When French supermarket giant Carrefour closed down in Hong Kong last year, rivals said it failed to understand local shoppers.
However, another reason could have been a supply-chain system that was not able to react quickly to customers' expectations.
Carrefour operates 580 hypermarkets, 1,300 supermarkets and 2,700 discount stores in 26 countries. The chain operates 28 outlets in 15 cities in China.
While some shops had trouble fulfilling customer demand, others had too much stock.
Similar to many businesses in retail and manufacturing, Carrefour's supply chain is linear, where suppliers and manufacturers face product demand that changes significantly on a weekly basis, giving little time to react to customer demand.
The problems were caused by the bullwhip effect, a term coined by Procter & Gamble executives to describe the magnification of demand fluctuations as orders move up the supply chain. As a result, many manufacturers hold excessive inventory to ensure acceptable customer service.
'Information flow and co-ordination of orders across the supply chain offer the only hope of taming the bullwhip effect,' said Robert De Souza, senior vice-president and chief knowledge officer of Viewlocity, a United States-based provider of software to monitor and manage supply chains over the Internet.