Saturday, February 5, 2011

Overweight in America - a serious topic for discussion

When I was looking at clothing the other day at Walmart, I noticed that most of the items were in larger sizes. It was hard to find anything in a small size. Later, I read that over 2/3rd of the people in America are overweight. Why is that?

I started thinking about it and came to some possible conclusions. The eating portions in restaurants and homes are quite large in most cases. And many people eat “junk” food. Why don’t people eat organic food that is healthy for them? Why doesn’t each person eat the types of foods and drinks that are best for their bodies (based on blood type and how their bodies react to the food)?

Based on my international travels and other experiences, I concluded that America is a country of the world with a high level of unhappiness. It may be one of the richest with respect to material goods and opportunities, but happiness does not come from material objects. I have seen some of the poorest people of the world be the most happy. One reason why people don’t eat well could be due to trying to feel better through eating food that soothes them – food that tastes good and takes away their pain and suffering.

What happened in America? In many ways, it has not changed for the better. What I have heard, read and seen about the 1950’s in America led me to think that those times were better in many ways. That was before my time though, so I can’t speak from personal experience.

Now most people in America are filled with fear and anger. It doesn’t take much for some people to vent that anger. President Obama was elected based on the principles of “hope and change.” Unfortunately, it appears that Americans were hoping in vain for the situation to improve in their country.

Friday, February 4, 2011

How can we ensure children are educated for success in school?

The most popular question of a five-year old child is “Why?” Why is that? It is because children are working on building a logical map of how the world operates. Each time an answer to the question is received, another connection is made – between a cause and an effect. Logical maps are easier to remember than just memorizing facts.

What happens as children progress through school? In many cases, the educational system in America (and possibly many other countries as well) has discouraged the usage and development of critical thinking skills. Critical thinking skills are a key part of the foundation for living a successful and happy life.

This leads me to wonder about what really should be taught in the educational system, from grade school through junior high school and high school. In America, children spend twelve years learning the basic skills and knowledge. I think we should carefully evaluate what is being taught during those twelve years to ensure the best potential of the children can be achieved in their personal and professional lives.

One skill that is important is critical thinking skills. An effective way to learn these skills is by learning the Theory of Constraints (TOC) Thinking Processes (TP). TOC for Education (TOCfE) is a not-for-profit organization which has taught millions of children, educators and administrators around the world the TOC TP. To learn more about the TP and TOCfE, see www.tocforeducation.com.

I shall end this blog with one example of an application of the TP. When the educational system was formed in America, it was designed to run for nine months of the year, with three months off from school during the summer. What was the logic underlying this decision? It was because the children needed to help their families with farming in the summer. Now that this is no longer the situation, shouldn’t we reevaluate what is the best way to educate our children? What are the negative effects of them having a whole three months off each year from their education? Perhaps it would be better to spread shorter breaks of two or three weeks across the calendar year instead.

Thursday, February 3, 2011

Noise pollution - so disruptive to our bodies and feeling peaceful

Living in America, I have noticed recently that noise pollution is rampant. Being in a big city makes it hard to find peace and quiet. In the mornings, it is common to be disturbed or awakened by the sounds of garbage trucks, leaf blowers, lawn mowers, and sounds from the neighbors or from work happening. Not everyone gets out of bed first thing in the morning, particularly on weekends. It would be nice to sleep in, without being rudely awakened by an obnoxious sound.

Even in retail stores and restaurants, I have begun to notice that it is not uncommon for the music to not only be loud, but also to be a selection that is not pleasing to the ears. Sometimes, the music is so loud that it is nearly impossible to hold a conversation with the person you are with. I wonder why these service organizations don't select music that is appealing - a selection that would enhance the environment and their sales as well.

I don't think many people realize how negative the impact of disturbing sounds can be on the psyche and the body. I noticed a difference when I started using noise-canceling headphones on a plane. The sound of the engines creates a droning hum. When I used the headphones with some light pleasing music, I felt better. It wasn't just the impact of the music. It was, more importantly, the reduction of the engine noise.

I prefer to be in nature listening to the sounds of animals, birds and other creatures. The songs of the birds are beautiful and comforting to my spirit.

Wednesday, February 2, 2011

Freedom in America and the world - thoughts on our history and the vision of our founders

Recently, I was thinking about the Statue of Liberty because the TOCICO International Conference will be held in New York this June. (We were considering which logo to use for the marketing materials.) The Statue of Liberty is a well-known symbol of freedom for America and a gift from France to celebrate friendship. Nearby Ellis Island was the location where millions of immigrants first came to enter America to become part of our “melting pot.” Inside the statue is a poem by Emma Lazarus that reads:

“Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed to me, I lift my lamp beside the golden door!”

My research on the statue led me to think more about freedom, what America used to represent, and how the TOCICO International Conference can support “hope and change.” Freedom is what we want to provide with TOC in organizations, to be free from misery and suffering, to find a way to bring the light and life back into humans, all the people of this world, not just in America. The Statue of Liberty represents not only freedom and friendship, but more importantly how this country once had open borders. The TOC community has further opened the door to support organizations in efforts to become ever-flourishing, to continuously and significantly increase value (both growth and stability) for all stakeholders - employees (including suppliers), clients and shareholders.

I wonder about how America has strayed from the vision of its founders, such as those who created and signed the Declaration of Independence and Constitution. The borders are now closed for many people, while for others it is not easy to immigrate to the United States. Many American citizens complain about illegal immigrants and their negative impact on our society. We should not forget that America is a melting pot, once open to people from all over the world, those who chose to become part of our society.

I wonder why a country, any country, needs to have borders at all? Aren’t we all human? Shouldn’t we all be treated equally? Is there really a need for separation of societies? Or can we all live in peace and harmony together, making the world a better place to live, a utopia, an ideal society?

Tuesday, February 1, 2011

Dramatically improving retailer performance

By how much can retailer performance be improved? To answer this question, we need to consider which operational measures of performance are important. Retail owners and managers typically understand that sales per square foot and inventory turns (how quickly the inventory is sold and replenished in the store) are important. Both of these measures of performance indicate how well the limited space of the store/shop is being utilized to improve the financial measures of performance.

Now that we agree on the measures, we can discuss how much potential for improvement exists. First, we need to understand that two major undesirable effects are blocking the ability of a retailer to significantly improve its performance: shortages and surpluses. Shortages occur when an item that is supposed to be on the shelf is out of stock. When there is a shortage, sales are being lost, although the amount of lost sales is unknown. Some customers will buy a different product (substitute), while others will choose not to buy or buy elsewhere. Surpluses occur when the level of inventory is too high. One effect of surpluses is blocked shelf space, which could be utilized to stock a larger variety of items to sell. The impact of both shortages and surpluses is detrimental to financial performance. What if we could find a way to dramatically reduce both shortages and surpluses? The result would be significantly improved performance.

Let’s begin by addressing inventory turns. Walmart, the world’s largest retailer, has on average about 12 inventory turns per year. This means that the stores are holding about 4 week’s worth of inventory. In other words, all of the inventory currently held in the store would sell out 12 times a year. Each of the Walmart stores receives deliveries from suppliers several times a week. If Walmart changed the supply-chain mode of operation to effectively react to actual consumption (sales) through implementation of the TOC pull distribution application, shortages and surpluses would be significantly reduced. How much improvement is possible? Walmart could effectively reduce the inventory level to about 2 to 3 week’s worth, meaning inventory turns of 17 or higher.

Let’s now address sales per square foot. It would also improve dramatically as a result of reduced shortages and surpluses. A financial measure that provides a good indication of improvement in sales per square foot is the net profit to sales ratio. After D’Agostino’s supermarkets in New York implemented the TOC pull distribution application, its net profit to sales ratio increased from about 2 to 3% (the typical ratio in the grocery industry) to over 8% - almost quadrupling the ratio!

What could happen to the net profit to sales ratio of Walmart, which is currently 6%? Experience in implementing the TOC pull distribution application indicates that it is not uncommon for up to 30% of the items to be in shortage and 50% to be in surplus. If Walmart reduced both shortages and surpluses, the sales could easily increase by 10% or more. In 2010, its sales and operating income were $405B and $24B, respectively; the gross margin was 25%. If the sales increased by 10% and the costs were unchanged, the new ratio for 2011 would be almost 8% ((24 + 40.5*0.25)/445.5).

The result that can be achieved with the TOC pull distribution application is a substantial decrease in inventories coupled with a significant increase in availability and sales, in a matter of a few weeks. Since the shortages are of high runners, it is likely that the sales will be much higher when shortages are reduced because we cannot really know how much sales of high runners are lost when shortages occur. We will only know how much sales actually increase once the shortages are reduced. Reducing the surpluses decreases the level of investment needed in inventory. In addition, reducing surpluses frees up valuable shelf space for a larger variety of products to offer for sale. Thus, significantly reducing the surpluses and shortages dramatically improves the inventory turns, net profit, return on investment and cash flow.

To learn more about the TOC pull distribution solution, read my book chapter on Strategy and Tactic trees in the Theory of Constraints Handbook and the novel Isn’t it Obvious?, which is co-authored by Dr. Eli Goldratt, the founder of TOC.