If all is collapsing around us, a sense of humour can in certain circumstances be regarded as grace under fire. That’s obviously what KFC hoped when it cheekily rearranged its KFC logo to read ‘FCK’ in an advertisement run in two national newspapers by way of an apology for running out of chicken over several days last month resulting in the temporary closure of two-thirds of its 850 UK restaurants. The accompanying text read: “WE’RE SORRY. A chicken restaurant without any chicken. It’s not ideal… Thank you for bearing with us.”
To err is of course human. After all, who hasn’t screwed up on occasion? It is just that KFC, or FCK, as it must now be styled, screwed up spectacularly, in a way that places it firmly in the pantheon of big screw ups alongside Heathrow’s Terminal 5 shock horror.
Even industry marketing bible Campaign congratulated KFC for its use of its gags, of the chicken crossing the road variety, saying it denoted a certain “confidence of leadership”. “They’ve also maintained some levity, in keeping with the somewhat farcical nature of their mistake,” said Campaign writer Andy Nairn.
Whether the edgy humour deployed was appropriate or not to KFC’s intended audience, many of whom are schoolchildren who appear overly reliant on the chain for much of their meals, remains a moot point. Perhaps we’re all being too po-faced, but then again you don’t need to suffer from a humour deficit to see the unfunny side of the situation – a sentiment no doubt shared by thousands of KFC workers, many of them on zero-hour contracts, who may experience an additional deficit in their take-home pay. The overwhelming question, however, is not so much as to why the chicken failed to cross the road, but rather what prompted KFC to switch its contract last autumn from Bidvest Logistics to DHL.
With millions of pounds worth of lost sales, and customers so incensed that in extremis some of them took to pestering the police, KFC still does not seem to know “the root causes” behind the fiasco. Fingers were squarely pointed at Deutsche Post AG’s DHL, KFC’s new logistics supplier, which KFC said was experiencing “teething problems” – something of an understatement.
The deal signed with DHL and its partner QSL, who provided the software for the information systems, to manage the supply and distribution of KFC’s food products, packaging and consumables for its 850 restaurants, the majority of which are franchisee-operated, was hailed as “revolutionary” by the parties involved. The deal would provide industry benchmark, deliver outstanding tailored service to all KFC’s restaurants as well as faster turnaround of orders. “To date there has been little variation in foodservice logistics but we have specifically chosen DHL and QSL for their reputation for innovation in logistics across other industries,” Jens Hentschel, supply chain director for KFC, told journalists last October.
Part of the deal included a focus on reducing emissions to net zero over the life of the contract, optimized delivery scheduling to provide a faster turnaround of orders, and greater
integrity of food during transportation allowing for even fresher products upon arrival in KFC restaurants. The only problem was that none of this worked.
In specifically choosing DHL, questions remain about just how much due diligence KFC really undertook before awarding the contract to DHL and partners. Was DHL the cheapest deal on the block and, if so, what evaluation, if any, was undertaken by the fast food parent company, Yum Brands, to determine things such as quality, reliability and value for money over price? Was the decision taken by head office in America, or here in the UK by Paula MacKenzie, an economics graduate from Cambridge University, who took over as managing director after being the UK chain’s chief financial officer? If this wasn’t entirely a head office decision, what pressure did franchisees, who now stand to lose millions of pounds of business, bring to bear to encourage KFC to switch its contractor from Bidvest to DHL? We put those questions to KFC, who declined to answer.
If KFC really did do its homework in this regard, it must surely have been concerned about the fact that DHL was reliant on just one UK storage depot in Rugby for KFC’s chicken supply, compared to Bidvest’s six depots, which implies a certain level of resilience should problems occur as they certainly did less than a week after the switch away from Bidvest.
It seems that KFC itself my have been after an exclusive and innovative deal with DHL. Its previous contract with Bidvest was based upon shared services. Bidvest had shared its network with KFC with others such as Burger King and Pizza Hut. But as an article in The Grocer points out, DHL was using roll cages rather than crates for its chicken and thus hardly represented the last word in efficiency. It was also most likely attempting to source additional customers for its depot.
The catalyst for the disaster was a crash on the M6, which caused major traffic gridlock and delays, which compounded delivery problems. The GMB union, however, said it saw problems looming well before the M6 crash exposed DHL’s particular vulnerabilities. The union’s national officer Mark Rix told The Guardian newspaper that KFC had been warned of DHL’s inability to handle the contract and reminded of the past problems experienced by Burger King when it similarly switched contracts to DHL. “I wrote to KFC,” he said. “I alluded to Burger King trying to cut costs and ending up with poorer quality service and poorer distribution. They had shortages too, but not on the scale we’re seeing now at KFC. Within six months, they [Burger King] were pleading with Bidvest Logistics to take it back.”
Some among you might say that Rix’s union response was entirely predictable: ‘He would say that, wouldn’t he?’ After all, 255 workers were made redundant by Bidvest after the company lost the KFC contract. But Rix has a point. The unedifying spectacle of Carillion’s collapse early this year shows just how precarious and unsustainable business becomes once contracts are awarded purely on cost, despite KFC stressing the environmental advantages the deal would bring.
And it’s not just environmental considerations at stake. How sustainable is the increasing complexity of the supply chain itself? KFC’s recent problems show how a single point of failure in the chain can expose the entire business to extreme danger. Managers need to mitigate such risks more effectively than they are doing and costs may have to rise as a result. “It’s not a matter of competition between individual businesses any more but between whole supply chains. KFC, like so many other major brands, is dependent on others, on the quality of its collaborations,” asserts Richard Wilding, professor of supply chain strategy for Cranfield School of Management.
In an article on the Chartered Institute of Procurement and Supply website, he said that modern supply chains were “hugely complex”, involving different organisations all contributing different expertise and resources to make the whole system work. Using a single distribution centre in the ‘Golden Rectangle’ between Milton Keynes and Rugby on the M1/M6 is a well-established and proven means of getting products to a network of outlets anywhere in the UK, and one that is used by the big supermarket chains themselves, explains Wilding. Experience, however, has tended to show that plugging together new software and technologies leads to teething problems, no matter how much more advanced and sophisticated the technology might be.
Wilding is convinced that there would have been extensive prior testing of this new system after the contract was awarded last October, “but perhaps there could have been a more phased in approach, for example, just using to the new infrastructure to deliver to one region before a roll-out,” he concludes, adding that evidence suggests that 10 % of all supply chains are severely disrupted each year.
In KFC’s case, that was no joke. This breakdown resulted in reduced company revenues, employees losing their wages and an unspecified level of chicken waste. The chicken did not so much cross the road, but as Hemmingway might have put it starkly, ‘To die. In the rain.’ Yes, The Colonel fowled up.