Scheduling restaurant workers to minimize labor cost and meet service standards.(RESTAURANT MANAGEMENT)(Report)

By applying a computer-driven model to scheduling in a Korean casual-dining restaurant, staffing levels were effectively matched to actual demand levels. At the same time, by maintaining a set proportion of full-time and part-time workers, the schedule ensured service standards. The model, based on integer programming, was implemented as a comparison to existing schedule patterns that had been developed by managers. The comparative analysis found that the existing schedule consistently overstaffed certain day parts while understaffing others. The new schedule both saved personnel costs, chiefly by reducing the number of part-time employees, and maintained service standards. While this study applies only to a single chain-affiliated casual-dining restaurant in Korea, the principles tested in this study should apply to any table-service restaurant. Moreover, if management changed the constraint that requires a certain proportion of full-time servers in each day part, the restaurant could save additional labor expense.

In labor scheduling, restaurant managers face dual challenges: overstaffing that means excessive labor costs and understaffing that invites the opportunity cost of service errors and lost business. Most operators seek to rely on their personal experience and judgment to determine schedules that are meant to maintain service quality and limit labor costs, but an analysis of one Korean restaurant finds that this goal is elusive. The labor scheduling model based on integer programming (IP) is presented to address the staffing and scheduling issues and service standards by maintaining an appropriate ratio of part-time to full-time employees. Using appropriate constraints, the model was used to generate a schedule for a table service restaurant in Seoul, South Korea, that is affiliated with a global chain. When compared to the existing schedule, the IP-generated schedule helped the restaurant reduce overall labor costs while ensuring appropriate service levels.

Keywords: restaurant scheduling; cost minimization; full-time and part-time employee ratios; labor scheduling; overstaffing; service quality; understaffing; Korea; chain restaurants

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Effective labor scheduling has always been a concern for restaurant managers. This article focuses on the labor-capacity management problems confronted by a single unit of a multiunit global chain restaurant located in downtown Seoul, South Korea. The labor-scheduling model proposed in this article seeks to minimize labor costs while ensuring that customer demand is satisfactorily met. Restaurant managers are only too aware of the problems inherent in scheduling, with its twin dangers of underscheduling and overscheduling.

Scheduling issues complicate the competitive challenges of the Korean market. The profitability of casual dining restaurants in global chains has diminished greatly since 2000, despite increased marketing efforts. For example, the 2006 profit margin of Korea's Bennigans was -4.47 percent; Sizzler, -4.23 percent; and TGI Friday's, -3.08 percent. Those negative margins were below the average profit margin of 6.54 percent for other audited Korean restaurant chains for that year and far below the 20 percent average profit margins experienced by such restaurants in the late 1990s (Choi et al. 2007). Those negative results may result in part from the inflexibility of the chains' operating systems. Restaurant companies free from such ironclad contracts generate higher profits than do those held to such contracts (Choi et al. 2007; Klonowski, Power, and Linton 2008). Additionally, in Korea, global chain restaurants' low profitability is also influenced by particularly high labor costs due, in part, to an increase in employee benefits mandated by Korean labor regulations.

The restaurant industry makes heavy use of part-time employees because of its budget constraints and irregular operating hours (Love and Hoey 1990). Although part-time employees help create flexible capacity, they also mean a more complicated scheduling task. Moreover, the proportion of part-time employees to full-time employees in a restaurant may interfere with maintaining service quality (on the principle that full-time servers have more expertise). Thus, any schedule should maintain a reasonable proportion of full- and part-time employees (Mabert and Raedels 1977; Bechtold 1988).

The restaurant in this study has encountered the same problem of low profitability as have other global chain restaurants and, thus, must focus carefully on labor as part of its cost control strategy. Setting appropriate schedules has been recognized as the most effective way of controlling labor costs (Thompson 2003). For this selected restaurant, we sought to address the staffing and scheduling issues over both the week (or the number of consecutive days worked, which we call the tour) and each day (that is, the shift). We further wanted to establish a schedule that would identify the correct number of full- and part-time employees, when each type of employee should be scheduled, and the shift to which each should be scheduled. Finally, we ran the resulting schedule in our test restaurant to assess the cost reductions arising from a schedule that adopted our constraints.

Literature Review

Numerous studies have been conducted on labor scheduling (Beaumont 1997; Bechtold, Bmsco, and Showalter 1991; Bechtold and Jacobs 1990; Brusco and Jacobs 1993, 1998; Easton and Rossin 1991; Goodale and Tunc 1998; Li, Robinson, and Mabert 1991; Loucks and Jacobs 1991; Thompson 1990, 1993, 1995a, 1995b, 2004). Most studies have focused on scheduling in other industries, including airline crews (Arabeyre et al. 1969; Bodin et al. 1983; Gamache and Soumis 1998), nurses in hospitals (Aickelin and White 2004; Bradley and Martin 1991), and service clerks in call centers (Mehrotra 1997). We have seen few studies investigating labor scheduling in hospitality services. Among the few, Love and Hoey (1990) demonstrated reduced payroll costs and saved management time as benefits of using a microcomputer-based scheduling system in McDonald's restaurants. Likewise, Hueter and Swart (1998) showed a $53 million savings in labor costs at a Taco Bell restaurant following implementation of a labor scheduling system designed to determine the optimal labor hours required to provide desired customer service (in this case, a three-minute wait time) and the optimal allocation of labor in different job categories to minimize labor cost.

In a series of articles published in this journal, Thompson details a four-step labor scheduling method specifically for the hospitality industry. In part 1, he identifies forecasting customer demand as a first step in labor scheduling and suggests that an appropriate forecasting model needs to capture variable demand in hospitality services (Thompson 1998a). In part 2, he identifies translating the demand forecasts into employee requirements as a second step (Thompson 1998b). In part 3, he compares two traditional frameworks for labor scheduling, one developed by Dantzig (1954) and one by Keith (1979); discusses their limitations; and then suggests two new scheduling approaches. These two new approaches, one of which uses optimal service standards as its goal and other of which aims for the highest economic benefit from the schedule, take into consideration the interdependence of staffing decisions across planning periods (Thompson 1999a). Part 4 of Thompson's series deals with assessing the deviation between planned and actual scheduling in comparison with customer demand and controlling the scheduling in real time (Thompson 1999b). Although he shows the benefits of the new scheduling frameworks, Thompson does not demonstrate the specific outcomes of his scheduling approach on an actual restaurant.

Thompson (2004) examined other aspects of restaurant scheduling and identified an appropriate planning-interval duration in labor-shift scheduling. He found five-minute planning intervals profitable and fifteen-minute intervals most effective. Goodale, Verma, and Pullman (2003) developed a market-based labor scheduling model that incorporates customer service preferences into scheduling of frontline service providers at fast-food restaurants. The model factors the impact of staffing on customers' expected wait time into a dynamic scheduling model. Perhaps because they focused on quick-service operations, their scheduling model focuses only on part-time labor.

When the focus turns to table-service restaurants, we find no study that has focused on a scheduling model that incorporates a mix of both part- and full-time employees, even though most researchers recognize the importance of this mix on service quality. To provide high-quality service, it is desirable to control the proportion of part-time employees in the mix of labor (Mabert and Raedels 1977; Bechtold 1988). Although Easton and Rossin (1991) used heuristics that accommodate a mix of full- and part-time employees to solve scheduling problems, they applied their model to a hypothetical case, not to a real service setting. In solving the issues of tour scheduling in a bank's lockbox department, Li, Robinson, and Mabert (1991) also used heuristic methods that factored in employees who differ in hourly cost.

The Restaurant

Moving beyond existing studies, we wanted to develop a scheduling model that addresses the distinct nature of the restaurant industry, including its highly variable and random demand and its variable service times. Other elements that a scheduling model must include are the fact that restaurant work shifts vary from a few hours to as much as eight to ten hours in length, restaurants hire more part-time employees than other service industries (Love and Hoey 1990), and restaurants must maintain service standards in the face of those uncertainties. We also wanted to incorporate the concept raised by Li, Robinson, and Mabert (1991) regarding scheduling of days on and days off. The restaurant that is the focus of this study is located in the business district in downtown Seoul, Korea. As we mentioned at the outset, the restaurant is a globally branded, multiunit chain restaurant that has been operating for eight years.

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