Purchase Management

This document analyzes the effectiveness of purchase management practices, supplier selection criteria, ICT for purchasing operations, and purchase cost analysis in KFC Singapore.

Running head: PURCHASE MANAGEMENT
Purchase Management
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Table of Contents
Introduction................................................................................................................................2
Supplier selection criteria and Issues.........................................................................................2
ICT for purchasing Operations...................................................................................................4
Purchase Cost Analysis..............................................................................................................5
Conclusion..................................................................................................................................7
REFERENCES...........................................................................................................................8

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1.0 Introduction
Kentucky Fried Chicken, better known as KFC is a name in the fast food industry that needs
no second introduction. The company is easily recognized by the well-known face of Colonel
Harland Sanders, the founder of the fast food giant. KFC started operating in Singapore in
1977 after the first KFC restaurant stared operating in Somerset Road (Randhir et al., 2016).
Currently the company has more than 80 franchises across the country and has successfully
cemented its place in the Singapore fast food market as one of the biggest companies in the
industry. Furthermore, KFC Singapore was recognized as the first KFC branch in Asia to
serve the popular KFC Zinger burger (Shen & Xiao, 2014). The company has been subject to
the similar fate as the rest of the KFC branches all across the world. The company has been
able to provide the consumers of the market with the best quality fried chicken that is made
up of an assortment of the secretive five herbs and spices. The fast food industry in Singapore
is highly competitive and the company has numerous competitors. Some of the biggest
competitors of the company in Singapore are Jollibee, Carl’s Jr., McDonald’s, Burger King,
Subway and others. The products that are offered by the company include their famous fried
chicken, burgers, French fries, Grilled Chicken, Saucy Chicken wings, smoothies and soft
drinks. The suppliers of the company include the frames that supply halal chicken throughout
the franchises of the company, and the suppliers of the material that are required for the day
to day operations of the company. The aim of the paper is to analyses the effectiveness of the
purchase management practices that are carried out by the company along with the critical
analysis of the suppliers of the company, the purchase related operations and the purchase
cost tools analysis.

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2.0 Supplier selection and evaluation
It is the role of the purchase management to deal with the inventories (Hugos, 2018). It is the
role of the purchase division of the country to carry check the requirement of the organisation
in terms of needs and requirement for the materials that are required by the company to carry
out operations on a regular basis. Hence, it the role of the purchase divisions of companies to
carry out purchase related activities that are required for the flow of operations of the
company. Same is followed by the KFC for the effective management of the inventory in
relation with the supply for the goods that are needed for the smooth operations of the
company and in order to ensure that the company does not run out of supply. It is also the job
of the purchase department of the company to ensure that the company does not run out of
supply of the raw material as they belong to the fast food industry that has high demand
throughout the world and Singapore as a whole (Humphries, 2013). Thus it is the goal of the
company to ensure that they have suppliers who have the capability to cater to the needs of
the company in terms of supply.
2.1 Single v multiple sourcing
Single sourcing refers to the practices of sourcing with the help of only one supplier. On the
ither hand sourcing form multiple suppliers allows the organisation to depend on more than
one supplier for the products or produce that they are subject to. Singe sourcing is risky and
the comoanies might run into the problems as a result of shortage of raw material s that are
needed for the purpose of production of the ultimate products from the part of the company.
Multiple sourcing allows the company and opportunity to operate more flexibly. A company
that is multiple sourcing need not depend on a single suppliers. The chances of running out of
supply is minimised. However, this leads to intensification of pricing competition which
allows companies to effectively get their products at the lowest possible prices. Multiple
sourcing is the sourcing strategy that is being applied by the KFC.

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2.2 Peter Krajlic Risk Value Model
Figure: Krajlic Model of Risk and Value
Strategic Positioning, Action planning, Purchase classifications and market analysis are some
of the main steps that are included in the Risk Value Model. It is an assimilation of the
leverage, non-critical, the bottlenecks and the strategic items and the evaluation of the risk
associated with the same and the impact of profit.
2.3 Supplier Evaluation
The company has been able to identify the supplier in the form of organic chicken
farms who fulfill the supply of the high demands of chicken. Furthermore, it has to be ensure
by the company that the suppliers that they select for the supply needs of the company have
the best capability in terms of supplying the best quality chicken. Hence, selection of the
suppliers who can provide the best quality materials that are required for the daily operations
of the company is vital. Following is the criteria that should be considered while selecting the

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suppliers. It starts with identification of the potential suppliers. It is stage when the companies
carry out screening of the potential suppliers. The suppliers who are offering the products that
are necessary for the operations of the company are shortlisted and identified. After the
process the effectiveness of the performance of the suppliers is adjudged. The potential of
production that the supplier has, the quality of goods that are supplied by the supplier and the
previous performances of the suppliers are adjudged in the stage and the performance of the
supplier as a whole is evaluated by the company. In this stage, the company separates the
potential suppliers from the bulk of suppliers that are available for their disposal. After the
supplier has been selected the supplier of suppliers who have been selected are subject to
research from the part of the company. This is known as the supplier feedback sessions and is
characterized by the supplier filling questionnaires regarding their performance and efficacy
(Jääskeläinen & Thitz, 2018). Once this stage has been completed, it comes down to
certification of the supplier. The cost evaliuation metjhod that is used by the company is
known as the cost ratio method. It is the stage when the supplier is ranked according to their
efficacy and viability for the operations of the company. Partnership is established after the
stage and the suppliers get recognized as the partners of the company. Regular quality checks
are carried out from that point.
3.0 Costing
The costs that are associated with the operations of KFC are the cost of raw materials. The
need of material involving the chicken that is required for the operations of the company and
the needs for materials. Apart from the needs of the material that are required for the
company are not limited to the organic produce that is needed by the company. KFC
Singapore has been catering to the needs of the company in terms of requirement of the
materials the will be applicable for the company. The company has identified that are
associated with the operations of the company. This has been recognized as a sustainable

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initiative from the part of the company that is aligned to reduction of accumulation of plastic
(Vegter et al., 2014). Hence, the company have been able to make a business policy that is
characterized by minimization of costs. There are numerous other requirements in the form of
the packaging materials, basic peripheral and supplies such as ketchup, cheese, mayonnaise
and various other materials. Thus, the company has to carry out the operations of the
company in terms in terms of the needs of the company and the requirement of the material
that the company needs to cater to in order to identify the requirements of the company. It is
one of the primary motives of purchase management to cater to the needs of the company
while ensuring that the costs that are incurred by the company are minimized. Total cost
ownership is technique that helps in identification of direct and indirect costs and also helps
in identifying the return on investment. Thus, it is used by the company. The cost can be
minimized the company by ensuring that the supply for the materials that are needed by the
company are catered to in an effective way. The cost associated with the maintenance of the
facility that will be responsible for the maintenance of the facilities that are available for the
operations of the company. By monitoring the actual needs of the organization, the latter will
be able to minimize the costs that the company will be subject to. The costs that are incurred
by the company can be analyzing the costs that are associated with the operations of the
company. There are differ types of cost analysis tools that can be used by the company in
terms of calculating the purchase costs that are associated with the maintenance of inventory
and other daily operations of the company. The cost management tools that can be used by
the company in terms of managing and monitoring the cost of the company are; the
investment cost analysis, cost allocation analysis, Cost-benefit analysis and the cost-
effectiveness analysis (Espinosa et al., 2013). By incorporating the above mentioned cost
analysis tools the company will be able to identify the potential cost that will turn out to

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become wastage, the costs that the company must reduce and the cost that the company
should incur in order to gain productivity while operating in the highly competitive industry.
4.0 Purchasing IT
As mentioned above, KFC has around 80 outlets in Singapore (Kfc.com.sg, 2019).
Furthermore, it is positioned in the market as one of the top fast food chains operating in the
market. Thus, the requirements of the company are huge. Most of the branches of the fast
food chain are in busy localities of Singapore. Hence, the customer inflow of the company
can be considered huge. Furthermore, the main raw material needed for the operations of the
company are organic produce and chicken. Thus, it is deemed to be risky for the company to
store the materials in bulk as the materials are highly perishable and can be rotten easily. If
the chicken or the other material are frozen they will lose their fresh quotient that will reduce
the quality that is associated with the final products of the company. Hence, the purchase
related operations of the company have to be carried out according to the demand that the
individual chains of the company are subject to regularly. Thus, while purchasing decisions
are made, it has to be ensured that the company has coordination with all the concerned
departments and branches before ordering the materials in a bulk. The company also has to
ensure that timely orders for delivery are timely, the wastage is minimized, and the quantity
and quality of the materials are controlled. In order to ensure that the customer choosing KFC
are subject to the best quality materials at the best prices best quality possible.
It is crucial to analyze the purchase costs that are associated with the proper implementation
of the purchase management functions in the company. Reducing the costs of purchase would
ensure that the price of the final products of the company is minimized. Furthermore, it is
crucial in order to maintain proper gaps in revenue and costs. The purchase related by the

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help of information and communication technologies such as a data base. It will provide the
company with all the insights that are required for the purchase related operations of the
company. Database management system such as SPSS can be used by the company to
effectively find the assimilation of all the information that is required for the operations of the
company related to the formulation of purchase related decisions (DeBrabant et al., 2013).
The material that are available in the inventory can be monitored by integrating the same with
the SPSS software. SPSS or Statistical Package for the Social Sciences is a statistical tools
that is used by companies go monitor the metrics and also has the ability to monitor the costs
that are incurred by the company according to the requirements of the company in terms of
requirement of materials (Hinton, McMurray, & Brownlow, 2014). It is the ground on which
the requirement of the purchase in terms of formulation of the purchase related decisions can
be catered to by the company. Thus, by checking the requirements of the each individual
department of the company, needs of the company can be catered to the purchase
management division of the company. The nature of the Portal used by the company is a
supplier portal which is used for sending and receiving invoices after the latter has been
created.
4.1 EDI
Electronic Data Interchange is the technique that is used by companies to integration of
operational level information with the help of electronic technology. The main reason behind
the use of such forms of technology is to mitigate the problem that a company might have
with the management of data. It is incorporated into a business in order to cater to the needs
of an organisation in terms in order to carry out calculation of the total cost that the company
is subject to, the reduction of wastage and the reduction of time and errors. Same can be used
by KFC.

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5.0 Conclusion
On a concluding note, it can be said that issues such as clarifying the criteria and the key
skills that are required to be present in the suppliers, the information and communication
skills that are to be utilized and the cost analysis techniques that are to be used by the
company. The information and communication technology to be used by the KFC is SPSS
and the types of cost analysis tools that are to be used by the company include investment
cost analysis, cost allocation analysis, Cost-benefit analysis and the cost-effectiveness
analysis.
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