Tag Archives: Supply Chain

Moneyball and retail: How to play smarter with big data

With the start of another baseball season upon us, I can’t stop thinking about Moneyball—the story of the Oakland A’s General Manager Billy Beane and his revolutionary method for recruiting and evaluating Major League Baseball players.

For those of you who aren’t familiar with the book (or subsequent movie starring none other than Brad Pitt), Michael Lewis’s Moneyball: The Art of Winning an Unfair Game takes a close look at how MLB’s veteran scouts, talent evaluators, team owners, and general managers in the early 2000s relied only on traditional methods and their gut instincts to evaluate and choose players.

Recruits at this time were viewed through a lens that leaned solely on superficial statistics like number of home runs, RBIs, or even a player’s appearance. Players with the “right” attributes commanded large salaries like those of the New York Yankees—money which small-market teams like the Oakland A’s simply could not afford.

To win at this “unfair game,” Billy Beane spearheaded an effort to dive deeper into the player data he already had at his fingertips—thereby uncovering the hidden value of players who were not identified as assets right off the bat. Today, the majority of MLB teams employ some form of deep statistical analysis, and recruiting on gut instinct alone is virtually unheard of.
What does Moneyball have to do with retail?

Much like Billy Beane, today’s retailers may feel they are playing in an “unfair game.” To many, competing with the New York Yankees of retail seems impossible.

Moneyball taught the baseball industry to use data to focus on individual players and the (sometimes hidden) value they could bring to a team at large. And while retailers may not have the resources, logistics, and of course, money, to compete with the behemoths of the industry, they do have the data at the fingertips to succeed by playing smarter.

If retailers dive into their data and focus on each individual consumer, as well as their products and services, there’s an opportunity to uncover hidden value in the data associated with the consumer and the products they seek—just like Billy Beane did with the Oakland A’s.

So why should retailers revisit this well-worn story?

  • It’s the customer, stupid. Most pundits and practitioners would agree that the retail dynamic has shifted. The consumer now has the bulk of the power. But the consumer is also willing to provide retailers with a wealth of data and information. Much like Billy Beane was able to, can retailers leverage this data to uncover more about their consumers? Who of them are really profitable? How are they interacting with the brand? And what do the answers to those questions mean for long-term profitability in a highly-competitive industry?
  • Efficiencies in the supply chain. How well is supplier A performing compared to supplier B? Are there metrics that can be measured to gain greater supply chain efficiencies? How about distribution networks, warehouses, and stores? Retailers need to be open to measuring new (and maybe counterintuitive) KPIs across their operations. By seeking data that might uncover new ways to measure and improve operations, retailers can get ahead of the game.
  • Product evaluations. Think of each product as a baseball player. While some products are consistently the highest performers, is it possible there are other equally profitable products sitting on the bench? By analyzing assortment under a data-focused microscope, retailers have the power to understand all the costs and opportunities associated with each product and mix, and identify the hidden gems lurking in their assortments. What else could be uncovered that may have been otherwise viewed as a retail truism?

None of these insights are especially earth-shattering, but what is surprising is how often retailers neglect them. The data is there. The insights are at our fingertips. It’s not about amassing more data, it’s about using the data we have to make smarter, more informed decisions. Billy Beane and the Oakland A’s didn’t discover a wealth of new player data—they looked at the information that was available to every other team and asked different questions of it. If retailers want to compete with retail Goliaths, it’s time they start asking different questions, too.

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Will the ghost of Christmas past haunt retailers?

The Charles Dickens’ novel, A Christmas Carol, Ebenezer Scrooge gets a visit from the ghosts of Christmas past, present and future. They all take their turns trying to melt the dark heart of Scrooge. Eventually Scrooge wakes up with a whole new outlook on Christmas. So what does this story have to do with retailers and their Christmas? A recent story in the Wall Street Journal points out that retailers, while trying to resist it, have looked to employ deep discounting to flush out inventories and to capture customers this holiday season. Click here for article.

Retailers, as we have stated on this blog, have been scrambling to keep up with customer demands and the shifting sands of retail. We witnessed this even more so this year during the beginning of the holiday season – Black Friday. Retailers were scrambling to allure customers to both their brick and mortar stores as well as their eCommerce assets. Clearly they are continuing to scramble to figure out what is the best combination of discounting and holding the line. The challenge for retailers is that the ghosts of retail past are exactly that…the past.

Consumers have become accustom, if not expect to see discounting take place early and often. Why would the major gift giving season of the December change this mentality? If everyone is discounting…is there really any discount? So what are retailers to do?

  • Consumers expect discounts…so you will have to provide them. But can retailers be savvier with them? Follow the Jet.com model – provide discounts but some caveats such as non-returnable. Rather than simply discounting, bundle items. The article points out discounting done at Ralph Lauren on a scarf, what about bundling it with gloves. Discount the bundle but look to capture a higher amount of revenue.
  • Lean on your supply chain network for greater nimbleness – the ghosts of Christmas past never had to deal with such new fulfillment models as deliver to home, order on line and deliver to store…add these to the traditional brick and mortar distribution methods. Underlying all these new models are retailers’ supply chains. The ability for retailers to position inventory, respond to demand and fulfill more effectively is vital. As consumers expect more from their experience, retailers need to keep pace. The supply chain is the best way of doing so.

No one wants a visit from ghosts, let alone during Christmas. Retailers are seeing ghosts themselves. They are reacting to consumers’ demands and leaning on discounting to draw them into their stores. The ghost of Christmas past when they had control of their pricing is exactly that, the past. Focus on the future, the game is constantly changing. Nimble retailers, who leverage their supply chain network will have the opportunity stay ahead of their competitors.

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The struggle for retailers – How do I fulfill all those orders, on time and within budget?

It’s December and retailers have kicked into high gear to meet the increasing demands of holiday consumer shoppers, both in store and online. If the Thanksgiving to Cyber Monday time frame in the United States is any indication, the strain felt by the retail supply chains is not going to subside during the Christmas season.

A recent article in the Wall Street Journal highlights the struggles retailers such as Toys “R” Us faced last year when it came to fulfilling all the online orders that taxed their systems. Click here for article. So what are we to make of this? Should retailers

Plenty to go around! If your supply chain is up to par.

Plenty to go around! If your supply chain is up to par.

throw their hands up and allow the mighty Amazon to march on, unabated? Of course not. Retailers must be increasingly savvy when it comes to their integrated online and brick and mortar strategies.

  • Be judicious with online promotions. Easier said than done, as the majority of consumers expect to get deals online, and better prices. But, retailers need to start being disciplined with their promotion and pricing strategies, and avoid running a promotion for the sake of it. They truly need to understand why and how this promotion will impact their bottom line.
  • Have a network view of all distribution nodes. The advantage traditional retailers have is the real estate they have invested in. While it is not always a positive, retailers must take a holistic view of their assets. Can they distribute popular, standard or fast moving items from their stores? View them as forward-positioned distribution centers. Hold back inventory that is more unique, less likely to be mass purchased back in true distribution centers.
  • Don’t be afraid to set expectations with customers. This is difficult, especially considering Amazon isn’t shy about taking a financial hit on some of their fulfillment promises. But why can’t retailers have a deeper understanding of their product assortment with associated costs? Certain items need to have a cutoff date – if you do not order by this point then there is no guarantee it will arrive by the desired date. Yes, this is available sometimes, but make these options crystal clear.

At times, retailers must feel like they are the dog that constantly chases cars – run, run, run, but alas the car is always faster than you. In a way retailers need to stop focusing all their attention on the car (aka Amazon) but rather focus on other dogs – can they out run them? Focus on your supply chain network. Is it flexible enough to allow the retailer to seek new offerings, new business models? Without the visibility and understanding of what is possible, what can you really hope for?

Retail faces a daunting task. Not only do they have to compete with the likes of Amazon but they have to keep up with our, the consumers’, needs and desires. A challenge, but a great opportunity.

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When we all become a market place, it is up to your supply chain network protect the brand

In a recent article, Crate & Barrel, announced that it would start selling other brands on their website. Click here for article. This is not a new concept. Companies such as Lord & Taylor, Saks, Macy’s, Walmart and JCrew are already selling other brands on their ecommerce platform. In the case of JCrew you can even purchase products such as New Balance sneakers in their brick and mortar stores as well. According to the WSJ article, there are more than 250 retailers already offering this functionality. This begs the question, are retailers and more specifically their eCommerce activities gravitating towards become more of a market place?crateandbarrelicon_400x400

Are we seeing another influence on retail from the likes of Amazon and Ebay, two online pioneers that made their businesses through offering their clients almost unlimited selection of products from a wide swath of brands. For the likes of Crate & Barrel it makes sense for their customers. For obvious reasons, they want customers who come to their web site to have access to the widest array of goods for the home. However, they cannot grow their inventory offered as fast as if they allow others to join their marketplace. Rather than spend time scouring for new products, niche vendors and the latest trend, Crate & Barrel can open up their platform and incentivize these brands to come to them. Makes sense, right? Yes, but there are some key issues these brands have to consider:

  • Transforming their eCommerce assets into a marketplace places greater pressure on the brand’s supply chain. The value that an Amazon offers when it allows vendors to sell their products via the marketplace is the massive supply chain and fulfillment engine that goes behind that front end web site. Retailers like Crate & Barrel and other traditional brick and mortar brands have struggled to seamlessly and easily bring eCommerce to their offerings. If they now take on a greater array of product through their site, product that falls outside their control, can their supply chains keep pace?
  • It’s the brand stupid. One appealing factor for brands to associate with the likes of Crate & Barrel is to ride on their brand presence and reach. For Crate & Barrel the positive is being able to offer their customers a deeper and wider product assortment. The risk for Crate & Barrel is that it is their brand that is on the mast head. What happens if one of the vendors they allow onto their online asset sells defective or subpar products? The real issue is that it is the brand, Crate & Barrel that will suffer.

So what does this mean? As more of these brands begin to explore the strategy of creating mini-marketplaces on their web site, they have the opportunity to expand their offerings to their customers (don’t forget as we have stated many times, the customer has now gained the power in the retail relationship) but they will have to rely upon their supply chain network at a more intimate level. These brands must be able to have absolute clarity with regards to which suppliers are being allowed onto the marketplace. There must be absolute understanding into the product offering, what happens post sale and how will disputes be handled by the entities involved. They must also have clarity as to the impact these relationships have on their financial supply chains. This requires a supply chain network that has a deep degree of insights and visibility, but also the capacity to have the flexibility to manage a marketplace that itself needs to be nimble enough in order to truly achieve the aspirations of the medium.

This is yet another example of the continuous evolution of retail. I wonder when I can start buying my groceries with that Basque Honey dining table on the Crate & Barrel site?

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Your supply chain – not simply about cost control

I recently attending the WWD CEO apparel summit in New York City. The event brought together a number of executives from the fashion world from the likes of Dior to Neiman Marcus, as well as fashion superstars such as Ralph Lauren, Vera 1477496755713Wang, Joseph Abboud and Diane von Furstenberg. Other than a fabulous two days at the Pierre Hotel, I took away some key themes to the event. The main talking points:

  • Supply chains are for more than simply cost control. Supply chains have long been seen as centers to control cost, but they are finally starting to be recognized as tools of differentiation, tools that need to be leveraged to gain opportunities within the space. The CEO from Neiman Marcus highlighted as his top initiative the supply chain. Without an efficient and robust supply chain, all the efforts Neiman Marcus are making to redefine their stores and customer interactions will fall short. The supply chains must be increasingly nimble to meet the shifts within the retail world. As we pass through the omni channel stage of retail and evolve to a state of constant retail, or ambient commerce, the supply chain has to be nimbler and more flexible.
  • Stores aren’t dead, just being redefined. As mentioned above, the store is not dead. Far from it. Brands such as Neiman Marcus recognize that the physical store remains an essential cog in the retail universe. However, it is undergoing a transformation and will continue to undergo changes. From bringing beauty salons, restaurants or coffee shops the real estate footprint for fashion and retail. The question for these brands is how do they better manage their ability to fulfill. As stores change dynamics, what are the repercussions of the overall network’s strategy? Brands and retailers must become even more sensitive to how they manage their inventory positioning and fulfillment as their distribution footprint constantly shifts. The retail footprint is evolving, the store is being redefined and driving the overall retail experience. As was often stated at the conference – retail and fashion cannot view physical stores as separate from web commerce, but both must go hand in hand. All one had to do was listen to Hudson Bay and why they acquired mobile eCommerce darling, Gilt. Truly creating a full retail footprint.
  • Consumers are the queens and kings of fashion and retail. The consumer runs the show, according to the numbers presented by MasterCard, close to 70% of the purchases are made by a female buyer. That buyer is also becoming increasingly driven by experiences and driving the relationship. Clearly the consumer continues to grow in strength. She expects to have unique products available, experiences but does not necessarily want everything immediately. Consumers want to have visibility into when they can expect product, but do not necessarily expect it always right now. Retailers and the brands need to keep this in mind, while they need to be sensitive to their consumers’ wants and desires, they must balance the importance between experience, available inventory and meeting consumer needs.

Hearing the presentations from main stage as well as the hallway conversation reinforce the notions that retail continues to evolve, and at an unprecedented pace. While these changes are happening at a breath taking pace, the fundamentals around inventory, supply chains and the consumer must be kept in focus.

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More stores coming to you a neighborhood…wait what?

The recent news that Warby Parker and Bonobos would be exploring opening a greater number of physical stores, coupled with Amazon themselves becoming more present in the physical space. Why? These are all eCommerce giants. Retailers who built their brands and businesses by bypassing all the costs and constraints that traditional retail was burdened with. In parallel we are seeing brick and mortar brands such as Sears and Gap, continue to readjust their store footprints. They are looking to shutter more of their stores, hopefully working to a profitable number and type of stores. So what gives?warby-parker-eyewear-logo

We are witnessing a balancing. Retail will most likely never be all online or all in person, but it will be a state of constant retail. We, as consumers, will be able to search for, experience, acquire and return products constantly, with fewer and fewer boundaries. There is no more omni channel or eCommerce, but really simply “commerce.” Whether it is social shopping like we see with Facebook or Salesforce, pop up stores, mobile commerce via trucks and vans, buy on line pick up in store, personal shoppers, subscription based shopping and the list of retail options continues to grow – how we shop, how we purchase and acquire “stuff” continues to evolve.

But what is the one underlying aspect we must always be aware of, that our brands have to be conscious of? Their inventory. At the core of this new shift in retail is the constant challenge – how do I make sure I have the right product at the right place and for the right margins? Being able to fulfill orders out of a dedicated distribution center for online sales, is challenging enough. As these retailers start growing their brick and mortar footprint, they will have to adjust their inventory strategy, fulfillment efforts and overall distribution tactics.

An overarching theme this recent news emphasizes is the continued shift in retail. Omni channel is really only a stage in the journey towards always on commerce: ambient commerce. A state of commerce when we are always able to transact and have fulfillment occur in multiple locations. Consumers will not distinguish between how they are accessing the brands, and expect experiences to be similar regardless of how they arrived at the decision making point. This shift in the retail landscape continues to emphasis the importance of have deeper view into the overall network and how inventory flows. Whether traditional or eCommerce retail giants, as consumers demand greater reduction in commerce friction, the network must support an inventory strategy that can keep up.

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Brexit – the unthinkable is now reality.

Late last night, in the UK, the news came out that the English populous had voted to leave the European Union. The finally tally was 48.1% to remain and 51.9% to leave – the impacts on the financial markets were immediate and as expected quite negative as the Pound Sterling dropped to its lowest levels versus the US Dollar since 1985, the stock markets across the global rapidly shed value and the impacts on British companies also suffered drastic losses on the market. Bell weather British retailers such as Marks & Spencer, Sports Direct and Tesco have suffered double digit percentage losses on the open markets. The repercussions are only beginning to be felt throughout the global economy. Let’s take a quick look at some areas that will feel the impact.

  • Disruptions to our supply chains come in many forms: One common thread with supply chains, is the fear and dislike of disruptions and unknowns. Often times we focus on such disruptions such as raw material cost fluctuating, demand being fickle or transportation costs to name a few, but Brexit reminds us that one large disrupting force are geo-politically driven. The severing of ties to the open market will impact supply chains when it comes to tariffs, trade agreements, freedom of labor movements, access to capital to name a few. How supply chains react to such disruptors comes down to how nimble and how flexible the supply chain network has been built. No supply chain can prepare for every possible disruptor, but how quickly the supply chain can lean on its digital mirror to react faster will separate which supply chains that simply survive and which thrive in moments of chaos. Supply chains must be nimble enough to be able to react to such changes – which markets will become more profitable, where may new costs impact profits, what about labor costs – these are but a few questions that supply chains must be able to address in order to survive and thrive in this environment.
  •  Impacts on the United Kingdom: As mentioned above, UK based firms as well as the currency is already feeling the impact. And this is simply the beginning of these changes. When it comes to such supply chains as retail, there will be issues around access to labor as well as the open markets. According to The Wall Street Journal, retail, which is Britain’s largest private sector, has leaned on labor coming from the European Union to bolster their needs. The labor tends to be more economically than locally hired assets. One of those countries, Poland, has by some reports close to 1m workers in England. Many of whom are in the retail sector. What will happen now with this labor pool? In addition, this labor pool sends back close to 1b pounds home annually, helping that local economy with discretionary spending. Retail will be impacted both in the UK and Poland in this example. The leave vote has also stoked some fires for North Ireland and Scotland to reconsider their stance within the United Kingdom, as both voted heavily to remain in the EU. If these nations break off what does that do for UK based nations and their supply chains? Will there be a move of services, financial and even manufacturing to these geographically close markets?
  • Wake up call for the EU: The European Union has just seen the second largest economy and one of the major players of its Union turn their back on the club. The statement coming from across the English Channel was, we are better off not being part of the one of the largest global markets and rather go it alone. The shift within the EU will tilt even more towards Germany. As the lean manufacturing powerhouse of the EU, it will continue to see its influence and power growing now that the UK can no longer wield the influence it had when it was part of the EU. What remains to be seen is which EU nations step up to try and counter balance Germany? France? Italy? None of the above? The silver lining in this vote is the possible kick in the pants this gives the EU to address issues from debt to immigration to trade. There are two clear paths the EU can follow – a slow and painful break down or a reawakening and resurgence as a stronger entity.

What all this reminds us, is that our supply chains are under constant pressure from disruptors. They can can come from natural events such as earthquakes in Japan, Tsunamis in the Indian Ocean or volcanic explosions in Iceland. Disruptors can pop up because of misinterpretations of demand signals, poor communications between suppliers, errors in forecasting and the list goes on. Finally we have witnessed, once again, a major supply chain disruptor that comes from geopolitical events. The standard operating procedure should be to expect these to continue to be part of our supply chains.

At a fundamental level, the turmoil that Brexit has unleashed, casts a light on the importance of having a much more robust and clear view of the extend supply chain network. How well does your supply chain have a clear and understanding of the digital mirror of your physical supply chain? The more industrial grade digital supply chain you have to mirror your physical supply chain the greater flexibility your supply chains will have to react to these occurrences. For example, if a UK based grocer depends on supplies from French vineyards for wine, Italian distributors for olives and Spanish farmers for pork, with the new geopolitical shifts how fast can this grocer find new sources of product? How rapidly can they determine the potential cost impacts new tariffs etc may have on their cost to fulfill? Without greater transparency and understanding of the network they might be operating with old data or even no data. A challenge in a market that demands rapid and wise reactions to these disruptions.

End of the day we don’t know what the long term and even short term effects will be. This is unprecedented and will be the first time Article 50 of the Treaty of Lisbon will be enacted. The reality is that there is no “status quo” we are in a world that is constantly changing and demands that our supply chains do the same. How well prepared is your supply chain to deal with such disruptions?

As the famous English saying goes – Stay Calm and check your supply chain.

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