Episode Summary
“Unfortunately, because supply chain managers have demonstrated an ability to execute in the short term and put out fires as they occur, in some ways, we are actually rewarding the arsonists.”
– Mike Griswold, Vice President of Research, Retail at Gartner
This podcast is part of our monthly Supply Chain Today and Tomorrow series featuring Mike Griswold, Vice President of Research at Gartner. Mike specializes in retail, with a particular focus on forecasting and replenishment, and is responsible for Gartner’s annual Top 25 Supply Chain ranking.
In this episode, Mike shares some of the background regarding his research into S&OP and S&OE. Retail still needs to fully embrace what these conceptual practices teach us about shorter term planning horizons and operational execution.
In this interview, Mike discusses the following with Supply Chain Now Co-hosts Greg White and Scott Luton:
· Balancing the inbound and outbound goods in distribution centers creates a high priority opportunity to improve the alignment between planning and execution
· Retailers need to understand stores’ role in fulfillment, both in terms of foot traffic and e-commerce
· Why master data management is very quickly becoming a top priority or prerequisite with regard to analyzing and drawing value from customer data
Episode Transcript
[00:00:05] It’s time for Supply Chain Now Radio Broadcasting Life Supply chain Capital of the country. Atlanta, Georgia Supply Chain Now Radio spotlights the best in all things supply chain the people, the technology, the best practices and the critical issues of the day. And now here are your hosts.
[00:00:29] Good afternoon, Scott Luton here with you, Liveline Supply chain. Now welcome back to the show. On today’s show, we’re continuing our series Supply chain Today and tomorrow with Mike Griswald. Each month we’ve been spending time with Mike Griswald with Gartner, and he’s been sharing his insights and perspective on what’s going on in the world. Supply chain especially from a retail perspective today, we’re gonna be sharing some of the key takeaways from Gartner Research and continuing gaining his insights, especially from a S P and the S No E perspective here today. So stay tuned as we look to increase your Supply chain leadership. Q Two quick programing note. First, you can find Supply chain. Now wherever you get your podcast from Apple podcast, Spotify, YouTube, you name it. We’d love to have you subscribe so you don’t miss a thing. And secondly, think a few of our sponsors that allow us to bring these best practices and innovative ideas to you, our audience. They range from the Effective syndicate to Vector Global Logistics Cap Gemini U.S. Bank manymore. You can check out each of our sponsors on the show notes of this episode. Let’s welcome in my fearless co-host here today, Mr. Greg White serial supply chain tech entrepreneur, trusted advisor. Supply chain adj. great. Good morning.
[00:01:44] What more is there to say? Yeah, great to be here. I always love spending time with Mike. He’s got a great retail supply chain mind.
[00:01:52] Agreed, and the other series has been well received. We’ve gotten both from a Sheer metric standpoint as well as some of the anecdotal feedback we’ve gotten. So with no further ado, let’s welcome in Mike Griswald, V.P. analyst with Gartner Mike.
[00:02:06] Doing well, guys. Thanks. Great to be with you again. And looking forward to the discussion on SNL incessantly.
[00:02:13] Absolutely. So, Mike, before we talk shop and start picking your brain here, let’s make sure folks know what Gartner does as well as your role. So refresh your memory there.
[00:02:25] Sure. Gartner is the world’s leader. And in research and advisory, we equip leaders with indispensable insights, advice and tools to help them achieve their mission, critical priorities and build the organization successful for today and for tomorrow. We give leaders what they need to build the future for themselves and their organization. We do that through advice, research and direct one on one interactions outstanding.
[00:02:52] And we’re looking forward to, of course, as we’ve referenced in the series before, the top 25 SUPPLY CHAIN rankings, which will be released for 2020 in a couple months. Right.
[00:03:00] Correct. We are just early into the top twenty five season. But yes, it will culminate in a keynote presentation that will do at both our all our Orlando event as well as our event in Barcelona in June.
[00:03:16] Outstanding. Okay. So for the purpose of today’s conversation, though, we want to start with kind of painting the landscape. So first up, Mike, if you could share some insights around the current retail environment.
[00:03:29] Sure. When we think about what’s going on in multi-channel omni channel, unified commerce, whatever you want to call it, one of the big transitions that’s happened over the years is an increasing use of the store for from a fulfillment perspective. And what that does is puts lots of pressure on things like forecasting replenishment, inventory positioning as the store becomes more and more of center when it comes to fulfillment. So being able to align planning and execution around that and in particular around the inventory decisions is incredibly important and has become much more of a priority than maybe we saw 2 and 3 years ago when the store had risen to the level that it has in terms of imports around fulfillment. So that’s what we also see a huge opportunity in other areas. And we’ll talk about that in a little bit later. But some of the areas around DC capacity, how do we manage capacity? How do we manage the inbound at the outbound within a facility is becoming very important to retailers. Then let. Oh, sorry.
[00:04:37] Yes, real quick. So for just for our audience that may not know when you say D.C., you’re talking about a distribution center, right?
[00:04:45] Sorry. Correct. Yes. We love acronyms here. And I would like to add in Supply chain. So sorry, Scott. Yes, I will do my best to to remove the acronyms. But yes, distribution centers is what I’m referring to around. That inbound and outbound flow.
[00:05:01] That’s right. And add this in to kind of further that thought for folks, for members of our audience, that may not make the connection between how critical distribution centers and fulfillment centers are to the e-commerce, especially landscape. Certainly retail, but also especially e-commerce. Just want to add that context for you. We’ve got audience members of all types. So I appreciate you sharing some of the acronyms because we do, as Greg mentioned, we do loves acronyms in Supply chain. So sorry. Go read it.
[00:05:30] No. That’s no problem. And so when we think about balancing the inbound and outbound within our distribution centers, that certainly is an opportunity for us to improve planning and execution alignment. You know, we’re also seeing for for all types of retailers an incredible growth in seasonal and specialty types of products where I may have, let’s say, a one time buy of summer summer goods, you know, pool, patio grills, those types of things. And my ability to to understand the demand side, the ability to flow that in the right way. And then during the course of the season, being able to evaluate, do I have the right of entry in the right location based on sales, transit patterns? And what we’re seeing is as that type of product continues to grow in the retail portfolio. You know, our need to handle that and manage that in a much more proactive way is becoming incredibly important. And I think the biggest impetus I’ve seen around retail has been this desire, this desire to become much more proactive and much less reactive or minimize the number of times that we have to be reactive in things like sales and operations, planning and sales and operations execution. Help us take those steps towards being more more proactive. You know, one of my colleagues had had a famous quote that he used in one of our presentations. And I think it’s it’s indicative. And I think it paints a great picture of how we tend to think as retailers. You know, we pride ourselves on being firefighters. We pride ourselves on being able to react and get ourselves out of a jam. Unfortunately, many of our practices, because we’ve demonstrated this ability to execute it short term and put out these fires, we are actually rewarding the arsonists. And one of the things I’ve tried to do with this is that Opie and S.A.G. research is to move us to be more proactive. So we aren’t putting out all these fires and we are, you know, unconsciously rewarding the arsonists.
[00:07:47] So that’s a really good point. And and, you know, you you’ve really displayed that well by talking about the store’s role in fulfillment, both of foot traffic and of e-commerce traffic, because once it’s positioned in the store, it’s there essentially for good. That is the end of the supply chain until it gets the consumer for so many retailers. And it’s really hard and really costly to bring it back to the next tier up, which is the distribution centers. So you have to be very careful about not just how you plan, right. The S&P, the Planning S.A.. Right. But also the execution S.A. in not only taking a look at the plan, but recognizing how the plan has changed or how situations have changed to change the plan, so that when you position those goods in their acentral final spot before they reach the consumer. You’re not so far out of whack that, you know, you’ve got the worst example that I’ve seen is you’ve got ski vests right in your South Florida stores. You know, I mean, people from South Florida do go skiing, but not in the same measure that people of color are at. So you’ve got to be really careful there.
[00:09:07] Yeah. Greg White. You’re exactly right. I mean, it’s part of the reason that we’ve seen in the last couple of years a huge growth in the exploration of things like network design tools. How do we start to model our network? At what point do we have enough volume moving through the supply chain that we do need to push that volume down into the store? And you’re exactly right. Well, once it’s in the store, that’s really, you know, where for many retailers, that’s where it needs to land. But what’s been interesting and Greg, not to date you, but, you know, I’ve been around long enough to know that, you know, for, you know, four and five years ago, there was an incredible for the light bulb went on around the role the store four and five years ago, there was incredible energy around taking inventory out of the store. You know, our stores are over inventory. We have too much stuff. You know, how often did we hear from organizations that said, hey, I just got a note from the CFO who said we need to take 25 percent of inventory out of the organization. Now, what we need to ask ourselves is we probably need more inventory at the store because as its role as a fulfillment node continues to grow in, all of our research suggests it’s not going backwards, it’s going to grow. You know, we now need to rethink how we think about inventory and how much we need in the store. So that for a lot of organizations, you know, that that’s a a turnaround or a error, an about face from where we were even four or five years ago.
[00:10:40] Well, and don’t you think, though, that since since we’ve had that recognition that we need to rethink how we. Allocate or distributer replenish inventory in the stores because. You know, in the past, the reason that we had this discussion and you and I have had it and that was very generous to say four or five years. Thank you, Mike. We have had this this discussion for some time. And the reason that we had the discussion about too much inventory in the stores was as much about too much of the wrong inventory as it was too much of the right inventory. And and because of. The advancements in technology in the last four or five years, we’re more able to put the right inventory, the right products in the right quantities in the right stores than we’ve ever been able to before, right, because we can assess and even predict what the consumer is going to do rather than focusing on the item as the thing we’re forecasting. And, you know, I wonder what you know, what your researcher or discussions are are raising in regard to that.
[00:11:51] Yeah. Greg, I agree. I mean, technology, particularly for retail, has come a long way in the last four to five years, four or five years. When you think about the strides we’ve made in machine learning and A.I. and all that. And that has certainly helped. I think the other thing that has helped is, you know, to your earlier comment, what once inventory got to a store, it was pretty much dead. That’s where its final resting place was, partly because we thought that was where it needed to go, but also because we never really had a process where we could go on a weekly basis, interrogate inventory. Where is it and is it in the right place? And does what is the forward looking demand look like for these allocation decisions that we’ve made? And we’ll talk about this in a little bit later in in our discussion about S.A.G. in particular. But one of the use cases that’s emerged is around allocations and establishing a weekly Gates where I asked myself the question, you know, do I have inventory in the right place? You know, the ski jackets in South Florida. And do I have if I recognize that early enough in the season? Do I want to ask myself the question, do I need to reposition that inventory? Is it worth, you know, relocating those ski jackets someplace else for the for the last four weeks of the season so that I’m not taking a 90 percent mark down in south Florida? Maybe I end up taking, you know, a 30 percent mark down someplace else, but that’s better than a 90 percent mark down in south Florida. And we’ve just started to make people aware around procedurally and process wise, how do we start to think about that? Whereas in the past, you know, it was this is where it is. This is where it’s going to be. And we’re not even going to we don’t have a way to talk about should it be someplace else.
[00:13:44] So it’s like we planned this. But so I think that’s a great Segway into, you know, what your research, your discussions with retailers and, you know, your valuable perspective on how s Opie and S.A.G. play into that. So can you share a little bit of of that with us?
[00:14:05] Sure. Let me let me maybe take if if the audience will bear with me for about a minute and a half. Let me just give you a quick history lesson from my research around where I started and where I’ve landed, because it it is, I think, helpful for the audience to see where our research has taken us from an S&P in and S.A. E perspective. So, you know, from from my days at a.m. R to now through Gartner, you know, as a research company, we’ve been writing about S&P for probably 20 years and it is well entrenched in every other industry except retail. You know, I took I took S&P to retail and repackaged it, rebranded it with an idea that we would be talking about the traditional S&P planning horizon. Three to 2 months, three to 20. I know you called that. Right. Exactly. Merchandisers, Nigeria. Yep. Merchandising, inventory operations, execution. I basically put, you know, retail lipstick on the S&P pig and it actually started to resonate. But what we found what I found is conceptually it resonated, right? Well, we do planning and execution. But what we tell is we’re struggling with, as as retailers do, is how do I take conceptual, you know, abstract concepts. How do I make them real? And we were struggling to get retailers to kind of buy into S&P. So I had a couple of conversations with with two retailers, in particular Kathmandu, who is the RBI equivalent in New Zealand and Tractor Supply. And you know, what they help me think about is the how do we take the concepts of S&P aligning planning and execution, but how do we make it real in a short term planning horizon, which everyone else calls S.A.G.? So what I’ve transitioned my research in the last two years has been recalibrating the research to be on a shorter term planning horizon 0 to twelve weeks.
[00:16:15] You know, I had transition MYOB from S&P. To the short term planning horizon, and then I basically said, look, it’s S.A.G., we’re gonna retire MYOB. And now all of my researches are on retail sales and operations execution. Because what we have uncovered to your earlier comment, Greg, is we’ve uncovered a handful of very tactical practical value adding use cases that nine out of 10 retailers will tell me, hey, it’s not that I have one of these problems. I have all of these problems. Where should I start? So that’s kind of where we’ve landed. And, you know, I think at some point, Greg, you know, it will make sense for us to revisit S&P as it’s, you know, you know, academically defined, longer term planning horizon. It will make sense to look at that for retail, because, you know, right now we’re solving very tactical problems recently. But, you know, in fairness, we’re solving them in a vacuum. And if you look at how this is supposed to hang together as a._p sets the direction and sets the deliverables that we use S.A. E to execute against, you know, we’re not there yet in retail. But I do see I’m starting to have some conversations with retailers that say, hey, we’ve had some early success with S.A.G.. Talk to us about s a._p. So that’s kind of where we’ve landed.
[00:17:47] You know that, again, we’ve known each other for four or five or longer years. Do you think that the availability of. Robust data on consumers out there. Do you think that that is yet contributing to this ability to first do sales and operations execution better, but then also use those learnings to drive back into better sales and operations planning? Do you think that that has yet to. Enter or I mean, if if you put it if you put it on a on a maturity curve, right. Where would you say robust data is in in terms of value in the in the retail supply chain today?
[00:18:33] Yeah. Greg. Great question. I think where we are still at a place where master data management is not sexy. And, you know, until we can get to the point where we can use you SPDM and sexy kind of in the same sentence, you know, we are still going to throw a bit of a stretch of it does. I am encouraged, though, by by more and more discussions with retailers that when we talk about these different use cases, you know, that the light bulb goes on that says, hey, oh, by the way, my data is important to the success of these. So I think through through e-commerce, multi-channel shown a light on things like data attributes and labor standards and those types of things as we put more orders in the store. I think master data management is is very quickly moving to the top of the list as a priority slash prerequisite to do some of these things that we’re talking about now. The customer data is interesting. I mean, I think, Greg, for right now, when I look at where the where the emphasis, if I think about, you know, planning emphasis and I think about execution emphasis, things like a forecast customer insights, those types of things, they really enhance the planning component of this.
[00:20:02] Right now, the use cases are heavily skewed towards execution, which in some ways is good, because if I think about where we are from a demand planning maturity perspective in retail, when I look at our data from from retail or self-assessments, you know, we’re just coming over stage 2. So for those people that aren’t familiar, you know, Gartner, we love maturity models. We have a ton of them. We use a five stage maturity model, stage one at least mature stage 5. Most mature. So retailers are just kind of crossing that that stage to threshold. So we’re getting better, right? When I started looking at this, we were, you know, middle stage once. So we are improving. But I think part of the S.A. P journey is going to require some more planning maturity as well, which is why I think we’ve seen that focus on data around the execution side and we’ve seen the focus on those execution use cases as we count start to wrap up this interview.
[00:21:02] Mike, any other onetime use cases now love practical applications of the concept you’re sharing? That’s that’s really what makes these conversations so, so valuable. Anything else come to mind when we’re talking about what S.A.G. really looks like in real life?
[00:21:19] Sure. Probably a bad a bad metaphor or a bad analogy, given the coronavirus. But but patient zero for S.A.G. was really D-C capacity management number of retailers have come to me. That’s by far the most popular use case in retail now. People are tired of answering the phone from the distribution centers, saying, I have I have no space where we’re going to put stuff today or where we’re gonna put stuff tomorrow. So this ability to look for five, six weeks out forecast the inbound, the capacity and the outbound so that I know three weeks from now I might have a problem, which gives me a whole a whole lot more options, cheaper options potentially to to fill that space. We talked about the allocation. You know, seasonal programs are another one where people are recognizing that, you know what, when I put all my gas grills in one location and it turns out, you know, three weeks into the season, some of them are in the wrong location. You know, I need a way to rebalance that inventory or at least have an educated, data driven discussion around what my options are. And then the one we did talk about, Scott, Greg, that’s becoming very popular with the food retailers is promotional planning. You know, we know from talking to grocers and our own personal experience right there, there’s a grocery sale every week. And I can tell you from my past life in the grocery of industry, you know, we’ve got three to five thousand items coming on and coming off promotion every week. The biggest challenge we have is what do I do with all this stuff? I didn’t plan for very well at the end of the promotion because, oh, by the way, a new one is starting, you know that next week. So that pro-ball planning use case. How do I get consensus on the demand? How do I flow? When do I allocate? How do I understand during the week how things are progressing? Putting structure around that has emerged as a very popular use case for the food retailers.
[00:23:18] All right. We’ll. Really appreciate your time, the series. We’ve heard a lot from folks that that want to see that research come to life. Right. And we’re really bear out in a meaningful way that that supply chain practitioners can relate to. So really appreciate your time today. Want to close? Mike and Greg, unless I won’t cut you off any commentary before we we make sure folks can connect with Mike Singleton.
[00:23:44] No, I mean, I think. Well, yes, a little bit of commentary. I’m sorry. But you know, what’s interesting is that, you know, as we’ve talked about a lot, Mike and I have known each other for a while and. These are common and legacy topics. Maybe D.C. capacity is relatively new. But I think now that we’ve got this recognition, recognition right that there it we are in Stage 2, which is really and you can refine this a little bit, Mike, but really that’s recognizing we have a problem. It’s starting to to do something about it. But now that we’re there. It’s interesting to see that these are the problems that we have so often had. And I think that they are probably the most difficult to solve because they are predicting the customer in the case of promotional planning, they are around a singular shot at placing the goods with seasonal buys and allocations and repositioning and and things like that. Those are some of the most difficult retail business problems to solve. And I think they will always be the most difficult. But. Where this is where we really need to see progress and this is where it really hits. The awareness of the consumer and of supply chain and retail professionals, so it’s interesting to me, interesting and a little bit disheartening, frankly, to see that those continue to be the issues. But but, you know, in retrospect, I realize that they will probably always be those issues. We’ve just got to progress much more rapidly on these things and they require a significant amount of focus. Yeah.
[00:25:27] Yeah. Greg, I agree. But maybe, Scott, that my last comment would be when we’ve spent twenty five minutes together and we haven’t really talked about technology and we don’t need to. The S&P and S.A.G. challenge for retailers can be additionally tackled and solved through process. And we don’t need technology will enable us at some point down the road. But I think my message to folks is, you know, if you think you’re going to solve your planning and execution alignment challenges through technology, I would ask you to rethink that and start thinking about it from a process perspective first and that that’s what our research has really told us.
[00:26:08] Love that perspective as much as we all love technology. In all of its ways, shapes and forms at the core, solid process, solid leadership, you can still highly relevant and and undervalued, especially in 2020.
[00:26:23] All technology does is accelerate a sound, sound or unsound a process. All right. I agree. So and the awareness appears to be coming. And that’s what Mike shared with us today. The A the recognition to change the process is important. And then we can start to apply technology.
[00:26:44] Yes. Yep. Well put. OK. That’s a great kind of a leap. The dropping off point here, I think for this episode. Really appreciate your time, Mike. So how can folks learn more about Gartner as well as connect with you, Mike?
[00:27:00] Probably the easiest way. Scott, Greg is just, you know, reach out to me directly, like Doc Griswald at Gardner dot com. Go to Gartner dot com. You know, check out the research that we have within the Supply chain committee. There’s a lot there. So those are probably the easiest ways for people to connect. And I’m happy that people reach out to me directly.
[00:27:19] Ok, well, big thanks to Mike Rosewell with Gartner for his time today to our audience. Be sure to check out our events and webinar tabs at Supply Chain Now Radio dot com. Got a variety of in-person and virtual events coming up along these lines with people, people that know what they’re talking about. Right. Folks have been there, done that and are offering sound agnostic thought leadership. Other organizations continue their their journeys to get better and better. Some of the partners that we that we are we’ll be working with in the months ahead. If T Reuters Events Automotive Industry Action Group, the George Logistics Summit, DHL resiliant 360, MOAD X and many more. If you can find something on our web site or if you got a question, she turned it over to our CMO Amanda at Supply Chain Now Radio RT.com or hit us on Twitter and we will try to serve as resource for you. OK. Once again, big thanks to my co-host Greg White. The ever present supply chain adj.. And of course, Mike Rosewell, V.P. of analysts, BP analyst at rather a Gartner to audience. Be sure to check out our other upcoming events, replays of our interviews, other resources at Supply Chain Now Radio dot com fundis and subscribe wherever you get your podcast from. On behalf of the entire team here, Scott Luton wishing you a wonderful week ahead and we will see you next time on Supply chain next month.
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Mike Griswold serves as Vice President Analyst with Gartner’s Consumer Value Chain team, focusing on the retail supply chain. He is responsible for assisting supply leaders in understanding and implementing demand-driven supply chain principles that improve the performance of their supply chain. Mr. Griswold joined Gartner through the company’s acquisition of AMR. Previous roles include helping line-of-business users align corporate strategy with their supply chain process and technology initiatives. One recent study published by a team of Gartner analysts, including Mike Griswold is Retail Supply Chain Outlook 2019: Elevating the Consumer’s Shopping Experience. Mr. Griswold holds a BS in Business Management from Canisius College and an MBA from the Whittemore School of Business & Economics at the University of New Hampshire. Learn more about Gartner here: www.gartner.com
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