Applying te risk solution approach

Pizza Inc., a pizza take our and delivery chain, is experiencing decreaseing revenue and is steadily losing
market share despite favorable market testing of its products/recipes. The company strategy has
traditionally been defines as gaining increased market share through customer satisfaction. Management
has ask your internal audit function to help them understand the reason for declining sales at the uptown
location and how the decline might be related to internal operation or work performance at the troubles
location odentified the following information.

In 2003, pizza inc’s corporate office screened this site location prior to construction to ensure that
neighborhood demograpichs supported the ideal business environment. This resulted in locating the cain
near a suburb where typical residents were in the mid to upper middle class income range and who owned
home with 3 to 4 bedrooms. Despite the favorable location, the site you are reviwing continues to have
gross and operating margins lowerthan their local competitors.

On the job training is the primary method used by managers to communicate corporate policy and
procedures. However, documented Pizza Inc. policies and detalled prosecures do exist for each key
process and are available by request from the shift manager. Employee are typically male (comprising
65% of total staff), 17 to 23 years old, with no prior work esperiance at the time of hire. Unscheduled
absenteeism is high and part time shift assignments are rotate frequently to reward those individuals sho
regularly work as scheduled. The internal audit team noted in last year’s review that management has
documented an average annual turnover rate of 18%.

The shift manager is responsible for ensuring that all Pizza orders are completed within established
deadlines, a long held competitive advantage. Drivers are required to record the time of their arrival at
the location of delivery on a delivery ticket. This time is compared with the time recorded on the order
ticket to calculate total elapsed minutes. Review of the last six month’s delivery tickets indicates that the
corporate benchmark deliver cycle time of 25 minutes from “placing the order to when we’ew on the
doorbell” has slipped to an average 43,8 minutes. For months there have been persistent rumors about
bets placed on one driver’s notorious reputation for beating the delivery deadline every time.

Delivery promptness is also dependent on the volume of completed pizzas at any given time and the
neighborhood traffle pattern. Drivers are initially screened at hire for outstanding traffic violations or dwi
infractions, the original site manager posted a large map on the woll so drivers can identify their routes,
mileage is reimbursed as part of the compensation for using their own vehicles so each drivers turns in a
mileage log at the end of the shift to indicatr both start and ending mileage. The manager checks the
recorded beginning or ending mileage with the ear’s odometer on a random basis.

Pizza Inc’s corporate policy requires that each location restricts itself to a 5 mile service area, however, if
an order comes in, the work is never refused. Phone orders occur in predictable patterns, but walk ini
orders are more random and less frequent. Scheduling staff rrequirements to match the need is done one
week in advance. The average workload during peak hours is 29 orders taken per hour. Orders are
manually written on prenumbered pads. When mistakes are made, the original order ticket, is tossed out
and a new order form is created to avoid confusion. Information captured uncludes: date, time of call (or
walk in), name address, phone number, type of crust, and toppings requested. Hand calculators are
available to assist with pricing quates that are told to the customer and recorded on the delivery ticket.
Shift managers check every order to ensure that information is complete prior to processing the order.
Employees who make the pizza are instructed in the proper quantity of ingredients for various standard
topping combinations. Frequently, special request orders are received that add items to the standard
recipe. Measuring cups are available but your internal audit team noted on prior visits that when activity
reaches peak load employees generally “know” how much pepperoni to use. The manager monitors the
supply cabinets and refrigerators at the end of the shift to ensured adequate inventory is on had. Several
month ago, the evening shift manager determined that inventory deliveries should be increased to four
per week, up from the usual three. Oven temperatures are monitored closely to ensure that pizzas are
properly cooked. Employee who bake the pizza rely on a centrally located wall clock to time the various
combinations. There are cooking guidelines posted for each standard topping combination with
instructions on what to do if a pizza is overcooked. Generally these are available to employees for
snacking.

All employees are responsible for ensuring the bake pizzas are cut, boxed, had labeled for delivery, and
assigned tho the next available driver. (drivers work in a first in first out method)

Your internal audit team determined, after reviewing information received from various external sources
and reading pizza Inc’s internal communications on strategy, mission, and vision, that using the business
risk to business process framework will assist Pizza Inc’s chief executive officer, chief financial officer and
chief operations officer with identifying the critical business processes and key success factors for each
process.