Demand Volatility and Channel Complexity
Brady Coady, Vice President of Merchandise Planning at FGL Sports Ltd, shares how retail organizations can address the challenges of demand volatility and channel complexity.
Emphasize Forecast Accuracy
Forecasting is at the heart of everything merchandise planning and inventory management related. Supply chain leaders need to be able to forecast their inventory accurately, including how much inventory they will have to house and ship. This makes investments in big data and predictive modeling algorithms essential for retailers. By leveraging non-traditional data like web data and consumer demographic data, retailers can create more complex algorithms to predict consumer demand and shipment demand.
Brady Coady emphasizes the importance of forecast accuracy and the ability to create a forecast and implement it across the business. That accuracy cascades into labor planning, supply chain, labor handling, planning, bin location planning, and warehouse operations. Supply chain leaders must leverage technology to create accurate forecasts and then implement them across the business.
"All this big data allows the leveraging of more complex algorithms, AI, machine learning-based ones that help us pinpoint and get more accurate in our forecasting. So first and foremost, forecast accuracy and the ability to create that forecast and implemented across the business."
Brady Coady -
Vice President of Merchandise Planning at FGL Sports Ltd
Agility Through Automation
Alongside forecast accuracy, supply chain leaders must leverage automation to react and be agile when demand volatility strikes. While forecasting accuracy is the preferred path, volatility and unpredictability will always be present in the forecasting world. Supply chain leaders must leverage automation and technological solutions to move quickly and shift strategies when the forecast is wrong, or there's a heavy amount of volatility.
Brady Coady explains that automation and technological solutions must be able to shift strategies quickly and efficiently when demand volatility strikes. Supply chain leaders must implement these technologies to overcome any volatility and create the best possible outcome at the lowest possible cost.
"If you can leverage automation and technological solutions to move quickly to shift strategies, that's going to help you overcome any of that volatility and create the best possible outcome at the lowest possible cost."
Planning for an Omni-Channel World
The rise of omni-channel retail has created new challenges for supply chain leaders. Retailers must create a seamless experience across all channels, including brick and mortar, ecommerce, curbside pickup, and buy online pick up in-store. Supply chain leaders must have a clear understanding of how to manage this complexity to reduce split shipments and associated costs.
Brady Coady highlights the importance of visibility when operating in a large geographic space. Supply chain leaders must decide what products they will show their customers online versus what they will make only available in-store. This decision can drive up split shipments, which can be costly. Supply chain leaders must use technology to optimize orders and routing for a seamless customer experience.
"The order optimization order routing could not be more critical. All those things really, really matter, and being able to actually use technology to compete contrast and create the ultimate cost to fulfil that gets you the quickest shipment to a customer because customers expect it very quickly."
The Importance of Digital Transformation
Digital transformation is no longer a luxury for supply chain leaders; it is a necessity. Investments in ERP systems, forecasting, and automation are essential for supply chain leaders to remain competitive in the market. If supply chain leaders do not transform digitally, they cannot leverage the amazing capabilities created in other areas of the business.
Brady Coady emphasizes that digital transformation must start with the customer. Supply chain leaders must place the customer at the top of their minds and understand that everything they do is in service of making the customer experience better. Supply chain leaders must also create a roadmap and work towards it incrementally. Implementing digital transformation in smaller pieces can be less disruptive than a wholesale, rip-the-band-aid-off approach. Finally, supply chain leaders must remember that people are at the heart of everything. Digital transformation is meant to leverage human capital better, creating more automation and tasking more efficiently and smarter ways of working.
"If you don't transform digitally as a supply chain network or as a leader, how can you consume all of this amazing capability that's created in other areas of the business?"
1.Forecast accuracy is at the heart of everything merchandise planning and inventory management related. Supply chain leaders must leverage big data and predictive modeling algorithms to create accurate forecasts that can be implemented across the business.
2.Agility through automation is essential for supply chain leaders to react and be agile when demand volatility strikes. Supply chain leaders must leverage automation and technological solutions to move quickly and shift strategies when the forecast is wrong, or there's a heavy amount of volatility.
3.Planning for an omni-channel world requires visibility and order optimization. Supply chain leaders must use technology to optimize orders and routing for a seamless customer experience.
4.Digital transformation is no longer a luxury for supply chain leaders; it is a necessity. Supply chain leaders must place the customer at the top of their minds and understand that everything they do is in service of making the customer experience better.
5.Supply chain leaders must create a roadmap and work towards it incrementally. Implementing digital transformation in smaller pieces can be less disruptive than a wholesale, rip-the-band-aid-off approach.
6.Supply chain leaders must also remember that people are at the heart of everything. Digital transformation is meant to leverage human capital better, creating more automation and tasking more efficiently and smarter ways of working.
Today I'm very happy to interview Brady Coady, Associate Vice President of Merchandise Planning and Allocation of FGL Sports, a subsidiary of Canadian Tire Corporation. Brady, thank you so much for taking the time to talk with us and our members today. Could you please introduce yourself to our members and tell us more about what you do? Thanks for having me, Juan
So my name is Brady Cody, as Juan mentioned and I oversee merchandise planning for FGL Sports, and that includes the financial planning for our merchandise assortments.
It includes our inventory management strategies. We operate two retail banners, Sport Chek and Atmosphere. And Sport Chek lives in the sporting goods, fashion, apparel, footwear space and Atmosphere is an outdoor brand; hiking, climbing, all the fun stuff you get to do outside and outdoors. And you know, I've been with the company for actually 15 years now in various roles and I've been excited or really engaged by a lot of supply chain improvements we've made over the years.
We've done a lot of investment in terms of digital transformation, everything from order optimization for a multi-channel fulfillment network, setting up hubs across the country to lower those costs or split shipments, opening new distribution centers, expanding our store networks. Really, a it's been a wild ride, to be honest. But I've been happy to be along and driving part of that from a supply chain standpoint, but also from a best practices development for inventory management. And a lot of that comes from deploying our inventory across a really broad network using, some pretty sophisticated predictive modeling algorithms, which is another really big change that we implemented over the last few years.
So happy to be here. Nice to have you here. Really an amazing experience. I can already tell and I mean, the last two years must have been particularly challenging with all the developments around the world.
What are some of the current supply chain challenges that are impacting merchandise planning in retail, and especially now that it's holiday season? Now you get
some of the same ones that pop up every year that are really hard to overcome. Weather is such a big factor. It drives performance, unpredictable performance, either positive or negative.
Oddly enough, at least in Canada, where I operate out of, we had a pretty, I would say, stable year. So we didn't have any shutdowns of any of our supply chain network. We didn't experience too much of that, which is always one of the most painful things because you really can't plan for unpredictable weather events. Channel volatility is another one.
You know, we went through COVID, we saw consumers need to really flock to the online channels. That was a necessity as a lot of brick and mortar operations had to close. So we saw, at least in my world, I saw our five year strategy for our e-commerce environment be achieved in one year and then it's receded back. You know, it's come back to that bricks channel a little bit.
And then in this Q4 (2022), what I saw in our network was that there was a little bit of a resurgence and a little more of a balance between the two. So obviously, channel volatility is a really important one because, you know, you're either fulfilling a customer's demand through the store network or through an e-commerce environment. You do want a seamless experience. What's challenging too, I think, is the signal your customer gives.
Usually the shopping experience ends up starting digitally, even if it finishes in a bricks location versus a digital transaction. So obviously channel volatility was a big one. I think over the last few years, receipt volatility too, it's been really challenging at times. Our vendors and our suppliers were under delivering receipts greatly and then we saw huge influxes as supply chains started to reopen and to get a little more stable.
So that volatility obviously creates a lot of challenge in terms of supplying our networks for inventory. And just deepening a little bit on this part. How can technology help you overcome these challenges, especially because you've done already some pretty significant digital transformations in your career? So how has that helped you overcome these challenges?
I would start with
forecasting is so incredibly important. It's really at the heart of everything we do in merchandise planning, whether it's on the financial side of the business or on the inventory side of the business. Obviously impacts supply chain; the ability to forecast your inventory, how much you'll have to house, how much you'll have to ship; all of that. Investments in big data have led to the ability of more complex algorithms predicting consumer demand, but also shipment demand.
Whether that's nontraditional data, so going beyond POS data, point of sale data of what you've sold in your network historically to maybe nontraditional data web data, consumer demographic data. But essentially all this big data allows the leveraging of more complex algorithms, AI, machine learning based ones that help us pinpoint and get more accurate in our forecasting. So first and foremost, forecast accuracy and the ability to create that forecast and implement it across the business because it cascades into things like labor planning, supply chain, labor handling, planning, bend, location planning and your warehouses, all of that.
And then on the flip side, what I would say is the ability to leverage automation to to react and be agile and move quickly where your forecast is wrong or there's a heavy amount of volatility. So you've got two sides of that coin. And I would say they're equally important. If you can get the forecasting right, obviously that is the preferred path.
But let's be realistic in the in the forecasting world, there'll always be volatility and unpredictability. And if you can leverage automation and technological solutions to move quickly to shift strategies, that's going to help you overcome any of that volatility and create the best possible outcome at the lowest possible cost. Also, earlier, you mentioned a little bit about having to accelerate your e-commerce adoption in speed record time. So how can technology help you improve assortment visibility and planning when we have these omni channel or multi-channel environments?
I'd start with
omnichannel. From a strategic standpoint, you generally would like to have a seamless experience so you can start your customer experience on one channel and finish it on another. What I've seen is the amount of channels or subchannels has rapidly expanded. So it's not just brick and mortar and e-commerce, but it's curbside pick up, it's buy online - pick up in-store.
All of these other, Call it micro channels, are equally important in terms of giving a customer full flexibility to find what they need and get it on the timelines they're comfortable with. In terms of the visibility piece, what I've seen is if you have a really broad network across a really large geographic footprint and you get into a lot of differences for localization or regional customer demand and you have skew churn. So you have a lot of different products coming in and coming out every year. Geocaching and deciding what products you will actually show your customer digitally versus what you'll make only available in a store is a really important decision.
You can drive up your split shipments and by that I mean customer business to customer shipments that come from multiple locations. But the customer is just transacting with one cart. If you're splitting your shipments, even if you're charging your customer, you're not really recouping your expenses on the freight and the handling. So it's important to make a make a decision as a business what you want to show your customer online and does that differ if you're operating in a really large geographic space?
And then finally, when it comes to the omnichannel environment, the order optimization or order routing could not be more critical. So taking into account things like freight costs, handling cost, the actual margin involved in the products, all of the service level agreements. Like how quickly can I get this to my customer when they order this product in an omni channel environment? All those things really matter.
And being able to actually use technology to compete, contrast and create the ultimate cost of to fulfill that gets you the quickest shipment to a customer because customers expect it very quickly. And not only that timeline is only getting shorter, not longer, obviously. But you also need to do it in a way that doesn't cost the business an undue amount of expense. So order optimization is a technological area I think is incredibly important to an omnichannel retailer.
And also going a little bit deeper in your experience because you have already done some massive digital transformations. Have you noticed or do you see digital transformation as a priority for supply chain leaders currently? I think it
needs to be. I think there's too much data out there to leverage to not digitize it and create it as a capability within supply chain.
So there's a lot of investment going on. On Whether it's ERP needs to run your business, whether it's in forecasting. If you're if you don't transform digitally as a supply chain network or as a leader, how can you consume all of this amazing capability that's created in other areas of the business? So when we generate our forecast for consumer demand, I mentioned it earlier like it needs to trickle into the ability for our stores to plan labor.
If I'm a supply chain leader for my distribution center, it's what is my my flow through going to look like? How much receipt is coming in, how much output is going to stores into our network. All those pieces require digital transformation. So yeah, as a supply chain leader, I think you need to be thinking about it if you're not already in the process.
For me, depending on this, what would be your advice to supply chain leaders that want to implement tech driven transformation in their organizations? The first place I would start
is you should be thinking about your customer who your end customer is. Everything we're doing is in service of making the customer experience better. So while we want to implement digital transformation, sometimes we can lose sight of the fact that this is supposed to make the customer's life easier, not just say cut costs and the business should become more efficient.
So first and foremost, place that customer at the top of your mind and that customer, you know, it could be your store network, but it's ultimately, I think, the person walking through your door or leveraging your e-comm platforms to transact. Secondarily to that is you need a roadmap. You need to be working towards that roadmap. And obviously that roadmap will evolve over time.
And it's not a fixed thing but you need to have your sights set on where you're working towards. I think you can get there with incrementality, meaning that, implementing pieces of digital transformation along the way can be a lot less disruptive than a wholesale rip the Band-Aid off, we're going to change everything all at once. It is much slower, though, so you have to weigh those two things. But I think incrementality is generally the strategy I like to go after versus completely reinventing everything all at once.
It just reduces a little bit of risk in the business. And then finally, people. People are so important. The reason to create digital transformation is to leverage your human capital better, create more automation and tasking more efficient, smarter ways of working.
But at the end of the day, you have to remember that we still need people. We need what people do really, really well that is critically think and to problem solve. So change management, support your people. Make sure you've got the right investments.
So those are three of the big areas. I would suggest that any supply chain leader consider as they embark on digital transformation. Thank you so much for taking the time today, Brady All these golden nuggets were really useful for our members. So any any last words that you would like to share with the community?
Well, I mean, thanks for having me, first and foremost, I guess the last words I would share would be volatility. I think I use that word quite a bit in our chat today. But it's it's not going to decrease. It's only going to increase.
So a lot of the capability development and the transformation we go after is to help offset volatility. That can be things like better accuracy. better predictive modeling,
but also capabilities that let us move efficiently and fast. But make no mistake, I think planning is at the heart of it.
The more we plan, the better and smoother our business will be. It's just a question of how do we deal with that volatility that will hit us no matter what we do. Thank you so much, Brady. This was an amazing interview and I'm sure our members will enjoy it very much.
So, thank you. And until the next time. Thanks. Have a good one.
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