The ‘KFC Chicken Crisis’ is proof, cheapest isn’t always best.

KFC was warned about switching UK delivery contractor, union says

Story found at The Guardian Online.


KFC was warned it would face delivery problems months ago, it has been claimed, as the company tries to grapple with a worsening chicken supply crisis that has forced almost half of its outlets to remain closed.

The fast food chain said it expected disruption to some restaurants to continue for the rest of the week “meaning some will be closed and others operating with a reduced menu or shortened hours”.

About 420 KFC stores are currently shut after the company switched deliveries to a cheaper service, amid mounting consumer anger. An updated list showed that the number of open outlets rose to 450 by Tuesday afternoon after dropping to just 254. And for a second day KFC gave no indication of when operations would be back to normal.

Police in Tower Hamlets, east London, urged the public not to waste officers’ time by complaining about closed KFC stores.

The GMB union said it had expressed major doubts about KFC’s decision last October to switch its deliveries from the food delivery specialists Bidvest Logistics to DHL.

Mick Rix, the GMB’s national officer, said he told KFC that it could face a repeat of supply problems that had hit Burger King when it ditched Bidvest Logistics in favour of DHL six years ago.

He said: “We warned them a few months ago. I wrote to KFC. 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.”

Rix claimed KFC’s current crisis stemmed from dropping a supply system based on six warehouses run by Bidvest to a system of one distribution centre in Rugby run by DHL. He said conditions at the Rugby warehouse were “an utter shambles”.

Rix added: “They took a lower tender with a load of promises that have not materialised. The system can’t cope. My sources say KFC execs knew three weeks ago that there was a major problem with DHL. They were concerned about the set-up and the systems after testing. And some of the answers from DHL were completely strange and worrying. It was clear it was going to fall flat on its face.”

He urged KFC to go back to Bidvest to help resolve the problem, despite its decision to make 255 staff redundant since losing the KFC contract.

Speaking en route to a meeting with Bidvest at its offices in Banbury, Rix said: “We’ve never had redundancies at Bidvest before on this scale. Some of those staff would come back. It is the only way of resolving the problem.”

He added: “DHL will not be able to provide the service they quoted for. Even if industry experts piled into that depot now to sort out the mess at Rugby, it would take weeks and even months to sort the problems out.”

“We think that with the dedicated professionals that are already there at Bidvest and with new people and new vehicles, you could have a good operation up and running within a couple of weeks.”

A KFC spokesperson said: “We feel for those who lost their jobs at Bidvest; the decision to change supplier wasn’t taken lightly. DHL have estimated that winning the KFC contract and opening the new distribution centre has created 300 new jobs.”

Malory Davies, editor of the trade journal Logistics Manager, said KFC would have to resolve the crisis within days. “Frankly, KFC can’t afford for it to go on for more than a few days. They have a whole load of franchisees who will be getting very angry,” he said.

Davies added: “This one is going to be a case study for business schools for years to come, it is really major. It is entirely possible to service the UK market from one warehouse – lots of people do it – but a contract of this size would be more of a challenge.”

The technology analyst Chris Green said DHL and its software partner, Quick Service Logistics, appeared to have failed to properly match up data from KFC’s ordering process to its new system.

He said: “If you were one of KFC’s 750 franchisees you could order your replacement chicken and other supplies and usually within about 24 hours a lorry from Bidvest would appear outside your store with what you needed. The stores were used to that kind of just-in-time ordering, and that’s what’s caught them out.

“It is doing huge brand damage to KFC. The franchisee can’t go off and buy chicken from a wholesaler. Their contracts with KFC prevents them from going to third parties. And KFC can’t put its name on chicken it didn’t supply. The franchisee and KFC have both got both hands tied behind their backs.”

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