National College of Business Administration &

Economics

Lean Operations
(FINAL PROJECT)

SUBMITTED TO: SUBMITTED BY:

SIR ZAHID AZIZ MUHAMMAD USMAN
ID# 2183105
 INTRODUCTION

ZFC in Pakistan:

ZFC are going to launch a fast food restaurant chain in ten (10) major cities of
Pakistan (Islamabad, Rawalpindi Karachi, Lahore, Multan, Sialkot, Murree etc.)
with more than 35 outlets nationwide. Its first outlet will be in blue area,
Islamabad. ZFC Pakistan will offer the different fast food items like, Burgers,
Sandwiches, Fried chicken, Nuggets, Fries, and drinks etc.

Vision Statement:
“To be leading integrated food services group in Pakistan delivering consistent
quality products and excellent customer focused.”

Mission Statement:
“To maximize profitability, improve shareholder value and deliver sustainable
growth year after year.”

Competitors:

 KFC
 Subway
 Mc. Donald’s
 Mr. Burger
 Burger king
Products:
ZFC Pakistan provides 100% Halal and Hygienic products to its customers. It
offers a variety of finger-licking products, some of which are as follows:

 Burgers
 Crispy Fried Chicken
 Twister
 Hot wings
 Fish Zinger
 Nuggets
 Corn on the Cob
 French Fries
 Hotshots

(01)

Highlight the operational activities of the restaurant

ZFC is fast food restaurant chain working all over the Pakistan is performing the
following operational activities:

Logistics Management
The transportation of ZFC has been completely outsourced and since 80% is in
refrigerated truck movement. Multi-temperature and single temperature trucks
transport the fast food swiftly to the ZFC restaurants across the country.

Transportation
It is the process where the inventory is moving from place to place. Refrigerated vans
are used here in this case. The company has both cold and dry storage facilities with
capability to store products up to -22º C as well as delivery trucks to transport
products at temperatures ranging from room temperature to frozen state. The
specially designed trucks maintained the temperature in the storage chamber
throughout the journey.

Procurement:
To plan purchasing activities monthly budgets are made. These consist of dividing
the allocated budget into the inventory policies already defined at the warehouse from
past data and experience. FIFO (First in First out) method is used for all items for the
inventory at the warehouses as because are perishable in nature.

Outsourcing the Ingredients

ZFC wants to become a more modern and progressive burger company, one thing
that will not be changing is expectation of safe and high-quality food. ZFC
commitment to sourcing the highest quality food products for restaurants starts with
suppliers.

Supplier Evaluation and Selection

ZFC uses the vendor selection process for assessing, comparing, negotiating (if
necessary) and then finally deciding on person or company for buying certain
product or services. The management of ZFC has constituted a Cross functional team
for selection of supplier

Relationships with Suppliers are Essential

One of the most impressive things about ZFC to date is the company's ability to
maintain long-standing relationships with suppliers.

Ordering Process:

The ordering process involves holding a small buffer stock. This is extra amount of
inventory held to meet any unexpected higher demand. Inventory manager uses a web
based communication software called ‘Weblog’ to view and amend store order
proposals. Each time of ordering weblog creates a proposed order to analyze and
amend if necessary. The system automatically generates a delivery note that gives the
exact quantities and descriptions of the delivery. The manager has to click confirm on
weblog when they finish selecting amount of inventory they needed to use.

The ordering processes are given below;

1. Cash & cashless payments

2. Online Orders
3. Online menu
4. Delivery fees
5. Redeeming discounts
6. Cancellations
7. McDonald’s Delivery

Inbound Logistics
It is the movement of materials from suppliers and vendors into production processes
and storage facilities. Based on the demand forecast, Manager orders the Venus
Distributors on daily basis. Some branch has its own cold storage facility, which is
used to store the daily procured raw material.

Outbound Logistics
Outbound logistics is the process related to the storage and movement of products
from the end of the production line to the user’s end. When customers enter the
restaurant, they go to the counter, give their order, which they are served within a
single minute.

Cold Chain Logistics

A cold chain is a temperature-controlled supply chain. It is used help extend and
ensure the shelf life of products such as fresh agricultural produce, processed food.
ZFC entire network supply-chain consists of movement of goods through a cold
chain. An interesting and innovative feature of this cold chain is that the same truck
can carry products at different temperatures ranging from:

 Frozen products at -18C to -25C

 Chilled products from 1C-4C
 Dry products at ambient temperatures

Reverse logistics
The buns are packed in plastic crates to ensure their quality. These crates have to go
back to the bakery, that’s when return logistics takes place.

Warehousing:
Pakistan is segregated into two areas, namely North and South. For simple
understanding Multan is set as midpoint. The area below Multan falls under the
southern region whereas, Multan and the area above it falls under North region. Each
region hence has its own warehouse. The North region has its warehouse in Lahore.
The south region has its warehouse in Karachi.

Inventory Management:
The process of making sure there is enough stock at all times to meet customer
demand whilst minimizing expensive waste is known as stock management. High
cost is involved in holding too much stock so ZFC uses lean stock control method to
save money.

Serving Customer:
Competition and increasing consumer preference for variety and healthier food
makes ZFC to expand the range of menu. Customers entering into ZFC are divided
into those who know about menu and those who are new and coming to restaurant
first time and are not familiar with menu.
 (2)
How can you apply Kanban and Poka yoke techniques? Give a
brief implementation plan.
Poka-yoke is a lean manufacturing method for eliminating mistakes. Poka-yoke
makes it very convenient to perform numerous tasks. It saves us a lot of time
and allows us to do many things without thinking. It keeps us safe by not letting
us forget to perform a specific action. Thus, significantly increases the quality of
our lives. Without them, we’d have to be attentive to what we do or how we
operate certain machines and appliances.

Some of the control methods to prevent human errors include:

o Designing a part so it cannot be used by mistake

o Using tools and fixtures that will not load a mis-positioned part
o Having a work procedure controlled by an electric relay
o A signaling mechanism can alert a worker of possible sources of error

The signals which permit production materials to be replaced or refilled are

called Kanban. A Kanban will be placed where products or manufacturing
components are stored and will signal when these need to be replenished. With
this process, items needed are always available and will not be replenished
without a signal from further down the production process.

Kanban signals can come in any forms. Kanban cards are the most common
type of signal. These cards are sent to a previous step in the manufacturing
process to indicate that more products or parts are needed. However, a Kanban
 can be as simple as an empty container that a worker can see needs to be
refilled. The Kanban will provide the worker with information for replenishing the
items such as the reorder quantity and part numbers.

Kanban signals provide an effective way to implement a pull system, which will
lead to an overall more organized, efficient and profitable business.

3. Can you apply JIT in your restaurant? If yes, then how?

JUST IN TIME

Just-in-time is a technique of Lean production to save money and reduce waste, the
products are only produce after receiving a request from the customers.

A chief benefit of a JIT inventory system is that it minimizes the need for a firm to store
large quantities of inventory, thereby improving efficiency and providing a substantial
cost saving. ZFC Fast-food restaurants have a very good operation system trained staff
and will follow the just-in-time inventory technique of lean manufacturing to serve their
customers on a daily basis during lunch and dinner etc. Most of its product will be in the
ready to serve form, they will have cheese, burger patties and all the fixings and toppings
on hand, but they will not start the cooking their Fries, burgers, chickens or fish
sandwiches until a customer places an order. As the customer order will be received,
they have to put them in the ovens or into the oil and the product will get ready to serve
in the minimum possible time which normally takes from 1-5 minutes. This will save the
waste and gives the chain bragging rights for the freshness of its food. They have also
trained their staff for each task in the ground serving and kitchen.
 (04)

How to use empowerment as tool of lean in a restaurant business?

ZFC has planned to use the empowerment tool of lean to empower his staff by the
following way:

1) Provide initial and ongoing training: ZFC will provide the initial and
ongoing training Even experienced workers need to know how things are done in
your restaurant. Well-trained employees are happier, more confident and more
effective. Plus, ongoing training builds loyalty and reduces turnover.
2) Employee Involvement: ZFC will make sure the Employee Involvement by
using the experience, creative energy, and intelligence of all employees by treating
them with respect, keeping them informed, and including them and their ideas in
the decision making process.
3) Report tips properly: The IRS is very specific about how tips are to be
reported; for details, check with your accountant or contact the IRS.
4) Offering Bonuses: ZFC will offer the semi-annual and annual bonuses for all
their employees and will introduce the reward system for those employee who will
provide the extra ordinary services/performance.
5) Part time Cook/servers: ZFC will hired one-part time cook/ server. When one
lead cook may need to arrive early in the morning to begin preparing soups, bread
and other items to be served that day. One full-time cook should work days, and
the other evenings. The part-time cook will help during peak hours, such as
 weekend rushes, and can work as a line cook during slower periods, doing simple
preparation.
6) Provide decisions making power: ZFC will provide the power of decision
making. The practice of giving non-managerial employees the responsibility and
power to make decisions regarding their jobs and tasks.
7) Involving of employees in the planning process; Employees involvement
in very beneficial for any organization. ZFC will encourage the employee
participation in the planning process of restaurant.

(05)

PUSH or PULL which model is most efficient and why?

A pull system is a lean manufacturing strategy used to reduce waste in the production
process. In this type of system, components used in the manufacturing process are
only replaced once they have been consumed so companies only make enough
products to meet customer demand. 

A pull system is most efficient and beneficial for any restaurant, because a pull
system reduces waste within a restaurant since no overproduction occurs. This also
frees up space in the workplace and reduces the cost of storing excess inventory.

Businesses that use a pull system experience increased customer satisfaction as

products are manufactured specifically to fulfill their requests. Since products are
made in small quantities, quality issues will be identified, if an error is found, less
defective products would require disposal.

A pull system allows manufacturing facilities to save time that would be spent for
producing goods that may never be sold. They also experience increased flexibility,
as they can rapidly respond to changes in demand. Each of these advantages of using
a pull system reduces total costs for the business, whether directly or indirectly,
resulting in increased profit.
 (6)

Classify the inventory of your restaurant.

ZFC has classified their inventory material into four following group:

CLASSIFICATION OF INVENTORY MATERIALS

CRITICAL LEVERAGE ROUTINE BOTTLENECK

MATERIALS MATERIALS MATERIALS MATERIALS

 Beef  Egg  Land/Space

 Chicken  Oil  Toys  Logo
 Flavoring  Milk  Tissues  Furniture
 Bread  Veggies  Tooth-Picks  Kitchen
 Fruits  Face Masks Appliances
 Sugar  Hand Sanitizer  Electronic
 Salt  Stationary Appliances
 Peppers  Sprays  Play Land
 Drinks  Security
 Ketchup Systems

1. Critical Materials:

No-doubt all raw materials are important to shape the products but Critical material are
those materials which are necessary for making products because without these
materials, we can’t manufacture or make a product. These materials are
mandatory/compulsory and must available at the time of production. In this category, we
choose suppliers very carefully because everything depends on these raw materials.

2. Leverage Materials:

Leverage materials are those materials which help to make products along with critical
materials. These materials are less important as compared to critical materials but most
important to product’s completion.

3. Routine Materials:

Routine materials are those materials which we buy on daily basis because of huge
consumptions, these items are low cost but need more attention as we require these
materials on daily basis. There are many suppliers available in market and we can
choose any one after quality inspection or through reference.

4. Bottle-Neck Materials:

Bottle-Neck materials are purchase mostly one time but these materials required
excessive funds. There is no need of supplier selection or performance measurement
because we spend funds only once.

Examples are, we purchase lands or plants and other equipment like Fridge, Furniture
etc.
 (7)
How can you manage the inventory of your restaurant?

Inventory management

“The process of making sure there is enough stock at all times to meet customer
demand while minimizing expensive waste is known as Inventory stock
management”.

High cost is involved in holding too much stock so, ZFC will follow lean stock
control method to save money. They are divided in three sections: dry, refrigerated
and frozen foods. The holding area for each category is maintained at a specific
temperature to avoid breaking the cold chain and so products don’t suffer spoilage
due to variations of weather and climate.

1) Chicken:
Chicken inventory will be for 10 days. Chicken will not store in the warehouse, in
fact there will be a separate cold storage area is built for chicken right beside every
warehouse in each region in which the chicken will be store at different
temperatures ranging from:

 Frozen products at -18C to -25C

 Chilled products from 1C-4C
 2) Bread and Buns:
After every 03 days, bread and buns will supply directly to the ZFC branches from
the factory. Every single inventory item at the warehouse will audited on weekly
basis to match it with the numbers in the system.

3) Spices and Herbs:

Inventory for spices and herbs will be store according to forecasted sales and the
lead time given by the procurement department is 01 months.

4) Sauces:
Inventory for Sauces will be store for around 25 to 30 days depending on the
expiry dates and forecasted sales.

Here are some of the techniques that many small businesses use to manage
inventory:

1. Fine-tune your forecasting. Accurate forecasting is vital. Your

projected sales calculations should be based on factors such as historical sales
figures (if you sell with Square, look to your online Dashboard for this info),
market trends, predicted growth and the economy, promotions, marketing efforts,
etc.

2. Use the FIFO approach (first in, first out). ZFC Will follow the FIFO
approach in which the Goods will be sold in the same chronological order as they
were purchased or created. This is especially important for perishable products
like chicken, breads, and sauces etc. The best way to apply FIFO in a storeroom or
warehouse is to add new items from the back so the older products are at the front.

3. Identify low-turn stock. If you have stock that hasn’t sold at all in the
last six to 12 months, it’s probably time to stop stocking that item. You might also
consider different strategies for getting rid of that stock — like a special discount
or promotion — since excess stock wastes both your space and capital.

4. Audit your stock. Even with good inventory management software,

periodically you still need to actually count your inventory to make sure what you
 have in stock matches what you think you have. Businesses use different
techniques, including an annual, year-end physical inventory that counts every
single item and ongoing spot-checking, which can be most useful for products that
are moving fast or have stocking issues.

5. Use cloud-based inventory management software. ZFC has cloud-

based inventory management software for inventory management. This software
will connect directly to the point of sale, so the stock levels will automatically
adjust every time when make a sale. Receive daily stock alert emails to know
which items are low or out of stock so can order more in time.

6. Track your stock levels at all times. ZFC has a stock track system.
This solid system will use for tracking the stock levels, prioritizing the most
expensive products. Effective software saves the time and money by doing much
of the heavy lifting.

7. Hire a stock controller. Stock control is used to show the amount of

inventory you have at a given time and applies to all items from raw materials to
finished goods. ZFC has hired a stock controller for it. A stock controller will
processes all purchase orders, receives deliveries, and makes sure that everything
coming in matches what was ordered.

(8)
How you manage/ control the quality of your raw materials and
finish product?
When a new restaurant is established it is necessary to standardize the quality of
products and also ensure that they are safe to eat. ZFC has planned to work with
the staff to go through each stage of processing, from purchase of raw materials
and ingredients to the consumption of the final product, to identify where factors
exist that could influence either product quality or safety and to then devise
procedures that control those factors.

ZFC is going to follow the following steps to control and manage the quality of
raw material and finish products:
1) Raw materials and other ingredients shall be inspected and segregated or
otherwise handled as necessary to ascertain that they are clean and suitable
for processing into food and shall be stored under conditions that will
protect against contamination and minimize deterioration.
2) Raw materials and other ingredients shall either not contain levels of
microorganisms that may produce food poisoning or other disease in
humans. Compliance with this requirement may be verified by any effective
means, including purchasing raw materials and other ingredients under a
supplier's guarantee or certification.
3) Raw materials, other ingredients, and rework shall be held in bulk, or in
containers designed and constructed so as to protect against contamination
and shall be held at such temperature and relative humidity and in such a
manner as to prevent the food from becoming adulterated within the
meaning of the act. Material scheduled for rework shall be identified as
such.
4) Frozen raw materials and other ingredients shall be kept frozen. Liquid or
dry raw materials and other ingredients received and stored in bulk form
shall be held in a manner that protects against contamination.
5) All food manufacturing, including packaging and storage, shall be
conducted under such conditions and controls as are necessary to minimize
the contamination of food. Physical factors such as time, temperature,
humidity, aw, pH, pressure, flow rate, and manufacturing operations such as
freezing, dehydration will be checked.
6) Staff are trained to operate the quality assurance methods. They should also
know the limits that are placed on any variation from the specified methods,
so that everyone involved in the process understands his or her
responsibilities.
7) Methods for monitoring quality assurance procedures are designed, together
with a plan of what should be done if the tolerances are exceeded. It should
be clear who has the authority to make decisions and who is responsible for
checking that a corrective action was properly done. This process is not just
the responsibility of the owner or manager and it should be developed with
the process workers so that everyone is clear about each other's part in the
system. The system should be reviewed every year.
8) Batters, breading, sauces, gravies, dressings, and other similar preparations
shall be treated or maintained in such a manner that they are protected
against contamination. Compliance with this requirement may be
 accomplished by any effective means, including one or more of the
following:
(i) Using ingredients free of contamination.
(ii) Employing adequate heat processes where applicable.
(iii) Using adequate time and temperature controls
(iv) Cooling to an adequate temperature during manufacturing.
(v) Disposing of batters at appropriate intervals to protect against the growth
of microorganisms.

(09)

How you can design the layout? Which principles you consider for layout
planning?

Layout Design

Layout is the physical arrangement of the economic activity taking into account
the nature of the product, its volume, type and size of the machinery used etc.
Layout design is the major factor in a restaurant's success. ZFC has taken into
account the size and layout of the dining room, kitchen space, storage space and
office. ZFC has planned to allot 45 to 65 percent of their space to the dining area,
approx. 35 percent to the kitchen and preparation area, and the remainder to
storage and office space.

 Dining area: 
The design and layout of dining area play an important role for customer
attraction, ZFC has design the layout of their restaurants in such a way that
people shifting in their seats throughout their meals is very easy and
comfortable and meals can be served easily and a good manner. Generally,
 40 to 50 percent of all sit-down customers arrive in pairs; 30 percent come
alone or in parties of three; and 20 percent come in groups of four or more.

To accommodate the different groups of customers, ZFC uses tables for two that
can be pushed together in areas where there is ample floor space. That gives ZFC
the flexibility in accommodating both small and large parties. Place booths for
four (04) to six (06) people along the walls.

 Production area:

ZFC has planned to arrange their food production area in such a way that
everything is just a few steps away from the cook. The design of production
area also allows for two or more cooks to be able to work side by side
during your busiest hours. Sometimes, the production area in a restaurant is
inefficiently designed and the result is a poorly organized kitchen and less
than top-notch service. Keeping the menu in mind ZFC has determined each
element in the production area and include space for receiving, storage, food
preparation, cooking, baking, dishwashing, production aisles, trash storage,
employee facilities and an area for a small office where daily management
duties can be performed.

(10)
Highlight the important aspects of supply chain in the context of
restaurant business.
There are following important aspects of supply chain in the context of restaurant
business.
There are a million things which we use or consume in our everyday lives, and
supply chain management weaves through it all, Supply chain management is
made up of a few components that are very important as well as critical to the
system. We shall discuss each of the components in brief.

1) Planning
This is one of the most important stages. Before the beginning of the entire supply
chain, it is essential to finalize the strategies and put them into place. Checking the
demand for the product or service, checking the viability, costing, profit, and
manpower etc., are vital. Without a proper plan or strategy in place, it will be well-
nigh impossible for the business to achieve effective and long term benefits.
Therefore, enough time has to be devoted to this phase. Only after the finalization
of the plans and consideration of all pros and cons, can one proceed further. Every
business needs a plan or blueprint or a roadmap based on which the strategies are
made. Planning helps to identify the demand and supply trends in the market and
this, in turn, helps to create a successful supply chain management system.

2) Information

The world today is dominated by a continuous flow of information. In order to be

successful, it is essential that a business stays abreast with all the latest
information about the various aspects of its production. The market trends of
supply and demand for a particular product can be best understood if the
information is properly and timely disseminated through the many levels of the
business. Information is crucial in a knowledge-based world economy, and
ignorance about any aspect of business may actually spell doom for the prospects
of the business.

3) Source
Suppliers play a very crucial role in supply chain management systems. Products
and services sold to the end user are created with the help of different sets of raw
materials. It is therefore necessary that suitable quality raw materials are procured
at cost effective rates. If a supplier is unable to supply on time, and within the
stipulated budget, the business is bound to suffer losses and gain a negative
reputation.

It is crucial that a company procures good quality resources so it can create good
quality products and maintain its reputation in the market. This necessitates a
strong role for suppliers in the supply chain management system.

4) Inventory

For a highly effective supply chain management system it is essential that an

inventory is kept and thoroughly maintained. An inventory means the ready list of
items, raw materials and other essentials required for the product or service. This
list has to be regularly updated to demarcate available stock and required stock.
Inventory management is critical to the function of supply chain management,
because without proper inventory management the production, as well as sale of
the product, is not possible. Businesses have now started to pay more attention to
this component simply because of its impact on the supply chain.

5) Production

Production is one among the most important aspects of this system. It is only
possible when all the other components of the supply chain are in tandem with
each other. For the process of production to start it is essential that proper planning
and supply of goods, as well as the inventory, are well maintained. The production
of goods is followed by testing, packaging and the final preparation for delivery of
the finished product.
 6) Location

Any business, that wants to survive as well as flourish, needs a location which is
profitable for the business. Take for example, a carbonated drink factory is set up
in an area where water supply is scarce. Water is a basic necessity of such
business. The lack of water could hamper the production as well as affect the
goodwill of the company. A business cannot survive if it has to share an already
scarce raw material with the community. Hence, a suitable location, which is well
connected, and very close to the source of essential resources for production is
vital to a business’ prosperity. The requirement and availability of manpower must
also be considered while setting up a business unit.

7) Transportation

Transportation is vital in terms of carrying raw materials to the manufacturing unit

and delivering the final product to the market. At each stage, timely transportation
of goods is mandatory to sustain a smooth business process. Any business which
pays attention to this component, and takes good care of it, will benefit from the
production and transportation of its goods on time.

It is essential that a company works towards a safe and secure transportation

process. Be it in-house or a third-party vendor, the transportation management
system must ensure zero damage and minimal loss in transit. A well-managed
logistics system along with flawless invoicing are the two pillars of secure
transportation.

8) Return of goods

Among the various components that create a strong supply chain is the facility for
the return of faulty/malfunctioning goods, along with a highly responsive
consumer grievance redress unit.