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The Top Supply Chain Disasters of All Time
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
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Case Picking Research Study
Expert Insight - Daily Jab: Health Care Costs for Manufacturers Gone Amuck
Expert Insight - Thinking Outside the Box: Orders of Magnitude and LTL Shipping by the USPS
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May 7, 2009 - Supply Chain Digest Newsletter



The Top Supply Chain Disasters of All Time

It's back.

In 2006, we put together our list of the greatest supply chain disasters of all time, a column and report that proved to be very popular. I have even been asked to give speeches on our list a number of times.

The good news is that really major supply chain disruptions happen rarely enough that there is no need or benefit from updating the list too often. It was also interesting that in 2006, the most recent incidents on our list were from 2001.

Well, we've had a couple of pretty "good" supply chain snafus since then, making it time to update the list. Hope you enjoy.

Gilmore Says:  

" Note most recent disasters are not technology related, as many earlier ones were. They are all process failures. Interesting."

What do you say?

Send us your Feedback here


The list is totally subjective, although, then and now, a lot of work and research by me and the staff went into it. Just to be clear, the list is meant mostly to be for fun and maybe shed a few lessons for us all, not to "embarrass" any given company receiving the "honor."

Most of us have experienced major issues of one kind or another. Fortunately, most often they don't make the press, or if they do, it's on the back pages. Just a few lucky ones get to grace page 1 of the Wall Street Journal.

As I have often said, the good news is that suppy chain management is commonly called out by CEOs these days as key drivers of corporate strategies and success. But with that comes added pressure - when the supply chain fouls up, its going to get the public blame as well.

So, what did we add for this year? Four disruptions/problems that have happened over the past 3 years, and one old one, we just missed the first time around.

The new ones are the Boeing Dreamliner 787 outsourcing snafu, the Mattel China toy recall disaster, Loblaws logistics network redesign foibles, and (I am sure most controversially), Wal-Mart's struggles getting its RFID program off the ground.

The "oldy but goody" is the strange saga of the Big Three automakers trying to launch the Covisint e-commerce exchange - quite unsuccessfully.

I hope all of you are familiar with the excellent work of Dr. Kevin Hendricks of The University of Western Ontario and Georgia Tech's Dr. Vinod Singhal on the impact on shareholder value from supply chain disruptions. It had a significant impact on awakening companies to how damaging such even modest disruptions can be, and was a key catalyst for the focus on supply chain risk management so many companies have today. Dr. Signhal graciously made that report available through SCDigest, which can be found here: SCM Disruptions and Shareholder Value.

So, our summary list is presented below, in order from worst to not quite as worse. A much more detailed version can be found in our new report on the topic, downloadable by clicking here. It's a fun read.

  • Foxmeyer’s "Lights Out" Warehouse: New order management and warehouse automation systems lead to inability to ship product and failure to achieve expected savings; bankruptcy and sale of the company follow.
  • 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 leads to two-year delay in aircraft launch and some $2 billion in charges to fix supplier problems. Ouch.
  • GM’s Robot Mania: CEO Robert Smith spends $40 billion in the 1980s on robots that mostly don’t work, while Toyota focuses on “lean” and cleans up.
  • WebVan Automates its Way to Oblivion: $25 million automated warehouses just make no sense given the market; company goes from billions in market gap to gone in just months in 2001.
  • adidas 1996 Warehouse Meltdown: Not well known story, adidas can’t get a first, and then second, warehouse system and also its DC automation to work. Inability to ship leads to market share losses that persist for a long time.
  • Denver Airport Can't Manage the Luggage: New airport opens late in 1995 due to failure of highly automated, hugely expensive system, which never really works and is completely shuttered
  • Mattel's China Syndrone: 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 drop in stock price is permanent.
  • Toys R 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 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.
  • Nike’s 2001 Planning System Perplexity: New planning system causes inventory and order woes, blamed for $100 revenue miss as stock loses 20%.
  • 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.
  • Aris Isotoner’s Sourcing Calamity in 1994: Then a division of Sara Lee, Isotoner decides to shut successful Manila glove/slipper plant to chase even lower costs elsewhere; costs rise, quality plummets, revenue cut by 50%; soon sold to totes Inc.
  • 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 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. Company blames two rotten quarters on high costs and lost sales from the effort, 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 permanent hit.

Quick notes. We obviously may have missed some. If you have any candidates, please share at Feedback button below. Someone last year told me a story of a foreign auto manufacturer that had to destroy a literal "boat full" of cars that were shipped here for a reason I can't remember. Please send that story if you have it. Also, note most recent disasters are not technology related, as many earlier ones were. They are all process failures.



What do you think of our list of top supply chain disasters? Any lessons learned? What would you add or delete from the list? Let us know your thoughts at the Feedback button below.


Let us know your thoughts.

Web Page/Printable Version of Column

***Upcoming Videocasts***


Quickly Reduce Manufacturing and Logistics Costs with Dynamic Safety Stock Optimization

May 12, 2009

In this outstanding Videocast, ILOG's Product Marketing Director Filippo Focacci and SCDigest’s Editor-in-Chief Dan Gilmore, will discuss an excellent case study showing the benefits of global optimization, dynamic safety stock, and manufacturing flexibility.

This Week's Supply Chain News Bites Only from SCDigest

Supply Chain Graphic of the Week: An Airline Analogy for Integrated Supply Chain Planning and Execution

This Week's Supply Chain by the Numbers - Economic Growth in China, Cass Freight Index Drop, RFID Market Growth Projection, Price of Goods Decrease in China


Another good week on Wall Street as our Supply Chain and Logistics stock index continued on a track of overall recovery.  In the software group, i2 soared 22.2% last week, followed by Ariba and JDA (up 14.3% and 8.5%, respectively).  In the hardware group, Intermec fell another 5.8%, while Zebra was up again this week – 5.4%.  In the transportation and logistics group, Ryder added to its gains of last week (up 6.7%). On the down side, Yellow Roadway added to its losses of last week falling 8%.

See full stock report.

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Weekly On-Target Newsletter
May 5, 2009 Edition


Only 10 Brief Questions!

Over the last few years, the materials handling market has seen a great increase in solutions designed to automate the case picking process. We are trying to better understand how companies view the importance of case picking in distribution, and the level of interest companies have in adopting automated case picking technology.

The survey is very short - just 10 brief questions, plus a few demographic questions.

All valid respondents will receive a copy of the report, expected to be completed in the May/June timeframe.

Daily Jab
by Dan Gilmore, SCDigest

Supply Chain Comment: Health Care Costs for Manufacturers Gone Amuck

Hard to Believe Who Will Be Dominant Shareholder in New Chrysler-Fiat

Thinking Outside the Box
by David Schneider

Supply Chain Perspective: Orders of Magnitude and LTL Shipping by the USPS

New Pilot Program will Offer Opportunity to Some Shippers

THIS WEEK ON Distribution Digest


HolsteHolste's Blog:

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>> Top Story: Can Maufacturers Successfully Execute Cross-Dock Strategies?
>> Vendor News: Supply Chain Execution Technology Continues Move Beyond DCs to Mobile Applications
>> Vendor News: New Energy Consumption Calculator for Material Handling Systems

How much lower on average is a company's stock price for three years after they have a supply chain disruption versus peer benchmarks, according the the Hendricks and Singhal research cited in today's First Thoughts column?

A. Click to find the answer below

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We received a number of great responses to our piece on Wal-Mart’s RFID Timeline, which looked back on the almost six years since the retail giant’s first announcements regarding RFID.

We include some of those below, including our Feedback of the week from the RFID program manager for a very large consumer goods company, who says, “It is somewhat frustrating to read the list here and remember each thrill and subsequent disappointment I felt with each pushback.”

He understandably wished to remain anonymous.

You'll find that and several other great letters below.

Feedback of the Week: On Wal-Mart’s RFID Timeline:

It is extremely interesting for me, as it somewhat chronicles my career in RFID.

The adoption curve that we have endured is obviously extremely long. It is somewhat frustrating to read the list here and remember each thrill and subsequent disappointment I felt with each pushback.

I would say we are almost numb to the point of cynicism now. Do not get me wrong, my company is still committed to the benefits of RFID (both internally and externally), but, I think you can see parallels in our adoption to the rest of industry.

We have all followed the Gartner technology hype cycle so closely it is scary!

Now, I was not working during the bar code implementations in the 80s, but I would have to guess there are some similarities to that technology platform's adoption as well. Albeit the supporting infrastructures platforms are different, but some parallels nonetheless.

Manager, Consumer Goods Company
Name withheld by Request

More on RFID Timeline:

Another point is the business case for RFID.

With all the effort that went into this program, did all stakeholders have their contributions and benefits clearly articulated?

RFID is only one component in the fight against out-of-stocks. However, there are more pieces to that puzzle, like store execution, CRP, etc. So, when one piece of the RFID 'system' has challenges, including readability, costs, etc, we don't look to additional benefits of the tool, including enhanced supply chain visibility, product traceability, etc.

We need to keep pushing to overcome this age-old dilemma of OOS. It is crazy that we have not solved this yet.

RFID can work, it doesn't have to be the exclusive silver bullet, but it can, and does work. (The largest food supplier in The Nordics, Matiq, is using it as we speak for traceability.) We need to pick a problem to solve (OOS), and address it with all elements of the task, not relying on only one piece and throwing our hands up when that one piece underdelivers to one or more stakeholders, when, in fact, the whole process may have been set up to fail.

Ralph Jacobson
Global Consumer Products Industry Marketing Executive

This timeline provides us the opportunity to see the value derived by RFID. Because the value is less than the expense, business has not adopted it. It is not, however, a fault of RFID technology to deliver value.

This value is dependent not on the new technology that can deliver it, but the old technology that cannot accommodate it. A full $8.40 per CG case is spent on direct labor, error resolution, trade promotion, IT Systems support and inventory carrying costs. There is plenty of value to be derived with RFID; or Imaging, Speech, and GPS, for that matter.

A previous post by a CG Company Manager referenced the technology adoption patterns of the 1980s. The foundation of the current systems were cast back in those days and serve to stop forward progress today.

Only when innovation can be more readily accommodated without the associated risk, expense and delay of modifying, integrating or replacing the existing systems, then new technologies can rapidly saturate your company and supply chain for only profitable uses. Until then, get your timelines ready for other advances that fail to deliver their available value.

Steve Christensen

I often feel like I am living the modern version of the 'Emperors New Clothes' fairy tale when it comes to discussing RFID.

First, the costs have not yet made it affordable to tag individual units. Second, the read distances for the tags are not as far as expected. Third, no one has really worked through all the software changes that are needed to avoid embarrassing consumer mistakes, like retailers charging customers for the products they bought last week but are carrying in their coats.

The one hope was that RFID could be used to monitor business processes and execution at store level. This made sense because it does not require as much precision as inventory management and does not involve the consumer.

Now it is appearing that even when RFID points out failure in execution it will take more than merely raising awareness to correct problems. Maybe the stores knew all along they were not executing the display program. Awareness was not the issue, it was 'What do I do with all the merchandise from last week?'

Bill Bittner
BWH Consulting

I just have to shake my head at the whole thing.

In the interest of full disclosure, I was at the big meeting that Wal-Mart called shortly after the very first announcement where the top 100 vendors came to learn what was really expected of them, and some technology providers (including my old company) were invited to demonstrate that real business process could be enabled with RFID. And I was pushing my company to be more involved in it, in part, because of the flurry of activity driven by Wal-Mart.

But pallets? I never understood why they started there. Most companies don't do enough with the data they already get related to pallet and case, even without the RFID tag. The whole point of RFID is stockouts at the shelf, and pallets are not the place to start with that.

Funny thing though, as soon as they started exploring shelf issues with RFID, a lot of in-store execution issues became highly visible. I have seen Kraft do a detailed explanation of root causes of stockouts at the shelf, and a LOT of them fall on store employees.

Tom Gruen at the University of Colorado has done extensive research into shelf-level stockouts, and I don't remember the exact number, but it was an extraordinary percentage that could be attributed to store employees in one way or another.

If you go into this thinking that it is lazy, shifty suppliers that are shorting you at the shelf or playing supply chain tricks, and you are magnanimously going to help them sell more through RFID-driven supply chain efficiencies, you are delusional.

And if you are not committed to making your own serious internal process changes, then really, why bother?

Nikki Baird
Managing Partner
Retail Systems Research

Can't--help--self. Must--repeat--dogma.

RFID--no--solution. Just--tool. Pointless--without--in-store--compliance--discipline.

Phew. Glad I got that out of my system.

This review of the RFID saga provides a valuable perspective on how even big players sometimes confuse a promising technology with a workable solution.

Point solutions are pointless in the absence of core underlying implementation practices. Most chain grocery and mass stores today cannot comply effectively with planogram, promotion, new-item introduction or other merchandising plans because they lack systematic practices, enabling communications and measurement tools to back them up.

There is no single solution to this, but there is a solution path, and RFID may well be one of the stops along the way.

When companies like Wal-Mart begin to share daily data on merchandising implementation performance, issues and compliance rates using portals like Retail Link, the true journey will begin.

James Tenser
VSN Strategies


Q. How much lower on average is a company's stock price for three years after they have a supply chain disruption versus peer benchmarks, according the the Hendricks and Singhal research cited in today's First Thoughts column?

A. 33-40% lower, they say, based on a study of hundreds of incidents

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