Operations Management at Home Run Inn Pizza Operations management focuses on tec

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Operations Management at Home Run Inn Pizza

Operations management focuses on techniques that can increase the quality of an organization's products, the efficiency of its production, and its responsiveness to customers. Attention to operations management is a vital part of an organization's overall strategy if it intends to grow, enter new markets, and develop competitive advantage. This video presents the operations management strategy that enabled a small pizza restaurant to become the fastest-growing frozen pizza supplier in the country and the largest supplier in Chicago.

HERE'S THE TRANSCRIPT VIDEO

>> Family owned Homerun Inn Pizza is one of the fastest growing frozen pizza companies

0:04in the U.S. And in their hometown of Chicago, which is the biggest market for frozen pizzas

0:09in the country, they dominate the competition.

0:12In fact, they sell almost as much as their next two competitors,

0:16DiGiorno and Tombstone combined.

0:19So how did this little pizza company that could, clobber the giants?

0:22The answer is strategic management.

0:25Home Run Inn started as an actual inn, a pizza parlor on the south side of Chicago.

0:31They started producing frozen pizzas at the request of their customers in the 1950s

0:35as a sideline to their regular restaurant business.

0:38The owner's son saw the potential in a new frozen pizza market.

0:42That son is Joe Perrino, Home Run Inn's current CEO.

0:46>> In 1987 we opened our second restaurant.

0:49At that point in time we were still producing our frozen pizzas out of our restaurants.

0:54To help our production needs, what I started doing is trying other facilities

1:00and how automation helped them.

1:02So we started very basically with conveyors and ovens, we then proceeded with different presses.

1:09So that was our first stuff in automation and really starting to change the culture

1:14from a restaurant mentality into a manufacturing mentality.

1:18>> At the time, Home Run Inn sold only to regional grocery stores,

1:23yet demand was out pacing their ability to fill retailer's orders.

1:27Then, in the early 1990s, Perrino bought a piece of equipment

1:30that increased production significantly.

1:33>> The most difficult part of our production we used

1:34to fully cook our pizzas and then we had to freeze them.

1:37Very difficult to freeze with conventional freezing methods.

1:41So we started to look into cryogenic freezings -- freezers with using C02 gas.

1:48So we did some testing and then I made our first purchase, and I'll never forget

1:52that freezer cost, $250,000.00, which at

1:55that time you could have bought a restaurant for $250,000.00.

1:58So we bought this little 12 by 12 box that was able to freeze pizzas in about 15 minutes.

2:04So we brought it in, put it online and it was the very first day we ran it was like a miracle.

2:11Here we were able to produce pizzas, three --

2:14four times as fast as we were currently doing them, with fewer people.

2:17So that really set a light bulb off in our heads.

2:21Oh my god, what will happen if we continue this automation process

2:25and take it further and further?

2:27>> Within two years, sales grew to a point that Perrino needed to build a new plant.

2:32>> Back in 1993 we were at capacity.

2:35We couldn't keep up.

2:36Our demand was exceeding our supply.

2:39Retailers were coming to us saying "You have to supply us.

2:43You have to supply us."

2:44And we at that point in time realized that if we did not meet our customers demand,

2:48we would start to regress as a company.

2:51So as we came into that era, we decided that we could stay very small and have a great life,

2:59or we could take this business and expand it.

3:01>> In part, the company's growth was due

3:03to Perrino's decision to focus on quality over price.

3:07This choice differentiates their product

3:09and gives them a competitive advantage in the marketplace.

3:12>> We've maintained some core focus fundamentals

3:16to our business, meaning that we make our pizzas.

3:19We don't let somebody cold pack our pizzas.

3:21We control our quality.

3:22We produce our dough in house.

3:25We produce our own sausage in house.

3:27We use the same puree that we've been using since 1947.

3:31And our cheese, a real simple thing, we use cheese that's made with real milk.

3:34>> Because of the quality of their pizzas, Home Run Inn does not need to compete on price.

3:39In fact, Perrino takes pride in having the highest priced frozen pizza on the market.

3:44>> I will take my pizza at the highest price and even at the highest price,

3:49we are the best value, because when people will take it and breakdown our core ingredients,

3:55we use more cheese, we use more sausage, less dough than our competitors are going to use.

4:00When we go in and we talk in retailers, we will tell them "Take our product,"

4:05and we actually show them charts and we cut it against fresh pizzerias

4:09and our frozen competition, and by far, by far, we're the best value.

4:14>> In 2002, Perrino made the decision that catapulted the growth of the company.

4:19Jay Williams, a former executive with Kraft, approached Home Run Inn with the idea of going

4:24into self-distribution, also known as direct store delivery.

4:28Up to this point, grocery store chains stored Home Run Inn pizzas in their warehouses

4:33and distributed them to individual stores as needed.

4:36Self-distribution meant that Home Run Inn would have their own fleet

4:39of delivery drivers go store-to-store and stock shelves.

4:43They would also have to keep track of inventory at each individual store.

4:47It was going to cost them money, but it would give Home Run Inn control of the product

4:51from the plant to the store shelf.

4:54>> I sat down with my family and I told them the idea,

4:58and they were like "Why would we want to do that?

5:00You know, we already have an 8% market share."

5:02And I went back to them and I'm like "Well, if we had to build a company

5:05from scratch again, how would you build it?"

5:08And they said "Well, we would make our own pizzas and we would have our own trucks,

5:12so this way we could control our quality from production to the shelf."

5:17Like "OK, so why wouldn't we want to do this?"

5:20And their answer was "Well, it's too expensive to do."

5:23And this is the same idea my dad had, and I'll never forget this that he say's

5:28"The most expensive thing is the cheapest in the long run."

5:31So what we did is we made that decision to do it the right way, the best way,

5:35the most expensive way, and it took our market share from eight to 28% market share.

5:43>> Self-distribution was the final tool Home Run Inn needed to compete

5:46with its largest competitor, Kraft, in the Chicago market.

5:50By 2006, the company had to expand its production plant to keep up with the demand.

5:56Today, Home Run Inn is a national brand.

5:59Its pizzas are sold in 25 states.

6:02Costco carries them as does Walmart.

6:04Because they contain no artificial preservatives, they've been picked

6:08up by Whole Foods and other natural food stores.

6:11Lately, they've expanded their reach to the southeast, in large grocery chains

6:15such as Publix and Winn-Dixie, and the company still runs restaurants in the Chicago area.

6:21They've recently opened their ninth location.

6:24>> Restaurants give us an insight to our consumer base that my competitors don't have.

6:31Restaurants also create another source of revenue, now it may not maximize our revenue

6:37like frozen pizzas, but it creates safety.

6:42>> Under the guidance of Joe Perrino, Home Run Inn Pizza is one

6:45of the fastest growing frozen pizza companies in the U.S.,

6:49featuring the highest quality frozen pizza on the market.

6:52For Joe, the most important ingredient for success is family.

6:57>> Family businesses really are the strength of America.

7:01And what I see in a family business really boils down to one word -- its passion.

7:09I have a next generation in the company right now, so the difference that we focus

7:14on is long-term versus short-term.

7:19So for us, is we think in decades versus probably other companies think in quarters.

7:25So our whole thing is if we do the right thing today, we'll pay dividends ten years from now.

7:31And so, that whole equation of, you know, how much we could do or what's

7:34in it, is never really discussed.

7:37It's always what's the right way to do business?

7:39What's the right way to treat the employees?

7:41What's the right way to treat the community?

7:43And that's how we exist as a family business.

7:47And I think that those threads are many family businesses in this country.

Home Run Inn began producing frozen pizza in their single restaurant in South Chicago in the 1950s. They did this because their customers wanted this product. Today, businesses use IT to track customer tastes and desires in order to both attract new customers and retain current ones. Today this customer/business interaction is called

>> Family owned Homerun Inn Pizza is one of the fastest growing frozen pizza companies

0:04in the U.S. And in their hometown of Chicago, which is the biggest market for frozen pizzas

0:09in the country, they dominate the competition.

0:12In fact, they sell almost as much as their next two competitors,

0:16DiGiorno and Tombstone combined.

0:19So how did this little pizza company that could, clobber the giants?

0:22The answer is strategic management.

0:25Home Run Inn started as an actual inn, a pizza parlor on the south side of Chicago.

0:31They started producing frozen pizzas at the request of their customers in the 1950s

0:35as a sideline to their regular restaurant business.

0:38The owner's son saw the potential in a new frozen pizza market.

0:42That son is Joe Perrino, Home Run Inn's current CEO.

0:46>> In 1987 we opened our second restaurant.

0:49At that point in time we were still producing our frozen pizzas out of our restaurants.

0:54To help our production needs, what I started doing is trying other facilities

1:00and how automation helped them.

1:02So we started very basically with conveyors and ovens, we then proceeded with different presses.

1:09So that was our first stuff in automation and really starting to change the culture

1:14from a restaurant mentality into a manufacturing mentality.

1:18>> At the time, Home Run Inn sold only to regional grocery stores,

1:23yet demand was out pacing their ability to fill retailer's orders.

1:27Then, in the early 1990s, Perrino bought a piece of equipment

1:30that increased production significantly.

1:33>> The most difficult part of our production we used

1:34to fully cook our pizzas and then we had to freeze them.

1:37Very difficult to freeze with conventional freezing methods.

1:41So we started to look into cryogenic freezings -- freezers with using C02 gas.

1:48So we did some testing and then I made our first purchase, and I'll never forget

1:52that freezer cost, $250,000.00, which at

1:55that time you could have bought a restaurant for $250,000.00.

1:58So we bought this little 12 by 12 box that was able to freeze pizzas in about 15 minutes.

2:04So we brought it in, put it online and it was the very first day we ran it was like a miracle.

2:11Here we were able to produce pizzas, three --

2:14four times as fast as we were currently doing them, with fewer people.

2:17So that really set a light bulb off in our heads.

2:21Oh my god, what will happen if we continue this automation process

2:25and take it further and further?

2:27>> Within two years, sales grew to a point that Perrino needed to build a new plant.

2:32>> Back in 1993 we were at capacity.

2:35We couldn't keep up.

2:36Our demand was exceeding our supply.

2:39Retailers were coming to us saying "You have to supply us.

2:43You have to supply us."

2:44And we at that point in time realized that if we did not meet our customers demand,

2:48we would start to regress as a company.

2:51So as we came into that era, we decided that we could stay very small and have a great life,

2:59or we could take this business and expand it.

3:01>> In part, the company's growth was due

3:03to Perrino's decision to focus on quality over price.

3:07This choice differentiates their product

3:09and gives them a competitive advantage in the marketplace.

3:12>> We've maintained some core focus fundamentals

3:16to our business, meaning that we make our pizzas.

3:19We don't let somebody cold pack our pizzas.

3:21We control our quality.

3:22We produce our dough in house.

3:25We produce our own sausage in house.

3:27We use the same puree that we've been using since 1947.

3:31And our cheese, a real simple thing, we use cheese that's made with real milk.

3:34>> Because of the quality of their pizzas, Home Run Inn does not need to compete on price.

3:39In fact, Perrino takes pride in having the highest priced frozen pizza on the market.

3:44>> I will take my pizza at the highest price and even at the highest price,

3:49we are the best value, because when people will take it and breakdown our core ingredients,

3:55we use more cheese, we use more sausage, less dough than our competitors are going to use.

4:00When we go in and we talk in retailers, we will tell them "Take our product,"

4:05and we actually show them charts and we cut it against fresh pizzerias

4:09and our frozen competition, and by far, by far, we're the best value.

4:14>> In 2002, Perrino made the decision that catapulted the growth of the company.

4:19Jay Williams, a former executive with Kraft, approached Home Run Inn with the idea of going

4:24into self-distribution, also known as direct store delivery.

4:28Up to this point, grocery store chains stored Home Run Inn pizzas in their warehouses

4:33and distributed them to individual stores as needed.

4:36Self-distribution meant that Home Run Inn would have their own fleet

4:39of delivery drivers go store-to-store and stock shelves.

4:43They would also have to keep track of inventory at each individual store.

4:47It was going to cost them money, but it would give Home Run Inn control of the product

4:51from the plant to the store shelf.

4:54>> I sat down with my family and I told them the idea,

4:58and they were like "Why would we want to do that?

5:00You know, we already have an 8% market share."

5:02And I went back to them and I'm like "Well, if we had to build a company

5:05from scratch again, how would you build it?"

5:08And they said "Well, we would make our own pizzas and we would have our own trucks,

5:12so this way we could control our quality from production to the shelf."

5:17Like "OK, so why wouldn't we want to do this?"

5:20And their answer was "Well, it's too expensive to do."

5:23And this is the same idea my dad had, and I'll never forget this that he say's

5:28"The most expensive thing is the cheapest in the long run."

5:31So what we did is we made that decision to do it the right way, the best way,

5:35the most expensive way, and it took our market share from eight to 28% market share.

5:43>> Self-distribution was the final tool Home Run Inn needed to compete

5:46with its largest competitor, Kraft, in the Chicago market.

5:50By 2006, the company had to expand its production plant to keep up with the demand.

5:56Today, Home Run Inn is a national brand.

5:59Its pizzas are sold in 25 states.

6:02Costco carries them as does Walmart.

6:04Because they contain no artificial preservatives, they've been picked

6:08up by Whole Foods and other natural food stores.

6:11Lately, they've expanded their reach to the southeast, in large grocery chains

6:15such as Publix and Winn-Dixie, and the company still runs restaurants in the Chicago area.

6:21They've recently opened their ninth location.

6:24>> Restaurants give us an insight to our consumer base that my competitors don't have.

6:31Restaurants also create another source of revenue, now it may not maximize our revenue

6:37like frozen pizzas, but it creates safety.

6:42>> Under the guidance of Joe Perrino, Home Run Inn Pizza is one

6:45of the fastest growing frozen pizza companies in the U.S.,

6:49featuring the highest quality frozen pizza on the market.

6:52For Joe, the most important ingredient for success is family.

6:57>> Family businesses really are the strength of America.

7:01And what I see in a family business really boils down to one word -- its passion.

7:09I have a next generation in the company right now, so the difference that we focus

7:14on is long-term versus short-term.

7:19So for us, is we think in decades versus probably other companies think in quarters.

7:25So our whole thing is if we do the right thing today, we'll pay dividends ten years from now.

7:31And so, that whole equation of, you know, how much we could do or what's

7:34in it, is never really discussed.

7:37It's always what's the right way to do business?

7:39What's the right way to treat the employees?

7:41What's the right way to treat the community?

7:43And that's how we exist as a family business.

7:47And I think that those threads are many family businesses in this country.

Home Run Inn began producing frozen pizza in their single restaurant in South Chicago in the 1950s. They did this because their customers wanted this product. Today, businesses use IT to track customer tastes and desires in order to both attract new customers and retain current ones. Today this customer/business interaction is called

quality assurance.

process management.

customer reengineering.

customer relationship management.

The use of conveyor belts at Home Run Inn's manufacturing facility is an example of a ______ layout.

product

process

fixed-position

flexible

reengineered

The change from freezing pizzas in a normal refrigerator to using a cryogenic freezer and other improved automation techniques is an example of ______ in that Home Run Inn was able to achieve dramatic improvements in lowering costs while increasing supply and speed of manufacturing.

just-in-time inventory management

process reengineering

reinvestment

retro-processed manufacturing

government regulation

Home Run Inn has developed its ______ based on quality rather than on price. As a result they are the fastest-growing pizza company in the country and number one in Chicago.

manufacturing policy

production philosophy

competitive advantage

marketing strategy

The decision to engage in self-distribution had many benefits for Home Run Inn including the ability to manage inventory. They could deliver pizza as it was needed to the stores rather than having their product sitting in storage facilities. This is an example of a(n) _____ inventory system.

rapid distribution

flexible

process

just-in-time

product

Joe Perrino has been responsible for deciding how to set up and run Home Run Inn's pizza business. He designed the production and distribution systems and determined how to improve operations in order to increase efficiency. Joe Perrino typifies a(n)

bureaucratic manager.

operations manager.

direct-to-market manager.

transformational manager.

tactical manager.

Explanation / Answer

Home Run Inn began producing frozen pizza in their single restaurant in South Chicago in the 1950s. They did this because their customers wanted this product. Today, businesses use IT to track customer tastes and desires in order to both attract new customers and retain current ones. Today this customer/business interaction is called

customer relationship management.

The use of conveyor belts at Home Run Inn's manufacturing facility is an example of a ______ layout.

fixed-position

The change from freezing pizzas in a normal refrigerator to using a cryogenic freezer and other improved automation techniques is an example of ______ in that Home Run Inn was able to achieve dramatic improvements in lowering costs while increasing supply and speed of manufacturing.

process reengineering

Home Run Inn has developed its ______ based on quality rather than on price. As a result they are the fastest-growing pizza company in the country and number one in Chicago.

competitive advantage

The decision to engage in self-distribution had many benefits for Home Run Inn including the ability to manage inventory. They could deliver pizza as it was needed to the stores rather than having their product sitting in storage facilities. This is an example of a(n) _____ inventory system.

flexible

Joe Perrino has been responsible for deciding how to set up and run Home Run Inn's pizza business. He designed the production and distribution systems and determined how to improve operations in order to increase efficiency. Joe Perrino typifies a(n)

operations manager.

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