misha

Benihana Simulation Analysis - Best Strategy Introduction: The goal of this simulation was to maximize utilization, throughput time and the nightly profit for the evening hours of operation (6pm to 10:30pm) using different batching, bar sizing, hours of operation, advertising strategies. The first five challenges are individual challenges where only one or two factors can be changed to gain maximum nightly profit. The final challenge is to design the best strategy, using factors from the previous challenges, in order to maximize the overall profit. Strategy: Our strategy for the final challenge was to use the best strategies from the previous challenges in order to maximize the overall nightly profit. Contrary to what we thought, this strategy did not work, leading us to change different factors. In our first challenge, we immediately noticed that batching strategy worked far greater than the non-batching strategy in profit maximization. Batching maximized dinner room utilization to 55%, whereas non-batching only used 42% of the dinner room capacity. Batching allows the restaurant to use less chefs which in turn lowers their fixed costs and maximizes their profits. The second variable was select how many bar seats versus dinner tables we want to be open in the restaurant. Maximizing the number of bar seats to 79 and 12 dinner tables increased the nightly profit o $476. Even though dinners bring in more revenue than drinks, our analysis showed that maximizing the number of dinner tables increased our fixed costs. This led us to believe that using more bar seats was the way to go to increase nightly profits. This also increased dinner table utilization to 71% and gave us dinner revenues of $2,707 and bar revenues of $1,007. The third challenge was to select the optimum wait time for pre-peak, peak and post-peak hours. Our strategy for this scenario was to minimize wait times and decrease costs. The strategy of 45 mins (pre-peak), 45 mins (peak) and 70 mins (post-peak) worked the best for us and gave us a nightly profit of $429. This allowed the customers to for pre-peak, and peak to be in and out of the restaurant the fastest, increasing our throughput time and having the post-peak customers wait a little longer for their experience and allowing the restaurant to use 52% of its dining room capacity. The fourth scenario asked us to pick the best advertising scenario. The best scenario was when we spent less on advertising (only 0.2x the normal budget), while using building awareness and opening the restaurant at 5pm. This led us to a nightly profit of $607. Our advertising budget was decreased to $81. This made sense because the less we spent on advertising, the less we spent on costs, therefore the higher our profits. The final challenge was to pick different batching schemes for the pre-peak, peak and post-peak hours. The one that proved to maximize our profits was to use tables of 8, 8 and 4 to 8 for the respective times. This gave us a nightly profit of $355.

Sarah Zaman

Best Overall Strategy: The best overall strategy that proved to give us the highest nightly profit was if we used 79 bar seats, 11 dinner tables, batching of 8, 8 and 4 to 8 for pre-peak, peak and postpeak hours respectively, average dining times of 55, 45 and 55 mins, and use 0.2x the normal advertising budget using building awareness and opening the restaurant at 5pm. This gave us a nightly profit of $761 and allowed us to use our dining room capacity of 52%. Using this strategy, our bar revenues increased to $637 and our dinner revenue increased to $2,920. Our total cost incurred was $2,797. With this strategy, we didnt lose any customers because they had a wait time of approximately 12 minutes. Our analysis showed that increasing the dining time for pre-peak hours to 60 mins increased our dining room utilization to 55%, but it decreased our throughput time. It took longer for the dinner to get out and customers to served, resulting in a lower nigh tly profit (Scenario 7, Figure 1). One variance we saw in our strategies was that for challenge 3, our best strategy was to pick dining timings of 45 mins, 45 mins and 70 mins. This proved to be inefficient and gave a nightly profit of only $640. This showed that we needed to increase our dining time for pre-customers and lower the dining time for post-peak customers. This maximized our throughput time, utilization and our profits. The short term implications for our strategy are that it maximizes profit for the present only. Since it was shown in class that the profit could be as high as $800, this shows that our strategy is not an optimal one. Benihana could increase their throughput time. The faster the dining experience, the more customers Benihana can serve maximizing their operations capacity and decreasing their idle time. Although a lower dining time has its upside, it also has a downside. I think 45 minutes is long enough for such an experience, but any shorter, the customer might feel rushed and not get to enjoy the full experience. Dining experience is an important decision factor in an service-based industry. This is why the simulation showed timing of 55 mins for the pre-peak and postpeak hours to be the most profitable. This allows the customer to appreciate the experience with minimum idle time. Perhaps they can look at batching of 8 to 10 or 12 in order to minimize their fixed cost (chefs). Since this strategy is not the optimal strategy, using this strategy could have negative effects on profits in the long term. Again, capacity utilitzation, idle time, throughput times are extremely important relative to profits. I believe the long term implications of our strategy rely on the advertising of Benihana. The restaurant needs to plan their advertising budget which will get their name out there in the most effective and efficient manner. Their longevity also depends on their business model and their operations management system. Although advertising suggests that the restaurant should open at 5pm in order for maximum profit, perhaps they could open only open their bar and have the chefs come and prepare at 5:30 for dinners shows at 6pm. They could offer appetizers at the bar to increase bar revenue from just drinks to food and drink. A lot of customers who would come to the restaurant at 5pm would come there in a happy-

misha

hour situation and they would want something to eat. But again, this is contingent on their business model and their brand image (whether or not they want to do happy hour). This simulation shows a strong correlation between operations management and profits! Therefore, Benihana would need to find an optimal operations strategy for their restaurant in order to be profitable.

Sarah Zaman

Figure 1: Nightly Profits for 20 Scenarios Figure 2: Nightly Bar Revenues

misha

Sarah Zaman

Figure 3: Nightly Dinner Revenues

Profit Sce nari o1 Sce nari o 10 Sce nari o2 Sce nari o3 Sce nari o4 Sce nari o5 Sce nari o6 Sce nari o7 Sce nari o8 Sce nari o9 Sce nari o 12 Sce nari o 13 Sce nari o 14 Sce nari o 15 Sce nari o 16 Sce nari o 17 $738 $723 $754 $698 $566 $759 $704 $703 $721 $680 $736 $739 $761 $741 $761 $759 Dining Room Utilization 58% 52% 49% 43% 53% 52% 55% 55% 52% 53% 51% 52% 52% 52% 52% 52% Bar Revenue Total Dinner Revenue $1,011 $600 $540 $366 $489 $635 $732 $721 $599 $622 $584 $659 $637 $481 $637 $635 $2,713 $2,880 $2,956 $2,970 $2,845 $2,919 $2,790 $2,793 $2,877 $2,803 $2,907 $2,877 $2,920 $2,962 $2,920 $2,919

misha Sce nari o 18 Sce nari o 19 Sce nari o 20 Sce nari o 21 $761 $754 $723 $319 50% 49% 52% 50% $577 $540 $600 $577 $2,949 $2,956 $2,880 $2,507