Rajagopal. Marketing Dynamics: Theory and Practice
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Marketing Dynamics: Theory and Practice
strike a balance between customer-service levels and distribution costs.The supply chain
management has been an integrated component of the implementation, control and evaluation of
the marketing program in the companies. Today, with lean and healthy operations as their foundation,
progressive companies are focusing intensely on growing revenues, thereby breaking the downsizing
death spiral. Instead of merely striving to meet annual cost-reduction targets, managers at these
leading companies are repositioning the supply chain as an enabler of growth. Logistics professionals
played key roles in improving the cost competitiveness of their operations across the supply chain
by adopting new strategies, closing warehouses, trimming inventories, outsourcing non-essential
services, and installing powerful forecasting and material-control systems. Successful growth
companies often follow one or more of three key growth strategies: customer franchise management,
new product development, and channel management. Each of these growth strategies depends on
supply chain innovations
Logistics and the supply chain management is an art of management of flow of materials and
products from the source of production to the end user. As a primary interface point with the
customer, supply chain management can offer value in the form of competitively superior delivery
and value-added services, as defined by customers. In this way, the value foundation translates to
customer-service excellence. In parallel with the downsizing and engineering efforts of the past
decade, customer service re-emerged as a key management priority for a wide range of
manufacturers. But for many companies, meeting basic service requirements and achieving
customer satisfaction are still the primary goals. The integrated concept to manage the supply
chain is proving to be analytical and able to transcend internal operational problems. The
implementations of the integrated pipeline of the logistics variables help achieve a quantum leap in
functional integration and operational effectiveness. Companies such as Procter & Gamble and
Newell, both manufacturers of a variety of consumer products, understood early on the growth
ambitions and strategies of Wal-Mart. By tailoring their logistics to support the retailer’s growth,
they have grown as well. Notably, a major component of Wal-Mart’s growth strategy has been
superior economics, including a low-cost, highly efficient merchandise supply chain. The retailer
backs up this strategy with significant investments in state-of-the-art logistics, information systems,
and communications technology.
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SELECTED READINGS
Robert E. Weigand, “Fit Products and Channels to Your Market,” Harvard Business Review January-
February 1977): 95-105.
Donald V. Fifties, “Make Your Dealers Your Partners,” Harvard Business Review (March-April
1996): 84-96.
Philip Kotler, Marketing Management, 7th ed. Englewood Cliffs, NJ: Prentice-Hall, 1994.
Louis W. Stern, Adel I. El-Ansary, and James R. Brown, Management in Marketing Channels,
Englewood Cliffs, NJ: Prentice-Hall, 1989.
Alan R. Raedels : Value Focused Supply Chain Management, Irwin Inc, New York, 1995.
David Frederick Ross : Competing Through Supply Chain Management, Chapman & Hall, New
York1998.
David Simchi-Levi, Philip Kaminsky, Edith Simchi-Levi : Designing And Managing The Supply Chain,
McGraw-Hill Companies, Inc., Irwin McGraw-Hill Higher Education, 2000.
John T. Mentzer, editor : Supply Chain Management, Sage Publications, Inc., Thousand Oaks, 1998.
Kern, G. and Guerrero, H., “A Conceptual Model for Demand Management in the Assemble-to-
Order Environment”, Journal of Operations Management, 9(1), 65-84, 1990.
Lee, H. and Billington, C.: “Managing Supply Chain Inventory: Pitfalls and Opportunities”, Sloan
Management Review, pp. 65 -73, Spring, 1992
Lee, H. and Billington, C.: “Material Management in Decentralized Supply Chains”, Operations
Research, vol. 41, no. 5, 1993.
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Case 5.1
DOMINO’S PIZZA DISTRIBUTION PLAN
6
Domino’s Pizza Distribution (DPD) is the primary source for food service and Equipment and
supply (E&S) distribution for Domino’s mainland U.S. pizza stores. Through a network of 18
distribution centers—all of which manufacture fresh dough—DPD regularly supplies over 4,300
stores with more than 250 products. These items range from all food items (except soft drinks)
to pizza boxes, napkins, forms, and cleaning supplies. All of the food products that the stores buy
from DPD are shipped from one of their distribution centers on their private truck fleet. E&S
supplies stores with everything from ovens and signs to pizza cutters and uniforms from two
distribution points (and in some cases, they drop ship directly from their suppliers). Their
International Division manages similar operations to support Domino’s stores in Canada, Alaska,
Hawaii, and Puerto Rico. From private fleet and delivery and service specialists to their customer-
service representatives and field managers, each distribution center acts as a key part of the
support channel for the pizza stores it services. The DPD Division started to grow in earnest in
the early 1980s as Domino’s store growth began taking off. In the mid-1980s, when nearly 1,000
stores were hidded in a single year, the DPD network grew to its most expansive distribution
structure. Their distribution centers historically have acted autonomously, focusing intensely on
excellent customer service. Each center had developed methods and procedures tailored to
support its assigned market.
It was during the late 1980s that their existing core-information systems were put into place. At
the time, these UNIX-based, customized systems employed leading technology. Back then, functionality
was fairly limited to transaction process management. After a period of limited change in the early
1990s, Domino’s Pizza Distribution started to re-assess its strategic vision. In 1995, the current vision
for DPD started to take form. The core guiding principles of their strategy are to:
• Achieve Customer Satisfaction and Success
• Impress customers and help their business succeed.
• Perfect the Supply Chain
• Focus on delivery systems—from the farmer’s field to the consumer’s front door.
• Develop Individuals and Teams and
• Find, develop, and keep the best people.
Over the past couple of years, DPD has aggressively pursued this strategic direction and has
been doing the groundwork required to support this vision. DPD now is in the midst of implementing
6 This case has been written as the basis for class discussion rather than to illustrate either effective or
ineffective handling of an administrative situation of the company.
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advanced technology and operational solutions that will allow them to perfect their supply chain.
Although Domino’s Pizza stores are not required to use DPD as a source for product or equipment,
96.5 percent do source through them. Their aim is to build an operation that ensures their continued
position as the leading distributor/manufacturer servicing the pizza stores.
LEADERSHIP STRATEGY
Domino’s Pizza Distribution has determined that its supply chain will play a key strategic role in
supporting the operations and growth of Domino’s Pizza stores by providing excellent service and
quality products at the best available price. Their goal in perfecting the supply chain is two fold: (1)
Streamline the supply chain and eliminate non-value-added activities and (2) Reduce or eliminate the
order-fulfillment and logistics activities that their stores need to perform. DPD is, and will continue to
be, best suited to provide this value. They will invest in the most appropriate assets that maximize
their effectiveness and efficiency, while providing the best return to their principal stakeholders—the
more than 1,200 franchisees. Importantly, DPD has a unique profit-sharing philosophy with these
stakeholders. The arrangement dictates that they create a balance between value-added service and
least-cost distribution that provides their customers with excellent service and a highly profitable
business opportunity. They strongly believe that their commitment to provide excellent service to
their stores, to help them reduce the challenges of operating in a difficult and competitive market, and
to do everything possible to enhance their profitability makes them the best sourcing alternative.
Therefore, it is critical that they be the best in the business. Their strategic vision would lead them to
that goal.
Operational Vision: Maximize Quality and Service
If they look at the activities—both value-added and non-value-added—within the entire supply
chain, it becomes clear that different supply chain participants are best suited to perform specific
tasks. DPD is positioning itself to provide the following services :
• Overall management of and planning for inventory of food products, store equipment, and
supplies.
• Control of the physical flow of products all the way to the picking locations within the
back room of the store.
• Manufacturing and delivery of fresh, ready-to-use dough products.
• Sourcing of the best pizza ingredients for their stores.
• Sourcing of the best equipment and supplies for their stores.
• Management of the store order process, including determination of what should be
delivered and when.
• Ownership of inventory from the point of Domino’s possession to the time of use by the
stores.
Much of DPD’s supply chain is not complex. They have comparatively few SKUs. They have
known Customers, accessible demand information, and relatively small distribution centers. The
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complexity comes from the high-velocity, high-volume, synchronous processes required to plan, process,
manufacture dough to order, route, pick, load, and deliver more than 10,000 deliveries per week.
DPD’s current and planned operations are highly service focused. They typically have a 10- to 15-
hour order cycle from initial order entry to dispatch. Actual delivery time varies from two to 24 hours.
They do not have an order cut-off. In fact, they accept add-ons after the truck has left, either sending
another shipment or meeting the truck with the additional product. They strive for a minimal number
of service errors and currently ship over 98 percent of their deliveries 100 percent correct. (This is a
measure of order-fulfillment effectiveness and does not incorporate product-quality issues that would
not be apparent from the package. They also are working with their suppliers to maximize quality
product at the stores.) At present, they’re managing this service level with more than 50 inventory
turns a year. The most critical failure occurs when a store is unable to sell pizzas to its customers—
a “store closing.” A store closing counts no matter how little time the store is out of operation, and no
matter what challenges nature has dealt. For Domino’s Pizza stores, bad weather brings opportunity.
Many consumers rely on fresh, hot delivered pizza while they are dealing with weather problems.
Bad weather, coupled with unpredictable peaks in demand, provides unique challenges for DPD.
Normally, they have fewer than 15 store closings per year.
One particularly innovative operational objective is to better manage the age of the four million
pounds of dough that they produce and deliver to stores every week. This “living” product performs
differently throughout its shelf life. Dough that is too young or too old should not be used. Their
delivery cycle allows for the stores to have very little old dough remaining at the end of shelf life.
Their goal is to sequence the production of their dozens of dough SKUs, so that the product at the
time of delivery is aged correctly to meet the stores’ needs. For example, if the store will have a fair
amount of dough in stock when the delivery is made, they should ship dough that will be younger at
the time of arrival. Their information-systems solution will provide a planning engine that allows them
to perform this kind of dynamic product planning.
THE INFORMATION TECHNOLOGY SOLUTION
Domino’s now is implementing an entire suite of operational and financial information-technology
solutions that will provide them with advanced support for their business. In weighing the benefits of
various best-of-breed operational solutions, they felt that the most critical functionality was the ability
to have a fully integrated, work-flow-driven order-fulfillment process. This would allow complete,
real-time visibility to the entire portion of the supply chain that they manage. The need for advanced
functionality to manage each individual process is limited given the simplicity of many of their processes.
For example, in their dough-manufacturing process, they blend ingredients, mix, cut, form, cool, and
package the dough product. There are no by products. All of their facilities are under 60,000 square
feet, so warehouse functionality is not required to deal with distance-related zone optimization. Overall
co-ordination of the integrated processes clearly is their competitive advantage in achieving high
levels of flexible customer service at a low cost. In evaluating information-technology options, they
sought a solution that fit their business model and provided the tools and information team members
needed to enhance business performance. This would allow them to build around the inherent
functionality of the software instead of designing heavy modifications.
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From a technology point of view, the new systems needed to provide a flexible technical
infrastructure to support changing business requirements. In a distributed operation, it was important
that hardware and software configuration not constrain where they chose to put systems functionality.
With their large number of sites, they also wanted to ensure that a highly reliable technical infrastructure
was inherent in the solution. This would provide an environment that minimized downtime risks and
provided for high availability of all systems. The selection process incorporated the modern approach
of paring down the pack to eight vendors using 20 to 30 key decision criteria. Later the company
developed a demonstration script, building on their knowledge of what they saw in their operational
vision as well as insights gained from standard product demonstrations of leading packages. In order
to perform a two-day scripted demonstration four vendors were invited. Each of these demos was
attended by more than 60 Domino’s team members from the selection team and from the end-user
community. The whole process to identify a supply chain IT solution took a relatively short five
months.
A central data warehouse and multi-dimensional analysis tools has been implemented, and have
been viewing their operations from an activity-based management perspective for about a year.
Although posing quite a cultural change for most of their team members, these new broad operational
measures have been key in driving operational change. However, the availability of analysis and
decision-support information from their new technology solution far surpasses, what they have to
work with today. The PeopleSoft/Essbase/Cognos solution provides both excellent accessibility to
information and the tools for end-users to analyze that information effectively.
RE-ENGINEERING FOR CROSS-FUNCTIONAL EXCELLENCE
Upon analysis, they determined that their current procedures and processes, though adequate for
today’s operations, would not leverage the advanced technological solution they had chosen. Therefore,
they are designing their new core processes around the inherent functionality of their new IT solution.
Their re-engineering efforts will surely cause some system functionality modifications. Yet, they
certainly will try to limit these so that future upgrades and integrations are easier to accomplish.
Since, the PeopleSoft solution allows them to manage entire processes, they have eliminated functional
or department thinking from their design process. This has taken a bit of effort since Domino’s as a
corporation, including DPD, historically has been functionally aligned. Interestingly, the breakthrough
really came during the scripted demos when team members had to sit through the functionality
presentations of other departments. The core supply chain process relates to the flow of inventory
and its parallel flow of dollars. This process is called Forecast to Cash. Within this process are
several sub-processes. Notice in the exhibit that the corresponding systems’ modules tend to relate
to typical, current departmental definitions. Although focusing on modules will benefit their design
team when dealing with the IT implementation, it confuses supply chain process re-engineering. To
assure proper design and implementation, the supply chain has been selected as both an entire
process and as sub-processes. As they look at the entire process, different users may be involved in
different portions, and different divisions may use certain portions of the entire process. There also
are processes that are relatively unrelated to this core Forecast-to-Cash process. These include
budgeting, treasury, asset management, item management, maintenance, project management, and
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Administration of travel/expenses. The overall integrated view, however, assures that they can create
a completely integrated supply chain solution that also considers these other processes.
In order to accomplish this integrated supply chain re-engineering, their project team is
structured to promote cross-functional process design and team interaction. Each of the sub-
processes will be developed using the same methodology. From a reengineering standpoint, the
processes will be designed in parallel with overall Forecast-to-Cash process oversight. From a
technical development and modification perspective, IT configuration and modification will be
structured around the system architecture. The goal is to simplify the solution by establishing
consistent core processes throughout their divisions and functions. For example, several of their
divisions process purchase orders. On the surface, Distribution’s PO process looks much different
from that of the Corporate Home Office. However, if they look deeper, they see that Distribution
places different types of POs: food; store equipment and supplies; office supplies; and capital
assets. The team believes that it makes sense for the whole corporation to buy supplies and
capital assets using the same process, even if it is somewhat different from how Distribution
purchases food. This approach will facilitate support of the continuous improvement to both
their processes and the supporting systems.
PHASED APPROACH TO IMPLEMENTATION
Phased implementation approach has been developed for their supply chain solution. The first phase
implements core transactional functionality that will allow the end-users to see and control the entire
core set of processes. Some planning functionality and basic decision support will be included. The
second phase will add greater functionality depth to many of their sub-processes to improve their
efficiency and effectiveness. Sophisticated integrated planning and advanced decision support will
be incorporated. They expect to continually improve upon their solution with additional enhancements
and new releases from their software solution providers. The design of Phase 2 is planned to overlap
the implementation of Phase 1.
Team has struggled over this phased implementation approach. Different constituencies have
their own needs and agendas—for example, minimizing the need to work on two systems at the
same time, putting a solution in quickly, getting a fair amount of additional functionality (over and
above current) in the first phase. To complicate matters, certain technology architecture attributes
make some solutions easier to implement than others. After a couple of months of debate, they
reached a consensus on at least the functionality goals of the phasing approach. There are still
technical issues to resolve. The large number of sites within their system complicates rollout of the
phases. Their current plans are to first pilot the complete Forecast-to-Cash process at one distribution
center. In parallel with this, they will implement the core financials functionality at their Corporate
and Distribution Home Offices. Once all of these locations have been tested and the interface issues
resolved, they will begin rollout to other distribution centers. Because of the impact on their team,
they will probably limit rollout to no more than five distribution centers at a time. Their equipment and
supply operations will be rolled out in a similar process once they have established control over the
distribution-center implementation. This phased implementation approach will provide a large increase
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in competitive functionality early on, while assuring high acceptance and minimizing risk. It leads
them to a fully configured system with well-documented procedures and incorporates the user-
supported re-engineering efforts of the design phase. The target date for the Phase 1 implementation
startup is May 1998. They expect full rollout of Phase 1 to take a year. The Phase 2 rollout could
possibly overlap the end of the Phase 1 rollout.
TEAM-DEVELOPMENT INITIATIVES
Many aspects of Domino’s re-engineering and information-technology solution involve
implementation risks. And these largely center on their end-user team members’ acceptance
and understanding of the solution. They have several initiatives planned or under way to minimize
this risk.
Communication of Their Operational Vision
Through communication programs, their team members are beginning to understand two important
principles of this process. First, this solution is a core requirement for DPD to successfully achieve
their mission in the future. Second, it makes sense to leap-frog several levels of systems solutions to
take advantage of the latest supply chain solutions and technologies. This means that their process
transitions cannot be gradual. In reality, many of their processes will change dramatically. It is important
for team members to realize that the radical nature of the change is not because they have been
performing poorly; they have, in fact, been providing service to their customers at levels that far
exceed industry standard. Instead, they are making the leap purely to take advantage of the best
tools now available to meet their mission statement. As a result of this communication, most team
members have embraced the need to implement the level of change required. Discussions throughout
the organization following the scripted demos raised the level of excitement as people began to get a
glimpse of the potential tools that will be brought to the operations. Most team members, however,
still are not fully aware of the magnitude of the change—and the profound impact, it will have on
their day-to-day activities.
Functional Training
Many of the new processes that will be incorporated in their solution involve methods never
before used at Domino’s. Some of these methods are fairly complex. Thus, it’s important for their
team members to understand the underlying principles prior to using the system tools. For example,
their managers and team leaders needed to really understand the principles of activity-based
management before they could utilize this information for decision making. If they do not build the
fundamental skills, they run the risk of a chaotic implementation because the users have neither
visibility over nor understanding of the decisions made by the system.
Involvement in the Design and Implementation Process
Ownership is key in their strongly entrepreneurial environment. At Domino’s, as in most companies,
solutions forced down upon the end-users are resisted—no matter how good they are. Although it is
impossible to have all 1,100 of their DPD team members involved in the design process, they can and
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will be involved in the implementation. To ensure that they do not miss anything during the design
process, they will incorporate a diverse group of team members from all of their processes to ensure
appropriate design, buy-in, and grass-roots communication on how the new solutions will work.
Advanced Systems End-User Training
Their team members are used to computer-based training. And they plan to leverage this
experience through integral PeopleSoft training tools as well as CD-ROM and intranet solutions.
PeopleSoft’s on-line work-flow support provides new users with excellent information on how their
process works and interacts with other processes.
Technology Support
System must operate reliably and technical issues and concerns must be addressed quickly.
They are transitioning to an environment, where IT tools will support nearly all of their activities.
Although they have not yet determined exactly how their systems will be supported, they recognize
that placing the burden of technical support on the end-user community will only cause frustration
and encourage inappropriate quick fixes.
ACHIEVING THE VISION
To sum up, Domino’s Pizza Distribution’s strategy is to support the operations and growth of Domino’s
Pizza stores by providing excellent service and quality products at the best available price. They need
to make significant technology investments and undergo substantial process changes in order for
DPD to provide the best return to their stakeholders, the franchisees. DPD should continue to be
responsible for the core value-added processes within their supply chain. New systems tools will
allow them to significantly enhance their already excellent service capabilities. Advance planning
and scheduling in their dough-manufacturing process will allow them to improve the consistency and
quality of this critical pizza ingredient. Even though many of their core processes are relatively
simple, their role as planner, just-in-time manufacturer, and distributor uniquely positions them to
coordinate and synchronize the entire flow of product and cash. Domino’s has selected PeopleSoft’s
ERP solution as the core of their future systems direction. They will incorporate advanced work-
flow-supported client server/network computing technologies while leveraging their corporate intranet.
They believe this highly flexible solution will provide them with a close functional match that minimizes
the need for dramatic systems modification. During this whole effort, they cannot neglect their most
important resource—their team members. Through communication, involvement, skills enhancement,
training, and technical support, they can assure a successful implementation of this new technology
and achieve the strategic supply chain vision.
Team Play
Team structure has been in place at Domino’s since the inception of the company—long before
the concept had become fashionable. Domino’s Pizza Distribution’s organization has both line
operations teams (executive leadership, distribution center leadership, and departmental leadership)
and support or special project teams. The re-engineering and information technology team structures
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are critical to the success of the process to perfect the supply chain. The design and implementation
teams has been built to develop a cross-functional perspective, leveraging internal and external
expertise. Every function of DPD is represented on the teams, both at a technical resource and end-
user level. In addition, several members of the team represent corporate functions. During the
development and implementation process, they also will include representation from their other supply
chain participants—the suppliers and stores.
DOMINO’S MISSION: GLOBAL LEADERSHIP
Domino’s Pizza has been dedicated to quality service, product, and delivery excellence for more than
35 years. Its mission: To be the leader in off-premise pizza convenience to consumers around the
world. Domino’s was founded in 1960 by Thomas S. Monaghan and owes its success to a few
simple precepts: A limited menu offered through carryout and delivery. Domino’s delivers quality
products with a Total Satisfaction Guarantee: Any customer not completely satisfied with the Domino’s
Pizza experience will be offered a replacement pizza or a refund. Tom Monaghan’s philosophy
guides the entire corporation in how it accomplishes its corporate and divisional mission statements:
• Being fanatical about product quality and service consistency.
• Providing product variety to meet all customer needs.
• Placing team-member and customer safety and security above all other concerns.
• Creating an environment in which all team members feel valued, because they are.
• Building and maintaining trusting relationships that reward franchisees and other partners
for their Contributions.
Domino’s Pizza Inc.’s sales in 1996 reached $ 2.8 billion, marking the fourth consecutive year of
increased sales. Domino’s Pizza has over 1,200 franchisees, and operates more than 5,700 stores
throughout the United States and in 57 international markets.