Monthly Archives: May 2013

Serving Fries 24 Hours a Day at McDonald’s

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MAY 29, 2013

mcdonalds salesI find the issue of running a restaurant 24 hour/day interesting. The Wall Street Journal (April 30, 2013) writes that “fast-food chains are hanging a lot of hopes on night owls and early birds.” With a lean economy squeezing their sales, thousands of restaurants are extending their hours to try to get more people through the door.

About 45% of McDonald’s 14,100 U.S. locations are now serving customers around the clock, up from about 30% in 2005. Dunkin’ Donuts has doubled its number of 24-hour restaurants over the past decade to nearly a third of its 7,000 U.S. outlets. Taco Bell implemented a breakfast menu for the first time last year, and today 825 stores open between 7 a.m. and 9 a.m., instead of the usual 10 a.m.

For many franchisees, extending hours is an alluring idea, since it lets them bring in more revenue without boosting fixed costs like rent. It can also simplify other operations issues: Outlets that stay open around the clock, for instance, can eliminate procedures for opening and closing the restaurant.

But the practice doesn’t always bring big payoffs. Even though fixed costs don’t rise, there are added expenses such as higher utility bills and extra pay for hourly employees working the graveyard shift. Simply finding people to work those hours can be a struggle. “It is always difficult to get people to work overnight. It’s just contrary to the body,” says one consultant.

Meanwhile, the boost in sales can be meager. Consumers still prefer to eat at fast-food joints during traditional hours. Noon to 1 p.m. is the busiest time of day for quick-service restaurants, accounting for about 15% of customer visits last year. In contrast, the hours between 9 p.m. and midnight represented just 6% of visits, and the hours from 1 a.m. to 4 a.m. less than 1%.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

Fill ‘Er Up…With Natural Gas

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MAY 23, 2013

LNG pump at Blu filling station in Salt Lake City

LNG pump at Blu filling station in Salt Lake City

If you drive down I-15 in Beaver, Utah, you’ll see a 30-foot-tall silo with white letters that spell out “Blu.” Next to it is a truck stop. It is no ordinary truck stop. The silo contains liquefied natural gas (LNG) chilled to -200° F and ready to fuel specially outfitted 18-wheelers. The facility is owned by Blu Transfuels, which expects to build 50 natural-gas filling stations nationwide this year, according to Fortune (May 20, 2013).

Drawn to the vast potential of America’s fracking boom, Blu plans to convert natural gas into a liquefied form and use it to power the country’s fleet of 8 million heavy and medium-weight trucks, which account for 15% of U.S. oil consumption. The company’s partner, ENN, already operates 238 natural-gas stations in 59 cities in China. Blu’s VP of sales says, “LNG will allow our transportation fleet to save money and at the same time reduce its carbon footprint by 25%.”

Blu is not alone. Clean Energy, a company backed by T. Boone Pickens, says it will have about 150 natural-gas stations in 33 states by year-end. Shell’s first LNG station opened in April in western Canada. Shell’s president says, “LNG has the potential to transform the transportation sector in a big way.”

The new LNG trucks should cost only $30,000 to $40,000 more than diesels. Given that a typical 18-wheeler travels 100,000 miles a year at 5 mpg and that LNG is about $1 to $1.50 a gallon cheaper than diesel, a driver can save as much as $30,000 a year in fuel — a one-year payback. Many trucking companies lock in their fuel costs for five years, which would provide a total savings of $120,000 over the life of the contract.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

The Turning of the Screw

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MAY 21, 2013

Harley's York PA plant

Harley’s York PA plant

Companies’ pursuit of “big data”—collecting and crunching ever larger amounts of information—is often thought of as another way to figure out exactly what customers want. But big data is also a means of measuring millions of little things in factories, such as how many times each screw is turned. That is what Raytheon is doing at its Alabama missile plant, writes The Wall Street Journal (May 16, 2013). If a screw is supposed to be turned 13 times after it is inserted but is instead turned only 12 times, an error message flashes and production of the missile or component halts. Improvising with a defective screw or the wrong size screw isn’t an option.

Similarly, At Harley-Davidson’s plant in York, Pa., software keeps a constant record of the tiniest details of production, such as the speed of fans in the painting booth. When the software detects that fan speed, temperature, humidity or some other variable is drifting away from the prescribed setting, it automatically adjusts the machinery. In the past, says Harley’s VP, operators had leeway on paint jobs and each could do the work in a slightly different way. Harley has also used the software to find bottlenecks that could keep it from its goal of completing a motorcycle every 86 seconds. Harley managers recently determined that installation of the rear fender was taking too long. They changed a factory configuration so those fenders would flow directly to the assembly line rather than having to be put on carts and moved across an aisle.

Harley and Raytheon are just two of many manufacturers installing sophisticated, automated software systems, known as manufacturing execution systems, or MES, to gather and analyze factory-floor data. Semiconductor and other high-tech companies were early adopters of MES, but now others are catching up. Suppliers include  Apriso, GE, SAP, Siemens, and Rockwell Automation.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.