Elena Streltsova - v2 - Eng - 8 TOCPA - Oct 2013

www.tocpractice.
com
8th International Conference of the

TOC Practitioners Alliance - TOCPA
26-27 October 2013, Moscow
Practical examples of the

Theory of Constraints
application
Elena Streltsova, Lybimy Kray, Russia

October 2013
8th International Conference of the TOC Practitioners Alliance - TOCPA
Elena Streltsova
General Director of CJSC Lybimy Kray (a
confectionary).
Jelena has been using TOC since beginning
2011. TOC implementation areas:
accounting, inventory management and
development of mafia offers.
[email protected]
Implementation of a pilot project on inventory

management to ensure availability
WWW.ULMART.RU
ULMART
ULMART is a unique store of domestic appliances and
household electronics, which does not have any storefronts,
but there are computer terminals, where the customer
chooses what he or she really needs
Ulmart is the first cyber market that was established in SaintPeterburg in 2008. Currently there are 29 cyber markets and
more than 130 distribution points in more than 60 cities of
the country.
Advantages of ULMART
The main storefront of ULMART is the online catalogue with
more than 35,000 branded SKUs. It is up to the client how to
buy a product. He/she may place an order on the website and
order a delivery "to the door" at a convenient time or delivery
to a place nearest ULMARTs distribution point. Also the client
can come to the 24/7 cyber market and write up an order and
receive the goods within 15 minutes.
Goals of the replenishment system?

Performance:
Ensure high level of availability of each item at
each storage facility;
Efficiency:
Ensure high level of inventory turns.
Project Charter
Goal:
Decision whether expand or not roll the method
out within the company.
Criteria of success:
Level of availability 95%;
Inventory turns 30 days.
Timeline:
from 11.03.13 through 10.06.13.
Project outcomes
Weeks
Conclusions
Availability
Increased but
did not reach 95%
Inventory turns
Increased
On-time project
completion
On time
Assessment of results
Does the achieved result suffice for making a
decision to switch to TOC inventory
management methods?
Is 95% availability level achievable?
Is 14 days inventory turns level achievable?
Does the achieved
result suffice for making
a decision to switch to
TOC inventory
management methods?
Level of availability as compared to

the same SKU in Moscow (weeks)
Moscow
Saint Petersburg
Weekly availability level (%)

Availability level
The TOC methods

demonstrated the best
results
Inventory turns as compared to

the same SKU in Moscow (weeks)
Moscow
Saint Petersburg
Inventory turns, days
Moscow
St Petersburg
Inventory turns
The TOC methods

demonstrated best
results
Buffer status at the

Central Warehouse
Blue
Red
OK
Buffer status at the

Central Warehouse
There were surpluses on
average of 32 SKUs or
43% of the sample
There were inventory
shortages of 19 SKUs or
26% of the sample
Normal buffer status was
of 23 items or 31% of the
sample
Potential to Increase
inventory turns!
Potential to increase
availability level!
Project results reflect the
effectiveness of the
method for 31%!
What if ?
Facts of 22 weeks:
Average daily balance of the company was ths. RUB.
Average daily sales were ths. RUB
The inventory turns according to TOC was 22.9 days
Dreams:
If the inventory were managed according to TOC (22.9
days), the inventory level would be ... ths. RUB or by 21%
less
And if we reach 14 days inventory turns, the inventory
level would be ths. RUB, that is 52% less
Does the achieved result suffice for making a
decision to switch to TOC inventory
management methods?
Details
Is 95% availability level

achievable ?
Buffer status at CW
Blue
Red
OK
Inventory shortages
There were inventory
shortages of 19 SKUs or
26% of the sample
availability level!
Inventory shortages
(potential causes)
At the moment of placing an order the item is out of the
suppliers stock ;
At the moment of placing an order, a customer is unhappy
with the commercial conditions;
The first order of the new SKU was placed unsuccessfully
(demand was higher than expected );
Execution accuracy of assignment for movement that is
especially critical for items with TBL=1 (target buffer level);
Lack of live information on the replenishment systems
requirement changes to ensure availability (SKUs are not
replenished consciously, but continue to be accounted for
as shortages in the calculation of the availability level).
The first order was placed

unsuccessfully
First, the SKUs were over and

then the TBL was zeroed
Details
Is 14 days inventory
turns level achievable?
Buffer status at CW
Blue
Red
OK
Surpluses
There were surpluses on
the average for 32 SKUs
or 43% of the sample
inventory turns!
Surpluses at CW
(actual causes)
Purchases did not follow the assignment:

More SKUs were ordered than it was required;
Items were ordered, when they were not required at
all.
Movement from Moscow to Saint Petersburg ;
Reserve deallocation;
Purchasing for Moscow without further
movement;
SKUs returned to the CW from cybermarkets;
TBL decreasing (02.04.13 and 24.05.13).
The order volume was higher

than required
Actual on hand
Target
level
2/3 Target
level
1/3 Target
level
Ordered, when it was

not required at all
Actual on hand
Target
level
2/3 Target
level
1/3 Target
level
Inventory turns, days
14,1
13,9
SPb-74
Cybers-74
Summary of causes
Purchases did not follow the assignment :
Shortage (the supplier does not have the SKUs)
Profitable/not profitable commercial conditions
for the supply
Habit
Unpredictable demand (new SKU, campaign)

Recording system (reserve, SKU status for the
replenishment system)
Specific features of the

implementation
Very low Target Buffer Level at the stores
Range of 32,000 SKUs
A lot of SKUs with short life cycles, up to one time
delivery and further transition to a new model
range
SKUs with frequent shortages
Large and rare deliveries to Russia, interim
replenishment is almost impossible.
VALUE OFFER
LUBIMIY KRAY
Project charter
Goal:
Increase on new contracts
Criteria of success:
Reduce time required to sign a new contract from 18 to 4
weeks;
Everybody, who participated in negotiations agree to sign a
contract;
Increase under new contracts by 37 mln. during 2012.
Timeframe:
From 16.01.12 to 17.05.12.
Project results
Before
Time to enter into new
contracts
Results
Assess
ment
Time was reduced,

but did not reach the
target level
+/-
After
18 weeks 10 weeks
Only one of 21 companies that we started negotiations with

refused to sign a contract.
, mln/year
(only regions)
2012/2011
2013/2012
On-time project
completion
48,2
During 16 month
was 48,2 mln.rubles.
187,1
217,9
was 16%, but did not

reach the target level
+/-
174,8
For the first nine

months of 2013 was
11% more
+/-
157,4
On time
Does the achieved result
reflect the potential of TOC
methodology in terms of
mafia offer development and
implementation?
Is it possible to reduce the
time of contract signing to 4
weeks?

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www.tocpractice.

8th International Conference of the

26-27 October 2013, Moscow

Practical examples of the

Elena Streltsova, Lybimy Kray, Russia

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

Implementation of a pilot project on inventory

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

Goals of the replenishment system?

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

Level of availability as compared to

8th International Conference of the TOC Practitioners Alliance - TOCPA

Weekly availability level (%)

8th International Conference of the TOC Practitioners Alliance - TOCPA

The TOC methods

8th International Conference of the TOC Practitioners Alliance - TOCPA

Inventory turns as compared to

8th International Conference of the TOC Practitioners Alliance - TOCPA

Inventory turns, days

8th International Conference of the TOC Practitioners Alliance - TOCPA

The TOC methods

8th International Conference of the TOC Practitioners Alliance - TOCPA

Buffer status at the

8th International Conference of the TOC Practitioners Alliance - TOCPA

Buffer status at the

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

Is 95% availability level

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

The first order was placed

8th International Conference of the TOC Practitioners Alliance - TOCPA

First, the SKUs were over and

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

Purchases did not follow the assignment:

The order volume was higher

8th International Conference of the TOC Practitioners Alliance - TOCPA

Ordered, when it was

8th International Conference of the TOC Practitioners Alliance - TOCPA

Inventory turns, days

8th International Conference of the TOC Practitioners Alliance - TOCPA

Unpredictable demand (new SKU, campaign)

8th International Conference of the TOC Practitioners Alliance - TOCPA

Specific features of the

8th International Conference of the TOC Practitioners Alliance - TOCPA

8th International Conference of the TOC Practitioners Alliance - TOCPA

Time was reduced,

Only one of 21 companies that we started negotiations with