Executive Summary
Fitness First’s success has been based on its prolonged business model that combines the best practices of its competitors to win customer loyalty. The importance of operations management in forecasting is essential in the fitness industry, where there is the threat of the changes in demand and the newsvendor challenge. The newsvendor challenge implies that if the fitness centers do not serve people on a given day, they lose the day’s value because they serve the final demand.
The challenge is exaggerated in the service industry because of the perishability of services upon use. A day without service implies lost value because the firm has already incurred logistical costs. Operations management helps Fitness First deal with this issue by informing the management of optimal service quantities that will neither result in surplus losses nor too little food that some customers miss. Fitness First has a Business Intelligence (BI) system integrated into the operations model that predicts demand for its various stores. The BI system assists, especially as the demand in the industry has shifted to more perishables.
Operations management aims to generate more profits by improving efficiency and cutting costs. Customer loyalty can only be maintained by keeping accurate inventory levels so that there are neither shortages nor surpluses. The physical training centers must remain attractive manned by enough staff, and all transactional channels must facilitate the flow of transactions. The company should consider investing in small training centers adjacent to social areas. The centers could work collaboratively with the central management objectives to ensure continued sustained services as per the demand. Moreover, the local trainers should manage the training houses so that they can adapt to changing local demands. The warehouses can help supermarkets manage products that are on-demand in their regions.
Fitness First
Fitness First was established in the United Kingdom and operated by various training clubs that grew to various parts of the world. The company offers various training programs, namely BodyFirst, Cardio Machines, Team Workouts, Personal Training, and Group Fitness Classes. The company encourages its members through yearly awards for those who achieve their targets. It offers membership plans for its members depending on its operating region.
The company ensures loyalty by issuing yearly contracts that members can only cancel at a cost. The company has established a branding strategy through its Fitness Week, launched in conjunction with BBC in 2009. The company gives its subsidiaries autonomy to design their training programs suiting their locals. For example, in Asia, a subsidiary of Fitness First launched a reality show based on its philosophy of showcasing how fitness improves confidence. In Australia, the company re-launched its fitness programs, introducing flexible contracts.
The operations management model for the company has delivered various awards due to its efficiency of the company. Operations management focuses on establishing flawless processes and efficient delivery of products (Reid & Sanders, 2019). Operations management is important for managing inventories, assuring quality, deciding growth patterns, forecasting, deciding layout, and capacity planning. Operations management is essential in effectively meeting the changing needs of customers and attaining a competitive edge. The effectiveness of the management of operations ensures that the products are displayed in a perfected way that caters to the customers’ needs.
Operations management has been instrumental in the success of the company by shrinking unsellable services and replacing the fitness exercises that are on demand. Continuous improvement of the operations management introduced a system that manages the various fitness centers’ supply chain. Besides, operations management plays a role in informing the company of the right skills required in different roles (Reid & Sanders, 2019). The information workers add value to the operations management by contributing important insights to improving processes. When consumer preferences change, the operations management informs of the necessary redesigns that could stimulate demand.
Key Operational Process
The company’s operations model focuses on competitive pricing, a large retail channel, and providing customers with a wide variety of fitness options. The company has positioned itself as a high-end fitness competing with local gyms at competitive prices. It implies providing the high-end quality of local gyms but at competitive prices. On average, customers find the Fitness First fees lower than those of most competitors. The operational model combining high-class ambiance in centers and low prices attract customers from various segments. The strategy is to serve more customers hence driving the revenues. The company’s fitness centers cover large areas occupying larger spaces than the industry average.
Space is an operational tool aimed at providing customers with a good exercise experience through spacious training apparatus and a wide variety of fitness options. The provision of wide varieties within the space implies that the company wins customers who could have gone to competitor stores specializing in fewer options. According to Reid and Sanders (2019), the large space compliments the priority of providing customers with more options to choose from. The company also leverages its operations model to provide customers with innovative methods of training and clubs that encourage people to have fun in training. The high-quality training experience is enabled by friendly and helpful staff, the fitness center layout, and the rooms’ general ambiance.
Process Analysis
The operations processes align with various operational models that give the company a competitive edge. The company’s success is based on a focus on the inventory turnover model. In the service industry, inventory entails created space that could be utilized by a client. Due to the perishability of services, the company must turn over inventory fast to reduce potential losses. Moreover, customers will only get innovative services if every day’s training is shared with more people.
The ability to serve more people for the company allows it to price competitively because it can take lower margins and depend on the volumes to drive profits. For example, the company expects to serve more people through membership clubs than a local gym depending on individuals. The profitability of the company depends on the inventory turnover operational model. The high rates of serving people mean that the company can always restock training programs, which further attract more customers, enabling competitive pricing.
The company also employs a vertically integrated chain of supply. The vertically integrated supply chain implies the company controls its distributors, retail locations, and suppliers. The company is accountable for its entire value chain and hence can influence processes at all stages. Fitness First can improve its efficiency by improving processes and hence reduce costs. Many supermarkets outsource distribution networks due to the huge capital outlays required to control distribution. However, Fitness First has control over its distribution processes. The distribution networks are centrally managed from various cities, and they determine the selection, transport logistics, and distribution of goods to all supermarkets. This operational model helps reduce costs by preventing external firms from taking margins that increase prices.
The operational processes depend on the employees’ skills, which explains why the company focuses on improving their skills. Many workers prefer to work for the company due to its employee benefits. The company invests heavily in its employees, paying for their scholarships and sending them to different parts of the world to learn about different training programs. The result of the investments is that its employees are ever willing to help customers and a friendly. Service is important for Fitness First because of the high volume of consumers that it serves.
The excellent customer service supports the operations model by winning customer loyalty hence ensuring consistent demand. The operations model is also supported by the company’s ownership structure (Reid & Sanders, 2019). The private worship structure is efficient in making critical decisions that make the company more adaptable to change. As a private brand, the company has assured its customers that the low prices do not imply compromised quality.
Operational Issues
One of the operational issues faced by Fitness First is increasing labor costs. The increased demand implies that the company should employ more staff. The challenge for labor costs is increased by the demand for better skills elsewhere that have driven the general labor costs in the different areas. Besides, the costs of hiring and maintaining staff are increasing. Staff also costs, including providing them with a good work environment that meets government regulations. The company has been investing in technology as an alternative to labor. The company’s operations model is based on very small profit margins that the high staff costs could threaten. The company must maintain a lean staff to support its operational model without overwhelming staff or compromising customer service.
A second operational issue is a change in demand that is threatening the profitability of the company. The operations model for the company depends on high volumes to cover the small margins. The demand for training programs in physical locations is falling for various reasons. The increase in awareness of lifestyle diseases has shifted the preference of people toward self-administered training programs.
Customers prefer training Apps compared to expensive gyms. Besides, customers want organic and natural means of weight loss. However, the company has an operational model that is responsive to demand, and due to the control of the supply chain, it can change production to meet the new demand. Demand is also falling due to the increased utilization of online training programs. People are busier and wish to have training programs at home or be guided virtually. This threatens Fitness First’s revenue because it reduces the demand for physical stores that the company has already invested in heavily.
Another operational challenge faced by the company is communication. Communication is important in training programs and membership contracts because they are expected to make abrupt changes in response to changing market trends. In the service industry, effective communication could determine a store’s profitability. The management structure should support information flow from top to bottom and vice versa.
Effective feedback ensures that market information reaches the top management timely and decisions from the top reach the stores efficiently. The expansion of Fitness First implies that communication could threaten the operational culture of the company. There is a chance that one of the supermarkets could have a different culture that could damage the reputation of the corporation. The company’s operational model depends on efficient communication to ensure that all the stores offer a seamless customer experience that is uniform.
Inventory management is another challenge that the company is facing. The concept of optimum service level depends on a fixed, predictable demand. However, with changing customer preferences, demand cannot be predicted accurately. This implies that there is a chance that one of the fitness centers could experience a shortage of sending the wrong message to the loyal customers. The probability of a missed demand estimate is worsened by the central distribution network of the company. It implies that it cannot meet sudden increases in demand without unnecessarily increasing costs.
Recommendations
The company should also invest in the automation of processes to reduce the demand for labor. Besides automation, the company should invest in improving workforce management, staff scheduling, and management. The company should consider including contract staff on the payroll to meet seasonal demand for labor at a lower cost. Labor planning is important in cutting labor costs and ensuring all the stores have just the optimal number of employees (Reid & Sanders, 2019). Staff planning will establish roles and the skills needed for the roles before fitting them with the right employees. The planning process would also identify redundant positions and remove them from the payroll.
Lastly, the company should invest in business intelligence tools to help address the issue of changing demand. Business intelligence tools integrated into operations management will provide useful insights on where the company should invest more. Besides, business intelligence will introduce reporting tools for the supermarkets so that their leaders can make informed decisions regarding products and shop setup. Business intelligence will also improve the communication process by standardizing the data collection and decision-making process.
Reference
Reid, R. D., & Sanders, N. R. (2019). Operations management: an integrated approach. John Wiley & Sons.