This week, Made.com is due to appoint administrators after a spectacular fall from grace.
Having dreamt of becoming the “new ikea”, only a short while ago in summer 2021 the company was valued at £775 million yet it is now expected that Next will buy its name for just £2 million.
What went wrong?
According to reports, Made.com’s business model was flawed. Its early success was built on a just-in-time model, with pieces shipped from manufacturers only after orders were placed. Rather than dealing with a small handful of suppliers, it worked with more than 200 factories.
But when the pandemic hit, that model meant that the retailer saw huge levels of supply chain disruption with manufacturers not prioritising Made.com. Customers were unhappy.
It therefore changed tack, stocking its warehouses to the rafters and tying up its cash in inventory with the expectation that sales would remain high.
But the timing was wrong and sales plummeted as consumers cut spending when the cost of living crisis began to bite.
Ultimately, poor management decision making meant the company ended up with vast amounts of excess inventory and a speedy demise.
Sharing his take on Made.com’s failure, Andy Dobson, Generator’s Lean Operations & Supply Chain specialist, says:
“just-in-time doesn’t work with parts that bob up and down on the seas for 6, 8 or 10 weeks before getting to a UK warehouse THEN being delivered to the customer.”
While Made.com’s problems began with the advent of Covid, it’s likely that they would have experienced delivery issues sooner or later.
Michael Morris, Generator’s Working Capital specialist says:
“This example goes to the heart of what many manufacturers are facing right now. They went from a just-in-time (JIT) strategy to just-in-case (JIC) to try and balance lengthy, disrupted supply chains, trying to hedge with stock they couldn’t eventually sell. Even if the company remains profitable under these conditions, it can still go broke if it can’t source, produce, and get paid fast enough to pay suppliers – i.e. negative cash-flow.”
If you’re concerned about your retail business and want to discuss strategies and processes to shore up its future, book a call with a member of the Generator team.
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About GoTo Generator
Generator are senior specialists collaborating in teams on projects to deliver value-based outcomes.
Our promise to our clients:
- We deliver outcomes faster and more efficiently than individual providers
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