John Perry, managing director of SCALA, a provider of management services for the supply chain and logistics sector, had some comments to make, following the news that KFC has now switched back part of its fast food outlet chicken supplies to its old supplier, Bidvest
“The decision by KFC to return part of its contract to its previous supplier, Bidvest, following the catastrophic issues it experienced when it switched to DHL, demonstrates the ongoing difficulties that the fast good giant is still battling with," said Mr Perry. "It also shows that there is a lack of confidence that the problems can be solved quickly.
“It puts DHL in a difficult position, as it is effectively being bailed out by a competitor, but it is also potentially harmful to its reputation and the success of winning other business. Splitting the operation between suppliers at this stage, after implementation, raises the question again as to why the transition from Bidvest to DHL wasn’t phased in and whether the proposed solution can be made to work.
“To date, this will have been a very costly experience for all concerned parties. With logistics contracts typically being low margin affairs, large, unexpected costs or incurred penalties can rapidly erode the benefit of switching suppliers. This highlights just how important it is to weigh up the risks before making changes to a contract.”
In January KFC was forced to close around 600 of its 900-odd outlets in the UK, just a few months after it changed its logistic services supplier from Bidvest, which has seven depots, to DHL, which operates out of one, in Rugby. The northern outlets, around 350, were particularly hard-hit, and these have been awarded back to Bidvest.
The damage to KFC’s reputation was short-lived. The company "fessed up" and apologised. Indeed, the fact that its customers were angry, bemused or anxious - ’phone calls were made to the emergency services!! - just showed how popular its products are in the fast-food market.
Several commentators have argued, however, that the embarrassment for Deutsche Port affiliate DHL is likely to be longer-lasting and it may have suffered reputational damage.