Exploring COFF[IE]: An Industrial Engineering Analysis Kenneth Acquah Colin Courchesne Sheela Hanagal [email protected] [email protected] [email protected] Kenneth Li Caroline Potts [email protected] [email protected] Mentor: Juilee Malavade, Brandon Theiss, PE RTA: Juilee Malavade times in each restaurant, the simulation Abstract could be manipulated to change resource values and process orders, deriving an Waiting in lines for extended periods optimal model of increased efficiency and of time results in inconveniences and a increased profitability for both restaurants waste of what may be the most important which could potentially decrease wait times resource of all, time, for all consumers. for both Starbucks and Dunkin’ Donuts. Thus, reducing wait times within Starbucks and Dunkin' Donuts and optimizing a 1. Introduction simulation of the processes within those restaurants could result in shorter wait times Standing in queues is not only an for customers and larger profits for the inconvenience for customers everywhere, it restaurants. Data of the wait times in line is also costly to firms and to the overall and the service times were collected at economy. A person who spends five minutes Starbucks and Dunkin' Donuts restaurants waiting for coffee each day who otherwise within New Brunswick through ® earns ten dollars an hour would lose over observational studies. Minitab statistical three hundred dollars every year due to the analysis software was then used to analyze opportunity cost of waiting in line. When the data and obtain the probability this cost is applied to the three million distributions and descriptive statistics. The customers served in Dunkin' Donuts alone results from the Minitab software were then daily,1 millions of dollars are lost every year used to create simulations of the queuing due to Dunkin' Donuts coffee lines. processes for both Starbucks and Dunkin' ® Extending this to Starbucks restaurants and Donuts using Arena Simulation Software . customers as well, the loss only multiplies. The simulations were run and analyzed to Minimizing queue length by improving see whether the simulated data accurately efficiency and productivity in Starbucks and reflected the data which was collected at the Dunkin' Donuts coffee shops has the two restaurants. The simulated data reflected potential to save millions of people both some of the collected data but not all time and money. depending on what queue we were obtaining This research seeks to create a simulated data from. It was found that working simulation of both a Dunkin' queues in Starbucks were longer than the Donuts and a Starbucks restaurant and queues in Dunkin’ Donuts. Upon evaluation predict how the processes observed in each of the parameters which could shorten wait restaurant could be improved. A simulation perfect cup of coffee” for the consumers.3 that accurately represents the waiting and The service aspect of customer service was service processes in Dunkin' Donuts and also a main block of the new Starbucks Starbucks locations could be used to analyze model. Starbucks grew rapidly, recording ways to potentially increase efficiency and millions of dollars in sales from thousands decrease queue length. of locations annually. By changing parameters of an accurate simulation, one could analyze the 2.2 Starbucks Business Model additional costs and benefits of altering store operation systems, such as increasing or Starbucks is a coffee retailer that has decreasing the number of employees its main location in Seattle, Washington. working at the cash registers or making There are over twenty-two thousand specialty drinks. This would allow owners Starbucks restaurants worldwide. It reported to determine if a particular change would a net revenue of $12,977.9 million from improve or detract from the service provided company operated restaurants and $1,588.6 to customers without actually testing it in a million from licensed restaurants in 2014. real store, preventing a decline in the quality The majority of Starbucks’ sales come from and profitability of the company during the beverages, with company operated stores testing phase. To obtain data to compare to reporting this category to account for the values output by the simulation, data was seventy-eight percent of sales.4 In the United collected regarding the amount of time States, Starbucks has 7,400 co-operated customers waited to order and to receive restaurants and 4,823 licensed restaurants.5 their drinks at both a Dunkin' Donuts and a The 2014 net revenue from the Americas Starbucks restaurants located in New was $11,980.5 million.4 Starbucks focuses Brunswick, New Jersey. on expanding its geographic locations, having diversified products, and creating the 2. Background semblance of an authentic neighborhood coffee shop. 2.1 History of Starbucks Starbucks strives to be the place to which people retreat from home and work The first Starbucks was opened in and thus encourages customers to stay in- Pike Place Market in Seattle, Washington, in shop by providing attractive services, such 1971 by Jerry Baldwin, Zev Siegl, and as free WiFi, and a welcome atmosphere. Gordon Bowker. The company grew slowly To promote this atmosphere, Starbucks and soon hired Howard Schultz as Director emphasizes service and customer 6 of Retail Operations and Marketing in satisfaction. When it comes to beverage 1982.2 Schultz eventually bought the choices, Starbucks is well known for its company and, borrowing ideas from the wide, accommodating range. The drinks coffeehouse culture of Milan, Italy, worked available at Starbucks include hot drip to build a coffee shop that was more of a coffees, iced coffees, teas, Frappuccinos, restaurant than a retail store. He had a lofty espressos, lattes, cappuccinos, and clovers, vision for Starbucks; he wanted it to be a which are hot coffees that can be highly national company with values and ethics of specialized and are made in a machine that which employees could be proud and “to individualizes each cup. build a company with soul" by making sure The typical process once in a the company would never stop pursuing “the Starbucks is to wait in line (see 2 in Figure 2.2.1 below) and then place an order with a license franchises, consequently leading to cashier (5), who then passes the order on to the development and growth of the chain as the barista by marking a cup with the order a nationally recognized brand.1 if the order is not a drip coffee (7b). The Dunkin’ Donuts has since customer then pays (8b) and proceeds to the experienced exponential growth, leading to a designated pickup area (9b). The barista total of over 8,000 restaurants in the United then makes the coffee (10c) and hands it to States and 11,300 restaurants globally.1 the customer (11c). If the order is a drip Much of the recent growth can be attributed coffee, the cashier makes the coffee (8a) and to the brand’s recent shift away from food hands it directly to the customer (9a). Once items, namely donuts, and instead towards this occurs, the customer typically chooses coffee, effectively transitioning from being to stay in the shop and drink the coffee, mainly a restaurant to being mainly a coffee rather than leaving immediately. shop. The Starbucks business model This change is generally attributed to focuses on consumer satisfaction, increased CEO Jon Luther who, in 2003, was forced to distribution, partnerships, and international adapt to changing market tastes in order to expansion to encourage customers to stay keep afloat what was then a struggling with Starbucks as loyal customers. This business. Luther introduced a series of new model has worked well as the company’s coffee-based products, including espresso, annual growth rate from 2010 to 2014 was and expanded the menu to cater to a diverse eleven percent.7 range of customers.8 Dunkin’ Donuts has Figure 2.2.1 – Process Map of Starbucks Operations 2.3 History of Dunkin’ Donuts since continued to follow this business model, which has brought it great success, The original Dunkin’ Donuts, almost doubling its stock price since its IPO excluding all affiliated brands such as in 2011.9 Dunkin’ Coffee and Baskin-Robbins, was started in 1950 by William Rosenburg in 2.4 Dunkin’ Donuts Business Model Quincy, Massachusetts. However, it was not until 1955 that Dunkin’ Donuts began to Dunkin’ Donuts focuses on service, amount of time to reach the counter, the emphasizing the quick delivery of food and customer served by one of two available drink items. The Dunkin Donuts system cashiers at either cashier’s earliest does not definitively delineate roles of convenience (3/4). The customer then cashier and barista; cashiers are proceeds to place his or her order simultaneously baristas. The workload is (5/6a/6b/6c), pay for the aforementioned often divided depending on the nature of the order and then wait for his order to be filled. drink, either hot specialty, cold specialty, or If the placed order is drip coffee or tea, drip, which is premade stock hot coffee. either cold or hot, the customer pays (7a) Dunkin’ Donuts does prioritize customer and is immediately served (9a). If the drink experience in the restaurant. Instead, service is a Coolatta®, or a frozen ice-based drink speed, convenience, and value are and the equivalent of a Frappucino® at prioritized, which can be seen in the brand Starbucks, the customer pays (7b), and the motto which is to “Make and serve the cashier then takes roughly three minutes to freshest, most delicious coffee and donuts personally make the drink (9b). If the drink quickly and courteously in modern, well- is a warm specialty drink, the order is passed merchandised stores.” This can also be seen down to a third employee who continually in the limited space inside restaurants which works the latte, cappuccino, and espresso indicates a model which primarily caters to machines (8).