Case 5 Sunshine EnterpriseI. ProblemIts not all fun under the sun for Abby Martin when a customer complained about a $25 tip service upset .Abby is the owner of Sunshine Enterprises, a company of six restaurants and a by-the-sea hotel in Southwest Florida. In managing her business, she highlights the importance of ensuring that she meets customer expectations. She customizes her business depending on the location, the target markets needs and demographics. She uses an entrepreneurial approach of observation and close contact in managing her business. Although she recognizes the fact that she can still fail, she loves the challenge of providing quality service to the companys customers. It is no surprise that she has established a reputation of superior service and food quality in her restaurants. Proper financial and quality controls are paramount for the company. Nonetheless, like most companies, she also envisions of expanding her business. She feels that the economic opportunities currently presented to her opens the doors to do just that. Given this, How can Abby improve its quality management while planning for the expansion?Secondary problem: What actions should the management take to resolve the current $25 dollar dilemma?II.Point of View: Abby Martin (Owner)III. Assumptionsa. Problem in record keepingb. 2009c. All 6 branches are located in Southwest Florida. d. Currently does not use lean operatione. Each restaurant has a unique namef. Customer is drunkIV. AnalysisCompany Strategy AnalysisCurrently, Abby Martin manages her restaurants quality through visiting the restaurants every few days and closely observing customers behavior and checking the overall ambiance and cleanliness of the restaurant. She also ensures close contact and direct communication with her staff to ensure that they are performing well at work and to know more about the problems directly encountered by the staff. The way Abby Martin handles her six restaurants (i.e. hands-on restaurant management) is effective but does not ensure efficiency especially when she decides to push through with the expansion of Sunshine Enterprises in the Tampa and Orlando areas.

To further gain an understanding about Sunshine Enterprises operations, a SWOT analysis of the totality of Sunshine Enterprises was conducted.

SWOT Analysis of Sunshine EnterprisesSTRENGTHSDiversified/customized restaurant concepts according to local market demographicsSuperior service and food quality in Southwest Florida branchesStrategic location of the restaurants1/100 customer complaintReasonable pricingConsistency in providing serviceWEAKNESSESIndividual ordering and shipment of items for each unique restaurantCustomers from other areas of Florida have to travel far to get to Sunshine Enterprise restaurantsProblem encountered with Mr. Otter

OPPORTUNITIESExpansion in other areas in Florida (e.g. Tampa and Orlando)Taking advantage of the current health trendExpand services and variety of products/menusTHREATSCompetition within the industryChanging consumer behavior/tastesDecrease in consumer spending due to recession

STEP AnalysisSocial Consumers are becoming more health conscious Varied demographics in different areas in FloridaTechnological Technological advancements in restaurant facilities Automation of business transactions Online orderingEconomic Low interest rates due to recession Post-recession shift in consumer behavior (i.e. reduced spending)Political Government regulations regarding health and food standards

In deciding whether or not to push through with the expansion of Sunshine Enterprises in the Tampa and Orlando areas, the costs and advantages entailed by doing so should be considered.

Cost-Benefit Analysis of Planned ExpansionCOSTSHigh start-up costs (e.g. building, utilities, and equipment) Additional maintenance costsDivided attention (time consuming)Employee training and additional payroll expensesUncertainty in gaining customers in the new areaBENEFITSIncrease in revenueLow interest rates due to recessionLeverage expertiseExposure to wider audience (i.e. being able to tap into new customer markets) and established customer baseBuild business valueAchieve economies of scale (cost reduction advantage)

Sunshine Enterprises currently employs a traditional payment system which is a paper-based mechanism of accepting customer payments. When making payments through credit cards, the cashier facilitates it and prepares two copies of the receipt (i.e. one for the customer and the other for restaurant documentation). The customer is then asked to verify the amounts recorded on the receipt by letting him sign on it. If a customer notices a discrepancy, the customer should inform the cashier to correct it accordingly. When giving tips through the use of credit cards, the customer should write the amount of the tip on the receipt with his signature on it. A problem arises when a restaurant personnel alters the amount written on the receipt.

Cause and Effect Diagram

A fishbone diagram will help analyze the 25-dollar problem. This diagram aims to trace the possible causes in 5 separate categories which are Environment, Machine, Man, Method and Material. Under the environment category, a possible cause is that the restaurant doesnt uphold standards of quality and ethics which may cause the rise of fraudulent tip. For the payment method that the restaurant apply in their operation, there is no additional layer of security. When the customer loses her receipt, the manager ends up with no alternative way to verify the amount and its breakdown in the receipt. Moreover, there is also no additional security to verify the amount of tip aside from cross referencing it to the customer. An additional security is needed specially when the customer is drunk, in which case waiters have higher possibility of doing fraudulent acts.

The manual way of adding tip is the most obvious cause of the problem. By implementing paper-based and manual-based of payment system, waiters can easily change the amount. The company should also improve its record keeping. It must have records of the breakdown and total amount of receipt. In that way, manager can easily review and check operations of the company. If feasible, the company should change its payment system to a more handy and automatic equipment.

All of the parties involved in the problem have a share in the causes. The customer should have written the amount of tip comprehensibly and should have checked the receipt before leaving the restaurant. The integrity of waiter is in question. As for the credit company, it would be better if they can give the breakdown of the amount. In doing do, feasibility and permission from customer must be acquired. Moreover, the manager should fail-safe the problem instead of pointing out that he cant do anything. Customer satisfaction is an ingredient to companys success. The manager should offer alternative ways to solve the problem.

LEAN OPERATION AND SIX SIGMA

Lean operations have a long history in manufacturing industries but nowadays, it is already streamlining service sector processes. Although its more difficult to apply it in the latter sector, the results have proven it to be effective in reducing costs and making customers happier. On the other hand, Six Sigma is founded on controlling defects. Although the use of one or the other is effective in quality management, combining Six Sigma with lean principles creates a powerful process to provide the customers with the highest-quality service.Because Sunshine Enterprise provides interaction-based services, customers need more personal care and attention. Quality is paramount to the company. Restaurants, in general, deal with wastes on a day to day basis. Not just physical wastes such as excess raw materials but also anything that does not add value to the service provided. Sunshine Enterprise can eliminate these wastes by utilizing lean, six sigma or both methodologies in order to provide quality service at the fastest speed with far less compromise.Excess raw materials are common to this type of business. As a result, inventory control is an important factor that needs to be monitored in restaurants. Because it is one of the biggest waste factors, it consequently results to higher expenses. Given that Sunshine Enterprises usually orders in bulk, the possibility of wastes is just around the corner. Streamlining these methods aims to minimize the food or ingredients that are spoiled before used.Analyzing the layout of the restaurant is also a process utilized in Lean and Six Sigma methodologies. It offers the best layout possible in order to ensure that the flow of employees and services do not collide with one another and create service interruptions. Sunshine Enterprise uses different concepts in its restaurants which includes differences in facility decor, size and layout. The company needs to attain the optimal layout that will reduce such wastes in services provided.

CUSTOMER SATISFACTION MODEL

Although there are many factors affecting customer satisfaction, studies show that perceived value, customer expectations and perceived quality are the key factors that lead to customer satisfaction and ultimately, customer loyalty. Customer satisfaction has always been highlighted as an important concern for service companies like Sunshine Enterprises. Not only does it translate to more profits but it also has an overall impact on the brands equity. Customer satisfaction, as defined by Hansemark and Albinson, is the overall customer attitude or emotional reaction to the difference between the service they anticipated and the service they received. Any successful hospitality business banks on customer satisfaction because it leads to repeat purchases and eventually, customer retention and loyalty. Sunshine Enterprises aim to provide quality services because customers expect to receive the value of the price they pay. Satisfied customers influence positive word of mouth marketing. On the other hand, dissatisfied customers like Mr. Otter can have a negative impact on the company in general. They sometimes voice out their complains as a means to receive compensation. Companies should develop strategies in handling these dissatisfied customers to prevent losing them. However, the company should ensure that they still do so with care and value for the customer.

GAP MODELAnalysis of Some Possible Gaps on Quality ManagementIn connection with the customer satisfaction model aforementioned, one of the analysis tools used by the group to analyze Sunshine Enterprise is the gap model of service quality. It is an important customer-satisfaction framework that highlights the main requirements for delivering a high level of service quality by identifying the gaps that lead to unsuccessful service delivery. Gap 1: Knowledge Gap (Between customer expectations and management perceptions of those expectations)Management perceives that the customer expects and wants delicious and affordable food. But in reality, the customer may be concerned with the treatment and responsiveness of personnel whenever problems arise.

Gap 2: Standards Gap (Between management perceptions of a target level of quality and the task of translating these perceptions into executable specifications)Management perceives a target level of quality standard. But then with training and guidance of personnel, it is not properly implemented and feedback is not properly taken into action.

Gap 3: Delivery Gap (Between quality specifications and their implementations)Management may train personnel to react fast to problems to avoid negative customer goodwill. But then, it is not specified how fast to respond, which in return creates inefficiencies in service delivery.

Gap 4: Communication Gap (Between actual delivery performance and external communications with the customer)The Sunshine Enterprise may look clean and its menu may look filling and delicious in company brochures and other promotional materials. But in reality, the restaurant may be dirty and not well ventilated, and the food may be served differently in an unpleasant way.

Gap 5: Service Gap (Between customers expectations and perceptions)

This arises when customers misinterpret the intention of management. An example would be personnel keep asking customer if there are anymore concerns, but the customer may interpret that the personnel is very annoying and just wants additional tip.

Known for customizing its business for diverse local needs, its reputation in Southwest Florida for superior service and food quality shows that the firm has favorably addressed these gaps. Abbys entrepreneurial skills and her own approach on quality control strongly supports this claim. This is also backed by internal data that there is 1 over 100 negative customer complaint per customer comment.V. RecommendationERIKE-nsure to resolve Mr. Otters complaintR-evamp the old payment schemeI-mplement lean operationK-eep up with the ERP trend

In fail-safing the customers complaint about the waiter adding a $25 tip on his bill, whether or not it was the customers fault, Mr. Gladiolus should apologize to him for such incident and assure that the problem will be addressed immediately. In that way, the customer will feel that Mr. Gladiolus understands his frustration and values customers concerns. This will also help mitigate further complications with the customer. In addition, Mr. Gladiolus should involve the customer in deciding what steps to take to resolve the problem in order to avoid overcompensation. If the customer lets Mr. Gladiolus decide, he may offer him the following as compensation:(1) Refund half of the 25 dollars(2) Gift certificate for a future meal(3) Discount coupons

To avoid encountering such problems in the future, Abby Martin should implement a new payment scheme that involves better control over payments.(See Figure 1.2)

Through this payment system, the waiter will bring the equipment to the table and allow the customer to swipe and enter the pin. It will also allow the customer to see and check the inputs made by the waiter. In this way, the customer can see if the inputted bill and tip is correct. This will also be integrated to the ERP system. This small equipment is feasible since it will not cost a lot considering the current trends in technology.

Given the cost-benefit analysis, Abby Martin should push through with the expansion in the Tampa and Orlando areas. The advantages entailed by the expansion clearly outweighs the costs. By expanding, Sunshine Enterprises will be exposed to a wider audience; thus, it will help increase revenue and build business value over the long run. Also, since the setting is in 2009, Abby Martin could take advantage of low interest rates due to recession.

To improve the operation of the company and start planning the expansion, we recommend to delegate the execution of quality management to the manager of each branch. With this strategy, Abby Martin can focus on planning the expansion.

Sunshine Enterprises should implement a lean operation system. First, we propose that Sunshine Enterprises utilize a JIT System. As mentioned earlier, excess materials is a common problem for the company. They need to minimize the food or ingredients that are spoiled before used to also reduce expenses.

Second, we recommend that Sunshine Enterprises continue customizing their business to local needs and local market demographics. However, they should ensure that optimal layout is obtained to avoid interruptions in the flow of employees and services. Adding amenities like WIFI and ensuring the cleanliness of the restaurant will also benefit the overall ambience of the business. It also reflects the quality of the services that the company provides. Furthermore, having a centralized database will also benefit the company as it improves the record keeping problems encountered by the company. For instance, the problem with Mr. Otter could have been easier resolved with the help of the database. In connection with this, Enterprise Resource Planning is discussed in the next section.

Sunshine Enterprise having six restaurants with the plan of expansion must consider the use of Enterprise Resource Planning (ERP). Being in the business for decades, the firm must scrutinize its resources and capabilities for the implementation of ERP, as to competently compete in the market with new technological advancements. It is about time that Abby think of integrating business functions into one information system to efficiently and effectively utilize its business potential while expanding.

ERP involves integrating and automating order fulfillment, billing, Customer Relationship Management, Human Resources, Supply Chain Management and others. Real time information to be derived here is accessible, reliable and easily shared that can be used in management decisions such as inventory purchasing and CRM which in return will enhance productivity. ERP addresses issues such as lack of cohesion between departments, integration of company resources and information, database for company records and accessibility and work flow for all employees. There will be a centralized database where information can be accessed anytime.With the possible expansion of the six restaurants in Southwest Florida, ERP will be favorable in managing huge amounts of information that will in return produce data for Abby and managements decision making.

The following table shows the different opportunities that the company can take. The recommendation column explains how the different opportunities can be implemented through ERP and lean system.

CategoryOpportunityRecommendation

EssentialBetter tasting foodBetter servicesImprove vicinity or better environment(cleanliness, theme)Record managementPaying termsFree Wifi.The company should uphold leadership in offering only the best by improving the quality of their products and services by employing lean operation and ERP. The new equipment will improve the payment system. The company should also improve the ambiance by maintaining cleanliness and offer free Wi-Fi.

IncrementalAssignment of waiter per tableImproved ordering of raw materials(and setting terms with supplier offering lowest cost)Improve the supply chain by implementing JIT system. Moreover, in serving the customer, each table must have an assigned waiter.

SustainingApply and maintain a liquor licenseEnsure liquor license

Waste Minimize food spoilageBy using JIT system, there will be fewer food spoilage.

VI. Lessons learned

Customer Satisfaction:The customer deserves an explanation. The customer deserves an acceptable reasonThe key to companys success is customer satisfaction. Just like in love, the manager should try to explain and reconcile the problem with the customer.In a relationship, may tampuhan at walang perfect relationship. But you can always try to improve and reconcile your differencesIn running a business, we can try to offer the best but we can still fail. There will always be room for improvement.Once satisfied, theyll crave for more.Good service increases the likelihood of customers coming back and also prevents negative feedback from them.Trust! Big wordCustomers prefer doing business with a trustworthy brand; thus, providing quality services should be ensured to gain customer loyalty.

TechnologyTechnology in business is like love, it must be changed or updated from time to time. Sometimes we need to let go of our past such as the usage of traditional systems and veer away to more advanced ways such as the lean operation and the ERP.Technology is also like breaking up with someone. It causes drastic changes in our life. Just like the lean operations and ERP, its integration of data in one information system causes drastic changes in the operations of the company.

ExpansionTry to fix, before you move onBefore a company can expand, it needs to first attain stability. Although expansion is a dream for most companies, they should never lose sight of their priorities of customer satisfaction in attaining that goal.Ang mundo ay isang malaking Quiapo. Maraming snatcher, maaagawan ka. Lumaban kaThe business world is a competitive industry. A player in the game should make sure that the company provides the quality service that the customers are looking for because the danger of losing them to better and more advanced businesses is always there.

AppendixValue Chain Perspectivetable 1.1CompanySuppliersInputsTransformation processOutputsCustomer and Market Segments

RestaurantFood WholesalerEquipment/Machine supplierCredit card companyFood raw materialEnergy/LaborEquipmentPayment service Order takingIn-store services(extra services, service breakdown solution)Bill payment and recordingFood production and packagingFoodHappy customerQuality serviceRecords In-Store seating(Dine in)*Catering and group sales*Home Delivery

*-not stated in the case, but usual

Customer Satisfaction ModelFigure 1.1

New EquipmentFiguer 1.2

http://www.shmula.com/lean-thinking-and-restaurant-operations/2845/http://www.flowmakers.com/articles/articlefoodindustryandkaizen.pdfhttp://www.hrmars.com/admin/pics/381.pdf