Members of the Supply Chain - Case Study Example

For the last 25 years, many companies have been negatively affected by the failure of their supply chain an aspect that has caused some of these companies to be acquired by their competitors at very low prices. Other failed companies have resulted in the loss of a lot of investor’s funds thus resulting in their closure and court litigation as the investors seek compensation. This paper will discuss common mistakes that are done by the company leading to supply chain disasters.

 One of the key mistakes that companies make is failing to do extensive research on the suitability of the technology in improving their supply chains. For example, in its effort to improve production, Foxmeyer failed to research how effective the new ERP system and the highly automated DC would be. Despite the efforts by the consultant to notify the company management that some areas of the new technology were not properly functioning, no step was taken. That ignorance has also greatly contributed to the supply chain disasters. Lack of undertaking feasibility studies that involve the evaluation of the benefits and costs associated with the supply chains is also a mistake that led to their failure. It is vital to note that before any company invests in new technology or a supply chain, it is essential to calculate the returns that are expected. For example, despite being an experienced manager, Robert Smith, the General Motors CEO failed to evaluate the performance of the robot technology leading to a supply chain problem that entailed a loss of billions of dollars in the investment (Supply Chain Digest, 2009). Lack of adequate market research is also another mistake that companies have made. Market research is crucial since it allows a company to initiate a system that will provide products that will meet the ready market. However, some companies such as Webvan, an online grocer invested in automated warehouses that reduced the company capital to a great extent yet the market demand for its products was very low. The same case applied to Cisco. On its part, Cisco failed to initiate an inventory visibility study as well as the adoption of poor market research leading to piles of products that were not demanded in the market. As a result, Cisco wrote down its inventory while the stock decreased by 50%. The company has yet to recover. During the planning stages of the management, most of the companies that faced the supply chain disasters did not skilled manpower to undertake the task. As result, the management was not aware of the repercussion of either adopting a new system or even entering new markets. For instance, in its effort to move its production facility from Manila to low costs countries in 1994, Aris Isotoner resulted in a reduction of costs by 50% while the Isotoner unit was sold to Totes. A mistake of poor estimation of the number of products and the delivery time is also a major cause of the supply chain disasters. For example, in 1999 Toys R Us.com company failed to realize that its system was not able to produce and deliver thousands of orders to its customers. This created a negative public image even though the company outsourced the supply to Amazon.com.

One of the companies that experienced a notable supply chain disaster was Apple Incorporation. Despite being a market leader in the production and selling of personal computers in the 1990s, the company was faced with an issue that made it lose huge market share. In 1995, the company emulated a conservative inventory strategy. Just in that time, the demand for Power Macs increased but the company failed to supply its customer with the brands. This resulted in negative public relations for the company as well as loss of customers and reduction in market share.  The company could have prevented this issue in various ways. First, the management could not have done away with the conservative inventory strategy and ensure that more outlets for the distribution of its brands are established. By closely monitoring the demand for Power Macs in the market, the company could have emulated competitive pricing to ensure that its customers were able to get their products any time they wanted. Apple could also have emulated other companies to assist it in the distribution of its products. Even though this would have been costly, the consumers would have easier access to the company brands thus eliminating the delay.  Instead of using the conservative inventory strategy, Apple could have used the strategy of linking its inventory to sales value. This entails computation of the stock to sales ratio (SSR) as the major performance measure that is vital in planning inventory values on a monthly basis. One of the key advantages of SSR is that avoids the cases of overstock.

Conclusion

Based on the above discussion, it is clear that the supply chain disasters that have been experienced by companies such as  Foxmeyer, Boeing, GM, Webvan, Adidas, Denver Airport baggage handling system, Mattel, and Hershey among others could have been avoiding by ensuring that mistakes in technology research, mistakes in market research and ignorance of the management team were evaded. Additionally, the companies should have hired qualified consultants to guide their expansion strategies to avoid risks of failure in foreign markets.