BLING MAX BUSINESS SIMULATION CASE

BLING MAX BUSINESS SIMULATION CASEQNT 5160, Fall 2015 SemesterUpdated 8sep15 Bling-Max Touch–Free Carwash in Fort Lauderdale, FloridaBernard “Bernie” West stood under a tall palm admiring his new business and the many vehiclesentering it on a sunny Florida day. Bernie’s Bling-Max Carwash had exceeded his expectations as asmall service business among many similar enterprises in Fort Lauderdale. Owned and operated by 32year old Bernie, he had purchased the business outright about six months ago, borrowing against hishouse and drawing down all his savings. The carwash, about 8 years old with a single auto wash bay,was not the newest equipment to be found in a modern automated car wash, but it had beenflawlessly maintained and was the popular high pressure, touch free, Pulse-Pro equipment withexcellent reliability. Best yet, the business was located in the perfect spot in Fort Lauderdale, near amajor intersection close to offices, popular clubs, restaurants, and busy shopping areas. There wereno nearby competitors and Bernie wanted to keep it that way.Bernie assessed the current business situation. Bling-Max offers its customers three levels of washservice, “Economy”, “Custom”, and “Deluxe”, which are priced at $8.00, $9.00, and $10.00respectively. Based on Bernie’s market research, the prices are slightly high but still competitive,compared to other automated washes. More important than pricing, he knew he had to dosomething to reduce wait times to keep customers from going elsewhere.Bling-Max is open 7 days per week, 365 days per year from 8:00 AM to 6:00 PM. This 10 houroperating schedule provides 14 “off-hours” for the necessary cleaning, preventive maintenance, andrefill of wash chemicals. During operating hours, arriving cars line up in a perimeter corral queue thatholds 14 or more cars, depending on their size. The first car arriving on or after 8:00 AM can pay witha quick credit card swipe and enter the wash. Successively arriving cars can swipe and enter as soonas they reach the control panel at the wash entrance, providing it is before 6:00 PM closure. At 6:00PM the control panel lights up the “CLOSED” sign and will not accept new customers. The last carentering just before 6:00 PM gets a complete wash cycle and exits normally. Any cars remaining inline when the service ends at 6:00 PM are let out a special gate by the maintenance technician whohas arrived to perform the standard daily maintenance.To better understand customer complaints about the long lines and wait time problem, Berniegathered random sample data at various times of day and on different days, recording timing ofcustomer arrivals entering the corral and what wash service they ultimately picked. The washprocess times (Service Times) for the “Economy”, “Custom”, and “Deluxe” washes are 6, 7, and 8minutes respectively, which includes credit card swipe, entry, and drive-off times. Since these threetimes are predominantly controlled by sophisticated electronic timers in the automated wash itself,any driver-induced variance from the 6, 7, and 8 minutes is of no consequence (for example, thereare no 6.2 or 7.9 minute wash cycles, only 6, 7, and 8 min.). The customer Inter-Arrival Times (IAT)and selected wash services are shown in the Excel file Q1 Raw Data Worksheet.xlsx.2 With six months financials completed, Bernie is confident that all-in costs (utilities, maintenance,chemicals, advertising, etc.) are 35% of revenues. Since customers are balanced between offices andshopping during the week, and restaurants, bars, and shopping on weekends, there seems to be littlevariation from day to day or within seasons. Demand is steady and strong all day, every day, exceptfor an estimated 6% rain periods when the wash is idle.The current car wash has the dryer blowers attached to the robotic wash arm, so the vehicle stays putafter the wash and wax cycle and during the one minute drying cycle. Bernie has found like-newblow-off equipment at an industrial distributor and it is ready to install. He can purchase and installthe blow-off section at the car wash exit portal, instead of the wash arm, for a total investment of$11,500, complete. This would de-couple the one minute drying cycle from the wash cycle, speedingup the service process by one minute per car, no matter which wash they chose. As a car finishedthe wash cycle it would move forward toward the exit to get dried off. This investment wouldseparate the wash and dry-off cycles, reducing all wash cycles by 1 minute and allowing the nextcustomer to enter one minute earlier than before, thereby improving throughput.It makes sense to Bernie that his wait times could be improved by a shorter cycle, but it is not obviousto what extent wait times and lines would be improved, nor whether the investment is financiallyjustified. He could reduce average process time just by selling more economy washes. He also knowsthat he is not on the low side of competition with his pricing and is concerned that long waits make ittoo easy for a competitor to setup a nearby carwash and steal his market. Bernie is pondering addinga fourth wash selection and related pricing adjustments, as well the merits of investing in a newblow-off section. Bernie knows that he can borrow the $11,500 for the new blow-off from hiscommercial bank with a 3 year loan at 6.5% APR, but there is gnawing risk in taking out this loan andpledging his carwash equity as collateral. He is thinking about his wife, their two-year old son, and anew child on the way as he considers his next steps. This business is everything to him and his family.Can he afford to take this investment risk, should he look for alternative improvements, or can he riska big loss of business if he does nothing?Bernie’s brother Craig has an automated car wash in Georgia. Craig’s wash has four wash selections,consisting of Bernie’s three washes plus a higher-end “Elite” wash using Rain-X ™ brand glasstreatment chemicals from a special dispenser that costs $8,000 and adds 1 minute to the Deluxe cycletime. Having run periodic specials Craig has given Bernie data on the relative popularity of the fourlevels of washes based on price. Bernie is considering further investment to add this fourth washselection and making pricing adjustments accordingly, but he needs more clarity as he weighsreduction of wait times with return on investment.Bernie remembers some of Peter Drucker’s wisdom as he ponders his next steps: “Efficiency is doingthings right and Effectiveness is doing the right things”, coupled with the key question “What doesthe customer most value?”3 Bling Max Case Assignment InstructionsPut yourself in the position of a management consultant helping Bernie with his businessimprovement decision. Organize your approach as follows:1. Analysis of Raw Data: Fit and describe the distributions represented by the IAT (inter-arrivaltimes) and customer-selected services data in the furnished Excel file titled “Q1 Raw DataWorksheet”. Paste the RSPE histograms you develop for the IAT and ST (service time) data onyour Q1 Raw Data Worksheet and into the Appendix of your report.2. Current Situation: Open the furnished Excel file “Q2 Simulation Worksheet” and build an RSPEsimulation model for Bling-Max, set the initial seed to 1234, run 10,000 iterations, and enter“current situation” data into Table 1. The current situation is long wash cycles with theintegrated blow-off attached to the wash arm.3. New Blow-off Investment: Save-as your completed Q2 Simulation Worksheet using file nameQ3 Simulation Worksheet. Update the model to reflect the improved cycle times from thenew blow-off. Enter the Q3 output data into Table 1.4. New Blow-off + 4-washes with Pricing “a”: Save-as your completed Q3 Simulation Worksheetusing file name Q4 Simulation Worksheet. Update the model to reflect the improved cycletimes from the new blow-off plus the impact of Q4 pricing (ref. Fig 3). Enter the Q4 outputdata into Table 1.5. New Blow-off + 4-washes with Pricing “b”: Save-as your completed Q4 Simulation Worksheetusing file name Q5 S
imulation Worksheet. Update the model to reflect the improved cycletimes from the new blow-off plus the impact of Q5 pricing (ref. Fig 3). Enter the Q5 outputdata into Table 1.Analyze the results from the Q2, Q3, Q4, and Q5 simulation scenarios. What business decision wouldyou make and why? What are the implications from the standpoint of business performance andfrom customer perception and retention?Follow the guidelines found on BB in the Format of a Management Report and the Grading Rubricwhen writing a 4-5 page (body) report. Place Table 1 and output charts in your report Appendixsection and use the model output to justify your conclusions and recommendations. 4 5 6 7