Fast Food Industry study of Pizza Hut

Introduction

A major transformation in business management is that organizations are trying to optimize every aspect of business. There has been a keen focus into every aspect of business which can give the organization a price or quality edge over its competitors. Effective Supply chain management (SCM) is capable of both the above mentioned advantages. If we look into the various components of SCM and analyze their significance in the context of the above we find that they are quite significant and capable of achieving price and quality edge over competitors.

In this research the focus will be to study various factors influencing the supply chain management in fast food industry by referring to Pizza hut. The aspects associated to price quality and customer satisfaction will be covered through this research. The fast food industry has seen huge transformations in the recent past; the affect of these transformations on the supply chain management is also discussed in this research.

Background

As we know that supply chain manages the entire materials from suppliers (Suppliers of raw materials to the organization) to retailers and distributors to the customers. There are various disciplines involved in this system. for example the supplier relations management, inventory management, distribution system, retail management, reverse supply chain management. It has been observed that action in one discipline can influence the performance of the whole chain and similarly the performance of the organization. (T.J. Peters 1982; Riddalls 2002).

More and more organizations / industries are identifying the significance of supply chain management. In terms of research there are three most researched issues in the whole supply chain management, they are;

Information flow through supply chain

Inventory / warehouse Management

Operations Management (queuing system)

The fast food industry is one of the most competitive industries. The competition majorly depends upon price, quality and service (which are core aspects of Supply Chain Management). Hence there is immense pressure on all the organizations in the fast food industry to keep the three aspects studied above to their supreme best.

As fast food industry is one of the most emerged industries in the recent past, the supply chain has seen huge transformations in this industry. The industry is still emerging so as the transformations in the supply chain management of this industry. Hence this study helps the learner identify and understand the factors driving change and the factors influencing the supply chain performance.

Few of the research questions and research objectives are underpinned;

Research Questions

This research will not only try to present the study associated with the title of the research but will also try to answer the questions mentioned below;

What is the core meaning of supply chain?

What is the significance of Supply Chain Management in fast food industry?

What are the major components of Supply Chain Management?

How significant is information sharing to keep the supply chain effective?

What factors influence / drive supply chain management in fast food industry?

How is demand forecast & supply managed accurately?

What is the impact of supply chain management on overall performance of Pizza Hut and in creating brand name for Pizza Hut?

How does Pizza Hut manage their SC effectively?

Similarly the research has set few objectives for itself to achieve in the course of this study. The research objectives are mentioned underneath;

Research Objectives

Aligned with research questions we have set few objectives for this research. They are listed underneath;

To understand the supply chain practices in fast food industry

To understand the difference between SCM practices in fast food industry and in other industries (manufacturing & Service sector)

To prove that effective core competencies can lead to competitive advantage

Identify significance of various parties in the supply chain on the performance of the supply chain

To understand the service level impact on the supply chain

The organization / company chosen for this research

Pizza hut was started in the year 1958 by two brothers Dan & Frank Carney. This was an idea suggested by a common friend which they agreed to. In 1972 they introduced corporate strategy. In the mid 90’s the profits of Pizza Hut were declining. Hence Dan & Frank Carney thought of selling out the company. In the year 1997 Yum! Brands acquired pizza hut and is currently (Pizza hut) under Yum! Brands

Highlight of Pizza hut is its variety in Pizza, garlic bread, pasta and breadsticks. In order to meet the production of the mentioned (menu) products pizza needs to co-ordinate all the suppliers of vegetables, chicken and bread and work in coordination with them. Keeping this aspect efficient is the key success factor of Pizza Hut. As we know that if an organization can manage its core competencies effectively they can surely act as competitive advantage for the company.

As the ingredients for various products of pizza hut are acquired through various suppliers from different parts of the globe. There has to be proper communication to keep the supplies and demand under check. In order to keep this aspect effective the company has employed Total Quality Management (TQM) process.

The strategic policy of Yum! Brands involve the suppliers to understand their role and impact in the overall performance of the organization. This keeps the supplier relations management aspect in place for the organization.

Pizza Hut has restaurants and they also deliver their products to customers place. The supply chain in these cases differs. If it is served at the restaurant then it usually shortens the supply chain and if the product (pizza, pasta etc), then the supply chain has transportation included in the supply chain.

Both these aspects will be discussed in detail in this study

Limitations of the study

As the research focuses on the supply chain management of fast food industry, there may be few differences in the supply chain then the supply chain of other industries. This research does not specifically answer questions which are out of the industry / focus of this research.

The supply chain of fast food industry keeps changing in short intervals. We have focused this study on supply chain of Pizza hut. This may answer the general questions with the supply chain of fast food industry but may not answer the specific questions of other organizations.

Literature review

Supply chain plays a critical role in maintain the organizations brand image and service levels in the market. In this section we will speak about Supply Chain Management (SCM) in general first and then will confine it to the fast food industry.

Supply chain is the term used to define the parties involved in the process of meeting customer demand. The parties involved in the supply chain are

Suppliers

Manufacturers / producers

Distributors

Retailers

customers

(Riddalls, C.E., Bennett, S., 2002) (Stanley E. Fawcett and Gregory N. 2004)

A brief of their role in the supply chain in underpinned;

As we know that supply chain management is a discipline that manages and controls the flow of information throughout the various departments to meet the customer demands. The supply chain starts from the extreme beginning of the manufacturing process i.e. acquiring the raw materials from the suppliers or in other words choosing the suppliers and ends at the extreme end of the production process i.e. the customers. (Raghavan, N.R.S., Viswanadham, N., 2001)

The members or parties of the supply chain are briefed below;

Suppliers: suppliers are a significant party in the supply chain. The raw materials are supplied / acquired through this resource. In terms of quality of materials / products the suppliers are held responsible. The price of the product depends upon the price of the raw material as well and the supply of raw material will influence the company’s ability to meet the customer demand at the right time. Hence we can say that suppliers have a great impact on the price of the product and company’s ability to meet the customers demand on time. (Riddalls, C.E., Bennett, S., 2002)

Manufacturers / Producers: These are the members who convert raw materials / semi finished goods to finished goods. The production process is significant as the company judges the quality and attributes of the process in this phase; hence manufacturers also influence the quality of the product. (Riddalls, C.E., Bennett, S., 2002)

Distributors: These are people who are responsible to make the product reach to the market (retailers). The distributors can be also termed as marketing intermediaries. There are various aspects associated with marketing of a product and choosing the right distributors. The reach of the distributor will always be directly proportional to the availability of the product in the market. (Riddalls, C.E., Bennett, S., 2002)

Retailers: These are people who are at the end of the supply chain. In other words these are the people who sell the product to the customers (supermarkets, stores etc). They are one of the significant members in the supply chain as they are in direct contact with the customers. They represent the product on behalf of manufacturer to the customers. The demand and customer feedback can be analyzed at this level. (Riddalls, C.E., Bennett, S., 2002)

Customers: These are the end users of the products. Customers were not considered as a part of supply chain, but the contemporary methods and study has added customers into the supply chain. (Riddalls, C.E., Bennett, S., 2002)

The significance of these parties in the supply chain varies in context to industries.

Few of the terms involved in SCM are underpinned;

Inventory size

This helps the organization decide the amount (size) of inventory to be ordered. This is one of the significant aspects in the fast food industry as this helps the organization not only order the right quantity but also meet the customer’s needs with minimum resources possible. (Raghavan, N.R.S., Viswanadham, N., 2001)

Replenishment Lead Time

This refers to the time between placing an order and acquiring the raw material. Usually lead time is always considered as an entity that makes the supply chain ineffective (loss in supply chain). (Raghavan, N.R.S., Viswanadham, N., 2001)

Stock outs

Stock outs are very common in every trade. This is a situation that arises due to miscommunications in supply chain parties, lack of analysis, bad demand and sales forecasting.

Safety stock

This is the excess stock that a firm maintains to manage demand fluctuations. The safety stock is maintained at the lowest levels as most of the firms are efficient in sales forecasting.

Reorder Point

This is a point in inventory levels wherein the firm feels the need to order more inventories.

SPECIFIC TO FAST FOOD INDUSTRY

Fast food is referred to food which can be cooked easily and can be eaten quickly. There are various food chains across the world, which are famous for fast food.

If we look into the history of the fast food industry, the roots of fast food are from 1920’s and from 1950’s this industry saw a rapid growth. There are many reasons for this transformation in food habits of people. People were busy and did not find time to cook food or even to wait for long hours after ordering food. There arose the term fast food. The Asians (Specifically Chinese) are responsible for this term and industry. There lies the secret behind the customer expectations. Customers expect food to be served quickly, should be delicious and should be healthy. In this scenario all the parties of the supply chain play a major role in meeting this expectation. (Tony Hines, 2004)

Few of the objectives of supply chain management in fast food industry are mentioned underneath;

Supply chain planning

This sets the chain direction and the strategies associated with all the aspects of supply chain. This is the overall sketch of the supply chain. (David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, 2004)

Procurement

This is the process of selecting a supplier and managing healthy and profitable relation with them. This also helps the organization maintain quality of their products. (David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, 2004)

Inventory management

This process helps the organization maintain right level of stock in the organization and eliminate stock outs with variation in demand for the product. (David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, 2004)

Packaging

This is a discipline that helps in ensuring right package design and reducing the cost by encouraging the recycling process of packaging. (David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, 2004)

Warehousing

This is the process of storing the raw material, semi – finished and finished goods. Effective storage and correct warehouse design can reduce the overall cost of the product (eliminates transportation cost to a certain extent) and improve the availability of the product. The other factors in this discipline are safety of the product, storage methods and locations of the warehouses. (David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, 2004)

Transportation

This process refers to transportation management of goods. This includes all the possible modes of transferring goods from one location to another. The records maintenance are also included in this aspect. (David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, 2004)

Logistics

This is referred to the use of technology in maintaining all the disciplines of supply chain effectively. The use of softwares is a trend in logistics management (CRM softwares). (David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, 2004)

Customer Service and marketing

This refers to meeting the customer expectations effectively and creating new opportunities through customer service. This is one of the major aspects that organizations are focusing in contemporary business world. (David Simchi-Levi, Philip Kaminsky and Edith Simchi-Levi, 2004)

The entire above mentioned are effective ways to remain competent, exist and grow in the market. Therefore managing supply chain effectively can help the business prosper.

There are few other associated concepts which have an influence on the supply chain, one of them is Bull Whip Effect.

Bull Whip Effect

This is referred to sudden increase in customer demand that forces the supply chain to reconsider its strategy and rearrange the stocks in the supply chain. This forces the management to include more stocks into the system to meet the increased product demand. The Bull whip effect always flows in reverse direction to the flow of products. I.e. starting with realtor and ending it with the supplier of raw materials to the manufacturers. (Raghavan, N.R.S., Viswanadham, N., 2001), (Peter D Ball, 2006)

There are various reasons of Bull Whip Effect; few of them are mentioned underneath;

Under – estimation of demand

Wrong sales report

Inefficiencies Lead time management

Miscommunication in the supply chain

(Peter D Ball 2006)

Hence we can say that effective communication (information flow) in the supply chain is significant.

The fast food industry cannot store the stock (Raw materials) in advance. Most of the products are vegetables and souses, which need to be fresh. Hence effective supply chain management is required.

It has been observed that the major focus of most of the fast food chains is to improve the service levels (quality of the product and delivery time to the customers). Recently it has also been observed that in developing countries such as India, Pakistan, Srilanka and others, the fast food industry is focusing on the quantity and price factors. Once again this can be achieved through effective supply chain management.

Research methodology

Research methodology plays a vital role in the outcome of every research. There are various aspects, which a researcher needs to consider, before during and after gathering data for a research. Few of the aspects are presented underneath and are discussed in the context of the research. (Cooper, D. & Schindler, P. 1998)

Research approach

There are various research approaches possible. Few of them are underpinned;

Inductive approach

Deductive approach

Qualitative approach

Quantitative approach

(Saunders, M., Lewis, P. & Thornhill, A. 2003)

A brief of the above four is given below;

Inductive approach: The term itself indicates that this process starts with a point and ends up adding information and few more points on the way through to making general interpretations about the research topic. (Saunders, M., Lewis, P. & Thornhill, A. 2003)

Deductive approach: This refers to an approach that starts with few concepts and theories and tries to confine the subject in the context of the research focus. This is one of the widely used approaches to reach to a conclusion in general researches to add more specific information to existing concepts. (Saunders, M., Lewis, P. & Thornhill, A. 2003)

Qualitative approach: This approach relies on the existing theories and practices. In other words this approach is based on the tested and proven methods. The available literature is the major source in this approach. This is called qualitative as the research results can be more reliable then compared to other methods / approaches of research. (Saunders, M., Lewis, P. & Thornhill, A. 2003)

Quantitative approach: This is one of the widely used research approaches. This approach relies on a wider study and does not majorly rely on the literature, instead will take a concept or theory from the existing literature and will research about it in the environment (surroundings). This is one of the approach used to make general interpretations about a concept or theory. The major methods of this research approach are surveys, questionnaire, interviews etc. (Saunders, M., Lewis, P. & Thornhill, A. 2003)

The research approach for this research will not be restricted to any of the research approaches. We will use all the approaches possible to keep this study effective. As there are various factors influencing the supply chain and the fast food industry is specific, hence we will try to emanate the drawbacks of various approaches and will use all possible methods to gather pertinent and result oriented data.

Research Strategy

Research strategy for every research is significant. As we know that this influences the outcome of the research, hence we have decided to formulate two questionnaires for gathering data. One will focus on the management and the other will focus on the experiences of the customers. This will also help in covering all the aspects in this research. For this research we will also contact few industry experts to analyse the interpretations and results of the research to keep it effective.

Data sources

There are various sources through which data can be gathered. The data for any research can be divided into two categories. They are;

Research specific data (Primary data)

Supporting data (secondary data)

The above two are explained in brief below;

Research Specific data

This is also known as primary data. The term itself indicates that this data is specific to the research. The data that is gathered to answer the set research questions is known as primary data. The major sources for gathering data in this category are interviews, focus groups, surveys, observations, questionnaires, telephonic interviews, etc (Bryman, A. & Bell, E. 2003)

Supporting data

This refers to the data that fills the gaps left by the primary data. As the major function of this data is to support the research, hence this is known as supporting data. This data is not research specific, instead is gathered from the available literature or some other pertinent research. The major sources through which this data can be gathered are academic books, magazines, newspapers, internet, etc (Bryman, A. & Bell, E. 2003)

The data for this research will be gathered through formulating two questionnaires and using two methods. First we will try to contact the management of Pizza hut through email and take their responses on the questionnaire; the second will be to carry-out a general survey in public to know about the customer service (and associate it with the effectiveness of the supply chain). We will also utilize the secondary sources such as Internet to gather pertinent data to make the research effective.

Data Analysis

There are various aspects that a research needs to focus before, during and after gathering data for a research. These aspects help the researcher keep the data effective in the context of the study.

Few of the aspects are listed below;

Validity: This refers to the relevance of variables in the study. As we know that there are various variables in a research. This aspects ensures that the data gathered should be relative to the research. In other words these aspects state that there has to be inter-connectivity between the focus of the research and the data gathered. (Ghauri, R. & Gronhaug, K. 2005)

We will try to gather relevant data and will avoid vagueness in data. The data gathered will be confined to the research focus but will also try to remain neutral to answer various other research associated questions.

Reliability: This aspect refers to neutral (correct or accurate) and bias free results. In other words this aspect states that if the same data is used again for a similar research the results of the research should be similar. This also states that there should be any biased interpretation or should be a favor for any person or organization through this research. (Ghauri, R. & Gronhaug, K. 2005)

We will not only stay neutral while interpreting the findings and framing the results of this research, but will also send the results to few industry experts to seek their view. This will eliminate the bias aspect from the research and will keep the research effective.

Generalizability: This refers to the spectrum covered by the research answers in resolving the general issues. In other words the results of the research should be able to answer a wide range of real time issues. (Ghauri, R. & Gronhaug, K. 2005)

We will try to keep the results as general as possible and will also try to cover as many issues as possible.

Authenticity of data sources: This is one of the significant aspects of any research. The data gathered should be from reliable sources. The authenticity of data sources defines the effectiveness of the research. (Collis, J. & Hussey, R. 2009)

We will try to gather data from authentic sources. As we have formulated questionnaires and are gathering data through sources which are reliable, I believe we can surely guarantee the authenticity of data sources.

Ethical Issues

This refers to the methods used for gathering data. The ethical issues are quite significant for every research’s credibility towards the society. This includes a code of conduct that states that the methods used for data gathering and research should not include any method that is illegal or unacceptable. The methods or results of the research should not harm any person / firm / industry. (Crowther, D. & Lancaster, G. 2009)

The methods used for this research will be decided by keeping the above code of conduct in mind and will not include any such methods which fall out of the code of conduct. We will try to keep the work ethical and free from any bias.

PROJECT PLAN

Weeks

0-2

3-4

5-6

7-8

9-10

11-12

13-14

15

Background Reading

Research Proposal

Theoretical framework

Primary & Secondary Data gathering

Report Making & Submission

Conclusion

Supply chain management plays a significant role in managing resources and effective customer service irrespective of industry. The fast food industry is customer driven and the service level plays a significant role in creating expectations with the customers. The fast food industry (Specifically Pizza hut) will be studied in the context of the supply chain extensively and the research results will be framed.

We will study all the associated aspects and will try to cover all the potential issues under the focus of the research. We will keep the research bias free and ethical to the extreme possibility.