What Not To Do

Sears, once a cultural treasure, was in business for 125 years and was one of America’s more recognizable home brands. Think Amazon, but in catalog – print form.  Sears was well-known for brands such as, Kenmore for appliances, Craftsman for tools, and car batteries that were sold under the name DieHard. Until recently, a Sears’ service truck was as common as a FedEx truck is today. In its prime, there were Sears catalog stores, Sears’ automotive centers, and many services, from roofing, siding, air conditioners, to bath remodeling. In a way, Sears invented Omni-channel shopping. The downward trend and decline is due to a series of missteps in Sears’ supply chain management.

Background

Sears, the American chain department store, was founded in 1893 by Richard Warren Sears and Alvah Curtis Roebuck. It began as a mail order catalog company, opening their first retail locations in 1925. The company grew by selling products at low prices to farms and villages, which had no other access to retail outlets. The Kenmore name first appeared on a sewing machine sold in the Sears catalogue in 1913. In 1927 they paid $500 for the rights to the Craftsman brand and sold its first tools. They later branched out into lawnmowers, and electronic and portable power tools, which led to Sears having the largest revenue of any retailer. Throughout the 1970s, Sears continued to expand its Kenmore brand to household appliances including refrigerators, freezers, and air conditioners. In 1985, the company introduced the Discover Card. It was the first company to offer cash rewards to customers using their credit card. In the late 1970s and early 1980s, Sears’ annual revenue reached about 1% of U.S. GDP, more than Amazon’s revenue last year.

Where Did Sears Go Wrong?

There are a few areas where Sears went wrong, which led to their decline.

Number 1: Branching Out

Firstly, they branched out too much. Since Sears opened, they were known for selling Craftsman and Kenmore brands, catering mostly to males and home-building products. While attempting to increase sales in the 80’s, they went after female shoppers.

“The Softer Side of Sears” ad campaign was launched in 1993 to get the attention of women and back-to-school shoppers. However, it didn’t mix well with the home-building products and washing machines. This was an early sign of them heading in the wrong direction. Since Sears added to their store, they also added on insurance, banking, investments, and real estate.

Number 2: Cutting Corners

In addition, the Sears brand that was once respected for quality, value, and innovation, began to cut too many corners. To reduce costs, they adjusted the ratio of full to part-time staff in their store, then cut commissions and benefits. They began transferring experienced sales people into departments they didn’t know, asking them to sell appliances one day, and women’s fashion the next. They sold off their credit card to create a short-term payout, but in the process lost a major competitive advantage.  

Number 3: Their Competitors

Throughout the 1990’s, Sears faced mounting competition from numerous big-box stores that offered even lower prices. In 1991, Walmart beat Sears as the nation’s largest retailer. Sears then shut down their catalog, because they thought that home delivery was not something that shoppers really wanted. Sears’ last catalog ran in 1993, just short of its 100th anniversary.

Number 4: Sears’ Supply Chain Management and Assets

In 2005, investor Eddie Lampert bought Sears, and merged with Kmart, which Lampert had bought out of bankruptcy two years earlier. They had a combined 355,000 employees and more than 3,500 stores. In 2009, Sears began cutting more jobs and then began to sell off leases to its prime locations. In 2011, after several years of profitability, Sears began posting losses.

Sears then began to sell off their biggest assets that were synonymous with their name, and in 2018 filed for bankruptcy. Their workforce totaled less than 90,000 across fewer than 900 shops at the beginning of 2018. Sears stripped their company of the unique brands that brought customers to their stores. 

The Takeaways

You must ensure that your business, and goals, stay in line. Companies shouldn’t lose sight of what you’re about or what your main focus is. Customers don’t like change.

Once the focus shifts to being all about the profit, instead of filling the gap that customers need, your business heads downhill and results in the loss of consumers. Sears didn’t do enough to reinvent as times changed. They failed to stay close to their shopper’s needs and adapt to the changes. Instead, refocusing the brand could have resulted in a smaller company, one that could again, become an industry leader.

 

Want to learn more about your supply chain? Find out how Clear Spider can help you. 

KFC is one of the top fast food restaurants in the world. With over 20,000 locations worldwide, they are a global brand with a huge operation. Being that KFC is short for Kentucky Friend Chicken, you would think that they were poultry experts. It’s the main item on the menu and is stated in its name. So how does a chicken restaurant run out of chicken? In this blog post we will discuss what went wrong and how the franchise is doing currently.

What went wrong?

In February of 2018, KFC suffered a major loss from a chicken shortage that affected its UK operations. The first thing that added to the problem was unequal distribution. At the time, they were only operating out of one warehouse. Doing this isn’t a bad practices and is something that many companies do. But for food, it’s different. Things like contamination can affect all of your inventory, therefore having multiple locations to ship out of is beneficial. In the case of KFC, delays with deliveries of ingredients was the main occurrence that contributed to the crisis.

Alongside this was a general lack of planning. Since KFC was operating out of a single location, it was as if they forgot about possible disruptions that could happen throughout the process of the supply chain. Having many restaurant locations to deliver to leaves a lot of room for potential error. In this case, since disruption happened in the beginning, it affected the rest of the operation.

Lastly, there was a lot of readjusting when they switched logistics partners from Bidvest to DHL just a few weeks prior. There may have been some oversights when it came to supply and demand, as DHL may not have been prepared. They were warned that making the switch would be detrimental, but they continued with it anyways.

These mistakes caused KFC to have ingredient shortages in many of its locations across the UK. Some restaurants could only serve a limited portion of the menu, while some closed completely. It was reported that over half of KFC restaurants had to be shut down. This went on for several days and left customers and staff alike in disbelief. The hashtag #WheresMyChicken was trending on Twitter and even escalated to local police releasing a statement to tell angry customers to stop calling about the shortage.

Recovery

Not long after the chicken shortage, KFC also suffered from a gravy shortage. Definitely not a good look for the franchise. Shortly after, they switched back to their old partners.

Though several months have passed, KFC is still working on rebuilding their image and PR. The chicken crisis left many angry and upset. In an attempt to make things a little more lighthearted, KFC put out a bunch of promotional material that joked about the crisis on both their social media accounts and website. Although humor with a touch of self awareness can help, it will still take a while for the backlash to settle down completely.

Recovery from a disaster like this is an extremely slow process, but KFC is large enough that it will not destroy them. Though damaging to their public image, there will still be loyal customers who will continue to support the franchise and their product.

What can we learn from this?

The biggest takeaway from the KFC fiasco is contingency. A combination of warehousing, logistics and forecasting problems were the causes. Ultimately, KFC did not prepare for the worst. Mass shortages may not always be a likely scenario, but that is never a 100% guarantee. Even in the most seamless supply chains, there is still room for disruption as no supply chain is perfect. There will always be chances for mishaps, big or small, and businesses need to be prepared for all of it.

Want to learn how to manage your inventory? Find out how Clear Spider can help you. 

On a regular basis, Apple continues to be a leader in supply chain. They have made the Gartner Top 25 in Supply Chain on multiple occasions, ranking #1 in the the High Tech category in 2017 and #1 Overall in 2014. But how about the present? With the launch of the most recent iPhone, the iPhone X, it doesn’t seem like Apple is in a very good position, according to specialists.

Now that a few months have passed and the hype has died down, what’s the 4-1-1 on the iPhone X now? Here are a couple reasons the latest iPhone was not as a successful as Apple hoped.

Bottlenecks

Before its official launch on November 3, 2017, it was said that only 2-3 million units were available due to delays in manufacturing. Probably one of Apple’s worst faux-pas, if you’ve gone through some inventory management best practices, you know that logistics is everything. For all large tech companies, launch dates are crucial. Especially for a product like the iPhone, which always receives a tonne of hype and media coverage prior to launch. It was reported that there had been rumors about manufacturing delays for several months before its official release, but Apple did not report anything to the public. They decided to keep going on the same timeline. Not a good look to potential investors and consumers.

It was said that the iPhone X’s TrueDepth Camera System and the choice to used OLED for its screen to be two of the reason for this bottleneck. In regards to OLED, the problem was that Samsung was already using this technology for its phone. When Apple made the switch, they did not take in account that there would be less supply available. Ultimately this caused some problems in the supply chain.

Supply and Demand

Supply and demand is one of the most fundamental concepts of business. It’s basic economics. However, this was something that Apple overlooked. Due to the manufacturing delays, supply for the launch date was low. It was reported that pre-orders outweighed supply by several million, causing a huge sale imbalance. Overall, poor planning and forecasting were the main causes of the outcomes. Especially for a company like Apple, who have previously been praised for its detailed approach to its business practices.

What Now?

It doesn’t look like the mistakes made during the launch of the iPhone X have damaged Apple too badly. Sales proved to be OK. Despite being the top selling smartphone at the beginning of 2018, that declined fairly quick. It is also rumored that they plan on cutting production of the current model soon.

As 2018 goes by, Apple will be working on the next iPhone models. Rumors about specs and pricing are circulating in anticipation for the next releases. Will it be cheaper? Faster? Everything consumers want in a smartphone and more? For now, we can only wait. Hopefully Apple has learned from the mistakes made with the iPhone X, because they really can’t afford to do it again.

Book a demo to see how Clear Spider can help with your business!

It’s no secret that Tesla has been having troubles with their supply chain lately. Last year, Tesla was even assembling the Model 3 by hand. The original goal was to make 5,000 Model 3 units per week by the end of 2017. Due to supply chain bottlenecks, this goal was then pushed back to March of 2018. Now, Tesla says they won’t meet the 5,000 units per week goal until midway through this year.

So, Tesla is still trailing behind their targets. In the last week of March, they built 2,020 cars, missing their 2,500 goal for that week. There is a wait-list 400,000 strong, who have put down a $1,000 deposit for the vehicle. Clearly, Model 3 production still isn’t where Elon  Musk wants it to be. But where is the problem coming from?

The Still Evolving Supply Chain

As a growing company, Tesla is experiencing production bottlenecks in its supply chain. Musk himself has referred to these procurement issues as “production hell.” After a subcontractor at Tesla’s Gigafactory “dropped the ball,” assembling battery cells became an issue. This was due to problems with the system integration.

But, Tesla says those problems are being mitigated. Musk says that “addressing production and supply chain bottlenecks” is what got the company in this position in the first place. They had to shut down the factory for a short period of time and upgrade their equipment.

According to Bernstein analyst Mark Newman, these supply chain bottlenecks are just part of the innovation cycle. He states that with new products, there are four barriers to mass adoption: immature technology; weak demand; incumbents’ resistance; and supply-chain bottlenecks. The latter is the last of these barriers that Tesla needs to solve.

Eliminating Your Supply Chain Bottlenecks

Tesla’s growing pains bring up some important supply chain questions. Where do supply chain bottlenecks come from? Can you eliminate them before they even happen?

The truth is that bottlenecks can occur anywhere in a supply chain, especially when it comes to manufacturing. By definition, a bottleneck is a point of congestion where input is faster than the ability to output to the next step. They can come from inefficient processes, inadequate equipment and much more.

Here’s three steps you can take to find and fix bottlenecks in your supply chain:

Prevention: Gain visibility into your data 

With end-to-end visibility of your supply chain, you can identify where bottlenecks may occur. You can gain this visibility by using an inventory management system to collect data at all points of your supply chain. Using a system, you can view reports and analytics to make smart, real-time decisions. This type of info can give you new insights into your supply chain. You can see which processes are at risk and where potential bottlenecks may arise.

Preparation: Always Have a Backup Plan

Tesla’s latest supply chain came from subcontractor issues. Do you have backup suppliers that you can rely on in case of disruption? If you use one supplier, this is a potential bottleneck. If that supplier experiences disruptions, the effect will trickle down to your supply chain as well.

Once you use visibility and analytics to identify potential problems, you need to act on them. That way, if something goes wrong you will already have a plan in place to handle it.

Solution: How can I fix a bottleneck? 

If a bottleneck occurs, decide what type of problem it is. Is the problem that the process is inefficient, or should you change the volume of inputs? If you decide its the former, can you automate this process? With automation, you can increase productivity and save your employees time. If your problem is the latter, consider decreasing input. If input is too high, there will be plenty of spare stock laying around while the bottleneck catches up. Be careful, carrying costs can make up 20-30% of the inventory cost.

 

In conclusion, there is much we can learn from Tesla’s supply chain growing pains. All firms can be subject to bottlenecks, and insight is vital into stopping them.

If you’d like to learn more about gaining end-to-end visibility of your supply chain, contact our team at Clear Spider for a demo.

The market of fast fashion is exactly that – fast, and H&M is having a hard time keeping up. Competitors like ASOS and Boohoo have cut down their supply chains to between two to four weeks. In contrast, H&M is falling behind with a six month turnaround time. Although H&M was once a top performer and pioneer of fast fashion, operating profit went down 62% in the first quarter of 2018.

Also, H&M was late to the e-commerce game. Shopping habits are moving more and more online, but this is an area where H&M is lacking. The reality is that they’re not the cheapest or the trendiest brand. Between this and the online shortcomings, H&M is running into problems.

Their latest is a $4.3 billion inventory problem. That’s the value of unsold inventory they’re currently holding. But how did this even happen? With 220 new stores opening and an expansion in e-commerce, more stock was needed. However, H&M greatly overestimated just how much they’d need.

Now, H&M needs to get rid of the $4.3 billion worth of unwanted inventory. There are plans to slash prices further and even talk of burning stock. There’s even a power plant in Sweden burns defective H&M items instead of coal. Obsolete inventory comes with carrying costs that can mean huge losses for a firm. Here’s three ways you can avoid it:

Lower Lead Times

Lead times are crucial to all firms, but especially to H&M given the nature of their operations. Focusing on trendier pieces, it’s vital to get items out before the world moves on to the next big thing.

Your firm may not be under the same pressure, but obsolete inventory piling up is still very costly. With lower lead times, you can streamline your supply chain. As a result, this will help you react quicker and avoid obsolete stock.

Improve Forecasting

Since they were opening new stores and expanding their e-commerce site, H&M also ramped up production. However, they clearly did not accurately forecast the demand for their products. This is a vital aspect of avoiding obsolete inventory. You have to keep in mind that at the end of a product’s life cycle, it will no longer sell.

This is also where an inventory management system comes in. You can use these solutions to forecast demand and make real-time decisions. Don’t forget that there are many factors that affect demand, which brings us to our next point.

Better Quality and Design

These days, competition in the fast fashion world is fierce. Stores like Zara and ASOS are known to quickly replicate runway trends on a large scale. In contrast, H&M is falling behind in quality, cost, and design. This can also have implicit costs such as damaging a firm’s reputation. As a result, H&M is alienating loyal customers and not attracting new ones.

If the quality and design of a product is poor, demand will quickly decline. As a result, you may be left with large amounts of obsolete inventory. What differentiates you from your competitors? Are the quality and design of your products meeting customer expectations?

 

There’s a lot we can learn from this inventory fiasco. Obsolete stock comes with a price tag, both in the stock itself and the cost of holding it. Carrying costs consist of storage, depreciation, labour, disposal, and more. With these tips, you can avoid obsolete inventory and the costs that come with it.

I know what you’re thinking– how could inventory management possibly be related to a NCAA basketball tournament? Here’s the thing: they’re more alike than you may know. From preparation to execution to the end result, there are many lessons from March Madness that you can apply to the way you manage your inventory.

Are You Ready For It?

How do athletes prepare for March Madness? They train, practice, study their competition, come up with game plans, and more. The more ready they are for what’s ahead, the better. You can apply this idea to the way you manage your inventory.

When it comes to safety stock, you don’t want to have too much or too little. Too much means you’re paying extra carrying costs, and too little means you’re missing out on potential profits. As a result, the best way to prepare is to ensure that your forecasting is accurate. Using an inventory management system, you can predict future stock levels and demand.

Without the right system, you may be left manually entering data. But, as we explored earlier, data integrity has a huge impact on your supply chain. When it comes to manual entry, this is human error-prone process. As a result, you may be using bad data to forecast. Don’t forget: when it comes to data, garbage in means garbage out.

It’s no secret that it’s always better to be prepared. Whether you’re playing 67 other teams in basketball or managing your inventory, preparation is key.

There’s No I In Team

You know what they say: there’s no I in team. In basketball, there’s five players allowed on the court for each side at a time. Their mindsets are aligned and they’re all on the same page. As a result, they work together to achieve their goal: winning. Also, each player has a designated role to play. For example, the point guard acts as the coach on the floor, the center plays near the baseline usually scoring in the key, etc.

Similarly, you have teammates in your supply chain. Depending on your firm, you may have less than five, you may have much more. Just like in basketball, each member has a role. Your team is your suppliers, customers, vendors, and everybody else who is part of your supply chain. No matter how many parties you’re collaborating with, communication is vital. Do the other members of your supply chain team know what your goals are? Do you share the same goals?

When there’s open communication between all parties, you can be sure that everybody is working together and on the same page. In basketball, players are always communicating with one another. Maybe it’s the point guard calling out plays, or the forward signaling they’re open to receive the ball. By openly communicating, the team can work together to get the job done.

One way to open up communication in your supply chain is with visibility. With a cloud-based inventory solution, you can give your partners a real-time view of your inventory levels. This can also help you build trust with your supply chain partners. When you collaborate with others, you can work together to achieve your goals.

Know Your Risks– And Your Rewards 

This year, for the first time in March Madness history, the No. 16 seed team beat the No. 1 seed team. Only 2.18% of brackets were predicting this, knocking out almost 98% of brackets right at the start. This underdog win came out of nowhere, and clearly most people were not expecting it.

Are you ready for unexpected disruptions in your supply chain? Increasing climate change risks could cause great damage to your supply chain. The 2017 Atlantic Hurricane season was the most active in history, bringing major disruptions to the logistics, energy, and agriculture sectors. It shut down ports, millions lost power, and there were billions of dollars in crop damage.

The key to surviving unforeseen supply chain risks is building a resilient supply chain. You can do this by gaining visibility, identifying the weak spots, and collaborating. With these three strategies, you’ll be able to make real-time decisions, improve vulnerabilities, and make network-wide changes.

The Winner – Is It You?

Here’s one stark difference: unlike filling out a March Madness bracket, the odds of you winning at inventory management aren’t 1 in 9.2 quintillion. In fact, they’re much higher than that. Using these strategies, you can gain control and visibility of your inventory. You can avoid stock outs and overstocking, make real-time decisions, and build a responsive, resilient supply chain.

With these March Madness lessons in mind, you can be an inventory management winner.

 

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