What We Can Learn From 4 Brands' Supply Chain Management Failures

    Posted by John Arkontaky on Jan 21, 2020 10:36:46 AM

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    From a spiked seltzer scarcity to KFC's fried chicken shortage, we take a look at four instances when the supply chains of major brands failed to deliver.

    A well-organized and efficient supply chain includes a lot of moving parts. From planning and production to housing inventory and transporting goods, there are a number of interrelated processes that need regular and proactive management to keep the supply chain running smoothly. 

    Unfortunately, a snag at any point in the supply chain can have a damaging ripple effect. Here are a few examples when supply chain operations went wrong—with some lessons companies can learn from them.

    Demand Planning Leads to Spiked Seltzer Shortage

    Spiked seltzer has become a billion-dollar industry, and White Claw is leading the charge. The brand has recently seen exponential growth, with sales up 250 percent year over year.[1] While this kind of demand is often desirable, it turns out there can indeed be too much of a good thing. In 2019, the company couldn't produce and ship enough spiked seltzer to meet demand.

    As a result, White Claw instituted a transportation, distribution, and logistics policy called allocation. This practice involves intentionally limiting supply to make sure that all markets receive regular shipments, even if supply runs out quickly. Allocation also means that White Claw isn't increasing the volume of shipments to stores that sell out faster. While the company works to fortify its supply chain, this strategy allows them to continue reaching all their markets, if at a reduced rate.

    The Takeaway: White Claw's rapid rise reveals how important it is for companies to have the proper food and beverage supply chain infrastructure in order to scale. This includes systems and a strategy to predict and forecast demand to proactively meet customer needs—eliminating the need to essentially ration inventory and underserve high-demand markets.

    Supply Chain Transportation Issues Cause KFC to Run Out of Chicken

    In 2018, the KFC supply chain crisis closed more than half of the company's 900 U.K. restaurants. KFC had shifted to a new delivery partner, causing major disruptions to their food supply chain. Without deliveries of fresh chicken, many of the stores were forced to close — a transport logistics issue that experts say cost KFC up to £1 million daily.[2]

    However, the fast-food giant handled the situation gracefully and with a sense of humor, using social media to respond quickly and honestly to questions. The company also created a page on their website so customers could see which locations were still open. Further, they continued to pay their staff even if restaurants were unable to serve customers.

    The Takeaway: Snags are inevitable, but mitigating losses needs to be a top concern for the business. Running pilots is a must, and there are even simulation technologies to stress test supply chain operations from a safe digital environment. Also, KFC reveals that being transparent and attentive to customers' needs, while actively working to fix the problem, can be an opportunity to build trust and reinforce customer relationships.

    eCommerce Inventory Management Woes for Rent the Runway Leads to Canceled Orders

    The clothing subscription start-up Rent the Runway has been beset with complaints recently, with customers saying that outfits are consistently arriving late — if they arrive at all. Issues began in mid-September 2019, when Rent the Runway installed a new supply chain management software for its New Jersey warehouse.

    Customers were contacted via email warning them that the company could not guarantee that their scheduled orders would arrive on time. Rentals for formal events were canceled, and the company stopped taking new subscribers for about six weeks.

    The Takeaway: Despite these setbacks, Rent the Runway remains hopeful that once the bugs have been ironed out, the new inventory management software will enable them to deliver items faster. But for now, their situation is an important reminder of the amount of time that goes into proper retail supply chain risk management.

    Inventory Management Challenges Contribute to Target Canada's Misfortune

    This is an older example, but it's worth mentioning. In 2013, Target opened its first stores in Canada. The move made sense — competitors like Walmart had done so successfully, and the Canadians were already crossing over to the U.S. to shop at Target. So, Target Canada seemed like a slam dunk. 

    However, less than two years later, the company announced it would close all of its 133 Canada branches. The combination of an overly ambitious plan — the company launched with dozens of stores and swiftly scaled up to more than 100 — paired with insufficient inventory stock, noticeably higher price points, and a lack of Canadian products led to a massive supply chain failure for Target Canada that cost upwards of $2 billion.[3]

    The Takeaway: There are no sure things in supply chain. But, if you lay a solid foundation, you are poised to not only meet customer needs, but to pivot when things don't go as planned. Even the biggest brands need to nail warehouse and inventory management. If you build it right, they will come.

    How Brands Can Avoid Supply Chain Failures

    As the above companies have proven, quality products and creative marketing are key components of success, but in the end, there's no substitute for a robust and well-executed supply chain. We all know that things move fast in supply chain. Yes, we listed some supply chain no-nos here. But, for every cautionary tale there are infinite opportunities to make better connections with your customer base and delight new customers. And the right supply chain management software can position you to jump on opportunities.

    Topics: Retail, Transportation, eCommerce, Omni-Channel, Warehouse Management Systems (WMS)