Quick Order SystemPrototype Demonstration

Computer Productivity InitiativeSpring 2005

Quick Order Pass

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Team Members

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Overview

• Societal Problem

• Proposed Solution

• Demonstration

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Societal Problem

The current ordering process used in coffee shops to provide specialty-orders is inconvenient, inefficient, and error prone. 

These inefficiencies stem from inherent menu complexity and the human to human flow of data.

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Inherent Complexity of Specialty Orders

http://www.starbucks.com

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Traditional Transactions

• Inefficient• Inconvenient• Error prone

“ I’d like a double tall, non-fat, decaf, vanilla latte, one-pump walnut, with room, please ”

Consider a typical order by a daily customer:

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Solution

Develop a system that can digitally:• Retrieve an order • Provide payment

Without verbal communication.

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Solution Characteristics

• Quick• Order is accurate• Payment is precise• Easy to use

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Faster Service Generates Revenue

• Statistics indicate that each six-second improvement in speed of service generates an extra 1 percent of sales.

• Wireless payment methods have shaved 15 to 20 seconds off transaction times.

McDonald’s CEO Jack Greenberg• http://pittsburgh.bizjournals.com/pittsburgh/stories/2004/05/31/story6.html?t=printable%208sep04 • http://www.chainleader.com/archive/0702/0702tech.html

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Explanation of QOP

Customer #

Receipt Customer #

Waves Pass

1010010111101010101

Customer #, 30bits

Central Database

Customer #

Order &Account Balance

New AccountBalance

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Solution Will Not

• Eliminate preparation errors

• Replace current ordering systems

• Prohibit order changes

• Eliminate the casual customer

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Customer Use

Starbucks Survey50 people

98%

2%

70%

30%

54%

46%

52%

48%

0

10

20

30

40

50

60

Yes No Yes No Yes No Yes No

Am

ou

nt

of

Peo

ple

A B C D

A: Are you a repeat customer here?B: Do you order the same thing most of the time?C: If you had small device that could store your order would you use it?D: If you could pay with this device also, would you use it?

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Market Identified

• Net Revenue 2003: $4.1 billion• Net Earnings 2003: $268.3 million• 77% of Net Revenue from beverage sales

Source: http://www.organicconsumers.org/starbucks/indie-coffee.cfm

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Starbucks U.S. Market by Stores

Source: http://www.organicconsumers.org/starbucks/indie-coffee.cfm AND http://www.starbucks.com/aboutus/pressdesc.asp?id=454

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Commitment to Innovation

“These strong trends can be attributed to an all-time high level of innovation, continued speed-of-service improvements, and successful new store concepts”

- Jim Donald, Starbucks CEO designate

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Required Prototype Hardware

RFID Transponder RFID Antenna

RFID Reader Simulated POS Terminal

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Lab Prototype vs. Real Product

Simulated POS Terminal

RFID Reader

Micros 3700 POS Terminal

RFID Reader

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Ord

er

&A

cco

un

t B

ala

nce

Production Software Diagram

Reader Input Module

Central Database

Ord

er

&A

cco

un

t B

ala

nce

Ne

w A

cco

un

tB

ala

nce

Database Communication Module

API Common Object Module

Customer #

Cu

sto

me

r #

Order &Account Balance

API

Pre-existing POS Program

Ne

w A

cco

un

tB

ala

nce

API opens check,Orders, pays and

closes check

New AccountBalance

Ne

w A

cco

un

tB

ala

nce

Simulated for Prototype

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Phase II: Schedule

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Phase II: Staffing Plan

Carlton Northern Project Manager

Kevin JonesBudget Manager

Systems Engineer

Chris RobertsDatabase Developer

Vicki TurnquistDatabase Engineer

Matt BassContracts

Administration

Technical Writer

Joan Smith Business Consultant

IAS, Inc.

Mary L. Brewer CPAAccounting Professor

ODU

Jack GroderR & D Manager

Software Engineer I

Quality Assurance

Abby BrownPOS software designer

Thomas HansenSoftware Engineer

IV

Software Engineer IV

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Phase II: Budget Proposal

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Break-Even Analysis

stores retrofitted Profit cost0 0 647960

500 560,076 811,6391000 1120153 9754451500 1,680,229 1,126,8412000 2240306 13037822500 2,800,382 1,460,7373000 3360459 1632121

3500 3,920,535 1,759,8974500 5,040,688 2,043,4545500 6,160,841 2,390,2256500 7,280,994

0500000

10000001500000200000025000003000000350000040000004500000

050

010

0015

0020

0025

0030

0035

00

Stores with QOP

US

Do

llars

Profit

cost

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5

2

1

4 3

Risk Matrix

Likelihood

Consequence

5

1 5

Legend

Low High

Rank Risk Mitigation Likelihood Consequence

1 Consumer Acceptance Slight difference from current use 3 5

2 High component cost Cost Benefit Analysis 4 3

3 Starbucks not interestedAdditional market research -

modify product2 5

4 Security Device Proximity 2 3

5 Transition Training 5 1

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Alternative Markets

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In-store Demonstration

• Use Cases

• Non-QOP based transaction

• QOP based transaction

• Favorite order and payment

• Payment only

• Update QOP favorite order information

• Credit QOP account

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• Login

• Change personal information

• View/Modify favorite order

• View/Add funds

• View transaction history

QOP Customer Website Demonstration

QOP Customer Website

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Conclusion

• Completed Phase I

• Prepared for Phase II

• Questions?

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Appendix: Break-Even Analysis justification

•Estimates based off current Starbucks trends and data.

•6,000 Starbucks, 3 new stores open daily

•35 million Starbucks Cards sold to date assume complete replacement in 3 years

•12 million Starbucks Cards sold per year, assume sales of 12 million tags per year

•$.10 profit per sale of transponder, $474 profit per store installation

•1st year QOS, Inc. production fixed cost is $647,960 (estimated in budget)

•1st year variable cost's are $85,300 per installation tech.

•Assume 1 installation technician, can retrofit with an average of 1 store per working day

•Assume replacement of Starbucks Cards proportional to retrofitted stores

Profit for Product Roll Out:

35,000,000 + 12,000,000 = 42,000,000 Starbucks Cards to replace.

Number of retrofitted stores x $474 = profit to retrofit existing Starbucks

Number of retrofitted stores / Current number of stores * $.10 = profit from transponder sales

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Appendix: References

RFID:http://www.ems-rfid.com/whatisrfid.htmlhttp://www.dimension-x.com/cf-mag.htmAccuracy:http://www.biz-architect.com/breakthroughs_at_drivethroughs.htmhttp://dsonline.computer.org/0303/d/p1app_print.htmhttp://www.qsrweb.com/hottopic_fastlane.htmhttp://www.g3act.com/qsr/2001QSR.pdfhttp://web.mit.edu/ctl/www/research/sc2020/SC2020%20IAC%20Proceedings.pdfhttp://www.qsrmagazine.com/drive-thru/2003/page3.phtmlhttp://www.restaurant.org/rusa/magArticle.cfm?ArticleID=443http://www.g3act.com/qsr/2001QSR.pdfhttp://www.kioskcom.com/articles_detail.php?ident=1942Speed: http://www.nytimes.com/2004/07/18/business/yourmoney/18mac.html?

ex=1097640000&en=529d90459b9e77a7&ei=5070&oref=regihttp://www.hme.com/pdfs/WirelessIQ.pdfhttp://www.qsrmagazine.com/drive-thru/2002/index.phtmlhttp://www.usatoday.com/money/covers/2002-04-03.htmhttp://www.mindfully.org/Technology/2004/HyperActive-Bob8sep04.htmhttp://www.chainleader.com/archive/0702/0702tech.htmlDefinitions:http://www.nationmaster.com/encyclopedia/Fast-food-restauranthttp://www.media.mcdonalds.com/secured/news/pressreleases/2004/Press_Release03252004e.html

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Appendix: ReferencesStarbucks:.http://www.msnbc.msn.com/id/6100243/site/newsweek/http://www.starbucks.com http://biz.yahoo.com/bw/041014/145258_1.htmlhttp://www.fool.com/news/commentary/2004/commentary040130ram.htmhttp://biz.yahoo.com/e/040810/sbux10-q_a.htmlhttp://www.entrepreneur.com/article/0,4621,315202,00.htmlhttp://www.hoovers.com/starbucks/--ID__15745--/free-co-fin-annual.xhtmlhttp://seattlepi.nwsource.com/business/114224_starbucks26.shtmlhttp://biz.yahoo.com/bw/041014/145727_1.htmlA. Growthhttp://www.starbucks.com/aboutus/pressdesc.asp?id=449http://www.starbucks.com/aboutus/pressdesc.asp?id=453B. Customershttp://www.fool.com/specials/2004/04020200ceo.htmhttp://www.franchise-chat.com/resources/whats_new.htmC. Starbuck’s Cardhttp://www.starbucks.com/aboutus/pressdesc.asp?id=451http://www.starbucks.com/aboutus/pressdesc.asp?id=397Customer Service:http://www.msue.msu.edu/msue/imp/modtd/33300010.htmlhttp://news.bbc.co.uk/1/hi/business/3833433.stmhttp://www.spcnetwork.com/mii/2001/010423.htmhttp://www.prophet.com/knowledge/articles/downloads/brand_contract_sd.pdfhttp://www.southcoasttoday.com/daily/07-01/07-15-01/b03bu066.htmhttp://www.qsrweb.com/news_fastcasual_loyalty_93003.htmhttp://www.hme.com/pdfs/Communication.pdfhttp://www.hme.com/pdfs/pr082300_clearsound3.pdfhttp://www.hme.com/pdfs/pr070102.pdfhttp://msnbc.msn.com/id/5233899/