Domino's India Logistics Management
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Case Details:
Case Code : OPER005
Case Length : 10 Pages
Period : 1999 - 2003
Organization : Domino's
Pub Date : 2003
Teaching Note : Available
Countries : India
Industry : Food, Beverage and Tobacco
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"We are more a logistics company than a food service
chain."
"Supply chain management is the factor that differentiates the winners and the
losers in this business."
- Pawan Bhatia, former CEO, Domino's Pizza India.
Introduction
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In early 2000, Pawan Bhatia (Bhatia), the CEO of Domino's Pizza India (Domino's)
was a man in a hurry. Ever since Bhatia took over as the CEO of Domino's in
November 1999, he had been frantically reworking the pizza chain's India
strategy. Bhatia was planning to open 150 new outlets by the end of 2002
covering 23 cities,1 including
Bhubaneshwar (Orissa) and Jamshedpur (Bihar).
In late 1999, Indocean Chase, the private equity fund bought a 25% stake in
Domino's operations in India from the Delhi-based industrial family, the Bhartias, who held Domino's franchise in India.
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Domino's told investment bankers at the fund that it planned to go in for an
initial public offering (IPO) in the next two years. Indocean Chase advised
Domino's to go beyond its 16 outlets in Delhi to exploit the potential in
the pizza delivery business. Unless a well-thought-out expansion plan was
put into place, the IPO was unlikely to find too many takers.
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As part of
its expansion plans Domino's revamped its entire supply chain
operations, from sourcing raw materials to shipping them for processing
at a central location to delivering it to the customer's. Initially,
Domino's had a simple model.
It had three self-contained commissaries in New Delhi, Mumbai and
Bangalore which bought their own wheat, tomatoes and other ingredients,
processed them, then delivered them in refrigerated trucks to each
outlet. However, volumes were expected to increase when Domino's planned
to open new outlets. Therefore, the existing model had to be revamped. |
Bhatia said, "It's crucial for us to build a low-cost supply
chain operation which takes costs out of the system and in turn gives us greater
pricing flexibility in the marketplace." Analysts felt that Domino's had to
rethink its supply chain operation because it was the biggest area of costs.
Since 75% of Domino's customers ordered either from office or home, it did not
have to lease large plots of land in prime locations to attract traffic.
Instead, it needed an efficiently managed call centre to bring better returns
(Refer Exhibit I).
Domino's India Logistics Management
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