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12/02/2021

The Art and Science of Successful Planning in a Customer-Centric World

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Getting inventory to the right location at the right time has become infinitely more challenging in today’s climate, making the ability to adequately predict and plan for demand vitally important to ongoing success. Luckily for retailers there are a host of technologies and strategies they can deploy to ensure their organization is prepared for whatever the market throws at them.

Read on to discover how to quickly sense planning deviations and diagnose potential hiccups to ensure you are optimizing inventory, satisfying customers, maximizing revenue, and minimizing waste.

Albert Guffanti:Hello, my name is Albert Guffanti and I'll be your host for today's webinar, “Resilient Planning For The New Retail Environment.”I don't think any topic is more timely or more urgent than how to build a resilient supply chain. We've seen the coverage on primetime television, and we live and breathe the painful realities of navigating these challenging environments. We have an impressive panel of experts today and I'm excited to dive in, not just to discuss how planning has evolved over the past few years, but what the future looks like and what retailers are doing to position themselves for future success. The panel of experts, welcome to the webinar. I'll give each panelist a chance to introduce themself and their roles in their organization. Jason, welcome, let’s start with you and then you can each take a moment.

Jason Boyer:Thank you, I’m Jason Boyer, the chief solution owner for the predictive planning suite of applications at SAP Retail. That means I get the opportunity to work with development colleagues to bring a next generation suite of planning solutions to market.

Jose Paredes:I'm Jose Paredes, the global SAP retail leader for IBM. I am responsible for all the IBM SAP retail offerings, working closely with customers to provide trusted advice and tough leadership on problems, and provide solutions. I also work closely with SAP to be in close collaboration in the future generation of SAP Retail solutions and offerings.

Kristin Howell:I am Kristin Howell and I lead SAP strategy and roadmaps, specifically in the merchandising topics. Just like Jason, I work in the solution management organization. We are privileged to work with retail customers around the world to collaborate, take input and understand not only the capabilities needed today, but also what SAP needs to be working on from an innovation perspective into the future.

Guffanti:Thank you all and as I mentioned, we have a great expert panel here. This is a very important topic and is part of a series of webinars that is designed to be quick hittingget you the information condensed, the real important points and then go on and tackle our respective jobs. To that point, let's dive right into our Q&A-style discussion.

Jason, this has been a hugely challenging year-plus for the retail industry and retailers. What do you think is the biggest challenge that retailers have faced regarding planning sales and inventory? Of the challenges we're experiencing, which do you think are sticky and here to stay that we should be aware of?

Boyer:As you said it's been a tough time for retail. In general, it's tough planning demand, getting the right inventory in the right locations at the right time, right quantities, and right price — all of that. That's never been easy, but it's harder than ever in the current environment. The pandemicexposed things for many retailers. If you were relying on old manual spreadsheets and older tools that had a hard time adapting, it made it a painful experience to try to adapt and be resilient in this time. Looking at some of the challenges, the ones that are here to stay can be looked at from a customer lens first.

In general, it's tough planning demand, getting the right inventory in the right locations at the right time, right quantities, and right price — all of that. That's never been easy, but it's harder than ever in the current environment.
Jason Boyer

The first one being, in this environment, customer and demand is harder to predict.The things you thought you may know about customers and priorities have changed and shifted. Part of that is the acceleration of digital shopping, especially in grocery. That took off faster than many expected, and consumers wanted to get that demand fulfilled even faster, which puts pressure on the supply chain in addressing customer needs and priorities. In an environment of rapidly rising cost and supply chain disruptions, whether it's limited supply or late shipments, having visibility into that and then being able to respond and react quickly, or sense that early enough is a key challenge. Being able to sense what's going on as fast as possible and then being resilient and agile in responding. Jose, what have you observed in this area?

Paredes:I agree with a lot of the points you mentioned. If we look into the supply chain today, we know all the problems and challenges that organizations are facing these days. If we compare the numbers today with what we have before the pandemic, we see the out-of-stock situation has doubled in comparison. This is something that some markets are used to doing. For other markets, it's a challenging situation that they don't know how to deal with. Sadly, there is no application thats able to solve the problem because there are many different situations. Retailers need to be able to use better processes and technology to solve as much as possible and be sure that the customer understands the situation so that they can manage the expectations.

This is going to requirean agile and resilient, in-season and replenishment planning process where extended collaboration with suppliers and everybody in the supply chain is going to be needed to plan and re-plan over and over. From the buying or the end-consumer perspective, buying patterns are changing. Where do they buy and what do they buy? Value is no longer the key factor for those decisions, and they are looking into other areas. For example, sustainability and social responsibility is an important point today when buying products. That makes the planning process and planning tools obsolete. You need to be able to bring more information, new information, into the overall end-to-end process, not only from planning, but also from a supply chain and marketing standpoint.

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Then we need to be able to build a better assortment to meet customer expectations. The final challenge that retailers are having — aside from all the problems they face — they still need to meet financial goals. Today, the challenge they face is how to reach the customer in retail, online, marketplace, and so forth. Retailers need to have the right planning tools to support the harmonization of the planning and cut off the different channels where they see cannibalization. Otherwise, they are going to see over-stock situations now that buying more to avoid the out-of-stock situations is trending. Matching that with the customer expectation, we need to understand the channel of customer expectation from an end-to-end perspective.

Guffanti:So many changes happen quickly. The key is the speed of all the changes and the amount of seismic changes that are happening. These are not small changes: consumer predictability, consumer behavior, the other things you mentioned. Then, coupled with the speed at which these things are changing, makes this an exciting time to be in the industry. Kristin, given the speed at which things are changing, how has this shift towards digital engagement impacted retailers in how they plan? How do they stay on top of it?

Many retailers have been forced into the secondary or the second order planning function, where even if they can get the macro demand right and understand the goods and geographically where they need to be, there is a new dimension in figuring out where customers are going to want to take receipt of those goods.
Kristin Howell

Howell:Retailers have been on an omnichannel digital journey for a while. What we've seen at SAP is that the situation with COVID and the lockdownsexposed a lot of the fractures or weak points for retailers who had to respond quickly to changing demand, pivot their supply chains, and deal with all the challenges that were just laid out. Even a few years ago, a lot of retailers would have almost separate lines of business. They would think about their store businesses running on an auto-replenishment model separate from the online businesses where they keep stock in a DC and have a dedicated supply network. From a planning perspective, there is a little bit more stability in terms of predicting demand and then matching supply to that demand.

Over the past 18 months,we've seen a second order effect with respect to inventory because retailers are trying to plan demand, build the right assortments, and meet the needs of customers. Many retailers have been forced into the secondary or the second order planning function, where even if they can get the macro demand right and understand the goods and geographically where they need to be, there is a new dimension in figuring out where customers are going to want to take receipt of those goods: Will they want to buy online and pick up in-store? Will they want to buy in-store, and have it delivered to home? Will they want curbside pickup? And all the different dimensions that come with this true omnichannel shopper that's taken over after COVID.

It's been really interesting to see any retailer who was using a legacy planning platform, or other tools that didn't have the flexibility to take in these dimensions and manage these volumes of data. Many had to pivot quickly to think about a new approach, new data streams, and a new set of tools that can handle these multidimensional demand patterns and multidimensional supply effects. Jose, you've been working on this from an IBM perspective as well, what have you seen about some of the changes with omnichannel demand and fulfillment?

Personalization is a baseline expectation. That means additional information needs to be brought into the overall omnichannel framework so that those expectations are met. A flexible attribution system is needed to allow retailers to pair customers with products, locations, and bring everybody into the supply chain to have products in the right place at the right time.
Jose Paredes

Paredes:From an omnichannel perspective, retail organizations that have been working in silos have a very difficult transition to becoming an omnichannel organization. They need to be able to harmonize and plan together so that they meet financial goals. Looking into the data, not only the different channels, but also the customers because personalization is a baseline expectation. That means additional information needs to be brought into the overall omnichannel framework so that those expectations are met. A flexible attribution system is needed to allow retailers to pair customers with products, locations, and bring everybody into the supply chain to have products in the right place at the right time. The key for retailers to be able to achieve that is by creating a sense of community and bringing targets together.

Previously, I mentioned sustainability and social responsibility. Retailers need to be able to use these areas to create programs. For example, by 2027, 70% of the assortment is going to be produced with 50% less water consumption. Expose that information from an end-to-end perspective so that it is also used from a planning perspective. All of this is going to drive a different way of working from a planning perspective. The tools are going to need to have the capacity to manage that volume of information and be able to add more information in the future.

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Customers are shifting on how they are buying. From the digital engagement perspective, the acceleration has been huge. We know that 70% of U.S. customers try new ways of buying — pickup in-store, curbside pickup, and all different models. This is going to need to be something that is taken into account when creating the assortment to avoid having financial issues at the end of the season. Retailers are being forced to harmonize and to have a better plan, they need to monitor and be able to plan or re-plan in season over and over, silos are no longer an option.

Guffanti:Jose, like many conversations, all roads seem to lead to data. With all the changes in planning and understanding customer demand, what does this mean for the types and volume of data that retailers need to consider as they're planning within this environment?

Paredes:Data and volume is going to be a challenge. However, the biggest opportunity that retailers have in front of them is market intelligence. They should be able to use their own structured data, meaning getting information on the local market to better plan and build the assortments they’ll be using. Organizations are gaining between 10-30% improvement on demand forecasting accuracy that is a big number. Customers in Europe are bringing weather information into the overall planning and replenishment process to find these benefits today. Now, the question is: how are organizations going to be able to bring those benefits? When we talk about adding information, that is not an easy task. If you are a global retailer or a regional retailer, information may come from different countries, governments, locations, areas, etc.

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During the last month, IBM, in close collaboration with SAP, has developed solutions that will allow retailers to automate the data collection process, which is one of the big challenges. We have automated the COVID-19 demographic economic supply chain, embedded that into the overall planning process, and that will create and reduce the burden of that area. The only way retailers are going to be able to consume that volume of information is through machine learning and AI. That is a key component of any solution, and especially our solution. We created specialized, predictive algorithms that help retail organizations have better information to complete the planning process more quickly.Kristin, anything to add?

Howell:Sure, we've seen the same things at SAP. I’d draw the parallel that the rise in data volumes both the quality of data and the quantity of data — has led to a rise in the use of algorithms, machine learning, and predictive analytics. Retailers want to infuse more data into planning processes and found that the traditional tools for consuming data running reports, general business intelligence tools just don’t have enough person-power to process all that data and find the signal in the noise. We've been very focused on not just matching data processing and analytics capabilities in our planning solutions but figuring out ways to bring algorithms and predictive analytics. For the next round or era of planning solutions, optimization, predictive and recommendations will be the key for retailers to find insight, and ultimately make money or generate revenue from the insights that planning solutions can provide.

For the next round or era of planning solutions, optimization, predictive and recommendations will be the key for retailers to find insight, and ultimately make money or generate revenue from the insights that planning solutions can provide.
Kristin Howell

Guffanti:In each segment of retail there are unique dynamics and challenges for planning. Fashion and apparel businesses, for example, have to deal with longer lead times and shorter lifecycle products, whereas food and drug retail manages products with shorter lead times and longer lifecycle products. Jason, how is planning evolving to better support the needs of each type of retail segment?

Boyer:There are some general developments that are happening, which benefit all segments of retail. Then there's things happening within the segments to help the uniqueness of each retailer. In general, there is a move to the cloud, which helps with faster deployment, time to value. As business scales, it scales with it more easily. That's part of the answer to smaller businesses being able to take advantage of newer generation planning solutions as it becomes more accessible through the cloud option. In terms of the collection and leveraging of data, and how important that is, the use of AI for better planning and more accurate demand prediction will aid that.

Another piece of this is using workflows and automation to reduce the manual work and effort that goes into planning. It frees up the planners to do higher value work and more analysis that will bring greater benefit. The other thing that's key is the continued rise in the path on omnichannel and digital commerce, and the acceleration of that. Having tools that are designed to plan for that and recognizing the ability to engage with customers across different channels, different touchpoints, and being able to plan accordingly. If we look at food and drug, there is an additional dynamic where customers are regular visitors with repeat purchases, so it helps to get a better understanding of customer behavior over time.

That data is important to not only collect, but then to use and leverage. That leads to being more customer-centric when it comes to planning and using customer data, customer data science and being less vendor-led. Rather than a vendor saying, hey, this is what we want to push,” retailers are using those customer insights. It's not that the vendor goes away, there is still important collaboration that happens there, but when you get the right data, the conversations are better and more favorable for everyone.

It's not that the vendor goes away, there is still important collaboration that happens there, but when you get the right data, the conversations are better and more favorable for everyone.
Jason Boyer

The other aspect is using technology, from automation to AI and optimization, to help localize assortments better, support that, and do that at scale. It allows you to be space awaredifferent size stores, different formats, different locations — then leverage that awareness to optimize the available space automatically, but keep users in control. It’s a powerful combination that brings a lot of benefits.

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All these things coming together, especially in food and drug, it's the next generation of category management. When planning preseason, some are trying to shorten lead times in that supply chain, but placing big bets in large buys to use data as much as possible to be smarter about buying and predicting better. Then, once the merchandise hits the shelves, being able to sense what's happening earlier, move and optimize inventory, and take the next best action to respond to what's happening. That may be allocating more inventory to certain stores than others so that they can be smart about what they’re doing.

Paredes:One other important factor is that as customers have been changing, retail organizations have also been changing. There is no longer a traditional grocery or traditional fashion retailer. The assortments are broader and more diversified than before, which pushes organizations to be able to support two different mindsets on how to manage the planning process. In general, that created a push for organizations to bring different tools, more data replication, and increase the overall total cost of ownership from a planning standpoint. Soon SAP will be releasing a new capability on their planning tools, Jason maybe you can talk about that.

Boyer:It's an exciting time for retail planning with all the developments coming out, but especially for SAP. We've been investing heavily in this space. In fact, last year, SAP was recognized by Forrester as a leader in retail planning. We're very happy about that, pleased that those investments have been paying off, and we will continue to invest in the space. In the next few weeks, SAP will release a new set of advanced category management capabilities for its assortment planning solution. We’re excited for the joint offerings that SAP and IBM are putting together around retail planning.

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Guffanti:This question is very much about generating quick wins or focusing on small steps, perhaps. What advice do you have for retailers that are looking to innovate their current retail planning capabilities and get moving on it, but don't necessarily have the roadmap? Jason and Kristin, what advice would you give?

Boyer:There's research out there that shows very clear benefits to moving towards these capabilities, these tools and everything around driving more revenue for more relevant assortments to gain customer loyalty and orchestrate inventory to the right places at the right times. Better margins come from greater visibility. When you're putting the inventory in the right places there are fewer markdowns, better vendor collaboration and negotiations because of the insights and becoming more efficient. There’s a shorter time to plan, you get rid of the manual work and focus on higher value work. The benefits and being able to make a case internally is clear when you look at the research and the data out there.

A few points of advice:

  1. Become a data-led, customer-centric company. See data as a strategic asset, use the data you have, look to gather data that you may need that will benefit you. Use that data and those consumer insights to drive key decisions and planning processes.
  2. Have the right tools in place. Those tools are ones that are modern, highly visual, easier to use and consume. They leverage customer data science, AI and optimization, workflows, automation, and collaboration to make the process powerful and impactful to the business.
  3. Look to the cloud to take advantage of these capabilities faster and easier to digest and get that value sooner.

Howell:With a lot of global retailers, we've seen that planning is not just a technology transformation. It comes with a change to processes, new people or new roles within an organization. Planning processes and technology are moving into new places, new processes, new lines of business where retailers may not have an existing solution or infrastructure. I call it the “Grow As You Go'' strategy. Many of today's planning solutions don't have to be a big bang type of implementation.

We've seen great success from retailers who start with a certain KPI that they want to plan, a certain flow of inventory or line of business. It's a great way toget your sea legs, implement technologies, see benefits, get some quick wins, quick returns, and then grow capabilities one module at a time. Again, using the tips that Jason outlined with a little bit of change management and a smart strategy of how to take the solutions one module at a time. It's a great way to build that foundation and ultimately create more planning capabilities.

Paredes:Retailers need to focus on making informed decisions at the scales. What this means is finding ways to reduce the planning process cycle. That way, they're able to do more and faster. If they’re able to achieve that, they need to use automation, AI, and machine learning capabilities to support the prediction model across the different channels. Retailers need to be customer-centric and engage on a large initiative, creating the community sense and focus on the teams that customers and consumers want to focus on. As a good example, sustainability is a segue to a start. Then, keep an eye on the financial target, create the culture and the framework of agility, and change to support those goals in front of the organization.

Guffanti:Working with SAP, we developed an impressive content roadmap for the retail industry to understand where the priority should be. “The New World of Retail” infographic is part of an entire story-scape content universe that we've created on the RIS website. It's fully integrated and you can dive into each of the segments.

Here at RIS, we welcome and speak with a community of the largest retailers, the small retailers, and different types of retailers (grocers, specialty, big box, and everything in between). There’s not a one-size-fits-all approach. In terms of small businesses, how can they pivot with all these new trends we’re discussing to be competitive amongst everyone? Jason, what are your thoughts?

Boyer:There are a couple of things, briefly. The cloudmakes these tools more accessible to smaller companies that are looking to grow. Another thing that we're doing with IBM, and Jose can touch on this a bit, is packaging these things up and creating accelerators to make it easier to consume and adopt as well. Those things are key to that answer.

Paredes:Acceleration for value is the key. Organizations such as IBM have been investing in creating preconfigured solutions, which allow customers to quickly enable them. Sometimes, we want to heavily customize the application before we see it live. The best practice we're pushing into the market is to start with a preconfigured solution. That way, the organization learns more, gets value and from an agile point of view, improves the tool after you’re getting value.

The best practice we're pushing into the market is to start with a preconfigured solution. That way, the organization learns more, gets value and from an agile point of view, improves the tool after you’re getting value.
Jose Paredes

Howell:At SAP, we see that just because you may be smaller in size and scope, many of the same retail challenges and complexities exist in every direct-to-consumer business regardless of size. Part of the reason we're focused on our work with IBM is to take this concept of cloud, the preconfiguration, and package it. This is where the modularity and alignment to the real business benefits become key. It doesn't have to be open-heart surgery to get some planning capabilities up and running quickly.

Guffanti:That concludes our time today. I want to thank our panelists for sharing their experience, expertise, and insights. Jason, Kristin, and Jose, thank you for participating in this discussion. Thank you to our audience for taking time to be with us today. I hope you found it productive and valuable. Have a great day and we will see you soon. Thank you.