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Prepared by Group 8 Achyut Gandham Anuj Wilson Biranchi Tripathy Sudarshan Garg Wisallaya Thaithammayanon Zafar Shah

MBA Challum 2011/12

9th December 2011 Word Count 5,970

Operations Management Assignment Dominos LLC

Operations Management Assignment

Challum Group 8 i

Table of Contents

Table of Contents ............................................................................................................. i

1 Executive Summary ............................................................................................... 4

2 Operations Strategy ............................................................................................... 5

2.1 Introduction............................................................................................................... 5

2.2 Corporate Vision ...................................................................................................... 5

2.3 Global Strategic objectives ...................................................................................... 6

2.4 Order qualifiers, Order winners................................................................................ 6

2.5 The Core Competencies of Dominos ...................................................................... 6

2.6 The Value Chain ...................................................................................................... 7

2.7 Product value chain ................................................................................................. 8

2.8 Operations Strategy Implications (Store Level) ....................................................... 9

2.9 Competitor Analysis ............................................................................................... 10

Figure 7 Dominos versus its Competitors (UK) .............................................................. 10

3 Product & Service Design ................................................................................... 13

3.1 Introduction............................................................................................................. 13

3.2 Product Life Cycle .................................................................................................. 13

3.3 Failed Product and Product Re-design: ................................................................ 14

3.4 Operations Challenge of the Product/Service Mix ................................................ 16

4 Process Design .................................................................................................... 17

4.1 Product Service Continuum ................................................................................... 17


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4.2 The Conversion Process........................................................................................ 17

4.3 The Production Process......................................................................................... 19

4.3.1 Store Layout.. 23

4.4 Suggested Areas of Improvement ......................................................................... 24

4.4.1 Process.. 24

4.4.2 Store and Production Layout.. 25

4.5 Proposed Improvements ........................................................................................ 25

4.5.1 Process25

4.5.2 Store Layout.. 25

5 Planning and Control ........................................................................................... 26

5.1 Goldratts Theory of Constraints (TOC) applied to Dominos: ............................... 26

5.2 Demand Forecasting .............................................................................................. 27

5.3 Promotions Planning .............................................................................................. 27

6 Innovation and Improvements............................................................................ 29

6.1 Paradigm Innovation .............................................................................................. 29

6.1.1 Radical innovation: Need pull..29

6.2 Position Innovation ................................................................................................. 30

6.2.1 Radical innovation: Eureka moment.. 30

6.3 Process Innovation ................................................................................................ 30

6.3.1 Radical innovation: Need Pull & Eureka moment 30

6.3.2 Incremental innovation: Need Pull. 30

6.4 Product Innovation ................................................................................................. 30

6.4.1 Radical innovation: Eureka moment.. 30


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6.4.2 Incremental innovation: Need pull: Knowledge push.. 30

7 Supply Chain Management ................................................................................. 31

7.1 Introduction............................................................................................................. 31

7.2 Dominos Supply Chain .......................................................................................... 31

7.3 Critic and recommendations .................................................................................. 33

8 Quality Management ............................................................................................ 34

8.1 Introduction............................................................................................................. 34

8.2 Quality Assurance and Quality Control.................................................................. 34

8.3 Critic and recommendations .................................................................................. 34

9 Conclusion and Recommendations .................................................................. 35

10 References ............................................................................................................ 36


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1 Executive Summary

This report has been prepared to analyse the processes and strategies such as control of operations systems, design and planning of Dominos LLC. Theoretical frameworks have been applied to evaluate the companys operational strategy in terms of it product and service offering. While the report considers Dominos LLCs overall strategy, it also focuses on the daily operations of Dominos DPG franchises. Particular focus has been placed on the daily operations processes of the Dominos store located on Alexandra Parade in Glasgow, UK. The report is a result of team research, case study analysis, a store visit, interviews and insights from Dominos existing employees, application of theoretical concepts, models and prior experience. The study evaluates how Dominos has been able to position itself as a leader in its market segment and analyses the strengths and weakness in the companys existing strategy. Upon dissecting various aspects of the companys processes, it provides an appreciation of the companys efforts to continuously evolve in the changing market conditions by incorporating new product design and being innovative to stay at par with its competition. Finally, upon identifying the areas of improvement in the companys existing strategy, the report proposes changes and recommendations that can be incorporated in order to further ensure operational efficiency thereby maximizing profits and increasing its value offering.


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2 Operations Strategy

2.1 Introduction

Dominos is one the leading pizza delivery companies globally. The Company has a

unique business and operation model and is a pioneer in the fast food industry. Since

1960, Dominos Pizza has successfully expanded from three outlets in the US to

9,350 stores operating in seventy countries. Dominos operation in the UK and

overseas uses the franchise model. The parent company, Dominos Pizza LLC is

head quartered in Michigan, USA. It maintains overall control on the sourcing and

supplying of raw materials to the master franchises and enforces quality of the service

and products sold.

Figure 1 show the structure of the Dominos franchise model in the UK.

Figure 1: Domino's Franchise Model: UK

2.2 Corporate Vision

The Dominos Corporate Vision statement

focuses on the following key areas:

Being better than the competition.

Ensuring a quality product.

Providing excellent service.

Creating lasting relationships with its

employees and the communities

within which it operates.

Figure 2 Corporate Vision: Dominos

A clear corporate vision ensures that the company and its franchises can work

towards meeting common goals thereby increasing its business in a potentially

virtuous cycle. Figure 2 show the graphical representation of the Dominos Vision. The

Dominos Pizza LLC

Sub-Franchisees

Sub-Franchisees

Sub-Franchisees

Master Franchise

Passionate about

winning

Passionate about

Quality

Passionate about

Service

Passionate about

relationships


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overall global vision translates into specifics at a country level in a seamless manner

so that the overall strategic vision is kept in mind at all times.

2.3 Global Strategic objectives

Strategic objectives adhere to the companys vision statement, Dominos key

strategic objectives are:

Targeted international growth competitors. Menu expansion, vary price points, 24 hour delivery model competitors. Use Company owned stores in the US and Australia as a test bed for new

innovations IT Strategy. Increase investment in training and auditing of stores to provide a consistent

service and good quality of products Human Resource Strategy. Allow master franchisees to apply their knowledge of the local market and

cuisines Knowledge Management Strategy.

2.4 Order qualifiers, Order winners

Order qualifiers are the basic criteria the product meets to quality for selling. Order

winners are the criteria that win the customers when it comes to purchasing. Figure 3

shows the order qualifiers and order winning criterias for Dominos.

Figure 3 Order Winner and Order Qualifiers: Dominos

2.5 The Core Competencies of Dominos

Dominos core competencies have evolved over time. Their unique sets of strengths

have helped the Company dominate the pizza food service industry, and a leader in

the home delivery / take away.

Order Qualifiers for a customer ordering take away :

Convenient : Tasty : Quick : Cheap

Potential Order losers : Inconsistent taste : Delay in

delivery : Poor quality of food : Pricing at a premium

Order Winners for Dominos : Core competency on Delivery : Consistent quality : Delivered with no delays : Wide variety

on menu : Tasty


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Figure 4 Core Competencies: Dominos

2.6 The Value Chain

It is important to consider how a customer need drives Dominos to create the product.

The customer need that drives the entire value chain is the need for a dependable

take away restaurant, reasonably priced hot quality food and variety that suits the

local palette.

Dominos has focused on these key customer needs throughout the value chain, and

has not allowed any digressions in this area unlike other competitors who have

evolved a mixed model of full service restaurants and takeaway outlets, or a hybrid

combination of both. This has diluted their strengths in the segment Dominos focuses

on - Takeaway / Home delivery. Its global operational model allows for lean stores,

well-trained staff and flexibility at a country level to customise menus to suit customer

tastes. Operational requirements have prompted the use of technology to make the

customer experience more enriching, it has a history of firsts they were the first to

use TV as a distribution channel, an online tracking system that allows customers to

track the pizza order and a proprietary point of sale system. A combination of the

Company level strategy and the Operational Strategy has resulted in Dominos having

a reputation for reliability and consistent pizza quality) these strategies have

ensured that Dominos continues to meet its customer needs.

Dominos Competitive advantage - Global leader in Pizza take

away / home delivery

Unique Supply chain model : Better quality & consistency

Unique GLOBAL

model: Allows flexibility at the regional

level

Leaner Stores : Better

operating margins

Focussed on the core

competency of delivery


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Process Flow & Infrastructure :

Seamless from the customers point of

view, centrally located stores

Global Strategy : Franchise model, Lean Stores, Investment in Staff, Robust quality

control

Customer Need : Dependable takeaway restaurant : Hot Food

delivered reliably

Operational Strategy : Innovative use of

technology to ease the transaction, Well

trained staff with local knowledge

Figure 5 Customer Value Chain: Dominos

2.7 Product value chain

Figure 6 illustrates Porters model, which depicts Dominos operations as a collection

of value-adding activities. The five primary activities are processes that are mainly

concerned with the production of the products and services to the external customers.

These are necessary to the business processes. The activities indicated as support

activities are activities that are vital for the development of the appropriate

transforming resources. These can be looked as value adding activities, for instance

incorporating the use of technology such as being able to place orders by text

message add to the convenience Dominos provides and increases the accuracy of

order. All these constitute the business processes of the organization.


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Figure 6 Product Value Chain: Dominos

2.8 Operations Strategy Implications (Store Level)

Dominos operations strategy mainly focuses on the providing high service quality to the customer:

1. Minimize operations cost: To minimize the operating cost by improving the efficiencies and process at the stores.

2. Strategic store locations to facilitate the delivery service: To leverage the strategic location of the store in order to facilitate quick service to the customer and maximize the revenue.

3. Production oriented store designs: To utilize the production oriented store design in order to facilitate efficient production and quick service to the customer.

4. Efficient order taking, production and delivery: To execute an efficient operational process that includes order taking, pizza preparation, cooking, boxing and delivery.

5. Use of Dominos PULSE point-of-sale system: Use of Dominos PULSE system to improve operating efficiencies, provide corporate management with easy access to financial and marketing data and reduce time consumption and expenses.

6. Product and process innovations: To promote an innovative culture that increases both quality and efficiency.

7. A focused menu: To maintain a focused menu that is designed to present an attractive quality offering to customers, while minimizing order errors, and expediting the order taking and food preparation processes.

8. A comprehensive store operations evaluation program: To utilize a comprehensive store audit program to ensure that stores are meeting both as the expectations of the customers.


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2.9 Competitor Analysis

Figure 7 Dominos versus its Competitors (UK)

1. Dominos DPG is the leading player in home-delivery and take-away food services in the UK region (Figure 7). It has the highest market share when compared to other food outlets such as Yum! and Papa Johns over the last five years. This is a huge contribution in sales due to the fact that no other pizza companies offer delivery as fast as Dominos (Order-qualifying criteria).

Figure 8: Dominos versus its Competitors (Global)

2. From a global perspective, it ranks 12th among all the top food chains in world. Other snacks joints and coffee shops are a long way ahead. Figure 8 shows that

0 10 20 30 40 50 60 70 80

Brand Shares of Chained 100% HD/TA


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Dominos needs to implement some new strategies in order to rank itself higher relative with other food chains.

Figure 9 Performance Prioritizing Curve

The Slack Model of Performance Prioritizing (Figure 9) would help Dominos in prioritizing its operational strategies based on the order-winning criteria and the current issues it faces in relation to the competition. A. Excess zone Dominos invests in promotional strategy to a greater extent

as compared to other food chain outlets. It offers many discount coupons to attract customers. Discount offers do help to some extent in attracting customers but too many discount and promotions tend to lower the brand image. So Dominos need to cut down some expenses in that section which will not affect its sales.

B. Appropriate zone Dominos has got an excellent unmatched home delivery service through which it stays ahead of its rivals. The 30-minute luxury of Dominos has given the brand a strong image among the customers. This gives Dominos a clear balance between its competitors and customers.

C. Improve zone Dominos need to improve its product quality in order to maintain reputed. It needs to emphasize on the pizza quality and prioritizing all aspects that relate to the customer. For example, Pizza Hut specifies the calories consumption in each pizza as illustrated in Figure 10. This reflects the brand concern for the customer. So Dominos should also initiate some measures which would foster the emotional connection to its customers.


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Figure 10 Comparison to competition

D. Urgent action zone In order to increase the service to customers,

Dominos should ensure speedy delivery of pizzas to customers. For this, Dominos need to work on its existing process design. There should be enough space and staff for service and extra machines to handle any machinery failure during peak periods.


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3 Product & Service Design

3.1 Introduction

Dominos has positioned and established itself as the pioneer in the pizza delivery

service. Pizza comprises the companys core product with additional items such as

subs, chicken strips/bites, wings, garlic bread and potatoes wedges. A fair degree of

flexibility is available where customers can customize their pizza and can choose to

purchase combos thereby providing better value for money. Additional items such as

soft drinks accompany these choices. Dominos has successfully implemented this

concept of mass customization by catering to customers individual needs through

unique combinations of modular components. Dominos standard product and services

offering is universal across the world quality pizza delivery in approximately thirty

minutes. Across all geographical regions, the target segment is a cost conscious

consumer whose prime concern is convenience.

It is useful to analyse the companys product performance and use it to evaluate how

successful the product has been, this sets the stage for Dominos product redesign.

3.2 Product Life Cycle

Idea Generation phase - The concept of pizza had been around for a while and was adopted by Dominos in the 1960s. It started from USA and then established its stores in UK and other parts of the world, which were controlled by the USA headquarters.

Concept Development phase - The concept of pizza took a concrete hold in the market. Local franchisees took over the existing stores in UK. There was a paradigm shift as the online ordering and interactive TV ordering replaced the traditional methods. This period witnesses a substantial rise in sales.

Production phase - The existing pizza phenomena continued for two decades until there was a sudden decline in sales in 2009. "The fact is, we love our pizza, but as times change, so do consumer tastes," said Russell Weiner, Domino's Chief Marketing Officer.

Service -There was nearly 80% change in existing menu. New items like oven-baked sandwiches and crunch cakes were introduced to the stores. The 30-minute delivery doctrine was highly stressed upon. Also, Dominos launched new iPhone apps and the pizza-tracker to maximize its services.

Withdrawal Since the new consumers needed freshness in Dominos menu. The company addressed this decline in sale by analyzing its failed product and re-designing its core product. Figure 11 below show the breakdown of product life cycle at Dominos.


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Figure 11 Evolution of Dominos

3.3 Failed Product and Product Re-design:

A good example of how Dominos re-designed its core product is to look at a how the

company dealt with its core product failing in the past. It was a bold move for the

company to a publically acknowledge that their pizza tasted bad. Additionally it is

refreshing to see a corporation openly acknowledge shortcomings and use customer

feedback constructively to revise their strategy and approach. In an effort to design their

core competency, the company reconfigured its recipe. They tested several

combinations of cheeses, sauces and crust to finally arrive at a recipe that was

welcomed by the public. It is useful to note that the end customer was heavily involved

in the process of the product being re-designed and influenced the outcome largely. This

approach of using customer feedback can be credited the company witnessing an

increase in sales following the redesigning of their product. Figure 12 and Table 1 iterate

this.


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Figure 12 New Product Development

Table 1 Product Re-design using the customer feedback

Customer Role NPD Phase Key Issue/Managerial Challenge

Customer as

resource

Ideation

Select customer opinion to develop new

product Market researchers collect customer

information by studying customer buying

patterns and using tools such as customer

surveys and focus groups.

Customer as co-

creator

Design and

development

Gather customer opinion that is utilized in

the design and development task. Set new

product approach along with core

competency of the company. Product

development team works on exploratory

project by mixing component and taste test.

Customer as user Product

testing

Blind taste test to ensure taste and quality

compared to competitor.

Product

support

Work with advertising agency to present new

product and development and do a road

show with franchisees. Get feedback from

customer and support customer interaction


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3.4 Operations Challenge of the Product/Service Mix

Outside the US, Dominos does not have any corporate stores. There are over 4,500

franchised stores. This one aspect can pose as a problem. The Youtube video that

surfaced in 2009 illustrates how employees can tarnish an employers reputation and

eventually sales. The video showed two Domino employees violating numerous health

codes standards in a Dominos store. To make matters worse one of the employees has

a criminal record. Better hiring practises and enforcing a stringent code of ethics will

help the company deal with issues such as these. Additionally the thirty minutes delivery

guarantee that was initially introduced but later cancelled due to a relatively high

incidence of accidents. This is an example of a service delivery challenge the company

faced. Recognizing that the thirty-minute delivery was an attractive option for the

customer, Dominos reintroduced the concept, however allowing itself some leeway and

positioning it as a gift to the customer.

4 Process Design

4.1 Product Service Continuum

Dominos as an entity is rather unique in that it straddles both the product based supported

by a service package and Service based with a product element in the Product-Service

continuum.

Figure 13 Product Service Continuum: Dominos

4.2 The Conversion Process

The value conversion process has tangible and intangible elements, with the customer being

present in important stages in the value chain. With the introduction of open kitchens, the

customer who is waiting for his / her takeaway is a part of the entire experience right from the

time the order placement to the food consumption.

Figure 14 The Conversion Process: Dominos

Product Based supported by a service package - The Product (Pizza) not only needs to be manufactured acurately,

it needs to be delivered to the end customer within a specified amount

of time and in optimal conditions

Service Based with product element - The Customer buys into a service

which delivers an end product in the form of a Pizza

Transforming Resources -

(1) Staff (2) Kitchen Equipment

Transformed resources -

(1) Ingredients (2) Recipies

Product - Pizza's &

other food items


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Dominos is also in a unique position when it comes to the product they manufacture:

Volume: High volume the overall volume justifies modern kitchens and trained staff who

operate the kitchen and the front desk.

Variety: While the overall products are standard (pizzas), the customers might, based on their

own preferences ask for certain toppings to be added or removed which means the system

needs to cope and be flexible.

Variation in demand: The order volume peaks during lunch and dinner times. Alternatively,

there are periods in the day where the demand is low.

Degree of visibility: This varies from very high to low, given the open kitchen format that

Dominos has adopted, a customer choosing the takeaway format has full visibility of the

production process while a customer choosing the home delivery option has no visibility until

such time the product reaches his doorstep.

Dominos has chosen a unique Product / Service mix that reflect in the production line method

the company follows.

Figure 15 Volume Variety Mix: Assembly Line: Dominos


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Given that the pizzas and other items need to be prepared with a high degree of consistency,

Dominos has chosen to use the assembly line approach to produce its pizzas, while at the

same time they have retained the flexibility of a batch flow process. Essentially, the production

process at a Dominos kitchen utilizes the consistency and efficiencies that comes from using an

assembly line approach while retaining the flexibility that comes from adopting a batch type

manufacturing process. It is useful to note that using the assembly line approach also gives a

Dominos outlet the flexibility to meet higher volumes during peak hours. Dominos calls the

assembly line the make line.

4.3 The Production Process

The production process is very streamlined and structured - from the order placement to the

final delivery to the end customer.

Step 1: The customer initiates the order. It could be through the phone, internet or a walk-in to

the restaurant.

Figure 16 Dominos: Order Taking

Step 2: The Dominos representative takes the order and enters it into the Dominos PULSE

system (a proprietary system that streamlines the order taking process).

The PULSE system increases efficiencies at a store level. The key functions of this system are:

(a) Touch screen ordering: Improves order taking accuracy and efficiency especially during busy periods.

(b) Delivery driver routing system: Improves delivery efficiency. (c) Improved MIS capabilities.


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Step 3: The order displayed on the screen on the assembly line along with the customers

specifications.

Figure 17 Dominos: Assembly Line

Step 4: One of the team members in the assembly line picks up the work order, prepares the

dough and applies the sauce and cheese accordingly.

Step 5: In the next step of the make line another team member add the appropriate type /

amount of toppings, and then places it into the oven.


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Figure 18 Dominos: Oven Baking

Step 6: After the allotted baking time, a third member of staff removes the pizza from the oven,

and places it in a box (which has the order type & number displayed to ensure accuracy of

delivery). The pizza is then ready for delivery.

Figure 19 Packing: Dominos

Step 7: The pizza box is put into a hot-bag and is dispatched through a delivery driver or

handed out for collection by the waiting customer.


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The following figures further illustrate various aspects of Dominos operations. Figure

below establishes the entire value chain until delivery.

Figure 20 Process Flow Design: Dominos

Phone

Web

Collection

Order Placed

Pizza

Personal

Small

Medium

Large

Side Orders

Chicken Strips

Chicken Dunkers

Potato Wedges

Chicken Wings

Drinks

Ice-creams

Assembly Line

Placed in

Oven Cooking

Personal Box

Small Box

Medium Box

Large Box

Side Orders Boxes

Packing Delivery

Collection

Sales

Master Franchise Support Services

Dough production, ingredients and equipment purchasing and supply, training, operations, IT, marketing, PR, finance, HR, property, franchise

sales, leasing, transport, warehousing and administration.


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Figure 21 diagram establishes the volume based positioning of Dominos:

Figure 21 Volume Based Positioning: Dominos

4.3.1 Store Layout:

Dominos adopts a process dominated store layout wherein common processes are

clubbed together as the product moves between stations. The integrated floor plan at most

Dominos stores facilitate the movement of products and team members between stations

to manage capacity during peak hours and minimize bottlenecks.

The store layout is designed to cope with the average peak hour movement of goods and

people. The storage area is setup to stock the ingredients for three days. The layout

design enables the optimal use of space and equipment thereby enhancing the skills and

efficiency of the team members, it also allows them to adapt to different level of production.

Dominos also ensures that the health and safety norms are adhered to in order to maintain

safe working conditions for the staff. The standardization of the surface materials for the

interiors across all its stores in UK provides a comfortable environment for the staff and the

customer and enforces the brand image.

A typical Dominos store layout includes the following: Reception, Assembly Line, Oven

Packing area, Office, Cold Storage, and Washing Area. Figure 22 shows the typical layout

of the Dominos Store.


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Figure 22 Typical Store Layout: Dominos

4.4 Suggested Areas of Improvement

4.4.1 Process:

One of the common problems faced at the Dominos make line is that by its nature, the line

is not balanced, and this is because of two factors:

(1) Time taken for each activity is not the same. (2) Since the process is not automated, individual efficiencies of team members results

in an uneven flow of work.

The above two reasons tend to cause inefficiencies in the make line and results in

bottlenecks, especially during peak hours in the evenings.

Another major concern facing the local Glasgow franchise is that the drivers are not

equipped a GPS based navigation system, efficient on-time deliveries are primarily

dependent on the topographical knowledge of the individual drivers and once again, it is

left to an individuals capabilities to ensure on time deliveries, which account for 70% of the

total sales.

Reception Waiting Area

Assembly Line

Oven

Packing Area / Ready for Delivery are

Office

Cold Storage

Washing Area Storage


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4.4.2 Store and Production Layout:

While the typical dimensions of the floor enhance efficiency and facilitate optimum usage

of floor space, serious health and safety hazards exist for team members working in close

proximity to the oven - there have been cases of severe burns. A detailed interview with

some of the stores employees who have requested for anonymity indicates that this hazard

peaks during the busiest hours. The store we visited was the busiest Dominos in Scotland

as it handled sales for both Central & Eastern Glasgow (in terms of sales / and number

of units produced), so clearly there quite literally is space for improvement - the store

might want to provide more space around the oven.

It is understood that the given the limited space only one oven with two conveyor belts can

be accommodated. This creates a serious bottleneck when the conveyor belts of the oven

fail or if the oven breaks down. Primary investigation suggests that during peak hours the

demand is significantly higher than the capacity of the oven resulting in severe delay in

service times.

Additionally, there is no dedicated parking for the delivery driver in the proximity of the

store. This results in illegal parking in the loading areas in front of the store and the Co-op

Parking. This creates serious hazardous conditions for the drivers and other road users in

the proximity for the store with series legal implications.

4.5 Proposed Improvements

4.5.1 Process:

The assembly lines need automation in order to remove the inefficiencies caused by the

manual movement of products along the assembly line. The provisions of mobile phone

with blue tooth headset and navigation system would enable a reduction in the delivery

times, and thus driving up overall efficiencies.

4.5.2 Store Layout:

The store space needs restructuring to create more space for movement of goods and

people especially during peak hours. Consideration should be given to the idea of

separating the operations of the Dominos store for Central Glasgow and Eastern Glasgow

to manage the demand.

The oven needs to be re-located to make it safer for the team members to work in the

area. This is especially important from health and safety point of view during busy hours.

The parking for the dominos delivery drivers should be clearly marked. The drivers must be

restricted from using the loading area to eliminate the potential hazardous conditions.

Given these changes to the store structure, and operational aspects, we believe that the

store can create a healthier, more efficient atmosphere within the store, and drive up

efficiencies across the value chain.


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5 Planning and Control

5.1 Goldratts Theory of Constraints (TOC) applied to Dominos: The maximum capacity of baking pizzas simultaneously is 24, which is a bottleneck

in case of getting a bulk order, or during peak demand. In case of excess demand on one outlet, the load should be shared with the

nearest outlet. In case the load is persistently high on a particular outlet, then the baking capacity should be upgraded.

Figure 23 Production Constraints: Dominos Store


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Figure 24 Dominos Demand Strategy

5.2 Demand Forecasting

Dominos uses the Prescient distribution-planning suite for its inventory and demand

planning (forecasting). With the help of Prescient, Dominos created a solution called

Matched receipts to demand module which maximizes their overall supply chain efficiency

by facilitating lean operations.

The prescient-planning suite monitors inventory and determines when a distribution centre

needs a product. It optimizes the orders by looking at the minimum material required for

each product, based on the existing inventory levels at the distribution centre.

The planning suite receives requests from its retail stores through the companys

PeopleSoft Enterprise Resource Planning (ERP) system; it aggregates these requests to

establish replenishment requirements. It also considers any constraints such as dollar

amount per purchase order the next order is then based on the prior order.

5.3 Promotions Planning

The Prescient-planning tool manages promotions, which substantially increase the supply

chain demand for certain products.

Dominos plans promotional forecasts by looking at 4 months of historical and internal

information. The Prescient system contains a library of promotion profiles and real-time

analysis of the current period, and can overlay new knowledge from the corporate


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marketing department that is likely to influence the new promotion. Based on this data, it

provides recommendations for promotion adjustments.


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6 Innovation and Improvements

Over the last 50 years, Dominos has innovated many new products and processes hence

increasing its quality and efficiency. The company has developed its innovative

approaches in four main areas:

Paradigm Innovation

Position Innovation

Process Innovation

Product innovation

As shown in the Figure 25 below, each of these are at times a combination of Market

based, Eureka and Resource Based sources of innovation. Each area is examined in detail

below.

Figure 25 Innovation: Dominos

6.1 Paradigm Innovation

6.1.1 Radical innovation: Need pull

This is one of the radical innovations the company incorporated. Expansion of the business

created a need for the company to develop its own system of supply chain, which is

vertically integrated. This topic is explored in detail under the Supply Chain section of the

report. This shift of operating procedures can be looked at as a need pull factor. Simply


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put, the need for a new more effective innovation approaches to save cost and time

resulted in this strategy.

6.2 Position Innovation

6.2.1 Radical innovation: Eureka moment

This innovation is another radical approach where Dominos invented the three

dimensional car top signs. Being the first to this invent this marketing technique was a

eureka moment for Dominos. Due to its viral marketing effects, Dominos is able to reach

out to various customer bases and position itself as a highly recognized pizza delivery

brand.

6.3 Process Innovation

6.3.1 Radical innovation: Need Pull & Eureka moment

The Company has developed several innovative approaches in their processes. The need

for more efficient and multi-functional tools resulted in the development of the Spoodle

which is a saucing tool that combines a spoon and a ladle. Their eureka innovation was

the introduction of the mesh screen that helped cooked the pizza crust more evenly. In

addition to this, the need to be the more attractive option in the market resulted in the 30-

minute delivery guarantee. Again, Dominos were the first to come up with innovative

approaches like these. Thirdly, the company improved the routing software for Dominos

delivery vehicles further cutting costs and delivery time. All these approaches stemmed

from the need to outperform the competition in terms of quality, cut costs and operate more

efficiently.

6.3.2 Incremental innovation: Need Pull

Dominos has also successfully incorporated incremental innovations such as online

ordering with additional feature like a Pizza Tracker and Pizza builder (available in certain

locations), smart phone apps through which customers can place their order and text

message order placing. Additionally the Out of the door time concept was introduced

the time it takes between new orders being placed online or in store and the ready to eat

pizza leaving the store en route to the customer reduced from 17 minutes to 13 minutes.

6.4 Product Innovation

6.4.1 Radical innovation: Eureka moment

Another radical innovation was applied to Dominos product. The Corrugated pizza box

protects the pizza from physical damage, weakening due to moisture, and prevents cheese

from sticking to the top during delivery. The latest Heat Wave bags have a patented

insulation system that keeps pizzas both hot and crisp.

6.4.2 Incremental innovation: Need pull: Knowledge push

The need for incremental innovation was developed by creating a dependency between

two previously unrelated variables price and delivery time thereby creating a high value

proposition for the customer. The Company has also expanded its core product to include

products such as Cheesy bread and Cinna Stix, Dominos Oven Baked Sandwiches, etc.

This expansion is credited to the knowledge push Dominos has in relation to the product

offering.


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7 Supply Chain Management

7.1 Introduction

Dominos Pizza has adopted the Make-to-Stock Approach for its Supply Chain

Management. The company supply chain is supports lean production and is based on just

in time stock management and stock control.

7.2 Dominos Supply Chain

Dominos has an innovative supply chain model that ensures all purchases are managed

centrally across all franchises around the world. The core entity, which runs the supply

chain network is called Dominos supply chain services a fully owned subsidiary which

supplies the dough, raw materials (the condiments, and ingredients that go into the food

products), the kitchen equipment / machinery.

This entity supplies to all the master franchises effectively giving the company a few key

advantages:

(1) With a centralized buying department, the company is able to leverage its buying

power, and is able to negotiate the best costs for its purchases. This also ensures

purchases on a scale which makes suppliers want to tie into the Dominos supply

chain services. For instance Coca-Cola is integrated into Dominos supply chain

network, and is seen more as a partner rather than a supplier; this was made

possible because centrally Dominos has agreed to only sell Coca-Cola products at

all its outlets around the world.

(2) Consistency and Quality of products across the board- Since the sourcing is

centralized, this ensures consistent quality of food products used, and similar

machines / kitchen equipment that make training easy for staff.

(3) Economies of scale: Dominos is also able to use its large buying power to hedge

better costs when commodity prices fluctuate, it also gives it a better bargaining

power with suppliers.


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(4)

Figure 22 Supply Chain Model

Even at a master franchisee level, Dominos has been able to standardise and centralise

the supply chain services. Taking the UKs supply chain as an example, we look at the

country level supply chain works:

(1) All the raw materials and food stuffs (dough, ingredients) are prepared at a central

commissary in the UK located at Milton Keynes.

(2) The commissary, then supplies to distribution centers which are located in Milton

Keynes, Penrith and Nass.

(3) The distribution centers then supply to the individual stores once in 3 days (to

ensure a JIT philosophy) it could be on a more need basis, and this is tracked by

the PULSE system which keeps track of stocks at an individual store level.

Dominos Commissaries

Farmers Producers

Stores

Stores

Stores

Stores

C C C C C C


Challum Group 8 33

Figure 23 Supply Chain at a Country Level

7.3 Critic and recommendations

It is useful to note that the stores have faced issues with stock of dough, side orders and

packing boxes when the demand has exceeded the predicted demand in the past. It also

needs a stock check on a daily basis to arrive at the quantity for the next order. A more

sophisticated and comprehensive stock management and control tool to enable store to

predict the demand and manage its stock is highly recommended.


Challum Group 8 34

8 Quality Management

8.1 Introduction

Quality of products and service is very essential to for Dominos to maintain its brand image

and reputation as a company that serves quality products; this becomes even more critical

considering the fact that pizza is often stereotyped as an unhealthy food.

8.2 Quality Assurance and Quality Control

Dominos owns its own supply chain network, 99% of its Master franchises source their

ingredients and other requirements from this entity, these are then stocked at central

commissaries, which then distribute the items needed to the smaller franchises / stores

directly on a 3 day basis, hence reducing the need for stockpiling of resources, and

ensuring a JIT type set-up. This central control on supplies ensures consistency is

maintained in all the raw materials that go into the food produced by the restaurants.

Dominos Pizza Group has a documented Supplier Approval Procedure in place. Dominos

is in agreement with all suppliers of food ingredients and packaging to a detailed product

specification for the products supplied. This is reviewed by a Food Technologist to ensure

that the product is safe, legal and consistently of high quality.

Dominos ensures that all food products are risk assessed and their production is either

audited by Food Technologist or is certified to the BRC Global Standard for Food Safety. A

database of Dominos approved products and suppliers is maintained. Suppliers are

continually assessed in various ways. Quality checks carried out on delivery, samples sent

for analysis or feedback received from stores or consumers.

8.3 Critic and recommendations

Dominos has some high quality standards for the food, however when it comes to service it

does very little to ensure the quality of service, a more robust approach to ensuring quality

of customer service is recommended to maintain, build customer loyalty.


Challum Group 8 35

9 Conclusion and Recommendations

Based on our study of Dominos operations, and its global operating model we

summarize that Dominos is currently in a state of flux.

As a company, Dominos has in the past shown resilience and an ability to innovate in the

face of competition, but this has been more push-based rather then pull-based. Dominos

has shown the ability to innovate but it has been more as a catch-up and not as a more

intuitive customer led change. The reworking of the recipe in the US market in 2009 was a

brilliant test case in a company reacting to change, and Dominos had to do this because it

was losing market share to other competitors, and there was consistent negative feedback

from US customers on the poor quality of its pizzas.

Dominos needs to drive changes more intuitive and customer led, rather than use one

successful operating model in an unchanged manner, it needs to make adjustments to it

when needed rather than just go in for one overall revamp.

Dominos also seems to be diluting its core proposition, which is:

(1) Delivery / Takeaway of Pizzas

(2) On-time, speedy delivery of Pizzas

(3) Minimum number of products / product base which enables quick delivery of

Pizzas

In response to a potential threat from other fast food companies Dominos is expanding its

product base - the Dominos Sub sandwich is an example of Dominos moving away from its

core-value proposition. This has some potential drawbacks such as complicating the

supply chain networks, potentially increasing cooking times and thereby increasing service

delivery times. If Dominos manages this expansion well, then it can add to its product

offerings while leveraging its core strengths, which might increase its market share.

A big threat for Dominos is that it is a service entity but it has adopted a product

manufacturing approach. The companys key focus areas have always been to deliver

pizza on time. Over time, Dominos has not been focusing on its service aspect, and in a

increasingly customer centric world it is critical that Dominos improves its hiring / training

practices and deliver world class customer service along with the best in class product that

it currently offers.


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10 References

1. Charlene Li, Harvard Business Review: The Art of Admitting Failure, 2011 http://blogs.hbr.org/cs/2011/03/the_art_of_admitting_failure.html

2. BIS John Reynolds, Dominos Pizza Inc.

http://web.ebscohost.com/ehost/detail?sid=5b87caa3-d294-4899-9e92-9941787fd7ab%40sessionmgr14&vid=3&hid=12&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&AN=53576535

3. Geoff Riley, Dominos Pizza - Growth & Strategy (Part 2) - Innovation, Service and Smart, Operations, 2010 http://tutor2u.net/blog/index.php/business-studies/comments/dominos-pizza-growth-strategy-part-2-innovation-service-and-smart-operation/

4. Dominos Corporate profile http://phx.corporate-ir.net/phoenix.zhtml?c=135383&p=irol-homeprofile

5. Global Logistics & Supply Chain Strategies, Planning, Sourcing, Replenishment Are Easy as (Pizza) Pie, 2008 http://www.supplychainbrain.com/content/industry-verticals/food-beverage/single-article-page/article/planning-sourcing-replenishment-are-easy-as-pizza-pie/

6. Dominos annual report 2011 http://www.dominos.com.au/corporate/investors/investors.aspx

7. Stephanie Clifford, The New York Times, Video Prank at Dominos Taints

Brand, 2009 http://www.nytimes.com/2009/04/16/business/media/16dominos.html

8. Jacob Goldenberg, David Mazursky, The Cambridge Press, Creativity in

Product innovation, 2002 http://catdir.loc.gov/catdir/samples/cam033/2001018106.pdf

9. BIS: Euro Monitor Dominos company profile 06 Sept 2011

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