KFC - FACILITY LOCATION AND LAYOUT Submitted By:
Submitted To:
Muhammad Muavia Khan
[SP09-MBA-081]
Rehmatullah
[SP09-MBA-114]
Danish
[SP09-MBA-027]
Asad sad Ulla llah Azam
[SP [SP09-MBA-02 -021]
Syad Azam Shah
[SP09-MBA-135]
Naveed Abass
[SP09-MBA-108]
Fazan Ali
[SP09-MBA-030]
Mr Tahir Aziz
Operation Management
Subject: Submission Date:
04/05/2010
Department of Management Sciences
COMSATs Institute of Information Technology, Lahore, Pakistan.
KFC - FACILITY LOCATION AND LAYOUT
KFC - FACILITY FACILITY LOCATION AND AND LAYOUT
COMSATS Institute of Information Technology.
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KFC - FACILITY LOCATION AND LAYOUT
FOREWORD
Great works are performed not by strength but by persistence. Facility location and facility layout analysis is the very initial part of locating new or relocating existing outlets of an organization. Such as KFC ( Kentucky Fried Chicken) Chicken) is the third largest fast food chain with over 12,200 outlets in 99 countries. KFC has maintained its title, for the last 60 years by supreme decision making management. All the facility locations and layouts selected by the KFC are the state of the art KFC because they used the proper methods for facility location and layout analysis of new or existing outlets. Lot of other location around the
world is waiting for KFC title.
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KFC - FACILITY LOCATION AND LAYOUT
ACKNOWLEDGEMENT
We are heartil heartily y thankf thankful ul to my superv superviso isor, r, Mr. Tahir Tahir Aziz, Aziz, whose whose encou encourag rageme ement, nt, guid guidan ance ce and and supp suppor ortt from from the the init initia iall to the the final final leve levell enab enabled led us to deve develo lop p an understanding of the subject. Lastly, we offer our regards and blessings to all of those who supported us in any respect during the completion of the project.
TABLE OF CONTENTS
1. Preamble:...................... ............................................. .............................................. .............................................. ....................................... ...................... ............ ............ ............ ........ 5
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KFC - FACILITY LOCATION AND LAYOUT
1.1 Facility Location:...................... ............................................. .............................................. ............................................. ................................... ................... ............ ......... ... 5 2. Factors That KFC Management Keep in Mind during Facility Location Analysis:...... ............ .......... ...... 7 3. Facility Facility Location Techniques:.................... ........................................... .............................................. .................................... ................... ............ ............ ......... ... 8
3.1. Method of Factor Rating:....... .............. ............ ......... ........ ........ ........ ........ ........ ........ ........ ........ .... 8 3.2. Cost-Profit-Volume Analysis: ....... .............. ........... ........ ........ ........ ........ ........ ........ ........ ...... ..11 4. Facility layout: .......................................................................................................................... 12
4.1. Factors Factor s that influence layout: layou t:...... .............. ............... .............. .............. ........... ........ ........ .... 12 4.3. Advantage Advant age of KFC Good Layout: ....... .............. .............. .............. ............... ............ ........ .... 13 6. KFC Process Layout Lay out Map:..................... ............................................ .............................................. .............................................. ............................. ............ ........ .. 15 7. Conclusion And Recommendation: Recommendation:....................... .............................................. ............................................ ........................... ............ ............ ........... ..... 16 6. Reference:...................... ............................................. .............................................. ............................................. ............................................. ....................................... .................. 16
1. Preamble:
1.1 Facility Location:
Facility location, also known as location analysis, is a branch of operations research concern concerning ing itself itself with with mathem mathematic atical al modelin modeling g and soluti solution on of proble problems ms concern concerning ing optimal placement of facilities in order to minimize transportation costs, avoid placing hazardous materials near housing, outperform competitors' facilities, etc. Once a firm firm has decided decided to open open a new facility facility OR relocate relocate an existing existing facility, facility,
it
must decide the site where that facility should be located. The selection of location is most important important for organization. organization. The business commenced without proper location location analysis analysis may have the high risk chances and may not longer compete with other competitors.
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KFC - FACILITY LOCATION AND LAYOUT
1.2. KFC & Facility Location:
KFC Corporation, or KFC, founded and also known as Kentucky Fried Chicken is a chain of fast of fast food restaurants based in Louisville, Kentucky. Kentucky. KFC is the third largest fast food chain with over 12,200 outlets in 99 countries. KFC has maintained its title, for the last 60 years, of being the chicken Experts. Opening the first KFC outlet in Gulshan-eIqbal in 1997. KFC wore the title of being the market leader in its industry. Serving delicious and hygienic food in a relaxing environment made KFC everyone’s favorite. Sinc Sincee then then,, KFC KFC has has been been const constan antl tly y intr introd oduc ucin ing g new new prod produc ucts ts and and open openin ing g new new restaurants for its customers. Presently KFC is branched out in eighteen major cities of Pakistan (Karachi, Lahore, Gujran Gujranwal wala, a, Sukkur Sukkur & Muree) Muree) with with more more than than 60 outlet outletss nation nation-wid -wide. e. The outlet outletss comprise comprise of franchises, company company owned and affiliated. affiliated. They used the proper proper method for facility location and layout analysis of new or existing outlets. Facility location involves
the evaluation of various sites for a new facility. Apart from fulfilling our commitment of serving delicious, fresh and hygienic food and at the same time providing our customer with the ultimate entertainment; KFC also plays in the economics development of our country. country. Presently KFC has provided to over 1200 Pakistanis, which adds up to 6000 individuals directly dependent in KFC Pakistan.
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The Government of Pakistan receives over Rs.10 million per month from KFC Pakistan as direct taxes.
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95% of all food and packing material used in KFC Pakistan is procured locally, which sums up to a purchase of over Rs.35 million per month.
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Each new outlet developed by KFC Pakistan costs approximately Rs.40 million, which is a huge amount for our construction industry.
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Existing Locations of KFC In Lahore: Cavalry Gound
Defence
Barket Market
Property No. 77, Commercial Zone, Cavalry Ground, Ext Lahore Cantt. For Delivery: Ph: 111-532-532 Chicky Fun Area
160/2, Block 2, Phase-1 LCCHS, Lahore For Delivery: Ph: 111-532-532 Chicky Fun Area
Plot 27 A&B, Ali Block, New Garden Town, Lahore. For Delivery: Ph: 111-532-532 Chicky Fun Area
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Shadman
Thokar Niaz Baig
Mall Road
Plot No. 2, Shadman 2, Jail Road, Lahore. For Delivery: Ph: 111-532-532 Chicky Fun Area
70 - Copra Building, The Mall Road, Lahore. For Delivery: Ph: 111-532-532
GT Road
Opposite Toyota Ravi Motors, Near Shah Pur Interchange Multan Road, Lahore. For Delivery: Ph: 111-532-532 Y-Block
Plot No. 2, Shadman 2, Jail Road, Lahore. For Delivery: Ph: 111-532-532 Chicky Fun Area
171/Y, Commercial Area, Phase III, DHA, Lahore. For Delivery: Ph: 111-532-532 Chicky Fun Area
90-B/1 Gulbarg III, Lahore. For Delivery: Ph: 111-532-532 Chicky Fun Area
M.M. Alam Road
2. Factors That KFC Management Keep in Mind during Facility Location Analysis:
There are several factors that influence the Facility Location Decision 2.1. Proximity to Customers:
KFC Management during facility location analysis keeps in mind the proximity of target customers and target market, so that the target customer can be approached easily to outlets. 2.2. Business Climate:
It is anot anothe herr impo import rtan antt facto factors rs dete determ rmin ined ed by the the KFC KFC duri during ng the the locat locatio ions ns analysis. The location with favorable business environment is selected for the KFC by the management. 2.3. Total Costs:
The core objective of the KFC is to select a site with the lowest total cost include land, labor, constructions, taxes and energy cost. By minimizing the total cost they can be able to reduce the product cost. 2.4. Infrastructure:
The locations locations enrich enriched ed with with adequa adequate te infrast infrastruc ructur turee i.e. i.e. road, road, rail, rail, air and sea transportation etc. are ideal for the KFC management.
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2.5. Quality of Labor:
The location where the skilled labor is easily available is attractive for the KFC outlets. KFC Management specially determined this factor in mind at the time of loca locatio tion n selec selecti tion on becau because se the the easil easily y avai availa labil bilit ity y of skil skille led d labo laborr can can deal deal with with customer effectively and easily. Labor cost decrease due to easily approach to the labor. 2.8. Host Community:
KFC manage managemen mentt also determine determined d the interes interestt of host host commun community ity during during the facility location analysis. If the host community is in the favors of KFC new project then the project started.
3. Facility Location Techniques:
There are many analytical techniques that can be used in facility location decision. Some of these are: 1) Factor Rating 2) Cost-Profit-Volume analysis 3) Center of Gravity Method, and 4) Transportation and Simulation Models. But first two methods “Factor Rating” & “Cost Profit Volume Analysis” are more simple & suitable for KFC Because of easily understandable than “Center of Gravity” & “Simulation Method”. 3.1. Method of Factor Rating:
In factor rating method, first we must identify the Most Important Factors in evalua evaluatin ting g altern alternati ative ve sites sites for the new facility. facility. Then Then we should should assign a weight weight between 0 and 100 to each of these factors. Each alternative a lternative location will then be rated based on these factor weights. The most weighted alternative is selected as the best alternative.
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Example:
Suppose KFC is considering three alternative sites for its new facility locations. •
Site A. Moon Market
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Site B. Shadra
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Site C. Chock Chu Burgi
After evaluating the firm’s Needs, the Managers have narrowed the list of Important Selection Criteria down into three major Factors. - Availability of skilled labor - Availability of suitable Infrastructure, and - Proximity of target customers. Weights reflecting the relative importance of each factor have been assigned as follows:
Based on these criteria, the three Alternative sites were scored between 0 and 100 points:
Now we will multiply each score by its corresponding factor weight:
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Weighted scores are calculated as: (Site Score)x(Factor Weight)
From these results, the largest total weight is for Site A. It appears to be the best location. What happens if we change change the factor weights. Lets use the following factor weights: Skill killed ed labo labor: r: 0.45 .45;
Raw Mate Materi rial als: s: 0.40 0.40;; and and
Mark Market et:: 0.15 .15
Then the following results are obtained:
In this case, Site “C” appears to be the best choice with largest weight score. Therefore, factor rating method is very sensitive to the weights assigned to each factor. Since factor weights, selected factors, and assigned scores are all determined subjectively, the managers should be very careful in selecting these items and numbers.
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3.2. Cost-Profit-Volume Analysis:
When the fixed and variable costs for each site differ, Cost-profit-volume Cost-profit-volume analysis can be used to identify the location with the lowest cost. Example
Suppose KFC is considering three alternative sites for its new production facility. •
Site A. Moon Market
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Site B. Shadra
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Site C. Chock Chu Burgi
The Annual Production Produc tion Cost associated with each alternative is a linear function of the production volume. That is: Total Production Cost = (Fixed Cost) + (variable unit cost) x (annual production volume) Assume that The expected annual production volume is 250.000 units. And further assume that: (x: production volume = 250.000) For Site A: Prod. Cost = 10.000.000 + 250 x For Site B: Prod. Cost = 25.000.000 25.000.000 + 150 x For Site C: Prod. Cost = 60.000.000 60.000.000 + 50 x Based on these information, Which site has the lowest cost? At a production volume of 250.000 units, site B has the lowest cost, because For Site A: Prod. Cost = 10.000.000 10.000.000 + 250 (250.000) (250.000) = 72.500.000 For Site B: Prod. Cost = 25.000.000 25.000.000 + 150 (250.000) (250.000) = 62.500.000 For Site C: Prod. Cost = 60.000.000 60.000.000 + 50 (250.000) = 72.500.000 72.500.000
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This graphic shows that annual production cost changes with different production volumes. -If the expected annual production volume is below 150.000 units, then choose site A. -If the expected annual production volume is between 150.000 and 350.000 units, then choose site B. -If the expected annual production volume is over 350.000 units, then choose site C.
4. Facility layout:
Means planning And Arrangement of all machines, utilities, employee workstations, customer service areas, material storage areas, aisles, restrooms, lunchrooms, internal walls, offices, and computer rooms, for the flow patterns of materials and people around, into, and within buildings Infrastructure services such as the delivery of line communications, energy, and water and the removal of waste water all make up basic utilities. 4.1. Factors that influence layout: •
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Volume, weight of items to be produced. Nature of the service to be provided.
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Cost of the building to house the operation.
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The fragility of the product or component
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4.2. KFC Facility Layout:
Internal & External layout of KFC outlet is attractive and charming all over the world. Ideal color schemes, pleasant lighting outlets, comfortable sitting arrangement, full fully y trai traine ned d empl employ oyee eess and and thei theirr prop proper er work work divi divisio sion, n, Stat Statee of the the art inte interi rior or beautification, speedy & appropriate cooking process, special s pecial club/block for kids, etc. are the chief characteristic of the KFC layout.
4.3. Advantage of KFC Good Layout: •
Reduces bottlenecks in moving people or material.
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Minimizes materials-handling costs.
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Reduces hazards to personnel.
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Utilizes labor efficiently.
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Increases morale.
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KFC - FACILITY LOCATION AND LAYOUT
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Utilizes available space effectively and efficiently.
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Provides flexibility.
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Provides ease of supervision.
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Facilitates coordination and face-to-face communication where appropriate.
4.4. KFC Facility Layout Map:
KFC fallow about the following facility layout for their outlets round the world.
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6. KFC Process Layout Map:
KFC use process layouts because of variability in customer processing requirements. The KFC’s old and new process schematic diagram are presented blow.
KFC Old Process Layout:
Customer Place Order
Cook
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Raw Materia l
Assemble
Finished Goods
KFC Modern (New) Process Layout: Customer Place Order
Raw Materia l
Cook
W. I. P.
Assemble
Deliver
7. Conclusion And And Recommendation: Recommendation:
KFC can progress rapidly rapidly by identifying new facility locations and increasing existing target market and facility locations by launching new competitive product chain at minimum cost. KFC’s Unity Drive Drive had a simple but essential message and objective. objective. To bring together the people of Pakistan by promoting in the words of KFC founder, “Unity, Faith & Discipline”. In a time of uncertainty and fear, KFC rose to the occasion and built a platform of solidarity and togetherness for the people of Pakistan. The campaign proved to be a successful initiative in not just providing hope for our patrons, but also als o allowed KFC Pakistan to take an effective step s tep forward during tough times and entrust other responsive companies to act in a similar manner.
6. Reference: 1. Of Offi fici cial al web web site sites. s.
www.kfc.com www.kfc.pk
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