Rent the Runway experienced a disruption in service that resulted in late or missed deliveries for thousands of customers. Here’s what supply chain managers can learn from this incident.
This past fall, Rent the Runway (RTR) found itself in hot water after reports from customers came pouring in that outfits they’d ordered for formal events were either canceled without warning or not delivered on time.
The fashion-rental company said the disruption was caused by a new inventory management software system for sorting and racking clothes in its New Jersey distribution center. The interruption in service lasted 11 days, during which time new subscriptions and orders were put on pause while RTR attempted to iron out the issues with their new inventory system.
All told, 14 percent of RTR’s subscribers were affected by the disruption, as were 6 percent of customers who use the company for individual orders. Customers took to social media to express their frustration, which eventually led to the company’s top supply chain management executive stepping down. In the end, RTR also offered to refund some orders and pay $200 to customers whose orders never shipped.
RTR is once again processing new orders and subscriptions, but the situation offers a prime example of the importance of ensuring that all warehouse management software has been tested for scalability and agility before being implemented. Here are a few things that logistics teams can learn from RTR’s supply chain snafu.
The Role of Rent the Runway's Supply Chain Software
In the past few years, RTR has committed to ambitious growth and scaling. The company has expanded its service offerings from special-occasions clothing rentals to include everyday business dress subscriptions, children’s clothing, and even home decor rentals. With these added initiatives, RTR’s market value topped $1 billion in 2019, with their estimated customer base expanding to more than 9 million subscribers.
However, this rapid growth raises a new set of operational and logistical challenges — most of which are related to the number of operational systems required to support the expansiveness of RTR’s business model. RTR’s eCommerce fulfillment processes — from cleaning and mending garments before they’re returned to circulation to leveraging algorithms that can predict what customers will want to rent next — are highly specialized and require WMS systems to efficiently manage. Sophisticated reservation inventory management systems and are responsible for the allocation of garments, as well as transportation logistics, accuracy of delivery, returns, and storage.
Another important element the RTR model is customer insights and data collection. Not only does the company have to deliver garments, but they need to take into account different fashion and style choices, as well as peak demand periods for different kinds of garments.
This drives the need for algorithmic ways of optimizing the company’s inventory according to metrics like item type, color, and size — something that may be challenging for some supply chain software and planning applications. Customer preferences and rental history are vital metrics that are necessary for determining the future inventory needs of the company. Ensuring that all these elements are working together requires the right technological infrastructure.
Similar to other companies that experience rapid growth, RTR had invested in a data warehouse running on cloud-based platforms. However, the combination of proprietary internal applications and commercial external cloud infrastructure might have led to some loose ends when it was time to scale up.
What Can Supply Chain Management Teams Learn?
The primary takeaway is that any initiative that involves expanding or scaling up a business needs to be given proper consideration in order to avoid gaps in service. A joint analysis from McKinsey and Business of Fashion found that operational efficiency is one of the key metrics that helps drive success for the top 20 percent of fashion companies. This emphasizes the importance of ensuring on-time delivery for businesses like Rent the Runway.
This is why scalability testing and capacity planning is critical. While the instinct for many companies can be to jump at opportunities during periods of growth, efforts to expand market share can backfire without the proper infrastructure to make that expansion sustainable.
It’s especially important for companies using proprietary internal applications to understand their system limitations. These tools may provide tailor-made solutions in the short term. But, any viable solution in today’s fast-paced economy needs system flexibility to quickly pivot to new conditions and challenges. Managing the logistical interactions and the specificity of customer needs in an online subscription business model requires a warehouse inventory management system designed for customizations and frequent changes. This could be a change in workforce; a change in order volume or order profiles, or system integrations that inject new capabilities into supply chain operations.