Distribution centres: economies of scale

KFC

The chicken shortage fiasco at KFC highlighted the risks of operating from a single point of distribution. Property Week reports on what this means for the mega-shed.

In mid-February, Kentucky Fried Chicken (KFC), the UK’s best-known fried chicken outlet, was forced to temporarily close the majority of its restaurants when the supply of its key ingredient broke down. Ultimately, it was not an unmitigated PR disaster for KFC – journalists quickly found plenty of people happy to lament the absence of their fast-food treat of choice – but it was embarrassing for logistics company DHL, which had only just taken over the contract from rival Bidvest.

While the causes of the supply chain breakdown were numerous, one major issue was the fact that DHL was servicing the contract from a single warehouse in Rugby, which was cut off from the transport network following a major collision on the M6 in the early hours of 14 February. Quite simply, the lorries bound for KFC restaurants up and down the land were stranded.

So what does the incident say about the merits of relying on only a few warehouses – or even just one – for distribution?

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