What’s in a name? That which we call a rose by any other name would smell as sweet. – William Shakespeare, Romeo and Juliet
It’s hard to believe that nearly 10 years have gone by since Flowcasting the Retail Supply Chain was first published. Mike, Andre and I had the manuscript nearly complete before we turned our attention to figuring out the title. I figured it would end up being something boring like ‘Retail Resource Planning’.
Then, Andre got us both on a conference call to tell us that he came up with a title for the book: ‘Flowcasting’. For reasons I can no longer remember (or maybe perhaps because it wasn’t my idea), I immediately disliked it. We went back and forth on it for awhile and as time went on, the name ‘Flowcasting’ grew on me.
Then I came up with the idea that we should be more descriptive about the process. It’s a new concept for managing the retail supply chain, right? So, we should call the book ‘Flowcasting the Retail Supply Chain’!
Now I wish I had just listened to Andre and left well enough alone.
Over the years, we’ve written and talked at length about the types of major changes a process like Flowcasting brings about in the supply chain areas for retailers and their trading partners:
- Managing all supply chain resources (inventory, labour, capacities and spend) using a single set of numbers based on a forecast of consumer demand at the shelf
- Collapsing lead times between retailers and their trading partners by unlocking the power of the Supplier Schedule
- Improving supply chain operational performance by providing 52 weeks of future visibility from the store shelf back to the factory and giving manufacturers the opportunity to shift their operations from ‘make to stock’ to ‘make to order’
- And so on and so forth
To be sure, the supply chain operational and planning changes are significant – but that’s just the beginning. To make Flowcasting successful, the mindset changes in other areas of the retail organization can be just as revolutionary.
The Merchandising Organization
Historically, the buyers in a retail organization were (and in most cases still are) just that: ‘people who buy stuff’. Their primary accountability is growing sales in their categories, and the conventional wisdom is that the best way to increase sales is to have a lot of inventory. If you think you’re going to sell 10,000 units on an ad, then you buy 20,000.
Flowcasting turns this notion on its head. Because it is always accounting for all inventories in the supply chain and replanning every day based on the sales forecast, ‘Buyers’ must learn to become ‘Category Managers’ who focus on their key accountability: generating demand and providing input to the sales forecast. The change management implications of this change cannot be overstated, as this can be viewed as taking away their control of a key input to their overall success.
Similarly, buyers are accountable for maximizing gross margin on their lines. When negotiating case packs and ordering minimums, they may be inclined to choose the option that gets them the lowest overall cost per unit. But this can be very costly to the business overall if these constraints make it impossible to flow product to the store shelf, particularly for lower sales volume stores. High gross margin doesn’t necessarily equate to high profitability for the business as a whole if folks in the merchandising organization haven’t been given the tools and accountability to think holistically about the supply chain.
Two decades ago, the retail supply chain was distribution centres and trucks. A few years ago, the thinking began to evolve to include the retail store as part of the supply chain. Now, we are finally starting to think of the supply chain as linking the factory to the customer’s hands.
Most retailers measure store ‘in stock’, but what’s meaningful to the customer is on shelf availability (meaning that if a store has 10 units in inventory, but it’s stuck in the back room somewhere, it’s an ‘in stock success’, but a failure to the customer).
One of the biggest questions retailers face is ‘How much autonomy do we give to the store?’ While it’s true that each individual store is closer to the market they serve than the folks at home office, does this mean that giving every store manager a stock ordering screen to use at their discretion will automatically increase customer service? In my experience, the only things it increases with regularity is inventory and confusion.
Even though Flowcasting would generally be a centrally managed process for most retailers, it’s driven from individual store level sales patterns and constraints that may not be known to a store manager. The entire process works much better when people are accountable and measured only for the things that are within their control. For a retail store, that means two things:
- Receive the product quickly and get it straight to the shelf
- Keep the inventory records accurate
If stores are focusing their energy in these areas, it doesn’t guarantee perfect on shelf availability for the customer, but it makes it easier to trace back where the process is failing and make corrections when there are fewer fingers in the pie.
Flowcasting isn’t just a different calculation for coming up with an order recommendation. It’s a fundamentally different way of operating a retail business. As such, it requires a different skill set and mindset to manage it.
While it might be tempting to fill an open replenishment position with someone with replenishment experience at another organization, you could be trying to fit a square peg in a round hole if her prior experience is with traditional reorder point or push methods. In fact, you may have to invest more time with ‘untraining’ than you do with training.
To be successful with Flowcasting, a person needs to be organized and possess decent problem solving skills. Other than that, no specific ‘experience’ is required – in point of fact, it could actually prove to be a detriment.