SCM in KFC

A THESIS ON CRITICAL ANALYSIS OF SUPPLY CHAIN MANAGEMENT AND TO SEE ITS IMPACT ON PROFIT MAXIMIZATION WITH SPECIFIC REFERENCE TO KFC IN PUNE REGION.

Submitted To: MRS. RUBY CHANDA

Submitted By: Sagar C. Cholke (Enrol. No.7NBPS057)

THE MBA PROGRAM (Class of 2009) INC

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CERTIFICAT E

This is to certify that the MANAGEMENT THESIS TITLE Critical analysis of supply chain management and to see its impact on profit maximization with specific reference to KFC in Pune region Is a bonafide work of Sagar C.Cholke Enrollment No.7NBPS057 of INC Pune is original and has been made under my supervision in partial fulfillment of the requirement for the award of MBA. This report neither full nor in part has ever been submitted for awarding of degree of either this University or any other University. I am pleased to say that her /his performance was ___________________________

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MRS. RUBY CHNDA Faculty Guide INC: S.B.ROAD PUNE

ACKNOWLEDGEMENT
The completion of this project leaves one spent, but with a sense of jubilation, a sense of achievement, having reached the end of a long arduous road cannot be put to words. The time has come, when I take upon myself the gracious opportunity of expressing in my heartfelt gratitude to many kind souls, who have helped and supported me, on this road I am very grateful to my most esteemed and revered faculty guide MRS.RUBY CHANDA faculty at INC Pune, and suggestions which helped me on each and every step of my project. Thanking her will not be sufficient to the inputs that I have got from her. I am sincerely thankful to Mr. Mangesh Sharma manager in KFC outlet Pune) for the co-operation and assistance during the project. I take this opportunity to extend my thanks to my faculties who directly or indirectly have supported me during the project. My words cannot express my deep felt gratitude to my family and friends whose support and encouragement have helped me cross all the hurdles that came my way.

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Date:

SAGAR C CHOLKE Enroll. no. 7NBPS057

Objectives of the study : 1. To study the concept Supply Chain Management. 2. To study the supply chain management of KFC in Pune region. 3. To study the impact of Supply Chain Management on profit maximization of KFC.

Limitations to the study :

1. Limitation of time : project is to be completed on or before 10th Feb 2008. 2. Limitation of location : project is to be conducted within Pune region. 3. Since the project is study oriented the information was collected from the

Managers and employees of KFC. Due to their busy schedule they were not able to give me detailed information. Methodology : The purpose of methodology is to describe study procedure to be followed in solving marketing problems. I have gone followed certain general steps to help in conducting the survey and analyzing the data therein.

Hypothesis : There is a impact of SCM on profit maximization of KFC.

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Alternate Hypothesis: There is no impact of SCM on profit maximization of KFC.

Sampling Procedure : Target Population: All KFC stores in India is identified as target population Sampling Frame: All KFC stores in Pune region is sampling frame. Sampling Method: Non-probability sampling -Convenience Sampling: Non-probability sampling involves selection of units based on factors other than random chance. Convenience Sampling is used to select the KFC stores in Pune region. Sampling Unit : Two KFC outlets are selected as sampling unit in the project namely KFC at Shopper stop and KFC at Adlabs Koregoan Park. Type of Data Collection: Basically there are two method of Data Collection. i) Primary Data ii) Secondary Data i) Primary Data: The collection of Primary Data has to be done by questioning the KFC manager and employees. Data Collection Method:

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Survey: Survey method is to be used for conducting research .Where as survey includes collecting information from KFC outlet, employees of KFC

Questionnaire: Questionnaire is to be used for collecting data from respondents (employees of KFC).

ii) Secondary Data: The secondary data is to be gathered from the company leaflets, brochure, Websites, Newspapers etc. Need for Study : Supply chain management is essential to company success and customer satisfaction. SCM also plays a critical role in society. It's absolutely true. SCM knowledge and capabilities can be used to support medical missions, conduct disaster relief operations, and handle other types of emergencies. SCM also plays a role in cultural evolution and helps improve our quality of life. Whether dealing with day-to-day product flows or dealing with an unexpected natural disaster, supply chain experts roll up their sleeves and get busy. They diagnose problems, creatively work around disruptions, and figure out how to move essential products to people in need as efficiently as possible. Need of supply chain management is due to demanding customers not only want reliable but also Just-in-time. Another important driver of SCM has been shrinking product life cycle and rapidly changing technology and customer taste have increased risk of obsolescence. Without efficient supply chain management, inventory tends to pile up and create serious problems. Earlier, large companies could dump inventory without a second thought, at the dealers premises and abdicate the responsibility of making the final sale to the end customers. Now dealers are asserting themselves and expects goods to be delivered only as and when needed but without any delay. New technology,

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increased business complexity, and greater connectivity across companies and geographies have increased the need of different and more varied supply chain skills. Supply chain management is seen as the wealth of new opportunities for companies that capture right customers, design a customer-responsive supply chain, create a flexible and cost effective supply chain and employ the right technologies to enable their business model Supply chain management is being increasingly looked upon as a source of sustainable competitive advantage by cutting costs intelligently, without in any way reducing value for the customers. The study of Supply chain management is also helpful for me in understanding, what are the various technological systems used, sources of raw material, inventory management methods, warehousing management techniques, the current scenario of supply chain practices carried out by various fast food companies and how efficient are they in following their standards and how does it helps to economy of the country. It also helps me in understanding the current opportunities in Supply chain sector and requirements of professionals in companies and helps me in developing the required skills and abilities required to be the part of supply chain management in a reputed organization. Introduction to the Fast Food Industry : Fast food is food cooked in bulk and in advance and kept warm, or reheated when an order is placed. Many fast-food restaurants are part of restaurant chains or franchise operations, and standardized foodstuff is shipped to each restaurant from central locations. Fast-Food in various regions A historical brief : The history of the origin of the fast-food is as old as cities themselves. Here is a chronological account of the same:

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There are records of ancient Roman cities having bread-and-olive stands Noodle shops were a common feature in East Asian cultures Flat bread and falafel were widely consumed in the Middle East Popular Indian "fast" food delicacies include Vada Pav, Papri Chaat, Bhelpuri, Panipuri and Dahi Vada, which were and are still popular today. In the French-speaking nations of West Africa roadside stands sold a range of ready-to-eat, char-grilled meat sticks known locally as brochettes, which are still popular in the present day.

Fast-Food Restaurants : Small individually-owned fast-food restaurants have become common throughout the world, as the capital needed to start one is meager compared to other sectors. Customers can sit down and have their fast-food orders brought to them. Most fast-food restaurants are self-service centers where the customer is required to pay for the order first and then serve himself. These restaurants may or may not have sitting arrangements. Indian Fast-Food -The Fast Food Trend Fast-food today sells like hot cakes, especially amongst youngsters. It has occupied a prominent place in the list of top sought after foods in the world. It has become a trend today of going to a restaurant for fast-food for the purpose of mid meal snacking. The reason for the increasing consumption of fast-food is that it is readily available, quick to make and easy to serve. Fast-food is generally high in terms of calories, and therefore, it is not advisable to consume them in larger quantities.

Introduction to the company:

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Background of KFC : KFC Corporation, based in Louisville, Kentucky, is the worlds most popular chicken restaurant chain, specializing in Original Recipe , Extra Crispy TM, and Colonels Crispy Strips chicken with home style sides and five new freshly made sandwiches. Every day, nearly eight million customers are served around the world. KFCs menu everywhere includes Original Recipe chickenmade with the same great taste Colonel Harland Sanders created more than a half-century ago. Customers around the globe also enjoy more than 300 other productsfrom a Chunky Chicken Pot Pie in the United States to a salmon sandwich in Japan. KFC continues reaching out to customers with home delivery in more than 300 restaurants in the United States and several other countries. And in quite a few U.S. cities, KFC is teaming up with other restaurants, Taco Bell and Pizza Hut, selling nearly fifty years ago; Colonel Sanders invented what is now called home meal replacement selling complete meals to harried, time-strapped families. He called it, Sunday Dinner, Seven Days a Week. Today, the Colonels spirit and heritage are reflected in KFCs brand identity the logo features Colonel Harland Sanders, one of the best-recognized icons in the world. KFC is part of Tricon Global Restaurants, Inc., which is the worlds largest restaurant system with nearly 30,000 KFC, Taco Bell and Pizza Hut restaurants in more than 100 countries and territories. KFC was founded by Harland Sanders (Sanders) in the early 1930s, when he started cooking and serving food for hungry travelers who stopped by his service station in Corbin, Kentucky, US.

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He did not own a restaurant then, but served people on his own dining table in the living quarters of his service station. His chicken delicacies became popular and people started coming just for food. Kentucky Fried Chicken was born. Soon, Sanders moved across the street to a motelcum-restaurant, later named 'Sanders Court & Cafe, that seated around 142 people. Over the next nine years, he perfected his secret blend of 11 herbs and spices and the basic cooking technique of chicken. Sanders' fame grew and he was given the title Kentucky Colonel by the state Governor in 1935 for his contribution to the state's cuisine. Sanders' restaurant business witnessed an unexpected halt in the early 1950s, when a new interstate highway was planned bypassing the town of Corbin. His restaurant flourished mainly due to the patronage of highway travelers. The new development meant the end of this. Sanders sold his restaurant operations. After settling all his bills, he was reduced to living on a meager $105 social security cheque. But Sanders did not lose hope. Banking on the popularity of his product and confident of his unique recipe for fried chicken, Sanders started franchising his chicken business in 1952. He called it Kentucky Fried Chicken. He travelled the length and breadth of the country by car, visiting as many restaurants as possible and cooking batches of chicken. If the restaurant owners liked his chicken, he entered into a handshake agreement that stipulated payment of a nickel9 for each plate of chicken sold by the restaurant. By 1964, Sanders franchised more than 600 chicken outlets in the US and Canada.

KFC India : KFC, One of the first fast food multinationals to set foot in India was Kentucky Fried Chicken (KFC), owned by PepsiCo. The largest chicken restaurant brand in the world has 13,000 outlets in 80 nations. It chose Bangalore as its launch pad because the city had a substantial upper middle class population, with a trend of families eating out. Also, it was considered Indias fast growing metropolis in the 1990.
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Bangalore outlet was opened in June 1995. Apart from Bangalore, PepsiCo planned to open 60 KFC and Pizza Hut outlets in the country over the next seven years. However, KFC became embroiled in various controversies even before it started full-fledged business in India. In India the brand is currently present in 9 cities with 34 outlets. Globally KFC is wellknown for finger lickin good food due to its high quality standards and innovative offerings. Its signature dishes like Hot and Crispy Chicken, Original Recipe and the Zinger Burger are popular worldwide. In India, KFC has a select and unique tasty vegetarian offering which include the Veggie snacker. Mission statement: KFC is an internationally renowned fast food industry in the world. They have the main ambition to increase & maintain the quality in fast food industry. Their aim is to capture the fast food market. Basically they want to provide their products to anyone that is why they expending their branches in all over the world. They want to increase their profit through giving maximum satisfaction & other better facilities to people that they want. Now after catching such a marvelous position in the International Market, KFC is introducing a new item Boneless Fried Chicken, with even more attractive and charming taste. Introduction to Supply Chain Management : There is a difference between the concept of supply chain management and the traditional concept of logistics. Logistics typically refers to activities that occur within the boundaries of a single organization and supply chains refer to networks of companies that work together and coordinate their actions to deliver a product to market. Also traditional logistics focuses its attention on activities such as procurement, distribution, Maintenance, and inventory management. Supply chain management, acknowledges all of traditional logistics and also includes activities such as marketing, new product development, finance, and customer service.
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Definition : Supply Chain Management is the coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best mix of responsiveness and efficiency for the market being served.

What is Supply chain?

Consists of all parties involved, directly or indirectly, in fulfilling a customer request.

Objective of a Supply Chain

Maximize overall Profit : Revenue generated from customer - costs incurred along the entire chain. (e.g. manufacturing / storing / distributing the product)

When is Supply chain effective?

Manage Product, Information and Fund flow.

The main objective is to be able to have the right products in the right quantities (at the right place) at the right moment at minimal cost.

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Drivers of Supply Chain Performance : Facilities Production/Storage Sites Responsiveness Vs Efficiency

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Inventory Raw materials WIP Finished Goods

Sourcing Outsourcing

Transportation

Inventory Where do we hold inventory? Suppliers and manufacturers warehouses and distribution centers retailers Types of Inventory raw materials WIP finished goods Why do we hold inventory? Uncertainty in supply and demand Lead Time Avoid stock outs (customer goodwill)
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Terms Involved Inventory lot size Replenishment Lead time Stock out Reorder Point Safety stock Procurement costs Ordering cost (appx. administrative, inspection, transportation etc.)

Holding costs Maintenance and Handling Taxes Obsolescence

Stock-outs costs Lost sales (Customer goodwill) Backorders

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Decisions

When to order How much to order Types of Review System Continuous Review Periodic Review

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EOQ: A View of Inventory

Types of review : Continuous Review

Continuously monitored R Reorder point, L Lead time Q Order quantity

Time b/w orders vary but Q is fixed

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Periodic Review Monitored at periodic intervals of length r Quantity set as the amount consumed during this interval Time b/w orders fixed

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Supply chain management in kFC : The main three consideration in any supply chain management are : Managing Product Information flow Funds flow

1. Managing product : Raw material : Chicken, vegetables, cheese, etc

Raw material suppliers : Reliance and More (vegetables), Chicken(Venkys) Distribution channel (logistics partners) : KFC has no any logistics partner as all the distribution of materials are done by individual suppliers and KFC head office also has its own distribution channel all over India.

2. Information flow : Communication channels : KFC uses email and telecommunication channel for communicating with KFC head office and suppliers like Reliance, More, and Venkys.

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3. Funds flow : Funds Flows i.e. the money payment to suppliers and other debtors are done through a bank account. Each and every KFC outlet has its own bank account and the payments of each outlet is done by Head office (Delhi) through these bank account on a monthly bases. Drivers of Supply chain management in KFC 1. Facilities : (Production/storage) As KFC follow a centralized system for all its raw material or ingredients are stored and produced at the individual KFC stores. The storage of some items are done for monthly bases and few for weakly bases. 2. Responsive V/S Efficiency : KFC follows the Efficiency method of distribution of materials in all over India. With help of this distribution method it is able to reduce the time involved in movement of goods from one channel to other channel member and then reaching the customer, able to reduce the carriage cost and holding cost involved in responsive method of distribution. With the help of simple diagram the concept of Efficiency distribution method followed by KFC is more transparent

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3. Inventory : (Raw Material, Work In Process, Finished goods) Raw material like chicken, vegetables, etc are supplied from the local market of Pune like Reliance, More, Venkys, etc all these are maintained on weakly bases and work in process items and finished goods are maintained on daily bases and are stored in KFC outlet only.

4. Sourcing : (Outsourcing) KFC has not outsourced any of its processes to any other company, all the operations and processes are managed by KFC Head Office (INDIA) Delhi and other by individual KFC outlet itself. 5. Inventory Cycle :

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6. Type of review followed by KFC : KFC follows a periodic review method for all its process like inventory maintenance except the ingredients supplied by KFC Delhi (HO) which is maintained on monthly bases. Periodic review involves :

Monitoring at periodic intervals. Quantity set as the amount consumed during this interval. Time between the orders is fixed.

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CONCLUSION : In overall study of Supply chain management ,it has been observed that KFC in all over India follows a similar pattern of Supply chain, that enables it to reduce time involved to reach end customers and reduce expenses in supply chain.Ultimately it is able to reach and fulfill its end customers needs and wants at a reasonable or customer acceptable rates all over India. In short we can say the Supply chain management of KFC has a positive impact on profit maximization by considering following points : 1. KFC (HQ) Delhi supplies ingredients to all its outlet by its own transportation network all over India 2. KFC has no logistics partners they are self sufficient and efficient to all logistic operation involved in reaching the customers.
3. KFC follows a periodic review system to keep track on all its inventory and

market demand.

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