I have been enjoying Ron Pereira’s great blog at lssacademy.com. He recently posted the following question to readers: Is Little Caesar’s Lean?
Is Little Caesars Lean? I’d like to offer my view. A basic feature of the ideal Lean system is pull initiated one piece flow. Pull initiated means that the factory does not make the product until the customer places an order. One piece flow means that the factory is able to accommodate order sizes as low as one piece as well as high piece-to-piece feature variation with no finished goods inventory.
Pull initiated one piece flow is not how Little Caesars does things. Their key competitive advantage is cheap, instantaneous pizza service. I love those Hot-N-Ready pizzas. Any time of day, I can drive up to a Little Caesars, hop out, and pick up a couple of Cheese or Pepperoni pizzas without a second of waiting. The paradox is that Little Caesars has to make pizzas ahead of time and keep a small inventory in order to provide the instantaneous service. The other non-lean feature is that they only offer Pepperoni or Cheese. No infinite topping variation on a Hot-N-Ready pizza. You would think that Papa Johns has a better business model. At Papa Johns, the customer must place an order before the pizza is built and cooked using pre-staged dough and toppings. Their business model is pull initiated one pizza flow. In fact, that is the business model of most pizza restaurants, except Little Caesars. The typical pizza house carries no finished goods inventory, but the pull initiated one pizza flow introduces a 10-15 minute wait that prevents regular pizza houses from capitalizing on the unanticipated and emergent pizza needs of potential customers.
Although pull initiated one piece flow is supposed to be the gold standard of Lean manufacturing, it really is not. The gold standard is whatever system delivers the most value to the customer. Since a made to order pizza cannot be made in microseconds, I would rather forsake extra toppings in order to get my pizza cheap and fast. The value from my perspective is speed over variety, so Little Caesars ends up being more lean than Papa Johns because they deliver value to me like no other pizza place. Toyota recognizes this, too. As we all know, Americans like their cars delivered at the time of purchase. In order to service the great majority of American consumers, Toyota has to build and maintain thousands of cars in finished goods inventories on dealer lots. This is waste in the process that must be tolerated, because the customer requires instantaneous delivery.