MBA Operations Management Assignment

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  • 1. 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
  • 2. Operations Management Assignment Table of ContentsTable of Contents ............................................................................................................. i1 Executive Summary ...............................................................................................42 Operations Strategy...............................................................................................52.1 Introduction...............................................................................................................52.2 Corporate Vision ......................................................................................................52.3 Global Strategic objectives ......................................................................................62.4 Order qualifiers, Order winners................................................................................62.5 The Core Competencies of Dominos ......................................................................62.6 The Value Chain ......................................................................................................72.7 Product value chain .................................................................................................82.8 Operations Strategy Implications (Store Level) .......................................................92.9 Competitor Analysis ...............................................................................................10Figure 7 Dominos versus its Competitors (UK) ..............................................................103 Product & Service Design ...................................................................................133.1 Introduction.............................................................................................................133.2 Product Life Cycle ..................................................................................................133.3 Failed Product and Product Re-design: ................................................................143.4 Operations Challenge of the Product/Service Mix ................................................164 Process Design ....................................................................................................174.1 Product Service Continuum ...................................................................................17© Challum Group 8 i
  • 3. Operations Management Assignment4.2 The Conversion Process........................................................................................174.3 The Production Process.........................................................................................19 4.3.1 Store Layout…………………………………………………………………….. 234.4 Suggested Areas of Improvement .........................................................................24 4.4.1 Process………………………………………………………………………….. 24 4.4.2 Store and Production Layout………………………………………………….. 254.5 Proposed Improvements ........................................................................................25 4.5.1 Process……………………………………………………………………………25 4.5.2 Store Layout…………………………………………………………………….. 255 Planning and Control...........................................................................................265.1 Goldratt‟s Theory of Constraints (TOC) applied to Dominos: ...............................265.2 Demand Forecasting ..............................................................................................275.3 Promotions Planning ..............................................................................................276 Innovation and Improvements............................................................................296.1 Paradigm Innovation ..............................................................................................29 6.1.1 Radical innovation: Need pull…………………………………………………..296.2 Position Innovation .................................................................................................30 6.2.1 Radical innovation: Eureka moment………………………………………….. 306.3 Process Innovation ................................................................................................30 6.3.1 Radical innovation: Need Pull & Eureka moment…………………………… 30 6.3.2 Incremental innovation: Need Pull……………………………………………. 306.4 Product Innovation .................................................................................................30 6.4.1 Radical innovation: Eureka moment………………………………………….. 30© Challum Group 8 ii
  • 4. Operations Management Assignment 6.4.2 Incremental innovation: Need pull: Knowledge push……………………….. 307 Supply Chain Management .................................................................................317.1 Introduction.............................................................................................................317.2 Dominos Supply Chain ..........................................................................................317.3 Critic and recommendations ..................................................................................338 Quality Management ............................................................................................348.1 Introduction.............................................................................................................348.2 Quality Assurance and Quality Control..................................................................348.3 Critic and recommendations ..................................................................................349 Conclusion and Recommendations ..................................................................3510 References ............................................................................................................36© Challum Group 8 iii
  • 5. Operations Management Assignment 1 Executive SummaryThis report has been prepared to analyse the processes and strategies such ascontrol of operations systems, design and planning of Dominos LLC. Theoreticalframeworks have been applied to evaluate the company‟s operational strategy interms of it product and service offering. While the report considers Dominos LLC‟soverall strategy, it also focuses on the daily operations of Dominos DPG franchises.Particular focus has been placed on the daily operations processes of the Dominosstore located on Alexandra Parade in Glasgow, UK. The report is a result of teamresearch, case study analysis, a store visit, interviews and insights from Dominosexisting employees, application of theoretical concepts, models and prior experience.The study evaluates how Dominos has been able to position itself as a leader in itsmarket segment and analyses the strengths and weakness in the company‟s existingstrategy. Upon dissecting various aspects of the company‟s processes, it provides anappreciation of the company‟s efforts to continuously evolve in the changing marketconditions by incorporating new product design and being innovative to stay at parwith 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 orderto further ensure operational efficiency thereby maximizing profits and increasing itsvalue offering.© Challum Group 8 4
  • 6. Operations Management Assignment 2 Operations Strategy2.1 IntroductionDominos is one the leading pizza delivery companies globally. The Company has aunique business and operation model and is a pioneer in the fast food industry. Since1960, Dominos Pizza has successfully expanded from three outlets in the US to9,350 stores operating in seventy countries. Dominos‟ operation in the UK andoverseas uses the franchise model. The parent company, Dominos Pizza LLC ishead quartered in Michigan, USA. It maintains overall control on the sourcing andsupplying of raw materials to the master franchises and enforces quality of the serviceand 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: Dominos Franchise Model: UK2.2 Corporate VisionThe Dominos Corporate Vision statement Passionate Passionatefocuses 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: DominosA clear corporate vision ensures that the company and its franchises can worktowards meeting common goals thereby increasing its business in a potentiallyvirtuous cycle. Figure 2 show the graphical representation of the Dominos Vision. The© Challum Group 8 5
  • 7. Operations Management Assignmentoverall global vision translates into specifics at a country level in a seamless mannerso that the overall strategic vision is kept in mind at all times.2.3 Global Strategic objectivesStrategic objectives adhere to the company‟s vision statement, Dominos‟ keystrategic 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 winnersOrder qualifiers are the basic criteria the product meets to quality for selling. Orderwinners are the criteria that win the customers when it comes to purchasing. Figure 3shows 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: Dominos2.5 The Core Competencies of DominosDominos‟ core competencies have evolved over time. Their unique sets of strengthshave helped the Company dominate the pizza food service industry, and a leader inthe home delivery / take away.© Challum Group 8 6
  • 8. Operations Management Assignment 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: Dominos2.6 The Value ChainIt 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 dependabletake away restaurant, reasonably priced hot quality food and variety that suits thelocal palette.Dominos has focused on these key customer needs throughout the value chain, andhas not allowed any digressions in this area unlike other competitors who haveevolved a mixed model of full service restaurants and takeaway outlets, or a hybridcombination of both. This has diluted their strengths in the segment Dominos focuseson - 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 customertastes. Operational requirements have prompted the use of technology to make thecustomer experience more enriching, it has a history of firsts – they were the first touse TV as a distribution channel, an online tracking system that allows customers totrack the pizza order and a proprietary point of sale system. A combination of theCompany level strategy and the Operational Strategy has resulted in Dominos havinga reputation for reliability and consistent pizza quality) – these strategies haveensured that Dominos continues to meet its customer needs.© Challum Group 8 7
  • 9. Operations Management Assignment 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: Dominos2.7 Product value chainFigure 6 illustrates Porters model, which depicts Dominos‟ operations as a collectionof value-adding activities. The five primary activities are processes that are mainlyconcerned with the production of the products and services to the external customers.These are necessary to the business processes. The activities indicated as supportactivities are activities that are vital for the development of the appropriatetransforming resources. These can be looked as value adding activities, for instanceincorporating the use of technology such as being able to place orders by textmessage add to the convenience Dominos provides and increases the accuracy oforder. All these constitute the business processes of the organization.© Challum Group 8 8
  • 10. Operations Management Assignment Figure 6 Product Value Chain: Dominos2.8 Operations Strategy Implications (Store Level)Dominos operations strategy mainly focuses on the providing high service quality to thecustomer: 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. © Challum Group 8 9
  • 11. Operations Management Assignment2.9 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© Challum Group 8 10
  • 12. Operations Management Assignment 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.© Challum Group 8 11
  • 13. Operations Management Assignment 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.© Challum Group 8 12
  • 14. Operations Management Assignment 3 Product & Service Design3.1 IntroductionDominos has positioned and established itself as the pioneer in the pizza deliveryservice. Pizza comprises the company‟s core product with additional items such assubs, chicken strips/bites, wings, garlic bread and potatoes wedges. A fair degree offlexibility is available where customers can customize their pizza and can choose topurchase “combos” thereby providing better value for money. Additional items such assoft drinks accompany these choices. Dominos has successfully implemented thisconcept of mass customization by catering to customer‟s individual needs throughunique combinations of modular components. Dominos standard product and servicesoffering is universal across the world – quality pizza delivery in approximately thirtyminutes. Across all geographical regions, the target segment is a cost consciousconsumer whose prime concern is convenience.It is useful to analyse the company‟s product performance and use it to evaluate howsuccessful 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, Dominos 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.© Challum Group 8 13
  • 15. Operations Management Assignment Figure 11 Evolution of Dominos3.3 Failed Product and Product Re-design:A good example of how Dominos re-designed its core product is to look at a how thecompany dealt with its core product failing in the past. It was a bold move for thecompany to a publically acknowledge that their pizza tasted bad. Additionally it isrefreshing to see a corporation openly acknowledge shortcomings and use customerfeedback constructively to revise their strategy and approach. In an effort to design theircore competency, the company reconfigured its recipe. They tested severalcombinations of cheeses, sauces and crust to finally arrive at a recipe that waswelcomed by the public. It is useful to note that the end customer was heavily involvedin the process of the product being re-designed and influenced the outcome largely. Thisapproach of using customer feedback can be credited the company witnessing anincrease in sales following the redesigning of their product. Figure 12 and Table 1 iteratethis.© Challum Group 8 14
  • 16. Operations Management Assignment 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© Challum Group 8 15
  • 17. Operations Management Assignment3.4 Operations Challenge of the Product/Service MixOutside the US, Dominos does not have any corporate stores. There are over 4,500franchised stores. This one aspect can pose as a problem. The Youtube video thatsurfaced in 2009 illustrates how employees can tarnish an employer‟s reputation andeventually sales. The video showed two Domino employees violating numerous healthcodes standards in a Dominos store. To make matters worse one of the employees hasa criminal record. Better hiring practises and enforcing a stringent code of ethics willhelp the company deal with issues such as these. Additionally the thirty minutes deliveryguarantee that was initially introduced but later cancelled due to a relatively highincidence of accidents. This is an example of a service delivery challenge the companyfaced. Recognizing that the thirty-minute delivery was an attractive option for thecustomer, Dominos reintroduced the concept, however allowing itself some leeway andpositioning it as a “gift” to the customer.© Challum Group 8 16
  • 18. 4 Process Design4.1 Product Service ContinuumDominos as an entity is rather unique in that it straddles both the product based supportedby a service package and Service based with a product element in the Product-Servicecontinuum. 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: Dominos4.2 The Conversion ProcessThe value conversion process has tangible and intangible elements, with the customer beingpresent in important stages in the value chain. With the introduction of open kitchens, thecustomer who is waiting for his / her takeaway is a part of the entire experience right from thetime the order placement to the food consumption. Transforming Transformed Product - Resources - resources - Pizzas & (1) Staff (1) (2) Kitchen Ingredients other food Equipment (2) Recipies items Figure 14 The Conversion Process: Dominos
  • 19. Operations Management AssignmentDominos 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 whooperate the kitchen and the front desk.Variety: While the overall products are standard (pizzas), the customers might, based on theirown preferences ask for certain toppings to be added or removed which means the systemneeds 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 thatDominos has adopted, a customer choosing the takeaway format has full visibility of theproduction process while a customer choosing the home delivery option has no visibility untilsuch time the product reaches his doorstep.Dominos has chosen a unique Product / Service mix that reflect in the production line methodthe company follows. Figure 15 Volume Variety Mix: Assembly Line: Dominos© Challum Group 8 18
  • 20. Operations Management AssignmentGiven 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 thesame time they have retained the flexibility of a batch flow process. Essentially, the productionprocess at a Dominos kitchen utilizes the consistency and efficiencies that comes from using anassembly line approach while retaining the flexibility that comes from adopting a batch typemanufacturing process. It is useful to note that using the assembly line approach also gives aDominos outlet the flexibility to meet higher volumes during peak hours. Dominos calls theassembly line the “make line”.4.3 The Production ProcessThe production process is very streamlined and structured - from the order placement to thefinal delivery to the end customer.Step 1: The customer initiates the order. It could be through the phone, internet or a walk-in tothe restaurant. Figure 16 Dominos: Order TakingStep 2: The Dominos representative takes the order and enters it into the Dominos PULSEsystem (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.© Challum Group 8 19
  • 21. Operations Management AssignmentStep 3: The order displayed on the screen on the assembly line along with the customer‟sspecifications. Figure 17 Dominos: Assembly LineStep 4: One of the team members in the assembly line picks up the work order, prepares thedough 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.© Challum Group 8 20
  • 22. Operations Management Assignment Figure 18 Dominos: Oven BakingStep 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 ofdelivery). The pizza is then ready for delivery. Figure 19 Packing: DominosStep 7: The pizza box is put into a hot-bag and is dispatched through a delivery driver orhanded out for collection by the waiting customer.© Challum Group 8 21
  • 23. Operations Management AssignmentThe following figures further illustrate various aspects of Dominos operations. Figurebelow 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© Challum Group 8 22
  • 24. Operations Management AssignmentFigure 21 diagram establishes the volume based positioning of Dominos: Figure 21 Volume Based Positioning: Dominos4.3.1 Store Layout:Dominos adopts a process dominated store layout wherein common processes areclubbed together as the product moves between stations. The integrated floor plan at mostDominos stores facilitate the movement of products and team members between stationsto manage capacity during peak hours and minimize bottlenecks.The store layout is designed to cope with the average peak hour movement of goods andpeople. The storage area is setup to stock the ingredients for three days. The layoutdesign enables the optimal use of space and equipment thereby enhancing the skills andefficiency 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 maintainsafe working conditions for the staff. The standardization of the surface materials for theinteriors across all its stores in UK provides a comfortable environment for the staff and thecustomer and enforces the brand image.A typical Dominos store layout includes the following: Reception, Assembly Line, OvenPacking area, Office, Cold Storage, and Washing Area. Figure 22 shows the typical layoutof the Dominos Store.© Challum Group 8 23
  • 25. Operations Management Assignment Storage Washing Area Cold Storage Office Oven Assembly Line Packing Area / Ready for Delivery are Reception Waiting Area Figure 22 Typical Store Layout: Dominos4.4 Suggested Areas of Improvement4.4.1 Process:One of the common problems faced at the Domino‟s make line is that by its nature, the lineis 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 inbottlenecks, especially during peak hours in the evenings.Another major concern facing the local Glasgow franchise is that the drivers are notequipped a GPS based navigation system, efficient on-time deliveries are primarilydependent on the topographical knowledge of the individual drivers and once again, it isleft to an individual‟s capabilities to ensure on time deliveries, which account for 70% of thetotal sales.© Challum Group 8 24
  • 26. Operations Management Assignment4.4.2 Store and Production Layout:While the typical dimensions of the floor enhance efficiency and facilitate optimum usageof floor space, serious health and safety hazards exist for team members working in closeproximity to the oven - there have been cases of severe burns. A detailed interview withsome of the stores employees who have requested for anonymity indicates that this hazardpeaks 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 numberof units produced), so clearly there quite literally is “space” for improvement - the storemight want to provide more space around the oven.It is understood that the given the limited space only one oven with two conveyor belts canbe accommodated. This creates a serious bottleneck when the conveyor belts of the ovenfail or if the oven breaks down. Primary investigation suggests that during peak hours thedemand is significantly higher than the capacity of the oven resulting in severe delay inservice times.Additionally, there is no dedicated parking for the delivery driver in the proximity of thestore. This results in illegal parking in the loading areas in front of the store and the Co-opParking. This creates serious hazardous conditions for the drivers and other road users inthe proximity for the store with series legal implications.4.5 Proposed Improvements4.5.1 Process:The assembly lines need automation in order to remove the inefficiencies caused by themanual movement of products along the assembly line. The provisions of mobile phonewith blue tooth headset and navigation system would enable a reduction in the deliverytimes, and thus driving up overall efficiencies.4.5.2 Store Layout:The store space needs restructuring to create more space for movement of goods andpeople especially during peak hours. Consideration should be given to the idea ofseparating the operations of the Dominos store for Central Glasgow and Eastern Glasgowto manage the demand. The oven needs to be re-located to make it safer for the team members to work in thearea. 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 berestricted from using the loading area to eliminate the potential hazardous conditions.Given these changes to the store structure, and operational aspects, we believe that thestore can create a healthier, more efficient atmosphere within the store, and drive upefficiencies across the value chain.© Challum Group 8 25
  • 27. Operations Management Assignment 5 Planning and Control5.1 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© Challum Group 8 26
  • 28. Operations Management Assignment Figure 24 Dominos Demand Strategy5.2 Demand ForecastingDominos uses the „Prescient‟ distribution-planning suite for its inventory and demandplanning (forecasting). With the help of Prescient, Dominos created a solution called„Matched receipts to demand module‟ which maximizes their overall supply chain efficiencyby facilitating „lean‟ operations.The prescient-planning suite monitors inventory and determines when a distribution centreneeds a product. It optimizes the orders by looking at the minimum material required foreach product, based on the existing inventory levels at the distribution centre.The planning suite receives requests from its retail stores through the company‟sPeopleSoft Enterprise Resource Planning (ERP) system; it aggregates these requests toestablish replenishment requirements. It also considers any constraints such as dollaramount per purchase order – the next order is then based on the prior order.5.3 Promotions PlanningThe Prescient-planning tool manages promotions, which substantially increase the supplychain demand for certain products.Dominos plans promotional forecasts by looking at 4 months of historical and internalinformation. The Prescient system contains a library of promotion profiles and real-timeanalysis of the current period, and can overlay new knowledge from the corporate© Challum Group 8 27
  • 29. Operations Management Assignmentmarketing department that is likely to influence the new promotion. Based on this data, itprovides recommendations for promotion adjustments.© Challum Group 8 28
  • 30. Operations Management Assignment 6 Innovation and ImprovementsOver the last 50 years, Dominos has innovated many new products and processes henceincreasing its quality and efficiency. The company has developed its innovativeapproaches in four main areas:  Paradigm Innovation  Position Innovation  Process Innovation  Product innovationAs shown in the Figure 25 below, each of these are at times a combination of Marketbased, Eureka and Resource Based sources of innovation. Each area is examined in detailbelow. Figure 25 Innovation: Dominos6.1 Paradigm Innovation 6.1.1 Radical innovation: Need pullThis is one of the radical innovations the company incorporated. Expansion of the businesscreated a need for the company to develop its own system of supply chain, which isvertically integrated. This topic is explored in detail under the “Supply Chain” section of thereport. This shift of operating procedures can be looked at as a “need pull” factor. Simply© Challum Group 8 29
  • 31. Operations Management Assignmentput, the need for a new more effective innovation approaches to save cost and timeresulted in this strategy.6.2 Position Innovation 6.2.1 Radical innovation: Eureka moment This innovation is another radical approach where Dominos invented the threedimensional 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 reachout to various customer bases and position itself as a highly recognized pizza deliverybrand.6.3 Process Innovation 6.3.1 Radical innovation: Need Pull & Eureka momentThe Company has developed several innovative approaches in their processes. The needfor 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 wasthe introduction of the mesh screen that helped cooked the pizza crust more evenly. Inaddition 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 innovativeapproaches like these. Thirdly, the company improved the routing software for Dominosdelivery vehicles further cutting costs and delivery time. All these approaches stemmedfrom the need to outperform the competition in terms of quality, cut costs and operate moreefficiently. 6.3.2 Incremental innovation: Need PullDominos has also successfully incorporated incremental innovations such as onlineordering with additional feature like a Pizza Tracker and Pizza builder (available in certainlocations), smart phone apps through which customers can place their order and textmessage 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 eatpizza 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 momentAnother radical innovation was applied to Dominos product. The Corrugated pizza boxprotects the pizza from physical damage, weakening due to moisture, and prevents cheesefrom sticking to the top during delivery. The latest „Heat Wave‟ bags have a patentedinsulation system that keeps pizzas both hot and crisp. 6.4.2 Incremental innovation: Need pull: Knowledge pushThe need for incremental innovation was developed by creating a dependency betweentwo previously unrelated variables – price and delivery time thereby creating a high valueproposition for the customer. The Company has also expanded its core product to includeproducts 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 productoffering.© Challum Group 8 30
  • 32. Operations Management Assignment 7 Supply Chain Management7.1 IntroductionDominos Pizza has adopted the Make-to-Stock Approach for its Supply ChainManagement. The company supply chain is supports lean production and is based on justin time stock management and stock control.7.2 Dominos Supply ChainDominos has an innovative supply chain model that ensures all purchases are managedcentrally across all franchises around the world. The core entity, which runs the supplychain network is called Dominos supply chain services – a fully owned subsidiary whichsupplies the dough, raw materials (the condiments, and ingredients that go into the foodproducts), the kitchen equipment / machinery.This entity supplies to all the master franchises – effectively giving the company a few keyadvantages: (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.© Challum Group 8 31
  • 33. Operations Management Assignment Farmers Producers Dominos Commissaries Store Store Store Store s s s s C C C C C C (4) Figure 22 Supply Chain ModelEven at a master franchisee level, Dominos has been able to standardise and centralisethe supply chain services. Taking the UK‟s supply chain as an example, we look at thecountry 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.© Challum Group 8 32
  • 34. Operations Management Assignment Figure 23 Supply Chain at a Country Level7.3 Critic and recommendationsIt is useful to note that the stores have faced issues with stock of dough, side orders andpacking boxes when the demand has exceeded the predicted demand in the past. It alsoneeds a stock check on a daily basis to arrive at the quantity for the next order. A moresophisticated and comprehensive stock management and control tool to enable store topredict the demand and manage its stock is highly recommended.© Challum Group 8 33
  • 35. Operations Management Assignment 8 Quality Management8.1 IntroductionQuality of products and service is very essential to for Dominos to maintain its brand imageand reputation as a company that serves quality products; this becomes even more criticalconsidering the fact that pizza is often stereotyped as an “unhealthy” food.8.2 Quality Assurance and Quality ControlDominos owns its own supply chain network, 99% of its Master franchises source theiringredients and other requirements from this entity, these are then stocked at centralcommissaries, which then distribute the items needed to the smaller franchises / storesdirectly on a 3 day basis, hence reducing the need for stockpiling of resources, andensuring a JIT type set-up. This central control on supplies ensures consistency ismaintained 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. Dominosis in agreement with all suppliers of food ingredients and packaging to a detailed productspecification for the products supplied. This is reviewed by a Food Technologist to ensurethat the product is safe, legal and consistently of high quality.Dominos ensures that all food products are risk assessed and their production is eitheraudited by Food Technologist or is certified to the BRC Global Standard for Food Safety. Adatabase of Domino‟s approved products and suppliers is maintained. Suppliers arecontinually assessed in various ways. Quality checks carried out on delivery, samples sentfor analysis or feedback received from stores or consumers.8.3 Critic and recommendationsDominos has some high quality standards for the food, however when it comes to service itdoes very little to ensure the quality of service, a more robust approach to ensuring qualityof customer service is recommended to maintain, build customer loyalty.© Challum Group 8 34
  • 36. Operations Management Assignment 9 Conclusion and RecommendationsBased on our study of Dominos operations, and its global operating model – wesummarize 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 theface of competition, but this has been more push-based rather then pull-based. Dominoshas shown the ability to innovate but it has been more as a “catch-up” and not as a moreintuitive customer led change. The reworking of the recipe in the US market in 2009 was abrilliant test case in a company reacting to change, and Dominos had to do this because itwas losing market share to other competitors, and there was consistent negative feedbackfrom US customers on the poor quality of its pizzas.Dominos needs to drive changes more intuitive and customer led, rather than use onesuccessful operating model in an unchanged manner, it needs to make adjustments to itwhen 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‟sIn response to a potential threat from other fast food companies Dominos is expanding itsproduct base - the Dominos Sub sandwich is an example of Dominos moving away from itscore-value proposition. This has some potential drawbacks such as complicating thesupply chain networks, potentially increasing cooking times and thereby increasing servicedelivery times. If Dominos manages this expansion well, then it can add to its productofferings 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 productmanufacturing approach. The company‟s key focus areas have always been to deliverpizza on time. Over time, Dominos has not been focusing on its service aspect, and in aincreasingly customer centric world it is critical that Dominos improves its hiring / trainingpractices and deliver world class customer service along with the best in class product thatit currently offers.© Challum Group 8 35
  • 37. Operations Management Assignment 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© Challum Group 8 36