Operations and Information Management – Interim Assessment

Answer

The lean philosophy of production or service delivery traces its roots to the Japanese automaker Toyota (Womack & Jones 2010). The now-second largest car manufacturer (Volkswagen recently overtook it to claim first position) devised a method of efficiently manufacturing cars while reducing costs and maintaining the highest quality of its products in what it termed the Toyota Way or the Toyota Production System (Liker 2012). The system sought to produce enough cars to meet the demands of its customers without having too much inventory lying in wait for orders, yet managing to supply a car whenever there was an order. Underlying this goal was the need to minimize waste in the form of excess inventory, delay in supply, and using the least amount of raw materials to produce their cars. The result was lean manufacturing, a philosophy that today finds application in both manufacturing and service industries.

Lean philosophy was first named so by Womack and Jones after refining the Toyota Way. It has five principles: value, value stream, flow, pull and perfection (Byrne 2016). The principle of value recognizes that a customer seeks to enjoy maximum utility from any product or service. The utility a customer seeks is the value of the product and it represents how much the customer is willing to spend on it. By understanding the value a customer places on a product, the company must strive to provide that value to or beyond the customer’s expectation (Byrne 2016). The value stream identifies the steps a product undergoes from the raw material to the finished product. The goal is to identify the value addition of each step and to eliminate those steps that do not add any value (Womack & Jones 2010). The flow principle seeks to organize various steps a product undergoes so that there is smooth sequence to eliminate bottlenecks. The goal is to increase efficiency and to speed up production times. The pull approach aims to supply the product or service on the order of the customer with the least delay (Byrne 2016). As opposed to a push approach, pull plans production on the basis of demand, eliminating expensive pile up of inventory. Perfection is the principle that represents continuous improvement in all the previous steps in recognition that there is always room for improvement. This is the philosophy of Kaizen.

Lean Philosophy and Coffee Shop Business

Although lean practice has origins in the manufacturing industry, it is today applied in all sectors of business to improve efficiency and to save costs. This paper examines the applicability of lean philosophy in a coffee shop business. It will explore the operations and activities involved in a coffee restaurant and discuss the extent of application of the principles of lean in improving the business profits while increasing customer satisfaction. The paper will also discuss various challenges the coffee service business will face in its implementation of Lean principles.

The Coffee Shop at a Glance

The coffee shop is a busy enterprise with customers throughout the day seeking to enjoy coffee in a relaxed manner either with a friend or in place of a meal to save time during a busy working day. Typically, a customer walks in and goes to the cashier’s desk where he pays for his or her order before sitting down. A shop attendant will then take the customer’s order and present it to the barista who prepares the beverage as the customer waits. When the beverage is ready, the attendant presents the drink to the waiting customer who proceeds to take it and depart thereafter. Depending on the number of customers available, the waiting time between entry and paying for the coffee differs and can range from zero during off-peak hours to half an hour during peak hours. Once the customer has paid for the coffee (and any accompaniment if applicable), there is more waiting time depending on the number of customers available before an attendant comes to pick the order for preparation by the barista. There is further time to wait between attendant taking the order and the customer receiving it. In general, the main concern of the customer is to get the best coffee in the shortest time possible. Even customers who are taking coffee as refreshment in informal meetings do not like waiting too long before getting their coffee. Ideally, a customer would like a scenario where he/she walks to the shop without having to queue to pay for his/her drink, has his/her order taken immediately he/she sits down and has it delivered immediately upon sitting down. This paper also examines applicability of Lean principles in the various steps to improve customer experience in the coffee shop.

Value

The coffee customers wants is a refreshing drink that excites their senses in many ways. First, the quality of coffee must be premium, brewed from the best berries and prepared according to customers’ desires (Peppers & Rogers 2017). A good coffee is served hot and with the right mix of ingredients and in right amounts. The pricing of the coffee must commensurate with the quality of the drink served (Muhammad & Lee 2015). These are the fundamentals of what coffee customers seek. However, the value a customer seeks from a cup of coffee at home is different from what he seeks in a shop.

The coffee shop customer seeks a unique customer experience to enable him enjoy the coffee. Besides the quality of the actual coffee, customers are concerned with the kind of cup in which the coffee is served, the environment in which the coffee is served and the best quality of service (Mahajan 2016). At Starbucks, the company sought to create a unique customer experience by making their stores relaxing lounges where coffee drinkers would enjoy time with friends or reading a book or browsing the net (Kaplan 2011). In its own bulletin, Starbucks (2014) reported that they created a friendly and homely atmosphere, where partners welcomed and engaged customers at personal level. The stores have sufficient space to eliminate the feeling of suffocation customers develop in squeezed places. Hygiene is paramount and the stores maintain a high level of cleanliness. To provide quality coffee, Starbucks worked with coffee farmers and provided technical services in growing and processing the best coffee. They enforced standards on the quality of coffee berries they can purchase. Lately, they established their own coffee farms with the best-qualified agricultural personnel monitoring the growing of the coffee in the best coffee regions of the world in Brazil and Africa. Besides assuring them of a steady supply of high-grade coffee, growing their own coffee lowers the cost of production, one of the key aims of lean production. To improve their customers’ experience, Starbucks trains its partners on technical matters of coffee preparation and customer engagement. The result is that customers enjoy Starbucks’s coffee as much as interacting with their partners. In addition, Starbucks opened an online portal (mystarbucksidea.com) where customers can discuss new ideas and give feedback on their experience at the company’s stores.

The main challenge in value provision in the service industry such as the coffee shop is that customer tastes and values are too varied making it impossible to provide one service that suits all. While most people are tempted to believe that the customer’s major concern is the main product, Raghunathan (2013) warns that customers value superficial aspects of products and services as much as the product itself. In the example of coffee, he asserts that customers value the type of cup in which the coffee is served as much as the coffee itself. Furthermore, personal tastes and individual circumstances may dictate the preference of customer at a particular time. For instance, a customer in a hurry may be more concerned about saving time than some friendly banter with attendants, while the lonely customer may very well appreciate the banter much more than the coffee.

In addition, service is part of customer experience for customers in a coffee shop. The service is provided by different individuals whose natural disposition or other reasons cannot provide exactly uniform service to customers all the time. The quality of service is likely to vary from individual to individual and from time to time. Starbucks tries to minimize the variation by training their partners in customer relations.

Despite the challenges of understanding what customers value most, coffee shops can provide a lot of value by offering well-brewed coffee from high quality beans. They can improve customer experience by training their personnel on customer relations and having them all understands the business in general.

Value Stream

The value stream of lean management refers to all the steps, activities and products that constitute the production of a good or the provision of a service (Trent 2008). It requires that management notes down these activities and steps to enable it identify sources of delay and wastage. In the typical restaurant described above, the activities are queuing to purchase the food coupon, sitting down and waiting for the staffer to pick the coupon and waiting for the waiter to bring the food or coffee ordered.

In a typical restaurant, the average waiting time for the purchase of the coupon is 15 minutes. Lead time for the collection of the coupon by the waiting staff is 5 minutes while the average waiting time for food is another 15 minutes. In total, the average time it takes to receive the cup of coffee (and snack if ordered) is 35 minutes. The delay in getting the coffee arises from waiting for the barista to prepare earlier orders. Where there is no prior order and the waiter finds a free barista, the latter takes only 5 minutes to fix the coffee and to warm the snack. The 15 minutes average waiting time means that a barista always has two orders at the time of the waiter’s arrival. These times can reduce to the minimum five minutes during off-peak hours and increase to 30 minutes at peak hours.

By identifying the value stream, it is possible to pick out the activities that cause delays (Sarkar 2012). A possible saving in time can be achieved by automating the coupon purchase and order placement. A restaurant can develop an app through which a customer seated in the restaurant can make a purchase and have the order go directly to the kitchen and barista. Once the customer walks into the coffee shop, his Smartphone automatically connects with the restaurant and he can see the menu and prices. He enters the table number and places his order that goes direct to the kitchen. The barista prepare the coffee and hands over to the waiting staff who delivers it to the customer and will clear the used cups later. Such a system would eliminate the queuing time to purchase the coupon. In the kitchen, more time can be saved by organizing the machinery, equipment and foodstuffs appropriately to reduce movement. If the restaurant has sufficient baristas, average waiting times can fall to 15 minutes at the highest and 5-10 minutes at the lowest.

Flow

The principle of flow seeks to smoothen the sequence of events from the initial to the last (Machado & Davim 2016). A lean service business should ensure that the steps identified in the value stream stage occur in the correct sequence to avoid interruption of services and to save as much time as possible. For instance, in the typical coffee shop example in this paper, if a customer sat down first before going to queue to purchase the coffee coupon, the time for sitting down is a waste. Similarly, if the customer placed the order before paying for the coupon and had to pay after taking the coffee, cases of customers leaving without paying would rise, leading to a loss to the establishment.

From the customer’s side, there is very little improvement in sequencing that can be achieved with lean operations. This situation arises because the sequence of events the customer follows on arrival at the coffee shop are logical. The first is to pay for the coffee, wait for it and when it comes, to take it. The only difference arises in payment as some restaurants collect the money after the customer has taken the beverage. However, majority of restaurants and coffee houses follow the order where customer pays before receiving the coffee.

The sequence of events for the coffee shop staff can improve drastically with a change in sequence. This is so especially with the baristas. For instance, after dispensing a cup of coffee, the barista could choose to pick the cup for the next coffee first or to run the coffee machine first. By running the machine first, he can spend the waiting time to pick the cup. In that manner, he saves time as the coffee is already brewing as he picks the cup. On the other hand, picking the cup before running the machine wastes time as no other activity takes place in the seconds it takes to pick the cup. Cumulatively, the barista will have wasted a lot of time by the end of the day. Once again, the layout of the kitchen will come in handy with regard to the activities and time it takes to pick whatever the barista needs. If there is sufficient space, the barista can arrange all the requirements for the coffee making process in the order of need. The seconds the arrangement will save the barista will add up to significant time together.

Pull

Pull is an efficiency principle that ensures that products are made as and when in need (Eriksen 2007). Unlike push where the firm forecasts the demand of goods and produces them in advance, pull produces goods depending on the demand (Seddon 2013). It is a complementary of the “flow” principle, as the demand for goods should be taken into account to ensure that the sequence of activities is smooth to avoid disruption. Levinson (2016) adds that short design cycles and flexibility are the wheels on which the principle of pull operates. The firm should be able to engage all the necessary gears on demand in short notice. A delay in supplying the order will make customers impatient and they can go elsewhere. 

In a restaurant setting, the common mode of operation is already full. Preparing food beforehand could lead to massive losses if excess of it was prepared. Preparing little food without the provision for more will deny many late customers from enjoying their meals. Consequently, coffee shops deal with orders with the shop preparing each customer’s order as he waits. This method is even mandatory as customers demand fresh beverage and making a lot of it in advance will give it time to become stale as it is perishable. Improving the flow of the value stream is a sure way of improving pull. If the coffee shop has short lead times between the placement of orders and their delivery, the coffee shop can serve many customers on any given day.

Perfection

This is one principle that is applicable in all kinds of business all the time. This principle is the Japanese equivalent of kaizen or continuous improvement. The principle recognizes that there is always room and need for improvement. In other words, if a certain procedure takes five seconds, the believer in perfection thinks of how to shorten the time further to less than five. Each of the previous four lean principles can be improved to save time or expenses. For one, the quality of the product offering can always do with further improvement. The organization can equally explore further uses of its products. In the coffee shop business, quality or value of the coffee and customer experience can undergo several modifications to produce unique products that can suit different customer tastes.

When Schultz took over the running of Starbucks a second time, he came up with a turnaround plan that he dubbed the “Transformation Agenda” (Dooley 2015). Part of the Agenda’s plan was to reignite the connection between Starbucks’ customers with the coffee shop (Kell 2015). The CEO went on record for one day closing all the US coffee shops for three hours to retrain the baristas in making coffee. The act connected with the customers who appreciated that the CEO could accept to lose business for a whole three hours to improve the product offering. The partners received training on how to engage customers and with time, the Starbucks experience became unique as customers felt that the stores treated them individually. The firm came up with ways that could enable a partner to recall the particular customer’s preferences such that next time he visited the shop, he/she could reproduce it without the customer having to repeat the order. Customers went to Starbucks to connect with the partners as well as take coffee. Schultz also came up with Mystarbucksidea.com, a portal through which the business interacted with its customers and took their ideas in making further improvements to their experience.

A key ingredient of perfection involves respect for the workers and their human dignity (Kell 2015). Starbucks initiated many welfare programs for its partners including social media platforms where the partners could share their daily experiences, interact freely with the management and just have fun (Starbucks 2014). The company came up with scholarship programs for the workers and improved their benefits to a point that the company was spending more on the health of the partners than it was spending on coffee. Consequently, working with Starbucks is a unique experience that few workers get in their workplaces.

In conclusion, therefore, lean management philosophy was originally meant for the manufacturing businesses with a focus on factory operations. However, the philosophy has found application in all business settings. In the service industry, it is difficult to reproduce it perfectly but it finds a lot of application altogether. The challenges of implementing lean concepts in service industry include the invisibility of services and the cumulative nature of wastage in time such that it can easily be missed as an area for improvement. However, the philosophy finds a lot of application in the coffee shop business albeit to a limited degree.