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

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.

March of the robots

I’m definitely not a techie. Just ask the long-suffering co-workers who rescue me when my laptop, smartphone, or various Google products (I’m talking about you, GVoice and Calendar) periodically become “uncooperative.” I grumble about technology all the time. But there is one aspect of technology that never fails to hold my attention and earn my admiration: robotics.

I know little about their inner workings or the nitty-gritty details of the technologies that make them do what they do. Still, they mesmerize me at trade shows, and I can barely tear myself away from watching them while on factory tours.

In the past few weeks, I’ve had several occasions to think about robotics and its impact on supply chains. On recent tours of the factories where The Raymond Corp. and Toyota Industrial Equipment Manufacturing make their forklifts, for example, robotic welders and laser cutters were much in evidence. These machines were unaffected by the intense heat, searingly bright light, and around-the-clock demand for perfect accuracy. And last month, my colleague David Maloney, chief editor of DC Velocity, and I toured a giant, highly automated pharmaceutical distribution facility in Japan. There we saw brawny robotic arms picking up individual packages of medicines and gently, precisely placing them on conveyor belts. At a demonstration center showcasing the latest products developed by Daifuku, the company we visited in Japan, we saw a robot that can pick up, deposit, and locate totes and boxes anywhere on a floor, without racks or storage structures; it can also remove individual items from a tote and place them on a conveyor or in another container.

Without these and the many other types of robots, manufacturing, warehousing, and distribution would be slower and production and shipment volumes diminished. More people would be required to carry out dangerous, exhausting, and mind-numbingly repetitive tasks. In conditions like those, people get hurt, quality inevitably becomes inconsistent, and the need for rework grows. Yet many people still view manufacturing and warehouse robots as competition for jobs.

Last month, Joseph F. Engleberger, a robotics pioneer who developed a robotic arm for use on assembly lines (way back in the 1960s!) that greatly accelerated production in many industries, passed away at the age of 90. Engleberger had an answer to those who charged that robots were taking good jobs away from people. In a 1997 New York Times interview, he asserted that the belief that robots stole jobs was “unjustified.” The robots, he pointed out, “take away subhuman jobs which we assign to people.” Based on what I’ve seen in factories and distribution centers, it’s hard to dispute that argument.

Warming up for the supply chain

While I am writing this blog posting, my area in Pennsylvania is experiencing the first real snowfall of the year. Just a few inches outside now. This is mid-January already, and to say that we have had a mild winter so far is certainly an understatement.

For the most part, the recent holiday season was a big winner from a transportation and distribution standpoint. Absent were the hiccups parcel carriers experienced in 2013 when many presents arrived too late to go under the tree by Christmas morning. Parcel capacity has expanded over the past two years, which has been the biggest factor in avoiding the nightmares of the Ghosts of Shipping Past.

Yes, volumes were high – about 1.3 billion packages in December alone, but most products got to destinations on time. Retailers also have gotten smarter, which has resulted in making the volume easier to handle. Many online stores began promotions earlier and more often, which helped spread the Black Friday and Cyber Monday deals over several weeks instead of one weekend.

But even with these changes, a lot of credit for a successful shipping season must be given to El Nino, which gave us mild weather that broke records across the nation. The lack of snow meant planes were flying, trains were moving, trucks were not delayed, and products met promised delivery dates. Lower fuel costs were an added benefit. Certainly such mild weather is not something we can expect every year, but at least for this season, we will count our blessings.

Logistics providers could add green links to global supply chain, DHL says

Imagine delivery trucks that haul used packaging back to warehouse recycling centers as they make their daily routes. Think of consumers who help slash even more consumer waste by choosing reusable packaging for the delivery of their online purchases.

A recent report from global 3PL and supply chain management giant DHL describes these and many other creative logistics initiatives that could help support a greener supply chain.

Of course, logistics managers already apply sustainable business practices in many corners of the supply chain, from using renewable fuels in forklifts and tractor-trailer cabs to paring excess miles off delivery routes and idling unused conveyor belts.

Despite these advances, however, the industry could do much more to support sustainable business practices, according to a November 2015 DHL report titled “Fair and Responsible Logistics.”

Beyond just saving the planet, supply chain firms can use green business practices to create a lasting competitive advantage. By embedding fair and responsible logistics at the core of their business models, these companies can ensure that their profits grow hand in hand with sustainability, says the study developed by the DHL Trend Research team, a unit of Deutsche Post DHL Group.

To blaze the trail for this green shipping initiative, the report identifies 15 potential use cases for fair and responsible logistics in the areas of circular economy, fair access, and fair production and trade.

The report points out that today’s climate of mass production and consumption is causing imbalances in global societies and the environment. In response, the group suggested three potential solutions.

First, logistics providers could establish recycling-friendly trucks that provide the infrastructure for both logistics and recycling. Such a truck would be equipped with a flexible interior that adjusts during delivery, shrinking the delivery area as parcels are offloaded, and growing the collection area as recyclables are collected on the return journey.

A second way to increase recycling volumes and reduce waste would be deploying bio-degradable materials to help cope with burgeoning parcel volumes, allowing consumers to compost the packaging in their gardens. An alternative to this approach is shipping items in reusable containers, just as shoppers increasingly use reusable bags at grocery stores. Known as “logistics unverpackt” in German, the strategy could lead to zero-waste shipping by eliminating the need for online delivery packaging.

In a third twist on standard logistics practices, logistics providers could map out complex end-to-end supply chains for smaller companies. By establishing greater transparency, this practice could expose areas where there are opportunities to improve “fair and responsible business.”

As they experiment with these methods, supply chain practitioners should see the philosophy as a potential profit center, not an additional cost, the report insists. While many companies today are relying on digitalization and technology as key sources of business rejuvenation, they should also listen to the growing expectations of consumers to “go fair.” By following the maxim “doing well comes from doing good,” logistics companies can leverage their position in managing global trade networks to accelerate fair and responsible business in other industries, as well.

“Logistics is a network business with a global reach that can play a key role in helping businesses to ‘go fair’ and in improving transparency across the entire supply chain,” said Markus Kückelhaus, vice president Innovation and Trend Research, DHL Customer Solutions and Innovation. “By placing fair and responsible logistics at the core of our own business, new revenue streams can be generated, as well as new social and environmental value for all stakeholders.”

To read the full report, see www.dhl.com/content/dam/downloads/g0/about_us/logistics_insights/dhl_trendreport_fairresp.pdf.