The fear of supply chain disruptions destroying your hard work and reputation is enough to keep you up at night. As a supply chain manager, you’ve probably already seen how many previously thriving companies lost billions or stopped their entire business altogether from a single supply chain mistake.
Supply chain management issues, no matter how big or small, are significantly detrimental to your overall business operations. Not to mention, it puts your entire career on the line.
Over the years, companies of all sizes have seen the pitfalls that are easy to fall into. That being, they are avoidable and manageable with the right tools and systems in place. These mistakes we’ll explore here caused some serious damage for these brands, but they’re eye-opening opportunities for the rest of us to learn from. By analysing these unique circumstances, you’ll know how to prevent them from happening to your own supply chains.
Trust me—you do not want to fall for the same traps, affecting your company’s reputation and bottom-line revenues. So, let’s look at five supply chain nightmares that happened in the past, and discuss the key takeaways from each of them.
1. ASOS and Its Missing Inventory
ASOS is an online British fashion retailer with a highly trend-driven brand. In 2019, it was offering 85,000 products to its customers in over 200 markets. As its consumer base grew, ASOS decided to upgrade and integrate innovation tools within its operations.
To accomplish this, ASOS introduced an automated storage and retrieval system to its European warehouse to manage inventory and update the availability of stocks.
But, here’s when the nightmare began.
In 2019, the company experienced a major supply disruption when it had a technology glitch in its warehouse. The system suddenly didn’t accept any new items, replenishments, or customer returns一and it took their team months to identify and address the problem.
ASOS’s inability to quickly deal with the root cause led to reduced stock availability for customers across Germany, France, and the United States. Such a disruption cost them over $30 million in sales—all from one faulty automation.
In hopes of improving its operational efficiencies with an automated storage and retrieval system, ASOS instead faced a horde of disappointed customers and a dramatically reduced bottom line.
Key Takeaway: Invest in software solutions that enable seamless processes and successful integration. When properly implemented, you’ll improve your access to marketing, demand, and supply chain data. Having such visibility on inventory from warehouse to market is essential, as it can alert you and other managers when inventory data is not consistent.
2. Hershey’s Delivery Failure in 1999
Even an industry giant, like Hershey Foods, is not exempt from supply chain failures.
From 1998 to 1999, Hershey’s invested more than $100 million to renovate and improve its IT infrastructure and supply chain. Unfortunately, before fully integrating the new and improved infrastructure into its operations, Hershey’s preemptively launched its new order and distribution system before knowing it would work.
And worse yet, this occurred during a critical time for Hershey’s sales. The company implemented the innovation while orders were pouring in for Halloween—one of its highest selling seasons.
Hershey’s rushed the process of integrating a new technology system from an initial four-year installation schedule to just 30 months.
Not surprisingly, the system experienced major issues. Although the company had enough product in stock, it failed to deliver more than $150 million worth of chocolate and candy in time for their biggest season, leaving trick or treaters without their favourite snacks.
The reason for all of this was because the inventory was not reflected in the order management system for allocation, and so the orders weren’t processed and fulfilled. The supply chain disruption was so immense, Hershey’s unfulfillment of orders led to 19% quarterly profit drops in the third quarter of that year.
Key Takeaway: Never rush the process of integrating new technology systems. Hershey’s did that and it led to a supply chain meltdown. This nightmare reminds us of how important it is to test, schedule, and train new systems before fully implementing them into our business operations.
3. Boeing’s 787 Production Delay
Back in the mid-2000s, Boeing’s game-changing commercial airliner, the 787, sent waves of excitement throughout the transportation industry. The Boeing 787 promised to revolutionize air travel for years to come, and yet, something seemed off about it.
The reason for the doubt? The planes were taking too long to build.
Boeing’s 787 was initially supposed to enter service in May 2008. Unfortunately, they missed the mark and didn’t have the planes in service until October 2011—over three years later.
You might think it’s because of Boeing’s time management. But it’s not. And here’s why.
First of all, building a new aircraft with lightweight composite materials was difficult in the mid-2000s. Not only was sourcing a challenge, but Boeing had to change every aspect of its plane production process.
But, more importantly, Boeing was sourcing from across the globe. It may have seemed like a good strategy to get the materials they needed, but the suppliers weren’t reliable enough. This is possibly because they weren’t able to assess and effectively manage the risks of each supplier properly.
With each supplier experiencing their own delays came a domino effect that slowed down Boeing’s entire supply chain. As a result, they failed to complete even one plane on time.
Boeing had a good idea with the 787, but they weren’t able to follow through on their goals. As such, they increased the risk of the entire company’s manufacturing process because they didn’t decentralise the sourcing process or choose reliable suppliers.
Key Takeaway: Boeing failed to assess the risks properly before charging ahead. It introduced a multitiered supply chain without proper management or a clear plan to address supplier delays. It goes to show that having control, visibility, and decentralised sourcing strategies can help strengthen a supply chain—especially when unexpected delays occur.
4. Playstation and the Suez Canal Blockage
Back in 2004, Playstation experienced a shortage of Playstation 2 consoles as the consumer demand for the newest console far exceeded the company’s expectations. Playstation did its best to fulfil the wish lists of consumers dying to have the product in time for the holidays, but the process was a nightmare.
One thing you have to understand is that, at the time, the Playstation 2 console had thousands of parts. This complexity meant there were a thousand ways things could go wrong from sourcing to delivery and manufacturing, effectively disrupting the entire supply chain.
Unfortunately, this concern is exactly what happened when an oil tanker became stuck in the Suez Canal.
The blockage caused ships from China to be unable to deliver the products on time. As a result, by the end of December, Playstation 2 console sales dropped by a million units worldwide, translating to a $40 million revenue shortfall.
Surprisingly, the mistake was not because the Playstation had too many parts. Instead, the mistake was that there weren’t immediate plans to address any uncontrollable delays in supplies. It had a good plan for its supply chain, but the unexpected blockage of the Suez Canal tripped the company up, resulting in failure to deliver its newest product on time.
Playstation even tried to overcome its shortcomings by chartering Russian cargo planes to fly the anticipated products. Still, it was too late for many of its customers to receive the product by Christmas.
Key Takeaway: Your business will inevitably experience supply chain problems from unpredictable situations. Therefore, you need to have a plan to quickly overcome these obstacles before they impact your business. For example, using a decentralised supply chain helps because instead of solely sourcing from China, you have more alternative solutions.
5. Nike and Pandemic-Caused Disruptions
Last year, the COVID-19 pandemic l caused major supply chain disruptions, affecting all kinds of businesses around the world, including the sneaker empire, Nike. The company’s distribution, third-party manufacturing, and logistics operations were all affected, resulting in a net income drop of 37% to $2.5 billion in 2020 (down from $4.02 billion in 2019).
The pandemic also forced Nike to close stores in China and, eventually, around the globe.
The reduced shipments to wholesalers, labour shortages, and other supply chain disruptions all hindered Nike. Because of this, they were unable to properly calculate supply and demand, or increased production and distribution costs.
On top of that, the situation resulted in higher prices for canceled purchase orders and inventory obsolescence. The company’s margins further dropped as fewer shipments completed their way from one country to another.
But, unlike the other examples mentioned so far, Nike did recover. And, spoiler alert, they bounced back fast.
Nike cleared inventory by canceling factory orders, offering discounts, and shifting store products to fulfil online orders. Because of this strategy, the company’s digital sales skyrocketed by 82% in the third quarter of 2020, compared to the same period in the previous year.
Nike was lucky to have invested in technology that provides them with predictive analytics and a demand-sensing system—even before the pandemic.
Key Takeaway: Nike adapted to sudden global supply chain disruption by investing in the right technology, enabling them to forecast demand, deliver the right inventory, satisfy customers, and continue business operations. The company reminds us of the importance of digitization, and how doing so gives you timely data for immediate action. Without technology, your supply chain won’t be agile enough to adapt fast.
Others’ Mistakes = Your Learning Opportunities
Learning from the mistakes that other supply chain managers experienced in the past will help you focus on preventing these nightmares from happening to your business. Strengthening your supply chain makes you more resilient and lets you adapt faster to the ever-changing situations across the globe.
If there are three things to remember, it’s these:
- Ensure excellent supply chain management by understanding that even the smallest of mistakes can lead to costly consequences. You only need one supplier to fail for your entire process to be affected, so you better manage them well.
- Introduce innovative solutions to your system the right way by being careful not to bypass any necessary testing to prevent technology glitches and unforeseen issues. The goal is to have timely data and complete visibility of your supply chain—not to make things rigid and more complicated.
- Implement a resilient risk management plan to quickly respond to disruptions, performing analysis to uncover all vulnerabilities in the supply chain network. Being proactive is always better than being reactive, especially when we can’t predict the future.
These lessons help you avoid most nightmares, protecting your business from even the worst of disruptions.
Invest in the right tools and partner with the right companies. Good for Life helps you safeguard your supply chain from any disruptions by linking you to the most sustainable suppliers.
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