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Leverage Points in Supply Chain have tremendous impact on the overall system performance.
Leverage Points, by definition, are the few spots in the supply chain where a small change (of the right type) has a multiplier effect on the system performance.
A leading FMCG company in India was struggling in the General Trade with short-fulfilment of retail orders. It was losing about 5% of retail orders due to stockout of skus at its distributors. The pattern of skus varied across geographies and time.
What could be the reason for this mismatch between demand and supplies? The shortage was specifically with distributors, not with CFAs.
Distributors kept stocks as per the norms laid down by the company. The norms considered the frequency of replenishment, transit time, and expected demand at each distributor.
Once we identified distributor norms as the leverage point, we realised that the norms were not responsive to demand shifts. If the demand accelerated beyond expectations, norms were unable to sense it, thereby remaining static.
A tweak in the norms logic made them more responsive to demand shifts.
The change was small… the results were huge.
Their lost sales came down from 5% to less than 1% of revenue. A reduction of more than 80%.
Are you still working with static distributor norms? Let’s have a chat.