production and operation management group report highlands coffees purchasing process

Prepare drinks/cakes/bread: 1-2 staff, a kitchen counter, cups, ingredients for making drinks, ice,a blender, a coffee machine, and a microwave.5.. This combination of payment options of

VIETNAM NATIONAL UNIVERSITY HCMC INTERNATIONAL UNIVERSITY

School of Business

PRODUCTION AND OPERATION MANAGEMENT

GROUP REPORT

Highlands Coffee’s Purchasing Process

Lecturer: Nguyen Nhu Tung

Date: 11/01/2024 Group: 2

1 Võ Minh Thư 14.3%

2 Lê Phương Nhã An 14.3%

3 Lê Quỳnh Anh 14.3%

4 Nguyễn Quốc Hưng 14.3%

5 Nguyễn Mai Thảo Ly 14.3%

6 Hoàng Như Quỳnh 14.3%

7 Lê Ngọc Phương Thùy 14.3%

TABLE OF CONTENTS

I Work process 4

II Data collection 6

III Layout 7

IV Customers’ role 9

V Information technology 10

VI Standardization and Customization 10

VII Waiting time 11

VIII Supply and demand balance 12

IX Problems 13

I Work process

The work process that is chosen to focus on is the purchasing process at Highlands Coffee There are 5 steps involved in our chosen work process:

- Step 1: Take customer’s order

- Step 2: Payment process

- Step 3: Notify the kitchen

- Step 4: Prepare drinks

- Step 5: Notify the customer

Key resources are used to implement those steps:

1 Take customer’s orders: 1 order clerk, menu, POS system

2 Payment process: 1 order clerk, cash, credit card scanner, QR code for mobile payment (Momo, VNPay, etc.), and a vibration card

3 Notify the kitchen: 1 order clerk and other staff

4 Prepare drinks/cakes/bread: 1-2 staff, a kitchen counter, cups, ingredients for making drinks, ice,

a blender, a coffee machine, and a microwave

5 Notify the customers: 1 staff, a vibration card system, and trays for customers to carry their drinks

In the implementation of tasks, key resources are crucial in ensuring smooth and efficient operations In the first stage, taking customers’ orders requires a menu for one order clerk to interact with customers and ensure orders are accurately taken Besides, a Point of Sale (POS) system is essential for this step, a digital tool that assists in tracking sales facilitates order taking, it will help the ordering process more quickly and increase the efficiency of sales

Regarding the payment process, it has been optimized to accommodate a wide range of consumer preferences It has a cash register for traditional cash transactions, a credit card scanner for secure and speedy card payments, and QR codes for online payments compatible with mobile payment apps like Momo and VNPay This combination of payment options offers a quick and flexible transaction procedure that meets the expectations of current clients while also improving overall service efficiency After paying, customers will be given a receipt and a vibration card

The process of notifying the kitchen can be streamlined by strategically placing the kitchen and the ordering counter close to each other This setup enables the order clerk to directly transmit consumer orders to the kitchen Because of the proximity and direct verbal communication, orders are transmitted quickly, reducing errors and delays in order preparation This effective communication ensures that food and drinks are prepared on time, improving overall service speed and client satisfaction

The service delivery system prepares drinks, pastries, and bread with precision and efficiency A skilled staff at the kitchen counter uses a range of equipment such as ice, blenders for drinks, a coffee machine, and microwaves for bread If the order clerk is not busy with taking orders, he/she will help the other staff make drinks This approach emphasizes speedy preparation while maintaining high-quality standards for flavor and decoration, which is important in increasing customer satisfaction and service efficiency

The final stage is the process of notifying the customer It includes a vibration card, which notify consumers when their orders are available via vibration and light signals This strategy effectively decreases noise A staff member will place ready orders and a tray on the pick-up counter This combination of technology and human support guarantees that orders are delivered efficiently and precisely, enhancing the customers’ experience

II Data collection

The data presented in this report has been gathered through direct observation of a Highlands Coffee branch located at 118 Hoang Dieu 2 Street, Thu Duc District, Ho Chi Minh City Our data collection of

141 customers was conducted from around 5 P.M to 8 P.M across 4 different days The aspects of customer behavior we focused on include their arrival time and the duration spent in queueing - ordering

- paying - waiting process (Table 1) This approach allowed us to capture a wide array of data points, providing a detailed insight into operational efficiency at this specific Highlands Coffee location

Based on our data, the arrival rate of customers at this Highlands Coffee branch is 13 customers per

hour on average This high arrival rate might be explained by its location on a crowded street and near

the Ho Chi Minh City University of Technology and Education and the Thu Duc College of Economics The average amount of time customers spend from ordering to receiving drinks is indicated by the

Output rate Cycle time Output rate

Step 1: Take customer’s orders 1 min 10 sec/order 0.86 orders/min Step 2: Payment time 14 sec/order 4.3 orders/min Step 3: Notify the kitchen 2 sec/order 30 orders/min Step 4: Prepare drinks 3 min 40 sec/order 0.27 orders/min Step 5: Notify the customers 2 sec/order 30 orders/min

Table 1 - Cycle time and output rate of each step in the purchasing process at Highlands Coffee

III Layout

Highlands Coffee's physical space in this case includes a coffee bar, an ordering counter, a pick-up area, two seating areas, a storeroom, and a restroom To be more specific, looking at the layout (Figure 2), there are two entries, with the main entry located at the front of the shop and situated near the parking area, whereas the remaining entry is situated on the side of the coffee shop At the top of the map, there

is a coffee bar, an ordering counter, and a pick-up area The coffee shop is divided into two areas: the outdoor and indoor seating areas, both of which include several tables represented by rectangles and circles The WC for customers is situated in the upper right corner of the map A storeroom area, located

at the top left of the map, contains a WC for staff

The physical space at Highlands Coffee is ideal for the purchasing process First of all, the path to the ordering counter is clear enough as soon as customers open the door This helps customers immediately know where to go to order drinks, and no one gets confused as to where they are supposed to be Secondly, to facilitate ordering, a small menu at the cashier counter for customers who are buying drinks, and a big one is hung on the cupboard for customers at the back of the line Additionally, the cake display counter is placed on the right, and small items such as cookies and nuts are displayed at the cashier counter This approach attracts customers' attention, which can encourage them to buy more and increase revenue per buyer

After completing the order and payment, another staff member standing at the coffee bar will prepare the drink Different orders use different equipment depending on the types of drinks ordered Materials and equipment are compact and close to one another, minimizing the travel time of employees Items such as cups, ice, or syrup are placed near each other, the staff only needs to stand in one place to make a drink instead of going too far However, there is still enough space between each area so that employees do not bump into each other Finally, the point of order is separated from the pick-up area to keep traffic flowing and avoid congestion at the ordering counter

In conclusion, the above-mentioned proper design and layout at Highlands Coffee allow for a smooth flow of customer traffic and efficient use of space during the ordering process Highlands Coffee's physical space is tightly regulated and organized in order to create a comfortable environment for both employees and customers It also contributes to staff effectiveness, and capacity to fill orders quickly

IV Customers’ role

Figure 3 - Process–Chain–Network (PCN) Analysis of the purchasing process at Highlands Coffee

Highlands Coffee’s purchasing process chain is divided into two sides which are staff and consumer On

the staff’s side, they independently prepare ingredients in independent processing and make beverages based on the customers’ orders in the surrogate interaction.Regarding the customers, in theindependent processing, they take the straw out of the wrapper and add sugar if they want In surrogate interaction,

customers take their drinks, straws, and sugar from the pick-up area The stage of direct interaction

requires communication between customers and servers Here the customers take orders and require changes based on their needs, for example, they require 50% sugar for a cup of coffee

Therefore, in this process, the role of customers is to take orders, pay for drinks, receive drinks, unwrap traw, and add sugar if necessary Customers can impact the quality of the drinks by asking the staff to modify drinks based on their demand They can also increase efficiency by reading the menu before and ordering more quickly The efficiency will also depend on the number of visits As there are many customers, the process of delivering an order may slow down and vice versa Customers enter the process by in-person visits and single-line queuing, which takes them 0.42 minutes (25 seconds) on average

V Information technology

Highlands Coffee creates a mobile app that allows customers to order food in advance and stop by the store to pick it up in less than 1 minute This brings great flexibility and a more convenient experience for customers by saving time in queuing - ordering - paying - waiting for their orders Highlands Coffee only accepts online payment through integrated banking cards for this type of order

VI Standardization and Customization

The purchasing process at Highlands Coffee is a combination of standardization and customization This coffee store has structured steps of the purchasing process from queuing, taking orders, processing payments, notifying the kitchen, preparing items, and notifying customers This standardized approach ensures operational consistency, allowing Highlands Coffee to effectively manage customer flows, particularly during peak periods This process also helps Highlands Coffee provide a smooth and

uniform experience for many clients Regarding customization, customers can request to modify their drinks to meet their tastes Additionally, multiple payment methods such as cash, credit card, and mobile payment apps are allowed Although there is a certain level of variety to satisfy consumers’ preferences, the actual purchasing process is likely more standardized to assure productivity and meet high-volume demand

All consumers have to go through similar steps in a single flow for this purchasing procedure The way

in which orders are prepared and payments are made, however, may result in the creation of several service lines For example, different customers order different drinks or some might pay by cash but others prefer digital payments

VII Waiting time

The average wait time for drinks is3.7 minutes This duration is reasonable and indicates that Highlands Coffee generally manages its service process effectively The time can also be seen as an opportunity for customers to find seating or chat with friends, thereby using the wait time productively However,

because of the higher arrival rate on the weekends, some customers have to wait in line for 4 minutes and wait another 10 minutes to pick up their drinks (Figure 4).

Figure 4 - Histogram of waiting time for drinks

VIII Supply and demand balance

1 Staff scheduling: Highlands Coffee adjusts its staff schedules based on the expected demand By

having employees work additional hours beyond their regular shifts, the organization can increase their capacity temporarily to meet the increased demand Additionally, the organization can hire temporary or part-time employees to handle the excess demand during peak periods This allows them to quickly scale up their workforce without making long-term commitments The number of staff at the low-demand hours is reduced to optimize resource utilization and cut costs

2 Inventory management: By using sales data and forecasting tools, Highlands Coffee closely

estimates future demand and plans its inventory levels accordingly Additionally, the company implements the Lot-for-lot strategy in inventory management Lot-for-lot is a procurement strategy that involves ordering exactly the quantity needed to fulfill the demand for a particular item or product In the context of Highlands Coffee, a lot-for-lot strategy would mean ordering coffee beans or other ingredients in quantities that match the expected demand for the product Every Thursday, they check the actual inventory and order enough raw materials for the next week This approach ensures that there is no excess inventory sitting idle and reduces the risk of wastage or obsolescence Particularly, some ingredients are perishable, and their quality can deteriorate over time, so it needs to be ensured that the ingredients used in production are fresh, resulting in a better-tasting product Besides, it enables Highlands Coffee to adjust its procurement quantities based on real-time sales data, so they are responsive to changes in customer demand

3 Queue management: Highlands Coffee implements effective queue management systems to

handle high customer traffic They may introduce measures like mobile ordering apps to expedite the ordering process and reduce waiting times Based on our interview with a staff, a cashier will normally spend 40 seconds per customer to make an order In case more than 4 customers are standing in line, there will be an additional staff using the tablet to create orders for other customers In addition, if the payment machine is broken or the queue is too long, the staff will arrange tables for customers to sit at and then take orders on the spot to save time

4 Dynamic pricing: To manage demand during peak hours, Highlands Coffee may implement

dynamic pricing strategies They may offer discounts or promotions during off-peak hours to increase demand during those times For instance, Highlands Coffee implements the GOLDEN DEAL HUNTING HOUR - 10K Gold Lotus Tea (15:00-16:00 every Tuesday), CHILL FREEZE AFTERNOON - 30K Freeze Green Tea (S) (15:00-16:00 only on App Highlands Coffee), and

"CUSTOMER APPRECIATION" program for customers to keep the receipt and return to the store the same day after 2 hours or the next day

1 Market analysis and forecasting: Highlands Coffee conducts thorough market analysis and

demand forecasting to understand future trends and anticipate changes in customer demand This helps them plan their capacity and resources, and determine the optimal level of facilities and infrastructure required to meet the projected needs

2 Materials and production management: Highlands Coffee maintains strong relationships with its

coffee bean suppliers to align production capabilities with demand forecasts and minimize the risk of supply shortages Additionally, by developing relationships with many suppliers, companies can reduce their reliance on a single supplier and ensure a steady supply Regarding production planning, this coffee store expands the production plants to ensure its roasting and processing facilities can meet the increasing demand In October 2023, Highlands Coffee invested nearly 500 billion VND to build a new roasting factory with international standards

3 Store openings and closings: If the demand is higher than supply, Highlands Coffee will consider

expanding its store network By expanding their offerings, the company can tap into new revenue streams, attract new customers, increase brand awareness, and reduce their dependence on a single store On the other hand, Highlands Coffee may shut underperforming locations when demand is less than supply Making this decision usually requires a careful examination of key performance indicators including sales volume, profitability, and operational expenses Closing locations enables Highlands Coffee to concentrate its resources and direct attention toward regions with more revenue potential

4 Hiring and training: Organizations can plan for hiring and training new employees to meet the

anticipated increase in demand This allows them to build a skilled workforce capable of handling the future workload

IX Problems

One of the biggest problems at this Highlands Coffee branch is the shortage of staff during peak hours Based on the analysis above, the bottleneck at Highlands Coffee appears to be the drink preparation process, which contributes to the longest customer wait times According to our observation, this bottleneck mainly results from inadequate staffing During weekends, some customers have to wait up to

14 minutes to receive their drinks, which reduces their satisfaction We recorded a case in which a staff forgot to make one man’s drink and he complained after waiting for 9 minutes The shortage of employees has a negative impact on other aspects of this coffee store’s operations Because of the overwhelming drink preparation, staff often neglect other important services As a result, tables are sometimes left unattended, covered in crumbs and leftover drinks Additionally, due to the busy staff, the trash bins are not regularly emptied and often overflow These situations not only affect the aesthetic appeal of the coffee store but also worsen the overall customer experience