07-05-2014, 02:12 PM
Distribution in a Food company (2008 to 2009)
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Discussions
Since our economy sauce is a consumer goods product, the relevant TOC solution is
the Distribution Solution, which is based on increasing the frequency of orders and/or
deliveries with respect to production capacity that had been reduced by half that we
had earlier. We were used to environments where frequencies of delivery of once a
week or once a month are common. From our experience in Economy sauces, we had
learnt that a delivery frequency of once in three days is enough to ensure no shortages;
increasing the frequency to higher than that does not increase availability and/or sales.
But Economy sauces were already being delivered to each shop every third day.
Considering the current high frequency of delivery, do we still have anything of
significance to offer? Before we give up and restrict our attention to our premium
products, maybe we should continue to ask: Why is our Economy sauce delivered once
in three days?
It is because our Economy sauce is a daily-use product. What typifies a daily-use
product is that freshness and appealing presentation is a major issue.
Yes, there is a big difference if the product was produced and delivered today or
yesterday.
How big an increase?
Well, it is a function of the level of conservatism or liberalism of the retailer. Being aware
that one cannot be sure to enter a shop towards the end of the day and find a decent
looking bottle of our product, I estimated that increasing the delivery to daily basis
might result in a not negligible increase in sales. Since I did expect shortages to be
mainly in the conservative shops and since most of the demand is in the evening, my
highest hopes did not exceed a ten percent increase, and I was going to be overly
surprised if the increase would be less than five percent.