|
Initially, Domino's worked on a simple model: it had three
commissaries in New Delhi, Mumbai and Bangalore, which worked as self-contained,
independent outfits. They bought their own wheat, tomatoes and other
ingredients, processed them, then delivered them in refrigerated trucks to each
outlet. But increasingly, as volumes began to grow and more towns were brought
under the fold, the model stretched far too wide.
In January 2000, Domino's began rolling out its own logistics model. Domino's
first decided procurement strategy for its key raw materials like wheat, baby
corn tomatoes and spices.
For instance, wheat was cheapest in Jalandar's
wholesale market. Its refrigerated trucks then got the wheat back to the
commissary in Delhi, which handled the processing of the wheat and prepared the
pizza base.
As the trucks had to go through Chandigarh, to reach Jalandhar, and since
Chandigarh was a potential market for Domino's products, it opened an outlet
there. The cost of entry was very low because there was no additional
transportation cost. The same logic was extended to Shimla. From Chandigarh,
Shimla was just a three-hour drive away with a large market, especially in the
tourist season. And on the way back to Delhi, the trucks pick up cheese from
Karnal, a town on the Chandigarh-Delhi highway. This cheese was transported to
its commissaries across the country.
There were three obvious benefits: lower transportation costs, cheaper procurement and economies of scale. It also cut out the duplication in
procurement and processing of the raw materials across each of the three
commissaries.
Based on the agricultural map of India, Domino's was looking for the best product at the lowest cost. Identifying specialty crops in each region also had
strategic implications for Domino's. It allowed the commissary in a region to
specialize in processing a particular crop.
For instance, the commissary for the
eastern region in Kolkata was responsible for buying tomatoes, processing them
and then sending them to all the other commissaries. Similarly, the northern
commissary sent out pizza bases. This way, not only did it cut out duplication,
the dangers of perishability were also minimized.
Domino's also planned to use its fleet of 25 refrigerated trucks to transport
products of other companies on the same route. The savings from the logistics model and money from third-party transportation was passed on to customers in
the form of lower prices.
|
