‘Isn’t it obvious’ is a business book written by Dr. Eliyahu M. Goldratt. He is a major proponent of his ‘Theory of Constraints-TOC’. This book is written for the retail industry with TOC in the background. In this book, TOC is built with the distribution logistics and merchandise forecasting background.
The book is written with a retail business family background. It starts with an unforeseen problem at a regional retail outlet. The story is built around how circumstances force the hero to think differently and stumble upon a solution that changes the core operating philosophy of his organisation.
I read this book 2 times. The first time, I read it very fast because it was a fast paced novel. It was racy and a good business drama. I read it the second time; because, as always I read Dr. Goldratt’s books 2 times. Only when I read his books - 2 times, do I understand his thoughts clearly .
The main tenets of this book are summarised below.
- Keep Less Inventory: Dr. Goldratt suggests that large retailers should stop keeping inventories in their retail sales outlets. They should rather keep only as much inventory as required for a few days and the rest should be kept in the warehouse. The space in the stores should be utilised to showcase the variety of SKU’s instead of storing the same stock that could last for months. For example, keep 20 days of bath towel stocks and use that space to showcase new collection of bathing accessories.
- Re-order only what sells: Shortages in a retail outlet can be reduced by replenishing exactly what is sold. Dr. Goldratt observes that whatever sells is in demand . Thus if you get your daily sales report and order exactly the same SKU that is sold, the chances of your stores facing shortages is reduced. He says this can be done with the help of a very good ERP that gives daily sales reports based on everyday billing. For example, If 10 large size, red colour, T-shirts are sold on a particular day, order the same T-shirts again and replenish the stock.
- Stock Inventory in Central Warehouses: When the inventory is stored in a central warehouse, the warehouse can keep a note of fast-moving SKU’s, shortages and most required Items of all their regional sales outlets. This data helps in central purchasing and placing orders for the most needed Items without waiting for the minimum order-levels to go down. Since the orders are placed well in advance, the purchase and delivery cycle time is reduced, thereby reducing the supply time of shortages to retail outlets. This system helps in accurate order placements that is based exactly on what the customer demands more. For example, if 4 regional stores reorder blue cotton bedsheets , the central warehouse can assume that this product is in demand and order it in advance, so that the remaining 6 stores can get this stock in time and avoid shortages.
- Increase Inventory turns: Inventory blocks investment capital. To avoid locking capital in inventory for longer periods, he suggests buying in small quantities and as a result selling quickly to achieve maximum inventory cycles. Dr.Goldratt explains convincingly how to increase inventory turns and create profitability. For example, Instead of placing a yearly order for 1000 red linen kitchen aprons, you can divide the order in 4 deliverables of 250 pieces quarterly.
- Invest in a good ERP: Dr. Goldratt shows how a good ERP can give records of daily sales, minimum order levels, warehouse’s stock levels, and reorder levels. He maintains that a good system that generates accurate data patterns can help in reducing shortages and managing stocks intelligently.
The tenets which I have stated above may make sense only after you read the book. While Dr. Goldratt has explained everything in a story-form, he has not outlined his obvious tenets. At the end of the book, you feel you have understood a new way of doing things. However, his book introduces so many new paradigms that you tend to get a little overwhelmed with all the knowledge. If you are a retailer, you should not miss this book.
