IT induction in the food service industry

As part of the business strategy in a competitive environment, for an organization to induct information technology (IT) appropriately, business process reengineering (BPR) must be conducted. We propose a process that incorporates both management information systems and strategic management concepts for the IT induction. First, we develop a business competition strategy based on Porter’s five competitive forces; second, using concepts developed in the field of information systems the business processes are reengineered to improve effectiveness and efficiency ; and finally, IT strategy is developed to achieve these goals. A real-life case in the food service industry is used to illustrate this process. In this paper, we apply the principle of reengineering-based IT induction to the food service industry. We suggest a process that incorporates information systems and strategic management concepts for the induction of IT: (1) developing business competition strategies, (2) reengineering business processes, and (3) developing IT strategies. This process is then applied to a real-life Chinese restaurant as a case study to illustrate the process of reengineering a table service restaurant with IT systems and concepts. The name of the restaurant is made up to protect the identity of the restaurant. Developing business competition strategy The restaurant The Good Earth restaurant has been under its current management for over 15 years. In this Pennsylvanian town of 50,000 people, poor economic times have forced several Chinese restaurants to close, leaving only one other Chinese restaurant 15 years ago. The Good Earth was the newcomer then and proceeded to become the most successful Chinese restaurant in town. It introduced new dishes that were unknown to the area; and because of the limited seating and parking space, the management heavily promoted take-out and delivery services, mostly through increasing order size (thus lowering the profit margin) and more considerately packaging food. The management had known early on that it is difficult to find help who are knowledgeable about ethnic food, so they tried to retain workers through proper pay, flexible schedules, and generally treating them as friends. As a result, though the labor cost is higher than comparable restaurants, the corporate learning has been preserved quite well. In addition to several family members of the management who have been working for the restaurant since 1985, almost everyone has been with the restaurant five years or more. In recent years, several new Chinese restaurants have opened in the area, including two chain restaurants in the food court of the new mall. On the other hand, the economy continues to worsen: one major employer has ceased its operation locally, and even the utility company is centralizing its operation to its headquarters in Harrisburg. The area was classified to be one of the most economically depressed areas in Pennsylvania State, and thus was qualified for some grants from the state. These grants enabled several companies to bring in new Chinese professionals and their families. Seeing the success of The Good Earth, some of these family members immediately became interested in the Chinese restaurant business. Even though few of these newlyopened restaurants maintained their grandopening booms to became successful, inevitably they took away some business in an already limited market. Porter’s five competitive forces Many business competitive strategies for small businesses already exist in literature (Thurston, 1983; Robinston et al., 1984; Holland et al., 1984; David, 1985), and these studies point out that small businesses fail primarily because they do not have a welldeveloped strategy. One widely accepted methodology in developing business competitive strategies is Michael Porter’s (1980, 1985) five-force model (Figure 1), which examines: 1 the bargaining power of buyers; 2 the bargaining power of suppliers; 3 the rivalry among existing competitors; 4 the threat of new entrants; and 5 the threat of substitute products. Porter (1980) suggested that `̀ the goal of competitive strategy for a business unit in an industry is to find a position in the industry where the company can best defend itself against [the five] competitive forces or can influence them in its favor’’. Furthermore, `̀ the crucial question in determining profitability is whether firms can capture the value they create for buyers, or whether this value is competed away to others’’ (Porter, 1985). Recently, through theoretical analysis, it has been suggested that these five forces can be summarized into action’s effect on the barrier of entry (Chen et al., 2000). The following is an analysis of these five forces in terms of The Good Earth restaurant. `̀ Bargaining power of buyers’’ refers to the ability of customers to force down prices, reduce product delivery cycle time, demand higher quality, and require better service. Porter described seven factors, which can be used to understand the position of the buyer power of The Good Earth. Our analysis shows that because there are many alternatives available, The Good Earth’s customers have high bargaining power. `̀ Bargaining power of suppliers’’ refers to the ability of suppliers to increase input material prices, increase product delivery cycle time, and reduce the quality of goods supplied without losing customers. The geographical isolation of the town and the need of ingredients that have few substitutes, give some suppliers of The Good Earth strong [ 14 ] P. Pete Chong, Ye-Sho Chen and Jason Chou-Hong Chen IT induction in the food service industry Industrial Management & Data Systems 101/1 [2001] 13±20 bargaining power. Ironically, because of the growing number of Chinese restaurants in the area, additional suppliers from Pittsburgh have expanded their services, therefore diminishing the bargaining power of suppliers somewhat. `̀ Rivalry among existing competitors’’ is the degree to which companies respond to competitive moves of other companies in the same industry, e.g. price cutting, new product introduction, and advertising slugfests. Due to the shortage of suitable new restaurant sites in the area, The Good Earth’s location in downtown helps reduce the competition for the lunch business. Unfortunately, this same location also gives the competitors the advantage of offering a perceived `̀ safer’’ environment for dinner business, although the crime is not really a problem in the area. To duplicate the success of The Good Earth, many competitors offer similar menu and services at nearly the same price. In fact, the head cook has recently left The Good Earth to open his own Chinese restaurant, which locates less than five miles away. Thus, the taste of the food per se is no longer a differentiating factor for The Good Earth. Fortunately, the personality of the manager cannot be duplicated, and The Good Earth is the only Chinese restaurant in town that has a liquor license, at least for now. `̀ Threat of new entrants’’ is the number and quality of potential competitors that may enter the industry. As stated earlier, because of the relatively low capital requirements of starting a restaurant business, the influx of Chinese professionals and their families, and the threat of layoffs have recently increased the number of new entrants in the market. Moreover, some earlier competitors have sold their businesses at a loss to other newcomers, thus lowering the entry barrier to the market even further. `̀ Threat of substitute products’’ refers to other products that can be used to satisfy the same need. The substitute products for The Good Earth came directly from Chinese restaurants and indirectly from restaurants serving fast food, Italian food, Mexican food, etc. In addition, some popular buffet-style restaurants, as well as catering services, begin to offer Chinese food options. Therefore, the threat of a substitute product is very high. The challenges Since The Good Earth is currently the only Chinese restaurant in the downtown area, with its reasonable pricing, the lunch business has been good. However, precisely because of its location, the management has not been able to bring their weekend business up. Now with the new competition, the weekday dinner business has fallen somewhat as well. To improve business, the management must retain every potential customer in the area. To simplify our discussion, we use only the lunch operation as example. The major problem with the lunch operation is its exceptional spike of orders around noon, and speedy service is essential to allow customers to return to work on time. Several specific problems are identified: 1 Not enough cooking capacity: with only two cooking ranges, if each order takes two minutes to prepare, at most 60 orders can be served during the peak hour, not even counting the time needed to clean and reheat woks. 2 Small kitchen service area: due to the layout limitation inherited from the previous establishment, during the peak hour three waitresses, two takeout food packers, and sometimes cooks have to squeeze through an area that is four feet wide by six feet long. 3 Small dining room area: The Good Earth seats about 80. Considering that many four-tops usually only seat two or three, the actual capacity is 60. Because of their short lunch break, customers are not willing to wait 15 minutes for lunch. 4 Limited delivery capability: Although almost all delivery orders have to reach customers at noon, it is not feasible for the restaurant to send out six or seven delivery people simultaneously. 5 Limited phone lines: Although the restaurant has two lines, often both lines are tied up for taking takeout and delivery Figure 1 Porter’s five competitive forces [ 15 ] P. Pete Chong, Ye-Sho Chen and Jason Chou-Hong Chen IT induction in the food service industry Industrial Management & Data Systems 101/1 [2001] 13±20 orders from 11am to noon, especially in poor weather. Potentially, customers who get tired of trying may quit calling. Given the short duration of the peak, it is not possible to hire someone or add capacity just to help out in that one-hour window. A more efficient use of existing capacity is more feasible. Competitive strategy development Examine the challenges listed above, the most urgent concern is to have the food on the table as soon as possible without sacrificing food quality. Speedy services not only allow customers to finish lunch within their limited break but also increase the turnover rate to lessen the capacity limitation. On the other hand, the management should redefine the market so that it relates more closely to its core competencies (Faulkner and Bowman, 1995) to develop competitive advantages. Most importantly, high-level strategies must be translated into measurable targets (Davenport, 1993). For bargaining power of buyers, the strategy is to provide unique and valuable services to customers so the restaurant can move away from being a `̀ commodity’’. Since the personality is the greatest asset for the restaurant, a series of newspaper advertisment was run depicting not only that The Good Earth was voted `̀ Simply the best’’ by its customers, but also the good times customers had had in the restaurant (`̀ You won’t forget our smiles!’’). At the same time, a large variety of unique menu selections may be a draw to customers. For bargaining power of suppliers, the strategy is to look for additional suppliers and find substitute goods for current ingredients. The focus is to remove some imported ingredients and replace them with fresh vegetables that can be purchased locally from more than one supplier. For rivalry among existing competitors, the strategy is to continue to innovate and keep imitators busy while cutting operation costs to reduce the needs of a price hike. Some remodeling is considered. For example, although The Good Earth restaurant is the only Chinese restaurant that has a liquor license, the bar business has not been great. The management admits that since it is not feasible to hire a full-time bartender, waitresses make their own drinks and the quality has been uneven. Thus, the hostess station may be combined with the bar so the hostess can double up as bartender to increase the functionality through using the idle capacity. For the threat of new entrants, the strategy is to use the remodeling to improve the restaurant’s appearance in order to create a sense of higher startup costs and to educate newcomers reagrding the difficulty of running restaurants. As a first step, a local artist is commissioned to paint a 20-foot mural of a traditional Chinese lady on the external wall of the restaurant. The mural is featured in the local paper (`̀ East meets West’’) and becomes a local attraction. The management attempts to generate a common feeling that `̀ there is no way to beat Dragons Seeds at the same category’’, hoping that any new entrants will be either too small to compete or too large that the heavier overhead will eventually force its closure. Finally, for the threat of substitute products, the strategy is to emphasize that The Good Earth is a restaurant that happens to serve Chinese food, and the quality of the food and the friendly service is second to none. Thus, the former establishes a more popular appeal to broaden customer base, and the latter stresses that there is really no substitute for the product. In addition, the challenge is to develop time/variety advantage as the center of the `̀ differentiation’’. In other words, the management should focus on tactics that would reduce food preparation time and increase the available variety to convince customers not to switch. Reengineering Business Processes It is clear from Section 2 that one strategy developed from analyzing one competitive force is also linked to other competitive forces. For example, providing a large menu selection serves to reduce the bargaining power of buyers as well as the threat of substitute products. In this section we describe three concepts used to implement these strategies. These concepts were originally used mostly in the information processing, but here we apply them to reengineering business processes. For illustrations, we use: 1 the 80/20 rule to speed up food preparation; 2 the principle of the linear search to design a more cost-effective and time-efficient menu; and 3 the multi-valued attribute approach to generate variety with a minimal increase