A Personal Story: Texas de Brazil and SC Inventory Management Concepts
In the last few classes, we have been discussing lean systems, forecasting, and supply chain inventory management. Since the last class, I had been thinking about what I was going to write on regarding these topics. I obviously wanted to avoid the companies and/or articles that have since been banned (i.e Walmart, Tesla, etc.). This week I chose to focus on supply chain inventory management but could not seem to find a proper business/article to focus on. So, I had been thinking about what to do. However, last night I happened to go to dinner with my roommate and his father at Texas de Brazil. For those of you who do not know, Texas de Brazil is a Brazilian style steakhouse that serves as much meat as you would like for a flat charge. Additionally, patrons are provided with a salad bar that contains many delicacies that make for a wholesome meal. You can read more about the company here: https://texasdebrazil.com/about/
As we were eating dinner, the conversation came up regarding the lean techniques of the company. We debated if it was more efficient to continuously serve small portions to restaurant goers or if plating individual meals like a traditional eatery was the way to go. Ultimately, we determined that waste is managed better within a business model such as Texas de Brazil’s. That said, it got me thinking about the inventory management practices that are in place at Texas de Brazil.
So, though I could not find much information on what exactly Texas de Brazil focuses on within their inventory management, I wanted to look at some outside information relating to improving inventory management that may relate to Texas de Brazil. In doing so, I came across this study by CSCO Insights that leads into 5 methods for actually improving inventory management: http://www.scdigest.com/assets/reps/exec_brief_network_inventories.pdf. At the core of this study is the notion that “effective inventory management is at the core of supply chain management excellence.” Following surveying and studying different companies, CSCO determined methods for improving inventory management practices.
CSCO recommends that to improve processes in supply chain inventory management companies should follow these five strategies:
- Get Much More Granular with Safety Stock Management.
- Add Inventory Planning to the S&OP Process
- Make Regular Use of Supply Chain Network Optimization Tools for Tactical Planning
- Consider Distributed Order Management Tools to Manage Multi-Channel Complexity and Reduce Inventories
- Step Up to Inventory Optimization Software
If you’d like, I encourage that you read over these steps at the link above. These seem to be a wholesome look at improving supply chain inventory management across your organization. Though all of these strategies may not apply to Texas de Brazil, one can see how they may relate. Assessing your safety stock would be very important for this type of operation, inventory planning would remain crucial, and tactical planning of supply chain optimization remains equally as important. What do you guys think? Where can you see the similarities between the aforementioned strategies and experiences within companies that you have had?
Kyle,
Thank you for the interesting read and your thought-provoking analysis. With a restaurant like Texas de Brazil, it makes me wonder how much safety stock they keep in their inventory. It seems it would be harder than a typical manufacturing company to anticipate demand, because you never know how much people are going to eat. Do they keep a lot of safety stock on hand in the restaurant? Although, I cannot find this information in my research, I assume they check their inventory very often. According to an Orderly article, “restaurants who take regular inventory can increase profits by up to 24% a year.” By tracking inventory, a restaurant is able to track expected food usage and prevent over-ordering. As many other people have mentioned, a buffet-style restaurant is able to prevent over-ordering for the most part by offering more drinks and using smaller plates. Although Texas de Brazil does not have the typical restaurant model, they could definitely benefit from frequent and consistent inventory checks.
Referenced article: http://info.getorderly.com/blog/2017-guide-to-restaurant-inventory
Kyle,
I have, or at least had, two conflicting viewpoints on Texas de Brazil and the waste they produce. At first glance, I figured they must produce more waste than other, order-based restaurants if they are continuously cooking up meat and have an endless salad bar. After thinking about it more however, Texas de Brazil is not really a buffet. At a certain point, customers must stop asking for bread and meat. This means there is probably less food left on customers’ plates, especially since their serving sizes are so small. Compared to restaurants like Texas de Brazil, buffets have a much harder time forecasting demand for specific items as well as general restaurant demand. As a result, they produce a lot more waste and are seeing a major decline in revenue. Texas de Brazil, on the other hand, is opening new restaurants across the country. Why? The only options are really meat or salad, so forecasting demand becomes a bit easier than it is for a buffet that offers multiple different food groups. As a result, Texas de Brazil is able to manage their inventory more efficiently.
https://www.foodtrak.com/docs/ArticleBooklet-ControllingBuffetCosts.pdf
http://www.stltoday.com/entertainment/dining/restaurants/off-the-menu/texas-de-brazil-opens-at-st-louis-galleria/article_c5376a8e-faf0-56aa-b353-0c94d6146484.html
I think Kyle’s story here is very interesting. Similar thoughts have entered my head as I had traveled to places that had all-you-can-eat buffets, such as Golden Corral. It is very interesting because I am sure that some customers eat more than others and eat more than they would at a typical restaurant. Because of this, the restaurant most likely charges a higher price than they would for a average sized portion, given the quality of the ingredients. However, on the flip side, some customers will eat the same amount of food they would normally eat, and the restaurant is able to make excess money off of this difference. This fact and a few other sneaky ways all-you-can-eat restaurants operate are highlighted in this business insider article (http://www.businessinsider.com/how-all-you-can-eat-restaurants-make-money-2018-3). Some of these tricks include: using smaller plates, persuading customers to drink more beverages, etc, tricks to keep their food costs down.
In order for the restaurants to be efficient with their processes, they need to have models in place that predict their inventory usage on each day of the week and during each time of day. These forecasts are essential to the success of these companies, because if a company projects too much food and cooks too much, they have waste, which can lead to a loss. They also need the food to constantly be fresh and they do not want to keep customers waiting, so they need to have their forecasts very accurate. It is very interesting applying what we have learned in class to a scenario such as this, the IP=OH+SR-BO equation works perfectly with a restaurant such as Texas De Brazil. They need to make sure they have enough food (IP), which is created by their current food out (OH), plus the food they are about to make (SR), subtracted by the food the customers are waiting for and promised (BO).
Kyle,
Thanks for the personal touch you provided in your article. It’s always awesome to read about someone who has had experience with the company in the post. As I mentioned in a comment earlier in the semester, my dad owns a fresh meat market and catering business, so I always love hearing about other companies in the foodservice industry and looking at prices. Of course, there are a ton of options when it comes to quality, quantity, and variability in fresh meat purchasing, so the question of the ability of the $45 price tag to cover costs is an interesting one.
The $45 has to not only cover what customers eat during their visit, but also all of the firm’s costs–including wasted inventory. Given that fresh meat has an acutely definite shelf life, it is absolutely essential that Texas de Brazil not waste any product (realistically, it’s essential that they waste very little product).
Another side of inventory management in this industry is the rapid changes in price that beef products undergo. Nearly every time my dad makes a purchasing order with a supplier (which is about once or twice a week), the price is at least slightly different than it was previously. For him, these prices are typically insignificant when talking about a small amount of product like he orders. However, with a restaurant/chain of restaurants, I think that the firm is probably subject to price swings that affect its bottom line.
Kyle,
When I saw the company you chose to discuss in your blog post, I knew that I just had to comment. Texas de Brazil is one of my favorite restaurants of all time, primarily because of the never-ending cycle of meats that are brought from table to table. Just like yourself, I too have wondered about Texas de Brazil’s business strategy in comparison to traditional, menu-based restaurants. Because their business model has every customer pay the same flat rate to eat at the restaurant, Texas de Brazil has discovered the perfect price point that balances customer expectations and demand. Their price point represents what the customer is willing to pay for a unique, high-end dining experience. However, on average, the customer is not physically capable of eating enough meat, salad, and bread to cover the cost of their meal (this does not stop me from attempting to cover that cost every time I eat there).
Another benefit of Texas de Brazil’s business strategy is producing significantly less inventory waste than traditional restaurant companies. At Texas de Brazil, because customers are served small portions periodically, they will eventually stop asking for food. Compare this to a normal restaurant, where the meat, potatoes, vegetables, etc. are served all at once, and it is easy to see how Texas de Brazil produces a lot less food waste.
The study conducted by CSCO Insights you mentioned in your post can help all companies improve their supply chain inventory management, but specifically for Texas de Brazil, I think an accurate analysis of their safety stock is extremely crucial. If the restaurant were to run out of a certain type of meat for just one night because of high demand, such as my personal favorite, the bacon-wrapped filet mignon, it could negatively impact the dining experience of dozens of customers.
Thanks for this post Kyle, I found it very interesting and really appreciated the personal touch. I had never heard of, or been to this restaurant, but have experienced a similar style of restaurant a few years ago. It was crazy to see how much food had been prepared and was being distributed in the time that I was at the restaurant.
At first thought, I would think that buffet, or similar style restaurants would be less cost efficient with their food costs. Buffets continuously prepare their food and in the case of overestimating and being left with leftover food, most restaurants have to just get rid of the waste. With made to order restaurants, ingredients can be stored and saved for at least a few extra days. For both cases, but especially for buffets, an important element for management is forecasting demand of customers to plan the amount of ingredients needed.
I looked deeper into how restaurants manage their stock and inventory and realized that there are some efficient processes that they can take, including buffets, to stay on track and minimize waste. Restaurant managers should determine how much of each ingredient they are using in a given time period, whether or not they are buying enough of the ingredient they need to make standard menu items, and if there are any particular ingredients that they don’t really use that they can stop purchasing. Tracking food usage allows managers to identify trends and anticipate and avoid shortages or other inventory problems. For restaurants, taking this inventory should be done on a weekly basis.
Ideo is a global design firm (they’ve worked to create the first Apple mouse and Ikea kitchen designs) worked with hotel buffets to measure how much food was being wasted or could be repurposed. According to their finding, just over half of the food at the buffet was consumed and only 10-15% of leftovers could be donated or repurposed. This study prompted hotels to switch up some of the common practices that were present at their hotels and was setting an example for buffets across restaurant industries.
https://www.nytimes.com/2017/09/08/dining/hotel-buffet-food-waste.html
Kyle,
This was an interesting company to choose for this topic. I enjoyed reading about Texas de Brazil and the 5 keys strategies associated with SC inventory management. One thing I am more curious about is how buffet style and all-you-can-eat restaurants such as Texas de Brazil manage their inventory. Obviously waste management is a key focus of lean operations which goes hand-in-hand with inventory, but beyond that, how does the restaurant prevent shortages and surpluses.
In the food industry especially, shortages can cause massive customer frustration. If Texas de Brazil ran out of filet, there would be an uproar from the customers who paid $45 each. Alternatively, a surplus can lead to a waste of thousands of dollars as food goes bad and has no alternative use. Herein lies the issue for buffets.
Some Las Vegas buffet managers shared their secrets on maximizing profit and efficiency. As you pointed out, it starts with waste prevention on the smallest of scales. This can mean something as simple as leaving shells on shrimp so customers are inclined to take less. Beyond that, however, these managers emphasized forecasting as the other crucial step to inventory management. Although it may not be so straightforward at a place like Texas de Brazil, I would imagine that forecasting begins with tracking the data on each food item. By counting inventory and tracking how much of each item is consumed each night, management can forecast averages and standard deviations to help determine how much inventory they need to satisfy demand. At that point, it becomes a management decision: what cycle service level do they want and how what balance of shortage and surplus are they willing to take? This is where is really just comes down to experience.
Source: https://www.foodtrak.com/docs/ArticleBooklet-ControllingBuffetCosts.pdf
Kyle,
Thanks for your post. I am actually a huge fan of Texas de Brazil. I’ve been there twice and both times I was glad I went (even though my wallet was not). Typically, Texas de Brazil is about $45 dollars a person. Although this is expensive, the food is very high quality and there is no limit to the amount of food you can order. Because of this, it is normally in the best interest of the customer to skip breakfast and lunch before going to Texas de Brazil for dinner. With all of this being said, I would like to expand on what you asked earlier in the blog. Is this flat fee beneficial for Texas de Brazil as a company?
Personally, I think it is. People normally go to Texas de Brazil for the experience. Therefore, they typically do not mind the steep price of $45 a person. Additionally, although it is an all-you-can-eat restaurant, people typically eat around same amount of food as they would at a typical restaurant. If you don’t believe me, read this article I found on Psychology Today: https://www.psychologytoday.com/us/blog/the-science-behind-behavior/201510/how-all-you-can-eat-buffets-use-psychology-make-money Because they are able to charge this large fee, they receive much more money per person than a typical restaurant would without having to provide that much more food. Moreover, like you said in your post, by offering their food in smaller quantities, they are able to minimize waste. Therefore, I really like their business strategy and feel like they are very successful because of it.
Daniel,
Thank you for sharing this Psychology Today article. I thought that it was very interesting and went along nicely with Texas de Brazil’s business plan. While I have never been to Texas de Brazil specifically, I have been to other Brazilian steakhouses and can see that they both follow many of the ways the article states owners try to restrain portion sizes and increase profits. One particular way is their use of salad bars. The article states by providing heavy starches and vegetables, restaurants–like Texas de Brazil–can increase their profits due to their consumers eating less of the more expensive meat. I would imagine this is also the case because a consumer can always go get more from the from the salad bar, but they must wait for the more expensive meat dishes to come around. Something else I found interesting was the fact that buffets that were priced less were less satisfactory for consumers. This is good news for Texas de Brazil who charges $45 for a meal. It makes me wonder if they charged less if satisfaction would be lower?