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Team 1 Term Project: In-N-Out Burger

In-N-Out BurgerJeff Tolonen

Tom Sobelman

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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.

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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

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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

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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 DreherCustomer Service Representative

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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 SobelmanOperations Data AnalystCare Level ManagementMobile: (818) 665-9851Office:  (818) 595-8251E-mail:  tsobelman@carelevel.com

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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.

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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.

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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

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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

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Team 1 Term Project: In-N-Out Burger

Process Architecture

ProcessFlexibility

JOB SHOP

(Commercial Printer,Architecture firm)

BATCH

(Heavy Equipment,Auto Repair)

FLOW SHOP

(Auto Assembly,Car lubrication shop)

CONTINUOUSFLOW

(Oil Refinery)

ProductVariety

Low

Few Major Products

Connected LineFlow (assembly line)

Oppor

tunity

Costs

Out-of

-poc

ket

Costs

High

Low

High

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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

potatoesLoad fries

Flow unit = customer

Assemble

Burger

Prepare

Fries

(Batches)

Cook fries

In oil

Unload

fries

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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

Assume average order: Double-Double, Fries, drink

Stable process (Ri = Ro)– No unserved customers at closing time

Ro (t)

Ri, drive through(t)

Ri, walk-in(t)

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Team 1 Term Project: In-N-Out Burger

Process Flow Measures

12:30pm 1:30pm

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ΔR=5.0ΔR= -11.0

ΔR=1.0ΔR=3.0

Problem:

When ΔR(t) > 0, line grows

Time 12:30p 12:30-12:45p 12:45-1:00p 1:00-1:15p 1:15-1:30p

Beginning Inv. * NA 15+2=17 19+3=22 21+2=23 10+2=12

Inflow Rate Ri* NA 24+10=34 23+7=30 12+6=18 16+16=32

Outflow Rate Ro* NA 19+10=29 19+10=29 19+10=29 19+10=29

Buildup Rate ΔR NA 5.0 1.0 -11.0 3.0

Ending Inventory* 15+2=17 19+3=22 21+2=23 10+2=12 14+1=15

ΔR(t) = Ri(t) – Ro(t)

I

* Drive-through + walk-in

1:00pm

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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)

1 7:15 14:45

2 7:40 8:30

3 8:01 14:15

4 9:15 17:10

5 6:52 15:10

6 13:02 13:12

7 7:18 12:15

8 5:46 13:45

9 7:41 11:35

10 7:36 10:40

Average (T) 8:02 13:07

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Team 1 Term Project: In-N-Out Burger

Customer Flow Variability

Flow time (T) increases with:

– Capacity utilization

– Interarrival variability

∞

I = R x T

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Team 1 Term Project: In-N-Out Burger

Flow Rate and Capacity Analysis

Resource pool Unit Load (min per order)

Worker (cashier) 0.5 min

Register 0.5 min

Worker (flipper) 3.5 min

Grill 3.5 min

Worker (fry cook) 0.5 min

Fryer 5.5 min

Worker (burger assembly)

0.25 min

Counter workstation 0.25 min

Worker (order assembly)

0.25 min

Counter workstation 0.25 min

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Team 1 Term Project: In-N-Out Burger

Flow Rate and Capacity Analysis (cont)

Resource pool Unit 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 min Min (16,3)=3 1 60 (3/0.5) x 1 x 60=360

Register 0.5 min 3 1 60 (3/0.5) x 1 x 60=360

Worker (flipper) * 3.5 min Min(16,2)=2 20 60 (2/3.5) x 20 x 60= 685

Grill 3.5 min 2 20 60 (2/3.5) x 20 x 60= 685

Worker (fry cook) * 0.5 min Min(16,8)=8 3 60 (8/0.5) x 3 x 60 = 2880

Fryer (baskets) 5.5 min 8 3 60 (8/5.5) x 3 x 60 = 261

Worker *

(burger assembly)

0.25 min Min(16,5)=5 1 60 (5/0.25) x 1 x 60 = 1200

Counter workstations 0.25 min 5 1 60 (5/0.25) x 1 x 60 = 1200

Worker *

(order assembly)

0.25 min Min(16,5)=5 1 60 (5/0.25) x 1 x 60 = 1200

Counter workstations 0.25 min 5 1 60 (5/0.25) x 1 x 60 = 1200

* 16 total interchangeable workers

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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?

– Ri = 114 orders x 85%* = 96.9 orders of fries per hour

– Effective capacity = 261.0 orders per hour

*Based on observation

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Team 1 Term Project: In-N-Out Burger

Flow Time – As is

Take

Order

Grill meat

Time (min)

-t 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0

Cook Fries

Assemble

BurgerAssemble

Order

Prep Fries

Load

Unload

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Team 1 Term Project: In-N-Out Burger

Flow Time – Take Fries off Critical Path

Take

Order

Grill meat

Time (min)

-t 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0

Cook Fries (continuous) Unload

Assemble order

Assemble burger

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Team 1 Term Project: In-N-Out Burger

Flow Time – Take Fries & Grill off Critical Path

Take

Order

Grill meat

(delay)

Time (min)

-t 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0

Cook Fries

(continuous) Unload

Assemble order

Assemble burger

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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 Encourages knowing what you want before getting in queue

Eliminate

– Drink cups with customers (walk-in)

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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)

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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

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Team 1 Term Project: In-N-Out Burger

Conclusion & Discussion