Don't ask me what made me think of this, I really don't know. But somewhere between reducing capacity concerns at a liquid hand soap co-packer and refilling my cup of water, I got the whiff of a ridiculous idea for fast pizza delivery - or maybe it was the pizza being pushed by me as I made my way back from the water cooler. Whatever it was, I think I'm on to something, or at least, its amusing to think about.
First, some background for non-supply-chain people. The products you buy in stores are considered make-to-stock products. Make-to-stock supply chain models are best suited for products that are low in value, like commodity items, have long shelf lives and have long lead times on the raw materials or manufacturing processes (or both). Products that are high in value, like fancy computers and cars, are often make-to-order rather than make-to-stock. Products with very short lead times and short shelf lives, like pizza or sandwiches, are generally make-to-order as well. Make-to-stock supply chains require demand forecasting (and forecasts are almost never correct, they can be too high or too low), production planning (which either makes too much or too little, depending on the forecast and lot size factors), and materials planning which can wreck havoc on an otherwise perfectly planned production plan if the materials are not available. When too much is produced and not sold, it becomes inventory which carries a cost. When too little is produced, customers get upset and service levels tank. It is easy to see why supply chain folks love make-to-order, because there is much less risk involved; you generally get payment up front, you have firm orders from real customers instead of forecasts, and all you have to do is produce it.
Manufacturing companies also have a lot of logistics problems to work through on both sides of their operations: getting the raw materials or components needed to make what they make, and getting their finished products out the customers. That is where 3PLs often come in. 3PL stands for third party logistics provider, and they are a unique kind of company that specializes in those logistical nightmares that manufacturing companies tend to struggle with. My own experience with 3PLs has proven gains in efficiency, inventory accuracy, and service to our production lines and to our customers.
So now that we have our basics, let's get back to my blasphemous or radically innovative idea I came to write about. I started wondering what would happen if there was a 3PL managing pizza delivery. On the one hand, sales forecasts are more accurate the more aggregated they are, so by removing the luxury of large warehouses, a 3PL might seem impractical. On the other hand, lean methodologies tell us that a lot size of as low as 1 can still be efficient if the processes around it support lean principles.
Let's imagine a densely populated neighborhood which orders on average 25 pizzas for dinner per night: 6 cheese pizzas, 13 pepperoni pizzas, 4 sausage pizzas and 2 special order pizzas. Let's say the standard deviation is 1 pizza in each category except pepperoni, where the standard deviation is 3 pizzas. The orders are placed between the hours of 5:30 pm and 8 pm and are normally distributed. Would it be possible to set up a micro-delivery station in that neighborhood and other neighborhoods like it, where the pizzas could be made based on a forecasting system and delivered within minutes of the order, without losing too much freshness? Imagine Jimmy John's delivery speed applied to pizza - if quality and freshness were comparable, it would blow away the pizza delivery market!
It wouldn't be that hard, assuming, of course, that the demand is steady enough to warrant such a setup and and high enough to be profitable. Some pizzas would be discarded at the end of each night (taken home by the delivery boys as a bonus), and special orders would still take a little bit longer. But even special orders could be semi-baked the time the order comes in; if the order is for a pepperoni and sausage pizza, just throw some sausage on a semi-baked pepperoni pizza, right? In fact, I could imagine these little micro-franchises could be run by a person living in the neighborhood, and the pizza could be delivered by bike rather than car. A teenager could do it after school, or a stay-at-home mom could run the dinner business when her husband comes home. The possibilities are pretty neat when you make it so tiny anyone can do it. And if there's no separate facility, there's no overhead. Just materials (cardboard boxes) and ingredients, which pay for themselves when the customers pay for their pizza. The only upfront cost would be a commercial oven, assuming that the conventional ovens at home are not large enough to support even this kind of demand.
I have another twist, too. I believe the very near future will include self-driving, autonomous vehicles in the marketplace. Now, pizza delivery boys are not known to drive the nicest of cars, but let's imagine if the company provided the vehicles in order to support their business model. With an autonomous delivery vehicle, an oven a mini-kitchen can be installed, and the delivery boy can be your cook as well. He literally would let the vehicle drive him around as orders pop up (there would have to be some algorithm to deploy delivery boys based on location and availability, not unlike a taxi service today) and he would prepare the pizza on the way there. When it finishes cooking, he boxes it up and brings it to your doorstep. Now THAT'S fresh pizza!
So, until we have self-driving cars with pizza ovens in them (and the legislation to allow autonomous cars to be driven without the driver being attentive), I suppose the only issue is whether or not a neighborhood or small geographic area could have the volume and reliability of demand to support such a business. Validating it prior to opening up shop could be difficult, as there are a lot of different pizza delivery companies, who are not likely to share their data with you. I suppose you could set up cameras and watch for pizzas to be delivered; the good news is that its pretty obvious how many pizzas are being delivered visually. In addition, the value proposition of impossibly quick pizza delivery is different than regular pizza deliveries. In fact, it could increase demand for pizza delivery. Borrowing a model I've heard for other startups, one way to validate it would be to set up a website to take orders, and when the orders come in, apologize to your would-be customers for not being able to deliver, and offer them a chance to sign up to find out when you actually are open. This seems like it could turn people off though, and I would be afraid of the damage it would do. Unless, of course, you did it in a different but similar geographic region then the one you plan to actually open up shop in. Alternatively, coupons for future purchases might alleviate some of the "burned" feeling of your customers.
Perhaps a good way to start is by making a few pizzas tonight and open up a preliminary shop (not yet equipped with commercial ovens), but limit the ordering process on the website to only take the first few orders with the 5 minute delivery time, and the rest to promise a more reasonable delivery time. You'll know pretty quickly what your demand looks like. You could even get friends and family who live nearby to pitch in their help for the first few opening nights in order to keep as many 5-minute delivery times as possible.
That's about as far as I got. I'm not all that interested in being in food service myself, but I think its an interesting proposition for someone looking to start perhaps the world's first culinary 3PL. Anyone hungry yet?