Wise Supply Chain, Warehouse, and Logistics Managers can learn from other people’s mistakes when it comes to warehouse and inventory management. There have been millions of minor inventory problems, and numerous major catastrophes as well. Some of the disasters were so enormous that it led to the formation of inventory management as an independent area of study in many management colleges keeping in mind the various supply chain organizations operating globally. It also gave rise to the Six Sigma practices being a dominant force of normalization for inventory and supply chains.
Here are 5 of the top 10 inventory disasters in the world, historically:
1. Foxmeyer’s Gamble into IT
In this era, information technology was just beginning to be in news and it impressed Foxmeyer the most, which was then the second largest wholesale drug distributor in the U.S, with sales over $5 billion dollars in a highly competitive industry. The company completely overestimated the efficiency gains from the new systems. It picked up orders in large numbers in advance. However the new system failed to handle huge order numbers leading to the collapse of company which filed for bankruptcy and the main operating division of the $5 billion company was sold to its larger rival, McKesson, for only $80 million. Pennies on the dollar, thanks to their blunders…
2. Robots Completely Ruin General Motors
Roger Smith the CEO of GM planned to deploy 14,000 new robots in GM plants by 1990 to increase the efficiency in plants. But the move backfired when robots worth billions of dollars failed to work and led to decrease in efficiency and lowered productivity. The entire project was later largely scrapped and Smith fired, as GM’s costs rose and market share shrunk. It is said that at that time GM could have bought both Toyota and Nissan with the money it spent on failed robots.
3. Adidas Warehouse goes Awry
Adidas decided to upgrade its warehouse to modern warehouse management system but remained rigid on using its own Stratus computer instead of vendor’s Unix-based System, asking them to port the system to their computers. The move failed and Adidas was unable to process and ship orders leading to major market share losses that persisted for a long while.
4. No toys for Christmas in 1999 by Toys R Us.com (Whoops!)
It was the beginning of online retailing business and Toys R Us, advertised heavily for its online division promising to make Christmas deliveries for any orders placed online by Dec. 10. Perhaps it underestimated the power of internet as tens of thousands of orders were placed and despite the inventory being mostly in place, the company simply cannot pick, pack and ship the orders fast enough. It led to the famous “We’re sorry “ emails being sent by the company to its customers two days before the Christmas leaving the customers irked and forever tarnishing the reputation of brand proving a wakeup call to the rest of the industry.
5. Cisco’s 2001 Inventory Disaster
This example is the perfect example of the excessive inventory affects as Cisco in May 2001, reported $2.2 billion worth inventory extra which it was unable to sell as Cisco was slow to see the slowing demand and ended up with way more routers, switches and other gear than it needed.