Interviews

As commerce has become more global and

diverse, so has the supply chain and its role in

organizations. Competition has forced diverse

sourcing strategies that include the

interconnectivity of organizations around the

world – all that are susceptible to many global

influences. As a result, the supply chain has

become more critical and much more complex.

To put some perspective on the key areas

within supply chain today, Symphony RetailAI

interviewed supply chain leaders from various

organization around the world. We also got a

perspective on key supply chain trends from

one of our own executives.

This paper shares some practical perspectives

and kernels of wisdom from each.

Conversations with Supply Chain Experts

>Read more

Tom Rose

Head of International

Operations

Spar International

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Q: Supply chain has changed massively in

the last few years. When you consider the

vast complexity of supply chain in today’s

global market, what do you think is the

least understood area by supply chain

professionals? How will an understanding

of this area propel us forward?

TR: As supply chain professional, I can say that

we like the physical and have worked for years

on the best methods of handling, picking,

packing, and optimizing our operations based

on what we know. The biggest opportunity is

to understand the customer requirement. So, I

think as supply chain professionals gain better

insight into serving the ever-increasing and

sophisticated demand of today's omni-channel

customer, this will be a significant

improvement.

Forecasting and demand planning are mainly

based on predictions of the future, but based

on historic performance.

They consider known events and factors that

influence demand and supply, like weather, for

example. However, in today’s market place,

historic trends are not necessarily the best

predictors of the future, as customer demands

are changing – and rapidly.

There are a lot of reasons why it’s key to

understand the customer requirement. We’ve

got the emergence of new offerings -

“grocerants,” fresh, food service etc. These are

evidence of retailers responding to the

pressures of the consumer.

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Then, take the news about the Amazon Whole

Foods acquisition. How is that going to impact

the average retailer or distributor in terms of

their customer requirement? It’s clear that

grocery players need to get very serious about

really understanding their customers,

personally, and then must be able to

distinguish their organizations by serving

these personalized needs, and providing

outstanding service.

Q: What’s the next “big thing” for supply

chain – be it an innovation in supply chain

itself, or in broader technology outside of

the discipline?

TR: I think it will be customer personalization

and the emerging use of Artificial Intelligence

(AI) and machine learning systems and

solutions to develop insight into the future of

customer requirements. We need to plan for

the requirement and use the tools we have in

the most efficient way.

I view AI and machine learning as game-

changers for retailers and suppliers, enabling

much more effective assessment of future

demand risk forecasting and optimization.

With the use of these approaches, people are

aided by technology that can make better

decisions than people alone, delivering better

business outcomes. AI and machine learning

can far out process we humans – there’s no

competition there! I believe this will take our

industry to the next level.

Q: Some would say that supply chain used

to be a back-office function, often left out

of strategy meetings and by no means at

the forefront of most organizations. This

has changed significantly. Can you tell us a

point or two about why supply chain has

become so much more critical?

TR: It certainly has become more critical, as

retailer and FMCG businesses have focused on

driving sales, negotiating commercials and

trading margin.

When considering the profitability of the

business, maximizing sales through availability,

controlling costs through inventory, and

operational optimization are being recognized

as key functions of the supply chain.

Today, with the intense focus on customer

personalization and relevancy, everything an

organization delivers to customers is

contextual. The customer wants the product,

often, under very strict parameters. For

example, consider someone driving to work in

the morning thinking about what he would like

for dinner that evening. He’s got a favorite hot

meal at the local supermarket and his mind is

set on that. But, when he stops by the store

that evening to buy it, it’s not available.

I think we’ve all had an experience like this in

recent years. You have lots of options for

purchase and you finally decide, only to be let

down by some issue that prevents you

receiving your order how and when you would

like it. This is largely unacceptable these days.

Interview: Tom Rose, Spar International

Q: You've been advising companies on

supply chain topics for many years. What

should be top of mind for retail supply

chain professionals reading this interview?

LC: As I think about the Xcelerate conference,

five themes come to mind. One is we're

drowning in data and low on insight, so how

can we use new forms of analytics and

technologies to drive outside-in processes

based on data and insights?

The second is that with the move to cross

channel and click and ship we need to be

much better at managing the “each.”

Traditional supply chain processes were

designed around the “case,” but our go to

market strategies today need to involve the

each.

This gets into a lot more work at the store, a

lot more work as we deal with replenishment

of the each and click and ship of the each, and

the management of stores with click and ship

capabilities.

Third, most products today, with the shift to

fresh, have a need for better open code

dating. We don’t really manage products with

short life cycles very well and have moved

towards more fresh products with open code

dates or expire by dates. There is a need to

have that kind of coding on the packages and

to be able to track and trace those packages

through the supply chain.

The fourth is that we've traditionally grown up

with a concept which I'm going to call “efficient

silos.”

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Lora Cecere

Founder

Supply Chain Insights

So, we believe that we could implement ERP

and could make efficient silos that would

create effective supply chains, but that hasn't

happened.

We’ve put in Supplier Relationship

Management (SRM) for procurement, or

Customer Relationship Management (CRM) for

customer management, but what we find is

that we make the silos stronger. This hasn’t

improved the ability for the silos to work

together within the organization and so we're

thinking about outside-in processes and cross

functional alignment. We've really got to focus

on revenue management, our go-to- market

strategies and cross functional work with

suppliers.

Finally, is the change in the world of analytics

and thinking about what we can do in

memory, with open source code and

streaming data architectures. Data used to not

be able to fly first class -- today it can fly in real

time! So, we need to rethink supply chain

processes to be able to use new forms of data.

That's what's on my mind as I come to the

conference. Those are some of the things I'll

be talking about.

Q: What do you think the next big thing in

supply chain will be or where will it come

from?

LC: I think it comes from outside-in processes

based upon demand insights; the ability to test

and learn and to adapt processes. We've got to

take supply chains across the commercial

teams of sales and marketing and not be

marketing or sales driven, but be customer or

market driven. That requires the building of

outside-in processes based upon demand

insights, and a sharp break with traditional

processes.

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Data used to

not be able to

fly first class --

today it can

fly in real time!

“

”

Interview: Lora Cecere, Supply Chain Insights

Jason Burnett

VP Inventory Management

SpartanNash

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Q: From your perspective, what has been

the biggest change or challenge in

inventory management over the last few

years and how is this impacting retail?

JB: First, I think the change in consumer

preferences and the ability for the CPG

companies to keep up with them is big. It’s

caused an explosion of new items that have

been introduced to the marketplace and now

there are more SKUs to manage. Most of it has

to do with flavor variations of existing

products, there are new products as well, but

first and foremost, there's a lot more SKUs in

the grocery industry than there used to be. I

think SKU counts have increased by about 25%

over the last two years.

The second piece is that the consumers are

going through an evolution of where they buy

products. Consumers are purchasing

traditional grocery items from numerous

channels.

This is changing the landscape of grocery

retail. So, it's really looking at how you manage

the deployment of the inventory and the

shipping based on where that product is going.

I would also say that we've seen much more

utilization of big data. The amount of data

that's available for us to use within our

forecasting to deploy our inventory has

increased, and we're harnessing that to create

unique verticals within SpartanNash. We’re

using it to fine tune our forecasting to support

each of our channels, not only from a regular

stock-turn business, but also for promotions.

In our industry, we're seeing an all-time high,

or at least over the last ten years, in number of

out of stocks from the manufacturing

community. This is very unusual and a lot of

that has to do with what I mentioned earlier.

Their portfolio of SKUs is so much broader

now, but the capacity to run the items, since

they run them on the same production lines,

can’t keep up. If they miss or they guess wrong

on a flavor and/or a product type, or they get

out of sync on runs, we see periods of out of

stocks as long as weeks … and in the past, it

would just be days. We're going to have to

figure how to better collaborate and provide

the manufacturing community with better

forecasts to allow them to produce more

appropriately for what the consumer demand

is going to be.

Q: What do you think will be the next big

thing that you anticipate changing the way

SpartanNash will work and serve its

customers?

JB: I would say that it's not the next big or new

thing, but I think it's something that's been

around for a long time, we just need to be

fundamentally more sound at it. That’s the

collaboration between the different channels.

We need to align ourselves with our customer

base more closely from a forecasting

perspective, so we can make sure we have

their needs correctly identified. Then more to

that point, we need to align better with our

supplier base, to ensure that they are

producing product in the ample supply to

meet the needs of the different customer

bases.

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“We need to align ourselves

with our customer base more

closely from a forecasting

perspective, so we can make

sure we have their needs

correctly identified.”

Interview: Jason Burnett, SpartanNash

Q: What’s the biggest change impacting

supply chain in the grocery industry?

EW: The main external factor is about the

changing consumer. Specific to supply chain,

it’s about how supply chain, both from a

technology and business process perspective,

is aligned to respond to the changing end

consumer – one who is very demanding due to

the internet giving them so much power

relative to product information, competitive

shopping and even expectations of service.

The front-end component of the customer

interaction quickly ended up having a lot of

implications for supply chain, particularly in

the areas of fulfillment, inventory availability

and speed - also the last mile around quality of

service.

So, all these changes in the landscape demand

a hefty dose of technology enablement along

with a willingness to make business process

changes - and ultimately - on a broader scale,

realigning the organization to be extremely

customer focused in delivering on

expectations that are always rising.

Q: It’s interesting to consider this because

the average person tends to think that the

customer-centric revolution is about the

front-end, the smartphone, mobility etc.

We don’t consider how pervasive the

impact is throughout the organization.

EW: Yes, if you look at retail, it used to be a

very product-centric industry, particularly if

you think of the department stores and how

retail was 15 – 20 years ago. Now we’re in the

era of the consumer with smartphones and

the internet, which has provided them new

capabilities. We talk about being more

customer driven, so at least in terms of

sequencing, products have

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Ed Wong

SVP Supply Chain & CIO

Smart & Final

become secondary because you must know

customer preferences before you decide what

type of assortment you build.

Internally, merchandising used to be about the

merchant “prince” and “princesses,” and then it

moved to an emphasis on CMOs because of

customer engagement resulting from the

internet, online shopping and digital. Now, it’s

in the third era where we’re talking about

fulfillment of promise. So, you may have the

right interaction in which the marketing team

is out there providing the digital footprint and

experience, and you may have the merchant

team providing the right product aligned with

pricing and branding, but now it’s getting into

supply chain—from the planning aspects of

inventory, to the fulfillment of logistics

execution.

Q: What do you think is the next big thing

in supply chain?

EW: I believe it’s about operationalizing

analytics. We’re picking up a lot of information

– all the talk about big data, etc. There’s a lot of

investment in tech companies like IBM Watson

trying to figure out what to do with

unstructured data (social forum chats, etc.)

and converging those points of insight into

something actionable. So, I think the

technology components exist. But it’s always

the case that operationalization is somewhat

behind, and there isn’t a very straight path in

terms of what to do with such an immense

amount of data. I think, in terms of supply

chain, there’s a lot of analytic insight for

planning and execution–

things like network analysis and capacity

planning to truck optimization, and managing

cube. When you get into the supply chain

area, it’s all about linking planning with

execution, and the ability to operationalize

data and insights becomes much more

important. How do we make that a realization?

I think this is the next very interesting thing, if

not the next BIG thing.

Q: Extending the analytics and

operationalizing across all the points of

supply chain seems extremely complicated

these days in terms of sourcing from

different parts of the world, supply

/demand, volatility and that sort of thing.

EW: Making technology into some sort of

operational component tends to be prevalent

in supply chain. For example, with

transportation optimization, we’ve got Google

Maps and traffic patterns, and we consolidate

them into a transportation management

application. We can produce an optimized

truck delivery route that would have

parameters to lower fuel costs and improve

the speed and timing of deliveries. So, that’s

one aspect of leveraging data into something

very operational.

When you apply that same concept and ask

“OK, now that we have a wealth of consumer

data, unstructured data and customer

preferences – implicit or explicit – how do we

aggregate all of that and drive it more toward

how supply chain operations can leverage it?”

This is what I mean by operationalizing the

data and insight, and it’s something that still

requires a lot of discussion.

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Interview: Ed Wong, Smart & Final

Patrick Buellet

CTO, Retail Solutions

Symphony RetailAI

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Q: What are the key market trends /

influences affecting how customers do

business today?

PB: We’ve had an acceleration of trends that

have been with us for a while like ecommerce

and the ability for consumers to engage

grocery stores in many ways - Click and Collect,

home delivery of course, Shop & Go. New

services. New ways to interact, like Chatbox,

for example. Or, in China, WeChat is fast

becoming a significant way for businesses to

interact with customers. These are impacting

grocery more than before.

This has a big impact on supply chain because

supply chains used to be developed specific to

online or brick and mortar etc. The challenge

now is to handle all these channels ― with a

single, real-time inventory.

Q: How should retailers react to these new changes in the market?

PB: First, retailers must develop a unified

supply chain, understand their inventory,

wherever it is – a warehouse, a store, at a

supplier. Second, retailers must understand

demand from all channels and effectively

forecast for each. Demand forecasting is

critical. You always must know sales and

inventory levels. For grocery retailers, this is

particularly hard because you have fresh

items, for example, that may need to be

replenished several times per day.

We’ve got a customer in Europe that is

significantly investing demand forecasting.

We have reduced

forecast error by 50%“ ”

We’re successfully testing AI-driven demand-

forecast models. Here’s the impressive part:

We have reduced forecast error by 50%!

We’re working on current projects with

demand forecasting at the warehouse level,

and others at store level – in Europe, the US

and South America.

Q: Everybody's talking about AI. How is it

really improving things?

PB: On the supply chain side, we’re using AI to

better predict the demand signals and to take

outside data or inside data, like daily price

changes, to better forecast and minimize

human intervention in parameterizing a

forecast engine.

A lot of small retailers lack the right level of

people to forecast, so AI makes them “bigger”

in terms of their ability to compete with the big

guys. It massively closes gaps like this.

Promotional forecasting is key in terms

anticipating capacity issues. For example, you

have fixed capacities such as in warehouse or

on store floors. If you can better predict sales

variations, you can better plan for space, and

for the staff you needed.

Q: Why is demand-forecasting such a hot

topic these days?

PB: Grocery retail is a cash-to-cash business,

meaning retailers can sell merchandise before

they have to pay their supplier. Obviously,

predicting demand allows you to lower

inventory and increase your cash.

In Europe, most of the biggest grocery retailers

have their own bank, and this is just to gain

one day of cash. Increasing the forecast

accuracy helps in this respect.

Q: Considering all factors above, what are

you seeing in emerging markets vs.

developed ones?

PB: Successful store formats in emerging

markets and those in established markets are

different. Emerging markets still love the one-

stop shop. But this format is decreasing in

established market, where convenience stores

are gaining market share. Also, more people

want fresh products now, that means you

need to have a much faster/agile supply chain,

especially in the established market.

Obviously, there are geography-specific

problems, like the US being a huge country. In

Europe you can deliver to stores many times a

day because of shorter distances and the

density of population, to a certain degree, is

higher. Both are established markets, but

geography differences have impacts on supply

chain.

AI helps in both cases, bringing value to

predict trends in supply chains. But it's not just

a question of being mature or established or

emerging; it's also a question of geography

and culture. If you go to Japan, you buy

everything fresh and go to shop nearly each

day. No weekly shopping. Space is expensive,

you don’t have the room. So, retail, and

grocery in particular, is very country/culturally

specific.

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Interview: Patrick Buellet, Symphony RetailAI

About Symphony RetailAI

Symphony RetailAI is the leading global provider of

Artificial Intelligence-enabled decision platforms,

solutions and customer-centric insights that drive

validated growth for retailers and CPG manufacturers,

from customer intelligence to personalized marketing,

and merchandising and category management, to

supply chain and retail operations. Symphony RetailAI

is innovating rapidly to drive faster, more profitable

decisions through AI, machine learning and voice

technologies. We are trusted by over 1200

organizations including 15 of the world’s 25 largest

grocery retailers, thousands of retail brands, and

hundreds of national and regional chains worldwide to

help solve their toughest business problems, through

AI-powered customer intelligence and retail solutions.

More at www.symphonyretailai.com

Copyright © 2018 Symphony RetailAI www.symphonyretailai.com

The experts within this article spoke at 2017 Xcelerate

Retail Forum.

Symphony RetailAI held its second annual Xcelerate

Retail Forums in the US and France, in September and

October 2017. The forums focused on the future of

customer-centric retailing, and how to meet today’s

shopper demands in the face of rapidly changing

technology and ever-evolving retail trends. They also

incorporated success stories in artificial intelligence,

cognitive and other technologies that are fast becoming

table stakes for successful businesses. For more about

Xcelerate go to: http://www.xcelerateretail.com/