978-1285451374 Chapter 15 Solution Manual Part 3

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14. Describe some examples of poka-yoke in consumer products or manufacturing or

service processes different from the ones cited in the chapter.

Poka-yoke (POH-kah YOH-kay) is an approach for mistake-proofing processes

using automatic devices or methods to avoid simple human error. Students can find

numerous examples similar to those described in the text, and should try to derive

15. Refer to the automobile repair flowchart in Exhibit 7.5 in Chapter 7. Identify three

activities where a potentially serious service error may occur, suggest performance

measures for each of these three activities in the flowchart, and poka-yokes that

might prevent such errors from occurring.

One of the most obvious potential errors is the accuracy of the mechanic diagnosing

the problem (s). Missing a serious problem or misdiagnosing it could lead to an

accident, even death. Metrics such as the number of call backs or returns or

Accurate bills and customer appointments are other good points in the flowchart to

Case Teaching Note: Sunshine Enterprises

Overview

An entrepreneur, Abby Martin, must make short- and long-term decisions about how to

manage and grow her restaurant business. The short-term issue is how to handle an extra

$25 tip on a customer’s bill the customer says he did not authorize. The long-term

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decision is whether to pursue an aggressive growth strategy by adding twenty restaurants,

do nothing, or something in between. Also, enough information is available in the case to

compute the value of a loyal customer. The case assignment questions focus the

student’s attention of these issues. Students are asked to draw a cause-and-effect diagram

(Chapter 15) and compute the value of a loyal customer (Chapter 3). The first case

question can be eliminated if you have not covered Chapter 15, the third question can be

eliminated if you have not covered Chapter 3. This case takes about 45 minutes to teach

on the board.

Case Questions and Brief Answers

1. Draw a cause-and-effect diagram for the possible causes of the $25 tip service. Select

one possible root cause from your diagram and explain how you would investigate

and fix it.

The case presents the following information w/r to possible causes of the $25 tip

service upset.

 The customer is responsible to tip properly, add the bill and tip correctly, write

 The employee is responsible to type the bill in the register/computer correctly, go

 The restaurant manager is responsible to investigate the store’s receipt history and

 The credit card company, a third party provider in this value chain, is responsible

The cause-and-effect diagram (not shown) should have at least four major branches –

customer, employee, manager, and credit card Company with appropriate sub-

branches. The fishbone diagram provides a “framework for root cause analysis.”

Students may add other sub-branches and possible root causes based on their

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2. What is the average value of a loyal customer (VLC) at Abby’s restaurants (see

Chapter 3)? What is the best way to increase revenue given your VLC analysis?

If you do not cover OM2 Chapter 3 then skip this assignment question. There is more

Lunch prices – $10 to $20 and dinner prices $20 to $30 so if we assume lunch and

dinner are equally likely the average meal price is ($15 + $25)/2 = $20. The

In Chapter 3 the equation is VLC = P*CM*RF*BLC (Equation 3.2) so as a base case

we have VLC = ($20)(.35)(6)(13.3) = $558.6 per year. Therefore, Sunshine

Example Data Table “What Ifs” w/r to Repurchase Frequency

and Customer Defection Rate

560

0.02

0.04

0.06

0.075

0.08

0.1

0.12

1

560

0.02

0.04

0.06

0.075

0.08

0.1

0.12

1

$350

$175

$117

$93

$88

$70

$58

2

$700

$350

$233

$187

$175

$140

$117

3

$1,050

$525

$350

$280

$263

$210

$175

4

$1,400

$700

$467

$373

$350

$280

$233

5

$1,750

$875

$583

$467

$438

$350

$292

6

$2,100

$1,050

$700

$560

$525

$420

$350

7

$2,450

$1,225

$817

$653

$613

$490

$408

8

$2,800

$1,400

$933

$747

$700

$560

$467

9

$3,150

$1,575

$1,050

$840

$788

$630

$525

10

$3,500

$1,750

$1,167

$933

$875

$700

$583

11

$3,850

$1,925

$1,283

$1,027

$963

$770

$642

12

$4,200

$2,100

$1,400

$1,120

$1,050

$840

$700

$175

$117

$93

$88

$70

$58

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One lesson from this type of analysis is at one visit per year and a 12% customer

defection rate the VLC is only $58 while at 12 visits per year and a defection rate of

The following Excel Data Table shows that price is a more powerful variable in the

VLC computations than decreasing operating costs (i.e., increasing contribution to

Example Data Table “What Ifs” w/r to Price and Contribution Margin

$560

0.2

0.25

0.3

0.35

0.4

0.45

0.5

$10

$160

$200

$240

$280

$320

$360

$400

$15

$240

$300

$360

$420

$480

$540

$600

$20

$320

$400

$480

$560

$640

$720

$800

$25

$400

$500

$600

$700

$800

$900

$1,000

$30

$480

$600

$720

$840

$960

$1,080

$1,200

$35

$560

$700

$840

$980

$1,120

$1,260

$1,400

$40

$640

$800

$960

$1,120

$1,280

$1,440

$1,600

These data tables are for faculty; undergraduates are not expected to do such tables; MBAs

maybe.

3. Critique the current “informal” quality control system. What changes and

improvements do you recommend if Sunshine expands to 20 restaurants?

The current quality control system is typical of entrepreneurs with a limited number

of sites. They focus on face-to-face interaction with customers and employees, and

As the business grows and adds more sites, the nature of the quality control function

changes considerably. Firms like McDonalds and Bonefish define and monitor

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One way to provide a framework for deciding whether to expand to twenty sites or

Strategy A is to keep the number of goods and services roughly constant and expand

the number of sites. McDonald’s and others fit this general strategy using a great deal

Strategy B is to keep the number of sites roughly constant and focus on providing

superior goods and services. This is the strategy that Abby adopted. For Sunshine

There are many successful businesses that have followed Strategy A or B. Strategy C

is difficult, if not impossible, to implement successfully. Here, a business is

Number of Site Goods &

Services

Strategy A

Strategy

B

Strategy

C

Number of

Sites

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Whether to franchise or not is another management growth decision. Strong

franchising agreements allow the business to grow more rapidly than they otherwise

4. What are your short- and long-term recommendations? Explain your rationale for

these recommendations.

Students must decide exactly how to handle the service upset, whether to expand or

Short-term Actions

 Resolve the $25 tip service upset (how, step by step, who does what and

when)

 Use Seven Tools and check sheets for restaurant quality control (train, teams,

etc.)

 Do a short customer survey that sits on each table (design, collect, and analyze

Long-term Actions

 Hire secret dinner’s to audit restaurant performance – food and service quality

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Postscript (you may or may not want to reveal this)

The short-term service upset was solved by the following action (service recovery)

plan. (1) The restaurant manager investigated the $25 tip error and found the waiter

had miss-typed it in the register. (2) The manager credits the customer’s credit card

for $22.50. (3) The customer was called and the manager apologized, obtained the

customer’s address and mailed him a free lunch/dinner coupon. (4) The waiter was a

core member of their staff and the manager believed the service upset was an honest

mistake so no action was taken against the employee. (5) All restaurant managers

were informed of the service upset and all employees were told to double check bills

and tip amounts when possible (i.e., disseminate this service upset and recovery

lesson at one site to all sites, learn from mistakes).

Abby Martin, the entrepreneurial owner of six restaurants and a hotel, decided not to

expand on the west coast of Florida over the long-term. She decided that the current

size of her businesses allowed her to monitor, control, and manage them effectively.

If they expanded to more restaurants she recognized accounting and financial control

systems would need to be standardized, marketing and advertising would need a

corporate and local emphasis, and operating and training policies and programs would

need to be standardized. It was best to focus on a fixed set of business sites and do

the very best with building customer loyalty and increasing revenue, and build

capability for the next business cycle upturn.

The management and system skills to manage a few sites (Sunshine Enterprises)

versus multiple sites (McDonald’s, Olive Garden, etc.) are very different. Many

entrepreneuriers make the fatal mistake of expanding sites rapidly without adequate

controls or losing control due to weak franchise agreements. Abby recognized these

pitfalls of expansion and focused on premium service at a small number of sites that

were controllable and profitable.

One lesson is an informal quality control approach/system is not scalable to multiple

sites!