Enhancing KFC's Procurement Strategies

KFC uses an interactive monitoring base to track supplier performance. The company's technical teams visit suppliers daily to monitor production and provide a supplier code and batch number. KFC also employs ICT tools, such as STAR system for selecting suppliers, and cost analysis strategies to optimize purchasing decisions. By analyzing supplier selection criteria, it is observed that the company visits all suppliers on a daily basis to monitor monthly progress results. KFC uses price analysis strategy and cost base pricing to determine the final price of its products.

Purchasing Management
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Table of Contents
Introduction......................................................................................................................................2
Purchasing goals of KFC.................................................................................................................3
Supplier selection criteria................................................................................................................3
Supplier related issues.....................................................................................................................3
ICT for purchasing operations.........................................................................................................4
Purchasing cost analysis..................................................................................................................5
Conclusion.......................................................................................................................................7
References........................................................................................................................................8
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Introduction
Purchasing management is basically a department within the company, which is responsible for
activities related to purchasing. Purchasing management includes technology, people and various
purchasing processes which at last lead to profitability in the company. Purchase is the vital
process in every company and it is the first factor that has impact over the product cost. This
study will demonstrate the important aspects of purchasing management and mainly analyze the
supplier related issues and selection criteria of supplier in KFC. The essay will also analyze the
purchasing costs tools used by KFC and also highlight the Information Communication and
Technology (ICT) for purchasing functions and management in KFC.
KFC is also known as Kentucky Fried Chicken which was founded by Colonel Harland
Sanders in the year 1952, the company is a largest fast food chain located in Kentucky, United
States. KFC deals with the products of fast foods like chicken pieces, fried chicken items, salads,
sandwiches and wraps. The company mainly focuses in fried chicken items and desserts as well.
KFC is considered as a Star system which means, it selects alternative suppliers for a global
evaluation of supplier management system. This global evaluation system includes five vital
areas like communication, quality, and reliability, technical and financial. KFC have a vast range
of strong competitors in the fast food industry, it has a direct competition with Chicken Cottage,
The Fried and Grill, McDonald and also with Burger king. The competitive prices and
innovation have become the center point for KFC in their planning. The main strategy and goal
of KFC is that they desire to run their promotional activities in a more innovative way, so that it
can create its brand image in the minds of the customers and customer’s first preference would
be KFC. The firm desires to become the first preference as if the business of KFC will expand
then they have an opportunity to gain more profits. So, basically this study will show the
purchasing management of KFC and also various aspects related to purchase.
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Purchasing goals of KFC
The goal of KFC is not only to sell fried chicken for profitability but also has an objective to
expand its business for being a worldwide leader in a food industry. It also wants to start many
restaurants across the country in order to provide faster and better service for the customer and
also to beat its competitors like Burger King, The Fried and Grill etc (Murphy, 2009). The main
purchasing goal of KFC is to purchase 100% paper-based packaging so that they can be able to
serve food conveniently, safely and quickly which is hugely relied upon the usage of disposal
packaging. The way in which they package the food item has been constant with the quality
packaging that is available for quick service.
Supplier selection criteria
The products of KFC are the actual raw materials such as mashed potatoes, seasoning, chicken
that is considered by the head office suppliers and the other raw materials like bread, vegetables,
packaging, and beverages puree etc, determined by the district level suppliers. KFC is basically
determined as a Star system it means; it selects alternative suppliers for a global evaluation of
management system of supplier. This evaluation system involves five vital areas like reliability,
quality, financial, communication and technical (Vriens, 2004). Every six months of normal
evaluation all over the year starts from technical department to the purchasing department which
are evaluated at the end of the complex total, which afterwards determine the volume of business
of suppliers in the coming year of shares. KFC works with suppliers for the purpose of increase
the standard of the industry, to improve the food quality and even to maintain the product safety.
This company has laborious process for selecting the suppliers.
It has been discussed before that KFC uses Star system for selecting their suppliers which
means it actually assessed and reward their suppliers by the Supplier Tracking Assessment and
Recognition system(STAR System) (Vriens, 2004). This system is laborious as the company
recognized audit process which actually monitors standard for every supplier. This system helps
the suppliers to operate globally to the same standards and gives an independent evaluation to
supplement their own audit system. For selecting suppliers, KFC seek for food safety regulations
that involves food security, pest control, product safety, recovery, hygiene and also better
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manufacturing processes. KFC look for suppliers not only for their products but also for their
suppliers’ management practices. All the suppliers of KFC are audited once a year and also have
an interactive monitoring base which tracks the performance of suppliers. The technical teams of
the firm visits all the suppliers on a daily basis to monitor production monthly progress results
and the tracking system of KFC provide a supplier code and batch number to each and every
supplier.
Supplier related issues
Strong regulated business of KFC experience issues between supplier quality and supply chain
effectiveness. The main issue is the separation of the board which includes product life cycles for
most favorable profitability from the quality managers. It means the executives of C-level are not
determined regarding the quality of the product and the quality managers does not have any
understanding of commercialization in terms of entire financial activities. This issue happens
only because of the differences in the responsibilities and objectives of teams (Pandit &
Marmanis, 2008). Only due to this difference the quality of the product are ignored in favor of
production competence and revenue rises. The poor quality product can destroy brand name and
also ruin share prices.
For reducing all these supplier related issues, KFC should monitor the quality of the
products daily and also should observe the consistency of raw materials used in the product from
new suppliers and also from existing suppliers. This monitoring process needs wide tracking and
monitoring system, audits, correctives actions and also supplier management qualifications. The
entire cost of the supplier relationship should be evaluated properly and factored in.
ICT for purchasing operations
ICT means Information and Communication technology is considered as the important enablers
of efficient supply chain management. As fast food business gain importance, new scopes exist
and the huge internet usage is enhancing the interest for the information technology. ICT tools
are basically a source of competitive strength for KFC as they are using information technology
hugely that have gained an important role in the firm(Achola, 2016). ICT tools gives support to
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human resource operations in KFC for improving its effectiveness. KFC uses some of the ICT
tools for its purchasing operations are discussed in the following:
ERP- Enterprise Resource Planning
This tool of ICT is basically a business management system which is supported through multi-
module software application that integrates entire departments of the company. ERP is
applicable to every department and enable managers from all the departments to conduct an
understanding of what is not or what is happening in the entire company(Pant, 2017). ERP
systems in KFC are framed with an amount of modules and every of it can be combined with
others. The various modules in the ERP are marketing, manufacturing, finance, supplier
management, human resource management and procurement as well.
MRP- Material Resource Planning
MRP is a tool of ICT which is a computer- based system that is framed for organizing the order
and time of relied demand goods. The requirement for the raw materials and elements of the final
good are evaluated through utilizing the requirement for the final good and it is considered in
what quality to order from these element and raw material, determining the production and
counting back from the delivery period of the product (Moore & Baldwin, 2009). KFC designed
this system for the independent need is being utilized for the dependent need also that results in
high stages of inventories.
DRP- Distribution Requirements Planning
This is the most important ICT tool used by KFC, this tool is basically scheduling technique that
regulates inventory control and adopts MRP rules to distribution inventories.
With the use of ICT tools KFC is now carry on its business effectively and efficiently that
gives them much importance and also provides proper information smoothly on time, so that the
company can maintain a competitive edge. ICT also allowed communications among various
companies along with the supply (Fogg, 2009). It also facilitates exchange of information
sharing of data rapidly for satisfying customer’s demands in time, so that the company can set
standard customer services within it.
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Kraljic Purchasing model
The most crucial aspect in supply management of every company is its vendor base. Threats like
to be happened for an unexpected event in the supply chains to disrupt the operations. A supplier
may suffer from diversity of risks associated with company geographical locations, business
model and supply chain length. Here is the matrix of Kraljic Model:
Figure 1: Kraljic Model
Source: (Pant, 2017)
Purchasing cost analysis
Every business firm can get benefit from implementing and executing an effectual and efficient
pricing formula in the purchasing process. It is important for the companies to acknowledge
which strategy is right for a specific commerce, and which factors are important to be
considered(Donnelly, 2010). It is important for KFC to whether the price of its products are fair
and reasonable for the competitive marketplace as it is very crucial to recognize and utilize the
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correct resources during the assessment of the procedures. Recognizing the best price involving
the price analysis strategy, requires performing a marketplace competition comparison (Weele,
2015). Cost analysis, is more complex procedure that in details requires the direct and indirect
costs leading to the final price of the product or service. According to Hauht, price analysis is
effective when it is applied to the products which can be contracted to the other same
procurements.
Procurements are crucial for business activity, thus business enterprises have to undertake
the regular analysis of its procurements to ensure what companies are creating from their earned
money. It is something that goes with the purchasing strategies of the companies (BEDEY,
EKLUND, NAJAFI, WAHRÉN & WESTERLUND, 2012). It is evident that pricing means the
amount of money that consumers are willing to pay while buying a product. For its pricing, KFC
does not emphasis on any age bar. KFC first used to price high its products and targeted only
middle and upper class people. KFC, now with the stiff competition in the market and due to
entry of many available substitutes, have cut down its pricing. The stated firm has trickled down
its pricing to attract consumers whoever want to have KFC global famed meals. It now
penetrates both sides of the market, by adopting cost base price strategy.
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Conclusion
From the above study it has been analyzed that the main purchasing goal of KFC is to purchase
100% paper-based packaging so that they can be able to serve food conveniently, safely and
quickly which is hugely relied upon the usage of disposal packaging. KFC uses Star system for
selecting their suppliers which means it actually assessed and reward their suppliers by the
Supplier Tracking Assessment and Recognition system i.e. STAR System. It has been also found
that ICT tools are basically a source of competitive strength for KFC as they are using
information technology hugely that have gained an important role in the firm. ICT tools gives
support to human resource operations in KFC for improving its effectiveness. By analyzing
supplier selection criteria of KFC, it has been observed that the technical teams of the firm visits
all the suppliers on a daily basis to monitor production monthly progress results and the tracking
system of KFC provide a supplier code and batch number to each and every supplier.
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References
Achola, M. (2016). FRANCHISING AS A MARKET ENTRY STRATEGY BY KENTUCKY
FRIED CHICKEN INTO KENYA. Retrieved from
http://erepository.uonbi.ac.ke/bitstream/handle/11295/99186/MBA%20PROJECT
%20FINAL%20-%20ACHOLA%20MARY%2077509.pdf?sequence=1&isAllowed=y
BEDEY, L., EKLUND, S., NAJAFI, N., WAHRÉN, W., & WESTERLUND, K. (2012).
PURCHASING MANAGEMENT. Retrieved from
http://publications.lib.chalmers.se/records/fulltext/90488.pdf
Donnelly, R. (2010). Marketing Excellence. Retrieved from
https://www.marketingsociety.com/sites/default/files/thelibrary/marketing%20excellence
%202%20KFC%20case%20study.pdf
Fogg, L. (2009). Information and communication technology. Chandni Chowk, Delhi: Global
Media.
Moore, N., & Baldwin, L. (2009). Retrieved from
https://www.rand.org/content/dam/rand/pubs/documented_briefings/2005/DB334.pdf
Murphy, J. (2009). Guide to contract pricing. Vienna, VA: Management Concepts.
Pandit, K., & Marmanis, H. (2008). Spend analysis. Ft. Lauderdale, FL: J. Ross Pub.
Pant, M. (2017). Yum! Brands Yum! Brands Building the KFC Global Brand. Retrieved from
http://library.corporate-ir.net/library/11/117/117941/items/224246/05-
buildingkfcglobalbrand.pdf
Vriens, D. (2004). Information and communication technology for competitive intelligence.
Hershey, PA: Idea Group Pub.
Weele, A. (2015). Purchasing & supply chain management. Australia: Cengage Learning.
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