We Can All Agree

 

We rarely think people have good sense unless they agree with us. – Francois de la Rochefoucauld (1613-1680)

agree-givemesomeenglish

My family has a history of heart problems.

Although my blood pressure and cholesterol are both fine, I’m 47 years old, carrying 15-20 extra pounds and I don’t get enough exercise, which compounds that risk.

Family History + Being Middle Aged + Being Overweight + Not Enough Cardio = Increased Risk of Heart Problems

It’s hardly a mystery. Everybody knows this. I agree.

I can do nothing about my family history or my age, but I’ve been about the same weight for the last several years and have not meaningfully or sustainably increased the amount of daily exercise I get on a daily basis.

Ask any smoker if they are aware of all of the various health risks from smoking. They too will agree that smoking is bad. But they still do it.

Clearly, there isn’t a binary choice (i.e. agree or disagree), rather different ‘levels’ of agreement:

  • I agree with what you’re saying.
  • I agree that something needs to change.
  • I agree to change my behaviour.

In business in general (and supply chain in particular), significant improvement in results can only be achieved with process-driven changes to people’s behaviour.

We can all agree that the quality of a retailer’s customer service is directly tied to the accuracy of their store-item level inventory records – especially in an omnichannel world where a customer can demand product from a website and expect to pick it up in their neighbourhood store a couple hours later. It’s not a stretch to further agree that processes, procedures and measurement systems need to be in place to improve and maintain store level on hand accuracy.

And yet many retailers (40% of grocery stores according to a recent study) don’t even use a system on hand balance and those that do are not attacking their accuracy problems.

We can all agree that retail supply chains should be consumer driven to be efficient and profitable. And yet most retailers are using the same ‘old school’ processes for promotions, new product introductions and seasonal sales – ‘buy a ton, push it out to the stores and pray that it sells’.

While ‘agreement in principle’ is certainly necessary, it is clearly far from sufficient. So what is the secret ingredient?

I’ve seen it many times throughout my career in retail. I visit one store and the aisles are uncluttered, the shelves are faced out beautifully and the back room is organized and tidy. Then I visit another store with the same retailer and it looks like it was recently hit by a cyclone – even though both stores have the same systems, processes and training manuals.

The difference is that you have to care.

Don’t get me wrong. I’m not saying that the store manager with the messy store has no passion. I’m just saying that he doesn’t have passion for retailing.

It’s the same reason I’m a supply chain consultant and not a fitness instructor (at least for now). I agree in principle that I need to exercise and lose weight, but I care deeply about order, organization and process discipline in the retail supply chain.

So where does this passion come from and how can it be cultivated and spread throughout an organization?

God, I really wish I knew. I believe that everyone is born with passion, but not everybody is in a job they’re passionate about.

That said, I know that passion can be infectious enough that a very small group of uber-passionate people can change organizations – not necessarily by making everyone as passionate as they are, but by generating just enough force to overcome the organizational inertia.

And once the boulder starts rolling down the hillside, we can all agree that it’s very difficult to stop.

Prototyping the prototype

If someone asked me to summarize myself, I’d probably say that I’m a life-long student – an avid reader and someone who knows that things can always be made better – a lot better.

Some recent experiences have got me thinking about our approach to designing and implementing Flowcasting-like solutions for our clients.

First, what has made our approach so successful?  It’s really an obsession with simplicity and a deep understanding that instilling new behaviors is about people and process.

At the heart of the approach is what we call a process lab, or process prototype.

Think about how successful products are created.  They are designed.  Then a prototype is created.  Then it’s tested.  Then it’s revised.  Prototyped again.  Tested again, and the process continues until the product sees the light of day.

Why can’t a process change also be prototyped?

It can and we do.

We work with teams to design new processes and workflows on paper then build a lab-like environment and prototype the process with real end-users.  It helps people see and feel the process first-hand, and also provides us critical early feedback on the process – how it works, what people like, what they struggle with, where it can be improved, etc.

It’s all consistent with our belief about change – that people rarely believe what you tell them, but they always believe what they tell themselves.

On our recent implementation of Flowcasting for a hard goods retailer in Western Canada, I was fortunate to experience what could be described as rapid prototyping, with respect to the technology solution.

To set the stage, the Flowcasting solution we used was an early and immature solution.  However, the fundamental foundation and architecture, along with the retail focused functionality was second to none.

Of course, even though we designed and did our prototype lab work with the team and users, a number of things emerged that we needed to revisit as we made the journey.  As luck would have it, we were working with the actual architect of the solution and, over a couple of months, we made some important and elegant revisions to the solution that improved it considerably.

Essentially we did a series of small, software-focused prototypes (to support our process thinking, of course) that were quickly designed, tested then deployed.  It was one of the most exhilarating experiences I’ve been involved in and I’ve been doing project work since the dawn of civilization (at least it feels like that!).

The result was equally impressive.  Even though the RedPrairie Collaborative Flowcasting solution was already an excellent one, the changes that were prototyped and implemented transformed the solution into something special and unique.

In my professional and expert opinion the solution solves all the major retail planning challenges, is intuitive, scales like stink on a monkey and is so simple that even an adult can learn and use it.  Even. An. Adult.

Not long after this experience I read an interesting book called Scrum – about an approach for designing and implementing new technologies that relied on rapid prototyping.  The basic idea was to design things quickly, make the changes, test it and demonstrate it to people and adjust accordingly.  Then rinse and repeat.

Boom!  It was essentially the approach that we’d used so successfully to transform the Flowcasting solution.  And, it got me pondering.

Why wouldn’t we apply the same thinking to our implementation framework?  After all, the idea of a process prototype was not foreign to us – in fact, it’s a cornerstone of our approach.

Perhaps we should do more than one…just like this:

Prototype picture

The idea would be to do shorter bursts of design and lab work, then engage the users, get them to work with the process, and provide feedback and adjust.  I have no idea how many of these micro-prototypes we might need but the approach could be flexible to have as many as required – depending on the magnitude and scope of the change.

I really like the idea and hopefully will test it soon.  We’re working with a great bunch of folks at a Canadian retailer and hopefully we’ll get the opportunity to help them with the implementation.  If that happens, I’m sure we can leverage this thinking and incorporate it into our approach.

It will be like prototyping the prototype.

Bad Habits, Part 1

 

Bad habits are like a comfortable bed, easy to get into, but hard to get out of – Anonymous

Friedrich Nietsche said “Most bad habits are tools to help us through life.”

This is especially true in the world of retail supply chain planning. When retailers embark upon implementing time-phased planning, it is tempting – from a change management standpoint – to tell people “this isn’t much different than what we do today” or “we’re essentially doing the same thing in a different way”.

While this is partially true at the 10,000 foot level, the things that are different are fundamentally different.

This month, we’ll explore a bad planning habit that is particularly insidious, because it is often treated as best practice in a non-Flowcasting world: Using the forecast as a “joystick” to control product flow.

There comes a time in every retailer’s life when product must flow further in advance of customer demand than desired, such as for capacity blowing seasonal peaks, planogram resets or promotional display setups.

In a reorder point world, there is little means to plan these types of things in advance. Replenishment rules such as safety stock apply “right now”, making it exceedingly difficult to do a lot of advance preparation in the system. This leaves 2 options:

  1. Plan all of your safety stock updates in advance and use an Outlook reminder to update the values at just the right time to trigger orders when you want them to arrive.
  2. Spend hours creating manual orders/transfer requests with the future ship dates you want – and pray that things don’t change a lot in the meantime that will require you to change those dates/quantities as it gets closer to execution time.

Neither very good options to be sure.

But wait!

There is a third option. By putting an artificial spike in the forecast at around the time you want product to arrive at various locations, you can ‘trick’ the system into flowing product when you want, but also take advantage of changing inventory levels right up until the lead time fence, thereby letting the ordering happen automatically.

To some extent, this makes sense in a reorder point world. Often, it can be the only efficient and automatic way to control flow. And it doesn’t do too much damage, because the forecast really only exists to trigger an order for an item at a location.

So what would happen if this approach was applied in a Flowcasting world? Not much: just unstable plans, incorrect capacity and financial projections and general chaos within operations and the vendor community.

That’s because, with Flowcasting, the sales forecast doesn’t merely drive ordering for an item at a location. It drives replenishment across all locations in the supply chain simultaneously. It drives capacity planning for the DCs and transportation department. It drives labour planning at the stores. It drives revenue, purchasing and inventory projections within the merchandising teams and finance.

Simply put, the forecast must always be representative of how much you expect to sell, where you expect to sell it and when you expect to sell it. And with the visibility afforded by a reasonable sales forecast, many options become available for controlling the flow of goods as necessary.

In other words, once you make the leap to Flowcasting, the bad habit of using your forecast as a ‘joystick’ to control replenishment is no longer  a ‘tool that helps you through life’ – rather, it is one of the quickest possible ways to make your life a living hell.

The Biggest Mistake You’ll Ever Make

 

You must learn from the mistakes of others. You can’t possibly make them all yourself. – Sam Levenson

bridge

‘How does it work today?’

It’s the first question any self respecting project leader or consultant asks on day 1 of a new initiative. It’s critically important to know the ‘state of the nation’ before you embark on any sort of effort to make the changes needed to improve results.

After asking this question, you set about the task of learning the current practices and procedures and documenting everything to a fairly low level of detail (along with the most common variations on those practices that you’ll almost always find in companies of any size).

In most retail organizations, you’ll hear versions of the following:

  • For non-promoted periods, our purchasing is mostly automated with a short lead time, but we buy promotions manually with a longer lead time from the vendor.
  • Our stores ‘pull’ product in non-promoted weeks, but for big events like promotions and shelf resets, we ‘push’ the product out to them .
  • The system will recommend orders, but our analysts review all of the recommendations beforehand and have the ability to cancel or modify them before they go out to the suppliers.

After a few weeks, you’ve become a pseudo expert on the current state landscape and have everything documented. Now it’s time to turn this retailer from a reactionary firefighter into a consumer driven enterprise.

And that’s when you make the biggest mistake of your life.

After summarizing all the current state practices with bullet points, you save the document with the title ‘Future State Requirements’. You don’t know it at the time, but you’ve just signed yourself up for years of hell with no light at the end of the tunnel. If it’s any consolation, you’re definitely not alone.

Common practices, whether within your organization or throughout your industry as a whole, represent ‘the way everybody does it’. This does not equate with ‘that’s the only way it can be done.’

At the time, it seems like the path of least resistance: We’ll try to do this in such a way that we don’t disrupt people’s current way of doing things, so they will more easily adopt the future state. But if you’re moving from a ‘reactive firefighting’ current state to a ‘demand driven’ future state, then disruption cannot be avoided. You might as well embrace that fact early, rather than spending years of time and millions of over-budget dollars trying to fit a square peg in a round hole.

So how could such a catastrophe be avoided? All you really need to do is dig a little deeper on the ‘common practices’. The practices themselves shouldn’t be considered requirements, but their reason for existing should. For example, look at the three ‘common practices’ I mentioned above:

‘For non-promoted periods, our purchasing is mostly automated with a short lead time, but we buy promotions manually with a longer lead time from the vendor.’

Why does this practice exist? Because, generally speaking, the sales volume (and corresponding order volume from the vendor) for a promoted week can be several times higher than a non-promoted week.

So what’s the actual requirement? The vendor needs visibility to these requirements further in advance to make sure they’re prepared for it. Cutting promotional orders in advance is the currently accepted way of skinning that cat – but it’s by no means the only way.

‘Our stores ‘pull’ product in non-promoted weeks, but for big events like promotions and shelf resets, we ‘push’ the product out to them.’

Why does this practice exist? More often than not, it’s because the current processes and systems currently in place treat ‘regular planning’ and ‘promotion planning’ as distinct and unrelated processes.

What’s the actual requirement? To plan all consumer demand in an integrated fashion, such that the forecast for any item at any location represents what we truly think will sell, inclusive of all known future events such as promotions.

‘The system will recommend orders, but our analysts review all of the recommendations beforehand and have the ability to cancel or modify them before they go out to the suppliers.’

Why does this practice exist? Usually, it’s because the final order out to the supplier is the only ‘control lever’ available to the analyst.

What’s the actual requirement? To be able to exert control over the plan (items, locations, dates and quantities) that leads to order creation, allowing the actual ordering step to be an administrative ‘non event’.

So, once you’ve identified the true requirements, what’s next?  A lot of hard work. Just from the 3 examples above, you can see that there are several change management challenges ahead. But at least it’s hard work that you can see and plan for ahead of time.

Woe to those who choose what they think is the easy path at the outset only to suffer the death of a thousand surprises after it’s far too late.

 

Flowcasting – Easy as Riding a Bike

Flowcasting – it’s simple, intuitive and makes perfect sense. At conferences, talks and seminars, I have yet to meet anyone who doesn’t describe it this way after learning about it.

But how easy is it for a retail planner (who has been living in a reorder point world for years) to internalize it?

Understanding the mechanics of it is very easy. And for newbies who have nothing to “unlearn”, internalizing it is a piece of cake too. But for those who have to break old habits, it’s no picnic. And even once they do “see the light”, it’s still incredibly easy to fall back into the old habits if they’re not vigilant and disciplined.

It’s kinda like this: