INTRODUCTION Pizza Hut is one of the flagship brands of Yum! Restaurant Int. 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 12,500restaurants 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. By the 1990's Pizza Hut sales had reached $4 billion worldwide. In 1998, Pizza Hut celebrated their 40th anniversary, and launched their famous campaign "The Best Pizzas Under One Roof." In 1996, Pizza Hut sales in the United States were over $5 million. The first Indian outlet was opened in June 1996 in Bangalore. In India, Pizza Hut has 139 restaurants across 36 cities. Pizza Hut has been voted the “best family restaurant” for the second year running at the 2007 Tommy’s Parent Friendly Awards. "Pizza Hut is known for quality, innovation and category leadership.
Background Pizza Hut entered India in 1996, and opened its first restaurant in Bangalore. Since then it has captured a dominant and significant share of the pizza market and has maintained an impressive growth rate of over40 per cent per annum. Pizza Hut now has 95 outlets across 24 cities in India; and employed nearly 4,000people by end of 2004. Yum! has invested about US$ 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! Brands owns Kentucky Fried Chicken, Pizza Hut, Taco Bell, A&W and Long John Silver’s restaurants worldwide. Yum! generated more than US$ 25.9 billion in worldwide sales in the year 2003, and has more than 33,000 restaurants in over 100 countries.
Operational Practice through (C.H.A.M.P.S.): C :
Cleanliness
H :
Hospitality
A
Accuracy
:
M :
Maintenance
P
:
Product Quality
S
:
Speed
Pizza Hut strictly follow 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 customer and on the other hand they want to responsive as well the cost will definitely go high so to be efficient enough they have to manage their supply chain.
Ingridents 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 Ingridents:
ITEMS
PLACE
Wheat
Jalandhar(Punjab)
Cheese
Karnal, Haryana
Tomatoes Spice
Bhubaneshwar, Orissa South India
Baby corn Pepperoni mozzarella cheese
Nepal Australia Spain
Market Share:
Supply Chain drivers of Pizza Hut:
"Supply chain management is the factor that differentiates the winners and the losers in this business," drivers play an important role in terms of the responsiveness and efficiency. We must examine the cross-functinal and logistical drivers of supply chain performance: facilities, inventory ,transportation, information, sourcing, and pricing.
Facilities: Facilities are the actual physical locations in the supply chain network where product is stored, assembled of fabricated.The two major type of facilities are production sites and storage sites.As we have seen the ingredients are carried out from different locations across the world so to maintain the same taste through out in india they made four commisionary in Noida , Mumbai, Kolkata, Bangalore where the pizza base is prepared and then transported to different pizza stores. Here it is very clear the they provide the same base which is then customized and appear 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 with in 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 the perishable good so the inventory stock cost is reduced .As only the base is transferred to the store so in case of any particular item demand is increased it do not creates any problem.
Transportation : To deliver the base from the commissionery to different outlets the use the refrigerated trucks in which the base is kept and there is a control of temperature which they set according to the distance between the commisionary and the outlets.There are 110 trucks to supply the base 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 so long as the counters are along the highway or the truck's route.In this way they use their transportation and maintain their efficiency.
Information: Tthere was no proper medium of coordination between the suppliers and the outlet managers ,due to this the flow of information at times the information was misinterpreted and not correlated this all happened because of no customer database was maintained and outlet manager could not recall the need of customer. There was not a proper inventory control, some outlets receive excess amount of inventory so the cost is increased and they were not able to come across this problem in the absence of proper information system .billing problem, there was a deep problem faced by pizza hut in initial years working of frauds at billing ,of some unusual favours done by staff. To tackle the billing system they made centralized They had built in server storage system ,but due to continuous exponential growth ,the system collapsed because of small storage capability . this system didn’t allow any type of centralization in respect of billing process and inventory control. They need such a storage infrastructure which can be scaled up against increasing demand. So at that point of time they went in for a direct –attach- storage solution from HP with the capacity of 3tetra bytes. With the daily requirement of data base of about 2 giga byte which was to be stored and maintained ,to scale up the system with demand, in march 2008 Pizza Hut took the call to upgrade its system from Intel xeon environment to intel intaniom based HP integrity based system. Pizza hut developed SAN of 15 tetra byte capacity .the SAN went on floor in 2008 after 1 month of testing ,it has been sized for 3 years keeping in mind of 2 giga byte growth per day pizza hut opted to run its SAP –ERP application on SUSE Linux enterprise server. Based on operating systems prize performance ,reliability and scalability. The ERP environment is hosted in data centre managed by third party specialist and offers extremely high resilience. They customized the SAP software for ccd requirements managed its roll out across the organization and provides support and maintenance for SAP ERP. The software is based on JAVA. SAP ERP plays the crucial role in helping to manage the internal operations and to maintain the extended supply chain. the five SAP server connected to SAN and this is how increased capacity has helped pizza hut increase its oracle data base space. This was how pizza hut managed its data base and keep on inventing ways to maintain ever Increasing data base. But how to know customer preference ,customer contacts ,customer satisfaction ,eusage to guarantee customer top of the world service.
Sourcing : As we have seen above that the Pepporine mozzarella cheese is imported from Australia and Spain respectively so it will take time an increased the cost also so they have to manage but on the other hand to compensate the increased cost they maintain the local supply chain to reduce the cost like vegetables, wheat, tomatoes are imported
from India .So they provide the world class facility and taste my importing its main ingredient from spain and Australia but other ingredients from local vendors.
Pizza and logistics? It is wrong to conclude that running a pizza chain is easy by looking its front-end operations. Compared to the complexities involved in managing a supply chain, the promise of pizza delivery within 30 minutes or offering it free is a child's play for pizza chains. "Supply chain management is the factor that differentiates the winners and the losers in this business," For example, the Pepperoni and Jalapeno needs of Domino's Pizza are flown in from Australia and Spain respectively. Within India, the chain sources other vegetables, including onions, potatoes, tomatoes, etc., from different markets at their prevailing prices. Even cartons are centrally purchased to avail of the benefit of scale. On the other hand, Pizza Corner imports all its potato requirements from Canada. The other major imports for Pizza Corner are cheese and olive oil. Lately, the company has started sourcing cheese from a Bangalore-based company. According to Mr. Antoine Bakhache, chief executive, Pizza Corner, imported potatoes land at ports in Mumbai or the Delhi airport. The consignment is then transported to other parts of the country. For the Pizza Hut chain, cheese is imported from New Zealand, while chicken and bread are sourced locally. Besides ambience and pricing, one of the important attributes of a food service chain is maintaining a uniform taste across all its the outlets. Hence, chains like Domino's Pizza and Pizza Corner have set up commissaries in different cities. While the former has five commissaries, the latter operates four. The inputs sourced from various places are supplied to the commissaries in reefers/refrigerated trucks for process and production of base material. The pizza dough and other items prepared in commissaries are then sent to the retail outlets again in reefers. "Based on the distance between the retail outlets and the commissaries, the temperature inside the trucks is fixed so as to set the dough to a required level when it reaches the outlets.
According to him, retail outlets have to exhaust the processed dough within three days of delivery. However, due to some reason if they fail to do so, the entire quantity is discarded. The existing commissaries and the reefers will be put to optimum use as Domino's India is now opening counters in Indian Oil Corporation's petrol bunks. The company will not incur any additional transportation costs so long as the counters are along the highway or the truck's route. Agreeing that there is spare capacity in the reefers that could be used to carry similar items for other food chains.
Responsiveness and Efficiency: As we have seen that pizza hut open their outlet in bulk in a particular city so they are responsive enough and they provide delivery within 30 minutes or offering it free is also to increase their responsiveness it is difficult to maintain such kind of responsiveness because it will incur extra margin and the profit margin will decrease that’s the main reason they open their outlet in bulk and if a particular customer order a pizza where pizza store is not available that store immediately call the nearest pizza corner to deliver that particular order to be responsiveness and if a particular product is not available they use to do transfer in and transfer out in which they take the product from different outlet.
Supply chain diagram of Pizza Hut:
Pepsi company and Cremica bakes Sauces
Dough
Meat market
Filling
Vegetables
Topping Ware houses Bakes
Customer(pizza hut)
Delivery service
Value preposition: Value proposition determines determines additional ways of adding value to your offer without affecting the price, so as to create a greater worth for the customer. This is called ‘value proposition’. The value chain analysis means of increasing customer satisfaction and managing cost more effectively. This is a systematic approach to examining the development of competitive advantage. Value chain analysis is particularly useful tool for looking at competitors, and identifying sources of competitive advantage. 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. Pizza Hut now has 95 outlets across 24 cities in India; and employed nearly 4,000 people by end of 2004. 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! Brands owns Kentucky Fried Chicken, Pizza Hut, Taco Bell, A&W and Long John Silver’s restaurants worldwide. Yum! generated more than US$ 25.9 billion in worldwide sales in the year 2003, and has more than 33,000 restaurants in over 100 countries. There are various factors which gives Pizza hut an edge over its competitors like Dominos, Pizza corner. Offering value food: Employing economies of scale, Pizza Hut has made its offerings more affordable. Its delivery offer of US$ 4.4 for four personal pan pizzas has been very successful, helping it grow the business by 25 per cent. They have recently introduced a range of vegetarian personal pan pizzas for US$ 1.1. Most Pizza Hut restaurants are located in the metros and smaller metros. In order to have better market share across the country, Pizza Hut is consolidating its position by opening more restaurants in the metros where it already has a presence as well as opening outlets in new markets. Pizza hut is also moving beyond metros these days
and opening its outlets in the cities like bhuvneshvar,pondichery,Nagpur etc in order to have better penetration.
Aggressive marketing and tie-ups with local and popular brands: Pizza Hut has increased its visibility by launching a well-received TV campaign aimed at the young crowd. It has formed partnerships with recognised brands such as Nestle and Pepsi. It also holds regular promotional campaigns targeted at children and uses these alliances to offer packages during these campaigns.
International brand with an Indian heart: Pizza Hut is one of the first international pizza chains with purely vegetarian dine-ins at Chowpatty (Mumbai), Ahmedabad and Surat, which also serve Jain menus. Pizza Hut has even opened two all-vegetarian restaurants in the western state of Gujarat to cater to the Jain religious community, whose members prefer not to eat at places where meat is served. So in this way pizza hut takes good care of the Indian culture and religion and designed their stores accordingly.
Offering more than the international menu: Pizza hut has always tries to give some extra values in terms of the food offerings as compared to their competitors. International food chains typically offer only a few localised products in other parts of the world. However, Pizza Hut’s local menu is as large as the international one. According to Pizza Hut, the Indian food heritage is very rich, and hence Indians like local flavours. The Tandoori range of pizzas, which was developed locally, has a menu mix of over 20 per cent.
Relationship with Suppliers:
Leverage Ongoing and frequent purchases
•
•
• •
Ar m length Strategic Alliance
• •
Low impact
Nature of buy
Infrequent purchase or limited impact
cost analysis Need generic relation
Strategic
Price analysis Do not need good relations
total cost of ownership need good relationship
Critical project • •
Long term capital investment Good relationship required
Low impact: The bottom left quadrant is the low impact area where the purchases are infrequent and the analysis are totally based upon prices where it is not necessary to maintain the good relation with the supplier. In the pizza hut case when they open their new store they need the well furnished dining which is not purchased frequently and then they go for that distributor 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 buys and the analysis is based on cost because you are buying the quantity in bulk and little careful purchasing makes a big difference in cost and on the other hand you have to maintain the good relationship with the supplier .In the case of pizza hut 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 and also cost effective.
Strategic: The upper right quadrant represents more important supplier relationship. The term strategic means that you are dealing with issues that are going to make a difference in your companies competitive success and generally relate to items you buy that are used to create the product or service that your firm sells. In the pizza hut their strategic decision is to form a chain of local suppliers to reduce their cost. Now the company buy 95% of the ingredients from the local vendors. A strategic development on the cards now is the sourcing of all ingredients locally, which is likely to lead to a significant reduction in prices. The chain is currently working closely with suppliers in India to
source cheese locally. Tricon has been importing the mozzarella cheese and dough blend all these years, and has some 75 domestic suppliers. The key ones include Bharat Bor Factory Ltd (for Pizza Hut boxes), Elmac Agro India Pvt x Ltd (for sauce, baby corn and red bean among other ingredients), McCain Foods (for fries and smileys), Midas Foods (for soups and cornmeal), 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 infrequent but has ongoing impact. In the pizza hut case here they look for the total cost of ownership before buying or introducing new technology the check whether this will be cost effective or not or this will provide any value added service or not .Like in pizza hut they use the temperature controlled truck and 30 minutes free pizza offers are the critical and they analyze that it will be effective or not.
