It’s funny how you sometimes recall something from years ago, often triggered by a recent event, and it helps to cement or solidify your thinking.

Flashback to 1992 and, after working for a prestigious Canadian Management Consultancy since my 1986 graduation, I decide it’s time to leave consulting and get an industry job. I’d land at National Grocers (NG), at the time the distribution and logistics division of Loblaw Companies Limited. My job, along with the newly minted Director (who was a colleague from consulting), would be to establish the logistics function in the company – taking an end-to-end view of the entire supply chain, both from a technology and physical flow perspective.

NG, at the time, had retained Jim Woods, the former VP of distribution for Kroger – the massive US based grocer – in an advisory role. He was full of stories, ideas, insights and on some days, other stuff as well. On most Friday’s we’d head to a restaurant called The Greek to listen to Jim’s Jenius, so to speak. One thing he said to me that I’ll never forget went something like this…

“Mike, I’m not sure what the future of supply chain will be but the best advice I can give you is never slow the product down”.

I was intrigued and have subconsciously been pondering that ever since.

I recently read an awesome book, Arriving Today, chronicling the global journey of a single USB charger, from factory to front door. A couple of chapters highlighted and not only solidified the advice Jim gave me thirty years ago, but likely outlines the fundamental paradigm shift of retail supply chain management.

As the USB chargers make their way to an ultra-modern Amazon fulfillment centre, what blew me away is what happens next, architected on Amazonian principles. The inbound shipment of USB chargers is de-palletized, and each individual USB charger is stored, in single units, in a random bin that the system had moved to the receiver.

So, a receiver would store a shipment of 48 chargers, randomly in 48 different bins amongst several shelving units. Storing items randomly mimics the basic architecture of computers and the process is called “random stow” – the idea that the best way to get products in and out of shelves in a warehouse is to put them anywhere they’ll fit, rather than trying to design some sort of system to organize them.

In addition to the significant improvement in storage capacity, the individuating of products facilitates something even more profound – optimizing for and enabling the each-supply-chain. Amazon has architected its supply chain for the consumer, rather than distribution – recognizing that most customer orders are in units of one (i.e., each-es), rather than cases or pallets. When a customer orders one of these USB chargers, then a bin is selected that contains only one charger and is moved to an order filler to select this single unit and get the order on its way.

Most retail supply chains are distribution-centric, rather than consumer-centric.

But could Amazon be onto something here? What if we applied the same thinking to a modern omni-channel retailer, complete with a network of distribution centres and stores?

Surely, I’m not saying to ship in each-es, both to the consumer and to replenish the stores. Um, er,…, that’s exactly what I’m saying.

Most retail supply chains don’t heed Jimmy’s advice. They slow the product down by shipping in cases and pallets. The conventional wisdom says that you need density to fill up trucks to go to the stores and most supply chain folks have ingrained the paradigm that larger shipments, by product, saves considerable handling costs.

All true, to a certain extent, but have you considered the other costs and benefits of architecting flows to the consumer?

First, outbound trucks from DC’s to stores could still be filled – it’s just the composition would be smaller, individual product shipments. The ability to stay in stock would be improved, since the inventory at each DC would only be shipped in units of one (or smaller shipments), rather than cases. In addition, in virtually all situations, product could flow directly to the shelf.

In two recent retail clients, both demonstrated that inventory accuracy improved significantly for products where the required inventory fits on the shelf selling location – rather than having top stock, overstock, or backroom stock. For these types of products, the inventory accuracy was 85%+, a significant improvement from the retail average of 50-60%.

This would be true for all stores and would also be an important benefit for consumers – since they are asking retailers to display their inventory availability, as evidenced by this recent Forrester research of US consumer expectations:

• 65% say it’s important for retailers/brands to show in-store product availability on the website
• 68% think it’s important to know when items will arrive, before placing orders online
• 30% checked for a product online before purchasing it in a store
• 33% are less likely to go into a store if inventory is not available online

In addition, replenishing in each-es could have a very significant impact on store inventories and space. I recently took a random store from a recent client and compared the inventory and space requirements from their current distribution-centric replenishment philosophy (i.e., replenishing in cases) to a consumer-centric philosophy (i.e., replenishing in each-es) and the impact was significant. Both overall inventory and space requirements were 40-50% less.

Now, of course, I realize that costs in the distribution centre will increase and the flows and operations inside these facilities would need a complete re-think and potentially a new operating model. However, if you step back and think about the retail supply chain, and include the consumer in it, it changes your perspective.

Online demand is usually in each-es. For most retailers, a significant percentage of item/store sales are less than one per week. Thus, I’d argue that we’re largely operating in an each-supply-chain today and that will likely proliferate in the years ahead. The issue is that we’re still burdened with distribution-centric thinking, slowing the product down and altering product flow as a result.

“Never slow the product down”.

It was great advice in 1992 and even better advice today.

Jimmy really was a Jenius.

“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.

“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.

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!

Many thanks to Supply Chain Management Review for publishing our article, The Customer is the Channel, in the January/February 2022 issue. To read the article, click HERE.

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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.

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:

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.

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.

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.