The Choice by Goldratt

Here is a summary of my learnings from Goldratt's latest book, The Choice. A very good read for anyone in the retail industry looking to transform their operations and bottom line...

The Choice
Eliyahu Goldratt

Thinking Process

- Live a meaningful life rather than an easy life. To do that, you need to think clearly
- Practice, Practice, Practice new ideas and solutions
- If something fails, consider it a prototype and learn from the mistakes
- The more complicated the situations seems to be, the simpler the solution needs to be
- Meaningful opportunities come when you remove the barriers that’s blocking you from making modest breakthroughs
- Naturavalde simplex est et sibi consona – nature is exceedingly simple and harmonious with itself
- Complexity is based on the number of degrees of freedom in the system. If everything is interconnected, a change introduced to the system will impact the whole system so you can see the cause-effect relationship easily
- There is typically one underlying cause that results in the conflict – we can solve the conflict by eliminating the root cause. If we compromise, we’ll never think of the underlying assumptions and never come up with a breakthrough
- Inherent simplicity is that reality is governed by very few elements and any part existing conflicts can be eliminated
- Blaming others pours fuel to the fire (preserving harmony in relationships is extremely important for a person who wants to live a full life) – put yourself in the other party’s shoes.
- Eradicate the notion that a positive change for you must result in a negative one for the other party (compromise) – find a solution that is positive to both parties – extend the frontier of gain
- There is always room for improvement – breakthrough improvement. Thinking there isn’t room for improvement is an obstacle in itself that needs to be removed.
- When you come up with a new solution, you should check all ramifications, otherwise you might miss something important
- The key to thinking clearly is to avoid circular logic – e.g. sales of our products are declining because market taste is changing. The causality is not substantiated. You need to dive further to find the root cause – inherent simplicity states that the causes will converge.
- Be on guard when the cause contains an abstract entity – try to come up with a predicted effect with another effect that must be the result of the same cause. The more predicted effects verified, the higher the validity of the cause. Practice. It should only take a second or two. If something is because of this..I assume that this other thing should also follow because of the same cause.
- Resistance to change is because people like to be in their “comfort zone”. Comfort zone is defined as an area where people feel that they have control or at least a sufficient amount of influence. An additional piece of comfort zone is where a person feels that he/she has sufficient knowledge of the cause and effect – what is going to be the likely outcome of an action and what is going to the likely response to a suggestion. So if you clearly explain the cause-effect, people may be more likely to respond positively to change. Also perform a test to validate the cause-effect that has been suggested
- Thinking clearly results in deeper emotions, resulting in stronger intuition, resulting in higher chances to apply logic successfully, increasing the chances to achieve good results, resulting in more meaningful outcomes, resulting in deeper emotions…

The Apparel Case
- Shortages in the store and warehouses are worse on your bottom line than you think, especially if a product runs out soon after it is launched. It causes non-linear negative impacts to the bottom line.
- The old way – lifetime of the product (6 months) is shorter than time to supply (1.5 yrs)
- “A forecast is the only way to order the correct quantity” is a false underlying assumption that needs to be changed
- Need to order smaller quantities more frequently
- Start the season with just 1 month of inventory and use the first two weeks to get a real understanding of what is moving and what is not
- The best display should be kept for the best sellers (not the slow movers)
- As long as the end customer has not bought, no one in the supply chain has sold
- If you have a large set of SKUs, provide only a few SKUs per store per month and change out the SKUs every month
- Suppose you produced all garments from one dyed fabric; if the company buys the material in huge quantities, but produces actual garments in small quantities dictated by actual consumption. This will increase inventory turns significantly.
- Holding inventories in the plant warehouse rather than pushing them to the regional warehouse further improves availability
- The most powerful improvement is to extend replenishment to the retailers; the higher the frequency of replenishment, it practically eliminates shortages while reducing inventories
- Straightening operations in retail is simple relative to production, and there is no need to do any sales and marketing activities; in retail, the improved operation automatically translates into increased sales.

Setting Personal Goals

I recently finished reading (listening to) Automatic Wealth by Michael Masterson. He suggests four main investment buckets to generate wealth: growth of income from your job, real estate (flipping houses and owning rentals), business ownership, and stocks as a distant forth. In addition to providing specific guidance on accomplishing these, he spends a significant amount of time discussing what being wealthy really means and why gaining wealth is a means to an end and not an end in itself.

The end, according to Masterson, is really having a fulfilled balanced life that spans your health, wealth, relationships, and personal growth goals. To that end, he devotes several pages to helping you set long-terms goals and then break those goals down to annual, monthly, weekly, and daily tasks that will be necessary to reach those goals. This technique is actually followed by several large organizations where the 5-yr plan is broken down into sizeable chunks of work for each individual in the organization – thus one can have a clear view of how their daily efforts contribute to the whole.

I decided to try this out and so far it has worked quite well. Not only does it help me prioritize my day, it also allows me to remain at ease each day knowing that I have not left things to chance if I do the tasks I have outlined diligently. I don’t feel like I am missing out on things because everything I do will lead to accomplishing my goals.

Like any new endeavor, I start by opening Excel. So I have created an Excel sheet to track my 2-3 yr goals, annual goals, and monthly, weekly, and daily tasks and the logic flows perfectly. I have broken down my goals into Wealth, Health, Relations, and Personal Growth and set specific parameters against each goal. I then identified specific targets against each parameter and from then on it was a matter of identifying the shorter-term targets and developing tasks needed to achieve the targets.

In all, it took about 2 hours to fill in the sheets (I created a separate sheet for monthly, weekly, and daily targets/tasks) and about 10 minutes a day to review the daily tasks and update them for the next day. At the end of the week, I updated the weekly tasks for the following week which takes about 15-20 minutes.

I have found this routine extremely valuable and suggest you give this a try for yourself. One thing I wanted to avoid was trying to do too much – so I occasionally removed or re-evaluated the tasks/goal as a way to prioritize the goals that I really wanted to achieve. For example, one of my personal growth goals is to be well informed about worldly matters. For this, my parameter was to read news from a different country once a week. I found that I could not get to this task and so I evaluated whether this was critical or whether another goal of travel to new areas in the world was a way to achieve the same goal of being well informed about worldly matters. For now, I took the leap that it was and dropped the task of reading worldly news off my list. I may add it back at a later date when I become more efficient at completing my other tasks. On average, I end up having about 10 tasks to be completed every day – each stemming from the four categories of broad goals that I have established for myself.

ps. One of my goals is to write about a new tool/tip/product/site per week - this blog is a result of that goal