Since its inception in 2009, roughly 11 million subscribers have used the eCommerce fashion service, Rent the Runway, to score deals on more than 650 designer brands that might have been otherwise unobtainable. 

However, ten years later, the brand was the subject of a different kind of attention. In 2019, a massive enterprise software failure disrupted its supply chain and left hundreds of shoppers empty handed. Rent the Runway scrambled to over-compensate those disgruntled users, but the damage was already done. 

What caused the Rent the Runway failure and what can you learn from it? Today, we’re diving into the background of the failure and providing key takeaways that you can apply to your own software implementation. 

A Failed Payroll System Implementation

Panorama’s Expert Witness team was retained to provide a forensic analysis and written report to the court regarding the failed implementation of a major software developer’s ERP/payroll system.

The 2019 Rent the Runway Failure: What Happened?​

In early September 2019, Rent the Runway completed its digital transformation. Heralded as one of the most important actions in the company’s history, the move centered on a major software implementation. The software was designed to provide a new inventory tracking system that would make items available to shoppers faster than ever before.

Soon after its debut, the software began to show problems. Communications with third-party outbound automation providers temporarily halted as integration issues became apparent. The integration wreaked havoc on order fulfillment, negatively impacting the number of orders that Rent the Runway could ship each day.

The first actual issue occurred on September 13. It was traced back to a New Jersey warehouse that had recently installed the new software. At that time, around 14% of subscribers began experiencing order issues.

The mishap also affected about 6% of customers who accessed the platform for individual orders. Angry and frustrated, they took to social media to air their grievances, claiming they could not get any support from customer service. 

To save face, Rent the Runway offered full refunds to anyone affected by the disruption, as well as an additional $200 in compensation. They also temporarily stopped taking new orders and canceled event orders. 

In all, the disruption lasted 11 days, during which time, the brand’s Chief Supply Chain Officer stepped down.

3 Lessons Learned from this Digital Transformation Failure​

While the Rent the Runway failure was significant, the brand was able to curtail the problems before they snowballed into bigger issues. Let’s take a closer look at the lessons you can apply to your own digital initiatives.

1. Software Issues are Rarely Just Technology-Related​

While we don’t know the fine-print details of what went wrong with Rent the Runway’s enterprise software deployment, it appears that the bumpy rollout of its new warehouse management system (WMS) was at least partially to blame. 

This brings to mind the 1999 Hershey failure where stores across the nation reported candy shortages right at the peak Halloween season thanks to the new technology the company had rolled out.

Both Hershey’s and Rent the Runway’s supply chain disruptions were caused by more than just faulty technology. There were other issues at play ranging from an understaffed project team to a rushed timeline and a failure to prioritize change management

2. Scalability and Agility Testing are Key

The new WMS software was an integral part of Rent the Runway’s effort to grow and scale its business. What began as a service for special-occasion clothing rental was soon to encompass a much wider array of options that included business attire, children’s clothing, and even home decor.

With these new initiatives on the horizon, the brand’s market valuation reached $1 billion in 2019, fueled by expectations of a customer base projected to reach more than nine million subscribers.

While new growth is exciting, it brings with it a new set of challenges. Chiefly, business leaders must gauge how many operating systems will be required to support the business model as it expands.  

In this case, Rent the Runway’s order fulfillment process was so intricate and specialized that it required advanced WMS capabilities.

Like many companies in the midst of rapid growth, Rent the Runway relied on an external cloud-based WMS platform, along with proprietary internal software applications. When it came time to merge these systems, scalability issues occurred.

With proper scalability testing and capacity planning, the brand could have ensured that the right infrastructure was in place to sustain the expansion.

3. Know the Limits of Your Existing Software​

Homegrown, proprietary software is preferred by companies across a variety of sectors. However, these applications have their limits. While they may deliver customized solutions in the short term, they are not flexible enough in the long term, especially when it comes to changing market conditions, shifting requirements, and new challenges.

For example, an online subscription model like Rent the Runway needed a WMS capable of keeping pace with fluctuations that could occur in order volumes, order profiles, and workforce numbers. 

A Smarter Approach to Supply Chain Transformation​

The Rent the Runway failure is a lesson in software planning, testing, and scaling. It also reveals the importance of swift customer service and owning up to one’s mistakes.

While the supply chain disruption left customers upset, it didn’t result in the major lawsuits or substantial setbacks that accompany many ERP failures of this scale. 

That’s not to say your company could recover just as quickly. The issues that Rent the Runway experienced could be more disastrous for your organization if it was in a similar situation.

As you approach your own enterprise software implementation, consider the risks of going it alone. For most organizations, it’s very risky.

Our ERP consulting team can help you assess your project plan and deliverables to ensure you’re on the right path, whether you’re implementing an ERP system, supply chain management system, or another type of enterprise software. Contact us below for a free consultation. 

About the author

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As Director of Panorama’s Expert Witness Practice, Bill oversees all expert witness engagements. In addition, he concurrently provides oversight on a number of ERP selection and implementation projects for manufacturing, distribution, healthcare, and public sector clients.

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