This document outlines an agenda for a presentation on "11 Greatest Supply Chain Disasters". It provides details on the first disaster - Foxmeyer's 1996 Distribution Disaster, where an ambitious project to revamp IT systems and distribution facilities with a new ERP system and automated distribution centers led to tens of millions in shipping errors and the company eventually declaring bankruptcy. The document continues to describe 10 other major supply chain failures faced by companies like GM, WebVan, Adidas, Denver Airport, Toys R Us, Hershey's, Cisco, Nike and Apple.

1. Management Development Institute Gurgaon
January 2014
Post Term: III (Dec 2013 – Feb 2014)
Graduate Program in International Management
PGPIM: 2013-15
Management Development Institute - Gurgaon
Global Supply Chain Management
Case 04
11 Greatest Supply Chain Disasters
ID Name
1 13PGPIM -04 Aniruddha Karlekar
2 13PGPIM-12 Harsh Matur
3 13PGPIM-16 Kushal Agarwal
4 13PGPIM-25 Shashank Gupta
5 13PGPIM-27 Shreya Sinha
6 13PGPIM-42 Felix Frauendorf
Presentation Date: 07/01/2014

2. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”2
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

3. Management Development Institute Gurgaon
January 2014
01 – Foxmeyer´s 1996 Distribution Disaster
Group 4 Major Project: “11 Greatest Supply Chain Disasters”3
 In 1996, Foxmeyer was the 2nd largest wholesale drug distributor in the U.S., with sales > 5 bn US$
 Ambitious project to revamp the company´s IT systems and
its distribution facilities
 New ERP
 Automated DC
 Foxmeyer estimated huge efficiency gains and started to bid
future contracts based on the expected cost reductions
 SAP´s order processing system was unable to handle the
volumes of orders
 Also the DC automation system had constant bugs
 Snowball effect between the combined system issues
 Tens of millions of dollars in unrecoverable shipping errors
occured
 Due to assumed higher efficiency and capacities, the large
bidding contracts led to filing for bankruptcy
 After filing for bankruptcy, the main operating division of the $5 bn company was sold to a larger rival (for
$80 mn)
ChainIssues
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Oper-ations Outbound
logistics
Marketing
& Sales
Service

4. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”4
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

5. Management Development Institute Gurgaon
January 2014
02 – GM´s Robot Mania
Group 4 Major Project: “11 Greatest Supply Chain Disasters”5
 In the 1980´s, GM´s CEO Roger Smith was fascinated with
technology and implemented 1,400 robots from Fujitsu-
Fanuc in GM factories by 1990
 The project occured costs of billions of dollars, but the robots
never really worked (robots accidentally painted themselves
and dropped windshields on the front seats
 The introduction nof the robots actually lowered GM´s
factories production significantly, rose costs and shrunk
market share
 Meanwhile, Toyota delivered low cost, high quality vehicles
using comparatively low tech lean production techniques
 One GM finance exec later noted, at the time the company
could have bought both Toyota and Nissan for the money
invested in the failed robot technology
ChainIssues
 CEO Robert Smith invests billions in robot technology that mostly doesn´t work
 Smith fired
 Low tech Toyota uses lean manufacturing techniques to gain strong competitive advantages as GM´s market share
shrinks
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

6. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”6
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

7. Management Development Institute Gurgaon
January 2014
03 – The WebVan Story
Group 4 Major Project: “11 Greatest Supply Chain Disasters”7
 WebVan was among several major online grocery initiatives
launched during the late 1990s
 Backed by Goldman Sachs and hired a high profile CEO
from Accenture
 Went public and raised billions of US$
 Erecting hugely automated warehouses that cost 25 – 30 mn
each
 Grocery industry usually has margins in the low single digits
 WebVans Plan to drive out logistics costs enough to make a
solid profit
 That strategy, though, depended too much on huge volumes
to drive high levels of system utilization, which never came
close to materializing
ChainIssues
 Online grocer has many problems, including massive investment in automated warehouses that drain capital and
aren„t justified by demand
 Company goes from billions in market capitalization to bankrupt in a matter of months
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

8. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”8
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

9. Management Development Institute Gurgaon
January 2014
04 – Adidas 1996 Warehouse Meltdown
Group 4 Major Project: “11 Greatest Supply Chain Disasters”9
 Attempt to implement first one and then second warehouse
management system in its distribution center
 Featured heavy automation
 Requiring extensive logic and integration in the WMS
 Adidas insisted vendor„s Unix-based system be ported to
fault tolerant Stratus computers
 First WMS vendor couldn„t make it work and went „belly-up“
in mid-project
 Second WMS vendor then tried to implement their system
 Due to long project dealys Adidas decided to go live before
the system was really ready
 Because the system did not really work Adidas was unable to
process and ship orders (only ~20%)
ChainIssues
 New warehouse system and DC automation just don„t work
 Company underships by 80%
 Adidas suffered market share losses that persisted for years
 IT and logisitcs staff left the company in droves
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

10. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”10
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

11. Management Development Institute Gurgaon
January 2014
05 – Denver Airport Baggage Handling System
Group 4 Major Project: “11 Greatest Supply Chain Disasters”11
 Set-up of a hugely automated underground baggage
handling system with a computer driven railroad network for
moving baggage
 Bags were mis-delivered, luggage was chewed up and
cars derailed and jammed tracks
 Issues:
 Underground tunnels to be used fot the conveyance
system had been already built before the prime contractor
was awarded the contract
 Therefore, the system was not designed with this level of
automation in mind
 Mis-communication between the prime contractor, airport
officials and the airlines
 Inability to see the interrelated problems
 Not enough time to test the system
ChainIssues
 Complex, hugely expensive automated handling system never really works
 Airport opens late and a huge PR fiasco
 System is only minimally used from start and shuttered totally in 2005
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

12. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”12
…
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

13. Management Development Institute Gurgaon
January 2014
06 – ToysRus.com Christmas 1999
Group 4 Major Project: “11 Greatest Supply Chain Disasters”13
 Online retailing business is finally strating to heat up
 Leading toy retailer Toys R Us advertises heavily and
promises it will make Christmas deliveries for any orders
placed by December 10.
 The company is swamped with tens of thousands of orders
and simply cannot pick, pack and ship the orders fast enough
 Toys R Us writes famous „We„re sorry“ e-mails 2 days before
Christmas
 Fire storm of negative PR
 The brand takes a big hit, even though other e-tailers have
some similar problems
ChainIssues
 Can not fulfill thousands of orders for which the company promised to deliver by Christmas
 The Christmas of 1999 causes hundrets of companies to analyze their e-fulfillment capabilities in more detail
 Outsourcing of fulfullment to Amazon.com
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

14. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”14
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

15. Management Development Institute Gurgaon
January 2014
07 – Hershley´s Halloween Nightmare 1999
Group 4 Major Project: “11 Greatest Supply Chain Disasters”15
 More than $100m spent on transforming the company„s IT
infrastructure and supply chain
 New order management
 Supply chain planning
 CRM
 Hershey Foods planned to go live will all the systems in parallel
 Whole project was delayed from April to the summer.
 Major issues were faced implementing these systems
 Products were ready, but due to non working transactions,
they couldn„t be shipped
 Inventory would not be visible for allocation
 Supply chain and logistics executives had to be trotted
regularly to Wall street analysts for assurance of no more
glitches
 Intra system communication was also changed – EDI
messaging
ChainIssues
 Order management & warehouse implementation issues caused Hershey to miss critical Halloween shipments
 The company lost atleast $150m in revenue, stock dropped from 57 to 38 and profit went down by 19%
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

16. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”16
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

17. Management Development Institute Gurgaon
January 2014
08 – Cisco´s 2001 Inventory Disaster
Group 4 Major Project: “11 Greatest Supply Chain Disasters”17
 Along with other companies, Cisco too rode the technology
wave in 1990 and grew immensly
 The networking industry had no experience with a downturn
and thus Cisco resoponded to high order patterns with higher
build rates and substantial inventory accumulation
 Cisco was unable to see the slowing demand and continued
high production
 Cisco was thus left unprepared when the tech bubble burst
and there were piles of inventory left
 Thus the “Cisco bubble” burst and the company was heavily
criticized in the business press along with huge losses to
stocks
ChainIssues
 Lacking adequate demand and inventory visibility, Cisco was caught with piles of inventory due to the slowing
demand
 Company forced to take a $2.2 billion inventory write-down and drop in stock by 50%
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

18. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”18
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

19. Management Development Institute Gurgaon
January 2014
09 – Nike´s 2001 Planning System Perplexity
Group 4 Major Project: “11 Greatest Supply Chain Disasters”19
 Nike„s newly implemented supply chain planning system in
2001 invited a myriad of issues
 Software bugs
 Integration problems
 Complexity, change for planners, lack of training
 Citing “Software problems”, the CEO, Phil Knight said that
the supply problems had created significant inventory
abnormalities and were the cause for a $100m revenue
shortfall
 Prices had to be slashed to get rid of the additional inventory
causing immense pressures on profit margins
 This is also a result of the“Big-bang“ approach rather than a
phased implementaion approach
ChainIssues
 Trouble with new planning system caused Nike inventory and order problems
 Inventory issues led to a $100 million shortfall in revenues and 20% drop in Nike‘s stock
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

20. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”20
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

21. Management Development Institute Gurgaon
January 2014
10 – Aris Isotoner´s Sourcing Calamity in 1994
Group 4 Major Project: “11 Greatest Supply Chain Disasters”21
 Aris Isotoner was one of the most well known brands in
gloves and slippers in the US with $220m sales, 15% net
profit and a high growth
 Production plant in Manila produced gloves at a very low
cost, even cheaper than the Chinese units and had highly
skilled workers
 The decision to move out of the Phillipines proved to be
costlier
 Production costs increased by 10-20%
 Quality plummeted alongwith the production quantity
 Sales declined by 50% and operating losses totaled $120m
 Additional amount of $100m also had to be invested to keep
the company afloat
Chainissues
 Aris Isotoner decides to move from Manila to even lower cost locations but this decision proves to be disasterous
as the quality plummets and costs rise instead of falling
 Due to relocation of the production unit, Aris Isotoner„s profit making business turned to a loss making one and
had to be sold to Totes Inc., a unit of Bain Capital
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

22. Management Development Institute Gurgaon
January 2014
Agenda
Group 4 Major Project: “11 Greatest Supply Chain Disasters”22
01 – Foxmeyers´s 1996 Distribution Disaster
02 – GM´s Robot Mania
03 – The WebVan Story
04 – Adidas 1996 Warehouse Meltdown
05 – Denver Airport Baggage Handling System
06 – ToysRus.com Christmas 1999
07 – Hershey´s Halloween Nightmare 1999
08 – Cisco´s 2001 Inventory Disaster
09 – Nike´s 2001 Planning System Perplexity
10 – Aris Isotoner´s Sourcing Calamity in 1994
11 – Apple Misses Power Mac Demand

23. Management Development Institute Gurgaon
January 2014
11 – Apple Misses Power Mac Demand
Group 4 Major Project: “11 Greatest Supply Chain Disasters”23
 Apple planned to introduce its Power Mac PCs in the
Christmas season in 1995
 It had a previous experience of excess inventories and
production capacity for a similar product
 Thus, Apple„s forecast for Power Mac was highly pessimistic
and totally off the mark
 There were certain delivery issues with some parts suppliers
also
 At one point, Apple had as much as $1 billion in unfilled
orders
 Stock price was cut in half, CEO fired, lawsuits by
shareholders and a permanent hit to Apple„s position as a
market leader
Chainissues
 A conservative forecasting strategy led Apple to be incapable of meeting the demand for Power Macs
 Apple lost the position of the leader in market share and could never recover from that point
Procurement
Technology
Human Resources
Firm‟s infrastructure
Inbound
logistics
Operations Outbound
logistics
Marketing
& Sales
Service

24. Management Development Institute Gurgaon
January 2014
Summary & Lessons
Learnt
Group 4 Major Project: “11 Greatest Supply Chain Disasters”24

25. Management Development Institute Gurgaon
January 2014
Summary and lessons learnt
Group 4 Major Project: “11 Greatest Supply Chain Disasters”25
“decided to go live before the system was
really ready…”
“huge loss of market share”
“IT and logistics staff left
the company”
„massive investment in automated
warehouses that drain capital and
aren‘t justified by demand“
Human
failure
Technological
failure
Company
failure

26. Management Development Institute Gurgaon
January 2014
Thank You!
Group 4 Major Project: “11 Greatest Supply Chain Disasters”26