Did you know that 70% of supply chain projects fail? And if the project involves software, the failure rate can go as high as 85%. There are countless reasons why supply chain failures occur, but some common ones include
- difficulty making scope-related decisions
- dysfunctional supply chain planning
- supply chain metrics working against each other
- inefficient resource management
- unrealistic goals and deadlines.
So, if projects fail all the time, what happens when you're facing unimaginable uncertainty? Seeing a project through during a crisis is particularly daunting. In the face of COVID-19, supply chain managers may be wondering how their organizations will ever bounce back from the effects of the pandemic and what they can do to prevent a disastrous breakdown. The key is to anticipate and mitigate the potential risks, establish an effective strategy, create an exceptional plan, follow it up with a precise execution, and understand the recent trends and hacks.
One of the best ways to do all of that is by looking at historical examples and understanding what went wrong at other companies. Following are six stories of real-life supply chain project management failures. Each has a takeaway to make your organization even more effective in the future.
1) Adidas, 2019: Supply chain shortage: In Adidas’s 2018 annual report, it stated that sales growth for the company would be negatively affected in 2019 due to “supply chain shortages.” At a news conference, CEO Kasper Rorsted said, “The volume grew quicker than anticipated and we didn’t respond quickly enough to that demand signal.”
Maintaining balance in a supply chain is extremely important. Adidas failed to do its research and, therefore, couldn’t anticipate that demand for its products would be so huge. The takeaway here is the importance of understanding demand surges and having the agility to make necessary adjustments instantly. The earlier changes are made in the supply chain process, the easier it will be to meet demand.
2) Kentucky Fried Chicken, 2018: Abruptly changing delivery partners: In 2018, 2018 KFC changed its delivery partner, which didn’t go exactly as planned: This change led many of the food deliveries to be delayed. Customers were unsatisfied with the service and usually had to order from a limited set of options, as the stock in certain KFC stores was limited. Several KFC outlets were even forced to shut down. According to a press release by the company, KFC “brought a new delivery partner onboard, but they've had a couple of teething problems. Getting the fresh chicken out to 900 restaurants across the country is pretty complex!”
It is essential to know what changes you need to incorporate as a result of any decision made by you or your company. Changing from a special food delivery partner to a general delivery company, for example, can have negative results — particularly if, like KFC, you don’t focus enough on the transition. Always analyze the possible outcomes of making changes to your supply chain process; this way, you have an idea of what could go wrong and how to overcome the problem.
3) Target, 2015: Supply chain traffic jam: In contrast to the supply chain shortage Adidas experienced, Target faced a supply chain failure due to oversupply. Although their shelves were always stocked with products, they weren’t being sold at the same rate. As a result, in 2015, Target was forced to close all 133 locations in Canada. This cost the company a whopping $2 billion.
Maintaining an equilibrium between the supply and demand process is essential to keeping a company alive and increasing profit margins. Always do market and customer research before any major launch or expansion. To avoid overstock, consider deploying a project management software to help track and understand customer purchases and make it easier to understand the demand margin and order the appropriate amount of supplies.
4) Oculus Rift, 2016: Overpromising: In January 2016, Facebook introduced Oculus Rift, a virtual reality headset, and started taking preorders. The Rift was sold out on the first day. It was a significant achievement for Facebook, but what followed was a nightmare by customer service standards. Preorders were dispatched beginning in March, but by May, stock was limited again. Some who had preordered had to wait until the end of July to get their Oculus Rift.
When you take the preorder route, it is essential to match the supply and demand numbers and have a product timeline in place. Facebook’s customers were excited and expected the product to be amazing. But the supply chain process flawed, and delivery was hugely delayed. If a product cannot be launched within two weeks of the preorder date, this strategy is not a good way to go about increasing sales.
5) Yodel, 2009: Failing to meet demand: Yodel is the biggest parcel delivery company in the United Kingdom. After acquiring DHL, its customer base and numbers increased exponentially. By 2014, Yodel couldn’t handle the massive demand. During the high demand holiday shopping and shipping season, Yodel was unable to consistently pick up parcels from retailers, which resulted in a major setback in terms of customer expectations and brand value.
When taking over another company, it is essential to analyze all the aspects and ensure your company can handle the extra baggage. Yodel took over DHL without considering the added demand or increased customer expectations. From supply chain management to customer satisfaction, changes need to be customized to match the newly merged company.
6) Mattel, 2007: Reliance on offshore suppliers: One of the most infamous supply chain failures of 2007 was Mattel’s recall of 1.5 million toys. The company had outsourced its work to multiple suppliers, resulting in a substantial quality failure. One supplier, Early Light Industrial, was diligent about product quality ; however, the business had offshored one job — painting toy cars — to Hong Li Da, which did not use the paint supplied by Early Light. Rather, Hong Li Da used paint that contained lead, which can be fatal to children.
When it comes to supply chain management, companies must perform a quality check of each product before putting it in stock. Early Light did take all measures possible to solve this issue, but the damage to its reputation was done. You must know your suppliers’ entire process so potential risks can be anticipated and supply chain failures can be avoided.
Deploy the Solution
Supply chain is a domain that embraces positive change and continuously strives to improve its functions and performers. There are hundreds of thousands of supply chain projects running simultaneously around the world. They provide food and goods to a population of seven billion people who are struggling with the consequences of the pandemic and an uncertain economy. Because most of those projects are intertwined, the success or failure of one of them affects the others. Thus, today, more than ever, the logistics need to be flawless and system driven. As systems and networks become increasingly supported by well-planned strategies, the processes get more streamlined. This is the kind of preparation that will help a supply chain prevent a failed project when customers are depending on them the most.
David Miller is a technical writer with experience in project management software. Follow him on Twitter @davidmiller4312 or connect on LinkedIn.