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Managing service operations

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Table of Contents

Introduction

Case analysis

4-12

References

13

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Introduction
The simulation exercise involving the Restaurant Benihana provides a classic example of
deciding upon the optimal operating strategy for service operations keeping several process
variables in view. The simulation consists of five strategic challenges related to Batching, Bar/
dining space design, advertisement & restaurant timing. Like any business, the objective of the
simulation was to maximize top and bottom line of the business with simultaneous increase in
throughput.
The simulation assumes that all other resources of the restaurant geared up to meet the batching
strategies adopted by the organization and most importantly the customers shall be malleable to
the batching strategies, wait times for batching and reduced dining times. However, the biggest
limitation of the simulation is that customer preferences are very dynamic and may change best
upon business environment and economics. These types of simulations do not address profit
maximization only quantitatively whereas the qualitative issues are ignored or are too complex to
map.
Discussion on decision parameters:
During the simulation, each challenge was analyzed separately for an optimal solution. During
this analysis, various combinations of options were run for some of the challenges with a view to
maximize profitability. However, in some of these concerning batching ,a strategy of elimination
was adopted to arrive at an optimum solution by eliminating a no batching approach since the
challenge I had made it obvious that batching was always a much optimal solution to increase
profitability due to a substantially higher resource utilization. Batching, as we understand is
central to operations management asin this case
Maximizing nightly profitability of operations and throughput was taken as a hall mark for an
optimal solution design as compared to revenue as revenue alone with lesser profits cannot
sustain a business on a long term basis.

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Presentation and analysis of simulation results:

Challenge no I: Batching or no batching decision
The first change was to arrive at a batching or no batching decision. Accordingly two scenarios
were chosen separately to run the simulation and arrive at a decision. In all cases it was found
that the decision to batch gave the highest nightly profits and a throughput with minimal loss of
customers. The results were as follows:
Scenario

Revenue($)

Batching
No Batching

3155
2909

Nightly Profits
($)
121.8
(201.58)

Asset utilization
(%)
57.11
44.57

Lost
customers(No.)
95
24

Upon detailed analysis of the financials of operations, the following was observed:

With batching , the restaurant could serve 71.35 dinners extra and consequently revenue
went up as dinners served earned a 400% higher revenue to the restaurant as compared to
the drinks sold , which was substantially higher in case of no batching. This has also
reflected in the substantially higher average utilization of 57.11% in the dining room for
batching as compared to 44.57% capacity utilization in case of nom batching.
(Forio,2015)
The average wait times in case of batching were 248 % lower in case of batching and the
resultant customer loss was also 75% lower. This indicates a significantly better customer
wait times management in case of batching.(Forio,2015)
Though the overall cost of running the restaurant operation with batching ($ 3025.84) and
non-batching($ 3035.97) have not varied much, the difference in the revenue / profit
earning capabilities in batching has come with much higher capacity utilization of
assets / profit margins of the dining room operations.(Forio,2015)

The above observations conclusively establish that batching is a much better approach to
management of customers from the perspective of revenue management though it may have
other issues such as customer inconvenience in terms of sitting together for dinner with unknown
persons. However, this may also be well accepted by customers if the restaurant is able to
establish this as a hot trend and a way to network with others.
In fact, batching seems to be a successful strategy in Benihana operations that in subsequent
challenges, we have focused much more on batching as compared to non-batching operation.

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Challenge II: Bar/ Dining room seating design

This challenge involves design of the bar/dining room seats leading to higher revenue, profits
and throughput. In this case, after observing the significant advantages offered by batching,
substantially higher simulation runs were taken with batching as compared to non-batching
operation. The details are as follows:
Scenario

Nightly
Profit ($)

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

($55.66)
($495.71)
($3.32)
($428.01)
$20.82
($345.41)
$48.55
($270.16)
$80.46
($226.07)
($226.07)
$121.80
($201.58)
$155.61
($184.70)
$213.56
($184.16)
$242.38
($195.50)
$214.79

Total
Revenue
($)
$2,830.89
$2,146.32
$2,907.98
$2,288.59
$2,946.45
$2,472.92
$2,996.30
$2,652.60
$3,060.09
$2,806.60
$2,806.60
$3,155.34
$2,909.82
$3,268.62
$3,002.26
$3,445.48
$3,065.31
$3,583.55
$3,099.28
$3,627.51

Revenue
Bar
($)
$125.39
$111.32
$155.48
$218.59
$194.45
$361.43
$244.30
$516.60
$308.09
$713.10
$713.10
$403.34
$871.32
$553.62
$1,031.26
$752.98
$1,183.31
$963.55
$1,315.28
$1,160.51

Revenue
Dinner
($)
$2,705.50
$2,035.00
$2,752.50
$2,070.00
$2,752.00
$2,111.50
$2,752.00
$2,136.00
$2,752.00
$2,093.50
$2,093.50
$2,752.00
$2,038.50
$2,715.00
$1,971.00
$2,692.50
$1,882.00
$2,620.00
$1,784.00
$2,467.00

Use
Batching

Bar
Size

Restaurant
Size

Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
No
Yes
No
Yes
No
Yes
No
Yes
No
Yes

15
15
23
23
31
31
39
39
47
47
47
55
55
63
63
71
71
79
79
87

19
19
18
18
17
17
16
16
15
15
15
14
14
13
13
12
12
11
11
10

It can be seen that the maximum nightly profits of $ 242.38 are made with a bar/ dinner seat size
of 79/11, which is also depicted in the graph drawn below(Forio,2015)

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300
250
200

Bar seats
Nightly Revenue('00,$)
% Utilization

150

Customers lost
Nightly Profit($)

100
50
0
1

The following points are observed from the above:

Though the profits are higher in a combination of 79/11 bar seats, the revenues ($ 3627)
are highest in a combination of 87/10 seats. This indicates that after a limit, increasing bar
seats with reduction in dining seats starts eating into profitable dining rooms operations
( 262 versus 246 dinners served) as more customers (52) are lost due to higher wait times.
(Forio,2015)

No Batching is never a solution as business numbers generated by batching is

substantially superior.

Challenge III: Change dining time

The 3rd challenge looked into changing the dining duration based upon the time of the day. The
idea is to maximize asset utilization and throughput by designing optimal customer durations
between three dinner times in slots of 5pm-7pm, 7pm 8pm (peak time) & 8pm-10.30 pm. The
restaurant can adapt various means to reduce service times such as reduction of planning,
product /service design, processing, change over & delivery times (Operations Management
Stevenson, William J.,11th edition)
Obviously, the restaurant is to design its systems in such a way that customer satisfaction is not
compromised resulting is the lowest possible loss of revenue and customers and highest possible
profits.Further, in designing the runs, an intelligent guess has been made based upon an
observation that dining room profitability needs to maximized to maximize profits and hence the
asset utilization of dining room needs to increased. This can be done by optimizing the dining
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time of customers so that more and more numbers of customers can be accommodated.
Accordingly, the run was started with a higher times but our aim has been to reduce the time as
much as possible.
The scenarios which were run on the simulation were as follows:
Dining Time ( in minutes)
Scenario

1
2
3
4
5
6
7
8
9
10

Nightly
Profit
($)
$64.34
$124.99
$121.80
$117.36
$117.36
$114.14
$110.91
$220.00
$217.75
$186.01

Total
Revenue
($)
$3,135.88
$3,165.96
$3,155.34
$3,140.55
$3,140.55
$3,113.48
$3,102.69
$3,221.33
$3,213.83
$3,186.20

Revenue
Bar
($)
$531.38
$413.96
$403.34
$388.55
$388.55
$347.48
$336.69
$245.33
$237.83
$277.20

Revenue
Dinner($)

Open
to 7pm

7pm to 8pm to
8pm
10:30pm

$2,604.50
$2,752.00
$2,752.00
$2,752.00
$2,752.00
$2,766.00
$2,766.00
$2,976.00
$2,976.00
$2,909.00

71
60
60
60
60
45
45
45
45
60

71
60
60
60
60
60
60
45
45
45

70
75
60
45
45
60
45
75
45
45

Further, a graphical representation of the data is as follows:

1000

100

Scenario
Revenue('00,$)
Capacity Utilization(%)
Lost customer
Nightly Profit($)

10

1
1

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From the above data,it can be observed that both nightly profits and Revenue is maximized when
a time of 45/45/75 minutes is chosen for the restaurant. This reinforces our thought that the
timings need be as less as possible in order to have maximum throughput and asset utilization.
This is especially true for the opening and the peak time butcan be extended during the non-peak
time of 8-10.30 hours wherein the customer numbers are dwindling.(Forio,2015)
In fact, a further analysis between 45/45/75 and 45/45/45 scenario indicates very little difference
in profits and revenue. This signifies that though the asset utilization goes up in the later scenario
(53.1% versus 44.3%) due to probably the same customers sitting for a longer period between 810.30 pm, it adds very little to the revenue and profits. A loss of just one customer in both the
scenarios indicate that no new customer arrivals after 8 pm. It is not surprising that under these
circumstances, 45/45/75 scenario adds to slightly higher profits as the same customer probably
orders more items as he is sitting longer.(Forio,2015)
Challenge IV: Boost Demand with Advertising and Special Programs
The 4th challenge has been to devise a strategy to boost demand through advertising and special
programs. In this case, the number of variables are projected in the simulation are three and
consist of the advertising budget, advertising campaign and the restaurant opening time. Further,
three choices of timings and campaign are also provided.
In this case, the following runs were made to arrive at the right strategy:
Advt.
Budget/Campaign/Ti
ming

Scenar
io

Revenue(
$)

Custome
rs Lost

3620

Capacit
y
Utilizati
on (%)
54

20

Nightl
y
Profit(
$)
317

1X/Advertising
Budget /5pm
1X/Discount
promotion /5pm
1X/Happy Hour /5pm
1X/Happy Hour /6pm
1X/Happy Hour /7pm
2X/Happy Hour /5pm
2.2X/Happy
Hour/5pm
2.5X/Happy
Hour/5pm
3X/Happy Hour /5pm

1
2

3141

54

20

-110

3
4
5
6
7

3502
2967
2209
4369
4547

54
55
54
74
77

8
6
8
28
34

452
200
-161
515
514

4687

79

45

448

4821

80

68

286

For a better understanding, a graphical analysis of the above data is also being charted below:
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100
80
60
Scenario
Revenue($'00)

40

Capacity Utilisation(%)
Customers Lost

20

Nightly Profit($,'0)

0
1

-20
-40

My observations on the above data sets are as follows:

Any discount promotion scheme can be ruled out as it leads to an unacceptable negative
profitability

Advertisements play a significant role in generating profitability but after a certain

threshold, additional expenses on advertising does not generate any additional revenue
and profitability but rather depresses them as advertising expenses go up.

It is extremely important to target the right time for the advertisement. It makes common
sense to advertise during the opening and peak hours but more so in the opening hours of
the restaurant.

Keeping the above aspects in view, it was found that an advertising budget of 2X, advertising
campaign targeted at the happy hour and restaurant opening time of 5pm had the maximum
impact on revenue ($ 4369) and profitability ($515) with minimum loss of customers (24). This
configuration also yielded a very high capacity utilization of 74%.(Forio,2015)
Challenge V: Use Different Types of Batching at Different Times

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The last challenge in the simulation was to use different types of batching at different times. The
simulation challenge consists of 36 variables comprising of three different restaurant timings and
four different possible batching combinations under each of these three timings.(Forio,2015)
The data runs carried out for this simulation was as follows:
Scenario

Open to
7pm

7-8 pm

810.30pm

Revenue
($)

Table of
8
Table of
4-8
4 share a
table

Table
of '8
Table
of '8
Table
of '8

Table of
4 to 8
Table of
4 to 8
Table of
4 to 8

2
3

3269

Capacity
Utilization
(%)
57

Customer
Lost
28

Nightly
Profit
($)
140

3129

56

26

105

3135

56

30

92

My basic premise to carry out this simulation based upon the past challenges was twofold:
Profits can be only optimized whenthe asset utilization is maximized at the opening and peak
times with minimum loss of customers. This can be only done by batching the largest number of
customers (8) in these two slots. At the same time, the restaurant can lenient on batching during
8-10.30 pm slot when the new customers stop arriving. Predictably, the scenario one yielded the
best profitability ($ 140) and revenue ($ 3269) in this case with all other scenarios yielding
substantially less profits.(Forio,2015)
Challenge VI: Design your Best Strategy
This simulation challenge involves designing the best strategy for maximizing profitability,
revenue and throughput by modifying the batching decision, dining rooms decision, advertising
decision and bar decision after applying the learnings from the past challenges.
In order to run the challenge, we made the following strategic presumptions:
Batching decision was always maximized at 8 per batch with a view to increase asset utilization
and throughput. Based upon learnings from past challenges, a smaller batching number was run
for the 8-10.30 pm slot.(Forio,2015)
Again, based upon learnings from challenge number IV, advertising campaign for happy hour
was chosen and slotted for the 5 pm time. As an experiment, we also tried other combinations on
this exercise just to test the assumption and to observe that the profits have dipped.(Forio,2015)
Again, we started with the presumption that the customer turnaround has to be kept at the
minimum for the opening and peak times with a relaxation only at the 8-10.30 slots. This would
ensure maximum asset utilization leading to better revenue and profitability.(Forio,2015)
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Lastly we started with a large bar size of 79 and tried various iterations in order to arrive at the
best possibly combination as depicted in scenario 3 of the following table(Forio,2015)

It was found that with combination of various variables addressed together as above, a maximum
nightly profit of $ 708 and revenue of $ 4330 could be achieved with loss of only 4 customers
and a high capacity utilization of 61.93%.(Forio,2015)
Scenar
io
Name

Nightly
Profit($,'
0)

Total
Revenue($,'
00)

$605.47

$4,659

$553.42

$4,609

$708.17

$4,639

$708.17

$4,639

$708.17

$4,639

$708.17

$4,639

Reven
ue
Bar($,'
0)
$690.9
3
$724.2
6
$309.4
2
$309.4
2
$309.4
2
$309.4

Reven
ue
Dinner
($'00)
$3,969
$3,885
$4,330
$4,330
$4,330
$4,330
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$689.56

$4,900

$679.64

$4,675

$672.69

$4,423

10

$672.69

$4,423

11

$658.36

$4,462

12

$658.36

$4,462

13

$658.36

$4,462

14

$250.82

$3,294

15

$155.61

$3,269

16

$38.52

$4,490

17

($180.64)

$3,706

18

($197.46)

$3,916

19

($217.19)

$3,985

20

$121.80

$3,155

2
$361.1
1
$398.3
2
$265.1
3
$265.1
3
$332.9
1
$332.9
1
$332.9
1
$329.3
3
$553.6
2
$771.9
4
$811.2
3
$726.0
8
$936.9
5
$403.3
4

$4,539
$4,277
$4,158
$4,158
$4,129
$4,129
$4,129
$2,965
$2,715
$3,718
$2,895
$3,190
$3,049
$2,752

Reflection of lessons learned:

My key takeaways from the Benihana simulation analysis were as follows:

The various critical variables of any restaurant (or a service industry) are interdependent.
Therefore even though we may design the most optimum strategies for each department,
it is extremely department to test the strategy as a whole for the entire organization and to
make necessary adjustments, if required. Further, a right operating strategy can create
enormous value in terms of Revenue/ profit generation and throughput using the same set
of assets.

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Strategies should be aimed at maximizing asset utilization in all departments with

minimum loss of customers coupled with necessary advertising campaigns targeted at the
right set of customers.

Operations management analytical tools such as linear programming models and

simulations can be of significant help in identifying the right strategy for the organization
by effectively dealing with many variables at a time, which are present in dynamic
business situations.Further, emphasis should be made to identify the right set of variables
in order to construct a right and unique operations management model for the
organization.

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References:

Cb.hbsp.harvard.edu,
(2015).Login[online]Availableat:https://cb.hbsp.harvard.edu/cbmp/context/coursepacks/3
5435945 [Accessed 06th March, 2015].
Stevenson, W. (2005). Operations management. Boston: McGraw-Hill.
Sasser, W. (2004). Benihana of Tokyo. [S.l.]: Harvard Business.

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