When Your Supply Chain Goes Wrong: From KFC to Construction

March 28, 2018

DHL TRUCKS

When historians look back on the 21st Century, will they revisit the Great Chicken Shortage of 2018, when hundreds of branches of Kentucky Fried Chicken were forced to close? When a supply chain this massive goes wrong, you can’t help but wonder how it happened.

It might not have been a truly world-shattering event, but the incident in January made headlines throughout the UK. There was plenty of banter in many of the reports, which included optimistic entrepreneurs listing KFC meals for sale on eBay for £25,000 and distraught diners bemoaning the fact that they would have to go to Burger King instead.

For the businesses involved, however, there was a far more a serious side, which demonstrated what could happen to a company when your supply chain goes wrong. KFC was robust enough to ride out the crisis, but it admitted at the time that it expected to suffer significant losses. At the time of writing, there was no figure put on those losses. But with hundreds of stores left closed or running on limited menus for days, it will certainly run into the millions, and it is far more difficult to put a monetary value on the reputational loss.

What went wrong at KFC?

KFC had its own particular problems with the supply chain foul up of course. The problems involved in storing and transporting fresh and frozen foods, including health and safety regulations and timing issues, are very different from those facing supply chain management in construction. But, there are still some elements that are pertinent to supply chains across all sectors, and it’s interesting to look at exactly what went wrong for KFC.

Flexibility, contingency plans and thorough risk assessment can be crucial in surviving or minimising supply chain problems.

A week after the fiasco, KFC was still claiming that it did not know the root cause of the problem, but a spokesman did say: “There was a fundamental breakdown in the implementation of a brand new distribution system with our new delivery partners DHL and QSL. Our focus right now is on getting back up and running.”

Or, as KFC tweeted at the time: “We’ve got the chicken, we’ve got the restaurants, but we’ve just had issues getting them together.”

The fast food giant had only just started working with DHL. It was announced on March 8 that the supply chain for around a third of KFC stores, specifically those in the North, would be handed back to Bidvest Logistics, the company which had operated them all for around eight years, before losing the contract in 2017.

With a bit of a dig at his rivals, business unit director Paul Whyte said: “We are delighted to welcome KFC back to Bidvest Logistics. As the UK’s leading food service logistics specialist, we understand the complexities of delivering fresh chicken… We will provide them with a seamless return to our network.”

Delivery depot issues

Most official comments cited ‘complex issues’ in the supply chain, but numerous issues at DHL’s delivery depot in Rugby were reported to have contributed to the problem.

The BBC reported that drivers were left waiting at the site for hours. One driver who wished to remain anonymous said that he had an entire delivery of chicken scrapped because his lorry's temperature had been set incorrectly at the depot, which he blamed on a lack of training. Another former DHL worker told the BBC that the depot was understaffed and that lorry-loads of chicken went off because there simply weren’t enough staff to deal with it. There were also reports that two road accidents that closed off parts of the M6 caused huge tailbacks that contributed to delays in getting the chicken in and out.

DHL was operating out of the single Rugby depot, where Bidvest used six. This is not unusual but could lead to potential issues.

One part of a construction project often relies on the successful completion of a previous stage, so any disruption can have a serious knock-on effect.

Samir Dani, professor of logistics and supply chain management at the University of Huddersfield's Business School, told Wired: “Serving the length and breadth of the country from one warehouse is a complex task anyway. The fact that it was a new warehouse, new IT system, and the handover was just happening, makes this a perfect storm."

Richard Wilding, professor of supply chain management at the Cranfield School of Management, added: “Using a single location will not be the lone cause of this particular problem at all. There will have been a number of elements which have come together. Demand, automation in the facility, the planning software, all those sorts of things interacting together. There may be a particular cause which will come out of this, but pinpointing that may be a tricky thing.”

Lessons for the construction industry

The KFC incident might have had its own unique challenges and causes, but effective supply management is crucial in many different sectors.

The construction industry faces risks both on an enterprise level and for individual projects. On the enterprise level, they could be exposed to global macro issues such as disruptions to the steel or cement markets. On a project level, they can still be exposed to risk in terms of the availability of materials, components and labour. To compound matters, many of the products required in construction projects may only be manufactured or produced on a ‘just in time’ or on-demand basis.

One part of a construction project often relies on the successful completion of a previous stage, so any disruption can have a serious knock-on effect. Larger firms might have many projects happening simultaneously and could be reliant on numerous subcontractors.

Flexibility, contingency plans and thorough risk assessment can be crucial in surviving or minimising supply chain problems. It also pays to have general contingency plans in place for one-off disruptive events that cannot necessarily be predicted.

Ted Scherck, president of US-based logistic consultancy Colography, told The Economist: “In many cases shippers have gone too far in implementing the lean supply chain and have found themselves virtually out of business because of a by now annual catastrophic event.”

He cited dock strikes, typhoons, hurricanes and an explosion at the Buncefield oil storage terminal in Hertfordshire as examples.

Some threats to the supply chain can be identified while others will essentially come out of the blue – but any disruptions can be extremely damaging for a construction business that does not have contingency plans in place to deal with them.

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