What is a Supply Chain?

I'm your host, Jonathan Strickland, an executive producer with How Stuff Works in My Heart Radio and I love all things tech, And you know, the world of technology can be pretty complicated at times, which is part of the reason why I think my colleagues at How Stuff Works back in the old days weren't really eager to jump on that particular category when we were figuring out who should be the head writer for each channel of subject

matter on the website. But I argue that once you get past certain thresholds, a lot of the basic principles underlying technology become fairly easy to grasp, and it's really easy to apply them to different areas. So really there's a barrier. But once you get beyond that barrier, things are relatively simple. But one thing that is deceptively implicated is the supply chain. Now, you may have heard stories of companies having to deal with issues involving supply chains,

but what does that actually mean. What is a supply chain. It's not just something that's restricted to the world of technology. Supply chains are in all sorts of businesses, but in tech we see how these challenges in supply chains can play out pretty easily, and it is frequently a matter of headlines and tech news. So to answer these questions you know, about what a supply chain is, I turned

to John Bermudez of trace Link. He's the general manager of trace links digital network platform, and trace link provides many services, including ways to manage a supply chain. So here's our interview. John. Welcome to tech Stuff, and thank you for joining us today. Very happy to be here, thanks for inviting us. Absolutely. So the first question I

have for you is really a very high level question. Uh, and it's simply because a lot of my listeners they come at the world as you know, a user slash consumer slash customer kind of approach, so they're not necessarily thinking about all the moving parts that make business in the twenty one century work. So if you had to explain to somebody who was completely ignorant of that world what supply chain actually means, how would you do that? Well,

it's a great question. So years ago, my three year old son when I was trying to get him to bed, which if you have kids, you know that they don't really ask you any questions and until you're trying to get to brush your teeth. So he asked me, because, Dad, where are you going to Marston. I'm going to Cowboy to speak about supply chain. He goes, what supply chain? He said, well, Eric, this toothpaste tube is almost empty.

So when we go and buy another one at market basket, Uh, the people at market basket need to have one, because we bought one there last time. So the process of getting that toothpaste to to market Basket from the manufacturer, maybe through a ware house, is the process of supply chain, of which my three year old looked at me and said, Dad, and you grew up, you should be a fireman. Quite simply, supply chain is about getting product from its raw materials

through the various manufactus to the ends to the end consumers. So, whether it's a consumer good something relatively simple like m bottle a can of coke zero which comes to a bottling plant which receives the secret formula from the secret coke manufacturing sites and then put in cans and deliver it to comedian stores and supermarkets um, or whether it's something much more complex like trace link is involved in where you have pharmaceutical supply chains that have many participants

and obviously going to make sure that life saving drugs get to the many different points at which they need to be, whether it's pharmacies, hospitals, clinics, uh you know, shift around the world to uh A deal with emergency situation. So supply chain is the process of getting things where they need to be. Yeah, and as I understand it, it's it's one of those things that can be fairly simple or incredibly complicated, depending upon the scale and the

necessities of any given products. So for example, in my sphere in the technology world, when we talk about things like personal computers are are a great example, or mobile phones. These are things that we as consumers often think of as coming from a single source. Right. You get an iPhone from Apple, and that's where you go, and that's where it comes from, and there's someplace a little Apple manufacturing facility, and these come out fully formed after they

do whatever magical thing it is they do. But in reality, what you're talking about is the combination of lots of different elements, many of which are coming from different places all around the world, that all have to come together in order to be assembled into this final product that we get our hands on. And that's just in the world of technology. This is obviously something that applies across

the board to lots of different industries. And I would imagine that today with the global economy, that we have the fact that we have facilities all around the world that participate in this economy, maybe they're providing one small part of an overall large package that that can get very very complex very quickly. Is that a fairly accurate assessment. Yeah, absolutely, And your example of iPhone is a great example. Yet

there are hundreds of little parts in there. If you wherever unfortunate to drop and break yours, you'll see that there are lots of tiny, very sophisticated parts in there that come from dozens of suppliers. And there's also a timing element, because if you think about Apple and their new iPhone launches, you know they plan these, uh and

our tract you know, by millions of people. If they're gonna have a launch on September or ten, hundreds of millions of people expecting product to be in stores around the world on September ten. So not only do you have to get hundreds of parts from lots of suppliers in different parts of the world and then get them

to a factory. But on top of that, you have to maybe make five or ten million of these iPhones and then get them to thousands of distributions to stores and do it all to make sure they're they're on September tent. So there's a timing element which sometimes you could say, what in the apple case, somewhat self imposed. They like the drama of having people camping out outside

the stores. But another supply chains, which seems simple. They think about, you know, fresh pineapple coming from Hawaii that cannot stay on a ship for six months and get lost. It needs to move very quickly through the supply chain, through distribution centers and end up on a store shelf in a relatively short uh segment of time. So even the simplest supply chains are not as simple as a seem. You know, I spend time in Asia with simple things

like fashion supply chain. You think, well, how complicated is to make a pair of yoga pads? Well, um, you know they're made in factories in Malaysia and China. They have the many very different sizes and colors. They have hang tags destined for hundreds of countries around the world with different pricing and different languages on them. Uh and then also the fashion industry has gone into a mode where it wants to change fashions ten, fifteen, twenty times

a year. The state of the art in the fashion industry as a company that's changing fashions almost fifty times a year. So if that product is stuck in the supply chain and UH and miss is the fashion window, it goes from being a very valuable pair of of workout gear that sells for a hundred dollars just something that ends up at the discount rack for twenty dollars. And obviously nobody makes any money at that. So even simple products UM have can have pretty complex elements to

their supply chain. And then on top of that you have all the added complications that come into things like whether or not tariffs are a part of it. We talk a little bit about pharmaceuticals. Obviously, with pharmaceuticals you have very real concerns about validity and quality issues to make certain that the the the various components that are coming together to make drugs are safe for a consumption. This sounds like it can very rapidly become a logistical

nightmare if you're trying to manage all of this. So can you talk to me a little bit about the approach to solving this where you're you've got this this complex web that if everything is working great, it's fine, every smooth sailing. But as we know in the real world, it it rarely does everything work great all the time. Usually there's going to be some issues somewhere along the line, and it's important to know where that's happening and how

to respond to it in a timely way. So talk a little a little bit about that sort of approach to solving this very difficult challenge. Well, just providing a little history that the approach up until recently had been to try to run these problems through very large, complex supply chain planning software that we kind of tell you where everything needed to be, when to order things, when to move things. But as you pointed out, it turned out that model is just too complex and these problem

these solutions would run forever. So the trend now is to put these uh and manage the execution these supply chains across real time networks so that you can get real time information. You know, a real time example is UH. You know tariffs. You know, tariff can pop up in a week. So a supply chain that was moving running smoothly now is sitting waiting for tariff UH documentation to get from through from one country to the next. So it may add a week to that supply chain, and

maybe despite chain cannot afford a week. So what you might end up doing with that if it was destined to go in a container on a container ship. You see this the the advantage of having your real time network that can reach out and know where that product is. You can then route it to UH to air cargo

and fly it. You can't do anything about the tariff, you can't do anything about the time it takes forward to get through the inspection center, but you can route it to to air cargo and change the amount of time and it's going to spend in transit. So it's really you're seeing a trend in real time networks to provide much more visibility. Because supply chains are complex, many things can disrupt them. UH and you know we've leaned

out supply chains to a point. You know, part of the just in time good inventory management practices of the eighties, nineties, and two thousands have made for very streamline supply chains. But then you know, they can be disrupted pretty easily. Um and it can cost you know, millions of dollars to a company that, um, just depending on something being

there what it's supposed to be. So the network allows you to see where it is, provide real time collaboration with the various parties to get it, you know, so it's not just the supplier who made it and the finished goods manufacturer or the consumer that wants it, but the logistics providers people provide customs documentation or making sure

that the two countries have a training agreement. You know, there are countries that will not take products sourced in other countries, so, um, you need to make sure it's not destined for a country that's going to block it at the port. And real time networks are helping company these deal with that. Yeah. I I've often I've done episodes in the past about a lot of of like crowdfunded campaigns for physical products and how I think a lot of people who go into that they don't have

this background in the manufacturing world. They have a clear idea of what it is they want to do. They've built a prototype in the prototype works, but they don't necessarily have a full appreciation of how complicated this can get, and UH in inevitably these end up being some of those stories that end up in the top ten lists

of failures and crowdfunding. Right like you see stories about companies or or would be companies that crash and burn because they encounter these these problems that U can quickly throw off a timeline, and as we've seen in crowdfunding, often people who back them are not the most forgiving

of of UH investors in a company. So to me, it's it's having this understanding is key of how this is UH something that people have to keep in mind if they're getting involved in any sense in in manufacturing, because it allows you to build in those buffers and to also be able to communicate in a transparent way to perhaps a group of investors in the case of a crowdfunding campaign, about what is going on and why it is UH something that is taking more time than

was anticipated. I'm also curious I know that there's been a lot of talk about using blockchain technology in UH in an effort to manage things like supply chains and blockchain I think is one of those those words that a lot of people have heard a great deal about, but they don't have a very deep understanding of what it means, and they it's hard to visualize how that is useful in UH management of a supply chain, verifying

when and where UH products have left particular facilities. Can you speak a little bit about the use of block chain in supply chain management and why it is so promising? Yeah, you're right. There's a lot of talk about it in supply chain, and I spent a lot of time looking at it, and you know, there's a lot of pilots that I think will go nowhere because they don't really have a value proposition that there is an easier way

to solve the same problem. You know, where blockchain does apply and actually at trade Link we have a pilot with a number of companies and also involves the FDA. Is where train where supply chain makes sense or blockchain makes sense in supply chain is where you need to share um information between multiple parties, and you may not want all parties to know where the information came from, but you want to make sure that every party on

the who gets the information can trust it. So the example UH is and I'm gonna have to get a little technical here on the pharmaceutical supply chain, but about seven eight years ago, there was a requirement that all lots and and serial numbers be tracked throughout the supply chain so that we could combat mostly counterfeit drugs, diverted drugs, to make sure that the medicines everybody receives are what

they think they are. So there's actually legislation going in place, UH in three in the United States and it will fast follow throughout the rest of the world. So that UM a pharmacy, if you go to UH your neighborhood pharmacy and you're concerned about where that medicine you would just received came from, they would be able to call up a history of all the steps that it went through. So UH, the pharmacutical supply chain, it is pretty complicated.

I won't get into the details of that, but it goes through multiple parties, from where the original ingredients come from, to the manufacturers, wholesalers and every in various part reeason between.

So blockchain is we're actually piloting a blockchain UH project with about twenty other players in the pharmaceutical industry, you know, to meet this FDA requirement that the pharmacy to be able to tell you, uh, you know, when each stage of the of the supply chain process happened, uh, and that and validate the data that there was no um that it can be traced back to an origin because often with counterfeit drugs, even things that are serialized, when

you try to chase trace them back, you find that they just magically appeared somewhere. So magically appearing is good for lepre cons, but it's not it's not good for anything you want to put in your body to help you with the illness. So so that's a great example how blockchain can be used in the supply chain because it's it's shielding the information and I won't get into the detail, but various parties don't necessarily want to be UM. You want the fact that they're just part of the

supply chain disclosed for competitive reasons or other reasons. So the blockchain will allow us to validate that this is a legitimate product. And there's an entire chain of custody history here that the blockchain application can validate without having to disclose you know which distributor supplied the pharmacy, because you might be uh, you know, Brand B distributor using your local pharmacy, thinking Brand B is supplying this pharmacy, only to find out that this product came from Brand

c UH wholesaler and you're questioning why that is. Well, you you wouldn't know that, but you will know that this is an an active product. So you'll see a lot of the A lot of the successful blockchain projects and supply chain I think will be oriented around the chain of custody and being able to validate um from source to consumption that this uh that the product has pedigree without having to know, you know, without you having

to know where exactly it came from. Now, the you know, the FDA currently requires the pharmacy to know where it got it from, and they could tell you that, but one step back, there's no current requirement that the pharmacy knows, say, for example, where the wholesale about it from. And the new law is not going to change that, but it will require this pedigree history, so you'll see a lot of that. You see uh IBM and MIRSK have been working on a similar blockchain effort to uh provide chain

of custody of globally shifted items. UM, you know where I don't see some of the other projects and supply chain UM transfer big pieces of information like entire contents of containers or bills of lading. Uh. That's a lot of information to be replicated across many notes in the

supply chain. And um, those projects you know are that they're out there, but their success is still people still questioning storing that much information the story of bitcoin, information which is actually very much tiny, is consuming our computer power than anybody would like to admit. We're going to take a quick break from the interview and come back with the rest of it, uh in just a moment,

But first let's listen to this word from our sponsor. Okay, let's get back to my interview with John bermudas of trace Link. We're picking up with a quick overview of blockchain technology and how it helps parties verify data. So basically the whole process in case people out there are wondering about this whole validation idea is that the block chain technology stores information in what are called blocks, and you can think of it as the name of the block.

Is the result of a mathematical process that's done on all the information that has been inputed into that block, and then the succeeding block has that name incorporated into its process of generating its own name. So, in other words, each block in the chain has a reference to a previous block, meaning that making any alterations trying to change the chain is incredibly difficult because not only do you have to change the information in the block that you're

interested in, but every block that follows after. And because the blockchain is a distributed ledger, not necessarily across as large a network as say bitcoin, but is a distributed ledger that multiple parties can see, it is very hard to do that on enough uh machines where you can alter that in a way that is undetectable. You have to essentially have control of more than half of all the machines on the system in order to do that, and it's that's not an easy task. So that is

sort of the thought process. I agree with you. I think that blockchain certainly has its usefulness in things like the pharmaceutical field, perhaps in things like food chain supply also, can you can see some applications there potentially. I do think as well, that it is not going to be the universal UH solution to all supply chain issues, but I think that in a few cases it it certainly will will meet the requirements that a lot of people have in order to verify Yes, in fact, this is

exactly what it claims to be. This is an a counterfeit, especially for something as important as medication. Obviously, we want to be absolutely certain that that stuff is valid and will do what it is uh it claims to do well.

This is really interesting to me because, again as someone from the other side of it, where I get to enjoy these various products that uh that I I don't have to spend a whole lot of time thinking about what actually was required to bring it to the point where I could get my grubby little hands on it. It is nice to be able to reflect for a moment how complicated this process is and how much work has to go in in order for me to enjoy that amazing privilege. I get a deeper appreciation for it.

And it also really reinforces the idea that I am never going to have a crowdfunded campaign to launch a product ever, because I just can't deal with that level of stress. UH John, thank you so much for joining our show and and describing this process. I think it really has helped open up my eyes and hopefully the eyes of many of my listeners too. You know, the work that you do and how you are able to tackle this very large and and sometimes confusing issue of

managing these supply chains. It's been fascinating. You're quite welcome, happy to participate. Thank you for inviting me. Now, at this point the interview was technically over, but John had a really good point about the food supply chain that I wanted to share with you guys. So this little bit came after our initial conversation, but I think it's worthwhile including here. I have concerns over the fresh food

block chains that are out there. Oh yeah, because you know, what one of the things think about is what makes the pharmaceutical supply chain. Actually, what Tracer plays a big part on is the serialization and digital you know, digitally tracking each serial number through its entire life cycle. The challenge that I see with you know, the the fresh tomato example, is, um, we all hear about these I E. Coli problems and all these other things, and quite often

they start in the field. So um, getting that digital uh blockchain update that it came from this particular field. You know, nobody has provided me with an idea how that's going to happen. We're picking the tomatoes are hand picked, um, and they go in boxes and then the boxes go on trucks and they probably go to a packing center and that's probably where they enter the blockchain. So what happened between the field and the packing center um or maybe you want to was loaded on the truck. It

was scared, but still UM. So that part I think. One I think is that you'll see blockchain applications, blockchain supply chain where we can. And this is why bitcoin works so well because everything is digital, so there's no way to fake it. There's no tomato growing on a there's no bitcoin growing on a tomato bush. And Selina's

valley right. I want to thank John Bermudez again for coming on the show and talking to me about supply chain management, and he does make an excellent point for blockchain technology to work effectively as part of a supply chain, you really need it to be a part of the

whole system from the very beginning. If there is any ambiguity about the origin for a specific component, such as a particular piece of fruit in the food supply chain example, then the best you can do is say, well, we can trace this particular piece of fruit back to this specific warehouse or distribution center. But you can't go back for either if you didn't have a means of entering

in the information from the very beginning. So if you're looking to identify the source of a particular outbreak in something like E. Coli, that becomes a problem. So it falls to supply chain and blockchain experts to figure out a practical way to implement the technology so that it

actually accomplishes the goals set out for it. The same thing can be said for counterfeit products, or whether or not something is truly organic for whatever worth that word happens to be in a case by case basis, or even things like free range chicken or grass fed beef. At some point you need some form of certification process to verify that yes, the claim being made is in fact verified and it is true, and then that goes

into the blockchain. Otherwise you could have a situation where someone tells you that it's true, it gets entered into the information that becomes part of the blockchain, and according to the block chain, yes it is true, but if you were to actually go and visit the site you might find otherwise. These are issues that have to be worked out for blockchain to truly be useful in those

supply chain implementations. Now, I thought to round out the rest of this episode, we could talk a bit about some stories of companies and products that encountered challenges due to supply chain issues, and you may already have some ideas about likely candidates. One of them which I was thinking about specifically while I was talking with Mr Bermudez, was The Coolest Cooler, and I've talked about this product

in episodes about crowdfunding before. I also have an upcoming episode of The Brink about the Coolest Cooler, and I don't want to harp on it too much because I think that Ryan Grabber, who is the guy who came up with this idea, was truly sincere about this project. The issue was not with his desire to deliver upon his promises. It's not like he was trying to suggest

a product with no intent on the of ring. Rather, I think he just underestimated how hard and expensive it was going to be to make the product he had in mind. So, for those of you unfamiliar with this particular product, the Coolest Cooler is a beverage cooler, you know, an ice cooler with lots of bells and whistles. A fully kitted out version of Grabber's design included a blender for drinks, a Bluetooth speaker, a USB charger and LED light built into the lid, cutting board, storage for plates

and cutlery, a bottle opener, and more. He launched his project twice on Kickstarter, and the first time it failed to get really any attention, but the second time, which he launched in July two thousand fourteen, it got a lot of attention. It became one of the best funded Kickstarter campaigns of all time. His goal was initially to raise fifty thou dollars, but by the end of that

campaign it had raised more than thirteen million bucks. And if you were early enough, you could pledge at the one d sixty five dollar level to qualify for a Coolest Cooler of your very own, And even if you didn't get one of those seventy spots, you could still pledge at one eight five dollars plus fifteen dollars for shipping and handling for that privilege. Now, Grepper estimated that the final retail price of the cooler would be two

so you get it at a substantial discount. However, as it would turn out, his estimation was actually a gross underestimation of how much it would cost to produce those coolers at scale and sell them at a profit. Grepper ran into supply chain problems fairly early into the process.

At one point, workers at the Chinese factory that produced the blender motor that Grepper needed for his coolest cooler they went on strike, and as we heard in the interview, when one piece of the supply chain goes wrong, it can affect everything else with the coolest cooler. This cascaded into a pr disaster for Grebber, who was trying hard

to fix things, but was then over his head. Currently, because of a class action lawsuit, he is under a mandate from the court system of the state of Oregon to get backers their coolers by the middle of or else he'll have to send each backer who has yet to receive a cooler a certain amount of money. I believe it's twenty dollars. He'll be obligated to do that even if the company itself were to go into bankruptcy.

So even if the coolest Cooler company dissolved, he would still be held liable for sending that money out to each of those backers, and there are thousands of them. Again, from everything I've read, it seems like Grebber has tried to meet his obligations. It's just that the promises he made were too grand and the process to achieve those goals too arduous, and there were other problems besides the

supply chain itself that would come into play. But I think that's one of the examples that really illustrates just how hard this is. And it's not just small startup businesses that can run into these issues. I evoked the name of Apple in my talk with Mr Mudaz, and that's for a reason. The company has had problems with

its supply chain a few times in its history. For example, in Apple unveiled the Apple air Pods, and that's the company's bluetooth connected wireless earbuds, and at the time, Apple estimated that the product would be ready to ship by late October. But even at the end of finding air Pods was really really hard. Nobody had them in stock. Apple stores would often receive fewer than a dozen boxes of air pods, not crates of boxes, but actual just samples of air pods. They would just get maybe twelve

or fewer at a time. There were a lots of reasons and a lot of speculation as to why there were so few units available, why the supply was so low. The Wall Street Journal published a piece that stated that was largely because of some technical issues with the air pods themselves, that Apple needed to work out that that they just weren't working properly, and so it was delaying shipments.

But John Gruber, who has written a lot about Apple, wrote that based on his unnamed sources at Apple, the real reason was that the company encountered an quote unexpected manufacturing problem at scale end quote. Typically that points to a supply chain issue. Now, when we come back, I'm going to cover a couple of other stories with some

similar problems. But first let's take another quick break. So I've talked about coolers and earbuds, but supply chain problems can affect all sorts of things at different sizes, even commercial jets. Back in the mid two thousand's the airline industry was eagerly anticipating the arrival of Boeing's seven eight seven aircraft a k a. The Dreamliner, and this was a new approach to large commercial aircraft. The airframe was made out of composite materials rather than the metal based materials.

This actually made the aircraft much lighter than earlier models like the seven sixty seven, and that meant that the seven eight seven had better fuel efficiency as a result. It's not as heavy, you don't need as much fuel to keep it in air. So Boeing estimated that they would be able to deliver the seven eight sevens to the various airlines by May two thousand eight, but in reality the planes would not be ready to enter service until October two thousand eleven, so you're talking about three

year delay three and a half year delay. Many factors contributed to that delay, but the two big ones, according to most analysts, was that Boeing had tried to overhaul its supply chain and it's assembly process all at the same time, and that this particular decision created complications that took way longer to work out than the company had and to a pated and every analyst or expert that I read about or read their work while researching this.

They all essentially said the same thing, which is that if you're going to make changes, it's good to make changes to one system first before you make changes to the other. Uh. If you're making changes to two integral systems at the same time, you are essentially doubling the risks you encounter for delays and losses. Sometimes supply chain problems aren't centered around not being able to get the

components you'll need when and where you need them. Sometimes supply chain problems manifest in a way where you receive way too many of something then you actually need. You end up with a surplus of stuff because the supply chain is not keeping an accurate record of where things need to go at any given time. This was the case for Target with their stores that were in Canada. In two thousand fifteen, the company announced it was going to leave Canada entirely because this problem was so bad.

So what exactly was going on? Well, again, there were many problems. Supply chain was just one of them, but it was a big part of it. Targets distribution centers in Canada, we're getting overwhelmed by more products than they could handle. So a distribution center is sort of a way point for a product. The companies will typically bring

in products into a distribution center. They're brought there, they're ordered from vendors throughout the world, and those products go into the distribution center, which then will send those products out to specific stores based upon their inventory needs. So if you have one target where their sprockets are getting low, the distribution center should send more sprockets to that target and keep track of how many sprockets are being sold over a given amount of time so that the supply

better matches the demand. Well, that was not happening with targets Canadian distribution centers. They were receiving tons of stuff even before they could send anything else out, and so things were getting very messy. It was coming in faster than it was shipping out, and rather than keeping an eye on demand and managing supply, the supply was coming in like a fire hose on full blast, even if the outgoing products to target stores were moving a little

more than a trickle. Reuters reported on this matter and specified a particular product to illustrate the problem that made it somewhat amusing. The product was a toddler sized pink suv branded with Barbies trademark. Apparently the distribution centers were getting overwhelmed by the pink toy vehicles among other products.

Reuters went on to say that the real issue was that Target tried to launch a coast to coast launch of stores throughout Canada, which created a monstrously complex supply chain. They tried to go from zero to one hundred in an instant rather than build out their presence gradually to grow more organically and manage thing in state stages, you know, trying to to grow province by province as opposed to

going nationwide in in one go. And as a result, it became a massive headache and lead to Target pulling out the country completely. So you could call that a massive supply chain failure. Another cautionary tail is in the form of Adidas, the shoe manufacturer, which had a major problem with its distribution center in Spartanburg, South Carolina. In the company wanted a new warehouse management system that in theory, would streamline processes and make things run more efficiently when

processing shipments to various stores throughout the US. So again another distribution center. Adidas partnered with a company called Integrated Software Logistics Engineering to make the system, but Adidas also insisted that this particular software package be made compatible with the distribution centers existing computers, and that proved to be

very difficult to do. In fact, the software vendor would go out of business in the middle of the project while trying to get it to all work out because they could never deliver a product that Adidas was satisfied with, So without the money coming in from that project, because they weren't able to deliver anything, the company went out

of business. Now, on top of that, the distribution center itself had a lot of automated components that were worked into the design, and all of those needed to be fully integrated into the warehouse management system in order for

it to work properly. And before all of that could be sorted out, Adida's decided to essentially flip the switch and go into business before this warehouse management system was actually ready, and as you might expect, that led to the company encountering a ton of problems with processing and shipping orders. It got so bad that the company was only able to meet twenty percent of the fifty million

dollars in North American orders it had actually received. And on top of that, most of that twenty percent didn't come from the Spartanburg distribution center. It came from overseas plants that were shipping their products directly two stores bypassing the distribution center entirely. Because that's how big of a mess it was, Adida saw its market share drop and had to work super hard to regain lost ground, all

because of a faulty supply chain management system. One of the biggest supply chain disasters I read about happened that same year in this was with a company called fox Meyer. Not at the time, fox Meyer was one of the biggest wholesale drug distribution companies in the United States. It posted sales revenues in the billions of dollars. This is one of those companies you should think about when you hear the phrase too big to fail and you wonder if that's true. Well, at least in the case of

fox Meyer, it was not true. The company had had an incredibly ambitious plan. It was overhauling its information technology systems and installing tons of automated systems into its distribution centers, including stuff like conveyors to move products to where they needed to be within a facility, and carousels that would make orders move around so that packers could grab the

orders easily. It all made sense from a theoretical standpoint, and the company estimated that these improvements and efficiency would mean much lower costs in production. And based upon that estimation, they started to put in bids on contracts, and because they thought, well, it's gonna cost a lot less, they could be really aggressive with those those biddings. And they just assumed that the estimates were entirely accurate. And you can probably see where this is going. So on paper,

the automated systems worked like a dream. When the actual high volume orders began to pour in, those systems could not keep pace. There was no one system that was performing at such a poor level that you could say that's what caused doom for fox Meyer. But there were problems throughout the entire management system. And these problems, even if they were small, all started to add up and

all those automated systems weren't working properly either. In fact, they were causing more work because when they weren't working as designed, a human being had to step in and bypass this. So fox Meyer actually had to dedicate more workers, not fewer, to compensate for the problems that the automated systems were causing. And as I'm sure you guys know, that's kind of the opposite of what you want when

you start incorporating automated systems. I mean, the whole goal is to reduce the workload on a human workforce, not

to increase it. On top of all that, the shipment tracking system for the distribution center wasn't sufficient, So there were a lot of cases where a customer places in order and that order might involve a certain number of doses of a drug or maybe a couple of different drugs, and the distribution center, because of its problems, would ship a partial order to the customer and the rest of the order might go out in a slightly later shipment. And this was just to try and get stuff out

of the distribution center to the customer's hands. But on the customer side, the customer would receive a partial order and look in and say, well, this isn't this is only part of what I needed. And these customers might be things like, you know, a drug store, so they look at an order and say, well, this is like half of what I was promised, And they would call up a customer representative and say, well, what, where's the rest of my order? The problem was that the management

system was not adequate. It did not actually show the customer representatives that the rest of that order had already been shipped out. So the customer representatives would do what you would imagine they would do. They would place in an order to send the rest of that to the customer.

So essentially that customer would get twice that part of their order because the the later shipment would get to them and then the reshipment would get to them, and this would all be resulting in losses for fox Meyer the company. In fact, the problems were so bad that they totally destroyed fox Meyer. The company never bounced back, and it ultimately had to file for bankruptcy. Then a competitor called McKesson came in and purchased all the assets

of fox Meyer for eighty million dollars. Now that's a lot of money, but it's a paltry sum compared to the billions of dollars of business that fox Meyer had been doing before it overhauled all these systems Now, the reason I'm telling you all these stories is really to frame how hard these supply chain challenges can be. I think it gives us a deeper appreciation for the effort

that goes into bringing products to market. And that's not to say that there aren't tried in true ways to keep track of a supply chain and to manage it properly. It's entirely possible, and more importantly, it's necessary. Also, I think for the right person, supply chain management can be a really lucrative career. It's a tech related job that is in high demand, even in industries that you wouldn't

associate with technology. It itself is a tech job. I frequently here that among the mani tech jobs out there, it's one of the most sought after in the industry. So if you're someone looking to be in demand and you're incredibly detail oriented and you're really interested in solving these kind of logistical problems, this could be a really

good path to look into. It's something that I would really stress that young people who are wondering about where they want to go into business, you know, where would they fit in that world? It's a good one to explore because there is a definite demand for that kind of talent um. In fact, some people would argue that there is a shortage of that talent right now. So

that wraps up this episode. I know this was a little bit outside of what I usually cover on tech Stuff, but because supply chain issues are so important in every industry, but in technology in particular, I thought it warranted an episode. Thanks again to John Bermudez of trace Link for joining the episode and giving us his perspective on things. I really appreciate him taking the time to talk with us.

And if you guys have any suggestions for future episodes of tech Stuff, I invite you to send those ideas to me. The email address is tech stuff at how stuff works dot com, or pop on over to our website that's tech stuff podcast dot com. You will find links to where we are on social media. Over there, you'll find an archive of all of our past episodes, and you'll find a link to our online store, where

every purchase you make goes to help the show. And we greatly appreciate it, and I'll talk to you again really soon. Text Stuff is a production of I Heart Radio's How Stuff Works. For more podcasts from I heart Radio, visit the I heart Radio app, Apple podcasts, or wherever you listen to your favorite shows.