5.9 Conceptual framework and guidelines
5.9.2 Guidelines
The biggest causes of stock-outs involve both internal and external factors.
According to the TOC, resolutions to the causes of stock-outs must be done either
one at a time or simultaneously where the two bottlenecks have the same ranking or
the solution thereof is similar. TOC is a methodological process of resolving
bottlenecks in a specific sequence according to priority (Section 2.6.1). According to
the study‘s results, the major bottleneck lies with local content, which requires the
implementation of guideline number i (see the complete list of numbered guidelines
on the next page). This bottleneck must be addressed first, and only when it is
resolved, can guideline number ii be addressed and resolved. However, if the local
content issue cannot be resolved by implementing guideline i, then according to
TOC, additional resources have to be employed to resolve the bottleneck.
Resolving other smaller bottlenecks would not resolve the organisational stock-out
problems until the major bottleneck has been resolved. An example of employing
additional resources in the case of a local content bottleneck, according to TOC,
would be to log a formal complaint together with the suppliers and the suffering
residents (due to poor services because of local content), to the relevant
government ministry. The complaint should be centred on the implementation of a
service delivery-oriented legislation revision on local content. This should capture
the government‘s attention to resolve the local content bottleneck.
Framework to explore the causes of stock-outs at CCT
External causes
Internal causes Measurements
Late deliveries
Discrepancies (ERP & Physical inventory) Stock-outs Goods receipt processing time
Procurement lead time
Support structures Business rules
Training Processes
ERP support Policies
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The sequence of the guidelines below merely reflects the current study results in
order to identify the most important bottleneck to resolve, which after resolving, the
second round of investigation must be actioned to discover the second major
bottleneck to resolve. According to the TOC, the investigation must carry on until
such time when the remaining bottlenecks do not affect the throughput of the
organisation. This would be the time when the remaining bottlenecks do not affect
the availability of stock in the stores. It is also important to know that each set of
investigative results may be different, for example, once a local content bottleneck
has been resolved and the second round of investigations is done, the results may
reflect the second major bottleneck as a management issue, requiring the
implementation of guideline number iii, and not an ERP-reporting bottleneck that
requires the implementation of guideline number ii.
Below are the guidelines to follow in resolving the stock-out problem at the CCT:
i.
Procurement does not receive responses from suppliers due to local
content requirements:
Ensure that action is taken by the DTI on the evidence that has been sent
to them, so that the DTI can improve their processes and adhere to
promised timelines. The evidence serves a proof that the DTI does not
respond to suppliers within the timeline indicated by the SCM policy (two
days).
ii.
Not all causes of stock-outs are measured by the ERP system:
Determine the key performance indicators and build the processes around
these KPIs with the help of the staff members to ensure that the major
causes of stock-outs can be managed in accordance with the entire CCT
SCM by using the real-time information on the ERP system.
iii. Staff members in the same department do not conduct their work the
same:
Ensure compliance and adherence to the standard procedures and
processes by educating the staff members and holding relevant staff
member and managers accountable for any deviation. Most importantly,
enforce entire SCM thinking culture by indicating the implication of any
deviations on the entire SCM.
iv. The ERP system is not aligned with the SCM policy:
Customise the ERP system to ensure that it accommodates the amended
procedures and processes. In addition, ensue that the system is interactive
and error free. Furthermore, ensure that the ERP system is fully functional
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and operational around the clock to eliminate the problems of manual
processes.
v.
Material specification is not in place:
Ensure that the product specifications and quality specifications are done
by the relevant people to ensure procurement of the correct materials and
the correct quality check at each store when the materials are received.
vi. Staff members only know their area of work and cannot relate to other
parts within the SCM division:
Enable free communication within the organisation by taking staff members
for site-seeing visits to meet their internal customers. The communication
should include procedures so that people know exactly what to do under
specific circumstances.
vii. Proper supplier screening is not in place:
The experts must investigate and estimate costs to determine the range of
acceptable quotations to benchmark against during adjudication in order to
eliminate suppliers with unrealistic material prices. In addition, assess the
awarded supplier‘s capability to supply by sending the subject experts to
conduct a full analysis at the supplier‘s premises as part of the screening
process.
viii. Suppliers do not manage their POs and master data:
To avoid e-mailing problems, implement an e-procurement solution that will
ensure that suppliers are able to access the purchasing document upon
creation. In addition, suppliers should own be able to amend their company
information online. CCT need to collaborate with suppliers via information
technology to manage the procurement process.
5.10 Summary
The discussion on themes is based on the research sub-questions, literature, and
interviewee responses. It is easier to recognise stock-outs when they have been
defined. In this study, stock-outs are defined because it is the major variable of the
study. The results of the study reveal that stock-outs cannot simply be defined in
general terms as unavailable stock; there is a deeper meaning to it, which is
conditional. It is clear that it is difficult to recognise stock-outs in the organisation
because, firstly, not all the causes of stock-outs are measured, and secondly, there
is misalignment between the SCM policy and the ERP system. The ERP system
cannot be used to identify all the reasons for stock-outs.
When stock-outs occur, the impact on service delivery cannot be determined.
Despite many initiatives by departments to reduce stock-outs, it is still at a high level
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at CCT. Stock-outs can be recognised by the reoccurring causes, although there is
no immediate solution to the problem. The results also reveal that the entire SCM
must work together to address the stock-out problems.
It is clear that materials cannot be classified from one perspective only. In classifying
the stock-outs, there are many common causes for frequent material stock-outs,
including materials that are manufactured with long lead-times; imported materials
or materials with a component that is imported; materials that are affected by the
intensity of labour; materials that are affected by transport; and materials specified
to be of local content.
In addition, there are different opinions regarding the main causes of stock-outs. In
general, the interviewees mostly mentioned issues that directly affect them.
Furthermore, local content materials seem to stock-out more than non-local content
materials. Materials without specifications also stock-out more because of wrong
deliveries from suppliers. Another related issue is that there are no quality
specifications for materials held as stock, therefore poor quality materials are
received and this is only realised at a later stage.
It is difficult to manage the causes of stock-outs. Supplier lead-time monitoring is
one of a number of reasons making it difficult to manage the causes of stock-outs,
because there are simply too many POs created and sent to too many suppliers on
a daily basis. Processes are still a challenge because it is not clear what process to
follow when the system is down. Employees only respond to their direct line
manager‘s instructions, therefore the work is only done under management
supervision. The staff members do not use the tools provided by the ERP Support
Department. The suppliers are allowed to bid outside their specialisation areas, and
these suppliers are the ones that struggle to meet the delivery dates and quality
requirements of the organisation. Statistics regarding the KPIs are drawn once a
month, therefore managers are always late to react.
Attempting to manage the causes of stock-outs is a challenge because suppliers‘
ability to supply is judged by their ability to follow instructions at CCT, which,
according to the results, is an insufficient method to apply. Individual reports are
generated to monitor specific parts of the BPs. According to the interviewees, the BI
report can be useful in measuring all the causes of stock-outs, but this will depend
on the staff members capturing the correct information every time they transact. This
is inclusive also of the system being online all the time to avoid employees
transacting offline.
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The amended conceptual framework is discussed to map the link between the
stock-out causes. The guidelines are discussed to propose possible solutions that
can be implemented to resolve the stock-out problem at CCT.
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6. CHAPTER SIX: CONCLUSION AND RECOMMENDATIONS
Figure 6.1: The flow for Chapter Six