Cloud Computing and its Based IoT Applications in Haidilao’s Unmanned Restaurants

By: Xuying Wen | ME20192334 Daniel Wang | MA20170148 Yuzhou Huang | ME20192385

In the near future, computing power will become something like electricity, which can be flexibly and efficiently distributed to each end user via massive network. Just imagine, each company can launch its own information center, manage its own business data and conduct on-line transactions with numerous customers as long as it has certain terminal displays! The exciting fact is this forecast has been gradually realized by a great technology — cloud computing.

What is cloud computing? It’s a very complex technology, and I’m trying to explain it in a simple way. When a customer wants to buy a computer to deal with personal documents or play games, he/she will pay attention to a computer’s parameters like CPU, memory, etc.

Similarly, a company will purchase servers with proper parameters to establish its information center. By the end of the last century, companies usually purchased physical servers to establish their information centers, however, there are several pain points for companies to buy physical servers: 1) the procurement cycle is quite long, companies usually got those physical servers weeks after they bought them; 2) physical servers are usually very expensive for their extremely powerful

CPUs, memories and other parameters, however, it was quite common that a company had to buy an extra sever even if it only needs to upgrade the performance of its current server a little bit more;

3) the maintenance of all those distributed servers in different geographical locations was very boring and time-consuming.

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When we have stepped into a new century, cloud computing technology, which was first launched and widely applied by Amazon, has been developing significantly. Could solve all the above problems. In a nutshell, the realization of cloud computing can be divided into two steps: 1) utilizing virtual machine technology to assemble the computing power of hundreds of distributed physical servers into an enormous resource pool; 2) using unified tools to allocate resources (e.g. computing power) to each individual user automatically and immediately. In addition, a user can enjoy the convenience of cloud computing as long as he/she can log onto the Internet. Amazon,

Microsoft, Alibaba, Google, and Tencent are some of the most famous cloud computing providers worldwide.

Nowadays, if a company wants to launch its own information center, it can buy the computing power from Alibaba and get the computing power immediately, instead of obtaining the physical server weeks later. It can quantify the performance of the information center it needs, for example,

1000 standard CPUs, 100G memory plus 10G bandwidth; if it’s going to upgrade the performance a little bit more, instead of purchasing an extra expensive physical server, it is feasible to buy one more CPU or 1G more bandwidth, which is much more flexible and economical. In addition, the company does not need to deal with most of that trivial maintenance of its ‘online’ information center, because Alibaba, the cloud computing vendor, will help do it. Therefore, cloud computing enables companies to access massive computing power immediately, obtain the number of computing power according to its exact need a certain point, and save a lot of maintenance cost.

Cloud computing technology has been widely applied to IoT (Internet of Things) systems.

Generally speaking, an IoT system consists of four layers as follows:

Figure 1: The framework of IoT system

Sensor Network Platform Application

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In the Sensor layer, data are collected by numerous sensors installed on-field. Typical collected data are voltage, currency, temperature, pressure and other physical information. These data are transmitted to backend through the Network layer, which is data transmission devices based on protocols like Wifi, Zigbee and NB-IoT. In the Platform layer, specific algorithms are used to analyze those massive data collected on-field. These algorithms are usually industry-specific, for instance, in the logistics industry, one important algorithm is to realize location-based service; in the e-commerce industry, a widely-applied algorithm is to analyze customer behaviors and predict their potential consuming needs. Finally, the Application layer is closely tied to specific functions like visualizing analyzed results or providing feedback signals to control those on-field electrical devices. By the way, the most common application scenario of IoT is remote monitoring & control.

Within an IoT application, the data analysis task is extremely heavy. There are several reasons: 1) hundreds of thousands of sensors are usually used in an IoT system, and each sensor continuously generates data; 2) in addition to those collected on-field physical information, time, address, device, and other information are usually integrated and transmitted to the backend for analyzing.

Therefore, the Platform layer of IoT often takes advantage of cloud computing technology, which has enormous and elastic computing power, to deal with those massive data.

On the other hand, I also would refer to edge computing as a perfect supplement for cloud computing. Edge computing is conducted in the Sensor layer for application scenarios with a high real-time requirement such as unmanned driving. In fact, some intelligent sensors have an edge computing function to pre-analyze collected data or communicate with other sensors nearby. To summarize, cloud computing is mainly responsible for complex data analysis remotely while edge computing mainly tackles light-weight analysis locally for applications with high real-time

P a g e 3 | 14 requirements. The combination of the two can efficiently deal with big data tasks within an IoT system.

Figure 2: Cloud computing & IoT applications along business chain

Sales & Marketing Logistics Manufacturing

Frontend Backend

• E-commence • RFID scanning and storage • Smart equipment tracking • Online payment • Automatic guided vehicles • Flexible production line • Advertising effectiveness evaluation • GPS position of fleets • Accident predicting and warning • … • … • …

IoT based on cloud computing has been widely applied in business operations and will continue exploring more application scenarios. In the past decades, with the rapid popularity of smartphones and great upgrading of IT infrastructure, cloud computing & IoT have significantly change the operations of sales and marketing. One interesting application is the evaluation of digital advertising effectiveness: the embedded cameras in the ad post can track passers’ eye and understand which parts of the advertising attract them most based on backend complex algorithms, thus to effectively modify the advertising contents. IoT also have improved the logistics efficiency a lot: 1) in the warehouse, RFID scanning and machine vision can identify, locate and track items efficiently; AGVs move cargo automatically and save a lot of labor costs. 2) during the transportation, IoT technology helps to monitor the status of cargos and fleets, give driving feedback to the drivers and optimize the driving routes.

Furthermore, we see a trend that IoT & cloud computing are gradually sinking down along the business chain, from the frontend to the backend, and will have more potential in dealing with the flexible production line, smart equipment tracking and other scenarios in the manufacturing process. Recently, the pilot unmanned restaurant launched by Haidilao is a great example of IoT

P a g e 4 | 14 based on cloud computing, which covers all those parts from the front end to the backend (sales & marketing, logistics, and manufacturing).

With the development of new technologies and consumption upgrading, big data and artificial intelligence (AI) have become the keywords of the food industry this year. On October 28, 2018,

Haidilao, one of the leading Chinese restaurants, officially launched its first "unmanned restaurant" (or named smart restaurant) in , , costing around 150 million Chinese

Yuan (Huang, 2018). New technology has begun to disrupt the food and beverage industry.

Haidilao restaurant can realize the operation by robots in most of the areas, including waiting for the table, raw material cleaning, dishes preparation, hot pot soup base preparation and food delivery.

Before this, Haidilao has used big data and artificial intelligence many times to optimize its selection of siting and inventory management. For example, it has developed an AI platform with

Ali Cloud technology to improve the selections on its website. The algorithm sifts through population density, business opportunities, nearby restaurants and nightlife spots (Huang, 2018).

Many Haidilao restaurants open 24 hours a day based on the algorithm results in terms of cost and benefits.

The AI platform also calculates centralized inventory management. Based on the in-depth learning programs regarding table turnover rate and consumption trends, Haidilao can meet consumer demand. In the meantime, it can monitor fresh food such as lamb imported from other areas.

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In October 2018, it is the first time that Haidilao has realized automation of service, and replaced waiters and waitresses with robots for basic services. The main improvements consist of reducing basic staff, enhancing the consumer experience and increasing supervision and management.

Reduce basic staff

In terms of personnel allocation, basic dishwasher, staff who prepare dishes and hot pot soup bases and bartenders are no longer needed.

It was standard in any ordinary restaurant to have a number of dishwashers in the past. However, the smart restaurant no longer needs anyone to wash the dishes. Haidilao has added an intelligent food warehouse where robots can allocate all the food processing steps to outsourced suppliers and the central kitchen.

All foods are stored in the automatic temperature control ultra clean intelligent warehouse, and they are delivered directly by the 0 ~ 4 ℃ cold chain logistics to the Haidilao restaurant (Guo,

2018). Overall, it takes less time in the whole process from ordering food to take the food to the table. It does not impact the quality, instead, the foods became more clean and safe.

At the same time, Haidilao's "unmanned restaurant" replaces the dish preparers with a set of robotic arms. The robot arm is highly flexible and can reach the top shelf with more than two meters height

(Guo, 2018). When customers come into the store, they can order through the iPad. Then the data is synchronized to the food warehouse in the kitchen. At this point, the robot arm will take the dishes off the shelf, and then put them on the conveyor belt for delivery, which greatly reduces the error and speed.

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Traditional hot pot restaurant takes more than 10 minutes to prepare foods per each table, and sometimes it contains mistakes. However, the robot arm only needs 2 minutes, reducing 80% of the working time. It dramatically shortens the customers’ waiting time. When the dish is on the conveyor belt, the pass robot is instructed to deliver the dish accurately to the customer's table.

In the Haidilao "unmanned restaurant" drink area, there is no bartender. Instead, they are replaced by a 3-meter high automatic wine tank, which can accommodate 1100 drawers with all kinds of drinks and beverages. The system will automatically send drinks to the waiting area according to the ordering information. Also, customers can pick up drinks by themselves or call the staff to deliver them (Institution, 2018).

Enhance the consumption experience

In terms of the hot pot soup base, Haidilao created a unique automatic soup base preparation machine, which can customize the soup base for each customer. When ordering the soup base, customers can choose their own taste, for instance, "extremely spicy", "less salt”, “less oil" or other personalized needs.

Also, Haidilao smart restaurant will also establish the exclusive customer files through the system.

Customers can name their own soup base, and every time they come to Haidilao, they can easily review their favorite hot pot flavor. In the future, Haidilao is planning to allow customers to share their customized hot pot soup base with their families and friends through a Haidilao APP, which they can PK their favorite special flavor (Institution, 2018).

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In the past, one of Haidilao’s most important symbol is their service in the waiting area, where customers can do manicure, clean the shoes, and do massage in the chairs. The unmanned restaurant reduces these facilities, but it sets up a space capsule waiting area. There are several rows of seats that face a huge screen with 13 meters width and 3 meters height (Chuangyebang,

2018). This screen is equivalent to a game platform, where customers can scan the code in their mobile phone to play games with other waiting customers. Currently, it supports playing with the customers in the store, and in the future, Haidilao is planning to broaden this service to the same city or to the global area.

In addition, Haidilao added an immersive consumption experience in the restaurant. In the past,

Haidilao relied on performance shows such as opera face-changing performance to create an interaction with the customers. The unmanned restaurant creates a 360 ° full house surround stereo projection with five large screens and six theme scene (Guo, 2018). Customers will enjoy the meal and immerse in a particular theme created by Haidilao.

Moreover, the system allows customers to customize these scenes, for instance, their love stories or biographical reviews can be played on the screen. This service greatly increases the customer's demand for birthday and annual dinner. Also, customers can book a box that has a personalized surprise. The atmosphere can be changed through lighting, and the touch screen on the wall can link to the customer's computer to serve small meetings.

Increase supervision and management

Haidilao added a central kitchen control platform to standardize management. It uses the IKMS

System (Intelligent Kitchen Management System) as the smart kitchen brain. The system

P a g e 8 | 14 cooperates with the automatic food dispenser in the store, loads RFID food material supervision system, and equips each dish with an exclusive "ID card".

By collecting data in each link of the smart kitchen and performing dimensional analysis, the system can supervise production status, inventory status, expiry dates and so on (NA, 2018).

For example, in the monitoring screen, the operation of each machine can be seen, the remaining number of dishes can be monitored in real time, as well as whether if there are expired raw materials exceeding 48 hours.

To respond to the previous scandal in terms of mice in the kitchen of Haidilao, the smart kitchen provides some confidence to customers. Yong Zhang, founder, and chairman of Haidilao said:

"When our kitchens are automated, we can reduce the risk of on-site management. When there are fewer people in the kitchen, there will be fewer mice (Institution, 2018).”

What CEO questions are you answering about this?

We need to know what changes this technology could bring to the business in short, medium and long-term. Beyond Haidilao’s own business, the CEO also needs to pay attention to F&B industry revolution to stay competitive. Making the right strategic decision among all the uncertainties is always the CEO’s responsibilities.

Let’s look at the short-term first. Every industry, including Haidilao, is affected by technology.

However, the result could be either better or worse. Since 2012, technology investment on F&B industry has reached almost $2.5 billion globally. However, many restaurants are reluctant to adopt new technology. In China, the F&B industry is the second largest industry sector only after the

P a g e 9 | 14 healthcare industry. So why Haidilao seems to be the 1st restaurant to do so? The reason might be that these restaurants spend a lot of time collecting and updating data, making complex spreadsheets to record and calculate, however, the result is too subtle. In the short term, it might be only partially technical and partially promotional. In this consideration, Haidilao, as the pioneer of F&B service brand, is in the right position to adopt this technology.

Of course, even in the short-term, as the technology matures, more and more restaurant owner’s benefit from these new technologies. These technologies can provide a lot of valuable information.

For example, which the main dish has the most repeat customers? Which bartender has given too many free drinks to customers? Is advertising better for brunch or wine tasting? For restaurant owners, this information is valuable in operational decision analysis. Of course, the value of technology is ultimately to serve customers, so that they get better dining options and services. At the same time, in this system, the restaurant can get more data, which will generate more insights into the service. Through data analysis, customers can be better informed, their historical order records and food preferences can be viewed, thus providing customers with “VIP level” treatment and facilitating the conversion of sales to services.

And what about the medium-term decisions?

Data will play a very important role. In most industries, the ultimate goal of data and analytics is to be used through artificial intelligence and machine learning, but it might not be easy for the

F&B industry to implement this. This AI-based technology is difficult to be accepted as human service, and it is difficult to provide similar services according to the customer's emotional behavior, such as providing warm towels for customers in a rainy day. And these services are very important in the F&B industry and it gives consumers a sense of belonging and social care.

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As a result, restaurant-driven data-driven AI may initially focus on restaurant operations: for example, using data analytics to optimize inventory or design menus. But in the medium and long- term, these collected data would be very meaningful. And the capability to use data wisely is very important. In this consideration, it is in a strategic consideration for Haidilao to adopt F&B robot solution this will enable Haidilao to start collecting all sorts of data, connect data wisely to influence internal and external processes and moreover, use machine learning to create the unknown benefits.

And what about the long-term? Will the industry be totally transformed by the AI technology?

Will industries other than F&B adopt AI at the same pace? What should the CEO of Haidilao consider in terms of long-term benefits for Haidilao as the industry practitioner?

In the long-term, the CEO has to consider all the changes from several aspects, including CAPEX investment, HR, management and the F&B industry as a whole.

First, the technology will impact Haidilao’s CAPEX investment. When technology enters the restaurant, and the one-time investment is perhaps huge, which will definitely increase the threshold for the restaurant industry to enter the market. First of all, we need to create a hardware environment suitable for robot information reception, followed by the purchase of catering robots.

These are all one-off inputs. CAPEX planning is a huge impact, which leads to changes in the capital structure. Of course, after this one-time investment, the technology will greatly reduce the labor cost in a long period of time. If this is maintained well, the profit margin of the enterprise will be greatly improved.

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Second, we could look at the HR aspect. The current F&B industry is essentially labor-intensive.

The emergence of robot solution is the first to impact labor-intensive industries such as F&B. It will greatly replace manual labor and programmed repetitive labor to a certain extent, reduce the labor cost of the restaurant, give the customer a high-quality dining experience, make the restaurant operation more efficient, and be more refined in the standardized cooking processes. From now, the AI waiters and chefs have appeared, but still in the early stage of application. It is only a matter of time before the AI service staff replaces the existing restaurant waiters, robots replace catering waiters, and the HR structure of F&B industry will see major changes.

Thirdly, it is the overall management. The HR structure changed. And the overall management will too. The overall management can be roughly divided into financial management and personnel management. Due to the increase in investment, the risk management and control of capital investment and the prediction of market changes need to be more specialized. The entry of robots, the number of human employees will be reduced. And the direction of the professional human employees has changed. Only "elite personnel" is needed. Usually, these elites may be chefs with innovative and research capabilities, knowledge of nutrition, or service personnel with certain psychological literacy, ability to adapt, try to figure out and discover the temporary needs of customers and meet such needs in a timely manner. Changes in quality also require that the corresponding training and management models catch up. In Haidilao’s case, the robots might not really apply its superior service standards. This strong differentiation might still have to be present by human “elite personnel”.

Fourthly, technology will make the F&B market more refined and personalized. The biggest advantage of robots is that there will be no errors under program instructions. When the popular

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F&B logics is written into the program and input into the intelligent robot, it will operate according to the program, resulting in similar tastes and increased market similarity. Therefore, the development and differentiation of new dishes will be competitive. However, different consumer needs and different tastes, the individualization, and refinement of the consumer groups will inevitably lead to market segmentation. In addition to the large group meals, the large and even large single-store restaurants will be relatively smaller.

In consideration of short, medium and long-term changes brought by the technology, Haidilao might be in the current marketing phase. But as the data accumulated and the technology going forward, Haidilao CEO must adopt full changes including HR, overall management, investment to stay in the correct direction. And since the technology is being developed in a quicker and quicker pace, it might never go back. So Haidilao should follow the technology and be the one to practice.

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References Chuangyebang. (2018, 111 4). Sohu. Retrieved from Goodbye, waiter!: http://www.sohu.com/a/273270717_705234 Guo, T. (2018, 10 25). Haidilao: the first smart restaurant. Retrieved from cnpharm: http://www.cnpharm.com/content/201810/25/c261021.html Huang, C. (2018). Is This Unmanned Haidilao the End of Excellent Table Service? Retrieved from freewechat: https://freewechat.com/a/MjM5MTcwODQ2Nw==/2652065715/1 Institution, G. S. (2018, 10 31). Throwing 150 million! Haidilao “Nobody Restaurant” is here! This industry will be completely subverted... 丨 machine substitution. Retrieved from Tencent: https://new.qq.com/omn/20181031/20181031A1NE9F00 NA. (2018, 10 30). Spend 100 million to open the first smart hot pot restaurant, Is Haidilao crazy? Retrieved from cnelc: http://www.cnelc.com/text/1/181030/AD100865663_1.html

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