Dominos operational strategies

Operations management

Date: May 19, 2014

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Table of content

1 Executive Summary ...............................................................................................3

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

3 Product & Service Design ......................................................................................8

4 Process Design ......................................................................................................10

5 Planning and Control..............................................................................................14

6 Supply Chain Management ....................................................................................15

7 Quality Management ..............................................................................................15

8 Conclusion and Recommendations ........................................................................16

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1 Executive Summary

This report has been prepared to analyze why domino’s pizza in Islamabad is not being as successful as it is in other regions and other parts of world. Why pizza hut and McDonalds having more market share than domino’s in Islamabad. As it’s the second largest pizza chain in United States.

The processes and strategies such as operating system, Strategy and competitive setting, supply chain and quality of dominos are analyzed. Theoretical strategies have been applied to evaluate the company’s operational strategy in terms of it product and service offering. The report is a result of team research, a store visit, interviews and insights from Dominos existing employees.

The study evaluates how Dominos has been able to position itself as a leader in its market segment worldwide but not in Pakistan. Finally, upon identifying the areas of improvement in the company’s 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. Since1960, Domino’s Pizza has successfully expanded from three outlets in the US to9, 350 stores operating in seventy countries. Dominos operation in Pakistan and overseas uses the franchise model. The parent company, Domino’s 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: Dominos Franchise Model

2.2 Region problem:

There are regions defined by the parent company and in this division they consider that in Pakistan there are Muslims living and Saudi Arabia also had Muslim population so they categorize Pakistan under master franchise of Saudi Arabia. Same taste pizza is selling in Pakistan as sold in Saudi Arabia those people have different taste and Pakistani people had different that is the main reason why dominos is not having market share in Pakistan .The pizza offering by dominos is not according to the Pakistani culture .

2.3 Corporate Vision

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Dominos Pizza LLC

Sub-Franchisees (Iran)

Sub-Franchisees(Pakistan)

Sub-Franchisees(Abu dhabi )

Master Franchise(Saudi Arabia)

The Dominos Corporate Vision statement Passionate 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.

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 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.

2.4 Mission

“Domino’s pizza is the pizza specialist who consistently delights the customer with great taste and choice pizza with friendly, courteous team members providing prompt, safe delivery service”

2.5 Domino’s values

During our visit to Islamabad franchise following five values were seen written on white board where all the employees was working

2.6 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.

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Core Competencies: Dominos

2.7 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. Its global operational model allows for lean stores, well-trained staff and flexibility at a country level to customize 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.

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Dominos competitive

advantgse-global leader in pizza

take away/home delivery

Unique Supply chain model : Better quality & consistency

unique global model:allows

flexibilty at the regional level

level Leaner Stores : Better

operating margins

focussed on the core

competency of delivery

2.8 Product value chain

Porter’s 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.

2.9 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 Domino’s 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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2.10 Major competitors

1. Tehzeeb bakers2. Pizza hut3. Italian pizza4. Papa salis

3. Product & Service Design

3.1 Introduction

Dominos has positioned and established itself as the pioneer in the pizza delivery service. They are giving different offerings for different segments like local favorites, Global favorites, Premium pizzas, kids’ corner and designer’s pizza .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 customer’s individual needs through unique combinations. Dominos standard product and services offering is universal across the world – quality pizza delivery in approximately thirty minutes.

3.2 Failed Product and Product Re-design:

Dominos openly acknowledge shortcomings and use customer feedback to revise their strategy and approach. In an effort to design their product again, 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.

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New Product Development figure:

3.3 Operations Challenge of the Product/Service Mix

Additionally the thirty minutes delivery guarantee that was initially introduced but later cancelled due to a relatively high incidence of accidents and snatching of pizza on roads. 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.

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4 Process Design

4.1 Transformation &conversion process in term of 4Vs:

Volume: high volume-trained staff following same standard procedures in massive quantity as it is efficient way to produce special equipment leading to continuous operations

Variety: the customers have a choice to select their own topping or can add more ingredients. Dominos moreover redesign operational strategies on the basis of customer feedback

Variation in demand: dominos has low demand in daytime but demand variation is high at lunch and dinner time

Degree of visibility: when the customer comes for dine in or for take away kitchen is highly visible, but in case of delivery at door step visibility of production process is low

4.2 Assembly line approach

Dominos were the pioneers to use the assembly line approach to prepare pizzas and other items at high degree of consistency .They 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.

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. Dominos calls “make line” to its assembly line. This make line methodology also facilitates dominos to produce higher volume in rush and peak hours

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.

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Order placement

Assembly line

Cooking

packing

product is served to end consumer or delivered

7 steps of production process

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

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.

Step 3: The order displayed on the screen on the assembly line along with the customer “specifications.

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.

Dominos: dough making

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Dominos: assembly line

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.

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.

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Dominos: packaging

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.

5.4 Store Layout:

Dominos stores layout 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. A typical Dominos store layout includes the following: Reception, Assembly Line, Oven Packing area, Office, Cold Storage, and Washing Area. Figure shows the layout of the Dominos Store.

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5 Planning and Control

5.1 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 monitors inventory and determines when a branch needs a product. It optimizes the orders by looking at the minimum material required for each product, based on the existing inventory levels at each branch.

If the demand exceeds or inventory is about to finish the branch Enterprise Resource Planning (ERP) system sends request to the commissary.

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6 Supply Chain Management

6.1 Dominos Supply Chain

Dominos has an innovative supply chain model that ensures all purchases are managed centrally across all franchises around the world. Master franchise supplies beef, cheese, butter chips, and dough ingredients to the 3 commissary in Pakistan. These commissaries take chapatti floor from sunny mill (quality floor) and add imported ingredients after mixing they left the dough for 2 days at 0c temperature then it’s ready for supply to the branches. This approach gives certain advantages, such as consistent quality, fresh products at a lesser cost .But sometimes over stock of dough, packaging material etc. cause losses to dominos if demand is less or exceeds.

6.2 Supply chain of Islamabad franchise:

(1) All the raw materials and food stuffs, such as (dough, ingredients)are prepared in Rawalpindi commissary

(2) The commissary, then supplies to the three branches in Islamabad(3) Branches had to use the inventory within 4 days ,commissary then delivers after 4 days

7. Quality Management

7.1 Quality Assurance and Quality Control

Dominos owns its own supply chain network, 99% of its Master franchises (Saudi Arabia) 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.

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8. Conclusion and Recommendations

Redefining regions:

Based on our study of Dominos operations– we summarize that Dominos is going in loss due to not under right region. Pakistan should be sub franchise under India master franchise as dominos is very successful in India and its rest of sub franchises.

Redesigning of product for Pakistani customers:

The best thing about dominos is that they acknowledges its shortcomings and try to overcome it. Hence 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.

Dominos has the best staff ,resources ,innovations and operations strategy but they are lacking in not understanding their target market need that’s why its competitor are gaining more market share. If dominos redefines and redesign itself then it will not only becomes the leader in the other part of world but also become successful in Pakistan region as well.

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