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Supply Chain Management Assignment On

Submitted By Aditi Singhi MFM Sem II Roll No 1

Introduction Pizza Hut is one of the flagship brands of Yum! Restaurants International. which also has KFC, Taco Bell, A&W and Long John Silver’s under its umbrella. It is the world’s largest pizza chain with over 12,500 restaurants across 91 countries. Pizza Hut was started in 1958, by two brothers Frank and Dan Carney in Wichita, Kansas. They had the idea to open a pizza parlor. They borrowed $600 from their mother, and opened the very first Pizza Hut. In 1959, the first franchise unit opened in Topeka, Kansas. Almost ten years later, Pizza Hut was serving one million customers a week in their 310 locations. In 1970, Pizza Hut was put on the New York Stock Exchange under the ticker symbol PIZ. In 1986, Pizza Hut introduced delivery service, something no other restaurant was doing. The first Indian outlet was opened in June 1996 in Bangalore. In India, Pizza Hut has 139 restaurants across 36 cities. Pizza Hut is known for quality, innovation and category leadership.

Background Pizza Hut entered India in 1996, and opened its first restaurant in Bangalore. Since then it has captured a dominant and significant share of the pizza market and has maintained an impressive growth rate of over 40 per cent per annum. Yum! has invested about US$ 25 million in India so far; this is over and above investments made by franchisees. Yum! Brands Inc is the owner of the Pizza Hut chain worldwide. A Fortune 300 company, Yum! Restaurants International owns Kentucky Fried Chicken, Pizza Hut, Taco Bell, A&W and Long John Silver’s restaurants worldwide.

Operational Practice (C.H.A.M.P.S.) C

:

Cleanliness

H

:

Hospitality

A

:

Accuracy

M :

Maintenance

P

:

Product Quality

S

:

Speed

Pizza Hut strictly follows the norms to attain the quality product .They have adopted the best operational practice to attain the customer satisfaction. They are doing their

operational practice under an umbrella of C.H.A.M.P.S .So here comes the role of supply chain because if they want to provide a quality product to their customers and be responsive and manage costs enough they have to manage their supply chain. Here, the supply chain is seen for pizzas.

Ingredients of Pizza • • • • • • • • •

Mozzarella cheese Pepperoni Sauce Base Potato Vegetables Wheat Baby corn Spices

Products of Pizza Hut • • • •

Pizzas Pastas Soups and salads Desserts

Outsourcing the Ingredients Items

Place

Wheat

Jalandhar(Punjab)

Cheese

Karnal, Haryana

Tomatoes

Bhubaneshwar, Orissa

Baby corn Pepperoni Mozzarella cheese

Nepal Australia Spain

Supply Chain drivers of Pizza Hut Supply chain management is the factor that differentiates the winners and the losers in this business. We examine the cross-functional and logistical drivers of supply chain performance: Facilities, Inventory, Transportation, Information and Sourcing.

Facilities Facilities are the actual physical locations in the supply chain network where product is stored, assembled or fabricated. The two major types of facilities are Production sites and Storage sites. As we have seen the ingredients are taken from different locations across the world so as to maintain the same taste through out India. They have made four commissionaires in Noida, Mumbai, Kolkata and Bangalore, where the pizza base is prepared and then transported to different pizza stores. Here it is very clear that they provide the same base which is then, customized and appears as a different product so there is a certainty in demand pattern and on the other hand they provide variety also so there is a clear line between the Push and Pull strategy.

Inventory It encompasses all raw materials, work in progress and finished goods within the supply chain. As the base is prepared in the commissionaires and then transported to different retail outlets and the outlets keep the inventory stock of only three days because it is a perishable good. Hence, the inventory stock cost is reduced. As only the base is transferred to the store, in case of any particular item demand is increased, it does not create any problem.

Transportation

To deliver the base from the commissionary to different outlets, they use the refrigerated trucks in which the base is kept and there is controlled temperature, which they set according to the distance between the commisionary and the outlets. There are 110 trucks to supply the bases across India. There is also a vacant space in which extra base is kept to fill the demand of a particular store. The company will not incur any additional transportation costs as the counters are along the highway or on the truck's route. In this way they use their transportation and maintain their efficiency.

Information There was no proper medium of coordination between the suppliers and the outlet managers, due to this the flow of information, at times, was misinterpreted and not correlated. This all happened because of customer database was not maintained and outlet manager could not recall the need of customer. There was no proper inventory control, some outlets received excess amount of inventory so the cost got increased and they were not able to come across this problem in the absence of proper information system. Therefore, commissionaires were created.

Sourcing As we have seen above that the Pepperoni and Mozzarella cheese is imported from Australia and Spain respectively. To compensate an increased cost, they maintain a local supply chain to reduce the cost like vegetables, wheat, tomatoes. So they provide the world class facility and taste by importing its main ingredients from Spain and Australia but other ingredients from local vendors. The Direct suppliers for Pizza Hut are Pepsi Company and Cremica Bakes.

Supply chain diagram for Pizza Hut

Pepsi Company and Cremica bakes Sauces

Dough

Meat market

Filling

Vegetables

Topping Ware houses Bakes

Customer (pizza hut)

Delivery service

Low impact The bottom left quadrant is the low impact area, where the purchases are infrequent and the analysis is totally based upon prices and it is not necessary to maintain good relations with the supplier. In case of Pizza Hut, when they open their new store they need the well furnished dining which is not purchased frequently and they go for the distributors who provide the required product with low prices and in that case it is not primarily to maintain the health relationship with the distributor.

Leverage The upper left quadrant represents larger purchases from suppliers who have a routine relationship with the firm. This is the area of leverage where buys and the analysis is based on cost, because they are buying the quantity in bulk and little careful purchasing makes a big difference in cost and on the other hand one has to maintain a good relationship with the supplier .In this case, they outsource their Pepperoni and Mozzarella cheese from Australia and Spain respectively, which are their main ingredients and they pay a heavy amount for these materials because they give a great impact on the product cost and they have to maintain the good relationship with the suppliers in order to get flexible supply chain..

Strategic The upper right quadrant represents the most important supplier relationship. The term strategic means that one is dealing with issues that are going to make a difference in a company’s competitive success and generally relates to items that one buys, that are used to create the product or service that a firm sells. In case of Pizza Hut, their strategic decision is to form a chain of local suppliers to reduce their cost. Now the company buys 95% of the ingredients from the local vendors. A strategic development on the card is the sourcing of all ingredients locally, which is likely to lead to a significant reduction in prices. The key suppliers include Bharat Bor Factory Ltd (for Pizza Hut boxes), Elmac Agro India Pvt Ltd (for sauce, baby corn and red bean among other ingredients), Midas Foods (for soups and cornmeal), and Western Hatcheries and Venkys (both for chicken toppings, patties and wings)

Critical projects The major difference between critical projects and strategic items is the frequency of the purchase .Strategic items tends to be purchased repetitively. For critical projects, the purchase is less frequent but has ongoing impact. In case of Pizza Hut, they look for the total cost of ownership before buying or introducing new technology, they check whether it will be cost effective or not or will it provide any value added service or not. Like for Pizza Hut, they use the temperature controlled truck and 30 minutes delivery or free pizza offers are critical and they analyze, whether it is cost effective or not.