KFC Chicken Crisis In The UK
- Topics: KFC
- Words: 1525
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- Pages: 3
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KFC is world’s second largest fast food restaurant chain, which mainly focus on fried chicken industry. In 2018, KFC faced a major crisis in UK. KFC UK has run out of chicken in most of its stores. Since, chicken was basic need for any KFC store to run its operations, this shortage resulted in the closure of various KFC stores in UK. Apart from this, KFC has got hit in terms of brand reputation as customers were very agitated by this closure of stores. The primary reason for these troubles was inefficacy of the logistics network. KFC contracted DHL to deliver the chicken but DHL was not able to deliver the chicken in time to KFC stores. To improve the situation, KFC has gone back to DHL’s predecessor i.e. Bidvest Logistics and issue various slogan on social media to improve its brand image.
KFC’s full form is Kentucky Fried Chicken. KFC is an American fast food restaurant chain which has headquarter in Louisville, Kentucky and which specializes in fried chicken. As of Dec’2018, KFC is world’s second-largest fast food restaurant chain (based on sales) after McDonald’s, with 22,621 locations globally in 136 countries. KFC is a subsidiary of Yum! Brands, a company that also owns the Pizza Hut, Taco Bell, and WingStreet chains. KFC was founded by Colonel Harland Sanders, who started selling fried in his roadside restaurant in Corbin, Kentucky, during the Great Depression. Sanders identified the potential of the restaurant franchising concept, and the first ‘Kentucky Fried Chicken’ franchise opened in Utah in 1952. KFC popularized chicken in the fast food industry, diversifying the market by challenging the established dominance of the hamburger.
As of May’2019, the total sales of the company was $26.2Bn and the company has a brand value of $8.5Bn.
In February’2018, most of KFC UK’s outlets were running out of chicken. As a fried chicken company, this shortage of chicken has forced those stores to close. The underlying reason for these problems was the change of transportation contract. KFC UK has changed its transporter from Bidvest Logistics to DHL.
DHL was one of the biggest names in home deliveries and it won the tender of KFC for handling KFC’s distribution. There were basically two problems with the DHL:
In KFC’s case, a collection of accidents in the surrounding roadways brought on trucks carrying in the fresh chicken to be caught in traffic, and delayed outgoing trucks. Without a secondary distribution middle to divert the trucks, the lone distribution core was once in trouble. As KFC was operating on Just-In-Time shipping model, i.e. retailers usually acquired the poultry delivery inside 24 hrs of order placement, so they have been just carrying inventory for one day, within a week of this swap a destroy down in the furnish chain grew to be evident as many KFC outlets commenced strolling out of hen products. Very shortly it emerged that DHL was working out of only one warehouse in Rugby, which had been purpose built to deal with the KFC contract. Apart from this, there were additionally 500 hen farmers imparting clean poultry on everyday basis. So, the chicken was available, but DHL was unable to deliver it to the KFC restaurants.
Because of this problem, in the beginning week itself 540 out of 900 of the retail outlets had closed. Some restaurants were only able to offer a ‘limited menu’ and even the restaurants have reduced their operating hours. Obviously, KFC customers were very upset and angry. Customers have even called police to report the shutdown of various KFC restaurants. Even KFC has also admitted that there would be losses with a total of 900 KFC restaurants were closed. Apart from all this, it also impacted KFC’s brand image, which can be seen in the below chart:
Starting from Feb’18, KFC’s brand image starting to deteriorate reaching its peak by Apr’18.
At this KFC was facing too difficulties, first is how to manage the deliveries? And second is how to improve its brand image?
KFC adopted different strategies to tackle both the problems, which are as follows:
They measured the success of their solutions by measuring the company’s image index as shown above and the availability of ingredients in its restaurants.
The results for these solutions were great. Within few months, KFC was able to reach normality in its operations and brand reputation.
In my belief, the solutions implemented by KFC were adequate in terms to time sensitivity. But these solutions not only defeated the purpose of whole supply chain management i.e. getting the right product at right place at right time at right cost, but also there are some consequences, such as the distributor may no longer have the capacity or capability to handle your business. In this case Bidvest laid-off 255 employees. It is difficult to add these employees back quickly. By going back to Bidvest Logistics, KFC has lost its negotiating power, increasing the cost of deliveries and shown their vulnerability to the vendors, which is never good sign for any company. Moreover, KFC has not planned anything for future i.e. any innovations to improve the future logistics operation. I think that KFC should have devised a plan to cater the future needs.
Few things KFC should have kept in my mind while making changes to its logistics partner:
If KFC had done all of this, they would not have seen such a disaster. Going forward, KFC should devise a plan to do the cost reduction without hampering its operations. Cost reduction in logistics is one of main aspect in supply chain management field. In this competitive and customer focused world, if a company doesn’t reduce its cost to mitigate the competition then they will no longer be in business. In my opinion, KFC should explore the following possibilities:
KFC should keep a check on its cost (biggest risk) while implementing the above suggestions. KFC should measure its performance after the implementation of above recommendations. The performance can be measured in various ways such as KPIs, Spend management analysis, Cost Analysis, Distributor performance analysis, Inventory Analysis (number of stock-outs) etc.
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