Inventory model of kentucky fried chicken ‘s strengths and weakness

MINISTRY OF EDUCATION AND TRAININGHO CHI MINH CITY UNIVERSITY OF TECHNOLOGY AND EDUCATIONHIGH QUALITY FACULTYTEAM REPORT: WinWinINVENTORY MODEL OF KENTUCKY FRIED CHICKEN ‘sSTRENGTHS AND

MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY AND EDUCATION

HIGH QUALITY FACULTY

TEAM REPORT: WinWin INVENTORY MODEL OF

KENTUCKY FRIED CHICKEN ‘s STRENGTHS AND WEAKNESS

Subject: INVENTORY MANAGEMENT Lecturer: Tc.Nguyễn Hoàng Long

SEMESTER I 2022-2023

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Reference Link 1

CHAPTER 1 INTRODUCTION TO KENTUCKY FRIED CHICKEN: 2

1.1 About the History of KFC 3

1.2 KFC’S Viet Nam 3

1.3 STP’s analysis 3

CHAPTER 2 WAREHOUSE AND SUPPLY CHAIN OF KFC: 5

2.1 KFC’s Warehouse 5

2.2 Logistics model of KFC 5

2.3 Suppliers of KFC Viet Nam 6

2.4 KFC supply chain in general 10

CHAPTER 3 ASSESSMENT OF THE INVENTORY MODELS: .12

3.1 Apply JIT and FIFO inventory models to KFC 12

3.2 Strengths and Weaknesses of the JIT models 14

3.2.1 Strengths of JIT 14

3.2.2 Weaknesses of JIT 15

3.3 Strengths anđ Weaknesses of the FIFO models 15

3.3.1 Strengths of FIFO 15

3.3.2 Weaknesses of FIFO 16

CONCLUSION 17

REFERENCE LINK

fefo/

https://blog.boxme.asia/vi/fifo-va-fefo-la-gi-uu-nhuoc-diem-cua-fifo-management-inventory-management

https://www.studypool.com/documents/11880722/kfc-operational-management/

https://paperap.com/paper-on-essay-kfc-inventory-and-process-https://new.kfcvietnam.com.vn/kfc-tabs/our-story

management/

https://paperap.com/paper-on-essay-kfc-inventory-and-process-CHAPTER 1: INTRODUCTION TO KENTUCKY FRIED CHICKEN

1.1 About the History of KFC

- 1952: The first “Kentucky fried chicken” franchise opened in Utah

- 1960: 400 franchise units in the U.S and Canada

- 1964: Kentucky fried chicken has more than 600 franchised outlets inthe United States, Canada and the first overseas outlets in England.Market Value was $2 million

- 1971: More than 3500 franchised and company-owned restaurants are

in worldwide operation when Heublein Inc acquires KFC Operation.Market value was $275 million

- 1979: Approximately 6000 KFC restaurants doing their operationsworldwide

- 1982: KFC becomes a subsidiary of R.J Reynolds Industries Inc

- 1986: Pepsico, Inc acquires KFC from R.J Reynolds Industries, Inc.Market value was $840 million

- 1997: PepsiCo, Inc announces the spin-off of its quick servicerestaurants – KFC, Taco Bell and Pizza Hut into Tricon GlobalRestaurants Inc

- 2002: Tricon Global Restaurants Inc changes Business Operation ofKFC 2006: Served more than 1 billion people in 80 territories aroundthe world

- 2015: There are over 20000 KFC outlets in 123 territories around theworld Every day, nearly 8 million customers are served around theworld The market value is $9.7 billion

1.2 KFC’s VietNam

In 1997, the first restaurant of KFC was opened in Ho Chi Minh City,Vietnam Until now, this fast-food restaurant chain has extended itspresence to over 140 restaurants in 21 cities and provinces of Vietnam, itprovides work for more than 3,000 people Besides, it makesconsiderable contributions to Vietnam’s fast-food industry as well as tothe formation of a new consumption habit and culinary culture in theareas where KFC is present The unique taste, hospitality, and theambiance of the restaurants remain key factors to the success of KFC inVietnam as well as all over the world Furthermore, KFC is highlyappreciated as a good corporate citizen through a great number ofsignificant social activities in Viet nam

- KFC is convenient, delicious, reasonable price, good service.

Political Factors

The government considers the origin of the KFC's supplier that thesupplier can respond to the standard and quality suitable for Vietnameseconsumption

Freshness and nutritional value will be retained for the food products byusing the cold storage systems, hence, it's formed an important part ofthe supply chain system KFC implements different storage for differentproducts consisting of dry storage and cold storage Dry storage use fornon-vegetable items such as cleaning products, disposable plates,spoons, towels, recipes, etc The products are stored at room temperature.Cold storage contains vegetable products, cold drinks, water stored, andchicken at temperature (-1oC to -4oC).

2.2 Logistics model of KFC

KFC supply process is: The restaurant will be reported to branchdistribution center order demand, the latter after an order to the supplier,the supplier delivery to the distribution center, distribution center underthe line delivery This mode of operation of the logistics supply thought

Be reported to branch distribution center order demand

to follow DRP Distribution resource planning (DRP) is a method used inbusiness administration for planning orders within a supply chain DRPenables the user to set certain inventory control parameters (like a safetystock) and calculate the time-phased inventory requirements Thisprocess is also commonly referred to as distribution requirementsplanning.

2.3 Suppliers of KFC Viet Nam

KFC building their own standards applied to the inputs they requireproviders to meet the stringent standards of the working environment,the impact on the environment, business ethics and most recently onhuman rights KFC's evaluation system consists of five areas that arequality, technical, financial, reliability, and communication Every three

to six months, KFC's supplier was assessment and evaluation; in thisevaluation process, the technical department and the purchasingdepartment were assessed at the end of the composite score and they willdetermine the volume of the supplier in their business in the next period

Chicken

KFC selecting CP; K&U; and Long Binh as the suppliers of chicken,chicken from CP; K&U; and Long Binh must ensure that the gaf hasbeen cut into pieces and packaged, on packages must be labeled asrequired, and shipped directly to KFC's warehouses in each area Thedelivery time that K&N's has agreed with KFC is one week for delivery.When transporting chickens, ensure that the chickens are stored inspecial freezers equipped to keep the chickens frozen during transport toprevent damage during transportation The different types of piecesordered by the warehouse will not be stocked with large, whole chickensbut will be placed in baskets measuring 5 square feet and measuring 8inches in height The means of transport used are small trucks with amaximum load of 5 tons

in any other market The sauces will be transported by Unilever to theKFC warehouse Unilever's delivery time is about 2 weeks Inventory forSauces are stored for around 25 to 30 days depending on the forecastedsales and the expiry dates for each.

Spices and herbs

These are two materials that must be imported from other countries,namely Dubai and Singapore Spices and herbs will be shipped by sea tothe KFC warehouse, they are shipped in 20” containers and thiscontainer is shipped exclusively for KFC Since these are not perishable

items and they also take a long time to move, the agreed delivery time is

no more than 2 months from the date of order Inventory for these arestored according to forecasted sales and the three months lead time given

by the procurement department

Packaging materials

Suppliers of packaging materials are somewhat more diverse and morenumerous KFC's choices for this product are Afeef Packaging, AAA andGold Packages These packaging materials are always kept to aminimum of inventory, i.e kept to a minimum as KFC regularlyredesigns its containers and transactions, so the types packagingmaterials are always changed to new, old packaging cannot be used oncethe new design has been changed

Bread and Buns

In previous years, KFC had to find suppliers and buy bread from outside.However, realizing the ability and using available resources, KFC withinthe past 4 or 5 years has produced their own bread in their own factory.The factory is located in Sohrab goth, Karachi Buns are provideddirectly to the branches at KFC from the factory after every 4 days.There is a weekly audit of every single inventory item at the warehouse

to match it with the numbers in the system as deviations are high due

to high replenishment cycles

Fish

The source of fish is purchased flexibly and not fixed from one supplier

In major international markets, fish will be purchased from Thailand Butthere are also a few places where fish is purchased locally, such as

transportation costs Fish is also an easy commodity to buy and is sold at

a low price

French fries

French fries are imported directly from the US For french fries, themarket in Pakistan is also imported from the US, through China toPakistan However, in recent years, with the scarcity of potato sources,KFC also imported french fries from other countries such as Belgium,the Netherlands,

Other items

All of the potatoes at KFC are imported from the large farms in Europeand the US; before being imported into Vietnam potatoes will be checkedcarefully for quality and packed wary to keep it fresh then transportedinto Vietnam

Vegetables using in the KFC store are including tomatoes, cabbage,

salad, and cucumber In Vietnam, KFC has a farmfresh vegetable in DaLat, it's applied high-tech processes and standards of VietGaph toprovide high-quality vegetables for their branches

The oil used to fry the chickens and potatoes of KFC is supplied by

Neptune, which is carefully examined for the origin, safety, andinfluence of frying, KFC commits that they don't use dirty oil or unknoworigin oil

Other materials of KFC were imported from abroad to Vietnam.

Especially, about the packaging, KFC introduces the first fast-foodreusable food container to protect the environment in 2010

VIETNAMESE SUPPLIER

CP, KOYU &UNITEK Long Binh

POTATOES

IMPORTED FROM EUROPE AND THE US

EUROPE; US

VEGETABLES

KFC’S FRESH VEGETABLE IN DA LAT

DA LAT, VIET NAM

OIL

VIETNAM SUPPLIER

NEPTUNE

OTHER MISCELLANEOUS ITEMS

RICE, SAUCES, SPICES, HERBS, BREAD

AND BUNS

IMPORT

2.4 KFC supply chain in general

With chain catering business, especially fast food, managing the supplychain always has a decisive role, because this is a business with theshortest product's life-cycle of all retail types Just a small problem in thesupply chain, the store will easily fall into the trouble of there material.For instance, the surplus of raw materials leads to expiring or spoilingupon still in the warehouse Besides, the differences and diversity oflocation, developing strategy, itself menu between each branch are theproblems that the supply chain need to considerate and solve KFC has asimple supply chain because it's supply chain operations are on arelatively small scale, the reason is most of the activities are performed

by the company itself The KFC's supply chain process can be summed

up as a 3 steps process as below:

Step 1: Raw materials were procured from various suppliers and stored

at two warehouses that are the normal-storage and the coldstorage

Step 2: All product preparation is done at the branch (except for the

chicken) and sold to customers at the branch itself or delivered at thedesired locations

Step 3: Transport materials to each branch upon the request of the

branch manager (usually three times a week) by using vehicles anddrivers of the company

Chicken from CP

& Long Binh

Preparation and packaging

Warehouse cold storage Vegetables from

open market

Distribution to all branches

Sauces from

Unilever

Warehouse dry storage Other

materials

KFC’s supply chain process

CHAPTER 3: ASSESSMENT ON THE INVENTORY MODELS 3.1 Apply Just In Time (JIT) and First-In First-Out (FIFO)Just In Time (JIT)

In controlling inventory and most importantly quality of the chicken,Kentucky Fried Chicken uses a variation of Just In Time (JIT) system, byreceiving chicken two to three times a week KFC starts to operate when

a delivery truck arrives at the back door The truck usually containschicken, vegetables, and other needed materials to successfully operate aKFC restaurant There are many steps involved in the successfulunloading of a delivery truck Frozen foods are taken off the truck firstand immediately transferred to the freezer This includes vegetables,deserts, and other food products Next to be unloaded is the refrigeratedgoods This is the part of the process where the world-famous chicken isunloaded Finally, the dry good and condiments are unloaded and stored

in their appropriate Place The chicken is received with a kill date Thekill date represents the date the chicken was actually butchered This kill

taking the chicken off the truck it is placed on the “chicken-side” of theisle next to the refrigerator to prevent warming until it can be placedinside Once the truck is unloaded, the refrigeration unit insides thetruck must be inspected for satisfactory working order For inventoryaccuracy all pieces aboard the truck are counted and checked against thebill of lading Any shortages or surpluses are noted and called in tofranchise headquarters The cases in which the chicken arrives in must

be damage free This includes the box being sealed as well as beingstructurally stable Any damages must be noted and relayed to theshipping agency The kill dates must be checked on each individualchicken No chicken will be accepted if it is received six days past thekill date Printed with the kill date on each chicken is a label stating

“Inspected for Wholesomeness by the U.S Department of Agriculture”which must be attached or the chicken must be rejected Acceptancesampling is done to ensure quality of the chicken during each shipment

At random at least five cases are selected, based on quantity of order.The middle bag of chicken is always used in each case for samplingpurposes To check for quality, a thermometer is used to check thetemperature of the chicken by inserting it into the thickest part along thebone Acceptable temperature is between twenty-eight and thirty-sixdegrees Fahrenheit If one chicken fails to meet the quality inspectionthen the entire lot must be rejected Upon rejecting a lot of the marketmanager and or the franchise supervisor must be notified immediately.This is necessary to arrange for an immediate shipment to be scheduled.This is important due to the inventory control system in place to ensurequality to every customer Once the sample testing is complete thechicken can be placed in the refrigerator

First-In First-Out (FIFO)