www.vectorconsulti ng.in www.vectorconsulti ng.in VCG employs the 'Theory of Constraints’ philosophy to bring about quantum jump in performance of organizations in its target industry clusters. LEVERAGING THE POTENTIAL Reta il Consume r Goods Equipment Manufactur ing Engineerin g & Constructi on Automobile & Auto Components
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Theory of Constraints Implementation in FMCG Industry : A Case Study
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www.vectorconsulting.inwww.vectorconsulting.in
VCG employs the 'Theory of Constraints’ philosophy to bring about quantum jump in performance of organizations in its target industry clusters.
LEVERAGING THE POTENTIAL
RetailConsumerGoods
EquipmentManufacturing
Engineering& Construction
Automobile &Auto Components
202, Orion Business Park, Kapurwadi Naka, Ghodbunder Road, Thane (West) – 400601
Stock Level based on customers ordering large batches typically monthly (based on inaccurate F/Cast)
Stock Level based on customers ordering daily or weekly based on with actual consumptionShortages
Surpluses
OrderLT
SupplyLT
ROP
The KEY to achieve “profitable availability of more SKU’s” is to geteach link to ORDER LESS MORE FREQUENTLY (START)… rather than the traditional practice of ORDER MORE, LESS FREQUENTLY (STOP)
Yes, BUT… the Cause and Solution has been known for long time, so why don’t we see MORE Supply Chains adopting this… especially FMCG Industry
As per Dr. Goldratt, “Until the consumer has bought, nobody has really sold…
The System Constraint found is in market demand or the No. of Consumers willing to buy
“Exploiting the System Constraint” means “Having the Right SKU, at the right place (in the downstream supply chain) and right time (when consumer is willing to buy).
What conditions block better exploitation?• Shortages of Products already stocked
by the downstream supply chain members
• Unavailability of Products that sell elsewhere but which is not stocked due to shelf-space constraints (occupied by Surpluses).
Change any Policy, Measurement and or Behavior that contribute to current high level of both Shortages and Surpluses
Step 01
IDENTIFY the System’s Constraint
Step 02
Decide how to EXPLOIT the System’s Constraint
Step 03
SUBORDINATE everything to the above decision
YES! BUT, how to find these and will it really be a win:win to change these…
Planning Rule: “Be Paranoid but not Hysterical”Target Stock Level for each SKU at each Stocking point = Maximum Demand within Reliable Replenishment Time
Execution Rules: Replenish up to Target level in sequence of buffer status more frequently (e.g. daily)
Feedback Rules: Adjust Target Level (Buffer Size) based on Level of Buffer Penetration
ActualDemand
400
300
200
100
Month01
Month02
Month03
Month04
Month05
Month06
Auto Upsize Buffer based on level of Red-zone penetration
Auto Downsize Buffer based on lack of Yellow zone penetration