Subway Restaurants Quality Management -- Using Teams in Production Management
Using Teams in Production and Operations Management
Subway Restaurants is a privately-held corporation with estimated annual revenues in the $5B range, operating 45,000 locations throughout 100 countries globally. Subway is a subsidiary of Doctor's Associates, a company founded by Peter Buck and Fred DeLuca in 1965 with a $1,000 investment in a sandwich shop on Long Island, NY (Nawrocki, 2006). Market share varies significantly by country and region of the world, with their largest market share being in the U.S. And throughout North America, with nearly 35% of total available market for quick service restaurants (QSR) in this region. Their market share through Europe and the Middle East is small, and growing quickly given the brand identity becoming more universally known The company's production and operations department is responsible for translating the strategic plan into a series of strategies and programs, enabling their fulfillment in the process. The intent of this analysis is to evaluate Subway's continual quest for quality, with specific focus on the production and operations management function. There are many aspects of quality management from the enterprise-level in QSR businesses in general and foodservice specifically (Field, 2009). And while quality management benchmarks and programs are often put into place for all types and variations of businesses that serve food, in the QSR industry has continually adopted and relied o the 14 points from Dr. Edward Deming with regard to production and operations management (Blair, 1997). The Subway Restaurants' Production and Operations Management departments are heavily reliant on these principles with communication being the most critically important of all to their success. The intent of this analysis is to illustrate how Subway is attaining critical quality goals while at the same time strengthening their business to be more resilient in the face of significant economic and industry change.
Subway's Continual Quest for Quality
Subway takes a strategic view of food safety and has created a comprehensive process to evaluate new products and the ingredients, suppliers with a strong focus towards quantifying and ranking quality of products and performance. The best practices in QSR business models have evolved into an analytics-based framework that quantify and promote the 14 key factors Dr. Deming's quality management initiatives have defined (Luk, 2005). Subway's Production and Operations Management team is given the task of not only evaluating each supplier and choosing from multiple back-up sources of ingredients, vegetables, meats and bread, they are also given the task of evaluating all new product ideas and making the Value Engineering (VE) process work flawlessly. These are all strategic tasks for any business yet at Subway, the Production and Operations Management is given responsibility for ensuring VE-based initiatives are coordinated with new product introductions and very thorough supplier evaluation and management (Tulip, 2009). This department is the catalyst of how Subway meets its mission, which is to deliver every customer so well, that they will tell their friends; in addition to delivering the freshest, most delicious made-to-order sandwiches while also providing an excellent experience (Nawrocki, 2006). This mission statement is the most pervasive of any in the QSR industry and spans across their entire value chain. It also captures the unique differentiation and value proposition of Subway, which is providing fresh, delicious customized meals built exactly to customers' requirements and preferences (Sussan, Kassira, 2009). The Subway Production and Operations Management must make this value proposition happen literally millions of times a day globally by closely coordinating and orchestrating these tasks throughout the entire value chain of the business (Nawrocki, 2006). Subway also realizes that there is a very strong correlation fo product quality, accuracy and perfection of a build-to-order sandwich and the extent of how positive the customer experience is to whether a customer will be loyal or not (Qin, Prybutok, 2008). The implications for the Subway business model then are clear then from the standpoint of how critical it is for the Production and Operations Management departments to closely communicate and become exceptionally strong at knowledge sharing throughout the entire company. Without this department serving as a catalyst of strong intercommunication and knowledge sharing, the business model Subway has created a nearly $5B enterprise on would not work. As a result of how critical they are to the operations of the business, the Quality Management teams in these departments have the power to completely shut down a given supplier, supply chain or a franchise location if they see exceptionally bad quality of product or service. The best practice of giving Production and Operations Management the authority to unilaterally shut down a supplier, location or any process that could potentially harm customers is considered a pre-emptive move to alleviate costly recalls and litigation (Liddle, 2007).
Subway's Production and Operations Management Department, in addition to all of the responsibilities mentioned previously, also has the responsibility of translating the strategic plan of the company into accomplishable initiatives and programs. They are essential for translating these strategic initiatives and values into actionable programs that will guide the company to profitability through customer retention and loyalty. The strategic plan for Subway is highly slanted towards new product development processes, with the following key components being the responsibility of Production and Operations Management to coordinate and fulfill: nutritional leadership to the ingredient level; ensure customer value and everyday affordability guides all purchasing decisions; build and strengthen profitable morning and mid-afternoon snack offerings; continuously and aggressively streamline systems and process; and foster innovation (Nawrocki, 2006). In the area of continually improving processes and systems, Subway has made Corporate Social Responsibility (CSR) and the continual investment in advanced lean supply chain techniques incouding reverse logistics a high priority as well, as this will not only save the environment, it will save Subway tens of millions of dollars a year in lost costs due to package waste (Nawrocki, 2006) (Field, 2009). Unifying all of these strategic elements is the company's commitment to Value Engineering (VE), which is the catalyst of the globally-based Production and Operations Management Department. The following section defines how communications and knowledge transfer work at Subway.
Subway Restaurants Production and Operations Management
The overriding concern for any QSR-based business is the need to continually have a new product, service or innovation to continually stay differentiated from the myriad of competitors in local, regional, national and global markets. Increasingly the standardization of the new product development and introduction (NPDI) process has become the focus in the QSR industry in general and at Subway specifically (Sussan, Kassira, 2009). Value Engineering (VE) owns the NPDI process at Subway and are measured on improving product safety and quality, improving and continually improving CSR-based performance as measured in carbon emission reductions and packaging that is environmentally friendly and easily recycled using the reverse logistics process.
The VE foundational elements are based on the 14 principles as defined by Dr. Edward Deming and are applied to the NPDI process to ensure product timelines are met with the highest levels of quality also met with ingredient sourcing.
For the VE initiative to work, there are teams assigned to each step of the NPDI process at Subway. Instead of following a product development cycle that many other companies do purely by functional area, Subway concentrates on VE-based teams that contribute to each phase of new product development, new supplier evaluation, and all combine to share information and knowledge to make the NPDI process a success.
Literally the success or failure of any given new product, service or corporate-based resource is directly tied to how well teams communicate and collaborate across the entire spectrum of activities as shown in Figure 1, NPDI Timeline Integration to Value Engineering Roles. The green boxes indicate which areas are of primary responsibility of the Production and Operations Management teams. The read areas are where've…