Sunday, July 17, 2011

Insights from the shop floor

I spent the month of June working as a sales clerk for a local fashion retailer. Not a very big one, but still respectable enough. During that time no one in the chain was interested in what I know about TOC and the chain was not doing any kind of TOC project. It was an entry level job and I was judged only by my ability to ring up the register, and using that parameter I was no star. I'm OK with that, not everyone has to be great in everything and a smart employer will get the best from each employee, even if it means shifting the person around a bit.
Anyway, I found myself working in one of the bigger stores in the chain, one considered a "flagship" store. Yet we sailed through some very rough waters during that short month, with me joining the ranks after most of the sales force quit and the store manager, who turned out to be the reason for all the turbulence, was removed from her position during my second week. Working the floor was a great opportunity to validate and better understand TOC's supply chain management application, presented in the supply chain management book "Isn't It Obvious".
Before I dive into the TOC point of view, some info about the shop is appropriate. The shop is located in a closed mall, this was one of the first closed malls in the Tel Aviv area, built some 20 years ago. The mall has been updated with a movies mega-plex a few years ago, but I think this was not enough to shake off its outdated image.
As for the shop itself - while this shop is considered large within the chain, it is actually quite small, perhaps even very small if you compare it to shops in the US. The shop has a tiny back room to store any inventory that is not needed for display on the floor. The shop's floor is small in comparison to the variety on hand and not all sizes are put on display, some are only available if you asked a clerk to get them from the back room.
The first things to come up were the fact sales were going hard, even though the shop was either in promotion or sale mode the entire month. The second was that we were constantly telling shoppers that we're sorry but the wished for item, in the wished for color and size, has sold out. We would always offer to check and if it is available at another store - the customer can pay for it and we'll call her after it arrives at the store. Some of them did, which only goes to show the competition isn't any better.
I had befriended the one sales clerk who had managed to survive through the turmoil created by that shop manager, so I checked with him if the theory works. A theory is tested by its ability to predict. I used the TOC theory to "predict" what had happened in the store at the season's start, weeks before I joined. As I "predicted", sales were easy and merchandise was flying of the shelves at full price.
This should come as no surprise. At season's start stocks are full, all the high runners are available at all sizes, so sales are easy - with customers easily finding garments they like at the right size they often convince themselves into buying. The sales force is free to help the customer find more items and "deepen" the sale.
By the time I arrived at the store, though, the negative effects of buying according to forecast, predominant in global logistics and supply chain management, have reared their ugly head. The cream of the crop, the best models, have been totally sold out. The fast runners we did have were running short on their best sizes and we had way to much of some dead weights  So even with lowered prices sales were hard and the sales force concentrated on convincing customers they should indeed buy. Sales were "shallow"  with most customers buying only one item.

If you want more details about the damages of working to forecast and the TOC approach to replenishment, here are a couple of links to the "Big Brand" case study:
First is Dr. Goldratt's report on the process (which can also be found in "The Choice", the best book on supply chain management) can be obtained here (just fill in the details and you'll get the PDF in your mail)
Second is the IDEA report on the project, this one includes graphs showing the progress made.

To be continued ....

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