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March 17, 2016 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Readers Respond - 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 Winners Announced bullet Trivia      bullet Feedback
bullet New Gilmore's Supply Chain Jab bullet On Demand Videocasts


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Supply Chain Graphic of the Week
US Manufacturing Jobs Lost Since China Entered WTO

Alibaba Says it has No Ceiling for Expense to Stop Fakes
UPS Investing Millions More in Nat Gas Trucks, Stations
Instacart Looks for Savings by Cutting Delivery Driver Pay
Scrap Steel Prices Collapse Hurting Huge US Industry


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Week of February 15, 2016 Contest

See Who Took Home the Prize!

Holste's Blog: Is 100% Customer Satisfaction Achievable & Sustainable?


Weekly On-Target Newsletter:
March 16, 2015 Edition

Last Chance Cartoon, Amazon Theft Videos, Megaship Cost Impact and more

Will Amazon Really Build Parcel Shipping Network?

by SCDigest Editor Dan Gilmore

New SCDigest Benchmark
Study on Global Sourcing & Trade Management


About how many stores does a traditional Walmart general merchandise distribution center support (low and high range)?

Answer Found at the
Bottom of the Page

Readers Respond - Finish Line's Distribution Disaster

Well, it's been quite a week. Last Thursday 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.


Hume noted that by launching both DOM/WMS at once a company has to solve the order orchestration issues at the same time IT may need re-direct volume to the other fulfillment points due to WMS issues.


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I went through all this in some detail, including some insider perspective on how the blame should be apportioned across Finish Line, the consultant and the software provider, and some lessons all of us might take away from the turmoil. You can find that column here: Lessons from Finish Line's Distribution Disaster

Well, I received a large number of phone calls and emails this week as a result of this piece. A number of readers from the retail sector emailed to simply say "thanks for shedding some light on this." Several consultancies said the piece had provoked intense interest and debate within their firms. Heard from a few others I hadn't communicated with in years but sent quick notes on the column.

Enough so that as I love to do, I am going to write the whole column this week based on highlights of this feedback. It's great when we get enough response on a topic to do this, which frankly isn't all that often, even though SCDigest clearly receives more feedback than any publication in the space. It's a fun and easy for week me, and I have been told readers really enjoy these ‘"Readers Respond" columns too.

So here's an interesting way to start this off: a consultant on the Finish Line project posted some addition details on what actually happened. These comments were sent anonymously, and I have no way to validate their integrity, but I think you will agree they have the air of authenticity.

"I have been on the project as independent consultant for a number of months. I saw this coming long back in 2013," our anonymous source wrote. "Go live was pushed four times and delayed for over 1.5 years. The basic problem is that associates are too protective and so concerned about job security that they wouldn't even give access to the system to help them to run efficiently."

He or she continued: "The system was basically controlled by set of people who have no idea about the WMS and DOM they are implementing, and consultants were very frustrated working with them and obviously no one could stick for more than 4-5 months."

Now there is a lot we could say about these observations (consistent with the other insider comments we received initially from two people I spoke with that put much of the blame at Finish Line's feet). But most important to me is how they relate to what I wrote in last week's column: "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."

From our new insider though, we learn go-lives had been postponed four times previously. So it seems likely to me the pressure to finally go live after those previous delays simply pushed some people to pull the switch even though they might have known the system and the people still weren't ready. You know in your heart that's the case, but you hope for a miracle - or at least only a modest disaster because it seems worse than asking for yet another delay.

Finish Line got a major disaster instead. If that reader - or any other insider - wants to contact me to discuss other details on what happened in complete confidence, please send me an email here, or at the Feedback button at the bottom of this column.

To some extent echoing the view of our good friend Mark Fralick of GetUSROI, whom as I quoted last week believes it is a big mistake to think of testing as a distinct phase of a WMS project, consultant David Schneider emailed us, commenting that "Testing is not an event, it is a continuous part of the process. Test often. You can't test too often. Test every day, perhaps every hour. You didn't do a test in the past day? Shame on you."

Schneider added that "Training is also not an event, it is a way of life. Train every day. Train so they can do it in their sleep. Train to where they can do it in their sleep and with their eyes closed. Don't. Stop. Training."

In a great email, Brent Ruth of Caterpillar wrote that "I personally have been involved in many WMS implementations and the key factors have been:

1. Always #1 is the business engagement. They must be fully committed (ham and eggs analogy) and not "wake me up when it's over."

2. Having internal center of excellence (COE) expertise that can translate the business requirements into "consultant speak."

3. Having internal COE expertise that understand the capabilities of the new system and can translate that back to the impacted business to drive point #1."

He adds that not having #1 means easily tripling the costs and doubling the time, such that "heads will roll." Not having #2 means wasting resources (time and money) and not getting full value out of the transformation. Not having #3 means "you are in real danger of not capitalizing on the full capabilities and efficiencies of the new system jeopardizing ROI."

Well said.

Kevin Hume, a consultant at Tompkins International, had some very interesting thoughts on implementing WMS and DOM together.

"DOM or WMS should always be independent of the other go live," Hume observed. "Typical best practice is to work through the stabilization of order orchestration [DOM] before you bring up a new facility/WMS."

He noted that by launching both DOM/WMS at once [which seems to have been the case at Finish Line] a company has to solve the order orchestration issues at the same time it may need re-direct volume to the other fulfillment points due to WMS issues.

"As a best practice, we typically plan to bring DOM on-line first because it enables a reliable mechanism to re-route orders in the event we do have WMS issue at the new facility," Hume added. "I don't have any details but it sure sounds like they were dealing with concurrent DOM/WMS issues. I don't want to even imagine dealing with that kind of situation."

He further said there are times when it may make sense to bring up the WMS first - but almost never WMS and DOM concurrently.

Mike Challman of CLX Logistics noted that "One aspect of the disaster that isn't mentioned is the apparent lack of a contingency plan for quickly and safely returning to "prior state" when it became evident that the new WMS was failing."

While as he observed in his email that this can be a difficult thing to pull off, and I will add will increase the cost to the project to have this back-up capability, "when the go-live plan hinges on "failure is not an option" it can force the project team to continue pressing a bad position. Better to have a plan for bailing out (even if doing so still creates a bit of a disruption) and then getting reset."

There were many more feedbacks but I am out of space. I may do another such column in a few weeks on this, featuring some more of the reader comments we received, especially if we get a few more emails or posts out of this piece.

So send in your thoughts on this interesting story. And again I would be happy to confidentially discuss it with you if you have more insight about what actually transpired at Finish Line.

Any additional perspective on on the Finish Line distribution disaster? What lessons or takeaways relative to WMS and beyond do you see, or do you have any reaction to these reader comments? Let us know your thoughts at the Feedback button below.

View Web/Printable Version of this Column

On Demand Videocast:

Now is Finally the Time for WMS in the Cloud

As Supply Chain Software Moves to the Cloud, Barriers to Warehouse Management Joining the Party have All Fallen Away

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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On Demand Videocast:

Trends and Issues Global Sourcing and Trade Management

Results from SCDigest's New Benchmark Study on Practices and Technology in Global Trade

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.

Available On Demand

On-Demand Videocast:

Using Supply Chain Modeling to Improve Operations and Outperform the Competition

PriceSmart Builds Optimized, Aligned and Dynamic Supply Chain Network

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

Available On Demand


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 leveraging 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: About how many stores does a traditional Walmart general merchandise distribution center support (low and high range)?

A: 90-170, according to research by Marc Wulfraat of MWPVL International. We have heard the average is in the 100-110 range.

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