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1 Team 1 Term Project: In-N-Out Burger In-N-Out Burger Jeff Tolonen Tom Sobelman.

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Presentation on theme: "1 Team 1 Term Project: In-N-Out Burger In-N-Out Burger Jeff Tolonen Tom Sobelman."— Presentation transcript:

1 1 Team 1 Term Project: In-N-Out Burger In-N-Out Burger Jeff Tolonen Tom Sobelman

2 2 Team 1 Term Project: In-N-Out Burger Why In-N-Out?  Everybody likes In-N-Out.  Part of Southern California Culture.  It’s a thriving “Mom & Pop” chain in today's corporate dominated “Mc World”.  In-N-Out is always crowded and for some reason people don’t mind waiting.  They have a unique business model.

3 3 Team 1 Term Project: In-N-Out Burger In-N-Out Burger  Family owned –California, Nevada, Arizona only –Accountable to customer, not shareholder  $1.8 million average annual revenue per restaurant (2005) –Rivals top chains: McDonalds & BK  Limited menu (Burgers, fries, sodas, shakes) –Consistent –McDonalds has added 37 items since 1955  Made to order business model –No freezers, heat lamps, or microwaves –Produce delivered fresh every other day

4 4 Team 1 Term Project: In-N-Out Burger Inventory Management  Delivered fresh –Daily or every other day, depending on location –Minimize holding cost  Own distribution system –Private butchers, warehouses, truck lines –Must improve system to expand beyond west coast and maintain strategic position  EOQ & ROP –Too hard without insider info: cost per order, vendor info, holding cost, etc

5 5 Team 1 Term Project: In-N-Out Burger Side Note About In-N–Out  What happened after I emailed In-N-Out Corporate?….NOTHING!!!  The response to my email: Dear Mr. Tom Sobelman: Thank you for taking the time to contact us. Your project sounds exciting! As you may know, In-N-Out Burger® is privately held and family operated. As such, the information you requested is not published. However, we sincerely appreciate your consideration, and wish you success in your future endeavors. Thanks again for your e-mail, and for your interest. Sincerely, Jeff Dreher Customer Service Representative

6 6 Team 1 Term Project: In-N-Out Burger What it takes to get a call from In-N-Out Burger Corp. Customer Service @ In-N-Out, I’m finding your response, below, a little confusing. If the information that I was looking for was published- I wouldn’t have contacted you, rather, I would have had it already. I would much rather prefer a “yes we can” or a “no we can’t”. I am not competitor nor am I requesting specific information. I find the fact that you wouldn’t have time to talk to a student from a school of 35,000, that is central to 2 of your San Fernando Valley locations, difficult to fathom. If In-N-Out is unwilling to speak to me- that’s fine, however, I would like a less condescending reason as to why. Is it because the information that I am requesting is too sensitive is it because In-N-Out doesn’t have time for students? Tom Sobelman Operations Data Analyst Care Level Management Mobile: (818) 665-9851 Office: (818) 595-8251 E-mail: tsobelman@carelevel.com

7 7 Team 1 Term Project: In-N-Out Burger Product Attributes (External)  Cost : In-N-Out is relatively inexpensive. Comparable to any other burger joint.  Response time: Slow compared to the competition. You get your food more than twice as fast at McDonalds & Burger King.  Variety: Limited to burgers, fries, soda, and shakes.  Quality: In-N-Out is the gold standard for fast food. All the ingredients are fresh and everything is made to order. Nothing is pre-made.

8 8 Team 1 Term Project: In-N-Out Burger Process Competencies (Internal)  Cost : Kept low by owning distribution system and minimizing holding costs  Flow time: Made-to-order business model slows flow time compared to the competition. You get your food more than twice as fast at McDonalds & Burger King.  Flexibility: Cross-trained workers adds to flexibility, but highly dedicated capital resources limits it.  Quality: Consistent product. Accurate, reliable, and maintainable processes.

9 9 Team 1 Term Project: In-N-Out Burger Strategic Positioning & Operational Effectiveness  Market driven business –Key competitive priorities »Low cost »Quick delivery-response time »Fresh  Competitive product space –Added quality »Made to order –Narrowed variety  Focused strategy and processes –Low flexibility »Dedicated capital resources »Maximize resource utilization Quality Responsiveness

10 10 Team 1 Term Project: In-N-Out Burger Strategic Positioning & Operational Effectiveness  The gluttonous customer dilemma –Accept or reject order? »Align processes with strategic position »Consider resource availability

11 11 Team 1 Term Project: In-N-Out Burger Process Architecture Process Flexibility JOB SHOP (Commercial Printer, Architecture firm) BATCH (Heavy Equipment, Auto Repair) FLOW SHOP (Auto Assembly, Car lubrication shop) CONTINUOUS FLOW (Oil Refinery) Product Variety Low Few Major Products Connected Line Flow (assembly line) Opportunity Costs Out-of-pocket Costs High Low High

12 12 Team 1 Term Project: In-N-Out Burger The Process Flowchart Drive through Walk-in Place order Order in queue Assemble Order Note: assemble order consists of making the burger with the grilled patty, boxing the fries, getting any drinks/cups (including shakes), box/tray order Grill meat Clean/peel potatoes Slice potatoes Load fries Flow unit = customer Assemble Burger Prepare Fries (Batches) Cook fries In oil Unload fries

13 13 Team 1 Term Project: In-N-Out Burger Process Flow Measures  Analyze Job Flow –Flow unit = 1 customer »Two inputs: Drive-through or walk-in »Any number of items per customer uAssume average order: Double-Double, Fries, drink  Stable process (R i = R o ) –No unserved customers at closing time R o (t) R i, drive through(t) R i, walk-in(t)

14 14 Team 1 Term Project: In-N-Out Burger Process Flow Measures 12:30pm 1:30pm 23 ΔR=5.0 ΔR= -11.0 ΔR=1.0 ΔR=3.0 Problem: When ΔR(t) > 0, line grows Time12:30p12:30-12:45p12:45-1:00p1:00-1:15p1:15-1:30p Beginning Inv. * NA15+2=1719+3=2221+2=2310+2=12 Inflow Rate R i * NA24+10=3423+7=3012+6=1816+16=32 Outflow Rate R o * NA19+10=29 Buildup Rate ΔRNA5.01.0-11.03.0 Ending Inventory * 15+2=1719+3=2221+2=2310+2=1214+1=15 ΔR(t) = R i (t) – R o (t) I * Drive-through + walk-in 1:00pm

15 15 Team 1 Term Project: In-N-Out Burger Observed Flow Times Random Order (12:30pm-1:30pm) Walk-in (mm:ss) Drive-through (mm:ss) 17:1514:45 27:408:30 38:0114:15 49:1517:10 56:5215:10 613:0213:12 77:1812:15 85:4613:45 97:4111:35 107:3610:40 Average (T)8:0213:07

16 16 Team 1 Term Project: In-N-Out Burger Customer Flow Variability  Flow time (T) increases with: –Capacity utilization –Interarrival variability ∞ I = R x T

17 17 Team 1 Term Project: In-N-Out Burger Flow Rate and Capacity Analysis Resource poolUnit Load (min per order) Worker (cashier)0.5 min Register0.5 min Worker (flipper)3.5 min Grill3.5 min Worker (fry cook)0.5 min Fryer5.5 min Worker (burger assembly) 0.25 min Counter workstation0.25 min Worker (order assembly) 0.25 min Counter workstation0.25 min

18 18 Team 1 Term Project: In-N-Out Burger Flow Rate and Capacity Analysis (cont) Resource poolUnit Load (min per order) Units in pool (c) Load Batch (orders per batch) Availability (min per hour) Effective Capacity (orders per hour) Worker (cashier) * 0.5 minMin (16,3)=3160 (3/0.5) x 1 x 60=360 Register0.5 min3160 (3/0.5) x 1 x 60=360 Worker (flipper) * 3.5 minMin(16,2)=22060 (2/3.5) x 20 x 60= 685 Grill3.5 min22060 (2/3.5) x 20 x 60= 685 Worker (fry cook) * 0.5 minMin(16,8)=8360 (8/0.5) x 3 x 60 = 2880 Fryer (baskets)5.5 min8360 (8/5.5) x 3 x 60 = 261 Worker * (burger assembly) 0.25 minMin(16,5)=5160 (5/0.25) x 1 x 60 = 1200 Counter workstations0.25 min5160 (5/0.25) x 1 x 60 = 1200 Worker * (order assembly) 0.25 minMin(16,5)=5160 (5/0.25) x 1 x 60 = 1200 Counter workstations0.25 min5160 (5/0.25) x 1 x 60 = 1200 * 16 total interchangeable workers

19 19 Team 1 Term Project: In-N-Out Burger Bottleneck Analysis  Levers for fixing the bottleneck –Take processes off critical path »Adjust strategic position –Increase capacity with more resources »To increase resources requires capital »Low utilization during low demand  Is the bottleneck a problem? –R i = 114 orders x 85% * = 96.9 orders of fries per hour –Effective capacity = 261.0 orders per hour * Based on observation

20 20 Team 1 Term Project: In-N-Out Burger Flow Time – As is Take Order Grill meat Time (min) -t0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.0 Cook Fries Assemble Burger Assemble Order Prep Fries Load Unload

21 21 Team 1 Term Project: In-N-Out Burger Flow Time – Take Fries off Critical Path Take Order Grill meat Time (min) -t0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.0 Cook Fries (continuous) Unload Assemble order Assemble burger

22 22 Team 1 Term Project: In-N-Out Burger Flow Time – Take Fries & Grill off Critical Path Take Order Grill meat (delay) Time (min) -t0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.0 Cook Fries (continuous) Unload Assemble order Assemble burger

23 23 Team 1 Term Project: In-N-Out Burger Levers for Managing Flow Time  Select –Takes McDonald’s fast food strategic position and focus it to only a few items –Eliminates customer initiated wait time (ie “gimme a minute…”) »Customers know what they want before getting into queue »“secret menu” off regular menu to avoid wasted time uEncourages knowing what you want before getting in queue  Eliminate –Drink cups with customers (walk-in)

24 24 Team 1 Term Project: In-N-Out Burger Levers for Managing Flow Time  Drive through management –Avoid blockage (ie drive through line into street) & abandonment (customer gets frustrated and leaves) –Bring the window to the customer (PDA guys) »Possible without a mobile menu due to limited product variety –Single line layout »Describe effect on time in buffer »Saves real estate »Downside: deceivingly long line (customer does not realize it will move fast) –Dual line layout: »Choice of which queue to enter »Slower queue (ie someone with a long or complex order) holds up all customers behind him »Not possible to switch queues, so flow time is significantly slower for those who chose the slow line (cost: lost goodwill)

25 25 Team 1 Term Project: In-N-Out Burger Levers for Managing Flow Time  Cultivate walk in business  Assign priorities (balance inflow sources) –Drive through –Walk in

26 26 Team 1 Term Project: In-N-Out Burger Conclusion & Discussion


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