Learning it the hard way- Lessons from SC Failures
Hi, I’m Priyanka Sunil- A final year MBA student from Amrita School Of Business majoring in Operations and Marketing. Welcome to my progressive learning space for Logistics and Supply Chain Management.
Companies face many challenges when trying to manage social and environmental issues in the supply chain. Supply chain risk is an enterprise-wide risk. Decisions made in the product design and development stage, decisions made about locating production facilities, manufacturing technologies, purchasing components and the choice of suppliers, decisions made about outsourcing functions, services, marketing and distribution strategy, and many other strategic and operational decisions, can all have an impact on the ultimate level of supply chain risk.
Following are the details of some recent supply chain disruptions to illustrate the range of events that can cause such disruptions and the scale of impacts such disruptions can cause to the companies involved, both directly and indirectly.
1. GM Supply Chain Disaster: Automation gone wrong
PC: bloncampus
At the moment,
robots still seem like a smart idea, before they chase you down the street and
free yourself from liquid puddles. With Short Circuit still fresh in mind in
the 1980s, but obviously not Terminator, then General Motor's CEO Roger Smith,
agreed to embark on a drive to increase the number of robots in GM plants from
300 to 14,000 by 1990. With Japan's robot designer Fujitsu-Fanuc, Smith set up
a joint venture to make his dream come true, investing billions of dollars in
the process.
The robots
sadly weren't running. Instead, the rest of their time was spent painting
themselves and lowering windshields. Productivity fell, prices soared and
market share shrank. Smith was released.
2. Main impact on Land Rover
UPF-Thompson,
the sole supplier of chassis frames to Land Rover (then a subsidiary of Ford)
for its Discovery models, unexpectedly went bankrupt on 4 December 2001 with
debts of around £75 million. This threatened the jobs of 1,400 Discovery
production line workers and 10,000 employees at companies that made parts for
the Discovery.
KPMG, the
receivers for UPF-Thompson, threatened to stop the supply of chassis frames to
Land Rover, unless Land Rover made a goodwill payment of £35 million to
UPF-Thompson. KPMG justified its actions by pointing out that it was legally
obliged to recover money on behalf of UPF-Thompson’s creditors and the sole
supplier agreement represented a valuable asset. After Land Rover won a
temporary injunction against this threat on 11 January to maintain the flow of
chassis frames into its Solihull plant, it put £1 million into UPF-Thompson,
which looked likely to find a buyer if the company was guaranteed a new
contract to supply chassis frames to Land Rover.
After further
legal action, an agreement was finally reached between Land Rover and KPMG in
February 2002139, under which Land Rover was believed to have paid between £10
million and £20 million of UPF-Thompson’s debt in exchange for the replacement
of KPMG by its preferred receivers, Grant Thornton.
3.
KFC’s Supply Chain Crisis
The supply
chain crisis for the KFC closed over half of the company's 900 U.K. in 2018.
KFC had switched to a new delivery company, causing their food supply chain to
suffer significant disruptions. Many of the stores were forced to close without
deliveries of fresh chicken-a transport logistics problem that experts estimate
cost KFC up to £ 1Million per day.
However, the
fast-food giant graciously and with a sense of humor approached the situation,
using social media to respond to questions instantly and honestly. The company
has also built a page on its website so that consumers can see which stores are
still available. In addition, they continued to pay their employees even though
restaurants did not serve clients.
4. Mattel Toys – Product Recall
Photograph: https://digitalstrategies.tuck.dartmouth.edu/
Like many toy
manufacturers, Mattel had occasional product recalls, but was then forced to
make a series of toy recalls in 2007149. There were two main causes. Firstly,
small magnets inside various toy figures or accessories (such as Batman,
Barbie, Doggie Day, Polly Pocket) could fall out and be swallowed or aspirated
by young children; if more than one magnet was swallowed, the magnets could
then attract each other and cause intestinal perforation or blockage, which
could have been fatal.
Secondly, surface
paints on various toys and accessories contained excessive levels of lead,
which was prohibited under federal law; lead is toxic if ingested by young
children and can cause adverse health effects. In the worst cases, some of
Mattel’s toys had levels of lead in paint that was 180 times the US Federal
limit150. All the affected toys, magnets and lead paint were manufactured in
China.
Although the
products concerned represented a small fraction of China’s exports, worth more
than $1 trillion per year, Chinese officials worried that the US government
could use these quality problems to restrict trade. Zheng Xiayou, the head of
China’s state food and drug administration over the period 1998 to 2005, was
convicted of dereliction of duty and taking bribes from manufacturers of the
substandard medicines that had been blamed for several deaths – and was
executed on 10 July 2007.
5. Adidas goes for broke
Photograph: businessmirror.com
Starting in
1993, Adidas attempted to implement two new management systems at its
distribution center in Spartanburg, insisting that the system of Integrated
Software Logistics Engineering be ported to fault-tolerant Stratus computers.
Adidas ploughed ahead despite the device not being ready. It just didn't work.
The sports
brand under shipped by an estimated 80 percent, and it took years to regain its
lost market share.
As the above-mentioned businesses have proved, reliable goods and innovative campaigns are essential components of growth, but there is no substitution for a stable and well-performed supply chain after all. We all know products change rapidly in the supply chain. Yeah, some supply chain no-nos were listed here.
Takeaways
Snags are unavoidable therefore
damage prevention has to be a key market priority. Running pilots is a must and
there are also simulation technologies to test supply chain operations.
Being open and attentive to the needs of consumers and working diligently to
solve the issue can be an incentive to develop trust and improve client
relationships. To scale it is important for
businesses to have the proper supply chain infrastructure. This includes
structures and a plan for anticipating and projecting demand to proactively
satisfy consumer needs -eliminating the requirement for inventory effectively
rationing and underpinning high demand markets. There are
countless possibilities for any cautionary tale to communicate more with your
customer base and entertain new customers. And the correct tools for handling
the supply chain will prepare you to leap on opportunities.
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