KFC Hands Work Back To Previous Supplier – Raises Sourcing Strategy Questions

So Kentucky Fried Chicken had to eat humble (chicken?) pie and go back to their previous logistics supplier, Bidvest, at least for the north of England. You will recall that the firm switched to DHL and software firm QSL and then saw disastrous supply interruptions closing stores around the country.

The fast-food chain, owned by Louisville, Kentucky-based Yum! Brands Inc., handed the supply of 350 restaurants in the north of the UK back to Bidvest, but DHL keep responsibility for the other 500 outlets.

We should give KFC credit for making what must seemed a tough decision – no one likes to admit they made a mistake, let’s face it.  And good of Bidvest to accept the work, although we wonder whether their charges will be the same as previously or whether a bit of a pricing premium might have crept in!

Aside from the specifics of this case, it raises some general issues that organisations should always consider but often don’t analyse as thoroughly as they should. When we heard about the partial return to Bidvest, our immediate thought was this – why didn’t KFC do that in the first place? That is, introduce a second supplier (DHL) alongside Bidvest?

Now there may have been good reasons not to do that, but it would have had some obvious advantages. It would have allowed the new process with the new supplier to be tested in part of the country (and maybe to begin with you might have given fewer than 500 stores to DHL). Particularly if the new supply option involved new software, as well as new premises, process and people, it might have been sensible to pilot first.

Secondly, it would have maintained competitive pressure on both suppliers, Bidvest and DHL. While the wider market for this sort of work looks fairly competitive, if you give your whole spend to one firm, you have created what is in effect a short-term (at best) “monopoly” situation. There’s a lot to be said for having two or more providers in situations like this.

Clearly, there are negatives and costs too around that approach  - higher contract management costs and effort, for a start, and perhaps some loss of consistency. But, while it is easy to be wise after the event, the benefits can often be significant, as they surely would have been in this case.

It’s an interesting conundrum, and one we might come back to soon. How exactly do you weigh up the merits of a single supplier versus multiple supplier sourcing strategy?  As we’ve seen in this case, it can be a really important decision to get right.

First Voice

  1. KBC:

    Single sourcing works, and it’s able to work well; however, with a food product, I’m not sure I would single source. The whole situation would be a great study into KFC’s sourcing process and whether it considered risk mitigation a key step in its process.

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