What can suppliers learn from KFC’s supply chain disaster?

Fast food chain KFC’s business is obviously chicken – but it couldn’t source enough poultry for several days after switching to a new supplier, and hundreds of its UK stores had to close or run limited menus.

This created a lot of disappointment and anger from loyal customers and some ridicule in the press. In addition, there was outrage about food wastage because trucks were queuing for days at inefficient and congested warehouses, so fresh chicken went off before it could be delivered.

Who is to blame for this disaster?

There are certainly two sides that are responsible for a major misjudgement of complexity and capabilities – namely supply chain and logistics managers at KFC, as well as senior leaders at logistics firm DHL, which offered to take on this large-scale contract without having proper warehouse capacities and processes in place. KFC’s C-level executives should also have scrutinised the viability of changing suppliers in more detail and put a stop to this move if they were not fully convinced since the fast food chain’s entire UK business would be in jeopardy if chicken – the absolute business-critical ingredient – is not delivered on time or does not meet the required quality standards.

How could this failure have been avoided?

If proper planning and testing methods were in place, KFC and DHL would have realised where any bottlenecks were, and could have redesigned processes and added capacities in order to make it work; or KFC could have judged that the best option was not to switch suppliers. However, it looks like overzealous managers at both companies were already seeing pound signs and downplayed any risks. DHL lacked the experience to deliver food on a similar scale but was keen to expand at all costs by relying on its reputation as a professional logistics firm in other segments, but should have been aware of the possibility and cost of failure.

The latest analytics and artificial intelligence (AI) technologies could have helped both parties to avoid this fiasco, and test the planned operations in more detail. By using cutting-edge technology, supply chains can be accurately simulated and issues identified. Proper comparisons can be made so that each aspect can be benchmarked against quality requirements and the existing supplier, and that decision-makers are not misled by the promised cost-efficiency. Machine learning can be applied to play through all possible scenarios, without the need to program complex algorithms or spend a lot of time on driving trucks in test mode.

What can other retailers and restaurants learn from this case?

Retailers and restaurant chains need to be realistic and avoid any gambles that could affect their core operations. Usually they don’t have all required skills in-house and could turn to external consultants, systems integrators and telcos with retail and supply chain expertise. Firms such as InfoSys, Wipro, BT and Accenture can provide holistic supply chain concepts with the latest systems and tools, and can assist with retail-specific implementation, testing and benchmarking.

What are the takeaways for suppliers and logistics firms?

Suppliers and logistics firms could run similar tests as retailers, and need to be aware of the complexity that comes with vertical-specific use cases, large-scale operations, and time-sensitive deliveries that are crucial for business operations. Any potential scenarios need to be assessed, including dealing with bottlenecks at warehouses if several trucks arrive at the same time due to traffic delays. Where necessary, capacity needs to be increased to have a reasonable buffer.

Contracts for large-scale operations should only be offered if the supplier or logistics firm is absolutely certain that it is capable of delivering, otherwise it can end