Title: Dine-in or Food Delivery? A Dilemma of Service Priority
Speaker: Assoc. Prof. WANG Zhongbin, Tianjin University
Time: 9:00 am, July 3, 2024
Venue: Room 105，Building No.12, Wushan Campus
Introduction to the speaker:
WANG Zhongbin is an Associate Professor at the College of Management and Economics, Tianjin University, and a specially-appointed researcher. His main research areas are stochastic service operations and queuing economics. As the first author or corresponding author, he has published multiple academic papers in top international journals in the field of operations management, such as OR, MS, MSOM, POM, etc.
Abstract：
Problem definition: In recent years, third-party on-demand food delivery (OFD) platforms have enabled traditional restaurants to expand demand. The OFD service is embraced by numerous patrons owing to its ability to diminish concerns regarding time sensitivity as opposed to in-person dining. Nevertheless, OFD unavoidably diminishes the dining experience quality due to the challenges of long-distance delivery. This factor significantly influences customer channel preferences and, subsequently, restaurant earnings. Surprisingly, this aspect has received scant attention in prior OFD literature. This paper aims to investigate the impact of OFD quality on the effectiveness of three common service policies in restaurant operation: (1) first-come-first-serve (FCFS) policy, (2) PI policy that prioritizes dine-in customers, and (3) PO policy that prioritizes OFD customers.
Methodology/results: We establish a service system susceptible to congestion, in which a revenue-maximizing restaurant caters to customers via both dine-in and OFD channels. Findings reveal that the introduction of OFD consistently amplifies overall sales, termed the demand expansion effect. However, it also triggers a migration of dine-in patrons toward the lower-margin OFD channel, known as the cannibalization effect. As a result, the incorporation of OFD is recommended primarily when its quality is moderate. In particular, with the enhancement of OFD quality, it is advisable for the restaurant to adopt the PO policy, FCFS policy and PI policy sequentially. Furthermore, we uncover the contrasting effects of two distinct channel-based service policies within the dual-channel system. Finally, we propose an innovative service mechanism, allowing restaurants to flexibly assign priority between the two channels, to maximize operational revenue. Notably, this service design significantly challenges the effectiveness of the widely used service policy, whereas a threshold is identified below (beyond) which a partial priority should be assigned to OFD (dine-in) customers. Such partial priority is demonstrated to outperform all three common service policies when the OFD quality is moderate. Managerial implications: Our pivotal insight provides guidance to restaurants on how to strategically assign priority according to the OFD quality, such that working with third-party OFD platforms becomes a strength rather than a threat.
