“Supply chain management is the factor that differentiates the winners and losers in this business.”, said Pawan Bhatia, former CEO, Domino's Pizza India. This tells us the importance of supply chain in the retail business and how the success of the business depends on it.
Pawan Bhatia took over as the CEO of Domino's in November 1999, he had been reworking the pizza chain's India supply chain strategy. He planned on opening 10 new outlets by 2002 covering 23 cities including Bhubaneshwar and Jamshedpur. In late 1999, 25% stake in Domino's India operations was bought by Indocean Chase, a private equity fund. Domino's planned to go for an IPO in the next 2 years, however Indocean Chase advised to exploit the pizza delivery business potential in Delhi. Unless a well-thought-out expansion plan was put into place, the IPO was unlikely to find too many takers.
As a part of the expansion plan, Domino's revamped their supply chain operations from for processing at a central location to delivering it to the customer's. Initially, Domino's had a very simple supply chain model. Initially, a very simple supply chain model was followed by Dominos. It had three self-contained commissaries in Mumbai, Delhi and Bangalore which bought their own tomatoes, wheat and other ingredients, processed them and then delivered them in refrigerated trucks to each outlet. This existing model needed to be revamped as the volumes were expected to increase with the new expansion plan. A low cost supply chain operation needed to be built which would take costs out of the system and give a greater pricing flexibility in the marketplace.
There was a need for Domino's to rethink their supply chain operation because it was the biggest area of costs. 75% of Domino's customers ordered from their work place or home, therefore they did not have to lease large plots of land in prime locations to attract traffic. Instead, an efficient managed call centre was needed to bring better returns.
India opened its doors to Domino's in 1996 through a franchise agreement with Vam Bhartia Corporation in Delhi. The first outlet was a huge success which led to the opening of another outlet in Delhi. By 2000, Domino's opened outlets in major cities of India.
The concept of home delivery was still in its formative stages when Domino's moved into India. Its presence was just in some major and prominent cities and confined to delivery by the local fast food outlets. Eating at “branded” restaurants was a popular option. To make inroads into the Indian market, an integrated home delivery system from a network of company outlets within 30 minutes was established by Domino's. Goutham Advani (Advani), Chief of Marketing, Domino's Pizza India, said, "What really worked its way into the Indian mind set was the promised 30-minute delivery." In addition, if there were a delay in delivery, Domino's offered compensation of Rs. 30/- off the price of delivery. Domino's main focus was its “delivery” strategy for the initial 4 years in India.
India was the third-largest market in 2013 for Domino's, behind the United States and United Kingdom. In December 2014, India became Domino's 2nd largest market. Domino's Pizza operates 1,126 stores in 264 Indian cities as on 26 October 2017. It is headed by Ajay Kaul since 2005.
While the Indian food sector was blooming, Domino's was struggling to retain its position. After facing a downfall, in August 2017, Domino's decide to improve the product and change their strategy. The pizza's included a soft and tasty crust with more options of toppings to choose from, more cheese and herbier sauce imported from Californian tomatoes. The new strategy focused on product improvement, seamless customer experience, value for money enabled by focus on cutting costs and driving efficiencies.
In order to cut costs, Domino's undertook manpower optimization, discontinued their famous ‘Buy One Get One' offer, reduced the number of staff per outlet from 25 to 22 and also shutdown some of their outlets. They now decided to go slow with their expansion strategy and are looking to open only 40-50 stores a year.
Every outlet offers the same tasty pizzas. There is standardization in more than 1000 outlets with the same taste and quality. With over 1000 stores in 20 years, they aim to open another 1000 in the next 5 years.
The new and improved pizza has certainly struck the right chords with the customers, and hopefully will re-establish Domino's India as the ultimate pizza brand in the country.
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