About Mike Doherty

Mike Doherty

Learning to love beer

“Education is the most powerful weapon you can use to change the world.”

Nelson Mandela

If you’re like me, and most people for that matter, you love a nice ice-cold beer.

Think back, if you can, to the first time you tasted beer. What’d ya think? Probably didn’t really like it at first and it probably took time to enjoy the taste.

Driving change is a lot like getting comfortable with the taste of beer. It takes time. And repetition.

I recently read a great new book about change, called “The Human Element”, which outlined an interesting way to look at change. In summary, the book beautifully outlines the concept of fuel vs friction.

When it comes to change, most people focus almost all their energy on adding fuel to help sell the change – usually in the form of benefits, features, examples, and case studies, etc. However, as the authors point out, people are generally comfortable with and predisposed to the status quo and, therefore, at least as much effort should be spent on reducing friction – or why people naturally resist change.

One of the core strategies outlined is to acclimate the idea. Acclimate the idea through repetition and repeated exposure, which gives people time to think about, question and, over time, internalize the change. Much like the taste of beer, the sooner people are exposed to the change, the better.

It’s an idea and concept that we wholeheartedly agree with and is foundational to our approach to helping companies embrace, implement, and internalize Flowcasting. We expose people to the taste of Flowcasting through an early, ongoing, and repeated education program.

The education program is designed to help the organization understand and talk themselves into the changes required to enable the Flowcasting process to be instilled – from Executive Leadership throughout the extended organization, including merchandise suppliers since they will also change their thinking and processes to support the new ways of working. The goal of the education program is to not only disseminate knowledge but also, importantly, to build commitment and ownership since the change is driven by the executive team with an executive level of commitment.

Questions are at the heart of the education program and when we can, we always try to have clients embrace and deliver the process education through a model we call cascade education. The model works as follows…

The design team builds and records an educational webinar that explains the new process design and demonstrates it using a series of examples, including the fundamental principles of the process. The cascade works like this: The CEO reviews the online educational course and then requests that their direct reports do the same.

Once complete, the CEO would then lead a session (supported by the design team) with their direct reports, where a series of questions would be asked and discussed – ensuring not only a healthy dialogue ensued, but also, importantly, new questions would emerge that would be answered and potentially added to the list.

At the end of the session, the project team would revise the list of questions and the CEO would outline the expectation of their direct reports; each direct report would be responsible for ensuring their teams took the online course and, more importantly, attended a facilitated session (led by each direct report) where the questions would be discussed, and answers and opinions documented. The cascade would continue down the company hierarchy until everyone had taken the education and attended a principles-and-questions-based session to help people understand, begin to convince themselves and build commitment to the change.

The cascade model of education helps increase understanding of the change and reduce change reactance because the foundation of the approach is based on questions – some are asked but most are surfaced and answered by peers, helping people persuade themselves. Instead of the project team always telling, people are asking, listening, learning, and changing their thinking.

Education does not stop with the initial cascade. Additional sessions are built, tailored to specific teams and business scenarios. They are delivered, refined, and used to help people get comfortable with the changes needed throughout the extended organization, including all merchandise suppliers – which, given the number of suppliers a retail partners with, often requires hundreds of educational sessions to help them prepare and embrace the new ways of working.

Acclimate the idea. Early, often, and ongoing.

It works for giving you the time needed to love the taste of beer.

It’s also foundational for instilling change.

Keeping it small

“I am a horse for single harness, not cut out for tandem or teamwork.”

– Albert Einstein

It’s early March 1975 and a loner saunters into a dungy and dark garage with a group of folks who have the audacity to call themselves the Homebrew Computer Club. The mission of this group of misfits: make a personal computer that is accessible to the masses.

Steve, a 24-year-old with long hair and a brown beard is an extremely shy introvert but is insatiably intrigued by the idea. He sits and listens. Doesn’t speak or ask a single question. He would continue to attend the Homebrew sessions, but rarely contribute.

Instead, he gets to work – alone. He arrives very early most days at work to learn and ponder – reading engineering magazines and books, studying the latest chip manuals, and thinking about a possible design. After work he’d hurry home, whip up a quick TV-dinner and then head back to his trusty cubicle, where he’d work late into the night. He’d describe this period of solitude, deep work and early morning California sunrises as “the biggest high ever”.

On June 29, 1975, around 10pm, Steve Wozniak would finish his initial prototype. He punched a few keys on the keyboard and voila – letters would appear on the screen. It was a breakthrough moment and he had built the world’s first personal computer – alone.

Fast forward 30 years or so, to the crisp, beautiful and serene landscape near Burlington, Vermont. Another engineer, Darryl, would be working on a solution for a problem that had perplexed supply chain planning technologists for quite some time – how to forecast and plan slow selling items in retail.

A few years earlier Darryl, and his long-time colleague Andre, would become frustrated in trying to convince supply chain planning software providers that they should build a store-level DRP solution (what we now call Flowcasting). Most ignored them, or worse, believed that could use a solution designed for manufacturing and distribution for retail. Eventually, one fateful day, they’d both say, “fuck it, let’s build something ourselves”.

Darryl, like Woz, would get to work – laser focused on being able to scale a planning system to retail volumes and developing a solution for planning slow selling items. Using actual data from a handful of retail clients, he’d test several ideas, refining and adjusting until eventually he’d bring forth an elegant, simple, and intuitive solution.

His breakthrough was achieved largely by working alone, just like Woz.

The solution for planning slow sellers is used by lots of retailers around the world to properly plan these type of items, including two of our Canadian retail clients.

Have you ever wondered how Apple has been able to bring forth a series of revolutionary products of elegant design and simplicity?

By keeping it small, that’s how.

Jony Ive was the Chief Designer at Apple and both he and Steve Jobs credit the fact that the iPhone, iPad, iPod and iTunes were breakthrough products because they were developed by very small teams.

According to them, a small, laser-focused team drives the innovation and then, as they share the design with others, they get good at “saying no to a thousand things” – to quote Jobs. Apple instinctively knows that every additional person added to the party brings more input and, very often, more noise.

For anyone working on projects and/or trying to design better ways, there’s some deep insight to learn from these stories. That is – small is not only beautiful, but generally produces better designs, implementations, and results.

So, to improve your odds of success, here’s some simple and practical advice that I always try to adhere to in any project I’m working on or leading:

  1. Reduce the number of meetings
  2. Reduce the number of participants in meetings
  3. Keep teams as small as possible

It’s a philosophy that’s worked well for Jobs, Ive, Bezos, Landvater and Doherty and I think it’ll work well for you too.

Compliments from a CEO

It’s always nice and also encouraging to hear positive comments from a retail CEO about Flowcasting and supply chain management in general. Below are some nice compliments from Ken Larson, President & CEO of Princess Auto Ltd, about Flowcasting, supply chain and the team (both internal and external) that helped make it happen. Thanks for the kind words Ken!

Working backwards

You’d likely agree that Amazon is a very innovative company.  AWS, Prime, Kindle, One-click-shopping are examples of innovations they’ve delivered through a process called Working Backwards.  Working Backwards is a systemic way to surface and vet ideas that sometimes lead to new products or services.  The key tenant of the approach is to begin by defining the product’s (or service) arrival, and then work backwards from that point until the teams achieve clarity of thought around what they will deliver.  

The main tool used to accomplish this clarity of thought is the PR/FAQ document – short for Press Release / Frequently Asked Questions.  The document is written from the perspective of the customer and is dated into the future, when they believe the innovation will arrive in the marketplace.  What’s simple, yet brilliant, about this approach is that it keeps teams focused on delivering something significant, valuable and meaningful to customers – rather than many approaches that are essentially based on the idea of incrementing-your-way-to-greatness.

You may not know, but Flowcasting is also based on the concept of Working Backwards.

Loyal disciples understand that the Flowcasting process starts with a forecast of consumer demand, by product and selling location (e.g., store, etc.).  Conceptually, what’s a forecast of consumer demand?  It’s when and where the customer wants to acquire the product – i.e., when and where it needs to arrive in their hands.

Flowcasting integrates the supply chain from this forecast of consumer demand by working backwards using an approach called arrival based planning.  For any product at any location, arrival based planning calculates planned shipments of when and how much inventory needs to arrive – scheduling a shipment so that the arrival date and quantity ensures the projected inventory doesn’t drop below safety stock.  

The basic logic is simple:

For each item/location:
1. Figure out what you expect to sell (or calculate what you’ll ship) 
2. Figure out what you have and what your constraints are
3. Figure out when you will need more product to arrive
4. Use the arrival based plan to figure out when you need to ship

The concept of planned shipments and arrival based planning is foreign to most retail demand and supply planners. After we do an educational session with planners, we often break people into teams and ask them to calculate a shipment based plan, using arrival based logic, with an example something like this:

Without exception, every retail client we’ve worked with struggles with this simple ask. Everyone has been so conditioned to focus on “ordering” that they struggle to understand that ordering (or committing the planned shipment) is the last decision, not the first. They are focused on “do we need to order” in week 1, rather than planning arrivals and the corresponding ship dates (i.e., planned shipments) first. 

Planned shipments are the foundational construct of Flowcasting and how the process integrates the retail supply chain to ensure the fundamental principle is achieved – that is, a valid simulation of reality.  Every planned shipment consists of an arrival date (when the product will arrive at the destination) and a ship date (when the product will ship from the supplying location).

Flowcasting plans shipments over the entire planning horizon and shares these projections with suppliers and other stakeholders in order to help them plan and improve productivity.  For suppliers we often refer to what is shared with them as a supplier schedule – that is, the projection of planned quantities and their associated ship dates by product and origin/destination.  

Ship dates are the key element to anchor the supplier schedule on.  That’s because ship dates are very specific from a supply chain and work perspective.  It’s when the inventory needs to be available and also when transportation needs to be scheduled to initiate the delivery.

The supplier schedule is, in most cases, the culmination of Working Backwards for a retailer who is using Flowcasting.  From the forecast of consumer demand, we work backwards to calculate when product needs to arrive and ship, through the entire distribution network, right back to when the factory needs to ship the product – integrating the entire supply chain via a series of dependent, cascaded planned shipments.

When you first hear the phrase Working Backwards it sounds like a dumb idea and implies you’re heading in the wrong direction.  Turns out, it’s been a proven and brilliant way to drive innovation.  

It also turns out to be the best way to plan inventory flows for the retail supply chain.

The Arrival Based Plan
For those students, here is the arrival based plan for the example outlined above:

What’s important to understand is that the planned arrivals that are calculated above would be the same, regardless of supply source.  They indicate the quantity and timing of a shipments arrival and are not dependent on the supply source.  The planned shipment, of course, is dependent on the supplying source and the transit lead time.

This make arrival based planning a powerful approach since it enables you to easily plan a change of source well into the future and have all the cascaded dependent demand reflect a valid simulation of reality.

Trust the process

Nick Saban is a brilliant college football coach and widely heralded as a football genius. At time of writing, his coaching record stands at 261 wins, 65 losses and 1 tie. He’s won 17 Bowl games along with 7 national titles (the most ever) and counting.

If you’re a fan of the Alabama Crimson Tide, in a state where college football is king, Saban is arguably more popular than Jesus. Fanatics think he is Jesus.

When asked about his unrivaled success, Saban offers a counter-intuitive philosophy that’s guided his coaching career, anchored on two fundamental principles:

  1. Don’t focus on the outcome
  2. Trust the process

Incredibly, Saban doesn’t focus on the result – which, for college football – like most sports – is whether you win or lose. Sure, make no mistake about it, Saban wants to win, it’s just he believes that the path to long term success is by trusting the coaching process.

His belief is that by coaching his team, repeatedly and without fail, so that they can execute their designed plays on offense and coaching schemes on defense, he’ll maximize his odds of winning. Losses are important to this process as it provides the team the opportunity to review the film and see where the process failed – either in execution or, sometimes, in coaching and design. Which leads to more coaching, practice and trust in the process.

Trusting the process is a philosophy that has served Saban and the Crimson Tide incredibly well.

We can learn a lot from Nick’s nuggets of wisdom.

Given that we’re often referred to as the Salty Old Sea Dogs of Flowcasting, it’s fair to say that we’ve been around the block a few times and, over time, changed our thinking often. No more than so than in developing, managing and measuring the retail forecasting/demand planning process.

For most retailers, the number of item/store products that sell less than 26 units a year (about 1 every two weeks) can be pretty significant – often comprising 30-50% of a retailer’s assortment. You wouldn’t expect to be as accurate in determining a forecast for these types of products, since there is a fairly large element of probability involved – as an example, based on history, you can feel confident that 1 unit sells every month but you’re not sure when it will be.

While it’s tempting to aggregate the lower level item/store forecasts up to a higher level and assess forecast performance, that’s of little use to anyone – after all, customers buy products in stores, or online, to be acquired or delivered at their preferred location. They don’t buy them at some aggregate level. Not to mention that item/store replenishment plans are driven from these forecasts and the dependent demand is cascaded throughout the supply network.

Like Saban, we work with our clients to help them understand and hopefully instill the idea of assessing the forecasting process by determining something called forecast reasonableness.

So then, what’s a reasonable forecast?

The following diagram outlines, conceptually, what we’re talking about:

The idea is to assess the reasonableness of the forecasts based on a sliding scale determined by selling rate. As an example, you wouldn’t expect to have as accurate a forecast for a product that sold 12 units a year as you would for something that sold 1200 units a year. Of course, you need to determine what’s a reasonable tolerance and sliding scale but from experience that’s not too difficult.

If the item/store forecast is within tolerance then the process/solution is producing a reasonable forecast. The beautiful thing is that the planner spends no time chasing these forecasts since, in all likelihood very little can be done to improve the process/outcome for these.

In practice, forecast reasonableness is an exception condition for the demand planners to action. For the item/store forecasts that are outside of tolerance, the planner can investigate these, see if the same item is outside of tolerance for a number of stores and determine if anything is systemically happening or could be improved in the process to bring them within tolerance.

To determine how well the forecasting process is working is simple. What percentage of the item/store forecasts is within tolerance?

We believe that, in retail, forecast reasonableness should replace traditional measures of forecast accuracy (like MAPE, WMAPE, etc., that were developed for more continuous demand streams in manufacturing and distribution).

Now before you think we’re completely mental, here’s something to ponder on. One of our retail clients, who plan using the Flowcasting process, does not measure baseline forecast accuracy.

Instead, they use a forecast reasonableness exception to evaluate the process, honing in on any forecasts that are not within tolerance to see if there is anything that can explain this and, potentially, how they might “improve the process”.
During the time they’ve not measured forecast accuracy they improved daily in-stock from an average of 91.7% to an average of 97.7%, while also improving inventory performance.

For a customer, in-stock is everything. They couldn’t care less about forecast accuracy.

Maybe you shouldn’t either.

Wrong becomes right

Phil Tetlock spent almost two decades determining people’s ability to forecast specific events – things like elections and the outcomes of potential geopolitical decisions. Unfortunately, the results were not impressive. Most people were about as accurate as a well-fed, dart-throwing chimpanzee.

There were a small number of notable exceptions. A small group of people consistently provided quite accurate forecasts – people he aptly named “super-forecasters”.

In a subsequent forecasting tournament organized by the Intelligence Advanced Research Projects Activity (IARPA) – a focused branch of the United States intelligence community, the super-forecasters trounced teams of professors and “forecasting experts” by wide margins.

What made the super-forecasters so super?

It wasn’t intelligence or that they had more experience than others. In fact, in many cases, they were mostly amateurs yet they outperformed the CIA’s best and brightest (who also had the advantage of years of experience and classified information). Armed with only Google, the super-forecasters beat the CIA, on average, by 30%.

What made them great at being right was they were great at being wrong!

The difference in their ability to forecast was simple, yet crucial. The super-forecasters changed their minds – a lot.

Not a huge, 180-degree shift, but subtle revisions to their predictions as they learned new information. As an example, one of the consistently top super-forecasters would routinely change his mind at least a dozen times on a prediction and, sometimes, as often as forty or fifty times.

Importantly, most viewed a revised forecast based on new information not as changing an initially wrong forecast but rather as updating it. Turns out, updating is the secret to being a great, or super, forecaster.

The concept of updating is important in Flowcasting as well.

As loyal Flowcasters know, an important component of the process is the sharing of what we call a supplier schedule – that is, a projection, by item and delivery location of how many units are needed to ship over a long time horizon (typically 52+ weeks).

If the schedule indicates that, 39 weeks from now, the supplier will need to ship 10440 units of a product to a location, what’s the chance that this projection (i.e., forecast) is perfectly accurate? Pretty low, right? And it doesn’t need to be – it just needs to be reasonable.

A week later, and guess what? The supplier schedule has been re-calculated and updated to indicate that 10400 units are needed to ship in that particular week (perhaps even on a different day). The updated forecast is more right than the previous one. This process of minor revisions continues as the projections are updated until it’s actually time to ship (i.e., when the planned shipment has reached the agreed-upon order release horizon).

In retail, supplier scheduling is the super-forecaster for suppliers – recalibrating and subtly updating the forward looking projections, based on the latest information until…

Wrong becomes right.

Flipping your thinking

From toddler to teenager, most of us had a fairly similar educational experience: The teacher would stand at the front of the room and spew out information that the students were to absorb. Then they would assign homework that would, theoretically at least, test how well you absorbed the content. The homework assignments would then be scored by the teacher and – if you were lucky – you might find some scrawled notes in the margin to give you a clue as to where you may have gone astray.

All this assumes, of course, that you didn’t just copy your homework from a smart (if gullible) friend, thereby completely circumventing the ability of the homework assignment to test knowledge. Not to say that this approach was completely ineffective. Somehow, most of us did learn what we needed to know to become productive members of society. That said, when the best praise you can muster is that it’s “not completely ineffective”, then you are basically admitting that there is ample room for improvement. 

Karl Fish is a veteran teacher with 20 years of experience. He teaches high school math in a town just south of Denver, Colorado.  Karl thought he could do better for his students than “not completely ineffective”, so he decided to flip the traditional thinking on its head.

Instead of using class-time to “teach” in the traditional sense, Karl tapes his lessons and uploads them to YouTube. Classroom time is used for application and practice.  His students are required to watch the lecture whenever and wherever it is most convenient for them.  What would be traditionally considered “homework” is actually done during in-class time.

The result of this flip in thinking has been significantly improved understanding of the content. Working through examples and case studies not only improves the students understanding, but also improves their ability to collaborate with fellow students and Karl himself.

Contrast this approach with doing your homework in the evenings (maybe even the wee hours of the morning). If you get stuck, there are few alternatives other than to become increasingly frustrated and demoralized.

In Karl’s class, you can pose your question to a group (many of whom are likely struggling with the same question) and work together to solve the problem. What better skill and habits are there for someone to learn in high school?

Retail supply chain planning is also in need of a flip in thinking.

Traditional thinking in retail has ingrained into people’s heads that ordering is the key decision a supply chain planner needs to make. Day in and day out the retail supply chain planner only has 2 questions:

1) Should I order today?

2) How much should I order?

All anyone can talk about nowadays is “demand driven supply chains” that are super-responsive to consumer demand – yet the entire planning approach is geared toward figuring out when to place an order upstream with, at best, an indirect link to the actual customer demand.

Flowcasting flips that thinking completely. In a nutshell, the decision to place an order is a mere after-effect of the planning process (not the one and only decision) and, generally, it should be performed by a computer, not a human being.

Instead of asking “When and how much should I order”, maybe the first question should be “When does more stock need to arrive?” – Isn’t that what’s really important to your ability to stay in stock and serve a customer?

By focusing on this question first, new thinking emerges. Once you understand when product needs to arrive, then you can calculate when you need product to ship (based on where it’s coming from) and when you need to order.

Of course, to answer this question you’ll need a system to project inventory and product arrival dates well into the future.  And to calculate the corresponding ship dates and order dates. The basic change in philosophy is simple – to really know when product needs to be ordered, you must first know when it needs to arrive at the destination.

While this may sound quite simple and logical, in practice it requires a great deal of education and understanding to make such a flip – particularly if people have been “ordering” for a long time.

In our experience, most retailers continue to subscribe to the “order first, ask questions later” philosophy and flipping to an arrival based planning approach like Flowcasting will not be a slam dunk, regardless of how logical it sounds.

If you’re struggling with the concept, we’d be happy to schedule some homework time with you and your team.

Principles

Folks that know us well and have worked with us, know we’re what you might call principles freaks.  A decent chunk of time and effort we spend helping retailers implement Flowcasting is oriented to instilling a set of principles, which guide our thinking and, hopefully over time, our clients.

Julia Galef, in her brilliant book, The Scout Mindset, beautifully outlines the paradox of principles in a chapter aptly named, “How To Be Wrong”…

Many principles sound obvious and that you know them already.  But “knowing” a principle, in the sense that you read it and say, “Yes, I know that,” is different from having internalized it in a way that actually changes how you think.

Times Ten

It’s hard to believe and counter-intuitive but it’s often easier to make something 10 times better than it is to make it 10 percent better.

Yes, really.

That’s because when you’re working to make things a bit better – like 10 percent better – you always start with the existing tools, assumptions and paradigms, and focus on tweaking an existing approach/solution that’s become the accepted norm.

This kind of progress is driven by extra effort, extra money, and extra resources – attempting to squeeze just a wee bit more from the current system. While making a minor improvement is generally a good thing, often we find ourselves stuck in the same old paradigms.

But when you aim for a 10 times improvement, you need to lean in and focus on being brave and creative – the kind of thinking that, literally and metaphorically, can put a man on Mars.

Retail Flowcasting solutions have been emerging for a while with some technology companies claiming that Flowcasting is in the DNA of their solution. More often than not that’s debatable but what’s not is that a retail Flowcasting solution needs to be at least 10 times more scalable and simpler than similar solutions that have been used in distribution and manufacturing – because in retail we’re dealing with 10’s of millions of item/location combinations.

We’ve been lucky enough to implement a purpose-built, times-ten retail Flowcasting solution. In our experience, it’s 10 times faster, 10 times simpler, and costs about 10 times less to implement compared to others who claim to have Flowcasting native solutions.

Over the course of the implementation, the chief architect shared with us how he was able to build something that’s a times-ten solution.

His secret:

  1. Start from scratch
  2. Solve the hard problems first

Most existing solutions are too heavy and burdensome – the result of solution providers not knowing how to say “no” to a specific ask – usually from a paying client that doesn’t know better, but also sometimes from competitive peer pressure. Checklist Charlie said our solution needs 11 different ways to handle safety stock, so we’ll make it so. The result is a system that cannot be the foundational starting point to build a times-ten solution.

Our architectural hero said the reason he started from scratch is that only what was necessary would go into the solution and not a drop more. A bit like Einstein once said, “everything should be made as simple as possible, but no simpler”.

In tandem with making things as simple as possible, our colleague believes that another reason he was successful is that he also solved the hard problems first.

To wit, he worked, tested and developed stunningly intuitive and simple ways to handle a variety of problems that have plagued existing providers from morphing their current solutions to a retail-focused Flowcasting solution, notably:

  1. Extreme scalability
  2. Handling slow selling items properly (both the forecast and the replenishment plans)
  3. Planning for product phase out (to provide a valid simulation of reality for any item at any location)
  4. Managing seasonal items (to maximize sales and minimize inventory carryover)

I won’t bore you with the specifics on how our architectural and design colleague solved each of these chronic retail planning challenges. He did say that he’d spoken to a number of grassroots folks in retail about each of these challenges and then – from a blank sheet of paper and some fundamental principles – developed, tested, refined and eventually delivered a times-ten solution.

Once the hard problems were solved, he believed that the rest of the planning challenges would be chicken-shit to deal with. Turns out, he was right.

The lesson here is simple, yet profound. If you’re looking for a quantum leap improvement – a times-ten solution if you will – then you need to start from scratch and solve the hard stuff first.