Summary the case study

In early 2018, KFC made a major change in its supply chain system in the United Kingdom. The firm acted to revolutionize the UK food service supply chain by parenting with DHL to streamline its supply network to improve its efficiency. Previously, KFC had worked with a different logistics services provider, Bidvest, to supply its restaurants with fresh chicken. In going with DHL, the chain moved from a regional distribution system that used five distribution sites to a single, national distribution center. DHL applied experience it had delivering durable products, such as auto parts, and found that managing the logistics of fresh chicken was very different and challenging. Delays and bottleneck at the distribution center in Rugby. England led to the spoiling of tons of chicken and, more dramatically, the closing of about two thirds of KC outlets across the UK for several days. The company found that its new supply system couldnt get chicken to all of its restaurant

The experience reminded the firm that inbound logistics is a key link in the firms value chain. When they switched logistics service providers, the firm saw its entire operation get bogged down, resulting in lost sales and a public relation black eye. The mistake that the firm made was to focus on the cost saving opportunity it saw in nationalizing its supply system. KFC had put the management of their supply chain system out to bid in 2017 and had picked DHL largely due to the cost savings DHL promised. As Kevin OMarah, a supply chain consultant, stated, too many business leaders still think of logistics and transportation simply in terms of cost.

KFC solution was to bring its old partner, Bidvest, back into the game. To help build a more capable supply chain system, KFC signed a long-term contract with Bidvest to supply around a third of KFCs outlets in northern England. DHLs centralized warehouse continues to supply the remaining set of restaurants. Having a capable in bound logistics system is critical for the firm. As Ruari Lee, one of KFCs customers who was left unable to get lunch at his local KFC, warned Theres always a McDonalds down the road.

Discuss Questions

1. Why do firms like KFC get so focused on efficiency what they take actions that weaken their value chain?
2. What additional actions can the firm take to overcome this failure?