Supply Chain Management

Dunkin Donuts works diligently at managing their supply chain. Doing so has contributed greatly to its overall success as being one of the best coffee chains in the world. Every item, from coffee beans to sugar to styrofoam cups, goes through the chain. The process begins with the suppliers of raw materials. The coffee, for example, which is originated in Brazil, is grown, picked, sorted, processed, packaged, delivered to one of the company’s main hubs, and finally delivered to a restaurant. Each process requires movement of the product from one place to the next. The company does not own the coffee until it reaches a hub. Even then, because it is not in the hands of a franchise owner, it is still moving though the supply chain and must be monitored, managed, and improved if need be.

Below is a link to a tour of the upstream movement of coffee from tree to cup.

Coffee from tree to cup

It is important to note that every single product is placed in one of the many hubs throughout the country before it is brought to a restaurant. The Mid-Atlantic Distribution Center, which is located in New Jersey, houses all perishable and non-perishable items in New Jersey and seven other neighboring states. The main office has a team working around the clock with managers in each distribution center in ensuring that inventory stays under control. The team also contracted with the company Voxware, which supplies each center with voice logistics. This system enables the company to more efficiently and effectively control, monitor and coordinate everything that comes in and out of the center. This improves the supply chain management of the overall company, reduces costs and ultimately puts the final product in the hands of the customer.

Below is an article describing the use of Voxware’s voice logistics.

Voxware Voice Logistics

Voice logistics is not the only technology utilized by Dunkin Donuts. The company also uses software that helps supply chain managers ensure the flow of goods is functioning properly. The article below explains Dunkin Donuts’ use of software.

VAI Supply Chain Software

All non-perishable items, such as cups and paper bags, are outsourced from several different paper and plastic manufacturers. In these situations, the items are made by suppliers and warehoused in their private buildings. They are then shipped to one of the Dunkin Donuts distribution centers and sit until Dunkin Donuts drivers ship them to individual restaurants. Perishable items, such as donuts and bagels, go through a slightly different supply chain. The reason being is that these items are not outsourced, for culinary experts who work for the company make them. First, ingredients such as sugar and flour are made by suppliers in their own factories and sit in their warehouses until they are ordered by Dunkin Donuts. These items are sent to distribution centers and when needed, sent to factories in each state. The culinary experts in each factory make the bagels and donuts and ship them daily to each restaurant in the immediate area. Other items, such as muffins and flatbreads, are made in one of the main factories at the distribution centers, where they are kept frozen until they are shipped to each restaurant in their weekly delivery.

Dunkin Donuts’ on-time delivery rate is extremely high. Very rarely does a customer encounter the inability to order a customized cup of coffee. Donuts, bagels, and muffins come in many different varieties. No one kind is expected to be available at any specific time. This allows for each restaurant the ability to adjust and modify the menu based on the inventory on hand. Therefore, fill rate can be much higher in these circumstances. Dunkin Donut’s decision to make their donuts and bagels in factories throughout the country, instead of having outside companies makes them or having them made by employees of each restaurant, is one of the reasons their products are of such high quality. Relying on someone else to make such important items may seem less complicated, but does not provide the company with the ability to control the quality of the products. In addition to the actual making of the products as being an important factor in quality, the decision to use suppliers who hold extremely high standards themselves has greatly affected the quality of both the food and coffee for the company. The total supply chain throughput time is actually quite long in comparison to other restaurant chains, but much less than in other industries. The reason is that the coffee beans take time to produce. If not for the coffee, the throughput time would be much less, perhaps as little as a few weeks. Because Dunkin Donuts sells perishables, it is imperative that the throughput times are low. Items such as eggs and milk must be consumed very shortly after they are produced. The urgency of time in these circumstances improves the overall issue of time in supply chain performance. Cost is something that never remains consistent for Dunkin Donuts. Fluctuations in price of coffee, milk, sugar, and other items that change drastically many times a year have deemed very challenging for the company. However, Dunkin Donuts has great relationships with their suppliers, so even with increase in prices, quality of the products have never been compromised. Holding time in the distribution centers is very low. This decreases costs while at the same time increases quality. Labor stays low because the company invested in technology that can do the work of many employees. Overall, unit cost is low because the company does everything possible to reduce costs throughout the entire supply chain.

Dunkin Donuts has a very well run supply chain management system in place. But there is always room for improvement. It might make sense for the company to hire a third party logistic provider to simply evaluate their system and recommend any changes to its infrastructure. The company might also want to look into the possibility of having each store have their own dairy providers that are in the immediate area. This would reduce the throughput time, cost and possible waste of these highly perishable products. Other than the modification of their dairy suppliers, the rest of the chain seems to be quite efficient. Outsourcing its signature items, such as donuts, would not be wise. Vertically integrating other products would become too complicated and costly. Dunkin Donuts might want to partnership themselves with their coffee suppliers. Doing so would bring awareness and marketing power to the coffee makers and at the same time reduce costs for Dunkin Donuts. Cross-ducking the perishable items from the distribution center to the factories may also be a wise decision for the company.