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Buggy WMS software hits sneaker retailer with $32 million sales loss

By Ben Ames | January 29, 2016 | 1:14 PM

The next time anyone in your company downplays the importance of supply chain software, pull out a copy of the “Third Quarter Fiscal Year 2016 Results” from The Finish Line, Inc., an Indianapolis-based retailer of athletic shoes, apparel, and accessories.

Earnings reports generally make extremely dull reading, but logistics industry professionals will flip through this one like a spy thriller novel from an airport bookstore.

Skip to the chase scene, and you will discover that the company recently installed a new warehouse and order management system which apparently disrupted its entire supply chain, triggering $32 million in lost sales over a 13-week period, the shuttering of 150 stores (representing one-quarter percent of the company’s branded retail outlets), and the reassignment of the company’s CEO to a seat on a board of directors.

“Our third quarter performance was severely impacted by a disruption in our supply chain following the implementation of our new warehouse and order management system,” outgoing CEO Glenn Lyon said in the Jan. 7 statement. The report covered a period spanning the 13 weeks ending Nov. 28, 2015, and featured a bottom line with consolidated net sales of $382.1 million—a decrease of 3.5 percent over the prior year period—and a slump in comparable store sales of 5.8 percent.

“Specifically, in October, we began experiencing issues flowing fresh inventory into our stores as well as fulfilling online orders as the new system was unable to process freight at volumes necessary to support our sales plans,” Lyon said. “We worked quickly to address the disruption in our system and improve our operating capabilities, increasing technical and operational resources including third party experts… We anticipate that we’ll return to a stable operating environment during the first quarter and we will start leveraging the multiple benefits from our supply chain system enhancements.”

In a separate announcement on Jan. 7, Finish Line said that company president Sam Sato will succeed Lyon as CEO on Feb. 28. In turn, Lyon will remain on the company’s board, but will transition to the role of non-executive chairman of the board beginning Jan. 1, 2017.

Although it plans to cut its line of branded retail stores from 600 to 450, Finish Line will continue its relationship with Macy’s, which allows it to reach a current total of 1,010 Finish Line retail locations, located primarily in U.S. malls and shops inside Macy’s department stores.

In addition to fixing its software SNAFU, the company’s future challenges will include fine-tuning its omnichannel strategy to allow it to keep prices low while delivering goods quickly, according to a Wall Street Journal article on the quirky earnings report.

Neither the Finish Line press release nor the newspaper story cited the specific problem with the WMS or indicated which vendor had sold the faulty system.

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