Kentucky Fried Chicken Supply Failure, What Went Wrong? – The Phantom CPO Speaks

We have had an unusual guest article submitted from someone (something?) that calls him- or herself
“The Phantom CPO!”

All they would tell us is this:

So see what you think – it’s an interesting and hard-hitting speculative take on the recent KFC issues, so it certainly sounds like the Phantom knows a thing or two about procurement …

I’ve read with interest the various reports on the Kentucky Fried Chicken (KFC) decision to change logistics supplier (editor’s note: see here and here for Spend Matters previous reporting). It’s clearly been a disaster. It’s a procurement disaster, before it’s a logistics disaster, no matter who was involved and what roles people played. A classic on how not to procure.

So where did KFC go wrong? What (does it appear) that KFC did not do – and why perhaps didn’t they do it? Maybe ...

1 - They didn’t run a robust supply market analysis & supplier evaluation process.

They are not skillful enough to know how to do it, how to assign real value to value-add features, risk management and non-price benefits from a supplier, or… they do have the skill but not the common sense to use it.

2 - They didn’t test the claims by DHL on their capability.

They took the supplier’s (DHL) word for it, they believed the supplier’s marketing and believed unproven claims of performance. Or… they were lazy (or both).

3 - They didn’t test the claims by QSL on their software functionality and its capacity to carry the KFC daily volume.

They took the software supplier QSL’s word for it, they believed the marketing and unproven claims of performance. They also believed DHL’s fine words about QSL. Or… they were lazy (or both).

4 - They did not sufficiently test the launch strategy decision to make it a big bang change-over rather than a staged approach.

They saw significant price savings and were greedy enough to start banking them before it was certain they could be realised.

5 - They did not do enough background checks on DHL and QSL past performances with other customers to be certain of the track record.

They stayed away from the Burger King DHL failures probably because they are a competitor.

A little Google searching and all would have been revealed. Again … lazy procurement.

6 - They didn’t have an effective risk management plan with mitigations and contingencies in the event of a failed change over.

The key word here is ‘effective’. The risk matrix theyl will say they had was proven to be flawed.

A risk plan, that when executed, still sees hundreds of store closures, is clearly flawed.

Either they are not skillful enough to know how to do it, or they do not have the energy and dedication to make it comprehensive … this is lazy procurement.

I can’t be the only one seeing a theme here?

In short,

Someone in KFC headed up this mess … this person must not lead such a piece of work again, at least, until re-trained in supply market analysis and supplier selection processes and re-calibrated on what business value actually is.

Everyone else in KFC whose thought process was the same as the leader needs the same re-calibration.

KFC should go cap in hand to Bidvest (the previous supplier) and map out a future plan where both organisations work jointly on process improvement and value creation. The first person who uses the word ‘tender’ again will have to sit in the corner… for a couple of years.

DHL and QSL should build their capability, test it and be able to prove it in a simulated real world (look that up if you don’t know what it means). Then those promises might have a chance of being the truth and their offer will be viable.

Procurement professionals everywhere, take note!

Do not behave like this.

Our profession deserves better than this. All our progress in the last 10 years says this KFC behaviour is not the norm across our profession.

… and never again let it be.

The Phantom CPO

March 2018

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Voices (2)

  1. Phantom Obrserver:

    On the basis that “no news, is good news”, might it be fair to suggest that by now all is back to normal again?

    We seem to assume that the issues are on-going, and that the on-going total cost of ownership is worse than before – yet there is no empirical evidence to suggest that. So what we seem to have hear is a failed implementation (change-over), but that’s potentially all.

    I think that the logistics responsible function at KFC needs to shoulder at least part of that blame, assuming that the change-over was not negatively impacted by any horse-play from the out-going vendor.

    I would have to therefore conclude that this article is mis-leading at best, #fakenews at worst.

  2. Trevor Black:

    Excellent article! I suspect that “procurement” had nothing to do with it as it reflects that too many commercial decisions are still being driven by finance, where the procurement function is a minor subsidiary. Whether the classic “lessons learned” will apply I some how doubt it, for as long as the commercial role of procurement is regarded as non strategic then disasters like this will continue. You expect this in the public sector but not in the private.

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