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: WinWinINVENTORY MODEL OF

KENTUCKY FRIED CHICKEN ‘sSTRENGTHS AND WEAKNESS

Subject: INVENTORY MANAGEMENT Lecturer: Tc.Nguyễn Hoàng Long

SEMESTER I 2022-2023

NumberFull NameCode

Reference Link 1

CHAPTER 1 INTRODUCTION TO KENTUCKY FRIED CHICKEN: 2

1.1 About the History of KFC 3

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

CHAPTER 1: INTRODUCTION TO KENTUCKY FRIED CHICKEN

1.1About 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 in the 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 operations worldwide

- 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 service restaurants – KFC, Taco Bell and Pizza Hut into Tricon Global Restaurants Inc

- 2002: Tricon Global Restaurants Inc changes Business Operation of KFC 2006: Served more than 1 billion people in 80 territories around the world

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

1.2KFC’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 its presence to over 140 restaurants in 21 cities and provinces of Vietnam, it provides work for more than 3,000 people Besides, it makes considerable contributions to Vietnam’s fast-food industry as well as to the formation of a new consumption habit and culinary culture in the areas where KFC is present The unique taste, hospitality, and the ambiance of the restaurants remain key factors to the success of KFC in Vietnam as well as all over the world Furthermore, KFC is highly appreciated as a good corporate citizen through a great number of significant 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 the supplier can respond to the standard and quality suitable for Vietnamese consumption.

- The city is densely populated such as Ho Chi Minh City, Ha Noi and developing branches system in supermarket.

Placement Outlets

- KFC is putting itself near to schools, universities, firms, entertainment center and markets in order to retain their youth customers.

KFC utilizes the “Push Strategy ‘’ to help them create awareness, be diverse, and sound appealing In Vietnam’s market, youngsters accounted for more than half of the population is an opportunity for KFC to develop their market segmentation.

With the veteran which KFC launched in Vietnam for 12 years that we can believe that KFC creates trust, prestige, and quality with their brand in Vietnamese people’s minds The hygiene and food safety are some of the most centers of gravity which makes KFC’s reputation.

2.1 KFC’s Warehouse

Freshness and nutritional value will be retained for the food products by using the cold storage systems, hence, it's formed an important part of the supply chain system KFC implements different storage for different products consisting of dry storage and cold storage Dry storage use for non-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, and chicken at temperature (-1oC to -4oC).

2.2Logistics model of KFC

KFC supply process is: The restaurant will be reported to 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 Be reported to branch distribution center order demand

to follow DRP 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.

2.3Suppliers of KFC Viet Nam

KFC building their own standards applied to the inputs they require providers to meet the stringent standards of the working environment, the impact on the environment, business ethics and most recently on human rights KFC's evaluation system consists of five areas that are quality, technical, financial, reliability, and communication Every three to six months, KFC's supplier was assessment and evaluation; in this evaluation process, the technical department and the purchasing department were assessed at the end of the composite score and they will determine the volume of the supplier in their business in the next period

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 has been cut into pieces and packaged, on packages must be labeled as required, and shipped directly to KFC's warehouses in each area The delivery time that K&N's has agreed with KFC is one week for delivery When transporting chickens, ensure that the chickens are stored in special freezers equipped to keep the chickens frozen during transport to prevent damage during transportation The different types of pieces ordered by the warehouse will not be stocked with large, whole chickens but will be placed in baskets measuring 5 square feet and measuring 8 inches in height The means of transport used are small trucks with a maximum load of 5 tons.

Sauce is an ingredient that is carefully selected by the supplier to be suitable and safe for users KFC's sauce supplier is Unilever (Yum) - one of the suppliers of sauces such as chili sauce, ketchup, Mayonnaise and Tartar sauce, In particular, Unilever produces a wide variety of sauces and sauces but Yum is a special brand for KFC and absolutely not sold in any other market The sauces will be transported by Unilever to the KFC warehouse Unilever's delivery time is about 2 weeks Inventory for Sauces are stored for around 25 to 30 days depending on the forecasted sales 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 to the KFC warehouse, they are shipped in 20” containers and this container 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 are stored 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 more numerous KFC's choices for this product are Afeef Packaging, AAA and Gold Packages These packaging materials are always kept to a minimum of inventory, i.e kept to a minimum as KFC regularly redesigns its containers and transactions, so the types packaging materials are always changed to new, old packaging cannot be used once the 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 within the past 4 or 5 years has produced their own bread in their own factory The factory is located in Sohrab goth, Karachi Buns are provided directly 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.

The source of fish is purchased flexibly and not fixed from one supplier In major international markets, fish will be purchased from Thailand But there 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, the market in Pakistan is also imported from the US, through China to Pakistan 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 Europe and the US; before being imported into Vietnam potatoes will be checked carefully for quality and packed wary to keep it fresh then transported into Vietnam

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

salad, and cucumber In Vietnam, KFC has a farmfresh vegetable in Da Lat, it's applied high-tech processes and standards of VietGaph to provide 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, and influence of frying, KFC commits that they don't use dirty oil or unknow origin oil

Other materials of KFC were imported from abroad to Vietnam.

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

KFC’S FRESH VEGETABLE IN DA LAT

DA LAT, VIET NAM

VIETNAM SUPPLIER

OTHER MISCELLANEOUS ITEMS

RICE, SAUCES, SPICES, HERBS, BREAD AND BUNS

2.4KFC supply chain in general

With chain catering business, especially fast food, managing the supply chain always has a decisive role, because this is a business with the shortest product's life-cycle of all retail types Just a small problem in the supply chain, the store will easily fall into the trouble of there material For instance, the surplus of raw materials leads to expiring or spoiling upon still in the warehouse Besides, the differences and diversity of location, developing strategy, itself menu between each branch are the problems that the supply chain need to considerate and solve KFC has a simple supply chain because it's supply chain operations are on a relatively 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 the desired locations

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

branch manager (usually three times a week) by using vehicles and drivers of the company.

KFC’s supply chain process

CHAPTER 3: ASSESSMENT ON THE INVENTORY MODELS3.1Apply 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, by receiving chicken two to three times a week KFC starts to operate when a delivery truck arrives at the back door The truck usually contains chicken, vegetables, and other needed materials to successfully operate a KFC restaurant There are many steps involved in the successful unloading of a delivery truck Frozen foods are taken off the truck first and immediately transferred to the freezer This includes vegetables, deserts, and other food products Next to be unloaded is the refrigerated goods This is the part of the process where the world-famous chicken is unloaded Finally, the dry good and condiments are unloaded and stored in their appropriate Place The chicken is received with a kill date The kill 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 the isle next to the refrigerator to prevent warming until it can be placed inside Once the truck is unloaded, the refrigeration unit insides the truck must be inspected for satisfactory working order For inventory accuracy all pieces aboard the truck are counted and checked against the bill of lading Any shortages or surpluses are noted and called in to franchise headquarters The cases in which the chicken arrives in must be damage free This includes the box being sealed as well as being structurally stable Any damages must be noted and relayed to the shipping agency The kill dates must be checked on each individual chicken No chicken will be accepted if it is received six days past the kill 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 Acceptance sampling 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 sampling purposes To check for quality, a thermometer is used to check the temperature of the chicken by inserting it into the thickest part along the bone Acceptable temperature is between twenty-eight and thirty-sixdegrees Fahrenheit If one chicken fails to meet the quality inspection then the entire lot must be rejected Upon rejecting a lot of the market manager 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 ensure quality to every customer Once the sample testing is complete the chicken can be placed in the refrigerator

First-In First-Out (FIFO)