Supply Chain Management Individual assignment 2012/ 12/ 11
Garden.com At the End of the Runway
Linda Schädler Student ID: 1202010203
1. Garden.com’s supply chain
Garden.com’s business model is based upon its virtual supply chain which provides customers with a convenient location for one-stop shopping. Garden.com’s supply chain includes four different actors: Suppliers, retailer (Garden.com itself), end-customers and Fedex. The company fulfils the function of a facilitator that acts as a bridge connecting suppliers and end-customers. With regard to the design of Garden.com’s supply chain, two different kinds of structures can be distinguished. These will be presented in the following.
The structure depends on the respective product attributes, the volume and the relationship with the supplier. When it comes to garden supplies and further related products, Garden.com has opted for two different approaches: In the first case, the product comes from the supplier and passes Garden.com’s distribution centre where it is kept as inventory until it finally reaches the customer. However, Garden.com only maintains a nominal inventory for a few products like specialty gifts, promotional merchandise and some safety stock for high-volume products. In the second case, the supplier ships the product directly to the customer. Garden.com acts as intermediary, but the product never passes its warehouse and the company never holds its possession. Garden.com merely transfers the customer order to the supplier. This is called “drop shipping”. Highly perishable goods such as live plants, flowers and bulbs are usually directly shipped by the supplier to the end-costumer.
All in all, drop shipping predominates. Thus, in most cases, Garden.com’s involvement is limited on being a consolidator of information whereby its own physical involvement is minimised. Information flow between Garden.com and its suppliers is via extranet. The physical transportation of the goods is mainly carried out by FedEx. (See appendix 1 for a diagram of the supply chain structure.)
2. Causes for Garden.com’s failure
There are multiple interrelated reasons that made Garden.com’s “rosy” predictions turn into “thorns”. Garden.com’s failures to address the numerous challenges they face – namely the high fragmentation of the industry’s supply base, the far-scattered suppliers and perishability of live plants from greenhouses- have accumulated and eventually led to their final failure.
First of all, the premium market niche Garden.com has positioned itself in is not as large as expected. Thus, Garden.com’s target market remains quite limited. A further severe problem Garden.com faces is inefficient inventory management. Although the company has tried to introduce “Trellis” – a shipping module which enables real-time update of inventory- many suppliers have refused to adopt the model. The suppliers’ unwillingness to invest in
integrating Trellis has several reasons: Some already use different systems, others are so small that they have no real inventory management at all. The lack of a consistent integrated inventory management system often results in confusion about inventory: For instance, backordering represents a major problem. It even happens frequently that Garden.com still continues to pass customer orders even when suppliers already have run out of stock.
Moreover, numerous problems with suppliers represent a huge threat: First, they are geographically scattered, which makes it very hard to bundle one offer with various products to ship them together. Thus, economies of scale cannot be exploited and shipping costs increase. As most of the suppliers are small family businesses, they perceive Garden.com simply as a further distribution channel and are quite indifferent toward the company. Therefore, the majority of suppliers are reluctant to make significant investments in the relationship. Apart from that, Garden.com has made severe...
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