Logistics Epic Fail

I would like to share a logistics horror story that is the epitome of a project planning epic fail.  I will call this company Kitchen Sink for the time being. So Kitchen Sink is a reputable company with an annual revenue of seven hundred million,  and employs over 45,000 people. At the beginning of Q1 of 2014, they decided to consolidate their Rancho Cucamonga CA and Atlanta GA distribution facilities. The goal was to have all freight routed out of Atlanta GA by the beginning of Q3. A task force of high-level managers was put together to implement the project.  On July 1, the project was right on schedule.  The entire inventory from the Rancho Cucamonga facility was loaded onto 90 trailers to arrive in Atlanta a weeks time. Seeing that their work was done the project manager proceeded to close down the California warehouse and layoff 30 employees. Anticipating that the project would continue to move smoothly, the logistics team placed orders for six cargo barges from India to also deliver freight in Atlanta by mid-July.

The problem was that although the Atlanta facility was enormous, the project manager did not anticipate how much space would be needed for all of the incoming freight. In short, Kitchen Sink’s Atlanta distribution center had to reject all  90 trailers and send them back to Rancho Cucamonga because there was not enough room for all of the cargo.  Since everyone had already been laid off in the California distribution center there was no one to unload the rejected containers. So the containers sat fully loaded in the yard. Also the six cargo barges could not be unloaded either.  They too sat fully loaded and waiting on the docks. In the meantime, there was a port strike. No containers could be unloaded until the Longshoremen came to an agreement about wages and benefits. At $60,000 a day for the cargo barges and $9000 a day for the sitting trailers, this was a very costly oversight by the project manager.

I believe that this problem happened because the decision to consolidate the warehouses was made from top-level managers without seeking the input of other crucial parties involved. They were so concerned with making the deadline that they did not do a proper risk management assessment.  The strike on July 18th was public knowledge weeks ahead of time and the project manager should have mitigated this possibility. Also the warehouse staff in Rancho Cucamonga was prematurely let go without consideration that they may be needed to further help with the transition.

What could have prevented the project manager from not knowing that there would not have been enough space for the warehouse consolidation? Could this have been prevented if the project manager had made an effort to work with the lower level warehouse employees in Atlanta?

7 thoughts on “Logistics Epic Fail

  1. I think this is really a problem of a project manager not including the right people in the information gathering part. The knowledge that was needed to understand the impact of this consolidation was probably spread throughout several warehouse managers as well as others. They were probably not brought into the discussion and for that reason the project failed. This type of thing happens all the time. Every car company has named their car something that translates into a human body part or something offensive. Ford Fiera – In Spanish,Fiera means “ugly old woman”.

  2. Ginger, I believe this is a classic case of not paying attention to the risk factors once the project has been kicked off, just like the problem we discussed in class. Unfortunately, your example is not the only one. One of our customers was consolidating their warehouses as well. They had closed the local facility which managed over 15,000 different sku numbers (supplied by us) and moved it to a different state. With this move all of the local people who were managing this inventory for years were let go. There was no training provided for the new personnel and it took them over six months to figure out what needs to be ordered and in what quantities. Their customers suffered, because they couldn’t figure out what had to be ordered and when. We suffered due to the lack of orders and every order we did receive was super rush. It seems that “stupid think” is not only prevalent in smaller companies but in really big ones as well.

  3. This blog reminds me of a story I read in the Zappos book. If you have yet to read it, I highly recommend it! There is a story in there about when the company was first beginning. Zappos was transporting their entire inventory of shoes to their new warehouse in Kentucky. I don’t remember all the details of what occurred, but the truck ended up tipping over leaving piles of shoes all over the road! The company lost inventory, time, and money in the mess. It also inconvenienced and angered the customer, because of the amount of orders that had to be canceled or stocked out.

    I believe both of these situations suffered from a lack of foresight on potential issues that may arise. If your situation, had they managed risk properly from the beginning, and maintained it throughout the entire project, the costly errors may have been avoided. In the Zappos case, even though no one could have predicted the truck tipping and loosing inventory, they may have been able to have contingency plans in place to deal with the loss of inventory and customer backlash.

  4. It is just hard to believe this can actually happen! How could you not check the room available in the warehouse before you sent a bunch of product there? Even if this happened at a high level, it seems like there should have been someone who knew the warehouse capacity. It makes me think back to other classes and the use of checklists. While checklists may sometimes seem silly, they can be helpful. In this case – check to make sure warehouse can accommodate initial capacity. Oh wait – it can’t?

  5. Sometimes the appeal of schadenfreude is too much to ignore. The story you outlined seems to indicate that the project manager had already checked out of California in an effort to avoid the aftermath that follows downsizing and closures.

    A project manager should be aware of the requirements of the project, in this case how much space (usually dictated by weight) the containers would need as well as the timing involved. By neglecting such simple details, the issues that the project manager sought to avoid were amplified by the lack of recourse.

    For this reason, I think every project manager should have a contingency plan ready based on risk analysis similar to what we’ve done in class. In this case, firing the California workers was the contingency to returning the shipment – like a line of dominoes, the failure of one contingency cascaded into the next. The lesson: don’t make your contingencies depend on each other.

  6. Great title and great response so far. Allow me to enter this great discussion. Larry agree with you this is an issue with the project manager managing to a schedule and not a project. This is often the issue with many, many, and did I say many? Project Managers. They look at the projects in mini buckets without understanding the entire picture and following the flow of the process until completion of the project and not just the completion of a task or milestone. This “epic failure” is sadly one of many failures for a project manager suffering from blinders. The best way to prevent issues like this is to bring all the players into the same room, not on a teleconference or virtual network, in a room to discuss the plan and have an open converstation on the project. This open dialogue with the key knowledgable players would be the best ice breaker to find problems and resolve them. Fantastic post, good work Ginger.

  7. I understand that you are speaking of project managers and their lack of sometimes not communicating throughout the company with warehouse employees. I agree with the fact that communicating with the warehouse employees in Georgia and also the shipyard may have reduced the issues or eliminated them as a whole. This was a costly mistake that the company made, one that should not have even happened. It is amazing to me to see stories like this, where a couple of simple phone calls to the right people could have had completely different outcomes. Managers need to sometimes understand that even the lowest-level warehouse employee could have very useful advice and knowledge since they do the job day in and day out.

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