When KFC switched from Bidvest to DHL as its logistics supplier and then, in part, back again, it demonstrated how poorly-managed supply chain relationships can become extremely costly.
Usually, when things go wrong they can be managed with little impact on delivery, but the lack of consideration of the complexity of the KFC business back in February has reportedly cost several million in lost revenue, plus considerable reputational damage to both KFC and DHL.
Degree of risk
Changing key suppliers always carries a degree of risk, which is essentially the responsibility of both parties. However, risk can be dramatically reduced through careful planning and management.
The challenge of switching key suppliers needs to involve a combination of robust communication at all levels, from forklift drivers to senior directors, and long-term planning that covers all parts of the process.
While every customer and contract is different, a consistent methodology can be applied. It’s important to get buy-in for the changeover process at every level, starting with the warehouse teams. This can include a detailed procedure manual, on-site posters showing the changes, and shift briefings.
It’s also crucial to get the support of the customer’s IT department, as integrating new logistics processes with existing software is vital in ensuring that pallet and goods movements are accurate from the outset.
There are advantages in a phased approach where the changeover is handled either site by site, day by day, or business unit by business unit, depending on the nature of operation.
It’s also key to have contingency plans in place, including having a reserve supply of pallets at key locations. Finally, everything must be backed-up to ensure a smooth and successful changeover.