Long lines at check out can spoil a shopping trip just as a bad dessert can spoil an otherwise fine dinner. Either can, if you will, leave a bad taste in your mouth. So what can a retailer do besides throw (expensive) bodies at the problem?
As the Wall Street Journal tells it, there are quite a few options. A recent article discussed process changes and new technologies different firms are using to try and reduce customer waits (Retailers Wage War Against Long Lines, May 2). The most interesting to my mind was what supermarket chain Kroger is trying.
Supermarket giant Kroger Co. is winning the war against lengthy checkout lines with a powerful weapon: infrared cameras long used by the military and law-enforcement to track people.
These cameras, which detect body heat, sit at the entrances and above cash registers at most of Kroger’s roughly 2,400 stores. Paired with in-house software that determines the number of lanes that need to be open, the technology has reduced the customer’s average wait time to 26 seconds. That compares with an average of four minutes before Kroger began installing the cameras in 2010.
“The technology enabled us to execute at the front of the store without that additional (labor) expense,” said Marnette Perry, senior vice president of retail operations for Kroger.”It’s remarkable that we’ve been able to improve execution as much as we have without a big price tag.” …
The system includes software developed by Kroger’s IT department that predicts for each store how long those customers spend shopping based on the day and time. The system determines the number of lanes that need to be open in 30-minute increments, and displays the information on monitors above the lanes so supervisors can deploy cashiers accordingly.
Automotive News recently had a report on driving a Tesla Model S electric car from Los Angeles to Las Vegas. You can find a video describing the drive here. What I found more interesting was the reporter’s description of stopping to charge up the car (A flaw in Tesla’s plan: It’s Chargie McVanish, Apr 8). In order to spur interest in its vehicles, Tesla is building out a network of solar-powered Supercharger charging stations. Their website says they currently have nine but plan to get to one hundred by 2015. One is in Barstow, perfectly positioned for a drive from LA to Vegas.
So what’s a reasonable wait to charge your Tesla? (more…)
All this week I have been traveling in China with a group of Kellogg faculty. It has been a fascinating trip as we have met with officials from several government agencies, executives from a variety of companies, and colleagues from the Guanghua School of Management. I have never been to China before so I have been trying to take everything in as we have gone around Beijing and Shanghai. This sign caught my eye as we were going through the Beijing airport.
I like the way they have chosen to present the wait time information for clearing security. It got me wondering why American airports don’t try reporting similar information. If nothing else, being clear about the targets would help set expectations for how long passengers should expect to be in queue. Of course, in the US, the people running the airport do not control how TSA agents are scheduled. Nor do they determine how many officers are managing the immigration desks (another piece of data on the sign).
I live in Wilmette, the village just north of Evanston. It is a pleasant place if a little sleepy. However, we currently have a controversy brewing over Wilmette Harbor. The harbor is where the North Shore Sanitary Channel enters Lake Michigan. To quote Wikipedia, “The North Shore Channel is a drainage canal built between 1907 and 1910 to flush the sewage-filled North Branch of the Chicago River down the Chicago Sanitary and Ship Canal.” Of course, that quote doesn’t quite do justice to the harbor. Where the channel meets the lake, there is a lock that keeps the nasty stuff out. Wilmette Harbor is actually a picturesque place with a Coast Guard station and space for 300 or so boats.
The kerfuffle is all about who will run the harbor. It is owned by the Metropolitan Water Reclamation District (MWRD), a regional government entity tasked with maintaining water quality, not accommodating boaters. Hence, they have outsourced the management of the harbor. For the last 75 years, the Wilmette Harbor Association has had the gig. The Wilmette Harbor Association’s lease has expired and they and other parties have bid to run the harbor, notably Wilmette Harbor Management. Following a murky process, the staff of the MWRD recommend the Wilmette Harbor Association’s bid be accepted even though it was lower than Wilmette Harbor Management’s. The MWRD’s commissioners voted against granting Wilmette Harbor Association the lease and now it is uncertain whether the harbor will be open this summer. For Chicago Tribune articles on this soap opera, see here and here.
I don’t own a boat so don’t have a whole lot at stake in this fight. However, there is an interesting operations question at the heart of the conflict. The Wilmette Harbor Association and Wilmette Harbor Management have very different ideas about how manage the queue for slips at the harbor.
My colleague Sunil pointed me a neat article on Domino’s Pizza’s Indian operations. While the chain long ago gave up on an explicit delivery time guarantee, their Indian franchisee Jubilant Foodworks still promises 30 minutes or the pie is free. That is not an easy promise to keep in, for example, an old neighborhood with streets running every which way and no really good maps. Still they manage to hit the thirty minute target remarkably often despite not having a whole of lot time for the actual delivery part of the process (Domino’s deadline to deliver, Financial Times, Jan 17).
With preparation, baking and boxing of pizzas taking 12-13 minutes, Indian deliverymen have 8-10 minutes to ferry their piping hot cargo to its destination – leaving a margin of just a few minutes. Riders cannot race to their destinations either: their motorbikes are modified to restrict their maximum speed to 45kph. That means riders must know every street, pothole, traffic light, choke point, construction site and police roadblock in their sectors of fast-changing, densely populated cities. …
Of all Domino’s deliveries in India, less than 0.5 per cent take more than 30 minutes to reach the consumer. Top managers monitor every store’s late rate closely. Rising pizza giveaways are seen as an indicator that a store is being overwhelmed by rapidly growing business – and that the area may be ripe for an additional outlet – or that local congestion is worsening considerably. “We watch that number like hawks,” Mr Kaul says.
Now there are obviously several steps in making these deliveries happen — from making sure that the kitchen staff is well-trained to scheduling enough delivery drivers. The most interesting part to my mind is the last thing hinted at in the quote above: How does Domino’s think about locating stores — and defining their service areas — so they can hit their delivery window?
How do you make sure customers take advantage of a promotion the way you want them to take advantage of it?
The question comes up at Disneyland. The Mouse people are currently offering a deal that allows park goers to get a break on multiple visits. Specifically a 3-Day Park Hopper pass lets customers visit multiple parks over three days. The days don’t have to be consecutive but you have to use the second two days within two weeks of using the first day. If you really want to spend a lot of time at Disneyland, this is actually a pretty good deal. An adult three-days pass goes for $220 while a one day pass goes for $125. (For those under nine, the comparable numbers are $205 and $119.)
Now there is clearly a problem here in that if two families split a three-day passes with, say, the Jones going one day and the Smiths going the next, they would come out ahead even if the third day went unused. If Smiths and Jones can recruit a third family, they’ve got an even better deal. Of course, a stumbling block in making this happen is transaction costs. If the Smiths and Jones live on the same cul-de-sac, maybe then coordinate this deal easily. However, if the Smiths are flying in from Chicago, it is much harder for them to take advantage of this deal — unless a middleman steps in to help broker the deal. And this just what is happening (Disneyland fights multiday pass abuse by photographing holders, LA Times, Jan 9).
Disney has been struggling to stop several ticket brokers in Anaheim from buying multiday park passes and then “leasing” or “renting” them to visitors for individual days.
The scenario works like this: A ticket broker buys a three-day “park hopper” pass for $205 and rents the ticket to three guests for $99 a day. The broker makes a profit of $92, and the guests, who would otherwise pay $125 for a one-day “park hopper” ticket, save $26 each.
Disneyland prohibits visitors from sharing multiday passes, but the practice does not violate local laws.
Slate has an article that asks an intriguing question: Who Really Benefits From “Big Data”? (Dec 27). That’s clearly something of a loaded question. Big Data is currently everyone’s favorite answer for everything. The ability to leverage vast amounts of data for new insights and improved decisions holds a lot of promise. There are also many success stories of firms creating new markets or improving profitability or providing great value to customers to back up claims and bolster expectations. Big Data has remade baseball with an emphasis on new statistical measures and has allowed Netflix to suggest the perfect next movie to watch.
Those examples sound great. Of course, consumers may be less enthusiastic about one of the longer standing examples of Big Data, airline revenue management systems. While these have been around for a couple of decades,they bear the hallmarks of Big Data applications. They are built on careful data analysis to forecast how systems will evolve and seek to replace intuition with frequent, reasoned decisions. These decisions may not necessarily be optimal but they clearly balance costs and benefits and can be improved over time. I’m not sure that customers love revenue management systems the way they love Netflix recommendations. Although revenue management systems are just as responsible for some sweet deals as they are over for extravagantly priced tickets, people tend to focus on the latter. Consequently, if you ask who benefits from Big Data and lead with revenue management systems as an example, I would venture that many customers would be leery of embracing Big Data.
So what example does the Slate article go with in thinking about Big Data? Lexus Lanes on the DC Beltway!
Advances in real-time data acquisition, processing, and display technologies means that it is possible to design a toll road that can continually change prices to control how many cars are on the road and how fast they are going. These “hot lanes“ have just been opened along a part of the Washington, D.C., Beltway, the 10-lane, traffic-infested artery that to normal humans is a metaphorical boundary between the real, outside-the-Beltway world and the weird, political one on the inside. (For those of us who live around Washington and must drive on it, however, the Beltway is very concrete indeed, a daily flirtation with delay and frustration, homicidal instincts, and death itself.)
At a cost of $2 billion, a private sector partnership (which gets to keep the tolls) has built a 14-mile-long, four-laned section of highway, parallel to the main lanes of the toll-free Beltway, and has guaranteed to the state of Virginia that it will always keep traffic moving at no less that 45 mph along its length. They do this by continuously monitoring the number of cars (which must be equipped with EZ-Pass transponders) and their speed, and by raising toll prices as necessary to keep the number of cars on the road at a level that will allow the speed to stay at or above the guaranteed minimum. The dynamic toll prices are displayed on huge signs near the entrances to the smart-highway lanes, so drivers get to decide at the last minute whether they want to spend the money to go faster or not. As the traffic on the toll-free Beltway lanes gets worse, some drivers will be willing to spend more to go faster. The worse the traffic is, the more they’ll have to spend. (In the early days of this new technology, numerous accidents were caused by drivers trying to decide how much they were willing to pay, but no doubt this initial problem will sort itself out as people get used to driving-while-economically-rational.
Apple products have a tendency to generate buzz with fanboys eager to line and wait and wait to get whatever new product on its launch date. This routinely happens in the US and other countries. But not in China — as least not for the iPad mini (Scalpers Lay Siege to iPad Mini in Beijing, Wall Street Journal, Dec 7).
The release of Apple Inc.’s iPad Mini on Friday at its flagship store in Beijing was missing the massive and unruly crowds reminiscent of some the company’s previous product launches in China, but scalpers were still out in force despite rules making it tougher for them to buy most of the stock.
Apple is requiring Chinese customers to participate in an online lottery one day in advance to buy the wifi-version of the iPad Mini at its seven retail stores in China. Those selected, however, are limited to two iPad Minis each and must bring photo identification.
The Cupertino, Calif. company instituted the iReserve system in China after a near-riot occurred during the release of the iPhone 4S in January, leading police to seal off part of the flagship store in Beijing’s high-end Sanlitun Village mall. The state-run Xinhua news agency later blamed the chaos on a clashes between rival groups of scalpers vying to buy up as much of the stores limited supplies of the device as possible.
So is a lottery a better than a queue to ration limited supply?
Here at the Operations Room, we love queues and few queues have gotten as much attention lately as the lines of drivers waiting to buy gasoline in New Jersey and New York following the hurricane. Stories abounded about wasted time and why allowing price gouging would actually be good. Of course, neither states cleared station owners to jack prices up. Instead, they implemented Nixonian rationing based on license plate numbers. Those with plated ending in even numbers got to buy on even days and those with odd numbers got to buy on odd days.
Now, the Numbers Guy column and blog at the Wall Street Journal is asking whether it worked (Fuel Rationing Is Hard to Gauge, Nov 16, and Does Odd-Even Rationing Work?, Nov 17). Turns out there is no clean answer on this. On the one hand, studies of when similar schemes were used in the early 70s claim to show they were ineffective but even those studies authors think this time may have been different.
“I’m not sure our analysis transfers directly to the Sandy shortage situation,” said Robert Goldfarb, an economist at George Washington University in Washington, D.C. In a 1983 paper, Prof. Goldfarb and co-authors found the odd-even rationing system could lengthen waits, because people who normally spaced out refills by an odd number of days—say, five days—might move up their regular refills to every four days to avoid running out.
William Huss, co-author of a 1981 paper with a similar conclusion, added that while his model “has a solid mathematical foundation, its assumptions regarding driver behavior are hypothetical and logical but not necessarily based on psychological research.”
I have to admit that I love that last quote since it could equally apply to every paper I have written. (more…)
The starting point of the article is that priority service has become fairly ubiquitous from airports to amusement parks to expressways.
But today, many Americans are waiting in a new kind of queue – the priority queue, where certain customers get higher priority because they pay.
In American airports, priority queues are now visible everywhere – at the check-in counter, at security and at boarding gates. Many airlines now board their passengers according to the amount of money they’ve paid for their ticket. …
Take the Six Flags White Water amusement park in Atlanta, which implemented a priority queue system in 2011.
Some guests simply queue up for their rides. Those who purchase green-and-gold wrist bands – fitted with radio frequency technology – are able to swim in the pool or eat snacks before being alerted to their turn.
Guests who pay an even higher fee – roughly double the price of admission – get the gold flash pass, cutting their waiting time in half. …
In October 2011, Atlanta created a priority lane on the highway [I-85] for drivers with a Peach Pass – the price of driving in the lane changes depending on how much traffic there is.
Critics call them “Lexus lanes”, because they claim the lanes benefit only the rich who can afford expensive cars.
Aside from the cost of the express lanes, some drivers are also upset that they replace car pool lanes – special lanes for cars with two or more passengers.
Overnight all the car pool drivers who used to ride free were pushed into the general lanes, making traffic worse for everyone except those who pay.
After the various examples, it builds to this:
Americans have a deep-rooted belief in the market and since priority queues can generate revenue it’s no surprise that they are turning up in the public sector as well.
But are traditional American values like fairness and equal opportunity really compatible with letting someone buy their way to the front of the line? And what happens when the people who pay more want more?