THE HUNGRY TOAD

Wastage Management

DECISION ANALYSIS
CASE PRESENTED TO DR. M. TAYYAB
ABDUL MOEEZ
ALI ZAR RAZA
AREEJ WARIS
FARAZ ANWAR
Company Overview
The Hungry Toad is a new entrant in small commercial market of V block DHA, phase 2. It is a
burger joint startup started by a student of Lahore School of Economics LSE, Shahzaib, four
months ago. Initially, he participated in different food festivals like Coke Music and Food
Festival and Lahore Eat with a small scales stall of his burger joint which became an inspiration
for this business. After a successful experience in these festivals, he decided to run a business
and he established his small fast food shop in DHA. One of the USP’s of the joint is moderate
pricing as compared to the competitors. It has majority of customer base belonging to student
community and people who prefer late night meals since the working hours of the business are
evening 6 o clock to 1 o clock in the night where 10 to 1 is the rush hour time. Although, there is
no proper seating area given the high overheads costs due to which the majority of customer base
is take-away or the people who carpool near the market. Since the business is still in early phase,
so the menu offered has only three main entrees. The owner does not have helping staff yet to
take orders and to cook which makes the operations quite hectic for him given the current
economic crunch to which the market says, “hard to have a lot of people on pay-roll”. Given that
the economy is tight, where each penny is crucial for the business, the owner of “The Hungry
Toad” sits outside his burger joint thinking of ways to maximize the profits and optimize the
current operations. His vision drives him to serve fresh and use minimum stored items which
enhances the impact of retention for his customers and helps in maintaining his marketing
strategy which is mainly word of mouth at the moment. With the idea of optimizing his
operations, the owner lights a cigarette and thinks of ways in which he is lacking and that how
will he be able to beat the market in competition regarding profits, market share and customer
retention. The following data is given to understand the situation:

Items
At present, the menu of The Hungry Toad consists of three main items: two classic burgers
(Kamakazi Original and Chickmaster) and an appetizer (Mozzetto). Apart from three core items,
menu also consists of fries, drinks, mineral water, extra patty and extra cheese. The items are
listed in the table below with their respective prices.

Item Price
Mozzeeto 350
Kamazaki Original 450
Chickmaster 350
Fries 50
Drink 70
Mineral Water 50
Extra Patty 150
Extra Cheese 40
Problem
Given the current conditions, one of big problems that The Hungry Toad is facing is regarding
waste management especially wastage of chicken and beef as, both of them are more expensive
as compared to other ingredients used to make a burger. Moreover, chicken and beef cannot be
used the next day, they have to be served fresh. Therefore, in this model, we will determine that
how much quantity of chicken and beef should be ordered so that there will be no wastage in
terms money as well as ingredients. We are considering the two items Kamakazi Original and
Chickmaster because only these two items contain beef or chicken patty in their recipe.

Sales data Collection

Sales data was gathered based on actual sales receipts of Hungary Toad for 16 days. The sales
data compromises of

 Date
 Items
 Quantity of items per order
 Total Amount (Sales)
In the sales data table, total of the purchases of each customer is calculated by multiplying the
price of each item with the quantity purchased. Lastly, at the end of the table the total number of
each item purchased and total sales over 16 days are also calculated.
 Date Order No Mozzeeto Kamazaki Original Chickmaster Fries Drink Mineral Water Extra Patty Extra Cheese Total
11/9/2019 1 1 1 1 1 920
2 2 2 2 2 1840
11/10/2019 3 1 1 1 570
4 1 1 1 570
11/11/2019 5 1 1 1 1 920
6 2 700
7 2 2 2 1140
8 4 1 5 5 2750
9 1 1 1 470
10 1 1 1 1 1 1270
11/12/2019 11 2 3 910
12 2 1 1 1220
11/16/2019 13 1 1 450
14 3 3 3 1710
11/22/2019 15 1 1 1 1 1 1270
11/23/2019 16 1 3 1500
17 3 3 3 1710
18 2 1 1 1020
19 1 3 3 3 1860
20 3 1 1 1170
21 1 350
22 1 1 1 1 920
11/24/2019 23 3 2 2 4 4 3130
24 1 1 1 1150
11/25/2019 25 2 2 2 940
11/27/2019 26 4 6 3500
27 1 1 1 1 920
28 1 1 1 1 820
11/29/2019 29 2 1 3 3 1610
11/30/2019 30 1 1 1 1 920
31 1 1 700
32 1 2 1 3 3 1960
33 2 1 770
34 1 1 1 470
35 2 1 1 820
36 1 1 1 1 1 1270
37 1 350
38 1 2 1 2 2 1700
12/1/2019 39 1 1 2 640
40 2 2 2 1140
41 1 1 2 640
42 2 1 2 1090
43 1 3 3 3 2060
12/2/2019 44 1 1 800
45 1 1 800
46 5 5 5 2850
47 1 350
48 2 2 2 940
49 1 1 1 1 820
50 1 350
51 1 2 2 2 1490
52 1 350
53 2 1 770
54 2 700
55 2 2 2 2 1840
56 2 3 5 5 2550
57 1 1 800
12/3/2019 58 4 1400
59 1 350
60 1 2 2 2 1290
61 1 1 1 1 1 1270
62 1 350
63 1 1 1 2 2 1390
64 2 1 3 3 1 1760
65 4 1400
66 1 350
67 1 1 2 2 1040
12/4/2019 68 1 350
Total 68 61 67 45 81 91 1 3 2 78200
Contribution per item
The total sum of each item from the data table above was used to calculate the contribution of
each item in the total sales for 16 days.

Item Count Contribution

Mozeeto 61 17%
Kamikaze Beef 67 19%
Chickmaster 45 13%
Fries 81 23%
Drink 91 26%
Mineral Water 1 0%
Extra Patty 3 1%
Extra Cheese 2 1%
Total 351 100%

From above table it is clear that drinks have the highest number of sales in data, followed by
fries and burgers. But when we calculate the proportion of these items in our revenue, we get
reverse results. For example, burgers generate around 86% of our revenue while fries and drinks
and other items make only 14% of it.

Item Demand Contribution Revenue Contribution

Mineral Water 1 0% 50 0%
Extra Cheese 2 1% 80 0%
Extra Patty 3 1% 450 1%
Chickmaster 45 13% 15750 20%
Mozeeto 61 17% 21350 27%
Kamikaze Beef 67 19% 30150 39%
Fries 81 23% 4050 5%
Drink 91 26% 6370 8%
Total 351 78250

Demand
Our objective was to minimize the chicken and beef wastage per day for The Hungary Toad as
the leftover quantity cannot be used the following day. As, already mentioned above Kamakazi
Original and Chickmaster are the only two items in the menu that contain chicken or beef patty
in them. So, we skipped all other items and calculated the demand for these two items only as the
other items can be used for multiple days.

We can see from the data that the maximum number of walk-in customers on a single day were
14. Based on this, we created a table for 14 customers where a maximum of 14 customers can
enter at any given day and the number of customers coming on any other day is entirely random
between 0 and 14.
From the data, it is clear that 40% of the times customers entering the restaurant will order
Chickmaster while 60% of the times they will order Kamakazi Original. Based on this
proportion, we created a random number to get answers in “Yes” or “No”, to get to know that
either a customer who just walked in order for Chickmaster or Kamakazi Original, or both.

Item Count Contribution

Chickmaster 45 40%
Kamikaze 67 60%
Total 112

From our data table, we computed the weightage (proportion) of amount of Chickmaster and
Kamakazi Originals that individual customers have ordered. For example, 58% of the times
customers walk-in order one Chickmaster and it happens for 15 times.

Chickmaster
Quantity No of Times Contribution Cumulative
1 15 58% 100%
2 6 23% 42%
3 4 15% 19%
4 0 0% 4%
5 0 0% 4%
6 1 4% 4%
Total 26

Kamikaze
Quantity No of Times Contribution Cumulative
1 23 56% 100%
2 13 32% 44%
3 3 7% 12%
4 1 2% 5%
5 1 2% 2%
6 0 0% 0%
Total 41

Now, If the customer has bought any of the burgers or both, the model will generate a random
probability for the total number of that specific burger which the customer has bought. This
random probability will be compared to the quantity weightage table of the burger and based on
this table, a random quantity for each burger will be generated.
 Status Chickmaster Kamikaze
Customer Walk in Bought? Probability Quantity Bought? Probability Quantity
1 No
2 Yes Yes 0.023130157 6 Yes 0.347989921 2
3 No
4 Yes Yes 0.505205589 1 No
5 No
6 Yes No Yes 0.315656874 2
7 Yes Yes 0.261548228 2 Yes 0.677691243 1
8 No
9 Yes No Yes 0.064075824 3
10 Yes Yes 0.83127948 1 No
11 Yes Yes 0.11561536 3 No
12 Yes Yes 0.341174755 2 Yes 0.135465811 2
13 No
14 No
Total Customers 8 Total Chickmasters 15 Total Kamikaze 10

Finally, we have the total number of customers walking in at any given day and the total number
of Chickmasters and Kamikaze Originals ordered on that day. This is our final demand,
incorporating complete randomness based on our data.

Working Model
For Chickmaster (Chicken):

The costing per burger is given below:

The Following formulas were used to calculate the optimum number of order quantity based on
the randomized demand forecast:

Summary of Working Model:

 Given that there is a 200 gram chicken patty used in each Chickmaster, the amount of
burgers made from each kilo of chicken were 5. Based on the data, a simtable of quantity
of burgers made from the ordered chicken quantity is used.
 The demand is calculated from the sales data given above with a reference to the formula.
 The ordered quantity is based on the estimate of fulfilling the demand and a range of
quantities to try are used.
 The revenue is the price multiplied by the minimum of demand and quantity ordered.
 The cost is calculated by the product of total cost and order quantity from the simtable.
 The profit is the difference of revenue and cost.
 The profit is declared the output cell and the simulation is run 5 times with 1000
iterations with the results given below.
For Kamikaze (Beef):

The costing per burger is given below:

The Following formulas were used to calculate the optimum number of order quantity based on
the randomized demand forecast:
Summary of Working Model:

 Given that there is a 160 gram beef patty used in each Beef Burger, the amount of burgers
made from each kilo of chicken were 6. Based on the data, a simtable of quantity of
burgers made from the ordered beef quantity is used.
 The demand is calculated from the sales data given above with a reference to the formula.
 The ordered quantity is based on the estimate of fulfilling the demand and a range of
quantities to try are used.
 The revenue is the price multiplied by the minimum of demand and quantity ordered.
 The cost is calculated by the product of total cost and order quantity from the simtable.
 The profit is the difference of revenue and cost.
 The profit is declared the output cell and the simulation is run 5 times with 1000
iterations with the results given below.

Analysis
Using @Risk, five simulations with 1000 iterations were conducted for both the Chickmaster
and the Kamikaze. The output cells declared were total profit for each of these menu items and
the goal was to find out the material order quantity of key ingredients that would maximize
profit. Below are the simulation results along with their description for each item.

Chickmaster
Five simulations were conducted to find out the best daily order quantity for chicken.

Simulation 1: Order quantity of chicken here was 0.6 Kg or 600 grams, this would allow the
Hungry Toad to make 3 Chickmaster burgers per day. The mean value for daily profit was Rs.
464 in this case.
Simulation 2: Order quantity of chicken here was 0.8 Kg or 800 grams, this would allow the
Hungry Toad to make 4 Chickmaster burgers per day. The mean value for daily profit was Rs.
498 in this case which is an increase of Rs. 34 from the previous simulation.

Simulation 3: Order quantity of chicken here was 1 Kg or 1000 grams, this would allow the
Hungry Toad to make 5 Chickmaster burgers per day. The mean value for daily profit was Rs.
533 in this case which is an increase of Rs. 35 from the previous simulation.
Simulation 4: Order quantity of chicken here was 1.2 Kgs or 1200 grams, this would allow the
Hungry Toad to make 6 Chickmaster burgers per day. The mean value for daily profit was Rs.
472 in this case which is a decrease of Rs. 61 from the previous simulation.

Simulation 5: Order quantity of chicken here was 1.4 Kgs or 1400 grams, this would allow the
Hungry Toad to make 7 Chickmaster burgers per day. The mean value for daily profit was Rs.
460 in this case which is a decrease of Rs. 12 from the previous simulation.
Summary: The below summary graph summarizes the results of all of the above simulations.
Accordingly, the order quantity that provides the highest mean is from simulation no 3. In this
case, the order quantity is 1 kg or 1000 gm which makes 5 Chickmaster burgers.
Summary Trend: The below diagram shows that the mean of daily profit increases till
simulation 3 at which it maximizes and then decreases afterwards. Moreover, the variation in the
profit values which is reflected by the red and green highlighted areas also show a wider spread
as the order quantity increases.

Kamikaze
Five simulations were conducted to find out the best daily order quantity for beef.

Simulation 1: Order quantity of beef here was 0.8 Kg or 800 grams, this would allow the
Hungry Toad to make 5 Kamikaze burgers per day. The mean value for daily profit was Rs. 1078
in this case.
Simulation 2: Order quantity of beef here was 1 Kg or 1000 grams, this would allow the Hungry
Toad to make 6 Kamikaze burgers per day. The mean value for daily profit was Rs. 1176 in this
case which is an increase of Rs. 98 from the previous simulation.

Simulation 3: Order quantity of beef here was 1.2 Kg or 1200 grams, this would allow the
Hungry Toad to make 7 Kamikaze burgers per day. The mean value for daily profit was Rs. 1213
in this case which is an increase of Rs. 37 from the previous simulation.
Simulation 4: Order quantity of beef here was 1.3 Kgs or 1300 grams, this would allow the
Hungry Toad to make 8 Kamikaze burgers per day. The mean value for daily profit was Rs. 1207
in this case which is a decrease of Rs. 6 from the previous simulation.
Simulation 5: Order quantity of chicken here was 1.5 Kgs or 1500 grams, this would allow the
Hungry Toad to make 9 Kamikaze burgers per day. The mean value for daily profit was Rs. 1132
in this case which is a decrease of Rs. 75 from the previous simulation.

Summary: The below summary graph summarizes the results of all of the above simulations.
Accordingly, the order quantity that provides the highest mean is from simulation no 3. In this
case, the order quantity is 1.2 kg or 1200 gm which makes 7 Kamikaze burgers.
Summary Trend: The below diagram shows that the mean of daily profit increases till
simulation 3 at which it maximizes and then decreases afterwards. Moreover, the variation in the
profit values which is reflected by the red and green highlighted areas also show a wider spread
as the order quantity increases.
Recommendations:
For Chicken:
As seen from the simulation above, it can be seen that in the Chicken burger case, the simulation
number 3 which 1 kg chicken is deemed to be most favorable since it will satisfy the demand as
well as return the maximum mean profit. Although there is a chance of obtaining a loss but given
the confidence level of earned profit amount, it can be recommended that simulation no.3 which
is 1 kg Chicken is Recommended.

Option Chosen: 1 kg Chicken based on Simulation #3

For Beef:
As seen from the simulation above, it can be seen that in the beef burger case, the simulation
number 3 which 1.2 kg beef is deemed to be most favorable since it will satisfy the demand as
well as return the maximum mean profit. Although there is a chance of obtaining a loss but that
is a risk that each option has so based on the confidence level of earned profit amount, it can be
recommended that simulation no.3 which is 1.2 kg beef is Recommended.

Option Chosen: 1.2 kg Beef based on Simulation #3

Influence Diagram Based on the Model:

Chicken Ordered Beef Ordered

1 KG (Simulation 3) 1.2 KG (Simulation 3)

Minimum Wastage

Maximum
Profit
Team Behind the Project: