FoxMeyer Finance Supply Chain Disaster

FoxMeyer Finance Supply Chain Disaster

Finance supply chain refers to the use of financial practices, instruments, and technologies to provide businesses with an opportunity to manage liquidity and working capital (Camerinelli & Schizas, 2014). Businesses can outsource capital to manage their operations with finance supply chain platforms and later pay back the debt; thus, the strategy enables the business to succeed in meeting the consumers and supplier needs by an additional financial boost.

This case study will look into the case of FoxMeyer a major drug distributor in the United States until 1996 when the company experienced a disastrous fall. The fall was catalyzed by a poor forecast and reliance on sales that were supposed would cover up for the costs of introducing an automated supply system which failed to result in massive financial losses and court cases and finally the sale of the company’s larger portion to McKesson (Supplychain Digest, 2006).

Major Facts

  1. FoxMeyer was the second largest wholesale drug distributor with a market share of 5 billion.
  2. The firm embarks on a project to revamp its distribution and IT systems
  3. The firm invests in the project from its savings, a project that would be very costly but fails to operate as expected such as failure in automation, and order placement. The overall result is that orders are incomplete at delivery and the failure of the bidden tender to supplier larger corporations.
  4. The firm goes bankrupt and processes the Sale of the largest portion of its distribution unit to McKesson for as low as $80 million (not close to the $5 billion worth) as it struggles with court cases.

 Major Problem

The main problem is the excessive investment in the project intended to improve supply efficiency leading to bankruptcy. The firm had failed to manage its finance supply chain as it paid software developers in an expensive endeavor, failed to meet the dates for its tenders and wrong deliveries to its customers.

Possible Solutions

The possible solutions include

  1. Maintaining the old method
  2. Investing in the new technology through Financial Supply Chain strategies

Maintaining the old system

The old system was manual operation and a poor state of the art in the technological amalgamation of the supply system, which necessitated the development of an efficient system to meet the consumer demands and the targeted supply tenders.

The concept of logistics has been revolutionized in a more global society where there is a demand created by the increased globalization thus necessitating the need for fast and efficient technologies (Ross, 2016). The introduction of technological advancements into the supply chain system enhances the movement of goods to the consumer and materials from the supplier to the industry. FoxMeyer is in a competitive market and as a leading pharmaceutical company; it needs to maintain its top profile. This necessitates the need for advancement from the simple management systems to a more automated platform that will enhance its productivity.

Maintaining the old supply method was problematic as a slow model that hampers productivity. However, since the new proposal is untried, FoxMeyer should maintain the old system to avoid losses that may result.

Investing in the new technology through Financial Supply Chain strategies

FoxMeyer is a large company worth $5 billion. It can the security leverage to obtain capital from an external source to fund its investment in the new technology. As noted, the new technology will leverage the firm’s ability to supply faster than it had initially, store records for auditing and monitor consumer demand patterns. Therefore, investing in the technology is possible with the sourcing of money to pay developers as they continue working on the system (Rinaldi & Bandinelli, 2017). This will help FoxMeyer to use its capital in the management of its businesses and provide enough time for the software to be developed to perfection after which the firm will pay the debt accrued through the process (Camerinelli & Schizas, 2014).

The limitation of this strategy is that the risks will be transferred from the software developer to FoxMeyer who will have to pay eventually for the costs (Camerinelli & Schizas, 2014). However, the firm will not interrupt its normal businesses and tenders, which will continue to generate more revenue for the company. Ultimately, the firm will have its technology developed and its operations maintained.

Choice and rationale

The company has a promising development in case it adopts the second option; seeks financial support from financial institutions and creditors to facilitate the development of its software as it runs its normal operations with its finance. Financial supply from external sources can be achieved based on the company’s net worth. This will cushion the firm against interruptions that result from using its fund to support the automated technology projects alongside other firm operations. Additionally, the company will not have to lose its clients or interrupt its services until the automated technology is ready. The access of external fund will be a twofold advantage, and the risks of failure are minimized due to the allocation of sufficient time to develop the software. Eventually, the firm will have an advanced technology that will help it perform even better in managing its supplies.

The first option will limit the firm from developing. It will eventually be phased out with the growing transformations in the logistics sector. Other consequences include a falling number of clients who will not be satisfied with the current state and a poor management and auditing system that will create more loopholes for losses. Essentially the company will die out due to the inability to evolve (Doole & Lowe, 2005). In conclusion, the second option is the best for FoxMeyer as a means to establish an efficient and less costly supply system 


            This plan is very simple to implement. First, the firm will continue its operations unaffected. Secondly, then it should seek a capable creditor or bank institution that can finance the software development program after which it should hire qualified software developers who will be paid through the bank. In case the project is not working, FoxMeyer should terminate it and arrange with the bank on how to pay the amount payable or find other developers. The firm can then pay for the software application in installments to the bank.


Camerinelli, E., & Schizas, E. (2014). A study of the business case for supply chain finance. The Association of Chartered Certified Accountants, Studie.

Doole, I., & Lowe, R. (2005). Strategic marketing decisions in global markets. Cengage Learning EMEA.

Rinaldi, R., & Bandinelli, R. (2017). Business Models and ICT Technologies for the Fashion Supply Chain. Springer International Publishing.

Ross, D. F. (2016). Introduction to supply chain management technologies. CRC Press.

Supplychain Digest (2006). The 11 Greatest Supply Chain Disasters. Retrieved from