KFC Sri Lanka: Operations, Market Changes, and Supply Chain Analysis

This report provides a comprehensive analysis of KFC's operations management and supply chain strategies, focusing on Cargills KFC in Sri Lanka. It examines key characteristics of the organization, including its B2C approach and international standards, and analyzes the achievement of performance objectives through operations management processes, such as volume, variety, variation of demand, and visibility. The report also assesses KFC's quality, speed, dependability, flexibility, and cost management, along with its order qualifiers and winners. Furthermore, it explores KFC's responses to market changes using Porter's Five Forces, evaluating the threats of new entrants, substitutes, and the bargaining power of buyers and suppliers, and competitive rivalry. The analysis extends to the effectiveness of upstream and downstream supply chain mechanisms, including inventory management using FIFO and JIT methods. Finally, the report offers conclusions and recommendations, highlighting the significance of operations and supply chain management for KFC's success, and suggesting areas for improvement.

Table of Contents
1. Key characteristics of the selected organization 3
2. Analysis of the achievement of organization’s performance objectives through
operations management processes & it’s effectiveness 3 - 6
3. The measures taken & it’s effectiveness in responding to the market changes 6 -
7
4. The effectiveness of up-stream and down-stream supply chain mechanism 7 - 8
5. Evaluation of effective use of new technology and challenges faced 8
6. Conclusions and Recommendations 8 – 9
7. References 9
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1. Key Characteristics of the selected organization
Cargills Ceylon holds the refinement of presenting a well – known restaurant and the second
largest fast food restaurant which KFC to Sri Lanka, which was established in 1995. Cargills
Restaurant Systems was able to build up to deal with the esteemed KFC franchise and to give
an unrivaled dimension of administration. Also, maintains the KFC’s international standards
which is sourced to the best local producer. The first restaurant was opened in Majestic City,
Colombo which has now extended to over 30 restaurants island wide and has over 1800
employees who are directly employed (Cargills, 2019).
2. Analysis of the achievement of organization’s performance objectives through
operations management processes & it’s effectiveness
Operations Management
“Operations Management is the activity of managing resources which are devoted to the
production and delivery of products or services” (Slack et al, 2007). This is the foundation for
the achievement of the organization since it briefs the facts of day-to-day operations,
prompting the conveyance of products to its customers. KFC uses a B2C approach, where the
process is taken place between the organization and the customers. This uses strategies to
take over costs, create a quality brand and to hold consumer loyalty.
Dimensions of Operations Management
Volume
Refers to “the scale of output of a process” (Jones and Robinson, 2012). There is a high
volume in KFC since it produces around 3000 products of all kinds for a day. They must
assure that its quality and taste of all products should be the same every time.
Variety
This refers to “the range of products produced by a process” (Jones and Robinson, 2012).
KFC produces various types of items such as Burgers and Wraps, Snacks, Biryanis, French
Fries, Sawans, Smart – Combo Meals, Family Meals, Krushers, Desserts and Beverages to
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maintain their demand and to satisfy their beloved consumers. It has an enhancing menu with
a choice of items to captivate their consumers. Therefore, it has a high variety.
Variation of Demand
Referred to as “how the rate of output varies from a process overtime” (Jones and Robinson,
2012). In KFC, there is a variation of demand for its products. Such as, during the Ramazan
season, there is a high demand for Sawans, Chicken Buckets and Biryanis. So, KFC has a
high variation in demand since the demand is seasonal based.
Visibility
This means “the amount of value – added activity that takes place in the presence of the
customer” (Jones and Robinson, 2012). This has a high visibility. It is because the customers
are provided with their orders within a short period of time. KFC has a good management
team that co-operates with the customers in a friendly manner. This is an advantage for the
organization.
Performance Objectives
This is how the operations function contributes to achieve the idea of an operations-based
advantage. It has five objectives. They are as follows;
Quality
This means “doing things right” (Pycraft et al, 2007). In every organization, almost every
customer investigates the quality of the products. The company should provide products of
free – errors to its customers. At KFC, it serves the best products which has a high quality
with a better taste. Also, it has a qualified workforce to produce the meals and to vigor the
customers. KFC also has won awards as the organization for good manufacturing practices
and the national productivity award (Cargills, 2019). Therefore, this shows the quality of the
company.
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Speed
This is “how quickly the inputs are transformed into outputs” (Pycraft et al, 2007). KFC
maintains this factor to the best standard. Every consumer who arrives is provided with the
service quickly. The order is being served within 4 – 5 minutes to the customers which
creates a competitive advantage.
Dependability
“Doing things in time for customers to receive their goods or services when they were
promised” (Pycraft et al, 2007). KFC always depend for their consumers in serving them on
time to meet their expectations, which has a well – trained management to make products on
time.
Flexibility
Means “being able to change the operations” (Pycraft et al, 2007). KFC should initiate new
kinds of products due to change in consumer taste. It provides seasonal meals and friendly
meals to meet consumer demand.
Cost
Cost is the main element in every organization which is referred to as “being productive by
reducing the cost of production” (Pycraft et al, 2007). By targeting the consumer
requirements, they can lower the cost. KFC has developed a strategy that a contains a meal
pack of french fries, burger and a drink that has a certain amount reduction in cost when it is
bought at once.
Order Qualifier & Order Winner
“Order Qualifiers are the attributes that customers expect in the product or service they
consider purchasing” (Mahadevan, 1964). Those factors of KFC could be the quality and
better taste of food, hygiene condition of the environment, time taken to serve an order and
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the take – away facility. To retain in the competitive market, they should provide their
customers with the above attributes.
“Order Winners are the attributes that have the potential to sufficiently motivate the customer
to buy the product” (Mahadevan, 1964). Exclusive taste of food, Location, Menu and the
range of different products could be the order winning factors of KFC. These factors must be
provided to perform better than its competitors.
3. The measures taken & it’s effectiveness in responding to the market changes
Porter’s Five Forces
Threat of New Entrants
Threat of Substitutes
Bargaining Power of Buyers
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There is a large no. of. barriers to entry. For an organization to compete with KFC, it
should contain many outlets island wide which needs a large investment to startup and
should have contact with various suppliers to gain their resources. Also, it would be hard
to create consumer awareness. Therefore, it is a challenging task for a competitor to
compete with KFC. Accordingly, threat of new entrant for KFC is moderate.
The Substitutes of KFC are McDonalds and Burger King which produces the same kind
of products. There is no switching cost incurred in shifting to other substitutes. Thus, it
has a strong impact on threat of substitutes.
Consumers can shift into different fast food restaurant if they are not convinced with the
products, since a switching cost is not incurred. Due to the competitors of this industry,
consumer preference declines. Therefore, the buyers have a strong impact for KFC,
because to get hold of the consumers, the prices should be fair. So, the bargaining power
of buyers is strong.

Bargaining Power of Suppliers
Competitive Rivalry
4. The effectiveness of up-stream and down-stream supply chain mechanism
“Supply Chain Management is the interconnection of organizations that relate to each other
through upstream and downstream linkages between the processes that produce value to the
ultimate consumer in the form of products and services” (Slack et al, 2013).
KFC assures that its suppliers pursue the right quality, freshness and value which is
scheduled by them. KFC can control each connection of its supply chain.
KFC handles both the upstream and downstream chains, the distributions are executed
through Cargills Food Company PLC. The upstream supply chain could be the resources that
are distributed from the main Cargills Food Company to every KFC restaurants. The
downstream supply chain is, which is then processed into finished goods which are sold at the
restaurants through dine – in, take away or delivery. It has a central commissary which is in
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The resources are being supplied to KFC by Cargills Food, which has bought the
franchise of KFC. So, although there are suppliers willing to supply for KFC, it cannot
shift to other suppliers because it has a main supplier to provide the raw materials.
Therefore, the bargaining power of suppliers in KFC is strong.
The competitors of KFC are McDonalds and Burger King. These competitors spend so
much to promote their product than its competitors, through marketing and advertising,
by introducing new products to the customers and by opening new outlets. Due to this, it
has a strong impact.

operation to service the preparatory activities of the chain. The resources are distributed to
each KFC outlet between 2 to 5 times a week.
KFC uses the FIFO (First – In, First – Out) and JIT (Just-In-Time) method to manage its
inventory. The raw materials are being used in the order that they obtain from the
warehouses. Due to this, the resources are in good quality and fresh since the meals are
prepared according to the orders placed. This helps to minimize the waste at KFC. The
benefit gained is that it reduces the cost of raw materials. At the end of the day, the
restaurants in every KFC branch is supposed to take an inventory list to check the number of
items sold within the day and the amount of raw materials that is remaining. KFC follows the
FIFO method and the JIT system in a very severe manner.
5. Evaluation of effective use of new technology and challenges faced
6. Conclusions and Recommendations
Throughout this assignment, it was able to look at the importance of operations management
and the supply chain management. Operations management is the main element in every
business organization. It always targets the achievement of the operational strategies which is
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used by the company, KFC. It was also to able to find how the quality factor which helps to
the success of the KFC.
Some of the recommendations that is given to KFC includes;
7. References
Cargills. (2019) KFC Restaurant. [Online] Available from:
http://www.cargillsceylon.com/OurBusinesses/KFC.aspx. [Accessed Date: 13th January
2013].
Jones, P and Robinson, P. (2012) Operations Management. United Kingdom: Oxford
University Press.
Mahadevan, B. (1964) Operations Management - Theory and Practice. India: Dorling
Kindersley Pvt. Ltd.
Pycraft et al. (2007) Operations Management. 9th Ed. South Africa: Pearson Education.
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Slack et al. (2007) Operations Management. 5th Ed. England: Pearson.
Slack et al. (2013) Operations Management. 7th Ed. United Kingdom: Pearson.
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