Dive Brief:
- More than half of KFC's restaurants in the U.K. were forced to temporarily close because of a chicken shortage, Bloomberg reported.
- KFC recently switched from Bidvest Logistics to DHL as its logistics provider, reportedly as a way to cut costs.
- GMB union, a labor union in the U.K., says it warned KFC months ago about the dangers of switching to DHL, and says the crisis could have been avoided if the fast-food chain heeded the unions warnings.
Dive Insight:
The supply chain is one of those areas of business that you never hear about when they work well, but it comes under intense scrutiny when things go south.
Disruptions in the industrial supply chain happen often and for a multitude of issues from the mundane to the extraordinary. Yet in most cases these disruptions never see the light of day as companies creatively work through the issues and keep the pipeline filled. But when the supply chain fractures in a high-profile retail-driven consumer market, the backlash can be abrupt and far-reaching.
While the root cause issues of this KFC issue were related to a new logistics provider, the damage might go deeper than just getting more chickens in place. Thin margins in this business segment, coupled with strong competition and quickly changing customer tastes, may have an extended impact on their business.
Perhaps customers, who cannot get their ration of extra crispy, will try, and like, another restaurant. This may impact the size of the customer base in an industry where loyalty is critical. And of course, the financial hit from reduced sales will hurt franchisers and company alike.
There may be one other pertinent issue to those with supply chain experience. Just where are the chickens?
I’d be a lot more comfortable with a shortage of chickens due to poor planning and high demand than one caused by flock issues, processing problems or chickens left on a loading dock somewhere.
There is a freshness factor at play here, especially with all of the food borne contamination in other segments of this market. Do customers begin to question the freshness and safety of the product at KFC? If so, that would leave long term issues once logistics issues are ironed out.
