Supply Chain in Isnt It Obvious? by Goldratt

Summary

Paul White is a struggling manager of a Boca Raton branch for a company called Hannahs Shop. He received news about the stores poor performance earlier that day. He confessed his work-related frustrations to his friends. He wondered how he failed when he was more than willing to adhere to the companys proven sales strategy. Nevertheless, an emergency situation made him realize that it was not prudent to emulate the same supply-chain management strategies espoused by the managers of the most profitable stores in the region. Paul discovered a critical flaw in the companys supply-chain process. This discovery prompted the creation of an alternative supply-chain management scheme, and when he was confident regarding its validity and effectiveness, he wanted everyone to hear the good news.

Paul realized that due to the corporate culture that resulted in the blind acceptance of an obsolete supply-chain management paradigm, store managers are compelled to load up their inventories and fill up the stores storage area with goods. As a result, the company as a whole spends a great deal of money, ordering large quantities from the producers of the said products several weeks or months before these items are needed by the customers. Due to this practice, store managers are confronted with two major problems: storage-related constraints and the indirect costs created by slow-moving items.

Paul created an ingenious solution to the said problems, and he listed the critical components as follows: reduce in-store inventory levels; develop a re-ordering system in order to replenish purchased items; keep sufficient inventory in warehouses; order smaller batches from manufacturers but increase the frequency of ordering the said items; and invest in an appropriate and effective management information system for the purpose of tracking sales, order levels stock levels, and other relevant data. Convinced about the effectiveness and validity of the new scheme that he created, Paul decided to spread the good news. He persuaded store managers to embrace the new way of doing things.

5 Scenes

Scene # 1

Paul thought he was having a bad day because he was unable to secure an item from another store. A few moments before he uttered unhappy words into the mouthpiece of a telephone, a customer wanted to order an out-of-stock item. However, Paul knew how to go around the problem. He thought that by simply giving a call to a store manager handling another branch, he had the chance of salvaging the reputation of the store he was overseeing, and at the same time, he prevented the possibility of losing sales due to inventory-related limitations. This scene exemplifies one of the critical supply-chain management issues that managers and salespeople are contending with while working at Hannahs Shop. This scene also provides insights into the practice of loading up on items in order to prevent the recurrence of the same scenario. However, the obvious problems related to this strategy crop up several times in a year when surpluses are eating up space and threatening to affect the stores profitability as a direct result of obsolescence.

Scene #2

After a broken pipe caused significant water damage to books, carpets, linen products, shoes, and other household items, Paul was forced to remove a significant portion of the stores inventory in order to protect it from the problems caused by damp and mold. Paul was also compelled to modify the stores supply-chain process in order to facilitate the movement of goods from a temporary holding area into the display area.

Scene #3

After discovering a gem of an idea in the revised supply-chain management protocol, Paul was excited to share his discovery with other managers. However, the other store managers doused cold water into Pauls fiery enthusiasm. The main problem, according to the unimpressed store managers, was that they were not going to risk the chance of not having enough items on standby. They explained how they were going to lose revenue if they are not able to sell the items at a time when a customer demands it. This scene exemplifies the dilemma faced by store managers. These business leaders are aware of the inefficiencies and constraints brought about by the surplus created by unsold items. Nevertheless, they are haunted by the memory of unhappy customers unable to purchase the products that they needed.

Scene #4

Paul and his associates were examining the details of a graph that described the status-quo in terms of the companys best practices. Paul pointed out that it is prudent to consider the strategic value of the warehouses. He wanted them to understand that there is an ingenious way to connect these warehouses to the store, and in effect, expand the stores capability to have access to more goods without the need to physically alter the stores configuration. This scene exemplifies the impact of changing a small part of the supply chain management process. For example, Paul and the other store managers had access to the same warehouse. However, they did not see the warehouse as a hub. They simply saw these large buildings as a platform that manufacturers use in order to ship large quantities of the products that Hannahs Shop ordered from them. It took managers a long time to improve the cost-efficiency of the business model.

Scene #5

Paul was able to get a second opportunity to present his case to the skeptics. The store managers were ready with their objections and criticisms regarding the perceived flaws of Pauls new system of moving goods from the manufacturer to the stores display window. However, at the end of the presentation, Paul was able to persuade them to adopt the new system. One of the most important insights that one can get from this scenario was the one about the clever way of modifying the ordering process. This scenario exemplifies the inability of store managers to determine the correct timing when it comes to replenishing stocks. If they wait until the last moment, they are going to experience problems due to unforeseen circumstances that prevented the timely delivery of specific items.

This particular scene also exemplifies the need for an appropriate management information system that tracks and monitors sales and threshold levels. It is not possible for a single human being to understand all the facets of the supply-chain protocol. However, a computer does not have to deal with distractions and other issues that easily cause breakdowns in decision-making. The said management information system serves as a tool to streamline the managers decision-making process. It is also prudent to invest in specific types of computer software that allows connectivity between the cashiers computer and the manufacturers database. In other words, the manufacturer of the product or the manager of the warehouse gets advance information regarding the dwindling supply, and this information triggers the reordering process. Thus, there is no need to waste a single hour and not to be able to do the right thing at the most opportune time.

General Thought

It is a good thing to know that managers and business owners are getting easy access to the type of insights that are made available through reading Goldratts novel. One can argue that it does not take much to acquire the same level of understanding and appreciation for the recent discoveries concerning the supply-chain management aspect of the companys business operations. Store owners and business leaders are going to learn the same thing if they pay careful attention to recent trends and development (Zaman 241). Paul White and his associates discussed a better way of handling the supply-chain-related problems of Hannahs Shop. However, one can also argue that Paul and his friends are going to develop a better framework if they are willing to invest time and resources in order to study the success stories of large online businesses like Amazon.

The success stories of online stores like Amazon provide real-life examples and applications of the principles that were described in Goldratts novel. It is important to point out that Amazons business model offers insights regarding how to enhance the profitability of Paul Whites business model. In the said novel, Paul was able to reduce investments and surpluses by activating the efficient use of a nearby warehouse and connecting it to the stores business operation. Thus, he created a system that virtually expanded the stores inventory, but in reality, the items were not physically present in the said Boca Raton branch.

Paul discovered something that has been perfected by Amazon and other online stores with a similar format. In this type of set-up, the store managers are not struggling with any type of surplus or the need to sell slow-moving items because there is a system that ships the product from the warehouse to the customer (Zaman 241). Paul has to consider the development of a new revenue stream, the one that is an offshoot of a brick-and-mortar store and one that is the direct result of having an online presence.