The mundane, laborious tasks of poring over inventory, tracking goods, recording sales, restocking shelves in a timely manner, and predicting future demands have never been popular activities for those running businesses—especially as their day-to-day challenges grow. As a result, we see over and over again, supply chains destroyed overnight, running businesses into the ground.
Like the time JPMorgan Chase lost $6 billion in 2012 because of the errors made on its Microsoft Excel spreadsheets. Or Hershey’s 1999 meltdown when it failed to deliver $100 million Kisses and Jolly Ranchers to stores in time for Halloween because of a failed supply chain system. What these examples prove is that when you ignore the lifeblood of your business—that is, a dedicated inventory management system—you run the risk of destroying your business’ health. Think you’re too big to fail? Think again.
Below are six times companies lost control of their inventory, and almost ruined their business:
Target’s Out-of-Stock Catastrophe
In 2015, a literal traffic jam of pink Barbie SUVs piled high in Target’s distribution centers killed the discount retailer’s big entry into the Canadian market. It sounds like a wacky scenario, but the inventory problem was so big and ugly, Target Canada was no more shortly after. What happened? According to Reuters, barcodes on the Barbie toy cars didn’t match the numbers in the computer system—proof that Target was trying to grow too fast, too quickly without taking proper precautions. The mismatched inventory left shelves empty, customers frustrated and cost the third largest store chain in the U.S. more than $2 billion.
Since then, Target has announced plans to cut down on the wide assortment of brands, sizes and flavors usually offered on its shelves. The company’s CEO Brian Cornell says the change will help the retailer be more efficient and focus on what consumers want and are buying. Target says the roll-out will happen slowly across its 1,800 stores.
Walmart’s Missing Goods
Like Target, Walmart has struggled with keeping shelves stocked with merchandise for years. In 2011, the retailer hired firms Acosta Inc. and Retail Insight to literally walk down its aisles to track items, yet in 2013, Walmart was back in the red zone. In a meeting that February with the retail giant’s store managers, CEO Bill Simon announced that stocking issues were “getting worse” and becoming a major threat to the business. According to the meeting minutes, acquired by Bloomberg news, Simon said: “We run out quickly and the new stuff doesn’t come in.” That year, misplaced goods resulted in the company’s $3 billion loss as inventory continued growing faster than sales. At the same time, shelves just couldn’t stay stocked because a cut in budget also meant there weren’t enough employees around to stock shelves as often as needed.
By the following year, managers were told that improving “in-stocks” was going to be a top priority for 2014. Earlier this year, Walmart announced lower earnings, again, because of a surplus in goods and messy storage spaces. Hopefully, Walmart’s newly launched My Productivity app, aimed at giving managers a more holistic overview of the supply chain’s various streams, will restructure the company’s inventory system.
Kmart’s Lack in Foresight.
Are you seeing a trend here yet? In the mid-to-late 1990s when Kmart and Walmart were having their price wars, Walmart decided to implement a supply chain system known as “just-in-time” inventory allowing shelves to be restocked efficiently. Kmart didn’t take any steps to adopt a modern supply chain management system. The result? Between June 1998 and June 2000, stock prices for Walmart rose 82% while Kmart’s dropped 63%. In 2002, Kmart filed for bankruptcy, closed hundreds of stores and merged with Sears Roebuck in 2005.
Nike’s Long Uphill Battle with Supply Chains
As one of the most recognized athletic brands in the world, Nike has a lot of goods to manage—and has lost a lot from its inability to keep inventory under control over the years. In the early 2000s, the company adopted an updated inventory management software after losing around $100 million in sales due to issues with tracking goods. The software promised to help Nike predict items that would sell best and prepare the company to meet demands, but bugs and data errors resulted in incorrect forecasts and led to millions more lost.
In 2016, thanks to mounting competitions with athleisure brands like Under Armour and Adidas, Nike is still struggling with excess inventory, leading to a negative impact on its most current financial reports.
Best Buy’s Inability to Deliver on Christmas
In December 2011—in the middle of the holiday season—Best Buy issued a statement: “Due to overwhelming demand of hot product offerings on BestBuy.com during the November and December time period, we have encountered a situation that has affected redemption of some of our customers’ online orders. We are very sorry for the inconvenience this has caused, and we have notified the affected customers.”
As you can imagine, customers were infuriated by Best Buy’s decision to cancel orders instead of delaying shipment (likely because the company ran out of stock!); one article was even titled “How Best Buy Stole Christmas,” illustrating just how much the company’s inventory problems killed its reputation. It’s not hard to imagine that Best Buy probably lost a lot of its customers to Amazon after that 2011 debacle.
Ralph Lauren’s imbalanced supply and demand chain
Ralph Lauren’s iconic clothing always looks so sleek and clean, it’s incredible that the American sportswear had a messy enough inventory system that profits plummeted 50 percent in the past two years. Consequently, the company is now worth half of the $16 billion it was worth just four years ago. All because it couldn’t get its inventory under control. On June 7, 2016, Stefan Larsson was named as the company’s new CEO to replace founder Ralph Lauren’s spot. Larson’s first task as chief executive? Trimming inventory fats, as reported by the Washington Post, meaning a refocus on the brand’s best-selling labels, cutting its multiple layers of management and closing 50 under-performing stores.
The businesses above should prove that a poorly managed system is one of the biggest threats to a business—especially in smaller companies where resources are scarce. Don’t wait for steep wastes and excess goods to destroy your business’ financial health. Smart businesses think ahead about advanced solutions and inventory softwares to properly track goods, manage inventory, measure performance—all needed for soaring growth.
Source: B2C
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