Supply chain sector comments on KFC chicken shortage

February 21, 2018 by David Tran
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Supply chain sector comments on KFC chicken shortage

DHL stated its apologies to its partner KFC and its customers after a distribution issue which caused fresh chicken failing to arrive at its stores forced a majority of the restaurant chain’s UK outlets to temporarily close.

In a statement, DHL said it plans to help address the situation with fellow supply and distribution partner QSL, which was awarded the contract in last October taking over from food distributor Bidvest Logistics but didn’t begin operations until earlier this month, in allowing KFC to reopen its stores in “the coming days”.

In a statement addressed to the press, John Boulter, Managing Director Retail DHL, Supply Chain UK & Ireland said: “DHL regrets the interruption of supply and is working diligently to rectify the situation by working with KFC and other partners involved in the supply chain.



“The reasons for this unforeseen interruption of this complex service are being worked on with a goal to return to normal service levels as soon as possible. With the help of our partner QSL, we are committed to step by step improvements to allow KFC to re-open its stores over the coming days.

“Whilst we are not the only party responsible for the supply chain to KFC, we do apologise for the inconvenience and disappointment caused to KFC and their customers by this incident.”

KFC took a jovial stance to the news, despite anger from some of its customers, saying on Twitter: “The chicken crossed the road just not to our restaurants.”

Supply chain community comments

Other analysts within the supply chain community have highlighted the importance of supply chain operations, with some in particular voicing that companies who opt to take cost-cutting measures when selecting new suppliers could potentially face a similar scenario as that experienced by KFC. Also, analysts have highlighted the issue KFC faced, moving from six warehouse operations under Bidvest, to one distribution centre under DHL.

In a statement earlier this week, the GMB union offered an outspoken view over Bidvest losing the KFC contract, which left 255 staff losing their jobs. Mick Rix, GMB National Officer said:

“We tried to warn KFC this decision would have consequences – well now the chickens are coming home to roost.

“Bidvest are specialists – a food distribution firm with years of experience. DHL are scratching around for any work they can get, and undercut them.

“It’s an absolute cock up. KFC are left with hundreds of restaurants closed while DHL try and run the whole operation out of one distribution centre – where conditions are an utter shambles.

“Three weeks ago KFC knew they had made a terrible mistake, but by then it was too late.

“KFC’s bird-brained decision has caused untold misery to customers, to Bidvest workers and restaurant staff who are not being paid.”

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Fiona Cincotta, a senior market analyst at CityIndex.co.uk, said:

“KFC restaurants are being forced to close because they are not receiving the fresh chicken needed for the menu. The heart of the problem here is a switch by KFC from specialist foods distributor Bidvest, to DHL. A case of cost cutting gone to too far. Obviously, DHL were able to provide a more attractive price for distributing the chicken, but at what cost.

“This will prove to be a costly mistake for KFC as customers are rarely forgiving towards these cost cutting errors. Furthermore, the majority of restaurants are run as franchises, owners will need to dig deep in order to weather the storm also begging the question as to how to deal with staff. Whilst this is unlikely to have a big knock on effect to the surrounding economy, it will most certainly put more than a few noses out of joint.”

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Dr Virginia Spiegler, a Senior Lecturer in Operations and Supply Chain Management at the Kent Business School at the University of Kent:

“The KFC case highlights the importance of transportation and logistics operations, which are frequently and unfairly regarded by many companies as non-value adding.

“In the past few years, many companies have taken steps to streamline supply chain processes by reducing holding inventory, outsourcing non-core activities and cutting the number of supplier on the assumption that the market is relatively stable and predictable.

“KFC’s decision to switch their 3PL (third party logistics) provider from Bidvest to DHL was a measure to reduce logistics service cost. However, having hundreds of restaurants closed could cost them millions in lost sales and low capacity utilisation. This problem could have been anticipated by comparing Bidvest and DHL capabilities.

“While Bidvest is specialised in food service distribution and operates a network of distribution centres across the UK, DHL is trying to run the same operation from a single distribution centre. Moreover, it is the first time that DHL is partnering with QSL, who has been providing IT solutions on demand planning and stock management to KFC since 2011. Therefore the alignment between QSL services and DHL physical distribution is also crucial.”

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Alan Gunner, Business Development Director, Adjuno:

“The closing of hundreds of KFC restaurants could have been prevented if the brand had worked more closely with their new delivery partner DHL (who are also working alongside logistics from QSL), in order to help put the right processes in place and ease any ‘teething problems’.

“Once red flags were raised, KFC and DHL should have not only focused on how to install their new processes, but established how they could maintain normal service for customers whilst they continued to iron out the unexpected kinks. Part of the problem they have faced is due to the change in the supply systems, switching from processing orders from six warehouses to just one distribution centre. A brand of this scale needs to ensure that it has a stable and wide-reaching supply chain in order to avoid situations like this occurring and minimise the impacts should a problem arise.

“That said, it is possible for a large company to operate from one hub, but in order to do this everything needs to be aligned, which unfortunately in this case, it was not. Whilst stores may be starting to reopen, the reputational damage to KFC and DHL could be long-lasting, amongst both consumers and franchisees."

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Andy Hill, Commercial Director at delivery experience company Sorted:

“The KFC ‘chicken crisis’ underlines the importance of not putting all your eggs in one basket and being reliant on one carrier.  It is always prudent to have other logistics options available especially as delivery problems are not uncommon when a new supplier is taken on.”

Read our SHD March issue for an update on this development

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