Operations and Logistics Management - Case Study Example

Operations and Logistics Management Introduction Operations and Logistics Management has always been a challenge for every organization. It is one ofthe components that ensure that the right product is in the market at the right time. “Operations management focuses on carefully managing the processes to produce and distribute products and services.” (McNamara, 2010) Therefore, operations and logistics management is always related to the long term strategy of an organization. It is an all encompassing term that consists of managing purchases, inventory flow and control, storage, transportation, quality evaluation, etc. For better understanding the purpose of operations management and its relationship with organizational strategy, it is important to look at a case study. An operations and logistics management case study of Domino’s Pizza in India will clearly explain the relationship between strategy and operations management. As the tagline of Dominos explains, the vision of Dominos Pizza is to become the pizza delivery experts. Dominos Pizza was called Dominick’s Pizza in the initial years when it was owned and operated as a small pizza shop by Dominick De Varti. It was bought by Thomas S Monaghan and James S Monaghan in the year 1960. From 1961 onwards it was owned and operated by Thomas when James sold his entire share to Thomas. In was later on renamed as Dominos Pizza and adopted a mass expansion strategy ever since. “Dominos philosophy rested on two principles – limited menu and delivering hot and fresh pizzas within half-an-hour.” (ICMR, 2010) Dominos entered the Indian market in the late 90’s when the market was just beginning to adapt to the fast food culture. The management saw an immense potential in the Indian market and had formulated a mass expansion plans in the country. This case study will give a clear insight into the strategic choices used by Dominos for managing its Indian operation. Main Body “An operation is transforming process converting a set of resources (INPUTS) into services and goods (OUTPUTS).” (Jpcmedia, 2010) For Dominos, the operations begin from the stage when it orders the raw materials like wheat, vegetable and other ingredients. As Dominos is in the food industry it is of utmost importance that the quality of the product should be given higher attention from the very beginning. The next operational challenge for the company is distribution of the processed raw materials to the different stores. Next is the step where customers are involved. That is, taking orders from the customers. Customers order pizza over the counter, online and through phone. There is real big challenge in this step as the orders are to be processed keeping in mind the waiting time. The vision of the Dominos is to be a pizza delivery expert. Therefore, food has to be delivered within 30 minutes of placing the order. Initially the supply chain model of Dominos was simple. That was the time when the company had less number of branches and franchises. But as the market potential grew the company had to rethink on the strategy. Dominos is spread over across 50 cities in India. Dominos has the highest market share in the fast food sector in India. “Domino’s, which has 65% market share in the home delivery segment, has opened its outlets in 25 new cities in tier II and III cities.” (Pal, 2010) The simple model was no longer suitable for Dominos as the number of franchises increased. The key issues for the company were two. Primary issue is maintaining the quality of the product, and secondary issue is controlling the cost of the product. Initial model The initial model of Dominos consisted of commissaries in three metros New Delhi, Bangalore and Mumbai. In those days the stores were concentrated only in these metros. Each commissary will procure their own raw materials for processing and supplying to the stores in the particular city. Quality was focused highly even during this time as the products were supplied to the stores in refrigerated trucks. But as the volume and market potential grew the present model could not be used due to higher cost. When the same model is adopted even in a highly expanding situation more and more processing centers needed to be established. This will lead to less flexibility in terms of pricing as huge cost will be incurred. Therefore the company decided to build a low cost supply chain so that it can control cost. The key points identified by the strategists were that 75% of Dominos customers ordered many for home or office delivery. Therefore, it is not important for the company to invest in larger restaurant space. Improving the efficiency of the supply chain was identified as the core development area. Improving the supply chain also includes a well managed call center for taking orders and related communication. The revamped model Based upon the strategic changes that were required, the supply chain model of Dominos was revamped. The new model begins from the spot where Dominos procure wheat, the primary raw material. Wheat was primarily sourced from Punjab where it was cheaper. Wheat was first carried in refrigerated trucks to the commissary in Delhi. This will ensure that the wheat remains in the same quality until it is taken for processing. It is in the Delhi commissary that the pizza dough is prepared. Once the dough is prepared it is sent along with other items to the retail outlets. This is again done in refrigerated trucks. To maintain the quality of the materials the temperature in the trucks is adjusted according to the distance to be travelled to the retail outlets. This makes the dough and other materials to remain in a fresh condition. The processed dough will not be kept in the retail outlets for more than three days of dispatch. If the outlets fail to use the dough before three days, it will be discarded. This shows that Dominos gives primary importance to the quality of the products even if it comes at a cost. This is the logistics in its procurement side. What is more important for them is the logistics on the delivery end. That is the delivery of the final product to the customer. It could be said that Dominos didn’t have strategies just in the paper. The average wait time for delivery of a pizza from Dominos India is just 30 minutes. This is the lowest waiting time when compared to any other Dominos store across the world. For improving the efficiency of the supply chain, Dominos integrated ERP solutions to the system. Based on the software solutions, Dominos makes a weekly forecast of the requirements unlike before when a monthly average was taken. The new system will provide all information such as safety stock, date of order, quantities to be ordered, etc. (Schell, 2000) ‘ERP BaaN version 4c4’ is the ERP solution that is used by Dominos to integrate its various functions. (Dominos.co.in) Online ordering is introduced in all the metros of the country and the customers find it very convenient with the same. As mentioned earlier, 75% of the orders are taken online or over phone for home delivery. Therefore, Dominos India integrated the same with the ERP solutions. Conclusion This case has clearly explained the importance of supply chain management to the overall strategy of an organization. This is not only the case of fast food industry. Logistics is of primary importance in any industry. Both the procurement of raw materials and delivery of finished goods have to be managed efficiently. The case really explains how important it is to manage the key elements of operations like sourcing, purchasing, inventory management, organizing warehouse, transportation of products, delivering to customers and servicing the customer. From sourcing to end process of servicing the customer, Dominos had maintained two core features, that is, quality and speed of operation in all the elements of its operations management. Works Cited Carter, McNamara, 2010. Operations Management. [Online] Available at: http://managementhelp.org/ops_mgnt/ops_mgnt.htm [Accessed August 3, 2010] ICMR. Domino’s India Logistics Management. [Online] Available at: http://www.icmrindia.org/casestudies/catalogue/Operations/Dominos%20India%20Logistics%20Management-Operations%20Case%20Studies.htm [Accessed August 3, 2010] JPC Media, 2010. Introduction to operations management. [Online] Available at: http://www.jpcmediallc.com/acrobat/managment.pdf [Accessed August 1, 2010] Neha, Pal, 2010. The Financial Express. [Online] Available at: http://www.financialexpress.com/news/dominos-pizza-to-customise-products-to-ramp-up-sales/592764/ [Accessed August 1, 2010] Dan, Schell, 2000. Supply Chain Management Helps Dominos Deliver. [Online] Available at: http://www.retailsolutionsonline.com/article.mvc/Supply-Chain-Management-Helps-Dominos-Deliver-0002?VNETCOOKIE=NO [Accessed August 2, 2010] Dominos, 2005. English News. [Online] Available at: http://www.dominos.co.in/media_dec05.jsp [Accessed August 3, 2010] Dominos India, 2010. Annual Report 2009 – 10. [Online] Available at: http://www.dominos.co.in/images/investor/PDF/annualReport2010.pdf [Accessed August 3, 2010] Remassoc.com, 2010. Business operations. Available at: http://www.remassoc.com/portals/0/rempre10ways.pdf [Accessed August 3, 2010] Read More