www.dunkinbrands.com

DUNKIN DONUTS

Dunkin Donuts

Dunkin Donuts is the largest coffee and baked goods chain in the world providing high quality coffee, bagels, donuts and other baked goods since 1950. In 1950 Bill Rosenberg opened the first Dunkin Donuts in Quincy, Massachusetts. Dunkin Donuts is franchised based company and its first franchise restaurant opened in 1955.

Currently, Dunkin Donuts serves more than 3 million customers per day with 8,835 restaurants around the world including 6,395 restaurants in United States and 2,440 international shops in 31 countries. Today, Dunkin Brands Inc. is world’s largest coffee and baked goods chain with $ 5.5 billion in sales.

Dunkin Donuts Inventory Management

Dunkin' Donuts' store managers calculate weekly inventory and labor usage manually. Within 24 hours the inventory report is sent to the Dunkin Donuts operating department and the operation managers analyze inventory for each store. As soon as the physical stock-check completes they send to the Mid Atlantic distribution center for final approval.


The system keeps the record of previous week’s inventory. Upon the launch of a new product, the main headquarters notifies each store of the ingredients needed and the anticipated quantity necessary to satisfy demand.

The system also monitors inventory usage during the current week and records labor cost. Managers need to maintain high standards while offering even higher performance. Inventory is carefully watched every day since fluctuations in sales are a major aspect of the business. Managers have the ability to add on cases of products up to 24 hours prior to their weekly delivery. It is important to note that franchise owners do not have to follow a specific ordering formula, for they decide how to go about managing their inventory.

Due to the fact that orders are placed and received only once per week, it is imperative that inventory counts are highly accurate. Perishable items are the bulk of their truck and the tossing of food can drastically decrease their profit margin. The use of the FIFO (First in First Out) is one of the most important tools needed to keep inventory and ordering under control.

The Process Selection of Dunkin Donuts

The Process Selection of Dunkin Donuts




Dunkin Donuts uses two product flows, line flow and project flow. Each franchise orders in large amounts. Because Dunkin Donuts has predictable sales, the flow of the product is sequenced. This business sells a limited variety of products, with one large customer base. Dunkin Donuts sells breakfast foods, coffee, and has recently expanded their menu to include very few lunch or dinner items. It is not advised that each store carry a large inventory. The inventory on hand serves a specific purpose. For example, each shipment of half and half is ordered for the sole purpose of adding it to the coffee, which is combined to order. Because it is a franchise business, customers expect consistency in every Dunkin Donuts. They also expect their coffee orders to be customized to their individual needs. This makes it clear that when it comes to items such as coffee, they follow a project method. This is where labor dollars are spent the most, for more employees with the most skills is needed. The making of their donuts and bagels, however, cannot be customized. This is where the line flow comes into play. Although made on a daily basis, these items are prepped and cooked throughout the day using specialized recipes. Every food recipe is consistently made in the factory. Labor costs are much lower here, volume is high, and equipment needed to mass produce these items are higly sophisticated.



Dunkin Donuts distinguishes two kinds of processes in its functioning.

a) Make – to – order (MTO) has higher flexibility for product customization. Based on customer’s order production process occurs. The key performance measures of an MTO process are the length of time it takes to design, make, and deliver the product. This is often referred to as lead-time. Another measure of performance in an MTO environment is the percentage of orders completed on time. Dunkin Donuts’ coffee orders go through the MTO process.

b) Make – to – stock (MTS) can provide faster service to customers from available stock and lower costs than MTO process. Customer’s order occurs after production process is completed and results in finished goods. The MTS process has a standard product line specified by the producer, not by customer. The products are carried in inventory to immediately fulfill customer demand. Everything in operations is keyed to producing inventory in advance of actual demand in order to have the proper products in stock when the customer calls. If it is not available, the order can be lost to the firm. Performance measures for an MTS process include the percentage of order filled from inventory. This is called the service level and is typically targeted in the 90 to 99 percent range. The donuts, bagel and muffins orders go through the MTS process due to time-consuming making procedure.

The customer attributes (CAs) are determined through market research in conjunction with potential customers of Dunkin Donuts to determine important attributes of the product. After CAs have been listed on the left side of the matrix, they would be rated on their relative importance by customers so as to add to a total of 100 points.

Dunkin Donuts’ CAs are:

- low cost,

- tastiness (high quality product),

- convenience (ready at any time, 24/7)

Therefore, coffee can be described in the matrix as a line flow MTO. The food is a line flow MTS.

Coffee is the highest volume product sold at Dunkin Donuts. Sales of this product vary, from low to very high. For the most part though, coffee is near the bottom right of the product-process matrix. Although brewing the coffee is quite easy, keeping up with customer orders can be quite daunting. It is necessary that a considerable amount of labor be spent in the front end, aiding in customer service. This is one of the reasons why food products are either made in lines or purchased from the manufacturer pre-made. Muffins, for instance, do not need to be baked from scratch, for they are made by the manufacturer, then frozen, and simply heated. This correlates to the idea of a focused factory. The high cost of labor needed to continuously make its baked goods greatly influences Dunkin Donuts’ decision to bake food in batches. In this method, labor costs are considerably lower and food costs can be more easily controlled and maintained. Most food products are located in the center of the product-process matrix. With the introduction and subsequent marketing campaign of new food products, customer orders for these new items are usually forecasted to be quite high. A move to the lower right of the matrix is sometimes necessary. Other factors that influence their process selection include limited shelf life and space, along with its inability to order products more than once per week. Fierce competition with companies like Starbucks also affects the selection. Keeping costs low for the customers is Dunkin Donuts' competitive edge. Keeping their captial costs low also enables the franchises to be profitable. Every restaurant has limited property and therefore limited space to store their perishable and non perishable items. This is purposely planned and enables a higher profit margin.

Mass customization is a term rarely used in coffee houses, but Dunkin Donuts uses this form of production in special circumstances. For example, call-ahead orders for large quantities of food and beverages require the use of modular production. In a way, the sale of coffee can be seen as a postponement form of mass customization, for although it is brewed continuously, it is customized to order. There is a limit to use of this concept, mainly because of changes in volume and limited shelf life.

Bottom line, increasing profit margin while maintaining the lowest costs possible is what allows the Dunkin Donuts franchise to prosper. There is no one way to run a prosererous business. Dunkin Donuts is well aware of this and uses several methods in deciding their process selections.