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 Silvers under its umbrella. It is the worlds
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 Silvers 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 Nepal

 Pepperoni Australia

Mozzarella cheese 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
companys 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.