Aerosole: Case Study in Risk Management

 

If you are looking for a great sale on shoes drive to your Aerosole shoe store. Why? On Friday, September 15th, the company driving the Aerosoles brand of women’s shoes filed for chapter 11 bankruptcy with plans to close over eighty retail stores.  The courts will liquidate inventory. This is inventory was hard fought to recover from a disasterous sourcing issue. This is a case study in risk management. When there is a major sourcing issue companies struggle to recover. 

What happened? Competition, expansion woes and supply chain sourcing. While we cannot comment on expansion or competition, here we will share insights on the supply chain disruption.  

In 2012 and 2013, Aerogroup expanded 125 retail stores at a “rapid pace”.  While sourcing in a growth agenda, last year, the company’s supply chain was disrupted in April 2016, when the contract sourcing agent in Asia stopped providing goods. The company could not recover. In the process, the company experienced short shipments, inventory and quality issues and delays in new product launch. The company fought the issues in the fall of 2016 and 2017, but could not recover. This is death in a fashion industry. 

What can we learn?

-Never mitigate the risk of sourcing with a single supplier. The unexpected happens.

-Implement supplier development programs to work with contract manufacturers within the extended supply chain to sense and mitigate risk. We can always manage costs, but we cannot ensure supply when there is a problem with a supplier.

-While we can outsource the supply chain, we can never outsource the risk.

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