CX Takeaways from KFC’s Supply Chain Foul Up

Headline writers with a penchant for puns (I plead guilty) have had a field day with the ongoing supply-chain debacle at KFC UK: Following a change of logistics partners on 14/February, the company was unable to keep its UK network of 900 restaurants supplied. The subsequent shutdown of more than half of its UK outlets, prompted KFC’s communications team to offer apologies with a dash of humour, in national newspapers, and updates in its Twitter feed about how the company was handling to the situation:

KFC UK Twitter feed
KFC UK Twitter feed explains the situation and the company’s response

How big a deal is this? An article from Diginomica estimates that this episode is costing KFC at least £4.2 Million per week in gross profit. That figure doesn’t include costs related to the disposal of undelivered chicken that has perished, or compensation that franchisees are likely to demand. Beyond the dry cost estimates, there’s misery for staff at franchises whose income isn’t guaranteed, and others who are working long, stressful, hours to get things moving again.

In Customer Experience, we sometimes talk about a hierarchy of customer expectations: At the most basic level, customers expect a company to provide a product or service that meets their needs – and if more than one company that can do that, customers’ choices are influenced by the ease, and emotional experience of doing business with a company. If a chicken restaurant runs out of chicken, it lets the customer down at the most basic level. This must be what KFC means when it apologies for failing to do the “one job” that it had to do. But how could a giant food company drop the ball on such a crucial aspect of its business?

When I’ve worked with firms to improve services that rely on outsourced supply chains, I’ve often found that few people in the company have detailed knowledge of what goes on between its loading bay and the customer’s site. Things that appear straightforward to decision makers in a conference room turn out to be more complicated on the ground, where exceptions to the theoretical model are necessitated by banal but relentless complications; narrow site entrances, city restrictions on daytime deliveries, waiting times for unloading, and mismatched documentation. That’s why it’s essential, when planning initiatives that require changes to the supply chain, to involve people in the discussion who have hands-on experience of the issues. Perhaps that simply wasn’t an option when KFC made the bold and risky decision to replace a partner that had an intimate knowledge of its supply chain (Bidvest) with a new provider (DHL). In its analysis of KFC’s problems, Supply Chain Digital cites an example of a company that put its logistics operation out to tender without fully accounting for “many complexities that came with the job.” Perhaps there is a similar story behind KFC’s current woes.

What is the impact on Customer Experience and Brand from all of this? Media pundits say that consumers will flock back to KFC, since temporary store closures do less damage to a popular food brand than a health scare might do. I think that’s true. I’m particularly impressed to see that KFC’s communications team is inviting people to download the KFC app so that they can receive promotions once their local stores are offering a full menu again. While consumers are likely to forgive KFC, I think there will be more lasting damage to one important element in the company’s ecosystem: The company has let down its franchisees. These are people who are invested in the ecosystem. They’re contractually obliged to get their supplies from KFC. Trust is even more important in this kind of high-stakes B2B relationship than it is in B2C commerce. KFC will need to convince its franchisees that they have a reliable partner for the future. Perhaps the greatest damage of all will be to DHL’s brand – Potential clients who are interested in reducing logistics costs by rationalising their supply chains will be more sceptical about DHL’s ability to deliver. So far, DHL’s communications about the situation are less impressive than KFC’s. The passive voice makes this executive statement sound particularly weak:  “The reasons for this unforeseen interruption of this complex service are being worked on… ” When the problems at KFC are resolved, DHL will need to find better words to explain how it tackled them and what it learnt.

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