Herfy - Grade: -A PDF

Preview

Summary

analysis of the case study company...

Description

King Abdulaziz University Faculty of Economics & Administration

Khalid Sayed Abdullah AlJaghthami 1801657

Operations management Section B

Herfy is a major fast food restaurant chain in Saudi Arabia and one of the largest in the Middle East, surpassing international chains in terms of presence. It has a total of more than 212 restaurants and 4,000 employees throughout Saudi Arabia. It also has many subsidiaries including Herfy Bakery and a soon to be built meat processing plant. It has been an entirely Saudi-owned company since its inception.

Brief history Herfy was founded by Ahmed Al-Said in 1981. In 1994, Panda United was acquired by Prince Waleed bin Talal's Kingdom Holding Company. Consequently, Panda's 70% stake in Herfy was transferred to Kingdom, bolstered by the new large budget provided by Kingdom. In 1998, AlAzizia Panda United (Panda's new name) was acquired by The Savola Group, headed by Adel Al-Fakeh, and Herfy became part of the group. Herfy's growth again grew as the number of Herfy chains doubled.

Herfy project Herfy recently opened its first overseas branch in Bahrain in cooperation with local partner Al Meer Trading. Franchise agreements in the U.A.E. and Kuwait have been concluded and more franchise requests have been received. Herfy opened its first branch outside the Middle East in Bangladesh in December 22, 2017, where they are supposed to open 30 outlets within "a few years". The first branch opened in Gulshan and the second branch in Banani, Dhaka. To cope with the added overseas branches, Herfy is planning to open its own SR13 million meat and chicken processing plant in a similar way to Herfy Bakery.

Herfy operations manager is Sayed Faisal.

Herfy’s Operations Management, 9 Decision Areas. 1. Design of Goods and Services. Herfy’s goal in this strategic decision area of operations management is to provide affordable products. As such, the serving sizes and prices of its products are based on the most popular consumer expectations. However, some Herfy’s products are minimized in size to make them more affordable. 2. Quality Management. The company aims to maximize product quality within constraints, such as costs and price limits. Herfy’s uses a production line method to maintain product quality consistency. Consistency satisfies consumers’ expectations about Herfy’s and its brand in this strategic decision area of operations management. 3. Process and Capacity Design. Herfy’s process and capacity design is centered on efficiency for costminimization that supports the company’s strategies. This strategic decision area of operations management focuses on maintaining process efficiency and adequate capacity to fulfill market demand. At Herfy’s, the production line method maximizes efficiency and capacity utilization. 4. Location Strategy. Herfy’s goal in this strategic decision area of operations management is to establish locations for maximum market reach. 5. Layout Design and Strategy. Herfy’s uses practicality for this decision area of operations management. 6. Job Design and Human Resources. Herfy’s human resource strategies involve training for skills needed in the production line in restaurant kitchens or production areas. For this decision area of operations management, individual and organizational learning are also emphasized to support Herfy’s organizational culture. 7. Supply Chain Management. The firm’s global supply chain supports its various locations around the world. Herfy’s has a strategy of supply chain diversification for this decision area of operations management. Such strategy involves getting more suppliers from different regions to reduce Herfy’s supply chain risks. 8. Inventory Management. Herfy’s goal for this strategic decision area of operations management is to minimize inventory costs while supporting restaurant operations. The company does not directly sell products and ingredients to its restaurants. Instead, local and regional intermediaries and distributors coordinate with Herfy’s restaurant managers to manage their inventory. 9. Scheduling. Herfy’s uses corporate conventions for scheduling, based on local market conditions and laws, as well as supply chain needs.

IPO model

            

Input

Process

Chicken Meat Bread Onion Vegetables Oil Water Energy Building Equipment Labor Costumer Cheaf

 Prepared Food  Agreeable environment  Cooking preparation

Inventory management

Output      

Chicken burger Beef burger Burger meal French fries Kids meal Satisfied costumer

Herfy uses Just-in-time inventory management system. As the name suggests, just in time provides the supplies for the customer in time. When a customer orders a burger, Herfy does not start to cook. It reheats and assembles the burger according to the particular order. If Herfy begins to cook food when a customer places an order, Herfy’s will take time to prepare a burger. As Herfy is a fast food, it cannot make a customer to wait for a long time to get the ordered burger. With the help of just in time inventory management system, Herfy pre-cook a batch of hamburgers and keep them under heat lamps. They keep them as long as possible and eventually discard what could not be sold. The advantage of this system is to serve a customer as fast as possible while having the finished product sitting in the inventory as short as possible. The other benefit of just in time inventory management system is that the product will be good in quality. Because of this system, Herfy prepares hamburger ‘just in time’. Herfy’s ability to produce faster reduced the ordering cost of the customer. Because of their ability to prepare fast, the customers need not to wait long for burgers. This firm has lower inventory levels, which may cause a bigger problem during high demand. But, Herfy’s ability to make burgers in record time prevents them from those situations. The holding cost of burger parts are costlier; hence it will be spoiled if it is kept for a month of time. If this frozen burger parts are cooked, the spoil time increases to 15 minutes. Because of this, in Herfy old system the cost of burger was high to absorb cost of spoiled burger. But now they can prepare burger in record time, as a result of that there is less spoiling of burger in turn low cost of burger. Hence, this Just in time system is beneficial to Herfy. The advantages for Herfy for using just in time inventory management system are reduction of cost of ordering and cost of holding, and reduction in safety stock. The reason for keeping the safety stock is to meet inconsistency in lead time and demand. In Herfy case, the supplier is internal and they are using just in time system, so they can reduce the lead time and variation in lead time.

Benefits 1. Restaurants avoid running out of stock. As a result, customers can always receive what they order. 2. The system eliminates problems of inexperience in the ordering process. The system enables a new Restaurant Manager to ensure the order is right first time. 3. Time saved in ordering as the system calculates how much is required. 4. Orders are based on the current stocks. The Restaurant Manager simply inputs the current stock level. 5. Less waste means food costs are reduced. This cost saving is then passed ones better value for money for customers. 6. The amount of stock ordered for promotions is more accurate, being based on past performance. 7. There is a reduction in the need for emergency deliveries, saving money. 8. Stock levels are always optimum, helping to ensure sales and the availability of the freshest product. 9. Stock can be reduced automatically at the end of a promotion, avoiding too much stock.

HERFY SUPPLYCHAIN STRATEGIES    

One stop shopping concept Central file management Inventory management Restaurant simplification

Synchronizing the perishable Supply Chain 1. Demand forecasting  Promotional + Continuous Supply  Restaurant and DC level 2. Supply Planning  Restaurant and DC level 3. Visibility and Collaboration across the chain

THREE LOGISTICAL DRIVERS: 1. Inventory It includes raw materials, work in progress, and finished goods within a supply chain. At Herfy’s, all raw materials, work-in-progress and finished products are handled on a First In, First Out (FIFO) basis. This means raw materials are used in the order they are received. Therefore, stock is always fresh because products are sold in the order they are made. If the process First In, Last Out (FILO) was used, then the finished product would be dry and unappealing because the first one prepared is the last one sold. 2. Transportation It is the process where the inventory is moving from place to place. 3. Facilities They are the actual physical location in the supply chain network where the product is stored, assembled, or fabricated. The two main facilities are production sites and the storage sites. THREE CROSS-FUNCTIONALDRIVERS: 1. Information It includes data and analysis related to facilities, inventory, transportation, cost, prices and customers in the whole supply chain. 2. Sourcing It refers to who will perform which activity (production, storage, transportation, and distribution) in a supply chain. 3. Pricing

Herfy’s also believes in value to the customer, that is, why prices are value oriented as Amin Mohammad Lakhani put it in his word, nothing sells forever unless it is value for money.

Forecasting demand A forecast is an estimate of future sales of finished products. Forecasts are calculated using: 1. store-specific historic product mix data from the last two years 2. store-specific and national causal factors. These specify dates for events such as national promotions & school holidays 3. information from store managers about factors that might affect demand, e.g. road closures or local events & promotions....