Fast Food Chain

I: Your client has hired you to decide whether cows should walk or run.

C: I would like to know more about our client and his line of business. Where are  they based out of? What are their products and/ or services and where does they lie in the value chain? And how will walking or running of cows affect the client?

I: Our client is fast-food chain, based out of New York. They have 10 outlets in New York. Our client is popular for their beef burger. They have a manufacturing plant near Bellport, where they produces beef patty from cows. What do you think how the walking or running of cows may affect the client?

C: Walking or running of cows may affect the quality of meat or quantity produced at the plant. Running or walking of cows may be related to their exercise which can further increase the quality of the meat. Pace of the cows in the manufacturing plant may affect the production rate of beef patty. Am I correct?

I: Yes. Here, you may ignore the impact of walking or running of cows on quality of beef patty. You may focus on its impact on the quantity of patty produced at plant. 

C: Ok, I would like to understand current scenario in terms of whether the cows are made to walk or run in plant. Due to which, what is the current daily production capacity? By changing the pace of cow, what would be the increased daily production capacity?

I: Currently, the cows are made to walk in plant. Also, plant can process 10 cows/ hr and 20 cows/ hr when made to walk and run respectively. We can make 20 burger patty from a cow in an hour. The plant operate 10 hours in a day.

C: Then, our current production capacity is 200 patties/ hr i.e., 2000 patties/ day, & we can increase it to 400 patties/ hr i.e., 4000 patties/ day by making the cows run. So, our client is looking to understand whether they should increase the production rate of beef patty by increasing pace of cows in manufacturing plant. 

I: Correct.

C: I would like to understand if we have demand for beef burger in market, which can accommodate the increased production. Secondly, I would like to analyse the operational feasibility for the same. 

I: Sounds good. How will you estimate the demand of our beef burgers in market?

C: I will follow the top-down approach. Starting with the population of New York, I will add filters such as Income, Age, Beef Burger Preference, and Eating Frequency to calculate the total beef burger demanded in Bangalore. Post that, by multiplying the market size with our share will provide market demand of our beef burgers. 

C: (…refer to previous page for calculations) As we can see that the demand of our burgers is more than what we are producing. We should increase our production capacity by increasing the pace of cows in the manufacturing plant.

I: Right, how will you proceed now?

C: I would now like to analyse the financial feasibility and operational feasibility of increasing the production capacity. In financial feasibility, I will calculate the net monthly contribution and payback period to recover the initial investment and compare with the targets set by the client.

I: Good. How will you calculate the net monthly contribution and payback period?

C: Net monthly contribution is (Monthly Revenue – Monthly Variable Costs). By dividing the initial investment with the net monthly contribution, I will get payback period in months. Till payback period, the net monthly contribution will add up to pay the initial investment and once the initial investment is recovered, the contribution will add up to profits.

I: Correct. How will ascertain the operational feasibility?

C: In this case, I would like to follow the value chain and understand the feasibility of the project. Value chain of our client should look like sourcing of cows and other raw materials; manufacturing; outbound logistics; and food outlet operations. We need to understand operational challenges at each stage. Starting with sourcing of cows and raw materials, we need to understand if they can meet the increased demand and look at transportation & storage facilities to guarantee timely and efficient supply chain operations.

I: There won’t be any challenges in this stage of value chain. You may move to next stage.

C: Ok, in manufacturing stage, we need to review the current manufacturing process and understand if it will need any modification. Secondly, we need to evaluate the availability of skilled labor to operate the new machinery. Will there be any challenge in any other these?

I: No, we won’t face any major challenge in this stage. You may proceed to Outbound Logistics.

C: In Outbound Logistics, we need to check if the existing distribution network can handle the increased volume. Secondly, we need to check availability & capacity of vehicles needed to deliver products. Will there be any challenges here?

I: No, we can close the case. Thank you

C: Yes, that's right. We can focus on green energy.

I: So I understand green energy would come from 3 sources. Water, wind and sunlight. We will require turbines, windmill farms, and solar panels.

C: I would like to start with wind energy. Is that okay?

I: Yes sure

C: So, I understand that windmill farms will require a lot of space, capital and wind. So, location is a prime issue.

I: There was a recent study that said that the entire northern India can be powered if we fill the Rajasthan desert with solar panels and windmills. So, I don't think space is a constraint.

C: Okay. Makes sense. The next thing I understand is that these renewable sources of energy are very expensive to setup. So that can be an issue.

I: Correct. Why do you think it is so expensive to set up solar panels?

C: I don't remember the element name, but I do remember that one of the metal raw materials is expensive which drives the cost.

I:  Absolutely right! These are called rare earth metals which are not abundantly available. Hence even if we could afford them, there just aren't enough of them to produce as much electricity to power the entire world. So, you've come to the right conclusion that it's just not possible that they could replace carbon-based fossil fuels.

C: Yes, that makes sense.

I: Why do you think that companies are still trying this even though they know it's not sustainable or achievable?

C: I believe that if they never try it in the real world and purely based on current technology and calculations reject the idea, they will never learn about the intricacies and scope of improvement.

I: Yes. Our chips used in phones have also constantly reduced in size while being able to store more data.

C: Yes! So, I feel that maybe based on current knowledge and technology this is not possible but eventually we will have to once we've finished all our resources. So, investing in R&D in this area will prove to be useful.

I: You're right. It was great talking to you. We can end it here.