Isn't It Obvious? Revised Edition by Goldratt Eliyahu M

Author:Goldratt, Eliyahu M. [Goldratt, Eliyahu M.]
Language: eng
Format: mobi
Publisher: North River Press
Published: 2010-08-22T16:00:00+00:00

Paul examined the data and added, “And except for once, throughout these two weeks the most we had in our inventory at the end of the day was three. Such a low level of inventory relative to the target should have blinked red for us. But the important thing is that it is not a matter of variability. Starting each day with nine units and closing with almost zero means that the daily sales are consistently much higher than was assumed.”

Ted considered Paul’s conclusion as he walked back to his chair. “A target of nine units for twenty days’ sales means that the rate was supposed to be less than one unit sold in two days. But actually, for the last two weeks, we sold more than six a day. Jeez, this is not an increase in demand, this is a mistake, a big one. I guess it’s because it’s a new collection, and the sales forecast was erroneous. It’s my fault, I should have checked it.”

“It’s okay, Ted,” Paul calmed his employee. “Our forecasts are far from precise, but I don’t suppose that many SKUs suffer from the same mistake. Not more than fifty.”

“Probably less,” Ted hurried to agree. “I’ll correct it right away.” Then he added, disappointed, “But even though they’re good sellers, since we are dealing here with a small number of SKUs, correcting these mistakes will not affect sales much. Oh well, I thought I had a good idea. I had judged according to the intensity of the sales associates’ complaints and hadn’t bothered to check what the real impact was.”

“Still, you were absolutely right to bring it up,” Paul encouraged him. “As few as these SKUs may be, each one must raise the blood pressure of the department managers. I shouldn’t be so stubborn; I should have listened.” In a firm tone he concluded, “However, it’s imperative that we correct it as soon as possible.”

“Without a doubt,” Ted agreed.

“More importantly,” Paul said, “you’ve just shown me the proper way to go about reducing the inventory.”

“I did what?”

“Look again at what we’ve discussed. You just showed me that we should have paid particular attention to an SKU that most days closes with very little in inventory; very little relative to its target. We concluded that such situations should blink red, warning us to increase the target inventory.”

“Correct, boss. Like I said, I’ll do it right away. But we are talking about increasing inventory,” Ted checked, just to be sure.

Alva interrupted them by bringing in a tray with two mugs of steaming coffee and a plate filled with cookies. Always the southern gentleman, Paul thanked her and returned to Ted.

“Well, it depends,” Paul said calmly, “What about the opposite cases, SKUs that are blinking green; SKUs that close most days with relatively high inventory?” Pointing to the computer screen he continued, “Now take these bathmats, the flamingo pink ones. On average they sell at less than one a day. Yet we’re holding fifteen! The closing inventory for these has never been below ten units.

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