Supply Chain Management

Supply Chain Management

Kentucky Fried Chicken (KFC)

Submitted to: CAPT.MUNAWAR AHMAD

Group Members:

NAZIR ALI QURESHI (01-220181-024)

WALEED AHMAD QURESHI (01-220181-031)

BAHRIA UNIVERSITY ISLAMABAD

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CONTENTS
PAGE NO #

Company Profile 6

Parent Company 6

Cupola Pakistan 6

Cupola's Vision 6

Cupola's Mission 7

KFC Pakistan 7

KFC's Mission 8

Objectives of KFC 8

Values of KFC 8

Core competency 9

Products of KFC 10

Franchise Locations 10

Oraganizational Structure 11

KFC Supply Chain 12

Warehouses 13

Procurement 14

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Storage and Inventory Management 16

Zonal Distribution 18

Quality Assurance 19

Just In Time Methodology 20

Software 21

Recommendations 21

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FOREWORD
“Glory to Thee: the knowledge we have none, save what Thou host
thought us.”

Business environment is becoming more and more complex and uncertain with the
passage of time. To understand and deal with this riddle phenomena one needs a
lot of capabilities and practical exposure. So, business education has become an
evolving science that helps to solve business problems. Academic education
provides erudite knowledge about business decisions & policies and practical
exposure enables us to know what is actually happening in business world. To
become professional in any field only abstract knowledge does not provide a
concrete base. This is a unique approach of particularly Bahria University to
provide the opportunity to their students to observe the daily business practices
and problems. The project is one of these leading features of this discipline that
fills the deficiency and helps us in scanning & analyzing various organizational and
social problems and decisions such as Launching of a new product in this
competitive market situation, how to market our business and products,
innovations and expansion of business. We have learnt a lot from this project of
applied research.

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Acknowledgements
By the grace of Allah Almighty and the utmost efforts of our group members, we
are able to accomplish our project well in time. At this moment we must pay
special thanks to our devoted teacher Capt. Munawar Ahmad for his cooperation
and guidance that made us, accomplish our project. Also, it is a matter of great
pleasure for us to put our efforts in front of well-esteemed personalities. We are
also grateful to other group members who showed a keen interest and cooperated
whole-heartedly throughout the entire course of our activities.

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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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schools, provision of training for teachers and now to educational support 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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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

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consistently providing a pleasant dining experience, with fast friendly, in a clean and convenient
location. Every moment dedicated to providing excellent and delighting customers.

 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.

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

FRANCHISE LOCATION
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,
1. Karachi. 8. Rawalpindi.
2. Hyderabad. 9. Sialkot.
3. Lahore. 10. Multan.
4. Islamabad. 11. Peshawar.
5. Sukkur. 12. Jhelum.
6. Faisalabad. 13. Sukkur.
7. Gujranwala. 14. Murree.

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ORGANIZATIONAL STRUCTURE

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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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WAREHOUSING

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.

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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
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.

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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-designing of boxes and deals offered by KFC, the inventory of these is kept at a
minimum.

Bread and Buns:

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.

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Other miscellaneous items:

Items Source
Oil IFFCO
Vegetables Local suppliers
Rice Makro
Salt Hub Salt
Toys Hong Kong
Corn 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
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.

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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.

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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

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)

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Dimensions:

Wheelbase Mm 3,870
Total Kg 2,470
Weight Front Kg 1,545
Rear Kg 925
Overall Length Mm 6,675
Overall Width Mm 1,995
Overall Height Mm 2,235
Turning Radius On tire Mm 6,300
Cab to axle Mm 3,280
Front Mm 1,045
Overhang
Rear Mm 1,760
Front Mm 1,655
Tread
Rear Mm 1,520

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
 Planned visits to branches
 Customer feedback
 Rigorous raw material inspection

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KFC JUST IN TIME METHODLOGY

In controlling inventory and most importantly quality of the chicken, Kentucky Fried Chicken
uses a variation of Just In Time (JIT) system, by receiving chicken two to three times a week.
KFC starts to operate when a delivery truck arrives at the back door. The truck usually contains
chicken, vegetables, and other needed materials to successfully operate a KFC restaurant. There
are many steps involved in the successful unloading of a delivery truck. Frozen foods are taken
off the truck first and immediately transferred to the freezer. This includes vegetables, deserts,
and other food products. Next to be unloaded is the refrigerated goods. This is the part of the
process where the world famous chicken is unloaded. Finally, the dry good and condiments are
unloaded and stored in their appropriate Place.

The chicken is received with a kill date. The kill date represents the date the chicken was
actually butchered. This kill date is also used as a measure of the freshness for the chicken.
When taking the chicken off the truck it is placed on the “chicken-side” of the isle next to the
refrigerator to prevent warming until it can be placed inside. Once the truck is unloaded, the
refrigeration unit inside the truck must be inspected for satisfactory working order. For
inventory accuracy all pieces aboard the truck are counted and checked against the bill of lading.
Any shortages or surpluses are noted and called in to franchise headquarters. The cases in which
the chicken arrives in must be damage free. This includes the box being sealed as well as being
structurally stable. Any damages must be noted and relayed to the shipping agency. The kill
dates must be checked on each individual chicken. No chicken will be accepted if it is received
six days past the kill date. Printed with the kill date on each chicken is a label stating “Inspected
for Wholesomeness by the U.S. Department of Agriculture” which must be attached or the
chicken must be rejected. Acceptance sampling is done to ensure quality of the chicken during
each shipment. At random at least five cases are selected, based on quantity of order. The
middle bag of chicken is always used in each case for sampling purposes. To check for quality, a
thermometer is used to check the temperature of the chicken by inserting it into the thickest part
along the bone. Acceptable temperature is between twenty-eight and thirty-six degrees
Fahrenheit. If one chicken fails to meet the quality inspection then the entire lot must be
rejected. Upon rejecting a lot the market manager and or the franchise supervisor must be
notified immediately. This is necessary to arrange for an immediate shipment to be scheduled.
This is important due to the inventory control system in place to ensure quality to every
customer. Once the sample testing is complete the chicken can be placed in the refrigerator.
First In First Out (FIFO) Method is used in placing the chicken in order in the refrigerator. The
earliest kill date is located at the front of the cooler such that it is the first one to be used when
needed. This guarantees quality and freshness to each customer.

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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.

RECOMMENDATIONS
Short Term:
Introduce new recipies suited to local taste.
Introduce cheaper items in the menu.
Introduce healthier recipies.
Differentiate through good services.
Work on the image of a healthy fast food chain through advertising.
Long Term:
Change in the image of KFC from fried to ‘Healthy’.
Open up new outlets.
Engage in CSR activities related to animals & environment.
Develop a strong culture of good service.

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