What is the innovation?

FROM: Conventional practice

  1.  Forecast to calculate future demand, set economic order quantities.

  2. Set a minimum stock or safety stock or replenishment order point, and only place a replenishment order when inventory hits that level.

  3. Adjust forecast with new information about demand, shortages and surplus.

  4. Try to improve forecast with more sophistificated models.

TO: FILLRATE100 mode

  1. Abandon forecast. Instead, set a target inventory buffer and replenish it.

  2. Set a fixed frequency and replenish whatever quantity is required to complete the buffer (do not duplicate what is in transit already).

  3. Adjust buffers following the trends of demand shown in colors along the time.

  4. Reduce time between replenishments, removing all blocking factors to reduce batches.

Results so far...

In spite of all efforts, there is an unsatisfactory level of shortages in most supply chains, especially at points of consumption (stores in retail), where it counts most.

Forecast cannot add a significant amount of capital and space to solve the problem of shortages.

Additionally, if the goods have a short shelf life, surplus erodes profitability through liquidations and write-offs.

Improvements in bottom line are erratic, mostly within the noise, meaning it is difficult to associate the improvement to a specific strategy.

Expected results (based on experience)

There is plenty of experience in decades of implementing Theory of Constraints in supply chains. There are cases in well known companies like: General Motors, Reddy's Laboratories, Adidas, and a long list.

Reducing times is key. The blocking factor was always the "cost reduction mentality". Most of the techniques used to reduce costs, resulting in larger batches (pushing for longer times) are demonstrably flawed.

Typical results are 30%+ less inventory (eliminating obsolescence and releasing cash) whilst shortages are reduced to almost 0% across the board, impacting in much more sales and better service: ~100% Fill Rate.