SAM’S PIZZERIA: MANAGING PEAK DEMAND
Ali Abdel-Razek wrote this case under the supervision of Professor David Wood solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
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Sam Moretti, owner of Sam’s Pizzeria (Sam’s) in Orillia, Ontario, found himself distracted as he finished preparing the pizza dough for the next day. Halloween, the busiest night of the year, was less than two weeks away, and Moretti had often found that date to be a source of frustration, as he struggled to keep up with demand. Providing customers with good-quality pizza and fast delivery was critical to Sam’s success. Not wanting to repeat the mistakes of the past, Moretti knew that he would need a better plan to staff his pizzeria if 2018 were to be any different than previous years.
Founded in 1998 by Moretti, Sam’s Pizzeria had become one of Orillia’s most distinguished restaurants, winning the Best Pizzeria of the Year award for the past five years. At the heart of it all, Sam’s prided itself on quality ingredients and homemade doughs and sauces. Authentic Italian pizzas, combined with exceptional service and delivery time, had made Sam’s the dominant pizzeria in Orillia’s highly competitive restaurant space.
Since its founding, Sam’s had focused on perfecting its pizzas. As Moretti explained,
In 1998, there were no authentic Italian pizzerias in Orillia. The space was occupied by chain restaurants with massive menus, most of which had nothing to do with Italian cuisine. The pizzas had thick crusts, the cheese was low quality, and the ingredients were almost always frozen. I set out to create a small menu of high-quality products. Along the years, I’ve passed on the opportunity to expand my menu with items like wings and breadsticks because that’s not what Sam’s is all about. We do one thing, and we do it well: pizzas.
Located in a small building in Orillia’s downtown core, Sam’s did not offer traditional table service. Customers could place their orders for either delivery or takeout. During lunchtime, a handful of customers chose to eat their slices on stools along the window countertop.
A large pizza, Sam’s most popular size, ranged in price, depending on toppings. On average, a large pizza was priced at CA$18;1 materials and labour accounted for 35 per cent of that price.
1 All dollar amounts are in Canadian dollars.
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Monday through Friday, Sam’s experienced predictable demand: an average of 20 pizzas per hour. That demand doubled to 40 pizzas per hour on average weekends. According to Moretti, demand could fluctuate up or down by as much as 30 per cent at any given time.
The process started when the cashier took an order, either by phone or in person. It took an average of 90 seconds to take and submit one order to the kitchen. The size of the orders varied, but the average order was estimated to be one and a half pizzas. Once the order was submitted, a member of the kitchen staff formed the pizza crust from the inventory of dough that Moretti had made the night before, after closing. Forming the pizza crust took one minute per pizza. Next, the sauce and cheese were applied; an operator skilled at this step could process 50 pizzas per hour. The toppings were then placed on the pizza. At this step, an operator could prepare an average of 40 pizzas per hour, but this rate was highly variable: a cheese pizza required no additional toppings, but a pizza with all the toppings could take several minutes. Once all the toppings were in place, the pizza would then be placed in the oven for baking. It took 30 seconds to load each pizza into the oven. Sam’s owned a large commercial pizza oven capable of baking eight pizzas at one time. Each pizza took seven minutes to bake. Once the pizzas were cooked, an operator removed them from the oven, one at a time. The operator had to be careful around the equipment, so each pizza took 30 seconds to unload from the oven. An operator then boxed and cut the pizza, which took one minute.
Payment could be taken either by the driver, upon delivery, or by the cashier, for pickup orders. Moretti noted that only 40 per cent of orders were placed for pickup. In those cases, the cashier could process the payment and hand over an order in 60 seconds. On the other hand, Sam’s delivery staff could typically deliver an order in eight minutes. Each driver usually took four orders out at a time. Staffing decisions were dependent on whether it was a weekday or weekend (see Exhibit 1).
The kitchen staff and cashier were each paid $15 per hour, and local labour laws required shifts to be a minimum of four hours. The delivery drivers were independent contractors, who were paid $2.50 per delivery plus any tips that they received from the customers. The delivery cost of $2.50 was added to the bill when a customer requested delivery.
With Halloween quickly approaching, Moretti knew that he would need to make staffing changes to meet demand on the busiest night of the year. With expected demand of 50 pizzas per hour, Moretti knew that the current staffing level would not be sufficient to fulfill orders as quickly as needed. Given that quality and service were the pillars of his business, Moretti knew that there was no room for error. As he prepared the dough for the next day, Moretti wondered how to best allocate additional employees to avoid repeating the mistakes of last year.
Case study questions:
1. What is the issue in this case? How long does Tom have to solve it? What impact does his role have on his ability to implement a decision?
2. Draw the process flow for Tom’s.
3. Determine the capacity and capacity utilization for all resources in the process.
4. Based on the expected increase in demand for Halloween, how would you recommend Tom’s staff his pizzeria?
5. What are the cost and benefit of cross-training? Would the implementation of cross-training change how you would add capacity to meet the expected increase in demand
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