticed this after looking at monthly sales and profits report. While sales keep increasing,
profits are very stable. I found out that we pay too much for employees for not working. The
more employees we hire, the less efficiency our human resource usages are.
I do believe this problem can be fixed after relating it to what Alex Rogo faced. Even the case of
Alex Rogo is in manufacturing, and my case is in service, there are still some relations. Alex
thought his plant was efficient. He got new robot; machines run 90% of the time; unit costs are
low; no one is fired; inventories are high. In my case, I thought I was right when hiring a lot
more employees in accordance with sales increases. However, we didn’t know that high
inventory and high unused capacity are wastes. Costs per unit lower but cannot cover the hiking
inventory costs. We both didn’t realize that the expected outcome was final profits.
OM Concepts/Tools That Can Be Applied
I’m going to use three operation management tools to solve my problem. First, capacity analysis
needs to be performed. I have to know how many technicians needed at certain period of day,
certain day of a week, and certain season of the year. Then, optimal human resource capacity can
be referred from here. Second, I need to do a waiting time analysis. We are famous for “no wait”
service since we always have available technicians to serve. However, 5-10 minutes waiting time
is acceptable for most customers with appointments. 10-20 minutes waiting time is acceptable
for walk-in customers. Under this method, we don’t have to pay for technicians to wait for
customers. This model is very successful at most health centers. I believe it can work with nail
salon also. Third, personnel scheduling technique in services will be used as instruction in
textbook Chapter 19 of Operations and Supply Chain Management by F. Robert Jacobs and
Richard B. Chase. This is an analytical approach to develop final working schedule using desired
human capacity and allowed waiting time.
These tools appear to be different from Alex’s manufacturing solutions. However, they are under
the same mechanism from Jonah’s recommendations. Jonah suggested solving a problem by
finding out what is really going on by walking around to discover the process. To make money,
according to Jonah, Alex has to increase sales or throughput. Also, he has to decrease inventories
and operational expenses. In my case, I manage to increase sales and decrease operational
expenses which are salaries for employees. In other words, to make money, I have to maximize
money going to the shop and minimize money going out of the shop.
Besides, I also need to apply some lessons learned from “The Goals” such as hiring skilled
people; life outside work; employees and community feedback from changes; open
communication with employees; identify what is the desire outcome.
Application of OM Concepts/Tools
Capacity Analysis
During the week, from Monday to Friday, customers are not crowded before 3pm. From Monday
to Wednesday, we only need 4 technicians before 3pm. From 3 pm to 8 pm we need 7
Table 2: Monday-Wednesday employee capacity
From 10am-12pm From 12pm-3pm From 3pm-8pm
Employee available 7 7 7
Employee needed 4 3 7
Hours available 14 21 35
Hours needed 8 9 35

Total waste of employment hours are (14+21)-(8+9) = 18 hours. If I schedule only 4 employees
before 3pm and 7 employees after 3pm, I only waste 3 hours of employment time. In 3 first days
of the week, I save 3x(18-3)=45 hours of salary.
Table 3: Monday-Wednesday adjusted employee capacity
From 10am-12pm From 12pm-3pm From 3pm-8pm
Employee available 4 4 7
Employee needed 4 3 7
Hours available 8 12 35
Hours needed 8 9 35

With a similar analysis, I can save 25 hours on Thursday for 5 employees not working in the
Table 4: Thursday adjusted employee capacity
From 10am-12pm From 12pm-3pm From 3pm-8pm
Employee available 9 9 9
Adjusted Employee available 4 4 9
Employee needed 4 3 9
Hours available 18 27 45
Adjusted Hours available 8 12 45
Hours needed 8 9 45

On Friday, I save 20 hours using the same method. Number of employees in the morning are 6
instead of 10. I only waste 2 hours that day, not 22 hours.
Table 5: Friday adjusted employee capacity
From 10am-12pm From 12pm-3pm From 3pm-8pm
Employee available 10 10 10
Adjusted Employee available 6 6 10
Employee needed 5 6 10
Hours available 20 30 50
Adjusted Hours available 12 18 50
Hours needed 10 18 50

On Saturday and Sunday, I save 2x(30-21) = 18 hours. For the whole week, I would save
45+25+20+18=108 hours. This is equal to 2.5 employees’ paycheck per week.
Table 6: Weekend adjusted employee capacity
From 10am-12pm From 12pm-5pm From 5pm-8pm
Employee available 10 10 10
Adjusted Employee available 10 10 7
Employee needed 10 10 7
Hours available 20 50 30
Adjusted Hours available 20 50 21
Hours needed 20 50 21

Current payroll expenses account for up to 65% of the total sales. I just save 108 hours on the
total of 600 hours or 18% of payroll. These numbers means I just retain 0.65x0.18 = 11.7% of
sales and turn it in to profits of the shop.
Waiting Time Analysis
I will not apply this method into reality right away because I may lose competitive advantages of
my shop over others. Customers like us because they don’t have to wait to be served. If I lose
this advantage, sales probably fall. And I don’t really want this to happen.
Theoretically, there are still some wastes of employment hours after adjusting the capacity as
discussed earlier. To save these hours, I can squeeze customers in the service line by using their
waiting time instead of technicians’ waiting time. This is the reason for me to bring this analysis

There are fast and slow employees. Customers’ nails are sometime very hard to work on, which
require extra time. Some time, customers request extra services that weren’t booked. Therefore,
waiting time is unavoidable. The above graph shows the important of normal capacity. I’m
currently collecting all records to find that normal capacity. Due to limited time in operation,
information is not comprehensive enough to perform such task, but this is noted as one of the top
priority tasks for me.
Personnel Scheduling Method
Numbers of working hours drop from 600 to 492 hours. Some of the employees have to work
part-time, or got lay-off. I prefer scheduling part-time to avoid further costs. Also, sales are
expected to increase in the summer, laying-off employees would cause a lot of problems and
related costs later.
Taking the lessons from “The Goals”, slow starting by making small changes will make big
change. Trainees and unskilled employees are the first ones that have to go part-time. These
changes won’t affect employee as much as a random pick.
Schedule will be built after open talk with employees and receiving feedback from them. There
are 4 general steps to build a schedule: define labor requirement, establish employee availability,
assign employees to groups of skills, and build actual schedule.
Analysis of Expected Results
Based on the above capacity analysis, we need only 492 working hours every week. But Sally
Nails is currently employs 15 technicians with 600 working hours. If the proposed method is
applicable, the company will save 18% of its payroll, which indirectly increase 11.7% of profits.
This explanation clarifies ideas from “The Goals”. Again, there is no inventory in service.
Operational tasks are increase throughput and decrease operational expenses, which is labor cost
in my case.
According to Jonah – “Impossible to perfectly balance capacity to demand, there even exists a
mathematical proof showing if you did, inventories go through the roof?” There is no way to
match customers demand with available capacity. However, we can collect long-term statistics to
define normal capacity. Derived from there, we can build waiting time frame for customers or
waiting time for technicians depending on the purpose and the situation of the company.
Below is the final numbers after analysis.
Table 7: Final Analysis

Current Proposed
10am-3pm 7 35 4 20
3pm-8pm 7 35 7 35
10am-3pm 7 35 4 20
3pm-8pm 7 35 7 35
10am-3pm 7 35 4 20
3pm-8pm 7 35 7 35
10am-3pm 9 45 4 20
3pm-8pm 9 45 9 45
Friday 10am-3pm 10 50 6 30
3pm-8pm 10 50 10 50
10am-5pm 10 70 10 70
5pm-8pm 10 30 7 21
10am-5pm 10 70 10 70
5pm-8pm 10 30 7 21
Total 600 492 108

“The Goals” can be used as a direction for necessary changes in operational management. First,
it is important to know what the goal of the organization is. In my case of Sally Nails as well as
the case of UniCo, profit is the ultimate goal. We do everything to achieve the goal of making
money. Productivity, capacity and things else have to be connected to the goal. Sometime,
everything appears to be good but it’s not serving the goal. Therefore, that “goodness” is
meaningless. There are three main points expressing the goal of making money: increase sales,
decrease inventory, and decrease operational expenses.
Besides, there are many other managing experiences to be learned from “The Goals” to apply in
reality. We need to walk around the problem to discover and breakdown the process. Then, we
can easily identify and solve the problem. Jonah teaches Alex and us about expecting the
outcome, or not applying sudden rapid changes. Any change may affect the whole system, so we
must be cautious and open in communications. Moreover, balancing private life and working
life. Sometime, solutions at work can also help at home.
Finally, there is no perfect model to match the reality. But we can get close to the perfection.