Supply Chain Analysis

Running head: SUPPLY CHAIN ANALYSIS 1
This article looks to tackle the challenges that come with Stochastic Demand of
products. This is a case study that deals with distributions of demands for different
products and uses Monte Carlo Simulation to best manage its inventory and make an
expected profit.
SUPPLY CHAIN ANALYSIS 2
Photo by Clark Street Mercantile on Unsplash
Imagine you are a distributor of highly customised product and the demand for this
product is therefore unique to every customer. It is not likely that you will receive an
order for this product every day. Some products may vary due to seasonality, while
others may have latent trends. To mathematically model this stochastic demand, you
must capture the sales information of each product at least for the last 12 months.
Now a customer can sometimes go into a store and not buy a particular item that they
wanted. While it is difficult to model consumer behaviour, we could provide a rough
estimate that a customer has a probability ‘p’ of placing an order on any given day. This p
can simply be calculated by dividing the number of orders last year by the number of
working days.
Unless or until you have a contract with a particular client, another uncertainty is the
order size. For this case study, an assumption was made that the order size would follow
a log-normal distribution whose distribution parameters are unknown (which is often
the case). Hence it is important to capture historical sales of the product.
This case looks at the sale of 4 different products and looks to adopt either continuous
review or periodic review policy to manage its inventory. The objective is to maximize
its expected profit.
Additional Product Data
Based on the past year sales, given below is the histogram of the demand distribution of
each product.
Demand Distribution for each Product. Graph by Author
You can see the stark differences in the demands for each product. For example, Product
2 is a high volume product that gets bought every day (p = 1) and the mean order size is
649. Whereas Product 4 is purchased 24% of the time and its mean order size is around
150. The table below provides a summary of each product that can be calculated purely
based on past sales data.

Summary of each product
It is important to understand the statistics of the demand during lead time.
To put these numbers into context, the lead time for Product 1 is 9 days (as mentioned
earlier), so in those 9 days, the distributor can expect an average of 705 orders. This
needs to be taken into consideration while placing the original order otherwise the
distributor would always fall short of meeting the demand.
Periodic Review
With a periodic review system, the inventory is checked and reordering is done only at
specified points in time. For example, inventory may be checked and orders placed on a
weekly, biweekly, monthly, or some other periodic basis. When a firm or business
handles multiple products, the periodic review system offers the advantage of requiring
that orders for several items be placed at the same preset periodic review time. With this
type of inventory system, the shipping and receiving of orders for multiple products are
easily coordinated. Under the previously discussed order-quantity, reorder point
systems, the reorder points for various products can be encountered at substantially
different points in time, making the coordination of orders for multiple products more
difficult. [1]
Inventory Pattern for Periodic Review model with Probabilistic Demand. [1]
In the Periodic Review policy method, the stock is replenished after a certain time period.
This time period is dependent on the review period and the lead time. Monte
Carlo technique was used to simulate the daily demand of each product in the store.
From the distributions plot in the previous section, we noticed that other than Product 2,
not every product is bought on each and every day. The expected proportion of orders
calculated indicate the probability that the product would be bought on the day. For
example, for Product 1 the expected proportion is 0.76 which means that on any given
day within the year, there is a 76% chance that a customer will buy Product 1.
If a product is purchased, then the demand follows a log-normal distribution. The
demand distribution from the previous year was converted into a log-normal distribution
by taking the logarithm of the daily values. To simulate daily customer purchasing
behaviour, a random number was picked from a uniform distribution within 0 and 1.
Python code to draw from a log-normal distribution
A Monte Carlo simulation was conducted to simulate the behaviour of demand and the
calculation of profit for one realization. In the simulation, the algorithm iterates through
each day trying to capture the inventory level for the product. This is to generate the
product demand for that day.

Monte Carlo simulation carried out for periodic review
The logic of the algorithm is as follows:

1. If the demand can be completely serviced by the current inventory level — the
inventory level is reduced by the demand and number of units sold on that day
increments
2. If the demand cannot be serviced completely by the inventory level — the
inventory on hand would be the number of units sold on that day
In order to model the Periodic Review policy, the algorithm keeps track of the current
day in the year. If the day of the year is equal to the review period, then the order is
placed to replenish the stock to an order up-to quantity M. This value is the decision
variable and is passed as an input to the algorithm. After the lead time has passed for
that particular product, the inventory is updated by the order quantity that was placed.
This is done for a duration of 365 days.

Inventory Simulation for Product 1. Graph by Author
The inventory levels for one simulation of 365 days can be used to determine the profit
the store would have made for that year. All the units that were sold are multiplied by the
products selling price to calculate revenue.
The costs are broken down into three components,
1. product costs,
Product costs are calculated by multiplying the unit costs of each product to the
aggregation of the units ordered.
2. ordering costs
The ordering costs are calculated by multiplying the number of times in that year an
order was placed to the individual cost of ordering for that product. The inventory
levels for each day of the year were aggregated to indicate how much stock was held
throughout the duration of the year.
3. holding costs.
The holdings costs were then calculated by multiplying the amount of stock held
with the unit size of the product and the daily cost of holding a unit.
These costs were subtracted from the revenue to give the corresponding profit for that
one realization of the year. The number of units lost was aggregated and divided by the
demand for the year to give the proportion of lost orders for that year.
The mathematical formula for the Annual profit is given below.

Python code to calculate the annual profit
This simulation was carried out 10,000 times to give multiple realizations of profit and
proportions of lost orders for each time. These results were used to plot a histogram and
calculate the mean and standard deviation of profit and the proportion of lost orders for
that particular order up-to point (M). The figure below is one such simulation for
Product 1 with the order up-to quantity to be 2071.

Profit and lost orders distribution for Product 1. Graph by author.
Similarly, this exercise can be carried out for a range of values of M to determine the
value that gives us the highest expected profit. As you can see from the figure below for
Product 1, we simulated the results for a range of values between 1000 to 3000. This gave
an optimum expected profit of $87,863 (in running the simulations again, $87,992 was
optimal) for the order up-to point of 2071.
These experiments were carried out for the other products and their optimum was
calculated accordingly. Since profit is linearly dependent on the demand and the costs
associated with a particular product, maxima for that function can be calculated.
Product 1 — Simulated Results. Graph by author.

Using a one month review period, the table below lists out the optimal order points, the
expected annual profits and the proportion of orders lost over the period of the year for
each of the products.
Alternative 1 — Periodic Review

Continuous Review
In the multiperiod model, the inventory system operates continuously with many
repeating periods or cycles; inventory can be carried from one period to the next.
Whenever the inventory position reaches the reorder point, an order for Q units is
placed. Because demand is probabilistic, the time the reorder point will be reached, the
time between orders, and the time the order of Q units will arrive in inventory cannot be
determined in advance. [1]

Inventory Pattern for an order-quantity, reorder point model with Probabilistic Demand. [1]
Note that the increases, or jumps, in the inventory occur whenever an order of Q units
arrives. The inventory decreases at a nonconstant rate based on the probabilistic
demand. A new order is placed whenever the reorder point is reached. At times, the order
quantity of Q units will arrive before inventory reaches zero. However, at other times,
higher demand will cause a stock-out before a new order is received. As with other order-
quantity, reorder point models, the manager must determine the order quantity Q and
the reorder point r for the inventory system. [1]

In this policy, the distributor has the ability to check on the inventory regularly and
determine at which point they want to place an order (i.e. reorder point). The distributor
can also specify how much they want to order each time (i.e. order quantity).
The logic in the Monte Carlo simulation is updated for the Continuous Review policy.
Monte Carlo simulation carried out for continuous review
At each day the algorithm checks the inventory level and compares it with the reorder
point.
1. If the inventory level is less than or equal to the reorder point, it then places an
order. But this stock is realized only after the lead time for that product has passed.
For example, Product 1 has a lead time of 9 days, if the order is placed on day 52, the
inventory will be replenished on day 61.
2. It then follows a similar decision logic in updating the inventory level, to the
periodic review algorithm.
3. The profit and expected lost orders calculation is similar to that of the periodic
review policy.
Inventory Simulation for Product 1. Graph by author.
The simulation of these results was again carried out 10,000 times for each product.
These results were used to plot a histogram to calculate the mean and standard deviation
of profit and the proportions of lost orders for the order quantity 2002 and the re-order
point of 812. The figure below is one such simulation for Product 1.
Profit and lost orders distribution for Product 1. Graph by author.

By performing a grid search between a range of values for each product, a combination of
order quantity and re-order points that optimize the profit function can be worked out.
As you can see from below for Product 1, the values were simulated for order quantities
from 1000 to 3000 and the re-order point between 500 and 1100. The plot seems to
display a concave function signifying a maximum point for profit.

Product 1 — Grid Search Results. Graph by author.
In this scenario for Product 1, based on the simulations, a maximum profit of $110,174
for the order quantity of 2002 and the re-order point of 812 was derived.
Using this policy, the table below lists out the optimal reorder points, optimal order
quantity, the expected annual profits and the proportion of orders lost over the period of
the year for each of the products.

Alternative 2 — Continous Review
Final Conclusion
Both the continuous and periodic review policy have their advantages. Periodic review
policy has a fixed review period which allows the organization to better forecasts the
orders made over a period of time. Whereas the continuous review policy keeps the order
size constant and gives flexibility in terms of the times to place the order. Since there are
two decision variables in the continuous review policy over the one in the periodic
review, the solution space for the continuous review policy will potentially be larger.
Profit Comparison between Periodic and Continous Review Policy

As seen from the table above we can clearly observe that the Continuous Review policy
outperforms the Periodic Review policy in terms of the expected profits for each product.
The total expected profits from the continuous review policy are 25% higher than that
of the periodic review. If the decision was entirely based on the expected total profit, the
study recommends continuous review policy as the superior alternative.
Supply Chain Analysis
(KFC case study)
Yonghao Wu
MGSC418
Description of the Organization
Kentucky Fried Chicken also famously known as KFC was founded in 1955 by Harland
Sanders and it is one of the fastest-growing fast-food restaurants in the world, and it is
headquartered in Louisville Kentucky in the United States of America. Currently, the global
outreach, the number of outlets, and the customers that are served by KFC, it is ranked as the
second-largest restaurant chain close to McDonald. KFC is currently serving in approximately
120 countries with almost 19,000 outlets around the globe. Additionally, it has approximately
16,000 employees who serve at different capacities under various terms and conditions
depending on the region they are located. Harland Sanders who is synonymous with the KFC
brand as his face is the official logo of the company had started KFC as a motel where he
popularized the famous fried chicken as the main recipe on his menu. By 1963, KFC had more
than 600 franchised outlets, and the company was growing at a tremendous pace, and it became
too big for Sanders to handle he sold it to investors for $2 million and an annual salary of
$40,000 which grew to $200,000.
Initially, KFC was acting as an independent brand, but it was sold to PepsiCo in 1986 at
the value of $800 million, but it was spun off as a public company which was named Tricon
Global Restaurants. Tricon Global Restaurants currently operates under the Yum! Brand, where
Taco Bell and Pizza Hut are the other organizations that are affiliated with the main company
and their influence, continue to grow. In this context, it points to the extent that KFC has been
able to exert its influence in the fast food sector around the globe and the pressure that it exerts
on Burger King, Wendy’s and McDonald as their main competitors. Most of the outlets that are
under KFC are either through franchise or they are company owned and the Chinese market
creates their biggest market share followed by the United States. After the Chinese market, KFC
is also predominant in Southeast Asia in Malaysia and India, where the prior region makes it
their strongest presence (Azman et al., 2014). In this research, the main focus will be directed at
the Southeast Asian perspective that will enable us to understand the supply chain analysis of
KFC in much depth.
Vision, Mission, Goals, and Values of KFC
The mission and goals that KFC operates on is to sell food in a friendly and fast
environment that appeals to health minded consumers through price conscious products. The
vision that KFC has adhered to is to be the leader in the ASEAN region in integrated food
services where they deliver quality food products and offer excellent and quality customer
service. The core values that guide KFC is that it listens and actively responds to its customers in
a timely manner through effective means. The decisions and their actions are customer focused,
and they have a passion for excellence. The vision, mission, goals, and values that KFC have
input their business have been an integral part of their success, and that is why they have been
able to dominate the fast food industry from the time that they were incorporated.
Description of KFC’s Supply Chain
Kentucky Fried Chicken Holdings (KFCH), is renowned worldwide for the high quality
food products, excellent customer services, the fast and efficient services that they offer, and
their strong financial position. KFC is involved in selling fast food products in food processing
industry and due to these reasons; their supply chain needs to be flexible, quick and efficient to
ensure that they continue to maintain their status quo. The supply chain network at KFC is based
on the demands and requirements of each region where the branch distribution center assesses
and completes the demands of each region. Therefore, the supply chain management at KFC uses
the distribution requirement planning (DRP) system which entails three output plans and two
input files (Kanyan et al., 2016). The distribution requirement planning involves the use of the
materials that are required in the process, procurement, distribution, inventory files, and the
supplies resource file.
The managers in each region orders from the distribution center the raw materials which
are an integral part of the KFC holdings as per the requirements that they have received across
their franchises. These orders include short life products like vegetables and bread, dry, frozen
and wet goods, which have a very short life. Usually the frozen and dry goods are ordered on a
weekly basis whereas the wet foods are ordered 2-4 times a week depending on the demands that
is in their outlets (Malaysia, K. F. C., 2014). The demand estimation decisions are made on the
basis of purchase cycle, seasonal patterns, past data and forecasting, safety stock, and the lead
time. The distribution store center and its affiliate employees together with the stores undertake
these data collection methods, and in turn, they find out the approximate demand of each
franchise or outlet. Subsequently, these statistics are later sent to the regional hubs and to the
headquarters of KFC so that they can analyze and evaluate how the different regions are faring.
The maintenance and efficient supply chain inventory files at KFC are regularly and
thoroughly maintained by the employees of the franchise and outlets. The data that is collected is
later used to decide the quantity of the orders that have been made by each outlet. Subsequently,
the supply resource file is used to track the supplies and the time that they arrive at their
destination. These process occur on a digital platform so that it can be easy to track how the
processes are going on and to avoid the manipulation and human errors. The essence of having
an integrated supply chain management system for KFC was to enable their franchises to
continue operating and undertaking their duties and responsibilities according to the parent
company’s vision, mission, and values (Kanyan et al., 2016). Therefore, when an integrated
supply chain management system was enacted to was also used as a control precept so that
quality of the food products can be maintained.
The capturing of data in a digitalized system further enhances the response of the
supplier, processing time of the order, and the competence of the distribution procedures and its
settings. In understanding how KFC further conducts their supply chain process, the procurement
processes are decided after observing the inventory that is available at the distribution center the
correctness of the demand and the fluctuations that are there (Azman et al., 2014). After
confirmation and verification and the accuracy of the orders, they are then sent to the suppliers
where the order quantities of the raw materials are done. These processes are done by taking into
account by taking into account the capacity approval, the route, and mode of transport, fuel rates.
All these approaches ensure that minimum costs and maximization of efficiency are maintained
and KFC does not incur unnecessary losses or disruption of their business.
Supply Chain of KFC in Southeast Asia
The Southeast Asian countries where KFC is located include Malaysia, Indonesia,
Thailand, Philippines, Singapore, and Vietnam, where the number of franchises and outlets have
continued to increase on an annual basis. However, in order to maintain quality, good customer
care services and to offer food products that are in line with the requirements that is set at the
KFCH headquarters. The Malaysian market is the dominant place in the Southeast Asia where
the first outlet opened in 1973 and through this approach; KFC has continued to focus heavily on
the improvement of their operations, human resource and market (Malaysia, K. F. C., 2014).
KFC in Malaysia has been trying to monitor the individual performances of each outlet as well
amongst themselves so that they can seek ways to improve their services and to strengthen their
market hold. Therefore, KFC focuses on strengthening their drive-thru outlets and their
restaurant business, which are all sectors that are dependent on their supply chain management,
which is an integral part of this process.
The supply chain network in Malaysia is still undergoing development, and due to these
reasons, KFC have to ensure that they use the expertise of running the business on a global scale
to tackle those problems. However, the supply chain framework that KFC uses is based on their
international experience, where they have continued to use their expertise to ensure that their
business and organization maintains its status. The conditions that have ensured that Malaysia is
a top business prospect for KFC is due to their growing per capita income and to plug into this
demand, the company has to increase its supply chain capacity. In ensuring that they have been
able to keep the pace of the economic growth, KFC has invested over RM 300 million in the
mainstream outlets in Malaysia (Ariffin et al., 2014). The investments are aimed at improving
the supply chain at KFC in Malaysia so that they can enhance customer experiences in the
country as well as to support the local franchises to continue their businesses.
KFC in Malaysia have also taken advantage of financing low cost breeder farms and
hatcheries where they rear chicken where they ensure that they satisfy the supply and demand of
the major component and product of their business. However, the low breeder farms and
hatcheries are only able to satisfy 25% while 75% of the rest are supplied by contractors who
make an integral part of their supply chain (Tan et al., 2013). The opportunities that present
themselves at this point is that the local farmers are able to get a chance to work with a
multinational company while they get empowerment on how to improve their agriculture.
Through this venture, there is also indirect employment to other industry players who are able to
act as middlemen between the farmers and KFC, but they sometimes create problems rather than
solving them. The opportunities in the supply chain, as indicated by KFC in Malaysia can
enhance business dealings with eh local people.
Challenges that are faced by the Supply Chain in Malaysia
Irrespective of the investments that KFC has put in place in Malaysia to ensure that the
business flows smoothly, the supply chain faces challenges which are beyond their control while
some can be streamlined with the right guidance. The arrangement between farmers, suppliers,
and the members of staff at KFC are some of the primary causes that create the challenges. As
indicated, the supply chain process suffers at this arrangement because there is a tendency of
having poor communication that occurs between the contracted farmers, the transporters, and the
hub managers (Monczka et al., 2015). These are the loopholes that cause a delay in the supply
chain, and even though KFC has invested in warehouses, there are still challenged due to the
miscommunication.
Most of the KFC operations are on a digital platform including the supply chain sector
and the underdevelopment in information and technology in Malaysia which can be used to track
the vehicles that deliver the goods, testing and loading times is difficult (Mohamed et al., 2013).
There are also no sufficient members of staff in Malaysia who have mastered the art of supply
chain, and management and operations suffer as most of the employees lack the necessary
qualifications. The available experts are mostly based in the urban centers, and they cannot be
persuaded to work in the rural regions where the products come from and where the farmers are
located. The inefficiency in the supply chain is also affected by the lack of sufficient data that
can be able to provide logistics, and this disarray of information and data causes further problems
to the process (Kanyan et al., 2016). In this context, it showcases that the strategy which KFC
had undertaken in a bid to improve efficiency in the supply chain process was aimed at ensuring
that the company would not have to be reliant on one source of supplies least they were able to
deliver on time.
Supply chain management focuses on the ability of the organization to create a platform
under which they can be able to carry out the whole process without failing as it would disrupt
the operations, cause unhappiness in customers, low sales and operating below capacity
(Christopher, 2016). Maintaining a steady flow of information amongst the supply chain partners
and the organization ensures that there are no immediate or long term problems. Trend variations
in supplies chain management showcases that data which is corrected at a specified period of
time should be done in such a manner that the business cycle continues to operate as long as
there are systems that have been put in place to ensure continuation. Quality management,
sharing real time information on the process, customer feedback, and supplier management are
also the aspects that KFC has tried to encompass in their operations to ensure that they keep the
Malaysian market contended. E-business management protocols have also been an integral part
of the KFC operations as the “Star System” which they have integrated into their business
enables them to keep track of how their supply chain management is running.
According to the business network approach, the business systems are open and,
therefore, the network is profoundly entrenched interactively with its environment. As such, the
firms are rooted in a complex network system among the consumers, suppliers, and related
stakeholders (Marshall et al., 2016). At the same time, there is the second team of players
referred to as actors which are primarily the organizations, although some of them may also exist
within the networks (Marshall et al., 2016). Many times, the activity will only happen on
occasion that brings together one or several actors combine, exchange, create, or develop
resources through the application and use of other resources.
Assessment and Application of Supply Chain management in KFC
Supply chain management has evolved as a concept that addresses issues of concern
within the boundaries of a firm. One of the first steps is the inter-organizational perspective; it
gives the common issues like operations management, logistics, and purchasing (Marshall et al.,
2016). Secondly, it has the explanatory power which solves the business problems through an
array of related disciplines like economics and strategic management
There is a constant need for supply chain management in the fast-moving foods sector. It
is enabled with the improvement of living standards which have altered in many ways the
consumer demands (Marshall et al., 2016). In reality, the concept of supply chain management
enables firms to grasp and contain the market opportunities, shorter structures, as well as the
ability to have a rapid response (Marshall et al., 2016). It enables the KFCs to develop and
maintain a customer demand-driven pull supply chain.
At the same time, supply chain management has been critical in enhancing product promotion,
inventory control, as well as the procurement of raw materials (Genoveva & Siam, 2017). Its
application to date remains relevant in the efficiency of supply chain and consolidation of the
business entity in the prime position in the market as well as firm backing for the continued
enterprise.
SWOT Analysis of KFC

It is essential for a business entity to understand its strengths, weaknesses, opportunities,
and threats to enable it to make relevant adjustments in the growing and competitive market.
Also, the analysis is critical in establishing reforms in the structure and technological
advancements that outshine the competitors who offer the same products (Omer, 2018). As such,
entities like KFC formulate SWOT based processes at every stage of production to the point the
products get to the consumers.
The end consumer is not only critical as the final objective, but he or she also gives
practical assistance that supports the decision-making process. Stadtler (2015) posits that the
consumers' wants and needs alongside their positions and quantities they need are critical for the
supply chain managers in understanding the market responsiveness (Stadtler, 2015). Intrinsically,
customer orientation is instrumental, and one features among the top reasons for the existence of
supply chain management.
However, it is imperative to acknowledge that KFC upholds a system perspective based
management approach. The approach aligns and involves all the participants in the supply chain
sector to give the best of what the customers need (Genoveva & Siam, 2017). KFC attributes its
market dominance to the fact that it comes second as the most significant contributor as a
standalone brand after the Taco bells in terms of revenue among the YUM products (Genoveva
& Siam, 2017). Below are the strengths, weaknesses, opportunities, and threats of KFC:
Strengths of KFC
Strengths define the unique features of a business entity or an organization that performs best
that distinguishes it from the rest of the competitors in the same sector of business operation.
Global presence
KFC has a global presence existing in over 130+ states alongside 21,000 plus stores, which gives
it a significant fraction in the worldwide market. Studies opine that KFC is the universal second
leading restaurant chain in most of the countries, particularly in the non-veg food sector (Omer,
2018). Today, with technological advancements and online marketing, KFC can sell its products
both to their physical and digital consumers at their points of need (Omer, 2018). Such platforms
give their loyal consumers with a resounding digital and physical experience.
Loyal Customer Base
Loyal customer base is another strength of KFC in the world's market. The KFC's chicken recipe,
which gives taste and crunchiness is a factor that has continued to create a fan base and loyalty
compared to its competitors in the market (Stadtler, 2015).
Price Leadership
KFC prices are relatively affordable in most countries, which builds the core reasons for
customer loyalty. Its operations on low costs are passed to the consumers who are accustomed to
its channel presence (Omer, 2018). In reality, it gives the customers the privilege to have access
to the products anytime they need them.
Variety in Menu
KFC offers its customers a variety of food to choose from the menu. The fact that KFC twists its
food offerings based on the region of operation has been critical in its survival in the competitive
global market (Omer, 2018). For instance, KFC provides veg food in India to serve the interest
of the vegetarians as well as the chicken lovers.
KFC Secret recipe

One of the profound secrets in the catering industry has been the Sanders' original recipe, which
comprised of eleven herbs and spices (Stadtler, 2015). It is believed that KFC holds a copy of the
Sanders' signed recipe in its Louisville headquarters as well as the eleven vials comprising of the
spices and the herbs.
Weakness
The weaknesses of a business define the factors that undermine its competitiveness in the market
compared to other players. A business entity must, therefore, improve on such areas to remain
relevant and compete for a niche in the market (Omer, 2018). The following have been identified
as some of the primary weaknesses of KFC in the market today.
a) Supply chain and distribution issues
KFC has incurred several challenges regarding the distribution and delivery of chicken,
especially in the early parts of 2018. The problem magnified with that it led to the closure of
some stores in the United Kingdom. Eventually, it involved serious marketing efforts and
logistical steps to get out of the mess (Omer, 2018). KFC can only get out of such messes by
taking care of its distribution and supply chain management of its raw materials like spices,
herbs, and chickens.
Managing Franchisees
One of the fundamental issues in the success of the fast-food industry lies in its ability to
properly handle the different operational problems emerging between the franchisees and KFC
(Stadtler, 2015). However, since its inception, KFC has had numerous incompatible operational
issues which have since led to many outlets and stores getting closed.
Opportunities
Opportunities entail all the factors which an organization can exploit to expand its brand
recognition, sales, and market share among other virtues. Studies rank opportunities as the
second most essential factor in the SWOT analysis of KFC as it directly affects and shapes the
company's future strategy (Mangan, Lalwani & Lalwani, 2016).
Some of the opportunities include the following:
Going digital
The emergence of millennials has not only come with health concerns but also technological
advancements and eventual expansion in markets. The contemporary society is fast embracing
the digital platform implying that KFC should open up its online presence and stores (Genoveva
& Siam, 2017). One of the appropriate mechanisms is by contracting or where possible
partnering with large eCommerce platforms like Flipkart, Olx, and Amazon to sell its products
on the online market.
Exploring and venturing in new food items
Exploring new ventures in the menu will be an excellent opportunity for KFC to boost its sales
and relevance in the fast-food markets. It is because the emergence of millennials has created a
change in demand and needs of specific menus crafted in specific recipes (Genoveva & Siam,
2017). For example, many customers today need food that is rich in nutrients and vitamins but
low in fats and calories (Genoveva & Siam, 2017). As such, it is a big opportunity for the KFC to
introduce foods that are healthy to meet the growing demands in the market.
Growing to new geographies

The emergence and growth economies around the world have expanded markets that KFC can
exploit for its advancement. At the same time, the challenging lifestyles alongside the purchasing
propensity permit fast food outlets to operate new geographies to expand their market shares and
revenues (Omer, 2018).
Threats
Threats constitute the factors that have the latent of harming a business entity or organization in
the foreseeable future (Mangan, Lalwani & Lalwani, 2016). The threats are "yardsticks" that
gives the company's products a far-sighted assessment concerning the problems that the product
may face in the future (Omer, 2018). As such, it is among the critical factors in KFC's SWOT
analysis. Some of the emerging threats for the KFC include the following:
Changing Consumer preferences and food trends
The advancement of millennials has led to several technological and health concerns in the
industry. Today, consumers, just like the respective governments, require foods that are
nutritious and healthy as per the recommendations. The health professionals assert that such
foods must be low in calories and fats (Omer, 2018). The change in taste and preference have
impacted negatively on the fast-food giants as KFC as they have to incur additional pressure to
meet the demands.
Increasing costs of labor
The emergence of growing economies has culminated into the increased cost of living. As a
result, the cost of living has directly impacted on the demands for increased wages to meet the
ballooning cost of life (Genoveva & Siam, 2017). Such pressures alongside the cost of training
employees to meet the company's standards will eventually affect the profit margins of KFC.
That will take the organization to the drawing table to rethink and evaluate their pricing
strategies (Genoveva & Siam, 2017).
Food Quality challenges
Today, one of the primary difficulties among fast-food producers is the food quality restrictions
instituted by the relevant agencies in the respective countries. KFC and other fast-food operators
perform (Genoveva & Siam, 2017). Adversely, KFC has been criticized about the kind of oils it
uses in its cooking. Such criticisms have prompted stringent laws in many countries to the
disadvantage of KFC and other fast food outlets.
Market Competition among the local and global players
KFC is not the world-leading in terms of fast foods despite its rapid growth in the recent
past. Findings demonstrate that KFC faces stiff competition not only from the locals but also
international competitors offering the same services (Genoveva & Siam, 2017). Currently, many
of its competitors are involved in the productions of new food items to supplement their already
rich menu. The motive is to continue to grow their market share as well as the consumers' base.
At the same time, there are local business entities which believe that the continued
existence of KFC's in the local markets will hurt and eventually close their businesses. (Omer,
2018). It is because KFC enjoys economies of large scale purchase and production. Today, such
backlash is visible in many local markets, which can lead to future tarnishing of the brand
reputation, among other shortcomings (Omer, 2018). Consequently, it is vital that KFC needs to
make relevant and practical changes to beat its growing competitors.

References
Genoveva, G., & Siam, S. T. (2017). Analysis of marketing strategy and competitive
advantage. Journal of Economic & Management Perspectives, 11(1), 1571 1579.
Halldórsson, Á., Hsuan, J., & Kotzab, H. (2015). Complementary theories to supply chain
management revisited–from borrowing theories to theorizing. Supply Chain
Management: An International Journal, 20(6), 574-586.
Mangan, J., Lalwani, C., & Lalwani, C. L. (2016). Global logistics and supply chain
management. John Wiley & Sons.
Marshall, D., McCarthy, L., McGrath, P., & Harrigan, F. (2016). What's your strategy for supply
chain disclosure?. MIT Sloan Management Review, 57(2), 37-45.

Omer, S. K. (2018). SWOT analysis: The tool of organizations stability (KFC) as a case
study. Journal of Process Management. New Technologies, 6(4), 27-34.
Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management
and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Malaysia, K. F. C. (2014). About KFC Malaysia.
Christopher, M. (2016). Logistics & supply chain management. Pearson UK.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and
supply chain management. Cengage Learning.
Mohamed, Z., Shamsudin, M. N., Latif, I. A., & Mu’azu, A. U. (2013, June). Measuring
competition along the supply chain of the Malaysian poultry industry. In International
Conference on Social Science Research (pp. 4-5).
Ariffin, A. S., Mohtar, S., & Baluch, N. H. (2014). Broiler industry with emphasis on short
supply chain in Malaysia.
Azman, M. I. M., Elbakoush, A. Y., Hashom, H., & Subhan, M. (2014, December). Indonesian
and Malaysian Consumers: Are they different in preference? A comparative study of
KFC Malaysia & KFC Indonesia‘s marketing strategy. In Conference on International
Studies (ICIS) 2014 (p. 271).
Kanyan, A., Ngana, L., & Voon, B. H. (2016). Improving the Service Operations of Fast-food
Restaurants. Procedia-Social and Behavioral Sciences, 224, 190-198.

Tan, T. M., Devinaga, R., & Hishamuddin, I. (2013). The common challenges of brand equity
creation among local fast food brands in Malaysia. International Journal of Business and
Management, 8(2), 96.

Supply Chain Analysis

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Running head: SUPPLY CHAIN ANALYSIS 1

Photo by Clark Street Mercantile on Unsplash

wanted. While it is difficult to model consumer behaviour, we could provide a rough

a log-normal distribution whose distribution parameters are unknown (which is often

the case). Hence it is important to capture historical sales of the product.

review or periodic review policy to manage its inventory. The objective is to maximize

Additional Product Data

Demand Distribution for each Product. Graph by Author

based on past sales data.

Summary of each product

It is important to understand the statistics of the demand during lead time.

distributor would always fall short of meeting the demand.

easily coordinated. Under the previously discussed order-quantity, reorder point

If a product is purchased, then the demand follows a log-normal distribution. The

product demand for that day.

The logic of the algorithm is as follows:

2. If the demand cannot be serviced completely by the inventory level — the

inventory on hand would be the number of units sold on that day

This is done for a duration of 365 days.

Inventory Simulation for Product 1. Graph by Author

products selling price to calculate revenue.

The costs are broken down into three components,

aggregation of the units ordered.

throughout the duration of the year.

The mathematical formula for the Annual profit is given below.

Python code to calculate the annual profit

Product 1 with the order up-to quantity to be 2071.

Profit and lost orders distribution for Product 1. Graph by author.

optimal) for the order up-to point of 2071.

Product 1 — Simulated Results. Graph by author.

each of the products.

Alternative 1 — Periodic Review

determined in advance. [1]

arrives. The inventory decreases at a nonconstant rate based on the probabilistic

the reorder point r for the inventory system. [1]

inventory will be replenished on day 61.

periodic review algorithm.

Inventory Simulation for Product 1. Graph by author.

Profit and lost orders distribution for Product 1. Graph by author.

display a concave function signifying a maximum point for profit.

Product 1 — Grid Search Results. Graph by author.

the year for each of the products.

Alternative 2 — Continous Review

Profit Comparison between Periodic and Continous Review Policy

study recommends continuous review policy as the superior alternative.

Supply Chain Analysis

(KFC case study)

Description of the Organization

second-largest restaurant chain close to McDonald. KFC is currently serving in approximately

$40,000 which grew to $200,000.

KFC in much depth.

Vision, Mission, Goals, and Values of KFC

Description of KFC’s Supply Chain

supplies resource file.

quality of the food products can be maintained.

Supply Chain of KFC in Southeast Asia

which is an integral part of this process.