Henry David Thoreau, in 1854, said something very prophetic.
“Every man looks at his woodpile with a kind of affection. I love to have mine before my window, and the more chips the better to remind me of my pleasing work. I had an old axe which nobody claimed, with which by spells in winter days, on the sunny side of the house, I played the stumps which I had got out of my bean field. As my driver prophesied when I was plowing, they warmed me twice – once while I was splitting them, and again when they were on the fire.”
The moral is that the process, or the journey, is as rewarding as the result.
It turns out, that chopping your own wood is important for helping to change your thinking and your work behaviors.
Implementing a concept and business process like Flowcasting, in retail, requires people to change their current work practices – both internal teams and external ones. Education, as we’ve often outlined, plays a crucial role. However, it’s not enough. People need to experience the new process and get comfortable with the new ways of working. How do we typically suggest people do that?
With what we call a process prototype.
A process prototype is a day-in-the-life execution of the new process, using real, company specific data to “experience” or simulate one or more key planning scenarios – for example, product introductions and discontinuations, promotions planning, and seasonal planning to name a few big ones in retail.
End users are guided through each of these scenarios by more knowledgeable and experienced project team members. Crucially, however, the end users are the ones who operate the keystrokes and execute the new process – effectively chopping their own wood.
This helps people turn the educational theory into practical applications as they get to see, develop, manage and revise real forecasts, replenishment plans and supplier schedules for various business scenarios. In some prototypes they can even experience new collaboration approaches – for example, how demand planners, merchants and suppliers will work together in the new process to produce promotional plans that are agreed upon and executable.
For the project team who’s leading the change, process prototypes are invaluable. You get the see how well the educational program instilled new thinking, as well as getting early feedback on the newly designed processes from the people who’ll be executing it. You also often get good ideas to improve the design. Incorporating these ideas helps the change effort, as people see that they are being listened to. Invariably you’ll also get ideas that aren’t so great, often rooted in maintaining the status quo. These are also valuable as they help uncover where additional education and coaching will likely be needed.
Personally, I’ve had good success using process prototypes (having people chop their own wood) but I’ve been thinking about taking the concept up a level, so to speak.
To date, we’ve only done process prototypes with the planners who’ll execute the new processes – sometimes, to be fair, also including key suppliers to get their feedback and suggestions. An improvement, I believe, would be to develop and execute process prototypes for the senior and executive leadership teams. I believe that would help leaders better understand the new day in the life for their teams. And a process prototype where executives could see, execute and collaborate on a process like retail sales & operations planning would be valuable, but also help to cement why the concept of a single set of numbers is important in retail planning.
Of course, this is not really a new idea, and the best retailers do something like this regularly. Retail leadership teams often work many days a year in their stores – helping customers and doing the work that’s needed to deliver a brand’s promise. A very valuable learning experience and my idea would be to take this thinking to the planning processes. It’s really part of what folks call experiential learning.
David Kolb introduced the idea of experiential learning in 1984. It’s a simple concept – you basically learn by doing and it comprises four elements: concrete experience (experiencing something firsthand); reflection on and observation of that experience (thinking about it); abstract conceptualization based on the reflection (learning from the experience); and active experimentation (putting the learning into action).
A process prototype is experiential learning and is like chopping your own wood. It will warm you twice – once when you do it in practice, and then again when you do it to deliver actual business results.
A schedule defends from chaos and whim. – Amy Dillart
Retail Systems Research recently surveyed 133 US retailers of various sizes ($250M+) and across 5 verticals on the subject of tariffs. The authors were trying to understand how retailers view the tariffs in the short and long term and how they are responding to them.
Some of the results were highly predictable – most are feeling the squeeze of trying not to alienate price conscious customers at a time when their cost of goods are increasing because of forces out of their control – but there were also some somewhat shocking surprises. A significant majority believe that in the long term, “the benefits from the current tariff policy will ultimately outweigh the short-term drawbacks to our business”. Those expected benefits, they believe, will flow from increased onshoring of manufacturing in the United States.
But there seems to be some inconsistency (cognitive dissonance?) at play, as the authors note:
“Most retailers excluding those selling fast moving consumer goods believe that robots will perform US-based manufacturing tasks. Yet they also believe that renewed manufacturing in the US will create a significant new job market. It is unclear to us how to reconcile those two opinion sets. It isclear retailers are all feeling quite positive about near-sourcing and ultimately benefits will outweigh the risks.
Again, it’s hard to reconcile these seemingly divergent opinions (remembering that most retailers don’t think they can survive even a year of tariff-driven retailing). It is emblematic of our country as a whole today: torn between the need for more self-sufficiency, yet unsure how to get there from here.”
I guess that’s chaos for you.
It’s a fascinating study and also a glimpse into the future for US consumers on how retailers are planning to respond to the tariffs.
They conclude with 7 recommendations for retailers that could be applied to chaos in any form (pandemics, natural disasters, financial crises, etc.). Six of those 7 recommendations are coded directly into the DNA of Flowcasting and – in our view – should be a “way of life” for retailers even in times of relative “calm” (or maybe the correct term is “normal background chaos” that always exists in retail, even if they’re not talking about it on CNN).
Acknowledge The Chaos
2025 has proven to be anything but normal, as an environment of wildly fluctuating tariffs has completely upended the relative stability retailers – and their supply partners – were expecting at the beginning of the year. The hard truth is that our industry is now trying to plan – what to buy,what to sell, how much demand there will be, how much supply will be needed – in an environment when planning is nearly impossible. Acknowledging this chaos is now the first step on the journey, as all indicators point to this being the “new normal” for the foreseeable future.
In Flowcasting speak, we call this “documenting your assumptions”. When you don’t know exactly what will happen in the future (and who really does?), you need to gain consensus on your best guess and then anchor your plans on that. As time unfolds, the assumptions you made may not hold water (more on that below), but at any point in time, everyone knows the thought process that was driving the plans.
Embrace ‘Sense And Respond’
The plan may be out the window, but that doesn’t mean a new plan shouldn’t take its place. We advise retailers to use the data available and new analytics to sense and respond to changes in market conditions as quickly as they possibly can. Just as it was during the pandemic, this is a time to get creative. Retailers have shown – time and again – that when backed into a corner, they are more than capable of adapting.
Throwing plans out the window and creating a new one to take its place is what Flowcasting is really all about. For every item at every location every day. While retailers writ large have shown that “they are more than capable of adapting”, those with fully a fully connected planning process from the store shelf back to the supplier can adapt far more quickly, accurately and efficiently.
Forecast Continuously And Adjust
Forecasts need to be updated in-season as the selling period unfolds to make short-term adjustments. This capability is empowered by new data (customer, product, competitor, and market) and the analytical tools that can turn those data into insights.
This recommendation goes hand-in-hand with “sense and respond”. With Flowcasting, forecasts are updated daily for every item at every selling location with current sales. As far as “turning those data into insights” goes, the continuously updated demand forecasts drive a fully integrated end-to-end model of the supply chain that updates the product flow plans from the store shelf right back to the supplier, also on a daily basis. What could be better than that?
Recognize That Scenario Planning / Predictive Modeling Is Vital
Few forward-thinkers would deny that the world will become more unpredictable with time. Weather events, social norms, wild swings in the geo-political world – all happen faster and less predictably than at any time in the recent past. Retail Winners view their ability to use predictive modeling techniques as key to helping them to react much more quickly to supply chain disruptions and sudden shifts in demand.
Digital transformation and the technologies it employs makes it possible for retailers to predict all kinds of unforeseeable patterns before they occur – to model future states – and react to them faster once they do. This has moved from being merely a winning behavior to becoming essential to survival.
With a realistic model of the supply chain constructed in a single system, scenario modeling is very quick and easy to do (i.e. “plug in some new assumptions and see what happens”). Not only can different demand scenarios be modeled to determine the impact on sales, costs and service, but you can also game out various supply side strategies that can be deployed in response. Once you have a complete plan that looks like it will work, you can commit the changes and start executing to it across the board. If it starts to look like it’s not going to work, you can change it.
Trust That Pricing Solutions Can Help – Even In Pricing Chaos
Consumers continually cite price as a primary value attribute, and retailers continually tell us price is something they need to get right. New technologies can bring advancements to pricing right now – not in some distant future. RSR’s take is that retailers simply cannot afford to overlook this opportunity. Price optimization solutions have improved to the point that changes as granular as SKU/location can be recommended daily based on dynamic demand and inventory availability.
Whether retailers want to be that granular and fluid is another matter, but (especially with the continued adoption of electronic shelf label, or ESL, technology in stores), retailers could be better able to maintain profitability even in the face of wildly fluctuating cost-of-goods, by taking advantageof what new pricing solutions have to offer.
While this recommendation is not in the direct purview of Flowcasting (pricing is taken as an input and the model does what it’s told), current and planned changes to pricing can be fed in at any level (right down to item/store/day if desired), forecasts can be updated at any level and the impact to the financials can be rolled up from there.
Maintain Flexibility At All Costs
The COVID-19 pandemic taught a great many lessons to retailers. The paramount need-to-know what inventory you have – and where – was just the beginning. How quickly a brand can change its course of action to deliver the right products to where they are needed very quickly is a lessonin the importance of flexibility that cannot be forgotten without creating risks to business survival.
Flowcasting allows not just the modeling of your supply chain as it exists today, but future dated modeling of planned changes to your demand picture, network flows, stocking policies, etc. right down to item/location/day level. And once you’ve modeled it, the system automatically executes the product movements at the right time.
Keep Every Eye Possible On The Supply Chain
The ability to monitor the supply chain in real time and react as necessary, using digital twin technologies to evaluate disruption scenarios and prepare supply chain to minimize financial impact, and the ability to enable “real time inventory management/visibility” are all top-of-mind capabilities for retailers.
Unlike standard computer assisted ordering approaches that only evaluate whether or not it’s time to request more stock on specific ordering days, Flowcasting recalculates demand and supply plans for every item at every location every day. With a complete model of the entire supply chain in a single system, it’s the ultimate digital twin that always has its eyes open.
It would be terrific if we could precisely predict the future, but that’s not possible even in times of relative stability. To the extent that you can come closer to this goal by collecting more information and improving your assumptions, by all means have at it.
But experience has taught us that the real secret to achieving maximum customer service with minimum inventory is not so much accurate forecasting, but continuous replanning.
“As to methods there may be a million and then some, but principles are few. The man who grasps principles can successfully select his own methods. The man who tries methods, ignoring principles, is sure to have trouble.”
- Ralph Waldo Emerson
Arthur Mesher is a supply chain legend and inductee into the Supply Chain Hall of Fame. He’s known for introducing the foundational “Three V’s” framework—Visibility, Variability, and Velocity—a widely adopted model for understanding and improving supply chain performance.
Art recently published a fantastic paper “The Supply Chain Awakens: A Call for Awareness in the Age of AI”. In it, he rails against solution providers, consultants, academics and others who use buzzwords and consultant/solution-speak. He wants people to get back to basics and fundamentals and believes, as do I, that this is needed in supply chain management.
In his paper he made, in my humble opinion, a very profound statement.
He said, “build on bedrock, not buzzwords”.
I love that and agree completely.
If you’re going to build and design something, you’d better make sure it’s built on a solid bedrock – much like a house or high-rise building. If the foundation is not solid, eventually it will collapse.
Course, this got me thinking about Flowcasting. In my opinion (and I believe it’s the opinion of the original four horsemen of Flowcasting), the concept of Flowcasting is architected on a few, timeless, enduring, bedrock principles:
Never forecast what you can calculate Did you know that this fundamental principle that Flowcasting is architected on is over 50 years old? Dr. Joseph Orlicky (of MRP fame and a planning pioneer) made the profound statement in the 1970s. The entire retail supply chain (or any industrial supply chain) is driven only by a forecast of end consumption – for retail, this is the consumer sales forecast, by product, by selling location, in units, time-phased over a long planning horizon (52+ weeks). All supporting partners in the supply chain have their time-phased product requirements calculated – based on the forecast and inventory rules and policies/strategies amongst the various participants in the network.
A valid simulation of reality A key principle of the process is that its underlying goal is to provide all partners with valid simulation of reality – that is, a valid view of the future, based on what’s currently happening and what’s planned. If you know something about the future that will affect consumer sales, it’s included in the forecast. If you want to change supply requirements sometime in the future, then it’s in the supply plan. At any moment, the projections that the extended business is using is the best view of the future – it may not come true, but it is the current plan.
Continuous replanning Flowcasting re-forecasts and re-plans any product and their extended projections as often as something changes. That can be in real time, hourly or daily. At any time, Flowcasting provides all partners in the supply chain with valid, up-to-date, actionable projections.
A model of the business Since the Flowcasting process continuously plans from consumption to supply at the most granular level (by product by location) over a long planning horizon (e.g., 52+ weeks) then the projections provide the retailer and their stakeholders with what we call a model of the business. That is, visibility of all projections, including sales/demand, inventory, receipts, purchases, resources and capacities in any language of the business (e.g., units, dollars, cube, etc.). This allows for continuous calibration of how well the operational plans are delivering to business objectives. It also dramatically improves collaboration between retailers and their trading partners and collaboration amongst internal teams.
Don’t commit until necessary You don’t buy milk until you need to, right? The supply chain should operate on the same principle. Product is committed/ordered when the planned shipment has reached the time needed to pick, pack, deliver and receive from their origin to their destination. This is true for all planned shipments, regardless of volume – even promotional purchase orders are ordered at the same lead time as regular volume (that’s because everyone has extended visibility into future requirements to use for planning and would have already planned that volume).
Do I believe that the concept of Flowcasting will stand the test of time?
Yes, I do.
Because it’s architected on these fundamental, timeless, enduring principles.
I am a man of fixed and unbending principles, the first of which is to be flexible at all times. – Everett Mckinley Dirkson
As a retailer, if you can accurately forecast the impact of your promotions – down to item/store level – within a narrow range, then everything will be fine.
Umm, okay, that sounds great but what if – hypothetically speaking – you’re not always able to do that? Then what?
Flowcasting has been fairly accurately described as a demand driven supply chain planning approach, with “demand” in this context referring solely to pure demand from consumers at the shelf.
In order for Flowcasting to work properly, the forecast of future demand at each item/store must be representative of what you expect to sell in every planned week in the future. While the starting point for the forecast can be derived mathematically by detecting patterns in history, it needs to be augmented when you know something about future consumer demand that will be different from the past (sometimes referred to as “demand shaping”). In this case, you know that you’re going to advertise a price drop to your customers in Week 9:
In the example above for an item at a store, we expect to sell 64 units on the promotion. This store needs to maintain 20 units of minimum stock at all times to keep the shelf display looking presentable. Flowcasting logic ensures that the Projected On Hand will never fall below that Minimum Stock in any future week, so as a result, the high expected promotional demand in Week 9 triggers 66 units to arrive at the beginning of that week (all requirements rounded up to shippable packs of 6 units). With a 1 week lead time, that 66 units is seen by the servicing DC as a shipment that will be made to that store in Week 8.
We’re only looking at a single store here and there are a variety of ways to have the promo uplift applied (top-down based on proportional contribution to past total sales, promo sales or baseline forecast, elasticity curves, machine learning based approaches, etc.). The key point here is that demand must be appropriately shaped and represent what you actually expect to sell.
What we have here is a really good plan… If you’re confident in your promotional forecast and if you’re just going to put a promo tag on the home location. For a lot of products (e.g. those that you’ve promoted frequently at the same price with no additional merchandising support), this might be just fine and dandy.
But what if you need product to be in the store earlier or in greater quantities than required just to support expected sales? This could be to support the set up of off-shelf displays or cover for upside forecast risk (particularly if shipments to the store are relatively infrequent and there may not be enough time to do a “mid-course correction” once the promotion starts).
This need is sometimes referred to as “push/pull” or “decoupling” and it can be a real challenge, especially when your supply chain is… well… decoupled.
Flowcasting is uniquely capable of solving this problem quickly, precisely and well in advance so that everyone (store operations personnel, support office planners, buyers and suppliers) can see what’s going to happen.
Because Flowcasting connects the entire supply chain from the consumer to the supplier – it doesn’t support “decoupling” – it completely invalidates it.
For example, suppose that the item we planned earlier will be supported by an off-location display of 30 units in addition to the 20 units required as a minimum on the shelf. Furthermore, the stores need to have sufficient stock a week ahead of time to organize their merchandising teams to set up the display.
In Flowcasting, this is executed as a simple, future dated temporary change to the minimum stock:
Instead of stock arriving just in time to support sales, a large shipment to support the additional display will arrive the prior week, while the additional stock to support the sales uplift will arrive later.
Okay, but what if you’ve never promoted this item at this price point before? The forecast is your best unbiased guess at what’s going to happen, but you would rather have additional stock at the store than risk running out.
Here, we’ve set our minimum stock during the promotion week to ensure that we’re covered if we sell double what we expect.
What if this store can get multiple shipments during the promotional week? You can instead apply a safety stock uplift to the distribution centre plan so that the stock is positioned there to quickly refill stores that are selling through it more quickly, while not overloading the stores that aren’t.
Or you can split the difference by adding some of the additional safety stock to the stores and some to the DCs. Or… you get the idea. All nodes are planned and all nodes are connected, so the effect of changing the shape of the supply plan is precise and the impact on all nodes is transparent.
And by planning in this fashion (shaping the supply plan separately and independently from shaping the demand), there is an additional advantage over pushing stock out via allocation: continuous replanning. The planned shipments and arrivals will be recalculated every day as sales and inventory movements are realized between now and when the promotion starts. And everybody sees how the plan is shifting over time at every location, right back to the supplier.
While there are other methods for shaping the flow plan (temporarily bypassing nodes with planned network flow changes, days of supply/safety time, etc.), simply having separate levers for demand shaping and supply plan shaping is a very effective way to plan not just promotions, but any other scenario where “decoupling and pushing” would be used outside of a Flowcasting context:
Cannibalization and halo effects on items that compete with or complement a promoted item
Planning for the initial pipeline and shelf filling, followed by ongoing replenishment for a new item
Pre-building stock ahead of a seasonal or holiday peak
There is not any memory with less satisfaction than the memory of some temptation we resisted. – James Branch Cabell (1879-1958)
What are my current stock levels? What’s the status of my inbound orders? How were the weekend sales for my products?
A great deal of effort has been spent over the last 2 decades to provide this information to planners and decision makers in near real time. But how useful is it, really?
We like to call this the “salt, sugar and fat” of supply chain planning. It’s extremely satisfying to get answers to these questions in the moment, but the satiation wears off quickly and you find yourself asking the same questions a few days later.
These types of supply chain visibility metrics are merely a glimpse in the rearview mirror. The myriad activities that give rise to a particular inventory level, a change to an order status or a weekend sales result have already happened and have been happening for days, weeks or even months before the question was even asked.
It’s like sitting at the gate and your airline announces a departure delay. You would rather have that information than not, but if that’s all the information you get, you have no control over the outcome. All you know is that you won’t be getting to your destination on time.
Now, suppose that you’re a savvy traveller. Hours before you even leave for the airport, you check the tail number for the inbound flight. Then you check the origin city of that flight and a massive storm is rolling through right around the time it’s supposed to depart, virtually guaranteeing a significant delay.
What are you going to do? Try to get booked on a different airline whose inbound aircraft is not coming from the city that’s about to get pummelled? Extend your hotel stay for another night because there’s no way you’ll be getting out at a reasonable time? Rent a car and just make it a road trip instead? Or just suck it up and leave on your scheduled flight, even though you know you’re going to be significantly delayed.
Any of those options may be acceptable, depending on your needs and constraints (e.g. cost, how urgently you need to get to your destination, whether or not the distance is reasonably driveable). But you only have one option available if you didn’t see the problem coming and only learned about it when you were sitting at the gate.
The point here is that knowing where things currently sit is certainly useful, but nowhere near as useful as being able to anticipate what things will be like in the future. Constantly checking in on up-to-the-minute information about the very recent past may give you a sense of control, but in reality, you’re just sitting in the back seat bingeing on cheeseburgers and donuts.
In a supply chain context, focusing too much on “real time current” information can lead to false conclusions and bad decisions (or non-decisions).
You look at your current DC and store stock levels and everything looks nice and healthy, so you breathe a sigh of relief and move on to the next item. But a promotion is scheduled in 2 weeks that’s going to virtually wipe you out. And your lead time from the supplier is 4 weeks. This is an example of something that is a big problem, but it doesn’t look like a problem in the current data. The cost is lost sales that could have been avoided.
You move on to another item and you see that 30% of your stores are out of stock. So, you panic. You spend the morning trying to figure out how can this be? What happened? And you have a bunch of higher-ups (who are looking at the same “here and now” data that you are) asking the same questions. Meanwhile, an order was just triggered with the supplier that covers the shortfalls and is due to arrive in a few days. Within a week or so, all of the stores will be back in stock. This is an example of something that looks like a big problem in the current data, but really isn’t much of a problem at all. The cost is stress and lost productivity trying to solve a problem that has already been automatically solved.
Subsisting on a diet consisting mainly of salt, sugar and fat is not good for one’s long term health. So, how do you kick the habit?
Like the savvy air traveller, you need to give yourself a window into the future to know all of your options and make the best decisions in advance.
Properly cooked, an end-to-end planning process that is designed to always maintain a valid simulation of reality is a very tasty and nutritious vegetable.
There are few people that have had such a profound impact on world history as Sir Winston Churchill. A personal hero of mine, Churchill was an inspirational statesman, writer, orator and leader who led Britain and her allies to victory in the Second World War.
Churchill was an enduring optimist, who believed in duty, hard work and a never say never attitude. In my humble opinion, it was his passion and total belief that ultimately freed Britain, and Europe, from the grip of the gestapo.
An accomplished writer and orator, he was renowned for many sayings that summarized his philosophy and outlook on things. One of these, was the phrase “keep buggering on” – a phrase used to encourage people to keep going, even when faced with overwhelming odds. Churchill believed that to achieve one’s goal, you need to “keep buggering on” – never giving in and continuing the journey until you reach your goal.
I’d like to share a true story of my colleague, Andre Martin, who – for roughly 50 years – has “kept buggering on” to realize his dream of a completely connected, seamlessly integrated supply chain from consumption to source; what we call Flowcasting.
To begin, let’s turn the clocks back to 1974. Andre has a huge problem on his hands as the Director of Manufacturing and Distribution at Abbott Labs in Montreal, Canada. He’s getting beat up about and trying to understand why the service levels in Similac (an infant nutritional product), and others, are dismal. They hover around 90% or so, but the target is 98%, or better. To make things worse, his manufacturing and distribution folks are at loggerheads and often in a fight.
Andre recalled a Jay Forrester article entitled “Industrial Dynamics” written in 1958 and decided what was needed was an inventory planning system that connects and manages 4 separate levels of inventory – their 10 regional DC’s supplied by a central DC, which was supplied by 3 factories which were supplied by multiple vendors.
About the same time a colleague recommended that he attend an Oliver Wight MRP seminar in Boston – which he did and where he met Oliver Wight. Soon after he would retain Oliver Wight in a consulting capacity. Andre would share his idea how he was thinking of planning production and synchronizing purchases with suppliers using the principles of MRP. Given that Abott had two more levels of inventory to manage, what Andre concluded was that he needed a four-level planning system that would integrate all levels.
Ollie liked the idea and agreed with the concept but informed Andre that no such software system existed in the market. To realize his design, he would need to develop it himself but could count on Ollie’s support and guidance should he choose to do so.
In fact, Oliver Wight informed Andre that he knew a person that could help develop the new software and introduced him to a young dude named Darryl Landvater. Two days later Darryl visited Montreal to work with Andre and began the journey to develop the very first integrated DRP/MRP solution – connecting distribution and manufacturing into an integrated system.
Once designed and implemented, the results were phenomenal! Service levels increased to 98-99% consistently, inventories were reduced at all levels by 25-60%, obsolescence was down by 60% and the cost of production fell by 15% as well.
Given the success of this initiative, Andre continued to think about seamlessly integrating any industrial supply chain. At the 1975 APICS conference in San Diego, California, he’d confirm his thinking. He had been pondering about an integrated supply chain driven from store-level to supplier using the principles of what they implemented at Abbott Labs. His breakthrough idea was that he flipped the MRP concept of a bill of material and instead created a bill of distribution – so the integrated supply chain could be driven by only one forecast.
At the conference he’d bump into and discuss this idea with the legendary Dr. Joseph Orlicky, the father of Material Requirements Planning (MRP) and a planning guru. Upon hearing Andre’s idea, Joe thought about it for a few minutes, then responded in a profound manner. “Andre”, he said, “your idea is sound, because you should never forecast what you can calculate.”
Not long after his success with Abott Labs and the DRP/MRP integration, Andre would join the Oliver Wight organization to help take DRP mainstream, including writing the seminal DRP book and later a book called “Infopartnering”. During his time at Oliver Wight, he would help lead the successful implementation of DRP with more than 40 companies – helping to cement the principles of DRP in distribution and manufacturing.
He then decided that the thinking should be taken to retail. To that end he would work with early retailers like Sears to help them implement DRP for their distribution operations, including early pilots of supplier scheduling in retail – i.e., sharing time-phased shipment projections with merchandise suppliers.
He would re-join forces with Darryl and create the Retail Pipeline Integration Group, focused on helping retailers embrace these concepts and drive their entire integrated supply chain from a forecast of consumer demand at the store level. They would help several retailers, including my team at Canadian Tire, and dabble in determining what was needed to build a retail focused solution capable of enabling Flowcasting – including how to process the massive volumes in retail and the retail specific planning challenges, like managing slow sellers as an example.
Based on their learning regarding a retail-focused solution during their initial prototypes and pilots, they would visit several large planning solution providers to convince them that a retail solution would be needed. All the major players declined to build one. So, given they were both committed to the cause, they decided to build a solution themselves. It’s a solution that has eventually found a home with the Oliver Wight Group – ironically the organization where the ideas, thinking and concepts of integrated planning largely originated.
In terms of the Flowcasting concept, early pilots and implementations have proved, beyond a shadow of a doubt, that Andre was correct in his initial thinking regarding an integrated supply chain. In retail, the entire supply chain for early adopters is driven by only a forecast of consumer demand and all other demands are calculated – providing all partners a model of the business and the ability to work in harmony using a single set of numbers.
Andre is retired now, but he still interacts with me and the original Flowcasting pioneers to share his wisdom and talk a little smack about hockey (btw, Andre, the Leafs are better than the Canadiens, at least for now).
I suppose that I’m now one of the ones that will continue to drive the thinking and adoption of the principles and concepts of Flowcasting. Which reminds me of another famous Churchill quote to help inspire us; “Never give in. Never, never, never, never—in nothing, great or small, large or petty.”
Don’t worry, we won’t, so when it comes to Flowcasting adoption…
It’s an early spring weekend, 1991. A cold and dreary day. Several of America’s sharpest young minds have gathered at a hotel near Detroit. After the students find their way to their seats and the event starts, the room would fall dead quiet. All eyes were fixated on the 8X8 rows of squares. It was the start of the National Junior High School Chess Championships.
The tournament was usually dominated by teams from fancy, elite schools. Most of them had the resources and desire to make chess part of the school curriculum. Dalton – an elite New York school – were the defending champs and had won three straight national championships. For students at Dalton, chess was part of student life.
At school, every kindergarten student took a chess class, and every 1st grade student studied the game for an entire year. As they did in subsequent years. The best players would receive additional lessons from some of the country’s best chess teachers. When it came to chess, Dalton was a powerhouse and the odds-on favorite to win again.
That year, another New York based school had entered the competition as a bit of an unknown wild card. They were the Raging Rooks – students representing a school hailing from Harlem. The Raging Rooks were a group of poor students of color, mostly living in neighborhoods dominated by drugs, violence, and crime.
No one gave the Raging Rooks a chance. As they walked nervously into the hotel, many heads turned. They had very little in common with their wealthy, elite opponents.
To everyone’s shock, the leading teams stumbled slightly, allowing the Raging Rooks to tie for first place. In under two years, the poor kids from Harlem had become national champions. The biggest surprise wasn’t that they had won – it’s why.
They won because they had had great scaffolding.
In construction, scaffolding is a temporary structure that allows workers to scale heights beyond their reach and work/build safely. Once the job is done, the support is removed. After that, the building stands on its own.
In learning, scaffolding serves a similar purpose. A teacher or coach offers initial instruction, knowledge and guidance, and then gradually removes the support. A key goal is to shift the responsibility to you, so you develop your own approach and methods to learning. That’s what Maurice Ashley – the coach of the Raging Rooks – did. He provided structures, coaching and guidance to give them the opportunity and motivation to learn and improve.
He would use unorthodox and creative ways to provide scaffolding to help the students not only learn but become very interested in chess, including self-learning and improvement. They would draw and use cartoons sometimes to highlight key moves and variations. Other times, they’d write stories about chess matches. They also wrote and recorded rap songs about the importance of central control of the chessboard.
As they became better and more of a team, the players started taking the motivation and opportunity to learn into their own hands. They would study and analyze each other’s games, with a goal for better understanding and learning. They didn’t care about being the smartest player in the room – they wanted to make the team smarter.
Another type of scaffolding is teaching others, with research showing teaching, tutoring or having to explain ideas and concepts boosts the tutor’s own learning. The oldest children appear to benefit from explaining to their younger siblings, for example.
As it turns out, scaffolding is crucial in learning and development, which was used extensively by Ashley to coach his chess team to a national title. It’s about aiding at the right time, gradually reducing support as the student learns and increases their competence. This approach not only fosters independence but also instills confidence, paving the way for individuals to harness their potential and improve their overall competence.
In my opinion, scaffolding is crucial for any business transformation – especially, as an example, for retailers who are moving to a holistic, integrated inventory planning approach like Flowcasting. The better the scaffolding, the better the implementation – both in the short-term and, importantly, the long term.
From experience, a coaching and support team that provides learning about the underlying principles and concepts of Flowcasting helps planners learn and understand. Not just the how, but the why. Flowcasting is not about the calculations (though, that’s important to learn as well). It’s about changing the working relationships amongst the entire retail eco-system participants, improving collaboration and working in harmony with a single set of numbers, driven by the heartbeat of the consumer. It’s about changing behaviors, and that kind of change needs to be supported by good scaffolding.
Ongoing coaching, including discussions and example walk-throughs regarding business scenarios and applying the principles/concepts helps to further ingrain new ways of thinking and working. The more a coaching and support team provides ongoing learning to the entire organization (including the merchants, suppliers and key service providers), the better. In short, the more scaffolding the better. In these kinds of transformations, the scaffolding is not temporary, like it is in construction. It needs to be enduring.
In my opinion, it’s so important that I would argue that the long-term success of a transformation to Flowcasting, or any other significant business transformation, can be determined by how well you answer this question…
Flowcharts are standard tools for delivering projects. At an overall project level, it depicts, from left to right, what needs to be done and the rough sequence, with the project concluding when the goal is achieved in the final box on the right.
The goal is the box on the right. Every project, or change initiative, should begin by thoughtfully exploring what should go in that box. Some people call this “thinking from right to left”, and other people in various disciplines have used different language to describe what is fundamentally the same idea.
“Backcasting” is a term coined by University of Toronto Professor John B. Robinson to help in urban, environmental and energy planning. Backcasting starts by developing a detailed description of the desirable future state and then you work backwards to determine what needs to happen for that aspirational future state to become reality.
The key is detailed. The more detailed and specific you can articulate the desired future, the better.
Amazon founder Jeff Bezos is a Backcasting superstar and an inventor at heart. One of his brilliant inventions/innovations is the PR/FAQ document. His brainstormed idea was to make the traditional last step in a project, the first. To pitch a new project and have it embraced at Amazon, you need to write a PR/FAQ document – outlining the desired future state of the project, including the goal of the effort in the opening sentences of the press release.
The initial PR/FAQ document is shared with the leadership team, who meet and read the document in silence. Then they begin to provide input and feedback. People ask hard questions and engage in intense debate, discussing key ideas about the project, very focused on the goal and how it will help the customer.
The author of the PR/FAQ document then takes the feedback into account, revises the document and brings it back to the group. And this process unfolds again. And again. And again. Everything about the project is pressure tested and improved through multiple iterations. And the beautiful thing is that the concept that finally emerges is seen with equal clarity amongst the team and, importantly, everyone is on the same page from the start of the project.
Everything that happens after project approval is working backwards from the PR/FAQ – essentially backcasting from what’s in the box on the right.
The critical component of the approach is that the box on the right – the goal of the project/initiative or the desired future state – is a written narrative.
When you need to document your project using proper sentences and complete thoughts, it makes a significant difference to the quality of the idea/proposal. You can’t hide behind PowerPoint bullet points, and the thinking needs to be clear, concise and able to be understood by a critical team reading the document. This forces the project leader/team to think better. Getting people’s involvement and feedback through multiple iterations strengthens the narrative and helps to build commitment.
At Demand Clarity, when it comes to narratives, we’ve become Bezos disciples. We now use a 6-page written narrative for both our initial assessments of how well a retailer is in terms of planning and for outlining our future state recommendations – whereby we usually articulate how Flowcasting could work for the retail customer/client. The narrative approach has improved our thinking and the quality of the work we’ve delivered.
However, what’s inside the box on the right can also be used early during the project as a key change management mechanism for articulating the change and, more importantly, building commitment and ownership – especially amongst the senior leaders and sponsors.
The idea would be to document a future-dated PR/FAQ document to describe the end-state transformation to a Flowcasting-driven, integrated inventory flow planning process, whereby everyone in the extended eco-system was planning to a single set of numbers. The document should outline how the extended organization (including suppliers) would be working in the future and, importantly, contain quotes from all key stakeholders about the impact of the change. These quotes are building commitment for change.
This change-focused PR/FAQ document would be shared and referenced throughout the project teams and leadership/governance teams to help ensure people stay focused on the goal, understand the change and stay committed to the transformation. The written narrative about what’s in the box on the right becomes the rallying call for change.
I’m pretty sure you’ve heard the phrase “you need to think outside the box”. Sure, that’s good advice in many cases but to drive real, meaningful and lasting change you need to start by articulating, in detail, the desired change or future state.
When we make assumptions, we contribute to the complexity rather than the simplicity of a problem, making it more difficult to solve. – Julie A., M.A. Ross and Judy Corcoran
Planning the retail supply chain not only requires, but is entirely predicated upon making assumptions about the future.
Why?
Because when a customer walks into a store, they already expect the products they want to be on the shelf in sufficient quantity to satisfy their demand – and they give no advance notice of their planned visit. So depending on the cumulative lead times from the ultimate source of supply to the store shelves, the decisions you make regarding product movements today must be made based on what you anticipate (i.e. assume) customers will want – how much, where and when – days, weeks or even months into the future.
So for retailers of any size, that could add up to millions of assumptions that need to be made each day just for the expected consumer demand element alone. And each assumption you make is a risk – if an assumption doesn’t hold, then the decisions you made based on that assumption will cost you in some way.
If the supply chain is disconnected, there are more assumptions to be made. So there are greater risks and higher costs in the form of customer service failures and/or inefficient use of labour and capital.
As an example, it’s not uncommon for a retailer to have different planning and replenishment systems for stores and distribution centres. And those systems usually have a “what do I need to request today?” focus – think min/max or reorder point.
The store replenishment problem is relatively straightforward:
What is the current on hand in the store minus the display minimum (or “cycle stock” for want of a better term)?
What do you anticipate (assume) you will sell between now and the next scheduled delivery day?
If what you expect to sell exceeds the cycle stock, request the difference, rounded to the nearest ship pack
In this case, the only assumption you’re making is the expected sales, with a few “sub-assumptions” with regard to trend, seasonality, promotional activity, etc. going into that.
(NOTE: You are also assuming that your store on hand balance is accurate, which is a whole other lengthy discussion in and of itself.)
Okay, so far so good. Now we need to make sure that there will be sufficient stock in the distribution centre to satisfy the store requests. Because the supply chain is disconnected, the requests that the stores drop onto the DC today need to be picked within a day or two, so that means that the DC must anticipate (assume) what the stores will request in advance.
A common way to do this is to use historical store requests to forecast future DC withdrawals. In this case, you are making a number of additional assumptions:
That store inventories are largely balanced across all stores served by the DC and have been so historically
That any growth/decline in consumer sales will be accurately reflected in the DC withdrawals with a consistent lag
That there are no expected changes in store merchandising requirements that will increase or decrease their need for stock irrespective of sales
Going further back to the supplier, they have their own internal planning processes whereby they are trying to guess what each of their retailer customers are going to want from them in order to plan their inventories of finished goods. They are now several steps removed from the ultimate consumer of their products and have to apply their own additional set of assumptions.
It’s like a game of telephone where each successive person in the queue passes what they think they heard on to the next.
And if something doesn’t go according to plan, a whole bunch of people need to revisit their assumptions to figure out where the breakdown happened. At least they should, but that rarely happens. Everyone is too busy dealing with the fallout in “crisis mode” to actually figure out what went wrong.
The result?
In stock rates to the consumer in the 92-93% range
Excessive amounts of “buffer stock” to try to cover for all of the self-inflicted uncertainty (assumptions) in the process
Margin loss from taking markdowns on excess stock that’s in the wrong place at the wrong time
So how does an approach like Flowcasting – a fully integrated end-to-end planning process – sustain in-stocks in the high 90s while simultaneously (and significantly) reducing stock levels throughout the supply chain?
It’s not magic. By connecting the supply chain with long term supply projections and keeping those projections up to date, the number of assumptions you need to make are drastically reduced:
You already know the inventory for every item at every location, so you can model the long term need for each individually and roll them up rather than assuming averages.
The planning approach automatically models the impact of any changes in consumer demand by netting against available stock in store and applying the necessary constraints and rounding rules using simple calculations – there’s no need to guess how a changing demand picture will affect upstream supply.
Inventory level decisions (e.g. changes to display quantities and off locations) can be discretely modeled separately from demand and incorporated directly into the store projections in a time-phased manner. You don’t need to make a “same as last year” assumption if you already know that won’t be the case.
However, it’s not perfect and things can still go wrong. You still need to have long term forecasts about consumer demand, which means assumptions still need to be made. But when bad things happen, the information travels quickly and transparently up and down the supply chain assumption-free after that. Everyone knows exactly how they are affected by any botched assumptions about consumer demand in near real time and can start course correcting much sooner. “Bad news early is better than bad news late.”
It’s like playing telephone, except that the first player doesn’t whisper to the next – he uses a megaphone to ensure that everyone hears the same phrase at the same time.
As someone who’s been doing project work for decades, I must admit, it’s always cool and rewarding when you implement something. Shipping your work and having it exposed to reality instead of theory is the essence of innovation – taking an idea, or a design, and making it real.
But implementation work is hard, especially for a business process like Flowcasting since it touches, interacts and changes a large part of a retail business and extended eco-system.
I’ve been very lucky over my career to have either led, or co-led, three successful implementations in retail of Flowcasting or major elements of the concept. As an implementer at heart, over the years, what’s emerged are some mechanisms I’ve used that I believe are instrumental in success.
What I’d call my secret formulas.
For a key one, we’ll turn the clocks back to the mid-to-late 1990s. At the time I was the leader of a team for a national, Canadian hardgoods retailer, who’s mandate was to design and implement new processes and supporting technology to improve the planning and flow of inventory from supplier to store shelf.
The team had essentially designed what we now call Flowcasting and had selected technology to support the process. While we all understood that planning from the store level back was technically infeasible, we decided to forecast DC-level demand, and calculate and share forward looking supply projections with our merchandise vendors – in the process instilling the concept of supplier scheduling in retail. I won’t bore you with the details, but the project was quite successful and helped cement some of the principles of Flowcasting in retail, including supplier scheduling and working to a single set of numbers.
For a project of this size, like most larger scale transformations, we had a cross-functional governance team established – essentially like a steering committee – that would help guide the project and provide advice and suggestions to the implementation team. And to be honest, they did a good job.
However, inevitably, when a group of that size and functional diversity is tasked with guiding and asking questions of the leader (in this case me), there are bound to be some dumb asks and even dumber suggestions.
That was the input for me to develop my “Rule of 3”, which I/we used successfully on this implementation, and I’ve used ever since.
It works like this. If the ask/suggestion from the steering committee or large governance group sounded mental to me, I’d note it down and tell everyone I’d think about it. Then, I’d go back to the team and see what they thought. If they agreed it was mental, I’d ignore the ask/suggestion. And I’d continue to ignore it until the group had asked a third time – at which time I/we’d develop a response.
The beautiful thing about this approach is that seldom does the request ever get asked again, let alone a third time. It’s forgotten and therefore requires no cycles of thought or response from me and the team. I’m not exactly sure why but my thinking is that in larger groups people tend to like to hear themselves talk – they want to make suggestions/contributions, so they can’t help themselves and sometimes make a dumb suggestion or ask. Then, by the time the next session comes around, they completely forget about their initial request.
As an example, when I was working with our Winnipeg-based retail client designing and ultimately implementing Flowcasting, me and the team leader had to regularly present to a large cross functional group about Flowcasting – how it would work, the benefits, the implementation approach, etc.
I remember at one large, cross-project session a participant asking something like “How will the new process factor in social media sentiment into the demand planning process, to potentially revise the forecast of that item and others?” My response was, “Not sure yet, but we’ll think about it”.
I remember the team leader asking me after, “what are we going to do?”. My answer was simple: “Nothing. We’re going to ignore that and see if it’s ever asked again”. It wasn’t and the rest is history.
Now, not to brag or anything, but this client was able to improve daily in-stock from about 92% to 98%, while reducing both DC and store inventories, all while completely ignoring social media sentiment (whatever that is). Thanks to the Rule of 3.
Now, don’t get me wrong. I’m not saying that most of the suggestions from steering committees and cross functional groups are/were dumb – they’re not. I’m saying that a certain percentage will be and you, as an implementer, need a mechanism to ignore them and/or say “No” nicely, so you can stay focused on what matters.
For me, it’s The Rule of 3. It has been a loyal friend to me, over many years and implementations, and I hope you can use it – or something like it – as well.
It’s one of my secret formulas of implementation success.
