The hockey stick syndrome
- Puneet Kulraj

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Research and Publications
In distribution companies the sales are very high in the last week, usually 40%. The usual sales pattern is 10:20:30:40 over the four weeks (the ratios may vary from company to company but the pattern is more or less generic). This sales pattern is popularly described as the “Hockey Stick” sales syndrome and is accepted as a normal industry practice in distribution industry. So accepted is this practice that the internal processes and measurements in operations, distribution and sales are aligned to accommodate and reinforce this hockey stick! The only damage companies see with this syndrome is the high level of stocks the company has to carry. Else it is fine with them.
We claim that the hockey stick is hugely damaging in terms of lost sales and preventing faster growth of sales (even if the opportunity exists).
If it is so damaging, it needs to be eliminated. First step is to understand the root causes. No sales person wants to take the risk of selling 40% of his target in the last week, neither does the final consumer consume the items in the same pattern. So what are the causes for this month end spike and its continuation?
1. Distributors buy huge stocks in the last two weeks and these are sold over the next 3 to 4 weeks. If the payment terms are advance or payment on delivery, the distributors needs to have the cash to pay for the stock he wants to buy. This cash is accumulated as he sells the goods over the first 3 weeks of the month. Hence the buying of huge stocks at the end of the month. Even if the companies have credit periods, over a period of time with this practice, the distributors are always near the credit limits. Unless the credit limit is cleared, fresh supply is not allowed. So even with credit period, the money is blocked till the last week.
2. Knowing well that nearly 40% is sold in the last week, the production planning also plans for the material to be produced and dispatched to manage the availability in regional warehouse accordingly. As a matter of fact distribution is measured on placement efficiency (per week) aligned with the sales trends.
3. This cycle continues every month. To break this cycle requires changes in processes / policies in sales, distribution, production and procurement. This is mammoth task as each entity is being measured for efficiency in his silo. (We should not underestimate the power of inertia).
Break the cycle! It is well now understood now that the consumption at the retail does not happen in this pattern and the hockey stick is only because of the reasons listed above. Using this as the premise the solution can be devised. Let us add more stringent criteria to the possible solution, such as
Find out how companies can get the right material to the right place and ensure availabilityRead more
Find out how stock replenishment time is the key to bringing down inventory in the entire distribution channelRead more
Find out a highly cost effective solution to reaching out to even the smallest of retailer point with a single tier distribution networkRead more
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