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Medium Operations Profitability Capacity Planning

Butcher Shop

#Food & Beverage #Fast Food #Meat Processing
ProHub Comment

This case teaches the critical principle that supply must be matched to demand rather than optimized in isolation. While the 'run' scenario achieves lower unit costs through higher volume, it creates excess capacity that the market cannot absorb, making it economically suboptimal. The analysis demonstrates structured problem-solving through capacity analysis, cost modeling, and market sizing.

Estimated Time 15 minutes
Difficulty Medium
Source Harvard
50 / 100
A fast food chain recently bought a bovine meat-processing outlet to supply it with fresh hamburgers and other meets. The shop process is: cows enter from one end of the shop, meat gets processed in the middle, and then the meat gets packaged and delivered at the other end. The manager of the butcher shop however could not decide whether to have the cows walk or run into the meat processing room. Can you help him?

Clarifying Information

  1. Only fresh hamburger meat is processed at the shop
  2. From each cow, 20 hamburgers can be made
  3. Shop is open 10 hours per day, 5 days a week
  4. If cows walk in, 10 cows can be processed in one hour with current labor
  5. If cows run in, 25 cows can be processed in one hour
  6. Walk scenario: $5,000 overhead, $1,000 labor, $6,000 total cost, 10,000 burgers/week, $0.60 cost per burger
  7. Run scenario: $10,000 overhead, $2,500 labor, $12,500 total cost, 25,000 burgers/week, $0.50 cost per burger
  8. Fast food chain has 10 outlets, each serving vicinity of 30,000 people
  9. About 3 competitors in each vicinity, giving 25% market share (75,000 potential customers)
  10. 40% fall within demographic target (30,000 desired customers)
  11. About one-third allowed by parents to frequent regularly (10,000 customers)
  12. Customers visit twice per week on average (20,000 visits)
  13. About half order a burger versus another menu item (10,000 burgers per week)