This website covers knowledge management, personal effectiveness, theory of constraints, amongst other topics. Opinions expressed here are strictly those of the owner, Jack Vinson, and those of the commenters.

New thinking for TOC in Retail #TOCICO13

Rami Goldratt of Goldratt Consulting talked about the latest knowledge that is coming out of TOC implementations in retailers.  [Disclaimer: I am doing a project with GC, so there may be some bias.].

The challenge that retailers is to have the right product available at the right time and in the right place.  On top of this, retailers are facing a number of related factors: customers demanding personalization; ever-expanding width of offerings (more options); product life-cycles getting shorter; and customer patience to wait for availability is going towards zero.  The end result of this? Retailers find themselves pushed to hold more and more products on their shelves.  But the stores are only so big, and they can only hold so much material.  Even internet retailers will eventually run out of space in all their warehouses.  Retailers end up finding themselves packed to the gills with inventory, and yet customers are unable to buy what they want.

The traditional TOC approach is the Replenishment solution. This guides organizations to move to replenishing what they actually sell with a fast supply chain to enable this.  The results are usually phenomenal increases in inventory turns and profits.  

But for retailers, this solution isn't enough. This is because of the effects mentioned above: there is just too much stuff sitting around and replenishing what they sell conflicts with selling what is already sitting in the stores.

The addition to the solution for retailers is that there needs to be a good mechanism for deciding which products NOT to replenish.  This will then create more space for the products that actually do sell well.  The starting point for this is to analyze actual sales to look for top sellers, middle sellers and the tail.  The tail are often a large percentage of SKU's that create very little portion of sales.  (There is a watch out here: sometimes it is difficult to identify the actual high sellers because they are out of stock when people come to the store.)

Rami and others at Goldratt Consulting are in the process of developing a new Strategy & Tactics tree for retail, based on this new thinking.

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