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KFC Facility Location and Layout Operation Management Project1
KFC Facility Location and Layout Operation Management Project1
KFC Facility Location and Layout Operation Management Project1
Rehmatullah [SP09-MBA-114]
Danish [SP09-MBA-027]
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KFC - FACILITY LOCATION AND LAYOUT
FOREWORD
Great works are performed not by strength but by persistence. Facility location and facility
layout analysis is the very initial part of locating new or relocating existing outlets of an
organization. Such as KFC (Kentucky Fried Chicken) is the third largest fast food chain
with over 12,200 outlets in 99 countries. KFC has maintained its title, for the last 60 years
by supreme decision making management. All the facility locations and layouts selected
by the KFC are the state of the art KFC because they used the proper methods for facility
location and layout analysis of new or existing outlets. Lot of other location around the
world is waiting for KFC title.
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KFC - FACILITY LOCATION AND LAYOUT
ACKNOWLEDGEMENT
TABLE OF CONTENTS
1. Preamble:....................................................................................................................................5
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KFC - FACILITY LOCATION AND LAYOUT
2. Factors That KFC Management Keep in Mind during Facility Location Analysis:.................7
6. Reference:..................................................................................................................................16
1. Preamble:
Once a firm has decided to open a new facility OR relocate an existing facility, it
must decide the site where that facility should be located. The selection of location is most
important for organization. The business commenced without proper location analysis
may have the high risk chances and may not longer compete with other competitors.
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KFC - FACILITY LOCATION AND LAYOUT
KFC Corporation, or KFC, founded and also known as Kentucky Fried Chicken is a
chain of fast food restaurants based in Louisville, Kentucky. KFC is the third largest fast
food chain with over 12,200 outlets in 99 countries. 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.
Presently KFC is branched out in eighteen major cities of Pakistan (Karachi, Lahore,
Gujranwala, Sukkur & Muree) with more than 60 outlets nation-wide. The outlets
comprise of franchises, company owned and affiliated. They used the proper method for
facility location and layout analysis of new or existing outlets. Facility location involves
the evaluation of various sites for a new facility.
Apart from fulfilling our commitment of serving delicious, fresh and hygienic food
and at the same time providing our customer with the ultimate entertainment; KFC also
plays in the economics development of our country.
• The Government of Pakistan receives over Rs.10 million per month from
KFC Pakistan as direct taxes.
• 95% of all food and packing material used in KFC Pakistan is procured
locally, which sums up to a purchase of over Rs.35 million per month.
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KFC - FACILITY LOCATION AND LAYOUT
2. Factors That KFC Management Keep in Mind during Facility Location Analysis:
There are several factors that influence the Facility Location Decision
KFC Management during facility location analysis keeps in mind the proximity of
target customers and target market, so that the target customer can be approached
easily to outlets.
The core objective of the KFC is to select a site with the lowest total cost include
land, labor, constructions, taxes and energy cost. By minimizing the total cost they can
be able to reduce the product cost.
2.4. Infrastructure:
The locations enriched with adequate infrastructure i.e. road, rail, air and sea
transportation etc. are ideal for the KFC management.
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KFC - FACILITY LOCATION AND LAYOUT
The location where the skilled labor is easily available is attractive for the KFC
outlets. KFC Management specially determined this factor in mind at the time of
location selection because the easily availability of skilled labor can deal with
customer effectively and easily. Labor cost decrease due to easily approach to the
labor.
KFC management also determined the interest of host community during the
facility location analysis. If the host community is in the favors of KFC new project
then the project started.
There are many analytical techniques that can be used in facility location decision.
1) Factor Rating
2) Cost-Profit-Volume analysis
But first two methods “Factor Rating” & “Cost Profit Volume Analysis” are more
simple & suitable for KFC Because of easily understandable than “Center of Gravity”
& “Simulation Method”.
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KFC - FACILITY LOCATION AND LAYOUT
Example:
Suppose KFC is considering three alternative sites for its new facility locations.
• Site B. Shadra
After evaluating the firm’s Needs, the Managers have narrowed the list of Important
Selection Criteria down into three major Factors.
Weights reflecting the relative importance of each factor have been assigned as
follows:
Based on these criteria, the three Alternative sites were scored between 0 and 100
points:
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KFC - FACILITY LOCATION AND LAYOUT
From these results, the largest total weight is for Site A. It appears to be the best
location.
What happens if we change the factor weights. Lets use the following factor weights:
In this case, Site “C” appears to be the best choice with largest weight score.
Therefore, factor rating method is very sensitive to the weights assigned to each factor.
Since factor weights, selected factors, and assigned scores are all determined
subjectively, the managers should be very careful in selecting these items and
numbers.
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KFC - FACILITY LOCATION AND LAYOUT
Example
Suppose KFC is considering three alternative sites for its new production facility.
• Site B. Shadra
• Site C. Chock Chu Burgi
The Annual Production Cost associated with each alternative is a linear function of the
production volume. That is:
Total Production Cost = (Fixed Cost) + (variable unit cost) x (annual production
volume)
At a production volume of 250.000 units, site B has the lowest cost, because
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KFC - FACILITY LOCATION AND LAYOUT
This graphic shows that annual production cost changes with different production
volumes.
-If the expected annual production volume is below 150.000 units, then choose site A.
-If the expected annual production volume is between 150.000 and 350.000 units, then
choose site B.
-If the expected annual production volume is over 350.000 units, then choose site C.
4. Facility layout:
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KFC - FACILITY LOCATION AND LAYOUT
Internal & External layout of KFC outlet is attractive and charming all over the
world. Ideal color schemes, pleasant lighting outlets, comfortable sitting arrangement,
fully trained employees and their proper work division, State of the art interior
beautification, speedy & appropriate cooking process, special club/block for kids, etc. are
the chief characteristic of the KFC layout.
• Increases morale.
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KFC - FACILITY LOCATION AND LAYOUT
• Provides flexibility.
KFC fallow about the following facility layout for their outlets round the world.
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KFC - FACILITY LOCATION AND LAYOUT
KFC use process layouts because of variability in customer processing requirements. The
KFC’s old and new process schematic diagram are presented blow.
Customer
Place Order
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Cook Deliver
KFC - FACILITY LOCATION AND LAYOUT
Raw Finished
Materia Goods
l Assemble
Customer
Place Order
Raw
Materia W. I. P.
l Cook Assemble Deliver
KFC can progress rapidly by identifying new facility locations and increasing existing
target market and facility locations by launching new competitive product chain at
minimum cost. KFC’s Unity Drive had a simple but essential message and objective.
To bring together the people of Pakistan by promoting in the words of KFC founder,
“Unity, Faith & Discipline”. In a time of uncertainty and fear, KFC rose to the
occasion and built a platform of solidarity and togetherness for the people of Pakistan.
The campaign proved to be a successful initiative in not just providing hope for our
patrons, but also allowed KFC Pakistan to take an effective step forward during tough
times and entrust other responsive companies to act in a similar manner.
6. Reference:
www.kfc.com
www.kfc.pk
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KFC - FACILITY LOCATION AND LAYOUT
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