Description
supply chain disasters Foxmeyer Distribution Disaster, 1996, GM’s Robot Mania, WebVan Automation Spree, 2001, Adidas Warehouse Meltdown, Denver Baggage Handling System, ToysRUs.com Christmas 1999, Hershey’s Halloween Nightmare 1999, Cisco's 2001 Inventory Disaster, Nike's 2001 Planning System Perplexity, Aris Isotoner, Apple - Power Mac
Introduction
? ?
Man made disasters Huge financial implications
?
?
Flawed strategy, Flawed execution
Analysis and learning
Foxmeyer
Distribution Disaster, 1996
Foxmeyer, second largest drug exporter in US, 1996
Revamping IT & Distribution Systems -New ERP System -DC in Ohio
Counted on being up and running in 18 Months
Anticipated huge operational profits and signed several giant contracts
What went wrong?
SAP?s first high distribution foray
High such huge volumes was proving unmanageable
DC Automation System • Constant Bugs • Software trips during the process • Manpower in thousands required to fix the problem Many issues, apparently trivial in nature ignored
Partial shipment delivery due to DC issues
Some Effects on Foxmeyer
GM?s Robot Mania
THE CASE
? ?
1980’s - Japanese offered reliable, small, competitively priced cars GM’s Radical business plan to automate and modernize
? Cost - $ 40 – 45 billion ? In 1980, CEO, Roger Smith honored with awards (Including: Financial World Gold Medal - best CEO in America)
?
The result:
? Plants running at 50% capacity GM ? Two major strikes in the U.S. & Canada Ford ? CEO, Robert Smith fired
Average number of autos produced by each employee 11.7 16.1 57.7
Toyota
“GM could have bought both Toyota and Nissan for this amount” - CFO, GM
GM?s Robot Mania
ANALYSIS
? ?
False assumptions - Replacing people with machines could increase productivity Missed essence of Toyota’s low-cost production success
? JIT inventory, ? TQM, ? Attention to production processes, ? Lean production, ? Extensive employee training, ? Close cooperation with suppliers
? ?
Balancing value added time Vs waiting time of labor Productivity is not just based on labor costs but on the entire production system
WebVan
Automation Spree, 2001
WebVan, Among major online grocery initiatives during late 1990?s
Initially backed by - Prominent financial outfits like Goldman Sachs - Hiring high profile CEO from Accenture - Getting into public, thus raising billions of dollars Opted to automate their entire business, specifically warehouses Two assumptions - Capital was endless - Demand was endless
What went wrong?
Saying, it was an overkill, is too mildly putting it
Could not drive logistics costs even to make up the investments
Could not do reach high levels of system utilization
Had this large amount not been invested, would it be a profit making preposition?
Attempt to create a „state of art? distribution system at Spartanburg, SC, in 1993
Adidas Warehouse Meltdown
Software ported from UNIX to Stratus Computer fault-tolerant OS failed due to compatibility problems Problem compounded when the software vendor, Integrated Software Logistics Engineering, went out of business Another WMS vendor(IBM) implemented the system and went live before the system was ready
Unable to process and ship orders Fulfilled just 20% of the orders from the North American market Suffered major market share loss
IT and logistics staff left the company Magazine named it “Warehouse of the Month” – before the facility even went live.
SCM concepts in play: Warehouse Management, Logistics and Supply Chain efficiency
Denver Baggage Handling System
? ?
?
?
Automated system built to improve baggage handling at Airport Originally scheduled to open in March 1994, the airport opening was postponed till February 1995 Automated system was an underground, computerdriven railroad network for moving baggage The Automated system built to decrease the turnaround time of the aircraft
Denver Baggage Handling System
Underground tunnels were not designed with the level of automation and thus failed Significant mechanical and software problems plagued the automated baggage handling system The system was not tested effectively Became partly operational but continuous failures and high operating costs led to return to traditional handling methods
SCM concepts in play: Automated Material Management or Handling and Logistics
Nov 6, 1999 • 62 million advertising circulars offering free shipping on Christmas toy orders placed before Dec. 10 over the Internet
Early Dec 1999 • Tens of thousands of orders • Inventory in place • Picking, Packing and Shipping is not fast • Employees worked for 49 straight days to fill orders
Dec 23, 1999 • Unable to fulfill orders in time • Company sent thousands of “We?re Sorry” mails • Negative publicity in Media • Customers displeased • Numerous customer complaints and angry emails
Packing
Upstream Side
Foca l Firm
Picking DownstreamShipping
Side
Problems
Downstream Side of Supply Chain Direct Customer Model
Outbound Logistics – Improper in-house forecasting
Distribution
Demand Forecasting
Empowered consumer
Competitive market
Poor design of Logistics network
Ignored Market Signals
No Risk Awareness or Risk Management
Insufficient Efulfillment capabilities
Even other E-Tailers had similar problems. ToysRUs.com?s failure led hundreds of other companies to add e-fulfillment capabilities
April 2000 • Company announced plans to triple fulfillment capabilities • Upgraded existing facilities & opened distribution centers • One centre to fill direct to customers order quickly, with well engineered facility • Location advantage as FedEx Home hub for shipping was close by
August 2000 • Signed a 10 year contract with Amazon.com • Outsourced its Outbound Logistics operations • ToysRUs focused on its core activities • Amazon would oversee site development, order fulfillment, and customer service
• $112 million spent on new order management, supply chain planning, & CRM system • Aimed at transforming company?s infrastructure & supply chain 1998-1999 • Intended to ease shipping and logistics between plants and retailers
• • • April 1999 •
System expected to go live Demand for products had increased Incompatibility due to different service providers – Problems! Rather than waiting, Hershey switched over in the summer to the new system (Mid July) • Failure of transactions and inventory visibility
• Company said that at least $150 million were lost in the Halloween orders
• Quarterly profits dropped by 19% September • Headlines across business press
1999
Upstream Side
Foca l Firm
Tracking Inventory Downstream
Order Fulfillment
Side
Problems
Failed Technology Implementation Incomplete testing and development of systems Wrong timing for implementation of ERP
Failure of ERP systems
Supply Chain Integration
Direct cutover strategy
Mismatch between project plan and complexity
Issue in Information flow led to problems in material flow
Problems in Technological Development
Order Fulfillment
Downstream side
Outbound Logistics issue
Demanding retailers switched to competitors
Later, lost sales effect
Personnel training not given
Cisco's 2001 Inventory Disaster
?
?
Cisco rode the technology wave of the 1990's Slow to react when the tech bubble burst
?
Solutions
?
Agile supply chain
?
?
Networking industry had never witnessed a slowdown Response to high order rates was higher build rates and inventory accumulation
Channel-wide information gathering taking into account every stage of the supply chain Detect early warning signals in the marketplace and take reactionary measures
?
?
$2.2 billion writeoff in May 2001
Nike's 2001 Planning System Perplexity
? ?
?
New, complex supply chain management system Myriad of issues
Software bugs and integration problems, complexity and change for planners, lack of training Major challenges in forecasting demand and deploying inventory
?
? ?
$10 million revenue shortfall 20% knocked off on stock price Solutions
?
Phased approach
? ?
?
Pilot approach
?
Changes will be familier
Shorter introduction Momentum is easier to maintain
Tools and processes can be well defined before
?
roll-out
Source:Hassan, Masood., (2005) Phased Implementation v. Big Bang, Frontline Solutions, Vol. 6 Issue 7, p37-39
Aris Isotoner
1994: High profit subsidiary of Sara Lee based in Manila
Highly skilled labor force with experience upto 15 years
Very low cost of production
Post - Outsourcing
Huge turn around time
10 to 20% higher costs of production
Quality much poorer
SCM concepts at play: Logistics network design, Supply chain efficiency
Apple - Power Mac
1995: Apple was the market leader in PC?s Introduced Power Mac line Wary of potential – Power Books failure Conservative market estimate: Limited launch
Power Mac Launch
Explosion in demand Upto $ 1 billion in unfilled orders Permanent hit to industry standing SCM concepts at Play: Supplier Relationship management, Demand-driven Supply
A Common Thread
Common Problems
? Implementation of
Impact
? Companies have lost
technology/IT spoils a well running business ? Problems due to new systems cause problems in time and additional manpower
their position – instead of consolidation, have fallen back, or even gone into bankruptcy.
Solution - The Rational Unified Process
Process Workflows (Also called disciplines)
Business Modeling Requirements Analysis & Design Implementation Test Deployment
Phases
Inception Elaboration Construction Transition
Supporting Workflows
Configuration & Change Mgmt Project Management Environment Customise the Process Establish tools
Preliminary Iteration(s) Iter. #1 Iter. #2 Iter. #n Iter. Iter. #n+1 #n+2 Iter. #m Iter. #m+1
Iterations
Thank you…..
doc_632178793.pptx
supply chain disasters Foxmeyer Distribution Disaster, 1996, GM’s Robot Mania, WebVan Automation Spree, 2001, Adidas Warehouse Meltdown, Denver Baggage Handling System, ToysRUs.com Christmas 1999, Hershey’s Halloween Nightmare 1999, Cisco's 2001 Inventory Disaster, Nike's 2001 Planning System Perplexity, Aris Isotoner, Apple - Power Mac
Introduction
? ?
Man made disasters Huge financial implications
?
?
Flawed strategy, Flawed execution
Analysis and learning
Foxmeyer
Distribution Disaster, 1996
Foxmeyer, second largest drug exporter in US, 1996
Revamping IT & Distribution Systems -New ERP System -DC in Ohio
Counted on being up and running in 18 Months
Anticipated huge operational profits and signed several giant contracts
What went wrong?
SAP?s first high distribution foray
High such huge volumes was proving unmanageable
DC Automation System • Constant Bugs • Software trips during the process • Manpower in thousands required to fix the problem Many issues, apparently trivial in nature ignored
Partial shipment delivery due to DC issues
Some Effects on Foxmeyer
GM?s Robot Mania
THE CASE
? ?
1980’s - Japanese offered reliable, small, competitively priced cars GM’s Radical business plan to automate and modernize
? Cost - $ 40 – 45 billion ? In 1980, CEO, Roger Smith honored with awards (Including: Financial World Gold Medal - best CEO in America)
?
The result:
? Plants running at 50% capacity GM ? Two major strikes in the U.S. & Canada Ford ? CEO, Robert Smith fired
Average number of autos produced by each employee 11.7 16.1 57.7
Toyota
“GM could have bought both Toyota and Nissan for this amount” - CFO, GM
GM?s Robot Mania
ANALYSIS
? ?
False assumptions - Replacing people with machines could increase productivity Missed essence of Toyota’s low-cost production success
? JIT inventory, ? TQM, ? Attention to production processes, ? Lean production, ? Extensive employee training, ? Close cooperation with suppliers
? ?
Balancing value added time Vs waiting time of labor Productivity is not just based on labor costs but on the entire production system
WebVan
Automation Spree, 2001
WebVan, Among major online grocery initiatives during late 1990?s
Initially backed by - Prominent financial outfits like Goldman Sachs - Hiring high profile CEO from Accenture - Getting into public, thus raising billions of dollars Opted to automate their entire business, specifically warehouses Two assumptions - Capital was endless - Demand was endless
What went wrong?
Saying, it was an overkill, is too mildly putting it
Could not drive logistics costs even to make up the investments
Could not do reach high levels of system utilization
Had this large amount not been invested, would it be a profit making preposition?
Attempt to create a „state of art? distribution system at Spartanburg, SC, in 1993
Adidas Warehouse Meltdown
Software ported from UNIX to Stratus Computer fault-tolerant OS failed due to compatibility problems Problem compounded when the software vendor, Integrated Software Logistics Engineering, went out of business Another WMS vendor(IBM) implemented the system and went live before the system was ready
Unable to process and ship orders Fulfilled just 20% of the orders from the North American market Suffered major market share loss
IT and logistics staff left the company Magazine named it “Warehouse of the Month” – before the facility even went live.
SCM concepts in play: Warehouse Management, Logistics and Supply Chain efficiency
Denver Baggage Handling System
? ?
?
?
Automated system built to improve baggage handling at Airport Originally scheduled to open in March 1994, the airport opening was postponed till February 1995 Automated system was an underground, computerdriven railroad network for moving baggage The Automated system built to decrease the turnaround time of the aircraft
Denver Baggage Handling System
Underground tunnels were not designed with the level of automation and thus failed Significant mechanical and software problems plagued the automated baggage handling system The system was not tested effectively Became partly operational but continuous failures and high operating costs led to return to traditional handling methods
SCM concepts in play: Automated Material Management or Handling and Logistics
Nov 6, 1999 • 62 million advertising circulars offering free shipping on Christmas toy orders placed before Dec. 10 over the Internet
Early Dec 1999 • Tens of thousands of orders • Inventory in place • Picking, Packing and Shipping is not fast • Employees worked for 49 straight days to fill orders
Dec 23, 1999 • Unable to fulfill orders in time • Company sent thousands of “We?re Sorry” mails • Negative publicity in Media • Customers displeased • Numerous customer complaints and angry emails
Packing
Upstream Side
Foca l Firm
Picking DownstreamShipping
Side
Problems
Downstream Side of Supply Chain Direct Customer Model
Outbound Logistics – Improper in-house forecasting
Distribution
Demand Forecasting
Empowered consumer
Competitive market
Poor design of Logistics network
Ignored Market Signals
No Risk Awareness or Risk Management
Insufficient Efulfillment capabilities
Even other E-Tailers had similar problems. ToysRUs.com?s failure led hundreds of other companies to add e-fulfillment capabilities
April 2000 • Company announced plans to triple fulfillment capabilities • Upgraded existing facilities & opened distribution centers • One centre to fill direct to customers order quickly, with well engineered facility • Location advantage as FedEx Home hub for shipping was close by
August 2000 • Signed a 10 year contract with Amazon.com • Outsourced its Outbound Logistics operations • ToysRUs focused on its core activities • Amazon would oversee site development, order fulfillment, and customer service
• $112 million spent on new order management, supply chain planning, & CRM system • Aimed at transforming company?s infrastructure & supply chain 1998-1999 • Intended to ease shipping and logistics between plants and retailers
• • • April 1999 •
System expected to go live Demand for products had increased Incompatibility due to different service providers – Problems! Rather than waiting, Hershey switched over in the summer to the new system (Mid July) • Failure of transactions and inventory visibility
• Company said that at least $150 million were lost in the Halloween orders
• Quarterly profits dropped by 19% September • Headlines across business press
1999
Upstream Side
Foca l Firm
Tracking Inventory Downstream
Order Fulfillment
Side
Problems
Failed Technology Implementation Incomplete testing and development of systems Wrong timing for implementation of ERP
Failure of ERP systems
Supply Chain Integration
Direct cutover strategy
Mismatch between project plan and complexity
Issue in Information flow led to problems in material flow
Problems in Technological Development
Order Fulfillment
Downstream side
Outbound Logistics issue
Demanding retailers switched to competitors
Later, lost sales effect
Personnel training not given
Cisco's 2001 Inventory Disaster
?
?
Cisco rode the technology wave of the 1990's Slow to react when the tech bubble burst
?
Solutions
?
Agile supply chain
?
?
Networking industry had never witnessed a slowdown Response to high order rates was higher build rates and inventory accumulation
Channel-wide information gathering taking into account every stage of the supply chain Detect early warning signals in the marketplace and take reactionary measures
?
?
$2.2 billion writeoff in May 2001
Nike's 2001 Planning System Perplexity
? ?
?
New, complex supply chain management system Myriad of issues
Software bugs and integration problems, complexity and change for planners, lack of training Major challenges in forecasting demand and deploying inventory
?
? ?
$10 million revenue shortfall 20% knocked off on stock price Solutions
?
Phased approach
? ?
?
Pilot approach
?
Changes will be familier
Shorter introduction Momentum is easier to maintain
Tools and processes can be well defined before
?
roll-out
Source:Hassan, Masood., (2005) Phased Implementation v. Big Bang, Frontline Solutions, Vol. 6 Issue 7, p37-39
Aris Isotoner
1994: High profit subsidiary of Sara Lee based in Manila
Highly skilled labor force with experience upto 15 years
Very low cost of production
Post - Outsourcing
Huge turn around time
10 to 20% higher costs of production
Quality much poorer
SCM concepts at play: Logistics network design, Supply chain efficiency
Apple - Power Mac
1995: Apple was the market leader in PC?s Introduced Power Mac line Wary of potential – Power Books failure Conservative market estimate: Limited launch
Power Mac Launch
Explosion in demand Upto $ 1 billion in unfilled orders Permanent hit to industry standing SCM concepts at Play: Supplier Relationship management, Demand-driven Supply
A Common Thread
Common Problems
? Implementation of
Impact
? Companies have lost
technology/IT spoils a well running business ? Problems due to new systems cause problems in time and additional manpower
their position – instead of consolidation, have fallen back, or even gone into bankruptcy.
Solution - The Rational Unified Process
Process Workflows (Also called disciplines)
Business Modeling Requirements Analysis & Design Implementation Test Deployment
Phases
Inception Elaboration Construction Transition
Supporting Workflows
Configuration & Change Mgmt Project Management Environment Customise the Process Establish tools
Preliminary Iteration(s) Iter. #1 Iter. #2 Iter. #n Iter. Iter. #n+1 #n+2 Iter. #m Iter. #m+1
Iterations
Thank you…..
doc_632178793.pptx