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Supply chain challenges: What SMEs can learn from KFC


In the wake of KFC’s chicken gate, where 750 of its 900 restaurants closed due to a lack of chicken, it’s clear to see just how costly supply chain disruption can be, both financially and reputationally.


The fast-food giant is reportedly losing up to £1m per day since changing its logistics partner, a change that was ironically planned to improve profit margins. While the company will continue to feel a backlash over the failed deliveries and its consequences which could prove fatal to some franchisees, the brand itself is big enough to front those costs and weather the storm.

Small and independent businesses are often not so fortunate and have little margin for error. Baring in mind the challenges, planning ahead and preparing for the worst affords you additional protection and peace of mind when you need it.

Know the chain and your limits

Mapping your supply chain, knowing who is accountable for what and when will allow you to effectively plan and manage customer expectations. This is especially important if you’re thinking about scaling your business or looking to reduce costs. If you cut corners on the quality of products and services it can have a disastrous effect on customer satisfaction. Do your research with suppliers and couriers. Do they have the infrastructure to deliver what you need? Ask their current customer base about their experiences.

Be flexible

Being flexible allows you to be more pragmatic when comes to meeting challenges, but what does this mean for small and independent retail and hospitality businesses reliant on their suppliers? It's key to not rely solely on one supplier. Should something go wrong at this stage of the chain, you’d be left with no products on your shelves, or ingredients in your kitchen. Consider sourcing your products from a number of supply partners if possible. This approach ensures if one fails to deliver you aren’t left high and dry.

Stay aware

What are the outside influences that could affect your supply chain? Many independents get caught out with currency fluctuations which can dramatically affect costs eating into an already thin profit margin. Even small oversights can be costly. We’re living in a time when the supply chain is very sensitive to political and economic change. These changes will also affect import/export conditions which can create expensive delays. This is not something to take lightly when your business is at the mercy of customer satisfaction.

Be prepared

The terms ‘insurance’ and ‘contingency fund’ aren’t sexy, but they will save your business from the brink should the worst happen. Understandably, SMEs can be reluctant to set aside profits for a dedicated contingency fund. As hard as it is to plan for the unplannable, a fund of this kind would soften what could otherwise be a critical blow to your business. In the same way it’s essential to protect yourself if your premises caught fire, or your employee injured themselves, it's wise to protect yourself if you have to cease trading due to supply issues. Insurers can help you identify areas of risk and set up ‘Business Interruption’ insurance. Be aware, if you fail to update your figures this could leave you underinsured.

Foster good relationships

Human relationships are at the heart of good business, facilitating better communication that allows you to get what you want. Having good relationships with suppliers and distributors makes it easier to broach issues when they arise and like any partnership, they will from time to time. If your business is going through some changes, such as you plan on scaling up it’s essential to keep everyone informed to avoid common pitfalls, such as outgrowing suppliers or failing service levels. Money talks so paying your suppliers on time is the best way to build trust and credibility which could buy you a line of credit if you needed it. Businesses who hold back payments can cause suppliers real cash flow problems which can be crippling.

Embrace technology

Implementing technology in your business is the easiest and most efficient way to manage your supply chain challenges. Visibility of your own sales and inventory data allows you to make fully informed business decisions. This allows you to identify what works and have the foresight to discontinue unpopular products. By using an intelligent point-of-sale system, you can even automate stock orders. This not only saves hours of tedious admin and eliminates human error, but also ensures you never over or under order products, protecting cash flow and customer satisfaction. An integrated e-commerce module will allow you to connect your on and offline stores where stock levels are updated in real time ensuring you never promise what you can’t deliver.

Conclusion

As we’ve seen with KFC, supply chain challenges are a struggle for even the biggest businesses. It’ can be hard to keep track of so many moving parts, which is why building relationships and planning ahead can you protect your business should the worst happen.



AUTHOR

Erin Heenan

Erin joined Epos Now in 2016 as an in-house content writer for the marketing department, making use of 10 years experience working in busy restaurants. An avid fan of shopping and eating out, she is committed to helping retail and hospitality SMEs get the most out of their businesses.



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