Wednesday, March 30, 2005

Creating Pull, where there is no pull

Creating Pull, where there is no pull


Much to blog little time it seems. I'll just keep at it...thanks for reading.

A few weeks ago, my wife and I attended a conference held at a large downtown hotel in Peoria, Illinois. The very useful conference had nothing to do with lean, yet I couldn't help but notice examples of flow and inventory (are you surprised?).

The most fascinating of which was the soda machine.

The conference attracted almost 600 people and ran from Friday evening through Sunday afternoon. After the first large session, I went looking for a Diet Coke before the late session began, thinking a little caffeine would be useful. Looking around the lobby, I spotted the (apparently) lone soda machine, with a short line of other like-minded folks. I popped in $1.25, got a 20 oz. soda and headed back to my seat.

The next morning, I thought another Diet Coke would be a good idea after the 10am break. Heading to the machine, I saw a longer line of folks, most of which with their hands on their hips, staring at the machine. It seems that all the diet sodas were sold out and only some obscure grape drink remained. Wow, I though, how are all these middle-aged folks (like me) going to get through the rest of the weekend?

Later in the morning, I saw a woman with a Diet Pepsi. I walked up to this total stranger and asked "Where'd you find that?" She looked one way and then the other, as if to keep a secret, and said softly, "Down by the swimming pool!" I headed that way , past the sold out machine, to the pool and settled for a Diet Pepsi, as the Diet Coke was already sold out.

By the afternoon, though, that machine was sold out as well.

And it got me thinking. How much revenue did the vending machine owners miss out on? What was the cost of the lack of inventory of cold sodas? How might they remedy it?

Assuming the machine held 200 sodas, then one fill of the cooler could gross $250. From the length of the conference and the number of participants and the location of the machine, I estimated they could have sold 600 sodas ($750) over the weekend, or one per person, on average (Yeah, I would have covered for about 5 people). If the vending machine company paid on average 35c per soda bottle, their gross margin on the one weekend would have been $540. On one machine. If only it had been filled.

My guess was this machine, like most, was on a route. On some appointed time, an employee would drive to the hotel, check each machine, fill it up, empty the change and go to the next one. On a schedule. Irrespective of actual demand. Pushing the soda, not letting the end user pull it through. And this cost them $400-$500.

How might they have known it was empty? How could they have developed a pull system?

It is tempting to suggest a cool technical solution. Like mounting a wireless transmitter in the machine to send a signal when it is empty. And that would be neat. But also expensive.

Why not a simple thing like a sign on the front that said "If you find this machine empty, please notify the front desk. Thank you!" And then place a card by the front desk with the name of the vending machine company's phone number. And a way to check that message regularly.

There are always ways to get closer to pull. I hope this triggers some creative thinking for you.

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