How to not run out of beer (or soft drinks, or chicken) – by supply chain experts

How to not run out of beer (or soft drinks, or chicken) – by supply chain experts

Football tournaments are unpredictable – that’s one of the best things about them. But one thing no one seems to have expected over the course of the FIFA World Cup this summer is how much carbon dioxide (CO2) would be needed to keep the beer flowing in British pubs.

But it’s not only beer which is facing a shortage. There is also increased pressure on supplies of Coca Cola, chicken and frozen food. And it’s all down to reduced levels of available carbon dioxide after three of the four production plants in the UK were temporarily out of action.

Although this might seem like a rare occurrence, such problems are actually not unusual. It was only in February 2018 that takeaway giant KFC had to temporarily close down hundreds of outlets when it ran out of chicken.

All of these shortages happen because of the decisions made regarding a company’s supply chain. With KFC, a few months before the shortage, the company had decided to switch its logistics service provider from Bidvest to DHL. The result was a massive disruption to the supply chain at the time of the changeover. Six years ago, rival firm Burger King made the exact same decision with very similar consequences.

The message to organisations who provide consumers with food and drink should be made loud and clear: start caring about your supply chain like it matters.

A complex system

In simple terms, a supply chain is a network between a company and its various suppliers which involves a product – say beer – being produced and distributed. The trouble is, for big firms, these networks are never simple.

They involve large amounts of complex information related to finances, services and products. It requires the firm to have a clear understanding of all the parts in the chain and the roles those parts play. Where are certain key products and services at any given time?, How is everything connected in order to deliver a constant flow of chicken and beer to the customer?

Unfortunately, the nature of supply chain management is such that its importance is only clear when we run out of something we want (or when we hear about horse meat scandals or poor treatment of workers).

But long gone are the simpler days of Henry Ford, whose car company owned everything in a supply chain – from a sheep farm to source wool for car seats to the final assembly plants. Companies now need to be able to coordinate the myriad of activities and information across a network of organisations, including in the case of chicken, pullet farms, breeder farms, poultry processors and packers, and distributors – as well as CO2 suppliers (involved in the slaughter).

Understanding the various flows across a supply chain is vital not only for managing the suppliers who account for most of your procurement spend, but also the suppliers that may end up as your bottleneck (when a shortage of one element slows everything down). In other words, while financial and product flows are important, so is a clear understanding and action plan to deal with suppliers who you rely on for a particular product or service.

From a company’s supply chain perspective, it is important to look beyond their own sector and map out their whole supply chain to genuinely understand the various flows of information. They need to be able to identify possible bottlenecks and have contingency plans in place.

Chain reaction

Common practice in some sectors – car parts, for example – includes dual sourcing in which companies select two suppliers for the same product to ensure a continuous flow. It also drives competition between suppliers and reduces possible supply chain disruptions.

Managing a whole network of companies is important. Beer, chicken and fizzy drink brands are nowadays more likely to feature in the social media limelight if consumers don’t get their products at the right time, of the right quality and at the right price. In other words, the mindset needs to change from a sector-specific supply “chain” thinking to broader sector-spanning supply “network” thinking.

This has implications for supply chain managers, as it requires them to move beyond being sector specialists to what we call “deep-knowledge traders and boundary-spanners”. This means that their knowledge is strong and portable enough to coordinate information and product flows across a firm’s boundaries and over multiple sectors. And hopefully this will have a positive effect on consumers – when their beer glass needs a top up.