Transcript Team 1 Term Project: In-N-Out Burger In-N-Out Burger Jeff Tolonen Tom Sobelman Team 1 Term Project: In-N-Out Burger Why In-N-Out?  Everybody likes In-N-Out.  Part of.

Team 1 Term Project: In-N-Out Burger
In-N-Out Burger
Jeff 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

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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
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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 Dreher
Customer 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 Sobelman
Operations Data Analyst
Care Level Management
Mobile: (818) 665-9851
Office: (818) 595-8251
E-mail: [email protected]
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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
Responsiveness
» Low cost
» Quick delivery-response time
» Fresh

Competitive product space
– Added quality
» Made to order

– Narrowed variety
Focused strategy and processes
– Low flexibility
Quality
» Dedicated capital resources
» Maximize resource utilization
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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
Process
Flexibility
High
JOB SHOP
(Commercial Printer,
Architecture firm)
BATCH
(Heavy Equipment,
Auto Repair)
FLOW SHOP
Connected Line
Flow (assembly line)
(Auto Assembly,
Car lubrication shop)
CONTINUOUS
FLOW
Low
(Oil Refinery)
Low
High
Few Major Products
Product
Variety
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Team 1 Term Project: In-N-Out Burger
The Process Flowchart
Flow unit = customer
Grill meat
Drive
through
Place order
Order in
queue
Walk-in
Assemble
Burger
Assemble
Order
Prepare
Fries
(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
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Team 1 Term Project: In-N-Out Burger
Process Flow Measures
Ri, drive through(t)
Ri, walk-in(t)

Ro (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
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Team 1 Term Project: In-N-Out Burger
Process Flow Measures
I
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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)
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
*
Drive-through + walk-in
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Team 1 Term Project: In-N-Out Burger
Observed Flow Times
Random Order
Walk-in Drive-through
(12:30pm-1:30pm) (mm:ss)
(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=RxT
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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
Assemble
Burger
Load
Prep Fries
Assemble
Order
Cook Fries
Grill meat
Unload
Take
Order
-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
Time (min)
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Team 1 Term Project: In-N-Out Burger
Flow Time – Take Fries off Critical Path
Assemble
burger
Cook Fries (continuous)
Assemble
order
Unload
Grill meat
Take
Order
-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
Time (min)
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Team 1 Term Project: In-N-Out Burger
Flow Time – Take Fries & Grill off Critical Path
Assemble
burger
Cook Fries
(continuous)
Assemble
order
Unload
Grill meat
(delay)
Take
Order
-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
Time (min)
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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
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Assign priorities (balance inflow sources)
– Drive through
– Walk in
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Team 1 Term Project: In-N-Out Burger
Conclusion & Discussion
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