“My Compliments to the Chef, er, Buyer“

Papaya Milk: Jason, Jimmy, Nick, Rachel, Richard, Sandy

Operations Management Prof. Ying Jiun Hsieh

Outline1. Case Introduction2. Question Discussion3. Conclusion4. Questions and Answers

Case Introduction• How they are able to serve everything on that menu

quickly• Flash-frozen and vacuum-packed• Top- quality restaurants like Fuddruckers and Perkins are

going the outsourcing route• Taglines such as “Hours versus ours” and “Just heat and

serve”

What can be outsourced?• Delivery of ingredients• Preparation of the food• Food arrangement• Others:

– Accounting and payroll services– Kitchen cleaning– Laundry– Advertisement and marketing– IT (website maintenance)

Question DiscussionQuestion 1Explain the meaning of the phrase “Hours versus ours.“

“Hours versus ours“• Consumer-goods companies such as Sara Lee,

Land O´Lakes used slogans as advertisement– “Hours versus ours“, “Just heat and serve“

• Stimulate B2B-relationships with restaurants– timely serving capability of restaurant businesses

can be increased• Encourage restaurants to outsource business

operations

Outsourcing vs. In-House• Capacity planning to identify requirements

“Hours“: Outsourcing to save time, increase profit

“Ours“: In-House solution to control quality

Example Outsourcing vs In-House

Receive meat, bread, toppings,

sauces

Toast bread, grill meat/cheese

Assembly Burger (meat, bread), toppings choosen by

cutstomer

Self- Service

• Fast casual restaurant - Fuddruckers

Preparation meat, bread, toppings, sauces Toast bread, grill meat/cheese

Assembly Burger (bread, meat cheese, toppings) Service

In-House Burger

Outsourced Burger

Time

Question DiscussionQuestion 2What advantages are there when restaurants outsource?

Advantages of outsourcing in restaurant• Improve efficiency

– Save time to prepare or manufacture materials

• Cost saving– Labor cost– Operating cost

• Improve productivity• Expertise

– Avoid time consuming of training employee

• Demand– Wide fluctuation in demand

Question DiscussionQuestion 3What are some important disadvantages or limitations of outsourcing for restaurants?

Disadvantages of outsourcing in restaurant• Quality consideration

– How to monitor the quality of the food material

• Risks– Loss direct control of operation– Delay in delivery– Quality defects– Taste (loss of freshness)

Damage to the organization’s reputation Losses customer’s reliability

Question DiscussionQuestion 4Do you consider restaurant outsourcing to be dishonest? Unethical? Explain.

In our opinion• We focus on restaurant -can provided food faster -capability-price-ratio -feature -health* If the restaurant can suit our demand we consider it is ethical

Restaurant outsourcing 1. Advantage -reduce product cost (low price) -increase business efficiency (faster) -focus on core product (feature)2. Heath (safety of the food )

Question DiscussionQuestion 5Does restaurant outsourcing increase capacity? Explain.

Measures of capacity1.Restaurant capacity = inputs / outputs -Inputs = number of tables , seating capacity -Outputs = number of meals served per hour2.Outsourced part of cooking process can increase output measures

Shorter lead time Increased number of meals served per hour

Take macro viewIt’s important to consider how parts of system related. - if the restaurant have high productivity because of outsourcing,but don’t have enough inputs to serve customers is not good.

ex: to add more tables and seats

ConclusionControl 100% of your core, outsource

everything else. Don’t open a restaurant if no one can cook!

Customer review:“Unfortunately everything we ordered was from a frozen box and then deep fried. At least it was all served hot (from the deep fryer) except the burger which was the Costco style claw burger on a stale bun. Everything unimaginatively warmed up, ...just heat and serve. Even the burger condiments seemed tired!”

Questions and Answers

References• Operations Management by William J. Stevenson (11th

Edition).

• http://www.tripadvisor.ca/ShowUserReviews-g2086961-d3846663-r152832353-Sandy_s_Family_Restaurant-Mildmay_Bruce_County_Ontario.html

• http://www.makingthingsoutofnothing.com/post/42502126421/control-100-of-your-core-outsource-everything-else