I went to a branch of a local drugstore to buy a small bottle of mosquito repellent lotion. The branch didn’t have any stock but the nice lady behind the counter checked her computer and told me to go to another branch which was a short five (5) minute walk away. I went to the other branch and yes, there were small bottles of mosquito repellent lotions available. I picked up a bottle and then shopped for another item: shaving cream. There was no stock but the nice lady behind the counter of this drugstore branch said there were some available in the branch where I came from.
What’s the lesson I learned here? Buy all the available items you’re looking for before going to another store. Haha.
Why is it that some stores would have plenty of one product and none in another? It’s easy to pin blame on the manufacturer who sold the product. Maybe the sales representative was remiss in checking stock availability or the manufacturer’s logistics department hadn’t been delivering pending orders?
The large corporation that owns the drugstore has a central warehouse that receives products and distributes them to all its branches. Could it be that the drugstore corporation wasn’t efficient enough to stock all its branches with the complete line-up of products?
There’s also the possibility that a customer bought plenty of one (1) product at one drugstore branch and left none for the rest of the day. It’s what managers would call a spike in demand.
Some supply chain managers would recommend building up inventories at branches to avoid stock-outs. Inventories, however, come with a cost, in the form of cash tied up on unsold products on a drugstore’s shelves. Executives don’t like cash being tied up especially if it can be used elsewhere such as high-interest returning investments.
Information technology (IT) managers could suggest installing an integrated information system which would flag out-of-stock incidences to the drugstore’s logistics planners in real-time. Supply chain managers could swiftly deliver items using smaller trucks or even motorcycle couriers. Transportation expenses might rise though.
All these possibilities sound well and good, and many companies do apply the ideas above. But what was the problem in the first place?
If perhaps it were the owners of the mosquito repellent lotion company who noticed the lotion being out of stock at the drugstore branch, they maybe would throw a fit as they call the sales and the supply chain departments to investigate and restock the branch.
Executives & managers tend to fast-track solutions to issues without first defining what the problems are. But is there really a problem? Does the drugstore chronically run out of stock in its branches or was that stock-out of mosquito repellent solution a one-time event which doesn’t happen often? What products are always out-of-stock? How much is the drugstore losing from stock-outs?
And there perhaps lies the bigger question: how are stakeholders addressing their supply chain issues? When does an issue become a problem, and when does a problem become a crisis needing a lot of attention?
These are questions which could keep supply chain managers, if not executives, awake at night. Answers won’t come, however, by grabbing for solutions. They come after clarifying the problem.
When stakeholders know what the problem is, when it becomes clear what the root causes are, solving problems becomes more straightforward.
Ellery's Essays 