Warehouse Vision 2020: Enabling The Smart Warehouse
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Posted On : Published By : Shawn Harris
While Supply Chain Management is a new term (first coined in 1982 by Keith Oliver from Booz Allen Hamilton in an interview with the Financial Times), the concepts are ancient and date back to ancient Rome. The term “logistics” has its roots in the Roman military. Additional definitions:
According to the Council of Supply Chain Management Professionals…
1. Classification (probability estimation or scoring): binary or categorical.Attempt to predict, for each individual in the population, which of a (small) set of classes this individual belongs to. Classification will bucket individuals, and scoring will provide quantification of likelihood of being in a particular bucket.
2. Regression (“value estimation”): numeric. attempts to estimate or predict, for each individual, the numerical value of some variable for that individual.
3. Similarity Matching: attempts to identify similar individuals based on data known about them.
4. Clustering: attempts to group individuals in a population together by their similarity, but not driven by any specific purpose.
5. Co-occurrence (also known as – frequent item mining, association rule discovery, and market-basket analysis): attempts to find associations between entities based on transactions involving them.
6. Profiling (also known as behavior description): attempts to characterize the typical behavior of an individual, group, or population.
7. Link prediction: attempts to predict connections between data items, usually suggesting that a link should exist, and possibly also estimating the strength of the link.
8. Data reduction: attempts to take a large set of data and replace it with a smaller set of data that contains much of the important information in the larger set.
9. Casual modeling: attempts to help us understand what events or actions actually influence others.
“When people talk about Zappos, it’s not just about the great pair of shoes they scored, but the awesome customer service they received. It truly has become a tangible asset that is synonymous with the Zappos brand. In extending the brand to hotels and beyond, the customer satisfaction bar will be set high. Execution will be key to protecting the brand’s equity. Also I could see some Amazon (the parent company) products and services being a part of this.” ~Shawn Harris
Read full article: http://www.retailwire.com/discussion/should-zappos-take-steps-into-the-hospitality-world
“As discrete service offerings, both Ralph Lauren’s “taxi” and Saks’ merchandise delivery service would be of value to shoppers, as they should help to save a shopper’s time or otherwise bail them out in a time of need. However, they must be a part of a coherent strategy of driving footfalls that includes digital engagement. These services should feel like a natural fit to the overall experience, as opposed to feeling like a disjointed one-off.” ~ Shawn Harris
Read full article: http://www.retailwire.com/discussion/saks-ralph-lauren-lure-customers-with-upscale-services/
Lean thinking
“Shawn Harris, N.A. Retail & Hospitality Industry Lead, Zebra Technologies: Retailers should look at last year as a turning point, where more shoppers chose online vs. offline on Black Friday 2015. This means they should go leaner on in-store inventory (don’t worry, the majority of shoppers will start with your website anyway), ensure their websites can truly dynamically scale to meet load, use broadcast media to create theater and excitement in combination with personalized targeted ads on social platforms, and deliver what they say they will deliver.”
Full article: http://www.retaildive.com/news/8-experts-predict-the-2016-holiday-shopping-season/428164/
Is this Everyday Low Price (EDLP) spun as a membership program? Will the elimination 0f the 20% Coupon’s “scarcity,” remove BBBY’s greatest customer activation trigger, or will the $29 annual fee create the “shop here first” behavior that Amazon enjoys with its Prime Members? The Amazon Prime comparisons always gets me as none of these membership programs come with all of the other value-adds that Prime does, (i.e.video streaming, cheap unlimited music). To truly compete, I think more complementary partnerships are required to enhance the value of these initiatives (e.g. discounted Uber/Lyft rides, Care.com services, etc [requested through the BBBY app] ), plus the extension of this membership’s benefits to the other BBBY subsidiaries. All in all, I do like BBBY’s willingness to test bold initiatives like this.
Reference Articles:
“I recall one of my first lessons in grad school, “cash flow is king.” I think that a lot of people feel the same about how they manage their home finances. Though there is only a $20 annual net savings, I think that the $14.99 per month fee will significantly lower the barrier to adoption for many Prime members. I think that this pricing move, and the recently announced push for both AmazonFresh pickup locations and perishables-focused convenience stores will position them to continue to grow their online grocery business and grow share.
Though the online grocery industry is relatively small at $33 billion as compared to the grocery industry as a whole at $795 billion, Amazon currently represents 26 percent of the online share with $8.7 billion in revenue. Convenience and competitive pricing will continue to reign … save me time, save me money.” ~ Shawn Harris
Read full article: http://www.retailwire.com/discussion/amazonfresh-lowers-annual-subscription-via-a-15-monthly-rate/
“I completely believe that this is a concept that could see wide adoption. Airbnb has helped in resetting the idea of what personal space means and blockchain technology will allow for secure, immutable, one-time access to home IoT locks. Delivery person tracking and home tracking (cameras, mobile device and presence sensors) will play an over-the-top role for auditing behavior. Insurance will cover the rest.” ~ Shawn Harris
Read full article: http://www.retailwire.com/discussion/will-customers-give-amazon-the-keys-to-their-smart-homes/
“Cost and styling already set this apart from Google Glass. I am bullish on this concept, as it removes friction (the mobile phone) from capturing moments quickly and as you truly see them.” ~ Shawn Harris
Read full article: http://www.retailwire.com/discussion/can-snapchat-spectacles-avoid-the-missteps-of-google-glass/
“I think that this offering coupled with the work they are doing in augmented reality is a winning solution.” ~ Shawn Harris
Read full article: http://www.retailwire.com/discussion/will-click-and-collect-conversion-transform-ikeas-business/
Consortium for Operational Excellence in Retailing (COER) is focused on advancing retail operations from a combined academic and business perspective. We hold an annual conference in May, alternating between Harvard Business School and The Wharton School, where we present cutting edge academic research for participants to exchange ideas, thoughts, and challenges. COER attracts companies and academics from various parts of the world.
COER began as the Harvard/Wharton Merchandising Effectiveness Project in 1996, started by Marshall Fisher of The Wharton School and Ananth Raman of Harvard Business School. The academics in COER have published dozens of papers in leading journals and many case studies that are taught at top business school. The work produced by COER was summarized recently by Fisher and Raman in the book “The New Science of Retailing,” Harvard Business School Press. COER has facilitated the work of numerous doctoral students, many of whom currently are on the faculties of leading business schools.
COER grew out of the understanding that while the retail industry now has the analytical tools to make merchandising more effective, there are still many areas where academia can help to push the retail industry forward from an operational perspective.
Consortium For Operational Excellence In Retailing (COER) @Wharton – Day 2 Quick Recap
Session Eleven: Impact of Stockouts
Presentation by Ananth Raman
Key takeaways:
* In manufacturing, a 1% increase in historical in-stock is associated with a 12% increase in demand.w
* If you have a supplier that delivers and one that doesn’t, you’ll order more from the one that does, even if at a slightly higher cost. It’s like buying insurance.
Session Twelve: Consequences of Centralizing Hiring at a Retail Chain
Presentation by Tatiana Sandino of Harvard Business School
Key takeaways:
* Employee Departures:
** Centralized hiring results in a lower rate of employee departure in more busy stores.
** Centralized hiring results in a higher rate of employee departures when the store serves service‐sensitive customers.
* Store Performance:
**Centralized hiring is associated with greater sales in distant stores: 1% increase in sales/additional 10 miles away from HQ
** Centralized hiring is associated with lower performance where customer relations may be important:
*** 7.3% decrease in sales if store serves service‐sensitive customers.
*** 0.04 point decrease in (0‐1) mystery shopper score scale when store serves repeat customers.
Session Thirteen: Demand During Store Liquidation: Local Economic Factors
Presentation by Nathan Craig of Ohio State University
Key takeaways:
* Across retail segments, revenue and asset recovery rates during store liquidation are positively associated with local median household income
* Revenue and asset recovery rates are negatively associated with local consumer sentiment
* Initial inventory, last-year revenue, local median household income, local consumer sentiment, and chain effects explain much of the variance in liquidation revenue (R2 = 0.96)
Session Fourteen: How Retailers Respond to Demand Shocks
Presentation by Vishal Gaur
Key takeaways:
* High inventory turn (HIT) retailers are able to react much more quickly than low inventory turn (LIT) retailers. Margin impact is greater for LIT, than HIT.
* HIT retailers lever is quantity changes, LIT is price changes. HIT retailer have better sustained return on assets in shocks than LIT.
* …so tune inventory for turn, vs availability.
Session Fifteen: Consortium on Patient Experience (COPE)
Presentation by Ananth Raman
Key takeaways:
* Replicate COER for patient experience. More to come…
Session Sixteen: Spatial Competition and Preemptive Entry
Presentation by Fanyin Zheng of Columbia Business School
Key takeaways:
* Deciding on store location, based on the future entry of competition.
Session Sixteen: Using Peer Feedback in Performance Evaluation
Presentation by Serena Loftus of Tulane University
Key takeaways:
* Multi-source feedback has advantages over single source
** Manager note always working w/ subs
** Manager bad evaluation
** Bias of manager.
Session Seventeen: Mobile Technology location-based marketing in Retail
Presentation by Jose Guajardo of Haas School of Business, UC Berkeley
Key takeaways:
* Effectiveness: Non-GEO < GEO < Facebook * Distribution: Non-GEO > GEO > Facebook
Consortium for Operational Excellence in Retailing (COER) is focused on advancing retail operations from a combined academic and business perspective. We hold an annual conference in May, alternating between Harvard Business School and The Wharton School, where we present cutting edge academic research for participants to exchange ideas, thoughts, and challenges. COER attracts companies and academics from various parts of the world.
COER began as the Harvard/Wharton Merchandising Effectiveness Project in 1996, started by Marshall Fisher of The Wharton School and Ananth Raman of Harvard Business School. The academics in COER have published dozens of papers in leading journals and many case studies that are taught at top business school. The work produced by COER was summarized recently by Fisher and Raman in the book “The New Science of Retailing,” Harvard Business School Press. COER has facilitated the work of numerous doctoral students, many of whom currently are on the faculties of leading business schools.
COER grew out of the understanding that while the retail industry now has the analytical tools to make merchandising more effective, there are still many areas where academia can help to push the retail industry forward from an operational perspective.
Consortium For Operational Excellence In Retailing (COER) @Wharton – Day 2 Quick Recap
I believe that 97.5 percent of today’s traditional retailers will NOT survive the earthshaking transformation that is currently occurring in their industry. Changes in the customer shopping behavior and preferences, rise of on-line shopping, local and state government push to increase minimum wage, and uncertainty in the global economy have placed quite a few obstacles in front of retailers.
In 2016, a significant number of store closings and bankruptcies are an indication of both shifting consumer preferences, and an unsteady economy. U.S. retail is an approximately $5 trillion dollar industry, and approximately 16 million people are employed in the U.S. retail industry according to the U.S. Bureau of Labor Statistics. An estimated two-thirds of the U.S. gross domestic product (GDP) comes from retail consumption. Therefore, store closings and openings are used an indicator of how well the U.S. economy is doing overall. However, total annual U.S. retail sales have increased an average of 4.5 percent between 1993 and 2015, with 2015 being effectively flat with ~3 percent growth; according to the U.S. Census Bureau.
Roughly 30 percent of the annual sales of the largest U.S. retail chains and almost 20 percent of the U.S. retail industry’s annual sales come from the Christmas holiday shopping season. This past holiday season, 2015, saw for the first time more shoppers choosing to shop on-line than in-store with 103m choosing on-line, vs 102m in-store; over the holiday shopping “opening” Black Friday weekend. Internet sales rose about 23 percent in 2015. Amazon continues to dominate U.S. retail. Amazon represented 51 percent of every growth dollar in on-line sales, and 26 percent for retail as a whole, up from 22 percent last year. Also, Amazon is far and away the most dominant mobile shopping app out there, boasting installation on 36 percent of all U.S. Android devices and ranking first in shopping app searches on Google Play during the critical holiday and Super Bowl selling seasons (October 2015-February 2016. If this rapid transfer of business from store sales to the Internet continues, and it seems it will, traditional brick and mortar retailers must look closely at their current business structure and decide where to cut/add administrative staff, which stores to close and where to open, in order to survive.
Labor represents approximately 30 percent of a retailers operational expenses. After years of national debate about the need to raise pay so families can earn a living wage, there is a push across the country to increase minimum wage rates. In July 2015, New York Gov. Andrew Cuomo announced a plan to raise the minimum wage for fast food-chain employees statewide to $15 an hour over the next few years. Over the past year, several other states have raised minimum wages, but all fall below $10 an hour, according to the National Conference of State Legislators. The city of Seattle is phasing in a plan to raise its minimum wage to $15 per hour, as has California. Going to $15 an hour represents a 50% rise from California’s current minimum pay of $10, and a 67% jump for New York. This certainly is a double edge sword for retailers, whereas on one end they should see an increase in consumption in these communities; they will also have to accommodate an increased cost component to operating their business.
Uncertainty and pessimism have dominated the economic and business news in recent months. While at face value the mood seems justified as many negative factors (China’s financial gyrations, volatility in oil prices, and the further weakening of the US economy) are colluding, the recent developments by themselves do not yet signal an imminent global economic recession. In the U.S., Solid domestic demand will help overall GDP growth at 2.0 percent in 2016, which is slightly lower than 2015 growth rate. In Europe, despite increased political risks, the short-term economic environment has actually improved faster than expected. As is the case in the U.S. economy, the European domestic demand continues to drive the current moderate recovery. In Asian, the growth rates of China, India and Southeast Asia are unlikely to see significant improvement in 2016 compared to last year. Chinese growth in 2016 is expected to stay the same as that of 2015 at 3.7 percent. In Latin America, rapid declines in oil and commodity prices negatively impacted Latin American economies, and exacerbated the ongoing troubles in the biggest economy in the region, Brazil. Africa is looking positive but uncertain. The prolonged decline in commodity prices, as well as weak growth in Nigeria and South Africa, will cause overall growth for the region in 2016 to come in at 3.7 percent – which is, though still an improvement from 2015, well below the average growth of the last few years. When it comes to international expansion, retailers need to maintain a sharp focus on those regions that will afford the greatest top-line growth for their core business.
Although the U.S. retail industry is slowly expanding, not recessing, the lingering effects of the Great Recession of 2008 can be seen in the dramatic shift in consumer buying habits and preferences. The post-recessionary retail industry is all about the empowered consumer. Traditional retailers are aggressively trying to meet the needs of today’s shoppers by implementing a number of service capabilities under the umbrella of Omnichannel, working to make broad based system changes to integrate various departments, leveraging Unified Commerce platforms, and reimagine the store at a reduced sq. ft. “experience center.” The most successful U.S. retail chains will need to be able to deliver what consumers expect or die.
I’m a student of retail history and disruptive innovation theory, and neither are favoring retail incumbents. In 1960, 316 traditional department stores existed. This included the likes of Macys, Dayton-Hudson, etc. Well, in 1962 discounters started to dominate the market (e.g. Zayres, Arlans, Gibson’s, Masters, Two Guys, Korvette). Of the original 316 traditional retailers, only 8 survived the insurrection of the discounter (2.5 percent). Many traditional retailers also tried to operate both a traditional model and discount model; all but one failed to make this transition. The only one of the 316 traditional retailers that successfully transitioned into a discounter, was Dayton-Hudson, which created the separate business unit named “Target.”
What many of the traditional retailers tried to do was effectively disrupt themselves; rule #1 of disruptive innovation theory is “an organization cannot disrupt itself.” The reason why an organization cannot disrupt itself is because at its core, a disruptive innovation must be separated from the core business, it cannot happen within the existing organization’s Resources, Processes, and Profit-formula (RPP) – RPP determines what a company can and cannot do:
There are three main types of innovation:
An innovation is not inherently disruptive, it gains the disruptive designation based on its deployment. In the case of ecommerce to traditional retail, ecommerce has elements of both a low-end and new-market disruptive innovation to traditional retail. In that it serves an over-served consumer with an option that allows for the purchase of goods and services at a lower than average price, with good enough service with respects to delivery service’s SLAs; while also making retail goods and services accessible to non-consuming customers due to the ubiquity of Internet access and through leveraging existing delivery services (USPS, FedEx, UPS).
Traditional vs. eCommerce
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In the mid to late 90’s to early 2000’s, when retailers initially launched their fledgling ecommerce initiatives they established the new channel as a separate business unit. At the time, the idea was that it was such a foreign and high-risk initiative that it made more sense to keep it separate, and thus easier to dissolve without impacting the core business being brick and mortar. Now retailers have adopted an ideal that integrating ecommerce into their core business will help them in servicing the customer. There is a lot that is true with this ideal. If you have a single view of your customer, products, and inventory then theoretical you should be able to orchestrate a consistent experience indifferent of the consumer interaction medium (stores, on-line, mobile, social, games, devices, or call-center). In the early days of an ecommerce initiative taking place within a traditional retailer, where it receives secondary focus and contributes sub-par revenue, this can work. It will still have inefficiency, but scale has a way of masking waste. However, as customers engage more with a retailer’s ecommerce business, causing leadership to encourage more internal attention be paid to it, yet it still does not compare to traditional sales profitability, the impact of the diverging resource needs, processes, and profit-formula start to weigh heavy.
Leaders in traditional retail organizations need to rethink their corporate structures, allowing for their traditional and digital businesses to be separate business units. This will allow the ecommerce business to develop the resources, processes, and profit formula needed to win! If a disruptive innovation is moved into the “old” business, the existing business will implement the innovation in a way that serves the existing company, making it a sustaining innovation, or ruin the innovation that was built/acquired.
This may be painful; there is a possible path to divert this existential issue. If retailers continue down the path of putting their ecommerce business under the same roof as their traditional business there is a high likely hood that it could cause both businesses to fail, or otherwise be negatively impacted. Retailers should take the initial step of taking a deliberate strategy of separating the two businesses, allowing them to operate independently with their own resources, processes, and profit-formula. Given the particular nature of the customer interaction, each business should focus on the customers’ “Job to be done.” A job-to-be-done is a circumstances-based description of understanding your customers’ desires, competitive set, anxieties, habits and time-line of purchase. This is key to aligning on the customer and being customer centered organizations. Provide your traditional and ecommerce business units with “Good money,” which is money that encourages a focus on driving growth and profits, respectively. The two businesses should have independent administrative functions, including finance and HR. However, they should share customer data, product information, marketing assets, inventory insights, and fulfillment services. All interorganizational shared services should be accessible via discreet web services. In addition, ecommerce should leverage the core business’ supply chain where appropriate; augmenting to meet its unique needs, up to and including leveraging services like Amazon’s Fulfillment by Amazon (FBA), in order to support scaling. On this last point, the amount of capital and complexity of Amazon’s supply chain/fulfilment services should not be underestimated, and retailers should take a serious look at how Amazon should best be leveraged for success.
In taking the Disruptive Innovation course through Harvard Business School, one of the first things that Prof. Christensen presented was that it’s surprising how many brilliant managers dismiss disruptions to their industry, or business, until it is too late. Omnichannel is possible; I believe that there will unfortunately be a large number of organizations who will not execute an effective deliberate strategy [top-down, thoughtful and organized initiatives], and will dismiss emergent opportunities [unplanned initiatives that bubble up from within]. If you want to see the real strategy of a company, don’t listen to what they say; watch what they do. It is the profit-formula (not leadership) that controls the resource allocation process. Leadership must understand that managing the resource allocation planning criteria is key as it will guide what you do; do not believe that as leadership what you say will just happen. Strategy is temporary. Never believe that the strategy that helped you to be successful, will always be the strategy that keeps you successful. Skate to where the puck is going.
References:
“We are living in an era of bundling. The big five consumer tech companies — Google, Apple, Facebook, Amazon, and Microsoft — have moved far beyond their original product lines into all sorts of hardware, software, and services that overlap and compete with one another…” “Amazon’s vision here is the most ambitious: to embed voice services in every possible device, thereby reducing the importance of the device, OS, and application layers (it’s no coincidence that those are also the layers in which Amazon is the weakest). But all the big tech companies are investing heavily in voice and AI….” “This would mean that AI interfaces — which in most cases will mean voice interfaces — could become the master routers of the internet economic loop, rendering many of the other layers interchangeable or irrelevant…”
Read the full article on Medium: https://medium.com/@cdixon/the-internet-economy-fc43f3eff58a
People often ask me about the impact of 3D printing on jobs. Will the technology be a job creator or destroyer? The short answer is, it will take more jobs than it makes — and 3D printing is…
Source: The funny things happening on the way to singularity | TechCrunch