elena streltsova_v2_eng_8 tocpa_oct 2013
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Elena Streltsova_v2_Eng_8 TOCPA_Oct 2013TRANSCRIPT
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Practical examples of the
Theory of Constraints
application
Elena Streltsova, Lybimy Kray, RussiaOctober 2013
26-27 October 2013, Moscow
www.tocpractice.com
8th International Conference of the
TOC Practitioners Alliance - TOCPA
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Elena Streltsova
General Director of CJSC Lybimy Kray (a
confectionary).
Jelena has been using TOC since beginning
2011. TOC implementation areas:
accounting, inventory management and
development of mafia offers.
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8th International Conference of the TOC Practitioners Alliance - TOCPA
WWW.ULMART.RU
Implementation of a pilot project on inventory
management to ensure availability
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8th International Conference of the TOC Practitioners Alliance - TOCPA
ULMART
ULMART is a unique store of domestic appliances and
household electronics, which does not have any storefronts,
but there are computer terminals, where the customer
chooses what he or she really needs
Ulmart is the first cyber market that was established in Saint-
Peterburg in 2008. Currently there are 29 cyber markets and
more than 130 distribution points in more than 60 cities of
the country.
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Advantages of ULMART
The main storefront of ULMART is the online catalogue with
more than 35,000 branded SKUs. It is up to the client how to
buy a product. He/she may place an order on the website and
order a delivery "to the door" at a convenient time or delivery
to a place nearest ULMARTs distribution point. Also the client
can come to the 24/7 cyber market and write up an order and
receive the goods within 15 minutes.
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Goals of the replenishment system?
Performance:
Ensure high level of availability of each item at
each storage facility;
Efficiency:
Ensure high level of inventory turns.
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Project Charter
Goal:
Decision whether expand or not roll the method out within the company.
Criteria of success:
Level of availability 95%;
Inventory turns 30 days.
Timeline:
from 11.03.13 through 10.06.13.
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Project outcomes
+
Weeks Conclusions
Availability
Inventory turns
On-time project completion On time
Increased
Increased but
did not reach 95%
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Assessment of results
Does the achieved result suffice for making a
decision to switch to TOC inventory
management methods?
Is 95% availability level achievable?
Is 14 days inventory turns level achievable?
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Assessment of results
Does the achieved
result suffice for making
a decision to switch to
TOC inventory
management methods?
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Level of availability as compared to
the same SKU in Moscow (weeks)
Moscow Saint Petersburg
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Weekly availability level (%)
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Availability level
The TOC methods
demonstrated the best
results
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Inventory turns as compared to
the same SKU in Moscow (weeks)
Moscow Saint Petersburg
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Inventory turns, days
Moscow St Petersburg
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Inventory turns
The TOC methods
demonstrated best
results
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Buffer status at the
Central Warehouse
Blue Red OK
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Buffer status at the
Central Warehouse
There were surpluses on average of 32 SKUs or 43% of the sample
There were inventory shortages of 19 SKUs or26% of the sample
Normal buffer status was of 23 items or 31% of the sample
Potential to Increase
inventory turns!
Potential to increase
availability level!
Project results reflect the
effectiveness of the
method for 31%!
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8th International Conference of the TOC Practitioners Alliance - TOCPA
What if ?
Facts of 22 weeks:
Average daily balance of the company was ths. RUB.
Average daily sales were ths. RUB
The inventory turns according to TOC was 22.9 days
Dreams:
If the inventory were managed according to TOC (22.9
days), the inventory level would be ... ths. RUB or by 21%
less
And if we reach 14 days inventory turns, the inventory
level would be ths. RUB, that is 52% less
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Assessment of results
Does the achieved result suffice for making a
decision to switch to TOC inventory
management methods?
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Details
Is 95% availability level
achievable ?
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Buffer status at CW
Blue Red OK
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Inventory shortages
There were inventory shortages of 19 SKUs or26% of the sample
Potential to increase
availability level!
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Inventory shortages(potential causes)
At the moment of placing an order the item is out of the suppliers stock ;
At the moment of placing an order, a customer is unhappy with the commercial conditions;
The first order of the new SKU was placed unsuccessfully (demand was higher than expected );
Execution accuracy of assignment for movement that is especially critical for items with TBL=1 (target buffer level);
Lack of live information on the replenishment systems requirement changes to ensure availability (SKUs are not replenished consciously, but continue to be accounted for as shortages in the calculation of the availability level).
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8th International Conference of the TOC Practitioners Alliance - TOCPA
The first order was placed
unsuccessfully
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8th International Conference of the TOC Practitioners Alliance - TOCPA
First, the SKUs were over and
then the TBL was zeroed
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Details
Is 14 days inventory
turns level achievable?
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Buffer status at CW
Blue Red OK
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Surpluses
There were surpluses on the average for 32 SKUs or 43% of the sample
Potential to increase
inventory turns!
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Surpluses at CW(actual causes)
Purchases did not follow the assignment:
More SKUs were ordered than it was required;
Items were ordered, when they were not required at all.
Movement from Moscow to Saint Petersburg ;
Reserve deallocation;
Purchasing for Moscow without further movement;
SKUs returned to the CW from cybermarkets;
TBL decreasing (02.04.13 and 24.05.13).
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8th International Conference of the TOC Practitioners Alliance - TOCPA
The order volume was higher
than required
Actual on handTarget
level2/3 Target
level
1/3 Target
level
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Ordered, when it was
not required at all
Actual on handTarget
level2/3 Target
level
1/3 Target
level
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Inventory turns, days
14,1
13,9
Cybers-74SPb-74
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Summary of causes
Purchases did not follow the assignment :
Shortage (the supplier does not have the SKUs)
Profitable/not profitable commercial conditions for the supply
Habit
Unpredictable demand (new SKU, campaign)
Recording system (reserve, SKU status for the replenishment system)
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Specific features of the
implementation
Very low Target Buffer Level at the stores
Range of 32,000 SKUs
A lot of SKUs with short life cycles, up to one time
delivery and further transition to a new model
range
SKUs with frequent shortages
Large and rare deliveries to Russia, interim
replenishment is almost impossible.
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8th International Conference of the TOC Practitioners Alliance - TOCPA
VALUE OFFER
LUBIMIY KRAY
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Project charter
Goal:
Increase on new contracts
Criteria of success:
Reduce time required to sign a new contract from 18 to 4 weeks;
Everybody, who participated in negotiations agree to sign a contract;
Increase under new contracts by 37 mln. during 2012.
Timeframe:
From 16.01.12 to 17.05.12.
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Project resultsBefore After Results
Assess
ment
Time to enter into new
contracts18 weeks 10 weeks
Time was reduced,
but did not reach the
target level +/-
Only one of 21 companies that we started negotiations with
refused to sign a contract. +
, mln/year
(only regions) 48,2
During 16 month
was 48,2 mln.rubles. +
2012/2011 187,1 217,9 was 16%, but did not
reach the target level +/-
2013/2012 157,4 174,8For the first nine
months of 2013 was
11% more +/-
On-time project
completionOn time +
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8th International Conference of the TOC Practitioners Alliance - TOCPA
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8th International Conference of the TOC Practitioners Alliance - TOCPA
Assessment of results
Does the achieved result
reflect the potential of TOC
methodology in terms of
mafia offer development and
implementation?
Is it possible to reduce the
time of contract signing to 4
weeks?