Case studies of KFC and Jaguar Business Processes - Porter's Value Chain
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Course
SE604
Institution
Waterford Institute Of Technology
Analysis of KFC's procurement challenges and Jaguar's lean manufacturing strategies. A business case study on the primary activities of Porter's value chain.
Trade union GMB has criticised KFC for a “penny-pinching” decision to award DHLits
distribution contract despite warnings the delivery firm would not be up to the job. Nearly two
thirds of KFC branches around the UK were forced to close yesterdayafter delivery problems
led to a mass chicken shortage. This morning the company’s website revealed that the
problems had escalated, with more than 80% of its stores now closed. GMB’s website claims
750 out of 900 UK stores are closed. The delivery issues arose after the fast food firm
switched its delivery partner from food delivery specialists Bidvest Logistics to DHL Supply
Chain last Tuesday. The GMB union said it had voiced concerns about KFC’s decision last
October to switch its deliveries from Bidvest to DHL, when the new partnership was
announced.
Mick Rix, GMB’s national officer, said he told KFC that it could face a repeat of supply issues
that hit Burger King when it dropped Bidvest in favour of DHL six years ago. “We warned
them a few months ago. I wrote to KFC. I alluded to Burger King trying to cut costs and
ending up with poorer quality service and poorer distribution – they had shortages too but
not on the scale we’re seeing now at KFC,” he said. “Within six months they [Burger King]
were pleading with Bidvest Logistics to take it back.”
Rix blamed the current crisis at KFC on dropping a supply system based on six warehouses
run by Bidvest to a system of one distribution centre in Rugby, run by DHL. He said the
conditions at the Rugby warehouse were “an utter shambles”. “They took a lower tender with
a load of promises that have not materialised – the system can’t cope,” he said. “My sources
say KFC execs knew three weeks ago that there was a major problem with DHL – they were
concerned about the set-up and the systems after testing and some of the answers from
DHL were completely strange and worrying. It was clear it was going to fall flat on its face.”
“DHL will not be able to provide the service they quoted for. Even if the industry experts piled
into that depot now to sort out the mess at Rugby, it would take weeks and even months to
sort the problems out.” Responding to GBM’s claims, a KFC spokesman said DHL winning
the contract had in fact created 300 new jobs. “DHL have estimated that winning the KFC
contract and opening the new distribution centre has created 300 new jobs.”
Virginia Spiegler, senior lecturer in operations and supply chain management at the
University of Kent, said the case highlighted the importance of logistics operations, which are
frequently and unfairly regarded by many companies as non-value adding. “KFC’s decision
to switch their third party logistics provider from Bidvest to DHL was a measure to reduce
logistics service costs. However, having hundreds of restaurants closed could cost them
millions in lost sales and low capacity utilisation. The problem could have been anticipated
by comparing Bidvest and DHL capabilities. “While Bidvest is specialised in food service
distribution and operates a network of distribution centres across the UK, DHL is trying to run
the same operation from a single distribution centre.”
1. How does what happened with KFC relate to what we studied in class?
The chicken shortage at KFC underscores the importance of making thoughtful
procurement decisions.
The union representative mentioned raising concerns about the switch to DHL,
highlighting the potential for problems based on the similar experience of Burger
King. DHL operated a single warehouse in Rugby that was run poorly, comparing it to
Bidvest’s network of six warehouses across the UK it became obvious that DHL
, couldn’t provide the service they were quoted for. Effective communication
throughout the decision-making process can help ensure that all aspects of a
procurement decision are carefully evaluated.
KFC's choice to switch from Bidvest, a food service specialist, to DHL, a more
general logistics company, was likely driven by cost savings. In this case, while DHL
might have offered a lower price, their lack of experience in food service distribution
seems to have resulted in KFC consequently suffering more losses through
diminished sales and low-capacity utilisation instead of expected savings.
Procurement goes beyond simply getting the lowest price; it requires careful
consideration of various factors to avoid unforeseen disruptions.
By carefully weighing factors like supplier experience, potential risks, and long-term
costs, companies can make informed decisions that avoid KFC's fate.
Jaguar Production Process
This case study focuses on the way in which Jaguar, one of the world’s most prestigious car
manufacturers, has employed lean manufacturing processes. This underpins the success of
the new Jaguar S-Type production line at its Castle Bromwich factory in Birmingham. Jaguar
is part of the Ford Group. Ford has for a number of years been improving its production
methods, particularly by introducing manufacturing methods developed in Japanese
industry. This includes lean manufacturing, a system pioneered at the Castle Bromwich
factory. The system will be integrated into Ford’s Halewood factory prior to the production of
the new Jaguar X400. Ford workers there will be developing a Jaguar motorcar, therefore
the skills developed at Castle Bromwich need to be successful at Halewood. Lean
manufacturing is the process of eliminating waste in production in order to guarantee quality
and maximise efficiency. Lean production involves the standardisation of work processes to
cut out waste. The standard is the best identified method of operation at a particular moment
in time and one that will be continuously monitored and improved by the individual operator.
The key to lean production is to identify which processes in the organisation of production
add value to the production process. Processes that do not can then be reduced or
eliminated so that labour and machinery can focus on added value activities. Firstly, it was
necessary to transform patterns of working relationships. Previously the factory had been
organised using a hierarchical approach with one supervisor and one group leader taking
responsibility for up to 30 production line workers. In the new structure a team leader works
with a small group of seven team members. The old approach was characterised by a ‘tell
and do’ approach with instructions being fed downwards in order to exercise control from
above. Today this pattern of decision-making has been inverted. Group members are
expected to take responsibility for their own work and to use team leaders for support - i.e. in
a helping role. Jaguar workers have enthusiastically adopted the new approach as it allows
for greater involvement and responsibility for improving their work patterns. Increased
productivity and quality is clearly visible as a consequence. The first step in implementing
change was to ask workers to operate in small teams with a group leader – an approach
known as cellular working. Teams were trained in their work areas rather than classrooms so
they could see how to apply the new tools in a work based context, and feel comfortable and
involved. One of the most significant changes has been creating continuous flow system of
production based on a ‘just-in-time’ approach. Previously, groups of employees had focused
on set processes in the production of Jaguar cars using batches of components. The work
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