1 Supply chain managment

Table of Contents
Pizza Hut ................................................................................................................................................ 2
Pizza Hut Pakistan ................................................................................................................................ 2
Outlet in Pakistan: ................................................................................................................................ 2
Product line of Pizza hut ...................................................................................................................... 3
Supply chain strategies ......................................................................................................................... 3
Supply chain management ................................................................................................................... 4
Drivers of Supply Chain ....................................................................................................................... 4
Facilities: ............................................................................................................................................ 5
Components of Facility ................................................................................................................. 6
Inventory: .......................................................................................................................................... 6
Components of Inventory .............................................................................................................. 6
Procedure Inventory Control: ..................................................................................................... 7
Transportation: ................................................................................................................................. 7
Information: ...................................................................................................................................... 8
Components of information ......................................................................................................... 9
Sourcing: .......................................................................................................................................... 10
Components of sourcing: ............................................................................................................ 10
Pricing: ............................................................................................................................................. 12
Responsiveness and Efficiency: ......................................................................................................... 13
Conclusion ........................................................................................................................................... 13
2 Supply chain managment

Pizza Hut
Pizza hut is the world renowned pizza chain. Pizza Hut Inc. was firstly introduced by
Dan and Frank Carney brothers in the year 1958 in their hometown of Wichita, Kansas.
Pizza Hut is an international franchise and it has its American restaurant chain.

Pizza Hut Pakistan

Pizza Hut was first incorporated in Pakistan way back in 1993. The journey that started
has not stopped, it continues to this day. There are over 43 outlets of Pizza Hut chain spread
all across Pakistan, and is undoubtedly, the largest restaurant chain in Pakistan. Various
amazing flavors and toppings have been launched by the Pizza Hut team, in addition to this, it
also strives to deliver new and ever-better tastes. The critically acclaimed topping, Chicken
Tikka, when firstly introduced in Pakistan, has swept the world since its creation. Customers
prefer Pizza Hut because of the innovative products and concepts being offered, and the
consistently high level of service, quality and standards that they have set and meet every day.
This is the basic technique or mantra that is uphold in all their restaurants, touching the lives
of hundreds and thousands on a daily basis.

Outlet in Pakistan:
City Outlets Address
KARACHI Clifton 1 QM Building, Plot# BC 15, Block, Khayaban-e-Roomi, Clifton
Clifton 2 Plot No. GPC-6, KDA Scheme 5, Kharkhar Chowrangi, Clifton

Zamzama 19-C, Zamzama Commercial Lane-9, Phase V, D.H.A

Gulshan-e-Iqbal 36-B, Hina Centre, Gulshan-e-Iqbal

I.I Chundrigar Road Mitha Chamber, I.I Chundrigar Road

North Nazimabad D-5, Block-D, North Nazimabad

Sea View Sea View

Cantt. Station Cantt. Station

Shahbaz 14-C, Lane 2, Kh-e-Shahbaz, Phase 6, D.H.A.

Atrium Mall 249, Staff Lines, Zaib un Nisa Street, Saddar

Shaheed-e-Millat Shop S-104 & Mazzanine Floor, Plot 7/4, block 3, DMC Housing
Road Society, Shaheed-e-Millat Road
Rashid Minhas Road Plot No. 8, Block 10-A, KDA Scheme No.24, Main Rashid Minhas
Road
Sharae' Faisal Shop No. 6, Al-Kamran Centre, Plot # 7-A,Block 6, P.E.C.H.S.

M. Ali Society Plot No. 12-C, Reliance Arcade, Muhammad Ali Soicety

Gulshan Block 7 1-B/FL-6, Block 7, Gulshan-e-Iqbal

Nazimabad 2 Opposite Matric Board Office

Korangi (Industrial Plot ST-6/4, Sector 24, Chamra Chowrangi, Korangi Industrial
Area) Area

LAHORE Gulberg 89/B-1, Gulberg-III, M.M. Alam Road,Aligarh Chowrangi

3 Supply chain managment

Mall Road 73- Mall Plaza, The Mall

M-3 Fortress Stadium

Defence 122-Y, Lahore Cantonment Soceity, Defence

Railway Station Railway Station

Johar Town Plot #15, Block N, Johar Town

Iqbal Town Block 6, Near Akbari Store, Allama Iqbal Town

Barkat Market Barkat Market 8, Power Block, Garden Town

Gulberg Delco 4-E-1, Hali Road, Gulberg 3

PSO Sunshine PSO Petrolium (Sunshine), Abid Majeed Rd. (Girja Chowk),
Cantt.

HYDERABAD Hyderabad Plot # 45, Hotel Indus, Thandi Sarak

ISLAMABAD Jinnah Super F-7 13-1, Sector F-7, Markaz, Jinnah Super Market
F-10 1-K, Plaza, F-10 Markaz

PESHAWAR Peshawar Captain Karnal Sher Khan, Stadium, ShamiRoad, Peshawar

Cantt.

Product line of Pizza hut

 Soupes
 Starters
 Pasta
 Sandwiches
 Pizzas
 Desserts
 Drinks

Supply chain strategies

He fast food chain recounts its transition from early data mining efforts to a project
where it recovered the costs of software licensing and started generating revenue. All
management programs are built on a data warehouse of millions of customer records gleaned
from point of sale transactions at its restaurants. They know your favorite topping, what you
ordered last and whether you like salad with your meat lover's pie. Much of that has to do with
data mining, a technology that converts details from customer data into competitive intelligence
that companies use to predict trends and behaviors. By using Teradata Warehouse Miner, all
data mining functions run directly inside the database. "A lot of data mining can be sloppy as
a result of situations where they are sampling from too small a source and it comes up with
conclusions that are too preliminary. With Teradata Miner, you can scan all the data as opposed
to sampling," Manager said database vendors are pushing mining into the warehouse and they
are doing it so companies can exploit all the technology of data mining from the database.
4 Supply chain managment

"Pizza Hut is taking advantage of this," The added benefits of in-database mining include
minimizing data redundancy, reduced proprietary data structures and simplified data and
system management. "You get better results using a larger amount of detailed data. You
eliminate the human factor that can lead to potential errors during data movement and
samples,” manager said.

Supply chain management

Supply chain plays a critical role in maintain the organizations brand image and service
levels in the market. In this section we will speak about Supply Chain Management (SCM) in
general first and then will confine it to the fast food industry. Supply chain is the term used to
define the parties involved in the process of meeting customer demand. The parties involved
in the supply chain are

 Suppliers
 Manufacturers / producers
 Distributors
 Retailers
 customers

Supply chain is basically the movement of material from source to end customer.
Supply Chain includes purchasing, manufacturing, warehousing, transportation, customer
service; demand planning, supply planning and Supply Chain management. All the activities
that are involved in moving a product from its supplier to customer are included in this like
people, activities, information and resources.

Drivers of Supply Chain

Supply chain capabilities are showed by the decisions made regarding the drivers of supply
chain. Each of these drivers are developed and managed to highlight responsiveness or
efficiency according to fluctuating business requirements. Decisions made regarding how each
driver operates will determine the combination of responsiveness and efficiency a supply chain
is capable of achieving. These drivers are divided into two categories i.e; logistics and cross
functional drivers. The cross-functional and logistical drivers of supply chain performance are
as follows;

Logistical drivers

There are three logistical drivers. Logistics is the process of planning and executing the
efficient transportation and storage of goods from the point of origin to the point of
consumption. The goal of logistics is to meet customer requirements timely and in cost-
effective manner. Logistical drivers are as follows;

 Facilities
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 Inventory
 Transportation

Cross-functional drivers

There are also three cross functional drivers. It means the information regarding coordination
between the supply chain.it also includes the prices charged to goods and services and
procurement of raw materials.These drivers are as follows;

 Information
 Sourcing
 Pricing

Company’s supply chain attains the balance between responsiveness & efficiency that
efficiently meets the needs of the company competitive strategy. The diagram about the drivers
of supply chain is given below.

Facilities:

Facilities are the actual physical locations in the supply chain network where product is stored,
assembled or fabricated. Facilities are further divided into two major types. They are;

 Production sites
 Storage sites

The fundamental trade-off that managers face while making facilities related decision between
the cost of the number, location, type of facilities & level of responsiveness that these facilities
provide the company’s customer. There are some facilities that are provided to the customers
of Pizza Hut.

 Air Conditioning
 Parking in the Oracle
 Take Away
 Children's Goodie Bag
 Buffet
 Outdoor Seating in summer

 Disabled Facilities

These facilities attract the customers and make them loyal towards the product. These facilities
are provided at the restaurant at the same time, facility of home delivery is also provided to
the customer.
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Components of Facility

There are components of facility which are explain as follows:

Location

Centralize to gain economies of scale or decentralize to be more responsive. Other issues

include quality and cost of workers, cost of facility, infrastructure, taxes, quality of life, etc. As
pizza hut take ingredients from different location to maintain same taste all over the country,
they have warehouses located in different regions such as Karachi, Lahore, Multan, Islamabad
where the pizza base is prepared and then transported to other stores.

Cross Docking

Pizza hut use cross docking methodology because they deal in perishable goods. More over
they donot keep inventory for more than three days.

Capacity

It means the process of determining the production capacity needed by any organization to
meet changing demand for its customers.So pizza hut should design the capacity that is efficient
for them.

Inventory:

Inventory includes all raw materials, work in progress and finished goods within the supply
chain. Changing inventory policies can dramatically change the supply chain’s efficiency &
responsiveness. The base is prepared in the commissionaires and then transported to different
retail outlets. The outlets keep the inventory stock for only three days because of perishable
good. Hence, the cost of inventory stock is reduced. As only the base is transferred to the store,
in case of any particular item demand is increased, it does not create any problem.

Components of Inventory
Cycle Inventory:

This is the amount of inventory that is required to satisfy the demand for the product in the
period between purchases of the product. In pizza hut only specific quantity of material is stored
to satisfy the demand of customer because all material that is used to make pizza and other
items is perishable.
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Safety Inventory:

Inventory that is held to meet the uncertainty of demand. If demand anticipation could be done
with accuracy, then the only inventory that would be needed would be cycle inventory. In Pizza
Hut there is no safety inventory because material cannot stored for longer period only the
beverages are stored for the customers. In inventory control procedure all the activities are
shown. How the material brings to cold and dry freezers and reached to the oven.

Procedure Inventory Control:

Cold Storage Dry Storage

Freezer Prep Room

Walk In Proffer

Retarder Make Table

Oven

Transportation:

The word transportation is defined as ‘moving of inventory from point to point in the supply
chain’. Transportation can take the form of many combinations of modes & routes, each with
its own performance characteristics.

 They use the refrigerated trucks in which the base is kept and there is controlled
temperature.
 They have 80 trucks to supply the bases across Pakistan.
 There is also empty space in which extra base is kept filling the demand of a particular
store.

 The company will not suffer any supplementary transportation costs as the counters are
along the highway or on the truck’s route.
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The type of distribution channel used by Pizza Hut is the direct channel. The direct channel is
successful when there is an extremely large market that is geographically dispersed. The direct
channel is also convenient when there are a large number of buyers, but a small amount
purchased by each.

Pizza Hut uses three different methods of selling its products directly to the market.

 The first method of distribution used by Pizza Hut is delivery. Customers can call Pizza
Hut ahead of time, place an order and the order is delivered to the customer's home.

 Another method of distribution is for customers to dine-in. Customers can go to the

nearest Pizza Hut, place an order and either leave with the order or eat at the restaurant.
One of Pizza Hut's largest competitive advantages is its restaurant style facility. It also
offers a clean place to sit down and enjoy the variety of pizzas, salads, and sandwiches
in a fun, family atmosphere.

 The third method of distribution is! Online ordering. Customers can now go on the
Internet and place an order. This method is suitable because it allows customers to view
the entire menu, download any special coupons, and order without having to disclose
any credit card numbers. The market coverage for "The Extreme" will be countrywide.
Customers all over the country will be able to order "The Extreme" by one of the three
distribution methods.

Information:
Information serves as the link between various stages of a supply chain, allowing them
to coordinate & maximize total supply chain profitability. It is also very important to the daily
operations of each stage in a supply chain for e.g. a production scheduling system.
When taking into consideration the information driver of supply chain, it is observed
there was no proper medium of coordination between the suppliers and the outlet managers,
due to this the flow of information at times was misinterpreted and not associated this all
happened because no customer data base was maintained and outlet manager could not recall
the need of customer. There was no proper inventory control, some of the outlets receive excess
amount of inventory which leads to an increase in cost also they were not able to meet this
problem in the absence of proper information system. At the same time, there was a deep problem
faced by pizza hut in initial years that is linked with an increasing number of frauds at billing,
because of some unusual favours done by staff. To tackle the billing system they made it
centralized. They had built in server storage system, but due to constant exponential growth, the
system collapsed because of small storage capability. This system didn’t allow any type
of centralization in terms of billing process and inventory control.
The storage infrastructure should be such which can be scaled up against increasing
demand. Thus at that point of time they went in for a direct –attach- storage solution from HP with
the capacity of 3tetra bytes. With the daily requirement of data base of about 2 giga byte which
was to be stored and maintained and to scale up the system with demand, in march 2008 Pizza
Hut took the call to upgrade its system from Intel Xeon environment to Intel intaniom system
9 Supply chain managment

based on HP integrity based system. Pizza hut developed SAN of 15 tetra byte capacity .the SAN
came into practice in 2008 after 1 month of testing ,it has been sized for 3 years keeping in
mind 2 giga byte growth per day. Pizza hut opted to run its SAP –ERP application on SUSE Linux
enterprise server that is based on operating systems prize performance, reliability and scalability.
The ERP environment is hosted in data centre managed by third party specialist and offers
extremely high flexibility. They customized the SAP software for ccd requirements managed
its roll out across the organization and provides support and maintenance for SAP ERP.
The software is based on JAVA. SAP ERP that plays the significant role in helping to
manage the internal operations and to maintain the extended supply chain, this is how increased
capacity has helped pizza hut to increase its oracle data base space. In this way pizza hut managed
its data base and keep on inventing ways to maintain ever increasing data base. But how to
know customer preference, customer contacts, customer satisfaction, e-usage to guarantee
customer top of the world service.
 There was no proper medium of coordination between the suppliers and the out let
managers.

 This all happened because of customer database was not maintained and outlet manager
could not recall the need of customer.

 The cost got increased and they were not able to come across this problem in the
absence of proper information system.

 Therefore, commissionaires were created.

In order to resolve all these problems they stated that they are constantly investing time and
money in the management information systems that will help their stores forecast and monitor
performance, labor usage, and food ordering and inventory management. These systems are
supported by a skilled internal team to make sure customers get the best use from them.

In addition to this it is also stated that they never rely on their achievements. They’re constantly
adding new technology to help make the business even more successful. Their current plans
include:

 Real time performance reporting - so you can monitor the progress of your business
anytime, anywhere via remote log-in functionality.
 Online recruitment of team members where only applicants who meet the minimum
success criteria are added to your shortlist.
 Online training for managers and team members.
 Digital marketing including online and mobile handsets.

Components of information

 Push versus pull: when designing processes of the supply chain managers must
determine whether these processes are part of the push or pull phase in the chain.
Pizza hut has mastered the art of pull strategy. In Pull systems, work release is based
on actual demand or the actual status of the downstream customers.
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 Coordination and information sharing : supply chain coordination of pizza hut

occurs when all the stages of a supply chain work towards the objective of
maximizing total supply chain profitability based on shared information.

Sourcing:
Sourcing is the set of business processes required to purchase goods & services. Managers must
first decide which tasks will be outsourced & those that will be performed within the firm.

The sourcing driver of supply chain of pizza hut includes:

 The Pepperoni and Mozzarella a cheese is imported from Australia and Spain
respectively.

 To compensate an increased cost that is associated with imported products they

maintain a local supply chain also that is related to other ingredients like vegetables,
wheat, tomatoes in order to reduce the cost

 This provides the world class facility and taste by importing its main ingredients from
Spain and Australia but other ingredients from local vendors.

Components of sourcing:
In-house or out-source
 The most significant sourcing decision for a firm is whether to perform a task in-house or
outsource it to a third party. Pizza hut usually outsource its main ingredients from Spain
and Australia but other ingredients from local vendors.

Supplier selection:

Supplier of Pizza Hut:

Supply chain of pizza hut starts from the suppliers of pizza hut. There are many suppliers of
the pizza hut but we categorize them in two parts.

 Direct suppliers
 Indirect suppliers

Direct suppliers:

There are three direct suppliers of Pizza hut named as:

 Pepsi Company
 Bake parlor company (Buns)
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 Habib oil Mills (First mineral water)

Indirect suppliers:

Pizza hut have many indirect suppliers because they need many other indirect materials like
Cutlery, meat, vegetables, sauces, and all these material are made available to pizza hut from
their warehouse named as “Commissary”.

Indirect suppliers of pizza hut are:

 Meat market (Their owns cattle)

 Vegetable market
 Sauces companies

Direct supplier
S1 S2 S3
(Buns) First water
Pepsi Company
Bake Parlour (Habib oil Mills)

Daily basis Indirect Supplier

S4
W Sauces Company
e
e
k
S5
l
W y Meat Market
Dough e B
d a
n si
e s S6
Filling O O s
r r d Mandi (Vegetables)
d d a
e e y Commissary
Topping
r r
(Ware house)
s s

Bake
(Cheese melts)
12 Supply chain managment

Customer Delivery
(Pizza Hut) Service

Procurement: procurement is the process of obtaining goods and services within a supply
chain. Pizza Hut & similar organizations have recognized the advantage of e-procurement &
are taking full advantage of it.

Pricing:
Pricing regulates how much a firm will charge for goods & services that it makes
available in the supply chain. The level of competition a business faces determines its pricing
strategy. Sometimes a business has the scope to set its price and sometimes a business cannot.
When a business has the scope to set its price there is a number of pricing strategies or policies
it might choose. As there are no such competitors of Pizza Hut which could compete with the
quality of pizza produced at Pizza Hut, therefore, the pricing strategy adopted by Pizza Hut is
'market skimming'. Pizza Hut has implemented this pricing strategy as they want to hold
maximum share of the market by maximum profit. This is a golden era for Pizza Hut, as there
are no competitors and hence, Pizza Hut is free to charge any price they want. They are
charging higher prices due to the uniqueness of the product. They satisfy the target market as
the food quality is worth the price paid. The pricing strategy is not just to get the worth of
quality but also to gain maximum profits before any competitor enters because then Pizza Hut
will have to change its pricing strategy. Even though the prices would be lowered with the new
entrants in the market but not to a greater extent as the quality food products are not home-
produced. They are imported from different countries keeping in view the best quality.

 Pizza hut is using Market Skimming Price Strategy.

 Low price for meal and expensive for just one
 Coupons Worldwide and Gift Card in Developed Countries
 Charging method in Pakistan is, Price +21% Tax
 e.g. For a Pizza of 999 you will pay Rs. 1208
13 Supply chain managment

Responsiveness and Efficiency:

As we have realized that pizza hut open their outlets in a particular city so they are
responsive enough and they provide delivery within 30 minutes or offering it free is also to
increase their responsiveness.
It is difficult to maintain such kind of responsiveness because it will incur extra margin
and the profit margin will decrease that’s the main reason they open their outlets and if a
particular customer order a pizza where pizza store is not available that store immediately call
the nearest pizza corner to deliver that particular order to be responsiveness and if a particular
product is not available they use to do transfer in and transfer out in which they take the product
from different outlet.

Conclusion

“It is the time and money that lets you enter the race but it is the services that you
provide wins you the race.” It shows that better services and responsiveness increase the loyalty
and demand. It conclude that if supply chain is good and effective then a company get good
response from the customer. Also Pizza Hut is a successful place. It has its weak points and
strong points. On every day end pizza hut manager forecasts the demand on next day and gives
the order to the suppliers than next day morning the goods come to the Pizza hut. Pizza Hut
manages the customers very well and fulfils their demand on daily basis. Its delivery is easily
available in different areas and easy access is the appreciable part from the side of its
customers. The prices strategies are also very nominal. They charge low to high prices,
according to customers purchasing power. Therefore, the success of Pizza Hut cannot be
denied.
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