Moq Case to Improve Efficiency
Improving Store and DC Productivity through Minimum Order Quantity Analysis
Lean Six Sigma in Retail & Distribution
Mitch Millstein, CFPIM, C.P.M., CQM, CQE Supply Velocity, Inc. mitch@supplyvelocity.com (314) 406-4962 November 2009 info@supplyvelocity.com Copyright: Supply Velocity, Inc. 1
Background A Value Stream Assessment (See White Paper: Finding Productivity Improvements from Field to Table) at this Grocery Retailer & Distributor identified poor productivity in its distribution centers during order selection and in its retail stores during shelf restocking. A very high percentage of the items selected (picked) in the distribution centers and re-stocked in the stores were in quantities of 1 case. This company’s roots were as a high volume, limited assortment retailer and distributor. Over time the business had shifted allowing the stores to reorder a higher mix of items at lower volumes. Given the companies market position as a low-price leader, this reduced profit margins. The two root causes of this shift were identified as: 1. Stock-keeping-unit (SKU) count growth outpacing sales growth, and 2. Allowing minimum order quantities from the stores to the distribution centers to drop to a quantity of one This white paper will study how this company quantified the impact of allowing its stores to order in one case quantity and then recalculated minimum order quantities for higher volume items. (For details of how SKUs were reduced see White Paper “SKU Reduction – Biggest SKLUsers”) A Supply Velocity Consultant led a team of employees through this 5 week project. The Supply Velocity consultant facilitated, but the employees did most of the analysis and therefore owned the improvements.
info@supplyvelocity.com Copyright: Supply Velocity, Inc.
2
Project Outline Evaluated all SKUs and the case quantity they are most frequently ordered at, to establish baseline data for how stores are ordering Time studied retail store shelf restocking and
Lean Six Sigma in Retail & Distribution
Mitch Millstein, CFPIM, C.P.M., CQM, CQE Supply Velocity, Inc. mitch@supplyvelocity.com (314) 406-4962 November 2009 info@supplyvelocity.com Copyright: Supply Velocity, Inc. 1
Background A Value Stream Assessment (See White Paper: Finding Productivity Improvements from Field to Table) at this Grocery Retailer & Distributor identified poor productivity in its distribution centers during order selection and in its retail stores during shelf restocking. A very high percentage of the items selected (picked) in the distribution centers and re-stocked in the stores were in quantities of 1 case. This company’s roots were as a high volume, limited assortment retailer and distributor. Over time the business had shifted allowing the stores to reorder a higher mix of items at lower volumes. Given the companies market position as a low-price leader, this reduced profit margins. The two root causes of this shift were identified as: 1. Stock-keeping-unit (SKU) count growth outpacing sales growth, and 2. Allowing minimum order quantities from the stores to the distribution centers to drop to a quantity of one This white paper will study how this company quantified the impact of allowing its stores to order in one case quantity and then recalculated minimum order quantities for higher volume items. (For details of how SKUs were reduced see White Paper “SKU Reduction – Biggest SKLUsers”) A Supply Velocity Consultant led a team of employees through this 5 week project. The Supply Velocity consultant facilitated, but the employees did most of the analysis and therefore owned the improvements.
info@supplyvelocity.com Copyright: Supply Velocity, Inc.
2
Project Outline Evaluated all SKUs and the case quantity they are most frequently ordered at, to establish baseline data for how stores are ordering Time studied retail store shelf restocking and