Kitchen Organisation :

Allocation of work – Job Description, Duty Rosters :

Job Description : It is a list that a person might use for general tasks, or functions,
and responsibilities of a position. It may often include to whom the position reports,
specifications such as the qualifications or skills needed by the person in the job, or
a salary range. Job descriptions are usually narrative,[1] but some may instead comprise a
simple list of competencies; for instance, strategic human resource planning
methodologies may be used to develop a competency architecture for an organization,
from which job descriptions are built as a shortlist of competencies.
A job description is usually developed by conducting a job analysis, which includes
examining the tasks and sequence of tasks necessary to perform the job. The analysis
considers the areas of knowledge and skills needed for the job. A job usually includes
several roles. According to Hall, The job description might be broadened to form a person
specification or may be known as Terms Of Reference. The person/job specification can
be presented as a stand alone document though in practice, it is usually included within
the job description. A job description is often used in employment (a new position that
needs to be filled).

The Importance of Job Description :

All employees like to know what is expected of them and how they will be evaluated. Job
descriptions can also be a great value to employers. Creating a job description often
results in a thought process that helps determine how critical the job is, how this particular
job relates to others and identify the characteristics needed by a new employee filling the
role.

A job description typically outlines the necessary skills, training and education needed by a
potential employee. It will spell out duties and responsibilities of the job. Once a job
description is prepared, it can serve a basis for interviewing candidates, orienting a new
employee and finally in the evaluation of job performance. Using job descriptions is part of
good management.

Components of a Job Description

1. A summary statement. These one or two sentences include a general statement

of duties and mentions who the employee would report to.
2. Functions of the position. Usually this section is the most lengthy. It details what
the job actually entails and can be quite specific. It should detail any supervisory
functions in addition to being as specific as possible describing tasks the employee
will face every day. This is also the best place to indicate whether the person will

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 deal with customers, the public or only internal employees. You can also use this
section to place priorities on the activities.
3. Attributes needed for the position. If the position involves the use of machinery
(or computers), spell out what type of machines or software the employee will use.
Also detail any technical or educational requirements that may be critical or desired.
This is also the place to provide some insights into the type of work environment
you are attempting to maintain. Is it pure business, or must the person be able to
contribute to an overall spirit of the organization?
4. Reporting. Provide details on the reporting and organizational structure. This will
help the employee better understand how their activities fit into the total
organization.
5. Evaluation criteria. The more specific you can get the better. Writing this section
will probably enable you to define what is most important for the organization as
well as the employee. Try to make sure the evaluation criteria of the position will
promote the type of activities to enhance the success of the business. Also provide
details on when evaluations will take place.
6. Compensation. Including a range instead of a specific figure will give you more
flexibility, but most people will feel they should be at the top of the range. It is
usually better to have a specific dollar amount, especially if you are giving the job
description to the employee. If your organization uses salary grades, use that.
7. Physical location and surroundings.

Summary
Using job descriptions will help an organization better understand the experience and skill
base needed to enhance the success of the company. They help in the hiring, evaluation
and potentially terminating of employees. All too often, there is a misunderstanding of what
a position entails and a well-prepared job description can help both sides share a common
understanding.

Job Description and Job Specification

Job Analysis is a primary tool to collect job-related data. The process results in collecting
and recording two data sets including job description and job specification. Any job
vacancy can not be filled until and unless HR manager has these two sets of data. It is
necessary to define them accurately in order to fit the right person at the right place and at
the right time. This helps both employer and employee understand what exactly needs to
be delivered and how.

Both job description and job specification are essential parts of job analysis information.
Writing them clearly and accurately helps organization and workers cope with many
challenges while on board.

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Though preparing job description and job specification are not legal requirements yet play
a vital role in getting the desired outcome. These data sets help in determining the
necessity, worth and scope of a specific job.

Job Description
Job description includes basic job-related data that is useful to advertise a specific job and
attract a pool of talent. It includes information such as job title, job location, reporting to
and of employees, job summary, nature and objectives of a job, tasks and duties to be
performed, working conditions, machines, tools and equipments to be used by a
prospective worker and hazards involved in it.

Purpose of Job Description

 The main purpose of job description is to collect job-related data in order to

advertise for a particular job. It helps in attracting, targeting, recruiting and selecting
the right candidate for the right job.
 It is done to determine what needs to be delivered in a particular job. It clarifies
what employees are supposed to do if selected for that particular job opening.
 It gives recruiting staff a clear view what kind of candidate is required by a particular
department or division to perform a specific task or job.
 It also clarifies who will report to whom.

Job Specification
Also known as employee specifications, a job specification is a written statement of
educational qualifications, specific qualities, level of experience, physical, emotional,
technical and communication skills required to perform a job, responsibilities involved in a
job and other unusual sensory demands. It also includes general health, mental health,

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intelligence, aptitude, memory, judgment, leadership skills, emotional ability, adaptability,
flexibility, values and ethics, manners and creativity, etc.

Purpose of Job Specification

 Described on the basis of job description, job specification helps candidates

analyze whether are eligible to apply for a particular job vacancy or not.
 It helps recruiting team of an organization understand what level of qualifications,
qualities and set of characteristics should be present in a candidate to make him or
her eligible for the job opening.
 Job Specification gives detailed information about any job including job
responsibilities, desired technical and physical skills, conversational ability and
much more.
 It helps in selecting the most appropriate candidate for a particular job.

Job description and job specification are two integral parts of job analysis. They define a
job fully and guide both employer and employee on how to go about the whole process of
recruitment and selection. Both data sets are extremely relevant for creating a right fit
between job and talent, evaluate performance and analyze training needs and measuring
the worth of a particular job.

EXECUTIVE CHEF

Job Title:

Executive Chef Responsible for:

All subordinate kitchen staff

Place of Work:

A hotel Liaises with:

All other heads of department

Scope and General Purpose:

To provide an efficient and cost effective food Hours of Work:

service to the establishment.
Flexible

Responsible to:
Limits of Authority:
General Manager

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According to establishment.
Main Duties:
 To ensure that all menus are constantly
updated, paying special attention to seasonal
availability.
 To ensure that all menus are calculated
correctly to obtain maximum gross profit.
 To ensure that all staff are constantly trained to
effect good portion control and pleasing
presentation of all dishes.
 To hold daily meetings with the Restaurant
Manager to ensure that VIP's are timeously
identified, and any special arrangements
properly communicated.
 To hold daily meetings with the Sous-Chefs and
Chefs des Parties to ensure smooth running of
all kitchen departments.
 To ensure that all areas under your control
satisfy the most stringent hygiene requirements
and that staff who are ill or injured receive the
correct treatment or are not allowed to work.
 To ensure that all staff are correctly dressed to
satisfy statutory requirements as well as
enhancing the image of the establishment.
 To ensure that all stocks are ordered to the
correct quantities, quality and price.
 To ensure that all stocks are being kept securely
and under the correct conditions applicable to
each type of commodity stored.
 To regularly meet with the storekeeper to
ensure that the correct stocks are kept.
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 To regularly hold maintenance checks with the
Maintenance Manager to ensure that no
equipment breaks down.
 To ensure that all statutory notices are posted
at all relevant points and that such notices are
conspicuously placed.
 To ensure that attendance registers are kept
daily and that any absenteeism is immediately
brought to the attention of the Personnel
Department.
 To ensure that all staff under your control are
fully informed in respect of disciplinary
procedures, the handling of grievances, etc.
 To ensure that all documents are sent to the
appropriate accounts department immediately
for processing.
 To constantly update your knowledge and skills
for the good of the establishment and the
profession.
 To conduct regular stock checks/stock takes.
 To ensure that expenses are within budgeted
limits.
 To ensure that all information which is required
to compile meaningful budgets is available at all
times.
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 HEAD CHEF

Job Title: To be agreed.

Head Chef

Main Duties:

Place of Work:  To ensure that all menus are constantly

updated, paying special attention to seasonal
A hotel or restaurant
availability.

 To ensure that all menus are correctly

Scope and General Purpose: calculated to ensure maximum gross profit.

To provide an efficient and cost effective food  To ensure that all staff are constantly trained to
service. effect good portion control and pleasing
presentation of dishes.

 To ensure that sufficient stocks of all materials

Responsible for: are being kept and stored under the correct
conditions.
All kitchen staff
 To liaise with management daily regarding
special requirements, VIP's functions, etc.
Responsible to:
 To ensure that all statutory hygiene
Food and Beverage Manager requirements are diligently followed.

 To ensure that maintenance problems are

promptly reported.
Liaises with:
 To ensure that attendance registers are kept
All other heads of department
daily and that any absenteeism is reported to
management without delay.

Hours of Work:  To ensure that all documents are passed to

management immediately for processing.
Flexible
 To ensure that all staff are dressed correctly to
satisfy statutory requirements as well as
enhancing the image of the establishment.
Limits of Authority:

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 To constantly update your knowledge and skills
for the good of the establishment.

 To assist with regular stocktakes as and when

required.

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 CHEF DE PARTIE

Job Title:

Chef de partie Limits of Authority:

To be agreed

Place of Work:

A hotel or restaurant kitchen Main Duties:

 To ensure that all stocks are kept under

optimum conditions.
Scope or General Purpose:
 To ensure that all mise-en-place is always
To take full responsibility for the running of a
freshly prepared and on time.
particular section of a large kitchen.
 To ensure that all dishes are being prepared to
the correct recipe and to the correct quantity.
Responsible to:
 To ensure that all dishes reach the hot plate or
Sous Chef passe correctly garnished, the correct portion
and size, presented on the prescribed serving
dish in the prescribed manner.

Responsible for:  To ensure that his section is being kept clean

and tidy at all times.
Subordinate kitchen staff, cooks, commis de partie,
apprentices (or trainees)  To ensure that junior cooks and trainees receive
the right training and optimum guidance.

Hours of Work:  To ensure that any anticipated shortages are

communicated promptly to the sous chef or
Variable, usually determined by opening times of head chef.
restaurant/dining room.
 To ensure that no horseplay is allowed in his
section and that all staff under his control are
treated fairly and with courtesy.
Liaises with:
 To deputise in the sous chef's absence and take
Storeman
charge of the kitchen when directed to do so.
Back of the house staff

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 To attend training courses and seminars as and
when required.

 To strive to study management subjects in

preparation for future advancement.

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 SOUS CHEF

Job Title:

Sous Chef Limits of Authority:

To be agreed

Place of Work:

Kitchen of a hotel or a large restaurant Main Duties:

 To deputise in the Head Chef's absence.

Scope and General Purpose:  To ensure that all chefs des parties are familiar
with the day's requirements.
To assist the head chef in the day to day running of
the kitchen.  To ensure that the necessary stocks are on hand
at the right quality and quantity.

 To ensure that fair discipline is maintained.

Responsible to:
 To ensure that all staff are treated fairly and
Head Chef (Executive Chef)
with commonly accepted courtesy.

 To ensure that timetables, leave rosters and

Responsible for: attendance registers are up-to-date.

All subordinate kitchen staff  To ensure that all statutory, as well as company,
hygiene regulations are being strictly adhered
to.
Liaises with:  To ensure that all maintenance problems are
Heads of Department timeously reported and followed up.

Storekeeper  To ensure that all communications between

restaurant and kitchen run smoothly.
Linen room
 To ensure that each cook receives the correct
orders for the appropriate tables.

Hours of Work:  To ensure that each dish leaving the kitchen is

checked for quality, quantity, presentation and
Flexible
correct temperature.

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 To ensure that the dining room/ restaurant
personnel are "standing by" when delicate
dishes are served.

 To ensure that regular on-the-job training is

carried out so that subordinate staff perform
their duties correctly.

 To attend seminars and training courses as and

when directed.

 To further your own knowledge of management

methods and principles to ensure future
advancement and further upgrading in
management standards for the profession as a
whole.

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 KITCHEN SUPERVISOR

Job Title:  To ensure that all meals, snacks and functions

are correctly prepared, cooked and served.
Kitchen Supervisor
 To ensure that foodstuffs are used correctly so
that wastage is kept to a minimum, and staff are
Place of Work: trained to effect good portion control.

A kitchen  To re-arrange duties and rosters as necessary to

ensure that all tasks are correctly and timeously
completed.

Scope and General Purpose:  To ensure that the preparation of food is

To control and supervise the running of the kitchen,
ensuring that the preparation and presentation of
food complies with the required standards.
Responsible to:
Catering Manager
hygienic and that a "clean as you go" discipline
is adhered to.
 To ensure that food in the bains-marie looks
attractive at all times, re-garnishing where
necessary or replenishing.
 To ensure that company and statutory hygiene
standards are maintained.

 To ensure that all kitchen staff are clean and

correctly dressed at all times.
Responsible for:
 To promote team spirit and lead by example.
Subordinate catering staff
 To assist with or present regular training or
coaching sessions, so that staff perform their
Liaises with: duties correctly.

Restaurant staff  To report any faults or defects to management,

paying particular attention to any safety or
health hazard.

Limits of Authority:

According to each establishment Irregular Duties:

 To deputise for management in their absence.

Main Duties:

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 FOOD & BEVERAGE CONTROLLER

Job Title:

Food and Beverage Controller Limits of Authority:

According to establishment

Place of Work:

A hotel Main Duties:

 To ensure that every cheque handed in to a

supply department is accounted for in cash-paid
Scope and General Purpose:
bills or debited to the customers account.
To provide an effective system of control which
 To ensure accurate bill summaries, in that cash
protects the financial structure of the undertaking
bills total and credit bills prove to debits on
through the methodical, systematic checking of day-
customers accounts.
to-day business transactions and at the same time
provide a source of information to management.  To ensure that each bill has been correctly
analysed.

 To ensure cash returns from each department

Responsible to:
tally with cash amounts on audit rolls.
Hotel Accountant
 To ensure a continuous audit and accumulation
of data for the production of daily reports.

Responsible for:  To ensure that official orders have been issued

for all purchases and goods received.
Clerks
 To ensure that stock records systems are
Goods Receiving Manager accurate and up-to-date.

 To audit requisitions and issues of all outlets

Liaises with: and highlight any inaccuracies.

Food and Beverage Manager  To ensure that all receivable costs for both
kitchen and bards are processed speedily and
Storekeeper held ready for rapid percentage computation.

Head Chef  To ensure that all computer input is effected

daily.

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 To ensure regular assets stocktakes are carried  To ensure goods receiving procedures are
out. strictly adhered to.

 To assist with the checking of overhead costs to
ensure that all departments are aware of costs,
particularly when there have been deviations
from the acceptable norm.
 To provide closing stock figures and physically
assist with stocktaking at stipulated intervals.
 To submit reports and identify possible reasons
when results differ from anticipated targets.
 To prepare feasibility studies as required.
 To carry out regular training/coaching sessions
to ensure that staff are performing their duties
correctly.
 To carry out regular performance appraisals,
identifying areas for development and training
needs and ensuring that this training is effected.

 To compile revenue reports showing when

controls are effective or highlighting
discrepancies and recommend appropriate
corrective action.

 To compile control reports for bars and kitchens

showing percentage profits.

 To compile consumption reports of metered

fuels, showing units consumed and variances.

 To compile stock check reports, with a

breakdown of items checked and give
comments where variances occur.

 To compile a summary of labour cost standards.

 To ensure that all information is passed freely to

Heads of Department so they can take
appropriate action in the event of adverse
results.

 To ensure a smooth working relationship with

other departments, avoiding antagonism in
sensitive areas.

 To ensure that the prices entered in

programmed or computerised cash registers are
correct and updated when necessary.

 To ensure that menus are costed regularly.

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K:\WP51\TRACY\JOBDESCR Page 15
 HOTEL BUTCHER

Job Title:

Hotel Butcher Limits of Authority:

To be agreed

Place of Work:

Butchery in the hotel Main Duties:

 To check meat stocks in refrigerators and

Scope and General Purpose:
To requisition according to requirements, within
agreed stock level parameters, all meat and meat
products required by the establishment and ensure
their correct and cost effective use.
Responsible to:
Head Chef
freezers in terms of availability and condition.
 To ascertain daily requirements for the order
period.
 To requisition new stocks when necessary.
 To ensure correct stock rotation, first in first
out, at all times and make recommendations to
the Head Chef when meat cuts need using up.
 To cut, trim and portion to the requirements
and standards laid down by the establishment.

 To ensure that red meat is hung under optimum

Responsible for: conditions.

Assistants  To ensure that brines and marinades are

changed regularly.
Apprentice
 To issue meat to the various kitchens as
Porters required, against a requisition docket only.

 To ensure that hygiene standards comply with

Liaises with: company and statutory regulations.

Sous Chef  To always be aware of and take precautions

against possible spoilage.
Maintenance Department
 To check equipment regularly and ensure
Buying Department preventative maintenance is effected.

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 To regularly check for other maintenance
requirements and report these to the
maintenance department.

 To ensure regular stocktakes are conducted.

 To ensure optimum security arrangements are

in operation at all times.

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 STOREKEEPER

Job Title: Limits of Authority:

Storekeeper Order up to R_____ may be placed, thereafter

permission must be obtained.

Place of Work:
Liaises with:
Restaurant or hotel
Suppliers, drivers and catering staff

Hours of Work:
Main Duties:
To be agreed, normally 06:00 - 15:00 or 07:00 to
16:00  To order goods and supplies to ensure that
maximum/minimum stock levels are
maintained.
Scope and General Purpose:
 To liaise with senior managers on the ordering
To ensure that optimum stock levels are of goods which fall outside the agreed financial
maintained, that all goods, perishable and non- parameters.
perishable are stored under ideal conditions and
 To order all items through approved suppliers
that maximum security applies at all times,
only, obtaining permission for ordering any
particularly when receiving or issuing goods.
items which are only available through an
alternate source.

Responsible to:  To ensure that goods received are of the quality

and quantity ordered and in accordance with
Food and Beverage Manager the agreed price.

Catering Manager  To ensure the timeous and correct completion

of all administration in respect of deliveries.

 To complete all documentation and take the

Responsible for:
necessary action in cases of non-delivery,
Clerk substandard deliveries or over pricing.

Stores Assistant  To ensure that all items are stored correctly, in

terms of temperature, humidity and shelf life
and that no food items are stored on the floor.

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 To ensure correct stock rotation and that issues
are effected on a first in, first out basis.

 To ensure that all issues are made against

requisitions and that no items leave the
storeroom without the appropriate
documentation or signature.

 To ensure maximum security of all storeroom

areas, that no unauthorised person enters the
stores or is issued with a key allowing access.

 To inform management and follow agreed

procedures in the case of spoilage or damage of
any item.

 To take stock at prescribed intervals and ensure

that all necessary administration is completed
without delay.

 To attend meetings or training courses as

required.

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Duty Rosters
The type of roster used, is dictated by the nature and the needs of the business it
serves:

 Full-time Rosters: used when staff work on a full time basis and the business
is operational 7 days per week. Award rules which govern the limit to how
many consecutive days that are allowed to be worked and the number of
hours that may be worked a week, must be considered when rostering staff to
fully cover the business opening hours.
 Part-time and Casual Rosters: used to boost staff levels when trade levels
dictate the need.
 Duty Rosters and Cyclic Rosters: duty rosters are used to alternate various
jobs for staff (this avoids repetitious work and shares duties that are
considered more or less pleasant to perform, amongst staff). Cyclic rosters
alternate desirable and undesirable time slots within a 24hour day.

The hours that staff are required to work are usually designated in a SHIFT
ROSTER. Shifts are often about 8 hours in length. A STAGGERD ROSTER is used
where start times and/or shift length, and/or amount of staff on duty, vary more
widely to accommodate the volume of business. SPLIT ROSTERS are used when
staff work two separate periods in a shift with a long break in between (for example
in a gym where the maximum amount of business is done before and after normal
working hours). These shifts can be unpopular with staff.

Many businesses will incorporate the use of all of these roster types, as different
systems suit different parts of the operation.
Considerations which influence the choice of roster type include:

 Opening and operational hours, and fluctuation in the volume of business;

 Operational procedures, policies and Industry Awards;
 Staff availability, skill levels and ratio of full-time to part-time and casual staff.

Here is an example of a busy hotel that will use different types of rostering for
different purposes within its workforce:

 Shift rosters for administration and reception staff.

 Duty rosters for security staff, grounds staff, housekeeping and trainees.
 Staggered rosters are used for staff working in the restaurant and bar.
 Split-shift rosters used when rostering workers in the kitchen.
 Cyclic rostering for kitchen and housekeeping staff.

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By implementing the organisational benefits from all of these different types of
rostering, the manager has:

 Increased operational efficiency,

 Minimised wage costs,
 Maintained customer service,
 Complied with award conditions and
 Allowed staff to vary their work and have some weekends off.

Some businesses take into consideration their employee’s work time preferences,
before planning and writing up the next roster. These preferences can be nominated
by the employee on their previous time-sheet. Using this procedure is an individual
company decision and can help to maintain staff moral; but can also cause
grievances as it is difficult to please everyone all of the time

Production planning :
Product Strategy Development:
Idea Generation and Screening

3.6 PRODUCT IDEAS SCREENING

The aim in idea screening is to retain the successful ideas and eliminate the ideas which could be failures -
much easier to write than to carry out in practice! If in doubt, keep the idea until more information is obtained.
Idea screening can be based on tacit knowledge of the individual and of the company, with little new explicit
information sought in or outside the company. But the aim in successive screenings is to build up the
necessary information for the decisions to be made in a quantitative, objective way. Screening is both a
reiterative and a progressive process, so there is a need to relate to the first screening even in the last
screening in case the product description has changed and it no longer fits the screening criteria first set out.

The components in idea screening are product idea descriptions or concepts, screening factors and screening
techniques. There is a need to have product idea descriptions that everyone involved in screening
understands and is evaluating in the same way. The choice of screening factors is of course fundamental -
obviously the direction of choice is strongly influenced by the criteria. Lastly the people who do the screening,
and the techniques they use, affect the screening results.

3.6.1 Product idea descriptions

These must be clear and concise. They include:

a clear description of the product;

the use of the product;
the target market segment;
the relationship to the company's present products;
the relationship to competing products.

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For example, the new product idea in an ice-cream company could be a range of liqueur ice-creams. What is
meant by a liqueur ice-cream - is it a liqueur flavour, or does it have drops of liqueur embedded in it? Is it
targeted at sophisticated diners at home or in restaurants? Is it to be the top of the company's ice-cream
range? Is the nearest competitor the specialty ice-creams made in high-class restaurants? Should problems
be anticipated from sections of the community such as teetotallers or religious groups or will there be legal
difficulties with excise duties?

The initial description is usually kept broad so that ideas on the product, the market and the technology can be
continually studied, but there is a need to focus the idea in a certain direction so that the people involved are
not taking off in too many directions at once. As the product idea builds from a product idea description, to a
brief product idea concept, to the final product concept, to the product design specifications and to the product
specifications, the focus is being narrowed all the time.

One product idea description for the liqueur ice-cream was: ‘a line of plain based ice-creams with little jellies
containing concentrated liqueurs, aimed as a gift to be taken to dinner parties, sold through higher-class
supermarkets’

3.6.2 Screening factors

The strong screening factors, with which the product idea must agree, arise from the project aim and the
project constraints.

The overall aims of the company always take precedence over other factors. No matter how brilliant a product
idea is in isolation, it is rejected if it does not fit with the company's business strategy, in particular the product
strategy. There may be an outstanding product idea which may change the direction of the company's
business strategy, but it has to be taken from the project ideas and directed back into the top management
area. This product idea has to be viewed in its scale and suitability for the company, and decisions within the
company must be taken at top management level.

The constraints identified at the beginning of the project are also important screening factors. A product may
be dropped for many reasons: it does not meet the food regulations; there is not sufficient money to develop
or to produce it; the managing director does not like it! The factors used in screening should be as objective as
possible, but sometimes subjective decisions are made.

Think Break 3.8

Product idea descriptions and screening factors: liqueur ice creams

Develop two more product idea descriptions for the range of the liqueur ice-creams as discussed
in 3.6.1Product idea descriptions.

What screening factors could be used for these liqueur ice-creams which would reflect your society’s
cultural and religious attitudes to the consumption of alcoholic drinks?

Some product screening factors are shown in Table 3.2.

Table 3.2 Factors for product screening

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 Marketing factors:
Potential market size
Compatibility of market image with company's product lines
Relationship to competing products
Compatibility with existing or specified market channels
Access to suitable physical distribution systems
Fits into an acceptable pricing structure
Relationship to promotional methods and resources
Marketing resources needed to produce success

Production factors:
Compatibility with existing product lines
Availability of processing equipment
Availability of raw materials and ingredients
Availability of technical skills to produce the product
Availability of production time
Agreement with any legal requirements
Cost and availability of new resources required

Development factors:
Knowledge needed for development
Available knowledge and skills
Available time and human resources
Development funds needed and available
Compatibility with existing strengths
Development difficulties and risks of failure

Financial factors:
Compatibility of development costs with financial resources
Capital investment resources needed and available
Finance needed and available for market launch and ongoing product support
Profits or returns on investment required

Significant factors are many and these are just a few that often occur. The choice of screening factors
depends on the type of ideas, the company and its resources, the company's environment and the level of
innovation. There could be many factors but it is not humanly possible to use them all, so that the factors are
ranked in importance and only the most critical chosen in the first screening, although others may be checked
later. Factors can be rated as crucial, most important, important and minor.

Think Break 3.9

Product idea screening factors: fruit slice snacks

A bakery company is at present producing wrapped cakes to be sold in supermarkets on ambient shelves.
It has decided to develop a line of fruit slices, such as apricot and almond, berry fruit and hazelnuts, which
could be eaten by the consumer as snacks. The aim is to launch these products in supermarkets, mainly
for adult consumers.

Identify the factors that could be used in screening the product ideas.

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 Rank the factors from most important to least important and give them ratings to show
their relative importance.

Divide the factors into crucial, very important, important and

CHAPTER 6
Product Commercialisation

6.5 KNOWLEDGE REQUIRED FOR THE PRODUCTION PLAN

A production plan is developed along the same lines as the market plan to ensure that all the tasks are carried
out and completed in time.

The main areas in production planning are:

raw materials;
processing;
quality assurance.

6.5.1 Raw materials

The aim here is to ensure that the raw materials are delivered at the right time and in the right quantities and
of the right quality and at the right cost so that the process runs successfully.

The factors to be considered when sourcing raw materials for both the product and the packaging are:

location of the source relative to the plant;

level of quality required for the raw material;
price that the product can afford;
reliability of the supplier regarding specifications and delivery;
services provided by the supplier;
uniqueness of the supplier for this raw material.

These factors are listed in order of importance. The most important factor is met first and so on down the list
to determine the most suitable supplier(s) for each raw material. The raw material might need to be of a
specified quality but as it is highly perishable it needs to be sourced near the plant. Therefore quality and
location would be considered first when choosing suppliers. An important decision is to have either a long-
term association with a supplier or to choose the supplier according to the factors as conditions change.

It is important to determine the timing and the quantities of ordering, arrival, storage and use of the raw
materials. Some raw materials have very long lag times before delivery, especially packaging materials and
imported ingredients, therefore a schedule for ordering materials is made out and followed so that all the
materials arrive in time to start production. It is also important that the materials do not arrive too early as this
can cost the manufacturer a great deal for inventory and also materials may deteriorate in storage. There has
been a great deal of emphasis on ‘just-in-time’ production in recent years, but this can cause a great deal of

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trouble when starting production for a new product. It is easier to manage a less tight schedule as it is never
certain what is going to happen. The quantity to be ordered and held in stock depends on the time from order
to delivery, the costs of delivery and storage, the quantity required for a production run and the number of
experimental runs planned. It is preferable to have the same raw materials for all runs so that the processing
effects can be studied.

Another important factor in raw material planning is to study if alternative raw materials can be used and also
if raw materials from different suppliers can be substituted for the first choice. Then if there are any problems
in supply, there are alternatives which can be obtained quickly. If the product is a greater market success than
predicted, it would be embarrassing and might even kill the product if production had to stop because of lack
of a raw material.

The ways of handling, sorting and preparing raw materials are very important in the food industry. There is a
need to study the materials handling so that it is not labour intensive and fits into the main process. Also in-
line sorting equipment gives a tighter control and reduces human sorting and judgement.

6.5.2 Processing/manufacturing

The aim of processing/manufacturing is to produce the right quality and quantity of product at the right time
and cost, not only for the launch but for the months ahead. After the production trial at the end of product
design and process development, many problems will have been identified and discussed with production
staff and hopefully solved in order to make 'start up' as trouble-free as possible. However, just because it
works, it may not be the most efficient and effective way of producing the product. The factors which need to
be studied in processing can be grouped under technical, economic and human reactions.

Technical factors to consider are the plant design and commissioning, and the process analysis and control.
New plant or new equipment may be needed and this has to be designed and built or bought; in both cases
there need to be engineering specifications based on the processing requirements, mechanical/electrical
design and computer control. The plant layout and supply of services is important. Sometimes imaginative
new thinking in this area can increase product quality and yields and improve the overall efficiency and
conditions of the plant. It is too easy to be complacent, so look carefully at movement of materials,
employment of staff and bottlenecks in production.

Economic factors in processing can be summarised as initially setting the lowest practicable capital and
running costs and the required financial returns from the project, and then ensuring by constant monitoring
and fine-tuning that the budget is implemented. Experience during the development may show a need for
reconsideration of the budget; if a change is required then it is essential that all implications for prices, profits,
predictions and so on are fully explored, understood and taken into account.

Human reactions in a processing line are critical both in getting a new development off the ground and in the
evolving stages. Commitment is a most important ingredient in implementing change, and development
always means change. If the staff want to make it work then they will, and often this means an extensive
selling job to staff at all levels from the most senior manager to the floor operators. This needs to be done
systematically and comprehensively, and the more effectively it is done the more smoothly the product
development project will move.

In commissioning new plants, several points to remember are:

Does the product meet specification in terms of quantity, quality, consistency?

Can the plant be operated and controlled reliably, conveniently, without stress?
Are the running costs for services, staffing and maintenance as planned?
Do the plant components match the design stipulations, pricing schedules?

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 Has adequate information material been prepared for the instruction of operating, quality
assurance, trouble shooting and maintenance staff?
Have arrangements been made to remove ‘out of spec' products and other waste materials from
the plant without loss of secrecy?

Think Break 6.8

Knowledge required for the production plan: processing and manufacturing

In planning for production of the Chicken Hotpot in Example 6.1:

1. Identify the raw materials that could be used in the Chicken Hotpot, including a nutritional mix that is
needed to give balanced nutrition.

2. Identify the unit operations in a processing flow sheet.

3. The present canning line is to be used, which includes washing equipment for vegetables, sorting belts,
mixers, canning line, jacketed pans, stationary autoclave/sterilisers, water cooling stands, labelling
machines.
Plan how you would use the equipment.

4. Develop a check list for all the activities needed before the trial runs.

5. How would you communicate your plans with the factory staff, engineers and quality assurance staff?

6.5.3 Quality assurance

The aim of quality assurance is to ensure a product correct for its intended use. Quality and safety are
absolutely essential elements which must be built into new products. The first step in analysing product safety
and quality is to set up systems for Hazard Analysis Critical Control Points (HACCP) or Hazard Analysis/Risk
Assessment (HARA) or Hazard Analysis and Operability (HAZOP).

The steps in studying a process using HACCP are as follows:

Establish full specifications for raw materials, processing, product, packaging and distribution.
Identify and quantify risks.
Prepare a full flow diagram for the process.
Identify critical control points (CCPs) along the processing and distribution line using risk
assessment techniques.
Establish measurements and set points and limits necessary at each CCP for adequate and safe
control.
Establish and define criteria for tolerable departure from set points, and corrective action to be taken
to maintain control.
Establish a monitoring regime; review the procedures for the HACCP system.

HACCP was originally introduced to ensure the safety of food, but it is now also used to ensure product
quality. Process control is based on the HACCP system, using computer controls, total process modelling
systems and process optimisation, and in-line testing. Process control techniques are improving rapidly and
will make this area of the product development process more quantitative and less empirical. The process
study also needs to ensure that there is integration of the new process technology into the existing system

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with minimum disruption and cost.

From these studies a quality assurance plan is developed, which includes the controls and testing required
during the process and the testing of the final product. Quality assurance includes the sampling, testing and
control procedures, the targets for each, and the statistical control methods needed to study any changes that
are occurring. Companies must decide how far to take these when choosing the quality assurance standard
(ISO 9001, 9002, 9003) for their production. There may be a need for new testing equipment and certainly for
the training of staff. Once the plant is running, tolerance limits will be finalised but they should be provisionally
set well before then. Production as well as quality assurance staff need to know the new requirements as they
are often the first to notice ‘out-of-specification' product. Quality assurance is integrated into the company's
TQM (total quality management) which takes into consideration all aspects of the business that affect quality.
Process analysis is one of the most important tools in TQM.

The most important factor in building quality into production is the staff and the communications between
them. There is a need to have regular exchanges of information both verbal and written between production
and marketing, but especially between the designers of the process and the production and quality assurance
staff. There should be cooperation between staff. Nothing is more likely to be disastrous than the design team
running the production trials. The production staff needs to run the production with back-up and technical
advice from the designers. Accurate and timely information is not only crucial for effective management
control, but it also improves staff commitment and morale across departments.

A set procedure is needed; the production trial will require details from the design and production managers
on:

quantity required, plant capacity/capability;

reasons for trial;
trial control methods;
review methods for problems;
personnel involved and contact methods.
contingency plans;
contamination and safety potential.

Other useful communication methods include factory trial requests, production sheets, quality assurance
sheets, product costing and a planning schedule, as well as the production specifications and an outline
marketing strategy. The regular critical decision points should be identified so that all understand when
production development is to continue and when it is to stop. Staff education about the new process is
important.

There are information security problems during these trials, as there is a need to keep information away from
competitors, so there will be constraints on communication and staff must fully appreciate and respect the
need for confidentiality.

CHAPTER 5
Product Design and Process Development

5.4 PRODUCT TESTING

Product testing is an integral part of the product design and process development as can be seen in Figure
5.2.

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Figure 5.2 Testing activities and techniques in product design and process development

PRODUCT DESIGN SPECIFICATIONS

Technical Consumer Costs

'Getting the feel' Setting up Ideal profiles Company costs

Reliability
Training

Standard tests Profile tests Cost analysis

Correlation of technical/consumer tests

PRODUCT 'MOCK-UPS'

Screening Technical Product comparison Raw materials cost

Sensory limits

Product testing Difference testing Materials cost

comparison

ELEMENTARY PRODUCT PROTOTYPES

Ball-park studies Technical Acceptability Preliminary product

Sensory costing

Statistical testing Preference panel Spread sheets

ACCEPTABLE PRODUCT PROTOTYPES

Optimisation Technical Product Improvement

Product, packaging,
Sensory
process costing
Storage

Control testing Use tests Cost comparison

Shelf life tests Competitive comparison

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 OPTIMUM PRODUCT PROTOTYPE

Scale-up Quality assurance Buying predictions Yields

Marketing study Materials
Equipment

Raw material testing Market survey Equipment comparison

Process study Attitude panel Total costing: capital,

Product study Large consumer test operational

FINAL PRODUCT PROTOTYPE

PRODUCT AND PROCESS SPECIFICATIONS
MARKETING STRATEGY FINANCIAL ANALYSIS

FEASIBILITY REPORT

To achieve the final product prototype, it is very important that the product is tested at all stages during its
design for technical compliance, acceptability to the consumer, and compliance with cost constraints as
shown in Figure 5.2.

Example 5.1 lists the types of tests used in the development of a Thai fermented sausage

Example 5.1
Testing of Thai Fermented Sausage (Nham)

In Thai sausage product design experimentation, there were:

chemical tests (pH, total acidity, volatile acidity, residual nitrite, reducing sugars and
cooked rice),

physical tests (Instron compression, shear force and energy, reflective colour, gas
formation, water activity, weight loss),

microbiological tests (mesophilic aerobic micro-organisms, Enterobacteriaceae,

Staphylococcus aureus, yeasts and moulds),

sensory tests (appearance, texture, flavour) and tests of consumer acceptability. The
product profile characteristics were: colour, visual texture, air pockets, firmness, juiciness,
smoothness, sourness, saltiness, spiciness, pork flavour.

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 Wiriyacharee, P. ( 1990) The systematic development of a controlled fermentation process for Nham, a Thai semi-dry sausage, Ph.D. thesis,
Massey University, New Zealand

5.4.1 Technical testing

Technical testing varies a great deal depending on the type of product, the testing facilities available, safety
needs, processing needs and legal regulations. The tests can be chemical, physical or/and microbiological.
The technical testing for consumer acceptance is built up from the consumers' product profile, and suitable
technical test methods are sought which relate to the product characteristics identified as important to the
consumer.

In the early stages of product design, correlating the technical tests on the product qualities with the consumer
product profile is essential. Technical testing is also required to confirm that any food regulations are being
met, that consumer safety is ensured and that any labelling requirements for example nutritional value are
confirmed.

At the later stages, technical testing is developed to monitor the product specifications for quality assurance,
and account needs to be taken of the accuracy and reliability of the results. Consideration also needs to be
given to the costs of testing – Can the efficiency be improved? How much testing is needed for control of the
product quality?

5.4.2 Shelf life testing

Testing shelf life is important in food design because there is usually a target shelf life to be achieved for
transport and storage in the distribution chain as well for storage of the product by the consumer after buying.

From previous knowledge, some predictions can be made early in the design on the possible shelf life; foods
can be divided into short-life products (up to 10-14 days), medium-life products (up to eight weeks) and
longer-life products (up to 1-2 years). The possible deterioration reactions in the food are identified, for
example chemical reactions like browning and loss of colour, and microbial growth of food spoilage
organisms, moulds and yeasts. It may be necessary to carry out accelerated tests under severe conditions to
identify exactly what the deteriorative reactions are.

Shelf life testing needs to be started as soon as possible in the prototype development, usually at the start of
optimisation experiments. Shelf life testing takes time and can be the critical activity controlling the completion
of the project. The variables need to be identified - usually temperature, humidity and surrounding atmosphere
in storage; vibration, handling and contamination in transport. Factorial designs are again used so that the
quantitative effects of changes in the storage and transport conditions on product quality can be measured.

Think Break 5.3

Product testing: shelf life

The 'use by' or 'best by' dates on food products are indicative of the shelf life of foods. The shelf life is the
length of time before the consumer can recognise a change in quality or the product becomes unsafe.
Look at some 'best by' dates in the chilled cabinets of the supermarkets and note the 'best by' dates for
different types of foods and brands. Did the information on the package include storage temperatures?

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 How would you use this information for setting the conditions for shelf life testing of two new products:
(1) natural active yoghurt;
(2) vacuum packed sliced salami.

(See Lewis, H. And Dale, R.H. (2000) ‘’Chilled yoghurt and other dairy desserts’ in Man, C. M. D. and
Jones, A. A. (eds,), Shelf-Life Evaluation of Foods, 2nd. Edition, Gaithersburg, Maryland: Aspen
Publishers pp.89-109.)

5.4.3 Sensory evaluation

Sensory evaluation can be carried out by expert sensory panels or by consumers. Traditionally in product
design, the expert panel determined the differences between prototypes and the direction of the differences,
while consumer panels evaluated the acceptance of products or preferences between products. This meant
that consumer input did not take place until the final stages of prototype development. But with the
acknowledged importance of the early stages of product design, consumer panels are now used to guide the
design.

Such panels are used in screening the ingredients, determining the product characteristics and their strength
in the ideal product, developing and optimising the product profile of the product prototypes, and optimising
products for acceptance and cost. Care needs to be taken when choosing the “consumers” – are they the
people who buy the product, who prepare the meal, who eat it?

A trained panel may consist of between four and ten people, but consumer panels are larger, comprising at
least thirty people depending on the type of testing. The members of a trained panel after a month or longer
training are able to score the product qualities reliably and accurately. Consumer panels are not trained, but
are representative of the users of the product. Initially consumer panels were considered 'too much work' and
expensive, but experience has shown that this is not so.

The size of the consumer panel increases throughout the design as the importance of making the right
decision becomes critical and the penalty for a wrong decision becomes larger. In product formulation, it can
consist of 15-20 consumers, rising to 50-100 consumers during the final processing trials and 200-300 for the
final product prototype, while in some large markets with greater variability it may be even more. The smaller
panels are useful when some depth of knowledge is needed though they are not a statistically valid method of
determining how many people in the market will buy the product. But over the years, it has been shown that
there are significant correlations between the verdicts of the consumer panel and the larger consumer test if
the members of the consumer panel have been selected carefully and are representative of the market.

Consumer panels are used for seeking in-depth information about the product's characteristics and uses. The
aim is to obtain as much detailed information as possible so that informed changes can be made in the
product design.

The consumer panel gives opinions on all product characteristics, not just sensory qualities but others such as
safety, nutrition, size, ease of use, transport, storing and convenience. They can also be involved in the
design of the package.

The final consumer panels test the packaged product under the conditions in which they would use it. This
would normally be in their home, but sometimes because of secrecy and also the need to watch their use of
the product such trials may take place in the laboratory. For example, there is a need to check: Is the pack
ergonomically suitable? Does it fit their hands? Can they open it? Is the product suitable for their equipment

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and their abilities? Can they prepare and cook the product? Do the other people in the house like it? Is it
acceptable to younger/older people, different sexes?

Think Break 5.4

Product consumer testing: dog food

A company is developing a dog food for the working

dogs

in the rural market. The product is a large sausage which can be stored at ambient temperatures. It is,
with dog biscuits, the dogs' only food.

Outline the consumer test programme that you would organise with the dogs and their owners from the
start of the product design to the final selection of the product prototype at the end of the product design.

5.4.4 Costs

Costs provide a basic criterion for controlling the design; they need to be monitored throughout development
to ensure they are within the target range. At the beginning of the design, the company's cost structure and
the target range of costs for the new product need to be agreed by all involved. The basic costs for producing
and distributing the product can be subdivided into manufacturing costs, distribution and marketing costs and
general company costs. A simple breakdown is shown in Table 5.1

Table 5.1 Basic costs for producing and distributing a product

Manufacturing costs Raw materials cost

Direct processing costs
Fixed costs
Plant overhead costs

Distribution and marketing costs Physical distribution costs

Market channel costs
Promotion costs
Sales and selling costs

General company costs Administration costs

Development costs
Financing costs

Some of the manufacturing costs comprise raw materials, packaging, labour, depreciation of equipment,
electricity, steam, gas, water, waste disposal and plant overheads. In many companies, during the product
design and process development, the raw materials and direct processing costs are continuously determined
and are part of the design. For example, in the linear programming models for product formulation there is
usually either a total cost constraint for the raw materials or the aim is to minimise cost. Standard percentages
or ratios on these materials and processing costs are used to predict the company costs. This has to be

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carried out with care, especially with innovative products or new markets where some of the marketing and
distribution costs are unknown - these may be found to be too high only at the later stages of the project and
prevent the launch. At the end of the product design and process development stage, there should be
reasonably accurate forecasts of production and distribution costs, and some indication of the probable
marketing costs.

Think Break 5.5

Product testing: fruit drink powder development

Fruit drink powders are dissolved in water to give a refreshing drink. These drinks are popular with
children, and are also used as cheap drinks for large parties.

1.Identify the ingredients in fruit drink powders by reading the labels on some powders available in the
supermarket or by searching on the internet e.g. ‘Ingredient manufacturers turn powder into health gold’
by David Feder. http://www.foodprocessing.com/articles/2008/370.html Sighted 14/11.2008.

2. Identify the important product qualities in such powdered drinks, and suggest how you might test these
product qualities with laboratory testing, with trained sensory panel testing and with consumers.

3. Fruit drink powders are produced by mixing the ingredients so that they are evenly dispersed and then
they are packed into sachets. Identify important factors in this processing and packing.

Outline the method you would use to develop a fruit drink powder, combining Figures 5.1 and 5.2 in one
diagram.

There are three important general activities in product design: product formulation, packaging development
and processing development.

Production scheduling :

(click below)

Effective Planning and Scheduling.pdf

Scheduling (production processes)

From Wikipedia, the free encyclopedia

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 Scheduling is the process of arranging, controlling and optimizing work and workloads in a
production process or manufacturing process. Scheduling is used to allocate plant and
machinery resources, plan human resources, plan production processes and purchase materials.
It is an important tool for manufacturing and engineering, where it can have a major impact on
the productivity of a process. In manufacturing, the purpose of scheduling is to minimize the
production time and costs, by telling a production facility when to make, with which staff, and on
which equipment. Production scheduling aims to maximize the efficiency of the operation and
reduce costs.

Contents
[hide]

 1 Overview
 2 Key concepts in scheduling
 3 Scheduling Algorithms
 4 Batch Production Scheduling
o 4.1 Background
o 4.2 Scheduling in the Batch Processing Environment
o 4.3 Cycle-Time Analysis
o 4.4 Visualization
o 4.5 Algorithmic Methods
 5 See also
 6 References
 7 Further reading
 8 External links

Overview[edit]
Scheduling is the process of arranging, controlling and optimizing work and workloads in a
production process. Companies use backward and forward scheduling to allocate plant and
machinery resources, plan human resources, plan production processes and purchase materials.

 Forward scheduling is planning the tasks from the date resources become available to
determine the shipping date or the due date.
 Backward scheduling is planning the tasks from the due date or required-by date to
determine the start date and/or any changes in capacity required.
The benefits of production scheduling include:

 Process change-over reduction

 Inventory reduction, leveling
 Reduced scheduling effort
 Increased production efficiency
 Labor load leveling
 Accurate delivery date quotes
 Real time information
Production scheduling tools greatly outperform older manual scheduling methods. These provide
the production scheduler with powerful graphical interfaces which can be used to visually
optimize real-time work loads in various stages of production, and pattern recognition allows the
software to automatically create scheduling opportunities which might not be apparent without
this view into the data. For example, an airline might wish to minimize the number of airport gates
required for its aircraft, in order to reduce costs, and scheduling software can allow the planners
to see how this can be done, by analyzing time tables, aircraft usage, or the flow of passengers.

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Key concepts in scheduling[edit]
A key character of scheduling is the productivity, the relation between quantity of inputs and
quantity of output. Key concepts here are:

 Inputs : Inputs are plant, labor, materials, tooling, energy and a clean environment.
 Outputs : Outputs are the products produced in factories either for other factories or for the
end buyer. The extent to which any one product is produced within any one factory is
governed by transaction cost.
 Output within the factory : The output of any one work area within the factory is an input to
the next work area in that factory according to the manufacturing process. For example the
output of cutting is an input to the bending room.
 Output for the next factory : By way of example, the output of a paper mill is an input to a
print factory. The output of a petrochemicals plant is an input to an asphalt plant, a cosmetics
factory and a plastics factory.
 Output for the end buyer : Factory output goes to the consumer via a service business such
as a retailer or an asphalt paving company.
 Resource allocation : Resource allocation is assigning inputs to produce output. The aim is
to maximize output with given inputs or to minimize quantity of inputs to produce required
output.

Scheduling Algorithms[edit]
Main article Job shop scheduling. See also Genetic algorithm scheduling
Production scheduling can take a significant amount of computing power if there are a large
number of tasks. Therefore a range of short-cut algorithms (heuristics)
(a.k.a. dispatching rules) are used:

 Stochastic Algorithms : Economic Lot Scheduling Problem and Economic production

quantity
 Heuristic Algorithms : Modified due date scheduling heuristic and Shifting bottleneck
heuristic

Batch Production Scheduling[edit]

Background[edit]
Batch production scheduling is the practice of planning and scheduling of batch
manufacturing processes. See Batch production. Although scheduling may apply to
traditionally continuous processes such as refining,[1][2] it is especially important for batch
processes such as those for pharmaceutical active ingredients, biotechnology processes and
many specialty chemical processes.[3][4] Batch production scheduling shares some concepts
and techniques with finite capacity scheduling which has been applied to many
manufacturing problems.[5] The specific issues of scheduling batch manufacturing processes
have generated considerable industrial and academic interest.

Production quality and quantity control :

Forecasting and budgeting :

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Yield management :

A Definition Of Yield Management.

By Dominic Martin
Thursday, 28th December 2006

A yield management system - which can also be referred to as revenue management - is a

system that attempts to understand - anticipate and then react to consumer behaviour in
order to maximise revenue/profit.

How Does Yield Management Work?

To achieve maximum revenue/profit, a yield management system needs to have an

understanding of what has happened before and what is happening now; using this historical
data to predict what may then happen in the future. So the yield management system will
periodically review transactions that have occurred between the consumer and the hotel.

Other external information is then fed into the yield management system and this can include
statistical data, events such as public holidays, competitor price information, seasonal
buying patterns, etc. A predictive modeller then attempts to forecast the total demand within
a specific period for the services on offer by market segment and price point.

In simple terms yield management tries to answer the question "Given our operating
constraints, what is the best mix of services for us to sell within a particular timeframe, so
that we generate the highest revenue?"

The process of yield management optimisation helps an organisation to adjust its prices so
that they meet the total demand characteristics of its markets. In order to maximise the
revenue, prices can be determined by:

 Service
 Group of services
 Market (consumer type or geographical)
 A combination of the above

Yield management models are most effective where the service being supplied is
characterised as:

 Capital intensive
 Perishable (revenue is lost if the product/service is not sold by a particular point in
time)

and the demand side is characterised with:

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  Variability of demand
 Variability of value

Dominic Martin is the Marketing Manager for Data Track Communications ltd, who are
Europe's leading hotel guest telephony strategy and Call Yield Management experts. Data
Track's call yield management solutions enable hoteliers to measure, monitor and manage
their communications revenue and cost, across their whole estate. The Company's unique
independence from technology and service vendors ensures that the service works across
mixed technology estates and does not require capital upgrades. Data Track
Communications (DTC) can bridge any deficiencies in legacy systems by utilising their
service technology, at no additional cost. Thus hoteliers can improve profitability without any
capital expenditure.

Yield Management

By: Glenn Withiam

Executive Summary:

Yield management is the umbrella term for a set of

strategies that enable capacity-constrained service industries
to realize optimum revenue from operations. The core
concept of yield management is to provide the right service
to the right customer at the right time for the right price.
That concept involves careful definition of service, customer,
time, and price. The service can be defined according to the
dimensions of the service, how and when it is delivered, and
how, when, and whether it is reserved. Timing involves both
the timing of the service delivery and the timing of when the
customer makes known the desire for the service, whether
by reservation or by walking in to the business. Price can be
set according to the timing of the service, the timing of the
reservation, the type of service, or according to other rules
that seem appropriate. Finally, the customer can be defined
according to demand characteristics relating to the service,
the timing, and the price. The ideal outcome of a revenue
management strategy is to match customers' time and

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 service characteristics to their willingness to pay-ensuring
that the customer acquires the desired service at the desired
time at an acceptable price, while the organization gains the
maximum revenue possible given the customer and business
characteristics.

The strategic levers of yield management can be summarized

as four Cs: namely, calendar, clock, capacity, and cost. They
are bound together by a fifth C: the customer. The strategic
levers of yield management are geared to matching service
timing and pricing to customers' willingness to pay for
service in relation to its timing. Based on customers' demand
levels and characteristics, management can shift the demand
of those customers who are relatively price sensitive but time
insensitive to off-peak times. Shifting that demand clears
prime times for customers who are relatively time sensitive
but price insentive.

Yield management is a variable pricing strategy, based on understanding, anticipating and

influencing consumer behavior in order to maximize revenue or profits from a fixed, perishable
resource (such as airline seats or hotel room reservations or advertising inventory).[1] As a
specific, inventory-focused branch of revenue management, yield management involves strategic
control of inventory to sell it to the right customer at the right time for the right price. This process
can result in price discrimination, where a firm charges customers consuming otherwise identical
goods or services a different price for doing so. Yield management is a large revenue generator
for several major industries; Robert Crandall, former Chairman and CEO of American Airlines,
gave yield management its name and has called it "the single most important technical
development in transportation management since we entered deregulation." [2]

Contents
[hide]

 1 Definition
 2 History
 3 Use by industry
o 3.1 Airlines
o 3.2 Hotels
o 3.3 Rental
o 3.4 Intercity buses
o 3.5 Multifamily housing
o 3.6 Insurance
o 3.7 Telecommunications

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 4 Econometrics
 5 Yield management system
 6 Ethical issues and questions of efficacy
 7 Experimental studies of yield management decisions
 8 See also
 9 References
 10 Bibliography

Definition[edit]
Yield management has become part of mainstream business theory and practice over the last
fifteen to twenty years. Whether an emerging discipline or a new management science (it has
been called both), yield management is a set of yield maximization strategies and tactics meant
to improve the profitability of certain businesses that focus on yield. It is complex because it
involves several aspects of management control, including rate management, revenue streams
management, and distribution channel management, just to name a few of them. Yield
management is multidisciplinary because it blends elements of marketing, operations, and
financial management into a highly successful new approach. Yield management strategists
frequently must work with one or more other departments when designing and implementing
yield management strategies.[3]

Hotels[edit]
Hotels use this system in largely the same way, to calculate the rates, rooms and restrictions on
sales in order to best maximize their return. These systems measure constrained and
unconstrained demand along with pace to gauge which restrictions to implement, e.g. length of
stay, non-refundable rate, or close to arrival. Yield management teams in the hotel industry have
evolved tremendously over the last 10 years and in this global economy targeting the right
distribution channels, controlling costs, and having the right market mix plays an important role in
yield management. Yield management in hotels is selling rooms and services at the right price, at
the right time, to the right people.

Yield management system[edit]

Firms that engage in yield management usually use computer yield management systems to do
so. The Internet has greatly facilitated this process.

Enterprises that use yield management periodically review transactions

for goods or services already supplied and for goods or services to be supplied in the future.
They may also review information (including statistics) about events (known future events such
as holidays, or unexpected past events such as terrorist attacks), competitive information
(including prices), seasonal patterns, and other pertinent factors that affect sales.
The models attempt to forecast total demand for all products/services they provide, by market
segment and price point. Since total demand normally exceeds what the particular firm can
produce in that period, the models attempt to optimize the firm's outputs to maximize revenue.

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The optimization attempts to answer the question: "Given our operating constraints, what is the
best mix of products and/or services for us to produce and sell in the period, and at what prices,
to generate the highest expected revenue?"

Optimization can help the firm adjust prices and to allocate capacity among market segments to
maximize expected revenues. This can be done at different levels of detail:

 by goods (such as a seat on a flight or a seat at an opera production)

 by group of goods (such as the entire opera house or all the seats on a flight)
 by market (such as sales from Seattle and Minneapolis for a flight going Seattle-Minneapolis-
Boston)
 overall (on all the routes an airline flies, or all the seats during an opera production season)

Yield management is particularly suitable when selling perishable products, i.e. goods that
become unsellable at a point in time (for example air tickets just after a flight takes off). Industries
that use yield management include airlines, hotels, stadiums and other venues with a fixed
number of seats, and advertising. With an advance forecast of demand and pricing flexibility,
buyers will self-sort based on their price sensitivity (using more power in off-peak hours or going
to the theater mid-week), their demand sensitivity (must have the higher cost early morning flight
or must go to the Saturday night opera) or their time of purchase (usually paying a premium for
booking late).

In this way, yield management's overall aim is to provide an optimal mix of goods at a variety of
price points at different points in time or for different baskets of features. The system will try to
maintain a distribution of purchases over time that is balanced as well as high.

Good yield management maximizes (or at least significantly increases) revenue production for
the same number of units, by taking advantage of the forecast of high demand/low demand
periods, effectively shifting demand from high demand periods to low demand periods and by
charging a premium for late bookings. While yield management systems tend to generate higher
revenues, the revenue streams tends to arrive later in the booking horizon as more capacity is
held for late sale at premium prices.

Firms faced with lack of pricing power sometimes turn to yield management as a last resort. After
a year or two using yield management, many of them are surprised to discover they have
actually lowered prices for the majority of their opera seats or hotel rooms or other products. That
is, they offer far higher discounts more frequently for off-peak times, while raising prices only
marginally for peak times, resulting in higher revenue overall.

By doing this, they have actually increased quantity demanded by selectively introducing many
more price points, as they learn about and react to the diversity of interests and purchase drivers
of their cu

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 Yield Management in Hotel Industry.pdf

In a nutshell, yield management can be defined as selling a product or service to the right
customer, at the right time, and at the right price. Yield management strategies can be
applied to virtually any type of business that:

 Has a fixed number of products to sell. Examples includehotel rooms, airline or bus seats, or rental
cars.
 The product’s value is time-constrained, meaning that after a certain date or amount of time, the
product loses value.
 Different customers are willing to pay different prices for the same product or number of products.

HOW HOTELS USING YIELD

MANAGEMENT TO MAXIMIZE
THEIR PROFIT
SEPTEMBER 25, 2012 BY HMSILENT1234

Yield management is the process of understanding, anticipating and influencing consumer

behavior in order to maximize yield or profits from a fixed, perishable resource (such as
airline seats or hotel room reservations). In order to maximize their profit, they need to sell
the right product to the right customer at the right time for the right price. In fact, it is deeply
affected by the changing supply and demand. If the hotel managers can know more about the
economy, they can generate more profit easily. So that effective yield management is very
important to help create profit as against expenses.

When we are maximizing our profit, we first need to maximize our revenue by taking an eye
on its pricing, inventory allocation and selling strategy. For example, hotels will charge more
when peak seasons are coming.

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There are three Revenue Management metrics included average price, occupancy rate and
average revenue per available room which can help measure yield management performance.

Ÿ Average price, AP

AP= (global monthly revenue)/(rooms sold in the month)

Ÿ Occupancy rate, OC

OC=(rooms sold in the month)/(rooms available in the month)

Ÿ Average revenue per available room, RR

RR =(global monthly revenue)/(rooms available in the month)

Here are the calculation methods of yield management performance:

The Yield Statistic is the Ratio of the Actual Revenue (Generated by the Number of Rooms
Sold) to Potential Revenue (The Amount of Money that would be received from the Sales of
Rooms in the Hotel at a Rack Rate)

Formula 1: Potential Average Single Rate:

¨Potential Average Single Rate = (Single Room Revenues at Rack Rate) / (Number of Rooms
Sold as Single)

Formula 2: Potential Average Double Rate:

¨Potential Average Double Rate = (Double Room Revenue at Rack Rate) / (Number of
Rooms Sold as Double)

Formula 3: Multiple Occupancy Percentage:

¨Multiple Occupancy Percentage = (Number of Rooms Occupied by more than 1 Person) /
(Total Number of Rooms Sold)
Formula 4: Rate Spread:

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¨Rate Spread = (Potential Average Double Rate) – (Potential Average Single Rate)

Formula 5: Potential Average Rate:

¨Potential Average Rate = (Multiple Occupancy Percentage * Rate Spread) + (Potential

Average Single Rate)

Formula 6: Room Rate Achievement Factor:

¨Room Rate Achievement Factor = (Actual Average Rate) / (Potential Average Rate)

Formula 7: Yield Statistic:

1. Yield Statistic = (Actual Rooms Revenue) / (Potential Rooms Revenue)
2. Yield Statistic = ((Rooms Nights Sold) / (Rooms Nights Available)) * ((Actual Average
Room Rate) / (Potential Average Rate))
3. Yield Statistic = Occupancy Percentage * Achievement Factor
Formula 8: Identical Yields Occupancy:

¨Identical Yields Occupancy = (Current Occupancy Percentage) * (Current Rate / Proposed

Rate)

Formula 9: Equivalent Occupancy:

1. Equivalent Occupancy = (Current Occupancy Percentage) * ((Rack Rate – Marginal Cost) /
(Rack Rate * ((1 – Discount Percentage)) – Marginal Cost)
2. Equivalent Occupancy = (Current Occupancy Percentage) * ((Contribution Margin) / (New
Contribution Margin))

Restaurant Yield Management.pdf

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