Domino's Operational strategies and Operations management- Adnan Ul Haque

Faculty of Business and Law

Operations Management- PGBM03

"Operations Management & strategies at Dominos Pizza" Intake: October, 2013.

Module Leader: Dr. Tie Xu

Submitted by: Adnan ul Haque. (139071579)

January 21, 2014

WORD COUNT: 3296

Table of contents INTRODUCTION..........................................................................................................................

04

OPERATIONS MANAGEMENT & OPERATION STRATEGY..........................................................

04

CORPORATE VISION AND MISSION...........................................................................................

05

GLOBAL STRATEGIC OBJECTIVES..........................................................................................

06

ORDER QUALIFIERS & ORDER WINNERS...................................................................................

06

THE CORE COMPETENCIES OF DOMINOS..................................................................................

07

THE VALUE CHAIN......................................................................................................................

09

PRODUCT VALUE CHAIN............................................................................................................

09

STORE LEVEL- OPERATIONS STRATEGY IMPLICATIONS............................................................

11

PRODUCT & SERVICE DESIGN....................................................................................................

12

PRODUCT LIFE CYCLE.................................................................................................................

13

RE-DESIGNING PRODUCT..........................................................................................................

14

PRODUCT/ SERVICE MIX OPERATIONS CHALLENGE.................................................................

15

PROCESS DESIGN.......................................................................................................................

15

THE CONVERSION/ TRANSFORMATION PROCESS....................................................................

15

TRANSFORMATION & CONVERSION PROCESS IN TERMS OF 4Vs............................................

16

THE PRODUCTION PROCESS......................................................................................................

17

DEMAND FORCASTING..............................................................................................................

18

SUPPLY CHAIN MANAGEMENT.................................................................................................

19

QUALITY MANAGEMENT...........................................................................................................

20

QUALITY ASSURANCE & QUALITY CONTROL............................................................................

20

INNOVATION AND IMPROVEMENTS.........................................................................................

21

CONCLUSION & RECOMMENDATIONS.....................................................................................

22

REFERENCES..............................................................................................................................

23

List of Tables Table # 1

Through customer feedback "Product Re-designed"

14

Dominos franchise model structure in UK Domino's Values Order Winner & Order Qualifiers Core Competencies Customer Value Chain: Dominos Product Value Chain Performance Prioritizing Curve Dominos Polar diagram of Performance indicators Dominos Evolution PLC model New Product Development (NPD) Product Service range The Conversion Process Assembly line: Volume Variety Mix Dominos production process Dominos Chase demand strategy Supply Chain Model Innovation

04 05 06 07 08 09 10 11 12 13 15 16 17 18 19 20 21

List of Figures Figure # 01 Figure # 02 Figure # 03 Figure # 04 Figure # 05 Figure # 06 Figure # 07 Figure # 08 Figure # 09 Figure # 10 Figure # 11 Figure # 12 Figure # 13 Figure # 14 Figure # 15 Figure # 16 Figure # 17

INTRODUCTION: Dominos is a business regarded as leading Pizza Delivery company (Dominos, 2008). The Company has an operation model and inimitable business that enable it to be a leader in fast food industry. Dominos Pizza has effectively expanded from three outlets in the US to 9,350 stores in service in seventy countries since its creation in early 1960s (Abilla, 2010). The head quarter is in Michigan state, USA whereas in UK is operation and franchise model all over the overseas market. The raw material is supplied to master franchise (UK) and quality is enforced by maintaining overall control on the products and services being delivered (Dominos, 2008). OPERATIONS MANAGEMENT & OPERATION STRATEGY: Operations management has been defined by Raturi & Evans (2005) as development, design, maintenance of system, and process which convert the raw material, labor, and technology, in to finished goods and services that satisfy the needs of consumers. According to Garvin (1992) define, "the operations and manufacturing competitiveness are examined through operations strategy" whereas, Slack and Lewis (2011) elaborates operation strategy as the whole method of choices that forms the long-term competences and abilities of any type of process, operations and their input towards overall strategy, by means of resources of operations and requirements of the market. Operations strategy has been understood by many to be distinct from operations strategy.

Domino Pizza LLC (Michigan)

Master Franchise (UK)

Sub Franchises (Overseas Unit)

Sub Franchises (Overseas Unit)

Figure 1: Dominos franchise model structure in UK.

Sub Franchises (Overseas Unit)

CORPORATE VISION AND MISSION: According to Lawfer (2004), "well implemented mission enable the company to attract employees, investors, and consumers to gain from organisational loyalty" (P. 198). The mission statement of Domino's is "Having more fun while selling more Pizza" (Domino's Corporate, 2012). The Vision is to be "number one in pizza as well people" (Domino's Corporate, 2012).

V A

Treat People as you'd like to be trated

Think big and grow

Set the bar high, train, never stop learning

Measure, managegee, and share what is important

L U E S

Figure 2: Domino's values

GLOBAL STRATEGIC OBJECTIVES: From the Domino's Annual report, (2012), it is derived that the vision statement is achieved through following strategic objectives:

I.

Competitive international growth as main target.

II.

Competitive menu expansion through 24 hours deliver model.

III.

New innovations through company owned stores.

IV.

Focusing on knowledge management strategy to penetrate local market through master franchises.

ORDER QUALIFIERS & ORDER WINNERS: To meet selling quality standards, the basic standard for products are "order qualifiers" and when consumers are won by making them purchase the product, than it is "Order winners". The criterions of Domino's order qualifiers and order winning are explained in figure below.

Order Winners for Dominos:

Order Qualifiers for a customer ordering take away:

Potential Order losers: Inconsistent taste

Convenient

Delay in delivery

Tasty

Poor quality of food

Quick

Pricing at a premium

Cheap

Core competency on Delivery Consistent quality Delivered with no delays Wide variety on menu Tasty

Figure 3: Order Winner & Order Qualifiers Dominos becomes order qualifiers to the consumers due to convenience which is durability and flexibility in its operations. Its taste, which means the quality and variety it offers to the targeted audience. The service delivery is quick and prompt which indicate that operations are speedy. Moreover in comparison to its competitor Pizza hut, it is cheap means low price so the cost is another performance indicator that dominos mix in its operational strategies to make it order qualifier. Considering order winners standards of Dominos, it is evident that the quality is a consistent everywhere which means there is no change in the quality standards. Moreover, the delivery to clients are in time which means that speed is a constant factor that has helped it

in earning orders.

Furthermore, the operations are flexible and highly dependable one.

Customers heavily rely on the services that it will be in time and highly standardized. There is a huge variety of products available which indicate towards flexibility again in the operations. Based on the notion of different types of consumers like different taste so stores keep high variety which help them in winning orders in the market. THE CORE COMPETENCIES OF DOMINOS: The core competencies of Dominos’ has enable it to be order winners and order qualifiers. It strengthen its position in pizza food industry in home and take away criteria. Unique Supply chain model : Better quality & consistency

Unique GLOBAL model: Allows flexibility at the regional level

Dominos Competitive advantage Global leader in Pizza take away / home delivery

Leaner Stores : Better operating margins

Leaner Stores : Better operating margins

Figure 4: Core Competencies

THE VALUE CHAIN: Domino design and develop its product after considering consumer's needs. The take away outlets, high variety at a reasonable price with quality suiting local palette are consumer's need driving the whole value chain. In entire value chain, prime focus of dominos has been on

consumers needs and resulted in strengthening its market position (Tripathy, 2011; and Bach 2013). High variety in taste, flexibility in operations, qualified staff to facilitate customers, and lean stores are driven from global operational model and strong value chain (Tripathy, 2011; and Bach 2013). Domino has used technology at its best to promote itself and improve customer's experiences. For instance, strong distribution from television and online tracking of orders from internet. The needs and demands of customers are met by Dominos through combining operational strategy with the company level strategy that has also improved its performance by making it more dependable and flexible.

Figure 5 Customer Value Chain: Dominos

PRODUCT VALUE CHAIN: Value-adding collective activities of Domino's operations are based on Porters model. According to Tripathy, (2011) "For external customers, products and services are produced via process involving five main activities that are essential for business. The proper transformation of resources are established through these supporting value-adding activities. For example, technology usage increase accuracy as text message order is placed is convenient to customer as well Domino and accurate order is placed. Together, all value adding activities forms Domino's business process" (cited from Bach, 2013).

Figure 6 Product Value Chain STORE LEVEL- OPERATIONS STRATEGY IMPLICATIONS: Provision of excellent quality services to customer is prime focus of Domino's operations strategies (Dominos Annual Report, 2012): 1. Improving process and efficiencies at stores to reduce operating expenditure. 2. Prompt services to customers through strategic store locations, resulting in maximization of profit. 3. Stores with prompt and efficient production for customer via production oriented store designs.

4. From order placement to preparation, cooking, packing, and delivering efficiently to complete operational process. 5. Via Dominos PULSE point-of-sales system adaptability in operations, becoming cost effective, and easy accessibility to financial and marketing data. 6. Attractive and focused menus for customers while reducing errors in orders. 7. A store audit program for assessing stores performance in meeting needs of customers. In order to priorities its operational strategies, Slack Model of Performance Prioritizing is considered, on the criterion of order-winning. A. Surplus zone – As compared to competitors, high investments are made in promotional strategies by Dominos to attract customers as various discount coupons are offered. Though such schemes attracts customers but leads to lower brand image. For this reason, cost cutting should be done by Dominos in parts that will have no negative impact on sales. B. Suitable zone – "30-minutes luxury" has built strong image as in this segment, Dominos is ahead of rivals as fitting balance is created by Dominos in market.

Figure 7 Performance Prioritizing Curve C. Progress zone – To be order winners, Dominos has to work on improving its quality and customer preferences should be taken in account. For instance, Pizza Hut produces less calories

pizza for conscious customers. Somehow, Dominos shall also create emotional connection for customers. D. Critical zone – There is need to improve present process design for prompt delivery. Especially in the peak hours, staff, equipments, and space should be available to assure and satisfy customers.

Figure 8 Dominos Polar diagram of Performance indicators

PRODUCT & SERVICE DESIGN: In pizza delivery services, Dominos stands as the pioneer. Additional items like wings, garlic bread, chicken bites etc are offered along with Pizza as core product (Horovitz, 2009). The flexibility in operations is a key that enable it to deliver customize pizza to customers with other additional items including soft drinks of wide range choices. Considering the product design,

Dominos is competing with 14th street pizza to deliver on prompt basis in Karachi's high-class area Defence. Modular components are combined together to meet the individual needs of consumers. The product is universally same and services too, as same quality is delivered in 30 minutes. Convenience and cost are two main targets that Dominos consider in product and service design. The success and performance of Dominos is elaborated through product life cycle. PRODUCT LIFE CYCLE: Introduction phase - Dominos in 1960 started making pizza and gradually moved to UK and other countries. Concept Development phase - When local franchise took over, the online ordering emerged replacing traditional methods. “Production” phase - In 2009, sales declined despite for two decades the concept of obtainable pizza. The decline was due to change in consumer's taste. Service - Domino changed its menus up to 80% as crunch cakes and oven-backed sandwiches are brought in stores. The highly used technique in redesign services was "30-minute delivery" and "pizza-tracker" along with new iPhone applications were used to enhance its services. Withdrawal – This is where Dominos realized that customers need fresh menus so it redesign its core product.

Figure 9 Dominos Evolution PLC model

RE-DESIGNING PRODUCT: Dominos admitted publically as Russell Weiner said. "it's time we change our taste as consumers don't like it anymore", so the core product was re-designed (Peterson, 2012). The open customer feedback showed that people disliked the taste and it was poor quality, as publically admitted by Dominos (Charlene, 2011). Moreover, customer feedback was use to change approaches and alter operational strategies. The recipes were reconfigured in redesigning process as experimentations were done through mixing cheese, crust, sauces, etc. This re-designing was done through customer involvement as the results were basically influenced by consumers. Re-designing enable it to compete with Pizza hut and Papa Jones (Hoovers, 2013). Customer feedback was main reason for the redesigning of product that improved its sales.

Figure 10 New Product Development (NPD)

Table 1 Through customer feedback "Product Re-designed"

PRODUCT/ SERVICE MIX OPERATIONS CHALLENGE: Dominos main dominance has been in United States as there are not corporate stores. Moreover, a shocking video of two domino's employees violating health standard codes on YouTube add more to the problem as one employee had criminal background decreased sales more (Clifford, 2009). To deal with these types of issues, company has to make hiring process more effective and inflexible code of ethics shall be implemented. Furthermore, the strategy of 30 minutes delivery guarantee was initially introduced but cancelled due to increase in accidents. A women being killed by Domino's driver is case to support the statement (Alder, 1993). This is a service challenge company faced, to ensure customers are attracted, the concept was reintroduced as "gift" to consumers (UPS - Dominos, 2012).

PROCESS DESIGN: Product Service range In the product-service range, it has a unique entity, comprising of both packaging as well services to serve foundation for product.

Product Based supported by a service package - The Product (Pizza) not only needs to be manufactured acurately, it needs to be delivered to the end customer within a specified amount of time and in optimal conditions

Service Based with product element - The Customer buys into a service which delivers an end product in the form of a Pizza

Figure 11 Product Service range

THE CONVERSION/ TRANSFORMATION PROCESS: In the entire value chain, customers are present as visible and invisible conversions take place. A concept of Open Kitchen and new design for customers to wait and experience while order is placed are part of marketing intelligence that is used in operational strategies at Dominos (Alfs, 2013

Figure 12 The Conversion Process

TRANSFORMATION & CONVERSION PROCESS IN TERMS OF 4Vs: At Dominos, simultaneously large volume is produced at low cost: Volume: High volume – Trained staff following same standard procedures produces in massive quantity as it is efficient way to produce through special equipment leading to continuous operations (Sykes and Crawford, 2012, P. 3). Variety: The customers have a choice to select their own topping or vise versa, even more ingredients and items are available at stores (Sykes and Crawford, 2012, P. 3). Moreover, it is evident that Dominos has redesigned operational strategies on the basis of customer feedback which explains high variety at stores. Variation in demand: According to Tripathy (2011), Dominos has low demand in day time but demand variation is high at lunch and dinner time.

Degree of visibility: As per Tripathy (2011), in the production process, open kitchen when customer comes for take away are highly visible but delivery at door step, the visibility of production process is low (Cited from Bach, 2013).

Figure 13 Assembly line: Volume Variety Mix In the assembly line pizza production process, Dominos has high flexibility at batch processing. Batch manufacturing process is used by Dominos to have consistency as well flexibility in the Kitchen assembly line processing. Domino calls "make line" to its assembly line. This make line methodology also facilitate Dominos to produce higher volume in rush and peak hours.

THE PRODUCTION PROCESS: Domino's production process is structured, from placement of order to customer's accepting it. Firstly, the order is placed through ealk0in, internet, or phone. After that order is placed in PULSE system to increase functioning efficiency. The order pop up on screen. Then, member of

assembly line pick order and applies ingredient. In the make line, another team member add topping and place it in oven. Then, third member remove it from oven and place it in box. It is ready for delivery and last step is dispatched and handed to awaiting customers (Guinness, 2012.

SalesDelivery/collection Packing Cooking

Assembly Line

Order Placement

Figure 14 Dominos production process

DEMAND FORCASTING: "In order to forecast demand planning and inventory management, "prescient" distribution planning is undertaken. Through this forecasting, demands are being matched by Dominos. This also facilitates in increasing the overall supply chain efficiency in lean operations. Moreover, it enable firms to check the inventory stock distribution time, as it optimizes the orders on the basis of distribution centre, as by undertaking minimum quantity material required for

production. The entire forecasting and inventory management is done through ERP- Enterprise Resource Planning" (Tripathy, 2011).

Figure 15 Dominos Chase demand strategy

SUPPLY CHAIN MANAGEMENT: According to Tripathy (2011), "Make-to-Stock approach is considered by Dominos in its supply chain management" (P. 32). Lean production is supported by the supply chain, on the basis of Just-in-Time (JIT) and inventory management. According to Kannan & Tan (2005), the operation function's efficiencies are improved by means of JIT and supply chain management (SCM). At Dominos, through this approach supplies are made to master franchises which gives certain advantages, such as consistent quality is maintained through centralized sourcing, and enable Dominos to use effectively the buying power to reduce the cost doe to fluctuation in the prices. But, stores at times faces an issue of over stock of dough, packing boxes, etc exceeding the regular demand.

Figure 16 Supply Chain Model

QUALITY MANAGEMENT: Ahargrave (2003), explains that quality product and brand image is being maintained by the Dominos, though pizza is stereotyped as "unhygienic" food. Though, the sales declined heavily after the You Tube video about employees of Dominos doing unethical things with Pizza at work.

QUALITY ASSURANCE & QUALITY CONTROL: "The agreement is done with suppliers by Dominos regarding the supply of food ingredients and packaging. All the details are written in black and white with specifications. This pact is an approval of procedures and moreover, high quality check is made by food technologist to ensure the safety, legality, and consistency. There is also a food audit program that ensure food safety is maintained. The samples as well deliveries are analyzed and checked by ensuring quality checks as well the consumer's feedback is also taken to maintain quality assurance" (Tripathy, 2011, P. 35). Furthermore, Joseph (2013) states that Dominos has focused on quality

and services that has increased its revenue by 6% in UK. Despite this, still it lacks the quality food standards in the service deliverance in the other regions. INNOVATION AND IMPROVEMENTS: According to Riley, (2010), the product as well the process of Dominos has continuously evolved with innovations in last 50 years to ensure quality and efficiency is maintained. (a) Paradigm Innovation (b) Position Innovation (c) Process Innovation and (d) Product innovation are four major areas of focus for Dominos.

Figure 17 Innovation:

Radical innovation is need of company that is explored by Dominos in its supply chain system. When changes are essential, the supply chain incorporates it. The technique of three dimensional car top sign is viral marketing, introduced by Dominos is an example of position innovation. Process innovation at Dominos can be seen in 30-minutes delivery approach (Goldenberg & Mazursky), and spoodle development for sauces (Tripathy, 2011). Domino's product innovation is visible in corrugated boxes of pizza so protect it from physical damage, moisture, and preventing cheese to stick to box, and heat wave bags to keep it hot.

CONCLUSION & RECOMMENDATIONS: To put it in a nutshell, at present Dominos is in state of change as from the detailed analysis of the operations at Dominos, it is evident that innovation has been its key approach to make its operational strategies work in positive and constructive manner. It has the potential to come up with innovative as well cost effective operational strategies to increase its efficiency in the operations management. On the basis of 5-performance objectives, it can be said that Dominos has high speed, dependability, flexibility in operations and has moderate quality while cost is high but under control so far. It is more of initiator who comes up with new innovation to compete with rivals as it never take pull-based approach but posses push-based strategies. The operational strategies have been designed after the customer feedback to ensure that the operations are done to satisfy the needs of consumers, especially take away customers. The consumer survey done in 2009 revealed that the quality was not up to standard and it served the basis for improvement as the company re-designed it's production process according to customer's taste.. Despite some serious challenges from the competitors, still Dominos is experimenting and increasing its base products such as shifting from core product pizza towards club sandwiches. This has further complicated the supply chain for the organisation as the time of cooking has increased which ultimately indicating that the delivery time extends. The speed and durability factors of performance are affected by it. Being, in the state of change, the picture is not clear at present but if the expansions are being managed by the Dominos in effective and efficient manner then it may provide leverage to strengthen core products by increasing its overall market share. The supply chain management is working in right manner but there is a need to have total quality management that can reduce the wastage and error by ensuring quality is kept first priority. Furthermore, in assembly line system, Dominos cannot maintain proper balance due to different activities consumes time differently and it is not automated as uneven flow in the process occur due to different efficiency level of team members. This is one of the drawback of make line as in peak times, there can be blockage in production. Moreover, high quality GPRS navigation systems should be installed in cars and so that on-time delivering in the peak hours

can be made possible due to topographical knowhow as more than 60% of sales of Dominos is through home deliveries. There is need of proper inventory management as at time the sock of dough is excessive and the boxes etc are more than normally required. The Master Franchise should be connected with the stores to show the exact requirements and ERP should be used by the stores also to keep a regular check. The stock management areas should be developed and distribution channels should also be very speedy and effective to deliver the material in time. A stock control tool such as supply chain optimization tool should be used and inventory optimizing software should be kept for maintaining the track. Similarly, the quality should be improved by introducing check sheets and control charts should be used more frequently. To enhance customer loyalty, emotional connection should be made with the product by training staff to be more friendly and the environment should encourage the families to visit. It should increase its promotions on social media, or viral marketing as by emotional intelligence is used in promoting the brand should be done so that it facilitates the operational activities to progress in right channel.

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