It was the cluck heard round the world. When KFC experienced a logistics nightmare back in mid-February, more than half of its 900 UK outlets were left with no chicken and had to be closed, as reported by BBC News.
Aptly dubbed the œKFC Crisis, citizens hungry for a savory bite of chicken from this frequented fast-food restaurant were simply out of luck. Understandably, some people were surprised, disappointed, and hungry. However, some were downright outraged and in disbelief.
Surprisingly (or maybe not) a number of these emotional individuals actually called the authorities. So many people contacted the police, in fact, that the Tower Hamlets Metropolitan Police Service tweeted a plea to the general public to stop:
But you know most of the story by now, especially if you’re a chicken lover. We’re not here to provide additional coverage, reporting, or updates.
As a consulting firm and strategic advisors, the Factum team read about this incident and wondered how KFC let this happen. So, we want to talk about how such a supply chain disaster could have been avoided.
Understanding the Difference Between Logistics Providers
According to multiple sources, operational issues occurred within a short timeframe of DHL and QSL taking ownership of KFC’s supply distribution and delivery.
Previously, KFC used Bidvest Logistics, a UK company that distributes and delivers products for many retail food and drink brands. In other words, Bidvest has more specialized experience in the space KFC operates in.
Alternatively, DHL is a much larger, international logistics organization, which likely offered a more competitive pricing structure or bottom-line cost to KFC. Hence, the most likely reason KFC chose them.
To note, DHL has no extensive history of managing the supply chain of food-service chains. Supporting this is Jens Hentschel’s, supply chain director for KFC, own comments in a DHL press release: we have specifically chosen DHL and QSL for their reputation for innovation in logistics across other industries.
Still, in the same press release, DHL noted its intention to manage KFC’s physical warehouse and distribution service, as well as commit to setting a new industry benchmark.
Yes, well, they certainly did that…
Look, we get it. Given our wide range of capabilities, we’ve worked with numerous organizations across industries and can understand a broad client-acquisition approach. However, we have core industries we tend to help more often and, more importantly, we never bite off more than we can chew.
With that context provided, let’s explore how KFC could have avoided, or at least mitigated, its current chicken crisis.
Do Better at Due Diligence
The best place to start is typically at the beginning. In KFC’s case, more due diligence in their consideration of potential delivery partners might have changed their final decision.
For example, one area of interest could be KFC’s modeling of upstream and downstream supply chain elements. What type of parameters did its modeling produce, and how well did DHL fit within those parameters?
Another area is supplier comparison. Given how well (at least on the surface) Bidvest was performing, how did DHL compare? (By well, we mean there were not major crises like this one.) For all the aspects Bidvest was delivering satisfactorily, what evidence did DHL have to show how they would deliver equally or better?
In addition, the context of KFC’s supply chain was markedly distinct from DHL’s typical clients, whom generally required delivery of non-consumables. In contrast, food products are time-critical consumables and require a whole different level of logistical modifications to ensure deliveries are on time, intact, and within regulated health parameters.
The burning question is then how well, if at all, did DHL actually evidence these capabilities to KFC as part of its supplier selection process?
Transition to a New Delivery Partner in Phases
When you have the scale of an organization like KFC, you don’t make strategic decisions lightly. (At least you shouldn’t.)
Knowing over 900 locations could be affected by their supply chain shift, KFC could have taken a rollout approach. Instead of just handing the reigns over to DHL, they could have had Bidvest retain control over a large portion of distribution and methodically transition to DHL control in phases.
With this approach, KFC would achieve two goals. Firstly, the chicken chain would maintain better control over multiple risk factors. Secondly, it would be able to test the capabilities of DHL against Bidvest. (Bidvest would be the control and DHL the variable.)
Thus, the impact of a single supply chain snafu would be minimized, and KFC would be able to determine whether it was making the right decision in switching suppliers. Further, even if it decided to move forward with DHL, the phased approach would give DHL the opportunity to optimize its efforts to better serve KFC.
Develop Contingencies for Negative Supply Chain Events
Since we don’t have a behind-the-scenes look at KFC’s supply chain, we can’t say whether it or DHL had any supply chain contingencies in place. Maybe they did, but apparently not for a situation of this magnitude.
In any case, KFC/DHL needed more, or more comprehensive, contingencies. Â With the scope of its supply chain and the time-limited nature of its consumable products, KFC should have readily available fallback plans for getting food to the right locations.
Fast food is an industry that’s about convenience, so avoiding interruption in service is paramount.
It’s not enough to know what should be done when a truck gets delayed or an A/C unit blows out. You have to think bigger. There has to be contingency plans in place that address large-scale disruptions in the supply chain. As longstanding and large as KFC is, this should have been obvious.
To be fair, though, perhaps there were a combination of events at play that just couldn’t be planned for (or handled by the previous delivery partner). In any case, hopefully this incident will provide a wake-up call for KFC in their logistics planning.
We’ll assume that KFC chose DHL primarily because of cost (of course). Here’s the thing about chasing the lowest cost: You may take on more risk. Sometimes it’s worth it, but in KFC’s case, it clearly wasn’t.
Now the fast-food chain is dealing with the cost of lost revenue, spoilage, and employee wages (in terms of both those working overtime and those not working at all). In addition, they’re receiving negative press and taking a hit to their reputation, even with their interesting post-crisis marketing campaign.
When you make strategic decisions like switching delivery partners, there needs to be a rigorous decision-making process that considers multiple perspectives and numerous factors (other than money).
In the future, perhaps KFC (and any organization that is heavily dependent upon their supply chain for daily operations) will consider points like the ones we’ve laid out in this article.
In the meantime, we hope the next strategic decision they make isn’t so half baked.
Update 3/13/2018: Apparently, in the wake of the #KFCCrisis, KFC has returned to its former logistics partner, Bidvest Logistics, to supply a third of its restaurants. Perhaps they read this article, haha!