Kfc Chicken Shortage Case Analysis

 KFC Strip DHL of Some Chicken Deliveries after UK Disruption

KFC has stripped parcel service DHL of some U.K. food deliveries, reverting to its former partner after a supply-chain breakdown shut hundreds of restaurants that ran out of chicken.

The fast-food chain, owned by Louisville, Kentucky-based Yum! Brands Inc., handed some of the work back to former supplier Bidvest Logistics, part of South Africa’s Bid Corp., according to a statement Thursday.

KFC overhauled its U.K. chicken distribution chain in November by replacing Bidvest with DHL, a unit of Germany’s Deutsche Post AG that’s better known for deliveries to offices and homes. At the time, the new supplier said it was committed to setting an “industry benchmark” in service.

The new arrangements hit a snag in February when DHL took over the work in partnership with another supply firm, QSL. The switch resulted in hundreds of KFC’s 900-plus U.K. restaurants being shut for several days.

“Our focus remains on ensuring our customers can enjoy our chicken without further disruption,” KFC said in a statement. “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 U.K. back to Bidvest Logistics.”

KFC’s supply chain snapped after the German delivery partners shifted from five regional distribution sites run by Bidvest to just one in Rugby, England. At the height of the crisis, analysts at Stifel estimated that the restaurant shutdowns were costing KFC more than $2 million a day in lost sales.

“In conjunction with our partners we remain fully committed to delivering excellent service to KFC‘s remaining 550 restaurants across the U.K.,” DHL said in a statement.

More than 97 percent of the U.K. restaurants are open again, KFC said, though some are still operating with limited menus.

— With assistance by Leslie Patton

Case Analysis:

From the case we can know that fast-food chain KFC closed nearly 650 of its outlets in the UK after its new logistics partner failed to deliver the chicken its stores needed. At the height of the crisis, analysts at Stifel estimated that the restaurant shutdowns were costing KFC more than $2 million a day in lost sales.

KFC awarded the contract for DHL to manage the supply and distribution of its food products and packaging for its UK outlets in November 2017. This included the management of physical warehouses and distribution services. When KFC switched its delivery contract to DHL, they never foresee this supply chain disaster would happen.

Large businesses changing the logistical company that manages their deliveries definitely will face some challenges when the transition is still new.

But clearly the closure of so many stores is not a small challenge and many will be questioning whether KFC adequately prepared the ground with the new supplier to take over this business-critical service.

Businesses can mitigate risks in their supply chain selections by provided they put effective souring practices in place, such as:

1) Risk identification