Strategic Operations Issues
STRATEGIC OPERATIONS ISSUES Elizabeth Kelly ABSTRACT This paper identifies an operational issue of a national food-chain. The problem is identified with the demonstration of the functional relationships and process flow analysis. With the use of concepts of operations and process management, the problem is analyzed and methods sought to provide recommendations and an implementation plan.
TABLE OF CONTENTS Background of Hi-Lo Food Stores……………………………….. 5 Problem Identification……. ………………………………………5 Background of the LINX Operating System………………………6 Analysis using Concepts……………………………………………7
Recommendation and Implementation Plan……………………….. 9 References………………………………………………………….. 11 BACKGROUND OF HI-LO FOOD STORES Hi-Lo Food Stores is a supermarket chain operating in Trinidad since 1950. With 17 outlets spread throughout the length and breadth of the country, Hi-Lo Food Stores employs over 1800 employees. PROBLEM IDENTIFICATION At Hi-Lo Food Stores, which is considered a mass service process type (Slack et al, pg. 114) customers are afforded the option of different payment methods. Payment methods include cash, credit cards and debit cards.
In an effort to continue to provide better options for settling of payments to merchants and customers alike, the company Infolink was formed. Infolink is a joint venture company owned by the four commercial banks of Trinidad and Tobago whose focus is to provide state of the art financial transaction-switching technology by way of debit card payment. In recent times, it has been observed that on peak commercial periods, Hi-Lo Food Stores terminals have not been able to process debit card payments. The message ‘No Communication Field’ is generated when debit card transactions cannot be processed.
The customer is either forced to use a credit card or use cash. The nature of the business of Hi-Lo Food Stores would in some instances cause for a large sum of money at the check-out terminal. Customers, who do not have a credit card facility available, are then forced to leave their merchandise at the store and locate an Automated Banking Machine (ABM) to withdraw cash and then return to the store to complete the transaction. Hi-Lo Food Stores is then faced with the issue of storing in a secure manner those items selected and already bagged for the prospective customer and can only be delivered until payment is tendered.
This then causes a storage issue since these items are usually placed at the terminal the customer was accommodated at. Sub-issues of pilfering and bottlenecking of check-out counters have also been evident. The second issue arises when the customer does not return for reasons such as, no ABM facility within range of Hi-Lo, and then causes the customer to leave to a more convenient supermarket. This leaves Hi-Lo with spoilage and re-stocking of the items already held at the terminals. Customer dissatisfaction sets in and an erosion of brand loyalty occurs.
The impact on Hi-Lo Food Stores can then be summarized to include increased check-out times at terminals, customer dissatisfaction and decreased sales. BACKGROUND OF THE LINX OPERATING SYSTEM In 1992 saw the advent of the LINX shopping experience to Trinidad and Tobago. Infolink Services Limited is the facilitator of the LINX Network where debit cards from any commercial bank in Trinidad and Tobago would be processed at all Automated Banking Machines (ABMs) regardless of the commercial bank the customer so belonged.
This system led the way for merchants to employ the LINX Network at their Point-of-Sale terminals thus allowing debit cards issued at any commercial bank in Infolink’s Accredited Partners to be accepted at these participating merchants. While the LINX system proved seamless during its pilot project phase of operations, in recent times as the service became more widely accepted by the general public, LINX seemed to be unable to manage the demand of merchants. Evidence has not been offered on the number of transactions over a structured period, in order to ascertain the workload capacity of the Infolink Services Limited’s system.
As the writer has evidenced at Hi-Lo Food Stores, the debit card payment system seemed unable to handle the workload during peak periods of demand. ANALYSIS USING CONCEPTS The use of technology to supersede traditional methods of payment can be seen to deliver great advantages and benefits to Hi-Lo Food Stores. The process design of the debit card system in its conception can be seen to provide great advantages to the mass service process type. This payment method can be seen as an internally supportive method of increasing operations capabilities.
For example, in times prior to the LINX operations, Hi-Lo Food Stores terminal processing time was generally a longer process. This could have been caused by the customer having to present a personal cheque for payment along with a cheque guarantee card, if applicable. The second step would be for the cashier to examine both card and cheque for validity. In instances where the cheque was written in excess of the card guarantee amount, a supervisor would then be referred to for authorization.
A process that would guarantee a longer turnaround time than the now widely used LINX service, debit card payment option. In analysis of the process however, we must measure the impact of the unreliability of the service and how it causes delays and decreased outputs. These delays then impact on the cycle time at checkout counters. In carrying out a process analysis, it is obvious that the LINX operating system has a process capacity which has not yet been determined. In identifying the system’s capacity, resources may be input into the process for improved reliability and performance.
As can be seen the debit card payment system when effective can have a positive strategic impact on operations performance objectives. By firstly, impacting on the speed by which customers is processed at check-out terminals. When you have a quick turnover time you reduce the traffic and congestion in the supermarket which can result in breakage and accidents. Secondly, the LINX system has impacted on flexibility by allowing the customer the option of choosing a more direct form of payment as opposed to credit cards.
Dependability can be seen as a performance objective where the system can be relied upon. The above performance objectives, speed, flexibility and dependability have been negatively impacted on as the debit card system has become unreliable during peak operating times as such the issues Hi-Lo has experienced relates to its inefficiency of its customer experience, its quality of service is risked, thus losing the trust and loyalty of some customers. RECOMMENDATIONS AND IMPLEMENTATION PLAN
It is the writer’s recommendation that an immediate sourcing of an Automated Banking Machine (ABM) be allocated to all branches. This ABM facility will give the customer the ability to exact cash to the check-out terminal without leaving the premises. The ABM facility will have the effect of speeding up turnaround time at terminals for payment. The added advantage of the facility not only being available to check-out customers but the facility will encourage more traffic with customers who may need just the convenience of an ABM facility.
The ABM facility will be strategically placed in an area just after the bank of check out tellers, but away from the main entrance point. This would force the person who came for the convenience of the ABM facility only to line up, surrounded by small convenient items that may encourage purchasing of candy, gum, magazines etc. In the hopes of a long term resolution, Hi-Lo Food Stores conduct a process design-analysis. This analysis will determine the throughput time and impact upon the flow rate of customers by measuring the number of successful or unsuccessful attempts using the debit card system.
In conducting this analysis, list the customers alternate payment method used and whether immediate payment was affected. The system of process mapping can assess the processes for example, Hi-Lo Food stores must also account for those customers who are inconvenienced by having to visit an ABM to use cash as a payment method. List those persons who in fact will follow through and complete the transactions as against those persons who find it far too inconvenient to return to Hi-Lo.
With the use of this data, Hi-Lo food stores will then be able to account for manpower used at the terminal for processing a void transaction, storage of items, spoilage of perishable items which may occur and hours of duty time spent re-stocking. Finally, Hi-Lo in conjunction with Infolink needs to formalize a structured plan of action to implement a larger capacity for processing of debit card transactions, and for Hi-Lo to ascertain its feasibility. ACTIVITY| TIME| OWNERSHIP/RESPONSIBILITY| 1. 1 Source a consultant | 2 weeks| IT Department| 2. 1 Identify number of transactions incomplete| 6 weeks| IT Department| 2. Identify time periods for ‘down’ time| 6 weeks| IT Department| 3. 1 Identify source of problem| 1 week| Consultant| 4. 1 Make recommendations| 2 weeks| Consultant| 5. 1 Implement changes and test| 6 weeks| IT Department| 6. 1 Gather feedback from customer| 2 weeks| Marketing Department| 7. 1 Make further recommendations| 1 week | Consultant| 8. 1 Implement and test| 3 weeks| IT Department| | | | REFERENCES Slack, N & Chambers, S & Johnston, R & Betts, A 2009, Operations and Process Management, Principles and Practice for Strategic Impact, 2nd edn