Domino's India Logistics Management

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Themes: Supply Chain Management
Period : 1999 - 2003
Organization : Domino's
Pub Date : 2003
Countries : India
Industry : Food, Beverage and Tobacco

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Case Code : OPER005
Case Length : 10 Pages
Price: Rs. 300;

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Domino's Logistics Model

Analysts 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."

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. 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.

Earlier, if Domino's had to open a new outlet, the commissary in Delhi would have to process the raw material and send it to the outlet. The truck would return empty. With the revamped supply chain, Domino's was able to leverage its fleet much better (Figure I explains how Domino's new hub-and-spoke model worked. There were two hubs in the northern region—the commissary in Delhi and the principal sourcing area in Jalandhar. The spokes were Shimla and Chandigarh).

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3] Regular ingredients like onions were sourced and processed locally by the commissaries.