Order Ahead for Pickup: Promise or Peril?

Abstract

Quick-service restaurants have been increasingly enabling customers to order ahead---placing orders on demand remotely so that orders can be prepared while customers travel to the service facility for pickup. It is widely believed that the order-ahead scheme reduces delay and therefore attracts more orders (i.e., yields higher throughput) than if customers must order onsite. We build queueing-game theoretic models to study the throughput and welfare implications of order-ahead.
Contrary to conventional wisdom, the order-ahead model commonly used in practice that locks in orders as they come in may yield lower throughput than the order-onsite model, and in fact, may create a lose-lose outcome for both the service provider and customers when the service provider optimally chooses the queue information provision policy to maximize throughput. We examine two alternative order-ahead schemes that can potentially mitigate the throughput deficiency. The first approach rejects new orders at the outset if there are already too many outstanding ones; the second approach allows customers to cancel their orders in the process if they so choose. While both approaches can restore the throughput superiority of order-ahead over order-onsite, neither is able to always dominate the plain order-ahead model that does not support rejection or cancellation, suggesting complementary strengths of the three order-ahead schemes.

Keywords: on-demand service, digital innovation, omni-channel retail, information provision, rational abandonment