The KFC chicken shortage has rumbled on for almost a week and has affected hundreds of branches. And it’s a classic lesson in logistics management.
Why didn’t the chicken cross the road? Because of a single-point-of-failure in the chicken restaurant‘s supply chain and lack of contingency planning, that’s why.
With over three-quarters of its locations closed on Monday, KFC was thrust into the national news as the fried chicken shop that had run out of chicken. But as the details emerged, the blame was moved to DHL.
How many warehouses?
At around 01:40 on February 14, a collision involving seven vehicles took place between junctions two and three of the M6. One man was killed, and two others injured. Police closed off the area between the two junctions to investigate, and eventually arrested a man on suspicion of causing death by dangerous driving. Shortly afterwards, a pair of lorries collided near junction one, although neither driver was injured.
KFC Bargain Bucket
These three junctions are in the vicinity of Rugby, where DHL’s warehouse is located. With its lorries getting stuck in the traffic as soon as they left the depot, and no other locations to send deliveries from, the delays that would lead to the KFC chicken shortage began here. In a statement, DHL said it was working with KFC to re-open all its stores in 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,” the spokesperson continued. KFC did not respond to a request for comment.
Many have questioned the wisdom of operating out of a single warehouse, but according to Richard Wilding, professor of supply chain management at Cranfield School of Management, this is apparently not uncommon.
“You have something called the ‘golden rectangle’ that is between Milton Keynes, Rugby, Daventry and Northampton,” he says. “If you locate a facility in that rectangle, you can deliver overnight to just about anybody in the United Kingdom. This is quite a standard way of working for supply chains of this type.”
However, even if it is possible to use a single warehouse, Samir Dani, professor of logistics and supply chain management at the University of Huddersfield’s Business School, thinks that it isn’t always appropriate to do so. “Companies may operate out of one warehouse, but you have to think about the product. There are legality issues around the quality of the produce and the contamination that can happen is not handled properly. That’s the problem with food, distribution can’t be thought about like any other supply chain.”
KFC Chicken shortage causes
The lack of chicken began to hit on February 16. KFCs started to shut down locations in response to their missing ingredients, meaning that by February 18, only 266 of the 870 restaurants in the UK and Ireland were open. Locations in Northern Ireland and the Republic of Ireland have not been affected due to different logistical arrangements.
Dani says the cause of the crisis which shut over two-thirds of KFC’s locations will be debated for a long time to come, but believes the decision to use the single depot didn’t help matters. “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.”
But the full cause of the great chicken crisis is more complex. “Using a single location will not be the lone cause of this particular problem at all,” says Wilding. “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.”
Dealing with disruption
Disruption is fairly common in supply chains. Wilding says that approximately ten per cent of chains experience disruption during a year. Normally these aren’t noticeable because only a small number of locations or a certain item would be affected. But in KFC’s case, with its specialised menu and single warehouse, the problem was much larger, and quickly noticed by customers.
In terms of returning to normality, Wilding says there are a few separate questions to consider. “How long will customers still be noticing the disruption? Probably for another few days. However, the overall disruption to the whole network, including the chicken farms and so on, that’s going to go on for a longer period of time. Then you’ve got to ask how long it’s going to take for KFC to rebuild confidence with its customer base.”
It’s safe to say that public confidence in KFC is shaken. Between phone calls to Tower Hamlets Police complaining about the limited menu, and a movement in Bristol to nationalise the chain to prevent future trouble, regaining the people’s trust will be a formidable task for Colonel Sanders. No matter how finger-lickin’ good his products might be.
Dani thinks people are missing the point by focusing on just the restaurants and their customers. “The bigger question is from a sustainability and food waste perspective. KFC have 500 farmers in the network that deliver chickens, which is the beauty of the model because it lets them use fresh chicken. What’s happening to the farmers in this situation? What’s happening to the chickens that are in the system at the moment? How much of it is being wasted?”
Plenty, as it turns out. There have been reports of entire lorries of chicken spoiling in the depot, as drivers are kept waiting for hours just to enter; another driver said the temperature regulator on his trailer had been set incorrectly, leading to more food waste.
The moral of the story
So, what can we learn from all of this? Perhaps it’s the importance of planning for the worst. “I think in this scenario you cannot see any contingency planning in place,” Dani says. “They are reacting to the situation as a crisis rather than saying that they had thought about this scenario and are going to go back to stability very quickly. So I think it’s shown that they were not resilient enough.”
For Wilding, the tale of KFC highlights an oft-overlooked area of competition. “The key thing to recognise is that competition is no longer between individual companies, it’s between the supply chains they are part of.”
“What makes up those supply chains is lots of different companies, lots of different relationships, all trying to manage processes, infrastructure, equipment, information systems and its staff, to make all of that perform in a synchronised way, so that the customer gets the chicken they want.”
KFC has returned to its former delivery contractor to supply chicken to 350 of its restaurants after hundreds were forced to close last month.
On Thursday, Bidvest said it was ‘delighted’ to confirm it had signed a new long-term agreement with KFC UK & Ireland to supply 350 restaurants across northern England and Wales.
Its business unit director, Paul Whyte, said: ‘As the UK’s leading food service logistics specialist, we understand the complexities of delivering fresh chicken.
‘KFC are a valued customer and we will provide them with a seamless return to our network.’
A KFC spokesman said: ‘Our focus remains on ensuring our customers can enjoy our chicken without further disruption.
‘With that in mind, the decision has been taken in conjunction with QSL and DHL to revert the distribution contract for up to 350 of our restaurants in the north of the UK back to Bidvest Logistics.
‘We’ve been working hard to resolve the present situation with QSL and DHL.
‘This decision will ease pressure at DHL’s Rugby depot, to help get our restaurants back to normal as quickly as possible.
‘As it stands, over 97% of our 900 restaurants are now open for business, although there will be some limited menus before we are back to business as usual.’