Think back to the first microwave that your parents had and what are you likely to see? A rectangular box with three buttons (High, Medium, Low) and a timer dial. Now fast forward to today and what will you find?

As a comparison, one of LG’s more popular models has 33 buttons. What’s the difference between Auto Defrost or Express Defrost? And what happens when you press Less/More? Will any of these really make your popcorn pop faster or taste better? And it’s not easier to use.

Why do products become more complex as they evolve?

My view is that most organizations head down the path to complexity as a result of listening to – and putting faith in -people who are unqualified. Uniquely unqualified. And who are these folks?  Most often, they are your customers and peers!
Customers? Peers? Uniquely unqualified?

Isn’t it the doctrine of good business to listen to your customers? And isn’t the customer always right? Nope and nope.

Consider Apple. They abhor customer focus groups. It’s in their DNA to not listen to their customer. After all, which customer suggested the iPod, or even the iPhone?
Ironically, listening to your customer is often the road to ruin. The issue is that there are too many of them. If you try to accommodate their collective wishes and suggestions, what you do get? 33 buttons on a microwave, that’s what.

It’s no secret that I think most planning solutions available in the market today are way too complex. Part of the problem is that many of them are fairly mature and they’ve done a great job, at least in their opinion, of listening to their customers over the years. People who are generally unqualified to suggest improvements.

Now, don’t get me wrong, I’m sure that good suggestions have come from customers. It’s just that very few companies from what I’ve seen have the courage to ignore the wishes of their customers and market forces and not include additional functionality.

Planning solution simplicity requires paring things away (or not adding them in the first place) when market forces tell you to add. It means removing layers rather than adding them. In short, it takes courage.

Since courage is largely lacking, most mature planning solutions in the market today are too complicated, too heavy and too burdensome. They are difficult to learn and implement, often requiring millions of dollars and years to realize benefits.

As a practitioner who helps companies implement these solutions it’s not hard to see where the uniquely unqualified come from. Most efforts to implement planning solutions are not grounded in fundamentals, or principles of the process.

Consultants and Solution teams focus on installing and configuring the software, rather than on configuring the way people think, so they understand the core principles of the new process.

And the result is telling. If people do not understand the key principles of the process, then they cannot think properly about the new solution. The result is that they mostly end up working hard to make the new solution act and behave like the current solution.

This is all they know because until they are educated and understand the principles of the new process, guess what? They are unqualified to implement the new approach. Uniquely unqualified.

It boils down to courage and the ability to say “no” in an effective manner. Solution providers need to resist the urge to add unneeded functionality, while helping to educate those requesting the “improvements”.

Similarly, consultants and implementers also need the courage to reject the idea of jury rigging the new solution to look like the old.

Can you say “no”? Are you qualified?

“Just definitions either prevent or put an end to a dispute.” – Nathaniel Emmons

Lora Cecere, a well-known supply chain industry consultant and author of the Supply Chain Shaman blog recently made the following prediction about Flowcasting:

“Distribution-centric industries are not all pull. The flows are a combination of push and pull based on demand shaping programs. As a result, flowcasting may be a good tool for turn-based volume, but lacks the depth of analytics to help with promoted goods and new product launch.”

To be fair, she was actually speaking about JDA’s Flowcasting software (which got its moniker in the RedPrairie merger), but based on the wording, one could also attribute her comment to the Flowcasting idea.

Whether or not you agree or disagree with her sentiment boils down to how you define the following:

• Distribution-centric
• Push and pull
• Demand
• Promoted goods
• New product launch

Ask any 10 supply chain people to define these terms and you’re likely to get at least 6 different answers. While Lora is an experienced and respected supply chain expert in the manufacturing space, I’ve spent my entire career in retail. I have often found that I speak a different dialect from my upstream supply chain brethren.

How you define each of these terms is critical to determining your view about what a supply chain does, why it exists and how it operates.

Distribution-Centric

Each successive step in the supply chain (manufacturing, distribution, transportation, merchandising) adds cost to a product and increases its value to the consumer. However, a key tenet of Flowcasting is that value is not fully realized in the supply chain until the product reaches the point of final consumption. In that regard, any company that manufactures, distributes, hauls or sells product that is meant to be purchased by a consumer should not consider themselves as part of a “distribution-centric industry”. Distributing the product is only one part of the process – if products are not purchased by the end consumer, then everyone – from the manufacturer to the retailer – will be out of business in short order. By my definition, all of the players should consider themselves part of a “consumption-centric” industry.

Push and Pull

By a wide margin, these are the two most overused words in the supply chain lexicon. We assume that everyone has the same definition, but if consensus has been reached on what these words actually mean, I have yet to hear it.

My definition of “push and pull” is an extension from my definition of “retail supply chain”. The way I look at it, the supply chain hasn’t done its job until the customer has made the purchase. In that context, the notion of a “push” supply chain sounds a bit absurd. I imagine a customer wheelling a shopping cart through a retail store while the staff fill the cart – against the customer’s will – with product that she doesn’t want. The point is that if you believe the supply chain ends with a customer purchase (and you also believe that the customer must choose to buy it), then the idea of “pushing” product is really a shell game – in the end, the supply chain can only be driven by a “pull”. In the case where supply exceeds demand (to be discussed later), the only option to get the product completely out of the supply chain is to “encourage a pull” from the consumer through markdowns and clearance pricing.

In the case where supply is constrained, decisions need to be made as to where to locate the product where profit will be maximized. This can mean forward positioning the product to DCs and allowing the stores that are selling it quickly to “pull” it the rest of the way. Flowcasting fully accounts for the constrained supply scenario and provides the most up-to-date information possible to properly ration when this occurs (i.e. when a customer facing stocking point has a stockout in its future, the “pull” is disabled until such time as the location is back in stock, which may not ever happen for short lifecycle products).

The point here is that there’s more to managing a supply chain than just replenishing the inventory and if the whole plan is not based on expected sales at the store shelf, then it will not be possible to do forward looking capacity planning, S&OP and joint business planning with a single set of numbers, all of which are necessary to maximize sales while minimizing supply chain resource usage.

Demand

For any enterprise that participates in making, distributing or merchandising product that will eventually find its way into a consumer’s hands, “demand” (or more specifically “independent demand”) must mean expected sales at the store shelf. When a manufacturer considers demand to be “customer order demand on the DCs or plants”, they are talking about dependent demand which does not exist without expected sales at the shelf. In the Flowcasting philosophy, managing dependent demand is a waste of time and a huge driver of inefficiency in the supply chain. As Dr. Joseph Orlicky (the father of Manufacturing Resource Planning) once quipped: “Never forecast what you can calculate.”

Promoted Goods

I’ll make a distinction here between “regularly selling goods on promotion” and “promoted goods”.

Regularly selling goods on promotion are easily planned in Flowcasting through an update to the forecast to account for the expected lift in sales during promoted weeks. The increased forecast “pulls” product to the correct locations just in time based on inventory levels, rounding rules and all the normal stuff that drives the supply chain for these same items during non promoted periods (with the exception that safety stock may increase ahead of the promotion to execute display setups).

In contrast, “promoted goods” (by my definition, not necessarily Lora’s) are items that are limited-run, short lifecycle items (perhaps with special displays) that are not planogrammed in the store. They are placed on the sales floor, sell out and are discontinued. Again, I fail to see how this is different from the short lifecycle product scenario. Before 10,000 units of a promoted product is made or bought, there needs to be a plan to sell it. Where will it sell? When will it sell? How did we arrive at 10,000 units? At what price will we sell it to make it a profitable venture but still not have any carryover stock? These are all “pull” questions. If they can be answered before commitments are made to make or purchase the product – and they certainly should be – then there’s no reason why a promoted item cannot be planned as a “pull” for all of the reasons mentioned previously.

New Product Launch

Flowcasting is the only process that can plan the expected sales of a new product discretely and independently (with regard to both magnitude and timing) from the “pipeline fill” requirements to ensure that both merchandising and safety stock needs are met and sales are supported with the correct timing for both.

If a product is a “new variation on an existing product”, then a forecast can easily be created by copying and scaling existing sales history. If it’s something that the world has never seen before and is completely unlike anything else, then additional guesswork and collaboration is needed to produce a forecast. In either case, the assumptions driving the sales forecast are documented and executed within the Flowcasting process.

When sales materialize in an unexpected way (i.e. higher or lower than expected for any selling location), Flowcasting automatically replans the supply chain and alerts people to the mismatch on the day it begins to happen.

Short of an actual crystal ball that can predict the future with 100% accuracy all the time, I’m not sure there’s a better way to manage a new product launch, at least in a world where retailers and manufacturers are working closely together in a single process, which is a trend that’s accelerating.

I’m certainly no shaman myself, but I have only one prediction: A lot more discussion and debate about this over the next few years.

 

“I have never been especially impressed by the heroics of people who are convinced they are about to change the world. I am more awed by those who struggle to make one small difference after another.”                           – Ellen Goodman

What does “customer service” really mean?

Many retailers subscribe to the notion that world class customer service is achieved through acts of heroism.

Nordstrom’s, for example, has built a reputation on its customer service folklore. In one case, a customer came into a store with a receipt to return a used set of tire chains. Without a moment’s hesitation, the clerk refunded the customer’s money and took the chains back – even though the receipt wasn’t from Nordstrom’s. The clerk refunded the customer from her own pocket, then on her lunch break, took the customer’s receipt and the tire chains back to the store where it was originally purchased to get her own money back.

Home Depot has a website called www.orangeblooded.net  where their employees can post the details of their customer service exploits. In one such account, 3 employees used a forklift to open a storm drain in their parking lot and climbed down 15 feet to retrieve a set of keys that a customer had dropped.

Employees making home deliveries to customers on their own time.

Staff spending hours with customers to share product knowledge and make sure they have everything they’re looking for.

Driving to a customer’s home to teach him how to use some new gizmo that he just bought and can’t figure out how to use.

These are great stories and there’s no doubt that the customers involved are now customers for life.

But what about customers like me?

According to published studies on retail out-of-stocks over the last 15+ years (not to mention my personal experience), on the average shopping trip, I walk out of the store with only 92% of the items on my list. Even worse, if I’m enticed into the store by a flyer or promotion, 15% of the time the product isn’t there when I show up.

Don’t get me wrong, retailers whose employees go the extra mile for customers should be fiercely proud and praise of those deeds should be bellowed from the highest rooftop.

I’m just saying that heroism isn’t the only definition for world class customer service.

Time is the world’s most valuable non-renewable resource. For 99.9% of my shopping trips, I don’t need a hero. I need to be able to get into the store, get what’s on my list and get out as quickly as possible without having to come back later or go somewhere else after being confronted with an empty shelf.

It won’t make any headlines, but the greatest customer service experience I can have is to walk into a store, easily find everything on my list and then leave without having to speak to anyone.

 

“I hope to soon be in contact with the man who is searching for Noah’s ark.” – Jim Sullivan

It’s early June 1972 and my Mom would do something she’d regret for years.  On my 10th birthday she gives me a wooden chess set and a chess book.

I devoured the book, studying the games of the great Jose Raul Capablanca.  Then in September the world becomes fascinated with chess and with one Robert James Fischer.  The Fischer – Spassky match gathered worldwide attention and put chess on the map in the west.

Fischer would become World Champion, then drop from existence for 20 years – never to play again until 1992.  Bobby Fischer became a hero of mine and soon I announced to my parents that I intended to one day become World Chess Champion.

For a few years I was searching.  Searching to become the next Fischer.  Eventually I’d give up on my dream.

The point of my little personal ditty is that searching can be a dangerous and pointless thing.  Especially when the search is fruitless.

Supply chain planners have been searching for lots of things too.  One thing that many have been searching for is the optimal order.

Like my quest to become the next Fischer, this is a search that makes little sense.

What, exactly, is an “optimal order”?  What criteria would you use to determine its optimality?  Weight?  Cube?  Dollars (heaven forbid)?

What makes this search futile is the paradigm shift in retail planning systems and processes.  It’s a fundamental shift that, on the surface, sounds like nothing when in fact it’s a big deal.

Retail planning will see a seismic shift from ordering to planning.  For what seems like eternity retail supply chain planners have been worshiping at the altar of orders.  A product is either on order or it’s not.  Optimizing the next order was critical since that’s all replenishment cared about.

Today smart retailers understand that there is little value agonizing and fretting over the next order.  Rather, they are beginning to understand that service and costs can be improved significantly not by focusing on the next order, but by carefully determining a series of planned orders – well into the future (like, say for the next 52 weeks).

These projections can be shared with the supply chain partners who are expected to satisfy these future orders.  It makes their job easier and helps to ensure no surprises.

These order projections can also be used to determine future capacities, financial requirements and potential problems.  Combined, these projections form a powerhouse of information to be used by everyone in the extended retail supply chain to deliver unheard of service levels, while simultaneously reducing total supply chain costs.

In a world of planned orders, what sense does an “optimal order” make?  None, precisely.

That’s because in the new world each planned order is dependent on the previous ones.  The planned orders adjust based on what’s happening at the store shelf, only for the upcoming one to become a committed order at the agreed-upon lead time.  Trying to optimize this order at this stage could change all future orders.

Does that make any sense?

Why not build realistic and sensible ordering rules into your planned orders, then let actual sales fine tune the planned orders until they are ready to be committed?  Wouldn’t that be much simpler, easier to understand and cause less disruption than searching for the optimal order?

Soon retail supply chain planners will realize that searching for the optimal order is pointless.

The same conclusion I arrived at in my search to become the next Bobby Fischer!