Foodservice by Design

Team members from PROFITALITY discuss how industrial engineering can be applied to the foodservice industry.


Using Industrial Engineering in Foodservice Design to Make Better use of Labor

Labor may be but one component of any foodservice operation but it remains one of the most expensive. Applied correctly, labor can make most any foodservice operation more efficient and help drive sales.

In a previous post I touched on the subject of efficiency, reminding us that efficiency has two aspects: a cost and a benefit, better known as the sales-building side. Although efficiency sometimes ends up being a cost-reduction exercise, we must remember that to drive true efficiency, operators need to change both sides of the equation. The application of many industrial engineering techniques can help achieve this critical balance.

Although restaurants can leverage many operating parameters (seen in the list below) to drive a higher level of efficiency for the purposes of this blog let's focus on labor.

Optimum Integration of Operating Parameters:

  • Process
  • Procedures
  • Platforms (Equipment)
  • Place (Facility)
  • People (Labor)
  • Product (Menu)
  • Promotions

Labor comprises one critical piece of a retail foodservice operation. Along with food cost, this variable typically represents one of the top two expense items on a foodservice operator's P&L statement. In addition to being a significant cost center, labor can impact both sides of the efficiency equation. Labor can show up as cost (or input), but if correctly applied the cost of the labor should drive sales many times over. After all, labor allows an operation to deliver sales. For non-foodservice retail concepts, labor becomes the key mover and enabler of sales.

If applied incorrectly, though, labor can result in more cost than benefit (sales). And foodservice operators will see the cost of labor immediately, while it may take time for the benefit to materialize. If operators were certain that adding labor would lead to more sales, the decision to increase personnel would be very easy. The problem is that you can't rely on the adage "if you build it they will come" and this applies even more if the foodservice operator does not apply the labor in a systematic way.

So how do you apply labor in a systematic way?

The first step is to understand the way the operation applies labor. Often foodservice and retail operators will base how much labor they need on a financial metric, for example. And many will assume that if sales remain consistent from one day to the next then the amount of labor should remain consistent, too. Yet, due to market demands, most retail foodservice concepts have become very innovative with the products they offer. Recall that in a prior write up I commented that if you don't innovate you can die as a brand by not staying relevant to your customers, but if you innovate wrong, you can kill yourself. Not providing the right labor level for the new menu items a foodservice operation plans to introduce can be an example of the latter.

Sometimes labor ends up being an entitlement, where the foodservice operator allocates the same number of hours regardless of how much work needs to be done. This scenario allows labor to expand to fill the void when there is more time than work allotted, or cut corners when the staff has too much to do in the allotted time.

The second step is to realize that to drive sales and optimize labor, foodservice operators should base staffing levels on the work required to deliver the desired level of customer service. Bottom line: The system must facilitate deploying the right labor in the right place at the right time. The best way to do this is with a work-content and activity-based labor scheduling system, where the operations clearly and objectively documents all the activities required to deliver the customer service and then assigns a fair time (standard time) to get these accomplished. A variety of industrial engineering techniques can facilitate the development of labor standards (see list below).

Industrial Engineering Labor Standards Techniques

  • Engineering Standard
  • Work Sampling
  • Time Studies
  • Professional Estimates
  • Work Rating

Then take into consideration the product mix, which along with an appropriate work utilization factor that is based on the level of demand, results in the optimum labor deployment to be used to optimize the top side (sales) of the efficiency equation.

In addition to providing the operations with a way to drive sales, there are many other benefits of defining labor in an objective and systematic way, as described herein. I will touch on these in my next article. One can say that labor is a precious commodity in a retail operation, thus the need to manage it optimally to drive the maximum sales building benefit (the top of the equation).