Over the last week the news has been full of stories about global fast-food retailer, KFC, running out of chicken, or more specifically not being able to supply the right amounts of chicken to the right places.
This is a classic supply chain interruption on a massive scale. KFC has just switched its logistics supplier from specialist food supplier Bidvest, to global delivery giant DHL. It seems that the new DHL depot in Rubgy, created by DHL for the KFC contract, was just not up and running in time to handle the new work.
Up to 600 of the 900 KFC stores across the UK had to close temporarily because of the disruption. Zero hours staff were told not to come into work and customers were turned away. The cost of the lost business is estimated at more than £1million a day and the loss of revenue might even be fatal to some of the franchisee KFC shops across the country.
In our ever more interconnected world, where we rely not only on third-party suppliers of materials and utilities, but also cloud-hosted data storage, outsourced IT help desks and many other outsourced services, our supply chains are becoming ever longer and more remotely spread. This trend brings with it many business benefits, such as access to highly trained professionals on demand. But it also leads to increasing risks of dependency on these stretched supply chains.
It is not just KFC that is suffering from supply chain disruption. The BCI Supply Chain Resilience Report 2016 suggests that 70% of businesses experienced at least one supply chain disruption over the previous 12 months. 41% of these disruptions occurred at the Tier 1 level and. 68% of companies affected by a disruption event suffered from loss of productivity, 37% lost revenue, 40% received customer complaints and, worst of all, as KFC is finding, 38% sustained damage to their brand reputation.
There are a number of steps that can be taken to mitigate the threat of these supply chain risks. The first step is to make sure that you have full visibility of your entire supply chain. This will include not only your own direct suppliers, but also the key suppliers that they are themselves dependent upon. If your data is held in cloud storage, then you will be dependent on the local power company of your cloud storage suppliers, unless you or they have secondary back-up somewhere else.
Once you have full visibility of your supply chain, conduct your own assessment of the impact that a business disruption event at your supplier could have on your operations along with the likelihood that such an event could occur. Ask to see your suppliers own risk register to help you with this. If they don’t have one, then take this as a big warning sign about doing business with them.
The next step is to extend your own BC planning standards to your supply chain. When you select a supplier, make sure that their BC planning is up to at least the same standard as your own, with recovery time KPIs that support yours, before you are prepared to purchase from them. If you are not satisfied with their level of BC planning, either don’t do business with them, insist that they raise their standards, or consider a fall-back secondary supplier.
Finally, you should include your entire supply chain within your own incident communications network, so that you can talk to each other when you most need to. These communications channels need to be completely independent of your normal supply chain, to avoid being brought down at the same time. This means choosing a cloud-hosted communications supplier that is not reliant on the same data centres as your own day-to-day network.
Supply chain resilience is growing as an operational issue and as a business risk, but there are BC planning and management tools out there, such as Crises Control, that can help you to reduce this risk and make sure that you don’t fall fowl of the same problems as KFC.
Shalen Sehgal
Director of Business Development
