Domino's India Logistics Management
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DOMINO'S LOGISTICS MODELAnalysts felt that
Domino's took a cue from McDonald's supply chain model (Refer Box and
Exhibit III for McDonald's model). However, they opined that the level of
complexity in McDonald's system in India was not as high as that of
Domino's. Commented Bhatia, “McDonald's operations are not as spread out as
ours. They are in four cities while we are in 16. Centralizing wouldn't work
on such a geographical scale.”
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McDonald's had one of the best logistics models in
India. To maintain consistency and quality of its products, McDonald's
shipped all the raw materials—lettuce, patties et al to a cold storage
close to the main market (Refer Exhibit IV for McDonald's outsourcing).
Based on a daily demand schedule that was prepared a day in advance, the
required amount of raw material was transported to individual outlets.
Thus in early 2000, Domino's came out with its own logistics model. It
began at the point Domino's purchased wheat for making the pizza dough.
Domino's first decided the procurement strategy for its key raw
materials: wheat, baby corn, tomatoes and spices[3]. For instance, wheat
was cheapest in Jalandhar's (Punjab) wholesale markets. Domino's
refrigerated trucks got the wheat back to the commissary in Delhi. |
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Commissary processed the wheat and prepared the pizza
dough. The pizza dough and other items prepared in commissaries were then
sent to the retail outlets again in refrigerated trucks. The temperature
inside the truck was fixed based on the distance between the retail outlets
and the commissaries. This was to set the dough at a particular level when
it reached the outlets. The retail outlets had to use up the processed dough
within three days of delivery. If they failed to do so for some reason the
entire quantity was discarded.
To get to Jalandhar, the trucks had to pass Chandigarh. Chandigarh with a
cosmopolitan population, was a potential market for Domino's products.
Therefore, Domino's opened an outlet there. The cost of entry was low
because there was no additional costs incurred on transportation of
products.
Domino's opened an outlet in every potential market, which fell enroute
between the commissary in Delhi and Jalandhar, it prime sourcing base. The
same logic was extended to Shimla. Shimla was just a three-hour drive away
from Chandigarh; it had a large market, especially in the tourist season. On
the way back to Delhi, the trucks could pick up cheese from Karnal, a town
on the Chandigarh-Delhi highway, and transport it to its commissaries across
the country.
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FIGURE I - DOMINO'S LOGISTICS MODEL
EXHIBIT I - THE PIZZA HOTLINE
EXHIBIT IV - MCDONALD'S-OUTSOURCING THE INGREDIENTS
[3] Regular ingredients like onions were sourced and processed locally by the commissaries.
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