Discuss about the Role of KFC’s Supply Chain Function.
It is the second largest restaurant chain in the world after McDonald’s. It is known as Kentucky Fried Chicken as it is headquartered in Louisville, Kentucky. The fast food restaurant mainly supplies fried chickens. Colonel Harland Sanders, who sold fried chicken in the roadside during the economic depression that took place in the 1930’s, first opened the food centre. His brand was famously known as “Colonel Sanders” and his picture was proudly used as the brand image. Colonel Sander mainly challenged the hamburgers and popularized the fried chicken in America. He became famous in the American cultural history. KFC restaurant is a subsidiary of the Yum! Brand, a company that owns Pizza hut, Taco Bell and WingStreet food chains.
KFC has grabbed the international food market in Jamaica, China, and Mexico and so on. It has become the largest single market in China. The products in KFC are made of pressure-fried chicken mixed with 11 herbs and spices. As reported the sales of KFC in the year 2013 was $23 billion. By 2013, KFC had numerous outlets in various countries. Statistics reveal that the outlets of KFC are spread over 118 countries with 4,563 outlets in China, 4,491 in US and in rest of the world about 9,821. Total number of outlets that KFC has as reported in the year 2017 is 21,487.
The mission of the restaurant is to deliver good quality food to the customers so that they are satisfied with the service provided by the brand. KFC aims at bringing a smile on the customers face every time they consume their products and ensure that the brand loyalty is maintained. The quality of the products should be such that the customers come back to eat the items offered by KFC.
The vision of KFC is to provide fast food services to customers thereby increasing the revenue and bringing satisfaction to the consumers at the same time. It is also aimed at increasing the profits of the company without compromising with the quality of its products.
The Supply Chain functions as the most important aspect for the smooth working of any restaurant. It is the integration of all the factors that contribute to supply chain like the demand planning, supply planning, suppliers, manufacturers and warehouses. Supply chain function is a complex procedure that involves two methods of supply. One is the Supplier tier-1, which is also known as the direct supplier that supplies raw materials directly to the operations, while the other is the Supplier tier-2 that is called the indirect supplier who supplies raw materials to Supplier tier-1. The more efficient the supply chain management of a restaurant is, the more the company will be able to achieve its mission and vision. In other words, it can be said that the mission and vision of a fast food company is dependent on the supply chain management. The demand of the consumers also affect the supply chain of KFC largely. Some of the activities of the supply chain management are listed below:
Ordering Process:
Initially KFC used RepSol software for ordering process. However, the supply of its products to the customers are now performed by facial recognition in China. The facial recognition machine recognizes the age and mood of the customer. According to the mood, the machine suggests some preferable orders. It also remembers the last order placed by the customer and according to that, the machine suggests the orders. This technique of placing order and supplying the orders have started in a fast food KFC outlet in Beijing. However, the process of ordering has been provided in the form of a flowchart.
3rd Party Logistics Company:
3rd party logistic companies are also known as logistic service providers. They are the third party that provides outsourcing. KFC also has a logistic service provider to support all its logistic activities like distribution and warehousing. Previously a specialized logistic service provider called the Bidvest logistics controlled the deliveries of KFC. However, KFC switched from Bidvest to DHL and QSL.
Suppliers:
Suppliers are mainly the one that provides raw materials to a company. For example, the raw materials required by KFC to produce its finished products are chicken, buns, spices, seasonings, fries, beverages and so on. Packaging suppliers also form an important part in the supply chain function of KFC. KFC has established a good relationship with its suppliers like PepsiCo and Coca-Cola that supplies beverages, KitKat and Oreo for supplying desserts with the main course, K & N for supplying chicken at its several outlets.
Inventory management and Warehousing:
Inventory management and warehousing of the raw materials are two important aspects of supply chain management. The inventory manager or the stock manager of the restaurant manages the raw materials. He keeps a track of all the materials on a daily basis. However, chicken is not stored in the warehouses, rather it is stored in the cold storages. The lead-time given by the procurement department for the storage of chicken is 15 days, for sauces around 25 to 30 days, spices and herbs for three months, bread and buns for 4 days.
3 Supply chain management strategies that will aid KFC in achieving its goals:
The strategies of the supply chain management are discussed in the following paragraphs. These strategies will help KFC to achieve its goal. They are:
Reducing unnecessary complexity in the supply chain: The strategies should aim at reducing the complexities of the supply chain by cutting down several outsourcing. The main drawback of KFC in the shortage of chicken case that was recently reported was due to the shifting of outsourcing from one company to another. However, the problem was overcome by giving the outsourcing back to Bidvest. Therefore, KFC should organize the business in such a way that the vision, mission and responsibilities of the company are clear.
Actions should be taken according to the cost: The cost of the materials bought and offered should be clear before planning any kind of strategies. They should plan models to that will understand better the input costing, which will directly lead to better management of the supply chains. Proper handling of supplies is directly proportional in achieving goals. For example, the inventory manager will be able to fix better freight rates that will enhance the unloading of the raw materials at the dock only if he has a strong knowledge of the prices of the materials and services that are available in the market. Therefore, market analysis is an important study that needs to be carried out for planning better strategies to meet the mission and vision of the company.
Proper selection of the core and the non-core suppliers: Core-suppliers are the suppliers of the materials that are part of the menu offered by KFC. Whereas, non-core suppliers are the suppliers of products that are offered for a limited period. Right choices of these two suppliers can help build a strong relationship between them. Good code of conduct between the supplier and a company is necessary to maintain transparency. If the suppliers supplies good quality raw materials then only the items prepared by them will be of excellent quality. Quality of food items for any restaurant matters a lot for its reputation.
In the previous paragraphs, broad discussion have been made on KFC as an organisation, vision and mission of the organization and so on. Discussion on some specific aspects should be made before the procurement and logistic plan. Those two aspects are the market and environmental analysis also known as the SWOT and PESTEL analysis.
SWOT analysis of KFC:
Strengths:
Weaknesses:
Opportunities:
Threats:
PESTEL analysis of KFC:
Political:
To achieve the vision and mission of the organization, KFC follows a political system that guides its services, changes the business strategies and makes profit. They give a pension fee to their employees to boast their motivation and started delivering their products to people who are ill.
Economical:
KFC provides its products and services at lower price. They even give huge amount of discounts to attract people to buy their products.
Social:
KFC strives for maintaining a good relationship with its customers. They appeal to the local tastes of the people. For example, additional herbs and spices are added to the items according to the taste of the local people. This gives them an additional benefit to come close to its customers.
Technological:
The technological interface of KFC with its consumers is significantly easy. The websites are designed in such a way that any information related to KFC is readily available. The online ordering system has also been made so user-friendly that the users do not face any problem while using them.
Environmental:
People like the environment of KFC as they feel that it is quite different from other companies. The staffs are highly trained to behave properly with the customers. Customers are their highest priorities.
Legal:
KFC is a legal company under the Yum! Brand. The companies that has spread worldwide has to be a legal company because there are some rules and regulations that needs to be followed while setting up a business overseas.
KFC’s Procurement Plan:
From the above SWOT and PESTEL analysis of KFC it is quite clear that a complete planning is required for the development and expansion of the company in the market. Therefore, KFC is focusing on making the business flexible by adopting the e-procurement. KFC has selected Wax Digital to manage all the requirements of its outlets. They will handle the stationary and IT goods of the company.
Wax Digital provides all the solutions to the problems faced by the company regarding the engagement of the customers online and delivering web-based goods to them.
KFC Logistics plan:
KFC did a blunder recently by shifting the logistics service provider that resulted in the shortage of chicken. Previously the logistics provider was Bidvest and now it is the DHL and the QSL. However, due to the unavoidable circumstances KFC had to again go back to Bidvest. While developing the logistic plan it should be kept in mind that the transportation part is all done the logistics service provider in contrast to the procurement plan where the company has to hire transportation.
Role of the block chain technology:
Block chain technology is the method by which all the digital transactions are stored in the database. This eliminates the need of a third party to handle the transactions. A number of organizations are adopting this method to cut down the transaction cost. This has proved to be a successful method in increasing the production rates of the global market.
Block chain technology finds application in auditing the supply chain management. The main advantages of using block chain technology in supply chain management are:
Businesses cannot exist without risks. There are various types of risks that exists in the company. For example: Supply risk, demand risk, environmental risk and process risk. Therefore, risk assessments should be performed continuously in any business activities.
Developing risk assessment plan:
Having assessed the type of risks that might occur, a risk assessment plan can be designed following the 3 main points: identifying the overall risk, analysing the probability of occurrence of those risks, the loss that are incurred on the business due to those risks.
The risks identified in the given scenario can be divided into 3 categories: supply, process and environmental risks.
Supply risk:
It includes the damage of the GT 6 Bladed rotor during the loading and unloading from the rotor from the ship at the Houston port.
Process risk:
This refers to the risk of damage to the rotor due to the loading delay in the Houston port, payment issues or the supplier not following the loading protocol.
Environmental risk:
It includes the risk of damage caused to the rotor due to shipping it in the hurricane season and stormy weather.
The risks are identified for the given scenario and a risk template has been filled up.
What are incoterms?
Incoterms are the rules and regulations that a particular company should follow during the transport of goods carriage from the seller to the buyer. In other words, it can be defined as the rules that should be obeyed during the import and export of materials. There are mainly four categories of incoterms:
Some of the incoterms for any mode of transport are listed below:
The incoterms for sea and inland waterway transport are:
As the transport in the above scenario is made by sea therefore, the incoterms that they will follow are CIF, FOB, FAS and CFR.
To eliminate the risks of business loss another plan B can be outlined to mitigate the risks. They may include flying cargo. There are several advantages of using this mode of transport. The cost of transport can be reduced. The time taken to fly from Houston airport to Trinidad and Tobago is 6 hrs and an extra 1 gay is required to reach the destination. By using this method, the penalty of USD 1 million can be eliminated.
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