Orlando, Fla. — You have probably seen in the news, the recent case of Kentucky Fried Chicken having to shut down nine hundred restaurants in the United Kingdom due to a shortage of their most important ingredient, the one that people love: Chicken!
The reason: a collision involving seven vehicles took place between junctions two and three of the M6. One man was killed, and two others injured. Police closed off the area between the two junctions to investigate, and eventually arrested a man on suspicion of causing death by dangerous driving. Shortly afterwards, a pair of lorries collided near junction one, although neither driver was injured. These three junctions are in the vicinity of Rugby, where DHL's warehouse is located. With its lorries getting stuck in the traffic as soon as they left the depot, and no other locations to send deliveries from, the delays that would lead to the KFC chicken shortage began here.
As a business owner, you probably may be wondering whether their insurance will kick-in to save them from such a chaotic situation. The supply chain insurance is a type of coverage that is still evolving, given the complex environment in which most businesses operate and tends to fall under business interruption insurance.
A business interruption standard policy would mostly be limited to an interruption coming from property damage.
The introduction of contingent business interruption brought the provision for limited cover in other types of scenarios. Lately, insurance companies started selling specific supply chain cover, which can be triggered by disruptions in the insured’s supply chain which have a negative impact on the business.
Unfortunately, these policies have been developed so recently that many businesses are completely unaware that they are now available in the market.
So, how it happened?
Just imagine, this all happened because the famous chicken couldn’t cross the road. They changed the company that was in charge of their logistics with one single warehouse vs. the six warehouse locations they used to be serviced with by their previous logistics partner.
Disruption is fairly common in supply chains it isn’t noticeable because only a small number of locations or a certain item would be affected. In KFC's case, with its specialized menu and single warehouse, the problem was much larger, and quickly noticed by customers. Note that Britain happens to be Europe’s largest market for fast-food chicken and the fifth biggest market for KFC.
Most business owners still don’t have an idea of the importance of a reliable supply chain which can make or break the rules of the game as it happened to KFC. The competition seems to be no longer between individual companies but between who is better prepared to counteract these types of logistics incidents.
In terms of customers reactions nothing has been left out of the table.
John Boulter, a managing director for DHL, said in a statement that the company was working hard with another partner in the supply chain, QSL, to rectify the “unforeseen interruption of this complex service.”
He added that, “Whilst we are not the only party responsible for the supply chain to KFC, we do apologize for the inconvenience and disappointment caused to KFC and their customers by this incident.”
On the other hand— GMB, a trade union, said it had warned the company against making the switch, and that the closing of a Bidvest (KFC’s former distributor) depot after it lost the contract had resulted in the loss of 255 jobs.