Professional Documents
Culture Documents
Course Title:
Submitted To:
Mr. A R Daroowala
Submitted By:
Murriyam Latafat (Roll # 19) Muzamil Shahid (Roll# 20) Noman Khalid (Roll# 21)
Date of Submission:
Class:
Acknowledgement
We would like to thank Mr. A.R Daroowala for providing us the opportunity of practically examining the operational behavior of a well-established company as part of our term report. This report made for the Productions and Management course that we have undertaken at the Institute of Business Administration, Karachi, has helped us understand how the functions of planning, organizing, leading and controlling of supply chain are actually used in the corporate world. We believe that this experience will benefit us significantly. We have selected Cupola Pakistan Limited for making the term report. We would like to thank Mr. Asim Mansoor, Supply Chain Executive in Supply Chain Management department at Cupola Pakistan limited for his immense cooperation.
Letter of Transmittal
April 28th, 2009 Engr. A.R. Daroowala Course Instructor Production and Operations Management Institute of Business Administration Main Campus, Karachi Dear Mr. Daroowala, This is our report on Supply Chain Management: Cupola Pakistan Limited; that you had authorized us to prepare and it is ready for your perusal. This report is in accordance with the proposal that we had submitted. This report will also be submitted to Cupola Pakistan whose help and interviews were taken. This report highlights the procedures followed by Cupola Pakistan in their Supply Chain Management Department. The report is a critical analysis of their supply chain function and identifies weaknesses in their department. Thank you for all the assistance and cooperation that you gave us during the making of the report. Sincerely Murriyam Latafat Muzzammil Shahid Noman Khalid BBA-V-II Group A
Executive Summary
Cupola is a Dubai based multinational company involved in several businesses like oil, gas exploration, plastic cards, retail markets and food franchising. Cupola holds the master franchise rights to operate KFC in Pakistan. It was founded in 1994, with its head quarter in Dubai and offices in the Middle East, London, Washington and Karachi. The aim of this report is to understand the workings of Cupola Pakistan Limiteds Supply Chain Management Department in order to gain real world knowledge about the working of Supply Chain Management and learn from the experience of such a huge organization which is responsible for the running of franchises like Kentucky Fried Chicken and Casa bakery. The Supply Chain Management Department is the most important department of Cupola Pakistan Limited. It is the hub of all activities being done by the company. Any material which needs to be purchased for the restaurant or for any other department has to be purchased through Supply Chain Department. The supply chain management ensures product availability, good quality, better prices, right time, right place and right quality. It is responsible for procurement, supply channel development and equipment planning. The department follows a lengthy but very effective procedure for making any purchases and ensures that the suppliers are reliable. In all Cupola Pakistan is very well supplied company with an effective work force working in office.
Table of Contents
Synopsis----------------------------------------------------------------------------------------------------------------------------- 1 Report Objectives: ------------------------------------------------------------------------------------------------------------ 1 Introduction to Cupola Pakistan ---------------------------------------------------------------------------------------------- 2 Cupola Pakistans Vision ----------------------------------------------------------------------------------------------------- 4 Cupola Pakistans Mission Statement ------------------------------------------------------------------------------------ 4 Cupola Pakistans Goals ----------------------------------------------------------------------------------------------------- 4 Organizational Structure ---------------------------------------------------------------------------------------------------- 5 Span of Control ------------------------------------------------------------------------------------------------------------- 6 Departmentalization ------------------------------------------------------------------------------------------------------ 6 Functional-------------------------------------------------------------------------------------------------------------------- 6 Divisional --------------------------------------------------------------------------------------------------------------------- 7 Type of Organizational Culture -------------------------------------------------------------------------------------------- 7 Introduction to the Supply Chain Management Department --------------------------------------------------------- 8 Working of the Supply Chain Department -------------------------------------------------------------------------------- 10 Functions ----------------------------------------------------------------------------------------------------------------------- 11 Procurement --------------------------------------------------------------------------------------------------------------- 11 Development--------------------------------------------------------------------------------------------------------------- 15 Equipment Planning ------------------------------------------------------------------------------------------------------ 15 Vendor selection----------------------------------------------------------------------------------------------------------------- 15 Role of Just-in-time Inventory ------------------------------------------------------------------------------------------------ 19 SCM system ----------------------------------------------------------------------------------------------------------------------- 21 Benefit of the Supply chain management --------------------------------------------------------------------------------- 22 Issues Faced by the Supply Chain Management ------------------------------------------------------------------------- 24 SWOT Analysis of the SC Dept------------------------------------------------------------------------------------------------ 26 Recommendations -------------------------------------------------------------------------------------------------------------- 27 What We Have Learnt ---------------------------------------------------------------------------------------------------------- 29 Conclusion------------------------------------------------------------------------------------------------------------------------- 30 References ------------------------------------------------------------------------------------------------------------------------ 32
Synopsis
This report was approved by the course instructor, Mr. A. R. Daroowala appreciating the fact that it will help us understand the workings of Supply Chain in the real world. Cupola Pakistan Limited, by our view point, provided a very good case to study as it is responsible for running the chains of Kentucky Fried Chicken, Indulge, Casa bakery, LOccitane and My Super Store; and follows different Supply Chain Management techniques for different business units. This real world case study combined with the knowledge gained through lectures will help us become better Operation Managers and better Business Administrators. When starting this report we intended to include a section regarding the theories of Supply Chain Management but as lectures passed by we realized that it was unnecessary to include such details as the information provided in classes was more than enough to give everyone a sound understanding of Supply Chain Management and hence it is assumed that the readers of this report are all very well informed and knowledgeable about this exponentially growing field.
Report Objectives:
To understand the workings of Cupola Pakistan Limiteds Supply Chain Management Department in order to gain real world knowledge about the working of Supply Chain Management and learn from the experience of such a huge organization which is responsible for the running of franchises like Kentucky Fried Chicken and Casa bakery. To understand and learn from Cupola Pakistan Limited, techniques which we can improvise upon and implement when we become operations managers in the future.
Indulge
CASA Bakery
Freshens
Nafura
Organizational Structure
The organizational structure is flat and horizontal rather than vertical. Cupola has departments and departmental heads. It is like an inverted pyramid because at the end of the day, it is the bottom line workers who have to deal with the customers.
CEO
DEPARTMENTAL HEADS
Span of Control
Each departmental head has a senior manager reporting to him. Senior manager supervises three to four junior managers. Junior managers work with the executives on different projects and assignments. This shows that Cupola Pakistan has a relatively wide span of control.
Departmentalization
The approach to departmentalization in Cupola Pakistan is a combination of functional and divisional.
Functional
The organization is divided into eleven main functions, namely: 1) Projects an Maintenance 2) Marketing 3) Administration 4) Operations 5) Finance 6) General Management 7) Human Resource 8) IT 9) Internal Audit 10) Quality Enhancement 11) Supply Chain
Divisional
Each of the brands has its own brand manager who heads all brand related activities. For example the KFC brand manager is responsible for all personnel working for KFC in all the departments such as marketing, quality control and finance to name a few.
CONTSRUCTIVE CULTURE
ACHIEVEMENT
SELFACTUALIZING
HUMANISTICENCOURAGING
AFFILIATIVE
Cupola employees take pride in their work and have a passion for excellence
Cupola believes in its employees, trusts positive intentions and encourages ideas from everyone and actively develops a workforce that is diverse in style and background
Cupola employees coach and support each other. They find reasons to celebrate the achievement of others and have fun doing it.
Cupola employees execute with positive energy and intensity. They practice team together, team apart.
The Supply Chain Department looks after the two warehouses of the company located in Karachi and Lahore. These warehouses are all computerized and keep updating the Supply Chain Management System every minute. These systems are very precise and custom built to satisfy the needs of the organization. Cupola is planning to open a third warehouse which will be located in Islamabad since it is becoming harder and harder to operate in Islamabad through Lahore warehouse as the Islamabad market is growing.
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includes not only the flow of materials from the procurement of raw materials to delivery of finished goods, but also includes the activities of sourcing and purchasing; conversion including capacity planning, technology solution, operations management, production and materials planning and managing warehouse and inventory operations. Moreover, it is involved in the organization and running of the outbound transportation and plays a role in building linkages with the customer service, sales, promotion and marketing activities.
Functions
During our interview, we found out that there are three major functions of the supply chain management, namely Procurement Development Equipment Planning
Procurement
The entire process of procurement starts of with Purchase Requisitions coming in from various departments, particularly operations and marketing departments, for different types of products needed for production, promotion and sales of goods and services being provided by Cupola. These may be routine requisitions like chicken for KFC, flour for Freshens, packaging material for the restaurants and bakeries, etc; or they could be one-off demands, e.g. KFC wrist watches required for the promotion of a new KFC outlet or Pakistan flags for a special promotion scheme commemorating 14th August (Independence Day). Each of these requisitions is approved by the
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SC department, after which Mr. Asim and Mr. Adil play their roles of market research and issuing Purchase Orders (POs) respectively. Once a reliable supplier offering a competitive price is found, their samples are tested by the Quality Assurance (QA) department, and only after their approval is a PO issued for the exact quantity needed as per Purchase Requisition. Such is the case for new products being ordered. However, when routine stocks need to be ordered, the process is much shorter involving only issuance of PO against a Purchase Requisition to a regular supplier. Haggling is also part of Mr. Asim and Mr. Adils job, in case an existing supplier suddenly raises prices. Also finding alternative suppliers if the regular ones run out or fail to meet right standards is part of their responsibility. Under the procurement function, the supply chain department is engaged in two basic activities. 1. Check items: First they check their database when last such similar requisition was received to ensure there is no mismanagement of resources. Therefore, if marketing department wants 100 pens, the supply chain department would first check when last pens were given to the marketing department. If pens were delivered very recently, the department can then question the Marketing department regarding what it did with those pens, how they finished so early etc. Similarly, SC auditors are at the restaurant to check right material and right quantity goes into the various deals offered at KFC and Indulge.. Moreover, in case of purchase requisition of new item the department checks the system to ensure if such an item is available of not before going ahead with the procurement. 2. Check rates: They check the supplier that was approached last and the quantity and the rates at which the item was purchased. New supplier gives good rates initially. However, after a month or so he raises the prices. Therefore, they have to be careful when selecting
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suppliers; they need to be worth doing business with and the goods they deliver should be of good quality too. Also SC-Department keeps regular tabs at what is going out of the warehouse and what is coming in and in what quantity and at what rates.
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New
New/Old Supplier
Old
Purchase Order
Yes
QCD
No
Yes
QCD
No
Purchase Order
Purchase Order
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Development
Development includes Product Development and Vendor Development. The two people mainly involved in this are Mr. Raheel Khan and Mr. Masroor Hussain. This function brings the SC department in contact with several other important areas like Research and Development, Marketing and Operations. It is the duty of this department to study the market for relevant new products and upcoming suppliers in order to keep pace with growing market competition. Product Innovation is determining factor in the growth of almost every business today and becomes a major differentiating factor. Thus getting it right is crucial for the growth and success of a business, and the pressure for this is being handled well by the SC department here at Cupola.
Equipment Planning
Equipment planning is again a crucial responsibility to deal with. According to Mr. Masroor Hussain, doing your homework right is very important, followed by negotiation skills. Every Capital Expenditure request (commonly referred to as CapEx by the SC-natives) coming from any part of the organization is followed by endless efforts by the members of the SC department to find the right suppliers and get the right product at the right price, bringing them in close contact with the IT dept and Quality Assurance again to ensure what they receive is exactly what was requested. Capital expenditure may include restaurant equipment like tables, chairs, bun toasters, etc; IT equipment includes laptops, multimedia systems, printers, etc; and Electronics like refrigerators and air conditioners.
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The section of imports is handled by Mr Shariq who has quite a taxing job, with KFCs supplies coming in from all over the globe. Products like potato strings for French fries, Ice berg for Zinger, Neon signboards fly in from places like Thailand, China, Australia, America, India, Dubai, Malaysia etc. From the opening of the LC to the billing of these products, the entire process is handled separately. Mr Wasiq is the Head of this Department- the Boss- without whose approval of a supplier, no PO can be issued to the same. His signature is the final authority here.
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Vendor selection
Vendors must be selected for the goods and services that a firm buys. The performance of the vendor is a key element in a company's success or failure. . An effective and appropriate vendor selection method is therefore very crucial to the competitiveness of companies. Here at Cupola, the supply chain department makes sure it has three suppliers for each item that it purchases or wishes to purchase. Several reasons for this came to light during the interview: To ensure Cupola gets good product on time. Cupola is better able to negotiate rates Prevent loss: Daniyal Packages had major items that were used as inventory items at Cupola. However, due to some misfortune the entire business was closed up and machinery sold off. This brought Cupola at a standstill for it used to purchase its major items from Daniyal Packages. Thus, they decided to have three suppliers for each item to prevent such future losses. This way they are also able to maintain buffer stocks. Cupola usually has two month buffer stock in its inventory. This is because it not only saves them time but they are able to get good rates on the items purchased. Finally, they are able to maintain long term profitable relationships with the vendors.
The SC-Department chooses the vendors themselves. They do this in a number of ways. Supplier profiling: this involves finding out the background of the supplier in the market, who the supplier works for and deals with, his reputation in the market etc.
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Market survey: in this they determine the rates that the supplier offers and the quality level supplied by the vendors, on-time delivery level and service level provided by them. It also involves finding potential vendors and determining the likelihood of their becoming good suppliers.
Credit term: the credit period that the vendor offers i.e. whether its 30, 60 or 90 days credit term. This is important because the rates vary according to the terms being offered.
Moreover, SC-Department is engaged in negotiations regarding critical elements of the contractual relationship. These negotiations focus mainly on quality, cost, delivery and payment. Thus the overall goal of selection is to identify high-potential vendors. The selection of competent suppliers is critical because if right suppliers are not selected then all other supplychain effort is wasted and the entire system collapses.
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5. As a result, Cupola experiences less inspection, scrap and rework, close and effective communication among departments and employees, and long-term relationships with suppliers and customers resulting in timely production and delivery of products and low inventory costs Consequently, these improvements ultimately accelerate Cupolas overall performance and give it a competitive edge over all its competitors.
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SCM system
SC is totally computerized. All data is entered in to the SCM system which contains info regarding the purchases, quantity in the warehouse, the amount of quantity flowing in and out of the warehouse and at what rates, supplier profile, deals being offered, food cost etc. Only the SC department can look at this information. Furthermore, whatever new deals that the marketing department plans to offer the customers, it informs the SC department of it. From then forth, SC department is responsible for ensuring that the items being offered in the deal are in buffer stock. These new deals are also entered in to the SCM system. Records in SCM are constantly updated. From flour coming in from Rehmat Roller Flour Mills to Air Freshners and Toilet Paper from FMCGs like Unilever and Packaging material from small unheard of companies like Daniyal Packaging, every bit of supplies received is neatly kept under record. Comprehensive study and comparative analysis of the costs of alternative suppliers for packaging material is also done using this system.
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suspicion and reduces errors in management of resources and funds allocated to various departments. Increases accountability: accountability of department is made easier by SCM. Also, the Finance department keeps a check on the SC department. This in turn ensures that the department works honestly, efficiently and in the best interest of Cupola.
Makes internal auditing easier: SCM improves the performance of the auditing department. Because the purchase requisition has the signature of the maker and the final authority figure, the audit department knows who to contact and question.
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the supply chain and hence, reduction in profits. Therefore, the SCM department at Cupola, in order to ensure success is careful when selecting vendors and forming agreements with entities involved in the entire supply chain process. Credit term: with world in a financial crunch, the SC department feels that the major issue being faced by them is the long credit terms that are being offered. According Mr, Asim, keeping the financial condition of the market, the credit terms being offered should be reduced.
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Strength
Weakness
Focal point which links with almost every Two systems operating parallel, i.e. Gray department in the organization McKenzie for issuing KFC POs and CPL for the other SBUs
Threat
Opportunity
Problems with suppliers caused by external Implementing Supply Chain Management to factors like price wars, inflation, etc. integrate suppliers along the line and gain cost benefits
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Recommendations
The SC department of Cupola has been facing some problems due to the financiall crisis. Other then this problem, other problems that the department has been facing have been discussed above. The recommendations put forward by Mr. Asim were: Due to the financial crisis the vendors are being offering long credit terms, up to 90 days. He is of the view that the credit term should be reduced in order to reduce the rates offered by the vendors.
The whole process of selection and profiling of new vendors should be changed in order to accommodate the old vendors. According to him the profiling of a new vendor takes a lot of time and becomes thus somewhat an expensive activity for the supply chain. Mr. Asim was of the view that the new vendors information tends to be imprecise and thus incurs a lot of cost for the department.
The vendor base for the SC department should be increased and diversified. According to him this would provide an edge to the organization regarding the cost incurred during the procurement procedure. The diversification of the vendors base will provide a competitive edge with regards to the costs.
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These recommendations are inline with the recommendations put forward by the group. Some of the other recommendations put forward by the group are:
The SC department should be divided into two sections; one concerning the local vendors and local supply and the other section should be concerned with the imports. Although there is an import manager, but this section should be different with its own employees working on the whole procedure regarding imports.
The market analysis for new vendors should be done systematically and some part-time employees should be hired to analyze and provide precise information to the SC department, thus lowering the cost of market analysis and vendor profiling.
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Conclusion
Overall the report helped us a lot in understanding the procedure of the SC department; the process starting with the purchase requisition to the bill verification and procurement of the inventory. The theory of SCM and the practices by the organizations in Pakistan are very different. The SCM theories have been changed and adapted according to needs of the organization in Pakistan. Cupola also has been adopting these theories to cater to its organizational needs and the organizational goals.
SC department in this age has been contributing to profit generation for many organizations. An efficient and effective SC department leads to reduced rates and costs and also generates profits or contributes in profit generation. The whole purpose of the SC department is to reduce cost.
SC department should be inline with the organizational goals to provide efficient and effective forward and backward linkages to the organization. This will in turn help in ensuring customer satisfaction and optimization of profits and costs. Every function and activity in the department should provide the organization with benefits as this is considered to be the backbone of the organization.
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The integration and cooperation between the SC department and other departments in the organization should be strong as the SC provides the infrastructure to these departments. Any entity cannot perform properly if it lacks the required infrastructure. Thus the SC department is the one that provides the base for the infrastructure of an organization. The cooperation of other departments in the organization with the SC department is necessary to ensure the smooth running of the organization. This cooperation is necessary while forecasting and budgeting is done. The information provided by the SC department is important for this activity to be performed in its essence so as to provide maximum benefit to the organization. Thus it could be concluded that presently SC department is the backbone of the organization and its effective, efficient, and smooth performance ensures growth, optimization of costs and profits, and high customer satisfaction.
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References
Mr. Asim Mansoor, Supply Chain Executive, Supply Chain Management department, Cupola Pakistan Limited Employee hand book (KFC). http://papers.ssrn.com/sol3/papers.cfm?abstract_id=983705 http://www.teenanalyst.com/glossary/j/justintime.html
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