Recently a client wanted to improve the reliability of inventory transfers from a central warehouse to several retail locations. The retail managers had claimed that sales were depressed because they didn’t have the items the customers wanted. Customers were frequently sent away empty-handed due to stock outs.
We developed a Kanban system, which is a process that automatically triggers replenishment when an item’s inventory level reaches a certain point. The system allowed for frequent inventory transfers with the dual benefits of improving availability and reducing inventory on hand. It worked exceptionally well…too well, in fact.
As it turned out, the reasons that sales were lower than projected in the stores had nothing to do with stock being unavailable. Lack of training, in some cases poor hiring practices, and lack of management oversight were the root causes of the problem. Unfortunately this was so clear after the system went in that the managers of a couple of stores loudly proclaimed that the system didn’t work, even when it could easily be shown that it did. They were hiding behind make-believe inventory shortages.
How do you prevent this from happening? First, be sure you have the right measures in place. Then understand the root cause of the problem. Then develop people and make sure you have the right ones on the bus. Develop a culture of accountability with ownership clearly established for the whole system. Great process does not automatically remove resistance to change.
Are your process improvement programs supported by all of your key people? Have you achieved true root cause?
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