In-N-Out Burger Jeff Tolonen Tom Sobelman
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.
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
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
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 DreherCustomer Service Representative
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: firstname.lastname@example.org
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.
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.
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 Responsiveness Quality
Strategic Positioning & Operational Effectiveness • The gluttonous customer dilemma • Accept or reject order? • Align processes with strategic position • Consider resource availability
Process Flexibility High JOB SHOP (Commercial Printer, Architecture firm) Opportunity BATCH Costs (Heavy Equipment, Auto Repair) FLOW SHOP Connected Line Flow (assembly line) (Auto Assembly, Car lubrication shop) Out-of-pocket CONTINUOUS Costs FLOW Low (Oil Refinery) Product Variety Low High Few Major Products Process Architecture
The Process Flowchart Flow unit = customer Grill meat Assemble Burger Drive through Assemble Order Place order Order in queue Prepare Fries Walk-in (Batches) Clean/peel potatoes Slice potatoes Load fries Cook fries In oil Unload fries Note: assemble order consists of making the burger with the grilled patty, boxing the fries, getting any drinks/cups (including shakes), box/tray order
Process Flow Measures Ri, drive through(t) • Analyze Job Flow • Flow unit = 1 customer • Two inputs: Drive-through or walk-in • Any number of items per customer • Assume average order: Double-Double, Fries, drink • Stable process (Ri = Ro) • No unserved customers at closing time Ro(t) Ri, walk-in(t)
Process Flow Measures I 23 Problem: When ΔR(t) > 0, line grows ΔR= -11.0 ΔR=5.0 ΔR=1.0 ΔR=3.0 1:30pm 1:00pm 12:30pm ΔR(t) = Ri(t) – Ro(t) * Drive-through + walk-in
Customer Flow Variability ∞ • Flow time (T) increases with: • Capacity utilization • Interarrival variability I = R x T
Flow Rate and Capacity Analysis (cont) * 16 total interchangeable workers
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? • Ri = 114 orders x 85%* = 96.9 orders of fries per hour • Effective capacity = 261.0 orders per hour *Based on observation
Flow Time – As is Assemble Burger Assemble Order Load Prep Fries Cook Fries Unload Grill meat Take Order Time (min)
Flow Time – Take Fries off Critical Path Assemble order Assemble burger Cook Fries (continuous) Unload Grill meat Take Order Time (min)
Flow Time – Take Fries & Grill off Critical Path Assemble burger Assemble order Cook Fries (continuous) Unload Grill meat (delay) Take Order Time (min)
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 • Encourages knowing what you want before getting in queue • Eliminate • Drink cups with customers (walk-in)
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)
Levers for Managing Flow Time • Cultivate walk in business • Assign priorities (balance inflow sources) • Drive through • Walk in