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Supply Chain Disasters Can Happen To Anyone And They Have

Posted: May 23, 2009 by Ly Phan

Supply Chain Disasters Can Happen To Anyone And They Have

SC Digest recently published a list of the worst supply chain disasters of all time, which really caught my attention here on my supply chain corner. Every day, many of us probably don’t even think twice when we go to a store and find something out of stock. What we don’t think about is how the process for making sure there are products on the shelves is either broken or somehow just screwed up. And, if it happens enough, that company won’t be in business too long.

The list includes companies such as Nike, Wal-Mart, Cisco, Mattel, and GM so you know business size matters very little. Improper management of the supply chain gets the best of every company, but the good ones address them. The ones who don’t are gradually damaging their reputation and financial well-being. And it’s obvious, that inventory visibility and collaboration would have prevented many of these supply chain debacles. Here are the 11 greatest supply chain disasters:

 

  • Foxmeyer’s "Lights Out" Warehouse: New order management and warehouse automation systems lead to an inability to ship product and failure to achieve expected savings; bankruptcy and sale of the company follow.

 

  • WebVan Automates its Way to Oblivion: $25 million automated warehouses just make no sense given the market; the company goes from billions in the market gap to go in just months in 2001.

 

  • Mattel's China Syndrome: Mattel's highly publicized recalls of tens of millions of toys made in China in 2007 due to safety issues such as lead paint became the poster child for anti-offshoring interests. Hit to the bottom line and brand are huge, and the drop in stock price is permanent.

 

  • Toys R Us.com Christmas 1999: On-line retail division can’t make Christmas delivery commitments to thousands; infamous “We’re sorry” emails on Dec. 23; eventually, Amazon takes over fulfillment.

 

  • Hershey’s Halloween Nightmare 1999: New order management and shipping systems don’t start right, as Hershey can’t fulfill critical Halloween orders; $150 million in revenue lost as the stock drops 30%.

 

  • Cisco’s 2001 Inventory Disaster: Lack of demand and inventory visibility as market slows leads to $2.2 billion inventory write-off and stock price cut in half.

 

  • Wal-Mart's RFID Saga: The end result may have been to move the RFID industry along from a technology perspective and spur overall interest, but the six-year Wal-Mart RFID drama required significant investment in time and dollars for Wal-Mart and many of its suppliers that can't possibly have delivered a payback. The program still seems confused, and Wal-Mart clearly forgot the axiom about avoiding over-promising and under-delivering.

 

  • Boeing Outsources its Way to Delays and Big Hits to Bottom Line: Plans to radically overhaul the supply chain for the new Dreamliner 787 aircraft sound good, but massive problems with component deliveries in 2007 lead to a two-year delay in aircraft launch and some $2 billion in charges to fix supplier problems. Ouch. 

 

  • Auto OEMs Get Trading Exchange Fever: Ford, GM, and Chrysler announce wild plans and $250 million in investment for giant online e-commerce exchange called Covisint in early 2000. Publicly say that they expect to IPO it in two years for a market cap of $20-30 billion. Internet stock bubble starts to burst just weeks later, costs are wildly out of control, technology strategy is all over the map, numerous CEOs, and soon an almost total disconnect between Covisint and the original concept. Total loss for the OEMs and Covisint eventually sold off, though operating successfully today with a totally different mission.

 

  • Loblaws Redesigns itself into Supply Chain Problems: I am sure it was a good idea, but Loblaws' plans for a significant logistics network makeover ran into poor execution problems in the second half of 2005. The company blames two rotten quarters on high costs and lost sales from the effort, The CEO apologizes to shareholders, and though the issues largely stabilize by early 2006, the stock price has never recovered from the hit.

 

  • Apple Misses Power Mac Demand: In 1995, Apple plays conservative with commitments and capacity and can’t deliver on demand for new PCs. Market share takes a permanent hit.

 

Supply chain management disasters could result in a consequence that is very costly to any business. That’s why each step of the process must work seamlessly with the next step to ensure efficient flow and happy customers. SmartTurn centralizes all the key components into one Solution. We understand the value of properly managing your inventory - quickly and error-free.

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