Where does KFC get their chicken from?

KFC: What companies should learn from the chicken crisis

KFC expects the closings to continue for around a week. Hundreds of employees will have to forego their wages by then, customers are outraged on social media, and losses are piling up. The British trade union GMB believes that the fast food chain is to blame and complains to the dpa about the “short-term profit thinking”: Both DHL and KFC were aware that problems would arise, according to the union.

Whenever a company changes a supplier, regardless of whether for services or products, there is a risk - the companies themselves know that too. In a survey by the Cologne-based management consultancy Inverto this month, 56 percent of the companies surveyed stated that they are dependent on suppliers to be assessed as a relevant economic risk.

Frank Welge is Managing Director at Inverto and advises companies on issues relating to supply chain management. He says: "If a company changes a supplier just for cost reasons, that is foolish." In addition to the prices for products and services, it is important to check the effects on internal processes and quality.

If a change of supplier is imminent, it is also important to include all parties transparently in the process, says the expert. And that long in advance: "The old supplier can adjust to this early on and the company initiate an orderly and for all sides fair handover." If the change happens suddenly, perhaps even in a dispute, it is no longer possible. "You can also talk to the old supplier about the requirements and specifications that the successor has to meet."

What happens if that doesn't work is also shown by the example of the now insolvent airline Air Berlin. In March 2017, the airline handed over the ground service for its flights in Berlin to the new service provider Aeroground. But there were serious problems: As a subsidiary of the Munich airport company, Aeroground had sufficient specialist knowledge. But there was a lack of staff and equipment.

There were no ladders or luggage trolleys to handle the Air Berlin flights, there were too few employees - and in the short time it was hardly possible to find new ones. Less than six months later, Air Berlin negotiated again with Wisag and returned some of the flights to the old service provider in July. Air Berlin filed for bankruptcy the following month.

"The company bears the moral responsibility"

Frank Welge from Inverto therefore advises companies to thoroughly examine the capabilities of the new service provider - and, if in doubt, have a qualified examination carried out. "Those who only rely on the promises of the potential service provider can run into problems."

A first step is therefore to specifically determine which services are required. "To say that 900 restaurants have to be supplied is not enough," says the expert. Anyone who describes the service in detail in advance of the order also has it easier to check the relevant processes at their contractor afterwards. "You have to look carefully here."

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Dutch farmers had to experience last year that working with the wrong service provider can not only cost huge amounts of money, but also a company's reputation. They hired the company Chickfriend to clean their chicken coops - and as a result had an international food scandal on their necks.

Because Chickfriend worked, as we now know, with the agricultural insecticide fipronil - for months without anyone noticing. When the scandal became public in the summer of 2017, discounters had to take their egg stocks out of sales and farmers had to close their farms. In Denmark alone, 20 tons of eggs contaminated with fipronil had been discovered by then. In addition, 14 other EU countries were affected; a few fipronil eggs had even made it to distant Hong Kong.

For Dutch poultry farmers, the losses ran into the millions. The German Farmers' Association estimated the loss of turnover at 4,000 euros per day in each closed business. This does not include the loss of image: Many people decided not to have their breakfast egg as a result of the reporting - in some cases, state authorities even warned against consumption.

"When something like this happens, the reputation damage is great," explains Kai vom Hoff. The managing director of the Düsseldorfer Kommunikationberatung Vom Hoff has been working as a consultant for 30 years and supports companies in the event of a crisis. His advice: Affected companies should remain “sovereign” in such a case and investigate the incident thoroughly.

Because even if the legal guilt lies with the service provider: “The company bears the moral responsibility.” It is therefore sensible for companies to put their internal processes to the test and to communicate this publicly. "From a legal point of view, it may be helpful if you didn't know anything - but that doesn't apply to public portrayals."

In the case of Kentucky Fried Chicken, the chain relies on customer understanding. On the entrance doors of many branches there is now the note: "We have brought a new delivery partner on board, but he had a few starting problems." A spokesman said that more deliveries were now arriving in the restaurants. "Nonetheless, we expect the disruptions to continue throughout the week."

DHL, on the other hand, points out that it is not the only company responsible for KFC's supply chain. "With the help of our partner QSL, we are gradually ramping up the processes again," said British DHL manager John Boulter. At KFC in Great Britain, QSL is responsible for the warehouse and requirements planning software as well as for purchasing and billing.

Around 70 percent of the British KFC branches are now back in operation. Impatient customers can use a website to find out where the nearest open KFC restaurant is. The London police in particular should make this easier.