A retail chain comprised of 100 stores located across the United States is currently not profitable. Inventory turns are too low. Store unit sales are not meeting expectation. Operating expenses are too high. Store managers are under great pressure to reverse the trend. There is significant cash flow pressure. The majority of sales are "on demand" and customers have a very low tolerance to waiting for out of stock products. Many customer sales are dependent on multiple products from multiple supply sources being in stock at the same time. The company must become profitable in one year or less, otherwise its parent company will be forced to shut the company down or sell it off at a substantial discount.

• They frequently do not have products when required in our stores, which are featured in current media advertisements or promotional flyers
• On many sales they run out of "hot" product and lose sales.
• There are too many fluctuations in incoming product shipments and too many separate deliveries.
• The work loading of their store staffing resources is unbalanced and they constantly have to shift work schedules and priorities.
• They have a big problem with having too many obsolete products that are difficult to sell in our store stock.
• They don’t have enough shelf or floor space to store and display all of their available products.
• Many times customers can not find products on the sales displays even though they have additional stock in their back room.
• There is more and more pressure to increase their store sales.
• There is more and more pressure to reduce their operating expenses.
• There is more and more pressure to increase their inventory turns.
• Their backroom (stock room) is too small to hold their entire reserve inventory.
• They have large amounts of inventory shrinkage.
• They have to spend too much time managing store returns to vendors
• Vendors are reluctant to ship products to their stores too frequently, many only want to ship once or twice a month maximum.
• Many vendors, who are primary source of specific products, are unwilling or unable to ship directly to a large number of destinations and therefore won’t ship directly to stores.
• Products that are "hot" are often in such high demand that getting replenishment shipments from vendors is often difficult or impossible.
• There is more and more pressure to reduce freight expenses.
• Some products with very short life cycles are supplied from overseas vendors and have very long lead times requiring them to commit to very large "one shot" orders that are delivered in a single shipment.
• Many products do not sell equally well in all markets. One markets "hot" seller may be another markets slow seller. Some stores may be over stocked on a product while other stores may be under stocked on the same product.

From the current reality tree that was constructed to show the cause and effect relationships that created this set of undesirables, the core problem of the retail chain was determined.

In order to implement the above objectives of our solution we need to apply a synchronization system utilizing Drum-Buffer-Rope with Buffer Management.

The Drum, the factor that will control the pacing of synchronization, will be the stores themselves. Systematically, the store point of sale and store "management" information software systems will function as the drum. The Buffer will consist of the outsourcing partners distribution centers and the in transit pipeline to the stores. Systematically, the integrated warehouse management systems will create the virtual buffer. The purpose of the Buffer is to deal with the uncertainty of customer demand. The Rope, which controls the release of additional product into the system, will be the supply chain management systems. The procurement and stock planning system provides for Buffer Management.

The details of operation of this design are proprietary. But the systems diagram above should give you a sense for the method of implementation. The Buffer is actually treated as one "virtual" distribution center, even though it is actually composed of many physical outsourcing partnership logistic center locations which are geographically positioned near the retail chains primary vendor points of distribution. The movement of product in transit is also part of the outsourcing partnership and is a managed logistics network.