Capacity Planning in Service Industry

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Table of Contents

Executive Summary
Introduction
Literature Review
Technical Part – The Research Project
Applied Research Model and Design
Case Study– Advantages and Disadvantages
Evaluation of the Case
Summary of findings and Recommendations
Conclusion
References

Executive Summary

Capacity planning plays a key role in the management of an industry. The concept applies in all types businesses to ensure successful determination of the production capacity required by an organization in meeting changing demands for its services and products on its customers and/or clients.

As it would be observed, the role of capacity planning would apply differently in various industries and sectors, depending on the services and products that are offered. There is no doubt that, capacity planning is one of the most effective management tasks that modern businesses should incorporate in their strategic planning processes.

This study examines capacity planning from the perspective of a firm in the service industry. A case study in capacity planning in a service industry has been examined for the purpose of this study, with hotel as the main sector of interest. The report starts with a brief overview of the concept and its importance on businesses.

There are various theoretical as well as conceptual literatures that have ascertained the application and importance of Capacity Planning in business. Some of these literatures have succeeded in establishing important aspects associated with this significant concept of marketing.

A portion of these literatures have been examined with the aim of providing an insight on the trend of Capacity Planning and the significant role it plays in modern industries. There is also a technical section reflecting the actual projects that have been undertaken, together with the research processes applied in getting to the conclusion.

Also examined here are advantages and disadvantages of Capacity Planning in regard with the chosen case, which is based on hotel as a type of service industry. There is an in-depth evaluation of the case to show how the concept of Capacity Planning has been used, and the purpose for which it has been applied in the chosen case.

There is always a summary of findings and recommendations for every research report. In this context, the observed outcomes are described, followed by possible recommendations on what should be improved. Evaluation of the case comes before the conclusion, which closes with a reiteration of the key points.

Introduction

The term capacity, as used in this report, refers to the amount of output resources or productivity that a business can manage to deliver in a specific period of time. Capacity Planning simply refers to the art and science of estimating and determining the capacity that an organization requires in meeting the ever-changing demands of its products and services.

In other words, this significant concept is applied in the business world to help entrepreneurs determine if there would be a need to diversify their operational outputs without having to strain the existing resources.

Some of the primary resources that can be used to conduct capacity management include things such as facilities, labor, and equipment, which are certain to make a contribution towards a company’s productivity and performance.

Capacity planning in business is conducted for four primary reasons and these are; to increase product and service demand, to change environment and technology approaches, to drop demand, and in spotting new business opportunities (Umble, Haft & Umble, 2003).

As it would be observed, the main objective of Capacity planning is to eliminate the discrepancy of inefficiency that may result from imbalances between the capacity of a company and the demands for its consumers.

A typical concern for many companies on the concept of capacity planning is whether significant business or marketing resources will be readily available to contain heightening demands that may be realized as the interactions with customers or clients increase.

For effective planning, capacity planners apply business forecasts and plans to predict what should be expected in the future. In this regard, capacity planning ensures that new capacities are included in the business at an earlier time, to enable the industry meet the anticipated product and service demands.

There are many advantages that are associated with application of capacity planning in an industry. First of all, the concept serves as a way of sustaining surprise in business. This timely planning also helps companies to invest on important business resources such as leasing of new facilities and purchase of new equipments.

Another benefit of the concept is that, it helps in mapping business objectives into successful outcomes as anticipated by entrepreneurs and the stakeholders. Capacity planning also plays a key role in ensuring reporting of services, which is management oriented.

Industries and companies can monitor costs in the course of high economical times and in recession. This allows businesses to budget and plan for expected changes by incorporating financial resources where necessary.

There is a need for new space and locations as businesses grow. In this regard, business investors would find it easier to discover the need to launch new production facilities, where capacity planning has been applied. Through effective capacity planning, businesses can be certain of developing projection personnel levels and facility needs that are more accurate.

Capacity Planning can also be used in maintaining perfect production levels all year round, particular in the course of anticipated business cycles. According to Staehr and others (2010), Historical business data acquired through capacity planning is a key tool which can be utilized in planning production capacity and ensure there are enough resources to contain the change in demand.

More importantly, this timely planning helps businesses to identify the periods at which recessions are expected, thus taking the necessary steps that need to be applied in order to remain stable and competent in the market.

Apart from production and personnel sectors, the other field where capacity planning can be useful in business is the information sector. Companies, particularly modern ones, do accumulate wide packs of digital information every day. Most of this information is crucial for the growth and success of businesses.

In that regard, effective capacity planning in business plays a significant role in ensuring that there is permanent and safe storage of vital information which is essential in the efficient productivity of industries. Based on the above benefits, capacity planning is a priority that needs to be addressed as a long-term approach that plays a key role in establishing the overall rate or level of resources owned by a company.

As it would be observed, the overall decision of capacity planning or capacity management, as it is known sometimes, would influence various key aspects of business performance. Some of these aspects would include the operating cost, production lead time, the ability of the company to operate and compete with other businesses, and customer responsiveness, among others.

Literature Review

Empirical evidence from past studies by various researchers and scholars has confirmed the ability of capacity planning on investment decisions. There is no doubt that there is no other way by which superior business performances can be achieved in the modern world, except through high levels of capacity planning and management.

No matter how smart and cherished products and services by a particular company would be, no company can reign the global markets without applying the magical concept of strategic business planning.

Good planning enables enterprises to focus on the changing demands of products and services in the market, thus executing their most valuable resources to attract the best business practices expected in the market (Lengnick-Hall, Lengnick-Hall, & Abdinnour-Helm, 2004).

For many years now, investors have come to see the benefit of this business idea as a very reliable tool that can be used to outline the equipment and personnel that are necessary in helping their businesses grow. Development of financial projections have proved to be an easy deal for many companies, since future expenses can closely be estimated and predicted through capacity management and planning.

The concept of capacity planning has played a great deal in helping businesses and investments cut costs on normal expenses. Taking the example of the computer technology, component engineers and manufacturers have made life easier and more affordable through the concept of capacity planning.

To emphasize on this fact, various computer parts such as the memory and processors can be upgraded for future application, and this is the best capacity planning which has ever been realized in the technology industry. Through this idea, people will not have to budget for new purchases, whenever one of their machines threatens to go down, but they can just upgrade them and save extra cost on new purchases.

Capacity planning is an integral part of business planning and management simply because it aids industries and businesses advance in regard with the projections they have established (Schuler & MacMillan, 2006).

No matter the levels of the business projections that businesses could make regarding their investment plans, capacity planning will make things easier for them through manufacturing projection, facility planning, and personnel planning.

The idea of capacity planning is known to have facilitated processes that are more efficient for enterprise success, thus placing many companies on a strong competitive edge (Occhino, 2010).

Through comprehensive capacity plans, competent investors in the world have got used to setting higher goals for them in the business world, and they have always gone ahead to achieve them. Over the last few decades, focused businesses from different industries have managed to gain long term competitive advantage over their rivals in the market, as a result of strategic planning achieved through capacity planning.

Capacity planning, management, and forecasting directly addresses the needs and success of industries, and their timely incorporation in business could encourage and facilitate smart utilization of resources and capital (Flynn, Schroeder, & Sakakibara, 1995).

Unlike in the past, when planning tasks were performed with paper spreadsheets and electronic calculators, things have become much easier nowadays, with the modern advancement of computer technology, where technology-enabled planning practices can be applied to process efficient planning data and information.

This revolution has acted as a major push for strategic business planning and management practices, thus encouraging full participation of entrepreneurs in comprehensive enterprise planning. This has not only helped to translate strategic business objectives and goals into operational targets, but has also equipped modern businesses with the ability required to thrive in the fast-paced business environment of today.

Technical Part – The Research Project

Hospitality is known to be capacity-constraint service industry, and for that reason, hotel has been as the area of interest for this study. Capacity in this type of industry can be assessed using information and data that are relevant to the service itself, such as the number of customers or clients that are served within a given period of time or the number of tables that are available for customers (Seddon, Calvert & Yang, 2010).

Likewise, capacity planning in this form of service industry would be conducted using the same aspects. For the purpose of this study, an actual research project was undertaken to determine the role of capacity planning in the field of interest i.e. service industry, and particularly hotels. Following is a summary of the research proposal carried out for this project.

Objective of the Research

The main objective of the research was to ascertain the importance of capacity planning in business, particularly in the service industry. Another objective of the study was to evaluate the application of this strategic tool of management in today’s business world.

Research Hypothesis

Capacity planning is a key management task in the service industry.

Research Question

The main research question in the study was to observe and determine whether capacity planning has any impact on a business within the service industry.

Study Methodologies

Both quantitative and qualitative methodologies were applied in this study, to determine the application as well as the impact of capacity planning in the hotel service industry. These were the most suitable methodologies to apply here, since the approaches used in collecting data and information would be combined to generate unbiased results.

In this regard, each of the two methodologies was applied independently in the study, before a comparison was done on the outcomes to improve the credibility of the findings. As it would be observed, each of the two methodologies had its advantages and disadvantages. For instance, talking of advantages, quantitative was appropriate for this study, since its application mainly focused on analysis of numerical data and statistics.

This way, answers to some questions related to the study hypothesis were sampled from selected participants to ascertain the variable of the overall findings. Through quantitative methodology, it was easier to sample information for the final analysis of the outcome using statistical approaches.

Study Population

This study was carried out in the U.S. with the main participants being drawn randomly from seven states, where a total of 300 workers from small and big hotels were featured. Over eighty percent of these participants were people with distinctive reputations in the hospitality sector.

Applied Research Model and Design

Survey proved to be the most appropriate research model to use in the study. Here, all the participants were taken through a structured interview session that was conducted on a face-to-face medium. This form of inter-personal interaction with the participants was the most suitable model of survey to employ in this context, considering it high flexibility nature.

Talking of the design, questionnaires were used to get information from the selected participants, through a simple random sampling method. In this case, each participant would have an equal chance of getting selected for the interview. This would help in eradicating any possible cases of bias that could have risen from the research findings.

Limitations

Although the study had proved successful in achieving its aims, there were various uncontrollable aspects witnessed in the course of the project whose impact must have interfered with quality of the potential outcome of the research.

For instance, there were some cases when the interviewers were forced to interview people in groups, especially when the members came from the same company, and this may have interfered with the efficiency and quality of the feedback received.

Another limitation here was that, the 300 research participants were drawn from only 15 hospitality companies, and this number could not have been enough to generate the best results for this study.

Findings

Data analysis and Interpretation for this study was carried out using two methods for the purpose of comparison. These methods are; software application and manual methods.

Using the SPSS software application, it was easier for the researchers to come up with a tabulated report on the feedback given by the participants through the questionnaires. As it was observed from this study, more than three-quarters of the participants had expressed ideas confirming the research hypothesis.

Case Study– Advantages and Disadvantages

The real case chosen for the purpose of this study is a case study showing how Hilton Hotels have achieved excellence through capacity planning. Some of the notable advantages from this case that have been realized by the company include high profits, improved customer satisfaction, and sustainable competitive advantage in the hospitality sector.

However, there some disadvantages as well, and these would include things such inaccurate predictions resulting from unexpected turn in demands. Another outstanding disadvantage here is that, since capacity practice is a long term process, Hilton Hotels have constantly used it in their management process, thus ending up spending excess workloads of resources for this task alone.

Evaluation of the Case

This case study shows how Hilton Hotels uses capacity planning as a road map to effective and efficient management of their business. For instance, the case explains how an attempt to become more aggressive in business would enable the company to realize new business opportunities in other fields such the gaming industry.

There is also a detailed report of how the company applied capacity planning, among other management practices to predict the demands of its customers and clients allover the world. This, according to the case would help them come up with the necessary plans that would help them focus on the needs of their many customers, thus improving customer services in all levels of accountability.

Through these interventions, Hilton Hotels were able to realize increased marketing opportunity in the service industry. It is also evident from the case that, Hilton Hotels have diversified their services in over fifty countries worldwide, and this great success has been realized as a result of effective capacity planning.

Summary of findings and Recommendations

Based on the observations of this study report, capacity planning and management is a significant tool whose role in business cannot be overestimated. The practice helps entrepreneurs come up with the best decisions regarding the use of available resources in their businesses. More importantly, it helps them predict requirements of business resources, thus preparing early in advance for any changes that may present.

As it would be observed from previous studies on this topic, capacity planning integrates with other key business practices such as performance management to offer acceptable service levels to consumers. In this respect, it would be good for entrepreneurs in all industries to embrace the best practices of capacity planning, so as to be able to offer satisfactory products and services to their customers and clients.

Conclusion

As it is observable from this report, this research has successfully achieved the intended goal. First of all, it has set ground on capacity planning and its importance on businesses. The objective of the study has been emphasized in the conceptual framework, which highlights previous views and opinions by experts in the field.

The main objective of this research is to examine capacity planning as it applies in a service industry, and this goal is well-achieved through out the report.

Capacity planning is still a priority in today’s business world, and this is emphasized in the featured research where the study hypothesis has been confirmed. Based on the observations of this study, capacity planning is the management tool required to connect entrepreneurs with the customers.

References

Flynn, B., Schroeder, R., & Sakakibara, S. (1995). The impact of quality management practices on performance and competitive advantage. Decision Sciences, 26(5), 659-691.

Lengnick-Hall, C., Lengnick-Hall, M., & Abdinnour-Helm, S. (2004). The role of social and intellectual capital in achieving competitive advantage through enterprise resource planning (ERP) systems. Journal of Engineering and Technology Management, 21(4), 307-330.

Occhino, T. (2010). Capacity planning model: the important inputs, formulas, and benefits: Advanced Semiconductor Manufacturing Conference and Workshop. New York: IEEE/SEMI.

Schuler, R., & MacMillan, I. (2006). Gaining competitive advantage through human resource management practices. Human Resource Management, 23(3), 241- 255.

Seddon, P., Calvert, C., & Yang, S. (2010). A Multi-project model of key factors affecting organizational benefits from enterprise systems. MIS quarterly, 34(2), 305-328.

Staehr et al. (2010). Understanding the business benefits of enterprise resource planning systems: Proceedings of the 8th Americas Conference on Information Systems. Texas: Dallas Publishers.

Umble, E., Haft, R., & Umble, M. (2003). Enterprise resource planning: Implementation procedures and critical success factors. European Journal of Operational Research, 146(2), 241-257.

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