KFC: 'Supply chain is a complex science'

David Read, managing director of Prestige Purchasing

Only the folks inside KFC, DHL and QSL know what is really happening within the business right now, but the impacts appear pretty catastrophic if the press statements are to be believed. A total of 562 KFC outlets remained shut following a weekend of disruption that peaked on Sunday night at 646 branch closures. KFC published a list of only 338 of its 900 stores that were still open on Monday night.

In November 2017 KFC appointed DHL and QSL to manage the supply and distribution of food products, packaging and consumables throughout the UK, as part of its stated ambition to revolutionise the UK foodservice distribution market. I have heard it said that it’s madness to appoint a parcel shipper to the world of food. This would be wrong – DHL have plenty of good experience and happy food distribution customers, as indeed do Bidvest their predecessors.

For the first time, the deal partnered DHL with specialist foodservice logistics provider QSL. DHL manage the physical warehouse and distribution service, and the PR that surrounded the deal stated aims of putting greater focus on innovation, quality and service performance. At the time DHL also committed to setting a new industry benchmark by delivering outstanding service to all KFC’s restaurants and its consumers.

Right now the ambition will have been refocused on the simple objective of getting chicken and fries into the restaurants in sufficient quantity to feed customers before any more damage is done to the brand.

I have seen situations like this in the past where new distribution implementations have gone seriously wrong. Supply Chain is a complex science, and requires many moving parts to operate in unison with each other. When they go wrong “change” is usually at the heart of the matter. Supply chains that have done the same thing day in day out for years just don’t melt down. Trying to do too much, too quickly, with too much change, new technology, and new people builds in risk – and errors can have a compound effect that can turn a few small fires into a raging inferno very fast.

One quote from the press announcement in November caught my eye: We are rethinking all of our internal and external processes, and placing distribution and logistics at the heart of our new supply chain strategy. We want to deliver a new level of service to our restaurants and franchise partners, improve the quality of service to our customers and reduce our environmental impact – all to a level that has never been done before. It’s an ambitious plan, but by working closely with our partners DHL and QSL we’re confident that we’ll be able to deliver against our strategic ambitions.

I would stress that until the situation is resolved, and the teams at DHL and KFC have had a chance to review, we will not know the true causes of this problem. But if asked to speculate right now I would say that the above might be at the root of it.

Frank Proud, director of Apex Insight

It is not the kind of thing you’d expect to happen. These things usually happen pretty smoothly – there’s lot of planning that happens with a new contract, so it a big surprise. I can’t remember an equivalent supply chain failure.

Its most likely some kind of IT integration which hasn’t happened, and the systems aren’t set up to speak to each other, and that’s caused the physical deliveries not to be ready or not to be in place at the time they’re supposed to be

DHL is one of the largest logistics companies in the world, and they are very experienced in the food industry, though perhaps not in this particular segment of QSR.

If you were going to pick a company you’d expect to screw something up like this, it wouldn’t be DHL.

I’m sure they’re scrambling around trying to get it fixed, though It’s always harder to fix something that’s gone wrong, then keeping it humming and working.

Andrew Emmerson, franchising expert

The franchisees will be devastated – they still have make payroll, pay their rent and all necessary costs of running the business. KFC corporate can take it on the chin, and let it be a costs against profits, but franchisees feel it much more in their pockets, as they’ve not got as large overheads.

They can afford some degree of mishap, but the franchisees’ first response is franchisee profitability. By making what they thought was an efficient decisions by shifting supplier, some due diligence has not been properly done.

If I was KFC and I had some degree of control over the supply chain, I would be looking to make some sort of contribution to franchisees with some free products. It would make sense for them to do this.

It’s a devastating impact because you lose the trust of the consumer. I don’t think it will be a terminal blow, but it gives customers a chance to try somewhere else. Other chicken and fast food brands will be having a great week.

Dave Greenwood, managing director William Murray PR

When a disaster strikes the acid test is how quickly you deal with it to protect your brand.

It’s always easy to criticise. But on the whole is seems that KFC is dealing with it. They’ve held their hands up, apologised and have got the tone right for their audience, reassuring customers they’re sorting the problem. A household brand like KFC is always going to create a lot of interest, particularly on social media.

Being critical, they should have been quicker to communicate, got ahead of the breaking story and been more honest about the size of the problem and how it would affect customers.

However, we need to remember this is a delivery problem not a food scare, so building trust won’t be as tricky. What they need to be thinking about is how the story will evolve and how they communicate the mountain of chicken that’s heading for the bin.