Chipotle Transformation Process
Exam 1 – Take Home
Brittany Bunch
06/11/14
MGT 124
Professor Vasquez
1). Explain the “Transformation Process” by using a retail format as an example. Explain the transformation process of your chosen retail format –
* The transformation/conversion process includes many value-added activities that come full-circle to equate to a business format. In this case, I will be discussing the retail format of Fresh & Easy throughout the transformation/conversion process. There are two types of markets: a pull- based (market is demanding your product) and a push-based (pushing your product out to the market). Fresh & Easy is a great example of a push-based market where they are “pushing” their products out to …show more content…
the consumer to be purchased. Within this process there are constant measurements and feedback between each activity. The “control” activity is used as a comparison of feedback against previously established standards to determine if corrective action is needed. All aspects are united in this, and in order to be efficient everything must be balanced. To achieve this balance, the inputs of the system need to be equal to the outputs for synchronization. The Inputs are land, capital, labor and information and the Outputs are the goods and services. At Fresh & Easy, examples of inputs would be the raw materials, warehouses for logistics operations, investments into labor and stores, as well as the information systems. The outputs would be the final products, i.e. pre-packaged food ready for sale, and the service that is going to be given to customer by having the Fresh & Easy Market in the neighborhood. Another contributing factor to the Transformation/conversion process is a “que”. This is the time that passes between each value-adding activity, and a business’s ability to handle these que’s determines a lot about the business. Some of Fresh & Easy’s que’s are longer than they really should be, and this has caused the chain to lose a significant amount of money in the recent past.
2). Explain the “7 Functional Activities” and how each functional activity is impacted in a Chipotle operational structure.
*Management (HR)-The organizing and controlling of the affairs of a business. The HR stands for Human Resources and involves mainly the personnel of the company. This would include recruiting, interviewing, hiring, promoting, training, firing, etc. In Chipotle’s operational structure, management (HR) could include scheduling, hiring new employees, training new employees, ordering the food, etc.
*Marketing – The process of communicating the value of a product to the customer through advertising and sales.
One way that Chipotle markets its organization is their campaign to serve food/meat that is natural; purchased from good sources that do not use hormones through their raising process.
*Finance/Accounting – This is the money portion of any business. This department would be responsible for accounting for the money going out and coming in. In Chipotle, obviously the sales generated money would be spent on leasing restaurant spaces, payroll, payments to food vendors, taxes, etc.
*Production/Operations – At Chipotle, the productions/operations would be directly related to the process of cooking the food, getting it out to the line, providing customer service and putting the food together for the customer, and checking them out.
*Research and Development-Research and development is the process of consistently conducting company research to see where weaknesses are so that new ideas can be developed to continually build on the brand. An example of this at Chipotle would be researching the latest trends that people are leaning towards within the gourmet burrito market. Staying on top of these trends will keep them consistently on …show more content…
top.
*Management Information Systems (IT) – Represents the electronic automation of several different kinds of counting, tallying, record-keeping, and accounting techniques.
The management information system reports on operations for every level of management in a company. At Chipotle, this would consist of the reports that are generated by store and upper management to gauge how the company is doing at store, region, and whole company level. With these reports, management can modify operations if necessary. Also, at a smaller level, an in store example of this would be the POS system that the cashier uses to check people out at the end of an order.
*Logistics, Supply-Chain (Value-Chain) – The supply chain is the sequence of activities and organizations involved in producing and delivering a good or service; also called a value-chain because with each step, value is being added on. Logistics is basically the routing/transportation as to how these goods get anywhere. For example, the first person in the sequence would be someone like a farmer, where the raw materials (fruits, vegetables, meat) come from. From this point, the products would be moved systematically/logistically through the supply chain to the end- Final
customer.
3). Explain the “4 Productivity Measures” in relation to your chosen or occupational retail format. Explain how the results of these measurements will help the operations managers make decisions on the efficiency of your chosen retail format.
*1) Productivity= Output/Input, When you divide the output of Fresh & Easy by the input I believe that you would probably find the productivity to be pretty low. In business, it is good to have a high productivity because a) it is linked to a higher standard of living, b) leads to a competitive advantage in the marketplace, and c) makes it less likely that it will be supplanted by foreign industry.
2) Partial Measures= Output/Single Input; or Output/Labor; or Output/Capital. This is used in business to determine what the measurement is relative to the sub-unit or single-unit; it is only one category, not a representation of the entire business. In Fresh & Easy’s model, this could be used to figure out the Labor relative to output in that particular area.
3) Multi-Factor Measures=Output/Multiple Inputs; or Output/Labor+Machine. This equation would be used when it is needed to determine more than one input. For Fresh & Easy, you could divide the output by the labor and machine cost to find the measure of those two particular inputs.
4) Total Measure= Goods or services produced/All inputs used to produce them. Instead of breaking parts up as the previous two equations did, this equation actually put everything together and gives you the total measurement of productivity for everything produced and inputs used to produce. This would be more of a final product measurement at Fresh & Easy, similar to the first equation, but more refined.
By using these measurements in the Fresh & Easy Retail format, managers can see specific areas and overall issues that can be adjusted through increased productivity. Factors that affect this include: Methods used, Quality, Management, Technology, and Capital. Productivity should not be confused with efficiency, however they do work hand in hand. By setting reasonable goals and consistent encouragement of improvement to the productivity, management can be successful in driving these numbers up to increase the efficiency in these areas
4). Explain “error”, “variation”, “complexity”, “innovation” and the “3 Dimensions of a Channel” in relation to the Case Study Article and the operational structure of the ABBA program.
*Errors, defects to products or problems with service, can occur more frequently when there is a high level of complexity, or simply when there is too much human element involved. Variation involves the differences that can occur through the manufacturing or processing of an item. Every item is always going to vary a little bit, but the goal is the decrease as much variation as possible. Complexity, related to the article, is the continual launch of new products and line extensions. This adds extra costs to managing these products, while sometimes the margins will begin to shrink. The Case Study Article actually talks about the innovation fulcrum, which is the level of innovation that effectively works for your company. Just like complexity, too much of it is a bad thing and too little of it is also a bad thing. The 3 Dimensions of a Channel are “Depth-Width-Rate”. In relation to the operational structure of the ABBA program, I believe that the Depth=students in the program, Width=Number of classes that you take within the program, and Rate=the accelerated pace that the program requires. The depth and the width are the factors that are going to increase/decrease the complexity within the program.
5). Explain “Lean Operations” and “JIT” and the benefits and risks of using this type of operational structure on your chosen retail format.
*A Lean Operations system is a more flexible system of operations that uses less resources than a traditional system. A JIT system is highly coordinated, where goods move through the system and services are performed, just as they are needed. Within this system, the goal is to achieve greater productivity, lower overall company costs, shorten the cycle times, and maintaining a higher quality of products. The key principals to this system are: 1) Identify customer values, 2) Focus on processes that create value, 3) Eliminate waste to create “flow”, 4) Produce only according to customer demand and 5) Strive for perfection. The major benefits of a Lean Operations system are its reduced waste and cycle time, lower costs, better quality, and increased productivity/flexibility. Risks would include that there would be a higher level of stress on the workers, less resources readily available if they were to encounter any problems, and if there was a supply chain disruption then it could cost the company a lot of money to fix as well as cause issues in production. Balance is the main goal that this operating system is attempting to achieve. One that creates a smooth, yet rapid, flow of materials through the system. With Fresh & Easy chosen as my example, the company would be much better equipped to perform if they were to utilize a system such as this. When you walk in a Fresh & Easy store today, it appears somewhat cluttered with tons of merchandise just sitting on the shelf. With a system like this, they could reduce their footprint, focus on certain items, order products as they leave the shelves instead of letting them sit there for long periods of time. Another thing that is easy to notice is that all the “no preservatives”, pre-packaged, fresh-cooked foods have very near expiration dates. Maybe stocking less would help them to lose less product, or possibly getting them there quicker so that they have more time to sit on the shelf before they expire.
References
Fresh & Easy. (2014, June 8). Retrieved from Fresh & Easy website: http://www.freshandeasy.com
Gottfredson, Mark (2005, November). Innovation versus Complexity: What is Too Much of a Good Thing? Harvard Business Review.
Li, Shan (2013, March 21) Five years in, Fresh & Easy Markets are a flop. Los Angeles Times.
Stevenson, W.J. (2015). Operations Management Twelfth Edition. In W.J. Stevenson, Operations Management (Twelfth Ed.,p.10, 139). New York: McGraw-Hill Education.
Brittany Bunch
06/11/14
MGT 124
Professor Vasquez
1). Explain the “Transformation Process” by using a retail format as an example. Explain the transformation process of your chosen retail format –
* The transformation/conversion process includes many value-added activities that come full-circle to equate to a business format. In this case, I will be discussing the retail format of Fresh & Easy throughout the transformation/conversion process. There are two types of markets: a pull- based (market is demanding your product) and a push-based (pushing your product out to the market). Fresh & Easy is a great example of a push-based market where they are “pushing” their products out to …show more content…
the consumer to be purchased. Within this process there are constant measurements and feedback between each activity. The “control” activity is used as a comparison of feedback against previously established standards to determine if corrective action is needed. All aspects are united in this, and in order to be efficient everything must be balanced. To achieve this balance, the inputs of the system need to be equal to the outputs for synchronization. The Inputs are land, capital, labor and information and the Outputs are the goods and services. At Fresh & Easy, examples of inputs would be the raw materials, warehouses for logistics operations, investments into labor and stores, as well as the information systems. The outputs would be the final products, i.e. pre-packaged food ready for sale, and the service that is going to be given to customer by having the Fresh & Easy Market in the neighborhood. Another contributing factor to the Transformation/conversion process is a “que”. This is the time that passes between each value-adding activity, and a business’s ability to handle these que’s determines a lot about the business. Some of Fresh & Easy’s que’s are longer than they really should be, and this has caused the chain to lose a significant amount of money in the recent past.
2). Explain the “7 Functional Activities” and how each functional activity is impacted in a Chipotle operational structure.
*Management (HR)-The organizing and controlling of the affairs of a business. The HR stands for Human Resources and involves mainly the personnel of the company. This would include recruiting, interviewing, hiring, promoting, training, firing, etc. In Chipotle’s operational structure, management (HR) could include scheduling, hiring new employees, training new employees, ordering the food, etc.
*Marketing – The process of communicating the value of a product to the customer through advertising and sales.
One way that Chipotle markets its organization is their campaign to serve food/meat that is natural; purchased from good sources that do not use hormones through their raising process.
*Finance/Accounting – This is the money portion of any business. This department would be responsible for accounting for the money going out and coming in. In Chipotle, obviously the sales generated money would be spent on leasing restaurant spaces, payroll, payments to food vendors, taxes, etc.
*Production/Operations – At Chipotle, the productions/operations would be directly related to the process of cooking the food, getting it out to the line, providing customer service and putting the food together for the customer, and checking them out.
*Research and Development-Research and development is the process of consistently conducting company research to see where weaknesses are so that new ideas can be developed to continually build on the brand. An example of this at Chipotle would be researching the latest trends that people are leaning towards within the gourmet burrito market. Staying on top of these trends will keep them consistently on …show more content…
top.
*Management Information Systems (IT) – Represents the electronic automation of several different kinds of counting, tallying, record-keeping, and accounting techniques.
The management information system reports on operations for every level of management in a company. At Chipotle, this would consist of the reports that are generated by store and upper management to gauge how the company is doing at store, region, and whole company level. With these reports, management can modify operations if necessary. Also, at a smaller level, an in store example of this would be the POS system that the cashier uses to check people out at the end of an order.
*Logistics, Supply-Chain (Value-Chain) – The supply chain is the sequence of activities and organizations involved in producing and delivering a good or service; also called a value-chain because with each step, value is being added on. Logistics is basically the routing/transportation as to how these goods get anywhere. For example, the first person in the sequence would be someone like a farmer, where the raw materials (fruits, vegetables, meat) come from. From this point, the products would be moved systematically/logistically through the supply chain to the end- Final
customer.
3). Explain the “4 Productivity Measures” in relation to your chosen or occupational retail format. Explain how the results of these measurements will help the operations managers make decisions on the efficiency of your chosen retail format.
*1) Productivity= Output/Input, When you divide the output of Fresh & Easy by the input I believe that you would probably find the productivity to be pretty low. In business, it is good to have a high productivity because a) it is linked to a higher standard of living, b) leads to a competitive advantage in the marketplace, and c) makes it less likely that it will be supplanted by foreign industry.
2) Partial Measures= Output/Single Input; or Output/Labor; or Output/Capital. This is used in business to determine what the measurement is relative to the sub-unit or single-unit; it is only one category, not a representation of the entire business. In Fresh & Easy’s model, this could be used to figure out the Labor relative to output in that particular area.
3) Multi-Factor Measures=Output/Multiple Inputs; or Output/Labor+Machine. This equation would be used when it is needed to determine more than one input. For Fresh & Easy, you could divide the output by the labor and machine cost to find the measure of those two particular inputs.
4) Total Measure= Goods or services produced/All inputs used to produce them. Instead of breaking parts up as the previous two equations did, this equation actually put everything together and gives you the total measurement of productivity for everything produced and inputs used to produce. This would be more of a final product measurement at Fresh & Easy, similar to the first equation, but more refined.
By using these measurements in the Fresh & Easy Retail format, managers can see specific areas and overall issues that can be adjusted through increased productivity. Factors that affect this include: Methods used, Quality, Management, Technology, and Capital. Productivity should not be confused with efficiency, however they do work hand in hand. By setting reasonable goals and consistent encouragement of improvement to the productivity, management can be successful in driving these numbers up to increase the efficiency in these areas
4). Explain “error”, “variation”, “complexity”, “innovation” and the “3 Dimensions of a Channel” in relation to the Case Study Article and the operational structure of the ABBA program.
*Errors, defects to products or problems with service, can occur more frequently when there is a high level of complexity, or simply when there is too much human element involved. Variation involves the differences that can occur through the manufacturing or processing of an item. Every item is always going to vary a little bit, but the goal is the decrease as much variation as possible. Complexity, related to the article, is the continual launch of new products and line extensions. This adds extra costs to managing these products, while sometimes the margins will begin to shrink. The Case Study Article actually talks about the innovation fulcrum, which is the level of innovation that effectively works for your company. Just like complexity, too much of it is a bad thing and too little of it is also a bad thing. The 3 Dimensions of a Channel are “Depth-Width-Rate”. In relation to the operational structure of the ABBA program, I believe that the Depth=students in the program, Width=Number of classes that you take within the program, and Rate=the accelerated pace that the program requires. The depth and the width are the factors that are going to increase/decrease the complexity within the program.
5). Explain “Lean Operations” and “JIT” and the benefits and risks of using this type of operational structure on your chosen retail format.
*A Lean Operations system is a more flexible system of operations that uses less resources than a traditional system. A JIT system is highly coordinated, where goods move through the system and services are performed, just as they are needed. Within this system, the goal is to achieve greater productivity, lower overall company costs, shorten the cycle times, and maintaining a higher quality of products. The key principals to this system are: 1) Identify customer values, 2) Focus on processes that create value, 3) Eliminate waste to create “flow”, 4) Produce only according to customer demand and 5) Strive for perfection. The major benefits of a Lean Operations system are its reduced waste and cycle time, lower costs, better quality, and increased productivity/flexibility. Risks would include that there would be a higher level of stress on the workers, less resources readily available if they were to encounter any problems, and if there was a supply chain disruption then it could cost the company a lot of money to fix as well as cause issues in production. Balance is the main goal that this operating system is attempting to achieve. One that creates a smooth, yet rapid, flow of materials through the system. With Fresh & Easy chosen as my example, the company would be much better equipped to perform if they were to utilize a system such as this. When you walk in a Fresh & Easy store today, it appears somewhat cluttered with tons of merchandise just sitting on the shelf. With a system like this, they could reduce their footprint, focus on certain items, order products as they leave the shelves instead of letting them sit there for long periods of time. Another thing that is easy to notice is that all the “no preservatives”, pre-packaged, fresh-cooked foods have very near expiration dates. Maybe stocking less would help them to lose less product, or possibly getting them there quicker so that they have more time to sit on the shelf before they expire.
References
Fresh & Easy. (2014, June 8). Retrieved from Fresh & Easy website: http://www.freshandeasy.com
Gottfredson, Mark (2005, November). Innovation versus Complexity: What is Too Much of a Good Thing? Harvard Business Review.
Li, Shan (2013, March 21) Five years in, Fresh & Easy Markets are a flop. Los Angeles Times.
Stevenson, W.J. (2015). Operations Management Twelfth Edition. In W.J. Stevenson, Operations Management (Twelfth Ed.,p.10, 139). New York: McGraw-Hill Education.