How Process Improvement can save your business: the Taco Bell Use Case
With the exponential proliferation of start-ups and never-lasting innovation, customer demands are growing accordingly. Businesses are therefore pressured to keep up the pace of their expectations to remain ahead of their competitors.
While the focus is satisfying customers, what is core to delivering customer-driven offerings is an organization’s underlying processes. A lot of these cross-functional processes often fail to perform, are inefficiently executed, duplicated or could be improved. However, underperforming will reflect badly on the whole user experience. We should then ask ourselves:
- Are our processes visible, understandable and well executed?
- How can we more efficiently allocate our resources?
- Can we automate, and if so, where and how?
Overall, how do we ensure we are performing at our best? We look at those processes mentioned previously and optimize them.
There is a need to continuously revisit how processes are executed, by analyzing, remodeling and monitoring them. And then repeat.
To highlight this framework’s trustworthiness, this article will individually look at how Taco Bell built its $3 billion worth in less than 10 years (from 1982 to the early 1990s). As such, their improvement initiative will be broken down into the different steps (shown above), from the “before” to the “after” of the re-engineering.
The famous Mexican fast-food chain currently competing amongst the giants McDonald’s, Chipotle or even Burger King, has not always been at the top. That’s right, four years following PepsiCo’s acquisition of Taco Bell (1979), it was seeing its annual revenue growth plummet to a negative 16%, while the industry averaged at a 6% growth.
Times were critical, the business was bound to fail. Taco Bell had to take action to survive.
Joining as CEO in 1983, James Martin had a new approach: Re-inventing the business. He pushed the improvement efforts a bit further down the road by completely redesigning some operations.
Let’s have a closer look at it.
The starting point is to make a statement about the overarching problem, as well as setting expectations for the improvement with a vision.
Taco Bell had to follow its own slogan by “Thinking outside the bun” to identify the core problem.
Studying their model allowed them to recognize they were delivering to the customers with the wrong focus. As such, these findings led Martin to discover the actual expectations of Taco Bell’s customers: ‘‘good food, served fast and hot, in a clean environment, at a price they could afford.’’.
In other words, shifting from being a typical Mexican eatery to a fast-food.
Entering the league of McDonald’s-like giants would then imply many operational adjustments. We will focus on one crucial aspect: The Speed of Service.
Have a good understanding of the current process. Then, analyze it by measuring it through metrics (cycle time, automation level, success rate and so on) to pinpoint the trouble areas.
This step scrutinizes the ‘as-is’ process in-touch with the pace of service delivery. Why are Taco’s customers unsatisfied with the service time? To understand better where delays occur, let’s have a look at an end-to-end process: Ordering a taco.
Having this documentation of the different tasks, participants and their collaborations already helps in gaining that thorough understanding of current frustrations in the experience.
Analyzing the above highlights what ought to drive our improvement initiatives:
- The level of effort to complete a task: Is it too time-consuming? Can it be reduced?
- The manually-executed tasks: Do those have to remain manual? Can we bring in automation?
- The automation opportunities : How can we automate those tedious tasks?
This notation pinpoints a rather manual and lengthy journey for what ought to be a simple and straightforward process. Indeed, the numerous communications and time-consuming tasks altogether lengthen the customer waiting time. What specific items act as blockers to a quick and smooth process?
The food preparation
As indicated above, it occupies a large chunk of time in the back-office operations.
Even though steps into preparing the vegetables, meat and shells are mindlessly line-prepared, it nevertheless requires (too) much time and physical efforts. That is even not mentioning the opportunity cost of labor and utilities to support these practices.
The oral communications
As perceived above, all communications are made orally throughout the process. While customer interactions should remain human-driven for a more personalized experience, oral directives from counter to kitchen are real hurdles to fast and accurate service.
Moreover, the dominant Automation label gives us great insights on how needlessly manual the process is operated, thus encouraging to digitalize. It is therefore in Taco Bell’s best interest to define a new mechanism to speed up the food preparation, for a reduced waiting time and a better user experience.
From the previously-led analysis, propose a new solution by redesigning either portions or the entirety of the current process to truthfully change the business. Once verified and approved, implement it.
See below the proposed solution Taco Bell thought of, at the time, to come to the rescue of these long-awaited orders.
One of the main motives was to move away from manual efforts to provide smoother transitions from the ordering to the eating experience. The model shows how Taco Bell successfully simplified the journey by automating tasks (preparation of the food) using new tools (POS) and outside components (manufacturing commissaries).
Shifting to a fast-food model, Taco Bell had planned to integrate two new programs in how they operate: K-minus and TACO. Now, what does that imply?
Taco Bell took the initiative to become kitchen-less, by outsourcing their meal preparation process. Previously chopped, cooked and seasoned on-site, the ingredients for a winner taco are now manufactured in a centralized commissary to be delivered to Taco Bell. By only having to line-assemble them, kitchen footprints were then significantly reduced.
Taco Bell took this opportunity to introduce the value pricing menu, offering items as cheap as 59, 79 or 99 cents, which proved to be remarkably profitable to the company.
Cutting on kitchen workforce also enabled to re-arrange real estate accordingly. As the kitchen previously occupied 70% of the premises, only 30% was now required. The remaining 70% was then allocated to additional customer dining spaces, as well as introducing its first drive through windows, key to the fast-food model.
TACO (Total Automation of Company Operations)
For Taco Bell’s expected return in the industry, Martin had to bring automation into the picture.
Their intent in maximizing productivity was therefore further increased with the TACO initiative. Not another taco option on the menu… But the Total Automation of Company Operations (TACO).
TACO’s first push was the implementation of a company-wide network of Point-Of-Sales systems, or computerized cash registers with automated features for better management and reporting. As databases, these allowed a drastic reduction of paperwork, but more especially, they would track everything!
The main functionalities are:
- Authenticating transactions
- Tracking and reporting sales
- Identifying and forecasting customer demands
- Coordinating supplies
- Managing staff schedules
More importantly, instead of taking orders manually and communicating orally from the counter to the kitchen, transactions and communications would become instant through the digitization of the workflow.
Shifting from a manual to a computerized ordering process highly strengthened Taco Bell’s Speed of Service, key in the fast-food industry. While delivering orders much quicker (bonus for the customers!), it also enables a much better inventory control. For instance, the POS linking stock to suppliers would detect any soon-to-run-out ingredients, therefore automatically ordering from the commissaries to avoid any shortage of food.
Each POS continuously tracks for its respective store, and TACO gathered all their data onto one company-wide information system. Centralizing data as such enabled quick, easy and thorough access to information, enhancing transparency and insights for better decision-making.
Process Monitoring & Further Analysis
Once implemented, these new measures must not be overlooked. Continuously monitoring these new processes, assessing their performance and re-iterating on where to improve further are crucial to an ongoing growth.
One thing to note, Taco Bell did not stop the efforts after witnessing its economic upswing. On the contrary, they kept on optimizing. This was further witnessed on the upgrade from TACO to TACO II, an improved version of the former computerized system for better performance.
Fast forwarding into time, Taco Bell has been resilient in its digitization until now by providing ongoing technological advancements such as self-serve kiosks, mobile ordering and delivery options.
Show me the numbers!
By the time you read this, it is no doubt Taco Bell’s process improvements paid off. How much though?
- A $2.5 billion growth in less than 10 years, enabling the regional Mexican (1982) to become a national threat to other fast food chain from 1990 onwards.
- Doubled its number of restaurants from around 1,500 franchises in 1983 to 3,600 in 1993.
- A 19% boost in sales directly influenced by the implementation of the value pricing menu. The three-tier value pricing which also successfully questioned fast foods’ dollar menus and made Taco Bell the low-price leader of the industry.
The grass is always greener on the other side of the fence. If you are not pleasing your customers enough, they will inevitably go elsewhere.
In many ways, Process Improvement is then a real deal changer in meeting those constantly growing customer expectations.
The focus is to continuously keep track of these processes running your business. Therefore, having such control over performance, alignment and an accurate reach to demand will be fruitful to your success, or save you from a destined failure. Taco Bell illustrates it as best.
Getting the reigns of Taco Bell at its worst in 1983, James Martin successfully saved Taco Bell from bankruptcy by integrating his customer-driven vision. Adapting the corporation to a fast-food model was then his remedy to drastically boost Taco Bell’s productivity and success.
Aren’t you hungry for some tacos already?
Here goes my second article, I would be very interested in hearing your feedback or comments on the topic!
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