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Management policies often come in the way of breakthrough improvements in Supply Chain!
When we work on improving a supply chain to substantially enhance product availability and product freshness, we often hit upon a management policy that blocks the improvement path. The policy looks perfectly good and in line with the prevailing industry practice, but it has devastating effect on both availability and freshness.
I was working with a foods company with some of its products having a shelf life of 3 months. The management had the policy of dispatching these items to depots immediately on production, based on their monthly sales forecasts. The inherent concern was stock ageing at the factory if it was held there.
We soon realized that a lot of these items remained at the depots for more than a month. The company had to offer a discount to liquidate them.
We did away with the policy of immediate dispatch and held stocks centrally till a replenishment plan was generated by the depots. Production plan was also tweaked based on replenishment plan generated by the central depot. The revised practice improved the overall product flow in line with actual market demand, with substantial improvement in both product availability and product freshness.
This simple change brought down the discounts to zero!