NATIONAL INSTITUTE OF FASHION TECHNOLOGY

BANGALORE

SUPPLY CHAIN MANAGEMENT

Case Study : DOMINOS

SUBMITTED TO :
MS. GULNAZ BANU

SUBMITTED BY: NEHA GUPTA

(SEMESTER III, MFM 2009-11)
Introduction

Supply chain Strategy

Supply Chain : Process & Operations

Bibliography

Introduction

Domino’s Pizza is the number one pizza delivery company in the United States and is one of the most

recognizable pizza brands in the world. On average, Domino's sells over one million pizzas every day across the

globe [1], and covers ten million miles per week in pizza deliveries [2]. At the end of 2007, there were 8,624
domestic and international locations- the vast majority of them franchised. In FY 2007, the company generated

$1.4B in revenue and over $190M in operating income.

Domino’s faces several headwinds moving forward. Rising food and energy prices [3], the housing slump[4]and a

weakening job market[5] are taking a toll on restaurant spending [6] in its core domestic market; the company saw

a 1.7% decrease in comparable sales in the U.S. in 2007 after a 4.1% decrease in 2006 as consumers reduced

their spending on pizza[7]. Rising food costs, especially the cost of wheat and cheese, have also cut into operating

margins[8]. In order to meet these challenges and revive sales growth the company is launching a new marketing

campaign under the slogan “You Got 30 Minutes" with the hope that this national advertising effort will help take

market share from smaller, local pizzerias. The company is also trying to offset a weak U.S. market by focusing

on expanding its international operations which continued to produce positive sales growth throughout 2007.

Domino's was founded in Michigan by Tom Monaghan in 1960; at the end of FY 2007 the company operated

over 8000 locations in all 50 states and 55 countries. The company focuses on two core strengths: high quality

pizza and fast delivery. Domino's business model sits on three pillars: 1) low cost delivery-oriented store design ,

2)franchising and 3) a vertically integrated supply chain[9]. The company operates in three segments: domestic

stores, domestic supply chain and international.

Domino's revenue by segment[10]

Domestic Stores
About 90% of the company's 5,155 domestic stores are franchised[12]. Domino's uses its company-owned stores

as a testing ground for new products and technologies which may then be passed onto franchisees. Domino's

generates income from company-owned stores in the form of store profits; income from franchisees mostly

comes from royalties. Domestic stores had revenues of $552.6 million and operating income of $128.6 million

during 2007[13].

Domestic supply chain

This segment operates 17 supply chain centers that distribute food, equipment and supplies to almost all

Domino's in the United States [14]. A vertically integrated supply system provides two important advantages to

Domino's and its franchisees. First, automatic delivery of raw materials cuts out a lot of the "back-of-store"

activities letting store operators focus more on sales and customer service [15]. Second, the vertically integrated

supply chain lets Domino's leverage the purchasing power of thousands of company-owned and franchised

stores nationwide which can help keep down food costs[16]. In fiscal 2007, the domestic supply segment

generated revenues of $783.3 million and operating income $49.7 million.[17].

International 
Domino's international segment consists of 3,469 franchised stores outside the United States.[18] Domino's also

has a supply chain in a limited number of its international markets; the company operates six supply chain

centers which manufacture dough and distribute food and supplies. Domino's international operation have

consistently grown as a percentage of company locations and systemwide revenues; in 2007, the international

segment accounted for 41% of Domino's store sales worldwide[19] (note: this figure represents percentage of total

sales at company-owned and  franchise  stores and is not percentage of company revenue.) During 2007,

Domino's international segment generated revenues of $126.9 million, of which approximately 52% resulted from

the collection of franchise royalties and fees, accounting for 93% of the segment's $57.2 million in operating

income[20].
Domino's domestic and international store count[21]