23rd International Conference of the

TOC Practitioners Alliance - TOCPA

www.tocpractice.com

21-22 March, 2016, Tennessee, USA

TOC Retail Mix

Management
Humberto R. Baptista
Vectis Solutions, Brasil
March, 2016

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

Aspects of Retail
Availability (SKU/Product)
Mix (size of variety, choice of products)
Pricing (initial, adjusted, offers, etc.)

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

Mix Problem
What is it:
Lower
Costs

Keep less
stock

Profitable
Business

Depth:
volume
of stock

Width:
Protect
Sales

Keep more
stock

23rd International Conference of the TOC Practitioners Alliance - TOCPA

Variety

www.tocpractice.com

Direction of the Solution

Criteria for a good solution:
Demand Driven
Short Cycle / LT
Adaptive (like DBM)
High Impact on Constrained Resources
Money
Sales Space

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

Availability?
What is the unit we measure availability
against?
SKU? Grid (Model)?
Here is where it is crucial to challenge the
SKU independence assumption
Each type of retail has its own appropriate
unit.
Ex: shoe retail: model (grid), supermarket: SKU
23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

Difference of Links
Life cycle x Lead Time (LT):
Supplier

Resupplying
(re-purchasing)

Warehouse

Stores

Replenishing
(re-shipping)

LT
Life Cycle

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

General Flow
Stores

CWH

New Product
Purchasing

New
Products

Resupply:
SKU Buffers

Fast Movers

Resupply:
SKU Buffers

Basic /
Perennial

Replenish:
SKU Buffers

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

New Products Purchasing

New concept: New Product Buffer
A buffer that holds several different SKUs
It provides
New products to send to stores
Replenishment of SKUs that will be bought only
once

It is set up in a similar manner to SKU Buffers

And is replenished in the same way (pull
replenishment: one unit out, one unit in)
23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

New Product Purchasing

Which product to purchase?
Profitable
Business

Known trends
exploited

Purchase according
to demand

Innovative mix

Purchase according
to other criteria

To evaporate this cloud:

According to demand renews the mix, but still
we need a significant amount of mix to instill
life in stagnant categories
23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

New Product Purchasing

The solution
Evaluate the product categories according to
their Financial Turns (ROI) = Throughput /
Stock (On Hand + On the Way to CWH)
Purchase:
80% of new products according to top
performing categories
20% of new products according to other
criteria (trends, ideas, experiments, etc.)
23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

New Product Purchasing

20%

Ideas/ Opportunities / Etc.

Release to Buy

Performance
(Finacial Turns)

...

...

...

...

80%

Category

Planned New
Products

Criteria to select new products to by

procured

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

New Product Purchasing

Shipment to
Stores

Stock
purchased/produc
tion

Release

New products
planned

Stock on the WH
Stock
purchased/produc
tion

NPI Buffer

Deliveries to
WH

NPI Buffer

Stock on the WH

New products
planned

Products to purchase/produce
(weekly or faster)
23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

General Flow
Stores

CWH
Outlet
20%
Free
form

NPI Buffer
(one buffer)

New
Products

80%
Demand
Based

Resupply:
SKU Buffers

Fast Movers

Resupply:
SKU Buffers

Basic /
Perennial

Replenish:
SKU Buffers

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

Fast movers
Evaluating products by throughput generated
ONLY (not revenues nor unit sales)
New Products that cross a threshold for a
certain period (moving average) become Fast
Movers
Fast movers that stay below a threshold for a
certain period (moving average) become
New Products (i.e. no more purchases)
23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

General Flow
Stores

CWH

20%
Free
form

NPI Buffer
(one buffer)

New
Products

New Product
Introductions

80%
Demand
Based

Resupply:
SKU Buffers

Fast Movers

Resupply:
SKU Buffers

Basic /
Perennial

Replenish:
SKU Buffers

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

New product Introduction

New Concept: Space
Buffer a chunk (20%) of
the maximum capacity of
a store sales area
According to how much is
consumed: priority to
send new products or NOT
to send new products
(remove old ones?)

Dont Send
Send Normal

20%
Free

Send More
Send
Urgently!
No extra
removals

23rd International Conference of the TOC Practitioners Alliance - TOCPA

80%
Minimum
Occupancy

www.tocpractice.com

New Product Introduction

How to choose which product to send to a given
store?
Very similar to purchasing new products:
Sort Categories by Financial Turns
Select new* products available on top(s)
category(ies) based on:
Performance of product on other stores
Date of introduction (FIFO)
* New on the particular store/location
23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

General Flow
Stores

CWH
Product Returns
20%
Free
form

20%
Free
NPI Buffer
(one buffer)

New
Products

New Product
Introductions

80%
Demand
Based

Resupply:
SKU Buffers

Fast Movers

Resupply:
SKU Buffers

Basic /
Perennial

Replenish:
SKU Buffers

23rd International Conference of the TOC Practitioners Alliance - TOCPA

80%
Minimum
Occupancy

www.tocpractice.com

Product Removal (Stores)

According to the Space Buffer priorities
products are removed from the stores
Products are sorted from worst to best on
Throughput generation*
Enough products are selected to be removed
to bring us close to minimum occupancy
Products are removed in the most frequent
economical way possible and sent to the WH
* On the model or other appropriate group
23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

General Flow
Stores

CWH
Outlet
20%
Free
form

Product Returns

20%
Free
NPI Buffer
(one buffer)

New
Products

New Product
Introductions

80%
Demand
Based

Resupply:
SKU Buffers

Fast Movers

Resupply:
SKU Buffers

Basic /
Perennial

Replenish:
SKU Buffers

23rd International Conference of the TOC Practitioners Alliance - TOCPA

80%
Minimum
Occupancy

www.tocpractice.com

Draining Old Products

Once a product has been returned from a
significant number of stores it must be
drained (killed)
It is crucial to develop an Outlet strategy that
allow for the selling of these products in
channels that do not interact with stores
The faster the Outlet strategy works the
faster NPI can proceed.
23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

Final General Flow

Stores

CWH
Outlet
20%
Free
form

Product Returns

20%
Free
NPI Buffer
(one buffer)

New
Products

New Product
Introductions

80%
Demand
Based

Resupply:
SKU Buffers

Fast Movers

Resupply:
SKU Buffers

Basic /
Perennial

Replenish:
SKU Buffers

23rd International Conference of the TOC Practitioners Alliance - TOCPA

80%
Minimum
Occupancy

www.tocpractice.com

THANK YOU!

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com

Humberto R. Baptista
Husband and father
changing the world one person at
a time
Scientist seeking to apply science
to peoples
endeavors
Hunter of hidden assumptions
Teacher, student and colleague of
students

humberto.baptista@vectis-solutions.com

Believer of values over tools

23rd International Conference of the TOC Practitioners Alliance - TOCPA

www.tocpractice.com