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Assignment

Operations Management
Costa Coffee
Table of Contents

1. Introduction............................................................................................1

2. Products of Costa Coffee........................................................................1

3. Costa Coffee Terminal 4 of Heathrow airport Information......................2

4. Types of Processes..................................................................................3

4.1 Make to Order.....................................................................................3

4.2 Make to Stock......................................................................................3

4.3 Conversion Process.............................................................................3

4.4 Fabrication Process..............................................................................3

4.5 Assembly Process................................................................................3

4.6 Batch Production.................................................................................3

5. Types of Layout......................................................................................4

5.1 Product Layout....................................................................................4

5.2 Process Layout....................................................................................4

5.3 Fixed Position Layout...........................................................................4

5.4 Layout of Costa Coffee Shop...............................................................4

6. Four Vs...................................................................................................6
7. Operational Issues at Costa Coffee........................................................7

8. Recommendations for enhancing the operations of Costa Coffee at


Hawthorne Terminal 4......................................................................................8

8.1 Gantt chart.............................................................................................9

10. Conclusion......................................................................................11

References.....................................................................................................12
1. Introduction

Costa Coffee is one of the world famous coffee shops, originally founded in Britain in the year
1971. The company which initially started with the supply of roasted coffee to coffee shops and
caterers in Italy made its presence worldwide, in the year 1995, after becoming the subsidiary of
Whitbread, by establishing around 1700 outlets across 25 nations in the globe. The terminal 4 of
Heathrow Airport is one such location which has an outlet of Costa Coffee. Heathrow airport has
nearly ninety airlines flying from it to nearly 180 destinations across the globe. It carries cargo
worth 1.3 million tonnes and passengers nearly 68 million in number every year. The airport has
nearly 5 terminals, a cross wind runaway and 2 main runaways. Out of 5 terminals, terminal 4 at
Heathrow airport was opened in the year 1986. The 38 airlines present in Terminal 4 handles
every year around 14.2 million passengers. Terminal 4 has three main coffee shops by names
Starbucks, Costa Coffee and AMT Coffee. However, Costa Coffees operations were poorer
when compared with Starbucks. This essay discusses in detail the issues in managing operations
of Costa Coffee shop situated at Terminal 4 of Heathrow airport and suggests recommendations
to improve the performance of the same. The report finally analyzes the improvement in
performance of Costa Coffee through a Gantt chart.

2. Products of Costa Coffee

The products of Costa coffee are given below:


Beverages:
The beverages available in Costa Coffee are Italian-style espresso, Brewed coffees, tea products,
beer, and fruit juice, roasted whole bean coffees; cold blended beverages, wine and aerated cold
drinks.
Non Food Items:
The non food items available in Costa Coffee are Travel Tumblers, Mugs, storage containers,
Costa Card, coffee grinders, coffeemakers and seasonal novelty items.
Food:

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The food items available in Costa Coffee are Muffins, Sandwich, pastries, Cakes and
Sandwiches (Americanagroup).

Coffees of Costa Coffee:


1. ESPRESSO: This kind of coffee is a strong, short and black coffee, with no milk.
2. RISTRETTO: This type of coffee is an additional small coffee, even smaller than an
espresso, with a common strong flavor.
3. ESPRESSO DOPPIO: This kind of coffee is a double shot of espresso shot for those
people who like coffee strongly.
4. CAFFE LATTE: This type of coffee is made with steamed milk and it is not as strong
as cappuccino.
5. AMERICANO: This kind of coffee blends some espresso shots with hot water and
adds milk as per the need of a customer.
6. MOCHA: This type of coffee is the blending of hot chocolate with Espresso with
frothed milk and topped with steamed.
7. MACCHIATO: This kind of coffee is topped with Espresso with a milk dash.
8. CAPPUCCINO: This type of coffee blends espresso with frothy and steamed milk with
a powder of chocolate on top as per the need of a customer.

3. Costa Coffee Terminal 4 of Heathrow airport Information

Costa Coffee shop on terminal 4 of Heathrow airport is situated in airside near gate 8 parallel to
world duty free (FranchiseInternational). Terminal 4 of Heathrow Airport is one of the Costa
Coffee shop which produces vast revenue with annual sale of minimum 6500 every day. Since
it is on airside, the shop delivers wine, spirits and beer which is not possible in a normal Costa
coffee outlets. It starts at 4 a.m. in the morning and opens the shop till 9.30 p.m. in night.
Including the store manager it has a staffing of around 23 staffs. It does transaction on an average
of 1600-2000 in number per day. It performs with 2 coffee machines and 2 tills. The staff
division is as follows during operations in busy period:
2 people for coffee machine,
2 people on till,

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1 for refilling the drinks and food display
1 for sandwiches toasting,
1 for dish washing machine, and
1 for clearing and cleaning the tables.

4. Types of Processes
4.1 Make to Order
Make to order process is characterized by the production of goods according to specifications of
customers. This type of process is activated when customers place order for customized products.
Semi finished goods are kept to their minimum level in Make to Order arrangement.
4.2 Make to Stock
Make to stock process is characterized by a process which is activated in order to meet
forecasted demand. Make to Stock process produces goods according to the level of sales.
4.3 Conversion Process
This type of process involves conversion of raw materials into finished goods, for example
conversion of iron into steel (Chase, 2006).
4.4 Fabrication Process
Fabrication involves changing raw materials into specific materials. The example of fabrication
process involves changing steel metals into cars (Chase, 2006).
4.5 Assembly Process
Assembling different parts into final product shape is done in assembly processes. The example
of assembly process is assembling parts of computer hardware I order to make a computer.
4.6 Batch Production
Batch production is a king of production in which similar products are produced together. Each
batch of products undergoes a similar set of processing before moving to the next phase. This
type of production process is mostly used in bakeries, manufacturing of clothes etc.

In Costa Coffee batch production is followed. Coffee products are offered to customers
according to their specification. Behind this a number of processes are involved. Ying et al.,
(2009) have presented a number of processes involved in a coffee shop. These processes include:
customer ordering processing, cash management, coffee production, procurement of material,

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payroll, and recruitment. Whenever a customer puts orders at the counter, staff member process
the coffee cups (From batch) and fulfill the order of customers.

5. Types of Layout
Layout is basically detailed arrangement of different components in one chart. There are three
basic types of layouts as described by Jae (1999). These are product layout, process layout and
fixed position layout.

5.1 Product Layout

Product layout is employed when a series of steps are involved in the production of product.
Product moves across different operations and processes until it is completed. It is also called
mass production layout. This layout is characterized by low cost per unit. High investment is
required for making arrangements of equipments. Repeated nature of work causes low job
satisfaction in employees. It is mostly used in assemble processes.

5.2 Process Layout

Process layout is employed when different departments are specialized in their respective work
arrangements. This type of layout is also called functional layout. It is mostly common in batch
production. Highly skilled employees are required for process layout. It is very flexible type of
layout. Modifications in the product can be made at any stage of process layout. Due to high
flexibility orders can take time for their completion.

5.3 Fixed Position Layout

These layouts are fixed at a particular place. High equipment and personnel are brought at the
location in order to do work. It is characterized by high cost and less flexibility.

5.4 Layout of Costa Coffee Shop

In Costa Coffee process layout is used which is aligned with the batch production process.

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Figure 1: Operation at Costa Coffee Shop

The layout of Costa Coffee Shop is explained below in steps as follows:


a) As a first step, the customer enters the coffee shop and they stand in the queue or line
for ordering their needs.
b) The 2nd step is that the customer selects and takes drinks or food from the display of
products (DigitalFc).
c) As the third step the customer places an order of coffee or pastry by going to the till to
either take the items or sit and have them. In case he needs a sandwich, he passes to the
person on the till.

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d) The 4th step is that on till the person gives the order of coffee right away to the
bartender and give Sandwich to the person who is toasting sandwiches who passes his or
her order number so that the customers do not have to wait until the sandwich is toasted.
e) When bartender is making coffee the customer tray is set with proper cutlery by the
person on the till. At the same time, the customer completes the payment through either
cash or card by paying to the cashier sitting at the counter.
f) In the sixth step, the bartender finishes preparing the items ordered by the customer in
the handout present in the counter.
g) As the last step, the customer enjoys the ordered items by taking them from handout of
the counter and consuming them at the shops sitting area.

6. Four Vs

Four Vs of operations management are (Nicole, 2007):

Volume

Variety

Visibility

Variations

Volume denotes the quantity of output produced by business. It indicates high or low volumes of
a product. If high volume of products is produced, repeated processes are used. Companies that
produce high volumes of products gain economies of scale. Costa Coffee produces high volumes
of coffee each day.

Variety refers to different types of activities performed in the businesses. If varieties of products
are produced processes must be flexible. Staff members must be ready to deal with different
types of customers. Costa Coffee shop hires different staff members for different jobs.

Variation refers to the changes in demand level. High variation in demand requires flexibility,
high unit cost and changes in capacity. On the other hand low variation in demand requires
stable, routine and predictable operations. Costa Coffee has low variations in demand.

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Visibility refers to the contact level experienced by the customers. High visibility requires short
waiting, high level of customer skills and high unit cost. Visibility level is high in Costa Coffee
so staff members having high contact skills are appointed in order to ensure customer
satisfaction.

7. Operational Issues at Costa Coffee

The following are the operational issues encountered by Costa Coffee.


a) Even though Costa coffee has its own service process and service standards the time
taken to serve a single customer is more than 3 minutes that is time taking for
locations like an airport where the turnover is very high. Starbucks, the competitor
of Costa Coffee, on the other hand, completes orders within 2 minutes which is much
efficient than that of Costa Coffee.
b) The presence of the shop at airside makes it a high security area zone and due to this
the products delivery in case of any shortage takes huge amount of time as it is
checked and scanned by the security authority of airport.
c) As Costa Coffee is on airport there is a large line of people all the time and it
becomes very critical to handle the line in the busy period as people have to wait for
some time for more than 15 minutes and they gets irritated.
d) The major ingredient in making coffee is milk. Shortage of milk makes it difficult for
Costa Coffee to serve its customers at a faster rate, due to security reasons in
bringing in milk from outside.
e) If the coffee shop runs out of any drink and food stocks or non eatable items then
staffs are not able to get them from other Costa coffee stores or shops as if there were
on normal streets.
f) In case of staff turnover, employing a new person becomes extremely difficult since
the airport authorities conduct strict background verification and demands the new
hire to show reference for at least five years in the past.
g) Moreover, staff turnover results in shortage of employees. Hence jobs like
dishwashing, etc., comes to hold and Costa coffee is forced to provide its customers

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with disposable trays and cups at no additional cost which becomes a bit expensive
to the management.
h) The airport area due to very tight security allows les storage space for items such as
milk, bread, cream, etc., that are perishable. Moreover, these items are stored in a
room that is 3 floors down the shop. This is considered as one of the major
drawbacks since the staff finds it difficult to get from there quickly in case of any
shortage.
i) Forecasting the numbers of customers that would be served on a particular day is
extremely difficult since airport has several dependencies like flights delay,
cancellation, etc. At these times the shop is flooded with customers and this result in
shortage of food items.
j) Finally, since predicting the number of customers who would visit a shop on a
particular day is difficult, the manager finds it difficult to frame a time schedule.

8. Recommendations for enhancing the operations of Costa Coffee at


Hawthorne Terminal 4

The following changes made from an operational perspective to Costa Coffee makes it smoother
to operate:
a) Costa coffee, rather than relying upon its time consuming service model must modify
its service model in such a way that the services are offered at a faster rate.
b) The number of staffs working on a particular shift must remain the same in order to
offer efficient services to the customers round the clock.
c) When the crowd is high with lengthy queues, the management must assign additional
staff to collect order from customers and process the same, directly from the queue
rather than making them wait till they reach the counter.
d) The Management and the Company must keep the staff as happy as they can to
eliminate the turnover of staff as it takes huge amount of time to appoint new person
on the airside of airport.
e) The manager must deploy appropriate people at appropriate places to operate the job
more efficiently during busy period. Moreover, the manager must keep all the

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vending machines and tills operating round the clock to offer faster services on all
days.
f) Sufficient storage space must be given to the store that too very near to the shop to
store perishable goods. The shop must demand the airport authorities to arrange for
the same.
g) The staffs must be offered with free meals during the shifts to keep them enjoyable
and make them stay from quitting the job.
h) The company must make offer an additional pass to permanent staffs to make them
avoid long verification queues on entering into the airport.
i) During flight cancellations and bad weather it is a huge opportunity for the coffee
shop to earn several revenue but as an outcome of high milk consumption to make
coffee the milk goes out of stock. In order to avoid this, the shop must have better
relationship with nearby vendors to get things that go out of stock from them.
j) People dont have the time to relax and have fun as they have to catch the flight on
airport so they have only less amount of time and on airport the Costa coffee is
suggested to focus more on serving on use and throw cups rather than giving in
ceramic glasses and cups hence during busy operations the person working in the
dish washing machine might be utilized to work in some other productive area.

8.1 Gantt chart

A Gantt chart is a tool used by an organization in order to plan complex tasks while managing a
project. The Gantt chart though developed in 1917, is still in practice by organizations
(Milozevic, 2003, p 172). The following figure shows how the steps taken by Costa Coffee in
serving its customers at terminal 4 of Hawthorne airport. According to the conventional service
model, it takes around 3-4 minutes for Costa Coffee to process the order as shown in the Gantt
chart below:

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Figure 2: Gantt chart for Operations Management at Costa Coffee- Conventional service model

In the following a new model is presented to the management of Costa Coffee Shop in order to
improve customer delivery.

Figure 3: Gantt chart for Operations Management at Costa Coffee- New model

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As the above figure shows, with new model, there is an additional person to receive orders and
process the same directly from the queue in which the customer stands. As a result the processing
and delivery time of a completed order has reduced to less than two minutes of time.

10. Conclusion

Effective operations management is essential for any organization to perform better. By


applying efficient operation management strategies Costa Coffee, that lacks behind its
competitor, Starbucks in offering faster and efficient services to customers at Terminal 4 of
Hawthorne airport, can become the faster serving coffee shop not only in the entire terminal but
also in the entire airport, in due course of time. The report resents details of operations
management at Costa Coffee shop. Processes and layout designs of Costa Coffee are described.
Gantt chart presents a new model to the management of Costa Coffee in order to improve
efficiency of processes and to improve customer delivery.

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