MBA Operations Management Assignment

Operations Management Assignment
Dominos LLC

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


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

© Challum Group 8 i


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 Process……………………………………………………………………………25

4.5.2 Store Layout…………………………………………………………………….. 25

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

5.1 Goldratt‟s 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

© Challum Group 8 ii


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

© Challum Group 8 iii


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 company‟s operational strategy in
terms of it product and service offering. While the report considers Dominos LLC‟s
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 company‟s existing
strategy. Upon dissecting various aspects of the company‟s processes, it provides an
appreciation of the company‟s 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 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.

© Challum Group 8 4


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.

Dominos Pizza
LLC

Master Franchise

Sub- Sub-
Sub-Franchisees
Franchisees Franchisees

Figure 1: Domino's Franchise Model: UK

2.2 Corporate Vision
The Dominos Corporate Vision statement Passionate Passionate
focuses on the following key areas: about
about
Quality
winning
 Being better than the competition.
 Ensuring a quality product.
 Providing excellent service. Passionate Passionate
 Creating lasting relationships with its about about
Service relationships
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


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 company‟s 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 criteria‟s for Dominos.

Order Winners for Dominos :
Order Qualifiers for a Potential Order losers :
Core competency on Delivery :
customer ordering take away : Inconsistent taste : Delay in
Consistent quality : Delivered
Convenient : Tasty : Quick : delivery : Poor quality of
with no delays : Wide variety
Cheap food : Pricing at a premium
on menu : Tasty

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.



Unique Supply
chain model :
Better quality
& consistency

Focussed on Unique
Dominos Competitive GLOBAL
the core
competency advantage - Global model: Allows
of delivery leader in Pizza take flexibility at
away / home delivery the regional
level

Leaner Stores
: Better
operating
margins

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.



Process Flow &
Infrastructure :
Seamless from the
customers point of
view, centrally located
stores

Customer Need :
Dependable takeaway
restaurant : Hot Food
delivered reliably

Operational Strategy :
Global Strategy : Innovative use of
Franchise model, Lean technology to ease the
Stores, Investment in transaction, Well
Staff, Robust quality trained staff with local
control 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.



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 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.



2.9 Competitor Analysis

Brand Shares of Chained 100% HD/TA
80
70
60
50
40
30
20
10
0

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 John‟s 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



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.



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.



3 Product & Service Design
3.1 Introduction
Dominos has positioned and established itself as the pioneer in the pizza delivery
service. Pizza comprises the company‟s 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 customer‟s 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 company‟s 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.



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.



Figure 12 New Product Development

Customer Role NPD Phase Key Issue/Managerial Challenge

Customer as Ideation Select customer opinion to develop new
resource product Market researchers collect customer
information by studying customer buying
patterns and using tools such as customer
surveys and focus groups.

Customer as co- Design and Gather customer opinion that is utilized in
creator development 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 Blind taste test to ensure taste and quality
testing compared to competitor.

Product Work with advertising agency to present new
support product and development and do a road
show with franchisees. Get feedback from
customer and support customer interaction

Table 1 Product Re-design using the customer feedback



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 employer‟s 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.

Product Based supported by a service
package - The Product (Pizza) not only Service Based with product element -
needs to be manufactured acurately, The Customer buys into a service
it needs to be delivered to the end which delivers an end product in the
customer within a specified amount form of a Pizza
of time and in optimal conditions

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.

Transforming Transformed Product -
Resources - resources -
Pizza's &
(1) Staff (1)
(2) Kitchen Ingredients
other food
Equipment (2) Recipies items

Figure 14 The Conversion Process: Dominos


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



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.



Step 3: The order displayed on the screen on the assembly line along with the customer‟s
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.



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.


The following figures further illustrate various aspects of Dominos operations. Figure
below establishes the entire value chain until delivery.

•Pizza
•Personal
•Small
•Medium •Personal
•Large Box
•Side Orders •Small
•Chicken Box
•Phone
Strips Placed •Medium
Order •Web Assembly
•Chicken Cooking in Packing Box Sales •Delivery
Placed •Collecti Line
Dunkers Oven •Large •Collection
on
•Potato Box
Wedges •Side
•Chicken Orders
Wings Boxes
•Drinks
•Ice-
creams

Master Franchise Dough production, ingredients and equipment purchasing and supply,
training, operations, IT, marketing, PR, finance, HR, property, franchise
Support Services sales, leasing, transport, warehousing and administration.

Figure 20 Process Flow Design: Dominos



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.



Storage Washing Area

Cold Storage

Office
Oven Assembly
Line

Packing Area / Ready for
Delivery are

Reception Waiting Area

Figure 22 Typical Store Layout: Dominos

4.4 Suggested Areas of Improvement
4.4.1 Process:
One of the common problems faced at the Domino‟s 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 individual‟s capabilities to ensure on time deliveries, which account for 70% of the
total sales.



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.



5 Planning and Control
5.1 Goldratt’s 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



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 company‟s
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


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



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



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, Domino‟s Oven Baked Sandwiches, etc.
This expansion is credited to the knowledge push Dominos has in relation to the product
offering.



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.



Farmers Producers

Dominos Commissaries

Store Store Store Store
s s s s

C C C C C C
(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 UK‟s 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.



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.



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 Domino‟s 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.



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 Pizza‟s
(2) On-time, speedy delivery of Pizza‟s
(3) Minimum number of products / product base which enables quick delivery of
Pizza‟s

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 company‟s 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.



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=JnNpdGU9ZWhvc3QtbGl2
ZQ%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 Domino’s 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


MBA Operations Management Assignment

More Related Content

What's hot

Similar to MBA Operations Management Assignment

Recently uploaded

MBA Operations Management Assignment