Chapter 10, Problem 6P

Gretchen’s Kitchen is a fast-food restaurant located in an ideal spot near the local high school. Gretchen Lowe must prepare an annual staffing plan. The only menu items are hamburgers, chili, soft drinks, shakes, and French fries. A sample of 1,000 customers taken at random revealed that they purchased 2,100 hamburgers, 200 pints of chili, 1,000 soft drinks and shakes, and 1,000 bags of French fries. Thus, for purposes of estimating staffing requirements, Lowe assumes that each customer purchases 2.1 hamburgers, 0.2 pint of chili, 1 soft drink or shake, and 1 bag of French fries. Each hamburger requires 4 minutes of labor, a pint of chili requires 3 minutes, and a soft drink or shake and a bag of fries each take 2 minutes of labor.

The restaurant currently has 10 part-time employees who work 80 hours a month on staggered shifts. Wages are $400 per month for regular time amid $7.50 per hour for overtime. Hiring amid training costs are $250 new employee, and layoff costs are $50 per employee.

Lowe realizes that building up seasonal inventories of hamburgers (or any of the products) would not be wise because of shelf-life considerations. Also, any demand not satisfied is a lost sale amid must be avoided. Three strategies come to mind.

• Use a level strategy relying on overtime and under time, with up to 20 percent of regular-time capacity on overtime.
• Maintain a base of 10 employees, hiring and laying off as needed to avoid any overtime.
• Utilize a chase strategy, hiring and laying off employees as demand changes to avoid overtime.

When performing her calculations, Lowe always rounds to the next highest integer for the number of employees. She also follows a policy of not using an employee more than 80 hours per month, except when overtime is needed. The projected demand by month (number of customers) for next year is as follows:

1. Develop the schedule of service requirements (hours per month) for the next year.
2. Which strategy is most effective?
3. Suppose that an arrangement with the high school enables the manager to identify good prospective employees without having to advertise in the local newspaper. This source reduces the hiring cost to $50, which is mainly the cost of charred hamburgers during training. If cost is her only concern, will this method of hiring change Gretchen Lowe’s strategy? Considering other objectives that may be appropriate, do you think she should change strategies?