Guest post from Charith Acharya, Product Marketing Manager, IBM Business Analytics
On a Wednesday afternoon, I gleefully said, “A six inch, honey oat, all veggies, extra olives, mustard, mayo, southwest, caeser, with cheese, and having it here.”
Sound familiar? No points for guessing that I was ordering at a Subway.
It was a Wednesday and I had left my lunch at home, so I headed to the food court in the Information Technology Park where the IBM office is located in Bangalore, India.
I like Subway, as do “lakhs” of other urban Indian techies. (Note: this isn’t a commercial for Subway, but I am going to help their business run more smoothly.)
Don’t get me wrong, Indians love Hyderabadi Biryani, Punjabi Butter Chicken, South Indian Masala Dosa and the thousands of other dishes that describe us, but submarine sandwiches are fast gaining popularity, especially on a Friday afternoon.
This brings me to the point – I was having a sandwich on a Wednesday afternoon. The main incentive for ordering it was because it was not Friday, which can often take up to 45 minutes due to the stores popularity and long queue.
Next to the swanky, neon lit, urban, trendy Subway is a traditional South Indian Vegetarian breakfast outlet. This restaurant was giving this multinational food chain a run for their money. Their line is usually thrice as long, but the service is ten times faster.
It’s not that urban techies prefer a South Indian breakfast dish (that they would otherwise eat at home) over a Subway. It’s simple – the waiting time kills the business. In this case, fast food is not fast.
This dilemma was perplexing, but important as I wanted a Subway sandwich quickly, and on my terms. I thought, “What should Subway do? Hire another “sub artist” for just the peak hours?”
They could, but that would only add extra overhead costs and right now it is only busy on Friday’s. Also, the crowd might only be temporary as they are curious about this new lunch option.
Thank goodness we just released the new version of IBM SPSS Statistics and its new Monte Carlo Simulation technique.
Given that Subway is working with very little historical data to make the best decision on how to run the business, it only made sense to simulate with Monte Carlo.
Monte Carlo Simulation is a technique used to build better models and assess risk when inputs are uncertain. This feature uses simulated data as input to predict an outcome. Essentially, once the input parameters are decided, the user could continuously vary the input values across all types of combinations and see the corresponding outcomes. For Subway, this would mean they could arrive at the optimum waiting time using the optimum resources.
It’s easy really. Subway would only need to know the variables to be simulated, such as peak hours with number of footfalls, estimated waiting time, cost of hiring additional employees, their effect on waiting time, and the profit derived from all these various situations.
And, simulation doesn’t just apply to my appetite. For instance, finance organizations could use it to understand uncertainty associated with investment planning, manufacturing could use it to determine how the cost of materials affects profit, the energy and utilities sector could check how temperature impacts energy usage and advertising and marketing could easily simulate various advertising budget amounts to see the effect on total sales.
Needless to say, my quest for a Subway sandwich on a Friday afternoon will not be deterred. Stochastic methods like Monte Carlo Simulation coupled with queuing theory will inevitably help the franchisee… and my six inch, honey oat slice of deliciousness.
For more information:
· Watch a short demo of Monte Carlo simulation