Business Analysis Report

by Wyatt Thomas

MGMT 300 - 001

Prof. Kiscaden
December 4, 2015

Table of Contents
INTRODUCTION AND COMPANY BACKGROUND

PROJECT OVERVIEW

WAITING LINE ANALYSIS

INVENTORY MANAGEMENT: AVERAGE INVENTORY AND INVENTORY

TURN 6

PROCESS DESIGN AND ANALYSIS

CONCLUSION

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REFERENCES

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Introduction and Company Background

Dominos is a worldwide pizza delivery company that was started over 50 years
ago by brothers Tom and James Monaghan in a small town in Michigan. By 1978, Tom
had bought out his brother James and exploded the company to nearly 200 stores
nationwide, and by 1989, that number grew to just over 5,000. Today, there are over
11,000 Dominos all across the world with over 5,000 of those stationed outside of the
United States.
With a multitude of pizza options combined with a great variety of sandwich,
pasta, chicken wing and desert options, Dominos has grown from one small family
pizzeria to a pizza delivery behemoth ranked as the second largest pizza delivery
company in the world. In combination with an ever-growing menu, Dominos places a
great emphasis on supporting their independent franchise owners and growing their
technological and online profiles. They also makes great strides in the form of giving
back, by partnering with the likes of St. Jude Childrens Research Hospital and other
major organizations, Dominos donates millions each year to local communities.
Project Overview
The main emphasis of this project will be one particular independent franchise in
Santa Fe, New Mexico, which has been owned by my family for over 20 years. A
thorough and profound study of various processes incorporated into the business will
yield a much deeper understanding of the inner workings of a Dominos independent
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franchise. This project will tackle the following business process analyses: Waiting Line
Analysis, Economic Order Quantity and Reorder Point, and Process Design and Analysis.
Waiting Line Analysis
Understanding waiting linesand learning how to manage them is one of the
most important areas in operations management, Jacobs & Chase (2011, pg. 222).
Sometimes referred to as Queuing Theory, Waiting Line Analysis is an integral tool used
by managers, to not only evaluate the amount of time customers spend in line, but to also
analyze and make decisions on how to minimize it, with the overall goal of profit
maximization in mind. This Analysis also allows managers to compare and contrast the
profits and losses associated with adding additional line tellers, purchasing additional
cash registers, or simply increasing the rate of service by adding more labor in the
kitchen.
Among the many downfalls associated with improper Waiting Line Analysis,
there are several positive advantages to utilizing this tool correctly, most notably being
increased productivity that, in turn, leads to increased profitability. Naturally, this
increase in profitability is something all businesses aspire towards, but the trick comes in
analyzing and, in turn, maximizing productivity, which is dependent on several unique
aspects: the source of the population, the arrival pattern, the queue discipline, the service
pattern and the layout, among others. For this particular project, we would like to analyze
each relevant component in hopes of yielding an all encompassing, comprehensive
conclusion.
To begin, an analysis of the queuing system in a Dominos franchise is reliant on
identifying and understanding the source of the population. There are two distinct
sources a population can come from: finite and infinite. The two are differentiated from
one another by the size of the customer pool in question, and in turn, the affect of
increasing or decreasing this population by one person. In Dominos case, the line is not
affected by either an increase or decrease of a customer, thus, the rate at which customers
already in line are affected by changes in new customers to the line is negligent, making
it an infinite population source. From there, it can then be stated that Dominos employs
a single channel layout with Poisson arrival patterns, since the arrival of new customers is
completely random. Dominos also employs a First Come-First Serve queue discipline
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and an exponential service pattern, making this a single channel, single phase system
(Exhibit A), which is the simplest type of Waiting Line structure.
In this system, Managers usually utilize one cash register during normal demand
hours and two during high demand hours, but for the purpose of this project, we are going
to focus on the more common of the two, the single line, normal demand hours. Other
than that, the only remaining component that affects the Waiting Line Analysis is the
degree of patience had by customers in line, which falls under two categories: patient and
impatient. Once again, for this particular project, we will analyze the more common of
the two categories, and for this particular Dominos, it is believed that most walk in
customers fall under the patient category. From there, we can begin to analyze the
mathematical aspect of Dominos Waiting Line Analysis, which can be seen below.
Exhibit A

Single
Channel
Line
Structu
re
Multi
Channel

Single
Phase
Multi
Phase
Single
Phase
Multi
Phase

Waiting Line Analysis for Dominos

Where:

Arrival Rate
5

Service Rate

Lq

Average Number Waiting In Line

Ls

Average Number In System (including any being served)

Wq

Average Time Waiting In Line

Ws

Average Total Time In System (including time to be served)

One Cash Register, Patient Customers

Lq
Lq

6^2
15(15 - 6)

36
135

Lq

Ls

Ls

Wq
Wq
Wq

=
=
=

0.26666
6
0.0444
2.6664

hours
minutes

0.26666 customers

6
15 - 6
0.6666 customers

Ws
Ws
Ws

=
=
=

0.66666
6
0.111
6.666

hours
minutes

Inventory Management: Average Inventory and Inventory Turn

From there, it is vital to address the importance behind maintaining a solid
Inventory System while managing a company such as a Dominos franchise. While most
people, even outside of the business world, understand what inventory is, it is much less
common for people to understand and utilize an Inventory System, which is best
described as the set of policies and controls that monitor levels of inventory and

determine which levels should be maintained, when stock should be replenished, and how
large orders should be, Jacobs & Chase (2011, pg. 515).
There are many reasons why a company would want to track and analyze
inventory. For assembly line and manufacturing companies, tracking inventory levels
helps to maintain independence of operations, which essentially gives a cushion for the
variance in output times from one assembly line to the other. For nearly all, non-service
companies, Inventory Analysis helps to allow flexibility in production scheduling while
ensuring the company can and will meet variations in product demand, as keeping the
necessary inventory on hand eliminates numerous hassles and costs associated with
reordering. Truthfully though, these are only a few examples of the dozens of advantages
one can attain by implementing a well thought out, well managed, and glitch free
inventory system.
Now, in terms of Dominos franchises, having a glitch free system is not only
imperative for running operations from a day-to-day perspective, its also fairly simple.
The logistics and overall set up of this system is crucial because if a particular store does
not monitor their inventory levels, they may end up running low on necessary materials,
such as dough, cheese, or marinara sauce, which could not only alter current sales for that
day or week, but possible negatively impact future sales as unsatisfied customers are less
likely to return. The simplicity behind the system, then, comes from the simplicity
behind the necessary inventory. For nearly all Dominos independent franchises, the only
overhead costs aside from store expenditures and labor are the pizza making ingredients
and associated ordering costs, which can easily be tracked, averaged and arranged so that
only weekly deliveries are required.
So, deciding what type of Inventory System to use and how to set it up is the first
step a Manager must take, and the question that he or she must ask is how can one predict
demand with the utmost precision possible? The most common answer is to
characterize demand by using a probability distribution and maintain stock so that the
risk associated with stockout is managed, Jacobs & Chase (2011, pg. 515). With this in
mind, three separate models must be considered: single period model, which is a one time
order of a specific product, fixed-order quantity model, which is a reoccurring order that
is manually placed when inventory levels reach a certain point, and fixed-time period

model, which is similar to fixed-order, but the reorder happens on an automated, time
based schedule (i.e. every Friday or every other Monday). For the Dominos in question,
a fixed-time period model is nearly perfect for keeping stock full in the store as there are
only a handful of required materials, each of which can be analyzed and averaged out to
see how much of each is required per week, as most Dominos franchises work with
weekly inventory orders.
When implementing a fixed-time period model, there are two associated
calculations that are useful in analyzing the model as a whole: average inventory and
inventory turn, both formulas of which can be seen under Exhibit B.
Exhibit B

Where:
d

Weekly Demand

Review Cycle

SS

Safety Stock

For the Dominos in question, it can be assumed that, on average:

Weekly Demand (d)

25 Units

Review Cycle (T)

1 Week

Safety Stock (SS)

18 Units
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The mathematical analysis follows:

dT
Average Inventory

2
25(1)

SS

18

2
=

Inventory Turn

20.5 Units

52d
dT/2 + SS
52(25)
(25)(1)/2 + 18

63.414 Turns per year

Process Design and Analysis

The analysis of a companys processes, which are defined as any part of the
organizations that takes inputs, transforms them to outputs, of which they sell and
hopefully, yield in a profit, is critical for a company to continually grow and optimize
profitability. Though there are enormous arrays of businesses one can enter into in the
United States, there is one reoccurring thing that nearly all of them have in common, and
that is the utilization of processes. Whether it is a large-scale car company turning
manufacturing parts into moving automobiles or a small-scale bakery turning flower,
milk and yeast into bread, each company is taking the basic idea of a process of turning
inputs into outputs and applying it to their field of choice. In reality, though, benefit is
only produced when these processes are continuously analyzed and optimized throughout
the course of the businesss lifespan, which is why Process Design and Analysis is such a
fundamental and integral part of the American Business world.

When analyzing a companys process designs, it is beneficial to categorize each

process in question, as there are several different ways a process can be designed, and an
even larger number of ways in which it can be implemented. To start, one must simply
break a process into single-stage and multi-stage processes. Naturally, single-stage
processes are usually simpler to manage and easier to implement than multi-stage
processes, but with that being said, there are distinct uses and applications for each. In
terms of multi-stage processes, there are a few problems that may arise when moving
inputs through a system towards a final output. Buffering is an initial problem, which
refers to a storage area between stages where the output of a stage is being used in a
downstream stage. From there, a few things can happen, blocking, which occurs when
the activities in [a] stage must stop because there is no place to deposit the item just
completed, and starving which occurs when the activities in a stage must stop because
there is no work. The succession of each of these interruptions, in turn, leads to what is
known as bottlenecking, a term used to describe any resource that limits the capacity or
maximum output of a process, Jacobs & Chase (2011, pg. 267). The overall goal of a
manager in charge of process design and analysis, then, is to minimize any buffering,
blocking or starving with the intention of eliminating any possible bottlenecking all
together.
Another useful classification is Make-to-stock vs. Make-to-order processes. A
make-to-stock process is one similar to that used to make Big Macs at McDonalds, in
which the majority of the work, i.e. the gathering of raw materials, cooking and
assembling, are all done prior to a customer ever placing an order, so that, as soon as the
order is placed, only a minimal amount of work is necessary to satisfy that order, in this
case, it is simply packaging the burger and delivering it to the counter. This process is
outlined in Exhibit C

Exhibit C

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Dominos, however, implements a Make-to-order process in turning inputs into fully

cooked, ready to eat pizzas. In this situation, the only work done prior to an order being
placed is the gathering of raw materials, which in this case are the necessary ingredients
needed to make the pizza. The major difference between the two comes in the level of
demand each manager can expect. For McDonalds, the make-to-stock process was
initially implemented with a high demand-high volume assumption where it is believed
that the demand for burgers will be high enough that a make-to-stock process will more
efficiently fulfill customers orders, though overall quality of the product may be at risk.
On the other hand, Dominos, rather than risking the quality of the product, decided to
implement make-to-order processes so that, not only will the efficiency of production be
maximized, but the quality of the pizza be maximized as well. An outline of Dominos
make-to-order process can be found under Exhibit D.
Exhibit D
Raw
Raw
Materia
Materia
ls
ls

Dough and
Topping Prep.

WIP

Pizza
Creation and
Assembly
Assembly

Baking Time

Cooling Time

Delivery

Customer Order is
Placed

One of the major bottlenecking problems that can arise during this process is
going to be human error. Whether it be an improperly timed bake, or the wrong pizza
created and assembled, the majority of wasted pies in most Dominos franchises actually
comes from some sort of error on the side of the staff. When pizzas have to be scrapped,
the waiting time for the customer is going to increase, while satisfaction is going to
decrease. In this situation, one of the most useful tools is a consistent and applicable
work-related education seminar in which members of the team go through minitrainings to refresh their skills and abilities. In small pizza shops like the Dominos in
question, there are usually no more than 10 employees total, depending on the amount of
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delivery drivers, but all in all, at any given time, only 3 or 4 employees are working at the
store, including a manager. In this situation, because it is such a small group, one can
almost certainly see the increased value behind refresher courses.
Another possible bottlenecking problem that needs to be addressed comes during
high demand or high volume hours, such as Super Bowl Sunday, the Wednesday before
Thanksgiving or New Years Eve, the three biggest nights of the year for Dominos,
respectively. During this time, stores usually vamp up raw material inventories,
employee labor and delivery drivers, yet most stores still seem to fail to operate at
maximum efficiency. This often comes at the fault of the size of the store, and the ability
to use multiple ovens vs. relying merely on one. While the majority of managers would
love to simply buy another oven and carry on, it is also true that the majority of stores do
not have the physical space, and often times the monetary means of doing so. In this
situation, it is important to stick to your processes, constantly track progress, and if
bottlenecking is anticipated, lengthen the anticipated weight time relayed to customers, as
surveys have shown that customer satisfaction is not directly correlated with wait time,
but rather the validity of the wait time. Dada, Kumar & Kalwani (2014, pgs. 2-3)
Conclusion
In summary, the objective behind this analysis report was to analyze, compare,
and contrast the inner workings of a single Dominos independent franchise, with the
intention of revealing the insurmountable importance behind supply chain management
and the day-to-day operations. Initially, we focused on waiting time analysis and were
able to calculate the average number of customers in the line and in the system as a
whole, as well as the average amount of time spent in line and in the system as a whole.
We then were able to look at inventory management by calculating average inventory and
inventory turn for any given week. Finally, we dove into process design and analysis
wherein we decided to outline a few individual processes used in the business while also
comparing and contrasting possible solutions to bottlenecking. Nonetheless, by creating
an efficient and focused supply chain and continuously analyzing and improving said
chain, any company has the ability to strive for complete efficiency and maximized

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profitability, so long as the operations involved continuously uphold and implant the
companies fundamental operating policies and values.

References

Jacobs, F.R., & Chase, R.B. (2011) Operations & Supply Chain Management. United

States of America. McGraw-Hill Companies, Inc.

Sherman, Peter J. "Queuing Theory and Practice: A Source of Competitive Advantage."
ISixSigma.com. N.p., n.d. Web. <http://www.isixsigma.com/industries/retail/queuing-

theory-and-practice-source-competitive-advantage/>.
Hiray, Jagdish. "Waiting Lines and Queuing System."
Businessmanagement.wordpress.com. Jagdish Hiray, 15 Feb. 2008. Web. 11 Nov. 2015.

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<https://businessmanagement.wordpress.com/2008/02/15/waiting-lines-and-queuing

system/>.
Kumar, Piyush, Manohar U. Kalwani, and Maqbool Dada. "The Impact of Waiting Time
Guarantees on Customers' Waiting Experiences." Marketing Science 16.4 (1997): 295314. Web.
<http://www.researchgate.net/publication/227442144_The_Impact_of_Waiting_Time_Gu
arantees_on_Customers'_Waiting_Experiences/>.

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