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2015 TOCICO International Conference

Transforming Businesses Track


Erica Fondevila
ERICA FONDEVILA
Consultant
Goldratt Consulting

Julio Sanchez
JULIO SANCHEZ
Project Director
Goldratt Consulting

Sustaining a Decisive Competitive Edge: Protecting
Availability While Having Limited Capacity
September 9, 2015

In this presentation we are going to talk about a factory in Ecuador that has been operating under TOC for more than 5 years. Its decisive competitive edge is inventory turns and so far 40% of their global sales come from clients that are connected to their replenishment system. During the last 3 years, sales have being increasing significantly, reaching the point where the current capacity of the plant is sometimes not enough.

When the company had capacity issues, the first clients who were suffering from stock outs were the ones connected to the replenishment system; every time a rumor of scarcity for some SKU was placed in the market, conventional clients (the ones that are not connected to the company’s replenishment system) bought all the remaining stock from the company, leaving the connected clients, the ones who had trusted their inventory management to the company, without stock of this particular SKU. Once lack of availability was in place, almost every client started making paranoid orders, for unreasonable volumes, creating chaos.

We were facing a real challenge, what could we do to protect availability for our most loyal clients? The ones who had opened their warehouses for us and let us manage them. One important fact is that the company’s sales process cannot differentiate types of clients; it simply verifies stock availability and reserves it according to the order of arrival of the purchasing orders.

In order to protect availability for the connected clients and assure they get a high level service, we designed a system which prioritizes the connected client’s needs: "Cascaded Buffers”. A virtual warehouse between the plant and the central warehouse was created. This warehouse receives all the stock from the plant daily, and its access is limited; this means that the only ones that can know what’s in it are the people responsible for the connected clients. The size of this warehouse has being calculated to satisfy the demands of connected clients during the normal replenishment time. Only when the buffer of this warehouse has been replenished 100%, the remaining inventory is sent to the central warehouse. From that moment on, the rest of the sales force can see the inventory level in the central warehouse and sell it.

After the implementation of this mechanism, the availability for clients under the replenishment has been above 97% and they openly manifest their satisfaction according to the service level they have. The reputation of the company in the market is being kept very high as a result.


ERICA FONDEVILA is an Industrial Engineer from Escuela Superior Politécnica del Litoral – Ecuador and Jonah in Thinking Processes. Currently Works as a Consultant for Goldratt Consulting in Ecuador and El Salvador. Have experience in other fields of the consulting sector and as an entrepreneur in Ecuador.

JULIO SÁNCHEZ has an MBA from Instituto Tecnológico y de Estudios Superiores de Monterrey, México and Industrial Engineer from Escuela Superior Politécnica del Litoral - Ecuador. Currently Goldratt Consulting Project Director for VV projects in Ecuador.

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