MGMT 8815M Week 6 Concept Brief Example

Who Should Decide the Order? A Concept Brief Comparing Four Answers to Empty Shelves at a Sixty-Store Convenience Chain, Each Argued by Its Champion, Scored Against Criteria Drawn From the Working Frame, With the Runner-Up's Best Objection to the Winner

Student Name

Walden University

MGMT 8815M: Managing by Design Theory

Instructor Name

Month Day, Year

Who Should Decide the Order? A Concept Brief Comparing Four Answers to Empty Shelves at a Sixty-Store Convenience Chain, Each Argued by Its Champion, Scored Against Criteria Drawn From the Working Frame, With the Runner-Up's Best Objection to the Winner

The Working Frame

Stockouts on the fastest-selling items at Corbin Fuel and Market, a composite chain of 60 convenience stores across eastern Kentucky and southern Ohio, trace to ordering decisions made two levels above the people who can see the shelf. Two central buyers in the Lexington office set weekly order quantities for every store from a forecast built on the previous six weeks of scanned sales. Store managers can request changes by email but cannot alter an order. Last quarter, the chain's top 150 items, among them bottled water, energy drinks, two-liter sodas, milk and the three best-selling cigarette brands, were out of stock on an average of 6.1 percent of store-days, against the chain's target of 2 percent. When a buyer's forecast misses a local event, a road closure or a week of heat, the store manager sees the empty cooler on Tuesday and the correction arrives the following Monday.

Corsten and Gruen (2003), surveying out-of-stocks across retailers worldwide, traced a large share of them to ordering, forecasting and replenishment practices at the store rather than to late deliveries from suppliers. The frame here locates the failure one step further up: in who is allowed to make the ordering decision.

Concept A: Store Managers Order a Defined List

Give each store manager authority to set order quantities for a defined list of 40 high-velocity items, within a weekly budget band set by the buyers. The champion's case is that the manager is the only person who sees the shelf, knows that the high school plays at home on Friday and hears that the bridge on Route 7 will close next week. Moving the decision to that person closes the gap the frame identifies directly. Buyers keep the rest of the assortment and the authority to audit and reset any manager whose orders drift.

Concept B: Supplier-Managed Inventory for the Top Items

Hand replenishment of the top 200 items to the suppliers whose drivers already visit each store, chiefly the soda, snack and dairy distributors. The champion's case is that these drivers see the shelf every visit and their firms have forecasting systems far better than the chain's. Vendor-managed inventory is well established in grocery, and Disney and Towill (2003) showed in simulation that it can damp the swings in orders that build up as demand passes back through a supply chain. The chain would set service targets and let suppliers meet them.

Concept C: Shelf Sensors Feeding the Buyers

Install weight sensors under cooler shelves for the top 60 items and feed counts to the buyers every hour. The champion's case is that the problem is not who decides but what the decider can see. Give the buyers live shelf data, and their forecasts improve without moving authority anywhere. The chain keeps central control of its largest cost.

Concept D: A Deliberately Reduced Assortment

Cut the number of items in the fastest categories by about a quarter, for example from 18 energy drink varieties to 12, so each remaining item gets more shelf space and a deeper safety stock. The champion's case draws on research showing a hidden cost of variety: Ton and Raman (2010) found that, although variety and inventory both raised sales at the stores they studied, more of each also increased the number of products sitting in back rooms where customers could not find them, which cut into those gains. Fewer items, each stocked more deeply, would absorb forecast misses without changing who orders.

Criteria Drawn From the Frame

The criteria are taken from the frame, not from a generic list. Because the frame says stockouts arise when the decision is far from the shelf, the first two criteria ask how close each concept puts the decision to local knowledge and how fast a correction can happen. The frame also implies a risk: whoever gains authority may misuse it, so the third criterion asks whether the chain can still see and correct bad decisions. The fourth is cost, and the fifth asks how soon a concept could be tested in a handful of stores.

Table 1

Four Concepts Scored Against Frame-Derived Criteria (1 = weak, 5 = strong)

Scores are the author's judgments from interviews with the two buyers, six store managers and two supplier representatives. Equal weights are used because the frame gives no reason to favor one criterion over another.

The Choice

Concept A is chosen. It is the only concept that moves the decision to the person who can see the shelf, which is what the frame says is wrong, and it can be tested quickly: five stores, the 40-item list and a weekly budget band for one quarter, with five matched stores as a comparison. Ulrich and Eppinger (2016) recommend that concept selection end with the team reflecting on whether the winner is truly better or just more familiar; here the winner is the least familiar of the four, which is some protection against that bias.

Concept B scored lower mainly because suppliers would order to their own interests, chiefly volume, and the chain would see less of what was happening. Concept C keeps the decision where the frame says it fails. Concept D treats the symptom; fewer items would reduce stockouts somewhat, but local misses would remain.

The Runner-Up's Best Objection

Concept D's champion, one of the two buyers, made the objection that most deserves an answer. Store managers at Corbin already run their stores with one assistant and part-time clerks, and their days are filled with staffing, cash and fuel deliveries. Giving them 40 ordering decisions a week, she argued, may simply move the stockouts from forecast errors to missed orders, and the chain would have no way to tell which managers had the time and which did not. The test must therefore record, for each pilot store, not only stockout rates but how long ordering took each week and how many orders were late. If managers cannot place orders on time, Concept A fails for a reason the frame did not anticipate, and Concept D becomes the stronger option.

References

Corsten, D., & Gruen, T. (2003). Desperately seeking shelf availability: An examination of the extent, the causes, and the efforts to address retail out-of-stocks. International Journal of Retail & Distribution Management, 31(12), 605-617. https://doi.org/10.1108/09590550310507731

Disney, S. M., & Towill, D. R. (2003). The effect of vendor managed inventory (VMI) dynamics on the Bullwhip Effect in supply chains. International Journal of Production Economics, 85(2), 199-215. https://doi.org/10.1016/S0925-5273(03)00110-5

Ton, Z., & Raman, A. (2010). The effect of product variety and inventory levels on retail store sales: A longitudinal study. Production and Operations Management, 19(5), 546-560. https://doi.org/10.1111/j.1937-5956.2010.01120.x

Ulrich, K. T., & Eppinger, S. D. (2016). Product design and development (6th ed.). McGraw-Hill Education.