POM Final Report

8/13/2019 POM Final Report

1/38

TO EXPLORE THE

WORKINGS OF CUPOLA

PAKISTAN LIMITED SUPPLY

CHAIN


2/38

Production and Operations Management

-------------------------------------------------------------------------------------------------------------------------------

Name of the Organization: Cupola Pakistan Limited

Course Title: Productions and Operations Management

Submitted To: Mr. A R Daroowala

Submitted By: Murriyam Latafat (Roll # 19)

Muzamil Shahid (Roll# 20)

Noman Khalid (Roll# 21)

Date of Submission: 28th April 2008

Class: BBAVIII, Class A


3/38


-------------------------------------------------------------------------------------------------------------------------------

Acknowledgement

We would like to thank Mr. A.R Daroowala for providing us the opportunity of practically

examining the operational behavior of a well-established company as part of our term report.

This report made for the Productions and Management course that we have undertaken at the

Institute of Business Administration, Karachi, has helped us understand how the functions of

planning, organizing, leading and controlling of supply chain are actually used in the corporate

world. We believe that this experience will benefit us significantly.

We have selected Cupola Pakistan Limited for making the term report. We would like to thank

Mr. Asim Mansoor, Supply Chain Executive in Supply Chain Management department at Cupola

Pakistan limited for his immense cooperation.


4/38


-------------------------------------------------------------------------------------------------------------------------------

Letter of Transmittal

April 28

th

, 2009

Engr. A.R. Daroowala

Course Instructor


Institute of Business Administration

Main Campus, Karachi

Dear Mr. Daroowala,

This is our report on Supply Chain Management: Cupola Pakistan Limited; that you had

authorized us to prepare and it is ready for your perusal. This report is in accordance with the

proposal that we had submitted. This report will also be submitted to Cupola Pakistan whose

help and interviews were taken.

This report highlights the procedures followed by Cupola Pakistan in their Supply Chain

Management Department. The report is a critical analysis of their supply chain function and

identifies weaknesses in their department.

Thank you for all the assistance and cooperation that you gave us during the making of the

report.

Sincerely

Murriyam Latafat

Muzzammil Shahid

Noman Khalid

BBA-V-II

Group A


5/38


-------------------------------------------------------------------------------------------------------------------------------

Executive Summary

Cupola is a Dubai based multinational company involved in several businesses like oil, gas

exploration, plastic cards, retail markets and food franchising. Cupola holds the master franchise

rights to operate KFC in Pakistan. It was founded in 1994, with its head quarter in Dubai and

offices in the Middle East, London, Washington and Karachi.

The aim of this report is to understand the workings of Cupola Pakistan Limiteds Supply Chain

Management Department in order to gain real world knowledge about the working of Supply

Chain Management and learn from the experience of such a huge organization which is

responsible for the running of franchises like Kentucky Fried Chicken and Casa bakery.

The Supply Chain Management Department is the most important department of Cupola

Pakistan Limited. It is the hub of all activities being done by the company. Any material which

needs to be purchased for the restaurant or for any other department has to be purchased through

Supply Chain Department.

The supply chain management ensures product availability, good quality, better prices, right

time, right place and right quality. It is responsible for procurement, supply channel development

and equipment planning.

The department follows a lengthy but very effective procedure for making any purchases and

ensures that the suppliers are reliable.

In all Cupola Pakistan is very well supplied company with an effective work force working in

office.


6/38


-------------------------------------------------------------------------------------------------------------------------------

Table of Contents

Synopsis ----------------------------------------------------------------------------------------------------------------------------- 1

Report Objectives: ------------------------------------------------------------------------------------------------------------ 1

Introduction to Cupola Pakistan ---------------------------------------------------------------------------------------------- 2

Cupola Pakistans Vision----------------------------------------------------------------------------------------------------- 4

Cupola Pakistans Mission Statement------------------------------------------------------------------------------------ 4

Cupola Pakistans Goals----------------------------------------------------------------------------------------------------- 4

Organizational Structure ---------------------------------------------------------------------------------------------------- 5

Span of Control ------------------------------------------------------------------------------------------------------------- 6

Departmentalization ------------------------------------------------------------------------------------------------------ 6

Functional -------------------------------------------------------------------------------------------------------------------- 6

Divisional --------------------------------------------------------------------------------------------------------------------- 7

Type of Organizational Culture -------------------------------------------------------------------------------------------- 7

Introduction to the Supply Chain Management Department --------------------------------------------------------- 8

Working of the Supply Chain Department -------------------------------------------------------------------------------- 10

Functions ----------------------------------------------------------------------------------------------------------------------- 11

Procurement --------------------------------------------------------------------------------------------------------------- 11

Development --------------------------------------------------------------------------------------------------------------- 15

Equipment Planning ------------------------------------------------------------------------------------------------------ 15

Vendor selection ----------------------------------------------------------------------------------------------------------------- 15

Role of Just-in-time Inventory ------------------------------------------------------------------------------------------------ 19

SCM system ----------------------------------------------------------------------------------------------------------------------- 21

Benefit of the Supply chain management --------------------------------------------------------------------------------- 22

Issues Faced by the Supply Chain Management ------------------------------------------------------------------------- 24

SWOT Analysis of the SC Dept ------------------------------------------------------------------------------------------------ 26

Recommendations -------------------------------------------------------------------------------------------------------------- 27

What We Have Learnt ---------------------------------------------------------------------------------------------------------- 29

Conclusion ------------------------------------------------------------------------------------------------------------------------- 30

References ------------------------------------------------------------------------------------------------------------------------ 32


7/38


-------------------------------------------------------------------------------------------------------------------------------

1

Synopsis

This report was approved by the course instructor, Mr. A. R. Daroowala appreciating the fact

that it will help us understand the workings of Supply Chain in the real world. Cupola Pakistan

Limited, by our view point, provided a very good case to study as it is responsible for running

the chains of Kentucky Fried Chicken, Indulge, Casa bakery, LOcci tane and My Super Store;

and follows different Supply Chain Management techniques for different business units. This

real world case study combined with the knowledge gained through lectures will help us become

better Operation Managers and better Business Administrators.

When starting this report we intended to include a section regarding the theories of Supply Chain

Management but as lectures passed by we realized that it was unnecessary to include such details

as the information provided in classes was more than enough to give everyone a sound

understanding of Supply Chain Management and hence it is assumed that the readers of this

report are all very well informed and knowledgeable about this exponentially growing field.

Report Objectives:

To understand the workings of Cupola Pakistan Limiteds Supply Chain Management

Department in order to gain real world knowledge about the working of Supply Chain

Management and learn from the experience of such a huge organization which is responsible for

the running of franchises like Kentucky Fried Chicken and Casa bakery.

To understand and learn from Cupola Pakistan Limited, techniques which we can improvise

upon and implement when we become operations managers in the future.


8/38


-------------------------------------------------------------------------------------------------------------------------------

2

Introduction to Cupola Pakistan

Cupola is a Dubai based multinational company involved in several businesses like oil, gas

exploration, plastic cards, retail markets and food franchising. Cupola holds the master franchise

rights to operate KFC in Pakistan.

Cupola was founded in 1994, with its head quarter in Dubai and offices in the Middle East,

London, Washington and Karachi.

Cupola Pakistan Limited has diversified into different markets, ranging from bakeries to personal

care products. In Pakistan, Cupola has two head offices located in Karachi and Lahore. The one

in Karachi caters to South Pakistan, and the one in Lahore to Northern Pakistan.

The work environment at Cupola and its outlets is very family oriented where the customer is the

boss and all the employees are out to put customer satisfaction as their first priority.

Cupola Cares is a charitable wing of Cupola which engages in activities such as providing

education to the underprivileged children. Mr. Danishmand (former Dean Director IBA) is

amongst the board of directors of this foundation.


9/38


-------------------------------------------------------------------------------------------------------------------------------

3

Cupola Pakistan owns the following brands:

KFC

Indulge

CASA Bakery

Freshens

Nafura
http://www.40sales.com/KFC%20Logo.jpghttp://images.google.com.pk/imgres?imgurl=http://cubexsweatherly.com/clients/Cupola.gif&imgrefurl=http://cubexsweatherly.com/&h=130&w=455&sz=4&hl=en&start=2&tbnid=3jjr0-ERejOvyM:&tbnh=37&tbnw=128&prev=/images?q=Cupola+Pakistan&gbv=2&hl=enhttp://www.40sales.com/KFC%20Logo.jpghttp://images.google.com.pk/imgres?imgurl=http://cubexsweatherly.com/clients/Cupola.gif&imgrefurl=http://cubexsweatherly.com/&h=130&w=455&sz=4&hl=en&start=2&tbnid=3jjr0-ERejOvyM:&tbnh=37&tbnw=128&prev=/images?q=Cupola+Pakistan&gbv=2&hl=enhttp://www.40sales.com/KFC%20Logo.jpghttp://images.google.com.pk/imgres?imgurl=http://cubexsweatherly.com/clients/Cupola.gif&imgrefurl=http://cubexsweatherly.com/&h=130&w=455&sz=4&hl=en&start=2&tbnid=3jjr0-ERejOvyM:&tbnh=37&tbnw=128&prev=/images?q=Cupola+Pakistan&gbv=2&hl=enhttp://www.40sales.com/KFC%20Logo.jpghttp://images.google.com.pk/imgres?imgurl=http://cubexsweatherly.com/clients/Cupola.gif&imgrefurl=http://cubexsweatherly.com/&h=130&w=455&sz=4&hl=en&start=2&tbnid=3jjr0-ERejOvyM:&tbnh=37&tbnw=128&prev=/images?q=Cupola+Pakistan&gbv=2&hl=enhttp://www.40sales.com/KFC%20Logo.jpghttp://images.google.com.pk/imgres?imgurl=http://cubexsweatherly.com/clients/Cupola.gif&imgrefurl=http://cubexsweatherly.com/&h=130&w=455&sz=4&hl=en&start=2&tbnid=3jjr0-ERejOvyM:&tbnh=37&tbnw=128&prev=/images?q=Cupola+Pakistan&gbv=2&hl=en


10/38


-------------------------------------------------------------------------------------------------------------------------------

4

Cupola Pakistans Vision

Cupola Pakistan aims to

create value through change, challenging existing paradigms by applying vision, innovation

and skilled execution.

The company has always accentuated corporate social responsibility.

Cupola Pakistan seeks opportunities for investment where others do not look and it examines

these opportunities with open-mindedness, thoroughness and hard-headed practicality.

Cupola Pakistans Mission Statement

To establish in Pakistan our position as leading WQSR (Western Quick Service Restaurant)

chain, serving good value and innovative chicken-based products. Consistently providing a

pleasant dining experience, with fast friendly service, in a clean and convenient location. At all

times we must be dedicated to providing excellent service and delighting customers.

Cupola Pakistans Goals

Build an organization dedicated to excellence.

Consistently deliver superior quality, and values in our products and services.

Maintain a commitment to innovation for continuous improvement and growth, striving

always to be the leader in the market place challenges.

Generate consistently superior financial returns and benefit our owners and employees.


11/38


-------------------------------------------------------------------------------------------------------------------------------

5

Organizational Structure

The organizational structure is flat and horizontal rather than vertical. Cupola has departments

and departmental heads. It is like an inverted pyramid because at the end of the day, it is the

bottom line workers who have to deal with the customers.

CEO

DEPARTMENTALHEADS

SENIOR MANAGERS

(FOR EACH DEPT.)

JUNIOR MANAGERS

(FOR EACH DEPT.)

SENIOR EXECUTIVES

(FOR EACH DEPT.)

JUNIOR EXECUTIVES

(FOR EACH DEPT.)
http://images.google.com.pk/imgres?imgurl=http://cubexsweatherly.com/clients/Cupola.gif&imgrefurl=http://cubexsweatherly.com/&h=130&w=455&sz=4&hl=en&start=2&tbnid=3jjr0-ERejOvyM:&tbnh=37&tbnw=128&prev=/images?q=Cupola+Pakistan&gbv=2&hl=en


12/38


-------------------------------------------------------------------------------------------------------------------------------

6

Span of Control

Each departmental head has a senior manager reporting to him. Senior manager supervises three

to four junior managers. Junior managers work with the executives on different projects and

assignments. This shows that Cupola Pakistan has a relatively wide span of control.

Departmentalization

The approach to departmentalization in Cupola Pakistan is a combination of functional and

divisional.

Functional

The organization is divided into eleven main functions, namely:

1) Projects an Maintenance

2) Marketing

3) Administration

4) Operations

5) Finance

6) General Management

7) Human Resource

8) IT

9) Internal Audit

10)Quality Enhancement

11)Supply Chain


13/38


-------------------------------------------------------------------------------------------------------------------------------

7

Divisional

Each of the brands has its own brand manager who heads all brand related activities. For

example the KFC brand manager is responsible for all personnel working for KFC in all the

departments such as marketing, quality control and finance to name a few.

Type of Organizational Culture

A constructive culture exists at Cupola where employees are free to interact with others and to

choose their assignments in ways that help them grow and develop.

ACHIEVEMENT

Cupola employees

take pride in their

work and have a

passion for excellence

SELF-

ACTUALIZING

Cupola believes in its

employees, trusts

positive intentions and

encourages ideas fromeveryone and actively

develops a workforce

that is diverse in style

and background

HUMANISTIC-

ENCOURAGING

Cupola employees

coach and support

each other. They find

reasons to celebratethe achievement of

others and have fun

doing it.

AFFILIATIVE

Cupola employees

execute with positive

energy and intensity.

They practice team

together, team apart.

CONTSRUCTIVE CULTURE


14/38


-------------------------------------------------------------------------------------------------------------------------------

8

Introduction to the Supply Chain Management Department

The Supply Chain Management Department is the most important department of Cupola

Pakistan Limited. It is the hub of all activities being done by the company. Any material which

needs to be purchased for the restaurant or for any other department has to be purchased through

Supply Chain Department.

Supply Chain Management Department works like a supplier to the whole department, ensuring

that right things are delivered in right quantity at the right time. If this particular department

falters at any time the workings of the whole organization will suffer. Supply Chain acts like the

back bone to all other departments. Its workings are very wide ranging from getting quotations to

ensuring perfect supply of all goods and services to the organization.

The department employs hardly ten people. It is headed by a Supply Chain Manager who

oversees every activity performed by the department. Under the Supply Chain Manager is the

Supply Chain Import Manager who looks after all the products which need to be imported from

any country. He is responsible for ensuring that all Bills of Laden are correct and all Letter of

Credits are arranged on time to ensure timely receipt of goods and timely payment of bills. There

are two more executives in the department and they are responsible for ensuring that every local

products supply is maintained smoothly and all bills are paid on time.

The monetary transactions are directly monitored by the head of Finance as this is a very crucial

department and chances of fraud are very high. Although Cupola trusts its employees entirely it

still has to maintain checks and balances on all its employees as it is an international practice.


15/38


-------------------------------------------------------------------------------------------------------------------------------

9

The Supply Chain Department looks after the two warehouses of the company located in Karachi

and Lahore. These warehouses are all computerized and keep updating the Supply Chain

Management System every minute. These systems are very precise and custom built to satisfy

the needs of the organization. Cupola is planning to open a third warehouse which will be

located in Islamabad since it is becoming harder and harder to operate in Islamabad through

Lahore warehouse as the Islamabad market is growing.


16/38


-------------------------------------------------------------------------------------------------------------------------------

10

Working of the Supply Chain Department

Logistics and supply chain are emerging as more important variables to the extent that today

successful logistics and supply chain management are essential elements of successful

organizations. Achieving this excellence requires thinking about logistics in terms of customers,

competitors and costs across the entire supply chain. To achieve this level of excellence,

Cupolas supply chain departmentplaces special emphasis on the following:

1. Ensured Product Availability

2. Good Quality

3. Best Price

4. Right Time

5. Right Place

6. Right Quality

Supply chain is the companys backbone. It is through the supply chain that the entire

organization, different departments and functions work efficiently and effectively. It smoothens

the running of the entire organization. Moreover, supply chain management helps reduce extra

workload. E.g. if marketing department needs stationary, they simply have to fill out the

purchase requisition form which is accessible to all employees. This purchase requisition form

then goes to the supply chain department which then makes the necessary procurement for the

marketing department.

According to Mr. Asim Mansoor, Supply Chain Executive at Cupola, supply chain refers to the

art of managing the flow of materials and products from the source to the user.At Cupola It


17/38


-------------------------------------------------------------------------------------------------------------------------------

11

includes not only the flow of materials from the procurement of raw materials to delivery of

finished goods, but also includes the activities of sourcing and purchasing; conversion including

capacity planning, technology solution, operations management, production and materials

planning and managing warehouse and inventory operations. Moreover, it is involved in the

organization and running of the outbound transportation and plays a role in building linkages

with the customer service, sales, promotion and marketing activities.

Functions

During our interview, we found out that there are three major functions of the supply chain

management, namely

Procurement

Development

Equipment Planning

Procurement

The entire process of procurementstarts of with Purchase Requisitionscoming in from various

departments, particularly operations and marketing departments, for different types of products

needed for production, promotion and sales of goods and services being provided by Cupola.

These may be routine requisitions like chicken for KFC, flour for Freshens, packaging material

for the restaurants and bakeries, etc; or they could be one-off demands, e.g. KFC wrist watches

required for the promotion of a new KFC outlet or Pakistan flags for a special promotion scheme

commemorating 14th

August (Independence Day). Each of these requisitions is approved by the


18/38


-------------------------------------------------------------------------------------------------------------------------------

12

SC department, after which Mr. Asim and Mr. Adil play their roles of market research and

issuing Purchase Orders (POs) respectively. Once a reliable supplier offering a competitive price

is found, their samples are tested by the Quality Assurance (QA) department, and only after their

approval is a PO issued for the exact quantity needed as per Purchase Requisition. Such is the

case for new products being ordered. However, when routine stocks need to be ordered, the

process is much shorter involving only issuance of PO against a Purchase Requisition to a

regular supplier. Haggling is also part of Mr. Asim and Mr. Adils job, in case an existing

supplier suddenly raises prices. Also finding alternative suppliers if the regular ones run out or

fail to meet right standards is part of their responsibility.

Under the procurement function, the supply chain department is engaged in two basic activities.

1. Check items: First they check their database when last such similar requisition wasreceived to ensure there is no mismanagement of resources. Therefore, if marketing

department wants 100 pens, the supply chain department would first check when last

pens were given to the marketing department. If pens were delivered very recently, the

department can then question the Marketing department regarding what it did with those

pens, how they finished so early etc. Similarly, SC auditors are at the restaurant to check

right material and right quantity goes into the various deals offered at KFC and Indulge..

Moreover, in case of purchase requisition of new item the department checks the system

to ensure if such an item is available of not before going ahead with the procurement.

2. Check rates: They check the supplier that was approached last and the quantity and the

rates at which the item was purchased. New supplier gives good rates initially. However,

after a month or so he raises the prices. Therefore, they have to be careful when selecting


19/38


-------------------------------------------------------------------------------------------------------------------------------

13

suppliers; they need to be worth doing business with and the goods they deliver should be

of good quality too. Also SC-Department keeps regular tabs at what is going out of the

warehouse and what is coming in and in what quantity and at what rates.


20/38


-------------------------------------------------------------------------------------------------------------------------------

14

New Old

Yes No Yes No

Purchase Requisition

New/Old

Supplier

Search another

Supplier

Sample and Rate

Quotations

Purchase Order

QCD

Search another

SupplierPurchase Order

Goods Received Note

Materials Issue Note

Goods Received Note

Materials Issue Note

Purchase Order

Supplier Profiling and

Quotations

Selection of Supplier

and Sample Testing

QCD


21/38


-------------------------------------------------------------------------------------------------------------------------------

15

Development

Development includes Product Development and Vendor Development. The two people mainly

involved in this are Mr. Raheel Khan and Mr. Masroor Hussain. This function brings the SC

department in contact with several other important areas like Research and Development,

Marketing and Operations. It is the duty of this department to study the market for relevant new

products and upcoming suppliers in order to keep pace with growing market competition.

Product Innovation is determining factor in the growth of almost every business today and

becomes a major differentiating factor. Thus getting it right is crucial for the growth and success

of a business, and the pressure for this is being handled well by the SC department here at

Cupola.

Equipment Planning

Equipment planning is again a crucial responsibility to deal with. According to Mr. Masroor

Hussain, doing your homework right is very important, followed by negotiation skills. Every

Capital Expenditure request (commonly referred to as CapEx by the SC-natives) coming from

any part of the organization is followed by endless efforts by the members of the SC department

to find the right suppliers and get the right product at the right price, bringing them in close

contact with the IT dept and Quality Assurance again to ensure what they receive is exactly what

was requested. Capital expenditure may include restaurant equipment like tables, chairs, bun

toasters, etc; IT equipment includes laptops, multimedia systems, printers, etc; and Electronics

like refrigerators and air conditioners.


22/38


-------------------------------------------------------------------------------------------------------------------------------

16

The section of imports is handled by Mr Shariq who has quite a taxing job, with KFCs supplies

coming in from all over the globe. Products like potato strings for French fries, Ice berg for

Zinger, Neon signboards fly in from places like Thailand, China, Australia, America, India,

Dubai, Malaysia etc. From the opening of the LC to the billing of these products, the entire

process is handled separately.

Mr Wasiq is the Head of this Department- the Boss- without whose approval of a supplier, no

PO can be issued to the same. His signature is the final authority here.


23/38


-------------------------------------------------------------------------------------------------------------------------------

17

Vendor selection

Vendors must be selected for the goods and services that a firm buys. The performance of the

vendor is a key element in a company's success or failure. . An effective and appropriate vendor

selection method is therefore very crucial to the competitiveness of companies. Here at Cupola,

the supply chain department makes sure it has three suppliers for each item that it purchases or

wishes to purchase. Several reasons for this came to light during the interview:

To ensure Cupola gets good product on time.

Cupola is better able to negotiate rates

Prevent loss: Daniyal Packages had major items that were used as inventory items at

Cupola. However, due to some misfortune the entire business was closed up and

machinery sold off. This brought Cupola at a standstill for it used to purchase its major

items from Daniyal Packages. Thus, they decided to have three suppliers for each item to

prevent such future losses.

This way they are also able to maintain buffer stocks. Cupola usually has two month

buffer stock in its inventory. This is because it not only saves them time but they are able

to get good rates on the items purchased.

Finally, they are able to maintain long term profitable relationships with the vendors.

The SC-Department chooses the vendors themselves. They do this in a number of ways.

Supplier profiling:this involves finding out the background of the supplier in the market,

who the supplier works for and deals with, his reputation in the market etc.


24/38


-------------------------------------------------------------------------------------------------------------------------------

18

Market survey: in this they determine the rates that the supplier offers and the quality

level supplied by the vendors, on-time delivery level and service level provided by them.

It also involves finding potential vendors and determining the likelihood of their

becoming good suppliers.

Credit term: the credit period that the vendor offers i.e. whether its 30, 60 or 90 days

credit term. This is important because the rates vary according to the terms being offered.

Moreover, SC-Department is engaged in negotiations regarding critical elements of the

contractual relationship. These negotiations focus mainly on quality, cost, delivery and payment.

Thus the overall goal of selection is to identify high-potential vendors. The selection of

competent suppliers is critical because if right suppliers are not selected then all other supply-

chain effort is wasted and the entire system collapses.


25/38


-------------------------------------------------------------------------------------------------------------------------------

19

Role of Just-in-time Inventory

It is widely known that firms no longer can compete effectively in isolation of their suppliers and

other entities. The future success of many businesses depends on co-operation and the co-

ordination of efforts; making Supply Chain Management important. JIT is one of the

philosophies that have been used to update supply chain relationships and management. It is

defined as:

Just-in-time (JIT) manufacturing is a process by which companies don't keep lots of excess

inventory; instead, they manufacture a product as an order comes in

At Cupola, JIT plays an important role. The company produces its own buns. Their restaurants

only have to call them up and the buns get delivered directly to the restaurant that needs it. Thus

SC department is responsible for the just-in-time delivery of items not only needed by the

restaurants but also the bakery itself. Moreover, they are also responsible for the JIT delivery of

panaflex, standees etc. needed for marketing purposes.

This new development and trend in the supply chain management offers several advantages to

Cupola.

1. It shortens lead time and improves quality.

2. Decreases their inventories and increases overall efficiencies.

3. Decreasing inventory allows Cupola to decrease waste, which saves them lots of money.

4. Encourages high quality production, shorter throughput time, low wastage and high

customer responsiveness.


26/38


-------------------------------------------------------------------------------------------------------------------------------

20

5. As a result, Cupola experiences less inspection, scrap and rework, close and effective

communication among departments and employees, and long-term relationships with

suppliers and customers resulting in timely production and delivery of products and low

inventory costs

Consequently, these improvements ultimately accelerate Cupolas overall performance and give

it a competitive edge over all its competitors.


27/38


-------------------------------------------------------------------------------------------------------------------------------

21

SCM system

SC is totally computerized. All data is entered in to the SCM system which contains info

regarding the purchases, quantity in the warehouse, the amount of quantity flowing in and out of

the warehouse and at what rates, supplier profile, deals being offered, food cost etc. Only the SC

department can look at this information. Furthermore, whatever new deals that the marketing

department plans to offer the customers, it informs the SC department of it. From then forth, SC

department is responsible for ensuring that the items being offered in the deal are in buffer stock.

These new deals are also entered in to the SCM system.

Records in SCM are constantly updated. From flour coming in from Rehmat Roller Flour Mills

to Air Freshners and Toilet Paper from FMCGs like Unilever and Packaging material from small

unheard of companies like Daniyal Packaging, every bit of supplies received is neatly kept under

record. Comprehensive study and comparative analysis of the costs of alternative suppliers for

packaging material is also done using this system.


28/38


-------------------------------------------------------------------------------------------------------------------------------

22

Benefit of the Supply chain management

Supply Chain Management as defined by Tom McGuffog is

"Maximising added value and reducing total cost across the entire trading process through

focusing on speed and certainty of response to the market."

Business climate in todays world has not only become more competitive but is also rapidly

changing. Organizations must not only operate at lower cost but also develop their own core

competencies to distinguish themselves from competitors and thus stand out in the market.

Supply chain management has allowed companies to rethink their operation and restructure it so

that they can focus on its core competencies and outsource processes that are not within the core

competencies of the company. It presents several advantages to companies and improves their

performance in the market.

Various advantages offered by the implementation of SC to Cupola are:

SCM acts as the backbone of the organization: without proper functioning of SC not

only warehouse will collapse but the entire organization will suffer and become

inefficient. For e.g. if the marketing department needs post aids it wont know where to

go, the rates offered in the market and nor will it have information regarding best and

reliable suppliers. SCM smoothens out the system and makes it more efficient.

Reduces errors: if the marketing department bought 5 lacs worth of supply, other

department might feel that the same supply should have been worth 4 lacs. Hence, the

question of where the 1 lac had gone would arise. This in turn will produce negative

feelings amongst the employee and destroy Cupolas organizational culture. By handling

the procurement of materials, the SCM eliminates such negative feelings of hostility and


29/38


-------------------------------------------------------------------------------------------------------------------------------

23

suspicion and reduces errors in management of resources and funds allocated to various

departments.

Increases accountability: accountability of department is made easier by SCM. Also, the

Finance department keeps a check on the SC department. This in turn ensures that the

department works honestly, efficiently and in the best interest of Cupola.

Makes internal auditing easier: SCM improves the performance of the auditing

department. Because the purchase requisition has the signature of the maker and the

final authority figure, the audit department knows who to contact and question.


30/38


-------------------------------------------------------------------------------------------------------------------------------

24

Issues Faced by the Supply Chain Management

Vendor selectionwith imprecise information is a difficult task in the management of a

supply chain. In a real-life situation for a vendor selection problem, a lot of input

information related to the various vendors is not known with certainty. Thus, Cupolas

supply chain department at times faces problem and challenges in obtaining precise

information about various vendors.

E-business environment and a growing emphasis on SCM have brought about a new

kind of competition for Cupola. Instead of traditional mode of firms competing against

firms, we now have supply chains competing against supply chains. This has brought

about a very complex and intriguing relationship between the core firm of a supply chain

and other members.

Nature of competencehas changed. Traditionally, competence of a firm referred to its

ability to produce at low prices without compromising on quality. Today, and particularly

at Cupola, it refers to the ability to identify the right suppliers to execute the given

activity in the value chain, to organize such activity and to manage its relationship with

these suppliers. Thus Cupola faces challenges in dealing with this new concept of

competency.

Managing and integratingthe supply chain in the organization is a hard job. It requires

ensuring a smooth flow from suppliers, to producers, to warehousing, to distribution, to

the customer. Since a number of organizations may be involved in this entire supply

chain, management issues, lack of compatible organization culture, lack of trust, failure

to compromise and agree on goals may all contribute to inefficiencies and disruption of


31/38


-------------------------------------------------------------------------------------------------------------------------------

25

the supply chain and hence, reduction in profits. Therefore, the SCM department at

Cupola, in order to ensure success is careful when selecting vendors and forming

agreements with entities involved in the entire supply chain process.

Credit term: with world in a financial crunch, the SC department feels that the major

issue being faced by them is the long credit terms that are being offered. According Mr,

Asim, keeping the financial condition of the market, the credit terms being offered should

be reduced.


32/38


-------------------------------------------------------------------------------------------------------------------------------

26

SWOT Analysis of the SC Dept

Strength

Focal point which links with almost every

department in the organization

Weakness

Two systems operating parallel, i.e. Gray

McKenzie for issuing KFC POs and CPL for

the other SBUs

Threat

Problems with suppliers caused by external

factors like price wars, inflation, etc.

Opportunity

Implementing Supply Chain Management to

integrate suppliers along the line and gain

cost benefits


33/38


-------------------------------------------------------------------------------------------------------------------------------

27

Recommendations

The SC department of Cupola has been facing some problems due to the financiall crisis. Other

then this problem, other problems that the department has been facing have been discussed

above. The recommendations put forward by Mr. Asim were:

Due to the financial crisis the vendors are being offering long credit terms, up to 90 days.

He is of the view that the credit term should be reduced in order to reduce the rates

offered by the vendors.

The whole process of selection and profiling of new vendors should be changed in order

to accommodate the old vendors. According to him the profiling of a new vendor takes a

lot of time and becomes thus somewhat an expensive activity for the supply chain. Mr.

Asim was of the view that the new vendors information tends to be imprecise and thus

incurs a lot of cost for the department.

The vendor base for the SC department should be increased and diversified. According to

him this would provide an edge to the organization regarding the cost incurred during the

procurement procedure. The diversification of the vendors base will provide a

competitive edge with regards to the costs.


34/38


-------------------------------------------------------------------------------------------------------------------------------

28

These recommendations are inline with the recommendations put forward by the group.

Some of the other recommendations put forward by the group are:

The SC department should be divided into two sections; one concerning the local vendors

and local supply and the other section should be concerned with the imports. Although

there is an import manager, but this section should be different with its own employees

working on the whole procedure regarding imports.

The market analysis for new vendors should be done systematically and some part-time

employees should be hired to analyze and provide precise information to the SC

department, thus lowering the cost of market analysis and vendor profiling.


35/38


-------------------------------------------------------------------------------------------------------------------------------

29

What We Have Learnt

The supply chain management is now being regarded as the backbone of the organization. The

department is expected to have a share in profit generation for the organization. Other

departments are expected to work in collaboration with the SC department. This has reduced the

burden and the cost of other departments by reliving them from a cumbersome activity. The

department smoothens out the system and makes it more efficient. The department works

towards integrating the different departments and providing them with the things they need. The

important things that we learnt from our interview are:

SC Department is becoming the backbone of the organization in the present age.

The SCM has reduced the errors that occur when procuring inventory or stationary.

It tries to integrate the departments vertically and horizontally both ways providing for

more efficient running of the organization.

SCM reduces the cost of other departments by ensuring reduced rates and good quality of

goods purchased.

It also provides for easier procurement of inventory by ensuring that these are provided at

the right time, to the right person, at the right place and in the right quantity.

It is easier to have a buffer stock for inventories of regular usage.


36/38


-------------------------------------------------------------------------------------------------------------------------------

30

Conclusion

Overall the report helped us a lot in understanding the procedure of the SC department; the

process starting with the purchase requisition to the bill verification and procurement of the

inventory. The theory of SCM and the practices by the organizations in Pakistan are very

different. The SCM theories have been changed and adapted according to needs of the

organization in Pakistan. Cupola also has been adopting these theories to cater to its

organizational needs and the organizational goals.

SC department in this age has been contributing to profit generation for many organizations. An

efficient and effective SC department leads to reduced rates and costs and also generates profits

or contributes in profit generation. The whole purpose of the SC department is to reduce cost.

SC department should be inline with the organizational goals to provide efficient and effective

forward and backward linkages to the organization. This will in turn help in ensuring customer

satisfaction and optimization of profits and costs. Every function and activity in the department

should provide the organization with benefits as this is considered to be the backbone of the

organization.


37/38


-------------------------------------------------------------------------------------------------------------------------------

31

The integration and cooperation between the SC department and other departments in the

organization should be strong as the SC provides the infrastructure to these departments. Any

entity cannot perform properly if it lacks the required infrastructure. Thus the SC department is

the one that provides the base for the infrastructure of an organization. The cooperation of other

departments in the organization with the SC department is necessary to ensure the smooth

running of the organization. This cooperation is necessary while forecasting and budgeting is

done. The information provided by the SC department is important for this activity to be

performed in its essence so as to provide maximum benefit to the organization. Thus it could be

concluded that presently SC department is the backbone of the organization and its effective,

efficient, and smooth performance ensures growth, optimization of costs and profits, and high

customer satisfaction.


38/38


-------------------------------------------------------------------------------------------------------------------------------

References

Mr. Asim Mansoor, Supply Chain Executive, Supply Chain Management department,

Cupola Pakistan Limited

Employee hand book (KFC).

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=983705

http://www.teenanalyst.com/glossary/j/justintime.html
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=983705http://papers.ssrn.com/sol3/papers.cfm?abstract_id=983705http://www.teenanalyst.com/glossary/j/justintime.htmlhttp://www.teenanalyst.com/glossary/j/justintime.htmlhttp://www.teenanalyst.com/glossary/j/justintime.htmlhttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=983705

Documents

POM Final Report