SUPPLY CHAIN MANAGEMENT of                          K & N’s FoodsSubmitted To:                   Mr. Israr Khan RajaSubmit...
Acknowledgement      First of all we are grateful to the blessings of Almighty ALLAH who gave us ability to      complete ...
TABLE OF CONTENTSHISTORY ....................................................................................................
CHANNEL BEHAVIOR CONFLICT ......................................................................................... 18MARK...
INTRODUCTIONHISTORYThe year 1964, Pakistan was a young independent nation forging ahead towards a dream, selfsufficiency i...
GRANAASIA. Business projects of M.ARTAL in Pakistan were Harry’s bread, Aiwa mineralwater, KFC restaurants and poultry pro...
Absolute                                                 Integrity                               High Quality   OPERATIONA...
Along with the developed brand identity and trust reposed by customers, K&N’s has          established its name in interna...
K & N’s Business Processes & PracticesBUSINESS PROCESSES & PRACTICESPoultry BreedingK&N’s maintains layer and broiler pare...
proper techniques and modern equipment. To ensure chicks get off to the healthiest start and stayprotected from viral dise...
operation each day. All chickens pass through veterinary inspection to confirm they arewholesome.Ready-To-Cook and Fully C...
STRATEGIC SUPPLY CHAIN PLANNINGThere are four steps which basically form the plan for our company which could derive resul...
K & N’S COMPETITIVE STRATEGYK & N’s competitive strategy has following core elements which are kept in mind whiledevelopin...
K & N’S SUPPLY CHAIN STRATEGYProduct flow involves the movement of goods from a supplier to a customer, as well as anycust...
K & N’s Competitive Strategy                          To Provide Distinctive, valued,                          standardize...
FRAMEWORK OF SUPPLY CHAIN IN K & N’s     Raw                             intermediate   Meterial                          ...
K & N’s NETWORK DESIGNK & N’S DISTRIBUTION NETWORKDelivery Methods from Company to Warehouse and ware house to retailers.K...
Cost of Development Of ProductsThe price of our product is based on cost of all ingredient used because of its low price o...
FRAMEWORK OF K & N’S DISTRIBUTION                                   K & N’s Manufacturing &                               ...
K & N’s FRAMEWORK OF NETWORK DESIGN DECISIONK & N’s Competitive             Phase IStrategy                               ...
INVENTORY MANAGEMENTSTORING PROCEDURESStoring Procedure is as per the International standards laid out by WHO for such pro...
Physical Infrastructures of K & N’s In-house StoresThe building blocks or operational criteria of K & N’s Warehouse Manage...
PRACTICES OF KEEPING GOOD INVENTORY MANAGEMENTGood inventory Management practices in the K & N’s helps by adding value in ...
K & N’S TRANSPORTATION NETWORKTRANSPORTATION NETWORKAs required for the frozen foods, K&Ns transports its products all the...
Suppliers                                                             Manufacturing                                       ...
SOURCING DECISIONS –1st CROSS FUNCTIONAL DRIVERBROILER AND OTHER RAW MATERIALSAlmost 90% of the Broilers for processing ar...
after market, managing rejections too. Procurement function works closely with procurementlogistics or inbound supply chai...
Service Provider Capability EvaluationEvaluation of a 3PL service provider involves understanding of their capabilities bo...
PRICING & REVENUE MANAGMENTROLE OF REVENUE MANAGEMENTK & N’s focuses on the revenue management to adjusts the pricing and ...
K & N’s REVENUE MANAGEMENT LEVERSWhereas yield management involves specific actions to generate yield through perishablein...
MarketingPrice promotion allows K & N’s to sell higher volumes by temporarily decreasing the price oftheir products. Reven...
Price Skimming StrategyFor our product K & N’s selected the market penetration pricing strategy. K & N’s apply thisstrateg...
IT SYSTEM OF K & N’sIT IMPORTANCE in K & N’sThe use of information technology (IT) is considered a prerequisite for the ef...
INFORMATION SHARING BETWEEN K & N’s SC PARTIESIT is one of the most important enabler of the Supply chain in modern comple...
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Project on K & N 's Supply Chain Management

  1. 1. SUPPLY CHAIN MANAGEMENT of K & N’s FoodsSubmitted To: Mr. Israr Khan RajaSubmitted 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 IslamabadQuaid-i-Azam School of Management Sciences Islamabad 1
  2. 2. 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
  3. 3. TABLE OF CONTENTSHISTORY ....................................................................................................................................... 5K & N’s BACKGROUND.............................................................................................................. 5COMPANY MISSION ................................................................................................................... 6MARKET ORIENTED MISSION ................................................................................................. 6K & N’s GOALS AND OBJECTIVES .......................................................................................... 6SWOT ANALYSIS OF K& N’s..................................................................................................... 7BUSINESS 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 .................................................................................... 11STRATEGIC SUPPLY CHAIN PLANNING.............................................................................. 12K & N’S COMPETITIVE STRATEGY....................................................................................... 13K & N’S SUPPLY CHAIN STRATEGY ..................................................................................... 14K & N’s MARKETING STRATEGY .......................................................................................... 14FRAMEWORK OF SUPPLY CHAIN IN K & N’s ..................................................................... 16K & N’S DISTRIBUTION NETWORK ...................................................................................... 17DISTRIBUTION OF K & N’s PRODUCTS ................................................................................ 17DISTRIBUTION CHANNEL OF K & N’s PRODUCT .............................................................. 17Quaid-i-Azam School of Management Sciences Islamabad 3
  4. 4. CHANNEL BEHAVIOR CONFLICT ......................................................................................... 18MARKETING SYSTEM .............................................................................................................. 18TYPE OF VMS ............................................................................................................................. 18FRAMEWORK OF K & N’S DISTRIBUTION .......................................................................... 19K & N’s FRAMEWORK OF NETWORK DESIGN DECISION ............................................... 20STORING PROCEDURES .......................................................................................................... 21REASONS WHY K & N’s MAINTAIN RAW MATERIAL INVENTORY? ............................ 21WAREHOUSE/STORING MANAGEMENT SYSTEM ............................................................ 21PRACTICES OF KEEPING GOOD INVENTORY MANAGEMENT ...................................... 23INVENTORY HEALTH - IMPORTANT FACTORS TO BE CONSIDERED TO AVOIDINVENTORY ............................................................................................................................... 23TRANSPORTATION NETWORK .............................................................................................. 24 Direct Shipment Method ........................................................................................................... 24BROILER AND OTHER RAW MATERIALS ........................................................................... 26K & Ns SUPPLIERS .................................................................................................................... 26PRODUCTION METHODS ........................................................................................................ 26SOURCING STRATEGIES & PROCUREMENT PROCESSES ............................................... 26SELECTING 3PL SERVICE PARTNER .................................................................................... 27ROLE OF REVENUE MANAGEMENT .................................................................................... 29K & N’s REVENUE MANAGEMENT LEVERS ....................................................................... 30MARKETING INFORMATION SYSTEM ................................................................................. 31PRICING STRATEGIES ............................................................................................................. 31IT IMPORTANCE in K & N’s ..................................................................................................... 33INFORMATION SHARING BETWEEN K & N’s SC PARTIES .............................................. 34 Challenges Faced by K & N’s .................................................................................................. 34Supply Chain Management of K & N’s 4
  5. 5. INTRODUCTIONHISTORYThe year 1964, Pakistan was a young independent nation forging ahead towards a dream, selfsufficiency in food production. Malnutrition remained a major problem and one out of fourchildren died before attaining the age of five. 80% of the ailing children were affected withdiseases caused by protein, vitamins and minerals deficiency. Poultry production, the quickestand 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 needto establish a poultry farm. His interest led him to start a broiler farm of 1, 000 chicks. Little hadhe known this flock was to become the foundation stone of K& N’s? This was the simple,inspired and nationalistic beginning of K&Ns with a single minded objective of providing abetter nutrition for health and happiness of the nation.K & N’s BACKGROUNDK&N’s is the founding pillar and beacon for Pakistan poultry industry- started in 1964 with asingle 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 allpoultry production activities under one umbrella to ensure quality and food-safety by managingand controlling all stages of productionIt is a marvelous food industry located at Raiwind. It deals with poultry processing. K & N´sPoultry 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 mainsupplier of eggs in Pakistan and is the biggest poultry industry in Pakistan. Formerly K &N’sfood was M.ARTAL Poultry Int’l Private Limited. M.ARTAL was Belgium base. It wasregistered 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 ARTALQuaid-i-Azam School of Management Sciences Islamabad 5
  6. 6. GRANAASIA. Business projects of M.ARTAL in Pakistan were Harry’s bread, Aiwa mineralwater, KFC restaurants and poultry processing. Poultry processing was integrated business. Butunfortunately 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 onJanuary 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 toprovide them safe and healthy chicken. Their trust in K&Ns and endorsement as Pakistansfavorite Chicken honored us.COMPANY MISSIONDriven by its basic values in pursuit of perfection, K&N’s is committed to have superiorproducts and unmatched service through devoted people and consistent development.MARKET ORIENTED MISSIONProviding the best hygiene and nutrition for the health and happiness of the nation being our veryfirst promised makes us remain stick to our commitment to the customers rather look for whatone may call better for one’s self. The increasing demand of our products all over the countryexplains the worth; our promises are getting through our valuable customers.K & N’s GOALS AND OBJECTIVESK&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 tofood-safety, K&N’s integrated all poultry production activities under one umbrella to ensurequality and food-safety managing and controlling all stages of production.Four basic objectives of absolute integrity, enthusiastic diligence, continuous improvement andhigh quality maintenance are at the core of all operations which provide an impelling urge forattaining perfection. Driven by its basic objectives in pursuit of perfection, K&Ns is committedto have superior product and unmatched service through devoted people and consistentdevelopment.Supply Chain Management of K & N’s 6
  7. 7. Absolute Integrity High Quality OPERATIONAL Enthusiastic Maintenance Diligence OBJECTIVES Continuous ImprovementSWOT ANALYSIS OF K& N’sIn 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 overallstandard, quality and brand equity while growing in competition to other production units inPakistan.In its quality assurance cell, the company maintains a check and balance on methods of salesdistribution, new business ideas and strategic options, such as entering a new market orlaunching 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.Quaid-i-Azam School of Management Sciences Islamabad 7
  8. 8. 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 ofOpportunities 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.Supply Chain Management of K & N’s 8
  9. 9. K & N’s Business Processes & PracticesBUSINESS PROCESSES & PRACTICESPoultry BreedingK&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 coldermountainous 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 toensure delivery of high quality layer and broiler day-old chicks to commercial farmersthroughout PakistanStrict bio-security measures are taken at all farms to reduce the risk of disease transmissionthrough mechanically and physically transferred disease causative agents. Careful attention ispaid to bird health, vaccination, weightiest and selection to maintain healthy and uniformbreeding flocks. Hatching-eggs are cooled down inside air conditioned, humidified egg-rooms,packed and dispatched in sanitized and environment-controlled vehicles to company ownedhatcheries located throughout Pakistan.HatchingAll hatcheries are equipped with most modern cooling, heating and humidification systems toprovide a uniform and consistent hatchery environment independent of varying outdoor weatherconditions. Incubators from world-renowned manufacturers are installed at all hatcheries andtheir performance data is recorded and monitored by a computerized incubation monitoringsystem.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 mechanicallytransferring eggs from one type of tray onto another until chicks are harvested from hatchers.Maximum care is exercised while handling, reconstituting and administering vaccines usingQuaid-i-Azam School of Management Sciences Islamabad 9
  10. 10. proper techniques and modern equipment. To ensure chicks get off to the healthiest start and stayprotected from viral diseases, they receive inject able and spray vaccinations at the hatchery.Broiler GrowingIn addition to supplying day-old chicks to farmers, K&N’s is also engaged in broiler growing atcompany owned farms to produce broilers for our poultry processing plant. Under the watchfuleye of our own poultry nutrition, health and housing specialists, they grow-up in large, clean andairy houses equipped with state-of-the-art heating, cooling and ventilation equipment. Thechickens 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 towater contamination.Feed MillingTo ensure consistent performance with high standards, our chickens really live on a healthy andwell balanced diet. It is based on: natural grain products such as corn, corn gluten, rice andwheat; oil seed meals such as soybean, canola and sunflower; fish; oyster shells supplementedwith multi-vitamins and minerals.Feed is always tested by our quality assurance lab to ensure it is wholesome because K&N’sdoes not compromise on quality. Feed is also supplied to our day-old chick customers andgrowers for realizing the profit potential of K&N’s quality day-old chicks.Poultry ProcessingAt our state-of-the-art poultry processing plant, only healthy chickens are used to produce highquality, safe and healthy chicken products. Chickens are Halal slaughtered by hand (IslamicZabeeha) 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 thebirds to confirm they are wholesome. Cleaning is constant and each evening the entire operationis completely washed and sanitized. Only after very thorough inspection, the plant beginsSupply Chain Management of K & N’s 10
  11. 11. operation each day. All chickens pass through veterinary inspection to confirm they arewholesome.Ready-To-Cook and Fully Cooked Chicken ProductsSome chickens are used for preparing our ready-to-cook and fully cooked chicken products usingstate-of-the-art meat preparation and production equipment. Choicest meat is carved and selectingredients are added to our premium chicken meat, for preparing flavorful high-quality productssuch as burger patties, nuggets and kababs. Our world-class value-added chicken products areindividually quick frozen using Individual Quick Freezing (IQF) Technology.Distribution System & Chicken StoresProducts are stored at -21ºC to maintain freshness. Packed products are moved into K&N’ssanitized refrigerated trucks for distribution to ensure uncompromising quality control. K&N’schicken products are available at K&N’s Chicken Stores and leading retailers and also deliveredto quality and food-safety conscious institutions such as hotels, restaurants, airlines, clubs andinternational restaurant chainsQuality Assurance LabK&N’s state-of-the-art Quality Assurance Lab monitors the entire integration process, fromlivestock to feed and on to preparation of ready-to-cook & fully cooked products. The entireintegration process is monitored and regulated to ensure K&N’s chicken products arewholesome, safe and healthy.Poultry Diagnosis & Research InstituteWith the assistance of US Agency for International Development, K&N’s Poultry Diagnosticand Research Institute was established in collaboration with Pakistan Agricultural ResearchCouncil. It is a very well equipped and state-of-the-art disease diagnostic, feed and feed rawmaterial testing laboratory which provides invaluable service to Pakistan’s poultry industrythrough research and extension service in close coordination with K&N’s Advisory Service.Quaid-i-Azam School of Management Sciences Islamabad 11
  12. 12. STRATEGIC SUPPLY CHAIN PLANNINGThere are four steps which basically form the plan for our company which could derive results inform 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 4In 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-termobjectives. The products are characterized and allotted weights according to demand andnecessity basis, which eventually forms the business portfolio.Supply Chain Management of K & N’s 12
  13. 13. K & N’S COMPETITIVE STRATEGYK & N’s competitive strategy has following core elements which are kept in mind whiledeveloping 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 standardAffordable: e. Buyer can afford to pay for the difference.Profitable: f. The difference is profitable both for the company and the customers.Quaid-i-Azam School of Management Sciences Islamabad 13
  14. 14. K & N’S SUPPLY CHAIN STRATEGYProduct flow involves the movement of goods from a supplier to a customer, as well as anycustomer returns or service needs, information flow involves getting orders. Supply chainmanagement 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 arrangementsK & N’s MARKETING STRATEGYK&N’s is using the marketing concept as its current marketing technique stating that “theorganization should be aware of the needs and wants of the target markets and should bedelivering the desired satisfaction better then the competitors do in order to achieve theorganizational goals.”Product Concept:This concept says that “consumer will favor products that offer the most quality performance andfeatures and that the organization should therefore devote its energy to making continuousproduct improvements.”K&N’s from the very beginning has focused on providing better nutrition for the health andhappiness of the nation and we will be keeping the words as they were before. Quality is ourvery first priority that will make us build strong and profitable customer relationships.Supply Chain Management of K & N’s 14
  15. 15. 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 partiesEfficiency K & N’s Supply Chain Structure Responsiveness Facilities Inventory TransportationInformation Sourcing PricingFigure: K & N’s Supply Chain Decision Making FrameworkQuaid-i-Azam School of Management Sciences Islamabad 15
  16. 16. FRAMEWORK OF SUPPLY CHAIN IN K & N’s Raw intermediate Meterial Suppliers Supplier Own Production/ Outlets/ Distribut Processing Stores ion Industrial Backward Integration SuppliersSupply Chain Management of K & N’s 16
  17. 17. K & N’s NETWORK DESIGNK & N’S DISTRIBUTION NETWORKDelivery Methods from Company to Warehouse and ware house to retailers.K&Ns 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 PRODUCTSAfter the development of our product our product are distributed into the market for thesatisfaction and attraction of our consumers. Our product plays a vital role in the availability ofour 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 StoresDISTRIBUTION CHANNEL OF K & N’s PRODUCTThe distribution channel of our product is indirect marketing channel because this channelcontains one or more intermediary levels.Quaid-i-Azam School of Management Sciences Islamabad 17
  18. 18. Cost of Development Of ProductsThe price of our product is based on cost of all ingredient used because of its low price ourproduct is very popular among customers. Product s Our product offers consumptions, attention to satisfy desire or need in the marketLevel 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 CONFLICTThe 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 commonMARKETING SYSTEMK & N’s products consist of vertical marketing system (VMS) because it is such type ofdistribution channel in which producers, wholesalers, retailers act as Unified system. So that onechannel member owns the others, has contracts with them, or has so much power that they allcooperate.TYPE OF VMSK & N’s products lies in the administered VMS in the vertical marketing system because thistype of VMS coordinates successive stages of production and distribution, not through commonownership or contractual ties, but through the size and power of the parties.Supply Chain Management of K & N’s 18
  19. 19. FRAMEWORK OF K & N’S DISTRIBUTION K & N’s Manufacturing & Processing Plant Central (Lahore) Distribution Centers North Central SouthIslamabad/Rawalpindi,Jehl Karachi & Hyderabad Lahore & Multanum ,Peshawar Regions Region Region K & N’s Stores (67 Stores in Major Retailers cities) Customer Customer Customer Customer Customer Customer Quaid-i-Azam School of Management Sciences Islamabad 19
  20. 20. K & N’s FRAMEWORK OF NETWORK DESIGN DECISIONK & N’s Competitive Phase IStrategy Competition in the K & N’s Market Supply ChainK & N’s Internal StrategyLimitationsK & N’s Production, Taxes & IncentivesFrozen and Storing Phase IITechnologies K & N’s Country DemandCompetition in the Facilities inIndustry Central, North & South Demand RiskTransportation Costs Region Phase III Infrastructure forK & N’s Production & K & N’s Poultry Breeding andPocessing Methods Favorable Sites Frozen Meet Phase IVFactors Cost Transportation & Locations for Delivery to Stores and Processing and Outlets Delivery Supply Chain Management of K & N’s 20
  21. 21. INVENTORY MANAGEMENTSTORING PROCEDURESStoring Procedure is as per the International standards laid out by WHO for such products. Anin-house developed integrated soft ware for inventory management is in place to ensure data update & First in First Out deliveries. REASONS WHY K & N’s MAINTAIN RAW MATERIALINVENTORY?Most of the K & N’s have raw material inventory warehouses attached to the productionfacilities where raw materials, consumables and packing materials are stored and issue forproduction 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 InventoryWAREHOUSE/STORING MANAGEMENT SYSTEMIn K & N’s Supply Chain, Inventory Management and Warehousing/storing form a part ofoperations intensive function and is one of the key building blocks in the entire chain. Most ofthe inventory is held at the warehouses and storing as compared to the pipeline, and theefficiency 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 3PLLogistics service provider but K & N’s supply chain management believes to build its ownwarehouses and cold storages to reduce costs and keep its inventory in safe environment.Quaid-i-Azam School of Management Sciences Islamabad 21
  22. 22. Physical Infrastructures of K & N’s In-house StoresThe 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 SystemsA 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.Supply Chain Management of K & N’s 22
  23. 23. PRACTICES OF KEEPING GOOD INVENTORY MANAGEMENTGood inventory Management practices in the K & N’s helps by adding value in terms of havingcontrol over and maintaining lean inventory. Inventory at K & N’s stores is not too much or tooless. 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 inventoryINVENTORY HEALTH - IMPORTANT FACTORS TO BE CONSIDERED TOAVOID INVENTORYMismatch inventory management on one hand consists of managing the inventory transactionsand data in the system and on the other it involves physical processes on the ground.Systems IssuesWhen in case of day-to-day operations, hundreds of transactions are being processes at both theends concurrently; the system updates may not happen on real time basis and can lead toinventory discrepancies. Therefore the K & N’s have to daily reconciliation of all transactionsbetween both systems as well as operations.System Discipline RequiredAny lack of discipline can affect not only the inventory but effect transactions as well. ForExample, if for any reason a particular SKU or consignment is blocked at the warehouse and isnot to be dispatched, the inventory block should not only happen in WMS which controls flooroperations but in ERP also.System Inventory is Matched with Physical InventoryThe inventory that is setup and maintained in the ERP as well as WMS should correspond to theinventory on the shop floor.Quaid-i-Azam School of Management Sciences Islamabad 23
  24. 24. K & N’S TRANSPORTATION NETWORKTRANSPORTATION NETWORKAs required for the frozen foods, K&Ns transports its products all the way through Cold Chain,supported by specially designed own vehicles to maintain temperatures in the required range tomaintain product quality.Direct Shipment MethodWith the direct shipment network option, the buyer structures his transportation network so thatall shipments come directly to each buyer locations. Routing is specified and only thetransportation 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 SuppliesSupply Chain Management of K & N’s 24
  25. 25. Suppliers Manufacturing /Processing Plant In-House Storing StoresDistribution Centre Consumer Outlets Retailers Flow Chart: Supply Chain-A Journey of K & N’s from Supplier to Valuable Consumer Quaid-i-Azam School of Management Sciences Islamabad 25
  26. 26. SOURCING DECISIONS –1st CROSS FUNCTIONAL DRIVERBROILER AND OTHER RAW MATERIALSAlmost 90% of the Broilers for processing are produced at K&Ns own Poultry farms located inthe suburbs of Lahore. Broilers of course, are our major raw material. Other than that, manyingredients & spices are procured from within Pakistan & some ingredients are also imported toproduce the Best Chicken Products for the Health & Happiness of our consumersK & Ns SUPPLIERSUnder the Supply Chain concept, the suppliers are our Business Partners & long lastingrelationship is maintained in the mutual interest. Accordingly, K&Ns, over the period, hasmultiple business partners in the field of Packaging, ingredients & many other fields.PRODUCTION METHODSDepending 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 addedproducts are produced through Fully Automated Process in K & N’s processing departments.SOURCING STRATEGIES & PROCUREMENT PROCESSESAt K & N’s procurement managers manage procurement and sourcing function both at strategicand 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 andmanufacturing functions.Procurement FunctionProcurement functions in K & N’s deals not only with procurement of raw materials andcomponents, but also with capital equipments, project procurement, ingredients procurementSupply Chain Management of K & N’s 26
  27. 27. after market, managing rejections too. Procurement function works closely with procurementlogistics or inbound supply chain in K & N’s.Procurement Process and Sourcing StrategyThough interlinked closely, both procurement process and sourcing strategy are not one andsame. K & N’s sourcing strategy deals with planning, designing and building a reliable andcompetitive supplier base, determining the strategy for procurement, defining pricing strategiesand supply chain requirements. The strategy involves integration of its objectives in line with orconfirming 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 rawmaterials, 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 shorterproduct life cycles. Lean Manufacturing and cost per unit concept is demanding that themanagers keep looking to reduce the procurement cost as well as procurement logistics cost. Bydeveloping a relationship with suppliers in a collaborative mode, buyers are able to get suppliercompanies to hold inventories for them at buyer location and postpone taking inventoryownership up to the point of consumption.SELECTING 3PL SERVICE PARTNERChoice 3PL Service ProviderBesides many companies have been traditionally transportation providers who have acquiredwarehousing 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 knowhow things work. They will have the local expertise and capability to manage operations andresources better. By virtue of them being local and small players, one can expect better focus andattention.Quaid-i-Azam School of Management Sciences Islamabad 27
  28. 28. Service Provider Capability EvaluationEvaluation of a 3PL service provider involves understanding of their capabilities both in terms oftechnical competence, operational capabilities and Management Culture.The evaluation normally consists of Detailed Response document to RFQ from the 3PL serviceprovider, 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. Detailingthese processes becomes important especially in the case of a bigger project depending upon thecriticality of the project.Management Focus / Involvement and CommitmentA management interested and focused on CL business is likely to invest into building a long termrelationship 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. Theother important and relevant areas to be evaluated are the IT Backbone and capabilities of the3PL and its experience and expertise in deploying and managing WMS systems.Supply Chain Management of K & N’s 28
  29. 29. PRICING & REVENUE MANAGMENTROLE OF REVENUE MANAGEMENTK & N’s focuses on the revenue management to adjusts the pricing and available of supply ofassets to maximize profits because revenue management play a significant role on theprofitability of the firm. in the high demand seasons, K & N’s try to manage revenue by focusingon the customers segments and taking the orders in bulk form and then fulfilling them at the righttime. As there is high demand or bulk of orders from retailer side to distribution centers so ithelps K & N’s to use efficient way to fulfill these demands and deliver them through the efficientmodes 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 SegmentQuaid-i-Azam School of Management Sciences Islamabad 29
  30. 30. K & N’s REVENUE MANAGEMENT LEVERSWhereas yield management involves specific actions to generate yield through perishableinventory management, Revenue Management encompasses a wide range of opportunities toincrease revenue. A company can utilize these different categories like a series of levers in thesense that all are usually available, but only one or two may drive revenue in a given situation.The primary levers are:PricingIt involves redefining pricing strategy and developing disciplined pricing tactics. The keyobjective of a pricing strategy is anticipating the value created for customers and then settingspecific prices to capture that value. K & N’s make decision to charge price against theircompetitors or even their own products, but the most value comes from pricing strategies thatclosely follow market conditions and demand, especially at a segment level. Once a pricingstrategy dictates what a K & N’s wants to do, pricing tactics determine how a K & N’s actuallycaptures the value. Tactics involve creating pricing tools that change dynamically, in order toreact to changes and continually capture value and gain revenue. Price Optimization, forexample, involves constantly optimizing multiple variables such as price sensitivity, price ratios,and inventory to maximize revenues. K & N’s successful pricing strategy, supported byanalytically-based pricing tactics, has drastically improved a firm’s profitability.InventoryK & N’s has focused on controlling inventory, Revenue Management of K & N’s is mainlyconcerned with how best to price or allocate capacity. First, company can discount products inorder to increase volume. By lowering prices on products, K & N’s can overcome weak demandand gain market share, which ultimately increases revenue so long as each product sells for morethan its marginal cost. Overbooking’s focus is increasing the total volume of sales in thepresence of cancellations rather than optimizing customer mix.Supply Chain Management of K & N’s 30
  31. 31. MarketingPrice promotion allows K & N’s to sell higher volumes by temporarily decreasing the price oftheir products. Revenue Management techniques measure customer responsiveness topromotions in order to strike a balance between volume growth and profitability. An effectivepromotion helps maximize revenue when there is uncertainty about the distribution of customerwillingness 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 revenueover a long time horizon. When this occurs, K & N’s also strategize their promotion roll-offpolicies; they begin decide when to begin increasing the contract fees and by what magnitude toraise the fees in order to avoid losing customers. Revenue Management optimization provesuseful in balancing promotion roll-off variables in order to maximize revenue while minimizingchurn.Distribution ChannelsRevenue Management through channels involves strategically driving revenue through differentdistribution channels. K & N’s different channels represent customers with different pricesensitivities. Different channels often have different costs and margins associated with thosechannels. When faced with multiple channels to retailers and distributors, K & N’s RevenueManagement techniques also help to calculate appropriate levels of discounts to offer distributorsthrough opaque channels to push more products without losing integrity with respect to publicperception of qualityMARKETING INFORMATION SYSTEMPeople, equipment and procedures to gather, sort analyze evaluate and distribute needed, timelyand accurate information to the marketing decision makers.PRICING STRATEGIESAs we know that there are two types of new product pricing strategies Price Penetrating StrategyQuaid-i-Azam School of Management Sciences Islamabad 31
  32. 32. Price Skimming StrategyFor our product K & N’s selected the market penetration pricing strategy. K & N’s apply thisstrategy to keep our product prices lower so that by doing this we attract a large numbers ofbuyers and also to gain large market shares.The reason for not using market skimming strategy is that as our product is an eatable productand there no sense of keeping high prices for an eatable product, because as we know thatskimming strategies are for luxury products.PRICE ADJUSTMENT STRATEGIESAfter penetrating into the market, we will adopt adjustment strategies in order to increase oursales 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 PricingWe will apply this strategy by giving quantity discount to our customers.Quantity DiscountWe 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 StrategyIn time pricing we will lower our prices according to different seasons. K & N’s reduces pricesin Ramadan season, as its demand is more in that season.Supply Chain Management of K & N’s 32
  33. 33. IT SYSTEM OF K & N’sIT IMPORTANCE in K & N’sThe 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 into1) Transaction Processing2) Supply Chain Planning and Collaboration3) 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 ConsolidationQuaid-i-Azam School of Management Sciences Islamabad 33
  34. 34. INFORMATION SHARING BETWEEN K & N’s SC PARTIESIT is one of the most important enabler of the Supply chain in modern complex businessprocesses of K & N’s.Information sharing can be applied to almost all the core domains ofcorporate operational activities of K & N’s. Starting from the development chain process whereinformation sharing can happen in the product design stages and product life cycle managementactivities 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 34

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