10 Operation Management Decision Applied To Kfc Outlet Sukkur

Interview conducted from the Manager KFC o Sukkur

10 OPERATION MANAGEMENT DECISIONS APPLIED IN KFC OUTLET Group Members:

SUKKUR Operation Management Project

Table of Content:

1. Tanveer Hussain(tanveerhussainlakho240@gma il.com) 2. Uzair Ahmed([email protected])

Introduction................................................................................................................. 2 Supply chain management: ........................................................................................... 3 Analysis: ....................................................................................................................... 4 Quality Management: ................................................................................................... 4 Analysis: ....................................................................................................................... 6 Process strategy: ........................................................................................................... 6 Questions: ..................................................................................................................... 6 Locations Strategy: ....................................................................................................... 8 Questions ...................................................................................................................... 8 Layout Strategy:............................................................................................................ 9 Human Resources Strategy: .......................................................................................... 9 Questions ...................................................................................................................... 9 Inventory management: Questions ......................................................................... 10 Short-term scheduling: ............................................................................................. 11 Maintenance and Reliability: ...................................................................................... 11 Recommendations: ..................................................................................................... 12

Introduction Kentucky Fried Chicken (KFC) widely known as the world famous fast food restaurant that based in Louisville, Kentucky. KFC was founded by Colonel Harland Sanders in 1952. But KFC rudiment should backward to 1930. At that time, Colonel Sanders run a restaurant at his hometown Kentucky. He study hard on fried chicken technologies, finally invented the 11 spices and unique cooking technologies secret recipe successfully. The secret recipe was continued to use until now. Fried chicken is KFC most popular products. Traditional method of making fried chicken was very time consuming, it takes around 30 minutes. The problem has been solved while Colonel found a unique method of making fried chicken by using pressure cooker. The fried chicken which was fried under pressure is the most delicious chicken he tasted and the KFC still maintained using pressure cooker until now. In 1950s, the 66 years old Colonel started sells the formula and the method to the interested restaurants around. In 1952, the first authorized KFC restaurants established. Surprisingly, within five years, the chain stores have developed to 400 in the United States and Canada. Nowadays, the image of Colonel Sanders with a business suit, white-haired and goatee has become the best symbol of international KFC brand. KFC has been the world biggest Fried chicken fast-food chain enterprise which has own more than 15,000 restaurants, over more than 100 countries. In 1997 KFC was introduced in Pakistan when first branch was inaugurated in Gulshan e Iqbal Karachi then it became symbol of fast food in Pakistan extending its branches to 81 throughout the country and serving more than 2 million customers per month, KFC has been constantly introducing new products

and opening new restaurants for its customers. Presently KFC is branched out in eighteen major cities of Pakistan (Karachi, Lahore, Gujranwala, and Sukkur & Muree)

Supply chain management: How your supply chain is designed, how much percent raw material you make by yourself and how much you purchase, what are advantages of it? KFC purchase almost all of its raw material from outside vendors like their major raw material which is chicken is purchased from the local vendors like big bird and Menu and for beverages they have contract with Pepsi and their potential supplier in this category is Sukkur beverages company, They also buy cheese from the local suppliers . KFC focuses on its core strength which is their special and secret recipe of making fried chicken and the other stuff is purchased and outsourced.

When it comes to low cost, quick delivery and long term relationships the supplier preferences vary some firms go for many suppliers and others go for few, what is KFC’s preferences in this regard? Does KFC have few long lasting and trusted suppliers or it has many? When it comes to the number of suppliers KFC has very few and long lasting suppliers like their contract with Sukkur beverages and big bird is since years, KFC’s main objective is quick delivery that’s why they have contracts with local companies and suppliers which makes them efficient to meet the demands of customers on time. When it comes to cost if a damaged chicken is offered to KFC at 100 rupees KFC never prefers it because KFC is very keen about its customers and values customers at highest level so they prefers raw material with highest quality, According to manager KFC Sukkur t considers their customers as their mother so customer satisfaction is key for them. This philosophy makes KFC very choosy with selecting suppliers that’s why they have very few but long lasting suppliers, they might have gone for local poultry forms for chicken to save cost but this is against their motives. In this age of increasing specialization ,low communication cost and fast transportation companies are making less and buying more which makes them rely on supply chain and they are more exposed to risk so what risks is KFC facing from its supply chain and how they mitigate that risk? The major risk which KFC considers which impacts themselves as well as their suppliers is political instability especially when rates of electricity and oil are increased their supplier charges them higher which forces them to set higher prices and as a result their middle class customers which is their prominent customer is snatched from them and their sales are badly affected. Otherwise they have very good and efficient suppliers which live up to their expectations, during Eid days or others festivals the demand go high and they ran short of supplies , this happens rare and problem emerge from their forecasting process when they couldn’t forecast properly , to counter that issue KFC has some emergency suppliers which are based locally , in such situations those local suppliers respond quickly and their issue is resolved so their seems very much flexibility in supply chain .In all this process their motive remain to balance the good relationship with all the suppliers that’s why they provide proper rationale to them.

As KFC mostly deals with perishable goods and raw materials which cannot be kept for longer time so how it has designed its JIT system to avoid this problem and what kind of material does it stock through warehousing? According to Manager KFC Sukkur they can stock chicken for 7 days, Chees for a month, mashed potatoes for 7 to 10 days and Frozen chicken from company has an expiry of 6 moths ,Beverages for longer time only breads and fresh vegetables were such goods which were perishable so they use to order it on daily basis as per the demand of customers which they forecast through the sales demand of previous month , they have sheet based software system which helps them forecast demand .For remaining items KFC has got a proper warehouse where they store chicken in frozen form , mashed potatoes , cheese and also their packaging stuff. All the items are used with respect to need and demand of customers and they there is a proper check and balance system for inventory in and out of the warehouse, Quality assurance team looks into this matter.

Analysis: KFC has very efficient supply chain due to local contracts which live up to their expectations in meeting the demands of customers, the positive thing is that after being affiliated with this local supply chain KFC is able to manage quality of standards set nationally and internationally this is because they have chosen few but best options available of suppliers locally, In this regard they even doesn’t care about cost. The other thing is that KFC is very much successful in maintaining the relationship with suppliers, in emergency when they go to another supplier the relationship is not disturbed this is because the KFC prefers flexibility in its system. As there is no direct competition in the region except few local fast food chain and McDonald operating too far away in Pano Akil KFC enjoys full favor of suppliers and the bargaining power of supplier is very low ,this is the reason KFC doesn’t have much risk in its supply chain and efficiency is maintained since years, Another positive thing for suppliers is that KFC has a proper expansion plan their new branch is going to be operational in Rohri in august so KFC considers same suppliers for the contract which increase value of KFC in the eyes of suppliers. Finally KFC has a proper warehouse which plays key role in their smooth operations. My only concern is the size of warehouse which was very small because since their renovation and capacity increment the demand become high and in recent past KFC ran out of supplies and it especially happens during EID so here efficiency of their warehouse is questioned, KFC must increase its size and bring in proper equipment’s to reduce damage of raw material especially perishable goods.

Quality Management: How do you manage quality and which approach you go for to define quality weather it is user based, product based or manufacturing based? KFC covers all three things in their quality philosophy but their maximum focus is on the user based ,the satisfaction of their final customers matters a lot for them .Their feedback system is very strong and they conduct survey about taste , cleanliness, time of delivery , different deals if feedback is positive then their quality is supposed to be up to the mark if the feedback is negative then their quality is questioned , other than that they have proper check and balance at every processing stage which will be explained in detail in further questions , lastly KFC is a brand which try to offer best products and put efforts to bring so many varieties with respect to culture they are operating , In Pakistan their their food is 100 percent Hilal but in other countries different recipes are used to offer different variety , In their

foreign restaurants even beer is very common beverage which is offered with KFC deals, so KFC is very much product oriented.

Managing Quality demand many costs like prevention cost, Appraisal cost, External failure and internal failure, out of above which cost KFC bears the most? KFC has a well-designed audit system at every stage so they try to prevent damage at every stage, they have equipment’s like temperature meters and they have certain standards for temperature checking, they use these meters in maintaining the quality of food even for delivering a small order they pass food through such equipment’s to check weather food is hot enough to be eaten because customer don’t like cold burgers or fries ,KFC also bears cost in terms of internal failure , this happens due to the human errors most the time When order is for 2 burgers and the Chef has set 4 burgers in oven so those 2 wasted burgers if kept free for longer time won’t be used for other purposes as they expires after a certain period of time ,so they are thrown away weather being delivered to other customer after a particular time , This happens very rare but KFC bears cost of damage in this way. TQM requires a never ending process of continuous improvement which covers people, equipment, suppliers, materials and procedures so that every aspect can be improved for perfection, does KFC implement this philosophy in its system? Yes KFC run through TQM philosophy, they continuously go behind better options to ensure quality, for suppose if a machine is outdated and a new machine is available in the market which is comparatively efficient so KFC buys that machine, If a supplier is not living up to their standards or not not delivering quality raw material then KFC switches its supplier but that supplier need to meet all the requirements of KFC, In Sukkur region they have very trusted suppliers so this happens very rare or when they change them they give them proper reasons ,they do this to maintain relationships ,If they find a better chef or any other employee they for him/her. Their layout and renovation was the result of the continuous improvement, when they took feedback from people they found that their layout is outdated and that needs renovation ,this thing was discussed with CEO and he gave go ahead to that , since that transformation their sales is increased. Benchmarking is a very good approach to manage quality, When certain standards are set then the quality is achieved so what are benchmarks of KFC in terms of health, taste, cost and raw material to ensure the superior service to the customers? They have certain benchmarks in terms of health and safety which are regulated by Sindh food authority if KFC doesn’t follow that, they have risk of a ban, The recipe of their chicken is very unique and secret and they to match that taste of recipe anyhow which can be termed as standard taste for them, this is huge task to be achieved and for that they have special chefs who are well trained and expert to achieve that milestone. According to manager KFC is leading in Burger though there are many competitors like Burger king and McDonalds which are very close to them but for other restaurants and food chains in Burger category KFC is itself a benchmark to be achieved. Other than that if McDonald is delivering in 5 minutes then it is an also a landmark for KFC and if KFC is delivering in 45 minutes around Sukkur then if McDonald will also deliver in that time , so mechanism runs that way.

Inspection is another important tool to deal with quality issues it can be done at supplier’s stage, at warehousing stage when goods are stored ,during production process or after its completion or finally at customer stage ,weather KFC has check and balance at every stage or it covers few prominent stages? KFC have check and balance at each and every stage. KFC have quality assurance team which ensures quality at each and every step, first of the raw material KFC buy is inspected at suppliers stage, let’s take example of cheese as manager quoted it the quantity, expiry and condition of cheese is observed at supplier’s stage by quality assurance teams person then it come to warehouse where it is stored, At warehouse stage the quality and quantity is checked by team and then the final verification is given by manager itself, If we talk about processing stage so when chicken is marinated the chef is instructed if he finds any black dot then he should skip that piece ,this is the level of quality at KFC.when we asked about the issue happened in KFC Karachi where some small insects were found in the food ,he instantly responded that was a rumor ,that receipt belonged to Dubai restaurant and he said if we talk logically the temperature they set for their fryer is hot enough to burn skin instantly then it is impossible for insects to to escaped from such high temperature so this reason seemed very valid to us as we visited their kitchen.

Analysis: KFC has left no stone unturned to maintain the quality, they have set benchmarks to achieve the best , From taste to customer satisfaction to their health concerns KFC put in everything to achieve those milestones, They have proper check and balance system at every stage their raw material is inspected at external (supplier ) as well as internal ( warehouse) stage , there are proper equipment’s to avoid damage at warehouse even there is temperature checking system which just ensure the food is hot enough to be eaten , this is the level of quality they are maintaining. They have proper maintenance system when it comes to machines, Human resource, cleanliness or other fixed assets, renovation was result of their maintenance process which happened after they took feedback from customers. KFC follow TQM system which helps skip nothing while maintaining quality. Few concerns here that when KFC go behind best like the updated machine , the skilled labor , renovation with modern technology ,best raw material this increases cost this is the reason the sales of KFC is high but their revenue is very this is because of their high operational cost ,there was a time the KFC was on the verge of closure due to losses and reasons were same ,these are great hindrance for the expansion and growth of KFC so they need to reduce their cost and still they need to maintain quality so must bring in such strategy which helps them achieve quality standards at reduced cost otherwise it will be very difficult for KFC to sustain success. When competition will arise it will even be more difficult.

Process strategy: Questions: Q.1 How do you process the activities and meet the customer’s order? Ans. The interviewee said that they have speedy equipment and well-trained workers who do that work speed without compromising quality and efficiency of work. Q.2 What is the main focus during the process?

The interviewee said that they have the tool/ formula which contain cleaning, hospitality, maintenance, product quality, and speed of service so with the use of tool they ensure these five things. The interviewee said that these are the priorities which they have to attain in a an efficient manner. Q.3 What things you consider in the process of producing food and delivering it to the customers?

Q.4 To achieve the process smoothly what things/resources you consider the most important and why? Q.5 Is the process designed to achieve competitive advantage in terms of differentiation, response, or low cost? QSR chain the interviewee said that they have the same standard like mackdonald of quick delivery and 45 minutes home delivery, he said they produce hand made fresh food and Mackdonlad has freeze food which they give by just heating it. Q.6 Does the process eliminate steps that do not add value? Yes, interviewee aid they always keep trck on the things being processed if they found any discrepancies or hinderance in the value delivery they find it and then try to remove it like the employee who is hospital and misbehave with the customers they if they found out then they will fire that person. And to ensure quality product, they verify it more than one times each and everything like bread, chicken, sauces, and other inventory. Q.7 Does the process maximize customer value as perceived by the customer? The process of producing food through various quality assurance and automated cooking and packaging all these things satisfies the customers, but f we compare with Macdolad; KFC miss that aesthetic touch which that restaurant has like play area, outdoor seating and customer service personnel standing there all the times guide and make sure that you have good experience with Mackdonald. Q.8 Will the process win orders? Obviously if the service is good and if environment is favorable and aesthetic then customer will rush to these outlets and various deals which most of the times offered by KFC also attract customers more. Q.9 Do you use any planned process flow? The interviewee said they had planning prior to the start of the restaurant abut eah and everything about the oven’s place, fries place, and cold drink, and flow of inventory and all other things necessary and important for smooth flow of the service.

Q.10

Do you entertain the customers asking you to provide them the customized vege products? The interviewee said they have to ask f any customer ask for vege products and they have to drop mail to the head office and if they allow they can provide custom made Vegeburgers.

Q.11 What sort of technological instruments you use during the process to achieve speed and quality? The interviewee said they have two types of oven cooking oven and heating and temperature maintaining oven and they have automated pipes which are fit for cold drinks and ice cubes too which are also easy at hand and from cooking ton the heating temperature maintaining oven they have line or flow of production to the final place of delivery. At delivery point they have very hospital people who greet very warmly and entertain customers’ orders. Q.12

What is the control system of the process? They internal as well as external audits.

Locations Strategy: Questions Q.1 How and why Military Road location was chosen for KFC? The interviewee said at the start of initiation he was not available there so he did not know much about that but he said he heard from others the location for KFC at military was chosen because it was near the public school and KFC targets students and schools so the message conveys easily and more fatly. Q.2 What factors were considered during the selection process of the location? The interviewee said that many factors were consider for this location like the availability of urban population, flow of traffic, schools available nearby, and less competitors availability. Q.3 Did you ever faced the external factors which could have affected your process? The interviewee said they face external factors but they have forecasting system which help them find the potential factors which could affect them and then try to mitigate or face these factors like the protest and shutter down, sudden sales increase due government test, and political factors, and the unavailability of inventory o shortage of inventory. So that case manager contact head office take steps accordingly. Q.4 Do you have any other option for KFC in terms of locations? The interviewee said they have expansion plan in the rohri at Bypass

Q.5 How do you cater the orders of the customers from Rohri, and surrounding areas? What boundary you have set for service? The interviewee said they have boundary of 3 Km diameter in which they can entertain home delivery orders if the Rohri comes in this boundary then they will serve them if not then they won’t serve them.

Layout Strategy: Q.1 Is there any layout strategy of the KFC? The interviewee said before construction of the building architect engineer was hired who was asked design each and everything precisely through kitchen to bathrooms and each and everything was designed prior to the start of the outlet. And was renovation too the interior designer and engineers were hired to design best and ambient environment. Q.2 Layout for ambient atmosphere? The interior designers too were hired to design the interior of outlet Q.3 Layout for warehouses? The interviewee said they had also designed and made layout for mini warehouse that which thing to be placed where so that no issue be created and inventory theft and perishability issues were took in to the consideration. Q.4 Any structure designed prior to the operations about the processes? Everything was designed prior to the operations. Q.5 What special you do to create an ambient, sophisticated layout that support KFC to achieve the competitive advantage? Managers said that they slogan of “ give Ma ka Pyar” to every customer so they follow in this strategy and they maintain the sophisticated environment “ He said ARY team came to their outlet and the they were astonished to see well cleaned and maintained outlet.

Human Resources Strategy: Questions Q.1 How Human resources are handled whether they are working in teams or under one supervisors or managers? The interviewee said that they ahd friendly environment employees under supervisor work but feel free to ask anything anytime and they are given the authority to check the things like inventory to ensure that whether that is usable or not.

Q.2 What work schedule is used in the KFC like shifts, a day, or a tasks related? He said they have shifts and task work schedule shifte of day and night and task to home delivery person. Q.3 What sort of work force is required at KFC outlet? And What compensations they are offered? The manager said they seek for the employees who are needy and encouraged by themselves and want to work dedicatedly and they give them good compensation for that. And the workforce vary with respect of the sales. Q.4 The decision about hiring firing are taken by you or the other personnel? He said the decision for firing at his outlet is taken by him but hiring is taken by their HR team. Q.5 What sort of things as a manager you expect to have in a employee that suits and add on in the service of KFC? Dedication and communication skills Q.6 Employee working here is given an specific task or different sorts of activities to perform in the specific given time period? They work like a team the employee know every task if one employee is absent due sto any reason then otherv can replace him and can work. Q.7 How these employees are treated in KFC? The maanger said he treat his lower labor force like a friend and brothers.

Inventory management: Questions Q.1 What sort of the things are inventory at KFC? Bread, chicken, sauses, Milean, cold drink, and packaging. Q.2 How do you manage the inventory? The manager said they have sheets and take average of the weeks sales and order accordingly and to make sure they have more than that average to meet the increase in demand. Q.3 Did you ever face the time when customers order somethings and you did not provide due to unavailability of inventory? The manager said he has never faced this situation, he shared one incident that once the demand for burgers increased so he asked for bread from Dawn and they said they have ordered bread of the other customers so manager said they paid double price to get breads at that upon a time and they bore the losses.

Q.4 Who is responsible for inventory management in KFC? He said he and his employees everyone has information of the inventory and they all keep track of that. Q.5 How do you forecast demand and order the inventory accordingly? Take averages of the weekly sales and the sheets available which assist them in ordering the right mix of inventory. Q.6 What system you use to store, audit, and count the quantity through? He said they have mini warehouse and the inventory before stored in the warehouse is count and sheet is made and inventory used is deducted from that and when inventory reaches the lowest inventory level he order that and they use FIFO method for inventory. Q.7 How do you respond to increment in the prices of inventory? Is this your head office decisions or it taken by the individual outlets? He said the decisions related to increment in the prices of the products are taken by the head office and higher level mangers Q.8 What technology you use to maintain the inventory? Cold warehouse,

Short-term scheduling: Q.1 Do you have any sales quotas which you have to achieve and for that you schedule the tasks? According to manager nothing runs without setting targets, targets are very important to run a system successfully, it gives you a clear path to follow, so KFC have daily, weekly, monthly and yearly sales quotas so they always make their strategies to achieve those targets, weekly sales quotas helps them to forecast sales of next week, monthly for next month and yearly for next year, but the growth factor is always considered and quotas are set with respect to that. In the days of high demand like EID, quotas are always set high to meet the demand. When we asked about their sales target of last month they resisted to disclose that information.

Maintenance and Reliability: Q.1 How maintenance is done what sort of measures you use for maintenance? Maintenance is mandatory task to keep the things up to date and in usable form and it also helps in maintaining efficiency because it is very difficult to achieve efficiency with obsolete machinery and old fashioned layout or, broken chairs and sofas. There is a proper time set for renovation at KFC, if a machine go obsolete or it doesn’t work then it is replaced, renovation of building, furniture and electric setup takes place at KFC after a particular time, This is done keeping in mind the latest trends especially

in technology. Other than cleanliness is slogan of KFC, according to manager there was a random visit of ARY team to KFC when they reached their they found it clean like mirror they suddenly asked that you knew about our arrival but manager said our staff is well trained and this our routine work, this is the way we maintain our restaurant, whenever you come you will find it this way because cleanliness is our slogan. Conclusively KFC is very professional with respect to maintenance of everything.

Recommendations: • KFC should try to reduce operational cost and try to maximize its revenue • KFC should go beyond local suppliers to bring in more variety which can help KFC to • • • • • • •

increase more products KFC should improve its forecasting system to match the demands of customers KFC should train its works to reduce human error which was cause of losses KFC should further increase its capacity and should personalize the sitting area KFC should take measures to reduce accidental losses as Pizza town catch up fire last year so that should be an eye opener for KFC KFC should reduce its cost on maintaining and ensuring quality. KFC should increase the size of its warehouse to store more raw material In comparison to Mackdonald, KFC has boring and lack of entertaining environment, so they should try to make it more fun like and enjoyment like environment because as they are targeting students preferably so they should provide them what they expect from these restaurants.

Conclusion: From the interview of KFC manager, we can say that KFC outlets are more cooperative and the personnel/managers run these outlets proudly say they are part of these outlets and they have created a friendly environment in these outlets. And process-wise they all the times try to find ways through which they could entertain customers in a better way and for that they make changes if needed. To provide quality food and ensure halal factor in their food, they assure quality many times from inventory to the final product. And to provide quality products they purchase their inventory from best suppliers. Manager said that they treat their in bests possible way and give them “Ma ka Pyar” which is their slogan. So, experience of conducting interview from KFC manager was great. And there are some recommendations above given which KFC need to work on.

References: https://www.tripadvisor.com/Restaurant_Review-g317120-d6197213Reviews-KfcSukkur_Sindh_Province.html Interview Recording Personal experience with the KFC Sukkur outlet