Readers Respond Part 2 - Finish Line's Distribution Disaster
In early March, I published a column on the major troubles athletic shoe and apparel retailer Finish Line had starting last September with a "go live" of a new Warehouse Management System (WMS) and Distributed Order Management (DOM) system that ultimately led to a loss of $32 million in revenue that quarter.
We know that because Finish Line called out the supply chain software problems at the very start of its earnings release for the quarter in early January - very unusual - as the primary cause of its disappointing sales and profit numbers. The CEO resigned in parallel with the news, and the chief supply chain officer - among we suspect others - was let go a few weeks later.
This then leads to a vicious circle: "After a certain point [of delay], if the software vendor is not making any money, everyone starts cutting corners."
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You can find my original column, which goes into this story in some detail, here: Lessons from Finish Line's Distribution Disaster.
That led to a spate of reader Feedback of all sorts, including an email from one consultant who worked on the project and thought Finish Line's management of the project was less than stellar.
So we published a column the next week highlighting some of the best of that Feedback, which is here: Readers Respond - Finish Line's Distribution Disaster.
But we couldn't fit all that good initial Feedback in, and that column itself generated still more Feedback, so I am going to take advantage of that situation to let readers do the heavy lifting for this week's column again, especially as I hear from many of you that you enjoy these Feedback-based columns.
So here we go.
Tom Ryan, who has been around the WMS industry for many years, perhaps most prominently as Gartner's lead WMS analyst for several years in the mid/late 1990s, offered a number of insightful comments.
"I've been involved now in multiple expert witness situations - I call it "software implementation failure forensic pathology, why did this thing die and who killed it." Interestingly, 80% of the time it is the customer's fault and not the consultant nor the integrator nor the software vendor," Ryan observed.
Among other interesting recommendations for WMS implementations, Ryan said "overstaffing" the start-up is key.
"No one is at normal efficiency yet, they are still getting used to the new system. They will be slower, less efficient," Ryan noted. "Throughput will be done with the new system. Overstaff resources to execute the work, overstaff supervisory people to manage the work, and overstaff trainers to assist the workers and the managers. Learn for this and adjust the training to reflect what happened."
Our sources indicate Finish Line was indeed understaffed, especially in DC floor supervisors.
Tom Dadmun, former VP of supply chain for network gear maker Adtran, says companies need to do more "due diligence" on their software providers.
"Due diligence is an expertise that requires background checks on the solution provider's customers and a review of the good, the bad and the ugly. And if they say they have no ugly they are not truthful," Dadmun wrote. "Not all implementations go well. Some due to the solution provider, some due to the customer being ill prepared to take on a major project."
I have a slight adjustment to Dadmun's point - make vendors provide you contacts for all deployments in say the past year, rather than cherry pick to only provide the ones that went well.
Dadmun also noted that "with a project of this magnitude, trial runs and simulations of the full blown system should be presented to the CEO and staff before the system is green lighted!"
Jay Morris of Intralogistics believes some of the SCDigest readers were off base in their analysis.
"The problem isn't WMS testing or integration. The fact that some of these consultants quoted in the article blame it on that exacerbates the problem," Morris wrote. "Failures like this will continue as systems get more and more complex until end users figure out you can't buy the design from a consultant, the physical systems from a MHE supplier, and the software to make it work from a WMS company," arguing a fully integrated system from one provider is what is required today.
That is a big topic for another day.
But Colin Jackson of RCL Foods does think training issues likely played a role in the debacle.
"My favorite quote on training is this," he wrote. "Don't train until they do it right - train until they can't do it wrong!"
Chirag Sanghavi is a consultant in the supply chain software industry, and says that while he wasn't involved in the Finish Line project, he knows others who were and "none of them wanted to stay on it for long."
Interestingly, Sanghavi says that when a project is headed in the wrong direction, "Consulting managers typically are afraid to give bad news to the client. They keep harping on their own team of consultants to get it right, but no matter who may be wrong and how hard the consultants try, they can't get it right because of other variables on the project."
This then leads to a vicious circle: "After a certain point [of delay], if the software vendor is not making any money, everyone starts cutting corners, sending knowledgeable resources to profitable projects, putting newbies in," and the downward spiral continues.
James Nelson picked out the comments of the anonymous consultant who said he worked on the Finish Line project that there wasn't a high level of "buy-in" for the new system among Finish Line managers and executives.
"As a retired supply chain executive and consultant, I can tell you our most significant challenge every single time we were standing up a new facility and system for a client was the full buy-in of the company personnel (from CEO to order picker in the warehouse) to the new program," Nelson writes. "If we could not get that understanding with a client, we walked away."
Mike Albert observes that "While no one wants to plan for failure, Finish Line should have had an option to revert to the version of the WMS being replaced. It worked before and keeping that version "alive" and working in parallel to the new version would have allowed for a smooth transition back to "known territory" and would have stopped the bleeding."
This can be a tough call - there is certainly a cost to keeping this option open. But in Finish Line's case, that cost would have been trivial compared to the costs the company ultimately paid for the failure.
There were many more feedbacks but I am out of space.
Finish Line seems to have largely recovered. In its fourth quarter ending in February, "We worked diligently to improve digital fulfillment rates and flow new inventory to our stores," new CEO Sam Sato said in the generally strong earnings release.
GAAP earnings per share were well below non-GAAP earnings, the company said, largely due to the latter "excluding the impact from the write-off of technology assets."
Any more perspective on on the Finish Line distribution disaster? Let us know your thoughts at the Feedback button below.