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Stockout Project

Six Sigma – iSixSigma Forums Old Forums General Stockout Project

This topic contains 7 replies, has 5 voices, and was last updated by  Scott 14 years, 1 month ago.

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  • #40573

    AT
    Participant

    Hello! I am doing a project to reduce stock out/lost sale instances for a retail outlet that stocks about 4000 items and sells about different 500 items daily. Sometimes new items ( that have never been stocked ) are lost sale opportunities but most of the time it is the regular stockable items that are not available.
    What should not be missed in the analysis??

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    #126259

    chetan bhargava
    Participant

    if possible pl. cover both ..
    the lost + current stock being out is your two oppurtnuties for defects..
    and your no will be with the person recording the data..
    therefore dont see a real problem but the data collection must be accurate and they must be trained to spot the defect are you doing it on a transaction based model or stores where end of day data it taken
    chetan
     

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    #126262

    AT
    Participant

    We’re doing it on a transaction model where the sales person is also recording the data. I agree that accurate data collection is critical. My initial estimate is that roughly 50-100 items are lost sales and or stock outs every day. But how to ensure that all the data is actually recorded? A sampling strategy will probably not work because finding a truly representative sample may prove elusive. What do you suggest?

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    #126298

    AB
    Participant

    Ramesh
    This is a classical retail industry problem. I do not think there is a very fool-proof way of collecting accurate data about lost sales in this situation. You are at the mercy of sales staff who may not do a great job all the time. Here’s a work around strategy.
    To begin with classify your lost opportunities into 2 categories:
    1. Lost opportunities of products sold regularly
    2. Lost opportunities of products with occasional/sporadic sales.
    Now you will have established a greater tolerance for inaccurate data. For regular items, you must have them in stock regardless of whether you had 10 data points or 40.
    For sporadically sold items, the impact of a lost sales opportunity vis-a-vis cost of inventory may not be significant enough for you to initiate an improvement, but you should use your estimate to assess the business benefit of ensuring availability of slow moving items.
    Hope this helps

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    #126338

    AT
    Participant

    Yes I agree that this is the classical retail problem. And thanks for the suggestions! The business benefits of stocking slow moving items is big mainly because VOC has suggested that availability is the key decision factor for consumers in choosing one outlet over another.
    But regarding accurate data capture, will a video cam focused on the interaction point/ counter help?? Do mechanical systems like these have value in six sigma measure phase or do they spoil the culture?? Anyon’s experience on this??

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    #126359

    AT
    Participant

    Yes I agree that this is the classical retail problem. And thanks for the suggestions! The business benefits of stocking slow moving items is big mainly because VOC has suggested that availability is the key decision factor for consumers in choosing one outlet over another.
    But regarding accurate data capture, will a video cam focused on the interaction point/ counter help?? Do mechanical systems like these have value in six sigma measure phase or do they spoil the culture?? Anyon’s experience on this??

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    #126364

    senthilvasan
    Member

    Hi Ramesh,
    Are you trying to achieve better “Fill Ratio”? (Supplied Items compared to ordered items).
     
    I would suggest you follow “Sell-One-Buy-One” (SOBO)Concept of Toyota.
    Then we may realize that the customer himself can become a person to provide that feedback. Provide cards with Item name near the area where it is kept. When customer does not find the required quantity he can just drop it in a drop box ( to be kept near the rack).
    That will give you a fair idea of line items for those you have lost the sales.
    But for a better idea you can go in for a detailed exercise by creating a fake “Lean” system for some time.
    ( It would be better anyway if you are “Lean”)
    For Example, based on your past sales data decide on a Minimum Quantity of Items to be kept in stock based on supply lead times , perishability etc., then replenish only when the minimum quanitity is “pulled” by customer, this will give you the right size for each item. Bottom line of the method is you try to keep more “width” ( More Number of Items) and less “depth” ( Less Quantity per line item ( This can be done by creating a fake situation also , if you are not in lean supply chain. i.e you keep the items in your warehouse & supply as per “SOBO”. ( please refer Kanban System for how to replenish)
    Though this method we use for Automobile Spare Parts in a less volatile situation , you can improvise the same to suit your needs.
    There are lot of resources / materials available on Tesco on retail implementation of lean concepts.
    Bye,
    Senthil
     

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    #126917

    Scott
    Member

    Senthil mentions a famous company on the subject. You may find them mentioned many timems in Womack’s new book, Lean Solutions.
    The “Newsboy Model” of inventory management describes somewhat your situation and offers an algorithm to consider. Of course, your major assumption whether sales is really lost is a major issue with any inventory management problem.
    Lean consumption and Lean provision are the ultimate answer. To get there, don’t forget about the statistical reorder point formula ROP=(xbardaily demand)(Days between replenishments) + (Std. Dev of demand between replensihments)(Z). I use Z=3 for 99%+ service level).

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