Why The Most Sophisticated Supply Chains Fall Apart In The Last Few Links

Written by Evan Schuman
January 4th, 2008

In what is surely a retail tech addendum to Murphy’s Law, the more sophisticated and elaborate a retailer’s supply chain strategy is, the more it’s likely to fall apart in the last few feet and, naturally, when it’s needed most.

I was reminded of this when shopping this past holiday season in a major national chain and wanted a particular model product, which the store was out of. "No problem," I was told by a store associate. "We’ll have a large shipment in just a few hours. It may be in there."

Conversations with store customer service and the store’s general manager—who happened to walk by—made it clear the store had no way of identifying the contents of the truck, which was just a few hours away. Clearly, it had already been fully-loaded by other employees of this chain so the information should be known, no?

Various supply chain players said such a situation is often not a technological problem as much as a psychological one. For example, if a regional manager has decided the store won’t get as many of the ultra-hot Widget Du Jour as the store wanted, the regional manager might be trying to avoid an argument. "Once they discover we only gave them ten when the truck is unloaded, they realize it’s a done deal and won’t bother complaining," the regional manager might say.

The problem is fairly common, said Shoshanah Cohen, co-author of a supply chain book ("Strategic Supply Chain Management: The Five Disciplines for Top Performance") and a director of PRTM.

"When a hot product is not available in a retail location, odds are good that product is in high demand in other locations as well. Most companies use sophisticated allocation algorithms to determine where distribution inventory will end up. A retail location can be denied inventory it had ordered because the algorithm determines it is more optimal to send it elsewhere," Cohen said. "So it has been ordered and the store expects it (and tells the customer it is coming), but it doesn’t arrive. Most store managers are too busy to go back and confirm that what they ordered is what’s actually coming."

Getting full access to supply chain data is a good thing, but getting access to flawed data can be worse than getting no data at all. Does this justify denial of access? No. Does it happen anyway? Sure.

"The holiday season is a frantic time for electronics retailers and the environment within a distribution center can be highly chaotic as people scramble to fill orders. Tools such as barcode scanners have greatly reduced errors related to manual data entry, but they can’t prevent someone from putting the right box on the wrong truck," Cohen said.


2 Comments | Read Why The Most Sophisticated Supply Chains Fall Apart In The Last Few Links

  1. Jerry Sheldon Says:

    Same thing happened to me last year with Circuit City. I was so ticked I sent an email to Philip Schoonover their CEO six days before Christmas, talking about this and other issues with poor store performance. Beleive it or not he read my email and had his executive assistant call me the very next day to apologize, say the issue was being addressed and they would work to correct the inventory visibilty issue. I was told that they had a truck coming in, but again, no visibility as to what was going to be one it! When you get upset about something write the CEO and tell them what you expect. They are at least listening.

  2. Emmanuel Oshitoye Says:

    In my years in management I have found all retailers to have a suspicious view of store management. It appears they are trusted to run the store and contribute millions to the bottom line. However; they are not trusted enough to provide consumers with current real time inventory status. Why?

    American Consumers are impatient, much more so during the comercialized holiday season. A retailer that gives a consumer empty promises has taught their consumer never to trust the retailer again. The consumer loses retail loyalty and uses other options to locate and purchase desired merchandise. Retailers and consumers are losers, lost loyalty, potentially lost creditability, and lost revenue. All of this from a simple decision to reduce visibilty of product, from retail leadership. Is this a wise decision, maybe not? With the increase of competition with numerous modes of product distribution, maybe retailers should remind themselves of one simple yet valuable question. How can we improve customer service that will add to our bottom line. The answer seems easy to those of us who have been given inaccurate information by uninformed employees, both as employees and as customers.

    Emmanuel Oshitoye Jr.
    Product Designer/Tomax Corporation
    Salt Lake City, Utah


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