supply chain management failure case study

3 True Stories of Supply Chain Management Disasters (And How to Avoid Them)

• Post author: prodadmin
• Post published: July 31, 2020
• Post category: Acumatica / Inventory / Supply Chain
• Post comments: 1 Comment

The fear of a supply chain disaster destroying years, even decades, of hard-earned company growth is enough to keep managers up at night — and for good reason: the smoking ruins of once-thriving companies have littered history, and fatal SCM mistakes have often been the culprit.

But with disaster comes new opportunities and, perhaps most importantly, new lessons that can help us learn from the mistakes of other businesses. These three SCM nightmares from history, though sobering, offer some valuable insights: 

1. The Massive Boeing 787 Delay and Its Painful Supply Chain Birth Pangs

In the mid-2000s, Boeing’s shiny new game-changing commercial airliner, the 787, was sending waves of excitement throughout the transportation industry.

But the planes weren’t getting finished quickly enough.

Initially scheduled to enter service in May of 2008, disastrous SCM problems resulted in a delay of over three years. It finally went into service in October of 2011, as  Air Transport World noted  with exasperation.

So what went wrong with Boeing’s supply chain management?

To put it simply: Boeing badly wanted to do more than it could handle, and they failed to assess the risks properly as they charged ahead. They attempted to rapidly change the assembly process and the supply chain simultaneously — and too quickly — to disastrous results.

Aerospace-Technology.com made these observations  about the debacle:

Changing the supply chain and the assembly process all at once is probably two steps too far too soon. “Boeing probably underestimated the size of the risks involved,” says Robin Jackson, chief executive at ADR International.

In the same report, an analyst cautioned companies to be careful about how quickly they introduce innovations: “If Boeing mismanaged anything, it is that they have tried to introduce an innovation in their supply systems at the same time they have innovated in product and assembly.”

In other words, their supply chain really wasn’t ready yet. But they charged ahead anyway.

2. Target Canada Ruined by Epic Barbie SUV Traffic Jam

In more recent history, Target announced in January 2015, as reported by USA Today, that they were pulling all their stores out of Canada and leaving the market. Why?

They had a traffic jam of pink Barbie SUVs — literally. As Reuters reported:

A pink Barbie-branded SUV that seats two toddlers offers a surprising glimpse into the myriad problems that jammed up Target Corp’s supply chain…The toy was one of many products that piled up in bewildering volume at Target’s new distribution centers…Goods were coming into the warehouses faster than they were going out, in part because the barcodes on many items did not match what was in the computer system.

Like Boeing, they took on too much too quickly, as Reuters noted: “Instead of a slow province-by-province rollout, the retailer clinched a big real estate deal, locking itself into a rapid, coast-to-coast launch that later magnified supply chain problems.”

The failure cost Target more than $2 billion. Their supply chain traffic jam left shelves empty and shoppers frustrated.

Marc Wulfraat, the president of logistics consulting firm MWPVL International — a man who has analyzed and written about Target’s supply chain extensively — summed up the epic scope of Target’s failure with one sentence: “The Target Canada story will go down in the history books as one of the great supply chain disasters of Canadian history.”

As a Target spokeswoman Molly Snyder confessed to USA Today: “We tried to do too much, too fast.”

3. It's All In the Timing: The Great Hershey's Chocolate Meltdown of '99

In 1999, in the months leading up to the over-hyped Y2K doomsday, Hershey’s had a little doomsday of their own: they failed to deliver $100 million of Hershey’s Kisses and Jolly Ranchers to stores in time for Halloween. As a result, the company’s stock lost 8% in one day when the problem was announced.

As CIO.com noted in their coverage of the Hershey incident in the early 2000s: “Hershey’s only real failure was its timing in launching its new order-taking and distribution system: the system went live right about the time when orders were pouring in for Halloween, and they couldn’t be fulfilled.”

What’s the common thread here?

Don’t rush the launch of new systems and supply chain protocols. And get outside help. Every company has blind spots in their judgment, even behemoths like Boeing and Target. Getting an outsider’s input will diagnose any fatal blind spots. (MaxQ Technologies, for example, offers superb application development and business intelligence consulting under one roof to ensure companies transition into new systems with success.)

Tips for Avoiding Disaster

The general principle is clear: don’t try to do too much too quickly. Beneath that generality there are some specific, practical things to remember:

Always operate with comprehensive visibility throughout every step in the supply chain.

As Chris Kushmaul, the vice president of finance for the American Production and Inventory Control Society’s greater Detroit chapter told Enterprise Apps Today: “If you don’t know where your raw materials originate from, what locations they will have to pass through, where your distributors are located and where your finished goods will travel, that could be costing you inefficiencies today and will hamper your risk management efforts in the future.”

Always be prepared for disruptions in the supply chain.

Jeff Karrenbaur, president of Insight, Inc., told Enterprise Apps Today how to be prepared: “Companies must be prepared for business disruptions by having in place overall risk management and resilience plan. They must perform rigorous analysis of their supply chain network to uncover its vulnerabilities and manage risk.”

Avoid launching a new product with multiple suppliers (unless you have enough resources to pull it off).

Akhil Oltikar, vice president of supply chain solutions at Riverwood Solutions, explains it this way: “…With a multiple contract manufacturer launch, the brand owner is faced with managing two of everything – a process that is far more complex than simply doing the same things twice. Managing the complexities introduced by launching a new product at multiple contract manufacturers almost always slow things down and causes more problems than it solves.”

Bridge the disconnect between the planning stage and the delivering stage.

This is a more tragic example of what poor supply chain management can do. Lithium-ion batteries — the little packets of power in our mobile devices, laptops, and other daily tech devices — explode when overheated, and such incidents have caused damages, injuries, even fatalities. Some of these explosions occurred while being shipped. Air carriers even refused to ship the batteries for that reason.

Toby Gooley, the editor of Supply Chain Quarterly, analyzed the exploding battery problem and came to this conclusion in a recent June 2015 article: “…it seems likely that the product planning phase did not take into account all of the activities and conditions that would occur at each subsequent stage in the supply chain.”

A Fresh Perspective

Oftentimes, these supply chain problems — whether it’s a company rushing into something or it’s a disconnect between critical nodes in the supply chain — can be remedied by bringing in the right kind of outside help.

In a February 2015 article about supply chain management in health care, Jean Skora, materials manager at The Surgery Center of Pinehurst (N.C.), explained the value of getting help from outside consultants — whether it’s implementing powerful new distribution software carefully tailored to your needs or it’s getting fresh advice: “They can provide your supply chain staff with a new point of view. A fresh perspective can re-energize an overwhelmed staff.”

MaxQ Technologies has that fresh perspective you need. Contact us to learn about our highly effective distribution software solutions and consulting services that will help you avoid supply chain management disasters.

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Boeing 787 Global Supply Chain Failure | MBA Case Study.

The global supply chain failure with the Boeing 787 has been covered in the media a great deal.  Various SCM related issues are discussed in the case.

Here is the artificial intelligence response when asked: What happened with the Boeing 787 Global Supply Chain Failure?

The Boeing 787 Global Supply Chain Failure was a production and supply chain problem that affected the development and delivery of the Boeing 787 Dreamliner, a wide-body jetliner. The problem arose in the late 2000s and early 2010s and was caused by a number of factors, including issues with the design and development of the aircraft, difficulties with the global supply chain that supported the production of the aircraft, and production delays.

One of the key issues with the supply chain for the 787 was that Boeing outsourced much of the production of the aircraft to a network of suppliers around the world. This allowed for cost savings and increased efficiency, but it also created challenges in coordinating the production and delivery of the various components of the aircraft. As a result, there were delays in the delivery of components, which led to production bottlenecks and delays in the delivery of the aircraft to customers.

In addition to supply chain issues, the 787 also faced other challenges, including problems with the aircraft’s design and development, as well as issues with the materials used in the construction of the aircraft. These problems contributed to the overall production and supply chain failure for the 787.

Overall, the Boeing 787 Global Supply Chain Failure was a complex problem that was caused by a combination of factors, including issues with the design and development of the aircraft, difficulties with the global supply chain, and production delays. The problem had significant impacts on Boeing and its customers, and it took several years for the company to fully resolve the issues and return to normal production levels.

Further Information about the Production Problems with the Boeing 787 Dreamliner.

The Boeing 787 Dreamliner is a wide-body jet airliner manufactured by Boeing Commercial Airplanes. It was introduced in 2011 and is the first commercial airplane to use composite materials for most of its structure.

The Boeing 787 Dreamliner was plagued by production and delivery delays due to a number of factors, including:

• The use of new materials and production techniques:  The 787 Dreamliner is the first commercial airplane to use composite materials for most of its structure. This required Boeing to develop new production techniques, which took longer than expected.
• The global supply chain:  The 787 Dreamliner is a global airplane, with parts sourced from suppliers all over the world. This made it difficult to coordinate production and delivery.
• The complexity of the aircraft:  The 787 Dreamliner is a complex airplane, with over 100,000 parts. This made it difficult to identify and fix problems.

The production and delivery delays of the Boeing 787 Dreamliner cost Boeing billions of dollars and damaged its reputation. The company has since taken steps to improve its production processes and reduce the risk of future delays.

Here are some of the key lessons that Boeing learned from the 787 Dreamliner experience:

• The importance of a strong supply chain:  Boeing underestimated the challenges of managing a global supply chain for a complex aircraft.
• The importance of thorough testing:  Boeing did not adequately test the 787 Dreamliner before it entered service, which led to a number of problems.
• The importance of communication:  Boeing did not communicate effectively with its customers and suppliers about the delays, which led to frustration and anger.

Continuous Improvement Quotes

• “Learning is not compulsory; it’s voluntary. Improvement is not compulsory; it’s voluntary. But to survive, we must learn.” ~ W. Edwards Deming
• “Continuous improvement is better than delayed perfection.”  ~ Mark Twain
• “When you are out observing on the gemba, do something to help them.  if you do, people will come to expect that you can help them and will look forward to seeing you again on the gemba.” ~ Taiichi Ohno.
• “One gets a good rating for fighting a fire. The result is visible; can be quantified. If you do it right the first time, you are invisible. You satisfied the requirements. That is your job. Mess it up, and correct it later, you become a hero.”  ~W. Edwards Deming
• “Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all.” ~ Dale Carnegie
• “Boeing has made the necessary changes to ensure that the 787 Dreamliner meets all certification standards” ~ FAA
• “Watch the little things; a small leak will sink a great ship.” ~ Benjamin Franklin
• “Quality depends on good data. It also depends on executive leadership in using that data.”  ~  Juran Institute, Inc.
• “Boeing started a new line for their 787 Dreamliner, creating 1,000 new jobs in South Carolina, giving our state a shot in the arm when we truly needed it.” ~ Nikki Haley
• “Observing many companies in action, I am unable to point to a single instance in which stunning results were gotten without the active and personal leadership of the upper managers.” ~  Joseph M. Juran

Flight and Supply Chain Resources

• 10 Fastest Passenger Planes In The World.
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• Best Drone Quotes.
• Billionaire Race for Space: Musk, Branson, and Bezos.
• Boeing Builds a 737 Plane in Just 9 Days.
• Continuous Improvement – The Most Important Aspect… START.
• Continuous Improvement Tools: Lean and Six Sigma.
• Jet Engine Maintenance – How Delta Fixes $32 Million Jet Engines.
• SCM Training & Overview .
• Supply Chain Quotes: Take it to the next level.
• Supply Chain Resources by Topic & Supplier.

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Target Supply Chain Strategy to Beat Amazon and Walmart’s Fast Delivery.

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Lessons Learned From the Nike Supply Chain Management (SCM) Failure

by Bill Baumann | Jan 27, 2022

A supply chain management system is supposed to help a company streamline and centrally manage its flow of goods and services. It isn’t supposed to result in excess inventory or lead to extensive order delays. 

Yet, that’s exactly what happened when Nike implemented an SCM system back in 2001. Performed in partnership with i2 Technologies, the project started off promising but quickly veered off-track. As a result, the mega-brand’s supply chain malfunctioned at several critical junctures, leading to a significant dip in profits. 

Today, we’re taking a closer look at the Nike SCM failure in this inventory management case study . We’ll share what happened, the lessons learned, and how you can avoid a similar fate in your own implementation. 

Contemplating litigation?

We have multiple software expert witnesses available for provision of reports, depositions, and testimonies.

The Nike SCM Failure: What Happened?

At its core, SCM software is designed to help companies reduce their operating costs by enabling more accurate and timely forecasts. With the right platform, users can better anticipate their suppliers’ purchasing requirements, as well as upcoming customer orders. 

Nike began installing the i2 SCM software in 2001. The goal was to automate certain parts of the supply chain for its footwear division, including inventory and order management. 

When the system went live, however, it was unable to match Nike product inventories with customer demand. As a result, the company experienced both excesses and shortages — both of which cut into their bottom line.

In fact, Nike announced  that as a result of its failed SCM project, it would be unable to meet its third-quarter projections.

According to one analyst, the financial implications were even greater. Specifically, the SCM breakdown with i2 was only one part of a larger technical failure that ultimately cost Nike $400 million over the course of the year.

The failure also caused i2 stock to  drop 22% , and led to a public dispute between Nike and i2.

Let’s look at the phases leading up to this SCM failure and discuss how it could have been avoided. 

4 Lessons Learned From The Nike SCM Failure

Are you planning an SCM implementation at your organization? When all the right steps are in place, these platforms have the potential to transform your supply chain operations for the better. 

Yet, as evidenced by Nike, the wrong moves can have the opposite effect.

Here are a few key lessons learned:

1. Keep Industry Complexity in Mind

One challenge that Nike faced was an inventory that was both vast and varied.

This is the case with most retail establishments. Trying to organize everything into an SCM system is a complex and time-consuming endeavor. Not only are there different products, but there are also different color options and sizes to consider.

It’s important to make sure you have the time and resources in place to input all this data before going live. This includes allocating the right personnel to the effort.

In this case, Nike hired the i2 consulting team to oversee the transformation, but there were still insufficient protocols to protect against critical software issues.

Considering that this was meant to be a multi-year systems upgrade that would eventually lead to global deployment, project leaders should have built a project plan that accounted for industry-specific challenges. 

2. Software Customizations Can Strain a Project

Many times, organizations will choose to customize some functions of their SCM, CRM, or ERP system . While these changes can help the software work for an organization’s unique needs, they can also heap additional cost and risk onto a project. 

With the Nike project, representatives acknowledged that standard methodology wasn’t in place during the implementation. While the i2 software came equipped with an apparel industry template, Nike chose not to use it.

Instead, they pursued a custom approach and rushed the migration process, settling for data that insufficiently represented their company. This strained the software beyond its built-in capabilities and led to issues with data transfer.

3. Tests and Pilot Runs are Key

One of the most glaring issues with the Nike SCM implementation was that the system, which affected the brand’s global supply chain, wasn’t tested even once before it went live. 

Testing is an essential stage in any enterprise software project. It gives the IT team a chance to identify and remediate any bugs or problems. This ensures fewer headaches when it’s finally time to go live. 

At the same time, it’s equally important to conduct system pilot runs. This ensures the software, data, and processes all work together seamlessly.

Going live without adequate testing or conference room pilots not only leaves the system ripe for failure but can also decrease user morale. A platform that malfunctions does little to increase confidence in new workflows, which can lead to organizational change management  challenges.

4. The Right Talent Makes a Difference

The people at the helm of an SCM project can greatly influence its success. Both Nike and i2 admitted shortcomings in this regard.

This was a major project that required top-tier talent. Both sides should have been equally invested in the outcome by building a strong project team.

Unfortunately, Nike’s IT staff was already stretched thin at the time of the implementation because employees were focusing on two other projects involving ERP and CRM software . 

Optimize Your SCM Implementation

The challenges involved in the Nike SCM failure don’t have to deter you from pursuing a similar project at your own company. As long as the right plans are in place,  SCM software or ERP implementation can help you improve the efficiency of your supply chain management processes.

Contact our enterprise software consultants below for a free consultation.

About the author

Bill Baumann

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Case Study: When Tragedy Strikes Your Supply Chain

• Ram Subramanian

In the wake of a factory collapse, a clothing retailer must decide whether to relocate production.

Laura Cronenberg, the CEO of Tots & Teens, sipped her black tea in the lounge of Shahjalal International Airport and took some time to collect herself before her flight departed. The past few days had been a whirlwind, and she was still trying to make sense of how her work life had transitioned so abruptly from celebration to crisis.

• Ram Subramanian is a professor of leadership at Stetson University.

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Top 10: Worst supply chain disasters in history

Walkers - the world’s largest single producer of crisps (or ‘potato chips’, if you’re from North America) - has taken out full-page adverts in national UK newspapers, to apologise  for the ongoing shortage of its products. 

The UK firm, based in Leicester, has been at the centre of a crisp-shortage storm for almost a month. Yet the problem has nothing to do with congested container ports, a lack of lorry drivers or any of the other multitude of pandemic-fuelled supply chain issues affecting so much of the world. 

The problem was caused by a computer glitch, following an IT upgrade made by parent company, PepsiCo.

Following weeks of shortages, Walkers has now formally apologised to customers, across social media and also in full-page ads in national newspapers. 

In the ad, headed ‘Humble Pie: the flavour we never wanted to taste’, Walkers says the situation is “getting better” and that it is “working 24/7 to address the backlog and meet orders”.

You have to feel for them. So, in order to make the C-suiters at Walkers feel a little better about things, here are ten wince-inducing examples of supply chain own-goals from history - some of which make Walkers’ problems seem minor by comparison. 

10. KFC, 2018

Why didn't the chicken cross the road? Because of KFC’s supply chain and its lack of contingency planning. February 14, 2018 is not a day KFC UK will look back on with love hearts in its eyes. This was the day it moved to a new supply chain provider, switching from Bidvest to DHL. Bidvest had six warehouses, DHL had just one. That’s an important detail. That warehouse was in Rugby, smack-bang in the middle of the UK. That’s another. The same morning, a fatal traffic incident closed the M6 motorway near… Rugby. With its lorries stuck in the traffic - and no other locations from which to dispatch chicken - KFC was in big trouble. By February 18, just 266 of its 870 restaurants in the UK and Ireland were open. It was lampooned by the country's media for poor planning. 

9. Denver International Airport, 1995

Following long delays, this brand-new airport finally opened in 1995. Early in the planning stage, United Airlines insisted on an ambitious automated high-speed baggage system that ran from the concourses to the main terminal. But technical and communication problems meant the system was only ever partly operational, and in aviation circles its mishandling of bags became the stuff of legend, with clothing and personal effects scattered beneath the system's tracks as luggage was spewed off. In the end, United returned to traditional handling methods. 

8. Toys R Us, 1999

In September 2018 Toys R Us filed for bankruptcy but back in 1999 it was red hot. E-retail was really heating up, and the online division of Toys R Us advertised heavily. Santa-like, the company promised to fulfil Christmas deliveries on any order placed by December 10, and was duly swamped by tens of thousands of orders. Although most of its inventory was in place, it simply couldn’t pick, pack and ship the orders fast enough. Some employees worked 49 straight days to meet demand, but to no avail. Just days before Christmas, Toys R Us was less Santa, and more Grinch, as it sent out thousands of now-infamous, “We’re sorry,” emails, telling customers their orders would not be arriving in time for Christmas. Never have so many tears been shed by so many children in such little time.  

7. Hershey, 1999

As for all chocolate makers, Halloween is a trick-or-treat cash-fest. It’s their sales sweet-spot. In 1999, Hershey spent more than $100 million on transforming its IT infrastructure and supply chain. Expected to go live in April, 1999, the schedule slipped, and rather than wait until the following year, Hershey switched over in the summer. But the  system was dogged with issues, not least of which was that inventory was not visible to the order management system. As a result, $150 million in orders were missed. Quarterly profit dropped by 19 per cent and the company’s stock value plummeted. 

6. Snap-on Tools, 1997

The US maker of high-end tools and equipment for use in the transportation industry installed an order management system implementation in 1997. It didn’t work, and led to $50 million in lost sales for the first half of 1998. Meanwhile, operating costs soared by 40 per cent, as extra staff were hired to overcome system issues. The company’s profits dropped by 22 per  cent in 1998.

5. Adidas, 1996

In 1993, the German sports shoe-and-clothing maker implemented a warehouse management system in its Spartanburg distribution hub in South Carolina. But the IT firm it was using went bust mid-project, so it engaged another, and forged ahead. Frustrated by long delays, in 1996 Adidas went live before the system was ready. Nothing worked, and it was unable to process and ship orders. It was able to fulfil just one fifth of its $50 million orders in North America. Adidas suffered market-share losses for years after, and haemorrhaged IT and logistics staff. 

4. Nike, 2001

In this year, sports-gear giant Nike went live with a new -  and supremely complex - supply chain planning system. Bugs and integration left the company with significant inventory shortages and excesses. Nike ended up slashing prices to get rid of the additional inventory,  putting pressure on margins and profits. At a quarterly conference call, Nike cited “software problems” for causing a $100 million revenue shortfall, and Wall Street knocked 20 per cent off its stock price. 

3. Apple, 1995

Back in 1995, Apple was market leader in a deeply fragmented PC market. But that all changed, thanks to a supply chain blunder. That year, Apple was set to introduce its new line of PowerMac PCs just before the Christmas season. Having been burned two years earlier by excess inventory after aggressively launching its PowerBook laptops, the company throttled back on inventory. But demand for PowerMacs went stratospheric and Apple was left facing $1 billion in unfilled orders. Its stock price was slashed by half, and the company spiraled into a cycle of decline that only the return of its visionary founder, Steve Jobs, was able to arrest.

2. General Motors, 1980-85

For 20 years, GM was the world's most profitable company. By 1970 its revenue was $22.8 billion. Now, it’s an also-ran auto manufacturer, and the seeds of its decline can be traced back to its desire to automate its supply chain. Reacting to a 1970s labour strike, then-CEO Roger Smith vowed to roboticise the manufacturing process. Between 1980 and 1985 the company spent an eye-watering $45 billion on automation. But the spending saw its global market share rise by just a single percentage point, to 22 per cent. Over the coming years, it increasingly lost market share, and watched as Toyota delivered low-cost, high-quality vehicles with a low-tech production approach. As a nameless GM exec said at the time: "For the same money we could have bought Toyota and Nissan outright."

1.  Foxmeyer, 1996

In 1996, Foxmeyer was the second largest wholesale drug distributor in the US, with sales of more than $5bn. Then it decided to revamp not only its IT systems but also all of its distribution facilities. It was leading-edge stuff at the time - almost in the realms of science-fiction. Accordingly, the company forecast huge efficiency gains from its new systems, and had such confidence in those forecasts that it bid future contracts based on expected cost reductions. Big, big mistake. Its new systems did not deliver any cost savings, because they barely worked, and so it was unable to handle any of its vastly increased orders. Before long, Foxmeyer had filed for bankruptcy, and its operating division was sold to rivals McKesson, for just $80 million.

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Taking the pulse of shifting supply chains

Since the onset of the COVID-19 pandemic, we have asked supply chain leaders annually about their efforts to overcome disruptions, mitigate risks, and build resilience in their operations. Our third and most recent survey shows that companies have made significant progress on measures that have been on their agenda since the start of the crisis, and that work has helped them weather supply chain challenges such as geopolitical disruption and the worldwide shortage of semiconductors.

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This article is a collaborative effort by Knut Alicke , Edward Barriball , Tacy Foster , Julien Mauhourat, and Vera Trautwein, representing views from McKinsey’s Supply Chain service line.

For example, over the past year, many companies have made structural changes to their supply networks by implementing dual or multiple sourcing strategies for critical materials and moving from global to regional networks. And as companies shift their focus from visibility to improvements in demand and supply planning, supply chain digitization efforts are also entering a new phase.

However, most respondents admit that they still have significant work to do. An acute shortage of talent is holding organizations back in their efforts to accelerate digitization and implement advanced planning systems. And despite progress over the past 12 months, many companies still lack a comprehensive picture of the risks lurking deep inside complex multitier supply networks.

Data for this year’s survey were collected from 113 supply chain leaders worldwide, representing organizations from a broad range of industries. We ran the survey over a three-week period from the end of March to the middle of April 2022.

An acute shortage of talent is holding organizations back in their efforts to accelerate digitization and implement advanced planning systems.

Network resilience: Footprints on the move

The turbulence of the past two years has forced many organizations to address vulnerabilities in their complex, highly globalized supply networks. But the 2020 and 2021 supply chain pulse surveys revealed a significant gap between respondents’ ambition and their action. While many respondents said they wanted to diversify their supply base and boost in-region sourcing, the most common action in response to disruption was increases in the inventory of components and finished projects.

Bigger buffers and safety stocks are still seen as an important tool for supply chain resilience. Eighty percent of respondents told us that they increased their inventories during 2021; separate McKinsey analysis of almost 300 listed companies found that inventories increased by an average of 11 percent between 2018 and 2021, 1 S&P Global; Corporate Performance Analytics (CPA) by McKinsey (n = 293 listed companies). with the largest increases in the high-tech and commodity sectors. Some supply chain leaders have told us that they would have increased inventories even further if suppliers had been able to meet their requests.

While higher overall stock levels have become the norm, our survey suggests that companies are now looking for smarter ways to ensure resilience while keeping inventory costs under control. Seventy-one percent of respondents expect to revise their inventory policies in 2022 and beyond (Exhibit 1).

Companies are also reporting significant progress in longer-term strategies designed to increase network resilience. For example, 81 percent of respondents say that they have implemented dual-sourcing strategies during the past year, up from 55 percent in 2020. Forty-four percent of respondents, up from 25 percent the previous year (an even larger relative jump), say they are developing regionalized supply networks (Exhibit 2). Most respondents expect this momentum to continue. Sixty-nine percent of supply chain leaders told us that dual sourcing will continue to be relevant in 2022 and beyond, and 51 percent think the same about regionalization.

Overall, our survey shows that disruption has reshaped almost every supply chain. Ninety-seven percent of respondents say they have applied some combination of inventory increases, dual sourcing, and regionalization to boost resilience. Supply chain leaders believe that these efforts are paying off: Eighty-three percent told us that the footprint resilience measures they have taken over the past two years helped them minimize the impact of supply chain disruptions in 2022. For example, respondents from the commodity, consumer goods, and chemicals sectors were most likely to say that recent geopolitical disruption has not resulted in significant supply chain challenges this year; it is these industries that have focused most on structural changes such as nearshoring or network redesign. This situation may change as disruption continues, however, since data collection for our survey was conducted in the spring of 2022.

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Supply chain planning: a winning formula.

The volatility of the past two years has rigorously tested planning teams. Our survey reveals a formula, with three key ingredients, for resilient supply chain planning (Exhibit 3).

The first of those is visibility—companies can manage their supply chains only when they have a clear picture of each link. This is one area where organizations report significant recent progress: sixty-seven percent of respondents have implemented digital dashboards for end-to-end supply chain visibility. And those companies were twice as likely as others to avoid supply chain problems caused by the disruptions of early 2022.

The second ingredient is robust scenario planning, which can be seen in the planning counterpart to footprint redesign. Scenario planning has not been as widely adopted as visibility tools, with only 37 percent of respondents saying they had implemented the practice. These companies are also twice as likely as others to have avoided supply chain challenges this year.

An essential foundation to both supply chain visibility and effective scenario planning is comprehensive, accurate master data. Just over half the respondents tell us that the quality of the data in their supply chain planning systems were “sufficient” or “high,” suggesting that many companies still have room to improve their data collection and data management processes. High-quality data were associated with lower levels of recent supply chain disruption, although the effect was less pronounced than with visibility or scenario planning.

Digitization: Building on success

Previous surveys revealed that most companies ramped up their digital supply chain investments significantly over the past two years. Digital tools have been critical to companies’ efforts to improve the resilience of supply chain planning and execution.

That story continues in our most recent survey: in almost every sector, more than 90 percent of respondents report that they invested in digital supply chain technologies last year. Only two sectors—automotive and healthcare—report lower-than-expected investments. For the automotive sector, that finding hints at implementation delays, while healthcare companies may have slowed their pace of digitization following several years of rapid progress. Overall, just over 80 percent of respondents expect to make further investments this year and beyond.

However, the focus of these investments is changing significantly, a shift that can be attributed to the success of recent digitization projects. Last year, supply chain visibility was the top priority for companies, with 77 percent of respondents saying they were investing in this area. This year, with little more than half saying they have supply chain visibility systems in place, it has fallen to fourth place (Exhibit 4).

As companies address their visibility issues, digitization efforts are shifting to the next big challenge in supply chain management: capturing the demand signal. In this year’s survey, respondents report that the top two priorities for digital investments were demand and supply planning, cited by 74 percent and 69 percent, respectively. Fifty-eight percent of respondents are prioritizing inventory optimization.

Of the companies looking to invest in advanced planning systems, more than two-thirds say they expect to use the technology offered by their existing supply chain software provider. This is indicative of a continued market shift away from specialized point solutions for specific tasks and toward integrated end-to-end technology platforms. DIY isn’t dead in the supply chain sector, however: thirty-seven percent of respondents tell us that they expect to develop at least some supply chain software in-house, with most focusing on specific point-solutions such as visibility dashboards.

Digital talent remains a significant challenge for companies. In our 2020 survey, only 8 percent of respondents felt they had sufficient in-house talent to support their digital ambitions. By 2021, when many large digitization projects were in full swing, that number had dropped to just 1 percent. The situation has improved somewhat in the past year: in our latest survey, 10 percent of companies indicate they now have the talent they need. Respondents from the high-tech sector report the most progress in acquiring digital talent, with 20 percent more respondents than last year saying they had sufficient talent to meet their needs. Respondents from the automotive, aerospace, and defense sectors, by contrast, were much more likely than last year to report “limited” or “no” in-house digital supply chain talent.

The past two years have also seen a marked shift in companies’ approach to talent acquisition. In 2020, 70 percent of companies were building talent by reskilling their existing labor force. This year, the primary approach, used by 68 percent of companies, was outside hiring. That shift might reflect the dramatic increase in labor mobility that has occurred worldwide following the lifting of coronavirus restrictions.

Risk management: Steady progress

While companies have made radical changes in the way they use technology to manage their supply chains over the past two years, the development of their supply chain risk management capabilities has been much more incremental.

Risk remains a priority for most respondents in our latest survey, with 83 percent of respondents experiencing at least some raw-materials shortages over the past year. Ninety percent say that they want to further increase resilience, and almost three-quarters expect to increase the budget allocated to resilience-related actions. Over the past 12 months, two-thirds of companies have implemented new supply chain risk management practices; among the most popular approaches are new processes to monitor supplier-related risks.

Forty-five percent of survey respondents say that they either have no visibility into their upstream supply chain or that they can see only as far as their first-tier suppliers.

However, understanding the status of complex, multitier supply chains is still proving extremely challenging. Forty-five percent of respondents tell us that they either have no visibility into their upstream supply chain or that they can see only as far as their first-tier suppliers.

Future-proofing the supply chain

There are some signs of progress. Last year, a paltry 2 percent of respondents said they had a good picture of their supply chains down to the third tier or beyond. This year, that fraction has increased to 17 percent, with the greatest progress in sectors with shorter, simple supply chains (Exhibit 5). In the consumer products and retail sector, for example, 21 percent of respondents feel they have sufficient multitier transparency. Forty-three percent of respondents from the commodity sector believe their organizations have sufficient supply chain resilience measures in place, even though only 14 percent have a good view of third-tier suppliers. Deep supply chain transparency remains especially problematic for the automotive, aerospace, and defense sectors, with only 9 percent of respondents confident in their third-tier supplier visibility and none expressing satisfaction with their supplier visibility at all levels.

For the third year in a row, supply chains remain at the top of the corporate agenda. Our latest survey shows that companies have made significant efforts to improve supply chain resilience over the past 12 months by expanding their successful digitization programs and implementing structural changes to their networks. With volatility and disruptions likely to continue, we expect resilience to remain a key topic for the foreseeable future. For leaders, upcoming priorities include more sophisticated approaches to planning, further adaptation of supply networks, and smarter inventory management strategies.

Knut Alicke is a partner in McKinsey’s Stuttgart office; Edward Barriball is a partner in the Washington, DC, office; Tacy Foster is a partner in the Charlotte office; Julien Mauhourat is an associate partner in the Paris office; and Vera Trautwein is an expert in the Zurich office.

The authors wish to thank Tim Beckhoff and Jürgen Rachor for their contributions to this article.

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Sunday, October 16, 2022

• Labels: Case Studies , Project Failure , Project Success

Case Study 16: Nike’s 100 Million Dollar Supply Chain "Speed bump"

“This is what you get for 400 million, huh?” 

Nike President and CEO Phil Knight famously raised the question in a conference call days before announcing the company would miss its third-quarter earnings by at least 28% due to a glitch in the new supply chain management software. The announcement would then send Nike’s stock down 19.8%. In addition, Dallas-based supply-chain vendor i2 Technologies, which Nike assigned blame, would suffer a 22.4% drop in stock price.

The relationship would ultimately cost Nike an estimated $100 million. Each company blamed the other for the failure, but the damage could have been dramatically reduced if realistic expectations had been set early on and a proper software implementation plan had been put in place. Most companies wouldn’t overcome such a disastrous supply chain glitch or “speed bump,” as Knight would call it, but Nike would recover due to its dominant position in the retail footwear and apparel market.

In 1999, two years before Knight’s famous outburst, Nike paid i2 $10 million to centralize its supply, demand, and collaboration planning system with a total estimated implementation cost of $40 million. Initially, i2 was the first phase of The Nike Supply Chain (NSC) project. The plan was to implement i2 to replace the existing system and introduce enterprise resource planning (ERP) software from SAP and customer relationship management (CRM) software from Siebel Systems.  

The goal of the NSC project was to improve Nike’s existing 9-month product cycle and fractured supply chain. As the brand experienced rapid growth and market dominance in the 1990s, it accumulated 27 separate order management systems around the globe. Each is entirely different from the next and poorly linked to Nike’s headquarters in Beaverton, Oregon.

At the time, there wasn’t a model to follow at the scale Nike required. Competitors like Reebok struggled to find a functional supply chain solution specific to the retail footwear and apparel industry. In an effort to solidify its position as the leader in sportswear, Nike decided to move forward quickly with i2’s predictive demand application and its supply chain planner software.

"Once we got into this, we quickly realized that what we originally thought was going to be a two-to-three-year effort would be more like five to seven," - Roland Wolfram, Nike’s vice president of global operations and technology.

The NCS project would be a success, and Nike would eventually accomplish all its supply chain goals. However, the process took much longer than expected, cost the company an additional $100 million, and could have been avoided had the operators or both companies taken a different approach to implementation.

"I think it will, in the long run, be a competitive advantage." – Phil Knight

In the end, Knight was right, but there are many valuable lessons to learn from the Nike i2 failure.

If you want to make sure your business critical project is off to a great start instead of on its way on my list with project failures? Then a New Project Audit is what you are looking for. If you want to know where you are standing with that large, multi-year, strategic project? Or you think one of your key projects is in trouble? Then a Project Review is what you are looking for. If you just want to read more project failure case studies? Then have a look at the overview of all case studies I have written here .

So, before we get into the case study, let’s look at precisely what happened...

Timeline of Events

1996 - 1999

Nike experienced incredible growth during this period but was at a crossroads. Strategic endorsement deals and groundbreaking marketing campaigns gave the company a clear edge over Adidas and Reebok, its two most substantial competitors in the 80s and 90s. However, as Nike became a world-renowned athletics brand, its supply chain became more complex and challenging to manage.

Part of Nike’s strategy that separated itself from competitors was the centralized approach. Product design, factory contracting, and order fulfillment were coordinated from headquarters in Oregon. The process resulted in some of the most iconic designs and athlete partnerships in sports history. However, manufacturing was much more disoriented.

During the 1970s and 80s, Nike battled to develop and control the emerging Asian sneaker supply chain. Eventually, the brand won the market but struggled to expand because of the nine-month manufacturing cycle.

At the time, there wasn’t an established method to outsource manufacturing from Asia, making the ordering process disorganized and inefficient across the industry. In addition, Nike’s fractured order management system contained tens of millions of product numbers with different business rules and data formats. The brand needed a new way to measure consumer demand and manage purchasing orders, but the state of the legacy system would make implementing new software difficult.

At the beginning of 1999, Nike decided to implement the first stage of its NSC project with the existing system. i2 cost the company $10 million but estimated the entire project would cost upwards of $400 million. The project would be one of the most ambitious supply chain overhauls by a company of Nike’s size. 

i2 Technologies is a Dallas, Texas-based software company specializing in designing solutions that simplify supply and demand chain management while maximizing efficiency and minimizing cost. Before the Nike relationship, i2 was an emerging player in logistics software with year-over-year growth. Involvement in the Nike project would position the company as the leading name in supply chain management software.

Nike’s vision for the i2 phase of NSC was “achieving greater flexibility in planning execution and delivery processes…looking for better forecasting and more profitable order fulfillment." When successfully implemented, the manufacturing cycle would be reduced from nine months the six. This would convert the supply chain to make-to-order rather than make-to-sell, an accomplishment not yet achieved in the footwear and apparel industry.

Predicting demand required inputting historical sales numbers into i2’s software. “Crystal balling” the market had substantial support at the time among SCM companies. While the belief that entering numbers into an algorithm and spitting out a magical prediction didn’t age well, the methodology required reliable, uniform data sets to function.

Nike decided to implement the “Big Bang” ERP approach when switching to i2 for the supply chain management. The method consists of going live where the business completely changes without phasing out the old system. Nike also opted for a single instance strategy for implementation. The CIO at the time, Gordon Steele, is quoted saying, “single instance is a decision, not a discussion.” Typically, global corporations choose a multi-instance ERP solution, using separate instances in various regions or for different product categories.

By June of 2000, various problems with the new system had already become apparent. According to documents filed by Nike and i2 shareholders in class-action suits, the system used different business rules and stored data in various formats, making integration difficult. In addition, the software needed customization beyond the 10-15% limit recommended by i2. Heavy customization slowed down the software. For example, entries were reportedly taking over a minute to be recorded. In addition, the SCM system frequently crashed as it struggled to handle Nike’s tens of millions of product numbers.

The issues persisted but were fixable. Unfortunately, the software was linked to core business processes, specifically factory orders, that sent a ripple effect that would result in over and under-purchasing critical products. The demand planner would also delete ordering data six to eight weeks after it was entered. As a result, planners couldn’t access purchasing orders that had been sent to factories.

Problems in the system caused far too many factory orders for the less popular shoes like the Air Garnett IIIs and not enough popular shoes like the Air Jordan to meet the market's demand. Foot Locker was forced to reduce prices for the Air Garnett to $90 instead of the projected retail price of $140 to move the product. Many shoes were also delivered late due to late production. As a result, Nike had to ship the shoes by plane at $4-$8 a pair compared to sending them across the Pacific by boat for $0.75.   

November 2000

According to Nike, all the problems with i2’s supply chain management system were resolved by the fall. Once the issues were identified, Nike built manual workarounds. For example, programmers had to download data from i2’s demand predictor and reload it into the supply chain planner on a weekly basis. While the software glitches were fixed and orders weren’t being duplicated or disappearing, the damage was done. Sales for the following quarter were dramatically affected by the purchasing order errors resulting in a loss of over $100 million in sales.

Nike made the problem public on February 27, 2001. The company was forced to report quarterly earnings to stakeholders to avoid repercussions from the SEC. As a result, the stock price dove 20%, numerous class-action lawsuits were filed, and Phil Knight famously voiced his opinion on the implementation, "This is what you get for $400 million, huh?"

In the meeting, Nike told shareholders they expected profits from the quarter to decline from around $0.50 a share to about $0.35. In addition, the inventory problems would persist for the next six to nine months as the overproduced products were sold off.

As for the future of NSC, the company, including its CEO and President, expressed optimism. Knight said, "We believe that we have addressed the issues around this implementation and that over the long term, we will achieve significant financial and organizational benefit from our global supply-chain initiative."

A spokeswoman from Nike also assured stakeholders that the problems would be resolved; she said that they were working closely with i2 to solve the problems by creating “some technical and operational workarounds” and that the supply chain software was now stable.

While Nike was positive about the implementation process moving forward, they placed full blame on the SCM software and i2 Technologies.

Nike stopped using i2’s demand-planning software for short-and-medium range sneaker planning; however, it still used the application for short range and its emerging apparel business. By the Spring of 2001, Nike integrated i2 into its more extensive SAP ERP system, focusing more on orders and invoices rather than predictive modeling.

What Went Wrong?

While the failures damaged each company’s reputation in the IT industry, both companies would go on to recover from the poorly executed software implementation. Each side has assigned blame outward, but after reviewing all the events, it's safe to say each had a role in the breakdown of the supply chain management system.

Underestimating Complexity

Implementing software at this scale always has risks. Tom Harwick, Gigi Information Group’s research director for supply chain management, said, “Implementing a supply-chain management solution is like crossing a street, high risk if you don't look both ways, but if you do it right, low risk.”

One of Nike's most significant mistakes was underestimating the complexity of implementing software at such a large scale. According to Roland Wolfram, Nike’s operators had a false sense of security regarding the i2 installation because it was small compared to the larger NSC project. "This felt like something we could do a little easier since it wasn’t changing everything else [in the business]," he says. "But it turned out it was very complicated."

Part of the reason why the project was so complicated was because of Nike’s fractured legacy supply chain system and disoriented data sets. i2’s software wasn’t designed for the footwear and apparel industry, let alone Nike’s unique position in the market.  

Data Quality

Execution by both parties was also to blame. i2 Technologies is on record recommending customization not to exceed 10-15%. Nike and i2 should have recognized early on that this range would be impossible to accommodate the existing SCM system.

Choosing a Big Bang implementation strategy didn’t make sense in this scenario. Nike’s legacy system data was too disorganized to be integrated into the i2 without making dramatic changes before a full-on launch.

Poor Communication

Communication between Nike and i2 from 1999 to the summer of 2000 was poor. i2 claimed not to be aware of problems until Knight issued blame publicly. Greg Brady, the President of i2 Technologies who was directly involved with the project, reacted to the finger-pointing by saying, "If our deployment was creating a business problem for them, why were we never informed?" Brady also claimed, "There is no way that software is responsible for Nike's earnings problem." i2 blamed Nike’s failure to follow the customization limitations, which was caused by the link to Nike’s bake-end.

Rush to Market

At the time, Nike was on the verge of solidifying its position as the leader in footwear and sports apparel for decades to come. Building a solid supply chain that could adapt to market trends and reduce the manufacturing cycle was the last step toward complete market dominance. In addition, the existing supply chain solutions built for the footwear and apparel industry weren’t ready to deploy on a large scale. This gave Nike the opportunity to develop its own SCM system putting the company years ahead of competitors. Implementing functional demand-planning software would be highly valuable for Nike and its retail clients.

i2 also was experiencing market pressure to deploy a major project. Had the implementation gone smoothly, i2 would have a massive competitive advantage. The desire to please Nike likely played a factor in i2’s missteps. Failing to provide clear expectations and communication throughout the process may not have happened with a less prominent client.  

Failure to Train

After the problems became apparent in the summer of 2000, Nike had to hire consultants to create workarounds to make the SCM system operational. This clearly indicates that Nike’s internal team wasn’t trained adequately to handle the complexity of the new ERP software.

Nike’s CIO at the time reflected on the situation. "Could we have taken more time with the rollout?" he asked. "Probably. Could we have done a better job with software quality? Sure. Could the planners have been better prepared to use the system before it went live? You can never train enough."

How Nike Could Have Done Things Differently

While Nike and i2 attempted to implement software that had never been successfully deployed in the global footwear and apparel industry, many problems could have been avoided. We can learn from the mistakes and how Nike overcame their challenges with i2 to build a functioning ERP system.

Understanding and Managing Complexity

Nike’s failure to assess the complexity of the problem is at the root of the situation. Regardless if the i2 implementation was just the beginning of a larger project, it featured a significant transition from the legacy system. Nike’s leadership should have realized the scale of the project and the importance of starting NSC off on the right foot.  

i2 also is to blame for not providing its client with realistic expectations. As a software vendor, i2 is responsible for providing its client with clear limitations and the potential risks of failing to deploy successfully.

See " Understanding and Managing Your Project’s Complexity " for more insights on this topic.

Collaborate with i2 Technologies

Both companies should have realized that Nike required more than 10-15% customization. Working together during the implementation process could have prevented the ordering issues that were the reason for the lost revenue.

Collaboration before deployment and at the early stages of implementation is critical when integrating a new system with fractured data. Nike and i2 should have coordinated throughout the process to ensure a smooth rollout; instead, both parties executed poor project management resulting in significant financial and reputational blows.  

See " Solving Your Between Problems " for more insights on this topic.

Hire a 3rd Party Integration Company

Nike’s lack of understanding of the complexity of SCM implementation is difficult to understand. If i2 had been truthful in that they did not know about problems with their software, Nike could have made a coordinated decision not to involve the software company during the process.

Assuming that is the case, Nike should have hired a 3rd party to help with the integration process. Unfortunately, Nike’s internal team was not ready for the project. Outside integrators could have prevented the problems before the damage was done.

Not seeking outside help may be the most significant aspect of Nike’s failure to implement a new SCM system.   

See " Be a Responsible Buyer of Technology " for more insights on this topic.

Deploy in Stages

A “Big Bang” implementation strategy was a massive mistake by Nike. While i2 should have made it clear this was not the logical path considering the capabilities of their software and Nike’s legacy system, this was Nike’s decision.

Ego, rush to market, or failure to understand the complexities of the project could all have been a factor in the decision. Lee Geishecker, a Gartner analyst, stated that Nike chose to go live a little over a year after starting the project, while projects of this scale should take two years before deployment. In addition, the system should be rolled out in stages, not all at once.

Brent Thrill, an analyst at Credit Suisse First Boston, is on record saying he would have kept the old system running for three years while testing i2’s software. In another analysis, Larry Lapide commented on the i2 project by saying, "Whenever you put software in, you don't go big bang, and you don't go into production right away. Usually, you get these bugs worked out . . . before it goes live across the whole business."

At the time, Nike’s planners weren’t prepared for the project. While we will never know what would have happened if the team had been adequately trained, proper preparation would have put Nike in a much better position to handle the glitches and required customizations.

See " User Enablement is Critical for Project Success " for more insights on this topic.

Practice Patience in Software Implementation

At the time, a software glitch causing a ripple effect that would impact the entire supply chain was a novel idea. Nike likely made their decisions to risk the “Big Bang” strategy, deploy in a year without phases and proper testing, and not seek outside help because they assumed the repercussions of a glitch wouldn’t be as catastrophic.

Impatience resulted in avoidable errors. A more conservative implementation strategy with adequate testing would have likely caught the mistakes.

See " Going Live Too Early Can Be Worse as Going Late " for more insights on this topic.

Closing Thoughts

One of the most incredible aspects of Nike’s implementation failure is how quickly the company bounced back. While Nike undoubtedly made numerous mistakes during the process, NSC was 80% operational in 2004.

Nike turned the project around by making adjustments and learning patience. Few companies can suffer a $100 million “speed bump” without filing bankruptcy, but Nike is in that position because of its resilience. The SAP installation wasn’t rushed and resumed many aspects of its original strategy. In addition, a training culture was established due to the i2 failures. Customer service representatives receive 140 to 180 hours of training from highly skilled “super users,” All employees are locked out of the system until they complete their required training courses.

Aside from the $100 million loss, the NSC project was successful. Lead times were reduced from nine months to six (the initial goal), and Nike’s factory inventory levels were reduced from a month to a week in some cases. Implementing a new SCM system also created an integration between departments, better visibility of customer orders, and increased gross margins.

While Nike could have executed far more efficiently, Phil Knight’s early assessment of the i2 failure turned out to be true. In the long run, the process gave Nike a competitive advantage and was instrumental in building an effective SCM system. 

In a nutshell: A failure to demonstrate patience, seek outside help, and rush software implementation can have drastic consequences.  

> Nike says i2 hurt its profits

> I2 Technologies, Inc.

> How Not to Spend $400 Million

> i2-Nike fallout a cautionary tale

> Nike rebounds: How Nike recovered from its supply chain disaster

> Scm and Erp Software Implementation at Nike – from Failure to Success 

> I2 Says: "You Too, Nike"

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Evaluating the impacts of COVID-19 outbreak on supply chain risks by modified failure mode and effects analysis: a case study in an automotive company

Amir hossein ghadir.

1 Faculty of Management, University of Tehran, Tehran, Iran

Hadi Rezaei Vandchali

2 Australian Maritime College, University of Tasmania, Launceston, Australia

Masoud Fallah

3 Faculty of Management, Economics and Engineering of Progress, Iran University of Science and Technology, Tehran, Iran

Erfan Babaee Tirkolaee

4 Department of Industrial Engineering, Istinye University, Istanbul, Turkey

Supply chains have been facing many disruptions due to natural and man-made disasters. Recently, the global pandemic caused by COVID-19 outbreak, has severely hit trade and investment worldwide. Companies around the world faced significant disruption in their supply chains. This study aims to explore the impacts of COVID-19 outbreak on supply chain risks (SCRs). Based on a comprehensive literature review on supply chain risk management, 70 risks are identified and listed in 7 categories including demand, supply, logistics, political, manufacturing, financial and information. Then, a modified failure mode and effects analysis (FMEA) is proposed to assess the identified SCRs, which integrates FMEA and best–worst method to provide a double effectiveness. The results demonstrate the efficiency of the proposed method, and according to the main findings, “insufficient information about demand quantities”, “shortages on supply markets”, “bullwhip effect”, “loss of key suppliers”, “transportation breakdowns”, “suppliers”, “on-time delivery”, “government restrictions”, “suppliers’ temporary closure”, “market demand change” and “single supply sourcing” are the top 10 SCRs during the COVID-19 outbreak, respectively. Finally, the practical implications are discussed and useful managerial insights are recommended.

Introduction

Risks associated with supply chains have been a main issue for companies as they can cause serious damages to the company’s performance. Since a supply chain includes a network of related actors, a disruption in one part of the chain can significantly affect the other actors as well (Rezaei Vandchali et al., 2020 ; Vandchali et al., 2021a ). The numerous examples such as $400 million loss for Ericsson due to a fire in 2000 (Chopra & Sodhi, 2004 ), losing $72 million in profit for Toyota due to tsunami in 2011 (Pettit et al., 2013 ), and losses of profits by Boeing ($2 billion), Cisco ($2.25 billion) and Pfizer ($2.8 billion) because of the poor decisions associated with supply chain risks (Oliveira et al., 2017 ) shows the importance of having a robust approach to manage those risks. Companies find that to have a competitive advantage in long-term, they should improve their abilities in responding and mitigating a wide variety of supply chain risks (Baryannis et al., 2019 ). Supply chain risk management (SCRM) plays a critical role in companies’ operations as it can help them to overcome the challenges caused by real-world uncertainties in a proactive manner (Tang & Musa, 2011 ). For example, to manage disruptions caused by sustainability violations, firms need to collaborate with their supply chain network actors to manage the negative consequences (Vandchali et al., 2021b ). Thus, SCRM is increasingly gaining attention from academicians and practitioners as it is responsible for identifying, assessing, mitigating, and monitoring potential disruptions in the supply chain to reduce the negative impact of risk events in supply chain operations (Munir, 2020 ; Yang et al., 2021 ).

The recent COVID-19 outbreak has caused drastic changes in global supply chains (Queiroz, 2020 ; Tirkolaee et al., 2021a ). Countries have faced lockdown and border closure which makes it more difficult to supply enough products and services. Markets and industries have confronted predicaments and many factories have shut down due to financial difficulties in affected regions. For example, many countries in Southeast Asia imposed lockdown in March and April 2020 to reduce the fast spread of the pandemic (e.g. Indonesia on March 15, Malaysia on March 18, Philippines on March 25, Singapore on April 3, Thailand on April 30) (Salcedo et al., 2020 ). As a result, global supply chains have been impacted profoundly due to their high dependency on their vulnerable suppliers (Tirkolaee et al., 2021b ). For example, around 200 firms listed in Fortune Global 500 firms are working with factories in Wuhan where the outbreak was initiated (Kilpatrick & Barter, 2020 ). This type of disruption can have huge impacts on other parts of supply chains; i.e., ripple effect (Pavlov, 2019 ). For instance, 50 to 70 percent of global demand for copper, iron ore, metallurgical coal, and nickel are covered by suppliers located in China, as reported by Chopra and Sodhi ( 2004 ); LINDA & L., 2020 ). Additionally, the COVID-19 outbreak has caused considerable fluctuations in customers’ demand patterns. For example, a sudden increase in the demand for toilet papers caused a temporary shortage in some grocery stores. These issues can certainly put a supply chain in a risky and uncertain environment.

Previous studies in the SCRM were mainly focused on natural disasters, wars and terrorism, political environment, fire accidents, economic instability, economic downturns, social and cultural grievances as the source of disruptions in supply chains (Kilpatrick & Barter, 2020 ; Linda, 2020 ; Pavlov, 2019 ; Salcedo et al., 2020 ; Tirkolaee et al., 2021b ). However, the COVID-19 outbreak can be seen as a turning point in SCRM, which can raise the awareness of experiencing similar outbreaks in the future. To avoid facing the next shocking moment and its negative consequences, immediate and effective responses to such disruptions via SCRM are key points for companies. Previous works have identified various types of risks that need to be taken into account by companies to mitigate their impacts on the supply chains. However, due to the limitation in time and budget, responding to all the identified risks is a challenging task, thus, firms need to prioritize their practices by focusing on the management of those risks which can be more affected by the future pandemic.

As identifying the comprehensive side effects of the COVID-19 outbreak in SCRM is at early stage (Baz & Ruel, 2021 ; Ivanov, 2021 ), there is a strong need to explore which types of supply chain risks can be most affected by the COVID-19 outbreak to provide more insights for companies in their future SCRM endeavors (Ardjmand, et al., 2021 ). In this regard, this paper aims to fill this gap by identifying potential risks in supply chains and investigate how those risks may be affected by the COVID-19 outbreak. We propose a modified Failure Mode and Effects Analysis which integrates the traditional FMEA and Best–Worst Method (BWM) to assess the impacts of the COVID-19 outbreak on identified supply chain risks. To address this issue, the following research questions are developed:

• What are the most important supply chain risks during the COVID-19 outbreak?
• How the identified risks can be mitigated?

FMEA is a valid risk assessment technique (Mangla et al., 2018 ) and is used as a structured and proactive risk management method to identify potential risks and estimate their impacts and relevance in various industries (Huang, 2019 ). It has the ability to eliminate and mitigate known or potential failures and is able to enhance the reliability and safety of complex systems (Choudhary, 2021 ; Liu et al., 2013 ). FMEA is an important method that provides insights for managers in making appropriate risk management decisions to face real-world uncertainties. To assess the risks via FMEA, the risk priority number (RPN) for each failure mode is calculated by multiplying the scores of risk factors like occurrence (O), severity (S), and detection (D) (Chen & Wu, 2013 ). However, calculating RPN via the traditional FMEA method has received several criticisms such as creating quite the same value of RPN (Chang & Cheng, 2010 ). Based on a comprehensive analysis conducted by Liu et al. ( 2013 ), there are 3 major issues associated in using the traditional FMEA method. First, the relative importance of O, S, and D is not considered within the final output (RPN). Second, the same RPN can be achieved by having different scores for each of these three factors without considering their different implications. Third, evaluating the three factors can be a challenging task as it is difficult to precisely find the related scores. Hence, a wide range of methods has been proposed to overcome the shortcomings and improve the effectiveness of the traditional FMEA. This elaboration modified FMEA methods by using BWM to overwhelm the drawbacks of traditional FMEA. BWM has been applied to calculate risks’ weight. The main reasons to select BWM among other MADM methods can be seen as follows (Rezaei, 2015 ):

• BWM is a “vector-based MADM method that needs fewer comparisons in comparison with other pairwise comparison matrix-based MADM methods such as AHP”.
• The final weights derived from the BWM are highly reliable due to the less input needed from the experts.

The rest of this paper is structured as follows: Sect.  2 reviews previous studies in SCRM. In Sect.  3 , the methodology is presented providing more information regarding the classic FMEA and BWM. In Sect.  4 , the impacts of the COVID-19 outbreak on supply chain risks are investigated. Section  5 discusses the top 10 risks and also provides recommendations to respond to these risks, and Sect.  6 presents concluding remarks, limitations and highlights several future research directions.

Survey on the literature

In this section, we review the most relevant papers/reports published in the literature in two complementary streams including supply chain disruptions and risk assessment.

Supply chain disruptions

Disruptions are imminent in a world where uncertainty is increasing and changes occur rapidly. All markets and industries may face different types of disruptions and there is no exception for supply chains. Supply chain disruptions are unplanned events that may occur and affect the normal (or expected) flow of material (Blackhurst et al., 2008 ; Svensson, 2000 ). These disruptions may occur at one level of a supply chain and quickly propagate to the entire supply chain or even other supply chains (Samvedi et al., 2013 ). The critical impacts of disruptions on supply chains’ performance stimulate researchers to put focus on SCRM/supply chain disruption management and identify a wide range of risks (Sharma, 2021a ; Wagner & Bode, 2008 ; Xie, 2011 ). Those risks mainly occur due to natural disasters like tsunami, earthquake, bushfires or man-made disasters, such as sanctions, war, oil spills and terrorist attacks (Chopra & Sodhi, 2004 ; Ho et al., 2015 ; Jüttner et al., 2003 ; Sodhi et al., 2012 ; Thun & Hoenig, 2011 ; Xie, 2011 ). A comprehensive overview of the importance of SCRM and identified SCRs is given in Tables ​ Tables1 1 and ​ and2, 2 , respectively. There are many views to categorize risks in the supply chain management literature. However, this paper follows the study of Ho et al. (Ho et al., 2015 ) as they conduct an extensive literature review to identify various SCRs, and provide deep insights into how they can be categorized. The categories are briefly described below:

• (i) Demand-side risks Demand risk stands for the possibility of an event related to outbound flows which may influence the probability of customers placing orders with the focal firm, and/or variance in the amount and variety wished by the customer (Manuj & Mentzer, 2008 ).
• (ii) Supply-side risks Supply risk represents the possibility of an event concerning inbound supply from individual supplier failures or the supply market occurring, such that its outcomes bring about the inability of the purchasing firm to fulfill customer demand or lead to the threats to customer life and safety (Zsidisin, 2003a ).
• (iii) Logistics risks Logistics risks happen when there are disruptions in planning and implementing the efficient transportation and storage of products from the origin point to the consumption point.
• (iv) Political risks Political risks are those risks related to changes that occur within a country's policies, investment regulations or business laws. Other influential elements contain international relationships and other situations that can have an impact on the economy of a certain country or organization.
• (v) Manufacturing risks Disruptions in the internal operations of a firm cause manufacturing risk. Examples of manufacturing risks are labor shortage, downtime or loss of own production capacity, etc.
• (vi) Financial risks Supply chain may occasionally experience situations in which its financial health face risk and lead a supply chain into disruption or bankruptcy. Examples of financial risks are changes in exchange rates, wage rate shifts and so on.
• (vii) Information risks Information creates a connection between supply chain members. Lack of proper information management in the supply chain can lead a supply chain into disruption. For instance, all supply chain operations face uncertainty and risk when there is a lack of information transparency between supply chain members.

An overview of the importance of SCRM

An overview of SCRs

According to Table ​ Table1, 1 , all studies have one thing in common. They all mention the point that supply chains are complex and tainted with uncertainty. Hence, risk may occur in both upstream and downstream of a supply chain and significantly affect its performance. However, the COVID-19 outbreak is a rare event in both scale and intensity compared to outbreaks, such as Severe Acute Respiratory Syndrome (SARS), Middle East Respiratory Syndrome (MERS), H1N1 influenza virus, and the severity of supply chains’ disruption is high in this outbreak (Ivanov, 2020 ; Kapoor, 2021 ). Since the beginning of the COVID-19 outbreak, the SARS-CoV-2 coronavirus that causes COVID-19 has mutated, resulting in different variants of the virus. The current COVID-19 and its new variants resulted in massive damage to all fields and organizations' businesses and brought panic worldwide (Qayyum, 2021 ; Queiroz & Fosso Wamba, 2021 ; Sharma, 2021b ). One of the unique characteristics of the COVID-19 outbreak is that it is the first long-term supply chain disruption in decades (Ivanov, 2021 ).

Risk assessment

An overview of risk assessment methods in supply chains is given in Table ​ Table3. 3 . As Table ​ Table3 3 shows, various combinations of different methods including FMEA, simulation, fuzzy logic, and multi-attribute decision making (MADM) techniques have been used in SCRM studies. To assess SCRs in this study, we propose a modified FMEA method by which the FMEA is enhanced by the recently developed MADM techniques-BWM (Rezaei, 2015 ). FMEA is a popular risk management tool and is widely used by companies and organizations for SCRM (Christopher & Lee, 2004 ; Zsidisin, et al., 2004 ). However, it has been recently criticized by researchers on the way that it prioritizes the risks (Barends et al., 2012 ; Li & Zeng, 2016 ). To overcome this weakness, this paper integrates the BWM with the traditional FMEA. BWM is a reliable MADM method to assess the weight vector of current SCRs caused by the COVID-19 outbreak. It is a vector-based MADM technique that needs fewer pair-wise comparisons against other pair-wise comparison-based MADM techniques such as Analytical Hierarchy Process (AHP), and also the final weights stemmed from BWM are highly reliable as the result of less inconsistency led by less pair-wise comparisons (Rezaei, 2015 ).

An overview of the literature on SCR assessment methods

Methodology

The framework for the proposed methodology is presented in Fig.  1 to assess the impacts of the COVID-19 outbreak on SCRs. The framework has four phases which are elaborated in the following sub-sections.

Framework for the proposed methodology

Phase 1: identifying supply chain risks and establishing panel of experts

Based on a comprehensive literature review on SCRM, 70 risks have been identified and listed in 7 categories including demand-side risks, supply-side risks, logistic risks, political risks, manufacturing risks, financial risks and information risks suggested by Ho et al. (Ho et al., 2015 ) (Table ​ (Table2). 2 ). After identifying SCRs, a panel of experts was formed to assess the validity and importance of the identified risks. The panel consisted of 10 experts, three from academia who work as a business consultant and seven from the automotive industry. Each expert had around 9 to 15 years of experience in the supply chain area including supply planning, transportation planning, export planning, quality management and production planning.

Phase 2: conducting a survey

After developing a comprehensive list of supply chain risks, a two-part questionnaire was developed. The first part of the questionnaire sought the required data for calculating weights of identified risks via BWM and the second part was designed to collect data for calculating RPN via FMEA. Using several online skype meetings, the purpose of the study, identified supply chain risks and methodology were explained to each expert in the panel. Then, the first round of surveys began by sending the first part of the questionnaire (BWM questionnaire) to each expert. Within a period of three days, the completed responses were received from the panel of experts. Then, the second part of the questionnaire (FMEA questionnaire) was sent to the panel of experts and the completed responses were received within 4 days.

Within the BWM questionnaire, the weights of each risk were obtained by asking each expert to answer the questions about which risks have the most important priority to be mitigated during the COVID-19 outbreak. Then, using collected data from the FMEA questionnaire, grades for three factors including O, S and D for each risk were obtained based on the 10-point Likert scale.

Phase 3: Calculating risks’ weight and traditional RPN

This phase includes two main steps (Step 7 and 8) which have been conducted simultaneously.

Step 7: Using Best–Worst Method to identify the risks’ weights

In this step, BWM was applied for calculating risks’ weights. The two main reasons to apply BWM are as follows:

BWM is a “vector-based MADM method that requires fewer comparisons in comparison with other pairwise comparison matrix-based MADM methods such as AHP”.

• The final weights resulted from the BWM are highly reliable since it needs less input required to be provided by the experts.

The execution sub-steps to implement the BWM are as follows (Rezaei, 2015 ):

• Sub-step 1 Specify a set of decision criteria: In this step, we identify a set of decision criteria c 1 , c 2 , c 3 , … , c n to make a decision.
• Sub-step 2 Determine the best and worst criteria: Experts identify the best (i.e. the most important, or desirable) and the worst (i.e. the least important, or desirable) criteria.
• Sub-step 3 Determine the Best-to-Others vector: Experts identify the preference of the best criterion against all other criteria through a number between 1 and 9, where score 1 stands for equal preference between the best criterion and another criterion and score 9 denotes the extreme preference of the best criterion against the other criterion. The consequential Best-to-Others vector would be A B = a B 1 , a B 2 , a B 3 , … , a Bn , where a Bj represents the preference of the best criterion B against criterion j , and a BB  = 1.
• Sub-step 4 Determine the Others-to-Worst vector: Experts identify the preference of all the criteria against the worst criterion using a number between 1 and 9. The consequential Others-to-Worst vector would be A W = a 1 W , a 2 W , a 3 W , … , a nW T , where a jW represents the preference of criterion j against the worst criterion W , and a WW = 1 .
• Sub-step 5 Calculate the optimal weights W 1 ∗ , W 2 ∗ , … , W n ∗ : The optimal weights of the criteria will provide the following requirements: For each pair of W B / W j and W j / W W the ideal situation is where W B / W j = a Bj and W j / W W = a jW . Hence, to receive a weight vector as close as possible to the ideal situation, we must minimize the maximum deviation among the set of { W B - a Bj W j , | W j - a jW W W | and the problem can be formulated according to Model ( 1 ): minimize max j W B W j - a Bj , W j W W - a jW subject to ∑ j W j = 1 , W j ≥ 0 ∀ j . 1

Model ( 1 ) can be converted into the linear programming Model ( 2 ):

Consistency index table

Considering the above sub-steps, once the final risk’s weights were identified, the consistency ratio was calculated for each risk. If the ratio was close to zero, the weight was approved and would be considered as an input for Step 9 in the next phase. Otherwise, step 5 should be conducted again. This process was continued until all the calculated weights were approved via consistency ratio.

Step 8: Using FMEA to assess identified risks

As mentioned earlier, step 8 was conducted with step 7 in parallel. FMEA is a well-known risk assessment approach that has been widely used by practitioners and researchers to assess the impacts of failure modes. In the traditional FMEA technique, experts typically use a 10-point scale (in which the larger points indicate higher risks), to provide a score to each risk by determining three factors including occurrence (O), severity (S) and detection (D). The risk/probability that the failure mode would occur as a result of a specific cause is referred to as occurrence. Severity is an assessment of the seriousness of a potential failure mode’s effect on the supply chain after it has occurred. The probability that a potential failure will be detected before it causes damage to the supply chain is referred to as detection.

The final output of the FMEA method is RPN which has been considered as the second input for Step 9. RPN is computed for each risk by the multiplication of these three factors as Eq. ( 4 ). Items with a high RPN will need to be investigated thoroughly. The higher number shows the high intensity of the failure mode. The general evaluation scheme for FMEA is shown in Table ​ Table5 5 (Shahin, 2004 ).

General evaluation scheme

Phase 4: Calculating weighted RPN using modified FMEA

Finally, in Step 9 the modified RPN was calculated using two inputs received from Step 7 and 8 in the previous phase. As mentioned in the introduction section, the final RPN resulted from the traditional FMEA method has been criticized by many scholars as it does not consider the relative importance, implications, and accuracy of the three risk factors (Lolli et al., 2015 ). In this regard, the risk assessment has to be more accurate to provide reliable insights for researchers and managers. As suggested by Rezaei ( 2015 ), BWM, which is an MADM method, can provide highly reliable weights compared to the other popular weighting methods such as the AHP method. Therefore, we integrated BWM and FMEA to rank risks based on a weighted RPN measure. Equation ( 5 ) is applicable in this study but instead of obtaining weights W by AHP, we obtain weights by BWM.

SCRM and COVID-19: case study

This paper investigated the impact of the COVID-19 outbreak on an auto part supply chain in Iran. The case company is a well-known auto spare-part company which manufactures several spare parts such as disc brake, control arm, etc. and supplies them to the domestic and foreign markets. The company’s main raw materials include ferrosilicon, copper, fire clay, and bentonite. The purchasing department can provide these raw materials from both local and global suppliers. The main foreign suppliers of the case company are from India, China, Germany and Spain. The COVID-19 outbreak highlights the need for SCRM because many countries across the world including the case company’s international partners (India, China, Germany, Russia and Spain) have been affected adversely by the COVID-19 outbreak. Considering the global supply chain of the company and the role of automotive industry in Iran’s economy, it has been an ideal case to investigate the impact of the COVID-19 outbreak on SCRs.

According to the comprehensive review of literature, 70 risks were selected and grouped in 7 categories in Sect.  2 (see Table ​ Table2). 2 ). 10 experts reviewed the identified risks and answered two questionnaires. In the first questionnaire, the experts were asked to determine the best and worst criteria in each category. Then, they were asked to determine the preference of the best criterion against all other criteria and also the preference of all the criteria against the worst criterion in each category. The geometric mean has been used to obtain the average of the experts’ scores. For the sake of brevity, the weights for the top 10 risks are just given in Table ​ Table6 6 while the weights of all risks are given in Table ​ Table10 10 in the Appendix.

Risks’ weights

Weights of risk factors

As can be seen in Table ​ Table7, 7 , the average consistency ratio for all categories is close to zero, therefore, the comparisons are highly reliable and consistent.

Consistency ratio

In the second questionnaire, the experts were asked to assess risks by answering the questions about occurrence, severity and detection of each risk. Geometric mean was used to calculate the average score of O, S and D. Risk assessment of the top 10 risks is given in Table ​ Table8 8 and also risk assessment of all risks is given in Table ​ Table11 11 in the Appendix.

Assessment of risk factors

Finally, we used the proposed FMEA method to calculate the weighted RPN R i . A comparison between the top 10 risks is given in Table ​ Table9 9 and Fig.  2 . Risks were ranked from 1 to 70. The first rank (1) is the most important risk and the last rank (70) is the least important one. All details of the ranking procedure are presented in Table ​ Table12 12 in the Appendix. According to Table ​ Table9, 9 , “Insufficient information from customers about demand quantities” is 26th important risk when we used the traditional FMEA and it is the first important risk when we used the proposed FMEA technique. Also, “Shortages on supply markets” is the 33rd important risk in the traditional FMEA, while it is the second important risk in the proposed method. As we discussed earlier, supply and demand uncertainty are critical challenges a supply chain faces during man-made or natural disasters like earthquakes or the COVID-19 outbreak. Thus, these types of risks are more harmful than other risks.

Ranking the risk factors based on the weighted RPNs

Weighted RPN

Weighted RPN of risk factors

Discussions and recommendations

In this section, we discuss the top 10 risks which can significantly threaten the supply chains during the COVID-19 outbreak, and provide some recommendations to respond to these risks. The discussion is based on the categories of the risks which are ranked in the top 10.

Demand risks

The first important risk is “insufficient information from customers about demand quantities”. As mentioned earlier, during the COVID-19 outbreak, customers’ buying patterns have dramatically changed. The automotive industry like other industries is facing problems in the process of production planning as the demand forecast error has increased. The main cause for this increase is the growing concern among customers resulted from the COVID-19 outbreak which can lead to uncertainty in the marketplace. Since the case company does not have proper and integrated information management system, they could not have appropriate access to the required and real-time information from the market. Insufficient information about customers’ demand may trigger the third important risk which is “Bullwhip effect”. When customer demand is uncertain or there is a lack of information about customer buying patterns, companies try to mitigate the risk by keeping additional inventory or placing higher order sizes. During the COVID-19 outbreak, customer demand is uncertain, thus the bullwhip effect may occur in the supply chain. “Market demand change” is the 9th important risk. Changes in demand may occur due to different reasons such as changes in customers’ expectations, customers’ income, customers’ preferences, etc. The main reasons for market demand change during the COVID-19 outbreak are changes in customer preferences and a reduction in the financial power of customers. While demand for cleaning and hygiene products is increasing dramatically, industries like the automotive industry may suffer from a decrease in demand. The reason is that customers pay more attention to their essential needs during the outbreaks like the COVID-19 outbreak. Additionally, a decrease in customer financial strength is another reason which causes market demand change. According to Table ​ Table12 12 in the Appendix, decrease in the financial strength of customers is the 12th important risk. The pandemic has put more pressure on blue-collar workers. From the beginning of the COVID-19 outbreak, many small- to medium-sized businesses and companies stopped their operations. As a result, the number of unemployed workers is increasing. Then, the more decrease in the financial strength would lead to less demand for unnecessary products.

Supply risks

“ Shortages on supply markets ” is the second important risk in Table ​ Table9. 9 . Sourcing under disruptive situations, like Japanese tsunami and Thailand flood in 2011, is a challenging task for firms. For example, Toyota stopped its production because its raw materials and component suppliers were drastically affected by the earthquake. Sheffi ( 2001 ) mentioned the 9/11 terrorist attack as a man-made disaster that caused many companies including Toyota and Ford to stop their routine operations. In case of the COVID-19 outbreak, since many firms across the world are shutting down their production processes as a result of the pandemic, many suppliers are facing difficulties with providing required raw materials and components to their customers. For instance, the closure of some of the biggest slaughterhouses in the U.S. during the COVID-19 outbreak may cause a nationwide meat shortage. This indicates that “Loss of key suppliers” and “Supplier temporary closure”, which are the 4th and 8th important risks, could cause shortages in supply markets. Regarding the case company, the suppliers are small- to medium-sized manufacturers which are located in the most affected regions including Iran, China, Spain and Germany. The COVID-19 outbreak has caused some of these companies to terminate their routine operations. Furthermore, it does not have strong supplier relationship management (SRM). Their low performance in SRM program may cause the case company to lose its key suppliers, especially its domestic suppliers, because during disasters like the COVID-19 outbreak, other manufacturers compete strictly to supply more materials or components than they need in a normal situation. According to the aforementioned points, one of the most important risk management strategies for the case company is how to manage shortages in the supply market. Relying on a single supply source for strategic items is another important risk because it puts the entire supply chain in danger even in a normal situation when there are no uncertainties in the markets. During the COVID-19 outbreak supply market is highly uncertain, thus “Single sourcing”, which is the 10th important risk, would create problems for the supply chain performance. Many companies around the world have been focusing on Chinese firms because of their lower wages, lower compliance, etc. As a result, China becomes a key player in the global supply chains. However, during the COVID-19 pandemic, Chinese markets faced a significant challenge. The lockdown of Wuhan, which is a major business hub for several international corporations, has put stress on different supply chains. The case company is supplying some specific materials and components such as shifter and drive plate only from Wuhan. Therefore, relying on a single supply source can put the case company’s supply chain at severe risk. “On-time delivery from supplier” is also an important risk because during disruptions various delays may occur in a supply chain including delays because of strict inspections, delay in planning routing, etc. In case of the COVID-19 outbreak, transportation breakdown and government restrictions, which are the 5th and 7th important risks, are the main causes of on-time delivery risk. Transportation breakdowns and government restrictions are logistical and political risks, respectively.

Logistics and political risks

There are many reasons for transportation breakdowns including natural or man-made disasters (Chopra & Sodhi, 2004 ; Ho et al., 2015 ). For instance, during a war, different modes of transportation are restricted by governments, or in case of earthquake, there may be the destruction of roads, bridges, etc. which cause transportation breakdown. During the COVID-19 outbreak, many countries have closed their borders to non-residents and restricted or suspended all international flights due to governmental restrictions. According to Salcedo et al. ( 2020 ) “China’s foreign ministry announced on March 26 that it was suspending practically all entry to the country by foreigners and also stopped almost all international passenger flights”, and “India has been barred all incoming passenger traffic by land, air and sea, except for critical goods and services”. The case company provides its main raw materials and components from international markets such as India and China. Thus, border closure and countries’ lockdown have had significant impacts on the case company’s supply flows.

Recommendations

Most of the identified risks in the demand-side of a supply chain may happen due to a lack of information about the status of supply chain members. For example, the bullwhip effect mainly occurs due to the lack of information sharing and also lack of visibility between members of a supply chain. Therefore, one of the key solutions to reduce the demand-side risks is working on supply chain visibility and also encouraging information sharing among supply chain members. Furthermore, uncertainties in the market cause the supply chain to face fluctuations in demand. In case of the COVID-19 outbreak, demand for some products has been increasing while other industries like automotive experienced demand reduction. Ranking important uncertainties and developing different outcome scenarios can help supply chains properly manage demand-side risks.

Regarding the supply-side risks, diversifying the supply base from the geographic perspective; i.e., following multiple sourcing strategies, is an appropriate solution. The case company can reduce supply-side risks by selecting different suppliers from different countries and regions. One of the most important weaknesses of the case company is its poor supplier relationship management. Building strong relationships with key suppliers and focusing on key suppliers and managing all interactions with them will help them to reduce supply-side risks. Moreover, visibility helps the case to be aware of supplier inventory, production, and purchase order fulfillment status. Therefore, providing visibility in the supply-side of the supply chain is another solution for the case company to mitigate the supply-side risks. Finally, buffering against supply-side disruptions; i.e., considering inventory pre-positioning strategy is another important solution to manage supply-side risks.

In the recent decade, supply chains have been facing several disruptions due to natural and man-made disasters. These disruptions adversely affect the performance of supply chains. Currently, the world is undergoing another disaster which is a virus outbreak called “COVID-19”. It has impacted almost every country, taking lives, damaging businesses, and spreading fear in the hearts of people. The COVID-19 pandemic puts different industry sectors at risk. The main contribution of this study is addressing the impact of the COVID-19 outbreak on SCRs and the question that what are the most important SCRs during the COVID-19 outbreak. A comprehensive literature review was performed to identify important SCRs during a pandemic like the COVID-19 outbreak. Seventy risks were identified and listed in seven categories including demand, supply, logistics, political, manufacturing, financial and information. An improved FMEA method, which integrates the traditional FMEA with BWM, was proposed to assess the identified SCRs. Based on final results appeared in Table ​ Table9, 9 , ‘Insufficient information from customers about demand quantities’, “Shortages on supply markets”, “Bullwhip effect”, “Loss of key suppliers”, “Transportation breakdowns”, “On-time delivery from supplier”, ‘Government restrictions’, “Supplier temporary closure”, “Market demand change” and “Single sourcing” were identified as the top 10 SCRs during the COVID-19 outbreak, respectively.

Considering the limitations of conducting this study, few interesting venues for future studies can be suggested for researchers. The main limitation is related to the data obtained from one specific company. Since the data collection for this study was during the early stage of the pandemic, many companies have rejected our calls to participate in this study. The main reason for this reluctance was related to their insufficient knowledge about the COVID-19 related issues as they were still in shock about the received disruptions. Since the current study used a single case study to collect required data, the results may only be generalized to similar companies in this specific situation. Thus, applying the proposed method to different cases can validate the findings. The other future directions would be related to applying this method in different sectors particularly, healthcare industry. Healthcare supply chains are under huge pressures during the recent pandemic as the demand for ventilators, personal protective equipment and drugs have been increasing. Then, researchers can pay specific attention to analyzing the impact of the Covid-19 outbreak on healthcare SCRs. Moreover, according to the result of the current study, insufficient information from customers about demand quantities become the most important risk during the COVID-19 outbreak. Investigating different solutions such as using industry 4.0 technologies to increase the visibility of the supply chain can provide valuable insights in mitigating SCRs.

See Tables ​ Tables10, 10 , ​ ,11 11 and ​ and12 12 .

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How to evaluate supply chain risks, including sustainable aspects? A case study from the German industry

Purpose: Outsourcing transactions have been arisen and evolved in the last years and purchase managers want to know if a Failure Mode Effects and Analysis (FMEA) is an effective qualitative technique to analyze supply chain risks (SCR) in a proper way. The aim of this study is to address this question developing a practicable risk management process based on the guidelines of the ISO 31000 for upstream Supply Chain Risk Management (SCRM) linking risk assessment, risk identification, risk analysis, risk evaluation, risk treatment and validate the process empirically through a case study.

Design/methodology/approach: After a review of the literature on Sustainable Supply Chain Risk Management (SSCRM), a case study based on a leading manufacturer of electrical products, collects evidences of SSCRM implementation.

Findings: Supply chain disruptions are one of the most critical issues which can negatively influence on firm’s performance. Avoiding and mitigating disruptions in the supply chain is one of the main challenges for supply chain managers.

Originality/value: This paper identifies the ISO 31000, the ISO 9001 and the use of an FMEA to analyze supply chain risks in a structured manner and to outline future research opportunities in the field of SCRM.

This work is licensed under a Creative Commons Attribution 4.0 International License

Journal of Industrial Engineering and Management, 2008-2024

Online ISSN: 2013-0953; Print ISSN: 2013-8423; Online DL: B-28744-2008

Publisher: OmniaScience  

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Mastering the Art of Supply Chain Collaboration and Teamwork

Effective supply chain collaboration and teamwork are critical components for any business seeking to optimize its operations and achieve sustainable success. In today's interconnected and globalized market, the ability to coordinate seamlessly across various stages of the supply chain can significantly enhance efficiency, reduce costs, and improve customer satisfaction.   

Understanding the intricacies of supply chain collaboration involves recognizing the importance of communication, trust, and shared goals among all stakeholders. By fostering a collaborative environment, companies can anticipate and respond to market changes more swiftly, mitigate risks, and leverage the expertise of their partners. Through practical examples and insights, below we highlight how businesses can master the art of supply chain teamwork, ultimately leading to a more resilient and competitive enterprise.  

What Is Supply Chain Collaboration?  

You may have heard of supply chain management, but you may not have heard of supply chain collaboration . So, what is supply chain collaboration , exactly?   

The Definition and Scope  

Supply chain collaboration involves the strategic alignment and cooperation among various entities within a supply chain—including suppliers, manufacturers, and distributors—to achieve mutual goals and enhance overall performance. This collaboration is characterized by shared information, joint planning, and synchronized operations to optimize efficiency and responsiveness.  

Historical Evolution and Current Trends  

This concept has evolved significantly over time. Historically, supply chains were local and limited in scope, but the Industrial Revolution expanded their reach and complexity. Modern supply chains now leverage advanced technologies such as artificial intelligence (AI) and predictive analytics to drive efficiency and innovation. Current trends emphasize the importance of resilience, sustainability, and digital integration in maintaining robust, adaptable supply chains.  

The Importance of Collaboration in Modern Supply Chains  

Collaboration in modern supply chains is essential for achieving seamless integration and coordination among various partners. This cooperation ensures all entities within the supply chain work toward common goals, thus enhancing overall effectiveness and adaptability. By fostering strong relationships and open communication, businesses can better navigate the complexities of today's global market, leading to improved performance and competitiveness.  

Enhancing Efficiency and Reducing Costs  

Collaboration in modern supply chains is pivotal for enhancing efficiency and reducing costs . When companies work together effectively, they can streamline operations, reduce redundancies, and share resources. This leads to lower operational costs and improved resource allocation. Integrating advanced technologies like artificial intelligence and the Internet of Things (IoT), businesses can automate processes, gather real-time data, and make informed decisions quickly to further drive down costs and boost efficiency.  

Improving Product Quality and Customer Satisfaction  

In addition to cost savings, collaboration significantly improves product quality and customer satisfaction . Effective communication and information sharing among supply chain partnerships ensure that products meet quality standards and are delivered on time. Enhanced visibility into the supply chain allows companies to anticipate and address potential issues before they impact the customer. This proactive approach not only improves the reliability of deliveries but also fosters trust and loyalty among customers.   

Key Elements of Effective Supply Chain Collaboration  

Now that you have a grasp of what supply chain collaboration is, it’s worth exploring several key elements that successful supply chain collaboration relies on to ensure seamless operations and mutual benefits for all parties involved. This includes transparent communication, shared goals and objectives, synchronized workflows, and the integration of advanced technologies.   

Communication Technologies and Platforms  

Effective supply chain collaboration hinges on utilizing advanced communication technologies and fostering trust and transparency among partners. Modern communication platforms enable real-time information sharing and seamless coordination, thus making them crucial for managing complex supply chains efficiently.  

Trust and Transparency Among Partners  

Additionally, cultivating trust and maintaining transparency in supply chain partnerships is fundamental. Open communication and mutual accountability help build strong relationships, ensuring all parties work toward common goals and can swiftly address any issues that arise​.  

Aligning Goals and Objectives  

Aligning goals and objectives is critical for supply chain collaboration. It involves ensuring all partners have a shared understanding of the overarching goals and work together to achieve them. This alignment fosters synergy, reducing conflicts and enhancing operational efficiency. When goals are not aligned, collaborations can suffer, as seen in cases where a lack of strategic alignment leads to missed opportunities and inefficiencies.  

Strategies for Enhancing Collaboration  

There are a number of strategies for enhancing collaboration in the supply chain:  

Developing a Collaborative Culture  

Creating a collaborative culture is essential for supply chain success. This involves fostering an environment where open communication, mutual respect, and shared goals are prioritized. Organizations should ensure that their leadership supports collaboration and provides the necessary resources for teams to work together well. Developing a culture of collaboration can significantly enhance trust and cooperation among supply chain partnerships, ultimately leading to better outcomes and innovation​.  

Leveraging Big Data and Analytics  

Big data and analytics play a central role in enhancing supply chain collaboration. By leveraging advanced data analytics, companies can gain valuable insights into demand patterns, inventory levels, and supply chain efficiencies. These insights enable more informed decision-making and help partners align their strategies more closely. Effective use of big data can lead to improved forecast accuracy, optimized inventory management, and a more responsive supply chain overall​.  

Implementing Joint Planning and Forecasting  

Joint planning and forecasting are critical strategies for improving supply chain collaboration. This involves the alignment of business objectives, setting mutual targets, and developing shared plans to achieve these goals. Companies can benefit from joint business planning by ensuring that all stakeholders are on the same page, which helps minimize conflicts and maximize efficiency. Productive joint planning requires clear communication, transparency, and a commitment to shared success from all partners involved​.  

Challenges and Solutions in Supply Chain Collaboration  

While supply chain collaboration can be rewarding, it comes with potential challenges , too. That said, solutions are also accessible when such challenges arise.  

Overcoming Barriers to Information Sharing  

Information sharing is fundamental to effective supply chain collaboration, yet it is often hindered by several barriers. Trust issues are a significant obstacle, as companies may be reluctant to share sensitive data with external partners. Establishing mutual trust and developing a common understanding of data value and accuracy are crucial steps in overcoming these barriers. In addition, creating standardized protocols for data exchange can help ensure consistent understanding among all stakeholders​.  

Managing Conflicts and Building Consensus  

Managing conflicts and building consensus within supply chain collaborations involve addressing professional differences, cultural disparities, and communication gaps. Different organizational structures, values, and practices can create misunderstandings and conflicts. Promoting a collaborative culture that values open communication and mutual respect is essential for overcoming this​.  

One effective strategy is to establish clear communication channels and regular meetings where stakeholders can align their objectives and address any concerns promptly. Investing in multicultural training programs can also help partners understand diverse perspectives and work ethics, fostering a more cohesive and cooperative environment​.  

Case Studies of Successful Supply Chain Collaboration  

Successful supply chain collaboration can drive significant improvements in efficiency, cost reduction, and customer satisfaction. This section highlights notable case studies from the tech and retail industries, demonstrating how supply chain partnerships and innovative approaches have led to breakthrough results.  

Tech Industry Innovations  

In the tech industry, Cisco's collaborative efforts with its suppliers have set a benchmark. Through leveraging cloud-based platforms and data analytics, Cisco enhanced its visibility across the supply chain, improved response times, and reduced lead times. This collaboration allowed Cisco to manage risks better and optimize its supply chain processes, leading to a more resilient and efficient operation.   

Another noteworthy example is Intel , which collaborates closely with its suppliers and customers to synchronize production and delivery schedules—thereby minimizing inventory costs and enhancing service levels.  

Retail Sector Breakthroughs  

The retail sector has seen substantial benefits from collaborative supply chain practices as well. A prime example is the partnership between Walmart and Procter & Gamble (P&G) . By sharing real-time sales data and coordinating inventory management, Walmart and P&G significantly reduced stockouts and enhanced supply chain efficiency. This collaboration both improved product availability and reduced costs through optimized logistics and inventory management.   

Similarly, Tesco's collaboration with its suppliers (including Coca-Cola and Unilever ) focuses on sharing detailed sales forecasts and aligning logistics strategies. These efforts have led to reduced out-of-stock rates and improved overall supply chain performance.  

Future Trends in Supply Chain Collaboration  

As the landscape of supply chain management continues to evolve, staying ahead requires a keen understanding of emerging trends . Two significant areas of focus for the future are the integration of AI and machine learning into supply chains as well as the growing emphasis on sustainability and ethical practices.   

The Role of AI and Machine Learning  

AI and machine learning are set to play transformative roles in supply chain collaboration. These technologies enable predictive analytics that help companies anticipate demand, optimize inventory, and streamline logistics. By analyzing vast amounts of data, AI can identify patterns and provide actionable insights that improve decision-making and operational efficiency. For instance, advanced AI algorithms can predict potential disruptions and suggest alternative strategies, enhancing supply chain resilience and agility. To add, machine learning models can continuously improve from new data, ensuring supply chains adapt to changing market conditions and customer preferences​.  

Sustainability and Ethical Practices  

The push for sustainability and ethical practices in supply chains is gaining momentum as consumers and regulators demand more transparency and responsibility. Companies are increasingly focusing on reducing their environmental impact by minimizing waste, lowering carbon emissions, and adopting circular economy principles. This includes initiatives like using renewable energy sources, optimizing transport routes to reduce fuel consumption, and implementing sustainable sourcing practices.   

Furthermore, ethical considerations (such as fair labor practices and ensuring supplier compliance with human rights standards) are becoming integral to supply chain strategies. By embedding sustainability and ethical practices into their operations, companies can not only meet regulatory requirements but also enhance their brand reputation and customer loyalty​.  

Learn More About Supply Chain Collaboration Through a Degree Program  

If you want to take your supply chain management skills to the next level, University of the Cumberlands offers comprehensive bachelor’s and online master’s programs in supply chain management—designed to equip you with the knowledge and expertise needed to excel in this dynamic field. Our curriculum is tailored to address the latest industry trends, including AI integration, sustainability, and ethical practices.   

Request more information or apply today to start your transformative educational journey that can open doors to exciting opportunities in the realm of supply chain management.  

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  Tanzania Journal of Health Research Journal / Tanzania Journal of Health Research / Vol. 25 No. 3 (2024): Tanzania Journal of Health Research / Articles (function() { function async_load(){ var s = document.createElement('script'); s.type = 'text/javascript'; s.async = true; var theUrl = 'https://www.journalquality.info/journalquality/ratings/2406-www-ajol-info-thrb'; s.src = theUrl + ( theUrl.indexOf("?") >= 0 ? "&" : "?") + 'ref=' + encodeURIComponent(window.location.href); var embedder = document.getElementById('jpps-embedder-ajol-thrb'); embedder.parentNode.insertBefore(s, embedder); } if (window.attachEvent) window.attachEvent('onload', async_load); else window.addEventListener('load', async_load, false); })();  

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Article Details

Mathew mganga.

Presidents’ Office, Regional Administration and Local Government, Dodoma, Tanzania

Stephen Kibusi

University of Dodoma, Dodoma

Romuald Mbwasi

St. John’s University of Tanzania, Dodoma.

Main Article Content

Understanding implementers' perceptions on the prime vendor system: a case study of tanzania mainland.

Introduction: Access to safe, effective, quality and affordable essential medicines for all is a central component of Universal Health Coverage (UHC). However, the availability of quality medicines in low and middle-income countries is often limited, especially in peripheral health facilities. MSD, as the sole supplier of drugs and medical supplies to all public health facilities, has been facing difficulties that hinder its efficiency in supplying 100% of all facility’s needs. Despite significant reforms, including introducing the Prime Vendor System in 2018, challenges persist, leading to regional disparities in commodity availability at the facility level. Successfully establishing an intervention based on PPPs within the public sector in the health commodities supply chain system mostly requires high acceptability by the Government, implementers, and beneficiaries. Furthermore, the effectiveness of any activity is primarily influenced by the participants' attitudes. While most studies have extensively researched the effectiveness of the prime vendor system in bridging the supply chain gap, none have researched implementers' perceptions of the prime vendor system in complementing health commodities. This study seeks to understand the Implementer's perceptions of the prime vendor system implementation.

Materials and Methods: This was a quantitative cross-sectional study. Data was collected from June to September 2023 using the ODK application from 356 respondents from Dodoma, Morogoro, Mtwara, and Mwanza in Tanzania. The data was analysed using SAS version 9.4. Statistical significance was determined at a 95% confidence level.

Results: 77.84% of study participants strongly agreed that involving the private sector in health commodities supply chain management is the best approach to solving supply chain problems. Additionally, 81.53% of all study participants believe that the Prime Vendor System has contributed positively to the improved availability of health commodities at the facility level.

Conclusion: Perceptions regarding the prime vendor system vary across different areas, including its impact on the overall availability of health commodities, streamlining of procurement processes, and the role of the private sector in addressing supply chain challenges within the country. Notably, the level of experience in the workplace emerges as a considerable influence on respondents' perceptions regarding the Prime Vendor System and its implementation nationwide.

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