INTRODUCTION

Pizza Hut is one of the flagship brands of Yum! Restaurant Int. which also has
KFC, Taco Bell, A&W and Long John Silver’s under its umbrella. It is the
world’s largest pizza chain with over 12,500restaurants across 91 countries.
Pizza Hut was started in 1958,by two brothers Frank and Dan Carney in
Wichita, Kansas. They had the idea to open a pizza parlor. They borrowed
$600 from their mother, and opened the very first Pizza Hut. In 1959, the
first franchise unit opened in Topeka, Kansas. Almost ten years later, Pizza
Hut was serving one million customers a week in their 310 locations. In 1970,
Pizza Hut was put on the New York Stock Exchange under the ticker symbol
PIZ. In 1986, Pizza Hut introduced delivery service, something no other
restaurant was doing. By the 1990's Pizza Hut sales had reached $4 billion
worldwide. In 1998, Pizza Hut celebrated their 40th anniversary, and
launched their famous campaign "The Best Pizzas Under One Roof." In 1996,
Pizza Hut sales in the United States were over $5 million. The first Indian
outlet was opened in June 1996 in Bangalore. In India, Pizza Hut has 139
restaurants across 36 cities. Pizza Hut has been voted the “best family
restaurant” for the second year running at the 2007 Tommy’s Parent
Friendly Awards. "Pizza Hut is known for quality, innovation and category
leadership.

Background

Pizza Hut entered India in 1996, and opened its first restaurant in Bangalore. Since then
it has captured a dominant and significant share of the pizza market and has maintained
an impressive growth rate of over40 per cent per annum. Pizza Hut now has 95 outlets
across 24 cities in India; and employed nearly 4,000people by end of 2004. Yum! has
invested about US$ 25 million in India so far; this is over and above investments made
by franchisees. Yum! Brands Inc is the owner of the Pizza Hut chain worldwide. A
Fortune 300 company, Yum! Brands owns Kentucky Fried Chicken, Pizza Hut, Taco
Bell, A&W and Long John Silver’s restaurants worldwide. Yum! generated more than
US$ 25.9 billion in worldwide sales in the year 2003, and has more than 33,000
restaurants in over 100 countries.
Operational Practice through (C.H.A.M.P.S.):

C : Cleanliness

H : Hospitality

A : Accuracy

M : Maintenance

P : Product Quality

S : Speed

Pizza Hut strictly follow the norms to attain the quality product .They have adopted the
best operational practice to attain the customer satisfaction. They are doing their
operational practice under an umbrella of C.H.A.M.P.S .So here comes the role of
supply chain because if they want to provide a quality product to their customer and on
the other hand they want to responsive as well the cost will definitely go high so to be
efficient enough they have to manage their supply chain.

Ingridents of Pizza:
• mozzarella cheese
• pepperoni
• sauce
• base
• potato
• vegetables
• wheat
• baby corn
• spices
Products of Pizza Hut :
• Pizzas
• Pastas
• Soups and salads
• Desserts

Outsourcing the Ingridents:

ITEMS PLACE

Wheat Jalandhar(Punjab)

Cheese Karnal, Haryana

Tomatoes Bhubaneshwar, Orissa

Spice South India

 Baby corn Nepal

Pepperoni Australia

mozzarella cheese Spain

Market Share:

Supply Chain drivers of Pizza Hut:

"Supply chain management is the factor that differentiates the winners and the
losers in this business," drivers play an important role in terms of the
responsiveness and efficiency. We must examine the cross-functinal and logistical
drivers of supply chain performance: facilities, inventory ,transportation, information,
sourcing, and pricing.
Facilities:
Facilities are the actual physical locations in the supply chain network where product is
stored, assembled of fabricated.The two major type of facilities are production sites
and storage sites.As we have seen the ingredients are carried out from different
locations across the world so to maintain the same taste through out in india they made
four commisionary in Noida , Mumbai, Kolkata, Bangalore where the pizza base is
prepared and then transported to different pizza stores. Here it is very clear the they
provide the same base which is then customized and appear as a different product so
there is a certainty in demand pattern and on the other hand they provide variety also so
there is a clear line between the push and pull strategy.

Inventory :
It encompasses all raw materials, work in progress and finished goods with in the
supply chain.As the base is prepared in the commissionaires and then transported to
different retail outlets and the outlets keep the inventory stock of only three days
because it is the perishable good so the inventory stock cost is reduced .As only the
base is transferred to the store so in case of any particular item demand is increased it
do not creates any problem.

Transportation :
To deliver the base from the commissionery to different outlets the use the refrigerated
trucks in which the base is kept and there is a control of temperature which they set
according to the distance between the commisionary and the outlets.There are 110
trucks to supply the base across India.There is also a vacant space in which extra base
is kept to fill the demand of a particular store. The company will not incur any additional
transportation costs so long as the counters are along the highway or the truck's
route.In this way they use their transportation and maintain their efficiency.
Information:
Tthere was no proper medium of coordination between the suppliers and the outlet
managers ,due to this the flow of information at times the information was
misinterpreted and not correlated this all happened because of no customer database
was maintained and outlet manager could not recall the need of customer. There was
not a proper inventory control, some outlets receive excess amount of inventory so the
cost is increased and they were not able to come across this problem in the absence of
proper information system .billing problem, there was a deep problem faced by pizza
hut in initial years working of frauds at billing ,of some unusual favours done by staff. To
tackle the billing system they made centralized They had built in server storage
system ,but due to continuous exponential growth ,the system collapsed because of
small storage capability . this system didn’t allow any type of centralization in respect of
billing process and inventory control. They need such a storage infrastructure which
can be scaled up against increasing demand. So 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 ,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 based HP integrity
based system. Pizza hut developed SAN of 15 tetra byte capacity .the SAN went on
floor in 2008 after 1 month of testing ,it has been sized for 3 years keeping in mind of 2
giga byte growth per day pizza hut opted to run its SAP –ERP application on SUSE
Linux enterprise server. 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 resilience. 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 plays the crucial role in helping to manage the internal operations and to
maintain the extended supply chain. the five SAP server connected to SAN and this is
how increased capacity has helped pizza hut increase its oracle data base space.
This was how 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.

Sourcing :
As we have seen above that the Pepporine mozzarella cheese is imported from
Australia and Spain respectively so it will take time an increased the cost also so they
have to manage but on the other hand to compensate the increased cost they maintain
the local supply chain to reduce the cost like vegetables, wheat, tomatoes are imported
from India .So they provide the world class facility and taste my importing its main
ingredient from spain and Australia but other ingredients from local vendors.

Pizza and logistics?

It is wrong to conclude that running a pizza chain is easy by looking its front-end
operations. Compared to the complexities involved in managing a supply chain, the
promise of pizza delivery within 30 minutes or offering it free is a child's play for pizza
chains. "Supply chain management is the factor that differentiates the winners
and the losers in this business,"

For example, the Pepperoni and Jalapeno needs of Domino's Pizza are flown in from
Australia and Spain respectively. Within India, the chain sources other vegetables,
including onions, potatoes, tomatoes, etc., from different markets at their prevailing
prices. Even cartons are centrally purchased to avail of the benefit of scale.

On the other hand, Pizza Corner imports all its potato requirements from Canada. The
other major imports for Pizza Corner are cheese and olive oil. Lately, the company has
started sourcing cheese from a Bangalore-based company.

According to Mr. Antoine Bakhache, chief executive, Pizza Corner, imported potatoes
land at ports in Mumbai or the Delhi airport. The consignment is then transported to
other parts of the country.

For the Pizza Hut chain, cheese is imported from New Zealand, while chicken and
bread are sourced locally.

Besides ambience and pricing, one of the important attributes of a food service chain is
maintaining a uniform taste across all its the outlets. Hence, chains like Domino's Pizza
and Pizza Corner have set up commissaries in different cities. While the former has five
commissaries, the latter operates four.

The inputs sourced from various places are supplied to the commissaries in
reefers/refrigerated trucks for process and production of base material. The pizza dough
and other items prepared in commissaries are then sent to the retail outlets again in
reefers.

"Based on the distance between the retail outlets and the commissaries, the
temperature inside the trucks is fixed so as to set the dough to a required level when it
reaches the outlets.
According to him, retail outlets have to exhaust the processed dough within three days
of delivery. However, due to some reason if they fail to do so, the entire quantity is
discarded. The existing commissaries and the reefers will be put to optimum use as
Domino's India is now opening counters in Indian Oil Corporation's petrol bunks. The
company will not incur any additional transportation costs so long as the counters are
along the highway or the truck's route.

Agreeing that there is spare capacity in the reefers that could be used to carry similar
items for other food chains.

Responsiveness and Efficiency:

As we have seen that pizza hut open their outlet in bulk 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 outlet in bulk 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.
Supply chain diagram of Pizza Hut:

Pepsi company and

Cremica bakes

Sauces

Dough Meat market

Filling
Vegetables

Topping

Ware houses
Bakes

Customer(pizza Delivery service

hut)
Value preposition:

Value proposition determines determines additional ways of adding value to your offer
without affecting the price, so as to create a greater worth for the customer. This is
called ‘value proposition’. The value chain analysis means of increasing customer
satisfaction and managing cost more effectively. This is a systematic approach to
examining the development of competitive advantage. Value chain analysis is
particularly useful tool for looking at competitors, and identifying sources of competitive
advantage.

Pizza Hut entered India in 1996, and opened its first restaurant in Bangalore. Since
then it has captured a dominant and significant share of the pizza market and has
maintained an impressive growth rate of over 40 per cent per annum. Pizza Hut now
has 95 outlets across 24 cities in India; and employed nearly 4,000 people by end of
2004. Yum! has invested about US$ 25 million in India so far; this is over and above
investments made by franchisees. Yum! Brands Inc is the owner of the Pizza Hut chain
worldwide. A Fortune 300 company, Yum! Brands owns Kentucky Fried Chicken, Pizza
Hut, Taco Bell, A&W and Long John Silver’s restaurants worldwide. Yum! generated
more than US$ 25.9 billion in worldwide sales in the year 2003, and has more than
33,000 restaurants in over 100 countries.

There are various factors which gives Pizza hut an edge over its competitors like
Dominos, Pizza corner.

Offering value food:

Employing economies of scale, Pizza Hut has made its offerings more affordable. Its
delivery offer of US$ 4.4 for four personal pan pizzas has been very successful, helping
it grow the business by 25 per cent. They
have recently introduced a range of vegetarian personal pan pizzas for US$ 1.1.
Most Pizza Hut restaurants are located in the metros and smaller metros. In order to
have better market share across the country, Pizza Hut is consolidating its position by
opening more restaurants in the metros where it already has a presence as well as
opening outlets in new markets. Pizza hut is also moving beyond metros these days
and opening its outlets in the cities like bhuvneshvar,pondichery,Nagpur etc in order to
have better penetration.

Aggressive marketing and tie-ups with local and popular

brands:

Pizza Hut has increased its visibility by launching a well-received TV campaign aimed at
the young crowd. It has formed partnerships with recognised brands such as Nestle and
Pepsi. It also holds regular promotional campaigns targeted at children and uses these
alliances to offer packages during these campaigns.

International brand with an Indian heart:

Pizza Hut is one of the first international pizza chains with purely vegetarian dine-ins at
Chowpatty (Mumbai), Ahmedabad and Surat, which also serve
Jain menus. Pizza Hut has even opened two all-vegetarian restaurants in the western
state of Gujarat to cater to the Jain religious community, whose
members prefer not to eat at places where meat is served. So in this way pizza hut
takes good care of the Indian culture and religion and designed their stores accordingly.

Offering more than the international menu:

Pizza hut has always tries to give some extra values in terms of the food offerings as
compared to their competitors. International food chains typically offer only a few
localised products in other parts of the world. However, Pizza Hut’s local menu is as
large as the international one. According to Pizza Hut, the Indian food heritage is very
rich, and hence Indians like local flavours. The Tandoori range of pizzas, which was
developed locally, has a menu mix of over 20 per cent.
Relationship with Suppliers:

Leverage Strategic
Ongoing and • total cost of ownership
• cost analysis
frequent • need good relationship
• Need generic relation
purchases

Nature of buy
Low impact Critical project
• Price analysis • Long term capital investment
• Do not need good • Good relationship required
Infrequent relations
purchase or
limited impact

Ar
m length
Strategic Alliance
Low impact:
The bottom left quadrant is the low impact area where the purchases are infrequent and
the analysis are totally based upon prices where it is not necessary to maintain the good
relation with the supplier. In the pizza hut case when they open their new store they
need the well furnished dining which is not purchased frequently and then they go for
that distributor who provide the required product with low prices and in that case it is
not primarily to maintain the health relationship with the distributor.

Leverage:
The upper left quadrant represents larger purchases from suppliers who have a routine
relationship with the firm. This is the area of leverage buys and the analysis is based on
cost because you are buying the quantity in bulk and little careful purchasing makes a
big difference in cost and on the other hand you have to maintain the good relationship
with the supplier .In the case of pizza hut they outsource their Pepperoni and
mozzarella cheese from Australia and Spain respectively which are their main
ingredients and they pay a heavy amount for these materials because they give a great
impact on the product cost and they have to maintain the good relationship with the
suppliers in order to get flexible supply chain and also cost effective.

Strategic:
The upper right quadrant represents more important supplier relationship. The term
strategic means that you are dealing with issues that are going to make a difference in
your companies competitive success and generally relate to items you buy that are
used to create the product or service that your firm sells. In the pizza hut their strategic
decision is to form a chain of local suppliers to reduce their cost. Now the company
buy 95% of the ingredients from the local vendors. A strategic development on the
cards now is the sourcing of all ingredients locally, which is likely to lead to a significant
reduction in prices. The chain is currently working closely with suppliers in India to
source cheese locally. Tricon has been importing the mozzarella cheese and dough
blend all these years, and has some 75 domestic suppliers. The key ones include
Bharat Bor Factory Ltd (for Pizza Hut boxes), Elmac Agro India Pvt x Ltd (for
sauce, baby corn and red bean among other ingredients), McCain Foods (for fries
and smileys), Midas Foods (for soups and cornmeal), Western Hatcheries and
Venkys (both for chicken toppings, patties and wings

Critical projects:
The major difference between critical projects and strategic items is the frequency of the
purchase .Strategic items tends to be purchased repetitively for critical projects the
purchase is infrequent but has ongoing impact. In the pizza hut case here they look for
the total cost of ownership before buying or introducing new technology the check
whether this will be cost effective or not or this will provide any value added service or
not .Like in pizza hut they use the temperature controlled truck and 30 minutes free
pizza offers are the critical and they analyze that it will be effective or not.