“Last week after a game we had to throw away 23 hot dogs and 7 hamburgers. That is too much. So here is the new policy…” And so it began. Has this happened in your business? A relatively small issue that your management team decides is a major crisis, and they overreact with a series of new policies that tie your hands and ultimately cost you- and them- bottom line profits? Well, you aren’t alone. It happens at concession stands also. Here is a case study of a management team that has focused on the process rather than the results, and by doing so has moved away from their value proposition and what their customers really want.
The old process: Hot dogs are steamed 50 – 75 at a time before the game, wrapped, and put under the heating lamps for customers to self-serve. As they get low, the volunteer staff will open more packages, put them in the steamer and wrap the hot dogs as needed, with an eye towards not running out, nor having too many out there for too long. It takes a bit of practice, but for the most part, we don’t run out of prepared hot dogs for any length of time, nor do we usually have too many of them wrapped for too long getting stale. Hamburgers are cooked by the chef. He will typically cook about 20 ahead of time, and keep them in a heated pan au jus to keep them fresh, but prepared, and within health department guidelines. There are typically 4-5 burgers prepped on buns with fries ready under the heating lamps for customers to grab when they come in. When the prepped burgers are gone, it is quick work to put more out.
The old results: Customers can usually get what they want quickly and get back out to the game. Sometimes the burgers and hot dogs sit a bit longer than you would like, and get a bit stale or dry. But consider that this is a concession stand at the ball game, not The Ritz. Our value proposition to our customers is to offer them fast food fast, and to keep the lines moving so they can get back out to the game. Our customers do not want to spend 15 minutes in line to get a beer and a burger.
The issue: At the end of a game, we had 23 wrapped hot dogs and 7 prepped burgers that had to be ‘spoiled’, or thrown out. They are marked down, and taken as a loss. Obviously, in a business you do not want to waste inventory. It is an unnecessary increase in your bottom line costs, and your procedures need to do everything possible to keep those losses from happening. It is something management absolutely needs to keep an eye on. But as with any business, care needs to be taken when making changes in procedure. Activities need to be thought out to the end, to make sure there are not unexpected results. Which is exactly what didn’t happen here. Because of one night of misjudged demand that led to spoils, a knee-jerk policy change was made with no thought to the effect it would have on the team’s performance and results. And worse, no thought was given to the bottom line profits and customer satisfaction.
The policy changes: Now only the chef can put hot dogs in the steamer. The volunteers are not to touch the hot dogs until they are cooked. Ostensibly, this is because the chef is the only one capable of judging the need properly. The chef can only cook 4 hamburgers at one time. No more pre-cooking the burgers.
Expected Outcome: The expected result of these changes was to have fresher food, and limited spoils. Customers will be happier with the freshest food possible, and the amount of food being spoiled will be limited. Birds will sing, and the forest animals will frolic in happiness, and all will be right with the world.
Reality Bites: There were a few glaring holes in this strategy that management didn’t consider, that the staff all saw coming. Here is what happened: We started of the night with only 25 wrapped hot dogs, and 4 cooked burgers. The gates open at 6pm. By 6:15, we have no wrapped hot dogs left, and no cooked hamburgers. The chef has put new dogs in the steamer, but they are 10 minutes from being done. He is cooking burgers, and they are 10 minutes from being done. We have a line of customers waiting for hot dogs and burgers. There is limited space, so the people waiting for hot dogs and burgers are milling about, and the people who just want drinks, beer, or pretzels can’t get in to place their orders. The line is out the door, and customers are not happy.
At 6:25, we have cooked hot dogs, and we hurry to wrap them. The burgers are cooked, and the chef is serving them, but now many of the customers want special orders: no onions, extra cheese… All this just slows down the process further. Eventually, we get it together as best we can, but there continue to be issues than can’t be solved. If the chef has to go in back and stem the hot dogs, he isn’t cooking burgers. And if he can only cook four at a time, he is always backed up, and can’t get to the hot dogs. There are a group of volunteers that can easily handle the hot dogs, but aren’t allowed.
The Results: Management saw a problem- and that much spoiled food is certainly a problem- and made a decision to fix it. But the change was poorly thought out. It disrupted the team’s ability to serve their customers, overburdened the chef, and underutilized the volunteer staff. The workers were unsatisfied, and the customers, forced to wait, were also less satisfied. On paper, however, it looked like a success to management. There were 2 hot dog spoils and no hamburgers. So, what was the true result of this change? Success in the lack of spoils, or failure because of the slowdown in the process?
It was a complete failure, though management doesn’t get it. Though there were less spoils, management has moved away from their value proposition; Fast food fast. Customers are dissatisfied, and the workers are unhappy. The intangibles are how many customers didn’t come to us because of the poor service, but all that management sees is what is on the paper; less spoils. But here is the real loss, which I tried hard to explain to the line manager. I figured (conservatively) we lost 20 hot dog sales and 5 hamburgers over the course of the night from people who didn’t want to wait and went to another vendor. The manager said to me “that is the same amount as what we had to spoil the other night. Tonight we didn’t waste the food, and we can sell it tomorrow!”
Really?
Here is what I wrote down for him. 20 hot dogs, 5 burgers, net cost $1 each. Buns, extras, total net cost $30. Burgers, sales price $5.50 x 5 = $27.50 gross sales. Hot dogs, $4 X 20 = $80. Total gross sales lost, $107.50. Net sales lost, $77.50. On an average of $5,000 per night in sales, this is a 1.5% loss of profit. He looked at me like I was from another planet. “It’s only $77 dollars!”
Only $77 dollars, times the three stands that they operate. Times the 50 games left in the season. This adds up to $11,625 in profit gone, with less customer satisfaction, and unhappy employees. But the spoils are down. I’m just a volunteer, so I let it go. It’s not my business to run. Maybe at the end of the season when they are scratching their heads to figure out why profits are down, they might figure it out.
One, two, three strikes you’re out!
Saturday, June 6, 2009
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