A similar more simplified mechanism is applied to the
distributor- retailer link. Higher frequency of visit (from current visiting
frequency) and the discipline of replenishment (not dumping) ensures near 100%
availability of wider range at retailer. The current incentives to the retailer
for prime shelf space can be restructured to ensure shelf space and range.
Most distributors/ retailers interested in a long term
relationship are more comfortable with a steady higher rate of return on
investment rather than speculating on prices or on anticipated returns on high
volume schemes. Most have, in the past, experienced the brunt of the losses
when these don't go as predicted.
Transportation costs, against common prediction, will not
increase as the trucks are now going always full. With reporting of daily
sales, the supplying warehouse/ distributor send vehicles with an assortment of
SKUs to fill the capacity of the vehicle. More full trucks means more sales and
not higher transportation costs!
'Buffer Management' provides the priority for supply based
on the threat to stock-outs. This system is based on simple colouring of the
stock levels as Red as bottom 33% of the decided stock level, 33-66% as yellow
for the next level and 66% to 100% for the topmost band. Such colouring systems
are easily understood by warehouse dispatch schedulers.
In summary- it is not difficult to achieve near 100%
availability at distributors and retailers without investment and address the
lost sales and double/ triple profits!
About the Author
Kiran Kothekar is Director in Vector Consulting Group. He has
experience of having designed and implemented TOC solutions in more than 20
companies. He has been associated with Dr. Goldratt, the founder of Theory of
Constraints, for the past six years.
About the Company
Vector
Consulting Group is the largest 'Theory of Constraints' consulting company in India and has operations in Indonesia and Singapore as well. Vector has the maximum experience in India of implementing TOC solutions' company wide in some well known FMCG, fashion and auto
after market companies. Please visit: www.vectorconsulting.in
