STRATEGIC PROCUREMENT IN
SUPPLY CHAIN
SUBMITTED BY:
Muhammad Ali Shah (01-111211-112)
Shehreyar Nadeem (01-111211-106)
Hizbullah (01-111211-039)
Adeena Naeem (01-111211-232)
Ayesha Tasawar (01-111211-021)
Muhammad Adam Banoori (01 111202 087)
ASSIGNMENT NO 1
Review the procurement procedures of two different organizations. Pay close attention to
the detailed steps involved in the procurement process for each organization and compare
the procurement process of both by explaining the potential similarities and differences.
KFC Procurement and Purchasing Process:
• KFC's procurement process involves a complex system to ensure the quality and quantity of its
ingredients are exactly what is needed for the hundreds of millions of customers who walk
through their doors each year.
• KFC's procurement process starts with local suppliers. This ensures freshness and keeps its
costs in line with regional market prices.
• KFC has developed high standards for incoming ingredients and works closely with suppliers
to verify quality and safety assurance before delivery.
• KFC sources from a specialized supplier—and has done so since 1940 when Colonel Sanders
created his top-secret recipe. To maintain this secrecy, KFC operates an airtight vendor
qualification system that involves multiple layers of evaluation before any supplier is accepted
into the network.
• KFC purchasing and supply management are running at a low risk avoiding any anticipated
supply bottlenecks and building long-term supplier relations.
• KFC franchises sometimes purchase directly from the suppliers in case of urgent supplies or
their supplier cannot deliver on time for some reason. This is only temporary to meet the
urgent demand and allow the operations to run without any abruption.
Procurement Strategies which are implemented in PepsiCo:
➢ Single Source Procurement:
Tariq Glass manufactures the bottles in Lahore under license by PEPSI Pakistan. PepsiCo purchases
its stationery items from a single source. PepsiCo purchases computers and related products from
a single source in bulk quantity.
➢ Core Purchasing Cycle:
PepsiCo The gases that are used in PEPSI are made by Multan Factory itself but in case of shortage
or any emergency in which Multan factory is unable to provide gas, the factory buys it from
Supreme Gas & Pak Gas.
➢ Global Sourcing:
Material is procured from international suppliers. All the ingredients including flavor enhancers
used in Lays Masala are imported from Thailand. Pepsi Pakistan made the plant in HariPur Hadar
where they import the material from USA & Ireland.
➢ Quality Testing Methods:
Takes effective measures for quality control. Production of the company is according to the
standards set by PCI. The company is very much concerned with the quality of raw materials as
well as end products. The following are the main steps taken by the company for quality control:
• Sugar Testing
• Water Treatment Testing
• Syrup Testing
• Finished Product Testing
➢ Vendor development:
Vendors undergo rigorous evaluation processes, including assessments of quality compliance,
financial stability, and past performance. PepsiCo fosters transparent and collaborative
relationships with vendors, providing training and support to enhance their capabilities and align
with PepsiCo's standards. PepsiCo employs technology-driven solutions for streamlined
procurement operations, including digital procurement platforms and data analytics for informed
decision-making. Additionally, risk management strategies are implemented to mitigate potential
disruptions and ensure the continuity of supply.
➢ Making Good Relationships with Suppliers:
PepsiCo issues qualitative measures for suppliers to ensure they are not below expectations. They
not only assist the suppliers to improve if they fail but also make sure that they continue to do so
in the future. They transmit information with the technology to make purchases and process the
transactions.
Potential Similarities:
1. KFC and PepsiCo rely on a network of suppliers for sourcing materials and maintaining strong
supplier relationships for quality and competitive pricing.
2. Both companies employ strategies like bulk discounts and cost-saving initiatives in
procurement to manage expenses while upholding quality.
3. Digital tools such as supply chain management systems are utilized for data analytics and
streamlined workflows in procurement.
4. Ensuring quality through supplier screening and adherence to legal standards is a priority for
both KFC and PepsiCo.
5. Both have contingency plans to mitigate risks to the supply chain, including monitoring
geopolitical and environmental factors and diversifying suppliers.
Potential Differences:
1. Cooperation with suppliers: KFC likes to work closely with local suppliers. PepsiCo works with many
suppliers and tests their products.
2. Where do they get their supplies: PepsiCo gets its supplies from many sources, while KFC relies
mostly on local suppliers.
3. Crisis Management: KFC is prepared for crises and can buy directly from suppliers if necessary.
PepsiCo uses technology and helps its suppliers improve and avoid problems.
4. Purchasing from Multiple Suppliers: KFC procures a variety of the same product from different
suppliers however Pepsi has various suppliers registered and only buys from one of them. In case of
an emergency procurement may done through other registered suppliers.
5. Purchasing in Bulk: PepsiCo purchases in bulk from its suppliers while KFC purchases daily. The
difference is due to nature of operations.
