Course: EPGPM 2017

Subject: Operations Management

KFC - FACILITY LOCATION AND LAYOUT

Submitted By: Group -5

Kumar Kishlay – 1711

Mayank Goel -- 1715

Varun Chamoli -- 1743

Arpan Kumar – 1706

Yadam Kanti -- 1712

Indian Institute of Management Kashipur
Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
 TABLE OF CONTENTS

1. Preamble: 3

2. Factors That KFC Management Keep in Mind during Facility Location Analysis:

2.1. Proximity to Customers: 4

2.2. Business Climate: 4

2.3. Total Costs: 5

2.4. Infrastructure: 5

2.5. Quality of Labor: 5

2.8. Host Community: 5

3. Facility Location Techniques: 5

3.1. Method of Factor Rating: 6

3.2. Cost-Profit-Volume Analysis: 8

4. Facility layout: 9

4.1. Factors that influence layout: 9

4.2. KFC Facility Layout: 10

4.3. Advantage of KFC Good Layout: 10

4.4. KFC Layout Map: 11

5. Conclusion And Recommendation: 12

6. Reference: 12

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
1. Preamble:

1.1 Facility Location:

Facility location, also known as location analysis, is a branch of operations research concerning itself with
mathematical modeling and solution of problems concerning optimal placement of facilities in order to minimize
transportation costs, avoid placing hazardous materials near housing, outperform competitors' facilities, etc.

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.

1.2. KFC & Facility Location:

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. 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 eighty-eight major cities of India with more than 600 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.

 Presently KFC has provided to over 12000 Indians, which adds up to 600000 individuals directly
dependent in KFC India.

 The Government of India receives over Rs.678.8 million per month from KFC India as direct
taxes.

 95% of all food and packing material used in KFC India is procured locally, which sums up to a
purchase of over Rs.785.2 million per month.

 Each new outlet developed by KFC India costs approximately Rs.40 million, which is a huge
amount for our construction industry.

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
Existing Locations of KFC In Delhi:

Cannaught Place Lajpat Nagar Preet Vihar

Shop No. 6-7, Outer Circle J-23a, Lajpat nagar 2, F-25, Ground Floor,

Cannaught Place, Delhi New Delhi Vikashnagar, Preetvihar,

New Delhi

Kirti Nagar Nehru Place Vasant Kunj

Moments Mall, Kirti Nagar TDI Mall, Nehru Place, Ambience Mall, Vasant kunj,
New delhi
Delhi Delhi

Saket Dwarka Gurugram

Select City Walk, saket Plot No.230, sec-9 Ambience Mall,

New delhi Dwarika, New Delhi NH-8, Gurugram

2. Factors That KFC Management Keep in Mind during Facility Location Analysis:

There are several factors that influence the Facility Location Decision

2.1. Proximity to Customers:

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.

2.2. Business Climate:

It is another important factors determined by the KFC during the locations analysis. The location with favorable
business environment is selected for the KFC by the management.

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
2.3. Total Costs:

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.

2.5. Quality of Labor:

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.

2.8. Host Community:

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.

3. Facility Location Techniques:

There are many analytical techniques that can be used in facility location decision.

Some of these are:

1) Factor Rating

2) Cost-Profit-Volume analysis

3) Center of Gravity Method, and

4) Transportation and Simulation Models.

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”.

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
3.1. Method of Factor Rating:

In factor rating method, first we must identify the Most Important Factors in evaluating alternative sites for the
new facility. Then we should assign a weight between 0 and 100 to each of these factors. Each alternative
location will then be rated based on these factor weights. The most weighted alternative is selected as the best
alternative.

Example:

Suppose KFC is considering three alternative sites for its new facility locations.

 Site A Janpath Road, New Delhi

 Site B  C Block, East of Kailash, New Delhi

 Site C  Chattarpur, New delhi

After evaluating the firm’s Needs, the Managers have narrowed the list of Important Selection Criteria down into
three major Factors.

- Availability of skilled labor

- Availability of suitable Infrastructure, and

- Proximity of target customers.

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:

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
Now we will multiply each score by its corresponding factor weight:

Weighted scores are calculated as:

(Site Score)*(Factor Weight)

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:

 Skilled labor: 0.45

 Raw Materials: 0.40
 Market: 0.15

Then the following results are obtained:

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.

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
3.2. Cost-Profit-Volume Analysis:

When the fixed and variable costs for each site differ, Cost-profit-volume analysis can be used to identify the
location with the lowest cost.

Example

Suppose KFC is considering three alternative sites for its new production facility.

 Site A Janpath Road, New Delhi

 Site B  C Block, East of Kailash, New Delhi

 Site C  Chattarpur, New delhi

The Annual Production Cost associated with each alternative is a linear function of the production volume is:

Total Production Cost = (Fixed Cost) + (variable unit cost) x (annual production volume)

Assume that The expected annual production volume is 250.000 units.

And further assume that:

(x: production volume = 250.000)

For Site A: Prod. Cost = 10.000.000 + 250 x

For Site B: Prod. Cost = 25.000.000 + 150 x

For Site C: Prod. Cost = 60.000.000 + 50 x

Based on this information, which site has the lowest cost?

At a production volume of 250.000 units, site B has the lowest cost, because

For Site A: Prod. Cost = 10.000.000 + 250 (250.000) = 72.500.000

For Site B: Prod. Cost = 25.000.000 + 150 (250.000) = 62.500.000

For Site C: Prod. Cost = 60.000.000 + 50 (250.000) = 72.500.000

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
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:

Means planning And Arrangement of all machines, utilities, employee workstations, customer service areas,
material storage areas, aisles, restrooms, lunchrooms, internal walls, offices, and computer rooms, for the flow
patterns of materials and people around, into, and within buildings Infrastructure services such as the delivery of
line communications, energy, and water and the removal of waste water all make up basic utilities.

4.1. Factors that influence layout:

 Volume, weight of items to be produced.

 Nature of the service to be provided.

 Cost of the building to house the operation.

 The fragility of the product or component

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
4.2. KFC Facility 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.

4.3. Advantage of KFC Good Layout:

 Reduces bottlenecks in moving people or material.

 Minimizes materials-handling costs.

 Reduces hazards to personnel.

Indian Institute of Management Kashipur
Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
  Utilizes labor efficiently.

 Increases morale.

 Utilizes available space effectively and efficiently.

 Provides flexibility.

 Provides ease of supervision.

 Facilitates coordination and face-to-face communication where appropriate.

4.4. KFC Facility Layout Map:

KFC fallow about the following facility layout for their outlets round the world.

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)
6. KFC Process Layout Map:

KFC use process layouts because of variability in customer processing requirements. The KFC’s old and new
process schematic diagram are presented blow.

KFC Old Process Layout:

Customer
Place Order
Finished
Raw
Goods
Material Assemble

Cook Deliver

KFC Modern (New) Process Layout:

Customer
Place Order

Raw
Material W. I. P.
Cook Assemble Deliver

7. Conclusion And Recommendation:

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 India 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 India. The campaign proved to be a successful initiative
in not just providing hope for our patrons, but also allowed KFC India to take an effective step forward during
tough times and entrust other responsive companies to act in a similar manner.

8. Reference:

http://www.kfc.com/

Indian Institute of Management Kashipur

Dehradun Campus
135/1, Vasant Vihar, West Road No.-4, Opp FRI Chakrata Road, Near Electricity Office, Dehradun-248006 (UK)