Operations Management: Subway Student Name Course Name Name of the University 1. Introduction The service industry is growing by leaps and bounds. The key players in this industry are the fast food chains like-KFC, McDonald’s and Subway. These chains have made a global impact and one thing which is common in these firms is the franchisee based operations management. These industry giants are winning more and more customers each year. The success secret of Subway is the low cost with high profitability margin and serving the customer with good health. This paper will examine the new service development tools employed by Subway, as a part of its operations management. We will start with the history of operations management, and then we will move towards service industry and the new service development models of this industry. 2. Origin of Operations Management The term operations management is historic in terms of theory and application. It originated from the manufacturing field and was linked to the production levels. It is believed to have roots in mid 70s, where it was used to plan, control operations and resource management. In the year 1980, the term operation management experienced a state of renaissance and during 90s, this concept found its way to the academics (ref. Slack et al). The first paper on operations management was published in the year 1972. In this article, Levitt explained the manner in which age old concepts in operations management were present in the McDonalds. This paper was published by Harvard Business Review. The article on McDonald was based on the activities of the back office and assembly line methods and it was for the first time that people recognized McDonald as the service industry (Sheahadeh et al, 2016). 3. Definition of Service Industry The scholars have given different views while describing the service industry. Many of them consider service as a set of activities, processes or collaborations (Solomon et al). Services have also been described as the change in the person’s situation when he knows the needs of the customer. Some of the scholars like Edvardsson define service in terms of the products, services and other resources. The customer acts as the partner in the production process, the service comes into existence during the process. Most of the definitions of service are based on the customer needs. So, services can be described as the way to solve the customer problems (Edvardsson, Gustafsson and Roos, 2006). 3.1. New Service Development Globalization and change in the technology have given rise to the high level of competition in the service industry. The firms operating in this age of information technology are under a constant pressure to perform best in the industry. The growth of the organizations depends on the factors like globalization. The NSD or new service development has become a tool for operations management of the firms. The benefits of the new services include- increase in the profitability levels of the company, attracting new customer base to the organization, providing an environment to the existing consumers and concentrating on the new markets for operations. (Menor and Sampson, 2002) 3.2. Innovation in Service Firms With the passage of time there was a significant amount of innovation in the service firms. Hipp et al(2000), describe this innovation in the following form: 1. Innovation in Service: There was an innovation in the service offers. Many new services were introduced and the previous ones were improved 2. Innovation in process: There was an improvement in the processes 3. Innovation in Organization: The scope of the organizational structures and process used for the production was widened. Scholars like Schmenner divided the operations of the service industry into four types- service factory, profession service, mass service and service shop. All four differ in the degree of customization and interaction with the clients. (Schilling and Werr, 2009) 3.3. Franchisee based Operations Model The era of franchisee gave rise to a new type of service industry. The fast food chains like McDonald’s, Subway and KFC etc. made a global presence by becoming the franchisors. They all have the franchisee based model of operations. The franchisee is given the right to be an independent seller, who uses the brand name to sell the services and products. The franchisor makes sure that the buyer of his brand ensures the smooth and standard operations. (Antonsson, 2011) 3.4 Innovative Service Firm: Subway Subway has more chains as compared to McDonalds. It started in 1965, when the two friends Fred DeLuca and Pater Buck, opened a sandwich shop. The first store was opened at Bridgeport and it was named, “Pete’s Submarines” but both the friends changed the name to “Subway”, in the year 1968. Soon, the store began its operations in full swing. Fred and Pete opened 16 stores by 1974. Then they planned to give franchise and the first franchise was bought by Brian Dixon. The operational management of the Subway was based on its motto of providing customer’s taste with fresh ingredients. This great organization boasts of serving two million people with just one store. So, Subway‘s first operational strategy was franchise chain. (Lichtenberg, 2012) 4. Transformation: A Turning Point Subway changed its operational strategy by targeted the health conscious customers. It already had a name in providing the customer friendly food. This organization further expanded the menu options by adding more healthy and nutritious food. Although the transformation was risky in terms of the number of franchises, yet the firm’s strong operations management made things possible. The main focus of all the franchises was to target a new type of client base. Subway became a brand as it was the first organization in service industry, which “made changes regarding the customer’s health and weight concerns”. In the year 2000, Subway launched a campaign with Jared Fogle, whose weight became less by eating healthy subway sandwiches. The campaign was a very successful and sales increased to unexpected levels. (Brennan, 2013) 4.1 Subway Operations Strategy Subway is the king of the sandwich industry and these people offer custom made sandwiches, in front of their customers. The bread used is fresh and properly baked. The fillings are also made from fresh vegetables and are quite healthy. Subway had more than five hundred and fifty stores in the UK, by the year 2012. The success strategy followed by Subway is to reduce the franchisee cost and make operations as simple as possible. Skills of the people who work for Subway franchisees matter a lot for the operations management. So, the people are trained on the service operations, in order to sustain the high competition levels of this industry. (Parker, 2012) 4.2.Subway Operations Process Subway can be called a world leader in operations management. The operation management process followed by Subway is “assemble- to- order” (Schroeder). They serve quality food in less time. The sandwich ingredients like meatballs and bread are the subparts of the assembly process. These products are brought from the Subway restaurants and a stock is maintained. These ingredients are the result of batch process. Whenever a customer orders a sandwich, the assemble-to-order process is used and a sandwich is made from the readymade ingredients. The choice of bread, vegetables and sauces is decided by the customer. In this way the ATO process at Subway ensures customer friendly and healthy food. (Schroeder, 2013) 5.Subway’s Management Customers have become health conscious and they prefer to invest in the foods which are healthy as well as tasty. Subway’s operation management is based on providing healthy food to the customers, so this firm has always focused on this motto. The people in today’s busy world want to eat and drink the foods which are good for their health. Reports by Data Monitor suggest that the people in American and Europe prefer to have a snack which can curb their hunger. They want to have natural, healthy, fresh and nutrient rich meal. The rise in health related diseases has given rise to a transformation in the food industry. People want to eat foods which offer them good health at reasonable rates. (Melia, 2011) 5.1 Success of Subway Success of this food chain lies in the operations management model, which is based on the customer health. Subway managed to be on the top position due to the quality of food it serves. In a poll, named “Harris Poll”, this firm has got Sandwich Shop Brand award for the 6th time. The scholars say that in history, only 9 such brands have got the same success. Subway has a capability to sustain the global markets and it can compete with its rivals in a strategic way. This organization has stayed on the top of fitness curve and will continue to be on top. (Whitehead, 2016) 6. Conclusion The term operations management is historic and it originated from the manufacturing field. In this field OM was linked to the production levels. McDonald’s brought the term service industry. This industry was based on fulfilling the customer needs by providing required services. Subway emerged as a big giant in service industry. It based its operations management model on franchisee structure. It provided franchisees worldwide and opened up more than thousands of stores. The brand standards are maintained through trained workers and franchisee cost is low. The operations management process followed by Subway is assemble to order and they follow a motto of providing best healthy food to their customers. Subway followed methods like new service development to satisfy its customers. References: Antonsson, H. Engstrom, L. Verbus, V(2011). Innovation within fast food restaurants. Jonkoping International University. Retrieved from https://www.diva-portal.org/smash/get/diva2:425700/FULLTEXT01.pdf Brennan, A. Sandwich and sub store franchises. IBIS Industry Report. 2013. Retrieved from http://big.assets.huffingtonpost.com/sandwich.pdf Edvardsson, B.Gustafsson, A. Roos, I(2006). Service portraits in service research. International Journal of Service Industry Management. 16(1). Pp 107-121. Retrieved from https://www.iei.liu.se/is/edu/courses/e-tjanster-i-foretag-och-samhalle/kurslitteratur/1.118178/Edvardssonetal.pdf Lichtenberg, A(2012). Restaurant chains to determine the secrets of their success. CMC Thesis. Claremont College. Retrieved from http://scholarship.claremont.edu/cgi/viewcontent.cgi?article=1367&context=cmc_theses Menor, L. Tatikonda, M. Sampson, S(2002). New service development. Journal of Operations Management. 20. Elsevier. Retrieved from http://www.business.uzh.ch/professorships/som/stu/Teaching/Teaching/MenorTatikondaSampson2002.pdf Parker, D(2012). Service operations management. Edward Elgar Publishing. pp 557 Schilling, A. Werr, A(2009). Managing and organizing for innovation in service firms. Vinnova Report. Retrieved from http://www.vinnova.se/upload/EPiStorePDF/vr-09-06.pdf Sheahadeh, R. Maqableh, M. Al-Zoubi, M. Khalil, M(2016). Review the operational excellence factors of service firms. European Journal of Business and Management. 8(3). 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