Managing distribution according to TOC principles
Ever been annoyed that your local store always seems to be out of one of the ten items on your list? Me too. Amir Schragenheim has written a piece on Managing Distribution According to TOC Principles (pdf) in the latest TOC Update from Goldratt Marketing
It is Wednesday afternoon. I'm entering the grocery store and want to purchase some green peppers. However, they don’t have any on stock. I can’t find any good looking tomatoes either. I'm continuing to the office depot store. I heard great reviews about a new mouse that Microsoft issued and I would like to get one. However, I come to an empty shelf with only the item description stating "out of stock". How many times did you go to a shoe store, tracked a wonderful pair of shoes you wanted to purchase but they didn’t have any in your size? Why do stores don’t keep the right stocks to fulfill the demand? Why can't they do anything right?
I have even asked the store manager at local grocery why they can't keep popular items in stock only to find obscure flavors or options on the products that just sit there. I've discovered, in some cases, that the store abdicates management of shelf space to the vendor. So, if the vendor doesn't supply product, there is a hole in the shelf where no one makes money (and the customers go away disappointed).
The article walks through a summary of how TOC attempts to rectify some of the common problems with the traditional distribution mechanisms. People familiar with Theory of Constraints will find much of the discussion familiar. Those not familiar might find this article helpful in seeing how the TOC applies. The basic ideas are to shift away from forecasting to actual consumption AND to move the bulk of inventory to a central location, rather than to the stores. This is a move from push to pull distribution.
FYI: Amir Schragenheim is the CEO of Inherent Simplicity, which sells software to help manage manufacturing and supply chain via TOC principles.
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