Jumping through hoops
A look at the supply chain of Dunkin' Donuts in the UAE.
At around 3am every morning, brightly coloured vans carrying some of the tastiest donuts known to man quietly slip out of their docks at a kitchen in Sharjah and make their way across the UAE.
Around 35,000 - 40,000 multi-coloured donuts are delivered to more than 115 points across the country from the new Dunkin' Donuts kitchen in Sharjah.
The facility - which includes a warehouse for storing the flour and mix, plus a kitchen for preparing and baking the donuts - was unveiled at the beginning of last month.
Since parent company Dunkin' Brands franchised out its operations in the UAE 10 years ago, the donut maker has evolved to become one of the country's best-loved brands.
Over the last two or three years, it became clear that franchisee Continental Foods would need to create a far larger facility at the Dunkin' Donuts HQ in Sharjah to handle the surging demand and the new US$5 million kitchen is now the largest of its kind outside the US.
"We absolutely needed a new facility," says David Rogers, general manager of Continental Foods. "We have grown significantly in the last three or four years and gone from 20 to 50 dedicated outlets, which, in addition to the petrol station outlets, gives us 115 distribution points. Business has been very good.
"What we wanted to do with this facility was not just to build it for today but to build it for the next 10 years. We have the capacity here to make in the region of 50 million donuts a year, which is basically three times what we are producing now.
"With the current equipment, we are able to make 50,000 donuts a day, and we could produce at least 150,000 donuts a day just by fitting in more equipment and adding more people.
"Although the economic situation is getting tougher than it used to be, the market is still growing," he adds. "We have been opening between 10-15 stores a year for the last 15 years, so if we continue going down that path, in seven or eight years we could be approaching those sorts of figures."
Dunkin' Donuts has evolved into a global brand that is famed for its superior produce. Perhaps aware that it was onto a winning formula, the company has done everything it can to ensure that its donuts taste the same wherever they are found in the world.
For this reason, all the primary materials that are brought into the UAE, such as flour, mixers and donut fillings, come from the same suppliers in the US.
"It is a Dunkin' Donuts product, which means you cannot get it locally," says Rogers. "It's one of the obligations of a franchisee that we must buy approved products. There's no approved supplier of these products in this region at this point in time, so we buy from the US."
He adds that such a move is unlikely to happen even in the near future as the UAE market, in comparison to the US, is too small to source locally.
"In terms of volume we are still dealing with 50 stores," he says. "The US has got 5000 stores; we are not exactly a big part of their business. Consequently, if we were to approach a local supplier even with 50 stores, while we might be consuming quantities that in the local market are quite substantial, they are still nothing like the amount the suppliers produce in the US.
"So there are quality issues and there's also a price issue. Because of the huge quantities that they make in the US, the price there is naturally a lot cheaper than anything we might be able to source in the local market. That's not to say that it won't change in the future but at the moment it's cheaper by far to bring in what we need from the US."
Rogers says that the franchisee does not process stock orders through parent company Dunkin' Brands, but rather through consolidator TradeTrans.
"They do it not just for us but for all the Dunkin' Donuts franchisees in this part of the world and in Europe," he says. "We place an order with TradeTrans and they go to the suppliers and get everything that we want, put it into the containers and ship it to us. We pay them and they pay everyone else. So we are only dealing with one point of contact in the US."
The goods are then shipped to Jebel Ali Port, where they are unloaded and taken to the warehouses by Gulftainer subsidiary Speedtrux/Trucktainer, a firm that operates 135 trucks and 200 trailers throughout the region.
Rogers says the company brings in five 40-foot containers every month filled with flour and yeast mixers.
"Most of our food products have a six-month shelf life. This may sound like a long time, but after you factor in the time it takes to order and ship the produce, time can catch up with you quickly.
The order process takes a month and the shipping process roughly another month. By the time you get it here, you are almost up to three months. One of the rules and regulations of the municipalities here is that you've got to bring a product in with at least 50% of its shelf life.
"Because we are shipping every month, we would carry a month and a half's stock - no more than that," Rogers adds. "Carrying that stock is a substantial cost for us because you need warehousing space. So the less we carry, the better.
"You've always got to carry some buffer stock in case there is a delayed shipment or something happens, so we carry a month and a half roughly. It's fairly standard and organised, especially as we've now been here for 10 years, and as a result we've smoothed out any problems in our supply chain from the US."
The company has around 2500 square feet of warehousing space connected to the kitchen and goods are brought in through the course of the day. The donut-making activity itself is split into two eight-hour shifts and the donuts are sent out twice a day - once between 2am and 5am and again at 1.30pm-2pm.
The franchisee owns 12 trucks, which deliver to points in Ras Al-Khaimah, Ajman, Sharjah and Dubai. It also owns a separate, smaller facility in Abu Dhabi, which services the market in the capital through two or three trucks.
Delivery of non-food goods such as plastic bags and tissues are done to distribution points once a week.
In the Sharjah kitchen, 36 staff are tasked with making the donuts and 15 are termed Ã¢â‚¬Ëœtransportation staff' - who are split between drivers and loaders. The donut production staff oversee the warehouse, which is connected to the kitchen, and two more staff members manage inventory in two separate warehouses. The kitchen warehouse itself is a very basic affair and eschews modern picking and racking systems.
"Our warehouse is quite simple in those terms," admits Rogers. "At this stage we haven't installed racking and we haven't palletised to any degree. That's something that we are looking at for the future. I would say we only carry 100-120 products - it's not a huge amount."
In order to ensure that the donuts are kept fresh, they are delivered soon after they are produced. Aside from keeping them at a normal room temperature, there is little else the company can do to keep them fresh.
"The trucks are air-conditioned," explains Rogers. "The back is air-conditioned as well as the front. We don't chill the donuts, because if you chill them they dry out quite easily. But they are kept at room temperature throughout the whole process; they have to be, especially in this weather."
Dunkin' Donuts is ranked as one of the world's largest coffee and baked goods chains, serving more than three million customers around the world per day. The company sells 52 varieties of donut and more than a dozen coffee beverages.
The brand was franchised to Continental Foods in the UAE in 1997 and since then has established stores in all of the country's major malls and sales points at Enoc and Epco service stations.
The UAE is already experiencing a retail boom that is estimated to see a 209% growth in retail space to 4.25 million square metres by the end of the decade. Perhaps recognising the growth potential, Sheikh Mohammed Saud Sultan Al Qasimi, chairman of the Government of Sharjah Finance Department, is the proprietor of Continental Foods in the UAE and attended the opening ceremony of the new kitchen.
But others have also recognised the enormous potential for organic growth in the UAE retail market, not least the firm's nemesis, Krispy Kreme.
Although Krispy Kreme only opened its first store at a mall in Deira, Dubai last year, the company has plans to open 100 more throughout the Middle East region in the next five years.
However, Rogers says bosses at Dunkin' Donuts are unfazed. "In this market we had a long start and obviously we've got a lot more stores," he says. "I think Krispy Kreme have got less than 10, but they are growing fast. In some ways it's good to have competitors - they keep you on your toes and make sure you stay alert.
"They also help to grow the market," he concludes. "All the work they do on advertising donuts means that more people will eat donuts. Although we have a headstart on them and need to stay in front, I don't see their being here as a negative thing. I see them as expanding the market and helping us fine-tune our business."