Retail Advisor by The Parker Avery Group

Realizing $8 Million in Benefits in Eight Weeks, Part 2

2020-12-10T08:58:00.014-05:00

This week, we continue our Talk Retail to Me podcast conversation about a tremendous client success story focused on an advanced pricing solution implementation with Parker Avery's pricing lead and Associate Partner, Josh Pollack, along with Senior Manager, Heidi Csencsits.

Josh: To explain a bit more about some of the things we did with this client, as we moved past the point where we had completed the technical design, and during the time period where the technical resources on the project were doing their magic and creating the interfaces and gathering the data and so forth, it was our job to lead process design and to define roles and responsibilities because many of those roles were changing in relation to pricing. There even some roles that had been responsible for pricing that were in the merchandising organization—on the buying team—that switched into a dedicated pricing team. So even though they were technically still in merchandising, their reporting changed, and some of their job responsibilities changed. Of course, that’s always a very sensitive topic when you’re altering people’s lives. So change management was an extremely important aspect of this project—it is on many of them, but especially if you’re changing people’s roles and responsibilities. So Parker Avery guided that activity.

In that role, we developed training around the changes in price strategy and the new processes that had been designed. We did several layers of that training; for example, one set of training was aimed at senior executives who have to understand how they operate in the company’s new pricing world; another was for the middle level of executives that actually have more hands-on responsibility in terms of needing to understand the pricing recommendations and the ones that had been agreed to by the buyers—and then approve them. And another layer of training for the buying and pricing teams was even more detailed. There were several levels of the training and communication that went out to the organization to make sure they were capable of taking advantage of the new tool as it was rolled out.

Josh Pollack

We also supported the client through the pilot and multiple layers of rollout. We took a sort of surgical approach: we would do one pricing task while they would watch, then they would perform the same task with Parker Avery looking over their shoulder, then they were comfortable proceeding on their own. After a short period of time, they were so comfortable with their role and discourse, they just really wanted us hanging about the edges of the room so they could direct questions to us if they needed. I consider that a very successful change management activity: when we’re there, ready to support, and the client doesn’t really require much support—perhaps once in a meeting they directed a question to us, but otherwise the “chicks had left the nest,” so to speak.

Tricia: Yes, the change management has to go hand-in-hand with any solution implementation, you can’t just stick a solution in a client environment and cross your fingers. That implementation success was very much due to the change management and organizational design elements that Parker Avery provided.

Heidi: You do have to keep in mind that you can’t just throw anybody in that role and hope they will be successful. When we talk to other countries, they have a hard time finding skill sets particular to pricing, because to some extent, it is very “fancy” math. To be able to have that almost-but-not-quite data scientist skill certain markets—especially in certain areas of the country, they become premium skills, and you need to be able to resource. That kind of understanding and the ability to detail a job description of exactly what a pricing analyst needs to have in their back pocket to do the job needs to be very clearly defined for the client.

Josh: This client (and most) need to be creative from the perspective that the kind of analytical mindset is more specific in these types of roles than merchandising knowledge or knowledge of a particular category. Because they’re analytic, and because they typically get assigned to support a particular category, they amass that specific knowledge incredibly quickly. But it’s much harder to train somebody who isn’t analytic by nature—that’s not their thought process—to be analytic than it is to train someone who is analytic about the mechanics of a particular category. So what we find is that our clients frequently have the right people within the company, but they’re sitting in disparate seats all over the locations. One may be in customer insights, or store operations, or an analyst in IT, or a buying assistant. So it’s kind of fun to watch those teams come together come together if they’re being sourced internally because it’s sort of this marriage of folks from different areas of the company who suddenly have this shared purpose.

Heidi Csencsits

Heidi: It’s an opportunity to re-skill people as well. And it’s easier to train someone who’s analytic to learn about, say butter, than it is to train someone who knows everything about butter to become analytic if they don’t have that skill.

Tricia: And that’s certainly not a value statement, it’s just the way we are created.

Josh: It’s a little easier in the grocery space. It’s not like apparel merchandising, where you’re dealing with merchants who are looking for the latest trend and applying their esthetic and that sort of thing. In grocery there is certainly some of that, but it is more of a commodity business, so the nature of merchandising tends to be a little more analytic to start with. I think in general that’s absolutely true.

What made this particular solution implementation such a success story?

Josh: One of things I think was a real factor was change readiness. As much as I’d like to take credit for that, I throw a lot of that on the client project team, who was led by an extraordinary group of people who were quick on the uptake, great communicators, and very well respected within the company. If you’re going to start a new capability from scratch, you need to put someone in place who’s heading the initiative who has innate credibility. Having seen other clients who’ve failed at that, it creates a much greater hurdle in terms of acceptance. This client fortunately didn’t have that challenge; they were really thirsting for the solution. Because the solution provided much more quality competitor data, it was more accurate, more granular. They were basically taking these rough estimates or semi-accurate data that was being collected periodically and being asked to do math to 3 and 4 decimal places on it. When we upgraded their competitive data capability, included web scraping, and changed the nature and frequency of their in-store price gathering, the quality of their data got so much better and the insights the merchants were producing as a result were so much better. It made their lives incredibly better on a day-to-day basis. When you take that and you know their pricing decisions are now supported by science, they know something they didn’t know before. On top of that we gave them a thought partner in the pricing organization to advise them on critical business decisions. They literally had a dedicated analyst who understood their category after a period of time and understood all the ins and outs of the components that made up a pricing decision. That took a lot of onus off the merchant teams—they were extremely happy with that.

We talked early about their rudimentary zone pricing capability, and because advanced pricing solutions are organically made to manage that, the client was able to expand their zone pricing and target the prices within those zones to specific regional competitors or regional characteristics to price sensitivity of products. That capability is a major driver of increased margin. At the same time, if you look at the company as a whole, it allowed them to maintain or improve their competitive pricing indexing. Because you’re ensuring that you’re being hyper competitive on items that customers have told you through behavior that they’re very price sensitive. But we all know that behavior varies by customer and different factors, and there are products customers throw in their basket without a second thought to the price unless it’s just glaringly out of sync with the expectation of what a customer would normally pay for that item. That’s where there’s an opportunity for the retailer to make a nickel more on an item because most customers don’t even notice. That’s a big plus in terms of zone pricing because those tendencies do change based on certain parts of the country and who the competitors are.

One of the things this clients really struggled with, given that they are a discounter and very much have low price offerings in the grocery space, they were very uncomfortable raising prices. They had this philosophy that their customers will notice and care deeply if they’re not some percentage below their competitors. The science underlying advanced pricing gave them the confidence that they could raise certain prices; that knowledge coupled with the pilot activity really gave them that license. Nobody’s talking about gauging customers, we’re talking about marginal increases of nickels and dimes on items that customers really just don’t care what the prices are—that’s what delivers these super-normal pricing returns.

Another thing that Heidi alluded to earlier: these tools gave them the ability to examine their strategies in an analytical way that they never had before, because these tools allow you to assess impacts of taking or not taking various pricing recommendations. You can also do “what-if” analysis to change scenarios; for example, a 10% discount instead of a 15% discount: what does that do to demand and margin? You can examine just about any aspect of your pricing strategy in this kind of virtual world. While the predictability isn’t 100%, it’s a heck of a lot better than anything you could do manually.

Tricia: That’s significant across how many categories and products—those what-if analyses result in meaningful financial impact. That’s so important as we talked about people getting away from their spreadsheets because that’s what they’ve always done and are familiar with. I am a self-admitted spreadsheet nerd, and I understand that passion. But when your eyes are opened to a whole new world of possibilities regarding being able to see into the future with these advanced analytical tools, it’s astounding for retailers.

Josh: It’s in the nature of advanced pricing solutions. I talk about advanced pricing as a blanket throughout this discussion, and there are a lot of different ways of defining that. For purposes of this discussion, advanced pricing includes things like regular price optimization—the everyday shelf/ticket price. There’s also capability around marking down product at the end of life in an optimal way, or markdown optimization, which takes into account your inventory position in different locations within the supply chain. We all know the greatest imbalances between supply and demand happen at the individual store. If you have the ability to address those inventory underages and overages differently by store, then you decrease your aged inventory much more quickly and retain much more margin associated with the clearance process. Finally, promotions optimization, which is a bit of a newer offering and is still developing, but it combines the elements of promotions management, planning and analysis with an optimization capability, where you can do that “what-if” analysis on different offers and promotional vehicles to see what the financial impact would be. With all of these tools, every penny that a retailer can add to a price is a penny that goes directly to the bottom line. The nature of these particular pricing solutions is to be able to drive superior ROI to any other application that I’ve encountered in my career.

Heid: That’s a really good point, because in many cases, writing a business case for an ERP or merchandise financial planning (MFP) solution is tough because they don’t really affect sales or profit, it’s more foundation or planning. But the pricing project sell themselves. This is a great way to really control how you’re financially going to be making additional funds and the business case writes itself.

If I’m a retailer and I’m interested and currently operating on disparate systems, what’s the next step? How do I even being down this journey of advanced pricing solutions?

Josh: That’s a great question, and there are different levels of approach to take that next leap. It partially depends on the nature of the business and the scale and sophistication of existing systems. For clients who don’t feel like they’re ready for a full-blown system due to their technology or data infrastructure, Parker Avery has gone in with the analytics arm and worked in tandem with the business on the analytics side to do an elasticity study. This gives the retailer insights into the price sensitivity of individual items within the assortment or categories or sub-categories if the items turn over too quickly to be able to really get a good data stream on an individual item. We use that to build a process and toolset that allows customers to make more informed pricing decisions on the basis of the elasticity study. In the middle of the spectrum, Parker Avery has an offering for price optimization in the markdown and regular pricing spaces, where we provide an analytics engine, but the output actually can be accessed through Excel. It’s another step of sophistication in that it’s actual optimization rather than solely better informing a merchant decision, but it doesn’t have the overhead associated with a full-blown commercial system. And then beyond that, if you’re of scale, certainly looking at some of the commercial solutions is a good bet. Again, there are solutions of different ranges of scale and different capabilities, depending on which business you’re in. So, what we do a lot is we advise potential clients on which one of those paths makes the most sense for them, given what their needs are and what their current level of sophistication is.

Tricia: It’s great there are different avenues to take depending on where you are in your maturity, scale, and things like that.

Heidi: To add to that, certain commodities and brands may not need the full suite of advanced pricing. Josh had mentioned three components: regular pricing, markdown, and promotions; there’s also the concept of dynamic pricing, where you can change the price during the day, should you need to. If you’re a vertical brand with no direct competitor, certain things like regular price optimization may not be for you because you don’t have carry-over product if you’re a fashion brand. You may be more focused on promotions or markdown optimization to try to manage the end-of-life cycle, based on whatever inventory you’re carrying in each of your stores. You need to evaluate what component would be most appropriate for your business. Often you don’t need to buy the whole suite necessarily but understand what is most optimal for the type of business you run, your competition, and the products you sell.

Click below to listen to the full podcast.

Listen to the Podcast

Contact Parker Avery

Realizing $8 Million in Benefits in Eight Weeks, Part 1

2020-12-02T08:51:00.008-05:00

We publish case studies for most of our client projects so that our audience can get a solid understanding of the type of consulting work The Parker Avery Group does for our retail and consumer goods clients. In a recent Talk Retail to Me podcast episode, we discussed an astounding client success story with Parker Avery's pricing lead and Associate Partner, Josh Pollack, along with Senior Manager, Heidi Csencsits, who worked with Josh on other advanced pricing projects.

The case study for this particular project was published a month or so after the project was completed, but the “eye-popping” results came just weeks later, with the client realizing $8 million in margin impact on just 8 items in 8 weeks. With the solution’s 5-year licensing fees coming in at $7 million, that’s an incredible ROI in just the pilot. Here is the first part of our discussion.

Can you explain a bit about the original business challenge the client was looking to solve with this solution?

Josh: This client is in the grocery category, but more on the discount side, rather than premium side of the grocery category. As such they follow more of a low-price leadership strategy. In the U.S. there are a lot of competitors: regional competitors and also some monstrous national competitors in terms of size, obviously. This company had done some investigation into zone pricing, but what they were doing was manual and mostly rudimentary. What I mean by zone pricing is that in different parts of the country they were establishing varying types of pricing characteristics for different customers. And so, they were trying to alter the pricing slightly within those to capture differences in propensities. But again, it was manual and quite rudimentary because of the fact that it was being managed on spreadsheets and manually keyed into host systems. It was too time consuming for them to try to do it in a more sophisticated way, and yet their competitor set really dictated more sophistication.

Josh Pollack

The client followed a rules based pricing approach, meaning, they’d look at competitive prices. They were very keen on understanding what pricing was on highly competitive items: items that stacked up against their items very closely, making sure that the prices that they were offering were at a discount to the competitor. And that was pretty much the guts of their pricing strategy. That being the case, though, they were very dependent on competitive pricing information to set their own pricing, but their methods of gathering pricing data led to some pretty sketchy results. Granted, this is an emergent area; the technology has been around to do it for a bit (as in e-commerce), but it doesn’t necessarily lend itself well to certain categories, like grocery. They were mostly gathering data from in-store audits, where they would send a 3rd party in with a shopping list (probably electronic), and that 3rd party would capture data on items that were identified by the client’s merchandising organization. But that was fraught with all kinds of errors in terms of the people that were doing it weren’t as familiar with the assortment or with the individual items that the customer carried—or those of the competitor, so there were a lot of data errors, missed data, collecting of mis-matched prices of competitive items; and therefore, data accuracy was at stake.

On top of that, they were in the process of transitioning from a very regionally managed business model to a more centralized model. And so, their store ops divisions still had some control over some pricing, but the types of product they had control over were extremely critical. They were items in key categories, key items, highest volume—the most impactful items. As a result of the company had lost control over the price strategy of those items and the margin of those items because each region was using those to maintain its own profit and loss statements and trying to respond to their own perceived competitive threats. The client, as most are, is facing increased competition—you have Amazon going into the grocery business, huge national chains like Walmart and Target, who are deepening their penetration in grocery and with their deep pockets, pushing the envelope of what is possible technologically in that area. There are also new entrants on the low end of the market, international chains like Lidl, for example. They’re facing this incredible wave of complexity and competitive pressure. On top of that, they’ve experienced periodic swings in profit, as a result of having this decentralized control of pricing and margins. So the pendulum would swing in one direction, leadership would see this swing, and they would attempt to make a correction in the home office. But their ability to do that was really hampered by the fact that they didn’t have the kind of pricing system that would allow them to understand what would be the competitive responses to various price changes they’d need to make in order to bring their profit back in line.

Was this done during or pre-COVID and what was the COVID impact on this whole project as well as the results?

Josh: This project was pre-COVID, which is a simplifying factor. COVID has had a big impact on their business. Because they’re in the grocery sector and on the discount side, COVID has impacted them more in a positive way because demand has continued to increase as opposed to dwindle like so many other categories. The thing about COVID is because there’s so much excess demand for a lot of products in a grocer’s assortment, it represents an opportunity to capture some extra margin, which means raising some prices. On the other hand, it’s obviously in bad faith to profiteer on an international crisis. So you don’t want to be put in a position of price gouging. My understanding is that during the early days of COVID challenges back in the spring of 2020, the client actually put a bit of a moratorium on profit-based price changes or price increases. So they continued to address areas where they were in danger of no longer being price competitive, or if a competitor dropped prices on an item, but they would not look to raise prices in the interest of bringing in more margin. They took it as an opportunity to take a hiatus in their process of rolling out pricing system functionality to more of their categories, and instead concentrated on a couple of categories where there’s a lot of complexity in the business, which creates a lot of complexity in the data. They took the hiatus to take a step back and work on solving some data complexities in order to bring those critical but more complex categories online with the advanced pricing system.

What was The Parker Avery Group’s role on this project?

Josh: We essentially acted as an adjunct to the client’s personnel. We tend to come in and spend time early on understanding a client’s business model, how they compete, how they drive value, their culture, customer base, and that sort of thing. And then we’re in a position to be able to behave as if we’re part of the team, part of the company, but a part that had amassed deep expertise and experience—in this case in advanced pricing. You could call it “rent an expert” if you will; we tend to be perceived as an extension of their internal team. In that capacity, we supported that client through the selection of advanced pricing software and eventual implementation of that software. To be more specific, what we brought to the table was our expertise and experience in industry leading practices and the kinds of pitfalls we had experienced or heard about second and third hand from working with providers in this space. We structured the activities and provided project oversight. We advised them on pricing strategy and ways they may want to consider rethinking their pricing strategy, both at large and in light of the fact that they were putting in place capabilities they didn’t have before. So both of those things dictate that they need to take a good look at their existing pricing strategy and find opportunities.

We supported them through the technical design and development—while we’re not coders or system integrators, we speak the language enough to be able to translate what the business people need, what the software provider needs to know, and what the technical people need to know in order for them to be able to go off and complete their individual tasks. Much of the work we do is to act as that go-between, that communicator and “ride herd” on those processes on behalf of the client.

We helped in the data preparation, which is one of the main things you need to provide for these types of advanced pricing software. It doesn’t really require a ton of configuration or customization from client to client; a lot of solutions in this space is software as a service (SaaS) where you’re working with common code to essentially a lot of other clients. So the biggest challenges in these advanced pricing projects are around getting the data, conditioning the data (in some cases it has to be created from scratch), and then ensure it’s being communicated to the pricing application in the format required.

Data cleanliness is so often talked about and yet the effort also often underestimated—especially with respect to pricing. But also that business liaison role that Parker Avery plays on projects and the communication with the business is key to getting implementation success and having optimal business user adoption.

Heidi Csencsits

Heidi: That’s part of the criticality in the success of a project is the adoption and the sustainment. A lot of times when we do projects, there are resources who’ve been in the seat for many years, they think their spreadsheets are the best, they know what they’re doing, they know the competition, even though they may have regional competitors. Within the grocery domain, companies come and go, they get bought and sold, and the amount of information that an end user pricing specialist has to manage has become overwhelming. As Josh mentioned, there are still new entrants coming into the market and companies continue to expand. A lot of people in the seats don’t trust the math—they think they’re smarter than the math. We have to bring them along for the ride and coach them to adopt and then sustain—that’s the only way to achieve these types of results. It’s getting them to understand and trust the math, and it’s a special skill set; you can’t just put anyone in the seat and expect them to be an expert at figuring out if it’s the right time to increase or decrease the price of tin foil by 10 cents. With that elasticity thought in mind, you really need people who can comprehend what’s going on in the marketplace and trust the system (if it’s been set up properly). That’s the role Parker Avery plays is getting clients across that line to where they do trust the math. Also, we didn’t just walk out the door the day the system went live, it’s helping along the journey of understanding the results.

Josh: To take it a step further, and for anyone that’s considering an advanced pricing solution, one of the differentiators in solutions is the degree of decision-making or the recommendation is transparent to the end user. There are different degrees of “black box,” depending on the solution. To some extent, the success of one of these systems is dependent on the ability of the pricing team to explain to the merchant how the tool got to the pricing recommendation that was made. It’s very difficult, it’s almost an impossible task to either get the pricing team or the merchants over the hurdle of saying, “Because the system said so, and you should trust the science.” Partly because of garbage in/garbage out issues, there are lots of ways a pricing tool could make a recommendation you can’t really act on, even if it’s following all the rules. It’s an imperative on the providers in this space to make sure they’re arming the pricing team with information required to be convincing.

Heidi: And Josh, you bring up a really good point about the recommendations that cannot be acted upon. Every state may have different laws and regulations about pricing. In some countries you cannot offer a retail price below cost. To set up that level of granularity, once again, it becomes very complex for a small team to manage and know all of those rules and regulations. And in some states, grocery stores can sell liquor, in some they cannot. In some states there are minimum thresholds of pricing, and so being able to look through all of that and set up those rules, and then trusting the system to tell you what’s right. Sometimes you can’t act on them, but at least you know what the results would be if you could. And that’s another thing: not just saying the price should be $2.99, but showing the future impact on your profit and sales if you make this decision. It’s knowing what the future impact on forecast and margin that helps a pricing analyst understand better that they are making the right decision. They can also monitor the results: Did the item perform like the system said it would? Did I get the profit I thought I’d get or do I need to tweak the rules a little to make the best decision possible?

Next week we'll publish the remaining transcript; click on the button below to listen to the full podcast.

Listen to the Podcast

Contact Parker Avery

Insights on the State of the Logistics Report: Resilience Tested

2020-11-17T09:01:00.005-05:00

I just finished reviewing CSCMPs (Council of Supply Chain Management Professionals) Annual State of the Logistics Report, authored by Kearney with input from a number of industry professionals. The report primarily covers 2019, and I was surprised to see it was the 31st year of publication - I have some catching up to do as I am roughly 30 years behind in reviewing these reports. Nevertheless, this year’s report provides not only a nice overview of the logistics industry but also delivers very useful deep dives into each sector along with key implications and overall themes to watch for going forward—including one that I was not expecting to see.

A couple weeks ago, Rob Oglesby and I discussed the report on Parker Avery's podcast, "Talk Retail to Me," and it was a lively dialogue around our findings that are relevant to the retail and consumer goods industries and our clients.

This year's report is titled "Resilience Tested" and is clearly tied to impacts of the COVID-19 pandemic. The title makes complete sense given what we're experiencing, but it is heavily weighted towards 2020 and not necessarily the calendar year of 2019 (which I presume is the typical focus of the "annual" reports).

Regardless of the title, the report is focused on 2019 overall logistics industry performance with insight into the first half of 2020 and early pandemic observations and impacts. It typically starts with a brief history of the prior year's performance, then leverages analytics to provide an updated overview of 2019's performance, and finishes up with 2-3 key observations for the sector looking to the future. The supporting analytics and graphs are well done, offering insight not easily found without substantial research, and paint the picture describing how each sector fared over the past 12-18 months. I found this sector-by-sector breakdown the most useful part of the report, helping me get a real sense of how the industry is operating and key considerations for Parker Avery’s clients.

Due to the timing of publishing, most analytics did not include a full 2020 data set. As such, I am really looking forward to next year's report to see the full impact on the historical trends across the various logistics components, which should make for some truly eye-opening insights.

Lee Whitaker

Following a nicely summarized executive summary, the body of the report kicks off with a macro-economic overview of the US economy, setting the stage for the more detailed logistics sector by sector analysis to follow. Needless to say, no typical economic metrics predicted the disaster that came with the global 2020 pandemic (supported via the sharp upward or downward spikes in most of the graphs highlighting economic indicator performance over time) and it finishes up identifying initial predictions pointing towards a U-shaped recovery in 2021.

The bulk of the report is focused on logistics performance for each sector throughout 2019, which is evaluated in suitable detail to assist in drawing conclusions about how the trends could impact your business going forward. As I thought about Parker Avery’s clients, a few key callouts resonated:

Over the road freight. In the largest logistics sector, control swung to the shipper's advantage in 2019, as rates dropped with capacity rising. This should provide negotiating power for many retailers’ larger expense categories.
Ocean. Disruption in this sector continues due to two very different causes: in 2019, it was the anticipated tariff impacts driving inventory increases, and now the 2020 pandemic causing tremendous carrier asset imbalances and capacity uncertainty due to general consumer related decreases.
Warehousing. The dramatic shift to/focus on e-commerce across multiple industries is driving tremendous growth in the sector—rents are increasing as overall vacancy decreases.
Freight forwarders. Increased competition is driving increased focus on technology enhancements that drive improved visibility and transparency with the goal of an overall improved user experience.
Rail. Volume is down including declines in intermodal following 2 years of growth.
Air. Immensely impacted in the first half of 2020 due to the pandemic with the shutdown of commercial air (which carries 48% of cargo volume) for the first half of 2020.
3PL. Immediately impacted certain industries (auto, hospitals, restaurants, etc.) as complete halts or shutdowns and a more complex environment puts pressure on 3PLs to still prove value.
Pipeline. Expanded capacity arrived just as pandemic shutdown most of the industries that would utilize it- Expect massive over-capacity in 2020-21.

Based on the above, smart shippers (and/or retailers) have an opportunity to leverage the new capacity across several sectors to help lock in cost reductions moving forward.

There were several key themes that jumped out at me in the report. These themes were no doubt influenced by the pandemic, but even absent such global disruption, they speak to opportunities for proactive organizations to position themselves for success in a dynamic, uncertain environment.

Value of technology in logistics. Numerous technology approaches (many existing) are gaining momentum as the understanding, cost of entry, and infrastructure catches up to the actual technology. Organizations are leveraging artificial intelligence, robotics, automation, supply chain transparency, and efficiency across the various sectors in some very intriguing ways and are quickly becoming the standard to compete. This is a change since just a little time ago many of these advancements were seen as non-necessary or “nice to have” by many operators.
COVID-19 impacted everything in logistics. Whether directly or indirectly, no sector escaped some impact from the pandemic. The positive aspect of this is that it forced innovation, created numerous opportunities, and highlighted areas of risk throughout the supply chain. Proactive organizations will leverage these new data points to advance their organization and build competencies targeted at resilience and growth.
Providers MUST build in resilience. Most logistics operators were caught unprepared for the disruption—their businesses were not structured for agility and flexibility that the pandemic forced. They must immediately start leveraging available technology to build resilience and flexibility into their business models to support stability as well as growth.
Early technology adopters fared better. The few organizations that had invested in various technology enhancements were in a more solid position than those that had under-invested. They had a distinct advantage in reacting to pandemic-induced changes and establishing a stronger position in the marketplace. Staying still does not hold up in an environment of change.
Ultimate impact of COVID-19 is still largely unknown. Pandemic-related news changes daily and so do the pressures applied to shippers and logistics providers. However, some trends are apparent and will most likely continue through balance of 2020 and into 2021.

The report also covers a topic that I was not expecting to read much about, despite the current avalanche of consumer advertising on the topic: 5G. I was surprised by the space dedicated to 5G and its potential benefits and implications for the logistics sector. It is this year’s "shiny new object" replacing AI/ML (which continues to fight for relevancy), and it was interesting to read about the various use cases already being developed or in initial pilots across the sectors. It’s clear that as 5G infrastructure reaches critical mass and acceptance, the logistics industry will have numerous opportunities to leverage 5G benefits to drive game-changing value both for providers and end-consumers.

All in all, the report made for some very good reading for those with an interest in logistics-relevant data analysis. It was a thorough approach and called out some interesting opportunities for proactive organizations in the marketplace. The report also highlighted some pioneering technological opportunities that could help organizations build resilience for current challenges as well as position them for future growth.

I am glad I found this report (thanks to CSCMP membership!) and will leverage it as I collaborate with Parker Avery clients currently battling through pandemic related impacts. I look forward to reading next year’s report to see how the analytics show the complete impact of 2020—and hopeful upward recovery curve—as well as insights into 2021 and beyond.

Lee

Listen to the Podcast

Contact Parker Avery

7 Tips for Solution Demonstration Success, Part 2

2020-11-10T08:50:00.006-05:00

This week, retail expert Heidi Csencsits continues her sage advice to solution vendors about conducting successful solution demonstrations—including tips on virtual demos. If you missed the first three points, you can read them by clicking here for Parker Avery's blog post from last week.

4. Don’t Jump the Line

For onsite demos, when it’s time for a meal or snack break, let the client eat first. In our consulting roles, eating out and getting reimbursed for a meal is the norm. But for the participants, getting a free lunch means they’re not spending money or eating leftovers they brought from home. It may be a real treat for some, especially on the rare occasion it is catered.

If food is brought directly into the room, you’re essentially the blockade to participants’ satiety. Try to be nimble enough to wrap up the current section as quickly as possible to let your potential clients eat.

Be mindful that many participants have been selected to join in the selection process as top candidates in their department—and likely in line for promotion. As such, they realize their focus must be on the demo, not on the gratis refreshments. If coffee, snacks, or lunch is provided, remember this and don’t graze if it is not an official break where the client can partake. If the client can wait 10 more minutes for their break, you can wait 15 more minutes for a cookie.

5. Remember, You are Not the Only Vendor

Many vendors ask for discovery workshops or calls prior to preparing for the demo. Similar sessions have likely already taken place with a selection partner to prepare the demo scripts that represent the business requirements.

With typically 3-4 vendors participating in demonstrations, requesting stakeholders block out time for several more hours of repetitive workshops is a big ask. With a firm decision deadline that approaches quickly, there is not enough time to accommodate these one-off requests.

6. Be Willing to Sit at the Kiddie Table

Don’t assume there are enough chairs at the big table for your team and the participants. The only person who should initially be seated at the table is the person who is handling the mouse. Everyone else should wait (in the periphery, if possible) until the client has confirmed all attendees are there, then, if seats are left, you should quickly sit down without making a big production. Know in advance who gets a seat at the big table to make this more efficient.

7. Virtual Demos

Virtually, we are still moving forward, but many of the above points still apply. With remote demonstrations, there are some nuances to call out:

Mute. Everything. This cannot be emphasized enough. No one needs to hear you multi-tasking with your keyboard clicking or eating your lunch. Of course, be conscious (and quick) to turn your mic back on if you are going to address a point.
Turn your camera on for the introductions or if you are speaking. Otherwise, it’s OK to turn it off. This shows you care enough about the event to be camera ready. Also, look directly into the camera to make better eye-contact. If you don’t have a camera, just let the attendees know.
Turn off notifications (like mail or instant messages–especially if you are sharing your entire desktop). Remember, especially after several days and hours of demonstrations, your potential clients' work from their "day jobs" has piled up and patience is likely waning–this is about making the best use of short attention spans.

As stated earlier, much of this may sound like common sense, but we have too often witnessed these actions demonstrated in practice. Be thoughtful, respectful, and courteous to the attendees who are giving up multiple days out of their schedules to find the best solution to meet their business needs. Read all communications thoroughly and follow instructions. Communicate with the designated resources for questions or follow-up. Keep your promises–if you need to circle back on something, do it quickly.

So many companies have managed to get by with aged systems with the intent to update them a few years in the future. However, many of our retail and consumer goods customers are quickly facing the need to re-prioritize automation and simplification in their internal landscapes. This means faster RFP/demo processes and decision making. Help them to make the best decision for their companies by coming to the demonstration with your best foot forward and leaving a positive lasting impression.

Heidi

Read the First 3 Tips

Contact Parker Avery

7 Tips for Solution Demonstration Success, Part 1

2020-11-04T07:05:00.004-05:00

Retail, like most industries, has been punched upside the head by 2020, with many companies understanding the need to quickly change their business processes, realign organizational structures, and evaluate supporting technologies.

As we outline and prioritize recommendations as part of our clients’ overall roadmaps to solve business problems and address a post-pandemic world, we often determine that selecting new systems is necessary. Sometimes these are enterprise-wide transformational solutions, other times they are point applications—addressing a small scope of business capabilities.

Quite often The Parker Avery Group is engaged to manage the software selection and “live” product demonstrations are a typical part of the process (often part of a request for proposal or RFP). Having participated in almost two dozen software demos over the past year, as well as countless demonstrations when I was in the retail industry (as a participant), I have witnessed some common behaviors, statements, and actions that make the demonstrations much less productive for the user participants.

This set of "tips" is geared to solution vendors.

To begin, let’s look at a few sample statements that are particularly frustrating for the audience you are trying to impress:

“Yes, we have brought 8 (or 10, or even 12+) people, but this shows our commitment to you as a future partner.”
“We’ll get to the demo in a moment, I just have a few more slides I want to show you.”
“I’m logged into the solution as an administrator—your users won’t see all of this.”
“This is dummy data in our demo environment,” related to, “This solution is easily/highly configurable to your requirements.”
“I know lunch just got delivered but let me finish this one section and then we’ll take a break.”

Think about those statements from a user’s perspective. From your potential new customer’s perspective. Let them sink in a bit.

There are mitigation tactics that can improve your performance and the audience’s perception of your company during the demos. Some may find these to be common sense, but in our experience, they have each happened so frequently that they merit a gentle reminder.

1. Read the Room

If you sense people are paying more attention to their phone or laptop than your demonstration, this could mean a couple things: (1) you’ve gone off the demo script and lost them or (2) something major in their functional area is going wrong, like production systems or shipping issues, and participants are distracted due to business priorities.

When you see that multiple people have left the room, you’ve likely exceeded the participants’ coffee capacity. In these circumstances, take a short break, even if it isn’t officially time. Be cautious about asking the room if they want a break. Participants will look to their leaders for direction, who will often say, “press on.” However, you still need to be respective of the demo schedule you’ve been provided.

During a break, try to get direction from the “leader” of the demo, either from the client directly or their selection partner, so you can get back on track and finish strong. Related to this is, “Don’t Over-Prepare.”

2. Don’t Over-Prepare

Do not have more content than your time allows. Minimize PowerPoint overviews and sales pitches. If you are provided a demo script, stick to it, and demonstrate (don’t just talk about) how your solution addresses the client’s business needs. Do not assume there will be time to add a follow-up session if you don’t cover all the content, especially in today’s frantic environment, there is likely no time in the client’s plan to do this.

In the spirit of “dry-runs” or practices, you still need to be prepared to occasionally go off-script. Truly listen to the customer. If you say, “payback will be in five years,” and the client says, “that’s not going to work for us,” you need to adapt your narrative.

Everyone in the meeting should have a role that adds value to the demonstration. If you have ten people in the room or virtual meeting and only two demonstrate, the client may wonder what the project team is going to look like (read: expensive).

3. Don’t Under-Prepare

This is probably one of the unfortunate behaviors we witness most often. When logging into the demo environment, do not log in as an administrator. If your solution is admin heavy, it makes the system appear more complicated than it may be. Create a separate user ID that is a business role and show only what participants need to see. If you must show admin tasks, try to structure your demo for a smooth transition. Telling the client “access can be limited to each user” is contradictory to logging into your demo environment as an admin and showing unnecessary functionality.

Along with demo scripts, you may receive sample client data. Don’t rely on data existing in your demo environment—this this is an opportunity to show that your system is easy to set up and configure.

Particularly for onsite demos, make sure your devices are fully charged when you begin (or bring a portable charger), to avoid having to search for outlets which may be scarce. Excess time spent locating power outlets means time away from precious demo time.

Also for onsite demos, be prepared to connect to any kind of projection device and have backup network access. Carry all necessary adapters for your laptops and have portable WIFI with you just in case there are problems.

When traveling for the demo, arrange flights, Ubers, etc. so you have more than ample time to get to the demo site and ensure you are properly set up. Any delays due to travel or logistics issues can cause irreparable harm to the perception of your company as a trusted partner to the potential customer.

Stay tuned...our next post will feature the rest of our demonstration success tips, including some focused on virtual demos.

Heidi

Read the Next 4 Tips

Contact Parker Avery

Unleashing Your "Superpowers"

2020-10-29T12:52:00.004-04:00

In this transcript version of our Talk Retail to Me podcast, we welcome the newest member of the Parker Avery team, Rob Gentry. While he’s fairly new to our firm, Rob is certainly not new to the retail industry. He has over 20 years of consulting and project management experience across a wide variety of retail clients. Rob has managed or led several successful, multi-year retail transformation projects for several brands. He’s worked with leading software offerings in the areas of merchandise financial planning (MFP), product lifecycle management (PLM), order management, supply chain, logistics, and point of sale (POS). He most recently departed from Tradestone Software (now Bamboo Rose), and we are very pleased to have Rob aboard.

Rob is interviewed by his long-time colleague Deanna Emsley and hosted by Tricia Gustin. Deanna joined the firm early in 2020—in January before the world fell apart, so she’s been able to witness this entire firm go through what everyone else has gone through and brings her own unique perspective.

This podcast episode not only showcases Rob's past experience and his "superpowers," but also shines light on what it's like to work with The Parker Avery Group and the firm's own unique character that truly sets it apart from the rest of the consulting world.

Listen to the Podcast

Deanna: Happy Friday to you, Rob. How’s it going?

Rob: It’s going very well—another very busy Friday.

Deanna: It’s funny to be interviewing you because, maybe the audience doesn’t know—but we’ve known each other for a very long time. And it is my pleasure to get the opportunity to expose you and all of your skills and strengths to a broader audience. So, thanks for letting us do this today.

Rob Gentry

Rob: Absolutely, it’s my pleasure.

Deanna: Let’s get started with, how did you end up in retail?

Rob: “End up!” You make it sound like it’s a negative thing (laughter). I’ve always had an interest in retail and marketing. Originally, I really wanted to be a hospital administrator and was actually in a college program to major in hospital administration. Unfortunately, in my sophomore year, they decided to cut that program, and I was left with business management. From there, I actually started working for various companies and became sort of a quality control specialist and was hired by Retek, which got me into retail and working with retail software.

Deanna: Well, there are certainly a lot of parallels in hospitals and administration with retail—especially as a customer focused synergy there, so I’m not surprised that retail would have been a good home for you. In your career in retail, you’ve gone from a huge software company (Retek), which was where you and I first met. That was 18 years ago—I did the math this morning, and now I feel very old (laughs).

Rob: So do I (laughs)!

Deanna: But we met at Retek and we both went through the experience of being acquired by a massive company, Oracle. And when you left Retek, you went on to a very large, big 5 consulting organization, and since then you’ve moved to smaller firms. So maybe explain to me a little more about what’s driven those choices.

Rob: Certainly. I can tell you that at times, I’ve felt like a pendulum on a clock because I’ve swung back and forth from large to small. Each has its advantages and disadvantages. On one hand, working with a smaller organization gives you a feeling of really being more connected, being very entrepreneurial, you feel less insulated from the everyday of what’s going on. The other part of that—from the larger side—you feel like more of a cog in the machine, you feel like a number. You’ve got different roles and responsibilities that are assigned to you that you don’t really get to spread your wings or have a lot of depth across the organization, so that’s really why I enjoy working with smaller organizations. I’ve cherished my time at all of the places I’ve worked; I’ve made great friends, and really enjoyed the time there, but my heart always goes back to a smaller organization, where I feel like I’m appreciated and really enjoy the one-on-one with different people.

Deanna: Well, I know we are super excited that your pendulum has swung back to the smaller firms. What are some of the things that you’re really excited to dive into now that you’re here at The Parker Avery Group?

Rob: Core merchandising is the area I get to really sink my teeth into. I’ve had the luxury of working with different retail software packages the left and the right side of core merchandising, but not directly in core merch, so this is an exciting time and opportunity for me to really learn from my peers and the folks at Parker Avery to basically get the best understanding and level of detail possible in that space.

Deanna: That’s also one of the reasons I swung from big to small employers and partners in business. And I love that Parker Avery brings both strengths together, in the sense that we have some of the best and brightest in the industry who have such deep experience—which is something I know we both experienced at very large firms. You have access to people with that depth of skills at very large firms, but as you said, we get an opportunity to really dive in deeply and make a big difference as individuals at a firm this size.

Rob: I agree, and I think the beauty of this is that, the people who are at Parker Avery are here because they truly love retail. This is the type of organization that you dream of working for when you specialize in a specific industry. The people here are 20+ veterans in retail, and that to me says everything about what Parker Avery stands for and what we can bring to the market for value.

Deanna: That’s right. And I love that despite that depth of experience, which can sometimes get people entrenched—as in, “this is the way I’ve always done it.” There’s very little of that in our peer group. You’re new to Parker Avery, and I’m only slightly less new (as Tricia mentioned at the beginning), I feel like I’ve only been here two months in pandemic time (laughter), because my tenure has unfortunately been marked by this incredibly unprecedented and highly disruptive “thing” in our industry. But it’s certainly given me an opportunity to dive deeply into some internal work with the firm. From that vantage point, I feel like I’ve reconfirmed an assessment that I’ve had as an outsider to the firm that: this is a team that not only loves this industry, but loves learning and loves hearing other peoples’ opinions. This is really appreciated in a group of 20+ year veterans—and now you’re making us feel old again, Rob (laughs). But that’s an odd combination, when you have people with that kind of depth and that kind of openness.

Tricia: I think it also has a lot to do with the respect that I certainly feel for the rest of the firm as well, because nobody is afraid to admit when they’re wrong, and everyone is open to new ideas. I think that speaks volumes about the firm, its people, and our leadership.

Rob: I think it also goes back to what I was saying in terms of working for the larger organizations. Those tend to be cookie-cutter in their approaches and methodologies, so you’re almost pigeonholed to NOT learn something new because they want you to do it their way. So here, you’re getting that depth and breadth of knowledge from many different experiences “in the wild.”

Deanna: I mentioned the pandemic Rob, again with our shared experience, I don’t think either of us has seen anything like this in our industry, and with very few exceptions, this industry has been rocked in a very negative way. With all your experience in software and management consulting and process engineering, what are some of the things you’re bringing to the table as you work with retailers under these conditions to help them get through this and potentially even thrive under these conditions?

Deanna Emsley

Rob: It’s a great question, and really interesting times. I never envisioned my life to be what it is today and spending my 50th birthday in my house—a milestone birthday! The way I look at the pandemic, I look at it on two levels, basically. The first is the human and emotional level, because this is a time that’s trying for all of us, and especially in the retail industry, brick-and-mortars were already being beaten by ecommerce, so people are nervous and scared. So I get it. The other part is, it’s a new way of working. For example, just as the pandemic was striking, I was two weeks into an eight-week design session with a customer, and while most of our clients were putting things on hold, they decided to move forward, and we had to shift our entire way of working with them. People going from an office every day to telecommuting from their home and being on Zoom. Working through that took some agility to change not only our approach to how we were working with clients, but also being empathetic to their plight. And from a business perspective, it sounds cliché, but that thinking outside the box attitude of going above and beyond and looking for the unorthodox ways that you could potentially help a business grow, looking for alternative revenue streams, different ways of selling and reaching your customer, even different marketing strategies. Those are the things that I think we should be advocating and helping our customers with. Even though it may not be “normal,” we have to think “un-normal” in the current circumstances.

Deanna: It sounds cliché, but it’s really not—to think how powerful our experience of thinking outside the box is under these conditions. As consultants, we’re asked often to come look at a problem that a very smart team internally has been looking at for a while. We don’t come to the table with a new perspective necessarily on what the problem is, it’s on how to solve it—that’s why you bring in outsiders to assist. So we’re often very good at quickly identifying what’s not part of the solution as well as pointing out blind spots the client may not have noticed and suggest diving deeper in certain areas. Those are really important skills, not only as practitioners, but also in teaching our clients how to build the muscle as individually and as organizations. That’s not cliché at all under these circumstances.

Rob: Agreed. An outsider’s perspective certainly lends itself to ideas that may not have been thought of internally, but certainly coming to the table with a wild idea takes courage and sometimes it can be very rewarding for that idea to take flight.

Deanna: Another thing that’s related to that question, as somewhat “newbies” to the firm, one of the things our clients need to learn how to do is communicate with even less authority that they are used to having. There’s an authority that comes with proximity; when you’re sitting in a conference room, your behaviors and interaction with each other creates a level of authority. Whether organizationally that structure permits you to behave that way or not, just the proximity to your professionals does. And now, we’re having to examine and model what does the behavior need to look like when you’re sitting on a Zoom call. What does it look like to influence each other from a distance, instead of having the benefit of proximity? So, have you found within the firm and in our clients that you’re relying on more now as well?

Rob: Yes, it is. It certainly helps having your dog quiet while you’re on the phone, but it’s a definite change. The new normal is being adaptable and being open to the disturbances. One of the things for me is being able to read body language and sense how the room is reacting to messaging that I’m putting out there. In this climate, it’s very difficult to scan the "Brady Bunch" screen and the nine or ten facial expressions and figure out if the messaging is landing properly. In those instances, it’s more touch bases, more communication back and forth and checking in to make sure people are getting what they need.

Deanna: I agree. Something I didn’t appreciate was a skill I had that I’ve had to rely very heavily on under these conditions, both as a new employee and as a retailer facing a pandemic and remote work almost entirely across the board. What’s one of the things you would say is your “superpower?” I use that phrase when I think about something that I know under almost any condition, no matter what the scenario, my superpower is something I’m going to be really good at. What’s Rob Gentry’s superpower?

Rob: That’s a wonderful question. On a basic level, I would say it’s my empathy. And with that comes both negative and positive connotations. So, on the plus side, I can read a room really quickly, and I can sense when there’s something going wrong. It also helps me change my demeanor and fit the mood to the room as well. So that’s one of the positives. The other challenge though, is that it can be very draining. For me personally, a lot of negative energy in a room can really make my role difficult, especially if I have to deliver bad news or if I have to negotiate an opposing opinion or view. That weighs on me because I can sense the negativity, and I can sense the pushback. That’s one of the areas that I am continuing to grow in, and for me to express myself and be able to keep it factual and keep the emotion out, but also keep the human element present.

Deanna: That’s great, thanks for sharing that. Again, going back to “we met 18 years ago,” chapter of our story—I absolutely concur that you have very strong empathy. I was new to the software industry, I was new to consulting, I was new to proper project management, and I was partnered with you, thank goodness, and you were just a great mentor. Right out of the gate on day one, to be handed such a fresh person—a fresh talent perhaps, but very, very raw—maybe not even going to be a diamond so raw—and you were so empathetic and so helpful, and yet gave me so much room to be able to figure it out in my own way. And I remain eternally grateful for that, and it brings me so much joy to be able to work side-by-side with you again now, because that is certainly one of your many superpowers.

Rob: Thank you, that’s very kind. Going back to what we talked about being in a small firm; [when I joined The Parker Avery Group], I was immediately welcomed with many different notifications, emails, etc. People offering to answer questions, let’s schedule lunch, coffee and so on—all of that was fantastic. Assimilating very quickly with Robert Kaufman and John Lawing on the project; also Dave Birdsall in helping me understand some of the logistics and how we do things at Parker Avery—enabled me to very quickly get up to speed, and I was very pleased to have that experience to immediately start bringing value to a customer.

Deanna: What’s something people wouldn’t guess about you?

Rob: I’ve never been intoxicated.

Deanna: Really! (laughs) In this industry, how have you pulled that off?

Rob: I do drink, but never intoxicated. And I was in a fraternity so that’s important to know. I’ve always wanted to be a standup comedian. I took some improve classes a few years back, and I found those very interesting and fun. I think general shyness precludes me from wanting to be the person that I want to be, but all in all, I think I do pretty good. Also, I’ve seen Elvis in concert twice.

Tricia: Wow…the real Elvis? (laughs)

Rob: The real Elvis.

Deanna: These are great nuggets that I didn’t know or would have guessed about you either. I love it!

Rob: And then the one final thing, I’m a huge Star Trek fan. Over the years I started collecting screen-worn costumes and wardrobe from Star Trek. I have Star Trek action figures and toys all around me, so very much into that.

Deanna: That’s fantastic. Well thank you, Rob. I hope everyone has gotten to know you a little better. We’re so excited you’re here, and that we get to work together in a proper stand by each other kind of way instead of more distant, which is what the last 18 years have been. We’ve certainly been colleagues in a broader sense, but not in this direct sense, so I’m delighted to have this opportunity once again.

Rob: I remember running into you at the Minneapolis airport.

Deanna: Back in the days when we got to fly around.

Rob: Exactly. I don’t think you recognized me, but as soon as I said, “Hey!” You did.

Deanna: I was probably in a zone; you know how you are when you’re moving through the gates of an airport, goodness.

Tricia: Well maybe someday we’ll be traveling on airplanes again and you two can bump into each other again. Rob, you’re in Atlanta, and Deanna, you’re on the West Coast, so some point we’ll meet in the middle, right.

Deanna: Or wherever! Far, far away because we’ll be so pent up with the need to go—just go.

Listen to the Podcast

Contact Parker Avery

Cover image by StockSnap from Pixabay

Three (or maybe four) Key Takeaways from Analytics Unite

2020-10-15T10:24:00.002-04:00

Last week, The Parker Avery Group sponsored and participated in Consumer Goods Technology’s Analytics Unite event—a groundbreaking virtual conference that brought together around 500 retail and consumer goods professionals from a variety of different backgrounds and from around the globe. While indeed, the virtual setting was quite different from attending a live conference, the event platform provided many opportunities to connect and discuss ideas with colleagues and new contacts in a real-time albeit highly remote, capacity.

Once attendees (and sponsors!) grew accustomed to navigating the virtual event platform, there were several lively exchanges of information about advanced analytics solutions and their increased necessity in a very changed world. During Parker Avery’s discussions over the 3-day virtual event, where the overall theme was “purpose-driven analytics,” we noted three key messages:

1 The focus on advanced analytics in retail and consumer goods/CPG is clearly high right now, especially as brands need to adjust quickly to continuous disruptions.

Brands have quickly—and some painfully—understood that local and global disruptions can dramatically shift shopping behaviors on a dime. As such, being able to quickly adjust consumer demand signals leveraging advanced analytics is essential for survival. The ability to understand shifts from physical stores to ecommerce is an easy example, as well as being able to understand demand shifts based on spiking coronavirus cases by geography.

2 Advanced omnichannel capabilities—supported by analytics and flawless operational execution—have become imperative.

Whereas before 2020, some brands (and entire segments) were merely “tinkering” with omnichannel, over the past few months forward-thinking companies have catapulted these initiatives into overdrive. Consumers are demanding more shopping and different fulfillment options, there is increasing pent-up frustration with continuous closures and restrictions, and patience is quickly waning—especially as we quickly approach the holidays. Retailers and consumer brands are refining and operationalizing what started out as “scrappy” omnichannel processes at the beginning of the pandemic.

Curbside pickup is a perfect example of a capability that few retailers had a year ago, and now many have gone through multiple iterations of new curbside options for consumers; an ability to better manage this demand signal and related services is critical to continued growth. To drive margins and profitability, new omnichannel processes must be supported by analytics to ensure demand signals direct products to and from the most optimal shipping and fulfillment locations. When implemented correctly, analytics can have far-reaching, positive implications throughout the entire omnichannel supply chain.

3 Brands are placing priority on business value from their analytics investments, as opposed to implementing just another “cool” technology.

The competitive landscape is cutthroat—even more so now—and shoppers continue to be fickle. Brands realize that analytics can no longer be relegated to the IT department or in the analysts’ cubicles. Analytics must be in the hands of the business: those critical roles making sourcing, planning, buying, replenishment, allocation, supply chain, merchandising, and other key operational decisions. To drive—or really optimize—business value, high priority must absolutely be placed on the infusion of analytics into retailer and consumer goods companies’ business processes as well as on change management leadership to ensure organizational adoption and sustainment of value. Analytic tools should be directly tied to key metrics and expected improvements, especially across revenue, margin, and inventory productivity.

As a final takeaway (but not exactly related to analytics), while we’ve all grown accustomed to Zoom/Teams/[name your platform] meetings, and this familiarity certainly helped during the discussions the Parker Avery team had during the conference, we also believe there is significantly more value in physical, face-to-face events. We certainly understand the importance of continuous diligence during a pandemic environment; however, in a virtual conference setting, attendees can quite suddenly “disappear” by simply closing a browser tab or exiting Chrome on their mobile device screen. This was indeed a slightly frustrating characteristic of the virtual platform—perhaps something younger generation gamers are more accustomed to—but it did make unplanned, casual conversations difficult to initiate and consequently somewhat degraded the value of the event.

But for those who kept the platform open on their screens, there were notifications for when keynotes, presentations, breakout sessions, topic tables, and 1:1 meetings were beginning—which proved to be very useful to those of us who are admitted multitaskers and needed a digital “nudge.” Further, we commend the staff at CGT and EnsembleIQ for being quite diligent in all the preparations leading up to the event.

All-in-all, we were pleased to make a number of new connections, and the opportunity to essentially test a new way of networking was interesting. We are looking forward to follow-on conversations and especially where The Parker Avery Group can work with companies in driving meaningful value from analytics.

Clay Parnell, Sam Iosevich, and George Arutyunyants

Interested in talking with us about your analytics initiatives? We'd love to start a conversation.

Contact Parker Avery

Strategic Sourcing in a Disrupted Supply Chain

2020-10-08T08:08:00.004-04:00

In this episode of Parker Avery's podcast, "Talk Retail to Me," we take a deep dive into strategic sourcing decisions for retailers and consumer brands. I interviewed Robert Kaufman, Parker Avery’s CEO, along with Senior Manager Rob Oglesby one of our resident inventory and supply chain experts.

Note: this is a long post, and you can listen to this episode and others by clicking here.

With so many recent global and domestic disruptions it seems that what some are calling the new normal is still a long way off—if we ever get to a normal state— so how do retailers and consumer brands need to think and change their sourcing strategies amid so many unknowns?

Rob: I think the biggest thing that has to happen here is flexibility. In the past everything has been about how to get the lowest absolute cost for the product. And that didn't necessarily mean timelines were as important as they need to be now. Timeline has become extremely important, because the lack of nimbleness and the lack of the ability to shift at a moment’s notice almost with regards to what's going on in the marketplace has now been exposed, and as a result, brands need to start looking at a lot more factors with their sourcing strategies today than they perhaps were comfortable with over the last several years.

Robert: A lot has obviously happened, and as we found out during the pandemic—and maybe you're still finding out—companies didn't even know where their products were. As common or obvious that may seem because of the complexities of the supply chain and the lack of true visibility, they might know who they're paying—what they might call their supplier—but beyond that, there a lot of things that were going on in terms of raw materials, suppliers, contracting beyond or behind those main suppliers that retailers and brands really didn’t understand. Beginning to better understand that is going to be critical.

It ties into visibility, but it's really not just the visibility. If you were to ask the question a year ago it was primarily from vendor to your company's distribution center; but now, it’s the entirety of everyone that's involved in the making of that product. And to your point about flexibility, until now, over the last 10 to 15 years companies worked really hard to eliminate waste and redundancy, and there really weren't buffer inventories, if you want to think of it that way. So, when this pandemic happened, there was really no option to be able to go to a different source of supply when your main link was down. Now, I think companies are going to have to start thinking differently about the criticality of certain finished goods, components, or even raw materials to avert things like this from happening—or not avert but be more prepared if and when something like this were to happen again.

Rob: I completely agree with that. It's a big complex mess and, [these disruptions] really exposed it.

Speaking of that exposure, there's a fair amount of unease, especially on the consumer side about where products are made where things are sourced from especially if they're coming from overseas and particularly from countries that may not be as America friendly. So, there's an increasing desire for things that are made in the USA and even locally. So how do they how do consumer brands or retailers handle this, realizing that cost, price points, visibility may not be as competitive with foreign-made counterparts?

Robert: There's definitely going to be a push for near-shoring product manufacturing or sourcing. All of the factors you just said are going to drive that, but while cost is obviously an important consideration, the reliability of the supply chain is going to become a heck of a lot more important than even cost. So, when you think about what's going on in a geopolitical sense, we have political disruptions that are happening around the world that can and will cause [supply chain] disruptions. Companies who will bring their product onshore or nearshore need to keep in mind that those things can and will have an effect. If it's within the United States, it's obviously a little bit different, but outside even if it's closer to the USA, those things are still going to be important.

I mentioned the supply chain visibility and traceability—just to bring a real-life example right now with the Uyghurs in China that are being imprisoned by the Chinese to produce cotton and cotton products in a lot of the fashion supply chain today. There is an enormous outcry that's beginning, and it’s going to really get to a fever pitch and companies are going to need to really understand what and where their products are being sourced from—all the way from the raw materials. You factor all those things in, and lastly, proximity to the end consumer. Is the labor cost more in the USA than other places around the world? Assuredly it is, but because companies are becoming much more concerned about building inventory in advance, which was maybe not totally the approach they would take, but they would assume their upstream customer was going to buy in a certain quantity. But now, their customers aren’t asking for as many and they are asking their suppliers or brands to be very nimble and replenish very quickly. By being nearshore or in the USA and having the ability to respond becomes viable and possible, whereas if you have an extended supply chain overseas, you’re adding travel and transit as well as 30-40 days in many instances. Having more control over your supply chain is going to bring that reliability, likely reduce the lead times, and albeit maybe cost a little more—in the end provide you with more value and assurance to their customers.

Rob: You hit on so many valid points, in particular the nimbleness. If you’re near-shoring, you can make decisions much later. The closer you are to demand, the more intelligent that decision is, so you’re able to make better buys, potentially buy less or more of a particular product, and to keep your margin as opposed to putting a bet on something that’s nine or more months out in the future—what’s traditionally been the lead time for the past 15-20 years. Making decisions that far out, you just don’t know what’s going to happen, and your sources could dry out or going into a situation where they can’t produce, which causes major issues. Whether it’s “made in the USA,” that certainly has a caché to it and in the geopolitical situation we’re in right now, that may have some benefits to it, but in my mind a lot of that—it’s beyond just that—it’s just the smarter way to operate.

Think about what Dell did many years ago: they put their factories right across the street and they almost had conveyor belts going right into where they were assembling computers. It was literally: you placed an order for a computer, and that triggered an order for a chip to be made. Are we going to get to that? No, not quite. But a lot of what you look at from a cost perspective needs to be re-evaluated. Before it was the lowest possible cost of the product, transportation be damned, etc. That thinking has to go by the wayside.

I think another thing to think about: brands are global. They’re not just US brands. Yes, a lot of them may have their headquarters here, but we work with clients that have stores or some sort of an operation with their brand in 100+ countries worldwide. And all of those deserve the same kind of proximity. So that goes back to Robert’s comment about multi-sourcing, because if you have all your eggs in a single basket, and that particular situation goes into an area where they can’t product or their factories get shut down. Look what’s going on in India—they’re quickly trying to overtake the US with regards to the case quantities. They’re in a world of hurt; that’s becoming a big production for fashion. As things move out of China, India’s becoming an area where we may start having the same types of issues trying to get product out of India. Getting that product closer too is a big deal.

Finally, the concept of blockchain and knowing where products and materials came from because there’s the social responsibility that adds into this, and people are demanding it. They do not want to be wearing a garment that came from a sweatshop or out of a dangerous situation, where people are walking into work and essentially putting their lives at risk because they’re working in a building that’s getting ready to burn down. That’s also stuff we’ve seen with our clients, and it’s a horrific situation. There’s a lot of benefit to be had if companies are able to get closer to where their markets are and be able to turn their entire product lifecycle much faster, that’s where the winners will be.

We talked about the transparency, and it’s obviously still a big factor. So, if that’s a big push, it’s also a major change from an organization perspective. How do supply chain organizations need to change?

Rob: A lot of our clients do have sourcing offices. It’s a matter of those sourcing offices having a lot more play and say—and visiting not just the factories that are making things, but also understanding the raw material piece of it. And getting involved in positions in those raw materials, because if you do that, you have to go deeper into the supply chain. The other thing I’ve seen is that there are compliance organizations that can be partnered with. These organizations do audits and leveraging that information across multiple companies as the single source of the truth. I can see more of that coming online and people demanding those types of audits. It does pressure the sourcing organization, and if you’re close to a market, you’re going to need to have some sourcing resources in there, so it will spread them out. A lot of our clients had a single sourcing office, more than likely located somewhere in China or Hong Kong close to that general area of production, and that may not be enough anymore.

Robert: You’ve touched on a few really interesting points about social responsibility, and with what’s going on in the USA now with a lot of protests and such, and even before the pandemic, there was a real push on sustainability and understanding where products were both being made as well as where they’re going to go afterwards: a full lifecycle for those products. What it really is going to boil down to, and we’re not quite there yet, but I would say that within the next 18-24 months it’s going to be table stakes: you’re going to be able to walk down an isle of a store, and you’re going to be able to use your phone to scan the UPC, barcode, or QR code; and you’re going to be able to see everywhere that product was manufactured as well as the raw material sources all the way back down the supply chain. It’s imperative: besides the social responsibility and audits, which have been around now for 10-15 years—and there are flareups where problems still occur—we’re going to go well beyond that. You’re going to be able to see where that product has been all through the supply chain; and consumers are going to make decisions based on that. If it’s made in the USA, and it costs 20% more, but they see that supply chain and know it’s a verified traceability, that’s going to mean something too. Not that companies are all going to pay lip service to social responsibility, but it’s going to be a mandate or requirement now for doing business because it is going to be fully exposed.

One of the things that I think companies can also do in support of that—it’s more of a technology play—with artificial intelligence and what has been called “supply chain digital twin” where you can simulate through a technology how that product is going to go from source (even pre-finished goods) all the way through to the completion of the product and the delivery to a brand’s distribution center or stores. And what’s really cool about those capabilities, besides the initial simulation is: there are examples today, where through internet of things (IoT) connectivity, as things happen, the digital twin can understand and receive that information and then reroute the product accordingly, based on alternatives that it’s already played out in various simulations. So that sounds really blue sky and not everyone’s doing it yet, but again AI/ML—yes, it’s not quite everywhere in everyone’s solutions, but the leaders are going to have that. Applying that type of technology to the supply chain to be able to solve some of those questions of, “How do I get my product if and when and there are problems?” is also going to become a real requirement to just be viable in the near future.

Rob: It’s almost like you go back to your comment about visibility: that’s visibility on steroids. Just imagine: you want to reroute a shipment—if you can send a signal down to change the destination of that QR or barcode or RFID or whatever the tagging process being used—at the next destination point, the product can be automatically rerouted—that is flexibility beyond measure. I can envision that coming in the not-to-distant future.

You said, “Not too distant future.” Is that two years out? Five years out? And related to that, who is on the forefront of this technology?

Robert: I’ve been in conversation with some supply chain companies that we work with that are really pushing that, and they have some technology that—maybe not quite as extensive as I described, but they are building this concept of a digital twin. Not necessarily tied to machinery and IoT, but to be able to do those simulations. There are companies in our industries that have those capabilities. From an adoption of our clients, there’s not been a whole lot of that. Ralph Lauren—while it’s not quite the same—but you can scan a Polo Ralph Lauren barcode and determine a few things about their product. First, is it a valid RL product or is it a grey market product? The way you can tell is if you scan it, it will go all the way back to the farm in which the cotton (if it’s a cotton product) was sourced from, so you see all that visibility. They’ve now made that now for branding reasons and to eliminate some of the counterfeiting that happens. So, companies that maybe you don’t think of as progressive, but from a brand protection standpoint are doing those kind of things.

To answer your question more directly: some companies are there, but it’s going to take, I’d say, the next 18-24 months for brands that are going survive and thrive to really adopt those types of capabilities.

Rob: To add on to that, a lot of this has to do with how the technology components have been assembled to interact with each other. Going back to that redirect, at some point in time as products come out of a factory—traditionally rigid PO’s sent that shipment to a final destination in a distribution center—that was set in stone. What Robert alluded to is that it’s no longer set in stone, and changes can be made at any point in time. It’s just a matter of how you take control. There’s an operation component to this and you also have to have the signal to be able to understand where product is needed and then redirect. You get critical checkpoints along the way. The technology components are there, it’s just a matter of if they’re getting assembled correctly so that we can start to leverage this capability. It’s going to be extremely important, especially when you’re not sure what’s going to happen with demand. Things are starting to look better, but nobody knows what’s going to happen with relapses over the winter. All of that is still a huge unknown; it took two years to get through the Spanish flu—hopefully with newer technology, we’ll get through this faster, but it’s still up in the air.

Robert: I was talking recently with the president of a supply chain software company, and we both came to the same realization: it’s a point now where there are capabilities that are now table stakes. Think about the companies who have gone bankrupt over the last six months. These companies truly may perish if they don’t take bold, transformative action. That’s what we’re seeing the leaders do. Even if they’re going through some struggles now, they understand that maybe it’s a leapfrog that buys them three years of leadership or it’s a leapfrog just to get to table stakes. They have to do it. The concept of incremental change, while it might help in a non-pandemic world and get you a little bit better, there’s just not enough time nor patience in the market right now for that. You’ve got to be bold and take on these new capabilities and the technologies that are there or unfortunately many of these companies just aren’t going to be there because the leaders are going take those bold moves.

In an industry where traditionally (pre-COVID), retailers were pretty hesitant to adopt newer technologies. They can’t be like that anymore—they’ve got to move forward and they’ve got to move fast. You’ve got to be “scrappy” in a big way now because they just won’t be viable. Any words of advice? What’s the first step for retailers and consumer goods brands?

Robert: It’s really looking at their supply chain holistically. I alluded to it a moment ago: incremental change isn’t really what’s going to move the needle for them. They can deploy incrementally, meaning, “Let’s build the holistic, transformative capability set, and we might deploy it in a pilot then roll it out.” But just taking piece-by-piece isn’t going to work, so coming up with what that supply chain strategy. Not to be trite about it, but what is that future capability set? How do they want to operate? Do they want to be an onshore capability for production or for global brands, at least have the option of a source of supply in North America? Making those key decisions and building that strategy is the first step and then not putting it in a drawer and saying, “That’s our 3-year strategy and we feel really good about it.” Take action. Deploy against that strategy, and again, that all may seem obvious, but there’s just not time to think about things too much. You’ve got to move because there’s so much going on right now. That’s another thing the supply chain software president said to me: “It’s been kind of quiet for the past three to four months, but all of a sudden companies are coming to us and asking not to just put in one or two modules—they want to take transformative massive leaps of capabilities.” I think that’s indicative of the leaders of our industry.

Rob: Obviously, we’re talking about supply chain right now. But this impacts the entire organization. Think about the merchants: their entire metrics set and how they are incentivized has to come along for the ride, because if we near-shore products and all of the sudden your first cost goes up—if they push back, then you don’t have that synchronicity. You need to look at what the final margin is on products. So, some of the KPIs across the organization must be considered. To be nimbler: there’s a huge value, but initial margin will be impacted. You need to look at overall profitability because of better sell through and lower costs through the supply chain. That become the real win for the organization. You’ll bring more people on board because it’s understanding the bigger picture. The former picture of success is no longer relevant, and success needs to be redefined. That’s how the organization will survive. If they can’t make those changes with everyone on board, it’s not going to be a good situation for a lot of these companies. It’s massive transformation.

Listen to the Podcast

Contact Parker Avery

Image by Valdas Miskinis from Pixabay

Digging DEEP: Achieving Omnichannel Resilience

2020-10-01T11:39:00.001-04:00

Earlier this week, Sam Iosevich and Marty Anderson participated in a virtual networking event hosted by Parker Avery partner Synoptek, a global systems integrator (GSI) and managed IT services provider (MSP). This invitation-only, private event was titled, “Reimagining Retail in 2020 and Beyond: Strategies To Modernize, Adapt and Weatherproof Retail Operations,” and included break-out sessions including:

Delivering a world class omnichannel retail experience
Leading with an efficient supply chain to optimize your business
Improving the shopping experience with AR/AI
Reducing risks by managing your inventory effectively in the age of COVID-19
Understanding who is coming into your store through thermal sensors
Strategic expansion through mergers
The evolving modern e-commerce platform
Demand analytics

According to Marty, "The event was a fast and fun way to meet many retail leaders in a short period to assess support needs and potential partnership compatibility. Imagine virtual a ‘speed-dating’ event if you will. We had approximately 8 minutes with each leader to introduce ourselves and our offerings and listen to what they are currently working on, as well as where they may need partnership for future projects. We were also able to meet many new retail leaders of businesses models that we normally haven’t had exposure to through our normal networking channels. I’m looking forward to following up with some of these leaders to discuss further their business challenges and how Parker Avery can help move them forward."

This week’s blog is a transcript of the keynote Parker Avery delivered during the live event.

Normally when we talk to companies about resilience, it’s focused around achieving stronger personal resilience throughout their organization. This is such a critical skillset because personal resilience allows you to keep your productivity high during times of stress or disruptive change. We normally approach this by first giving a quick diagnostic to each person to determine their innate flexibility with ideas or adaptability with more or less structure. Then we council on ways to engage by leading with their strengths and building awareness of areas for growth and improvement. We encourage them to experiment and be proactive by trying new innovative ideas to solve business problems during times of ambiguity. Partnership and/or mentorship is always encouraged to learn new ways of coping and managing through disruption.

Building resilience within your omnichannel business should follow very similar steps. You first must identify where you have gaps in either your business process or technical capabilities. Use this information to engage your cross-functional organizations with an improvement roadmap that is prioritized base on value and impact to your business. Find ways to test and learn and move forward as quickly as possible to deliver continuous improvement over time. Stay proactive. Find the right partners to help you on you journey. You may need consulting partners to help you with your assessment and building your roadmap, as well as software and implementation partners to deliver new and modern technical capabilities.

Since March, the retail market has been more volatile than ever before due to the impacts of the COVID-19 pandemic and how it has dramatically limited and/or changed customers' shopping behavior and service expectations. Even well-established businesses have struggled to stay relevant, essential, and most importantly accessible. There are many concerns and/or opportunities that still need addressing to help businesses recover and stay strong throughout this disruption.

However, the two most prominent challenges that have been consistently on our clients' minds have been

Addressing customer accessibility through up-to-date omnichannel capabilities in order meet customer demand across multiple channels and delivery options; and
Creating a predictive demand signal that can react faster and more accurately in a volatile sales environment where history is less relevant than current trend.

Omnichannel Capabilities

While we know that ecommerce has been growing in importance for years, recent events pushed omnichannel and supply chain demands faster than ever. Between March and August of 2020, analysts have attributed over $100B in additional ecommerce sales to the impacts of COVID-19 on our retail industry. It is critical that every business assess their current omnichannel and supply chain capabilities and build a strategic roadmap for where you must position your company to be more adaptable to this type of disruption in the future. Ask these questions:

Do you have a multichannel selling strategy that provides a consistent quality experience to your customers?
Do you utilize search engine optimization capabilities?
Do you offer a high-quality mobile experience?

It’s now more important than ever to meet your customers where they are, which should include a strong mobile strategy and multiple ship/pickup options. Over 54% of all ecommerce sales are completed with mobile devices—even though mobile conversion rates are less than half of desktops'. This is in part because half of customers abandon a site if loading takes longer than three seconds. Therefore, some companies are utilizing progressive web applications (PWA) combined with an accelerated mobile page (AMP) to ensure better performance and conversion rates. This is so important because less than 75% of American households have home computers, yet 96% of them have cellphones with over 80% being smartphones.

Demand Analytics

The other major capability that we see companies scrambling to add or improve is demand analytics. Right now, the demand signals that many companies have depended on for years are proving unreliable in the current retail climate. Whether it's due to forced brick-and-mortar closures due to quarantines or lower traffic patterns due to health concerns, when and how customers are shopping has changed dramatically in a short period of time. These changes make it increasingly difficult to predict where your demand will be and how high (or low) it could be week-to-week. These patterns are still changing and adapting at different rates across the country and the globe.

The best way to get in front of this problem is to have an effective demand analytics strategy that is AI-
enabled to ensure it can react and adapt to changing trends quickly and accurately. However, really optimizing this capability will require you to enable a cross-functional demand signal that can be utilized across multiple processes throughout your organization. This improves consistency throughout your end-to-end processes while managing all the way through a product’s lifecycle. Remember, whether you are trying to build a strategic financial plan, determine inventory flow needs, or decide where and when to take markdowns, it all starts with understanding current and future customer demand.

By building these signals with a centralized statistical approach, you reduce variability and improve both accuracy and efficiency across your organization by providing one version of the truth. Remember, you can’t fully optimize your omnichannel sales if you’re struggling to predict where your demand will be by channel.

These two critical capabilities have far-reaching impacts across your operations. Let's explore these further.

Inventory Management & Supply Chain Optimization

If we have learned anything from the pandemic’s effect on retail, it’s that managing inventory and producing dependable predictive analytics are critical capabilities to staying flexible and meeting consumer demands without risking wasted inventory. Make sure you have the ability plan by channel and create optimized assortments by location. Examine your fulfillment capabilities, and ask questions like:

Do they utilize statistically driven demand signals?
Do you establish product lifecycle expectations and apply them when choosing how and when to replenish and/or markdown items?

Our supply chains have also been challenged to discover new ways to receive and ship goods on shorter windows and with greater agility, all while maintaining or reducing costs. This year we've seen product shortages due to rolling production shutdowns across the globe as well as a stream of cancellation requests due to diminished demands. Building a resilient supply chain is critical to ensure you are agile and scalable to growing and changing demand [Parker Avery’s latest podcast episode focused on this challenge].

Diversification and efficiency are key, so think about all your inventory carrying locations as ship and pickup points including your brick-and-mortar stores. Customers want more fulfillment options—and they want it free—so effective order management and WMS accuracy are crucial to keep costs low and shipping times short. According to Shopify, 65% of retailers are moving to same-day delivery offerings, and it’s quickly becoming the norm.

The Store Experience

While ecommerce is growing rapidly in both volume and importance, brick-and-mortar locations will continue to produce 75-80% of total sales. This is still one of the top drivers of customer satisfaction and loyalty, and it’s constantly evolving as well. However, you’ll find that your mobile strategy should include the in-store experience too. Especially now when customers want to feel safe and look for things like contactless checkout or using mobile apps for payment. Also, the ability to identify your customers as they enter your store with your mobile apps and offer individualized promotions or product recommendations is a great advantage. Just make sure the personal offerings are meaningful and relevant to them—otherwise messaging will become more annoying background “noise” and you risk having customers opt out of notifications in the future. Using thermal scanning to check temperatures or build heat maps of traffic patterns can also be used for either strategic product placement decisions or for focused cleaning/sanitation to keep customers safe and healthy.

New innovations in augmented reality (AR) supported with AI are starting to have real impacts on certain markets. These capabilities could include 3D mapping to assist with product location for a grocery store or using photo imaging to virtually try on eyewear or cosmetic products. Ikea and Wayfair are currently promoting applications that allow consumers to scan and measure spaces in their homes and then produce 3D imaging of furniture pieces so consumers can get a feel for how selected furnishings look and feel in their personal space before they buy. These advancements will drive customer confidence, flexibility in the shopping experience, and reduce risk of returns.

Final Word

While companies may be in different starting positions with different strengths and/or opportunities, just remember to go DEEP. Take the time to assess and Diagnose both where you lead with strength and where you need to improve to stay competitive and essential to your customers. Engage by building a robust multi-year roadmap that is prioritized by greatest foundational need or benefit opportunity to keep you focused. Experiment and learn from your mistakes quickly. The current disruptions have taught us that we can accomplish great things quickly under duress, which means we can also do it when we have the luxury of more time. Fail fast, adjust and keep moving forward. And most importantly, build the right Partnerships to ensure your success. Some organizations may need partners to help diagnose and build a roadmap, while others may only need support with implementation and execution. Either way, establish those relationships early to avoid rework and slowdowns. The right partnerships can get you going faster and keep you on track longer.

Join us at Analytics Unite

Contact Parker Avery

Image by Kranich17 from Pixabay

Deep Analytics: Why You Need it Now More Than Ever

2020-08-20T08:31:00.002-04:00

In this podcast, we interviewed Parker Avery experts Clay Parnell and Sam Iosevich to discuss how retailers and consumer brands can embrace analytics into their business models to enable cross functional collaboration and deliver meaningful financial results. In this week's blog, we provide the conversation transcript.

We hear the word analytics everywhere these days in different contexts and industries, and while the recent disruptions have certainly put an even stronger focus on things like integrating digital and physical channels and deeply understanding consumer behavior, are these the most important areas for analytics investments?

Sam: The integration of the digital and physical channels is first and foremost a business process challenge—where analytics is an enabler. Analytics can help us optimize your digital traditional and marketing spend, inventory across the physical assets, assortment, and pricing—but it all comes back to the business process.

Clay: I absolutely agree. First of all I think this is a great question to start with—I'll share that in my many years of consulting with retailers, the consistent challenge we always hear for business teams, especially in merchandising and supply chain, is the fact that they're always focused on execution and solving problems and dealing with daily fires. There's always a strong desire to be able to spend more time and energy on analyzing results, working smarter, and just having time to truly manage their business, so it's even more important today for obvious reasons.

You touched on the omni aspect, the digital aspect; in the past, consumers shopped almost only in stores and there were less options for the assortment, the channel…and pricing was relatively straightforward. Today in the COVID world, you can shop anywhere and get inventory in a myriad of different ways and from a myriad of different sources, whether it's the store curbside, the traditional direct-to-consumer—so the channels are endless, the level of consumer specific data, and personalization is immense. So I truly believe in today's world of increasing omnichannel complexity, it's not possible to understand and drive effective decision making without advanced analytics.

What are the other top key areas or business challenges on which retailers and consumer goods companies should focus their analytics investments in their efforts?

Sam: Analytics should be integral to every business function.  Anything from planning, marketing, pricing, fulfillment, operations. I don’t think there’s a process where analytics is not key these days. Analytics not only serve to optimize these processes but align them as well.  These functions are all looking to satisfy customer demand.  A common understanding of the demand levers that each of these functions controls is necessary for collaboration. For example, look at something like planning, think about the products you can bring in, your marketing dollars can be focused there as well; your pricing and your fulfillment are aligned to the same demand signal. And, of course your operations—stores, transportation—are aligned to make all of that work together. So analytics is part of every business function—not only does it optimize it, but it brings it all together and aligns it. Very often you’ll hear about business challenges related to working in a siloed environment, and analytics can play a key role in bringing that all together.

Clay: As far as other business areas, just focus on what makes sense for you. Just because a competitor or peer you’re talking to is focused on forecasting or market basket or something else—figure out what makes sense for your business: What areas have real challenges? What opportunities do you think are worth additional analysis? I agree with the silos and collaboration; one of the unheralded benefits of analytics is the ability to drive collaborative behavior and cross-functional integration. The classic example is that you can use analytics to improve your overall demand signal, and it’s great to start off with using that to drive merchandise planning, but it can be that same demand signal to drive other functions, like replenishment, allocation, supply chain, etc. Just having that common signal itself can help break down those silos.

How can analytics system integrate into a company’s existing operating model without a major disruption?  

Sam: The analytics systems are the grease that enables improved business process.  You don’t ever do analytics for analytics sake. Necessary disruptions should be driven by business process and strategy improvements—not analytics.  Analytics is there to facilitate not drive the change.  It’s important that everyone understands this before embarking on the analytics journey—how analytics will be the enabler for process and strategy.  From that standpoint, change management is a crucial component.

Clay: The analytics itself shouldn’t be disruptive, the results can be—and leadership needs to embrace and think about what analytics can provide. Listen to the numbers and don’t pre-judge what the answer should be based on bias or previous results or what you’re reading in the latest business journals. Test and learn—and keep moving forward. And in that regard, speed is important. It’s important to show results, even in a test and learn situation or a pilot, as quickly as possible. Especially in today’s environment, be nimble, be agile, and that will help win support across the business. And just continue to iterate through additional improvements.

We hear a lot about being “nimble and agile” and when it comes to integrating analytics into an existing environment, can you give a real-life example of what you mean by this? 

Sam: We will hear a lot about people focused on a process and almost being a hamster on a wheel in whatever process they’re involved in—they’re constantly playing catchup. And that’s because they’re pulling the levers for everything they do. There is a lot of automation that analytics can bring to where we can focus associates on managing by exception. As an example, there’s no need for a demand planner—either retail or CPG—to be touching every plan, for every item, in every geography. They should be managing by exception, and analytics can enable that.

Besides data cleanliness and governance, what pre-requisites are necessary for a company to begin embarking on their analytics journey? 

Sam: Deep data science expertise are necessary, but not every company is going to have access to that expertise. If you look at the bigger organizations, like Walmart and Amazon—they likely have access to dozens of data science experts in-house—but some of that expertise can be brought in. It’s very important for the entire organization to understand what data science can do for them, and it starts with the business functional leaders. They don’t need to have a profound understanding of machine learning, neural nets, etc. are. What they need to understand is the benefits that analytics can bring to their function.

Clay: I will always harp on the need to have a solid strategy and plan. I always emphasize, “Don’t just buy the new shiny object for the sake of having a new shiny object.” Define what your team needs to focus on first, but don’t go any further than that because you’re likely going to learn new information and change your mind anyway. The team needs to have spent some time on business process. Many companies just look for a new solution that sounds like it will fit, but they haven’t thought through the how and where it will fit in the workflow: what roles will drive the solution or be impacted by it and how it’s going to work with what’s already in place. I’m a firm believer that analytics without business process focus is a recipe in futility. And as with any new initiative, communicate and keep over-communicating, tell people about the investment in analytics and how it’s going to be done, including expectations and success measures. But recognize that your people are your experts: ask for input and feedback along the way. And like any other major initiative, don’t underestimate the change management requirements that will likely come forth.

What other skills or resources are critical for analytics to be successful? 

Clay: Few, besides some of the largest retailers have those data science skills in-house. I’ve worked with retailers where we’ve tried to find and recruit data scientists and the right analytics skills, and it’s neither easy nor cheap when they have so many other options. But there are options to “rent” or lease skills as well as software-as-a-service platforms. One easy option is to find some partners out of the gate as you build up your skills and bench strength, it’s an option to consider. One other key point is that a lot of retailers continue to pigeonhole people, with mindsets like, “my merchants are my buyers—they’re product people” and “my planners need to know the numbers—they’re my numbers people.” In today’s world, you can’t have that dichotomy. Everyone has to be a numbers person to some extent—not that they all have to be data scientists, but they must understand the results of the analytical tools and the implications of those results. It’s very important to not assume that the data scientists are down in a dungeon throwing out answers and results without interpretation.

As far as benefits, what have you seen in retailers and consumer goods companies who have successfully adapted an analytics-driven mindset?

Sam: That’s the right question because the focus should always be on financially measurable results. There’s no reason to embark on an analytics journey if you’re not focused on the bottom line. Personally, I’ve seen financially measurable results in the hundreds of millions of dollars.  These benefits have been driven by better planning, pricing, marketing, fulfillment, and operations.  Although many of these benefits have come from automating tasks such as ordering, most of these benefits were realized in enabling people.  Therefore, adoption is key.

Clay: Some of the automation ties in with efficiencies and letting people attain results without having to churn through huge spreadsheets that are both hard to maneuver and typically can’t get the level of detail required anyway. But the efficiencies are very minor compared with the financial results. The ability for analytics to impact a medium-to-large enterprise is huge: impacts on demand signals to drive sales, impact margin or GMROI, to impact inventory turns and how companies are buying and setting replenishment targets, how they’re allocating to channels and stores. Analytics will fit well for retailers that focus on key metrics and set improvement goals for those key metrics. The ability for analytics to drive improvements in those metrics is significant.

Any last bits of advice for retailers who are just starting on their analytics journey?

Sam: You probably have already started on that journey, whether or not you realize it, so embarking on it will not be as scary as perceived. These days, anyone coming out of university will have some level of exposure to data science, and very likely some of your existing tools have evolved to already use some of the analytic tools, so you’re likely well on your way. I wouldn’t let the phrase “advanced analytics” scare you in any way, the focus needs to be on business process and strategy—and understand that analytics is the enabler.

Clay: Just get started. The conversation needs to continue; people are going to keep asking questions, and you need to dig down into your data. Don’t be afraid of getting started, but also don’t expect to define a huge, rigorous project. Expect quick results—maybe not significant results right out of the gate—but expect improvements over time. And keep the conversation going cross-functionally; don’t say it’s only a forecasting or planning or supply chain project—make sure everyone is engaged and involved because it is going to have many tentacles and touch points across your organization.

To listen to this podcast episode and others from The Parker Avery Group, please visit the podcast page on our website: https://www.parkeravery.com/pag-podcasts.html. Also available on Apple Podcasts, Spotify, and other podcast platforms.

Cover image by Bessi from Pixabay

Retail's New DNA

2020-08-18T06:23:00.006-04:00

Once again, summer is quickly coming to an end, and consumer attention is turning to back-to-school. But with many local governments largely in flux on how to return to classes, consumers are unsure what they need for the coming school year. Do we simply need some new tops to make our Zoom videos look good, or will a full ensemble of clothes, masks, and school supplies be necessary?

What all of us have learned in the past five months is that predicting what’s coming next is extremely difficult and requires every one of us (consumers and corporations) to become more resilient and flexible. Congratulate yourself for finding the personal survival skills to make it this far—you may not know how you did it, but rest assured, you’re much more able to cope than you originally thought. These interpersonal skills will serve you well going forward—and they are also foundational for retailers and consumer goods companies as they navigate the coming months.

Many additional approaches that have been around for years will enable companies to cope with and eventually thrive in this unprecedented reality. Some of these methods are “tried and true” and have not been affected by the pandemic, while others have been accelerated into our everyday vernacular and near-term future thinking.

Nobody needs to be reminded of the tidal shift to omnichannel fulfillment capabilities—a true acceleration of capabilities that have now become table stakes. But underlying these is a fundamental premise: it’s vital that retail and consumer goods companies understand their customers.

Employing voice of the customer tools and approaches remains incredibly important. Being able to understand the needs of your customers requires a well-crafted customer engagement and marketing strategy but you must also leverage analytics. The application of analytics to determine what customers want and need is not revolutionary but marrying the customer’s engagement with brands—their proverbial “journey”—with analytical insights of product desires and fulfillment expectations is a tenet we all should be adopting.

The fact that “change is a constant” has been drilled into our heads for years. Today, change is happening at light speed and with greater frequency—and is pressing the need for new capabilities, approaches, and mindsets. Embrace these changes by preparing and positioning your teams for the turbulent ride ahead—but understand that you’re not alone in dealing with this constant evolution. Focus on building your team’s resilience with optimism about new possibilities—not dwelling on an eventuality that you did not predict and cannot control.

Trying to outsmart this virus is a fool’s errand; but knowledge that we are faced with perpetual change must become infused into your company’s DNA. And when the pandemic has been vanquished by a vaccine (soon, we all hope), this new DNA will be a capability that helps you and your company emerge as leaders when the next transformative event impacts your business.

If you’d like to have a conversation about how to better prepare for change or adapt an analytics-driven consumer approach, we’d be happy to chat. In the meantime, know that soon after back-to-school, it’s fast-forward to holiday and a new year. We are optimistic that 2021 will reveal a stronger future—and Parker Avery is here to work through it with you.

Wishing you the best,
Robert Kaufman
CEO, The Parker Avery Group

Two Critical Inventory Changes for BOPIS Success

2020-07-23T10:47:00.000-04:00

The Parker Avery Group recently published a point of view, "Essential Disruption: Store Level Omnichannel Capabilities for Retail’s New World," in which inventory expert, Rob Oglesby discusses key tenets retailers must embrace to deliver exceptional omnichannel experiences in our disrupted world, focusing on store fulfillment. In this week's blog, we provide an excerpt of this publication, focusing on one of the most critical capabilities any retailer must possess: inventory accuracy.

Stores are notorious for inaccurate inventory. There are plenty of legitimate reasons—and just as many "self inflicted" reasons as well. The inventory accuracy issue must be addressed to drive long-term success in a store-based fulfillment program like buy online, pick up in store (BOPIS).

Your customers are relying on your ability to follow through when you accept their orders to purchase products. They are looking to take the "risk" out of the trip to the store for items they want or need, as well as being able to potentially shorten the shopping experience if they are in a time crunch or have safety concerns. Customers assume that your acceptance of the order means it will be fulfilled.

If your inventory is not accurate, you face customer disappointment and eroded trust when you must notify a shopper that their order cannot be fulfilled—especially if this notification occurs after they think they’ve successfully completed the transaction. Further, the longer the time period between order placement and the notification, the more frustrated the customer. If this type of event occurs repeatedly, you may not only lose a customer wishing to transact this way, you might lose them for good.

All modern BOPIS systems include logic to protect from this problem, and it essentially works like safety stock. Once the perpetual inventory in a store drops to a pre-determined value (usually set up by category using velocity and other characteristics), the system prevents a customer from placing an order for that item by showing “out of stock” or “zero quantity available.” That's certainly the right policy, because inventory—even very accurate inventory—is always in flux while the store is open for business. It's important to account for the fact that customers shopping the store may have collected the very item you are presenting to customers online, making it impossible for the associate tasked with picking the item, even moments later, from successfully securing it.

The more inaccurate your inventory, the more risky it becomes to expose it, and the greater the buffer you have to configure, which limits your ability to present items to customers shopping online. Further, the smaller the assortment, the less compelling the transaction becomes for the customer—meaning, if too many items fall below the “pick up today” threshold, a retailer risks customer abandonment.

Inventory accuracy is a constant battle. While stores will perform a physical inventory on an annual basis (a critical "true-up" process to establish a clean baseline), typical day-today activities erode that accuracy. There are two critical inventory changes the organization needs to address to increase the success rate of BOPIS:

Start Clean. Before a store goes "live" with BOPIS, conduct a complete physical inventory. This ensures the system has the most accurate version of inventory available to begin the new operation.

Maintain. This is a lot more complicated, and it really requires a deeper look at the inventory-related business processes currently performed in the store. Here are a few to review (and potentially adjust) before you go live with store-based fulfillment:

Cycle Counts. In theory, cycle counting is a great way to keep store inventory accurate. The challenge in a store is the fact that product may not all be where you think it is. Some might be in the back room, a good portion will ideally be on the "home" shelf, but if you are also featuring the product on an end cap, in a display, or in another part of the store, some might be missed in a count. While this process has the best intentions, it may actually lead to less accurate inventory if executed without precision. Review this practice, if it is in place, and consider adjustments if you notice significant change transactions in stores with otherwise good shrink number.
Quantity Key Scanning at POS. This is typically an issue with grocery and other high-velocity retailers when a customer buys several varieties of the same product and the cashier scans one then counts the balance and indicates a sale of that many units of the initial item they scanned. While this won't necessarily lead to financial shrink, it absolutely leads to inaccurate inventory on a SKU basis. This issue has plagued replenishment for years, and now it impacts your new omnichannel program. While it may seem more efficient, that perceived efficiency comes at a cost. If this is a practice in your store (especially in the categories you intend to include in your omnichannel program), consider additional guardrails around the process to ensure the front end team uses it judiciously.
Shrink. Obviously theft and damages are challenges every retailer faces to varying degrees depending on merchandising practices. This is not an easy problem to address. It requires diligence within the leadership team of each store and is best managed through shelf maintenance. The more orderly the store is kept, the easier it is to spot anomalies in the inventory. Messy stores are usually magnets for shrink in all forms, and there is a direct correlation between shrink levels and inventory accuracy. Address the shrink challenge with focused leadership. If the store cannot be maintained, it is not a good candidate for an omnichannel program.

Read the Full POV

Check Out Related Insights

Contact Parker Avery

Cover image by 15299 from Pixabay

Retailing Curbside: Six Keys to the New Omnichannel Customer Experience

2020-06-02T07:02:00.002-04:00

I’ve been impressed by the efforts of many retailers over the past couple of months to quickly deploy new capabilities to allow some level of ongoing commerce while also dealing with the complexity and unknowns around Covid-19. As we outlined in a prior blog, “You Don’t Have to See the Whole Staircase,” it may have been slightly easier for small, local retailers to turn on a dime and quickly develop new ways of keeping their lights on and customers engaged. But despite their larger size and more complex infrastructures, even some medium-sized and larger retailers that had no or limited omnichannel capabilities have been nimble and agile, and in many cases developed “scrappy” processes and approaches to at least provide options for shopping and customer service. Curbside pickup is likely the best-known example.

Some of these have certainly been works in process—they may not be pretty and likely are not sustainable. But it’s something, and it works for now. These quickly developed means of “safe” shopping attract customers and add revenue. So, kudos for teams that developed quick solutions—this clearly required hard work, leadership, and creativity. After all, in today’s environment, the ability to serve customers and support a banner or brand that would be struggling even further without these new capabilities is a big win.

Whether you as a retailer had strong omnichannel capabilities or were just at the starting point, it’s clear that some of the new areas of focus such as curbside pickup are here to stay. However, there is a level of staffing, logistics, and collaboration that is above and beyond what most retail store models are prepared for. Further, the organizational and role impacts, as well as change implications across various operational aspects, can be significant.

Since few will be willing to invest significantly in new technology—at least for a while, retailers must be highly cognizant that their store associate roles and operational processes will continue to change dramatically over the next month and year.  This change won’t be subtle. We believe that sustaining the ability to test, assess, learn, revise, and repeat—and ensure the communications with your store teams are wide open to keep them informed of these continual changes and engaged as your internal brand ambassadors—will be the difference between those brands who succeed and those who fail.

What do you do next? How do you move from scrappy to excellent and continue delighting your customers? Just as important, how do you avoid making mistakes and negatively impacting customer experience? “Scrappy” is ok when it has to be, but it can also be a recipe for disaster if it becomes, well, scrappy without the “S.”

To keep the focus on the “S,” here are six components that are imperative in today’s omni-channel shopping environment, especially with curbside in the post-Covid-19 world:

Focus on SERVICE. Acknowledge orders, questions, and feedback. Over-communicate with your customers and associates. Focus on beating expectations, with appropriate speed and desired convenience. Even though we predict that consumer demand to shop will be strong in many ways, understand that some customers may be nervous or hesitant about re-entering your stores. Equip and empower your associates to make decisions that maintain the highest level of customer service.
Where possible, keep it SIMPLE. Avoid excess complexity, especially in customer experience. Use fewer steps and make things easy to understand.
In today’s environment, above all, ensure the process is SAFE. Make it easy to maintain distance in and around your stores. If possible, encourage contactless transactions. Provide customers options for masks, hand sanitizer, and wipes—and keep them required for associates, for now. But don’t make it scary. Make sure your signage and any PPE worn by employees reflects messaging that is welcoming, assuring, and calming—keep this in mind when determining colors, wording, and font choices you are using.
Have a SUPPORT model. Respond to questions and concerns—from both customers and associates. It is important to be able to effectively manage returns, and ensure your reverse processes follow other customer-centric guidelines: service, simple, safe. Ensure stability across channels and touch points.
Keep it all SEAMLESS, across website, mobile, store, and now—including your parking lot and curbside. Remove barriers to service, speed, and completing the transaction.
Finally, ensure SUSTAINMENT. In addition to key customer-facing processes, review your back-office processes and tools. What foundational elements need to be changed to sustain your new capabilities across planning, fulfillment, inventory visibility, data/attributes, analytics, and more?

The curbside experience, combining service and supply chain elements, is new to many retail brands and a challenge to all. Several retailers I’ve visited have a few of the above elements going well, yet very few are hitting on all of them as well as they could—and I’m sure they would agree. As with all omni capabilities, success combines the shopping experience (website, mobile, etc.), store operations, inventory visibility, customer service, CRM, and more, with tight integration for an ultimate customer experience test.

Store operations functions and processes will continue to evolve over the coming months, and as retail expert Joe Skorupa pointed out in a recent blog, “Retail’s Moonshot Moment: Once-in-a-Lifetime Opportunity,” it’s critical that retailers acknowledge the changes and the opportunities their teams are facing. Again, these new ways of operating won’t—nor should they—be subtle. The ability to manage these changes well, without bumps, with minimal friction, will be your competitive advantage.

If you're interested in how you can take advantage of the opportunities that are being presented as the fog from this disruption begins to lift, we would be happy to start a discussion. The Parker Avery Group has developed a set of "reconstruction" services that are designed to quickly get your business moving in a direction that will provide benefits in the near term as well as strategically in the future:

Operational Risk Assessment
Business and Technology Roadmap Reinvent
Organization Reset
Tailored Intelligence

If you would like to talk about any of these services and how they may apply to your situation, please don't hesitate to reach out to us.

Wishing you the very best,

Clay

Learn How We Can Help

Contact Parker Avery

Cover image by Piotr Kowalski from Pixabay

You Don't Have to See the Whole Staircase

2020-05-21T10:43:00.002-04:00

Looking back over the events of the past 3 months, I’m certain we can all agree it’s been a roller coaster of emotions, anxieties, stresses, and zaps of energies we’ve never before encountered—and hopefully at least in my lifetime we’ll never have to endure this again. But we are emerging—better and stronger.

In one of The Parker Avery Group's recent Reconstructing Retail webinars, “Mobilizing & Sustaining a Resilient Organization,” Marty Anderson talked about the three ways energy can be depleted from a person: societal, organizational, and personal. As Marty explained, because we each have a finite amount of energy to spend, and COVID-19 disruption is very fiercely hitting all three of these at once, most of us are exhausted emotionally and physically without even really understanding why. I've thought about and discussed this topic many times over past few weeks because of how applicable it is in my own life and in the organizational impacts I'm seeing as businesses begin to emerge.

Yet recently, despite our collective sheer exhaustion of the past few months, we’ve also all begun to witness the beginnings of our “new world,” and many are starting to plan for a brighter future beyond this pandemic.

Granted, it’s not over. Not nearly. But we are seeing increasing glimmers of hope and light, as states and businesses begin their cautious process of re-opening. And throughout it all, we’ve seen communities, companies, and other organizations pull together and find strengths, skills, personalities, and commonalities we never knew existed.

In our neighborhoods, families are suddenly planting vegetable gardens to the extent that many seed companies have begun to run out of stock. I think about the new worlds these efforts are opening up for the next generation of farmers, agriculture scientists, and environmentalists, and the ways these children will be able to infuse technology and new thinking into these specialties for a better, healthier future.

Our schools are finding innovative and fun ways to teach even the youngest of kids through distance learning. I think of the children who are sick at home or even hospitalized in normal times and the new possibilities that can now keep them engaged with their schoolmates, friends, and teachers—and the tremendous positive effect this camaraderie can have on their recovery.

I’m not saying I’m in love with the devastation on our economy, many families, and countless businesses. It’s been a nightmare in many ways, and our daily prayers are with those most impacted. But I do believe that not many of the new possibilities would have emerged—at least not nearly this soon—without the pandemic.

Small businesses are tapping into digital methods like never before and opening up brand new channels for those who may be “stuck” at home and can’t get out, shop, or socialize—whether because of the pandemic or due to other reasons. In my own small town, a local home décor chain has experienced record sales over the last 2 months due to the speed and enthusiasm of the store owner and staff in successfully launching and navigating a series of online “live” shopping events. These events have not only introduced the brand to an entirely new audience of shoppers, but they very quickly created a close-knit community of consumers that have become fiercely loyal brand ambassadors and solidified new relationships that would have never existed prior to COVID-19.

Behind the scenes is a slightly different story, but still ultimately a resounding success. With a homegrown POS system, and over 330 individual vendors across 6 locations (each with highly variable and unique product assortments), the retail stores weren’t set up to process sales transactions remotely or handle quick store-to-store transfers. Not even close. At first it was a back-of-the-house disaster on many levels.

But there was grit, determination, tapping of skills, mistakes, learning, relearning, trying new things, and crossing fingers. And yes: late-night system coding and configuration, quickly implementing new processes and applications with minimal testing and training, searching through scattered inventory to find products and determine pricing, and of course managing customer expectations. A LOT of it. But this was not the time our band of retail associates, small business owners, and vendors was going to sit back and cry and be defeated. If you’ve ever been through a retail system implementation, you can understand what I’m talking about.

Parker Avery’s CEO, Robert Kaufman said it perfectly in his recent blog, “Fortune Favors the Bold,” where he echoed this sentiment, saying, “…in many cases, the circumstances uncovered the very best of organizations, and these characteristics should not be put back ‘into the drawer.’ Rather, leading companies need to operationalize these skills and put them to good use as we all emerge from the pandemic.”

With this sentiment, translate my small business example to your own situation. Even larger retailers and consumer brands need to break down the barriers of yesterday, leverage new skills and learnings, and enable their merchandising, product development, operations, and supply chain teams to take bold chances and make more informed, quicker, and smarter decisions.

We still are very uncertain about tomorrow. We can use history, science, art, and experiences to try to predict our future, but there are no guarantees, and we know it.

But now is the time to take chances. Now, if any, is the time to be bold. Minded, not without at least some vetting and precautions, but what do you have to lose? As the late great Martin Luther King Jr. said, “Take the first step in faith. You don’t have to see the whole staircase, just take the first step.”

So, grab your PPE, pull up your fancy pants (and mask), and get out there to take that first bold step.

If you want to toss around some ideas for your own business to emerge successfully from the pandemic and going forward, we invite you to contact Parker Avery.

Shop on.

Tricia

Learn How We Can Help

Contact Parker Avery

Cover image by Frank Meitzke from Pixabay

The Future Ain't What it Used To Be

2020-05-12T17:03:00.000-04:00

Yogi Berra is often quoted as saying, "The future ain’t what it used to be." Steve Jobs echoed the same sentiment as a preface to his optimistic extrapolations about the future of technology. In today's world, this couldn't be closer to the truth. Last Thursday, The Parker Avery Group hosted our 4th and final session in our Reconstructing Retail webinar series, with a focus on Predicting the Future and how very different it will be for retailers and consumer brands—not only the outcome, but the elements involved in creating these critical predictions. This blog is a recap of key messages, as well as questions raised from the webinar attendees. If you weren't able to join the live sessions over the past few weeks, we invite you to visit our website to review the replays, download the presentations, and read the blog recaps.

Review Reconstructing Retail Webinar Recaps & Replays

Most of us have adapted to major changes by learning from the past, but the last few months have put us in an interesting position. Retail as we know it has never seen anything like this, so learning from the past is not likely an option. The future is not certain, and many retailers will be learning as they go. In our Predicting the Future webinar, we discussed three phases with tools and actions that retailers can take as they reopen in order to prepare and forecast for the future.

Learn and Assess
Recover and React
Evolve and Adapt

Learn and Assess
Let’s talk sales forecasts. One of the first things you are going to notice coming out of the COVID-19 crisis is that your sales patterns look significantly different than they have in previous years. This is important because your forecasting systems rely heavily on historical sales. Especially true with traditional time-series based models, many of the forecasting systems that are built into the execution tools that retailers and consumer goods companies rely on are going to need varying levels of intervention.

Allocation and replenishment solutions and methods will likely be hit hard, and you will need to be as efficient as possible. Talk with your teams. Make sure they know when to switch methods and what other levers they need to adjust. Ensure they know that it’s OK to make changes and understand who to partner with if they have questions. This is not a time to do things because “That’s how we did it before COVID.” Explore your inventory flow options like pack and hold and do what’s right for the current situation, but with an eye on future business decisions and strategies.

Also, keep an eye on your teams and be careful they do not get into analysis paralysis. Your teams will want to be as accurate as possible knowing inventory investments are high with new shipments coming with no place to go. There will be stress. It will be easy to get stuck in multiple forecast scenarios trying to answer questions and be as precise as possible.

Recover and React
As we move out of the initial shock of reopening, we will move into the recovery phase—granted this will vary across brands. Retailers and consumer brands rely on forecasting systems for support in many functional areas across the enterprise—from planning and pricing to fulfillment and operations. We recommend starting with the easiest and most intuitive mitigation strategies first. Impute demand lost during the COVID-19 crisis using simple proxies such as LY/LLY and look at the reasonableness of the resulting forecast. Then, move on to more complex solutions as time and resources permit.

Prolonged store closures could have a significant effect on sales mix as well. Many retailers will move to more to allocation and rely less on replenishment as they will likely have a higher mix of fashion product in their inventory. Online sales could be a good indicator of this change especially with the seasonality by region in a great deal of flux. Who every thought it would snow in May? If you are using more advanced machine learning approaches that learn from different channels, then you should be able to recover faster.

Also, test where you can. Be flexible and allow for the option to roll out goods slowly by region where possible. Some areas will likely recover more quickly than others, and you will need to maximize on those. Online will give you a good view, but it will not show you what customers are willing to set foot in brick-and-mortar.

In any case, you should have a set of easy metrics that you follow as your stores open. A simple rolling sales mix will give you an easy way to validate your analytical output. Again, easy and intuitive is where you start and then prove to yourself that more complexity is required.

Advanced analytical systems can bring significant value to help you through this crisis, but they can also provide you with very spurious results. Remember, the analytical systems have not seen anything like this before either. The best systems will use a plethora of input and will adjust quickly with minimal hiccups, but if that’s not an option, have a mitigation plan for manual forecasting and communicate it to all stakeholders. This is not a time to be siloed.

Evolve and Adapt
Lastly, we don’t believe many retailers can, should, or will go back to pre-pandemic behaviors. As we emphasized in last week’s blog, “Fortune Favors the Bold,” those that leverage learnings and newly tapped skills from COVID-19 and continue to evolve and adapt will come out stronger. From a forecasting and analytic perspective, disruptions in the business make it more important to utilize additional streams of input. Decision tree based and deep learning approaches can take in a variety of inputs and do not simply rely on continuous time series data. These algorithms make it easier to utilize inventory, plan, hierarchy, product, and location attributes such as COVID-19 case by trade area.

Looking forward at supply chain visibility and data accessibility to make faster decisions will also play a critical role. Those companies that have to piece together information will have a tougher time moving forward and keeping up. The future will be about agility and being able to pivot as different scenarios arise.

When it comes to current tools and processes, come up with a plan to make what you have smarter. Then prioritize changes that will need to be made in the short term, mid-term and longer term. In some cases, you can adapt and change what you have now to limit spend. Also, remember it’s not all about technology. Just evaluating how you’ve always done it and making changes to your existing business processes can go a long way. This approach also sets you up for a successful technology change in the future if that is the route you choose. Ensure you are keeping up where you can and evolving your processes to stay engaged and relevant.

Wrapping up
Overall, keep in mind these five key takeaways and hopefully your future will look much brighter.

Understand your end game – easily consumable metrics for validation are key
Remember your benchmarks and don’t overcomplicate – LY and LLY compares can still help
Know your limits – many execution systems in place rely solely on traditional models for forecasting – have a mitigation plan
Don’t throw the baby out with the bath water – make your existing systems and processes smarter
Limit manual intervention – enable your teams to move quickly

Webinar Q&A
Q1.  Should we do an updated top down plan or aggregate the location plans to determine the company impact?
A.  Having a store group plan vs. a location plan in conjunction with a top down view is likely the best bet if you have this capability. The next few months will be fast moving with many changes. Doing detailed plans at store level will likely not be useful for a long period of time so it will be about getting directionally ‘OK’ and being able to have the flexibility to change.

Q2.  Video analytics / RFID - How do we leverage AI - video for contactless shopping / inventory / self-checkout?
A.  RFID is a great input for helping you understand your inventory position. Video analytics is another input that can utilized by the advanced models that we mentioned above. The availability of this type of data will continue to drive forecasting to more advanced methods that can best utilize the plethora of data that is becoming available in retail.

Q3.  I've read you can implement your demand planning system in as little as 6-weeks. Can you briefly discuss that if you have time.
A.  We have built an AI platform that produces an accurate and stable demand signal very quickly. We can integrate this signal into your execution systems to minimize the effect on your existing business processes. We are happy to set up a time to discuss this in your own situation if you would like to contact Parker Avery at contact@parkeravery.com.

Q4.  This callout that backlogged inventory needs quick attention even before replenishment seems critical. How do you believe companies should be looking at SP21 Fashion? Is there a chance that many assortments may look 'too safe' a year from now?
A.  At this point for spring fashion, likely there are two choices. Retailers who can pack and hold will need to evaluate the inventory and the investment to hang on to it for a year. Others will need to markdown and move it while fully understanding the profitability model for the remainder of the year. Many wholesalers have already decided to pack and hold where they can so one way or another this year’s spring will be next year’s spring (whether we like it or not). So, we’re not sure if there is a model that would be termed ‘too safe,’ but it will come down to balance and ease of execution in the long run.

Q5.  Unemployment continues to increase - how can I get a good estimate of future demands?
A. Unemployment numbers can be tracked as location attributes and utilized for forecasting by machine learning algorithms such as decision tree-based models.

Q6.  In the short term - how many months should I forecast reduced sales for? E.g. the next 6 months?
A. This will depend on multiple factors such as when your stores are going to reopen and what portion of your sales come from the brick-and-mortar channel. There are of course the macro economic impacts which are even harder to predict. Likely thru the end of 2020 there will continue to be significant impact of some kind and sales reduction. You will need to continue to monitor relative time periods and be in a position to react as the customers decide. Just be ready for things to also ‘right size.’ There will continue to be strong online sales, but they may subside slightly as brick-and-mortar locations open and footsteps return. Placement of inventory into the correct channels will need to be carefully monitored.

If you have any questions about your own analytics systems and how to predict tomorrow and the months ahead for your company, please don't hesitate to contact us.

Amanda & Sam

Learn More

Review Webinar Series

Contact Parker Avery

Cover image by Gerd Altmann from Pixabay

Fortune Favors the Bold

2020-05-06T16:43:00.000-04:00

At long last, over 30 states have begun to ease or eliminate shelter in place restrictions. This means your operations will begin to rev-up again, and there are many experts and advisors providing recommendations on what to do next.

You may have had the opportunity to participate in Parker Avery’s recent Reconstructing Retail webinar series—we hope you found value in them and more importantly, relevancy to your own current situation. In our most recent session, “Beginning the Journey: Emerging from COVID-19,” we discussed several points regarding triaging your situation, planning your immediate next steps (and your mid and long-term activities), and reconstructing your business.

The latter pillar of our recommendations posed a call to action for companies to not just review but more so, take the opportunity to reimagine their business. For certain, with all that’s required just to get your doors back open, this is a daunting task. Coupled with some of the key tenets discussed in the triage and plan pillars, it presents a radical departure from the pre-COVID-19 way of working for most companies. Let’s revisit these key points and outline why embracing them is so critical for brands and retailers to regain their footing and subsequently thrive in the face of adversity.

Nobody was prepared for the gravity of the circumstances surrounding COVID-19. Companies were forced into a rapid-fire assess/decide/act mode unlike any they had likely ever encountered. Yet, companies endured, and some even thrived during these turbulent times. We all hope and pray that another event of this magnitude never occurs again. But in many cases, the circumstances uncovered the very best of organizations, and these characteristics should not be put back ‘into the drawer.’ Rather, leading companies need to operationalize these skills and put them to good use as we all emerge from the pandemic.

The frenetic pace of the past two months has been exhausting, but early-mover advantage goes to companies that institutionalize these skills into their daily operations. Simply put, there are benefits to those companies that have fine-tuned their ability to quickly analyze new information, solicit input from key functional leaders, and make conclusive decisions. Similarly, the successful companies have been and will continue to be action-oriented with an increased sense of urgency.

Planning immediate actions and incorporating them with mid and long-term needs is still important. But leading companies will create an agile and flexible model that allows them to analyze new needs and prioritize them against on-going activities, current events, and other previous plans. The days of leaving plans locked-in once developed are gone, and this approach is no longer advisable. Being nimble and spinning-up new efforts and/or altering in-progress initiatives, though more challenging, will separate the future winners from the losers.

While speed and an intensified sense of urgency are traits of the future leading companies, building a governance framework to ensure these necessary events are occurring on a regular and consistent basis will be another competency front-runners must demonstrate. The governance will ensure the assess/decide/act model regularly prioritizes and addresses key risks. It will also ensure key decisions are communicated to the necessary stakeholders. Without proper governance, the speed of external change and your company’s rapid reaction activities could lead to internal chaos.

We are now at a critical inflection point in the history of our industry. Every enterprise has a choice of how to respond—they can revert to pre-COVID-19 operations, and hope to get back to where they were, or more likely, where they were striving to be. For certain, that is the logical and safe next step. But I titled this blog, “Fortune Favors the Bold” for a reason: those companies with the courage to think beyond the now, and to project their future selves, to innovate, and find ways to delight their current and future customers will separate themselves from the pack. These industry leaders will develop the muscle memory to rapidly test and learn with innovative product and service ideas. They may fail along the way, but they will assuredly be amongst the group of highly successful companies that will blaze a trail and set the bar high for all others.

You may be asking yourself, “How can my company do this? We have never been trailblazers.” You may not have the model of Google, Apple, or Amazon, but nobody knows your business and your customers better than you. Leveraging the intimate knowledge of your business, insights of where your customers’ wants and needs are heading, and your team’s passion to seize the opportunity to leapfrog other companies, will enable you to innovate. As we’ve advised our clients and colleagues many times over the past few weeks: Be bold. Be “in the arena” to determine your company’s fate rather than on the sidelines hoping your competition does not pass you by. Apply what you and others have learned over the past two months: rapid decision making, a “test and learn” approach, an understanding that not all ideas are going to be winners, and yet some may bring surprisingly positive results—and the resilience to withstand the setbacks and forge ahead. Harness these learnings and the passion and capabilities of your team and you CAN achieve your audacious goals.

The state of your digital capabilities is going to be a key determinant of how quickly you can pivot to embrace new, innovative operations. If we’ve learned one thing during this pandemic, it’s that the pace at which you’ve been ‘traveling’ on this digital trek must be accelerated. But where should you focus your efforts? The specific areas in which to be courageous include omnichannel fulfillment, as demonstrated by companies, like Michael’s, Bed Bath and Beyond, and Kendra Scott, who quickly implemented capabilities such as home delivery, curbside pick-up, and ship-from-store. Rethinking how and where customer returns should occur, as well as other shopping options, such as cashless in-store payment and contactless curbside delivery, will enhance your customers’ omnichannel shopping experience options.

Another key digital focal area is improved data and analytical tools. Retailers and consumer brands must consider the criticality of accurate and timely data as well as related analytics in helping drive improved decision-making; but this must be done now. Applied to your new business objectives, analytics will enable speed to insights, versus analytics without business focus, which is not meaningful. Some example analytics priorities that will be important in the near term include forecasting and sensing demand, supporting omnichannel fulfillment, and determining how to deploy inventory across various distribution points, including stores.

Further, improvements in the go-to-market development process, via digitization efforts including voice-of-the-customer crowdsourcing and digital sampling, will greatly improve the effectiveness of your assortment and the speed with which products can be brought to market. These are just a few ideas, but as noted, the digital journey must be accelerated and targeted at enhancing the customer experience.

Parker Avery believes so much in the characteristics and approach described above that we have developed a set of services focused on helping leading brands and retailers cycle though the triage, plan, reconstruct (or reimagine) steps – quickly and effectively. We bring a hands-on, action-oriented engagement model that will ensure your teams have a partner who is in the “war room” with you. Our teams not only help establish the approach and the command and control governance required, we roll-up our sleeves and assist in getting “stuff” done. We offer innovative, pragmatic ideas and recommendations that can assist in the ideation efforts required to envision the future of your business model.

It would be our distinct pleasure to join forces with your teams to boldly pursue the steps needed to make you one of our industry’s future leaders.

On behalf of The Parker Avery Group, we wish you and yours health and safety.

Robert

Learn More

Review Webinar Series

Contact Parker Avery

Cover image by My pictures are CC0. When doing composings: from Pixabay

Reconstructing Retail: Defying Yesterday's Logic

2020-05-04T15:44:00.002-04:00

The Parker Avery Group hosted our third Reconstructing Retail webinar last Thursday, "Beginning the Journey: Emerge from COVID-19." Here, we recap key messages, as well as answer questions from the webinar attendees.

Before talking about the future, we thought it made sense to spend a couple of minutes putting things in perspective. Back in January, as we do at the start of every year, many of us are used to looking ahead and determining priorities and focus for the coming year – this is our actual list from January.

Today, our context and perspective as far as where we are and what we are facing is completely different from just 3 months ago. Yet, we could look at these priorities and firmly believe they all still apply, and they do. But it’s these “plus:”

Health and safety of customers and associates
Intense cleaning
Managing social distancing
Intense focus on how to manage in what will clearly be a new environment

Along with many of you, Parker Avery attended NRF in January with colleagues and business partners. We were certainly channeling our inner prophet when we chose the quote for our NRF recap: “The greatest danger in times of turbulence is not the turbulence—it is to act with yesterday’s logic.” (Peter Drucker). How fitting this is to today, and especially for our Reconstructing Retail discussions. Yesterday’s logic, and yesterday’s retail models, simply won’t help us be successful in the future we are facing. The context is different, and our strategies must change and adapt.

In the last week, many retailers announced opening plans and Simon Property Group announced the opening of dozens of malls and shopping centers. Macy’s announced it would open 68 stores this week and expects to have all 775 stores open within 6 weeks. Once some retailers start to open, while everyone will err on the side of health and safety, they’ll also want their share of the consumer wallet. It’s not unlike when the first retailers chose to open on Thanksgiving Day, rather than waiting until early Friday morning. Many didn’t necessarily want to, yet they felt the pressure.

To help guide these efforts, several industry groups or companies have contributed examples of checklists or blueprints for re-opening of retail. Kroger and NRF offered very good checklists, while Cathy Hotka also shared her company’s compilation of store opening suggestions last week. These are all good starting points and offer good steps for store leaders.

We framed up the emergence from COVID-19 and our “Beginning the Journey” discussion along 3 dimensions:

Triage. Rapidly assessing the “state of the state” and determining immediate actions needed. Additionally, it addresses the governmental regulations and your ability to reopen, communication protocols, risk assessment, collaboration, inventory assessment, etc.
Plan. The immediate plan(s) stemming from your triage of the situation and near, mid, and long-term plans across various scenarios. A key dimension is how these plans differ from traditional plans in their need to be reviewed and revised frequently
Reconstruct. The actions you need to take and/or have taken to be a leader in addressing your customer’s needs. Pivoting to rethink your business operations. This may include new omnichannel fulfillment capabilities, addressing speed-to-market activities, and analytics, to name a few

We'll take a deeper dive into these, but as you look at your own plans on emerging from the pandemic and would like to understand how The Parker Avery Group can provide you immediate assistance, please click here to see our Reconstructing Retail service offerings.

Triage. Plan. Reconstruct.

We touched on this in our first webinar with a focus on inventory. We also need to think about speed and flexibility, communication, collaboration, and cross-functional teams. With a lot happening quickly, some aspects changing daily, and many just returning to work—communication and collaboration are paramount.

Examine what tools you have already in place to support communication both in the back office as well as to the field. Even for back office or headquarters associates, communication will not be normal. Some of the team may be in the office, but certainly some will need to continue working remotely, whether for health or family reasons, or simply limiting associates in tight spaces. Managing a mix of on-site and remote is more challenging than everyone working from home. A lot will be happening across your teams, trying to determine inventory status, needs and placement at the same time store opening schedules are changing daily.

For communication with stores, beyond the typical pricing and promotion updates, signage, etc., stronger focus and compliance with health and safety requirements is crucial. Are you confident all stores are getting and understanding the right instructions and have the right supplies? A lot of retailers still use email or posted newsletters, but there are newer tools that can be rolled out in just a few weeks, that may be worth a look.

As far as collaboration, silos simply cannot exist. Leadership – not just executives, but all of us – must insist on active full team engagement and transparency. There is no we and they.

Rapid and decisive decision making is important now more than ever. Focus on what’s good enough vs. striving for perfection; things will continue to change and evolve; scrappy approaches vs. waiting for a scalable hardened solution is the right approach. Also, for team leaders, anything not absolutely required should be taken off associates’ plates.

Regarding risks, but really common sense – we need to think about return policies and logistics for opening. We suggest adjusting policies: plan on no returns for a stated period of time to ease traffic and mitigate risks of product coming back into the store with no idea of where it’s been. Consider offering customers postage-free mailing labels—while you may not be able to accept returns in the store, you can still make it as easy as possible.

The opening of stores must be done in a controlled manner—similar to the approach we recommend for business system implementations (test and learn), with a few specific overarching tenets:

Hypercare-level monitoring (2x daily calls/meetings to discuss what is working and what is not)
Rapid, decisive actions/decisions
Governance to ensure risks and issues are addressed in near real-time and decisions are documented and communicated widely—to avert chaos and lack of clarity

Consider incorporating things that work well in this re-opening period into your new normal; examples:

Rapid decision making
Acceleration in the rate of change – and how we deal with it (rapid decision-making with limited concrete information)
Dedication to one task, or a handful, until complete – no time-slicing
Improved communication
Can-do attitudes

It’s also important to consider and understand the myriad of risks that the teams will be facing.

Store risks.

Follow best practices to avoid legal difficulties when store associates DO get sick…and they will.
The checklists from Kroger, NRF, and Cathy Hotka are excellent resources.

Supply chain holes that need immediate remedies.

Ensure you have transparency and visibility; where you do not, take immediate measures to address, even if it requires manual follow-up.
Use e-mail, Excel, and/or trading partners’ technology (e.g., freight forwarder dashboards) to provide you with visibility you may be lacking.

Supply chain reliability.

Assess the risk of logistics for goods on-order not yet at stores/DCs and put action plans in place.
Assess the risk of suppliers, and their suppliers, based on location, prevalence of COVID-19, and any indication they have given of constrained supply of raw materials, personnel, export visas, etc.
Evaluate supplier production capacity and their ability to export with new certification requirements.

Existing inventory.

We addressed in our first webinar, but the knowledge of what is saleable now, what is ‘stale’ and not relevant in a future season, and what can possibly be resold in future seasons is very important and will require one of two dimensions of analysis: merchant input and voice of the customer analytics.
Based on this information you can take actions, including aggressive pricing/markdowns as appropriate

There may not be any contingencies immediately available but knowing your risks and constraints will allow you to prioritize and make informed decisions.

Triage. Plan. Reconstruct.

The planning process is inclusive of any immediate/priority initiatives stemming from Triage, but also includes short, mid, and long-term initiatives which may have been contemplated as part of Triage or were part of an existing roadmap. The key is to build the plans but also to put in a place a mechanism or structure to monitor, adjust, and re-plan—often. In other words, you need to be flexible and adapt. Doing this regularly will be essential in an environment that is changing rapidly. Even without changes, a schedule of revisiting the plans should be established to review them relative to new and emerging priorities. There is an old adage that says, “Plan the work, work the plan.” Under normal circumstances that is prudent counsel as revisiting and changing elements of the plan typically create disruption and delay. But in today’s environment, turning a blind eye to the realities of an ever-changing, dynamic environment would be devastating to your business.

In defining scenarios we need to include various factors—the economy overall especially as it relates to consumer confidence and spending, the latest virus status with a special focus on potential rebound in the fall, state and local plans and regulations, and business/competition—your current state and what are others doing. Regarding agility, the plan needs to account for minimizing or right-sizing commitments—this could be our buys, inventory flow plans, raw material commitments, leases, etc.

As we think about planning and scenarios, we’re sharing a framework that looks at a hierarchy of needs and expectations, and some examples. It’s important to note that this is a framework, and what works for one retailer may be very different for others.

We suggest a conceptual hierarchy of needs—starting at the bottom with health and safety and moving up, from basic needs, to trust, customer experience, value.

Health and safety. The definition of frictionless retail certainly continues to expand, initially focused on only making it easy and fast, but now adding emphasis on sanitation and safety.
Connection and community. Some aspects are new with the pandemic, but some will continue as retailers and brands strive to cultivate and strengthen consumer loyalty.
Flexibility in product fulfillment. This is perhaps the biggest focus in the past few weeks and near term, and likely represents a key area of differentiation between leaders and those playing catch up.
Assortment and price. This will vary by retailer and category, but the levers around assortment breadth and depth overall, but also by location, must be critically managed. Pricing and promotions, and how offers are communicated, can be a big opportunity.

The arrow on the bottom right represents the potential degree of change from before COVID-19, and so it will depend on each retailer’s situation. We can argue everyone will have significant changes in cleaning, etc. But some are much better positioned in omni capabilities for example. Think about where your team needs to focus first, and then what might be next.

Another key point is while in Triage we are completely focused on fighting fires and dealing with day-to-day issues. Moving to medium and longer term, how we will think about inventory productivity, how we plan, how we think of item lifecycle and inventory velocity—all may be very different. The plans, scenarios, and roadmap must be guided by an end in mind—which brings us to the Reconstruct phase.

Triage. Plan. Reconstruct.

This is a critical inflection point, where you as an enterprise have a choice. You can revert to normal operations, and hope to get back to where you were, or more likely where you were striving to be. Or, you can opt to innovate your operations. Reimagine your business model. Think deeply about what could be.

Our suggestion is that you need to dig deeper and think differently in meeting your customer’s needs now and in the future. You must have a digital focus—but accelerated. How your company takes its next steps will be critical to its future. You can go back to doing things the way you did them before, reverting to your company’s comfort zone of pre-COVID-19 norms. Or you could use this forced transformation, new-found speed of decision making, and adoption of digital tools to reconstruct your business to be stronger, more agile, and more relevant. Tomorrow’s leaders will have seized this opportunity to move faster, experiment, and fundamentally reinvent how they execute.

Times of great disruption are often when new business models are born, and innovative companies forge a new path. Not every company can be Apple or Amazon, but within your own business now is the time to not only think about how to restart operations, but how to pivot, innovate, and springboard the competition. Innovation is the path to future success and provides the ability to thrive in an uncertain environment.

During the past 2 months, many companies have done just that. Companies like Bed, Bath, and Beyond, Michael’s, and Kendra Scott have rapidly evolved their omnichannel capabilities to offer ship from store, curbside pick-up, and delivery. But why? For them it was survival, but always with an eye to the customer. It’s important now more than ever to pivot to the future—determine how to delight the customer…or you will perish as your competition embraces this approach.

One element of what has occurred which is fascinating is the means by which companies deployed these solutions. What traditionally takes several months, or even years, was accomplished in mere weeks. How did they do it? They took the adage that “Perfect is the enemy of Good” to heart, coupled with a burning platform of survival, and they created solutions that may not be fully integrated, or without deficiencies, but they brought them to life in a minimalist way to get to the goal.

Many companies talk about minimum viable product capabilities and the need to deploy just that, but still often complicate these objectives and cause delay. Will this new ‘test and learn’ model, powered by rapid and decisive decision-making and a singular focus persist? I am not suggesting we want to be working 24 hours/day to bring new initiatives to life, but a hindsight of the elements that worked should be revisited and those that are game changers, brought into your normal way of working.

Priorities need to change—and more importantly—it’s incumbent upon all of us to challenge ourselves, our teams, and our leadership. What must we do differently? How are we going to position ourselves to win in the future? Obviously, we can’t expect to step back into how things operated before; if we just re-open and operate the way we did and hope for the best, we’ve already lost. Now is the time to think BIG. And BOLD. If not now, when? Focus on innovation and imagination across the complete business model, not just efficiencies of old ways.

Think about the current pain around inventory. Has anybody heard their leadership say or thought to themselves, “I never want to have this much inventory in our enterprise again—ever.” More tactically, what do we think our inventory levels will look like by holiday, or where would we want to be?

It’s the beginning of May. Many retailers are focused on surviving but beyond that, many are already thinking about how to manage future seasons, including holiday, with a much lower average inventory level than recent years. I’d advise consumers to shop early—the depth of options in holiday 2020 will be much lower than recent years.

To manage inventory better, one key suggestion is improved focus on data and analytical tools. If you have the right sophisticated or advanced tools already in place, along with assurance in your data, then you’re ahead of the curve. However, we’ve not seen many retailers and brands raise their hand with confidence they have both tools and data. Retailers and consumer brands must consider the criticality of accurate and timely data as well as related analytics in helping drive improved decision-making—but this must be done now. Most simply don’t have time, nor likely the budget, for large, lengthy systems projects.

We recommend leading with business objectives and understanding potential change management hurdles, such as reliance on only old metrics, or other examples of “this is how we’ve always done it.” This approach will enable speed to insights, versus analytics without business focus, which is not meaningful. Some example analytics priorities that will be important in the near term: forecasting and sensing demand; markdown optimization; supporting anything tied to fulfillment (especially with complexity of an omni world) and how to deploy inventory across various distribution points including stores. This is a focus in our next webinar, Thursday, May 7.

Back to thinking bold, we suggest using the current opportunity to consider completely different business models, channels, positioning, etc.

What is a ‘season?’ Is it important to us as a retailer or brand? Does it matter to the consumer?
How early is new product needed in a store or available online?
If we consider all the steps in a merchandising calendar – design, development, sourcing, manufacturing, packaging, shipping, etc. – what is truly required, and what are some ways to dramatically alter the makeup of these steps, and therefore the real end-to-end timing? If my overall calendar for development, buying, and lead-time is, as an example, 30 weeks, what would it take to reduce it to 20, 15 or fewer weeks?

Bottom line, can we leverage data, analytics, and AI to help determine what my optimal assortment mix looks like; breadth and depth; overall demand patterns; and pricing lifecycle?

Key Takeaways

And remember, retail matters!

Q&A

Q1. Joe spoke about unresponsive systems on replenishment planning and ordering. How are retailers handling the forecasting capabilities as the stores comes back up?

A. It’s clear that any forecast based on prior demand patterns is essentially useless in the current period. We’ll touch on this further in our 4th webinar with a focus on how to manage through this. But we can think in terms of:

Geography – where are stores opening?
Timing – what is open, and when are other locations opening?
Channel – what is my likely demand online, versus stores?
Planning – how do I account for macro-economic conditions as I plan next season’s inventory, including holiday and beyond

Longer term and going forward, how we account for March-May 2020 will be a challenge for most of us. What is traditionally a key demand period including spring, Easter, graduation, and Mother’s Day will for 2020 be an abysmal legacy.

Q2. There will likely need to be a team focused on our reemergence as we “start the journey.” Do you have thoughts on what areas of the company should be represented and how much time these individuals should dedicate to this effort? Is it a full-time dedicated team? If so, until what event(s) should the team be in place?

A. Absolutely, this will need an ‘all hands on deck’ approach. Whatever you call this team, it must be cross-functional, with senior participation or sponsorship. Echoing our survey, collaboration and transparency are critical—this is no time for traditional silos. Participation is needed from finance, supply chain/operations, stores, planning, merchandising, product development / sourcing, IT, HR – and this should be considered full time or as much time as required, until full operations are in place and can be transitioned to a steady-state team.

Q3. As we embark on reconstructing our business model, should we assign a different team to focus on innovation and pivoting to a new business model? If so, what characteristics should these folks possess and from which business areas should they be assigned?

A. Not certain if a separate team than the above team is required, provided they are strategic thinkers. But it will take a different mandate from executive leadership to shift from triage and stabilization to looking at what the future should hold.

Q4. You talked about restarting brick-and-mortar stores, and the likelihood of multiple Day 1’s driven by easing of governmental restrictions. Should we also assess the density of stores we actually need since most projections do not expect an immediate return to the same level of brick-and-mortar shopping?

A. Yes – in the larger context of cost to serve, profitability, consumer-facing fulfillment needs, etc. So as geographies ease restrictions, balance the ability to open with the need and value of re-opening.

Q5. How do we provide a feedback loop from stores back to HQ? It seems like the teams will be seeing a wide variety of challenges and issues, and we need to ensure there’s an ability to get questions and issues raised very quickly – basically real-time.

A. Part of the same Triage team that communicates out to stores; there needs to be a mechanism to capture input (intranet, town Halls, etc.). We agree this is heightened from typical feedback needs, so the teams should clarify tools, frequency, and general exception management.

Q6. Analytics with good data sounds good, but how do we know if our data is ‘good enough?’ How clean does our transaction history need to be, and how accurate does our inventory need to be?

A. First, let’s agree your data is never as good and clean as you’d like it to be. But, hopefully, given the recent “quiet period” within your supply chain and stores, some of the noise and bad data has moved through or settled down. Anything showing as in transit should be somewhere, whether officially received or not. The teams (operations, supply chain, stores, and IT) may be able to determine some atypical approaches to further address some potential data updates.

Q7. How do you balance speed of actions and decisions with ensuring you have enough information to make a good decision? It seems like there will be a risk of snap decisions based on minimal real data?

A. You WILL NOT have enough information but need to be decisive with the best information you have and agile to adjust as necessary. Things will be evolving quickly over the next 2-3 months, so its best to keep moving based on the best information you have right now—and be flexible to adjust as things change.

Cover image by Aline Ponce from Pixabay

Retail Needs Much More than Analytics

2020-04-30T09:10:00.002-04:00

Last week, The Parker Avery Group enthusiastically announced the addition of Mathematics PhD, George Arutyunyants to our firm, bringing a deeper focus on retail and consumer goods analytics into our existing team of industry professionals. I have worked with George for 14 years at former companies, and I am thrilled to continue our working partnership at Parker Avery, further advancing our efforts in the analytics space.

There are many “advanced analytics” offerings being touted by retail and consumer goods solution vendors and blogged by industry pundits. Especially now, given the hyper-critical nature of strategic decisions as the industry emerges from the pandemic environment, a solid grasp of our data, the implementation of advanced analytics, and the resulting intelligence are needed more than ever.

Intelligence is the key—while machine learning (ML) and artificial intelligence (AI) do make seemingly compelling arguments, the industry needs much more than analytics.

That ‘much more’ is Parker Avery’s Tailored intelligence.

Tailored Intelligence represents the infusion of cutting-edge analytics with some of the industry’s most experienced business process and change management professionals. This holistic approach results in meaningful results and greater financial benefit for our clients.

You have likely read about or attended one or more of our Reconstructing Retail webinar series, during which we emphasize that Parker Avery is here to help. Above all, our goal is to be a trusted advisor to our clients—through the good times and challenging times equally. We are fortunate to have enjoyed strong professional and personal relationships with many of our clients. Parker Avery’s Tailored Intelligence line of services allows us to deepen that relationship by staying connected as we help them integrate, design, and adopt new and better ways of operating, propelled by advanced analytics, industry leading business practices, and practical change tactics adapted to their unique environments.

As a firm, The Parker Avery Group has completed countless software selection projects for our clients, across the broad spectrum of retail business functions: merchandise financial planning, assortment planning, pricing and promotions, and so on. During these initiatives, the guiding principal always is to integrate our knowledge of industry solutions and best practices while maintaining objectivity to determine the solution that meets a company’s desired future-state business and technical requirements. Bottom line: we meet our client’s needs by suggesting the best solution that meets their unique requirements.

We hold this same principal with Tailored Intelligence: what our clients need may not always be our own intelligence offerings. It does no good to claim we are a trusted, objective advisor, and then push a solution set that is not the best fit for a client. At the end of the day, Parker Avery and our partners do well when our client’s needs are most optimally satisfied. For our solution partners, we continue to supplement their execution systems with a wider range of retail and consumer goods industry expertise.

All that being said, I’d like to give a brief overview of Parker Avery’s Tailored Intelligence, and why we are enthusiastically offering this array of services.

What is Parker Avery’s Tailored Intelligence?

The proliferation and increasing quality of open source AI and ML tools with the combination of cloud computing has led to an explosion of the application of AI. Data science departments and analytics programs are becoming ubiquitous throughout many industries—retailers and consumer goods companies are no exception.

Evolution of algorithms is happening at an ever-faster rate. Retail has seen AI/ML infiltrate every aspect of the business from planning and pricing to fulfillment and operations. Amazon has been leading this charge with great success. There is no question that the landscape is changing rapidly, and current events are expediting the matter.

What remains is the need for insights to be seamlessly integrated into existing business processes. Because we believe full automation in many parts of the business is still a long way off, the ultimate decisions across enterprises are still made by people. The value garnered from AI/ML integration rests with them. Therefore, any integration of artificial intelligence must be tailored to the decision makers. Any recommendation provided through machine learning must make the decision more intuitive by providing the accompanying insight into why the recommendation is being made. Lack of such insight from the analytics, regardless of the quality of the recommendation, renders it superfluous.

Pursuit of cutting-edge analytics is important, but it is only one component of what is necessary to realize value in the age of AI.

We have decades of hands-on experience architecting and implementing demand platforms for some of the world’s largest consumer packaged goods and retail clients. Innovation and incorporation of the latest AI/ML algorithms led to accurate recommendations that were only financially measurable when they were trusted by the organization. We learned that the process required to build the trust was generally the most time intensive and the financial results were thus seen over time. This process, although successful, is fraught with risk. I’ll explain.

Too often, major implementations of analytical systems fail not because of the quality of the data, science, and algorithms—but because of the misalignment with the business process, lack of clarity of the recommendation, and the organization’s hesitation to understand and accept the new way of thinking and operating. Parker Avery’s Tailored Intelligence bridges those gaps.

The journey into analytics should always begin with the business decisions in mind. What would make the final decision-maker move forward with a given allocation method or a replenishment suggested order quantity, take the suggested markdown, or keep from overwriting the forecast in the demand plan? A hindsight analysis of the decision, though useful, can be short circuited by process design and a change management plan that starts before the data is ever pulled for implementation.

So that—at a very high-level—is Parker Avery’s Tailored Intelligence. It is a journey of seamlessly interweaving the analytics and business process by professionals who have had to make retail and consumer goods business decisions countless times under varying circumstances.

It is AI/ML tailored to your challenges.

If you would like to learn more, please click here to visit Parker Avery's website. If you're ready to have a conversation to understand how Tailored Intelligence can help your business, please reach out to us.

Sam

Cover image by Gerd Altmann from Pixabay

Mobilizing & Sustaining a Resilient Organization

2020-04-27T10:33:00.002-04:00

Last Thursday we conducted the second webinar in our 4-part series, Reconstructing Retail. For those of you that were able to participate with us, thank you! We know that although many are working from home, there are a lot of competing activities and other webinars. We appreciate your interest and your time.

It goes without saying that we recognize and support our healthcare and first responder professionals serving the country tirelessly, as well as our essential retail colleagues working hard to keep grocery, pharmacy, and other shelves stocked and flowing. Let’s all keep them in our thoughts and continue to do what we can to make their lives easier.

We’re here to help, and we want to emphasize that. This series is about helping our clients and friends in the industry. We’ll be sharing our pragmatic and meaningful thoughts and perspectives, but this is surely not a commercial for Parker Avery services. For most or all of us, this is the transformation of a generation or even our lifetime. With so much on hold for many retailers and brands, our webinar series is allowing us to look forward. Reconstructing Retail means at least catching back up to where we were before, or perhaps even getting ahead. Innovation opportunities are abundant.

Reconstructing Retail Webinar Series

April 30 • Beginning the Journey: Emerge from COVID-19
May 7 • Predicting the Future: Retail's New World

We invite you to come to all or whatever sessions you can; they begin at 2pm ET. You can register by clicking on the button on the right. Recordings will be available shortly after each live event, and we are following up with transcripts and Q&As in this blog.

Our most recent session focused on the people part of the equation: the impact COVID-19 has had for you personally and your team. Change leader, Kathi Toll, along with Marty Anderson and Deanna Emsley from Parker Avery, and long-time RIS News editor Joe Skorupa, collaboratively provided concrete actions to not only mobilize your own organization coming out of this pandemic—but moreover, make it resilient and sustainable.

To ground the conversation, consider what we know and what we don’t know about the upcoming days and weeks. We don’t know when ‘Day One’ will be for most of us, we don’t know what ‘Day One’ will look like; further, we don’t know how our workplaces will change—whether it’s a corporate office, a distribution center, or a store.

But there are certainly some things we do know: we know we will leave our homes, we will return to work, and we will begin to integrate all that’s happened. We also know we weathered an epic storm, and our path back forward will not be a straight one. Consider the past several weeks we’ve all been through—each one of us has been through a traumatic experience; not a little frustration or inconvenience, but true upheaval.

Our path forward will depict the change curve in the purest sense of its description—two steps forward and one step back. The complexity of the situation intensifies when we consider how quickly our personal and professional lives collided into one. As we contemplated the webinar and this post, our goal was to provide concrete tools and techniques leaders and team members could use in the upcoming weeks. We introduced three “R's”:

Let’s begin with Reflecting
Trauma happened and trauma lingers for weeks and months after it occurs. Typical change management models view transition through the lens of an organization or a collective, however these models overlook the individual’s response to the disruption. As we return to the workplace, it is normal and expected to feel:

Disorientated
Overloaded by stimuli
Hypersensitive
Angry
Anxious

Although we went through an extraordinary experience “together,” we all interpreted and digested it differently. As a leader, you may be exhausted by the long days and intensity of the decisions you needed to make. On the flip side, you may be an employee who was furloughed, and now will be asked to return. That’s a veritable emotional landmine waiting to be stepped on.

As a leader you may asking yourself, what can I do?

Address the elephant in the room. A theme we weaved throughout the webinar was communicate, communicate, and communicate. Consider developing a communication plan with your leadership team, so even before employees return, they know what is being done to keep them safe. Day One, you must acknowledge the experience with your team and let them know you don’t have all the answers. Ask them what they need, never assume you know want they want or how they are feeling.
Meet people where they are. Some people may require a lot of attention and handholding in the early weeks back and others may prefer to work more independently. Be prepared to calibrate your leadership style for each person’s needs. And, as a leader be aware your energy will be zapped in the first weeks back, so give yourself a break.
Create psychological and physical safety. We know a characteristic of high-performing teams is psychological safety—ensuring people are comfortable to voice an opinion, take a risk, or make a mistake. But now more than ever, your team also needs to know how you are protecting them physically. Tell people what you are doing to keep them safe (e.g., deep cleanings, hand sanitizer stations, limited meetings, social distancing guidelines) Consider creating a team “rules of road” for the short-term and post it, so everyone knows their needs are heard and respected.
Understand cognitive responses to stress. Cognitively, we perform “less than” when under sustained stress. Our executive functions blow up—we’re unable to concentrate as deeply, regulate our emotions, or make objective decisions (to name a few things) as well. As a leader, manage your expectations: your team, and perhaps even your top performers will not be firing on all “eight cylinders” their first days and weeks back.

Everyone will rebound at their own pace because everyone’s resilience is different. Not surprisingly, in a recent survey we conducted, overwhelmingly the top characteristic called out as being paramount to survival was adaptability; it goes without saying that an organization that wants to adapt quickly needs to be comprised of individuals who are resilient and adaptable. Resilience is not a gift bestowed a chosen few—it is a skill that can be developed and improved over time. And, adversity is our best teacher.

Which leads us to Rebuilding
As we begin rebuilding our lives, we’ll need energy and a lot of it. The good news is we have several types of energy – physical, mental, and emotional. The bad news? Our energy types overlap and ultimately fill (and drain) from the same reservoir. Change can be divided into three components:

Personal. The more personal a change is, the more energy it takes to adapt.
Organizational. This type of change is less disruptive than a personal one, unless you are personally being impacted by the changes.
Societal. Societal changes tend to take less energy due to their diffusion over a broader group of people.

However, the real paradox of our current environment is that the impacts of COVID-19 are hitting on all three types of change at once. Stress is at an all-time high and energies may be at an all-time low as people struggle with the societal implications changing their way of life, the organizational changes effecting their employees through pay cuts and furloughs. They are also experiencing tremendous personal impacts through shelter at home orders and isolation or maybe even personal or family illness and/or death. It will be important to acknowledge these impacts and how and why they may slow down initial productivity as workers start to go back to work and begin their journey forward.

Resilience, as noted earlier is a skill that can be learned. Be aware of the resilience characteristics and note how you as a leader and a team member can strengthen them.

Focused is about establishing the most important tasks/strategies to accomplish first, second, and so on. So many things may have gone untended during the quarantine/furlough period that it will be important to establish new short-term and long-term expectations to successfully pick up the reins again and achieve full productivity.
The flexible characteristic also has two sides. There is the “flexible self” which really is about the capacity to generate lots of different ideas and think out of the box when needed. “Flexible social” is the other type which is about openness to others’ ideas and the ability to create strong collaborative teams that build ideas and solutions together. Leaders need to really utilize this characteristic as they bring back their workforce and decide on the short-term focus. The best leaders are strong listeners.
Organized is about establishing productive systems and discipline to help reduce stress and improve consistency of results. One of the main causes of adversity in change is the lack of control or predictability that ensues. Things may feel chaotic on week one but don’t be afraid to try new structures even if they are only temporary. Try daily stand-up meetings to gauge the climate and determine what is working. This gives you the opportunity to recalibrate and communicate quickly until the dust begins to settle and people feel back in control.
Proactive is all about comfort with experimental actions to discover the best path quickly. While somewhat counter-intuitive to organized, don’t be afraid to utilize your network and team to source ideas, create a quick feedback loop to gain insight, and start trying things. It’s OK if your first idea isn’t perfect. Just revise and keep open communication lines.
Positive actually has two implications. There is “positive world view” and “positive self.” Positive world view is related to the ability to find the silver lining in difficult situations. This will be incredibly important as leaders look to review lessons learned and maybe even adopt some new positive outcomes like remote working and video conferencing. The positive self has to do with your personal self confidence and trust that you can be successful. While most leaders are probably fairly self-confident, it is important to understand that some of your team members may not be feeling this way right now, especially if they were chosen for furlough. It will be critical to rebuild trust as associates rejoin the company full time.

We closed with Repurposing
While it’s certainly true that most of this situation has been stressful and disruptive, it hasn’t been all bad. As the saying goes, “necessity is the mother of invention,” and retailers across the globe have invented some very exciting approaches to serving their customers, teams, and communities throughout these past several weeks. On the customer front, just a few examples of ways that retailers are adapting how they provide service include:

Several brands are piloting 1:1 digital “stylist” appointments with their best customers, to fill the gap in the customer experience that cannot be accomplished (for now) with a visit to the store.
Distribution centers which were previously handling shipments to both stores and customers have been rapidly re-configured to handle unprecedented direct-to-customer demand.
Some retailers are conducting social media “Live” events, using store staff to showcase items in the stores and offering a variety of purchase and fulfillment options. This approach also appears to be deepening relationships between customers and the in-store teams in an unexpected way because of the highly-personal, engaging nature of these events.

We have witnessed really uplifting examples of organizations stepping up to help their teams in unexpected ways, such as:

Rapidly scaling ship-from-store capabilities to unlock the value of the inventory sitting in closed stores, but also to avoid furloughing an entire store team.
Enabling employees to not only work from home, but also encouraging them to leverage tuition reimbursement benefits to pursue continuing education opportunities during their time away from the office.

Perhaps the most incredible examples of innovation have been those retailers who have turned their extensive capabilities toward aiding their communities, such as:

One retailer’s “returns refurbishment” team developed a way to re-purpose their second quality returns into face masks for health care professionals, leveraging the same equipment they already had for repairing returned goods.
One home improvement retailer made the decision to donate their entire supply of N95 masks to hospitals, health care workers, and first responders.

Across all of these examples, the most valuable lesson being learned is: “What became true now that had not been true before?” For most teams, the answer will be about constraints previously thought to be required for success: under these conditions were only barriers to success. Shame on us – as individuals, teams and organizations – if we miss this opportunity to carefully examine how we made things work in new ways throughout this pandemic. Those lessons are the silver lining in all of this.

Key Takeaways
We wrapped up our session with some closing thoughts:

Reflect on how this impacted you as a person and as a leader. Do not forgot how destabilizing it was for you, your organization, and your employees to have change thrust upon us – this is often what organizational “transformation” feels like to your teams. It’s uncomfortable and anxiety provoking.
Engage your team early and often to establish priorities, source ideas, and create a positive feedback loop. Support your people as they strive to build more resilient characteristics.
Embrace the new capabilities you have uncovered so those lessons learned become embedded in our days and weeks ahead. Things will never be what they were and that may be OK.

Q&A from the Webinar
The following is a compilation of questions asked by the webinar participants, a few which we were able to answer during the webinar:

Q1: In the realm of change management, what is your advice for planning/managing for the "second wave" we might encounter?
A: At the risk of being dramatic, assume a second wave of COVID-19 (or something else) will occur. Every single organization needs a crisis communization strategy and plan, so if you have not already done so, get your COVID-19 task force together to document lessons learned—soon, before they are forgotten. Bring in all levels of the organization so you gather a full understanding of what people need during and after a crisis. Use your learnings to develop a playbook for the next community, state, or national emergency. Then, actively communicate it and make sure your teams know there are contingency plans in place to protect them and they know what to do in case the plans are activated. Learn your lessons well.

Q2: Do you think working remote will become more accepted in the future?
A: Absolutely. We’re delighted to see this particular barrier broken down. Especially for more established teams where there is really no need to sit side-by-side every single day. Sometimes the in-person environment impedes concentration and productivity. We do believe for newer teams the remote or virtual environment may be harder to (in the beginning) to build a shared identify and establish goals. But, there is a lot to be said for the magic of a computer camera and a glimpse into people’s “real lives” to break down barriers, establish commonalities, and deepen relationships. Be creative.

Q3: Open concept seating in some offices has become a new way of business, there is no social distancing. How do you express concern to your employer regarding seating and not seem negative?
A: We believe you may be pleasantly surprised by employers and employees who will require “six-foot rule” or social distancing practices be implemented before they return to the workplace. If that’s not the case for you, then book a few minutes with your supervisor to explain your concern and present a few solutions to them. “I would feel more comfortable and be more productive if I could maintain some social-distance for the short-term. Are you OK with me shifting to the empty desk near the supply closet?” Bottomline, you will not be the only person feeling this way, so take the precautions you need to stay healthy and productive.

Q4: On the topic of "safety," what are your thoughts regarding employers trying to secure virus tests, check people's temperatures, etc. to ensure they are "OK" to come back to work? Does this help, or just create more psychological stress?
A: We need to default to the “consultant’s” answer…it depends. Some people may feel deeply reassured by these efforts and appreciative of them, and others may be stressed by the extreme tactics, or feel they are intrusive. During the webinar we equated it to the security line at the airport—it certainly is inconvenient and can be stress-provoking, but it’s for the greater good (so to speak) of all of us, so we learned to adapt to it. A caveat to this—if at any point you feel individuals or groups are being targeted for the more extreme measures or testing, than that is not OK. Again, we all have to go through the airport security checkpoints—it’s not a random selection. Your employer must ensure they are fair and equitable for how they choose to enact any safety measures.

Cover image by Pexels from Pixabay

Triaging Your Inventory: Decisions for Stability

2020-04-21T08:12:00.001-04:00

Last Thursday we conducted the first webinar in our 4-part series, Reconstructing Retail. For those of you that were able to participate with us, thank you! We know that although many are working from home, there are a lot of competing activities and other webinars. We appreciate your interest and your time.

This series is covering some important topics, but it goes without saying that we recognize and are supportive of our healthcare and first responder professionals serving the country tirelessly, as well as our essential retail colleagues working hard to keep grocery, pharmacy, and other shelves stocked and flowing. Let’s all keep them in our thoughts and continue to do what we can to make their lives easier.

We’re here to help, and we want to emphasize that. This series is about helping our clients and friends in the industry. Throughout this series, we’ll be sharing our pragmatic and meaningful thoughts and perspectives, but this is surely not a commercial for Parker Avery services. For most or all of us, this is the transformation of a generation or even our lifetime, and we’re in this together. With so much on hold for many retailers and brands, our webinar series is allowing us to look forward. Reconstructing Retail means at least catching back up to where we were before, or perhaps even getting ahead. Innovation opportunities are abundant.

Reconstructing Retail Webinar Series

April 23 • Mobilizing & Sustaining a Resilient Organization
April 30 • Beginning the Journey: Emerge from COVID-19
May 7 • Predicting the Future: Retail's New World

We invite you to come to all or whatever sessions you can; they begin at 2pm ET. You can register by clicking on the button on the right. Recordings will be available shortly after each live event, and we are following up with transcripts and Q&As in this blog.

Last Thursday’s session focused on inventory and supply chain. We all recognize the distortion in our industry right now, in different ways. Essential retailers are just trying to keep up with demand and control the flow of consumers in the stores. Other retailers, of course, are mostly closed, only managing to ship and support ecommerce and other omni operations. While many of the topics or suggestions may be applicable to all retail sectors, our emphasis particularly in Thursday’s session was really focused on those retailers deemed ‘non-essential’ that have been closed and need to plan to re-start.

Joining me last Thursday were Amanda Astrologo and Rob Oglesby from Parker Avery, and Joe Skorupa, long-time RIS News editor and industry recognized subject matter expert on all things retail and CPG.

In introducing the webinar, there’s a lot of talk right now about when shelter in place orders will be lifted, and when the economy will re-open. We’re not going to try to guess exactly when this will happen, nor are we able to ensure when ‘Day 1’ will be. But we know this: we will leave our homes again. We will come out from behind our screens and webcams. We will shop again. Consumers will be back. And we as an industry need to be prepared.

Why is focus on inventory so important, especially for retailers that have been shut down? We’d venture to say that in February, even early March, few of us would have forecasted what happened so suddenly by mid-March. We had plans for the season, were hopeful for a strong 2020, and had no idea of the coming pandemic and its impact on the world. Now, many retailers’ only focus is ecommerce fulfillment and any omnichannel shopping options they may have. Otherwise, stores are dark, inventory is aging quickly – and unlike fine wine, it is not getting better with age.

For our Reconstructing Retail inventory focus, we introduced the “triage” concept with 3 stages:

Level 1: Critical – what do absolutely need to address right now
Level 2: Urgent – what are the next things that will need to be managed
Level 3: Recovery – what’s next and how can we balance further stabilization with future opportunities

Triage Level 1 – Critical
First and foremost, continue to focus on your customers and community. Your reward will be consumer loyalty and trust. It’s going to be the little things you do today that build brand loyalty and trust. People will remember. As we discuss gluts of inventory, keep in mind that donations are one way to potentially ease things. Remember this doesn’t have to be in total or at once. We are all being impacted at different times and climates. Help those around you where you can; this includes your associates.

It’s important to focus on inventory, especially excess goods, immediately. Major milestones represent points in time where decisions must be made. Identify the criteria for the decision before you get there…so you can make the call without hesitation (and put the plan into action). Identify your options: markdown, donate, clearance center, outlets, pack up for next season. What can live on as potentially another ‘collection’ even if you didn’t intend it to. Be flexible–think differently.

You have inventory everywhere: stores, DCs, factories, in transit. Focusing on the product you have on hand is most critical now. Think of every location as a distribution center. This may require changes to how your systems work—if you have BOPIS, leverage it. Curbside pickup may not be an option, so consider going the last mile and delivering to the customer. If you already ship from store—maximize it.

That means resources in the field and a great opportunity to get associates back to work. While you may not have enough demand to justify bringing them all back, you’ll need to at least have teams in place; look to your DMs and store managers to form the first group. You may have to let local authorities know your intentions. Landlords too, especially if your stores are in enclosed malls. By limiting the number of people, you can ensure social distancing is in place.

One other consideration…most didn’t identify inventory accuracy as a challenge on our survey. Stores notoriously have poor accuracy, and for the time being, they are DCs—so you want to make sure orders can be filled from your stores. Now may be the time to conduct a physical inventory in the stores to support your new operating model.

Triage Level 2 – Urgent
Start by evaluating your next assortments and what’s in flight. Evaluate seasonality—especially what is needed and where. Pull back on “all store” buys – give yourself flexibility. Determine where you can buy smaller quantities and more frequently. Review purchase orders in the factory and in transit and adjust accordingly.

Now is the time to partner closely within your trading community. Know your vendors and their vendors. Understand your levels of risk. Push some limits. Remember we’re all in this together and in that spirit, everything should be on the table: negotiate costs, payment terms, staggered deliveries. If you're having issues with factories in one country, perhaps it's not the factory, but the raw materials that are sourced from another. Transparency has become more important in today's marketplace due to heightened social awareness, now we see the value in limiting supply chain disruption.

Also, remember your internal partners. Your peers are always an asset. It’s easy to get stuck in ‘this is how we did it’ without realizing in the immediate environment that part of the race either hasn’t started, isn’t being run—or maybe it’s finished (like spring product for some). Be thoughtful about your decisions and be a partner.

Triage Level 2 is a bit farther into the future, yet still with lot of unknowns and driven by knowledge. While your systems may not be perfect, chances are you’ve got the data you need somewhere—it’s a matter of being able to mine it and use it.

If you’ve not already done so, set up a virtual “command and control” center. You need to know the current and detailed state of your purchase orders that are still in the factory: when will they exit, and are they still going to the right place? Can you defer any shipments? Also, what’s in transit? Literally to the container level. Where is it going, and what will you do with it when you get it there? You may need to create additional “buffers” in your supply chain, perhaps with auxiliary storage. When space is critical in your DCs, you need to prioritize by need.

Your systems may be part of the challenge. If you operate pure flow-through DCs, find ways to adjust the operations in the short term by executing things like pack-and-hold. While deep technology changes aren’t realistic, creative ways to use what you have are paramount. Make sure you are being efficient with inventory movements, given the operating limitations that will continue to exist in the “mid-future.”

Triage Level 3 – Recovery
It’s time to take a holistic look at your buying and planning cycles and think small and agile. Some of you have things for fall en route. Do you need to change distribution, flow to different stores, or flow just to ecommerce sites? Where you can, buy smaller and more often. Buying “tight” and maximizing profitable sell through is always a balance, but it comes down to comfort level with risks. Is it “ok” to run out or run leaner? The answer in the short term for fashion: yes. Be ready to chase but remember Triage Level 2 and stay close to your partners.

During this time, you likely have discovered things that you do well and things you don’t. When it comes to inventory, there are always challenges of visibility and data. Teams need both, and they need it easily accessible. If you need to be more flexible, you can’t spend hours pulling data and scenarios. Evaluate what you have and where you have bottlenecks/challenges at each of these phases. Re-prioritize where you can. Remember, it’s not all about technology and high spend. Look at your business processes and make changes there first. It may help alleviate short term pain.

Back in January, many of you were probably worried about your POs for the upcoming fall and holiday season. With China in lock down, supply was uncertain. Fast forward to today, and the issue is demand for the product you DO have. The more seasonal it is, the more risk you’ve undertaken.

While it may be hard to consider it now—given all you’re dealing with “in the moment,” this should be a wake-up call. You can emerge stronger from this situation by addressing some key elements in sourcing and product development. Think differently about your key sourcing drivers. Speed to market is perhaps even more valuable than lowest cost. The closer you are, the more flexible you can be to react to changes and not miss an opportunity. Evaluate your sources and look for opportunities to shorten the “first mile”. In addition, your product development practices can be modified to further benefit speed to market. By beginning with raw materials and designing “into them,” you take more control of your supply chain, and as a result gain valuable time to make decisions.

There are strategic initiatives born out of crises. While we hope we’ll never see anything like this again in our lifetimes, it’s teaching us some valuable lessons. These are the kinds of changes that will provide lasting benefits in your business well after we recover from this current situation.

Determining What’s Next
Nobody saw this coming. We all thought it was an “isolated problem” in China just a few months ago. Now it’s global—and we know there are parts of the world that are in various stages of the virus curve. The biggest unknown is when: when will we be able to safely get back to “normal?” What will “normal” even look like? We’re pretty sure it will come in waves…both at an international level and within the countries we operate.

As things change daily, so must the decisions we make. Visibility to your inventory, across your supply chain, and with partners will enable you to understand what’s possible and act in the most efficient manner. Stay small and fluid. Success will be dictated by your ability to remain flexible – both in planning, and in how you operate.

Key Takeaways
Our webinar closed with summarizing a few key points.

Continue to take care of your customers and associates; a focus on both will pay long-term dividends
You may be able to make the best of your inventory productivity and margins in the short term, but they will likely still be far below your original projections of just a couple of months ago
Think outside the box in connecting with your customers – but be careful to focus on the overall relationship and experience vs. any short-term selling push
Be the partner you want to see in others
Keep a full lifecycle perspective in mind

We talked a lot about responding to the crisis and looking for ways to do things differently. But don’t forget – many fundamentals still matter, like product, assortment, pricing lifecycle, and inventory productivity. Getting back to where we were may seem like a fantasy, but, as with other types of disruptions, there is also an opportunity to get ahead by looking at your challenges and opportunities differently. Reconstructing retail need not be limited by what was before, and can bring newer, better ways of operating.

Q&A from the Webinar
The following is a compilation of questions asked by the webinar participants, a few which we were able to answer during the webinar:

Q1: How do you balance profitability of goods sitting in the closed stores that are also being sold in ecommerce now? Basically, these goods would be at deep discounts in ecommerce by the time the stores open!
A: Obviously getting stores reopened is key and utilizing capabilities such as BOPIS and ship from store, but in situations like this normal markdown cadences should be evaluated. Look at where your inventory is and determine a plan for both. Do you need to markdown the ecommerce inventory? If you are true omni and the customer can get the goods from anywhere, if it's a markdown on the web it's a markdown in the stores regardless if they are open or not. It just depends on where it ships from. So, determine if you can take the critical steps to open your inventory up to the entire network first, but if you can't, always be flexible with your pricing options.

Q2:  What are you hearing from your clients about discounting for purposes of converting inventory mix to fresh?
A: I think most if not all retailers are evaluating markdowns and aging inventory at the moment. Generally, when planning assortments, you want a constant flow of fresh goods to keep consumers coming back and having repeat traffic. Clients that have an ecommerce business should be concentrating on this metric as that is how the consumer is mostly shopping these days. Keeping the online assortment updated will also be increasingly important to making decisions on brick and mortar when they start to open. It will give you a view of the categories people are shopping vs. not without having to wait and see. Don't shut off the flow of goods but do consider limiting the allocation to online and/or key distribution stores.

Q3: In China it seems that the spring season was eviscerated, and when retail came back online consumers moved on to summer goods. Do you anticipate a similar leapfrogging of seasons, and consumers not really buying summer goods and opting to wait for fall goods as buy now wear now?
A:  There is no doubt there will be "season skipping" across many areas of the country, but this will obviously be regionalized. It will also depend on the way the pandemic plays out and the "opening" by country and state. Creativity in the management of the portfolio will be essential to long term success. Get creative with assortments and consider movement or redirection of goods to where they will sell the longest.

Q4:  Do you think customers will still want to buy spring goods come May? What are your thoughts in terms of merging seasonality to make product last longer?
A:  I’d say, they’ll buy "late" — but not at full price. Consumers will expect the markdown cadence to be in full force. Accelerating that may be a good option as well (assuming you can get to the merchandise via BOPIS, etc.). As far as merging seasons is concerned, perhaps it’s possible. Again, I see a broader approach of reviewing each style in the portfolio for its attributes and making decisions on the best course of action (liquidate or "keep"). Certainly not a one-size-fits-all decision.

Q5:  What about customer returns?
A:  This is a tricky subject, especially with stores operating in a modified format — and the fear of contamination of the merchandise itself. Ideally, the return would be shipped to a DC where it can be properly (and safely) triaged. The biggest challenge will be regulating the flow of goods—you don’t want a tidal wave when this opens back up. So, encourage your customers to "return early" — and as easily as you can make that happen.

Q6:  When jobs at risk, wouldn't people cut down spend on non-essential things ? Lock down really teach us how low our actual needs are ! How do retailers plan on non-essential things?
A:  Likely there will be a slow start to non-essential goods as people evaluate their positions coming out of this time of uncertainty. Retailers should continue to be flexible with both the amount of goods they are bringing in and the pricing. Most consumers will be looking for "the deal" especially on the highly seasonal merchandise. As new goods begin to flow in, it will be more about the right amount and being smarter with the allocation and placement of those goods. Keep things fresh where you can and give them a reason to buy other than price.

Q7: How much recent (sales) data will be important/useful for forecast in future. As pandemic seems to be very rare event. How we can best use this data?
A:  Without a doubt, the sales we are seeing now are anomalies. And as such, will require some very creative approaches to make sense of them. Especially since the pandemic will continue to "ripple" throughout the marketplace as communities across the globe emerge at different times and different paces. It’s like we have a myriad of "microseasons" occurring. A company that has a highly adaptable forecasting tool will be able to leverage this information in the short term to improve decision making on pricing, product flow and even operational requirements. In the long term? Not as relevant—but we will be better equipped to act faster and more decisively if we are faced with something similar in the future.

Q8: Have you heard from any your clients in terms of providing masks, for instance, to their employees once back in business?
A:  In the ‘interim’ normal, it should be a judgement call as to how necessary they are. If the store is limited to only employees executing BOPIS activities, they may be able to work around not needing them, especially with limited staffing. I think the best approach is to offer them to all — and require them if there will be customer interaction.

Q9: Do you have a recommendation for furloughed boots on the ground planners/buyers as to where they should even start when they return to the office as it relates to inventory? It could all seem so overwhelming with weeks/months away from the business.
A: Now is the time to assess the portfolio for today AND the next season. Sell through is not happening at the rate it was projected and bought for. Liquidating it all at massive discounts is not an ideal decision either, especially for the styles that have more "fashion longevity." As planners and buyers return to the office, always keep the basic fundamentals in mind. You won't be able to solve it all at once—nor should you. Prioritize, partner, and communicate. Peel the onion so to speak. What are your biggest bogeys? What can you impact now vs. later? What vendors work with more flexibility than others? Remember nothing will be perfect but focus and prioritization will be your best assets and strategies. We’ll be talking about ways to successfully emerge your organization out of the pandemic environment and position them for the new world in our next webinar: Mobilizing & Sustaining a Resilient Organization.

Q10: Do you expect companies to diversify their sourcing to become less dependent on China?
A:  The simple answer is yes. And it’s beyond just the dependence on China. There are two key takeaways here. One is speed to market versus just lowest cost — there is so much supply tied up in long lead time supply chains that is proving nearly impossible to manage today. The second is about transparency all the way back to the raw materials. Before companies may not have been concerned with where those were sourced. Now it matters — from the perspective of control as well as social compliance. This is not an easy change to make — and the longer you wait to make your moves, the more difficult it will be to establish the new approach.

Q11: What are you hearing about how retailers are managing payment terms with vendors, especially during the downtime & in the face of significant cancellations?
A: This one is tricky. We've heard of payment terms being evaluated but not widespread as of yet. This should be a last resort. Once you move payment terms out, it will be harder to get them back or make additional changes.

Retail Supply Chain: Decisive Actions To Take NOW

2020-04-14T13:38:00.001-04:00

The COVID-19 pandemic is a double-edged sword, wreaking havoc not only on our health, but also our economic well-being. While some retailers are experiencing record sales, many more have come to a near standstill. Understandably so, future uncertainty has driven most consumers to become extremely conservative financially and quickly reduce normal consumption of most discretionary goods — and some non-discretionary too. This is especially evident as unemployment claims continue to skyrocket in the US and around the world.

The result is utter devastation to the retailers who cater to the discretionary spending of the general population. When income is cut, only the essentials become important. Surviving this pandemic will prove to be a tricky endeavor for many retailers. To make matters worse, the ripple effect of the virus has already impacted the retail supply chain in the months to come.

Essentially, the problem has three nasty barbs

The seasonal product in the stores today — closed stores that cannot move it (even if there is demand).
The product on its way from the factories right now — some may be replenishment orders for the current season or early floor-set merchandise for the upcoming season, with nowhere to go since DCs aren’t shipping existing stock (assuming the factories actually shipped; many core producing countries were dealing with the peak of the pandemic when orders were scheduled to ship).
The future season — the products in the final stages of design right now. While the sources may have returned to a sense of normalcy, how do you predict the return of demand? This is both a question of timing, and of appetite.

Let's take a deeper look.

The Current Season
As we are in the heart of the spring season now, the challenge is twofold. First, incentivize demand. Second, find a way to fulfill that demand. Let’s discuss each in succession.

To drive demand, promotions will be required. While the consumer has drastically cut discretionary spending, some will still open their wallets for the right deal. In addition, the shopping process is now completely remote, and browsing isn’t as simple as going from store to store. Aggressive marketing and innovative promotions or even value added services are critical to getting a share of a seriously diminished demand pool.

Most retailers have implemented capabilities to support buy online, pickup in store (BOPIS) or even using the stores as local distribution points for shipping directly to customers. Now is when the early investment and adoption of unified commerce processes and capabilities can become the difference between not surviving and thriving. Actual distribution centers should be able to remain safely open.

The key with moving current product is being able to quickly:

Direct the order to the optimal distribution point,
Access the inventory regardless of where it exists, and
Direct fulfillment teams to process and ship the orders when they are received.

While labor in the DC is centralized, store labor is widely distributed—and likely already furloughed. Retailers need to be thinking now about creative labor models that will be able to efficiently restart in-store staffing to ensure access to inventory, regardless of where it is, and enable commerce to continue freely.

Supply “In Play”
For the product that is in transit to the DCs, the challenge is different. While many future POs may have been cut or cancelled, much is still coming. Question is…where to put it? Perhaps the DC has capacity, but with reduced outbound fulfillment, that’s sure to fill up fast. Furthermore, since so many retailers are struggling with the same problem, the buffers are also starting to clog, making it that much more difficult to manage the flow. Some retailers are even considering a "pack and hold" strategy for a future season, which of course comes with its own unique set of risks like off-trend merchandise and increased holding costs.

Whether its demurrage fees at the docks or yard capacity at the DC, space will come at a premium. This makes it crucial to plan and prioritize the receipts that should be processed, and visibility to shipments and containers are the critical link in order to make the right decisions. Leveraging integration points with freight forwarders and carriers and micro-managing each inbound shipment is essential. Connecting this information with updated demand signals is imperative to ensure the right product continues to flow.

The Future Season
What to buy for next season (or the one after)? This is likely the season that follows the one in such disarray. Planning this assortment will be tricky, as it may be in the best interest of the retailer to selectively carry forward items from this season that contain more neutral traits, thereby allowing a more focused spend. This future season is further complicated because it’s still too early to tell when (or if) “normal” will actually return. For many retailers, the "easy" POs have already been canceled, and that still might not be enough given the uncertainty. Same goes for long term fabric and component commitments and/or projections. It’s a delicate balancing act determining what should be canceled and what should remain in order to support a seasonal assortment that resonates with a newly cautious customer. Clearly budgets will be slashed as sales now are draining cash resources, yet robust assortments will be necessary to drive demand from the consumer.

The first component to this success comes with robust forecasting models that are able to consume updates in a near real-time basis. Never before has the future been less certain, as so many factors are at play that will ultimately dictate when we come out of this pandemic — and how ultimately devastating it will be to our country and the world. These models will help determine the “what and how much.” Strategic and nimble demand forecasting capabilities will never be more welcomed, with the critical need to analyze changes in historical demand and accurately predict future demand.

The next step is figuring out how to turn on a dime to resume the supply chain. Here, flexibility with sources is required. Managing the supply chain more deeply, as well as developing a more rapid fulfillment cycle is a key to success. This is a more strategic play. Incorporating a combination of raw material management and tiered sourcing options — enabling a faster reaction to the demand when it returns. In other words invest in materials that have flexibility across products, design “into” them, and consider “near sourcing” to get the factories closer to the consumer. Additionally, true end-to-end supply chain visibility, leveraging solution-specific tools and/or collaborative processes can become a key differentiator for retailers to effectively adapt to the short, medium, and long-term challenges that this environment thrust upon them.

Retailers that succeed in the long run will address these specific challenges now. Not only to provide immediate benefit, but to prepare the organization with the tools and processes that will enable it to overcome other potential disasters.

These unprecedented times require both decisiveness as well as flexibility. Most importantly, a comprehensive approach is needed — with the understanding that the present, near term and long-term are interdependent.

I invite you to join us in our live, interactive webinar series, Reconstructing Retail, where we will discuss additional realistic strategies retailers can employ to navigate their way out of and beyond the pandemic environment. Click here to view the topics and to register.

Rob

Covr image by Alexander Kliem from Pixabay

Mitigating the Impact of COVID-19 with "Art and Science"

2020-04-02T08:52:00.000-04:00

The definition of insanity has never been more important to avoid:

“Doing the same thing but expecting a different result.”

Given the current state of consumer’s actions, retailers are scrambling to understand the impacts on channel sales, inventory recovery, and supply chains now and for the future. Consumers are facing unchartered territory as much as retailers. The desire to spend is suppressed by lay-offs and uncertainty for their future. For most retailers, there is no data that matches this environment, and there is not much chance to get forecasts right for the future without changing something.

The race to deploy omni-channel capabilities like buy-online-pickup-in-store (BOPIS) and buy-online-return-in-store (BORIS) has been the latest shift for retailers. However, these capabilities now come with additional considerations for recovery. Despite the growing percentage of online commerce, most business is still done facing the customers, on the ground, in the stores—at least before COVID-19.

The way you respond in these unthinkable times will surely determine the future of your business, your employees, and your financial recovery. The idea of getting back to “the new normal” is both exciting and causes significant trepidation.

Retailers’ typical approach, whether using a sophisticated software system or not, will likely be more successful "blending art with science." Here are some examples of ways to do that:

Use your people. Given an unprecedented time, the call to action has never been louder. Leadership: now-more than ever—is the time to make this clear. Employees are extremely loyal and want to be a part of the solution. Additionally, your employees drive a substantial portion of the "art" in this equation. The knowledge they have of the business, the items in your assortment, and the stores is crucial in solving a viable, quick and impactful solution. Your people know the systems and spreadsheets, how to fine tune them, and how to translate a company’s vision and strategy. Don’t assume anything, communicate goals, ideas, and strategies often and clearly. If we’ve learned anything in this crisis, we are in this together.

Understand your inventory. Where is it? How to manage your inventory now and in the future? Having a single view of total inventory is key. Understanding where the inventory is in the supply chain is crucial to proactively mitigating risks. While today may not represent “normal operations,” evaluate current on hands and weeks on hand across the various channels and consider how to best fulfill outages with overstocks located elsewhere if supply is constrained. Strategize incoming orders to maximize sales opportunity but keep in mind the unknown future liability. Did some stores close, forcing sales to other channels or stores that will likely not occur in the future? Consideration of seasonal items and everyday basics should have a different strategy anyway, so should that strategy change now, temporarily at least? Retail has never been a black and white world—but is now grayer than ever. Here again is "art"—thinking differently, driving systems and strategies down a new, probably unchartered path, all along using the science to the fullest extent.

Predict the future. What will the demand be? When will the stores reopen/recover? How do you execute most profitably? You’ve heard the term “peanut butter” approach, and this is not the time for a one size fits all. Dig into the data, use your people and your intelligent systems to identify anomalies. Fine-tune, cleanse, and learn to trust the data. Likely unplanned strategies will have to be deployed to move through non-sellable inventory, making room for new, seasonally-right incoming inventory. Having a plan will allow the execution of each order to be deployed through allocation and replenishment to support the strategy. Additionally, the steps you take for recovery will be instrumental in supporting the retail planning process for the years to come.

Those retailers who have already enabled technology that can help drive data into decision points will be ahead of the curve for sure. Systems that enable sophisticated settings, like service level goals and safety stocks certainly will help. Retail forecasts that are supported by artificial intelligence (AI), and machine learning (ML) are a big part of the “science.” However, without the “art” (your people’s knowledge and forward-thinking strategy of how to approach or fine-tune results) the definition of insanity prevails.

Above all, The Parker Avery Group is here to help. If you have any questions about how to move forward in this uncertain world or just want to toss around some ideas over the phone, please reach out.

Michele

Image by Gerd Altmann from Pixabay

Here for You: Parker Avery's Response to COVID-19

2020-03-23T16:25:00.000-04:00

I am writing to share how The Parker Avery Group is responding to the impact of the COVID-19 pandemic and to offer our help. We all recognize these are unprecedented times, and the health and safety of our clients, associates, friends, and family is our absolute highest priority. We are in constant communication with our team and clients, and we are closely monitoring the evolving situation as well as heeding advice from our local and federal government and health experts.

We are collectively navigating unchartered territory and trying to understand what this new reality will ultimately look like, both in our personal and business lives. However, we are also recognizing—with deep gratitude—the many selfless acts of healthcare workers, our service men and women both here and abroad, as well as countless numbers of other first responders who must continue their jobs amid even greater precarious circumstances. We’ve seen many instances of large retailers quickly devising solutions to help ensure their customers can safely access food and supplies, and we applaud those companies. Locally, we are seeing our communities band together—in unprecedented ways—to help small businesses keep afloat.

We are also optimistic that the ‘other side’ is not far away. If we continue to help each other through this difficult time —no matter how small an act of kindness or generosity may seem—we’ll all be better and stronger in the aftermath.

In the meantime, if you have any questions or ideas that you would like to toss around—or just need a compassionate ear—know that we are here for you. Please don’t hesitate to reach out to us.

Sincerely,

Robert Kaufman
CEO
The Parker Avery Group

2020 NRF Recap: Thriving through Turbulence

2020-01-20T07:51:00.001-05:00

NRF’s 2020 Big Show brought many things we expected to see: large Sunday and Monday crowds, a myriad of solutions incorporating Machine Learning and Artificial Intelligence (AI and ML), along with a handful of new & promising technologies. The event also came with the unexpected: a determined focus on fundamental retail execution and managing change, as well as—perhaps most pleasing to all participants—warm January weather in NYC.

The Expo floor was lively, and the retailer presence was energizing. Retailers we spoke with continue to explore emerging technologies, but with the recent years’ focus on the emergence of AI and ML, the big question now is, “How do I use it?” This query could be a sign that over the last year or two retailers have been in discovery mode with their legacy infrastructures (inclusive of people, process and technology)—essentially trying to understand, “What must we replace vs. what we want, and can the legacy handle what we want?” Or it could mean they’ve been trying to adopt, but their current internal fundamental building blocks are not ready.

Many questions still remain on how to absorb the new tech, especially for those who are not in a position to incorporate a whole team of data scientists into their organization. The prequel question for many retailers is, “How do we stay relevant or just get started?” Let’s dive deeper into some of the key areas of focus we saw at the Big Show relative to AI and ML.

Solution Updates. There was buzz around new platforms and solutions that are now incorporating the science of AI and ML without the need for another stand-alone forecasting solution. Many solution providers have realized that retailers cannot absorb a pure science platform without understanding how it fits with the execution solutions, so they have started to mesh the concepts. This also brings a unique opportunity for retailers to manage more of the true science pieces on their own, without hiring a complete data science team. From a Parker Avery perspective, however, the jury is still out on this approach. As these solutions are implemented, it will be interesting to see the adoption and how today’s workforce engages with balancing the art and the science. Those implementations that result in clear business value will be significant in help driving AI and ML-infused solutions forward.

Flexible fulfillment is a good example here. Should it be automated replenishment? Allocation? The answer may be, both! Many software solutions we looked at are focusing on giving retailers choices on how they fulfill in one tool and having the ability to change modes based on needs or requirements. Also, the ability to infuse ML and AI into one solution with one demand signal simplifies the applications and likely will make them easier to manage. This new approach may not only streamline and optimize inventory management, but potentially a retailer’s organization as well.

Master Data Management. While most retailers come to the Big Show to see new and emerging technology, there were many discussions around data. It’s a hard pill to swallow when you want the shiny object, but you discover the very basic component you own (your data) is not in a place to support your vision, and it’s a complicated web to untangle. As we talked to our clients about what they had planned for the next 12-18 months, many were taking the path of foundational changes to enable the future. This was a mix between new ERP implementations, placing a focus on improving business processes, and strengthening master data governance. Foundational changes may not be the shiny object, but they have become a necessary step to secure future growth—or in some cases just stay afloat.

Managing the Change. As we walked the show and met with both retailers and solution providers, one of the prominent questions people asked us was “How do we manage the change and achieve the adoption we need to sustain this transformation? We don’t want to make this big investment and have it go nowhere.” GREAT question! Whether we’re talking about new solutions, ML or AI, it all applies potential new logic and approaches to give retailers insights based on science. This can be a hard lesson to coach a team to adopt. You’re essentially asking your team to not only learn a new solution, but also think differently about the job they’ve done for most of their careers. Retailers can no longer approach solution implementations as expensive, IT-driven burdens (maybe with some flashy new user interfaces). They must incorporate a focus on their people and support just as much as the technology to ensure success and longer-term sustainment.

As we continued our discussions throughout the show, it was refreshing to hear that many were putting much more focus on the organization and business impacts of new technologies—much more than we’ve seen in the past. We are hopeful that retailers are incorporating comprehensive change management activities and remaining steadfast with this portion of the investment—even if budget becomes a question. As Peter Drucker is quoted to say, “The greatest danger in times of turbulence is not the turbulence – it is to act with yesterday’s logic.” This sentiment rang very true during our interactions at the Big Show.

Overall, this year’s NRF Big Show was encouraging, and the promise of innovative technologies bringing meaningful value to retailers is within reach. Retailers were inquisitive and engaged, whether they are in the midst of flux or rapidly opening new stores, and there is a fresh recognition for the need for change balanced with the sober acknowledgment to shore up the foundation.

We look forward to continuing the conversations we started with current and potential clients as we move forward into 2020. Please don't hesitate to reach out to us with any challenges you are facing.

Amanda & Clay

Retail Inventory: When is there too much of a good thing?

2019-12-05T09:47:00.001-05:00

Parker Avery recently published a new point of view titled, "Getting to Global: Managing Inventory in a Unified Commerce World," where inventory expert Rob Oglesby discusses the imperatives, implications, and challenges that consumer brands face when migrating from channel-based inventory management to a global or 'pooled' approach. This week, we provide an excerpt of this publication.

The Root of the Issue

More often than not, we see inventory issues arise with brands that began their operations exclusively operating physical retail or ‘brick-and-mortar’ stores. In this situation, a company employs typical retail models to manage the business, using key tools like open-to-buy (OTB) and initial markup (IMU). In this traditional retail model, store sales are seen as the primary measure of success—and usually drives all other operations within the business.

In addition to the traditional retail mindset, the technologies used to support the business are often architected using a ‘closed loop’ approach. This means the core merchandising systems support a buy (from vendor) with a single path: get product into the DC and ultimately the stores. Each buy normally has a component of allocations to the stores with a portion held back in the DC for reserve (to support store replenishment). However, this model frequently does not give enough consideration to external customers like other retailers or franchise operations that hang the banner and sell the brand. Including these other operators (or channels) is important because unless the systems are configured to support a true multi-channel business, design compromises and process work arounds must be made, which often lead to fragmentation of the business—along with the key inventory required as its lifeblood revenue source.

This fragmentation is even more pronounced in retailers where different channels historically managed their own inventories (with the advent of online shopping, mobile shopping, and so on). Only with the onset of the ‘omnichannel’ or ‘unified commerce’ mindset have brands realized they were investing resources and duplicating efforts in managing their inventory—most of which was comprised of identical products and similar assortments.

These fragmentation challenges can be categorized as the following:

Unique stock keeping units (SKUs) by channel or geography. This approach ensures inventory is isolated by channel or business unit because they all have their own (different) SKU for every product. If the product is identical, using unique SKUs essentially guarantees segregation from ordering all the way through to fulfillment.
Fragmented procurement. Even if a common SKU is used, when product is purchased separately across channels, a likely result is segregated inventory—with respect to both quantities received and timing. Further, this approach almost assuredly leads to excess reserve, as each channel accounts for their own reserve separately.
Different allocation and fulfillment models. Different channels require different processes to distribute the goods to the customer (or end consumer). In the brick-and-mortar channel, extra inventory quantities are almost always bought so product can be used to replenish initial sales. Existing ‘staple’ or ‘basic’ items may be on a pure replenishment model, since the initial allocation. For wholesale, fulfillment is usually to the customers’ DCs, and the order comes in and goes out together. This works only if demand is captured at the same time as procurement and sales are not beyond what was purchased (as in a custom or ‘make to order’ business).

Why Inventory is Broken

Keeping the business siloed as we just described leads to significant operational inefficiencies. Let’s start with the inventory itself. The more fragmented the inventory, the more investment is required to cover the overall needs of the business. A common pool of inventory is shared amongst all channels, meaning it can be leveraged easily by the business to support sales and ultimately drive profits.

In addition, siloed inventory requires considerable hand-offs and duplicate business processes, which are commonly misaligned. With a common inventory pool, key operational activities like procurement, inventory management, and distribution can be streamlined. Rather than multiple purchase orders (POs) being managed—a single PO may be used. This single PO is of course larger, but much more straightforward for the factory and all downstream teams to manage. And because single POs are written for the common pool, the overall quantity required is likely less if a common reserve is purchased—which translates to lower inventory investment.

If the organization has multiple DCs, they will need to ensure the POs target the right locations. The objective is to get the product as close to the customer as possible (the ‘last mile’). While this makes sense, it will fragment the inventory to a certain extent. While inventory has to physically go somewhere in the supply chain, the intent is to still ensure visibility to it, regardless of location. This enables ultimate flexibility in the event the most profitable utilization of it moves it to a secondary region.

To read the full point of view, please click here. To read more insights about inventory management, we invite you to read the following Parker Avery publications:

If you need to talk to one of our retail experts about an inventory issue you may be facing, please don't hesitate to contact The Parker Avery Group: http://www.parkeravery.com/contact.html.