Competing through Operation: KFC Report Essay
Competing through Operation: KFC Report
The report focuses on KFC – the leading chicken fast food restaurant in the world, and one of the largest players in the fast food market. By using five performance objectives and various research methods, the report aims to analyze how the restaurant perform and manage its operation capacity in order to provide qualified food and service to the customers.
Besides, the restaurant’s capacity constrains and capacity strategies are discussed base on the primary data from KFC Union Street, Bristol City centre. It would link to the relationship between Capacity strategy and five performance objectives (Slack et al, 2004), as well as, how they support each other.
KFC first starts in 1930s, when Harland Sanders opened his restaurant in Corbin, Kentucky. KFC now spreads out to more than 100 countries with around 15500 outlets worldwide. Of these, there are more than 800 restaurants located in the UK.
The restaurant has concentrated on fried-chicken-on-bone products under the name Original Recipe and expanded the offers with other items include chicken sandwiches and chicken wings, as well as, biscuits, mashed potatoes, corn, potato wedges and desserts. The new line-grilled chicken with fewer calories, fat and salt than the Original Recipe- was launched in 2009. It was called “one of the biggest new product rollouts in the history of the company” by the KFC president Roger Eaton. Being tested in many regions included the UK; this new line has been well received as a healthier alternative which retains good in taste.
The following part will discuss about how KFC applies five performance objectives (Slack et al, 2004) into its operation and which of the five objectives is concentrated on.
FIVE PERFORMANCE OBJECTIVES
The theory has been applied for many companies worldwide for over 10 years in order to manage operating performance. Due to the limitation of resources, each company tends to put only some of the five objectives in priority during particular periods. It is considered as one of smart methods to maximize profits.
Source: (Adapted from Slack et al, 2004)
FIGURE1. FIVE PERFORMANCE OBJECTIVES
Figure 1 explains the idea and meaning of five performance objectives (Slack et al, 2004) in general.
QUALITY is the responsibility to always provide the good product or service that company has claimed. It also requires doing the right thing at the right time and meeting customer specifications, which give customer satisfactions. In KFC, main factors listed as Quality objective are quality of food (delicious, tasty, fresh, healthy, etc), quality of service (clean, supportive, friendly, etc)…
SPEED is defined as how fast the company responds their customers. This is one of the most important things required in fast food restaurant, especially in rush hours. Applying to KFC restaurant, speed objective is considered as the elapsed time between customers’ placing orders and the food or services being delivered.
FLEXIBILITY measures how much variety in products, services, and solutions for a dynamic market environment in order to meet customers’ need. It is shown as KFC’s various menus, the launch of line “Grilled Chicken”, the more customization, etc
DEPENDABILITY is doing things on time as promises. It not only gains customer’s trust but also has an influence on cost, which are saving money, saving time and giving stability to improve the efficiencies (Strecker, Ulrich, 2011). In KFC, it is on-time deliveries.
COST is the product or service price that enables company compete the market, as well as ensure the return. The company aims to maximize their profit; therefore, reducing the cost is necessary. Cost objective in KFC is measured by the cost of food, cost of manager and staff’s salaries, etc.
The Polar diagram below shows how KFC restaurant performs in manager, staff and customer perspectives base on the data that was collected.
(Adapted from Slack et al, 2004, p58)
FIGURE2. POLAR DIAGRAM OF KFC RESTAURANT
The Polar diagram is designed by the result of KFC manager’s interview, staff’s questionnaire and customers’ questionnaire (Appendix 1.0, appendix 2.0 and appendix 3.0).
According to KFC manager, the restaurant is performing quite well in quality, cost and dependability objectives while speed needs to improve, especially in rush hours (16:00pm to 20:00pm). Staff and customers have the same opinion about improving speed objective in KFC. “Although we have 8 queues” – as the manager – “it is hard to serve a large number of customers at 19pm. However, we tend to give the staffs more training sessions to increase their speed in taking order and cooking. Focusing on people will push up dependability, flexibility and speed all.” (Appendix 3.0) It is the fact that most of the customers want a lower price for their food and services. However, with a fixed price tag, the restaurant tries their best to prove that the food and service offered to customers are worth their paying.
The next part of report will focus on how the restaurant meets its customer’s fluctuating demand.
The capacity of an operation is the highest level of value added after certain period of time that the process would be able to achieve under certain conditions (Slack et al, 2001). It includes: actual output, design capacity and effective capacity.
FIGURE3. CAPACITY OF KFC RESTAURANT ON UNION STREET, BRISTOL
Planned losses Avoidable losses Actual capacity 1929 people Planned losses Effective capacity 2331 people Design capacity 2680 people
(Adapt from Slack et al, 2001)
The figure is resulted from calculations below.
Design capacity is “the capacity which its technical designers had in mind when they commissioned the operation” (Slack et al, 2001, p335). The KFC restaurant on Union Street is the largest KFC outlets in Bristol which can serve maximum 100 customers a day (approximate number from KFC manager).
670 people (7 working days, less working hours on Sunday)
While design capacity is “everything according to a plan”, effective capacity helps to show what might happen if something not goes as a plan. Effective capacity is calculated as design capacity minus planned losses, which is 13% (from KFC manager).
87 people (100 – 100×13%)
582people (670 – 670×13%)
2331 people (2680 – 2680×13%)
Actual output is the amount of a product that a production facility actually produces, as opposed to the amount that it could produce if it were to run at full theoretical capacity. It is calculated as design capacity minus planned losses and avoidable losses which is 15% (from KFC manager).
72 people (100 – 100x[13%+15%])
482 people (670 – 670x[13%+15%])
1929 people (2680 – 2680x[13%+15%])
Planned losses: Public holidays (Christmas, New Year, etc)
Human issues (Illness, pregnant …)
The time customers waiting to be served
Avoidable losses: Weather (Storm, heavy snow, etc)
Capacity constraints are considered as factors that limit the number of customers served by operation (Dettmer, 2003). For KFC, these are: number of staffs, number of queues, available eating space, speed of cooking and delivering. These factors would push the restaurant to its limit points of operation, which called Bottle necks.
NUMBER OF STAFF: There are many shift of working hour a day in KFC. The maximum number of staffs that needed in rush hour is 12 people approximately (with 8 front-men taking customers’ orders and cleaning, 2 middle-men making burgers and chips, and 2 cooks in the kitchen working strenuously). At the busiest hour, the staffs face pressure of too many customers waiting in the queues, shortage of food available, and the mess in eating place. 2 or 3 front-men have to make burger and chips in order to provide food on time.
NUMBER OF QUEUE: It often happens in the fast food restaurant that long lines of customers are waiting to be served. Although KFC Union Street has 8 queues, it does not mean that there are always staffs available.
AVAILABLE EATING SPACE: It is hard to find a clean table in rush hours because of the large number of customers and the busy staffs.
SPEED OF COOKING AND DELIVERING: To ensure the fresh of food provided to customers, the middle-men just make some available. Hence, if a big order is placed or many orders are placed at once, it will take time to make more burgers.
Some constraint factors would be solved by staff’s working flexibility, some, however, could not avoid because they links to other factors. For example, KFC could make more burgers available to avoid customers’ waiting time and increase speed performance objective; however, the foods will not as good as the just-in-time one, which reduces quality performance objective. Therefore, it is essential for the restaurant to decide which objectives are priorities.
The analysis of KFC’s capacity and capacity constraints lead to the following part which will discuss about which strategy it uses to manage the operation.
There are 2 evidences from the data collected that shows Chase demand plan (Sasser, 1976) is the strategy KFC following. There are different staff numbers and the amount of food ready in a day.
Due to staff contracts, the manager arranges a large number of staffs for rush hour, which is from 16:00pm to 20:00pm each day while reduce staffs at the opening (9:30am) and the closing time (22:00pm). In 30 minutes before closing, the kitchen stops working and the front-men focus on cleaning rather than standing behind order place. This arrangement is based on which time customers usually come to the restaurant. It helps reduce cost of staff salaries and avoid human surplus on the time not many customers. Besides, working flexibility is required for all the staffs, which are ability of working in different positions (front, middle or in kitchen), doing different tasks and even overtime, if needed.
The other one – amount of food ready in a day – does show that KFC is applying Capacity leads demand theory (Sasser, 1976). KFC always provides the amount of food slightly over than customer’s demand so as to ensure available service in working time. The food left changes to waste because it could not be stored due to KFC’s quality standard. This waste, according to the manager, is not significant and enables to bear with. From the analysis above, it is clear to see that KFC is doing right because the strategy not only fits to identity of fast food market, but also expresses KFC’s customisation, which highly focus on satisfy its customers.
After discussing about five performance objectives (Slack et al, 2004) and capacity strategy (Sasser, 1976), the final part will clarify relationship between those and how they support each other.
THE RELATIONSHIP OF CAPACITY STRATEGY AND FIVE PERFORMANCE OBJECTIVES (Slack et al, 2004)
Before having strategy, the objectives have to be set. It could be simply explained that objectives are the place you want to drive to while strategy is vehicle that helps to get there. For KFC as a whole, the company expresses its concentration on Quality objective through the slogan “Don’t worry. Eat happy” (http://www.kfc.co.uk/dontworryeathappy) and various actions to be healthier for the customers, such as “Get fresh inspiration from our Deli Deluxe Range”, “We’re fighting trans-fats, not flavour”, “We’ve done away with 25% of saturated fats”, or “Fitted out with green energy”, etc. Quality is known as the vital factor to compete with other big brands like Subway, MacDonald’s, Burger King…, and gain fast food market share when customer’s health concern is increasing more and more.
(http://www.propertyweek.com, Domino’s pizza tops the market article)
FIGURE4. FAST-FOOD MARKET SHARE IN THE UK
However, for smaller scale, according to the manager of KFC Union Street, the restaurant put Speed objective as their first priority to strive because quality standard as well as promotions is already fixed. “It is KFC Company’s job to upgrade and spread out how good the food is.” – Said the manager – “Our job is to provide food with the same standard, and serve the customers those come to our restaurant best services, and it is speed”. Hence, the restaurant tends to increase the factor it can control, which differentiates it among the others.
Following the objective above, the Chase demand plan (Sasser, 1976) is decided to make it done. This strategy fits to fast food restaurant’s identity so as to utilize time, human, and money resources. Then, considering either capacity lags demand, which allows demand never less than capacity or capacity leads demand (Sasser, 1976), which is that capacity always meets forecasted demand, KFC Union Street chose the second one. The restaurant gives up waste in order to better its service for customers. Amount of food available reduces waiting time for delivering, as well as, waiting time to be ordered. The customers would be more satisfied thanks to fast service.
To sum up, the report is designed from result collected at KFC Union Street, Bristol. With five performance objectives (Slack et al, 2004), capacity, capacity strategy (Sasser, 1976) analysis, it clarified how KFC operates and how theories links to each other, as well as, are applied into practice with particular circumstances.
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