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August 16‐18, 2016 Johannesburg, South Africa
Application of TOC Beckons in Retail Dawid B Janse van Rensburg, CargoSolutions, South Africa 17th – 18th August, 2016
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Dawid B Janse van Rensburg MD of CargoSolutions, a supply chain optimization business unit of the Cargo Carriers Group. Focus on TOC supply chain solution implementations, and is an Implementation Partner for Inherent Simplicity’s Symphony software in SA. Completed TOC implementations in many industries in SA, including FMCG, building supplies, extrusion, footwear, clothing and printing, distribution, etc. TOCICO certified in Supply Chain and Logistics.
Contact info:
[email protected] 011 485 8700 083 3034183 27th International Conference of the TOC Practitioners Alliance ‐ TOCPA
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Application of TOC Beckons in Retail TOC identified retail as “target” industry – “easy gains” S&T & sales efforts – limited penetration Riachelo, Sportswear, pharmaceutical (Baltic), Titan Watch, etc
Why is Retail so attractive…? Bastion of forecasting! Good T leverage
Simulations in SA Enabling systems maturing Footwear Projects Update 27th International Conference of the TOC Practitioners Alliance ‐ TOCPA
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Retail is Nothing New….
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Many Challenges in Retail SKU Proliferation and the implications – Finished Goods ranges expanded by 67% in last 3 years…. Customer tolerance times reducing – ‘instant gratification’ Product Life Cycles accelerating Customers placing more frequent, smaller orders
Complexity increasing! 27th International Conference of the TOC Practitioners Alliance ‐ TOCPA
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Forecast Error by Industry
www.DemandPlanning.Net; Mark Chockalingam Blog. Forecast Error Benchmarking across various industries – survey results » Average of forecast error
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Forecast Error by Industry
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Common Undesired Effects of Forecasting • • • •
Too much inventory of slow movers Too little inventory of fast movers Poor customer service Too much/little capacity
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SKUs vs Sales
www.cohnreznick.com
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The Devil….
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Perishables Supply Chain
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Perishable Item – As Is
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Perishable Item – Simulated
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Colour Stats Report for 30 SKUs As Is vs Simulated
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General Retail (Non Foods)
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Consumer Goods Item – As Is
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Consumer Goods Item – Simulated
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All SKUs – All Stores Composite Graph ‐ All SKUs ‐ All Stock Locations 2500000
2000000
1500000 GreenBuffer Red Yellow
1000000
Current SOH Simulated SOH Consumption
500000
0
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Building Supplies – Long Lead Times
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Long Lead Time Items
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Retail Leverage % % Change Change in Qty in Price
Now ZAR
% of Sales
Sales Cost of Sales GP OE NP
100 70 30 20 10
Inv ROI
20 50%
5% 70% 30% 20% 10%
68%
3.5
‐50%
235%
Future
ZAR % of Sales 5% 110.25 73.5 67% 36.75 33% 20 18% 16.75 15% 10 168%
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Enabling Systems – “The Eco System” DC & Purchasing
Store / DG / AG / Family / SKU DG Max (max budget) X L
X LL
DG Stock Control
M S L M L M S L M S
L M S L M L M S L M S
AG Variety Max X LL
M S L M L M S L M S
AG Variety Target
X LL
M S L M L M S L M S
XL
L
SKU Family1
DG Min (Units)
MTA Buffers
Sales
M S
L
SKU Family2 M
Allocator
AG Variety Min
AG Variety Control
Liquidate
L
SKU Family3 M S
SKU Depth Control
Liquidation Control: • Space / Refreshment
L
SKU Family4 M S
AG X 27th International Conference of the TOC Practitioners Alliance ‐ TOCPA
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SKU Depth • SKU Depth – Number of units from same SKU to be kept in the store in order to improve availability/inventory turn Example SKU: TG ‐ XL
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Manage the Depth of the SKU • Keep an MTA buffer for each SKU (different buffer for different sizes) • DBM algorithm will manage the buffer size dynamically • Minimum buffer size , safety stock and display stock can be defined
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SKU Family • SKU Family – SKUs which part of the same product adapted for different clients (for example, size) Orange‐RL‐XL Orange‐RL Orange‐RL‐L
Orange‐RL‐M Orange‐RL‐S 27th International Conference of the TOC Practitioners Alliance ‐ TOCPA
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Valid SKU Family • Valid SKU Family – the amount of inventory of SKUs from the same family is enough to consider this SKU family as valid (not broken) Example : Valid SKU family will be if you have at least 2 units of Large. 1 unit of medium and 1 unit of small
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Product Variety • Product Variety (width) – manage (increase/decrease) the offering to the customers in order to improve sales for each category in each store
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Assortment Group • Assortment Group (AG) – groups of family SKUs which have common characteristics • Each AG will have variety target for different valid SKU families • Manage the target (similar for managing DBM buffers) between Min and Max Example: Variety Target = 4 Depth 27th International Conference of the TOC Practitioners Alliance ‐ TOCPA
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Manage Assortment Group Variety Target
• Dynamically set each AG variety target (=number of unique SKU Families ) – Based on consumption/turns of that AG (compare to other AGs in DG) – AG target size can be increase to decrease
• Will be limited by min and max value of the AG/DG • Can be changed through seasonality event
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Display Group • Display Group (DG) – several AG which are part of the same theme of the display • Display Group range – manage the overall stock for the DG in order to make sure the display capacity is satisfying Min – By Units Max – By Money Value
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Manage SKU End of Life • Monitor each SKU consumption frequency • The user can defined End of Life (EOL) policy for each SKU • Once system recognize that this SKU reach Its EOL, alerts the user and stop replenishment for this SKU
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Stock Allocator • Allocator generate refreshment/replenishment recommendations: – Recommendations will be based on Available stock in the origin warehouse – Recommendation priority will be based on buffer/variety penetration – Recommendations also consider “tail rotation” – Refreshment consider best seller
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Manage New Product Introduction ‐ Pull • System to monitor the sales for all the SKUs in the System • Once recognized that a refreshment is needed for a specific store (i.e. variety target is not reached) it will make its selection based on actual consumption in different stores (best seller)
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Manage Seasonality Events • Seasonality event van defined in different aspects: – Increase buffers for SKUs – increase variety target for assortment group – Increase Min/Max range for display group
• Seasonality event can trigger replenishment and/or refreshment to store
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Management Dashboards • The Dashboard will be adapted to each management level (whole chain/region/store) • Reports will have the ability to drill down to lower hierarchy in order to focus our efforts
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Management Dashboards • Availability status (depth) of best sellers in store/warehouse/transit Best Sellers ‐ Store's Availability 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 5/7/12
5/14/12 5/21/12 5/28/12
6/4/12
6/11/12 6/18/12 6/25/12
7/2/12
7/9/12
7/16/12 7/23/12 7/30/12
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Management Dashboards • Assortment group status (between min/max) AGs / Stores 80% 70% 60%
70% 60%
60%
60%
70%
75%
70%
60%
50%
Too Much
40%
Good
30% 20%
30% 20%
20%
10%
20% 10%
0% Week 1
30%
Week 2
Week 3
10%
10%
120% Week 4 Week 5
25%
25%
5%
5%
Week 6
Week 7
20%
Too Little
5% Week 8
100% 25%
25%
Cyan
5% 20%
5% 20%
Green
20%
20%
Red
25%
30%
30%
Black
Week3
Week4
Week5
80%
40%
40%
40%
60%
5% 20%
5% 20%
5% 20%
10%
10%
10%
25%
25%
Week1
Week2
40% 20%
Yellow
0%
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Management Dashboards • Display group inventory status (between min/max)
DGs / Stores 70% 60%
60%
60%
55% 50%
50%
40% 30%
50%
50%
40%
40%
50% 45%
45%
40%
OverStocking
30%
Good
30% 25%
20%
20%
UnderStocking
20% 15%
10%
10%
10%
10% 5%
0% Week 1
Week 2
Week 3
Week 4
Week 5
0% Week 6
Week 7
Week 8
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Jordan Factory
JDN
RM WH
Watson Factories
WAT WH
RM WH
Barker Factory
BKR WH
RM WH
Bagshaw Factory
BGW FG WH
RM WH
RM WH
Mossops WL
FG WH
WH
BF Retail
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Conclusion • • • • •
Retail – very difficult sale! Simulations are very powerful, but…. Enabling systems mature Less effort required than production Fashion has definite complexity
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