Supply Chain Management of K&N's Foods

SUPPLY CHAIN MANAGEMENT of

K & N’s Foods

Submitted To:

Mr. Israr Khan Raja

Submitted By:

Muhammad Rizwan Aslam Reg. #: 01151111062

Muhammad Haroon Reg. #: 01151111032

Maaz Hameed Reg. #: 01151111051

Oneeb Aslam Reg. #: 01151111025

Aisha Akram Reg. #: 01151111002

Quaid-i-Azam University Islamabad

Quaid-i-Azam School of Management Sciences Islamabad 1

Acknowledgement

First of all we are grateful to the blessings of Almighty ALLAH who gave us ability to
complete the project in an appropriate manner.
We also gratefully acknowledge the immense help of our respected and extremely
encouraging course Instructor, Mr. Israr Khan Raja, who remained crucial in the
process of preparation of this report. We acknowledge his guidance, help and
cooperation, without his cooperation this project work would not have been possible.
He made our concepts clear about the project as well as about the course ‘’Supply Chain
Management’’. We also thank the K & N’s management to provide us the data of
interest. We also thank the appreciation and guidance of our parents who gave us
encouragement whenever we faced any difficulty in the way of academic life and
particularly for the accomplishment of this project.

Supply Chain Management of K & N’s 2

TABLE OF CONTENTS
HISTORY ....................................................................................................................................... 5

K & N’s BACKGROUND.............................................................................................................. 5

COMPANY MISSION ................................................................................................................... 6

MARKET ORIENTED MISSION ................................................................................................. 6

K & N’s GOALS AND OBJECTIVES .......................................................................................... 6

SWOT ANALYSIS OF K& N’s..................................................................................................... 7

BUSINESS PROCESSES & PRACTICES .................................................................................... 9

Poultry Breeding ......................................................................................................................... 9

Hatching ...................................................................................................................................... 9

Broiler Growing ........................................................................................................................ 10

Feed Milling .............................................................................................................................. 10

Poultry Processing .................................................................................................................... 10

Ready-To-Cook and Fully Cooked Chicken Products.............................................................. 11

Distribution System & Chicken Stores ..................................................................................... 11

Quality Assurance Lab .............................................................................................................. 11

Poultry Diagnosis & Research Institute .................................................................................... 11

STRATEGIC SUPPLY CHAIN PLANNING.............................................................................. 12

K & N’S COMPETITIVE STRATEGY....................................................................................... 13

K & N’S SUPPLY CHAIN STRATEGY ..................................................................................... 14

K & N’s MARKETING STRATEGY .......................................................................................... 14

FRAMEWORK OF SUPPLY CHAIN IN K & N’s ..................................................................... 16

K & N’S DISTRIBUTION NETWORK ...................................................................................... 17

DISTRIBUTION OF K & N’s PRODUCTS ................................................................................ 17

DISTRIBUTION CHANNEL OF K & N’s PRODUCT .............................................................. 17


CHANNEL BEHAVIOR CONFLICT ......................................................................................... 18

MARKETING SYSTEM .............................................................................................................. 18

TYPE OF VMS ............................................................................................................................. 18

FRAMEWORK OF K & N’S DISTRIBUTION .......................................................................... 19

K & N’s FRAMEWORK OF NETWORK DESIGN DECISION ............................................... 20

STORING PROCEDURES .......................................................................................................... 21

REASONS WHY K & N’s MAINTAIN RAW MATERIAL INVENTORY? ............................ 21

WAREHOUSE/STORING MANAGEMENT SYSTEM ............................................................ 21

PRACTICES OF KEEPING GOOD INVENTORY MANAGEMENT ...................................... 23

INVENTORY HEALTH - IMPORTANT FACTORS TO BE CONSIDERED TO AVOID
INVENTORY ............................................................................................................................... 23

TRANSPORTATION NETWORK .............................................................................................. 24

Direct Shipment Method ........................................................................................................... 24

BROILER AND OTHER RAW MATERIALS ........................................................................... 26

K & N's SUPPLIERS .................................................................................................................... 26

PRODUCTION METHODS ........................................................................................................ 26

SOURCING STRATEGIES & PROCUREMENT PROCESSES ............................................... 26

SELECTING 3PL SERVICE PARTNER .................................................................................... 27

ROLE OF REVENUE MANAGEMENT .................................................................................... 29

K & N’s REVENUE MANAGEMENT LEVERS ....................................................................... 30

MARKETING INFORMATION SYSTEM ................................................................................. 31

PRICING STRATEGIES ............................................................................................................. 31

IT IMPORTANCE in K & N’s ..................................................................................................... 33

INFORMATION SHARING BETWEEN K & N’s SC PARTIES .............................................. 34

Challenges Faced by K & N’s .................................................................................................. 34


INTRODUCTION

HISTORY
The year 1964, Pakistan was a young independent nation forging ahead towards a dream, self
sufficiency in food production. Malnutrition remained a major problem and one out of four
children died before attaining the age of five. 80% of the ailing children were affected with
diseases caused by protein, vitamins and minerals deficiency. Poultry production, the quickest
and least expensive way of filling the protein gap was planned to overcome malnutrition.
Backyard poultry farming has to graduate to a more professional level.

In January 1964, a young man, Khalil Sattar, still a college student, had a vision to foresee a need
to establish a poultry farm. His interest led him to start a broiler farm of 1, 000 chicks. Little had
he known this flock was to become the foundation stone of K& N’s? This was the simple,
inspired and nationalistic beginning of K&N's with a single minded objective of providing a
better nutrition for health and happiness of the nation.

K & N’s BACKGROUND
K&N’s is the founding pillar and beacon for Pakistan poultry industry- started in 1964 with a
single minded objective of providing better nutrition for health and happiness of the nation.
Building on years of poultry expertise, and a commitment to food-safety, K&N’s integrated all
poultry production activities under one umbrella to ensure quality and food-safety by managing
and controlling all stages of production

It is a marvelous food industry located at Raiwind. It deals with poultry processing. K & N´s
Poultry processing is integrated business containing essential components like breeder farms,
hatchery, and broiler growing farms, feed mill and poultry processing plant. K & N’s is main
supplier of eggs in Pakistan and is the biggest poultry industry in Pakistan. Formerly K &N’s
food was M.ARTAL Poultry Int’l Private Limited. M.ARTAL was Belgium base. It was
registered in Holland. M.ARTAL Poultry processing plant started work on August, 03, 1998.
M.ARTAL launched their business projects in south Asia by the name of ARTAL


GRANAASIA. Business projects of M.ARTAL in Pakistan were Harry’s bread, Aiwa mineral
water, KFC restaurants and poultry processing. Poultry processing was integrated business. But
unfortunately their projects in Pakistan were failed. So first they sold Harry’s bread, then KFC,
then Aiwa mineral water to Nestle and at last poultry processing project to K & N’s foods on
January 2002. Now K &N’s foods poultry processing business is flourishing day by day.

Today with our undeterred commitment to food-safety, customers repose confidence in us to
provide them safe and healthy chicken. Their trust in K&N's and endorsement as Pakistan's
favorite Chicken honored us.

COMPANY MISSION
Driven by its basic values in pursuit of perfection, K&N’s is committed to have superior
products and unmatched service through devoted people and consistent development.

MARKET ORIENTED MISSION
Providing the best hygiene and nutrition for the health and happiness of the nation being our very
first promised makes us remain stick to our commitment to the customers rather look for what
one may call better for one’s self. The increasing demand of our products all over the country
explains the worth; our promises are getting through our valuable customers.

K & N’s GOALS AND OBJECTIVES
K&Ns has set a single minded objective for providing better health and nutrition for the nation.
In order to achieve this objective K&N’ Built on years of poultry expertise, and a commitment to
food-safety, K&N’s integrated all poultry production activities under one umbrella to ensure
quality and food-safety managing and controlling all stages of production.

Four basic objectives of absolute integrity, enthusiastic diligence, continuous improvement and
high quality maintenance are at the core of all operations which provide an impelling urge for
attaining perfection. Driven by its basic objectives in pursuit of perfection, K&N's is committed
to have superior product and unmatched service through devoted people and consistent
development.


Absolute
Integrity

High Quality OPERATIONAL Enthusiastic
Maintenance Diligence
OBJECTIVES

Continuous
Improvement

SWOT ANALYSIS OF K& N’s
In order to gather useful information about its position in the market and commercial viability,
K&N’s use SWOT analysis to determine various factors which may improvise the overall
standard, quality and brand equity while growing in competition to other production units in
Pakistan.

In its quality assurance cell, the company maintains a check and balance on methods of sales
distribution, new business ideas and strategic options, such as entering a new market or
launching a new product in its product line, changing its suppliers and outsourcing its services.

A few points necessary to be included in this section are given in coming sections.

Strengths

The company is now a producer of its own unique type which produces various
categories of products segmented for different chunks of population while remaining
in lowest costs.


Along with the developed brand identity and trust reposed by customers, K&N’s has
established its name in international market as well.
This is driven by a factor of self production plants which are self sufficient to produce
ingredients and helping materials by themselves for K&N’s finished products.
Another factor is the strong supply chain through its distribution channels. These
factors are the basic strengths of our product inherited from the company setup.
The unique taste and first time introduction in the markets have a vast scope in the
product line of its nature.

Weakness

Though no company is a perfect in business activity performances yet pricing strategies
have been the pinching element in company’s market positioning.
Though the products are cost effective as we take quality under consideration yet most of
the products are targeted for the upper class of society. We can use appropriate and
differentiated pricing strategy to avoid this weakness of

Opportunities

As K&N’s majorly operates in Pakistan, a country where distribution of products is
limited to specific areas within an urban sector hence grooming their product of under
such circumstances has always been an opportunity for K&N’s.
By improving their Distribution channels as well as pricing strategies for , can give a
robust increase in brand equity and can promote their product demand overall in the
market.

Threats

Threats are always there in poultry oriented firms so K&N’s keeps an eye on new
competitors in dealing with different products related to chicken and poultry.
At present the only threat is the diseases spread amongst broiler chickens which can be
prevented by establishing medic control at breeding premises of company.


K & N’s Business Processes & Practices

BUSINESS PROCESSES & PRACTICES

Poultry Breeding

K&N’s maintains layer and broiler parent stock populations in different regions of Pakistan.
Layer parent stock farms are located in the south and broiler parents are bred in the colder
mountainous northern region. Both types of parents are housed at isolated breeder farms.

K&N’s operates several strategically located hatcheries covering all day-old chick markets to
ensure delivery of high quality layer and broiler day-old chicks to commercial farmers
throughout Pakistan

Strict bio-security measures are taken at all farms to reduce the risk of disease transmission
through mechanically and physically transferred disease causative agents. Careful attention is
paid to bird health, vaccination, weightiest and selection to maintain healthy and uniform
breeding flocks. Hatching-eggs are cooled down inside air conditioned, humidified egg-rooms,
packed and dispatched in sanitized and environment-controlled vehicles to company owned
hatcheries located throughout Pakistan.

Hatching

All hatcheries are equipped with most modern cooling, heating and humidification systems to
provide a uniform and consistent hatchery environment independent of varying outdoor weather
conditions. Incubators from world-renowned manufacturers are installed at all hatcheries and
their performance data is recorded and monitored by a computerized incubation monitoring
system.

Upon arrival from breeder farms, hatching-eggs are candled at all hatcheries to remove eggs,
which may have cracked during transit. Sanitation and hygiene is enhanced by mechanically
transferring eggs from one type of tray onto another until chicks are harvested from hatchers.
Maximum care is exercised while handling, reconstituting and administering vaccines using


proper techniques and modern equipment. To ensure chicks get off to the healthiest start and stay
protected from viral diseases, they receive inject able and spray vaccinations at the hatchery.

Broiler Growing

In addition to supplying day-old chicks to farmers, K&N’s is also engaged in broiler growing at
company owned farms to produce broilers for our poultry processing plant. Under the watchful
eye of our own poultry nutrition, health and housing specialists, they grow-up in large, clean and
airy houses equipped with state-of-the-art heating, cooling and ventilation equipment. The
chickens freely strut around, breathe fresh air, eat at will and drink fresh, cool and pure water.
We really mean pure water as our chickens do not drink water from troughs, which can lead to
water contamination.

Feed Milling

To ensure consistent performance with high standards, our chickens really live on a healthy and
well balanced diet. It is based on: natural grain products such as corn, corn gluten, rice and
wheat; oil seed meals such as soybean, canola and sunflower; fish; oyster shells supplemented
with multi-vitamins and minerals.

Feed is always tested by our quality assurance lab to ensure it is wholesome because K&N’s
does not compromise on quality. Feed is also supplied to our day-old chick customers and
growers for realizing the profit potential of K&N’s quality day-old chicks.

Poultry Processing

At our state-of-the-art poultry processing plant, only healthy chickens are used to produce high
quality, safe and healthy chicken products. Chickens are Halal slaughtered by hand (Islamic
Zabeeha) strictly according to The Shariah.

After Halal slaughter, chickens are processed in the most hygienic and automated manner.
During processing, the birds are washed inside out and our veterinarians constantly examine the
birds to confirm they are wholesome. Cleaning is constant and each evening the entire operation
is completely washed and sanitized. Only after very thorough inspection, the plant begins


operation each day. All chickens pass through veterinary inspection to confirm they are
wholesome.

Ready-To-Cook and Fully Cooked Chicken Products

Some chickens are used for preparing our ready-to-cook and fully cooked chicken products using
state-of-the-art meat preparation and production equipment. Choicest meat is carved and select
ingredients are added to our premium chicken meat, for preparing flavorful high-quality products
such as burger patties, nuggets and kababs. Our world-class value-added chicken products are
individually quick frozen using Individual Quick Freezing (IQF) Technology.

Distribution System & Chicken Stores

Products are stored at -21ºC to maintain freshness. Packed products are moved into K&N’s
sanitized refrigerated trucks for distribution to ensure uncompromising quality control. K&N’s
chicken products are available at K&N’s Chicken Stores and leading retailers and also delivered
to quality and food-safety conscious institutions such as hotels, restaurants, airlines, clubs and
international restaurant chains

Quality Assurance Lab

K&N’s state-of-the-art Quality Assurance Lab monitors the entire integration process, from
livestock to feed and on to preparation of ready-to-cook & fully cooked products. The entire
integration process is monitored and regulated to ensure K&N’s chicken products are
wholesome, safe and healthy.

Poultry Diagnosis & Research Institute

With the assistance of US Agency for International Development, K&N’s Poultry Diagnostic
and Research Institute was established in collaboration with Pakistan Agricultural Research
Council. It is a very well equipped and state-of-the-art disease diagnostic, feed and feed raw
material testing laboratory which provides invaluable service to Pakistan’s poultry industry
through research and extension service in close coordination with K&N’s Advisory Service.


STRATEGIC SUPPLY CHAIN PLANNING
There are four steps which basically form the plan for our company which could derive results in
form of long term company survival. These for steps are

• Planning Supply Chain Strategies
Step 1

• Designing the Business Portfolio
Step 2

• Setting Company SC Goals & Objective
Step 4

• Defining the Company Mission
Step 4

In these steps, K & N’s aim is to provide the basics of functioning throughout the companies’
production process. The long-term missions are to be achieved through setting short-term
objectives. The products are characterized and allotted weights according to demand and
necessity basis, which eventually forms the business portfolio.


K & N’S COMPETITIVE STRATEGY
K & N’s competitive strategy has following core elements which are kept in mind while
developing competitive strategy.

Important:

a. We deliver highly valued benefits to our target customers in our products.

Distinctive:

We have no strong competitor and enjoy distinctiveness in the market.

Superior:

b. We are providing pure hygienic food in at comparable prices.

Communicable:

c. The consumers can feel the difference in our quality, taste, hygiene and prices that
are communicable.

Preemptive:

d. Competitor needs a lot and lot of hard work to match our standard

Affordable:

e. Buyer can afford to pay for the difference.

Profitable:

f. The difference is profitable both for the company and the customers.


K & N’S SUPPLY CHAIN STRATEGY
Product flow involves the movement of goods from a supplier to a customer, as well as any
customer returns or service needs, information flow involves getting orders. Supply chain
management flows can be divided into three main flows:

K & N’s ultimate goal of effective supply chain management system is to reduce
inventory (with the assumption that products are available when needed)
K & N’s supply chain management involves coordinating and integrating these flows
both within and among companies. Supply chain management (SCM) of K & N’s is
the oversight of materials, information, and finances as they move in a process from
supplier to manufacturer to wholesaler to retailer to consumer & updating delivering
status, the financial flow consists of credit terms, payment schedules, and
consignment and title ownership arrangements

K & N’s MARKETING STRATEGY
K&N’s is using the marketing concept as its current marketing technique stating that “the
organization should be aware of the needs and wants of the target markets and should be
delivering the desired satisfaction better then the competitors do in order to achieve the
organizational goals.”

Product Concept:

This concept says that “consumer will favor products that offer the most quality performance and
features and that the organization should therefore devote its energy to making continuous
product improvements.”

K&N’s from the very beginning has focused on providing better nutrition for the health and
happiness of the nation and we will be keeping the words as they were before. Quality is our
very first priority that will make us build strong and profitable customer relationships.


K & N’s Competitive Strategy

To Provide Distinctive, valued,
standardize and hygienic food

K & N’s Supply Chain Strategy

Aim to reduce in-house inventory as low as
possible by coordinating supply chain parties

Efficiency K & N’s Supply Chain Structure Responsiveness

Facilities Inventory Transportation

Information Sourcing Pricing

Figure: K & N’s Supply Chain Decision Making Framework


FRAMEWORK OF SUPPLY CHAIN IN K & N’s

Raw intermediate
Meterial Suppliers
Supplier

Own
Production/ Outlets/
Distribut
Processing Stores
ion
Industrial
Backward
Integration
Suppliers


K & N’s NETWORK DESIGN

K & N’S DISTRIBUTION NETWORK
Delivery Methods from Company to Warehouse and ware house to retailers.

K&N's maintains 3 Distribution Centers,

the Northern (Rawalpindi / Islamabad),
Central (Lahore)
& Southern Region (Karachi).
o A cold chain feeds the Northern & Southern Regions. Distribution to our
Institutional & Retail partners is also "through & through Cold Chain" as
described above.

DISTRIBUTION OF K & N’s PRODUCTS
After the development of our product our product are distributed into the market for the
satisfaction and attraction of our consumers. Our product plays a vital role in the availability of
our services to attract the customers.

How to Distribute our Product to Retailer

Sell Directly to Retailers
Sell through distributors, which sell a broad range of products to many retailers
Sell through captive distributors, which sell a broad range of products to one chain of
retailers.
Sell through distributors, which sell to your targeted customers
Distribute to K & N’s Stores

DISTRIBUTION CHANNEL OF K & N’s PRODUCT
The distribution channel of our product is indirect marketing channel because this channel
contains one or more intermediary levels.


Cost of Development Of Products

The price of our product is based on cost of all ingredient used because of its low price our
product is very popular among customers.

Product s
Our product offers consumptions, attention to satisfy desire or need in the market

Level of Products

Core Benefit:
o Providing the good taste.
Actual Product
o Product includes all ingredients in packaging according to the core benefit.
Augmented Product
o Product may provide some benefits which are related to our product.

CHANNEL BEHAVIOR CONFLICT
The conflict of channel behavior of our product is vertical conflict. Because in this conflict;
conflict lies between different levels of the same product, is even more common

MARKETING SYSTEM
K & N’s products consist of vertical marketing system (VMS) because it is such type of
distribution channel in which producers, wholesalers, retailers act as Unified system. So that one
channel member owns the others, has contracts with them, or has so much power that they all
cooperate.

TYPE OF VMS
K & N’s products lies in the administered VMS in the vertical marketing system because this
type of VMS coordinates successive stages of production and distribution, not through common
ownership or contractual ties, but through the size and power of the parties.


FRAMEWORK OF K & N’S DISTRIBUTION
K & N’s Manufacturing &
Processing Plant

Central (Lahore)

Distribution Centers

North Central South

Islamabad/Rawalpindi,Jehl Karachi & Hyderabad
Lahore & Multan
um ,Peshawar Regions Region
Region

K & N’s Stores

(67 Stores in Major
Retailers
cities)

Customer Customer Customer Customer Customer Customer


K & N’s FRAMEWORK OF NETWORK DESIGN DECISION

K & N’s Competitive Phase I
Strategy Competition in the
K & N’s
Market
Supply Chain
K & N’s Internal
Strategy
Limitations

K & N’s Production, Taxes & Incentives
Frozen and Storing
Phase II
Technologies
K & N’s Country Demand
Competition in the Facilities in
Industry Central, North
& South Demand Risk
Transportation Costs Region

Phase III
Infrastructure for
K & N’s Production &
K & N’s
Poultry Breeding and
Pocessing Methods Favorable Sites
Frozen Meet

Phase IV
Factors Cost Transportation &
Locations for
Delivery to Stores and
Processing and
Outlets
Delivery


INVENTORY MANAGEMENT

STORING PROCEDURES
Storing Procedure is as per the International standards laid out by WHO for such products. An
in-house developed integrated soft ware for inventory management is in place to ensure data up
date & First in First Out deliveries.

REASONS WHY K & N’s MAINTAIN RAW MATERIAL
INVENTORY?
Most of the K & N’s have raw material inventory warehouses attached to the production
facilities where raw materials, consumables and packing materials are stored and issue for
production on JIT basis. The reasons for holding inventories can vary from case to case basis.

Meet variation in Production Demand
Cater to Cyclical and Seasonal Demand
Economies of Scale in Procurement
Take advantage of Price Increase and Quantity Discounts
Reduce Transit Cost and Transit Times
Long Lead and High demand items need to be held in Inventory

WAREHOUSE/STORING MANAGEMENT SYSTEM
In K & N’s Supply Chain, Inventory Management and Warehousing/storing form a part of
operations intensive function and is one of the key building blocks in the entire chain. Most of
the inventory is held at the warehouses and storing as compared to the pipeline, and the
efficiency of the warehouse operations will determine the further supply chain efficiency.

Though it is a normal industry practice now to outsource the warehousing operations to a 3PL
Logistics service provider but K & N’s supply chain management believes to build its own
warehouses and cold storages to reduce costs and keep its inventory in safe environment.


Physical Infrastructures of K & N’s In-house Stores

The building blocks or operational criteria of K & N’s Warehouse Management System includes

 Location
 Structure, roof height and flooring
 Design and layout external, utilities and facilities in the premise
 Internal layout design, storage infrastructure, material handling equipments
 Safety equipments and mechanisms,
 IT and communications infrastructure, power and backup services and finally
accessibility of the location and availability of labor.

IT Systems

A robust WMS capable of managing inventory and locations which is RF driven or enabled,
would be the backbone of a good efficient warehouse.

The Warehouse Management System controls two sets of operations:

1. On the inventory front, the system maintains inventory in the warehouse at Zone &
individual location level, SKU level, pallet wise, carton wise and unit level inventories
for multiple customers and allows specific inventory attributes and parameters to be built
in to manage, allocate or block the inventory. The system also provides options to adapt
FIFO method as the products are perishable.
2. On the Operations front the system manages, controls and directs all operations
including receiving processes, put away processes, order processing, inventory allocation,
picking process, packing process and finally shipment along with inventory updating.
The K & N’s intelligent system guides and helps operations manager to schedule and
manage all operations for various groups and teams simultaneously depending upon the
work load and pattern and thereby manage resource allocation too.


PRACTICES OF KEEPING GOOD INVENTORY MANAGEMENT
Good inventory Management practices in the K & N’s helps by adding value in terms of having
control over and maintaining lean inventory. Inventory at K & N’s stores is not too much or too
less. Both the situations are bad for the K & N’s.

Review Inventory periodically and revise stocking patterns and norms
Get into detailed inventory planning - One size does not fit all
Study demand pattern, movement patterns and cycles to build suitable inventory norms
for different categories of inventory

INVENTORY HEALTH - IMPORTANT FACTORS TO BE CONSIDERED TO
AVOID INVENTORY

Mismatch inventory management on one hand consists of managing the inventory transactions
and data in the system and on the other it involves physical processes on the ground.

Systems Issues

When in case of day-to-day operations, hundreds of transactions are being processes at both the
ends concurrently; the system updates may not happen on real time basis and can lead to
inventory discrepancies. Therefore the K & N’s have to daily reconciliation of all transactions
between both systems as well as operations.

System Discipline Required

Any lack of discipline can affect not only the inventory but effect transactions as well. For
Example, if for any reason a particular SKU or consignment is blocked at the warehouse and is
not to be dispatched, the inventory block should not only happen in WMS which controls floor
operations but in ERP also.

System Inventory is Matched with Physical Inventory

The inventory that is setup and maintained in the ERP as well as WMS should correspond to the
inventory on the shop floor.


K & N’S TRANSPORTATION NETWORK

TRANSPORTATION NETWORK
As required for the frozen foods, K&N's transports its products all the way through Cold Chain,
supported by specially designed own vehicles to maintain temperatures in the required range to
maintain product quality.

Direct Shipment Method

With the direct shipment network option, the buyer structures his transportation network so that
all shipments come directly to each buyer locations. Routing is specified and only the
transportation mode and routing is decided by the supply chain manager of K & N’s.

Suppliers of K & N’s K & N’s Locations

Sub urban areas of
Broiler
Lahore

Manufacturing Site
Packaging
Raiwind

In-house Storage
Ingredients

Intermediate Distribution
Centers
Supplies


Suppliers Manufacturing
/Processing
Plant

In-House Storing

Stores

Distribution Centre Consumer
Outlets

Retailers

Flow Chart: Supply Chain-A Journey of K & N’s from Supplier to Valuable Consumer


SOURCING DECISIONS –1st CROSS FUNCTIONAL DRIVER

BROILER AND OTHER RAW MATERIALS
Almost 90% of the Broilers for processing are produced at K&N's own Poultry farms located in
the suburbs of Lahore. Broilers of course, are our major raw material. Other than that, many
ingredients & spices are procured from within Pakistan & some ingredients are also imported to
produce the Best Chicken Products for the Health & Happiness of our consumers

K & N's SUPPLIERS
Under the Supply Chain concept, the suppliers are our Business Partners & long lasting
relationship is maintained in the mutual interest. Accordingly, K&N's, over the period, has
multiple business partners in the field of Packaging, ingredients & many other fields.

PRODUCTION METHODS
Depending upon the type of product, production method is used. For instance, raw chicken &
special cuts are produced on the Automated / Semi automated lines, whereas, Value added
products are produced through Fully Automated Process in K & N’s processing departments.

SOURCING STRATEGIES & PROCUREMENT PROCESSES
At K & N’s procurement managers manage procurement and sourcing function both at strategic
and operational levels. They are proactively engaged in building supplier networks, estimating,
controlling and reducing costs besides performing other functions and ensuring service levels.
Their job functions are increasing becoming cross functional together with supply chain and
manufacturing functions.

Procurement Function

Procurement functions in K & N’s deals not only with procurement of raw materials and
components, but also with capital equipments, project procurement, ingredients procurement


after market, managing rejections too. Procurement function works closely with procurement
logistics or inbound supply chain in K & N’s.

Procurement Process and Sourcing Strategy

Though interlinked closely, both procurement process and sourcing strategy are not one and
same. K & N’s sourcing strategy deals with planning, designing and building a reliable and
competitive supplier base, determining the strategy for procurement, defining pricing strategies
and supply chain requirements. The strategy involves integration of its objectives in line with or
confirming to the objectives of stake holders in operations, finance, Marketing and distribution.
K & N’s sourcing strategy also involves planning to competitive buying sources for its raw
materials, components and services along with alternative variables.

Shift in Sourcing Strategic Approach.

Advancement in technology and R & D capability of K & N’s has enhanced leading to shorter
product life cycles. Lean Manufacturing and cost per unit concept is demanding that the
managers keep looking to reduce the procurement cost as well as procurement logistics cost. By
developing a relationship with suppliers in a collaborative mode, buyers are able to get supplier
companies to hold inventories for them at buyer location and postpone taking inventory
ownership up to the point of consumption.

SELECTING 3PL SERVICE PARTNER
Choice 3PL Service Provider

Besides many companies have been traditionally transportation providers who have acquired
warehousing competence and skill sets and are not warehouse centric or focused players.
Domestic Service providers on the other hand would know the laws of the land better and know
how things work. They will have the local expertise and capability to manage operations and
resources better. By virtue of them being local and small players, one can expect better focus and
attention.


Service Provider Capability Evaluation

Evaluation of a 3PL service provider involves understanding of their capabilities both in terms of
technical competence, operational capabilities and Management Culture.

The evaluation normally consists of Detailed Response document to RFQ from the 3PL service
provider, followed by presentation by the 3PL and subsequent site visits to the proposed location,
site visits to other locations /operations of 3PL, coupled with customer references. Detailing
these processes becomes important especially in the case of a bigger project depending upon the
criticality of the project.

Management Focus / Involvement and Commitment

A management interested and focused on CL business is likely to invest into building a long term
relationship and enhance its competence and deliver better value proposition to the buyer.
Company profile and meetings with management will enable one to assess this criterion. The
other important and relevant areas to be evaluated are the IT Backbone and capabilities of the
3PL and its experience and expertise in deploying and managing WMS systems.


PRICING & REVENUE MANAGMENT

ROLE OF REVENUE MANAGEMENT
K & N’s focuses on the revenue management to adjusts the pricing and available of supply of
assets to maximize profits because revenue management play a significant role on the
profitability of the firm. in the high demand seasons, K & N’s try to manage revenue by focusing
on the customers segments and taking the orders in bulk form and then fulfilling them at the right
time. As there is high demand or bulk of orders from retailer side to distribution centers so it
helps K & N’s to use efficient way to fulfill these demands and deliver them through the efficient
modes of transportation.

700

600

500

400

300

200

100

50 100 150 200 250 300 350

Figure: Revenue Generated by K & N’s Pricing for 1 Segment


K & N’s REVENUE MANAGEMENT LEVERS
Whereas yield management involves specific actions to generate yield through perishable
inventory management, Revenue Management encompasses a wide range of opportunities to
increase revenue. A company can utilize these different categories like a series of levers in the
sense that all are usually available, but only one or two may drive revenue in a given situation.
The primary levers are:

Pricing

It involves redefining pricing strategy and developing disciplined pricing tactics. The key
objective of a pricing strategy is anticipating the value created for customers and then setting
specific prices to capture that value. K & N’s make decision to charge price against their
competitors or even their own products, but the most value comes from pricing strategies that
closely follow market conditions and demand, especially at a segment level. Once a pricing
strategy dictates what a K & N’s wants to do, pricing tactics determine how a K & N’s actually
captures the value. Tactics involve creating pricing tools that change dynamically, in order to
react to changes and continually capture value and gain revenue. Price Optimization, for
example, involves constantly optimizing multiple variables such as price sensitivity, price ratios,
and inventory to maximize revenues. K & N’s successful pricing strategy, supported by
analytically-based pricing tactics, has drastically improved a firm’s profitability.

Inventory

K & N’s has focused on controlling inventory, Revenue Management of K & N’s is mainly
concerned with how best to price or allocate capacity. First, company can discount products in
order to increase volume. By lowering prices on products, K & N’s can overcome weak demand
and gain market share, which ultimately increases revenue so long as each product sells for more
than its marginal cost. Overbooking’s focus is increasing the total volume of sales in the
presence of cancellations rather than optimizing customer mix.


Marketing

Price promotion allows K & N’s to sell higher volumes by temporarily decreasing the price of
their products. Revenue Management techniques measure customer responsiveness to
promotions in order to strike a balance between volume growth and profitability. An effective
promotion helps maximize revenue when there is uncertainty about the distribution of customer
willingness to pay. When K & N’s products are sold in the form of long-term commitments, e,
and promotions help attract customers who will then commit to contracts and produce revenue
over a long time horizon. When this occurs, K & N’s also strategize their promotion roll-off
policies; they begin decide when to begin increasing the contract fees and by what magnitude to
raise the fees in order to avoid losing customers. Revenue Management optimization proves
useful in balancing promotion roll-off variables in order to maximize revenue while minimizing
churn.

Distribution Channels

Revenue Management through channels involves strategically driving revenue through different
distribution channels. K & N’s different channels represent customers with different price
sensitivities. Different channels often have different costs and margins associated with those
channels. When faced with multiple channels to retailers and distributors, K & N’s Revenue
Management techniques also help to calculate appropriate levels of discounts to offer distributors
through opaque channels to push more products without losing integrity with respect to public
perception of quality

MARKETING INFORMATION SYSTEM
People, equipment and procedures to gather, sort analyze evaluate and distribute needed, timely
and accurate information to the marketing decision makers.

PRICING STRATEGIES
As we know that there are two types of new product pricing strategies

Price Penetrating Strategy


Price Skimming Strategy

For our product K & N’s selected the market penetration pricing strategy. K & N’s apply this
strategy to keep our product prices lower so that by doing this we attract a large numbers of
buyers and also to gain large market shares.

The reason for not using market skimming strategy is that as our product is an eatable product
and there no sense of keeping high prices for an eatable product, because as we know that
skimming strategies are for luxury products.

PRICE ADJUSTMENT STRATEGIES
After penetrating into the market, we will adopt adjustment strategies in order to increase our
sales and attract more customers. Basically these adjustment strategies are according to the taste,
culture and the changing situation of the market. Following are the price adjustment strategies.

Discount and Allowance Pricing

We will apply this strategy by giving quantity discount to our customers.

Quantity Discount

We will give quantity discount by offering “buy one get one free” offers.

We will also give discount to those customers who will buy in bulk or in large quantity.

Time Pricing Strategy

In time pricing we will lower our prices according to different seasons. K & N’s reduces prices
in Ramadan season, as its demand is more in that season.


IT SYSTEM OF K & N’s

IT IMPORTANCE in K & N’s
The use of information technology (IT) is considered a prerequisite for the effective control of K
& N’s complex supply chains. The use of IT for SCM purposes can be divided into

1) Transaction Processing

2) Supply Chain Planning and Collaboration

3) Order Tracking and Delivery Coordination

Reduction of Costs

Elimination of Human
Errors

Transaction Processing

Speeding up
Information Transfer

Volume of
Transactions b/w
parties

Unpredictable and
Supply Chain Planning Logistically
and Collaboration Demanding
Environment

Project-orientation of
the business
Order Tracking and
Delivery Coordination
In-transit Delivery
Consolidation


INFORMATION SHARING BETWEEN K & N’s SC PARTIES
IT is one of the most important enabler of the Supply chain in modern complex business
processes of K & N’s.Information sharing can be applied to almost all the core domains of
corporate operational activities of K & N’s. Starting from the development chain process where
information sharing can happen in the product design stages and product life cycle management
activities with both internal and external partners.

In the customer chain processes information sharing is helpful in formulating customer
experience strategies, increase customer service effectiveness and operations.
Information sharing is most effective and least disruptive for all concerned when done by
implementing the available technological tools, which would accomplish the process in a
controlled and secured way thereby streamlining the global supply chain operations.
Collaborative Planning, Forecasting and Replenishment workflows and solutions exist in
the supply chain process of K & N’s to enhance supply chain integration and data sharing
across business activities and K & N’s is effectively use it for their competitive
advantage.
Additionally, synchronized and tightly integrated procurement and manufacturing
planning activities gave K & N’s planners the ability to quickly re-plan national based on
changes in execution.

Challenges Faced by K & N’s

The current challenges that K & N’s is facing in implementing these workflows really
revolve around non-integrated processes and systems with retailers and manufacturers
operating out of their own silo and different planning data. This results in excessive
response times, costs and inventory due to forecast inaccuracy. Retailers on one hand
face stock-outs, material shortages, lost sales and poor customer service to name a
few.
The gains achieved were two-fold. On the planning side sharing of mid to long term
forecast and publishing near term requisition forecast to suppliers and receiving
supply commits from them resulted in reduced material shortages and stock-outs at
the component level.

Supply Chain Management of K&N's Foods

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