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2013

In my last entry I discussed Sears as an example of a company that stopped asking ‘Why not?’ and started asking ‘Why?’.  I believe that this is a major reason why Sears seems to have lost its way as a leading retailer and is going through an elongated ‘aging’ process to what could be its twilight.  I think that a big reason that Sears started to decline is that it started playing safe, or trying not to make mistakes, and this lead to  a stagnation that can be extremely difficult to overcome.  This is what I was referring to when I say they stopped asking ‘Why not?’ and started asking ‘Why?’.  There is one other thing that’s important in this equation and that is the courage to follow through and execute your ‘Why not?’ question.

I chose Macys as a positive example of a company that continues to ask ‘Why not?’ and also a company that has the courage to follow through with that conviction.  Anyone can look at a company such as Apple, or Google as great examples of innovative companies that continue to ask the question ‘Why not?’ so I thought it is important to focus on an example of a company that has been around for a long time to provide a ‘bookend’ to my negative example of Sears and so I chose Macys because I see them as a company that not only has the initiative to continue to ask ‘Why not?’ and they also have the courage to follow through on the innovation.  I also chose Macys because I see this as an example of a company that is driving innovation through a continuous improvement process.

Macys could have followed the same trajectory as Sears, afterall here is a company with a long history and had gone through growth by acquisition, which is always tough to successfully navigate.  The difference is that Macys focused on the market, they identified their target market and customers and then they focused on that market.  Macys is not trying to be all things to all people, they focus on the niche they have selected in order to be the best in that niche.  In addition to a focus on the market, Macys also focuses on the operational and execution side through their supply chain and omni-channel sales.  I see this as an example of focusing on the ‘Why not?’ and dismissing the ‘Why?’.  This is also where Macys understood their capabilities and more importantly identified where they needed to grow and then focused on growing those capabilities. 

The end result is that Macys is considered a leader in the omni-channel sales capabilities along with a leader in their niche.  These capabilities were identified and developed over time in a progressive manner that builds on the previous deliverables to continue to add new capabilities and improve on the current capabilities.  They have shown their focus on asking ‘Why not?’ by continuing to use their tools in new ways and putting tools together in ways to deliver new features to their customers and also new opportunities for their business to grow.  Another point that I find interesting is that Macys’ use of direct to consumer has grown based on the opportunities to support their market share and simplify their customers’ shopping experience.  I think that this shows Macys’ focus and commitment to asking ‘Why not?’

Now for the audience participation portion of this program…….

What other examples can you think of that describe the lifecycle of innovation?  What other examples can you think of that describes the positive and negative examples of the trajectory in addition to my examples?

In my last entry I explored what I discussed the power of the question ‘Why not?’. I believe this is a deceptively complex question that has been a driving the success of many organizations and many famous and inspiring people throughout history.  I want to take this time now to discuss how this deceptively complex question sparks innovation.  Another point that I made was that innovation is something that you cannot teach, and while I am still committed to that belief I do think that there are some practices or habits that you can follow that will provide the encouragement to think in new ways that will encourage innovation.

As I discussed previously I think there are two types of innovation;  innovation can be instantaneous, or it can be a gradual series of small innovations, (that come about from a continuous improvement program) that reshapes, or in some cases, destroys the method or business model.   In fact, I believe that innovation is a great way to describe life - innovation can be viewed as a birth (or rebirth) and as such it heralds a fresh beginning.  So if that is the case, then the lack of innovation, or a focus on safe or tried and true methods and practices should be viewed as an aging process that eventually leads to death, in this case the death of a method, or practice, or business.

Let me provide an example of the lifecycle that is innovation from a real life company.  I’ve been thinking about potential examples and selecting an example that would provide the full lifecycle in a way that appropriately supports my belief.  I chose Sears as my example because it shows a birth of a totally innovative shopping concept and the gradual aging of this once great company into a shadow of its former greatness. 

Sears was born in the beginning as a result of a totally innovative concept in shopping - the mail order catalog.  This came along at a time when the nation was young and the population was expanding across this vast nation.  Sears provided a means for the growing and expanding population to shop for their needs and their desires from the comfort of their home.  More importantly Sears provided people with the opportunity to purchase anything they could dream of from a catalog and have it delivered for pickup at a local outlet.  The consumer could purchase anything from clothing to a house and the compelling point is that Sears provided a means for the customer on a farm to purchase the same goods as a person living in New York city.

Fast forward to the 1980’s and you find this once great company still the largest retailer in the world, but they are looking over their shoulder at the competition gaining.  You would see a great company that was stalled because they were focused on their past and did not understand the changing habits of the society at large.  The company was focused on maintaining the status quo and so their offerings became stale, they may not have lost the desire but they definitely lost the mindset of ‘Why not’ - they focused on doing more of what made them successful in the past than how to meet the future needs of their customers.  In this time they even eliminated their catalog business because it was not profitable. 

Fast forward again another 30 years and you find a company in the twilight of its existence struggling to just exist.  The epitome of this struggle can be seen in the combination of Sears and K-mart - two dinosaurs struggling to navigate the business world being lead by gazelles that can change direction on a moments notice and are driving to an omni-channel shopping experience to allow their customers to spend their money with them anytime and anywhere they may desire.  It may be a little harsh but it seems now that Sears is focused more on following concepts developed by their competitors rather than defining their world through innovation.  I think this can be attributed to a simply change in philosophy from ‘Why not?’ to ‘Why?’

Now for the audience participation portion of this program…….

What other examples can you think of that describe the lifecycle of innovation?  What positive example can you think of that describes the opposite trajectory of my Sears example?

tbrouill

The Power of Why Not

Posted by tbrouill Apr 23, 2013

After my last discussion promoting the importance of the question ‘Why not?’ I realized that this simple question epitomizes the simplicity and power of creativity and curiosity.  I believe that simple question is probably the most powerful force in driving innovation but, as Peter Parker’s Uncle Ben told him before dying - With great power comes great responsibility!  I would also expand on that warning to say you must be careful not to wear out the phrase and especially the concept.  I think the worst thing that can happen is that ‘Why not?’ turns into the same kind of empty phrase as I consider ‘Think outside the box’.  Hence my warning that with great power comes great responsibility.  Lets make a commitment that we will not overuse the phrase. 

Using this question judiciously will only increase its power, in my opinion its hard to determine when to use the question but sometimes after all else has failed its time to look at the concept that may have initially seemed outrageous and just say ‘Why not?’  The hardest thing to do is to refrain from using the question in all situations, that is how the question would turn into a flippant joke.  The last thing that I would want is to turn a powerful question like ‘Why not?’ into a flippant joke like ‘Oh well, what the hell?’.  I’ve seen many articles and discussions lately on the innovative company, the innovative supply chain, the innovative school, the innovative ‘fill-in-the-blank’ and each article I believe has a tendency to over complicate the challenge and I think these articles have a tendency to encourage the readers to try too hard.  I think that innovation is not a verb and too many articles have a tendency to use the word as a verb.  Using this word as a verb I believe causes people to think that there is a method to being innovative and unfortunately that is how many of these experts earn a living by turning this innovative ‘fill-in-the-blank’ concept into a method that over complicates and even discourages innovation because of a focus on method.  Think about it for a moment - How can innovation be delivered by a method?  isn’t the definition of innovation literally a new method, idea or product?  So if that is the definition, then how can you encourage innovation through a methodology?

In my thinking, true innovation can be instantaneous, or it can be a gradual series of small innovations, or a continuous improvement program, that reshapes, or in some cases, destroys the method or business model.   I think that innovation is a great way to describe life, in other words innovation can be viewed as a birth and as such heralds a fresh beginning.  So if that is the case, then the lack of innovation, or a focus on safe or tried and true methods and practices should be viewed as an aging process that eventually leads to death, in this case the death of a method, or practice, or business.

Now for the audience participation portion of this program…….

Do you remember a time or a place where you may have felt like you could not come to a successful resolution and just decided ‘why not’ try the option that at first did not seem to be viable and find it to be the best solution?

What was the craziest thing you’ve done because you decided ‘why not’?


tbrouill

Innovative Supply Chain

Posted by tbrouill Apr 21, 2013

In my previous discussion I suggested that we may have reached a tipping point in much of society where the cost and the capabilities and even the tools equation have reach a point of pervasiveness and acceptance that more people in society are accepting the paperless concept.  I also suggested that in order for a business concept to be accepted it helps if the capabilities are available and accepted in society at large.   I conveyed an example of how i recognize that a concept has reached a level of pervasiveness through a common example - how many times have you been in a discussion at work when the phrase ‘if I can do (fill in the blank) at home, why can’t I do it here at work?’  I believe that this concept and especially question ‘why not?’ is an especially powerful driving force in support of a concept.  In fact I think this question is the way to tell that the concept has reached the point now in our normal day-to-day activities to provide that tipping point in society.  When the concept has reached a tipping point in society, I see  it quickly reaching the tipping point in the business world and especially in the supply chain world, which after all is my focus of interest.

I realized after thinking about it for a while that the above concepts or methods perfectly describe an innovative supply chain.  Furthermore I also realize that this concept also brings together and provides the common thread to the key concepts that I have been discussing for a while now, including the collaborative extended supply chain network.  I realize that also that the innovative supply chain is the objective or even the mission to be delivered by these concepts and these concepts are the methods, or more simply the tools, or activities, that must be employed in order to meet the objective, or mission, of an ‘innovative supply chain’.  I’m sure that you can also see the connections between all of these concepts too, its a common thread that seems to the objective of the innovative supply chain. 

I believe that the spark that will ignite the innovative supply chain is curiosity and this curiosity is represented by the deceivingly simple question ‘Why not?’.   This simple question, though, is the one thing that cannot be taught in the traditional sense.  This simple question must be applied to processes or situations that can provide the tipping point action, and you must also utilize this concept to eliminate current dead-ends, or probably more precisely, concepts that have not reached the tipping point yet. In other words, sometimes the ‘Why not?’ question can be a tool to identify when the concept has reached a tipping point.   You must have the patience though to be willing to re-ask the question at later points in time.  I say you must remember to re-ask the question because great concepts, or innovative concepts, may not have reached the point of acceptance, or the tipping point.  Until the concept is accepted, the tools and capabilities are readily available even the best idea will not ‘stick’.  The paperless supply chain is a perfect example of the best idea and even the capabilities of the paperless concept being available, in this case for many years, and the concept just did not ‘stick’ until the concept reached the tipping point in society where people were ready to accept and even ask ‘Why not?’. 

Now for the audience participation portion of this program…….

What is your favorite example of a great concept that just fell flat when it was first introduced?  What was the tipping point that allowed the great concept to be accepted and embraced?

What is your most desired capability that you are waiting for?

tbrouill

Paperless Supply Chain

Posted by tbrouill Apr 20, 2013

Periodically discussions pop up focused on the benefits of the paperless supply chain, or the paperless office, or for that matter sometimes it seems like the ‘paperless fill-in-the-blank’ and I’m sure that you’ve seen these discussions yourself.  This is one of those concepts that is a great objective and I believe will eventually happen, but i also believe that the conditions that drive using paper must also be addressed and overcome, in order for us to become a true ‘paperless ‘fill-in-the-blank’.  For years now the capability and the tools have been available to support the paperless requirements but the capabilities, tools, acceptance and more importantly the cost have recently reached a point where this can be actually achievable. 

I realized this as I was sitting one morning writing on my Google Chrome netbook, saving that document in Google Drive so that I could share with a colleague in another city.  I realized this as I was sitting in a remote office without a printer/scanner but with a paper invoice that I needed to send to accounting for payment in another state and I was able to download a scanning app to my Android phone and use my camera to scan and send the invoice to accounting for payment.  I realized this when one day I was walking down the aisle of an airplane and noticed that 75% of the people were using various types reading devices such as Kindle, Nook or Ipad.  I realized this when I was able to access my Gmail account in a hotel business center to print a movie ticket that I purchased online.  Finally I realized this as i checked into my flight on my Android and was able to use an electronic boarding pass throughout the flying experience from the TSA security check to the actual plane boarding process.  In fact, the paperless flying experience may be the best example of the impact that paperless can have on a business process because the effects are easily visible in the new scanning devices at the TSA security and the new scanning devices in the boarding gates.

I think that we may have reaching a tipping point in much of society where the cost and the capabilities and even the tools equation have reach a point of pervasiveness and acceptance that more people in society are accepting the paperless concept.  I also think that in order for a business concept to be accepted it helps if the capabilities are available and accepted in society at large.  So in this case, over the last 4 to 5 years especially society at large has come to accept and even welcome the paperless concept.  This acceptance provides a great opportunity and incentive for the business to also drive into a paperless process.  Think about it for a minute - how many times have you been in a discussion at work when the phrase ‘if I can do (fill in the blank) at home, why can’t I do it here at work?’  I believe that this concept and especially question ‘why not?’ is an especially powerful driving force in support of a concept and I think that the paperless concept has reached the point now in our normal day-to-day activities where the paperless concept and capabilities have reached that tipping point in society and because it has reached a tipping point in society it will quickly reach a tipping point in the business world and especially in the supply chain world.

Now for the audience participation portion of this program…….

What is your favorite paperless capability and what did it take for you to accept this ability?

What is your most desired paperless capability that you are waiting for?


My last discussion I brought up the importance of curiosity and suggested that you must do everything in your power to maintain an intense level of curiosity.  As I stated, you will never know where or when a piece of information will spark a thought, when a new analysis, or a new method that will change your market will come to light.  The critical piece is to be open to the opportunity and in order to be open to the opportunity you must spend time - its like building a 10,000 piece monochrome puzzle, it takes a lot of time and the ability to stick to the problem in order to discover and create knowledge.  I thought I would take the opportunity in this discussion to expand on this curiosity topic to explain my reasoning for selecting that particular word.  I put some thought into the selection and since that discussion I have come to the realization that ‘curiosity’ is avery powerful description of this concept.

There were many phrases to choose from, like ‘thinking outside of the box’ for instance, but I chose ‘curiosity’ because I believe it conveys a trait that I believe provides the secret sauce to invention.  I especially dislike the phrase ‘thinking outside the box’ because of its overuse and it seems to me misunderstanding of the challenge to delivering the invention that has the potential to change the market place.  In fact I would say that ‘thinking outside the box’ may even be too overused for buzzword bingo!  I have come to the point where I use the phrase more sarcastically that any other phrase and in fact I’ve come to think of the phrase as being a mark of thinking inside the box.  I think I’ve complained enough about the phrase ‘thinking outside the box’ and now its time to move on to my reasoning for selecting curiosity as the critical secret sauce to invention.

So why did I choose the term ‘curiosity’ to express what I believe to be the secret sauce to invention?  Simply because curiosity describes a much broader, and more open view of the world and the challenges that are presented by this world.  It may be contrite but I think that people that possess a curious streak also possess an openness to new experiences and challenges.  These people have a view that drives them to ask two questions - ‘What if?’ and ‘Why not?’ these two questions are critical to meeting the challenge and openness to discovery.  I have described the process to people as ‘walking around the problem and poking at it from different directions to see what happens’. 

So take a look around your world and your challenges with the perspective of a pre-schooler asking ‘What if?’ and ‘Why not?’ at every opportunity.  Let me go back to my earlier example of a 10,000 piece monochrome puzzle, putting this type of puzzle together requires patience, a little ingenuity and an awful lot of curiosity.  Do be afraid to change your mind and don’t be afraid of walking away from the problem and letting your subconscious ‘simmer’ on the solution and by all means - don’t worry about thinking outside of the box!

 

 

Now for the audience participation portion of this program…….

What methods do you utilize to solve a challenge?

What is the critical aspect, or secret sauce to your invention?


I ended my last discussion by saying we have reached the point in the producer-to-consumer supply chain where sales are measured and replenished at the level to achieve the greatest gains.  We have reached the point in the supply analysis which now results in a piece-pick replenishment model with multiple deliveries to support the daily fluctuations.  This method allows omni channel model to flex the inventory in the channel that requires the inventory allowing a more efficient inventory utilization.  This actually highlights a couple of key challenges in the flexibility and stability of the extended supply chain.  The interesting result is that as your extended supply chain increases performances and efficiencies, the opposite must also be accounted for and that is a decrease in flexibility, or more accurately and increase in rigidity.

We must look at this from two perspectives I think to fully understand and be able to actually have a positive impact on these challenges.  The first perspective is from the flexibility or more precisely  increased rigidity; in this we must implement a more robust risk program to identify risks to the extended supply chain and set into place triggers and mitigation procedures to address.  And the second perspective is from a inventory sharing and maintaining a level of inventory allowing you to flex levels across channels.  You must be careful however that you do not lose your focus on improvements by increasing your focus on the day-to-day challenges.  Your business intelligence capabilities can be channeled to support these activities quite easily and the compelling part of configuring your business intelligence to support these capabilities is that you can also create alerts to monitor and flag situations that require additional investigation.

This does not however address changes in the market or help you in identification of improvements in your extended supply chain.  This is where a robust business intelligence framework will help to drive the improvement initiatives.  In my opinion the critical aspect of achieving benefits from you business intelligence framework is an intense level of curiosity  that will drive your business intelligence efforts to identify improvements.  In order to feed the curiosity ‘fix’ you must constantly be re-evaluating the information you are collecting and then another critical aspect is the ability, or more accurately, the curiosity to combine the data in different ways to actually create knowledge from the data.  Remember, collection and storage of data is the least of your worries.  In this age with the cost of storage dropping dramatically you only need to worry about the procedures to collect the information.  This can bring a great deal of freedom to your business intelligence efforts to create knowledge, after all, the only reason to collect the data is to be able to analyze and actually create new knowledge based on your market adjustments.  This is the only way that you will actually bring value to your organization and especially your extended supply chain.

I believe you must be open and also do everything in your power to maintain that intense level of curiosity.  You will never know where or when a piece of information will spark a thought, then a new analysis, or a new method that will change your market.  The critical piece is to be open to the opportunity and in order to be open to the opportunity you must spend time - its like building a 10,000 piece monochrome puzzle, it takes a lot of time and the ability to stick to the problem in order to discover and create knowledge.

Now for the audience participation portion of this program…….

What is your opinion of the omni channel piece-pick replenishment model?

What types of challenges do you see in sharing inventory across channels?


In a recent posting I discussed my previous experiences with analyzing the retail, brick and mortar, replenishment strategies in the late 1990’s.  If you remember this was a time when there was no discussions of omni channel retail, it was all multi-channel retail.  I was working for a major specialty retailer with both a catalog channel, with an ecommerce channel in infancy and a retail brick and mortar channel.  Also at this time the concept of shared inventory was just coming out into discussion, even then though the point of a shared inventory being that sharing inventory across channels would provide a more efficient utilization of the inventory and also reduce the overall inventory cost.  At that time it was a very interesting and compelling argument but there were some challenges in matching the replenishment strategy with the fulfillment strategy.

One of the major challenges revolved around analyzing the patterns of utilization in replenishment in the brick and mortar environment.  Remember that at that time the ‘best practice’ store replenishment model was to ship full cartons as much as possible with only minor piece-pick shipments as a last resort.  Another challenge was the seasonal store ‘swap out’ of one season’s product with the new season’s product, this was especially prevalent in apparel retail.  This presented an especially large challenge because it involved major shipments of new product for the season and then the potential of the previous seasons returns of inventory that could not be liquidated.  At that time many retailers provided the option for stores to return out of season, or customer returned product that could not be sold even at reduced prices.  This retail model utilized or even depended on a model of larger shipments on a regular basis and the model focused on driving savings in the transportation charges by consolidating shipments to take advantage of freight discounts.

This was also a time when business intelligence practices began to grow and become more common.  This was also a time of extending the retail sales floor to gain more selling space by reducing the storage space in the store.  One of the outcomes of this was a better understanding of the sales planning and forecasting.  Another outcome resulted in more stock on the sales floor and less room for backstock to store additional inventory.  This resulted in an understanding that the existing replenishment model caused a great deal of lost sales and the cost of these lost sales more than off-set any increase in transportation caused by more frequent and smaller shipments.  In an earlier discussion I mentioned that in a past life we discovered that our store replenishment model started moving more towards a piece-pick model rather than a bulk-pick model, well this was how we realized this shift in strategy - we actually pushed ourselves into this strategy by changing the retail store layouts and then had to ‘discover’ the shift using business intelligence analysis!

Now we have reached the point in the producer to consumer supply chain where sales are measured and replenished at the level to achieve the greatest gains, which in most cases now results in a piece-pick replenishment model with multiple deliveries to support the daily fluctuations.  The omni channel model now allows the retailer to flex the inventory in the channel that requires the inventory allowing a more efficient inventory utilization.  The challenge now however is the flexibility and stability of the extended supply chain.  Any hiccup in the supply can dramatically impact the results and the difficulty now is forecasting hiccups in the supply chain.

Now for the audience participation portion of this program…….

What is your opinion of the omni channel piece-pick replenishment model?

What types of challenges do you see in sharing inventory across channels?

Recently I began a discussion on the challenges managing inventory in an omni channel retail environment and I touched what I believe are two key topics that are critical to the success of omni channel retailing.  These two key factors, or topics, are the expansion of the piece pick capabilities across channels in retailing and then the second factor is the ability to share inventory across channels.  These two factors are key to the success of distributed order management across channels.  The distributed order management strategy and capabilities is the ‘secret sauce’ that glues the channels together and provides the communication and collaboration methods to support the omni channel retail model.  I would also say that the most significant factor to the success and also benefits of the omni channel model is the ability to share inventory across channels.

You might ask why do I say this and my response is that the shared inventory model provides a level of flexibility that is critical to the customer service aspect of an omni channel retail model.  This ability in effect turns the whole customer fulfillment model on its head because it doesn’t just blur the line of fulfillment, it basically smashes the line of fulfillment.  The ability to share inventory has also been proven to provide significant benefits by significantly reducing cross channel inventory requirements while also reducing the volume of price markdowns in the brick and mortar stores.  At first and from a very cursory view I admit that it is not an obvious answer.  The significant inventory reductions are achieved at the end of the product life cycle by allowing the retailer to more effectively move inventory across channels to meet demand needs.  This model was proven by Nordstrom’s a few years ago. 

A few years ago Nordstrom’s embarked on a project to replace their warehouse management system and if you remember starting five to ten years ago one of the pushes in the WMS market was to consolidate or share the inventory across channels.  This concept would eventually be refined into the omni channel concept.  Well Nordstrom’s decided that a they could achieve significant inventory reductions by sharing the inventory across channels.  They based this belief on the concept of more effectively managing the inventory at the end of the life cycle.  Nordstrom’s studied their sales across channels and identified variances across channels in how the inventory was utilized.  One of these variances was that direct-to-consumer orders seem to utilize inventory later in the season, or life cycle of the inventory and so Nordstrom’s realized that they could achieve two major benefits by sharing inventory; more efficiently utilizing inventory by utilizing inventory in the brick and mortar store to fill direct-to-consumer orders and the second is that utilizing inventory on hand, and especially at the end of the life cycle and / or season across channels reduced rebuy needs and also reduced overstock and cost reductions.

These capabilities allowed Nordstrom’s to reduce their inventory needs by 10 - 12 % a year after the full implementation!  The current omni channel retailing capabilities are a direct result of those initial efforts and capabilities to share inventory.  The new capabilities have improved over the years to support even more efficient use of inventory while also providing greater customer support across all channels.  I think that the customer satisfaction aspects in themselves are more than enough to justify these capabilities but when you add to this an opportunity to reduce your inventory levels while also reducing your overstock and cost markdowns and you have a true ‘no brainer’.

Now for the audience participation portion of this program…….

What is your opinion of the omni channel merchant model?

What types of challenges do you see in sharing inventory across channels?

tbrouill

Cool New Tools

Posted by tbrouill Apr 7, 2013

I mentioned in my last entry that new technology capabilities and especially cost reductions in these new technology capabilities has improved to the point where it is now cost effective to tag the individual inventory units in the store to allow you to efficiently track and locate the inventory anywhere in the store.  In addition to helping with inventory location these tags can also help to reduce the instance of theft in store, reduce of course but not eliminate.  These tools and capabilities can also help consumers in their shopping, much to the chagrin of retailers in general, to allow them to search for best prices and also to try out items before ordering these items from Internet retailers.  I think this is a testament to the ingenuity and creativity of the consumer, the manufacturers the carriers and the retailers.  The industry and market place has continuously driven these improvements from the very beginning! 


Now it seems to me that we have come to a point in the technology availability and capabilities that consumers can utilize these tools and are even starting to develop new capabilities and tools by combining capabilities in new ways to provide beneficial capabilities.  These capabilities are distributed and expanded on then by the social networks and the social networking technology.  These new consumer capabilities allow you go to your department store or mall, find the item item you are looking for and then within seconds perform an electronic shopping comparison to determine the best price for the item.  This capability allows you to make an informed decision prior to purchasing that can save the consumer both money and shopping time.  In addition, this type of shopping can also save in fuel expense by reducing the travel time of consumers searching for a particular product or the best price.  These capabilities also drive the market and retailers reactions to these capabilities shows that they are taking this seriously and these capabilities are also driving reduced prices in order to encourage consumers to purchase.  In effect these changes have caused retailers to enact an always lowest price practice along with price matching across the entire marketplace because retailers don’t want to lose the sale. 


The results of these new capabilities has been to level the playing field for consumers and also as an additional side benefit it delivers a reduction in fuel usage  through reductions in driving by the consumer in their shopping trips.  These usages and continuously changing and improving capabilities are the direct results of the increased sophistication and comfort of the general consumers in using these new technologies.  The other point that I find very interesting is that these improvements and new capabilities are increasing in velocity and quantity.  We are almost becoming desensitized to the ‘game changing’ tools and capabilities any more because of the volume and the speed of these changes.


Now the question comes to mind - How will current capabilities and technology be combined in ways that will further change and improve the consumers’ abilities?  The velocity and influence of these changes are increasing as time passes in ways and impacts that i sometimes wonder if anyone considers.  For instance, I remember when Blockbuster came on the market as a game changer that reshaped the marketplace in video and game rentals.  That industry giant did not take long to become inconsequential when services such as Netflix and Red Box came along.  Now how long will Red Box last with increased data streaming on the Internet and improved services from Netflix along with other Internet streaming capabilities, and never mind Red Box, what will be the impact on cable TV?   


Now for the audience participation portion of this program…….


How do you use the new tools, services and capabilities? 


Are you comfortable with the security of these new Internet services?

Omni channel retailing presents a challenge in inventory management that is quite different than you may expect, and that is the inventory location management of the store inventory.  On the surface this may be a little surprising to someone that is not familiar with the retail inventory and supply chain model.  Inventory management in the retail supply chain has been changing for years, these changes have been caused by changes in the inventory replenishment model that has been driving this store replenishment model into a piece pick model and away from a case pick model.

Over ten years ago I worked on an analysis project for a major apparel retailer to develop a more efficient store inventory replenishment model.  In this analysis we found that the sales inventory replenishment would be more efficient and actually reduce overall supply chain inventory needs if we were to switch to a piece pick replenishment strategy and deliver more frequent and smaller replenishment orders.  In that situation the sales replenishment shipments changes from LTL type to a parcel type shipment.  This allowed us to ship these replenishment parcels via UPS which greatly simplified the mall store deliveries and improved the overall store inventory availability.


I mention this project to provide an example to show that omni channel, or in this case, direct to consumer fulfillment from retail distribution centers is not such a stretch.  This allows the retailer to consolidate the inventory across channels and more easily support the omni channel sales model.  The last challenge then is the inventory within the four walls of the store.  This is also where the fun begins because of the challenges in maintaining the inventory location within a store and especially the inventory location within a large department store, or a super store environment.  Not only that but you must also take into consideration the impact of shrink, or more bluntly theft.  These present two problems in inventory management that impact the efficiencies and capabilities of the inventory model.  Of these two challenges the one that can be most efficiently addressed is the inventory location within the store.


Think about this challenge for a minute based on your own shopping habits within the store and especially within a department store.  If you’re anything like me when you’re shopping you pick up an item, lets say a pair of pants, you go into a fitting room and if they don’t fit you bring them out and hang them on a rack to restock, if they fit you may bring them with you while you continue shopping.  Then in your shopping you find another item you like more and hang or place those original pants on the new rack or shelf.  I think you can understand the inventory location challenge especially when you add hundreds of shoppers with various methods of shopping and then add to that the dishonest ones that leads to theft! This leads to a huge challenge in managing inventory locations.  in an omni channel retail fulfillment model a critical success factor is knowing the location of the inventory so you can sell the inventory across channels. 


This is where progress in technology capabilities come into play in support of the inventory location challenge, and as a side benefit can also help to reduce the instances of theft, or shrink.  RFID technologies have been improving and are at the point now where the cost and capabilities trajectories have reached a point to make it cost effective as a means to address the two points of my discussion, the inventory location along with theft.  With RFID technologies you can not only tell that the product has not left the store but you can also tell where in the store the inventory is located.  This knowledge reduces the cost of in store omni channel fulfillment required to ship product to the customer and allows the retailer to truly treat the store as an extension of the direct to consumer fulfillment supply chain.


Now for the audience participation portion of this program…….


What is your opinion of the omni channel merchant model?


What types of challenges do you see in managing the inventory location?

I saw a sales report a while back for Macy’s covering the great financial news of significant same store sales increases in their 4th quarter.  In addition, during this same time period I was seeing stories about the benefits and opportunities provided by an omni channel retailing strategy that combine and blurs the lines between sales from all of the retailers channels, and Macy’s is a major force leading the way in omni channel sales.  This is the great new rallying cry of retailers - allow customers to order anywhere, anytime from any channel and delivered to the customer via the most convenient method for the customer.  I think this has been a long time coming and I’m greatly encouraged by these opportunities both as a consumer and also as a professional for personal and career development.


From a consumer aspect I am excited about this trend and practices expanding throughout the retail marketplace because of the improvements and simplicity that can be achieved in shopping.  Its a compelling capability and can dramatically change, and from my perspective, improve my shopping experience.  Combining the omni channel shopping experience with the capabilities of the smart phone and my shopping experience is dramatically simplified and allows me to not only save time but also save money by finding the best deals. 


From a professional aspect the omni channel shopping experience will be driving changes and improvements in technology capabilities for a long time.  This will be driving improvements in not only the features and functionality but it will also drive improvements in collaboration and efficiencies along with  greater efficiencies in the supply chain.  There are huge challenges in delivering these capabilities and in addition we are so early in the life cycle of omni channel shopping that there will be great opportunities to form and guide the capabilities for years to come.


After daydreaming about the above opportunities and benefits of the omni channel shopping experience I started to think about sales measurement challenges.  A key question came to mind regarding sales tracking - in an omni channel shopping retailer how can you accurately measure sales in any one channel, or more appropriately only one channel?  This is where the sales report from Macy’s came back into the picture.  My question regarding their sales report was simple - in an omni channel environment an increase in the standard sales measurement of same store sales has no meaning because an increase in any one channel can be easily offset in another channel.  The only way to obtain an accurate sales measure is viewing the sales combine across all channels. 


This in itself presents some challenges, not the least being the ability to combine all sales and then go back and re-set your history figures.  JC Penny took a bold step a couple of years ago and started reporting their sales combining all channels, which fell flat on its face!  I think though that the tide is turning and more financial reporting will accept this type of measure, realizing that there is no other option to measure sales.  What this will also come down to is that the omni channel shopping entities must force a new measurement of sales simply because the model will not work if you segment your sales to an individual channel.


Now for the audience participation portion of this program…….


What is your opinion of the omni channel merchant model?


How would you measure sales?

First of all I want to wish everyone a happy Easter or Passover as the case may be!


The Easter holiday and seeing all of the shows and ads for the Easter Bunny (I don’t even want to think about this year’s most disturbing commercial - ‘The Lambit’ - half lamb, half rabbit!) got me to thinking about the extended supply chain required to support the Easter Bunny and the overnight deliveries.  Then of course being of an analytical mind I started to think about the differences in the extended supply chain that support Santa on Christmas.


What exactly are the differences between the supply chain requirements of Peter Cottontail and Jolly Old St. Nick?  it seems to me that the key objective of the supply chain supporting the Easter Bunny is the support of perishable product and the key objective of the supply chain supporting Santa Claus is that it does not require support of perishable items.  I understand that each of these supply chains is not strictly a one dimensional supply chain, but for the sake of this discussion on two completely make believe supply chains, lets just leave it at one supports perishables and one support non-perishables. 


It seems to me that the supply chain that Santa Claus has developed over the ages is much more advanced than the Easter Bunny’s supply chain.  i say this because of the advanced forecasting signals that must feed into Santa’s supply chain planning (the infamous ‘Naughty and Nice’ list along with all the orders through the letters) to help him to identify the replenishment needs to support his delivery.  While both supply chains must be very sophisticated to support a direct-to-consumer fulfillment model.  Santa’s model must be much more sophisticated in its capabilities because of the requirement to support special requests, or highly customized orders in his model.  While the Easter Bunny’s supply chain is a little more straightforward; there are some specialized requirements regarding Easter Basket requirements, the Easter egg requirements are very standard across the supply chain.


Santa’s supply chain has some flexibility and ability to order early to fill the standard types of product, for instance clothing and the hot toys of the season, in order to build a pipeline of product receipts to allow for a certain amount of leveling in the forecast needs and planning.  The Easter Bunny however is in a supply chain crunch in order to support the delivery of the overwhelming amount of perishable items.  These are items that cannot be acquired early for the most part and some of the items (colored eggs for instance) that require a certain level of customization prior to the eventual delivery.


I’d like to get your input and opinions as they relate to the two holiday supply chains.  I’m especially interested because I would like to hope that I am not the only one that thinks about these types of things during the different holiday seasons.  Please confirm that I am not alone in these analyses!