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Supply Chain Management

Supply Chain Management Term Report Kentucky Fried Chicken (KFC)

Submitted to: Syeda Shazia Hamid

SCM – Monday (6-9pm) Group : Abbas Sajjani Ayesha Ibrahim (6408) Dania Saher Imtiaz (6208) Mahwish Jawaid Mohsin Ahmed (6407) Sadiq Rajani (6302)

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Supply Chain Management

Contents Supply Chain Management.........................................................................................1 Kentucky Fried Chicken (KFC).....................................................................................1 Submitted to: Syeda Shazia Hamid............................................................................1 SCM – Monday (6-9pm)...............................................................................................1 Group :.........................................................................................................1 Contents..................................................................................................................... 2 Company Profile......................................................................................................... 4 Parent Company......................................................................................................... 4 Cupola Pakistan .........................................................................................................4 Cupola’s Vision........................................................................................................... 4 Cupola’s Mission......................................................................................................... 5 KFC Pakistan............................................................................................................... 5 KFC’s Mission..............................................................................................................6 Objectives of KFC.......................................................................................................6 Values of KFC.............................................................................................................6 Core competency....................................................................................................... 7 Franchise Locations....................................................................................................8 Presently KFC is branched out in eighteen major cities of Pakistan with around 64 outlets nation-wide. Some of the cities in which the KFC is in operation are as follows,....................................................................................................................... 8 Organization Structure...............................................................................................9 KFC Supply Chain.....................................................................................................10 Procurement............................................................................................................. 11 Chicken..................................................................................................................... 11 Sauces......................................................................................................................12 Spices and herbs......................................................................................................12 Packing Material....................................................................................................... 12 Bread and Buns........................................................................................................ 12 Fish........................................................................................................................... 13 French Fries..............................................................................................................13 Other miscellaneous items.......................................................................................13

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Supply Chain Management Storage and Inventory Management........................................................................13 Chicken..................................................................................................................... 13 Sauces......................................................................................................................14 Spices and Herbs......................................................................................................14 Bread and Buns........................................................................................................ 14 Zonal Distribution.....................................................................................................14 Vehicles....................................................................................................................15 Company: Hyundai Shehzore...................................................................................15 Company: Hino Dutro Truck.....................................................................................15 Quality Assurance.....................................................................................................16 MRP/ERP................................................................................................................... 16

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Supply Chain Management

COMPANY PROFILE KFC Corporation, based in Louisville, Kentucky, is the world's most popular chicken restaurant chain, specializing in Original Recipe, Extra Crispy, Kentucky Grilled Chicken. Every day, more than 12 million customers are served at KFC restaurants in 109 countries and territories around the world. KFC operates more than 5,200 restaurants in the United States and more than 15,000 units around the world. It is the world’s largest and most well known chicken restaurant, with chains in more then 10 thousand locations and worldwide in 80 countries. KFC and its franchised employees are more than 200 thousand, all over the world. KFC is world famous for its Original Recipe fried chicken -- made with the same secret blend of 11 herbs and spices Colonel Harland Sanders perfected more than a half-century ago. Customers around the globe also enjoy more than 300 other products -- from Kentucky Grilled Chicken in the United States to a salmon sandwich in Japan.

PARENT COMPANY CUPOLA PAKISTAN Cupola is a Dubai based multinational company and has been at the forefront of development in Food & Retail sector for over a decade. Its flagship brand KFC has amassed itself as the dominant concept in the Quick Service Restaurant (QSR) business in the country. Cupola’s Vision Cupola, Pakistan Ltd. aims to, “Create value through change, challenging existing paradigms by applying vision, innovation and skilled execution”. The company has always accentuated corporate social responsibility through various initiatives taken under the banner of its flagship brand KFC. These include setting up of libraries in various

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Supply Chain Management schools, provision of training for teachers and now to educational for underprivileged children. Cupola’s Mission Cupola’s mission is to harness and reap the potential of the rapidly developing markets of the Arabian Peninsula and South Asia. In the mature capital markets of Europe and the United States, they are well regarded as innovative and creative niche investors. They believe in the minimization of risk: through the depth of their senior management and the quality of their professional staff; through exhaustive and through an emphasis on pre-feasibility. Everyone in Cupola shares an almost obsessive drive for quality, an active consciousness of the team approach and a commitment to their collective success. They strive continually to improve the tangible and intangible returns for all their stakeholders. Cupola’s Businesses: Cupola is involved in several business including, oil gas exploration, plastic cards, retail markets and food franchising. Cupola holds the master franchise rights to operate KFC in Pakistan. Some of the businesses which are under contract with Cupola Pakistan are, 1. KFC 2. Indulge 3. My Superstore 4. Lal Qila

KFC PAKISTAN Food, fun & Festivity, this is what KFC is all leading the market since its inception; KFC provides the ultimate chicken meals for a chicken loving nation. Be it colonel sanders secret original recipe chicken or the hot & spicy version, every bite brings a yum on our face. At KFC they say, “We do chicken right”.

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Supply Chain Management Perfecting its secret recipe of 11 herbs and spices in 1939, KFC has come a long way. With over 10,000 outlets in the world, KFC has maintained its title, for the last 60 years, of being the chicken Experts. Opening the first KFC outlet in Gulshan-e- Iqbal in 1997, KFC wore the title of being the market leader in its industry. Serving delicious and hygienic food in a relaxing environment made KFC everyone’s favorite. Since then, KFC has been constantly introducing new products and opening new restaurants for its customers. KFC’s Mission KFC’s mission statement is, “To be the leader in western style quick service restaurants through friendly service, good quality food and clean atmosphere” KFC Pakistan has contributed in providing Halal and Hygienic products to its customers and managed this through proper training of its human resources. It has created competitive level for other thus improving the overall industry standards.

Objectives of KFC Every organization and company has some certain goals laid down by them to achieve to make it renown and have value added services to satisfy customers.  Build an organization dedicated to excellence.  Consistently deliver superior quality and value in our products and services.  Maintain a commitment to innovation for continuous improvement and grow, striving always to be the leader in the market place changes.  Generate consistently superior financial returns and benefits our owner and employees.

Values of KFC To establish a position in Pakistan as a leading WQSR (Western Quick Service Restaurant) chain, serving good value added services and Innovative chicken based products. KFC is consistently providing a pleasant dining experience, with fast friendly, in a clean and convenient location. Every moment dedicated to providing excellent and delighting customers.

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Supply Chain Management

 Focusing all resources to the restaurants operation because that is where they serve their customers.  Reward and respect the contributions of each individual at KFC.  Expand and update training with time and be the best we can be and more.  Be open, honest and direct in our dealings with one and other.  Commit themselves to the highest standard to the personal and professional integrity at all times.  Encourage new and innovative ideas because these are the key to their competitive growth.  Reward result and not simple efforts.  Dedicate themselves to continuous growth in sales, profit and size of organization.  Work as a team.

Core competency Since beginning, KFC has presented itself and well competed, only through it delicious chicken. People from all over the world know KFC as the best chicken expert. Their chicken has always been unique in taste and has helped them in order to build their own identity all over the world.

PRODUCTS OF KFC KFC Pakistan provides 100% Halal and Hygienic products to its customers. It offers a variety of finger-licking products, some of which are as follows: 1. Crispy Fried Chicken 2. Zinger 3. Twister 4. Hotshots 5. Chicken Burger 6. Hot wings

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Supply Chain Management 7. Rice n Spice 8. Fish Zinger 9. Nuggets 10. Corn on the Cob 11. French Fries

FRANCHISE LOCATIONS Presently KFC is branched out in eighteen major cities of Pakistan with around 64 outlets nationwide. Some of the cities in which the KFC is in operation are as follows, 1. Karachi, 2. Hyderabad, 3. Lahore, 4. Islamabad,

5. Sukkur, 6. Faisalabad, 7. Gujranwala, 8. Rawalpindi, 9. Sialkot, 10. Multan, 11. Peshawer, 12. Jhelum, 13. Sukkur, 14. Murree etc.

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Supply Chain Management

ORGANIZATION STRUCTURE

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Supply Chain Management

KFC SUPPLY CHAIN KFC has a very simple supply chain. As the operations are on a relatively small scale, all the operations are performed by the company (i.e. Cupola) itself. The supply chain process can be summed up as a 3 step process: Step 1: Raw materials procured from various suppliers and stored at two warehouses; the normal-storage and the cold-storage. Details are discussed later. Step 2: All product preparation is done at the branch except for the marination of chicken and sold to customers at the branch itself or delivered at the desired locations. Step 3: Warehouses replenish each branch according to their requirement (usually three times a week) using company’s own vehicles and drivers upon the request of the branch manager.

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Supply Chain Management

Pakistan is divided into two areas, namely North and South. The area below Multan falls under the southern region whereas, Multan and the area above it falls under North region. Each region hence has its own warehouse. The North region has its warehouse in Lahore. The south region has its warehouse in Karachi.

PROCUREMENT Monthly budgets are made to plan purchasing activities. These comprise of dividing the allocated budget into the inventory policies already defined at the warehouse from past data and experience. FIFO method is used for all items for the inventory at the warehouses. Chicken Chicken is supplied by K&N’s in customized cut, packed and labeled packets directly to the warehouses in each region. Labeling is necessary for inventory management and efficiency. KFC gives a lead time to K&N’s of one week for them to deliver their order. The chicken arrives in special freezer fitted van which keeps the chicken frozen while it is being transported. The

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Supply Chain Management different types of pieces ordered by the warehouse are in baskets of 5 square feet and having a height of 8 inches. The vehicles used for this are small trucks which have a maximum loading capacity of five tons.

Sauces Unilever (Yum) provides all the sauces needed by KFC such as Ketchup, Chilly Sauce, Mayonnaise, Tartar Sauce etc. Yum is a brand especially made for KFC and cannot be sold in the market to the customers. These are delivered directly to each warehouse by Unilever themselves. The lead time for this operation is about two weeks. Spices and herbs These are imported directly from Dubai and Singapore. The lead time for these exceeds two months as these are not perishable items and it takes a lot of time for transportation. All imports are done through sea in dedicated 20” containers for KFC. Packing Material This is purchased from local parties namely Afeef Packaging, AAA and Gold Packages. Due to frequent re-deg of boxes and deals offered by KFC, the inventory of these is kept at a minimum. Bread and Buns

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Supply Chain Management Since the last 4 or 5 years KFC has been producing their own buns in their own bakery. Their plant is located at Sohrab goth, Karachi. Fish Information was not provided. Internationally, fish is bought from Thailand. But in Pakistan, fish is bought from local vendors as it is a low selling item. French Fries These are imported directly from America. They are also imported to Pakistan by Yum company through china where they also come from America. Other miscellaneous items Items Oil Vegetables Rice Salt Toys Corn

Source IFFCO Local suppliers Makro Hub Salt Hong Kong America

STORAGE AND INVENTORY MANAGEMENT Chicken Inventory of chicken is for 15 days. The storage area for chicken is not in the warehouse itself but in a separate cold storage area built right beside the warehouse in each region. Before marinating, the chicken is stored in an organized form in six separate cold storage rooms whose area is around 45 to 50 square feet, having a height of around 7 feet. The chicken is stored in the same baskets which it comes in and stays there till its turn for marinating. Marination is done in a separate room in the same cold storage facility where the chicken is first washed and mixed with the herbs and spices it needs. The mixture is fed into a machine known as ‘Tumbler’ which marinates it. After this is done the chicken is re packed into labeled clear

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Supply Chain Management plastic bags with stickers on them showing the description of the item inside it and the expiry for it. These bags are then put into a separate cold storage room, again in an organized form.

Sauces Inventory for Sauces are stored for around 25 to 30 days depending on the forecasted sales and the expiry dates for each. Spices and Herbs Inventory for these are stored according to forecasted sales and the three months lead time given by the procurement department. Bread and Buns Buns are provided directly to the branches at KFC from the factory after every 4 days. There is a weekly audit of every single inventory item at the warehouse to match it with the numbers in the system as deviations are high due to high replenishment cycles.

ZONAL DISTRIBUTION Distribution is done on need basis. The cities are divided into zones and the routes taken are accordingly. Karachi is divided into 3 zones: Zone 1: Gulshan-e-Iqbal and Gulistan-e-Johar

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Supply Chain Management Zone 2: Clifton and Defence Zone 3: Bahadurabad, Tariq Road and Sindhi Muslim Society Daily 5 to 6 vehicles are dispatched from the south warehouse for the interior Sindh (15 days inventory) and Zonal distribution in Karachi (1 week inventory for normal-storage and 2 days inventory for cold-storage goods).

Vehicles Company: Hyundai Shehzore Quantity: 4-5 Company: Hino Dutro Truck Quantity: 4-5 Gross vehicle weight: 8.90 tons Maximum capacity: 4 tons (reduced from 5 tons because of modifications) Dimensions: Wheelbase Weight Overall Length Overall Width Overall Height Turning Radius Cab to axle Overhang Tread

mm Total kg Front kg Rear kg mm mm mm On tire mm mm Front mm Rear mm Front mm Rear mm

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3,870 2,470 1,545 925 6,675 1,995 2,235 6,300 3,280 1,045 1,760 1,655 1,520

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QUALITY ASSURANCE There are multiple ways by which KFC assures the quality of its products. Some of the ones which were disclosed to us were: •

Surprise visits to branches

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Planned visits to branches

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Rigorous raw material inspection

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Customer

SOFTWARE MRP/ERP The company uses Supply Chain Management (SCM) Software to manage its inventory across its whole supply chain. This software has been developed by Siddhat Haider. There is a weekly physical count of the inventory to tally it with the figures in the softwares.

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