Shop floor insights - freinds and foes

TOC for retail is based on the statistical characteristics of forecasting. Specifically the fact that the more general the forecast - the better fit you will get between results and reality. The other side of this coin is, of course, that the more specific the forecast - the worse fit you'll get. Therefore TOC calls for holding inventory centralized and moving it closer to the end costumer as late as possible.

Pushing the merchendise into the final storage rooms earlier creates local shortages and surpluses. These increase the workload for the sales staff, of course. Since they can never know what is available and what is not, so they are always checking. Another very significant impact this has is the increase of the customer's percieved risk. Since you can't know ahead of time, even when you know for sure the SKU is part of the store's stock, if it will be available in that store at that moment and if they will have the size and color wanted.

As I described in earlier posts, the chain I worked for pushed the inventory forward as soon as possible. I am sure this seems logical to them, after all - if the item is not in the store it can't be sold, so that seems like the best place to store you inventory, no?
The stores also had access, through the central database, to the tracked inventory of all other stores in the chain.  This data is used to reduce lost sales by cross shipping from oher branches. There were always calls from one branch to the next requsting the relevant SKU (though we were always describing, not using the codes) and issueing a cross shipping. I don't think there was a morning we did not have packages of cross shipments coming in AND going out.
A couple of things I noticed. First off - we never checked the warehouse inventory. This makes total sense in retrospect, since the warehouse was automatically replacing any shortages we had if there was stock. So, if the warehouse had it, we knew we'd get it. Even surpluses were rarely sent of to the warehouse. Everything was worked out between the stores. Second - cooperation between shops was choppy at best. Finding the garment you need to get the sale was always a good thing, but sending off a garment wasn't such a hit. We were directed to limit the outgoing shipments to those garments we had enough stock off and the ones that were not selling well. When a branch "overdid it" the manager would stop answering their calls and direct us to do the same. Then, if one of us inadvertedly did answer, the manager of the other store would give that poor bastard such a talk to.....
From my point of view, as a simple sales clerck, this was a no win situation. If I help out the other store - my manager gets mad at me, if I don't help them I have the phone going on all the time and at the end they manage to get a hold of us and they are mad at me.
Taking the owners point of view this whole situation is not in their best interest, either. Don't you think?

Shop floor insights – winners and losers

One of the pillars of TOC is the "win-win" concept, which states that for every conflict a solution in which nobody loses is feasible (Please see the comment I got on this from Avraham Mordoch below). This stems from the very basic assumption or axiom that win-lose situations can't exist in real life. Compromises can exist only when the compromise is acceptable for the compromiser and in most cases both sides need to compromise to make the situation acceptable. When a compromise can't be achieved there are only two options: either everybody wins or everybody loses. No other option exists.

This axiom should be taken into consideration when creating any kind of incentive pay scheme. If your scheme is based on "one man's gain is another man's pain" you are setting yourself up for disharmony and loss.

So what happens when people get paid a commission based on their sales? As far as I could see we got less service to customers as it is considered bad manners to step into another worker's sale and we got quarrels when such step in accidentally happened. Sometimes even heated quarrels. Between people who have to work together day in and day out. When I asked about this I was told that when we compete against each other (the data was easily reviewed at all times) we become more motivated. If we see the other sales clerk has more sales, we'll push harder, if we see the other store has more sales – we'll push harder. But, as far as my logic goes – people buy what they want. Sales clerks have an impact, sure, but it is limited. If someone has lit a fire under me, the natural reaction will either be to push hard, which will turn off the buyers, or clam up, which will reduce service to the buyers.

I have to say that I find I get the best service at restaurants that use a tipping pool – all tips go into the pool and are then split between the entire shift staff. This means all the service staff has a vested interest in my pleasure and cooperation is beneficial for all. I am sure that the team members know who is free riding on them and quickly straighten such abusers. When tips are personal, service can still be great, but it is at risk.
My suggestion to that retail chain - pay comission based on store performance, then you'll have a team working together.

Shop floor insights – goals and incentives

Here is one subject on which I can't really recall much TOC specific wisdom. Dr. Goldratt did concur with the common saying "tell me how you'll measure me and I'll tell you how I'll act". This supports his claim that people are predictable. The other related content is this research summary clip that talks about the limited power of financial incentives. But they were looking at the impact of offering a too high incentive. I've found out how I react to a too low incentive. It killed my drive.

Let me give you the background. While shops may mark up their products 100% or more, most of this mark up is needed to cover fixed costs of operating stores in good locations, holding on to stock and paying for people to sell this stock. Shop operation is quite work intensive and since rent on good locations is high and inventory spending is high (when you buy stock for the entire season ahead of time) and both are relatively inflexible, it seems there is no choice but to limit workforce costs. Hence hourly pay at the shop floor is insultingly low. This is not singular to the chain I worked for, the pay I was given was pretty much the standard pay in this kind of job in Israel.

On top of that, to offer some incentive, you get paid 1% commision on all your sales as well as bonuses if you reach certain sale volumes.  Sounds good, doesn't it? Well, only until you do the math. There was no way the bonus would amount to anything substantial; the shop just did not have that kind of potential. So that went out of the window, at least for me.

The other thing that kept killing my motivation is the habit of the managers to set personal sales goals. It was a bad day, I had a couple of hundred NIS in sales and 2 hours to go when the manager comes in and hands me a piece of paper with my goal for the shift. The goal was 2,000 NIS. There were no customers in sight. Shocked I turned to her and she just said "you'll have to try harder and make it happen". OK, it was not her fault, she was stuck in the same messed up system as we were and she was also misled by her managers to act like that, taught that goals create motivation. Well, I guess my TOC understanding miss-served me there because it was clear to me that people buy what they want. Sales clerks have an impact, sure, but it is limited. I also thought no effort in the world can create a sale when there are no customers in the shop. I found out I was wrong when the manager tried to make me buy something to improve the registry.

Is that really what management wanted?