Summary of the Firm
Big Bone BBQ and Wicked Wings is a full-service casual dining restaurant located in Kanata and is the only location this franchise offers in Ottawa. There are other locations in Markham, Keswick, Barrie, and Whitby. This restaurant specializes in smoked ribs, wings, beef brisket, and pulled pork. Also available are restaurant classics such as burgers, fried wings, nachos, poutine, and chicken fingers.
The strengths of this restaurant include excellent customer service, quality products, and competitive prices. Another strength is that they are licensed to sell alcohol. Weaknesses include the small size of the restaurant and poor temperature regulation within. Due to the size of the restaurant, the drink options are limited. Additionally, there is not space enough for a warming fridge. Customers need to be on time to pick up takeout orders, to avoid food getting cold and soggy while sitting on the counter.
The opportunities mostly include re-location or additional Ottawa locations. With their excellent reputation, there is an opportunity for Big Bone BBQ to expand into other parts of Ottawa and Canada. The threats of the restaurant include the competitors in the area. There is a Wild Wings right across the street that they must compete with, as well as Montana’s less than 15km away. Considering ribs and wings are the main attraction for Big Bone, they must strive to maintain competitive prices and superior quality against Wild Wings and Montanas.
The Issue at Hand
Although profit margins at Big Bone BBQ are good and the restaurant is overall successful, there are operational issues in place that decrease productivity. The main issue that faces the restaurant is inventory. Inventory is ordered using a “gut feeling” basis, and a fixed- period model that is occasionally changed when demand is known to change. For example, when a large catering order or reservation is booked the owner knows to order extra food and raw materials for that week.
Food in the restaurant is prepared on a “made to order” system. Meaning all food is cooked or prepared in advance. Products are cooked in advance and wrapped and conserved in the fridge or freezer. Freezer items are pulled at night and placed into the fridge for the following day. Products are reheated when orders are made. Preparation is done twice a day, once before lunch and again before dinner. The only “forecasting” done is using very naive approaches on a daily, weekly, or yearly basis.
For example, the assumption that it will be extra busy today because it was busier than normal yesterday, last Saturday was busier than usual so this Saturday will be as well, or demand for products increases every year on Superbowl Sunday. However, these are all based on assumptions and gut-feelings rather than data. The issues at hand in terms of inventory are as follows:
- High waste of perishable products such as tomatoes, cabbage, potatoes;
- No automated tracking system for bills of material;
- Shortages on products (i.e. not enough prep was done for the amount of demand);
- Lack of portion standardization;
- For example, cooks judge how much cheese and gravy to use when preparing an order of poutine;
- The amount of food to cook and prep each day is based on judgment and routine, rather than data or historical needs;
- For example, the amount of coleslaw prepared is based on a daily judgment of demand for lunch and dinner, as opposed to one batch of cornbread baked per day;
- These types of items are the ones that run out most often.
The employees at the restaurant have years of experience and feel very confident in their abilities to properly prepare products. Another issue may be thoroughly implementing procedures that change the way they work. Higher monitoring, surveillance, and emphasis may help with this issue. We intend to provide recommendations for the following:
- Fixing the current model (maintain a fixed period model);
- To further improve operations, management needs to implement a system for an EOQ model. This would mean:
- Acquiring software and updating the POS system to track inventory through a bill of material;
- Setting up a bill of material;
- Standardizing portions to provide accuracy in the bill of material;
- Forecasting demand to better estimate how much food and ingredients to cook and prep on a given day, using a multiplicative seasonal model.
Improve the Current Model
Implement an EOQ Systems
Purchasing Inventory Tracking Software
The first step in implementing an EOQ inventory system is to purchase the necessary software that tracks inventory at the POS computer. Although taking inventory by hand is still very common and valid in the restaurant industry, there are many benefits to using computer software systems to help track inventory. By automating the inventory process, you can take stock more quickly and accurately than possible by hand. It allows you to determine which items to buy and how much you have left under how much is sold of each item (“Restaurant Inventory Management”, 2018). There are several things to consider when choosing an inventory software: (“Restaurant Inventory Management”, 2018)
- How much you are willing to spend;
- The software’s ease of use;
- The program’s setup time;
- Your business’s existing technology;
- The features you and your employees need.
Here is a table comparing the most popular inventory software in the restaurant industry:
The software that we recommend is Restaurant Maid, this is an affordable inventory software that tracks inventory quantities and provides alerts for low stock which helps avoid shortages. The overall ratings on this software are high, and it is cited as incredibly easy to use. This software comes highly recommended for general restaurants. Additionally, it allows you to track inventory in multiple locations which will have long-term benefits as Big Bone BBQ explores opening more locations in Ottawa and Canada.
Setting Up A Bill Of Materials
A bill of material is an inventory tracking tool that helps restaurant owners track the inventory of the materials used to prepare finished food items that are sold. For example, when we sell a chicken sandwich, we want to track the inventory of buns, chicken, lettuce, and tomatoes used to make the sandwich. However, to do so there must be a defined amount of each ingredient used in the recipe to prepare 1 order of a menu item.
Therefore, before we can begin to set up a bill of materials we need to fix the environment first – this is addressed below. Once the environment is fixed, a bill of materials can be set up so that every time a product is sold, the system automatically reduces the ingredients accordingly (Rista Apps, 2016). The bill of materials can help with pricing, production, and purchasing.
Fix the Environment
Before you can begin to set up a bill of materials, you need to begin by standardizing portions. As previously stated, there is very little standardization in the ingredients used for various food dishes; much of it is done on a judgment basis. The advantage of standardized recipes is knowing the quantity of food being produced but also keeping consistent quality across the board. If you don’t have standardized recipes, or if they’re not being followed, you won’t have consistency in cost and quality. If you permit deviations from your recipe standards, you will lose both cost and quality consistency (Santibanez, 2019).
A good example of this at Big Bone is the fact that every back of house employee has their modified recipe for the cornbread. A variation in the recipe between employees means that the quality and flavor of the cornbread is not consistent. A customer could come in for lunch and dinner and have two different batches of cornbread with two completely different tastes. These deviations from recipe standards create problems for tracking costs and tracking quality.
To improve operations, Big Bone must establish and enforce standard and consistent recipes for all products. A technique to do this is the Mise En Place method, meaning “everything put in its place,” it is often used by professional chefs. In simple terms, the idea is that kitchen staff will plan and organize all stages of food preparation, cooking, and serving within a given time (USDA. Food and Nutrition Service, 2006). There are 5 stages to ensure that mise en place is practiced properly and correctly: (USDA. Food and Nutrition Service, 2006).
- Plan and Assign – ensure that kitchen staff members understand their role for each standardized recipe;
- Gather Equipment – all tools needed for each recipe should be gathered and placed in the preparation area;
- Gather Ingredients – each ingredient should be gathered, placed, and measured;
- Prepare Ingredients – proper techniques indicated in each standard recipe should be used;
- Serve – ensure that the food served is of good quality and properly prepared.
The final tip for tracking and ensuring standardization is to track day-to-day operations by documenting procedures and policies. Using forms such as Line Check Forms, Productions Charts, Close-to-Open Checklists, and Waste Sheets will allow you to ensure all procedures and policies are in place, up to standards, and being followed as well as identify areas in need of attention and allow for employee accountability (Sarris, n.d.).
Forecasting Demand
One way for Big Bone to solve their inventory problems is by forecasting demand. Having a good forecasting plan is critical in all aspects of a business. Forecasts of demand impact the following functional areas: labor, capacity, and supply chain management. We will apply these functional areas and illustrate their importance concerning Big Bone BBQ.
Labour
There will be additional costs when acquiring and training new workers. Bad forecasts can lead to unnecessary hiring costs and firing costs, where there will be an excessive amount of workers that are hired or a shortage that will not meet the overall demand for total production. Furthermore, if more workers are needed without advanced warning, the number of training declines, and the overall quality of production and service can drop off significantly, which will make the restaurant less competitive against its rivals as the wait times are longer or more mistakes are made by inexperienced staff.
Capacity
When the projected capacity is inadequate, the shortages can lead to loss of customers and revenue. If the quantity demand of the customers is not met, it will create dissatisfaction from the customers which will turn them into loyal customers of Big Bone BBQ’s competitors.
Supply Chain Management
Good supplier relations and the ensuing overall quality for food and beverages depend on accurate forecasting. With an accurate forecast of demand, transportation time and production needs can impact the overall quality of meals that are presented to the customers. Some restaurants use the practice of purchasing food items they are short on from a grocery store in the event of a shortage, which could lead to inconsistencies in taste, quality, and overall look of the prepared meals.
Performing the Forecast
The restaurant and service industry is very seasonal, being busier in the summer and slower in the fall, and they also experience spikes around lunch and dinner time. Seasonality is defined as regular upward or downward movements in a time series that tie to recurring events (Heizer, 2016) – which is the case in service industries. To forecast their demand while considering the seasonality of the business as well as incorporating the judgment of management, we recommend Big Bone BBQ use the multiplicative seasonal model. This method ignores the trend to properly estimate the effects of seasonality on the forecast.
Due to the spikes in the business between May-August and low points in business from November-February, the forecast should be done for each month to eliminate shortages when demand picks up and reduce wastage when demand slows down. This method is relatively simple and does not require any extensive software. This is beneficial for the management because it only requires Excel, and allows for some flexibility if the forecast seems too low based on professional judgment. The steps to perform this forecast are as follows:
- Find the average historical demand for each month.
- Compute the average demand for overall months.
- Compute a seasonal index for each month. This is done by dividing the month’s actual historical demand by the average demand overall months.
- Estimate next year’s total demand.
- Divide the estimate of next year’s total demand by the number of seasons (12), and then multiply it by the seasonal index for that month.
This forecast could be performed easily by management and would allow for more accurate inventory ordering. Management has a historical number to base the order off but can also add or remove from the order as they see fit to meet the recent period demand or if they are aware of large reservations or catering orders that will be coming in the current period.
Final Recommendations
The current system employed by Big Bone BBQ is successful, but it does not realize its full potential due to a lack of automation that leads to imprecision and considerable wastage. An operations management plan would attempt to address these concerns by altering the restaurant’s approach to several critical areas, inventory being the foremost. As a food business, Big Bone BBQ employs large amounts of perishable items that have to be used up during a short period after their purchase. As such, excessive acquisitions of material lead to wastage while insufficient amounts would lead to potential failures to serve customers, damaging the brand’s reputation.
The first recommendation is the acquisition of a specialized EOQ inventory management system to track the remaining stock more reliably than the traditional hands-on approach. Human memory is fallible, and a person may forget that a restock is in order shortly or order additional items of a type that is present in the inventory but has been overlooked. Besides, under the current approach, the restaurant orders food items at fixed intervals without considering need or scarcity.
A computerized system will not have that concern and provide well-timed, high-quality information, and reminders about the state of the business’s stock after the initial configuration and data entry is complete. It will also be able to deliver accurate estimations of the amount of inventory that is required for purchase, leading to efficient spending.
This report recommends Restaurant Maid due to its capability to manage multiple locations at once, but all of the investigated variants have benefits and flaws. Generally, higher prices appear to correlate with the presence of additional capabilities, which may or may not be desirable for Big Bones BBQ. All of the reviewed products share the same necessary inventory management capabilities and so are suitable for the fundamental purpose of their purchase. The staff should review the offerings, determine whether the extra features are worth the cost increase, and make an informed choice. If necessary, the use of multiple toolkits at once may be warranted, such as IPro Series 40 to automate the management and Restaurant Maid to keep track of each location at the same workstation.
Regardless of the solution chosen, specific changes will be necessary to accommodate automation. Standardization is foremost, as the software should be able to deduct a specific amount of raw ingredients from the corresponding records and maintain accurate representations of the real situation. As such, the introduction of uniform ingredient lists, with amounts of each material included, is strongly recommended. An offering on the menu should represent a specific amount of particular foods and contain a fixed value proposition for both the customer and the company. Currently, the practice is not enacted at Big Bones BBQ, but its introduction is essential to quantifiable performance and predictions.
Forecasting is the final recommendation for the company, as food demand is not constant and displays seasonal fluctuations. According to Lasek, Cercone, and Saunders (2016), the enactment of the practice is fundamental to the execution of other analyses. A variety of methods exists, and all of them require the collection of large data foundations. Once that information is gathered, no special software will be necessary to perform the rest of the procedures, as Microsoft Excel offers a sufficient toolkit. Once the required steps outlined above are complete, the company’s profit margin should improve, and further opportunities for improvement through operations management should become possible.
References
Heizer, Jay H., and Barry Render. Operations Management: Sustainability and Supply Chain Management. 2nd ed., Pearson, 2016.
Lasek, A., Cercone, N., & Saunders, J. (2016). Restaurant sales and customer demand forecasting: Literature survey and categorization of methods. In A. Leon-Garcia, R. Lenort, D. Holman, D. Staš, V. Krutilova, P. Wicher, … K. Nguyen (Eds.), Smart City 360° (pp. 479-491). Cham, Switzerland: Springer.
Restaurant Inventory Management. (2018). Web.
Santibanez, R. (2019). Why Standardize Your Recipes. Web.
Sarris, L. Standardizing Your Food Service Operation.
USDA. Food and Nutrition Service. (2006). Chef Designed School Breakfast (pp. 22-25). Web.
RistaApps. [Screen name]. (2016). How to set bill of materials Restaurants.