It's Not Luck - Eliyahu M. Goldratt [85]
“How can we possibly trim it? I want to hear your ideas, even if you already discussed them and decided that they are impractical.”
“Yes, we did discuss some possibilities,” Bob admits. “But none of them made any sense. We’re stuck. So what will happen if we can’t trim it? Are we going to move ahead or drop it?”
“I haven’t decided yet, it’s too early. Now I would like to hear some of these impractical injections. Please.”
They don’t want to continue. They want the verdict now. I can’t blame them. They live under immense pressure. It’s not at all easy to work in a company with such an uncertain future. Right now, for them, any answer is better than this uncertainty. But I can’t afford to give it to them. Not until I’m convinced that there is no other way. And I’m not yet convinced.
“At least give me the opportunity to realize that there is no way to trim this branch,” I try to persuade them to continue. “Do you want me to decide on such an important matter before I’m convinced that I have all the facts? Bob, will you please give me the injection that looked the most promising. Even though at the end you decided that it’s impractical.”
“What we were playing with,” Jeff speaks up, “is the underlying assumption that we can’t increase sales in the near future. We were toying with ideas of how we could.”
“Good thinking,” I say. “Right into the heart of the problem. And . . .”
“And we came up with something, but the medicine is worse than the disease. And besides, there is no chance you’d approve it.”
“Try me.”
“Well, we could give our merchandise to the shops on consignment terms. No obligation when we ship to the shop, but it has to pay upon selling. Susan claims that this would increase sales to new shops more than what we’ll lose from the existing shops reducing their surplus inventory. Yes, we know that it’s impossible. You’ll never authorize the cash injection,” Bob says.
“Besides,” Susan adds, “it has many other negatives. If we give our goods on consignment the shops will have much more cash.”
“What’s bad about that?” I ask, still trying to figure out if I can get them some cash to do it. Maybe short term. I’ll have to check.
“What’s bad about it?” she echoes my question. “The shops are going to use this money to buy more from our competitors.”
“Live and let live,” I say.
“No. It’s going to hurt us. The shops have limited display space. We are going to end up with less display space than we have now. And you know, whatever is not displayed is not likely to be sold.”
“Susan,” I ask, “can we condition our offer on agreed upon display space?”
“You mean, that the shop commits to dedicate certain predetermined space to our products, like brand names in the big chains? I don’t think that would be a problem, especially when they can fill up the display without any hassle. And that’s the case if we give it on consignment, it doesn’t require any cash investment from them. And with our delivery ability they won’t have any blanks. I think that we can actually ask them to guarantee us more space than they currently give us.”
“This will increase our sales?”
“Oh, yes. No doubt. It will also give us some more immediate sales. In order to fill this space many shops will have to expand what they carry from our product line. You see, most of them are not carrying all our product lines, and they don’t want to display a lot of repetitions. Yes, this will help. Considerably.”
“But,” she turns gloomy again, “how can we control them. We are working with thousands of shops. It’s impossible.”
“What do you mean by control?”
“Look,” she tries to explain, “if we give our goods on consignment, the shops don’t have to pay when we ship.”
“They don’t pay for it now, as I understand. They pay only after ninety days.”
“Yes,” she tries to control her impatience, “but the sale is done when we ship it to them. If we switch to consignment, then they’ll have to pay only when they sell it. Most of them are·so pressed for cash that I’m afraid they will simply not report sales. We can’t control it. We can’t build a police