Theory of Constraints Handbook - James Cox Iii [762]
24Of course, there are always exceptions to any rule, so judicially choose candidates you want to eliminate. Maybe you get a low margin on bread (necessity goods), but a grocery store that doesn’t stock it might lose a lot of business for all other items. Complementary goods are another class of goods that require scrutiny in that one may have a high margin and another a low margin (toothpaste and toothbrush, for example).
25A year is generally used but for seasonal or fashion goods, the length of time must be modified to fit the situation.
26If severe fluctuations exist, a larger fluctuation factor should be used but beware of demand patterns in an environment where volume discounts are given. These discounts distort the demand pattern significantly.
27See the Inherent Simplicity’s Web site for references at: http://www.inherentsimplicity.com/.
28For example, think about the change in demand for beer consumption for the summer versus the winter; for a national holiday weekend across the country versus a regular weekend; for a home football game weekend for a major college town versus a regular weekend in that same town.
29Inherent Simplicity is a leading provider of TOC distribution/replenishment software, and has faced and solved these situations based on client needs. I will discuss several different scenarios that exist in reality and the solution methods derived for a pull system by this company. This is not meant as an endorsement of the software but to illustrate a practical way of addressing that issue if it exists in your environment.
30A forecast can be as simple as noticing that retail sales on the weekend of a college football game increase six times over a normal session weekend. By determining when the next season’s home football games are, one can plan to have inventories to cover these peaks for the season.
31The Inherent Simplicity methodology involves a series of steps to be performed for each SDC and for each SKU group separately.
32BM priority during this time might be skewed as well. Suppose the buffer was 100 and now it increases to 400. Even if we had a full buffer at the site, the VBP at the site would now show a 75 percent penetration—quite deep in the red.
33It is imperative that management judgment is used to determine if there is a decrease in demand immediately following the SDC and therefore make adjustments for the SDC impact. An advertising campaign based on price reduction for a cereal is an example of a sales decrease. There are also situations where the normal demand would resume almost immediately. For example, while retail sales are high (SDC) for a football game weekend (caused by out-of-town consumers), normal demand resumes almost immediately.
34If you know the number of SKUs in your system, then you can skip this step; it just shows the calculations of converting items by locations to SKUs.
35A supply chain board game comprised of three products, six retailers, two RWHs, and one PWH has been used to teach the differences between managing under the traditional push systems (ROP/EOQ and min-max) and the TOC distribution/replenishment system. It is described in Cox and Walker (2006).
36See “The Science of Successful TOC Holistic Implementation” presented by Mickey Granot at the TOCICO 2008. For further references of Inherent Simplicity, please refer to Inherent Simplicity’s Web site at: http://www.inherentsimplicity.com/.
37As in all business functions, distribution goes through cycles of centralization for cost control to decentralization for flexibility/responsiveness. CWH has been tried using distribution requirements