Supply Chain Management of KFC - December 29th, 2010 KFC Corporation (KFC), founded and also known as KentuckyFried Chicken, is a chain of fast food restaurants based in Louisville, Kentucky, in the United States. KFC has been a brand and operating segment, termed a concept[2] of Yum! Brands since 1997 when that company was spun off from PepsiCo as Tricon Global Restaurants Inc. KFC primarily sells chicken pieces, wraps, salads and sandwiches. While its primary focus is fried chicken, KFC also offers a line of grilled and roasted chicken products, side dishes and desserts. Outside North America, KFC offers beef based products such as hamburgers or kebabs, pork based products such as ribs and other regional fare.[citation needed] The company was founded as Kentucky Fried Chicken by Colonel Harland Sanders in 1952, though the idea of KFC's fried chicken actually goes back to 1930. The company adopted the abbreviated form of its name in 1991.[3] Starting in April 2007, the company began using its original name, Kentucky Fried Chicken, for its signage, packaging and advertisements in the U.S. as part of a new corporate re-branding program;[4][5] newer and remodeled restaurants will have the new logo and name while older stores will continue to use the 1980s signage. Additionally, Yum! continues to use the abbreviated name freely in its advertising. Born and raised in Henryville, Indiana, Sanders passed through several professions in his lifetime.[6] Sanders first served his fried chicken in 1930 in the midst of the Great Depression at a gas station he owned in North Corbin, Kentucky. The dining area was named "Sanders Court & Café" and was so successful that in 1936 Kentucky Governor Ruby Laffoon granted Sanders the title of honorary Kentucky Colonel in recognition of his contribution to the state's cuisine. The following year Sanders expanded his restaurant to 142 seats, and added a motel he bought across the street.[7] When Sanders prepared his chicken in his original restaurant in North Corbin, he prepared the chicken in an iron skillet, which took about 30 minutes to do, too long for a restaurant operation. In 1939, Sanders altered the cooking process for his fried chicken to use a pressure fryer, resulting in a greatly reduced cooking time comparable to that of deep frying.[8] In 1940 Sanders devised what came to be known as his Original Recipe.[9] The Sanders Court & Café generally served travelers, often those headed to Florida, so when the route planned in the 1950s for what would become Interstate 75 bypassed Corbin, he sold his properties and traveled the U.S. to sell his chicken to restaurant owners. The first to take him up on the offer was Pete Harman in South Salt Lake, Utah; together, they opened the first "Kentucky Fried Chicken" outlet in 1952.[10] By the early 1960s, Kentucky Fried Chicken was sold in over 600 franchised outlets in both the United States and Canada. One of the longest-lived franchisees of the older Col. Sanders' chicken concept, as opposed to the KFC chain, was the Kenny Kings chain. The company owned many Northern Ohio dinerstyle restaurants, the last of which closed in 2004. Sanders sold the entire KFC franchising operation in 1964 for $2 million USD, equal to $14,161,464 today[11] Since that time, the chain has been sold three more times: to Heublein in 1971, to R.J. Reynolds in 1982 and most recently to PepsiCo in 1986, which made it part of its Tricon Global Restaurants division, which in turn was spun off in 1997, and has now been renamed to Yum! Brands. Additionally, Colonel Sanders' nephew, Lee Cummings, took his own Kentucky Fried Chicken franchise KFC denied. 2007 is the 20th anniversary of KFC(Kentucky Fried Chichen) into the Chinese market, the number of branches in mainland China have more than two thousand. Behind the rapid development, efficient and smooth logistics system is a KFC a powerful weapon ahead of the competition. 1, the fast moving consumer goods supply chain requirements Fast moving consumer goods (FMCG, Fast Moving Consumer Goods or CPG, Consumer Package Goods), refers to the rapid consumption of consumers, need to constantly repeat purchase of products, typically fast moving consumer goods, including cosmetic products, food and beverage and tobacco. CPG market is a typical mass consumer market, the market capacity. With the improvement of living standards, consumer demand preferences change faster, the product tends to fierce competition, this time, the enterprise should have a supply chain thinking. CPG supply chain must have a keen ability to capture market opportunities, rapid response capability and a shorter structure. To this end, establish a customer demand-driven pull supply chain, enhance product promotion, and ensuring the procurement of raw which according to the quantity and date for production and transportation to distribution centers.2 – 4. The assessment team through the delivery vehicle loading efficiency. usually raw materials (bread. after ordering the distribution center personnel view existing inventory and shipment data are not revised order. the efficiency of distribution centers. not yet reached the volume of the end of the stock. vehicle selection. the restaurant orders must be received 15 points in the end of the afternoon. packing. This time depends on the time of transmission and processing orders. punctuality rate of fuel consumption and goods. KFC a “star system (STAR SYSTEM)” a selection of alternative suppliers. order quantity. transfer. the supplier delivery to the distribution center. including raw materials. 3.1. Distribution Planning According to the distribution centers indicated by the restaurant’s order number and the required raw material arrival time in the system. the logistics of the supply of KFC (A) Supplier Management KFC products are the main raw materials (Chicken. supply the resource file. This data is the order quantity is essential calculations. and then converted according to the amount of thousands of round needed the number of raw materials. This assessment system consists of five areas: quality.). beverage puree. wet goods (short shelf life of bread. 4. 2. the communication and confirm. the number of weekly orders are 1. distribution plans. picking. reliability. 1. the form signed by the store manager sent to distribution centers . etc. distribution center under the line delivery. such as the number of orders found abnormal fluctuations in a restaurant. or weather factors to calculate the turnover of an order cycle. 5. Supply resource file It is affected by supply-side arrival time. and. Inventory File Every day before work. 2. packaging. The main requirements planning Manager of the store orders the use of term-type orders filled.) by the district level has confirmed that the suppliers. including: capacity approval. vegetables.materials and inventory control. dry goods. Procurement Plan Distribution Center branch of the restaurant received orders for processing. technical. ordering volume = demand – inventory. to ensure and consolidate the business in the market position to provide strong support for the extended enterprise. this data can also be used for costing the same day. mashed potatoes. which is specifically for a global assessment of supplier management system in China since 1996. etc. safe rate were carried . raw materials into frozen goods. set the table. Every three to six months of regular assessment and evaluation throughout the year were. inventory files. the latter after an order to the supplier. from KFC’s technical department and the purchasing department were assessed at the end of the composite score will determine the supplier of the volume of business in the next year in the share. picking orders and shipments to generate summary tables. pickers. the next day by email or fax sent to the supplier. (B) the supply of logistics model based on DRP KFC supply process is: The restaurant will be reported to branch distribution center order demand. to make fast food chain to build a more efficient supply chain. This mode of operation of the logistics supply thought to follow DRP. ordering the manager considering the historical sales data and promotional activities. shipping transportation officer under the distribution plan summary arrangements. Demand is the purchase cycle. procurement plans. supplier response time of the order. estimated demand. lead time and safety stock of. full implementation of the supplier. namely: the main demand planning. and communication. DRP system includes two three input files and output plans. delivery routes. Demand plans to form form. financial. seasoning) determined by the head office supplier. the staff of the provisions of the inventory of raw materials inventory and registration. vegetables. the amount of allocation of the purchase details. KFC was one of the three largest fast-food restaurant chains operating outside of the United States. By 1995. KFC’s products have survived the earlier stages. being the world’s largest chicken restaurant chain and third largest fast-food chain. By 1990. Jr. thus KFC must have to imply ways on how to meet there customers expectations. KFC ought to think that customer goes to their establishment not just because of their product but also their service. and Mexico. in 1966 they took KFC public. He sold the business to two Louisville business people Jack Massey and John Young Brown. During the 1980’s. with over 9. KFC’s early entry into the fastfood industry in 1954 had allowed it to strong brand name recognition and a strong foothold in the industry. Subsidiaries were also established in Hong Kong. Australia. restaurants located outside of the United States were generating over 50 percent of KFC’s total profits. New Zealand. Fourth. Stage in Product Life Cycle KFC is on its Maturity Stage. 3. on average. and the right to operate 14 existing KFC franchises in England were acquired. the number of KFC franchises had risen to over 300 and revenues had reached $500. . simply shows that KFC has the capacity to address the needs of its customers no matter how old their facilities and product form was. 3. Ltd. because nothing bits a quality service. the colonel had tired of running the day to day operations of the business and was eager to concentrate on public relations issue.450 franchises and 600 company owned restaurants worldwide. South Africa. By 1960 “colonel” Sandlers had granted KFC franchise to over 200 take home retail outlets and restaurants across the unite states. in Japan. KFC had 2. During the next five years. status and role of information systems to be truly reflected. it change its logo from Kentucky Fried Chicken to KFC in 1991. It responded to consumer demands for greater variety by introducing a variety of new products. By 1971. Massey and Brown concentrated on growing KFC’s franchise system across the U. the evaluation mode of supply logistics KFC Through the above analysis we can see the following advantages Kentucky logistics system: First. the second is based on the various restaurants on the basis of accurate demand planning procurement strategy makes the company’s inventory costs are greatly reduced. A.S. In order to reduce KFC’s image as a fried-chicken chain. They had also succeeded in establishing a number of franchises in Canada by 1963. 2. The increased popularity of healthier foods and consumers-increasing demand for better variety led to a number of changes in KFC’s menu offerings. consumers began to demand healthier foods. and Massey and Brown turned their attention to international markets. distribution planning and other aspects of quantitative and standardized management reflects the high level of enterprise management. As KFC entered 1996. By 1964. KFC pursued an aggressive strategy of restaurant expansion quickly establishing itself as one of the largest fast-food restaurant chains in the United States. Capacity of the Industry KFC. and was operating in 48 countries.. demand forecasting. it grappled with a number of important issues. In 1969. and the company was listed on the New York Stock Exchange. Stability of Demand for Products Many KFC’s problems during the late 1980’s surrounded its limited menu and its inability to quickly bring new products to market.000 per unit.out. SUPPLY OF PRODUCTS AND SERVICES 1. By late1960’s a strong foothold had been established in the United States.000 in both franchise and company-owned restaurants worldwide and was operating in 68 countries. strong support for the normal operation of the enterprise and rapid expansion. During the 1990’s and 1970’s. and KFC was faced with a limited menu consisting mainly of fried foods. However KFC’s significant service problem will probably push their customers away from them. a joint venture was signed with Initsubishi shoji kaisha. for $2 million. Long Run Growth/ Decline Fast food franchising was still in its infancy in 1954 when Harland Sandlers begun his travels across the United States to speak with prospective franchises about his “colonel” sanders recipe Kentucky fried chicken”. third distribution center in the entire logistics system in a central location. increasing trade and current account deficits and the uncertainty surrounding the economic policy. KFC Despite of the rivalries of employees and managers. Labor was really cheap in Mexico. It held over 50 percent of U.000 restaurants worldwide. 5. Inflation Vulnerability As KFC entered business in Mexico. and this lowered price of imports & led to an increase in imports of over 23 percent in 1989. Volatility of Technology Basically KFC’s past technologies still existed at present. lead many businesses to lay-off workers.7 million in this regard KFC has the capacity to innovate their old system or how to transform the old KFC into new one. KFC had surpassed this incident. market in terms in sales and ended 1995 with over 9. These problems with worker retention and labor unrest were mainly the result of workers frustration over the loss of their purchasing power. However the main issue now is how they could transform the existing facilities for them to be more competitive. approximately two restaurants in every three days is one way of proving their competence when it comes to business expansion. Due to inflation & to past government controls on wages increases. Whereby it reaches $1. & punctuality continued to be significant problems. and foreign ownership of assets in Mexico was largely prohibited or heavily restricted. As to the company’s money. Some incidents were directly attack of nationalist against KFC and closure of the first restaurant in India by local authorities are to protest of local farmers group allied with a campaign across India against foreign investment which was occurring as part of the countries four year old program of economic liberalization. worldwide on both company-owned and franchised restaurants. 2. labor unrest. KFC’s culture was built largely as the employees enjoyed relatively good employment stability and security.The continuous opening of new restaurants in 1995. because of the benefits and pensions and other non-income needs. the Mexican government battled high inflation. Structure of the Industry KFC remained the largest chicken restaurant chain and third largest fast-food chain. labor unrest. 3. Availability of Needed Resources KFC has several problems when it comes to its resources. . Over the years. KFC has the ability to retain and manage its manpower. Mexico improved. One of the first fast-food chains to go international during the late 1960s. Thereby. President Salinas institutes a policy of allowing the peso to depreciate against the dollar by one peso per day. After 1982. A slowdown in business activity brought about by higher interest rates & lower government spending. specially on the needed materials. C. low job absenteeism. since this is the key to success in terms of production and it would be there competitive edge in the wide array of fast food chain industry. Social Constraints KFC encountered several factors constraining KFC’s international expansion plans such as the social unrest. 4. thereby providing a wide market segment not just local but worldwide. which means that their families were durable enough because it works for years. High tariff and other trades barriers restricted imports in to Mexico. When Carlos Salinas de Gortari seated as President. While KFC benefits from lower labor costs. In 1995 KFC opened 234 new restaurants and operated in 68 countries. KFC has the enough profit on its recent operations as of 1994. it result a grossly overvalued peso. a strong loyalty had been created among KFC employees. and the new legislation eliminated many restriction for foreign investment. top marginal tax rates were lowered. KFC’s primary concern was the stability of Mexico labor markets. KFC had developed one of the world’s most recognizable brands. because there system is older when it comes to their facilities and product forms and it’s one thing that needs an attention. and lost consumers power.S. high interest rates. COMPETITIVE CONDITIONS IN THE INDUSTRY 1. 2. However there are laws regarding its operation on food sanitation and hygiene. . Government Support and Regulation The food industry does not get much support from government.