Flawed logistics contract changeover leads to KFC shutdown

The fried chicken chain recently switched its delivery contract to DHL, which said it was working to rectify the situation with other partners involved in the supply chain. 

KFC said on Twitter: "We've brought a new delivery partner onboard, but they've had a couple of teething problems - getting fresh chicken out to 900 restaurants across the country is pretty complex!

"We won't compromise on quality, so no deliveries has meant some of our restaurants are closed, and others are operating a limited menu or shortened hours."

Union GMB says it tried to warn KFC that changing 3PL provider from Bidvest to DHL ‘would have consequences’.

The union argued ‘KFC’s penny-pinching decision’ cost 255 distribution jobs.

Mick Rix, GMB national officer said: “Bidvest are specialists – a food distribution firm with years of experience. DHL are scratching around for any work they can get, and undercut them.

“It’s an absolute cock up. KFC are left with hundreds of restaurants closed while DHL try and run the whole operation out of one distribution centre – where conditions are an utter shambles.

“Three weeks ago KFC knew they had made a terrible mistake, but by then it was too late.”

Dr Virginia Spiegler, a senior lecturer in operations and supply chain management at the Kent Business School at the University of Kent said the case highlighted the importance of logistics, which is frequently and unfairly regarded as non-value adding.

She explained: “In the past few years, many companies have taken steps to streamline supply chain processes by reducing holding inventory, outsourcing non-core activities and cutting the number of supplier on the assumption that the market is relatively stable and predictable.

“KFC’s decision to switch their 3PL provider from Bidvest to DHL was a measure to reduce logistics service cost. However, having hundreds of restaurants closed could cost them millions in lost sales and low capacity utilisation. This problem could have been anticipated by comparing Bidvest and DHL capabilities. 

“While Bidvest is specialised in food service distribution and operates a network of distribution centres across the UK, DHL is trying to run the same operation from a single distribution centre. Moreover, it is the first time that DHL is partnering with QSL, who has been providing IT solutions on demand planning and stock management to KFC since 2011. Therefore the alignment between QSL services and DHL physical distribution is also crucial.”

In a statement John Boulter, managing director Retail DHL, Supply Chain U.K.& Ireland said: “DHL regrets the interruption of supply and is working diligently to rectify the situation by working with KFC and other partners involved in the supply chain.

“The reasons for this unforeseen interruption of this complex service are being worked on with a goal to return to normal service levels as soon as possible. With the help of our partner QSL, we are committed to step by step improvements to allow KFC to re-open its stores over 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.”