A chicken crisis caused by the wrong software
Industrial Strategy Supply chain meltdowns can cost companies millions, destroy reputations and result in massive food waste. The right enterprise management software can cut the risk.
In Spring 2018, people were calling the police to report a personal crisis: KFC had run out of fried chicken.
Laugh if you like, but it was certainly a crisis for KFC. Deliveries of fresh chicken to its restaurants had broken down. At the peak of the crisis, 646 of it 900 UK restaurants were closed, and the cost to KFC was estimated at US$1 million a day.
The root cause was a problem with the supply chain. Under KFC's system the chicken should be consumed within five days of the company ordering it. Any longer, and it is consigned to waste. For KFC, supply chain disruption meant closed restaurants, wasted food, unsatisfied customers, huge financial losses, and a damaged reputation.
How could this happen?
Who could it happen to?
The answer is: very easily - and not just to KFC. Supply chain problems can - and have - resulted in huge losses for other major companies too.
The reason is that many organisations adopt the 'just in time' (JIT) system of distribution, whereby product stocks are kept as low as possible, but replenishment deliveries are frequent. This saves warehouse space, reduces waste and ultimately cuts costs. It’s a strategy adopted across a variety of supply chains, from cars to pharma, but it’s particularly well-suited to food and drink.
However, if anything goes wrong, big problems result. And the most unlikely things can throw a spanner in the works of a supply chain - including software problems.
In KFC's case, the problem was rooted in a decision to stop using its logistics supplier, foodservice specialist, Bidvest, which has a network of distribution centres, and to start using DHL and QSL. The new arrangement meant supplies of chicken would be delivered daily to all of KFC's 900 restaurants from one depot. Many UK companies have a similar one-depot arrangement.
However, if something goes wrong at that single depot there aren’t ready alternatives. This was one of the problems in the KFC crisis - but other factors were also involved.
Software problems - and solutions
Logistics expert Professor Richard Wilding, from the Cranfield School of Management, insisted that, “neither the use of a single warehouse or DHL” were to blame for the meltdown, but said that new technology and software being introduced to each other for the first time often presents problems.
Dr Virginia Spiegler, a senior lecturer in operations and supply chain management at the University of Kent, also pointed to the difficulty of pairing unfamiliar IT systems. She said: “This problem could have been anticipated by comparing Bidvest and DHL capabilities.”
IT also proved to be part of KFC’s salvation: Stowga, an online platform that pairs businesses with excess warehousing and logistics, says it created a temporary network for KFC within hours.
Software can cut supply chain risk and waste
The right software can reduce the risk of supply chain problems, and make many other business processes more reliable, increasing efficiency and cutting costs. It can also make businesses 'greener' by cutting food waste.
Nicole Hardin, director of product management at software supplier Sage says: "Business management solutions, such as Sage Business Cloud Enterprise Management, can connect all areas of a business, enabling the factory and the supply chain to work more effectively. Business management tools bring critical information from different systems together – inventory and order management, for example – to significantly increase operational insight through real-time data analysis.
"As a result, manufacturers will be able to identify the most inefficient areas of the supply chain, as well as streamlining processes and improving collaboration."
This can also cut waste. "Improving supply chain efficiency across key areas such as production, handling and storage, and processing and packaging, is believed to be able to cut food waste by $700bn globally, which would have a direct monetary impact on the businesses involved," said Hardin.
She cites a 2017 report from Champions 12.3, which found over half of businesses that invested in reducing food waste earned a 14-fold or greater return on their investment.
Hardin says: "Software will enable manufacturers to modernise their business processes, improve collaboration and drive greater efficiency – all of which will contribute to a reduction in food waste and, ultimately, increase profits."
Read more software success stories: "Cloud-based software has been vital to our fruit and veg expansion" "How software helped us create better kitchens"