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SUPPLY CHAIN of KFC

INDIA

TUSHAR SHARMA-150301007

PRANJAL JOSHI-150301005

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Contents Introduction: ................................................................................................................................................. 3

Significance of SCM ....................................................................................................................................... 3

Objective: .................................................................................................................................................. 4

Kentucky Fried Chicken ................................................................................................................................. 4

KFC Corporation ........................................................................................................................................ 4

Food ...................................................................................................................................................... 5

STP Analysis ................................................................................................................................................... 7

Segmentation ............................................................................................................................................ 7

Targeting ................................................................................................................................................... 8

Positioning ................................................................................................................................................ 9

KFC’s Supply Chain ...................................................................................................................................... 11

Strategic Decisions regarding supply chain drivers: ................................................................................... 11

Supplier of KFC ........................................................................................................................................ 12

Logistics model of KFC: ........................................................................................................................... 12

Cold storage system in KFC: .................................................................................................................... 13

Facilities and Warehousing: .................................................................................................................... 14

Facility processing using JIT .................................................................................................................... 14

Information: ............................................................................................................................................ 15

Inventory Management: ......................................................................................................................... 15

Sourcing: ................................................................................................................................................. 15

Strategic Fit: ................................................................................................................................................ 16

Performance Metrics .................................................................................................................................. 16

ROE (Return on Equity): .......................................................................................................................... 16

ROA (Return on Asset): ........................................................................................................................... 17

Accounts receivable turnover: ................................................................................................................ 17

Accounts Payable turnover: .................................................................................................................... 17

Inventory Turnover ratio:........................................................................................................................ 18

Summation and Recommendation: ............................................................................................................ 18

References: ................................................................................................................................................. 18

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Introduction:

Supply chain management is the systematic and the strategic coordination management for supplying

goods and products required by the end customer. Or we can say that a practice of products that

reaches to an end user and represents the efforts of the organization is known as supply chain

management. It represents a conscious effort by the supply chain firms to develop and run supply chains in

most effective and efficient ways possible.

Supply chain management exercises cover very nearly everything, for example, from items to its

improvement, sourcing, logistics and even data framework moreover. The primary goal of SCM is making

net worth, assembling an aggressive framework, synchronize the merchandise supply, measures the

execution all-inclusive and utilizing overall logistics and so forth.

Today the greater part of the worldwide organizations are compelled to continue searching for a creation

focus where expense of work and crude material is modest and to contend in the worldwide market and

arranged economy, SCM is extremely useful for associations. Different exercises are there in an association

which needs key administration like sourcing of crude materials from better place and after that from

distinctive areas these completed products are gone through diverse chains of circulation system which

incorporates retailers, wholesalers and end clients.

Significance of SCM SCM assumes an essential part in affiliation practices and a vital segment to operational capability which

can be associated with purchaser devotion and association's flourishing. You can say that it is much the

same as the establishment of an affiliation which manages the segregating issues of the business

relationship, for instance, quick improvement of multinational associations, overall augmentation and

natural concerns which by suggestion or essentially impacts the corporate method.

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Different profits and significance of inventory network administration are:

Reduces stock expenses

Provides better medium for data offering between accomplices

Improves consumer loyalty and administration

Maintains better trust between accomplices

Provides productive assembling system

Improve process coordination

Improves primary concern (by diminishing the utilization of settled resources in the store network)

Increase income

Improves quality and gives higher net revenue

Objective:

The underlying objective of this study are:-

1. To know the strategies of KFC, what its vision is and how it is trying to achieve its strategic goals.

2. Strategic measures in terms of supply chain.

3. Study the performance metrics of KFC and deduct its strategic supply chain alignment.

Kentucky Fried Chicken

KFC Corporation

KFC Corporation (KFC), established and known as Kentucky Fried Chicken, is a chain of fast food

restaurants situated in Louisville, Kentucky, in the United States. KFC has been a brand and operating

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segment, called as a concept of Yum Brands, following 1997 when that organization was spun off from

PepsiCo as Tricon Global Restaurants Inc.

KFC essentially offers chicken pieces, wraps, mixed greens and sandwiches. While its essential focus is fried

chicken, KFC additionally offers a line of barbecued and cooked chicken items, side dishes and pastries.

Outside North America, KFC offers meat based items, for example, burgers or kebabs, pork based items, for

example, ribs and other local toll.

The organization was established as Kentucky Fried Chicken by Colonel Harland Sanders in 1952; however

the thought of KFC's fried chicken really dates back to 1930. The organization embraced the condensed

manifestation of its name in 1991. Beginning in April 2007, the organization started utilizing its unique name,

Kentucky Fried Chicken, for its signage, bundling and advertisements in the U.S. as a component of another

corporate re-marking program; newer and rebuilt restaurants will have the new logo and name while more

established stores will keep on utilizing the 1980s signage. Also, Yum keeps on utilizing the shortened name

uninhibitedly as a part of its promotions.

KFC India

The principal Indian KFC was a two-story outlet on the elegant Brigade Road in Bangalore in June 1995. The

organization couldn't have picked a more troublesome venue for its first entry into the country. Bangalore

housed the home office of the Karnataka Rajya Raitha Sangha, a standout amongst the most persuasive,

vocal and hostile to remote venture agriculturists' relationship in the nation. The main outlet experienced

challenges left wing, hostile to globalization and ecological campaigners, and additionally neighborhood

agriculturists, who protested the chain bypassing nearby producers. Many Indians were worried about the

surge of consumerism, the loss of national independence, and the disturbance of indigenous traditions. The

dissents reached a crucial stage in August 1995, when the Bangalore outlet was more than once

ransacked. The KFC outlet in Bangalore requested, and got, a police van for all time stopped outside for a

year. The outlet was shut on September 13, 1995 by neighborhood powers, who guaranteed the

organization utilized illicitly high measures of monosodium glutamate (MSG) in its food. The outlet re-

opened a couple of hours after the fact as the consequence of a bid by KFC to the Karnataka High Court.

The organization expressed the formula was the same than that utilized as a part of some other KFC store.

Rural dissident M. D. Nanjunda swamy asserted KFC would unfavorably influence the strength of the

bankrupted, by occupying grain from destitute individuals to make the more productive creature feed. A

second outlet opened in Delhi yet was shut by the powers all through November, purportedly for wellbeing

reasons, however more inclined to evade a reiteration of the Bangalore incident. The Delhi outlet soon shut

forever.

KFC started to grow outside of Bangalore in 2004, with a confined menu that was the most far reaching

without meat menu over the chain's overall operations. It presented a vegan menu that included rice

suppers, wraps and side dishes and, in the same way as McDonald's, served eggless mayonnaise and

sauces. By 2008–09, KFC worked 34 outlets in India. In 2014, KFC dispatched the "So Veg, So Good" menu as

a feature of an India-particular special system concentrated on improving their vegan ran.

Food

GRADE A, 100% REAL CHICKEN

When it comes to sourcing chicken, getting the highest quality is our top priority. Right from our

suppliers’ farms to your plate, each piece of chicken goes through about 34 checks before

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you take that bite. And, of course, our chefs add authentic spices, fresh ingredients and a

whole lot of love to our 100% real, farm bred chicken.

AUTHENTIC RECIPES

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Exotic Spices- Vasco da Gama sailed across the world for these, but you just have to walk into

the nearest KFC. We select only the most aromatic spices from the spice capital of the world

“Kerala” to make sure your food tastes so good.

Magical Alphonso- The ‘king of mangoes’ in all its glory! Real chunks of Alphonso is what get

blended in your mango burst Krushers at KFC.

Pure Rich Cocoa- This perfect mélange of cocoa and crushed ice is sweet and sinful! And that

rich and smooth taste you get is the handpicked cocoa from Ghana, blended into a heavenly

chocolate sauce that goes into your favorite chocolate Krushers.

BEST IN CLASS SUPPLIERS

KFC sources only real, 100% chicken. Venky's is the biggest poultry company in India and is

widely available with its range of ready to eat product across several retail stores in the

country. The group was established in 1971 by the father of the Indian poultry industry, Late

Padmashree Dr. B.V. Rao and is the largest fully integrated poultry group in Asia. The

pioneering efforts of the VH Group have been well rewarded with several national and

international awards. They are also our biggest suppliers of chicken.

Operational Strategy of KFC in India

They targeted on the below mentioned points as part of their operations in India:-

1. Localization of menu

2. Understood the operational challenges in India which were as important as customer acquisition

therefore, built a proactive supply chain.

3. In a country with over a billion people targeting a concept was a concern which they mastered by

using pricing, product mix and branding to target young population.

STP Analysis

Segmentation

Demographic Factors:

Age: Generally there is no age point of confinement concentrate by the KFC. The target and center is on

every last individual in a general public. KFC thinks that it’s biggest demographic is the youth of any

society.

Sex: Both male and females are concentrated by KFC; sex does not assume any part here.

Family unit Size: This assumes a basic part in the demographic component of the KFC. By and large they

target entire families instead of single persons. This being the purpose behind their Family Meals which are

fundamentally packaged things served at an ostensibly less expensive rate.

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Economic Factors

Wage: Income is a vital key element for KFC. This component chooses which class is to be focused on. In

the early ascent of KFC they concentrated on the high society yet gradually are presenting economy

suppers that pull in the lower to working classes.

Utilization Behavior: It appraises the conduct of individuals, their liking and dislike towards the valuing of the

items.

Behavior Factors

In behavioral viewpoint they fragmented the business sector on the premise of value, taste and cost.

Taking after are the diverse conceivable fragments in this respect: taste cognizant, quality cognizant, class

cognizant, and blend of value and quality.

Geographic Factors

On the premise of the geological variable KFC has partitioned its business sector in two fundamental

fragments, urban and semi urban.

Political Factors

The operations of KFC are influenced by the administration strategies on the regulations of fast food

operation. At present government are controlling the showcasing of fast food restaurant in view of

wellbeing concern, for example, cardiovascular and cholesterol issue and corpulence among the youthful

and kids in the nation. Governments additionally control the permit given for open the fast food restaurant

and different business regulation need to take after, for example, for an establishment business. Great

association with government in giving common advantages, for example, occupation and assessment is

an absolute necessity for the organization to succeed in any outside business sector.

Targeting

Location

Commercialization of urban and sub-urban markets prompting more mid-area individuals that discover top

of the line consuming joints exceptionally expensive..

Mid-segment individuals are continually searching for change which KFC gives in their scope of fast food.

Quality cognizant – individuals in urban zones are more conscious about the nature and quality of food

than people of rural areas.

Placement Outlets

Because of KFC putting itself near to schools, universities, films and markets which are for the most part

populated by the youth and the individuals who are in a hustle, KFC enjoys an expansive number of

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footfalls consistently. Likewise, they additionally have outlets near to non-vegans (generally Muslim

populated regions).

Strategy

Given the focused way of fast food joints, KFC utilizes the "Push Strategy" to help them create awareness,

be diverse, and sound appealing.

Positioning

KFC gives importance to the first-level channels in the order: producers, retailers, and consumers. KFC deals

with the stream of great operation strategies i.e.

"Great Operating Manager→ prompts "Great Team Selection →Good Services → Good Targets → Good.

Incomes through the accompanying inner procedures:

• Training

• Incentive based targets

• Recognition for good work

• Performance based reward

• Employee advantages to keep them motivated

Supply Chain Strategy

Critical Components of a supply chain strategy are:

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Fig.:Supply chain planning at KFC

Demand Forecasting

Operations Planning

Demand Management

Demand Forecasting

• Combination Forecast:Qualitative +Quantitative

• Historical Sales Data +External Factors (Promotional activities,weather factors etc.)

Operations Planning

• Adjusting Capacity Strategy: Level Production

• Making sure of enough stock of ingredients to cover demand in peak hours.

Demand Management

• Produce-to-stock Model : Producing chicken in anticipation and customers buy as in set meals

• Create demand for idle resources:Offering afternoon tea from 2 to 5 pm.

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KFC’s Supply Chain

A Supply Chain is network of facilities: material stream from suppliers and their "upstream" suppliers at all

levels, change of materials into semi-finished and completed products, and distribution of products to

customers and their "downstream" customers at all levels.

The raw material flows as follows:

The information and the money flow in the backward direction. The harmony between these 3 streams is

what a Supply Chain is all about.

Supply chain operates at its best when there is a balance in the finished product offering. Any significant

vacillation in the item requesting ways causes abundance/ fluctuating inventories, deficiencies/stock outs,

longer lead times, higher transportation and assembling expenses, amistrust between supply chain

partners. This is known as the Bullwhip Effect. Contingent upon the circumstance, the Supply Chain may

incorporate significant item components, different suppliers, topographically scattered activities, and both

upstream and downstream activities. It is critical to go past one's prompt suppliers and clients to envelop

the entire chain. For instance, a diesel motor maker may have the capacity to coordinate a GPS locator

framework into its motor control framework. Its prompt client, a heavy vehicle producer, may see no

requirement for this usefulness. Be that as it may, the downstream client, a trucking organization with a

large fleet, may be very fond of the locator system. Passing the quality to the downstream client is an

important part of the SCM process.

Strategic Decisions regarding supply chain drivers: A group of interconnected facilities constitute a Supply chain. In this material flow from suppliers and their

upstream suppliers at all levels. Materials are transformed from raw stage to semi-finished and then to

finished products which are then distributed to the consumers. Money and information will be flowing in the

opposite direction. Hence the flow of raw material is as follows:

Supplier manufacturer distributor retailer consumer

The supply chain management in KFC follows STAR system which includes Quality, Financials, Technical,

Communication and Reliability. It gives at most importance to these things which have helped it become

one among many successful business models.

Supplier Producer Wholesaler Retailer Customer

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Supplier of KFC

KFC sources only real, 100% chicken. Venky's is the biggest poultry company in India and is widely available

with its range of ready to eat product across several retail stores in the country. The group was established

in 1971 by the father of the Indian poultry industry, Late Padmashree Dr. B.V. Rao and is the largest fully

integrated poultry group in Asia. The pioneering efforts of the VH Group have been well rewarded with

several national and international awards. They are also our biggest suppliers of chicken.

Venky's (India) Limited is a subsidiary of V H Group, an Indian company that specializes in chicken meat

processing, and pharmaceutical products for both poultry and human usage.

Logistics model of KFC:

KFC uses DRP system as the logistics supply model. The DRP model is:

Distribution resource planning (DRP) is a method used in business administration for planning orders within a

supply chain. DRP enables the user to set certain inventory control parameters (like a safety stock) and

calculate the time-phased inventory requirements. This process is also commonly referred to as distribution

requirements planning.

DRP uses several variables:

the required quantity of product needed at the beginning of a period

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the constrained quantity of product available at the beginning of a period

the recommended order quantity at the beginning of a period

the backordered demand at the end of a period

the on-hand inventory at the end of a period

DRP needs the following information:

the demand in a future period

the scheduled receipts at the beginning of a period

the on-hand inventory at the beginning of a period

the safety stock requirement for a period

In this system, the restaurant will be reported to the branch distribution center order demand, the latter

after an order to the supplier, the supplier delivery to the distribution center, distribution center under the

line delivery. This mode of operation of the logistics supply thought to take after DRP, DRP framework

incorporates two three info documents and yield plans, in particular: the fundamental interest arranging,

stock records, supply the asset document; obtainment plans, appropriation plans.

Cold storage system in KFC:

Freshness and nutritional value will be retained for the food products if we use the cold storage systems.

Hence it forms an important part of the supply chain system. Setting up the Cold chain includes the

exchange of best in class nourishment preparing innovations by 'Kentucky fried chicken's and its universal

suppliers to Indian entrepreneurs, who have now turned into an essential piece of the Cold chain.

The term cold chain explains a network for the procurement, warehousing, transportation and retailing of

food products under controlled temperature. 'Kentucky fried chicken's outlets store items to be utilized on a

consistently premise, inside a temperature scope of –18ºC to 4ºC. Around 52% of the sustenance items

need to be put away under these conditions before they are utilized. All suppliers hold fast to Indian

government regulations on sustenance, wellbeing and cleanliness while persistently keeping up 'Kentucky

fried chicken's perceived measures. As the ingredients move from farms to processing plants to the

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restaurants, KFC's Quality Inspection program (QIP) does quality checks at more than 20 separate focuses

vulnerable Chain framework. Setting up of the Cold Chain has additionally empowered 'Kentucky fried

chicken' to eliminate operational wastage.

Facilities and Warehousing:

KFC has a simple supply chain process which can be summed up in three steps.

Step1: Raw materials are obtained from numerous suppliers and are stored at two warehouses. The first one

is the normal warehouse and the second is the Cold –storage.

Step2: All the food items are prepared at the respective branches itself except for marinating the chicken

and these are sold to the customers at the branches or are delivered at the requested locations.

Step3: Distribution centers renew every branch as per their requirement (generally three times a week)

using organization's own particular vehicles and drivers upon the appeal of the branch supervisor.

Facility processing using JIT

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Information:

Supervisor of the store requests the utilization of term-sort requests filled, crude materials into solidified

merchandise, dry products, wet merchandise (short time span of usability of bread, vegetables, and so

forth.), the quantity of week by week requests are 1,1,2 – 4, Ordering volume= Demand– Inventory. Interest

is the buy cycle, lead time and safety stock of, and, requesting the manager considering the historical sales

data and promotional activities, or climate variables to compute the turnover of a order cycle, and

afterward changed over as indicated by the measure of a huge number of round required the quantity of

crude materials. Interest arrangements to structure, set the table, including crude materials, assessed

interest, not yet arrived at the volume of the end of the stock, request amount, the measure of assignment

of the buy subtle elements, the structure marked by the store supervisor sent to dispersion focus.

Inventory Management:

The Inventory method that is followed by KFC is the FIFO method which means the First in First Out

process where in the goods that enters the branch first are the ones that are first served to the

customers

At the end of each day, the staff of the branch gives the provisions of the inventory of raw material

that is left out to the to the registration department. This is an important data which is used in the

calculation of inventory. It is also used in costing for the same day.

Inventory cycle starts from receiving the material, storing, preparation, production and serving. It

has a buffer inventory of 9 days.

KFC uses MICROS 6.7 version as the ERP system.

In order to manage the back orders, it takes the help of the neighboring KFC branches.

Sourcing:

Kentucky fried chicken has dependably been focused on sourcing its necessities from neighborhood

suppliers and agriculturists. This affirmation is established in the reasoning of their organization's founder. He

solidly had faith in common advantages emerging from an organization in the middle of KFC and the

neighborhood organizations, hence guaranteeing that Kentucky fried chicken has responsibility to

development was reflected by that of its accomplices. In keeping with this conviction, KFC has precisely

recognized neighborhood Indian organizations that take pride in fulfilling clients by giving them the most

astounding quality items. Adherence to Indian Government regulations on nourishment, well being and

cleanliness is currently a top need.

Kentucky fried chicken India today buys more than 96% of its items and supplies from Indian suppliers.

Indeed their restaurants are built utilizing neighborhood designers, builders, work and most extreme nearby

substance in materials. The relationship between Kentucky fried chicken and its Indian suppliers is

commonly advantageous. As KFC grows in India, the supplier gets the chance to extend his business, has

admittance to the most recent in sustenance innovation, and gets introduction to cutting edge agrarian

practices and the capacity to develop or to fare.

All their crude materials as well, have affirmations from their suppliers to affirm that they conform to the

necessities. With everything taken into account, their dedication to putting "Clients First" in all that we do. To

guarantee that all their mainly made items fit in with necessities, KFC actualize stringent inward controls

over crude materials, assembling and bundling. They are amazingly watchful to avoid cross defilement with

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rottenness or hazardous contaminants amid the capacity, arrangement, taking care of, bundling and

transport of our items. KFC additionally stick to best practices to keep up the most noteworthy benchmarks

of value and cleanliness.

Strategic Fit: There are few key success factors that are very essential in this industry.

1. Location/Number of outlets

2. Extensive menu

3. Price

4. Service/Ambience

5. Taste

Threshold Factors:

1. Operations

2. Quality Standards

Performance Metrics

2014 2013 2012

Revenue 13084 13633 12626

Cost and Expenses 11268 11339 10811

Operating Profit 1798 2294 1815

SG&A Expenses 3.86 B 3.79 B 3.97 B

Interest Expense 247 149 156

EBT 1551 2145 1659

Income Tax 487 537 324

Net income 1019 1597 1319

ROE (Return on Equity):

Return on Equity = Net Income/ Total Equity

2014 2013 2012

Net Income 1019 1597 1319

Equity 2229 2253 2250

ROE 45.7156 70.883267 58.62222

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From the above table, we can see that the ROE has been inconsistent with increasing in 2013 than in 2012

and then decreasing in 2014

ROA (Return on Asset):

Return on Asset = EBT/ Total Assets

2014 2013 2012

EBT 1551 2145 1659

Assets 8695 9013 8834

ROA 17.8378 23.798957 18.77971

Return on Asset ratio is also not consistent

Accounts receivable turnover:

2014 2013 2012

Purchases 7519.32 7870.476 7158.066

Account Receivables 319 301 290

ART 23.5715 26.147761 24.68299

We can see that the account receivable turnover has increased for the years 2012 to 2013 but decreased

in 2014 which is not a good sign as ideally ART value should be higher which means that you are receiving

your money fast.

Accounts Payable turnover:

2014 2013 2012

Purchases 7519.32 7870.476 7158.1

Account Payables 1929 2036 2200

APT 3.89804 3.8656562 3.253682

Accounts payable turnover has increased consecutively for 2012, 2013, 2014 which means that KFC is

taking longer time to pay its debts which means that it is in good terms with its suppliers which also indicates

its good sourcing management

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Inventory Turnover ratio:

2014 2013 2012

Inventories 294 313 304

COGS 9501 9852 9140

IVTR 32.3163 31.476038 30.06579

Even the inventory turnover ratio is increasing for the past three years which means that inventory holding

days are decreasing which is a good sign. It means that KFC is managing its inventory well

Summation and Recommendation: Below are the advantages of SCM which KFC uses:

1. Rapid expansion and strong support for the normal operation of the enterprise

2. Based on the various restaurants on the basis of accurate demand planning procurement strategy

makes the company’s inventory costs are greatly reduced

3. Warehouses and distribution centre’s are the central point of the logistics and also information,

which uses ERP and other tools, plays a vital role in the KFC success

4. Demand forecasting and other management techniques reflect the high level of enterprise

management

References: 1. http://www.managementparadise.com/forums/elements-logistics/211413-supply-chain-

management-kfc.html

2. http://www.ukessays.com/essays/history/global-supply-chain-management-history-essay.php

3. http://www.yum.com/

4. http://www.forbes.com/sites/saritharai/2014/11/06/in-indias-crowded-fast-food-market-newest-

entrant-burger-king-pre-sells-burgers-online/2/

5. http://en.wikipedia.org/wiki/KFC

6. http://www.managementstudyguide.com/supply-chain-management-definition.htm

7. http://www.aceanalyzer.com/Analyser.aspx

8. http://kfc.co.in/tastethatyoucantrust/venkys.html