Supply Chain Management- Capstone Project for Postgraduate Diploma in Supply Chain Management

This Capstone Project for Postgraduate Diploma in Supply Chain Management focuses on KFC's supply chain function, procurement and logistic plan, SWOT and PESTEL analysis, and supply chain management strategies to achieve its goals.

Supply Chain Management- Capstone Project
Postgraduate Diploma in Supply Chain Management
Assignment Cover page
Student Information (To be filled by the student)
Name of the Student:
Contact number:
Email:
Programme name: Postgraduate Diploma in Supply Chain Management
Module: Capstone Project
Schedule:SCMCAPSFA1807A
Date Issued: 18/07/2018
Submission deadline: 11/08/2018
Number of pages:
Faculty Information
Faculty Email
Vivek Mohan [e-mail]
Declaration
I certify the content of the assignment to be my own and original work and that all sources have been
accurately reported and acknowledged, and that this document has not previously been submitted in
its entirety or in part at any educational establishment.
I hereby also confirm that I have read and understand the contents of the Exeed School of Business
and Finance policy on Academic Integrity: The Prevention and Handling of Plagiarism.
Participant Signature Signature of line manager
FOR OFFICE USE
DATE RECIEVED
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Supply Chain Management- Capstone Project
Assessor Remarks on overall report:
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
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(Note: Detailed remarks for every Assessment Criteria (AC)
should be provided by the assessor by adding comments at the
answers written by the learner)
Suggestions for Improvement:
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
__________________
The following grading criteria will be applicable for this assignment brief:
Marks Grade
70 to 100 A - Distinction
60 to 69 B - Merit
50 to 59 C -
Satisfactory
40 to 49 D - Pass
Less than 40 F - Fail
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Table of Contents
Response to Task 1......................................................................................................4
Summary of the chosen organization and role of the supply chain function............4
KFC at a glance.....................................................................................................4
KFC mission and vision.........................................................................................5
Role of KFC’s Supply Chain Function......................................................................5
3 Supply chain management strategies that will aid KFC in achieving its goals......9
Reducing unnecessary complexity in the supply chain........................................9
Response to Task 2....................................................................................................10
KFC Procurement and Logistic Plan.......................................................................10
SWOT analysis of KFC.......................................................................................10
PESTEL analysis of KFC....................................................................................12
KFC’s Procurement Plan........................................................................................13
KFC Logistics plan..................................................................................................13
Role of the block chain technology.........................................................................14
Response to Task 3....................................................................................................15
Risk Assessment of the scenario............................................................................15
Plan B......................................................................................................................20
Various Payment options for shipment...................................................................20
Bibliography................................................................................................................22
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Supply Chain Management- Capstone Project
Response to Task 1:
Summary of the chosen organization and role of the supply chain
function:
It is the second largest restaurant chain in the world after McDonald’s. It is
known as Kentucky Fried Chicken as it is headquartered in Louisville, Kentucky. The
fast food restaurant mainly supplies fried chickens. Colonel Harland Sanders, who
sold fried chicken in the roadside during the economic depression that took place in
the 1930’s, first opened the food centre. His brand was famously known as “Colonel
Sanders” and his picture was proudly used as the brand image. Colonel Sander
mainly challenged the hamburgers and popularized the fried chicken in America. He
became famous in the American cultural history. KFC restaurant is a subsidiary of
the Yum! Brand, a company that owns Pizza hut, Taco Bell and WingStreet food
chains.
KFC at a glance:
Figure 1. Products sold by KFC
(Source: https://theregister.co.nz/checkout/2017/11/kfc-sorts-christmas-gifting-its-
latest-retail-range)
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Supply Chain Management- Capstone Project
KFC has grabbed the international food market in Jamaica, China, and Mexico and
so on. It has become the largest single market in China. The products in KFC are
made of pressure-fried chicken mixed with 11 herbs and spices. As reported the
sales of KFC in the year 2013 was $23 billion. By 2013, KFC had numerous outlets
in various countries. Statistics reveal that the outlets of KFC are spread over 118
countries with 4,563 outlets in China, 4,491 in US and in rest of the world about
9,821. Total number of outlets that KFC has as reported in the year 2017 is 21,487.
KFC mission and vision:
The mission of the restaurant is to deliver good quality food to the customers
so that they are satisfied with the service provided by the brand. KFC aims at
bringing a smile on the customers face every time they consume their products and
ensure that the brand loyalty is maintained. The quality of the products should be
such that the customers come back to eat the items offered by KFC.
The vision of KFC is to provide fast food services to customers thereby
increasing the revenue and bringing satisfaction to the consumers at the same time.
It is also aimed at increasing the profits of the company without compromising with
the quality of its products.
Role of KFC’s Supply Chain Function:
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Supply Chain Management- Capstone Project
Figure 2. Supply chain functions
(Source: https://www.quora.com/What-is-meant-by-upstream-and-downstream-
Supply-Chain)
The Supply Chain functions as the most important aspect for the smooth working of
any restaurant. It is the integration of all the factors that contribute to supply chain
like the demand planning, supply planning, suppliers, manufacturers and
warehouses. Supply chain function is a complex procedure that involves two
methods of supply. One is the Supplier tier-1, which is also known as the direct
supplier that supplies raw materials directly to the operations, while the other is the
Supplier tier-2 that is called the indirect supplier who supplies raw materials to
Supplier tier-1. The more efficient the supply chain management of a restaurant is,
the more the company will be able to achieve its mission and vision. In other words,
it can be said that the mission and vision of a fast food company is dependent on the
supply chain management. The demand of the consumers also affect the supply
chain of KFC largely. Some of the activities of the supply chain management are
listed below:
1. Ordering Process:
Initially KFC used RepSol software for ordering process. However, the supply of its
products to the customers are now performed by facial recognition in China. The
facial recognition machine recognizes the age and mood of the customer. According
to the mood, the machine suggests some preferable orders. It also remembers the
last order placed by the customer and according to that, the machine suggests the
orders. This technique of placing order and supplying the orders have started in a
fast food KFC outlet in Beijing. However, the process of ordering has been provided
in the form of a flowchart.
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Supply Chain Management- Capstone Project
Figure 3. Flowchart of the ordering process
(Source: Hujainah et al., 2017
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Supply Chain Management- Capstone Project
2. 3rd Party Logistics Company:
3rd party logistic companies are also known as logistic service providers. They are
the third party that provides outsourcing. KFC also has a logistic service provider to
support all its logistic activities like distribution and warehousing. Previously a
specialized logistic service provider called the Bidvest logistics controlled the
deliveries of KFC. However, KFC switched from Bidvest to DHL and QSL.
3. Suppliers:
Suppliers are mainly the one that provides raw materials to a company. For example,
the raw materials required by KFC to produce its finished products are chicken,
buns, spices, seasonings, fries, beverages and so on. Packaging suppliers also form
an important part in the supply chain function of KFC. KFC has established a good
relationship with its suppliers like PepsiCo and Coca-Cola that supplies beverages,
KitKat and Oreo for supplying desserts with the main course, K & N for supplying
chicken at its several outlets.
4. Inventory management and Warehousing:
Inventory management and warehousing of the raw materials are two important
aspects of supply chain management. The inventory manager or the stock manager
of the restaurant manages the raw materials. He keeps a track of all the materials on
a daily basis. However, chicken is not stored in the warehouses, rather it is stored in
the cold storages. The lead-time given by the procurement department for the
storage of chicken is 15 days, for sauces around 25 to 30 days, spices and herbs for
three months, bread and buns for 4 days.
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Figure 4. Warehousing of raw materials
(Source: Scribd, 2018)
3 Supply chain management strategies that will aid KFC in achieving its
goals:
The strategies of the supply chain management are discussed in the following
paragraphs. These strategies will help KFC to achieve its goal. They are:
Reducing unnecessary complexity in the supply chain: The strategies should
aim at reducing the complexities of the supply chain by cutting down several
outsourcing. The main drawback of KFC in the shortage of chicken case that was
recently reported was due to the shifting of outsourcing from one company to
another. However, the problem was overcome by giving the outsourcing back to
Bidvest. Therefore, KFC should organize the business in such a way that the vision,
mission and responsibilities of the company are clear.
Actions should be taken according to the cost: The cost of the materials bought
and offered should be clear before planning any kind of strategies. They should plan
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Supply Chain Management- Capstone Project
models to that will understand better the input costing, which will directly lead to
better management of the supply chains. Proper handling of supplies is directly
proportional in achieving goals. For example, the inventory manager will be able to
fix better freight rates that will enhance the unloading of the raw materials at the dock
only if he has a strong knowledge of the prices of the materials and services that are
available in the market. Therefore, market analysis is an important study that needs
to be carried out for planning better strategies to meet the mission and vision of the
company.
Proper selection of the core and the non-core suppliers: Core-suppliers are the
suppliers of the materials that are part of the menu offered by KFC. Whereas, non-
core suppliers are the suppliers of products that are offered for a limited period. Right
choices of these two suppliers can help build a strong relationship between them.
Good code of conduct between the supplier and a company is necessary to maintain
transparency. If the suppliers supplies good quality raw materials then only the items
prepared by them will be of excellent quality. Quality of food items for any restaurant
matters a lot for its reputation.
Response to Task 2:
KFC Procurement and Logistic Plan:
In the previous paragraphs, broad discussion have been made on KFC as an
organisation, vision and mission of the organization and so on. Discussion on some
specific aspects should be made before the procurement and logistic plan. Those
two aspects are the market and environmental analysis also known as the SWOT
and PESTEL analysis.
SWOT analysis of KFC:
Strengths:
 It is the 2nd largest restaurant chain in the world that is famous for its quality
non-veg items. It has the added advantage of originating from a well-known
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Supply Chain Management- Capstone Project
parent, Yum! Brand. The brand image and reputation of KFC is also
satisfying.
 It has the potential to compete with the other food retailers like McDonald’s,
Starbucks and Pizza Hut with the high quality food products that it produce
and the high level of customer satisfaction that it receives.
Weaknesses:
 The main weakness of KFC is the fatty food items that it offers. The items are
quite unhealthy as it is rich in fat content.
 Issues between KFC and its franchises led to closing down of a number of
outlets. This has become one of the major weakness of KFC.
Opportunities:
 KFC has the opportunity to focus on some vegetarian menu.
 With the change in the lifestyles of many people, KFC has a good scope to
expand its market into more countries.
 People have now become health conscious. They like to eat healthy along
with tasty foods. Therefore, there is an opportunity for KFC to change the food
recipes by making it healthy and tickle the taste buds of the health conscious
population.
Threats:
 Change in the eating habits of the consumers is one of the main threats that
KFC is facing. People now prefer eating healthy and fat free foodstuffs rather
than the oily and the fatty foods.
 Increase in the rise of the raw materials is also putting the company under
great risks. The main motive of food retailers are to provide reasonably priced
food items however, without compromising with the quality of the food. If the
prices of the raw materials shoots up then it will become difficult to achieve
the motive. This might lead to loss of customers and brand reputation.
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Supply Chain Management- Capstone Project
 The other leading restaurants like McDonald’s, Starbucks and Subway poses
great threat to KFC. They give a tough competition.
PESTEL analysis of KFC:
Political:
To achieve the vision and mission of the organization, KFC follows a political
system that guides its services, changes the business strategies and makes profit.
They give a pension fee to their employees to boast their motivation and started
delivering their products to people who are ill.
Economical:
KFC provides its products and services at lower price. They even give huge
amount of discounts to attract people to buy their products.
Social:
KFC strives for maintaining a good relationship with its customers. They
appeal to the local tastes of the people. For example, additional herbs and spices
are added to the items according to the taste of the local people. This gives them an
additional benefit to come close to its customers.
Technological:
The technological interface of KFC with its consumers is significantly easy.
The websites are designed in such a way that any information related to KFC is
readily available. The online ordering system has also been made so user-friendly
that the users do not face any problem while using them.
Environmental:
People like the environment of KFC as they feel that it is quite different from
other companies. The staffs are highly trained to behave properly with the
customers. Customers are their highest priorities.
Legal:
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Supply Chain Management- Capstone Project
KFC is a legal company under the Yum! Brand. The companies that has
spread worldwide has to be a legal company because there are some rules and
regulations that needs to be followed while setting up a business overseas.
KFC’s Procurement Plan:
From the above SWOT and PESTEL analysis of KFC it is quite clear that a
complete planning is required for the development and expansion of the company in
the market. Therefore, KFC is focusing on making the business flexible by adopting
the e-procurement. KFC has selected Wax Digital to manage all the requirements of
its outlets. They will handle the stationary and IT goods of the company.
Figure 5. Difference between Procurement and Logistics plan
(Source: https://www.quora.com/What-is-the-difference-between-procurement-and-
logistics)
Wax Digital provides all the solutions to the problems faced by the company
regarding the engagement of the customers online and delivering web-based goods
to them.
KFC Logistics plan:
KFC did a blunder recently by shifting the logistics service provider that
resulted in the shortage of chicken. Previously the logistics provider was Bidvest and
now it is the DHL and the QSL. However, due to the unavoidable circumstances KFC
had to again go back to Bidvest. While developing the logistic plan it should be kept
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Supply Chain Management- Capstone Project
in mind that the transportation part is all done the logistics service provider in
contrast to the procurement plan where the company has to hire transportation.
Role of the block chain technology:
Block chain technology is the method by which all the digital transactions are
stored in the database. This eliminates the need of a third party to handle the
transactions. A number of organizations are adopting this method to cut down the
transaction cost. This has proved to be a successful method in increasing the
production rates of the global market.
Figure 6. Block chain technology
(Source:
https://www.comptia.org/about-us/newsroom/blog/comptia-blog/2017/10/30/
blockchain-and-cybersecurity---a-primer)
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Supply Chain Management- Capstone Project
Figure 7. Working of the block chain technology
(Source: https://blogs.thomsonreuters.com/answerson/blockchain-impact-tax-and-
accounting-industry/)
Block chain technology finds application in auditing the supply chain management.
The main advantages of using block chain technology in supply chain management
are:
 All the data transacted can be traced electronically.
 Contracts can be made electronically and online payments can be made
instant where fast delivery is required.
 Block chain technology provides secured transaction.
Response to Task 3:
Risk Assessment of the scenario:
Businesses cannot exist without risks. There are various types of risks that
exists in the company. For example: Supply risk, demand risk, environmental risk
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and process risk. Therefore, risk assessments should be performed continuously in
any business activities.
Developing risk assessment plan:
Having assessed the type of risks that might occur, a risk assessment plan
can be designed following the 3 main points: identifying the overall risk, analysing
the probability of occurrence of those risks, the loss that are incurred on the business
due to those risks.
Figure 8. The procedure for risk assessment plan
(Source: https://www.mitre.org/publications/systems-engineering-guide/acquisition-
systems-engineering/risk-management/risk-mitigation-planning-implementation-and-
progress-monitoring)
The risks identified in the given scenario can be divided into 3 categories: supply,
process and environmental risks.
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Supply Chain Management- Capstone Project
Supply risk:
It includes the damage of the GT 6 Bladed rotor during the loading and unloading
from the rotor from the ship at the Houston port.
Process risk:
This refers to the risk of damage to the rotor due to the loading delay in the Houston
port, payment issues or the supplier not following the loading protocol.
Environmental risk:
It includes the risk of damage caused to the rotor due to shipping it in the hurricane
season and stormy weather.
The risks are identified for the given scenario and a risk template has been filled up.
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What are incoterms?
Incoterms are the rules and regulations that a particular company should
follow during the transport of goods carriage from the seller to the buyer. In other
words, it can be defined as the rules that should be obeyed during the import and
export of materials. There are mainly four categories of incoterms:
 E-terms
 F-terms
 C-terms
 D-terms
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Supply Chain Management- Capstone Project
Some of the incoterms for any mode of transport are listed below:
 EXW
 CPT
 DAT
 FCA
 CIP
 DAP
 DDP
The incoterms for sea and inland waterway transport are:
 CIF
 FOB
 FAS
 CFR
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Supply Chain Management- Capstone Project
Figure 9. Incoterms of the year 2010
(Source: http://www.ewcnow.com/en/ewc/resources/inco-terms.html)
As the transport in the above scenario is made by sea therefore, the incoterms that
they will follow are CIF, FOB, FAS and CFR.
Plan B:
To eliminate the risks of business loss another plan B can be outlined to mitigate the
risks. They may include flying cargo. There are several advantages of using this
mode of transport. The cost of transport can be reduced. The time taken to fly from
Houston airport to Trinidad and Tobago is 6 hrs and an extra 1 gay is required to
reach the destination. By using this method, the penalty of USD 1 million can be
eliminated.
Various Payment options for shipment:
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Supply Chain Management- Capstone Project
Figure 10. Various payments methods.
(Source: https://www.webdesigncity.com.au/website-design/how-can-ecommerce-
owners-use-the-latest-trends-to-their-benefit/)
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Supply Chain Management- Capstone Project
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Theregister.co.nz. (2018). KFC sorts Christmas gifting with its latest retail range.
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