Today’s Supply Chain Tech Investments Driving Retail Profits

When we're finally able to put the pandemic behind us, retailers will have evolved into experts at disruption navigation. Getting to that place, unfortunately, is an arduous, complicated journey. In “Megatrends from the RIS Supply Chain Benchmark Study: Balancing Resilience and Efficiency,” RIS talked with industry leaders to put deeper context around the recent study, including exploring how the tech investments that rose to the top found their way there. The group also breaks down how today’s successfully retailers have built and managed their supply chains through the pandemic, how they’re leveraging them to drive profits, and the interesting role that connected packaging can play in consumer engagement. Read on for an edited version of the webinar transcript, including all of the presentation slides and retail takeaways. Tim Denman: Welcome everyone to “Megatrends from the RIS Supply Chain Benchmark Study: Balancing Resilience and Efficiency,” which is presented in collaboration with Digimarc. I am Tim Denman, editor in chief of RIS, and I thank you for joining us today. The retail supply chain is always evolving, reinventing itself to keep pace with emerging technology, and changing consumer demands and shopping patterns. But that always-steady evolution shifted into high gear this year as the industry and the entire global community reacted to the worldwide health crisis. Massive stockouts and overflowing warehouses were only two of the major problems that rocked the retail supply chain during the pandemic. Lessons learned from the crisis have focused on improving agility, and upgrading technologies that enable retailers to quickly adapt and recover for future disruptions. With me to explore the supply chain strategies and technologies retail should develop — and deploy today if they're going to remain relevant tomorrow — are Digimarc's executive VP and chief technology officer, Tony Rodriguez. Tony, thanks for being here. Tony Rodriguez: Thanks, and hello everybody. Denman: And also with us today is RIS News editor at large Joe Skorupa. Joe, thanks for taking some time. Joe Skorupa: Thanks for having me, Tim. Looking forward to our discussion today. Denman: And so am I. Now, many of the points that we'll be discussing today were recently covered in depth, and in our first annual Supply Chain Technology Study: Balancing Supply Chain Resilience and Efficiency benchmark report, which was sponsored by Digimarc. Now, the research was conducted this summer, and explored not only the current COVID-induced supply chain trends, but also where smart retailers are allocating their vital investment dollars to ensure they're equipped for future market disruptions. Before we jump into the report findings, it is important to set the stage and establish who actually took this survey. The respondent pool was made up of director-level and above headquarters staff at both the large- and medium-sized retailers, as well as a fair representation of small SMB retailers. Nearly 40% of survey takers reside in the C-suite. And these high-level retail execs come from various retail segments, with the largest group of respondents coming from food, drug, and convenience. Now, one of the major goals of any retail tech study is to pinpoint retailers’ current tech investment levels, and where they're allocating these funds today, and where they plan to allocate them in the future. Retailers report that currently nearly a third of their IT budget goes to support supply chain capabilities. And at this point, I'd like to invite our panel of experts to join the conversation. Joe, does a third of the total IT budget to supply chain seem right to you? And you think we'll see that number rise in the coming years? Skorupa: Well, Tim, the reason we ask the question about allocating a percentage of the IT budget is to get a sense of the importance. And, yes, I think allocating nearly a third of the IT budget, which will be by the way in the $20 million range annually for a billion dollar company. I think this indicates that the supply chain is a very significant area of focus for our retailers' IT department. And therefore, a very significant area of focus for RIS News, and Digimarc, and others to focus on the supply chain. So, that's one of the main points you get out of asking a question like that in the figure of close to a third. But more important to note is how the IT budget dollars are being spent, which we're going to be covering in some detail in upcoming slides. However, I would like to say that as an overall smart approach to supply chain budget allocation is the pursuit of a two-pronged strategy, and that's invest in projects that will have an immediate impact. That's one prong. For example, filling in technology gaps or upgrading areas that are stifling growth or efficiency as one prong. And then the other prong pursued at the same time is to invest in initiatives that will deliver long-term benefits such as purchasing or creating a platform that integrates all the disparate links in the supply chain together into a single dashboard, which some are calling a digital supply chain. So, that's a long-term project that is very worthwhile, that should be pursued simultaneously with the short-term project. So, when we look at tech strategies, and initiatives for 2020 and 2021, we'll be able to see how this two-pronged approach plays out in more specifics among retailers, Tim. Denman: Thank you, sir. And Tony, as you see here on this slide, we asked retailers their top supply chain investments for both 2020 and 2021 like Joe mentioned. And a couple of technologies popped up on both lists, sourcing replenishment, and advanced analytics. Why do you think these three technologies in particular are important this year and will continue to be top investment areas headed into 2021? Rodriguez: Yeah, that's a great question. So, really, these three elements that you've highlighted are really essential in building a resilient supply chain, promotes visibility, and one that is really demand-driven to meet customer needs. Excuse me, finding the right suppliers at the lowest cost really used to be the dominant driver in sourcing. But now it's much more about finding those suppliers that are willing to partner with you in creating that visibility needed really based on accurate data to help you migrate from more of a traditional, linear planning replenishment framework to really a virtual organization that more effectively shares data between partners, and can more quickly respond to changing demand signals. And so, that element of the changing dynamic nature of the sourcing side of the conversation has changed quite a bit in the last number of years. Been working outwards towards the customer. The pressure on replenishment processes is really acute as we've seen through the pandemic. With everything ramping up from customer expectations, diversity fulfillment, just the diversity and breadth of SKUs alone, that growth has been impressive across these various channels. But knowing that you have a stockout, but not being able to address it quickly, not only do you lose a sale, but as we all know more importantly, it risks the customer as well. And given the amount of time and energy it takes to attract new customers, given the intense competition in the market, it's really important that that replenishment process is optimized, and you don't have those stockouts. Finally, out of those three that you mentioned, advanced analytics gets the most attention, which makes sense. It's new, it's exciting. And it is built on artificial intelligence, which is a terminology or a term that we now here all day in our lives as consumers. And we're starting to interact with more and more. The techniques are truly powerful, and are an important element in building that resilient demand-driven supply chain. But one of the parts that's really discussed, which is maybe not quite as much fun to talk about is just the fundamental importance of data cleanliness, and coaling before using such tools. So, the tools are powerful but only if the data they've been provided is correct. Whether that's inventory counts, whether that's demand signals from customers, whatever the case might be. So, we really are an exciting time in predicting stockouts, and using predictive analytics, but all that only works if you have accurate operational data, and visibility with your partners up to the supply chain. Denman: It makes total sense. And it makes sense that what we're seeing for 2020 supply chain trends are going to resonate beyond this year. Obviously, this year was like no other because of COVID, and the health crisis was a major theme of our research, and influenced pretty much every aspect of the findings. Tony, another question for you, we asked retailers about their biggest future threats to the retail supply chain, and not surprisingly pandemics top the list. How can retailers best prepare their supply chains to meet future disruptions, including pandemics, and some of the other events that are listed on this slide? Rodriguez: First and foremost, it goes back to really building that resilient supply chain and creating that virtual organization where you and your partners and suppliers really act in unison, as opposed to this linear lockstep process where it might be multiple weeks before those signals are being sent back to you up through the supply chain. So, I'll just go back to one of the elements I mentioned previously, which is really leveraging those forward-looking demand signals, and dealing with disruptions like we're seeing now. And those demand signals, many of them come from that core transactional data systems, POS, and internal data systems, which drive so much of the infrastructure. And to really make sure that the fundamentals are there such that you're operating on accurate information is important. And this is where having a cohesive AIDC strategy that provides robust and reliable data to create that visibility is so important. But when I talk to retailers about future threats, I recommend that they really start with the fundamentals. Something as simple as even tracking things such as a number of hand keys, and grocery can be important. Another example is the need to control sources of shrink, especially those that result in automated ordering systems, replenishing the wrong product. Stating the obvious, it's always better to keep something on the shelf than the expense and inventory headaches of rushed, inaccurate replenishment orders, in this case in the midst of a pandemic or other challenge that's facing us. Denman: Right. And Joe, we also have in this slide here, key lessons learned. And a lot of what came up here are what we've been talking about for months, keeping workers safe, new facility, and operations and offerings, inventory visibility. Does anything here surprise you? And was there anything that scored lower on the list, and maybe didn't make the chart that you think will have a greater impact going forward? Skorupa: I have heard, Tim, in the media the phrase “pandemic fatigue” pop up now and then. And it's irrelevant in certain ways because we have to deal with it. I mean, it's a lesson we have to learn. This is still with us. We are not over it yet. We have to manage it well to avoid deeper impact on the future. And yet, I think there is a certain level of disruption fatigue. And we really couldn't get around not having a key finding or several key findings in our study about the lessons learned from this unique time. It wasn't surprising that retailers placed a high priority on needing to protect essential workers. And even fairly compensating them. And to be honest with you, I thought, "If I can put this phrase together, a highlight of the pandemic, it was the fact that essential workers was a phrase that popped up in our vocabulary." And essential workers do include supply chain workers. It does clearly include delivery last-mile fulfillment, warehouse distribution workers. And so, I was honestly very happy that we shifted away from reviewing or viewing this as being a labor statistic, as being a labor management. It turns out what we're doing is we're managing essential workers. And I thought that was a real positive. That was not surprising; the surprising thing for me was that the bottom of our supply chain lessons learned during the pandemic list is the need for greater visibility across the supply chain. Every supply chain gap that we discovered during the crisis when stockouts were rampant on one hand and overstocks were rampant and piling up in stores, and warehouses, and distribution centers on the other hand, well, every one of these problems could have been moderated, not solved completely, but certainly moderated, and more quickly managed by possessing an end-to-end supply chain dashboard with visibility across what are currently siloed links in the chain. Now, when the virus broke out in China, where we have located the world's largest manufacturers, the broadest, deepest, most robust manufacturing capability, and that was where the virus broke out in December, I believe. And when Italy shut down in January, where there are major markets, and certainly indicated that Europe was next. Well, visibility into what was happening, and the impact this would have on the U.S. market was not fully taken into account. It may not have been enough to have this visibility to stop the complete shock, and the stockouts, and the hoarding, and even the over supplies because stores were closed, and people were not able to purchase. But it would have provided retailers weeks of making adjustments so that they could have bounced back faster. They could have moved things from locations that didn't need product to locations that did. It could have saved retailers millions of dollars. Now, of course, this pandemic is a once in a century event. And hopefully, it is not going to happen again for a while, but we do have to plan a full end-to-end dashboard. It has helped some retailers like Costco, for one, reducing the impact of misaligned inventory. And they certainly had a better handle on that, and the vast majority of retailers that took months to get their inventory where they needed it to be the most. So, to me to have to see that greater visibility into supply chain was at the bottom of the list, indicated to me that they were focused more on short-term things like solving the problem with safety of their workers, which was clearly a short-term impact. But the longer term view, for me, is focusing on that end-to-end dashboard. Denman: Got it. Now, some of the lessons learned, we just talked about was the backdrop coupled with the obvious need to drive sales and margin. And with our study, we took a look at the strategies retailers are deploying now to keep their revenue streams healthy. And we asked retailers to name the top strategies that are driving sales and margins today, and what they believe will be the top strategies as we head into 2021. The two lists both highlight the need to optimize last-mile fulfillment, but there's also significant differences in what retailers selected as key strategies for this year and next year. So, Joe, what do you make about this? The difference that retailers think a year will make. Skorupa: Well, I tipped off where I was going to go with this earlier with the first slide. And I mentioned something, what I call a two-pronged investment approach. And I believe that you can clearly see this in the list for top strategies for 2020 and 2021. And by the way, we are approaching November here. That means there's not much time left in 2020. But when this survey was taken, it was in the summer. And there was still about six months left in the year. So, it was realistic for retailers at that time to make an effort to invest in these areas at that time, by the end of the year. So, the top strategic areas for 2020, we see, are really intended to have an immediate impact and drive sales and margins. And then include maximizing support for digital channels, which was chosen by 60% of respondents. Now, we know this is important because e-commerce and all digital sales have been booming during the pandemic. So, if you wanted to have a bang for your buck, an immediate bang for your buck, for an investment, it would be to invest. As we see most retailers did choose for maximizing support for digital channels. Now, the same is true for scaling click and collect management for both stores and curbside. This was chosen by 55%. And here's another area that was booming. And curbside, by the way, was not an area that was on anyone's number one list of investment areas before the pandemic. But boy did that change in a hurry. And the third and big area that I'll focus on here is optimizing omnichannel fulfillment to better serve customers, which was chosen by 53%. And of course, investing in things like order management, shipping direct-to-consumer, warehouse management, and other technologies that make it quicker and easier for consumers to receive their purchases. Well, this is something that will have an immediate impact by the end of the year had they begun investing in the summer where we took our poll. Well, obviously, this is something that will have an impact for 2020. Now, looking ahead, I'll just pick three here as well, the top three to 2021. The top three areas for strategic investment shift to ... And here at number one is expanding collaboration with supply chain partners. Now, clearly, as supply chain partners in China and other manufacturing locations were impacted by the pandemic, it became crucial for retailers to have tight supply chain partners in other locations, and to find as many partners as they could to establish good collaborative relationships with. And then also, to be able to quickly find and onboard new partners. So, this is something that will help retailers have more ability, to have agility during other disruptions that may come in the future. Now, also, the second most chosen strategy here was the ability to respond to fluctuations in demand, or agility to respond to fluctuations in demand. And I think the key point here is that since the start of the pandemic, retailers have been focusing on refining their demand planning, and forecasting ability. And responding to fluctuations in demand actually showed that they didn't have a good handle on what demand was. And they notice that they discovered the data that they used for demand, the data they use to predict and plan was severely lacking and in need of improvement by adding more external sources of data, and using AI and machine-learning, and having a more robust prediction modeling capability. And then, the final element I'll focus on here, Tim, is the third highest rated strategy on the list. And that's improving the ability to leverage shopper behavior data, which was chosen by 45%. And that is related to the previous point, improving the ability to understand demand since, well, shopper behavior is central to forecasting demand accuracy; however, it is also an area where retailers can use deeper data to increase personalized marketing, to drive targeted sales, promotions, and loyalty. So, just to wrap up here, Tim, I think the top three in both '20 and '21 show that a two-pronged strategy is probably what the smart retailers are going to pursue. By two prong, I mean, one prong being for immediate results, and the other prong being for longer term benefits. Denman: That's great analysis. Thanks, Joe, appreciate that. Tony, what other things are you seeing as key to making retailers more profitable from a revenue and profit perspective? Rodriguez: Yeah, actually, I'll build on some of the previous comments here, but what we're seeing through our retailers is really this realization that primary packaging can be a powerful enabler for several of the strategies that are listed here going into 2021. As was just mentioned, specifically, the need to be able to create those connections with consumers, do that personalized marketing, do the upsells, do that engagement is so important in collecting and understanding shopper behavior. And that's a place where the primary package. That's the interface for the shopper dealing with many of these products. So, that's one area that we see our retailers increasingly investing time and energy in is how to build those connections. The other one that I'll touch upon is, again, expanding that collaborations with supply chain partners as it was mentioned previously. That visibility up to the supply chain, and having lot batch, even instance level, deterministic identity for the package is so important to understanding what the inventory is, where it's headed, if there's been diversion in the like. So, at the core of that, as I started off with, it's really that properly designed primary packaging. And if designing that to enable the analytics we're talking about is so important in doing so, basically, we can help with that efficiency stockouts, and really assist in building that resilient supply chain that we're looking for. So, with that, maybe what I'll do is ... If it's okay, let's go ahead and jump into a broader view of how we look at this, and specifically as it relates to primary packaging. And so, this is a representation that we've actually put together to explain this, that it's not just at the front of store in this case, using grocery as an example. It really is, throughout the entire, what we refer to as a packaged journey. And I'm not going to touch upon each one of these, but just to call out a few specifics. Starting off with manufacturing, we know that this is really the cornerstone of sourcing, and there's enormous pressure in manufacturing to ensure the safety and quality of their products, and to deal with the spikes and demand. Challenges here, typically, involve misfill, parts mismatch in packaging, and with the rival blockchain, really the need to have that deterministic identity for each instance of the package. And so, having that design ethos, that basically includes all that functionality at the very beginning can make an enormous difference. This is a great opportunity to increase, it was mentioned previously, not only the efficiency but really the safety as well for those essential workers. Those sales associates and those doing order fulfillment. The processes here that end up taking a lot of time, and in many instances, some repetitive stress injuries include price checks, planogram compliance, pick, and the like. So, anything we can do there to simplify and expedite that process. Another one checkout, of course, we've all experienced what happens, the slowdowns related to a label or package doesn't scan. And yes, that's problematic, but even more so as it relates to the findings here from the study is what that does to the accuracy of the data, and the ramifications for those automated ordering systems when we have additional stock and the likes that didn't need to be ordered. And then, finally, getting back to demand generation, talking about home use of consumer engagement. This is really where the package, again, is the best vehicle to drive that consumer engagement, and where we can collect those demand signals, and create that personalized marketing, and upsell opportunities, and learn more. Get those early indicator metrics are so important for the predictive models. So, those are just a few of the places that we've seen where retailers are benefiting from having an optimized packaging strategy. We refer to this sometimes as a connected package to help transform operations. And so, just to provide one more piece of context, I'm going to describe a little bit more what we mean by the connected package. So, packaging itself really historically only had one job, really make that favorable brand impression. And you can go back to the 1970s with the introduction of the UPC. And that was built at the time, and technology that was already 20 years old. Right? But as time has gone by, what we see now is that the dominant viewer of packages really are machines, and the emergence of IOT. So, packaging aesthetics, first moment of truth are still vital and essential. But these packages are basically being constantly scanned, and constantly imaged. I mean, if you think about a self-checkout scenario where I can just pick something off the shelf and walk out the door. There are multiple cameras, mobile devices, and the like that are imaging that package to enable that. So, really, the focus today and thinking through an optimized packaging strategy is really how do you enable them to enable all these applications without infringing on human design aesthetics. Evolution goes slow, right? The way that we interact the colors, the typeface, the font, the hero image, those are all things that are still vitally important. But for those 10, 100,000 points for that package has been imaged, we need to make sure that it's also an effective channel for those processes as well. Denman: Very interesting stuff, Tony. Building off of your comments, obviously, in technology and retail it's always about the next best thing. And we asked retailers to rank their top emerging supply chain tech, and we highlighted a few of the most popular answers here. Joe, can you provide some insights? And do you agree with the results here? Skorupa: Yeah, Tim, I think this is a really interesting slide. The way this is listed here, it shows a top tier of interests, the top cohort so to speak, the three that were at the top of the list, and then three that were in the next cohort, one cohort down. And none of these achieved like a high level of percentage of interest like 50% of retailers chose that. That's not what happens here. And that's typically not what happens with emerging technology. Who picks emerging technologies to invest in are really the leaders in the field. And by leader, we are talking about something less than a majority. Most retailers attempt to be fast followers. That's getting to be harder and harder to do, but that is their philosophy. There's only a small cohort of true leaders. And I want to talk about tech. The number one tier of interest here in emerging tech is delivery services. And if you had been investing in automated delivery service, and computer-driven delivery service, and optimized delivery services, you would have been sitting pretty when it turned out that we were stuck at home, we were not able to go into stores. We were only able to use online services, and delivery of course was a big part of that, especially, for food. And I was part of a discussion, Tim, online, early on in the pandemic, where there were a bunch of practical retailers in the discussion. And they were just saying, "We can't make money on home delivery. We just can't do it. It's killing us." And I just could not understand that when companies like Walmart, which does a phenomenal amount of home delivery, and does it within house resources. When Target does a great job of home delivery using primarily its shipped automated service. And Kroger, which came somewhat late to the game but certainly first among grocers. Did a tremendous job with partnering with Instacart, and other services. And in fact, made a profit on their home delivery services by working for years to get these systems in place. And so, they didn't plan on having those systems, get their ROI almost overnight when a pandemic would hit. That was not their plan. But their plan was to get part of their systems ready for a full omnichannel treatment, which grocery was late to come to. And it turned out that they were in the right place at the right time. So, the answer to the question is can retailers make money on home delivery, even grocery retailers? And the answer has proven, yes, as long as they have optimized, scaled capabilities, applications, software, and partnerships in place, none of which is easy, but it can be done. And those retailers that did it well have proved it. I also want to make a point here on the two others in the top tier list. Looking at micro fulfillment centers, I saw Jeff Bezos deliver a keynote speech in 2004. And I was really shocked because at the time in 2004 all everyone wanted to talk about in retail was e-commerce. They were ramping up their e-commerce divisions like crazy. And all Jeff Bezos talked about was the supply chain, and building warehouses, and what his plan was to put them across the country. And I was really surprised about that. And it turned out, of course, he was five moves ahead of everybody else. And now that Amazon has done that, their focus is on putting small warehouses everywhere. Getting the warehouses and the product closer to retailers. It makes it cheaper to ship from shorter distances. It also makes it quicker and easier. And by talking about small warehouses, we can talk about in-store warehouses, so to speak. And then we can talk about micro-fulfillment centers. And just going to wrap up here, Tim, going to point out that dark stores are also fulfillment centers. And dark stores are like small warehouses. And even Macy's just recently announced they were converting several stores into dark stores. So, to me, what these technologies show that they're emerging, they're not widespread. Only the leaders are investing in these. It shows that these are going to be mainstream technologies, and strategies very quickly. Denman: Well said, Joe. I mean, obviously, the retailers that plan ahead have a strategy in place, can "see the future," and are willing to put some investment dollars behind it will reap the benefits. Tony, as retailers look ahead for 2021 and beyond, what do you believe the top emerging tech should be and will be? Rodriguez: That's a great point that Tim was laying out is that the way that fulfillment is happening is becoming more and more heterogeneous, from dark stores through these micro-fulfillment centers. And what I would point out is that in every single instance that's described, there is a common element. And it's actually called out here on the slide, which is really around imaging and AIDC systems. How do you actually image the cases, the pallets, the primary packaging as it passes through these environments in a way that absolutely minimizes manual rework? And so, you are ensured that not only are you getting the right data at the right time, but you're also expediting how you're sharing that data. And so, through all this, the common theme that we continue to see is just a significant ramping on investment in those types of technologies. And plus the linkage into those core transactional data, and internal data systems, they're leveraging these cameras and AIDC systems. There's one other element that I would point out here that is an enabler, that's maybe one step removed behind what's represented here, which is really the advancement in printing technologies. And again, not the thing that comes to mind when you think about data analytics, and AI, and everything else. But it all comes down to being able to have unique identity, or lot level, or batch level identity on the packaging. And what we've seen in the last five years is really an explosion of industrial and digital printing technologies either working in standalone. So, for example, some retailers have just gone to full digital printing, so that way they can have on-demand package creation and fulfillment, which is incredibly flexible. So, that's one example. But even more hybrid press configurations, whereby large volume, what you would think of as CPG global brands, they're also able to now have unique identity on the package as well. So, I just call out that one that is maybe an order removed, but that evolution in print is really enabling a lot of this as well. So, the net result of both of these, not only the ability to impart deterministic, unique identity. At whatever level of granularity, you need to create that visibility with your partners in the supply chain, you have that happening on one hand. And on the other hand, you have this explosion of imaging around AIDC systems, and computer vision systems that basically are being deployed to enable all this. So, those are the two primary points I'd call out here. And maybe I can take a step from there and then talk just real quickly about how we're seeing both those technologies actually come into play, or in a few specific use cases. And so, this then goes back to what I was mentioning previously of, how do these systems enable optimization within the supply chain? I'm just going to touch upon a few examples here. So, one in particular, so, we are customer engagement, and shopper behavior. And this is an instance where we've already talked about the need to really collect that feedback, that engagement with the shopper, and understand what those buying signals are. Are they pulling product information from the package? Do they want to reorder? Do they need a slightly different variant of the product, making them aware of other offerings within that tier? It's also an opportunity to link that demand generation to what you know your supply chain's capable of doing, right? So, can you direct them to other offers from within the same brand family that, basically, you know you have on stock and you can deliver immediately because it's at the micro warehouse five miles away. So, this engagement around, again, the primary package we see really ramping very quickly across packaging using a variety of technologies. So, that's one example around customer insights and shopper behavior. Another one is moving into a core element of all this, which is managing of stock outages, and planogram compliance, and the like. And one of the elements I would point out here is that planogram compliance, there's been a lot of conversation and talk around it. But the act whether it's a manual process where you need to really make sure that that essential worker is efficient, and safe in how they're doing this, not having to get up on ladders, hopefully. And being able to not have to manually move around large, heavy objects all the time to get scans. But also just the fact that as we've seen, when the supply chain is under duress, lots of times the way the planogram is populated on the shelf is very different than the plan. You'll have plugs. You'll have things moved around just to keep that cohesive view. The result is, is that all these rather static, well laid out plans to track compliance, and understand stockouts start to be challenged. So, again, you need that imaging infrastructure. And it's an exciting space as well, because not only do we have the sales associate that's armed with the mobile or handheld, but we also now have robotic systems that are now being rolled out, both in retail, and warehouse systems for this imaging. But now drones are actually being looked at as well. So, I just called that out as another example of where having that granular identity is so important in being able to understand stockouts, and understand when you've had maybe poor planogram compliance practices that are going to create inaccurate orders. The final one that I want to touch upon is one that is of such vital importance to consumers, and in-brands, and the like, which is just really having confidence in the product that has been purchased. And this is something that we see any time a supply chain's under duress or is being stressed, the frequency of gray market diversion goes up dramatically. And we've seen that as well through the COVID-19 pandemic. And so, having that imaging, again, here we are talking about imaging as well. But having those imaging systems, and that visibility up to the supply chain to understand when pallets have, well, gone rogue, basically, and you're ending up through other retail channels, through domestic for some of this was supposed to be international, or it's challenging pricing tiers, whatever the case might be, is it creates enormous inefficiency in the supply chain. But even more importantly, it really damages the relationship with the consumer as well. So, I just call this out as something that, historically, has always spiked counterfeits in diversion when there's stockouts. Nothing fills a void like creativity. And unfortunately, with the advent of digital technologies, it's much easier to undertake these kinds of diversions and threats. Denman: We've been talking a lot about disruption throughout the webinar today, but the shakeup has also brought with it a lot of interesting opportunities for retailers. Joe, where do you think the greatest opportunities are going forward? Skorupa: Well, the greatest opportunities going forward for retailers ... And by the way, it's not cynical to say that retailers should use this pandemic as an opportunity to rethink what their business model is, what their mission is. And to emerge from this in a stronger way for greater resilience, greater agility, greater adaptability to future disruptions. As a matter of fact, with the marketplace changing so rapidly, and increasing the pace of change itself, dealing with disruptions on a vast scale like this is not necessarily something that you need to plan for. Our expertise and skillset does not necessarily have to become great at dealing with pandemics. But what it does have to become great at is dealing with disruptions. And I think that's a major lesson to be learned. Now, we see that the top five inventory management challenges relate to stockouts in various ways. And on the other hand, slow moving products. And really, that can all be summed up in not having the visibility into the complete supply chain. Not having the ability to have resilience when a problem occurs to make that correction as quickly as possible. And so, this is not something that we're going to, aside from the dashboard, be able to solve all problems during a pandemic, but what we are going to be able to do is to moderate the impact, to moderate this scope of disaster when it happens by employing dashboards with complete visibility while having a wide variety of suppliers on hand, then on our platform, so that when trouble occurs in one place, we scan our partners, and our collaborators, and we shift and make that shift to other partners. So, Tim, the great opportunities that we see all lead to developing greater agility. Again, we're never going to avoid the huge tsunamis of disruption that hit us, and come our way. But we can modulate the effects. We can be able to bounce back quicker. And I think that's the overall lesson learned. Denman: Tony, do you have anything to add on the opportunity front? Rodriguez: Yeah, no, that was a comprehensive view. And so, I don't have a whole lot to add to what Joe was sharing. But, I guess, the piece that ... And he brought it up previously is really the importance of enabling those essential workers. Right? They're the ones that can make all this come together. They're the ones that basically can drive the efficiency. And so, making sure that they're equipped with the right tools that allow them to be productive whether or not they're doing planogram compliance or doing price audits. Whether they're working in dark stores doing picks, those are all opportunities to really empower and enable them. And so, what we're seeing is this realization that investing in those essential workers is so vital to any strategy for success. And so, I would just underscore that keeping them armed with the latest technology, so they can do their jobs, and be safe, and be efficient is a great opportunity to going forward. Denman: Absolutely. 100% agree. And every research report is filled with statistics, and plenty of numbers. But the real power of a successful report comes in turning those numbers into actionable insights. And RIS, we always include findings and recommendations in all of our reports. And Joe, you are the author of the Supply Chain Tech Study this year. Can you walk us through some of the key findings, and any recommendations that you can share? Skorupa: Well, we had 10. And each of those recommendations and findings is based on hard numbers found in this study. So, we covered most of them in the charts that we saw. But very quickly, job number one today is safety. And not just a safety for consumers, which of course is critical, but also safety for associates, and other essential workers in the supply chain. Now, that's a no brainer. I'm not going to spend a lot of time on that. Number two on our list ... Now, I just want to say, if you want to remain competitive with your peers in the marketplace, you should really look at our number. Our 29% number are just about a third of your IT budget number. That's what the overall average is in the marketplace for retailers allocating IT budget dollars. And that amount goes to supply chain. So, that number is not going to be the same for everyone. And spending smart is better than just spending toward a number. We all agree to that. But what we have to point out is that if you're substantially below that number, you're just not going to be catching up at the speed you're hoping to as being a fast follower, which most retailers are. So, in other words, if your budget is surprisingly lower than that, down in the low 20s for supply chain, and you're using that two-pronged approach, you have immediate break fixes, so to speak, to fill in gaps, but you're also investing in the long-term, well, your long-term investments are going to lag over time. So, that's how we view the importance of that number. Now, we've quoted a number of statistics both for 2020 and 2021 that show that investments in supply chain are going toward maximizing digital channel sales, knows the curve, of course, and e-commerce, and mobile. But digital sales channels today are also being executed through curbside. So, maximizing that and home delivery also helps maximize digital channels sales. And we've seen slides and data points that make that point. Approving agility to drive sales and margins in 2021, that was the key theme if we had an overall theme, could establish an overall theme for 2021. And that showed up in two important ways, and they're different, but related. One was to expand collaboration with partners. As I've mentioned, there were certain geographies where we have a lot of supply chain partners that were more impacted than others. Expanding your ability to choose your locations, to choose your partners will help you adjust to future disruptions in a different point. But I believe we have some questions coming in on this topic is leveraging shopper behavior data to improve demand forecasting, and planning, to understand demand. And I think the point is that a lot of times demand data is based on internal data. It's based on sales, historical sales, actual sales, real-time sales. It's based on flow through the retailers own supply chain abilities. But the truth is, shopper behavior data exists outside in many cases, outside of the retail organization, and that will improve your demand data as well. So, I think the ability to leverage shopper behavior data better will actually increase the ability to use demand as a key forecasting tool. The final point on this slide is just something that all supply chains try to do every day, every year is increase, actually, efficiency and productivity. When problems occur there, that's where dollars can be saved. And so, retailers are focusing on filling in gaps, and adding new functionalities, upgrading capabilities that have not been invested in, in a while. And a lot of it has to do with click and collect. A lot of it has to do with curbside pickup. A lot of it has to do with direct to consumer capabilities. The final five points that we have: Sourcing is a top 2020 technology investment. And sourcing in and of itself is a responsibility handled by specific executives in the supply chain system, or in a department, or in the merchandising department. And there's so much blending between merchandising, and supply chain. And so, it's important to know that sourcing is an area that should be folded into a full supply chain dashboard view, a complete end-to-end view. It's not just that super executive that bend to all the factories, that knows all the marketplaces, that can get the best deals done with the highest quality products at the best price. That person's responsibility should be folded into a dashboard so that there's complete end-to-end visibility. And that certainly came to the forefront when China and other markets were totally impacted very early on during the pandemic. Advanced analytics, I've mentioned several times that key element for forecasting, predictive modeling, using that demand data we were talking about, and the customer behavior data, very critical. Emerging technologies, went into that in quite a bit of detail, not going to go into that here. But let me just reemphasize that the three big areas of emerging technology that our retailers in our survey pointed out they were investing in was tech-driven technology services, micro-fulfillment centers, and dark stores. Optimizing commerce ready inventory. And commerce ready inventory is not inventory found on trains, planes, ships, or trucks. Commerce ready inventory is inventory that's ready to be sold to shoppers. It's where the rubber meets the road. It's where retailers make their money. And I think the systems that can be beefed up for getting inventory in the right locations, meaning it could be dark stores, it could be micro fulfillment centers, it could be and high-speed DCs that are well-located. They will help retailers reduce out of stocks, oversupply, and an accurate inventory data. And the final point is seizing fulfillment opportunities. Obviously, fulfillment has become probably the number one impacted part of the supply chain when retailers are dealing with customers that cannot come into stores or can come into stores only infrequently, or in lower numbers, and they have to order from home. So, fulfillment opportunities have been critical to retailer success this year. And those retailers that did it well scored huge gains during the worst part of the pandemic, and still are delivering great numbers for their shareholders and stakeholders. Denman: Thanks, Joe. That's a great summation of the study there. We are almost out of time. And we did get a bunch of questions in. We do have an interesting question here about some of the stuff that was presented on the package journey. For this value through package journey, is there a digital e-commerce version? How does the primary package concept evolve in the digital space? Rodriguez: Yeah, actually, that's a great question. And really central to our work at Digimarc is really providing identity to all forms of media. For purposes of this conversation, really focused on the physical manifestation, the primary package, the label, the secondary case, the pallet, whatever the case might be. But our work in general works across all media forms. And so, in the digital domain, it's actually where the company got started over 20 years ago, now, was really being able to identify and track those brand impressions around digital imagery. So, if you think about a digital supply chain, or digital e-commerce environment, the currency is the image of the product, right? And all the product information that travels with it. But really that first moment of truth for that digital e-commerce customer is the product image. And so, what we see, and what we've enabled now for a number of years is for brands and retailers to understand where the imagery is going. And to understand specifically when the imagery is being used inappropriately. And, historically, when we got started, it was really focused around looking at diversion and counterfeiting, because it's an enormous issue if you're a brand or a retailer that is responsible for even private label. We see this happening. And you now seeing the products being sold through other channels, and you see counterfeit products being sold through other channels. And the single best indicator of that is that you have digital imagery of your product that's being used on inappropriate sites, or being used inappropriately. So, part of what we provide for our retailers and brands is the ability to basically enable all that efficiency within the supply chain, but then in the digital world, being able to actually go and find where those images are, and report inappropriate use of product imagery. And which nine times out of 10 leads you straight to product diversion activity, or inappropriate channels, which not only damage you, but also damage the consumer as well. So, that's just an example of the digital side of that. Not to mention that each one of those images can phone home, and enable an e-commerce activity, but it's really that awareness, and that dashboard that Joe was talking about, which has been our focus. Denman: Thanks, Tony. Great answer. We are out of time. We thank everyone for coming to the webinar today. Thank you, Tony and Joe for taking the time to join us. And obviously, the big thank you to Digimarc for sponsoring the webinar, and for being a partner with the study. But until next time, thank you everyone for listening.

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