An Assignment about KFC operation, relates to Production & Operation Management Subject/Course

1. PRODUCTION AND OPERATIONS
MANAGEMENT
2015
[Type the document subtitle]
MADY
[ T Y P E T H E C O M P A N Y A D D R E S S ]
Submitted To: Sir Faisal Hameed
Submitted by:
Suleman Asghar 11032120-078
Muhammad MoeedAwais 11032120-084
Salman shafiq 11032120-045
Muhammad Feroz 11032120-125
BBA 7th
Section-AS
University of Gujrat
G.T.Road Campus

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THIS PROJECT IS DEDICATED
TO THE MOST PRECIOUS PEOPLE IN MY LIFE
“MY PARENTS”
ACKNOWLEDGEMENT
We wish to express our sincere appreciation to those persons who have contributed
either directly or indirectly to this project. Most of all, we want to thank Sir faisal
Hameed. He guided, motivated and assisted us in developing this project. Finally,
we want to pay our compliments, to our friends, who encouraged us in completing
this project. All the members of the group worked hard in getting information from
the concerned departments.

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Table of content
1. Purpose ofrep……………………………………………………………………………………………….……..4
1.1 Introduction ofKFC………………………………………………………………………………….………….4
2. Hierarchy of KFC…………………………………………………………………………………………………4
3. Operation ofKFC in Pakistan……………………………………………….…………………………………..3
3.1. Supplier in Pakistan……………………………………………………………………………….……………5
3.1.1. Phase 1…………………………………………………………………….…………………………………...5
3.1.2. Phase 2……………………………………………………………………….…………………………….......5
3.1.3 Phase ………………………………………………………………….………………………………….……5
3.2. Warehousing………………………………………………………….………………………………..………..5
3.3. Procurement……………………………………………………………….……………………….…..….…….6
3.3.1. Chicken……………………………………………………………………….…….………………….………6
3.3.2. Sauces……..…………………………………………….………………………………….………………….6
3.3.3. Spices and herbs………………………………………………………………..……………..………………6
3.3.4. Packaging material…………………………………………………….………………..……………………6
3.3.5. Bread and bun…………………………………………………………………………………………..…….6
3.3.6. Fish…………………………………………………………………………………….…………………........6
3.3.7. Fries……………………………………………………………………….……………………………….….6
4. Storage and inventory ………………………………………..………………………………………………….7
5. Quality management …………………………………….…………….…………………………………..……..7
6. Halal food fundamentals………………………………………………………………………………..…………7
7. Roles and responsibilities ofOM……………………………………………………………..…………………..7
8. Products…………………………………………………………………………………….…………..………….8
9. Issues…………………………………………………………………….………….………….……….………….8
10. Recommendations…………………………………………………………………………………….………….8
11. References………………………………………………………………………………………………………10

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1. Purpose our report:
The purpose of our report to highlight key elements that could improve the efficiency of organization in a
positive way.
1.1 Introduction of KFC:
Kentucky Fried Chicken (KFC is one of the world's largest chicken fast food restaurant chain,
specializing in Crispy and Grilled Chicken and its headquarters is in Louisville, Kentucky. After
Mcdolands it is the world’s second largest restaurant chain in term of sales. Up till December
2013 it has 18,875 outlets in 118 countries. KFC is subsidiary of YUM Brands, a restaurant
company that also owns pizza hut. Harland Sanders is the founder of KFC. The total numbers of
kfc employees are 100 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 made by Colonel Harland
Sanders more than a half-century ago. KFC has the crown of being the leader in its line of
business. Serving mouth-watering and healthy food in a relaxing environment are the key
success factors of kfc. KFC opened its first location in Gulshan-e-Iqbal (Karachi) in 1997.
Currently KFC has branches in eighteen major cities of Pakistan (Karachi, Lahore, Gujranwala,
Islamabad, Sukkur & Muree) and more than 60 outlets nation-wide. Kfc also play its part in
economic development of Pakistan.
 There are 6000 individuals directly dependent in KFC Pakistan.
 KFC pays Rs 10 million taxes per month to Government of Pakistan
 95% of food packing material worth Rs 35 million per month used in kfc Pakistan is
obtained locally.
 KFC Pakistan’s each new outlet cost approximately Rs 40 million which is in the best
interests of construction companies.
2. Hierarchy of KFC
C.E.O
HOD Supply
Chain
(Communicates
)
Manager
Supply chain
(ordering,
forecasting,
planning)
Supply Chain
Executives
(requirements
monthly &
weekly basis)
HOD
Marketing
Manager
Marketing
Marketing
Executives
HOD
Human
Resource
HR
Manager
Manager
Human
Resource
HOD
Finance
Finance
Manager
Finance
Executives

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3. Operations of OM Department (Supply Chain)
3.1. Supplies in Pakistan:
There are two classifications of supplies. The DRY FOOD SUPPLY and the FROZEN FOOD
SUPPLY. They have established their own warehouses for Dry Food Supply like Burgers-Bunns
and Frozen Food Supply e.g. chicken, they have agreements with K & N and ‘fish’ is supplied by
Thailand and spices are supplied by Dubai to all over restaurants in Pakistan. KFC has a very
simple supply chain process. All the operations of kfc Pakistan are performed by the company
i.e. Cupola (largest restaurant management company in Pakistan). The supply chain process has
3 phases.
3.1.1. Phase 1
Raw materials picked up from various suppliers and stored at two warehouses; the normal-
storage and the cold-storage.
3.1.2. Phase 2
Preparation of all products is done at branch except for the marinating of chicken and sold to
customers at the branch itself or delivered at the desired locations.
3.1.3. Phase 3
Warehouses refill each branch according to their requirement (usually three times a week) using
company’s own vehicles and on the request of the branch manager.
3.2. Warehousing:

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Warehouse:
Pakistan is segregated into two areas, namely North and South. For simple understanding Multan
is set as midpoint. 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.
3.3. Procurement:
To plan purchasing activities monthly budgets are made. These consist of dividing the
allocated budget into the inventory policies already defined at the warehouse from past data and
experience. FIFO (First in First out) method is used for all items for the inventory at the
warehouses as because are perishable in nature.
3.3.1. Chicken:
K & N cut chicken in piece (as required by KFC) and then pack and label the packets and
deliver them in each reign. Labeling is important for inventory management and efficiency. KFC
gives a lead time of one week to K & N to deliver their order. The chicken is transported in van
with special freezer fitted inside it which keeps the chicken frozen.
3.3.2. Sauces:
Unilever (a company under Yum Brands) provides all the sauces needed by KFC such as
Ketchup, Chilly Sauce, Mayonnaise, Tartar Sauce etc. Yum function is to provide supplies to
KFC only and supplies cannot be sold to customer in general market. These suppliers are
delivered by Unilever themselves to each warehouse. Two weeks is the lead time for this
operation.
3.3.3. Spices and herbs:
These are imported directly from Singapore and Dubai. The lead time for these is more than two
months as these items are not perishable in nature and it takes a lot of time for transportation. All
items are imported through sea in 20” containers.
3.3.4. Packing Material:
This is purchased from local suppliers. Due to frequent changes in designing’s of boxes and
deals offered by KFC, the inventory of these is kept at a minimum.
3.3.5. Bread and Buns:
From the last 4 to 5 years supply chain management of KFC has been producing bread and buns
in their own bakery. The production plant is located at Sohrab Goth, Karachi.
3.3.6. Fish:
To cope with international demand fish is bought from Thailand. But in Pakistan, fish is bought
from local dealers as it is a low selling item.
3.3.7. French Fries:
The French fries used in KFC 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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4. Storage and inventory management
4.1. Chicken:
Chicken inventory is for 15 days. Chicken is not stored in the warehouse, in fact there is a
separate cold storage area is built for chicken right beside every warehouse in each region.
4.2. Sauces:
Inventory for Sauces are stored for around 25 to 30 days depending on the expiry dates and
forecasted sales.
4.3. Spices and Herbs:
Inventory for spices and herbs are stored according to forecasted sales and the lead time given
by the procurement department is three months.
4.4. Bread and Buns:
After every 4 days bread and buns are supplied directly to the KFC branches from the factory.
Every single inventory item at the warehouse is audited on weekly basis to match it with the
numbers in the system..
5. Quality Management Process:
5.1. Food Safety and Quality:
KFC took their products well above the minimum temperature recommended by World Health
Organization (WHO).
5.2. Supplier Quality:
Regular submissions of quality reports are monitored to ensure suppliers performance.
5.3. Restaurant Quality:
The main characteristics for KFC restaurant excellence are CHAMPS. C for cleanliness for
hospitality, A for accuracy, M for maintenance, P for product quality and S for speed of service.
6. Halal Food Fundamentals in KFC:
Halal Food which is absolutely necessary and in accordance with the Islamic Shariah Law. All
the food that is consumed is considered halal if it meets the certain characteristic and
requirements such as (1) Hygienic (2) Clean (3) Not Dangerous and Harmful for Health and
Body (4) Free from the prohibited parts of animal body parts and other stated in Shariah (5) Free
from anything which are considered as filth (najis) under Islamic Law. These are the main
features of Halal Food. All the chickens and chick raw materials sent by certified poultry must
meet the standards of Islamic Law.
7. Roles and responsibilities of OM Department:
As we are focusing only on OM department so we will only mention the roles and
responsibilities of OM department. It is being mentioned in hierarchy HOD supply chain give
necessary instruction to manager supply chain and then managers pass on the instructions to
Supply Chain Executives. All tasks are done with the coordination of supply chain executives
and Managers Supply Chain. The supply chain executive communicates with managers about the
requirement of materials and supplies on monthly and weekly basic. Managers supply chain

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make plans and forecast about ordering supplies and then final decisions are further
communicated to purchasing department. But there are some flaws in supply chain because many
times in some franchises customers claim that one of their favorite meal stock out in the peak
time. I personally face the same situation in seasonal occasions.
8. Products:
 Chicken Mania (Rs 595)
 Zinger burger (Rs 495)
 Wow Meal (Rs 620)
 Mighty Zinger (Rs 560)
 Twister (Rs 250)
 Family Festival (Rs 1295 & Rs 1495)
 Bucket of fries (Rs 185 & Rs 265)
 Hot wings (Rs 330)
 Zinger Strips (Rs 300)
 Corn on the cob (Rs 110)
 Double Down ( Rs 420)
 Snacked (chicken & veggie)
 Hot Shot (Rs 300)
 Value Burger (Rs 200)
 Chicky Meal (Rs 325 & Rs 350)
 Rice Spice (Rs 250)
 Add on (Rs 80)
9. Issues:
 They should make their menu more diversified by offering new deals by keeping in mind
the love for desi taste and by introducing vegetarian burger/meals.
 In order to attract more customers they should adopt a pricing strategy i.e. by lowering
their prices.
 Reduce flaws in supply chain because in some franchises customers claim many times
that one of their favorite meal is stock out in the peak time.
 KFC needs to have more outlets at commercial areas in order to increase its market
share..
 KFC needs to pay more attention on its marketing department. They should organize and
run the proper advertisement campaigns by taking local people and national artists.
10. Recommendations:
After critical evaluations of Operation Management process we have come up with following
suggestion that will increase and change the previous roles of OM Department of KFC and KFC
needs to pay more attention on these critical areas in order to be effective and we bet on that
these suggestions will be in the best interests of KFC.
10.1 Dynamic menu:
Kfc should introduce some desi taste menu that will be help for him. To expand its market share.
People saw KFC as diversified. The best example of dynamic menu is LAYS. Lays recently
introducing some new flavors according to Pakistan desi taste e.g. lays (Street Dahi ballah) and

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lays (mint chattni). And it got a good response. Another example in the same field of fast food is
KARACHI HOT and Spicy. It’s offering pizza in desi taste as well as its original taste. KHAS
offering pizza with Seekh Kabab name as (Chicken seekh kabab pizza). So KFC should take
these steps for better customer response. The one big thing that KFC do as soon as possible it
must introduced veggie burger (low calories diet) most of the people conscious about their
health. And they try to avoid fast foods. In this situation KFC introduced Diet burger that looks
too attractive for health conscious people. They don’t felt any bothering to eat fast food.
10.2. Price Base competition:
The prices of KFC are high. So KFC should reduce its prices to increase its market share and
customer response. Do doubt KFC providing best quality services and better taste with good
quality. But if KFC reduce its cost then it would be capture or overcome the local customer.
There is thinking about KFC that Only Upper class or Middle Upper class can afford that. It May
be wrong. But KFC should change this thinking and also change the mind set of people. Provide
quality services at minimum price. Reduce the cost increase the sales.
10.3. Rearrange the supply chain management:
There are some flaws in supply chain because many times in some franchises customers claim
that one of their favorite meal stock out in the peak time. I personally face the same situation in
seasonal occasions. So KFC needs to rearrange its Supply chain management and find out the
new strategy for that because when you are refusing a customer, you show him the other path
and that is your competitor. So KFC should set a new way to fulfill this flaw.
10.4. Location:
There is no sequence in KFC outlets. Because in some cities it have 2 or more franchises or
outlets in the same area. Some outlets are situated at unpopulated areas. Where there is no need
and most of the commercial areas are need that but they don’t have any outlet of KFC there. E.g.
in Gujrat the KFC franchises is far away from the city. It is outside from the city Gujrat and
Considered as risky area in late night time although there is huge traffic all time beside this
people feel insecure at night. It would be better if it is situated in the middle of the city every one
can access it easily and anytime. The current location is not in the area of Gujrat and in
Wazirabad as well. There are many other franchises that have the issue of location.
10.5. Commercialization:
Honestly if you ever see the advertisement of KFC regarding to Pakistan. All the commercial ads
belong to Indian that we saw in our cable network channels. And if you ever seen the ad of KFC
on Geo, ARY, Hum, and PTV. The answer is no. why it is? Vey often we saw the billboards of
KFC. So KFC need a good Marketing team that aware the people about its new product. New
packages and other offers like other organization do. They should advertise on local Pakistani
T.V channels regarding to Pakistan. Currently the ads that we see on T.V channels are made by
according to their culture i.e. India presenting those offers that presenting on them are not
available in Pakistan. E.g. in India there is a veggie burger but it’s not available in Pakistan. KFC
should start marketing campaigns in Pakistan.

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11. References:
www.Kfc.com
www.kfcpakistan.com
http://en.wikipedia.org/wiki/KFC