About Mike Doherty

Mike Doherty

Think Different

An accountant and a former pig farmer would take the elevator and head to the 9th floor of an office building located at 2180 Yonge Street in Toronto, Canada. It’s fall, 1994. They’d make their way to a corner of the floor and be joined by a few other new teammates. A recent economics graduate, an operations research PhD candidate, an engineer from overseas, a former grocery IT analyst, and a person from a large multi-national CPG company with an educational background in history and geography.

There they’d meet their team leader – a dude that had worked in industry and in consulting and was self-described as “a bit of a maverick, who had little regard for hierarchy and was equal part genius, equal part buffoon”.

Their mandate?

Completely change the way product was planned and flowed in a retail supply chain, from factory to store shelf, for this $5billion Canadian retailer with more than 450 stores from coast to coast.

To say this team was unconventional was an understatement. As an example, every team was given the latitude to select their own furniture for meeting rooms and workspaces. After reviewing various options and costs, the team would decide that instead of a costly large meeting table they’d instead buy a ping-pong table and use it for working sessions. It was considerably cheaper, and at lunch and during breaks, they could play ping pong.

The introduction of a ping pong table as a work area became the stuff of legends. Lunch times were dominated with ferocious matches and the Senior Vice President of Supply Chain (the ultimate boss of this team) would famously have his ass handed to him one day during a match with one of the team members. No one worried about taking it easy on him. Both his forehand and backhand were weak and, as a result, he got what he deserved – crushed!

Work wise, the team would stutter and stumble. They’d take too long and get bogged down numerous times. They’d spend considerable time in stores, listening to store owners lament about poor product flows and shit service levels. Several ideas were documented, debated, and eventually scrapped.

One idea, though, would survive and the team continued to refine and improve it. Eventually, the idea of what we now call Flowcasting would be documented, and the team was certain the idea was simple, intuitive, and potentially game changing.

Unfortunately, the Senior Executive team didn’t concur. Several executives considered the idea a pipe dream and told the team, “Change the design since this will never work”.

Luckily the team leader was also a bit of a c*nt and was not too keen at being “told” to change the design, especially by speculators – no one knows if something will work before you do it, so how can anyone say, with certainty, that “this will never work”. Never is long time.

As it turned out, one of the technology team members would connect the business folks with Andre Martin and Darryl Landvater and they would reassure the team with the fact that they had already conceived and ran some pilots of this design idea a few years before. A turning point for the design and the Flowcasting concept in general.

They would help convince the Senior Executive team that arrival-based, integrated, time-phased planning (the foundation that Flowcasting is built on) would be a critical capability retailers would need to enable their supply chains to flow product and deliver. The design direction would be approved, and subsequently implemented from DC to supplier and the rest is history.

What was the secret sauce of that pioneering team from Canadian Tire?

Diversity.

There’s lots of talk today, and rightly so, about diversity. I think, however, many companies and especially teams are missing the real key to diversity – that is, cognitive diversity.

Are you looking for ways to inject fresh perspectives and innovative thinking into work?

Step forward, cognitive diversity.

Numerous studies have shown that people like working with others who think like them and have similar values.

The problem, however, is that it leads to groupthink, stifles creativity, and can limit the solutions that are proposed. Instead, you should embrace cognitive diversity, which means forming teams of people who are quite likely to disagree and bring widely varying perspectives and experiences to the table.

Look for people with different beliefs and/or personalities. Seek out colleagues with different educational backgrounds, widely different work experiences, from different parts of the world, or with different levels of risk acceptance.

The best teams, who deliver real and meaningful change, are ones with diverse perspectives and skills that complement each other. The best teams are cognitively diverse.

Think about many supply chain transformation initiatives. More often, the teams are composed of people with a similar background – type A personalities with a technical, mathematical, or engineering background. And what does that almost for certain guarantee? Groupthink and that the designs will be factual and logical.

Everyone who’s implemented something knows that logic plays a small role. Implementations are about people and people have feelings, emotions, wants and needs. They can, at times, seem quite illogical. A cognitively diverse team will have better understanding, wider perspectives, better questioning & listening skills, and more empathy – all ingredients needed for successful change.

So, the next time you need to recruit a new team member and you have a candidate that’s got pig farming (or other seemingly oddball experiences that don’t fit the standard mold) in their experience, my advice is to hire them.

You’ll be glad you did.

HBR article included as chapter in upcoming book

We’re happy to announce that our recent Harvard Business Review article (A Better Way to Match Demand and Supply in the Retail Supply Chain) about Flowcasting was selected to be included as a chapter in an upcoming Harvard Insights Series book entitled, “Supply Chain: The Insights You Need from Harvard Business Review”. This book will outline the latest thinking, insights, case studies and leading practices in supply chain, from several authors.

Thank you, HBR, for including our piece in this upcoming book (due out in October in paperback and as an eBook) and for recognizing the strategic significance of Flowcasting and a consumer-driven, integrated inventory flow planning process.

Timing (is everything)

There’s an old saying that “timing is everything”. And while it may not always be true, more often than not, it is. Especially when it comes to implementing new planning approaches, like Flowcasting.

Even though implementing Flowcasting usually means implementing new technology, it’s got very little to do with software. It’s about changing the mental model and how organizations work, plan, and collaborate. As a result, these implementations are about change – helping people unlearn old ways, learn, and ingrain new ones.

And that requires time for change.

Here’s a beautiful view of change management, highlighting the critical importance of timing:

About 25 years ago we were blessed with a dose of shit luck. We were working as employees at one of Canada’s most iconic and successful retailers, designing and implementing what we now call Flowcasting. As luck would have it, two former Oliver Wight planning pioneers would somehow emerge from the wilderness and join the party. They would ingrain the project team with an implementation approach, called the Proven Path – aptly named given thousands of successful implementations of integrated planning over several decades.

Over the years we’ve retail-ized the approach but the basic principles and fundamentals have endured.

At the heart of the approach is early and repetitive education for executives, management, planners, and suppliers. The diagram above nicely outlines the importance of engaging people early – teaching them how the new process will work, what’s different and why it will be better.

We’re often asked why start educating and engaging people so early. It’s simple, yet instructive. People really don’t like to be surprised and they need time to think. The term we use is “soak time”. The sooner people begin to understand the change, the longer time they can think about it, question it, challenge it, even improve on it. Of course, education is not a one-time event and constant and refresher education happens throughout the change.

It’s why we typically follow up educational sessions with process prototypes – where people, who are now more knowledgeable, can “test” the new approach in a guided, lab-like environment.

And what does that do? It gives people time to experience the new process and more time to “soak” in the new approach and thinking. Helping the change effort considerably.

The reason the diagram above is so instructive is that it reflects the difference between super successful implementations and successful ones. Many teams view these implementations from a technology lens. You’re installing new software to improve things. With a view like that, typically teams scrunch the change effort much closer to when the software go-live will be. And, almost always, it’s too much, too fast for people and the implementations suffer.

In contrast, if you understand that the implementation is about changing people’s behaviors and corresponding mental models (throughout the extended organization, including suppliers) then the importance of starting early should be apparent.

To drive the point home, years ago the Oliver Wight team surveyed over 1000 companies regarding how successful their implementations of integrated planning were. The results were enlightening. The companies that started the change program early, with early and ongoing education, realized an average Return on Investment (ROI) of 200%, compared with 30% for the companies who thought they were installing software.

I suppose if you’re looking for a super successful implementation and a big, fat, juicy ROI then timing is, indeed, everything.

Doctor’s orders

In years past companies have focused on demand side forecasting accuracies. SC managers are realizing the big gain is on supply side management.”

                                                    – Chris Barnes

An article I co-authored with George Stalk, Jr., “A Better Way to Match Supply and Demand in the Retail Supply Chain” was recently published by Harvard Business Review.  A colleague, who happens to go by the handle of “Supply Chain Doctor” made a profound comment on the underlying premise of the article.  He said… 

“The future of SCM is here. In years past companies have focused on demand side forecasting accuracies. SC managers are realizing the big gain is on supply side management. Whatever you can do to help your suppliers will pay dividends to your company. Not as glamourous as omni-channel distribution, but without strong supplier relations, omni-channel won’t really matter much.”

Loyal readers will understand that we’re talking about using the Flowcasting process to only forecast where it counts (i.e., the final point of sale) and to calculate all other inventory flows from consumption to supply.  This, of course, culminates in sharing planned shipments with suppliers – a concept referred to as supplier scheduling.

The concept of supplier scheduling has been standard practice in manufacturing for decades – that is, sharing a projection of future required product needs to help a manufacturer’s suppliers plan and deliver.  Flowcasting allows retailers and their manufacturing partners to leverage the same concept.

The planned shipments are the demand plan for the supplier for this retail customer – indicating how many units of each product will need to be shipped, when and where. This eliminates the need for the supplier to forecast demand for this customer.

From a supplier perspective, their major retail customers can provide them with calculated demand, rather than having to forecast it themselves.  Most CPG manufacturers would only require a handful of supplier schedules from their large retail customers to provide 70+% of their total demand.  They can forecast the balance. 

The projected requirements have all retail, supply chain and inventory flow constraints/rules incorporated, specific to each retail customer.  If a Retailer Customer was experiencing increased sales or had decided to change the shelf inventory requirements at a future date, the supplier schedule would reflect this in the planned shipment quantities. 

The Flowcasting model is based on a fundamental principle – a valid simulation of reality.  If the retailer and trading partners know the future will be different than the past, then these insights are factored into the forecast and resulting inventory flow plans, culminating in the supplier schedule. 

The impact of retailers embracing Flowcasting and supplier scheduling is significant.  It obsoletes a significant amount of non-value-added forecasting and, even more significant, effectively eliminates the bullwhip effect.

Perhaps we should listen to the Doctor’s orders.

Harvard Business Review article about Flowcasting

Our article, “A Better Way to Match Supply and Demand in the Retail Supply Chain” co-authored by Mike Doherty and George Stalk, Jr., published by the Harvard Business Review. The basic thesis of the article is that Flow-casting can address the most insidious problems in the retail supply chain – out of stocks, overstocks, and the bullwhip effect.

To read the article, click HERE.

Managing a Retail Business to a Single Set of Numbers article

by Mike Doherty

I’d like to thank Retail Insider magazine for publishing my article about “Managing a Retail Business to a Single Set of Numbers” – outlining the pioneering work of Andre Martin, Darryl Landvater, and Oliver Wight (Oliver Wight Americas, Inc.) from 40 years ago in manufacturing and how it can and does apply to retail.

To all my colleagues and clients around the world, you should read Retail Insider and subscribe to their Retail-Insider eNewsletter. They are both enlightening and bring valuable insights to the retail community.

To read the article, click this link

1970s Montreal Genius

1970s Montreal Genius

If you happen to be a long-time fan of the Montreal Canadiens hockey team, then undoubtedly the late 1970s was a dream for you. The Habs were on a tear, winning 4 consecutive Stanley Cups and playing some of the fastest and best hockey ever seen.

In the late 1970s there was another Montrealer who was on a tear as well, in this case with respect to inventory flow planning innovation.

In 1975, as Director of Manufacturing Operations and Distribution, Andre Martin lead the creation, development, and successful implementation of the first integrated time-phased planning system in industry. Andre leveraged the Bill of Material (BOM) concept to integrate manufacturing operations from distribution centre to factory floor. Instead of a BOM, he flipped the idea and developed the concept of a Bill of Distribution (BOD). Once we forecast the demand at the DC’s, he reasoned, we could calculate the dependent demand onto the factories.

The Distribution Planning solution was aptly named Distribution Resource Planning (DRP) and adhered to the mantra laid out by Dr. Joseph Orlicky (of Material Requirements Planning fame) to “never forecast what you can calculate”. This in-house development and implementation enabled Abbott to seamlessly manage the flow of products across a three-echelon supply chain – a worldwide supplier network supplying to three factories (Montreal PQ, Brockville ON and Toronto ON), and ten distribution centers across Canada.

Prior to managing manufacturing and distribution operations Andre worked in accounting and finance. Having this accounting background, and coupled with his experience in manufacturing and distribution, Andre realized that they needed to tie their new time-phased inventory flow planning system with Abbott’s financial system.

In 1978 he saw the opportunity of enabling Abbott’s top management team to manage their business to “A Single Set of Numbers” – converting the forecasts and resulting plans into financial, resource and capacity projections.

He also realized that the new DRP solution, along with the DRP/MRP integration could be used as a financial planning and budgeting tool. The projections would form the foundation for the annual plan. As a result, Abbott’s top management was able to use their operating system to put together their 1978 annual budget using the very same system they used to manage their day-to-day business.

Oliver Wight, Abbott’s consultant at the time, created the term Manufacturing Resource Planning, or MRPII, to describe this broader application of the solution and the rest is history.

Loyal readers and disciples (yes, we have a few of those but would love several thousand more!) will realize that Andre’s pioneering work is also relevant and applicable in retail.

For example, consider Canadian national hard lines retailer Princess Auto Ltd (PAL). PAL plans inventory using the Flowcasting process—developing consumer-driven, integrated inventory flow plans that are valid across the entire value chain, including plans that span multiple organizations. Every department—including suppliers—use the projections for planning and to identify opportunities to improve service, cost, and productivity.

The item/store forecasts in units are converted to financial sales projections, and then aggregated to category, department, and sub-department level to provide the starting point for the baseline budget for the upcoming year. The impacts of additional strategies and tactics are then added to the calculated baseline to arrive at the budget, or business plan.

Given the new planning process is always recalibrating based the on the latest information, it has provided the Leadership Team with a continuous, forward-looking critique of how well the business plan is being realized – essentially a Retail Sales and Operations planning process. Instead of looking in the rear-view mirror to evaluate the plan, the Leadership Team has the capability to assess the forward-looking plan and determine where the plan may be at risk – giving them time to make any adjustments necessary to stay on track.

More importantly, they are managing their business to a single set of numbers – having essentially a model of how they wish to do business, spanning their entire eco-system.

It’s a concept that originated in Montreal over 40 years ago – thanks to the pioneering work of, among others, Andre Martin, Oliver Wight, Darryl Landvater and Abbott Labs – and is being realized today by smart, forward-thinking retailers like Princess Auto Ltd.

More Genius from the 1970s

Did you know that during this time, Andre also invented a concept called Game Planning?

He converted the time-phased production plans (developed by calculating production requirements from the DRP-driven plans) to dollars and called it “Game Planning” – since it produced a dollarized view of planned sales, production, shipments, and inventory levels (i.e., essentially the company game plan) for a 2-year planning horizon. The combined views of financial and resource projections allowed Top Management to gain better control of the business.

In the early 1980’s, an Oliver Wight Associate named Dick Ling renamed Game Planning to what it’s referred to today – Sales & Operations Planning (S&OP).

The late 1970s was a special time for the Montreal Canadiens.

The late 1970s was also a special time for Andre Martin.

Maybe We’re All Wrong

Work alone. You’re going to be best able to design revolutionary products and features if you’re working on your own. Not on a committee. Not on a team.”

                                                    – Steve Wozniak

In 1963 Marvin Dunnette, a psychology professor at the University of Minnesota performed an experiment that challenged conventional wisdom, yet few people know about it and even fewer have learned from it.

Dunnette gathered 48 research scientists and 48 advertising executives, all of them from 3M, and asked them to participate in both solitary and group brainstorming exercises. 

He divided the group into twelve teams of four.  Each foursome was given a problem to brainstorm, such as the benefits or difficulties of being born with an extra thumb.  Each man was also given a similar problem to brainstorm on his own.  Then Dunnette and his team counted all the ideas, comparing those produced by the groups with those generated by people working on their own.

The results were startling and counter-intuitive.  The men in 23 of the 24 groups produced more ideas and of better quality when they worked on their own rather than in a group. 

Since then some forty years of research and studies have shown that, almost always, performance gets worse as the group size increases.  The “evidence from science suggests that business people must be insane to use brainstorming groups”, wrote the organizational psychologist Adrian Furnham.

When it comes to forecasting, collaboration is the accepted conventional wisdom.  Consider retail supply chain forecasting.  Most of us believe that collaborating with multiple people, potentially including the supplier, produces a better forecast.  Yet, Dunnette’s research would suggest otherwise.

Perhaps better results could be achieved if forecasting was solely left to the retailer?  And, further, to one person who is focused on a specific category of products.  Then, using the Flowcasting process, this forecast of consumer demand would be translated into all other demand, supply, capacity, and financial plans for all partners in the supply chain.

But wait, you say, having the input of lots of people can materially improve the quality of the forecast.  Sure, we all say that, but how specifically?  It’s just accepted practice that if multiple people work on the forecast, then it will be better.  Just like group brainstorming produces better results.

Do we think the forecast can be improved for promotional forecasts by having more people collaborate?  Again, how exactly?

If you think about forecasting consumer demand isn’t the retailer closer to the consumer?  Haven’t they got all kinds of information regarding past promotions for the item in question and similar items (likely from another supplier)? 

Don’t they have a complete view of other marketing and promotional activities that might impact specific products being forecast at the same time?  And isn’t this information available to the demand planner accountable for the forecast?

If two people were tasked with developing a forecast of consumer demand for a promotion and had the same inputs and history as a starting point, how different would their forecasts really be? 

It’s a question that’s seldom asked.

Maybe, retail supply chain forecasting would be better served with one forecast, created by the retailer, owned, and managed by one person – and with the advances in Artificial Intelligence and Machine Learning, managed by reviewing only a miniscule number of exceptions that the machine couldn’t understand yet.

It’s counter to the collaboration Kool-Aid we’ve all been drinking for years.  And to what most supply chain practitioners say.

Maybe, though, we’re all wrong.