Learning from Experience III

Paradigms

An inappropriate paradigm will result in unfulfilled (or even over fulfilled) expectations.
In the Post “Where should we hold Stock” the organisation may have followed the following paradigms:
1. Distributors are given a good margin to sell our products – it’s only right that they invest in the correct amount of inventory to supply their customers.
2. Adding value – through cutting the rolls and sheets to customer requirements is an additional way to make more money.
3. Holding stock close to customers (at distributors) ensures a better customer service. Material availability is better; lead-times are shorter.
Unfortunately the result was quite different – not only did distributors complain about the high cost of holding inventory, but; customer service to the end client actually deteriorated. What is going on?
Maybe holding inventory centrally and cutting to size centrally is much more effective. Maybe the aggregation effect (at a central warehouse) causes less waste in added stock and makes it much easier to service the market. Maybe aggregation of demand makes demand at that level much less uncertain. The aggregation paradigm is well known in a number of areas – insurance aggregates many risks that offset each other.
Maybe the right paradigm is aggregation! Don’t many supply chains use aggregation to prepare inventory at such a point and differentiate the product when customers actually order?

It seems you should ‘watch your paradigms’!

Nov 11th,2011 Eli Schragenheim will lead a workshop on Learning from Experience. The purpose is to learn how to understand the cause and effect (the why) of disturbing and unexpected results from our actions AND, more importantly to take and apply the important lessons we learn.
The stories in these posts are all about unexpected effects that someone has experienced and that he or she could not properly understand. With Eli, we will look at such problems (bring your own!) and analyse them.
If you are interested the Workshop (in English) will be at the hotel Schiller in Olching (near Munich) followed by the TOC4U Meeting (mostly German) on Saturday Nov. 12th. You can register here: Register or call +49 6252 795 3070 if you have problems with the German registration page.


Technorati Tags: Availability, Continual Improvement, Distribution, Efficiency, Focus, Goldratt, Inventory, Make to Stock, Replenishment, Risk Management, Shareholder Value Add, Strategy and Tactics, SVA, Theory of Constraints, TOC, Value Chain