23rd International Conference of the TOC Practitioners Alliance - TOCPA www.tocpractice.com
21-22 March, 2016, Tennessee, USA
TOC Retail Mix Management Humberto R. Baptista Vectis Solutions, Brasil March, 2016
23rd International Conference of the TOC Practitioners Alliance - TOCPA
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Aspects of Retail • Availability (SKU/Product) • Mix (size of variety, choice of products) • Pricing (initial, adjusted, offers, etc.)
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Mix Problem • What is it: Lower Costs
Keep less stock
Profitable Business
✔ Depth: volume of stock
✗ Width: Protect Sales
Keep more stock
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Variety
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Direction of the Solution Criteria for a good solution: • Demand Driven • Short Cycle / LT • Adaptive (like DBM) • High Impact on Constrained Resources – Money – Sales Space
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Availability? • What is the unit we measure availability against? • SKU? Grid (Model)? • Here is where it is crucial to challenge the SKU independence assumption • Each type of retail has its own appropriate unit. – Ex: shoe retail: model (grid), supermarket: SKU 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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Difference of Links • Life cycle x Lead Time (LT): Supplier
Resupplying (re-purchasing)
Warehouse
Stores
Replenishing (re-shipping)
LT Life Cycle
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General Flow Stores
CWH
New Product Purchasing
New Products
Resupply: SKU Buffers
Fast Movers
Resupply: SKU Buffers
Basic / Perennial
Replenish: SKU Buffers
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New Products Purchasing • New concept: New Product Buffer • A buffer that holds several different SKUs • It provides – New products to send to stores – Replenishment of SKUs that will be bought only once
• It is set up in a similar manner to SKU Buffers • And is replenished in the same way (pull replenishment: one unit out, one unit in) 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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New Product Purchasing • Which product to purchase? Profitable Business
Known trends exploited
Purchase according to demand
Innovative mix
Purchase according to other criteria
• To evaporate this cloud: • According to demand renews the mix, but still we need a significant amount of mix to instill life in stagnant categories 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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New Product Purchasing The solution • Evaluate the product categories according to their Financial Turns (ROI) = Throughput / Stock (On Hand + On the Way to CWH) Purchase: • 80% of new products according to top performing categories • 20% of new products according to other criteria (trends, ideas, experiments, etc.) 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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New Product Purchasing 20%
Ideas/ Opportunities / Etc.
Release to Buy
Performance (Finacial Turns)
...
...
...
...
80%
Category
Planned New Products
Criteria to select new products to by procured
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New Product Purchasing
Shipment to Stores
Stock purchased/produc tion
Release
New products planned
Stock on the WH Stock purchased/produc tion
NPI Buffer
Deliveries to WH
NPI Buffer
Stock on the WH
New products planned
Products to purchase/produce (weekly or faster) 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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General Flow Stores
CWH Outlet 20% Free form
NPI Buffer (one buffer)
New Products
80% Demand Based
Resupply: SKU Buffers
Fast Movers
Resupply: SKU Buffers
Basic / Perennial
Replenish: SKU Buffers
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Fast movers • Evaluating products by throughput generated ONLY (not revenues nor unit sales) • New Products that cross a threshold for a certain period (moving average) become Fast Movers • Fast movers that stay below a threshold for a certain period (moving average) become “New Products” (i.e. no more purchases) 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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General Flow Stores
CWH
20% Free form
NPI Buffer (one buffer)
New Products
New Product Introductions
80% Demand Based
Resupply: SKU Buffers
Fast Movers
Resupply: SKU Buffers
Basic / Perennial
Replenish: SKU Buffers
23rd International Conference of the TOC Practitioners Alliance - TOCPA
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New product Introduction • New Concept: Space Buffer – a chunk (20%) of the maximum capacity of a store sales area • According to how much is consumed: priority to send new products or NOT to send new products (remove old ones?)
Don’t Send Send Normal
20% “Free”
Send More Send “Urgently”! No extra removals
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80% Minimum Occupancy
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New Product Introduction How to choose which product to send to a given store? • Very similar to purchasing new products: • Sort Categories by Financial Turns • Select new* products available on top(s) category(ies) based on: – Performance of product on other stores – Date of introduction (FIFO) * New on the particular store/location 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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General Flow Stores
CWH Product Returns 20% Free form
20% “Free” NPI Buffer (one buffer)
New Products
New Product Introductions
80% Demand Based
Resupply: SKU Buffers
Fast Movers
Resupply: SKU Buffers
Basic / Perennial
Replenish: SKU Buffers
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80% Minimum Occupancy
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Product Removal (Stores) • According to the Space Buffer priorities products are removed from the stores • Products are sorted from worst to best on Throughput generation* • Enough products are selected to be removed to bring us close to minimum occupancy • Products are removed in the most frequent economical way possible and sent to the WH * On the model or other appropriate group 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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General Flow Stores
CWH Outlet 20% Free form
Product Returns
20% “Free” NPI Buffer (one buffer)
New Products
New Product Introductions
80% Demand Based
Resupply: SKU Buffers
Fast Movers
Resupply: SKU Buffers
Basic / Perennial
Replenish: SKU Buffers
23rd International Conference of the TOC Practitioners Alliance - TOCPA
80% Minimum Occupancy
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Draining Old Products • Once a product has been returned from a significant number of stores it must be drained (killed) • It is crucial to develop an Outlet strategy that allow for the selling of these products in channels that do not interact with stores • The faster the Outlet strategy works the faster NPI can proceed. 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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Final General Flow Stores
CWH Outlet 20% Free form
Product Returns
20% “Free” NPI Buffer (one buffer)
New Products
New Product Introductions
80% Demand Based
Resupply: SKU Buffers
Fast Movers
Resupply: SKU Buffers
Basic / Perennial
Replenish: SKU Buffers
23rd International Conference of the TOC Practitioners Alliance - TOCPA
80% Minimum Occupancy
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THANK YOU!
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Humberto R. Baptista • Husband and father changing the world one person at a time • Scientist seeking to apply science to people’s endeavors • Hunter of hidden assumptions • Teacher, student and colleague of students
[email protected]
• Believer of values over tools 23rd International Conference of the TOC Practitioners Alliance - TOCPA
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