Smithy’s Brewery
Introduction
Smithy’s Brewery is a small independent brewery in the UK supplying ale to its 200 pubs in the south-west of England. It brews a range of quality beers, the most popular of which is Anvil Ale, a traditional, light tawny-coloured beer with a slightly fruity taste and malty finish with an original gravity (OG) of 1038, alcohol by volume (ABV) 3.8%. In the summer a lighter addition to the range is Thirstquencher with a dry hopped aroma and clean bitter taste, OG 1035, ABV 3.4%. All of the brewery’s pubs trade under the Anvil name. Many of the pubs are featured in The Good Beer Guide published by CAMRA ().
Pub Segmentation
1. Local – small town or city pubs, usually on the outskirts with a regular clientele, with darts and dominoes and a snack menu
2. Traditional Town Pub (Young People) – town center drinking pubs with music, serving snacks at lunch time and early evening, transient clientele with large numbers of customers at weekends
3. Traditional Town Pub (Older People) – town center quiet pubs with bar meals, real tires and quiet background music
4. Traditional Country Pub – destination pubs requiring car journeys from nearby towns, with family-friendly facilities, wide range of meals available all day, piped music and beer gardens
Challenges
Between 1990 and 2000, British beer consumption fell by 13 per cent around two billion pints per year and during the same period, wine consumption doubled. Whilst this movement is the result of changing consumer tastes, it has also been exacerbated by the strengthening grip on the market by big breweries. In the early 1990s the British Government, following a review of the beer industry by the Monopolies and Mergers Commission, tried to force the six big breweries to relax their complex monopoly on the industry. At that time these breweries accounted 75 per cent of beer production. The legislation required the breweries to open up some of their pubs to non-tied beers, that is allow their tenants to buy one draught beer not produced by the brewery that owned the pub. Rather than free their pubs of some of their pubs of some tie to the brewery, the major breweries embarked on a number of different strategies, including selling thousands of their pubs to new pub-owning companies, often set up with money from the big breweries. These pub companies were outside the remit of the legislation. By 1999 there were just four major national breweries now controlling 85 percent of the country’s beer production and the new pub companies (pubcos) had emerged as a major retailing force in the industry. These new powerful pubcos could now not only demand heavily discounted beer but also require a product that does not need too much looking after.
Discussion
Why was Smithy’s Brewery considering improving its customer service?
Smithy’s Brewer maintained their beers and excellent pubs. However, because of stiff competition and the changing taste of its target markets, the management decided to raise the level of service and product quality that they offer the customers. A survey commissioned by the brewery revealed that service is important to customers. The also revealed that the customers felt that staff attitudes were crucial in creating the right atmosphere and that customers expected them to be friendly, happy, smiling, polite and efficient. Every single person in the survey agreed that pubs should provide a friendly, warm and happy atmosphere. Furthermore, customers believed that the high turnover of staff was an indication of poor management.
The brewery believes that is they positioned themselves as a traditional brand with good honest values of good beer, good food and homely service provided by people who care, they will have an advantage that competitors and the major players cannot easily copy.
How good or bad was its service and how reliable is the evidence presented in the case?
The service at Smithy’s pubs was not considered bad. However, the management realized that in order to achieve success and to have an edge against its competitors, they must achieve a quality service. The survey revealed that the customers value service and they saw the high turnover rate of employees as a sign of bad management.
The evidence presented was reliable because of the supporting surveys and documents.
What are the Barriers to improvement?
1. Staffing Problem
The main problem is that the pub managers rely heavily on part-time staff. Most of the pub managers have difficulty in recruiting good staff. Another problem is the high staff turnover rate. Another source of headache is the staff training. The small central training staff cannot deal with the many new staff that the pubs are hiring each year. The managers train their own staff.
2. Central Control
The control systems that were used in the brewery were not appropriate for a family owned business like Smithy’s Brewery.
3. Inadequate Training
The small central training staff at Smithy’s cannot accommodate all the new recruits. The mangers are often left to train their own staff.
Evaluate the Customer Service Report as a means of measuring service quality.
The customer service report is intended to measure the level of service that is rendered to the customers and to identify the areas that need improvements. The report aims to measure the quality of service delivered to the customers at the pubs of Smithy’s Brewery. The customer service report is an adequate means of measuring the service quality because it gathers the responses of the customers.
Conclusions
Improving customer service is among Smithy’s Brewery’s top priority. This shift was caused by the stiff competition and the changes in the customers’ tastes. Delivering a quality customer service will aid a company to position it self as a traditional brand with good honest values of good beer, good food and homely service provided by people who care. The new goal and strategy of the brewery call for a new business and operations structure. Product and service are equally important to make the business successful. The management is now focusing on the training and development of its workforce.
Recommendations
Operations Management
The company needs to change not only the operations at its pubs but an overall change of company structure and control systems. The brewery needs to restructure and a new focus must be given to the customer service. However, in order to achieve maximum benefit the entire operation including the production must also be aligned to the brewery’s new strategy and goal.
1. Product-Service Combination
The value that is added by both operations management and operations strategy is fundamental to most organizations. Operational activities are central to the provision of services and goods. Every organization provides a product and service combination.
Operations management is:
- The design and improvement of the systems that create and deliver the firm’s primary product and service combinations.
- The design, operation and improvement of the internal and external systems, resources and technologies that create and deliver the firm’s primary product and service combinations.
- The design, operation and improvement of the internal and external systems, resources and technologies that create product ands service combinations in any type of organization.
Operations has a strategic contribution to make in supporting the needs of customers and consumers. More and more corporations throughout the world are adding value to their core corporate offerings through services. The trend pervading almost all industries, is consumer demand-driven, and perceived by corporations as sharpening their competitive edges. Modern corporations are increasingly offering fuller market packages or bundles of consumer-focused combinations of goods, services, support, self-service, and knowledge. But services are beginning to dominate (2002).
2. Customer Service Quality Improvement
Customer Service
Customer service is not just an add-on, a little something extra to keep the customer happy. Customer service is an integral part of the total product. Service is not what you do to the product, it is what you do for the customer. The customer-focused firm looks at the core product as an incomplete solution for customers. These firms supplement the core product with services that help customize or otherwise enhance solutions for customers. Such product enhancements add value for the customer ( 2003).
A service package consists of four interrelated elements that must provide a consistent image to the customer. First, facilitating goods are the materials purchased or consumed by the buyer or the physical items that an operation uses during service delivery. Second, explicit services are the readily observable or sensual benefits that the operation delivers. Third, implicit services are psychological benefits that derive to the customer from using a particular service. Fourth, supporting facility is the physical environment that must be in place before a service can be offered (2000).
Improvement Focus
The beers and foods offered at Smithy’s pubs can be bundled with a quality service in order to make the customers’ experience more satisfying and enjoyable. Smithy’s products (beers and ales) are the motivating factors that make the customers go to its pubs. A quality customer service will enhanced the experiences of the customers and will make a distinct advantage over Smithy’s competitors. Attention should be given to the following:
- Quality of foods and drinks
- Speed of service delivery
- Accuracy of the order
- Menu range
- Aesthetic appeal of the pubs
- Restaurant decors and designs
- Attitude of staff members
- Physical structure of the building
- Car park
- Furnishings and fittings
- External landscaping
Service Quality
Service quality is intangible and instantaneous. It perishes with the completion of the transaction and cannot subsequently be verified or audited. It depends not on what actually happened. The key to quality in service provision is not standardization and verification but skills, knowledge and education. The challenge for service organizations is to embrace those notions of process control which can be usefully applied to the service environment and couple them to management of the skills of the staff to assure quality ( 2002).
Characteristics of Services
1. Intangibility – Services are Intangible
Services are performances. Services cannot be seen but they can be experienced. Services are experiences and not physical goods. Customers cannot take ownership or title to a service (2003).
2. Simultaneity – Services are Consumed as they are Produced
The acts of production and consumption occur simultaneously in services. Services are produced and consumed in real time. There is a great deal of interaction before, during, and after the service between provider and customer.
Services cannot be moved through distribution channels. Customers usually must come to the service facility or the provider must be brought to the customer (2003).
3. Perishability – Services cannot be Stored
Since services cannot be produced and stored for alter use, as physical products can, services are said to be perishable products ( 2003).
4. Variability – Services Vary from Production to Production
Service products as experiences vary form one experience to the next, from customer to customer, as well as for the same customer from one occasion to the next (2003).
Service Recommendations
1. Careful Identification of target market
2. The product and service must be carefully defined and the values or outcomes it provides well understood
3. Important long-term decisions will need to be made about the service delivery system. These include workforce and human resource issues, organizational policies, control of quality cost, technology, resources and value delivery, layout, technology, equipment, processes and procedures, work force levels and job description and roles. The design of the delivery system should ensure maximum customer satisfaction. A well-designed delivery system will be a source of competitive advantage and difficult for competitors or new industry entrants to copy ( 2002).
Positioning
Positioning is the method by which the organization can differentiate it self from its competitors. It requires a deep understanding of customer needs, the organization’s capabilities and competencies, competitors’ service offering, and the ability of the service to meet and provide value needs. Once understood, the organization can seek unique attributes that match the service offering to the value needs of the segment targeted. This uniqueness can use cost, service features, advertising and promotion, distribution channels and delivery channels ( 2002).
Value/Cost Leverage
A well-designed and positioned service offering provides unique benefits to customers and creates value more than competitors create ( 2002).
Strategy/System Integration
In addition to the consistency between target market and service concept, and between service concept and operations strategy, the operations strategy must also be consistent with the delivery system to provide integration and consistency. This consistency can be achieved by carefully designing the delivery system to reflect the operations strategy and overall business for the service ( 2002).
3. Internal Control System
An internal control system according to Hermanson and Hermanson is a collection of controls designed to provide reasonable assurance that the company meets the following objectives:
- Reliability and integrity of information
- Compliance with policies, plans and laws
- Safeguarding of assets
- Efficient use of resources
- Accomplishment of goals
An internal control system consists of three elements – the control environment, the accounting system, and the individual control procedures. The control environment includes the company’s organizational structure, management’s operating style, the personnel practices used, and the methods of assigning authority and responsibility to employees. The accounting system is designed to accurately identify, record, and report the company’s transaction. Control procedures are detailed policies and rules, such as authorization of transactions, segregation of duties, documentation, physical control over assets, independent checks on performance (1994).
4. Total Quality Management
Total Quality Management is built on a philosophy where individuals, teams and organizations can improve their performance at all times ( 2002).
Principles
1. Leadership
Leadership is a prerequisite for putting TQM principles and core concepts into practice. Management at all levels must understand TQM in-depth and show their commitment through outlining quality goals, policies, principles and plans. In order for management to plan for quality improvements, one must first know where they are at this moment (2002).
2. Delight the Customer
Delight the customer focuses on how to satisfy the external customer. This implies understanding the needs of both products and services, tangible and intangible (2002).
3. Continuous Improvement
Continuous improvement is probably the most powerful principle to guide management. By following a continuous improvement cycle it means that you never stop learning and improving, both internally and towards the external customer (2002).
4. Management by Facts
To be able to improve one must first know the current performance. When managing the business, decisions should be based on facts. The philosophy of TQM is built on measuring the process in order to find the cause of a failure early in the process. Actions to correct the fault should be focused on changing the process (2002).
5. People-based Management
There is a need for cooperation between people and that excellence cannot be achieved only through standards, technology and processes. People must be encouraged to produce quality. This should be done through clear goals, processes and feedback on the performance ( 2002).
Achieving TQM
1. Processes need to be examined to determine ways to reduce complexity while providing a better service and producing a better product.
2. Satisfaction of customers, both internal and external is paramount.
3. Management must provide leadership and foster commitment to quality.
4. The empowerment of employees is crucial. Employees must understand the business of their organization, and must have an understanding of how their activities contribute to the organization, and must have an understanding of how their activities contribute to the organization. Employee participation is critical in identifying root problems and finding solutions to such problems; employees should be encouraged to control, manage, and improve processes for which they are responsible.
5. Total quality management is built around the concept of using teamwork to accomplish change. Terms need to be trained in using problem-solving techniques aimed at quality improvement.
6. Tools and techniques are important and must be integrated into an organization’s routine. Processes are brought under control through consistent application of a quality improvement methodology.
7. Long-term commitment is critical. TQM is based on the concept of incremental change, which leads to a gradual change in organizational culture. As the organization institutionalizes a philosophy of quality management, the areas where changes occur increase until the entire organization has been transformed into a more effective entity (1996).
5. TQM and Human Resource Management
A TQM strategy focuses on customer satisfaction, quality improvement, solving problems at the source, just-in-time production, and continuous improvement. The tools and techniques used to achieve these ends all rely on employee empowerment and involvement to accomplish objectives of the organization (2000).
In cultivating the TQM philosophy, strategy implementation must involve a focused effort on the part of every employee within the organization. TQM requires that management, and eventually every member of the organization commit to the need for continual improvement in the way work is accomplished.
To institute total quality management as a philosophy within an organization, all employees must come to realize that satisfying customers is essential to the long-run well-being of the firm and their jobs. The TQM approach entails identifying the wants and needs of customer groups and then propelling the entire organization toward fulfilling these needs. A customer’s concerns must be taken seriously, and organizations should make certain that its employees are empowered to make decisions that will ensure a high level of customer satisfaction. Human resource management can plan a vital role in implementing and maintaining a total quality management process. HR managers are responsible for recruiting high-quality employees, the continual training and development of those employees, and the creation and maintenance of reward system. In developing TQM training programs, efforts should be aimed at an integrated approach to the instruction process. Training objectives should be directed at helping employees reach goals set forth for their individual jobs and overall goals of the organization (1994).
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