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 - daily replenishment

When I first encountered the TOC logistic and supply chain management solution I got the impression that the daily replenishment of stock with what was sold, is the driving force of this solution. The solution is based on the idea that the sales outlet should hold minimal stock on hand - just enough to allow you to sell to any patron who may wish to buy the item + enough to support the display.

For the shop I worked in (some background and a disclaimer - I was a sales clerk, this was not a TOC project) the second part was almost negligible, we sold all garments displayed in the shop which were not on the manikins, of which we had only 3. The first part, however, is quite tricky as we have no idea how many patrons may wish to buy a certain item on a certain day. This is why the forecasts aren't good, remember? we had items of which we sold 1 unit, or maybe even nothing at all for weeks and then one day we'd sell 3 or 4. The TOC replenishment solution answers that with a rule of the thumb. You start high, with enough stock to equal 14-20 days of average sales. Then you adjust as you go by tracking end-of-day inventory using 3 zones. Red zone is the bottom third of your target. If for a few days you continually end up having less than one third of your original target then this is a fast runner and the target has to go up. Green zone is the top third, pointing out that this is a slow runner, the target is too high and has to go down. Yellow zone is in between and where we'd like to be.

Well, the store had daily replenishment. Israel is a tiny place, everything is within a few hours drive, there is no sense in replenishing less frequently. The store was also supposed to be replenished according to the last day's sales, with four o'clock as the cutoff time. There was even a general target level of 2-3 units per SKU (that would be model - color - size) at each shop.

Didn't work. As I reported earlier we had surpluses and we had shortages.

The most annoying sensation for me was, after finding myself telling 3-4 different customers that we have run out of the blue dress in most sizes, but was have the black one in all of them and have the customer explain the blue is what she wants and thank you very much, good bye. After all that, the next day we get 3 more of the black dress in a variety of sizes. So the shortage stays and the surplus grows. Now I'm not trashing on the warehouse, they do the best they can. They don't have what we need so, trying to be helpful, they send "the next best thing", something similar, something close enough. But it isn't. 

Sometimes it just became macabre. The day after the new manager finished cleaning up the back room and sending some of the surpluses to another branch (took her 3 days), we got at least one of those surplus models again in all colors and all sizes. We were really low on it.....

My point of view now is that daily replenishment is a great way for minimizing inventory, but you can implement TOC replenishment without it, it is not the most important thing. As long as your central stock is out of whack with the market, nothing's going to help in the long run, this should be the most important factor of your supply chain analytics and your supply chain risk analysis. This is felt much more profoundly in a small country like Israel, where there is simply not enough clout for the "big numbers" rule (that's the statistics rule that shows that if you have a big enough sample everything ends up looking like a normal distribution) to take effect.