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March 10, 2016 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Lessons from Finish Line's Distribution Disaster bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet Cartoon Caption Contest Continues bullet Trivia      bullet Feedback
bullet Expert Insight and Gilmore's Supply Chain Jab bullet Upcoming Videocasts and On Demand Videocasts


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Supply Chain Graphic of the Week
No Wonder there is a US Truck Driver Shortage

Amazon Confirms Deal for 20 Air Cargo Planes
Scaleback of Chicago Nabisco Factory Makes Campaign News on Both Sides
Megaships Adding Supply Chain Costs to All but Carriers, Group Says
Obama Makes Controversial Payment to UN Climate Fund


New Benchmark Report Takes a 360-degree Look at Next Year’s Trends in Global Trade


Week of February 15, 2016 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!

Holste's Blog: Smart Software Programs Increases DC System Shipping Capacity


Weekly On-Target Newsletter:
March 9, 2015 Edition

Cartoon, Driver Pay, Inventory Planning, Digimarc Stock, Slow Steaming and more

What You Need to Know about the EU's Union Custom Code

by Suzanne Richer
Director, Trade Advisory Practice
Amber Road


Remembering Supply Chain
Executive Ken Miesemer

by SCDigest Editor Dan Gilmore

New SCDigest Benchmark
Study on Global Sourcing & Trade Management


How many manufacturing firms are there in the US?

Answer Found at the
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Lessons from Finish Line's Distribution Disaster

Supply chain management disasters, especially of the technology sort, have clearly declined substantially in recent years - but certainly not gone away.

Case in point: the mess that occurred in recent months at athletic shoe and apparel retailer Finish Line.

In early January, the company announced disappointing results for its third quarter, with sales down 3.5%, and a loss of $21 million when far better financial performance was anticipated. The stock price fell 11% on the news. 


Let me just say somewhat repetitively that trying to address processes and training challenges on the DC floor in parallel with some level of WMS bugs or set-up issues is an absolute nightmare.


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The first line of the body of the company's Q3 earnings release read as follows: "'Our third quarter performance was severely impacted by a disruption in our supply chain following the implementation of our new warehouse and order management system,' said Glenn Lyon, Chairman and Chief Executive Officer of Finish Line."

Well that's not exactly beating around the bush.

The system went live just in September, and there were obviously major problems - more on that in a minute. Finish Line said it had trouble filling on-line orders and replenishing stores that cost it $32 million in lost sales, or roughly 8% of the company's revenue for the period.

Now as supply chain disruptions go this is on the mild side versus the worst of them, and I doubt it will make our soon to be updated list of the greatest supply chain disasters of all time. That said, it was headline news in the Wall Street Journal, an 11% drop in stock price is a big deal, and CEO Lyon announced his departure simultaneous with the Q3 earnings release.

A few weeks later, chief supply chain officer Dan Marous became another casualty of the debacle, and I assume some other lesser heads rolled as well.

What the hell happened, and more importantly, what can the rest of us learn from the debacle? It isn't often these days a major company leads its earnings report by calling out a supply chain software failure.

I have been doing some digging on this, just to get the basic facts, speaking to two people with inside knowledge of what transpired. The new system was at an existing Finish Line DC, which used an existing "tilt tray" sorter for order processing. That facility had for years been running an old WMS from what was once EXE Technologies, but some time back, seeing an opportunity for operational improvement and the need to support Omnichannel fulfillment, Finish Line selected a new software provider for WMS and Distributed Order Management (DOM).

In this mix beside the software provider was obviously Finish Line itself and an outside consultant. Because I do not think it is fair for either the software provider or the consultant to be overly tainted by this one problem project out of the many projects each works on every year I am not going to cite the names, but will note both parties are major, very well-known companies.

Of the two people I spoke with, one apportioned the "blame" this way: Finish Line: 50%; consultant: 40%; software provider: 10%.

The other apportioned it this way: Finish Line: 30%; consultant: 40%; software provider: 30%.

The interesting thing, however, is that while both give some blame to the software company, neither gave it the majority culpability.

Here is my take, focusing on "lessons learned" for the rest of us.

Let me say first that WMS is often darn hard to implement - and can be, if not done well, high risk. That's simply because if the system isn't working right, product isn't flowing out the door, and that means revenue isn't being realized. It's no surprise there were several WMS related disasters in our all-time greatest list, such as Adidas's "warehouse meltdown" and drug wholesaler Foxmeyer's distribution disaster that led to its bankruptcy, both in the 1990s.

The story was the same here: the distribution system snafus led directly to lost sales - at least $32 million worth.

Let me further say that there is nothing quite like having major WMS troubles while simultaneously trying to ship major volumes. I have been there. It is easy to be simply overwhelmed, as I believe happened at Finish Line.

I wasn't there, so I don't know for sure, but from my two conversations melded with some experience in such matters, the contributing factors that led to the problems from each party are something like this:

Software provider: There were some glitches, especially in the joint processing between the DOM and WMS. Add in some delayed response in fully addressing the issues once the problems arose.

Consulting firm: Put simply, for the $250,000 or so it was billing monthly, too much high level knowledge, not enough "hard expertise" it getting a complex system up and running. That firm obviously is also no longer engaged on the project.

Finish Line: Obviously overestimated the challenge of the project, especially the level of change management in moving from the old system to the new. Not nearly enough training for associates and number of supervisors on the floor to help when ramping up the system. Too much trust in software vendor and consultant.

Let me just say somewhat repetitively that trying to address processes and training challenges on the DC floor in parallel with some level of WMS bugs or set-up issues is an absolute nightmare. Separating the process/training issues from the software problems becomes an almost impossible task.

The most important collective failure was simply this: the decision was made to turn the system on, and ramp up to full scale, when obviously the people, process and technology were not ready to do so, as is conclusively demonstrated by the results.

The reaction of most supply chain practitioners is probably that there simply wasn't enough testing, right? More testing would have uncovered the looming problems.

Yes and no. At one level, it is hard to argue that there was enough testing, given what transpired at after go live. But my friend and occasional colleague Mark Fralick, one of the most important persons in the history of WMS, actually, and now running consulting form GetUsROI, has a different take.

He thinks it is a big mistake to view "testing" as a distinct phase - usually of course at the very end - of the project. The right approach, Fralick argues, is one he calls "validation," in which the system is in effect tested operationally and technically every step of the way, not just at the end of the implementation process. And that validation has to clearly demonstrate that all aspects of a process work - the goal is to "prove" the results are acceptable across all dimensions, and you don't move forward absent that proof.

When approached this way, final testing becomes something of a formality, rather than a last step for which there is never enough time or resources, and which may reveal some unpleasant truths just days before scheduled go live.

Some other lessons, it seems to me, for all of us from this saga:

Take WMS deployment challenges and revenue risks very seriously: That big picture risk can often get lost in the minutia of trying to get the system up and running. On-time and on-budget are important goals, but they can't become the primary drivers of the project. Operational success is the primary goal, and believe it or not that is sometimes forgotten in the "fog of war" that characterizes getting ready for a WMS go live.

Pick your consultants very carefully: Former consultant and now a fellow at the Drucker School of Management at Claremont University Dr. Chris Gopalintroduced me to the concept of "hard versus soft consulting" a few years ago relative to global sourcing, and it applies in spades to WMS. Does you consulting partner have real expertise and experience in the nitty gritty work of making an integrated WMS and automation system work? And remember, this means the people that will be working on your specific project, not the firm's overall experience.

You can test scalability - but many companies don't: Fralick and others use advanced tools to simulate how the system will perform under the real volume of orders expected in the go-live environment. But many projects don't do such sophisticated testing - and assume if the system is working on the floor for a few hundred orders in acceptance testing, it will equally work under the stress of tens of thousands of orders. Wrong - as most of the WMS disasters historically have proven, including the one at Finish Line.

There is more, but I am out of space Would love to hear your thoughts on this.

What's your take on the Finish Line distribution disaster? What lessons or takeaways relative to WMS and beyond do you see? Let us know your thoughts at the Feedback section below.

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What has changed, and what WMS technology developments are fueling this transition. We'll cover all that and more in this detailed, fast-paced broadcast.

Featuring SCDigest editor Dan Gilmore and Dinesh Dongre, VP Product Strategy, Softeon

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You'll learn the results of the survey, unveiled in a new report launched with this Videocast. Not to be missed by anyone interested in global sourcing, global trade management and supply chain visibility.

Featuring SCDigest editor Dan Gilmore, Gary Barraco, Senior Director of Supply Chain Solutions at Amber Road, and Dan Gardner, President of Trade Facilitators Inc.

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You'll learn about key new trends in supply chain design, where companies are finding the value, and learn the powerful story of how leading retailer PriceSmart has used network design tools to craft its network of the future to support growth, optimize flow paths, and right size inventory levels.

Featuring Frank Diaz, senior vice president, distribution and logistics at PriceSmart, and Toby Brzoznowski executive vice president at LLamasoft and SCDigest's Dan Gilmore

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Some more emails this week from our First Thoughts piece on Amazon - The Most Audacious Logistics Plan in History? That includes some outstanding feedback from consultant David Schneider, which is our Feedback of the Week.

Feedback of the Week on Amazon - The Most Audacious Logistics Plan in History?:


Over a decade ago a Walmart executive commend about his company at RILA event that Walmart was a "Global Supply Chain masquerading as a retailer." At the time WalMart established buying centers in Asia and controlled the flow of goods from the factories in China all the way to the retail stores.

I called that the Walmart decade of retail Supply Chain Management.

Since then, other retailers, and manufacturers like Apple, have replicated the same structure. They did it through leveraging the services and assets of 3rd parties to provide the physical assets and resources to operate the mechanical components of the chain, and 4th parties to provide the management and information systems to plan and monitor execution.

Sure, some of those players used their own assets and resources, but mainly to support the close in tactical operations, depending on far flung networks of 3PL and 4PL operators to cobble together a working system. These networks are magnificent examples of the state of the art of the possible.

Yet nobody has created scale like what the mavens in Amazon have created.

Where those who created the past examples remain happy to get the systems to work and take the created gains in cost leverage, Amazon followed, improved, and built an ever-improving network that moves beyond the tactical and into the strategic.

Who else:

1. Created incredible interconnected global system of data centers with so much power and capacity that the Federal Government is a customer?

2. Operates a network of Fulfillment Centers that cover the globe, scaling from over 1 million square feet to just over 15,000 square feet?

3. Commands a network of Sortation Centers able to sort packages at speeds approaching 400 cartons per minute per sorter, each center with multiple sorters, feeding hundreds of outbound doors, creating a capacity that approaches the capacity of carriers like UPS and FedEx.

4. Provides 3PL fulfillment services to tens of thousands of independent ecommerce merchants that seamless connects to external web based selling platforms?

5. Provides 4PL ecommerce platform services to tens of thousands of independent ecommerce merchants who inventory and ship direct to the customers who purchase through the platform?

6. Created hybrid delivery networks using combination of their own fleets of trucks, bicycles, package cars, fleets provided by private operators, and Sunday delivery services by none other than the US Postal Service?

It is no surprise that Amazon started building an international logistics network, creating themselves as a NVOOC, a customs broker, and building transport infrastructures into the manufacturing countries like China. It is no surprise that Amazon start experimenting with air cargo, using the assets left behind by DHL/Airborne Express. It is no surprise that Amazon is leveraging the capabilities of its data networks to create the tracking and control infrastructure needed to manage such a massive network of physical assets and resources.

Here is an interesting challenge. Go take a trip through Linked-In and search through profiles of people who work in supply chain at Amazon today, or the profile of those who did work at The Big River. Starting about 5 years ago the company started to recruit the finest talent into the company. Yes, some people left, but other remained. If you look at the roster of leaders who worked at the company in the past 5 years, people who held titles like Senior Manager, Director, Senior Director, Vice President, you will find a cadre of the finest minds in supply chain and logistics. You will find people who had superior careers in the places they left, and went on to create at Amazon what they could not at their last company.

Over three decades ago I learned the 5 Ps of successful retail: Product, Placement, Promotion, Process and People. People is the last of the list because none of the rest matters without the people. Process is before people because the people create the processes, and together they make the rest work.

Take the best people you can find, give them the incentives to engage their passion to create processes unlike anything else, process that work where others failed, and the audacious challenge to do more than any other organization does, with less money, greater efficiency, and laser focus on customer happiness, and you have an irresistible force.

Welcome to the Amazon decade of consumer Supply Chain Dominance.

They are just getting started.


David K. Schneider
David K Schneider & Company, LLC

  More on Amazon's Audacious Logstics Plan  

If true, this is indeed a truly audacious plan, the likes of which we have never seen, I agree with you.

What will be most interesting will be to see if other retailers do in fact jump on board. If it isn't better (lower cost and/or better service), obviously they won't, as they would prefer not to work with competitor Amazon, which seems to be taking over the world.

But if it is better, what then? You might decide to not participate for competitive reasons, but what if another of your close competitors gains cost/service advantages from using Amazon's network? There would be a lot of pressure to jump in.

The critical question will relate to the data. We know Amazon is adept at leraging data with advanced analytics.Contracts with Amazon Logistics must forbid Amazon from using data about another retailer's business for its own analytic purposes.

John O'Malley
Richmond, VA



Q: How many manufacturing firms are there in the US?

A: About 256,000, according to the most recent government data. Of that total, all but 3,600 were considered small, with under 500 employees.

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