During the recent World Cup, a domestic CO2 shortage led to supplies of draught beer running low, to the great concern of football fans. Earlier this year, fast food retailer KFC hit the headlines after running out of chicken in many of its U.K. restaurants.
Good supply management typically involves building and maintaining strong relationships with key suppliers. It should also involve keeping a close eye on suppliers at tier two level and beyond. Conducting regular risk assessments and strengthening supply networks to avoid potential shortages will almost certainly have time and cost implications, but it is important that businesses weigh these up against the potential impact of supply chain disruption leading to a dip in sales and the risk of reputational damage.
It was KFC’s decision to switch its delivery contract to DHL that triggered “operational issues,” forcing it to close over half of its 900 U.K. restaurants when they ran out of chicken. To avoid this type of disruption at the point of contract switchover, the incoming supplier should be encouraged to agree to a ‘buffer period’ allowing them to prove their capability and avoid any unwanted surprises.
Attention to detail during the procurement process is also important. For example, all elements of the service being provided by the incumbent supplier should be assessed and steps taken to ensure they are incorporated in the new contract prior to its introduction. When engaging new suppliers, an effective due diligence process should take into account the financial stability of the business, its commercial track record, and also a balanced consideration of cost-quality-delivery performance.
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