Logistics Failures and how to avoid them

At www.dmg-freight.com we’re committed to helping our clients achieve the very best, which requires a bit more than just helping them to find the ideal warehousing solution for their needs or helping solve problems with fulfilment and logistics. Today we’re looking at some cautionary tales from the world of logistics, exploring what went wrong and offering some ways to avoid ending up in similar situations. Of course most logistics failures become public because they happen to multinational firms, but even the smallest enterprise can learn from their experience.

 

KFC and the chicken logistics crisis

 

By 17 February 2018, a whole new type of joke had emerged – ‘why did the chicken cross the road?’ ‘Because KFC couldn’t get it to their store’. What went wrong for KFC was a combination of several logistics problems:

 

1. On February 14 they transferred their logistics from Bidvest to DHL, apparently without trial runs
2. Also on February 14, two traffic collisions on the M6 led to a total traffic bottleneck for several hours
3. DHL’s single chicken warehouse, in Rugby, was completely inaccessible. Every HGV that left the site was immediately caught in a traffic jam that went on for up to 14 hours.

 

So what can we learn from this? Well first of all, even the biggest companies such as KFC and DHL, are capable of a certain kind of blindness to risk. Here’s what analysts have pointed out:

 

• Never do anything on a significant date – February 14th is an insane day for logistics, like Christmas day or Black Friday. To make substantial changes to your supply chain on a day that is already stretching transport infrastructure to its limits is – frankly – insane. Add to this the simple fact that Valentine’s Day is a traditional accident magnet, with lovesick, disappointed or drunk individuals taking sickies, turning up at work in a less than perfect condition or throwing various emotional spanners into the works, and you’ve got a perfect storm of potential problems.
• Failure of contingency planning – although the golden rectangle (warehousing in the area between Daventry, Milton Keynes, Northampton and Rugby) is always appealing, problems on the M6 can lead to massive delays. Not having a plan B for as common a problem as M6 closures suggests a complete inability to understand the reality of UK logistics.
• Too many eggs in one basket – DHL planned to deliver all KFC’s chicken from a single warehouse. Their previous 3PL provider used six. Clearly using one warehouse offers cost and efficiency savings and many DMG Freight Services clients successfully operate in this way. But if you have a national coverage, a time-sensitive product and a marketplace based on swift delivery of an internationally recognisable product, it’s probably best not to bottleneck any part of your supply chain through one place/system until you’re sure it cannot fail.
• No trial runs – from the biggest corporation to the smallest start-up, the failure to run test-to-destruction trials on new logistics is a big gamble.

 

The snow disruption effect

 

Hardly a single haulier, warehouser, importer or exporter hasn’t felt the effect of the recent snow in the UK. Disruption is commonplace, surveys suggest 10% of supply chains experience it every year, but failure to recognise its effects is dangerous.  Bad weather, roadworks, major public events … all these will impact logistics. Understanding how badly and for how long can make the difference between success and failure.

 

Lessons to learn – after bad weather, expect to find slow moving vehicles (rubbish lorries, removal vans, breakdown vehicles) clogging the roads for a full seven days. That’s the minimum most logistics experts suggest it takes to get infrastructure back to normal. If you don’t factor in the time and cost of dealing with the restoration of service process, you will continue to fall behind schedule.

 

Target Canada’s warehouse failure

 

In 2015, Target, one of the most successful chains in the USA, pulled out of every store they’d established in Canada. It was an epic business failure. Why? Barcodes.

 

For some reason the SKU codes on many items didn’t match up with the Target Canada computer system. Nobody knew what was in the warehouses, and when distribution centres asked for stock, nobody could find it even though it was piling up on the shelves. Customers in their millions, hoping for the Target experience, were left angry and frustrated as they placed orders for goods that never turned up in their local shops. A huge property deal that had led to Target having a store in almost every city became meaningless when they couldn’t get supplies from their warehouses to the stores.

 

Lessons to learn – town by town roll-outs are better than big splurges, testing your distribution is vital before you make promises. Logistics always begins with the tiny details – SKU codes, the parking restrictions outside shops, the skill and speed of your stock pickers. Target lost $2 billion on its Canadian ‘expansion’, by learning from their experience you can save yourself a similar loss.

 

Know where your supply chain stops

 

Ed Sheeran may be the UK’s most popular act, but he’s failed to understand the basic rules of logistics. When his tour tickets sold out in less than five minutes after going live, devastated fans went online to complain and Sheeran stepped in to tell them he was ‘deeply concerned’ and not to buy from ticket touts. The problem is that the supply chain for gig tickets is widely dispersed. Auto-buying bots purchased over 50% of Sheeran’s stock and then had them online with resellers  before other buyers had even got to the front of the Ticketmaster website queue. While this happens to every popular entertainer, Sheeran got it in the neck for appearing to promise than he could deliver.

 

Lessons to learn – don’t try and expand your influence beyond your supply chain. Be clear with everybody about where your power stops. Just because your logistics appear to reach the end user, don’t assume that’s the end of the story – resellers may impact your logistics reputationally so be aware of what happens to your goods or products after you’ve given them over to new ownership. You can’t control the supply chain, but you can manage your reputation around it.