KFC is running out of chicken
http://money.cnn.com/2018/02/19/investing/kfc-chicken-shortage/index.html?iid=SF_LN
https://twitter.com/search?q=dhl%20kfc&src=tyah
https://www.washingtonpost.com/news/worldviews/wp/2018/02/19/kfc-restaurants-in-the-u-k-have-a-problem-they-dont-have-chicken/?utm_term=.5e60d105b021
This week, over 800 of KFC’s stores across the UK were closed due to a chicken shortage, while the remaining 100 are operating on a very limited menu (reaching it’s maximum closure amount, initially starting with just 300). As the UK alone is one of KFC’s top 5 markets (number 1 in all of Europe), this mistake will be a massive blow to KFC’s sales for the year.
This all comes as a result of the switch over of a delivery service; initially, they were supplied by Bidvest Logistics, but last Wednesday, switched over to DHL. Bidvest has stated that the transition for them has gone very smoothly. On the other hand, DHL currently admits that it has had sudden “operational problems” as of late that has led to many delayed and/or incomplete orders.
It seems as if the new supplier had not properly accurately predicted the effect that this new client would have on their operations. As a result, it appears as if they have gone over their capacity to not deliver products to their clients across the entirety of the UK in a timely matter. There was clearly a problem with the amount of shipping that the company could complete, and they seem to have gone over capacity and not been able to meet the demands of their clients as a result. This also comes at a time when KFC UK is already under heavy fire. This switch from Bidvest to DHL led to a closure of 2 distribution centers and layoffs for about 300 employees, all on the guise of “increased efficiency in the supply chain”, efficiency that should have been handled and met by DHL shipping. l
Additionally, this is definitely a big issue for KFC from both a profit standpoint as well as a PR standpoint. Many consumers have already begun posting videos, snapchats, and tweets calling out the company and claiming to angrily head to their competitors as a result.
However, KFC is handling it quite well- they have chosen to continue to pay for all employees for the week as an act of goodwill as well as to respond to consumers over social media platforms with a more humorous approach (such as the one pictured below):
Interestingly, as can be seen in the comments, KFC’s post seemed to pay off: most people are commenting in favor of the company while tearing into DHL. Comments include calling KFC “birdbrained” for trusting DHL as a shipping company, cracking jokes at how the company often just leaves a note claiming they tried to deliver, and many more negative comments aimed at DHL.
The shipping company claims it to be a result of the transition and that things should get better in the following weeks. This inability to proper plan and to handle the increase shipping has definitely led to some questions: Will DHL actually be able to meet the current (and future) demands of their clients, even as they grow, without having another issue such as this one? How will KFC proceed from here given the incredible losses they are facing as a result of loss of a whole weeks sales?
While I think this scenario certainly puts DHL in the worst light, we should also be questioning KFC’s role. Certainly, it is the logistics company’s responsibility to handle logistics, but their inability to do so, or know what it would take to do so, raises questions about how much information they were given by KFC. One would imagine that a very established logistics company like DHL would not fail to prepare for the incoming capacity to such a degree if they knew what to expect. This leads me to believe that they either didn’t know what was coming or inaccurately prepared for future capacity. The second scenario is without a doubt DHL’s fault, but if the first scenario occurred, KFC has some responsibility for not providing its shipping company with the required information.
I agree with Nicholas that KFC should absolutely be held responsible for this issue. Yes, it seems as if DHL should be given a lot of the blame for this logistics problem, since they are now the logistics provider of the fast food company. However, knowing that the transition from Bidvest to DHL could cause some hiccups, KFC’s operations management team should have been ultra focused on this transition. They should have placed a ton of their focus on the transition to make sure that nothing about their supply chain process would be affected. This was clearly not the case, and it is now both a financial and PR problem for the food supplier.
The planning of transitioning between the two delivery services was definitely flawed, and I don’t think the blame can fall on just one of the two companies. The company taking over expressed sudden problems, while the first company thought the transition went smoothly. This tells us that the communication during the planning and execution of the transition was not effecting, leading to lost business. Some strategies KFC and DHL can use in the future include forecasting demand more accurately, finding the ultimate operating level and building for change. However, I wonder if the DHL and KFC relationship has put too much of a bad taste in the mouth of its consumers, leading to permanent damage.
I’m surprised that KFC did not have a back up plan for their supply of chicken, especially considering chicken is the main feature of their menu. I would have thought that dealing with a new supplier, the people in charge at KFC would have been even more careful and would have made some plans in case the transition did not go smoothly. This failure clearly put KFC in a tough spot. I found this article (https://nypost.com/2018/02/20/kfc-workers-seen-smuggling-raw-chicken-into-restaurant-during-shortage/) that describes a particularly bad experience one of the KFCs had when the chicken supply ran out. A few of the workers at the particular KFC went to a local butcher shop and bought all of the raw chicken. They put all the chicken into the car and smuggled into KFC through the back door. The smuggled chicken was in bags, not boxes, and was unrefrigerated. Obviously, the workers got in trouble. I think this instance could have been avoided if KFC had a better plan for dealing with potential supply failures. Obviously mistakes will happen, but there should be safeguards put in place to deal with them before things get worse.
While social media may transfer most of the blame to DHL, KFC will be the one to experience the consequences of this poor planning. Ultimately, KFC can’t blame their supplier for failing during this transition. The operations managers at KFC UK should have foreseen some difficulties in the transition from one logistics company to another. They should have had a strategy in place in case the transition did not run smoothly. To answer, your question I don’t think DHL has much to a worry about in the long run. They are a well-know and respected logistics company. They will analyze all the information concerning why this issue has taken place and they will correct it. In contrast, KFC will continue to feel the consequences of this blunder.
Seems to me that DHL did not adequately assess KFC’s process structure correctly which resulted in a misinformed measure of their capacity. They were not equipped to handle the amount of output or chicken that KFC was producing and therefore led to incomplete orders and delays. Right now DHL needs to focus on constraint management which includes identifying their bottleneck and finding a way to better manage it. If they don’t then they will continue to see a lack of production in the supply chain causing KFC to lose even more customers, employees, and money. After DHL can fix the short term issues they should focus on the long term planning. Redesigning their capacity decisions and sizing strategies should help them be equipped to handle other large companies in the future. They want to fix and then improve their capacity system or else they will dropped from companies and go out of business for their corrupt and faulty services.
This article goes to show how important it is to take into consideration how detrimental an ill-organized operation management plan can be. The one thing that customers hate more than waiting in line is not being able to purchase the item at all. Waiting in lines typically guarantee that the patient will receive the product or service at some point, and that they just have to be patient. However, in the case of KFC, the customers do not know whether or not they will be the 259th customer who is able to order their meal or not, so many are entering stores and waiting in line just to find out that it was all for nothing and that they have run out of food. KFC is conducting the first come, first serve priority rule. I wonder if KFC has been using the probability of customer arrivals to determine around what time they should begin to shut down the store and turn and turn away customers. This way customers can avoid waiting in lines just to be rejected. I would much rather be informed beforehand that they would be running out of food rather than being told after waiting in line. After reading a few articles, I do realize that a few locations do have set limited hours. I also wonder if KFC has analyzed their waiting lines to see what times most customers frequent the restaurant. This way they could better estimate how long the available chicken will last, and which stores would be able to maintain open and receive sales.
Lastly, I wonder if it would make more sense to place a greater focus on stocking the most popular restaurants. Would it be more beneficial to have fewer stores open, if they can guarantee to bring in a greater number of customers?
This is an interesting choice of article with regards to waiting lines. It is true that the inability to supply the demand of chicken at KFC will cause a structure imbalance to the waiting line process KFC tries to establish, but to me the problem here is with the management team at KFC. When switching suppliers for any reason, financial or ability to provide quality ingredients, a company as established as KFC should have tested the supplier with certain stores before fully relying on the company. With a problem that affects around 400 stores, it is confusing to me the KFC would rely on an ingredient supplier with a clear flaw that should have been detected. I would be interested to hear any press conferences from KFC management about this situation, and if they talked about why they weren’t able to stop this problem from happening.
While the hope is that KFC and Yum! Brands can get this switch to DHL figured out eventually and create a solid distribution network, time is not on their side as a back office company. The constant standardization of chicken products within their product line creates an incredible amount of demand that DHL has a tough time matching. KFC UK thought they would be able to operate with DHL as their lone supplier through one single warehouse (which has yet to get health board approval), and they were incredibly wrong.
A couple of ways that KFC UK and DHL can manage this demand and fix capacity problems is to limit bottlenecks to get this shipped to KFC stores. Since all of their chicken is stored in one large warehouse, this may seem difficult, and perhaps expanding to other warehouses may be a good idea. In fact, KFC had six different warehouses when they had Bidvest as their client. Another way they could solve this matter is for DHL to utilize their economies of scale to spread the fixed costs out when they invest in new warehouses. This can help match demand, and hopefully limit fix costs after these warehouses rent and utilities are properly paid for.
This article really caught my eye, because the fact that a large chain fast-food restaurant actually ran out of their number one ingredient caught me by surprise. I was interested to hear about the logistics and capacity issues while also seeing the PR stance that KFC took in light of the challenge. In this instance, the constraint was the absence of chicken, which limited and caused severe bottlenecking in the supply chain of ingredients. My opinion lies with those who fault DHL, rather than KFC. DHL is a key partner involved in the operation of KFC and must recognize this immense responsibility as a vendor who offers necessary services. Short term, DHL needs to seriously identity and manage bottlenecks in order to prevent future delays and transition into the role that Bidvest once held. Long term, however, the company should employ capacity timing and sizing strategies such as forecasting demand accurately and building for change. Its service undoubtedly relies on technology, which must lead the company to understand the capacity increments and its limitations. Overall, I hope that DHL learns from its egregious mistake and can prove itself a worthy partner to work with KFC
This was obviously a critical planning capacity failure that should have been prepped extensively. Changing the delivery service of your primary direct material company wide is a massive switch that KFC should have been prepared for. Although DHL obviously provided the service at a cheaper price than Bidvest, or promised increased quality of shipping, KFC failed to provide them with the true volume of their needs. DHL also failed to adequately prepare for the large influx of the KFC orders. DHL must increase their capacity through the addition of trucks, warehouses and more personnel in order to complete the contract. Hopefully they are able to meet this increased capacity while still being able to draw a profit. If I were Bidvest, I would now be lobbying to win back the old shipping contract based on the current performance of DHL. If DHL remains unable to complete the orders it will be interesting to see how long KFC will be willing to wait before switching back to their original delivery system. KFC and DHL should have forseen this bottleneck and hopefully operations will resume shortly so that KFC doesn’t lose their customer base across the UK.