Running head: supply chain 26th November 2013 Introduction Local and international companies have taken initiatives to maintain an effective supply chain in order to ensure that their products are appropriately distributed in the market…
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 to loss of a lot of investor’s funds thus resulting to their closure and court litigation as the investors seek for 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 failure to do an 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 on 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 involves 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 loss of billion 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 system that will provide products that will meet 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 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 man power to undertake the task. As result, the managements were not aware of the repercussion of either adopting 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 to 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 the 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 1990s, the company was faced with an issue that made it lose huge market share. In 1995, ...
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