The script is flipped as Tony D'Onofrio interviews Mike Graen on opportunities of RFID at retail including:

• Current state of the industry.
• Inventory accuracy.
• How to win in retail.

Greetings, my name is Mike Graen. Welcome to

another Walton Supply Chain Center Edition of on shelf

availability. Today we flip the script a little bit. And Tony

D'onofrio actually interviews me about the opportunity if RFID at

retail, let's go ahead and join in his progress.

Tony D'onofrio: Thank you very much, and a really great

pleasure to be with you once again. So lots going on right

now in terms of what's going on in retail, and those kinds of

things. And it's really my great pleasure to welcome my good

friend, Michael Graen. And what I want to do is actually jump

in, and I do want to make some announcement at the end. And if

I forget, Matt, let's make sure we talk about the retail

conferences coming up on October 18. Because I think that's an

important addition to all this, this type of activities that

we're doing. But I want Mike to actually do his own introduction

instead of me reading his bias. So tell us a little bit about

your yourself and your journey, in terms of where you're at now.

Yeah, well, first off, let me echo the Good

morning as well, to all the listeners. Thank you very much,

Tony, for for having you out. I've admired a lot of the

podcasts you've done in the past. And you're right, Matt

Pfeiffer. It's weird to be on this side answering questions.

I'm usually the one who's asking the questions. But that's it'll

be a good role. I'll have to have Tony on my next podcast, so

I can ask him some questions. So just a brief background of me.

I've been in the industry, about four years, started out with a

very small consumer products called Procter and Gamble

directly out of Cincinnati. And I was I was there for about two

or three years, probably five years total. Between that and

one of our manufacturing facilities. And in 1989, I got

asked to come down to work directly with a customer called

Walmart. And I won't go through the whole story, but just

suffice it to say p&g was a big consumer products company,

Walmart was a big retailer, we did not like each other very

much, and that we really needed to reinvent the relationship

between the two companies. So I came down and I was one of the

first ones on the ground here kind of play the Information

Technology role. Did that for about almost 20 years or so that

I left p&g And then actually left p&g on a Friday and Monday

morning, I was a Walmart associate. Some people say if

you can't beat them, join them. So I joined Walmart, in about

2008 was very actively involved in something called retail link,

which is a retailing platform, but really spent a lot of time

both at p&g and Walmart in the on shelf availability space, led

Walmart's RFID program for a number of years. And well I'm

sure we'll get into some of the specifics of that later. But

left Walmart when there was some patent litigation lawsuits

across the industry. It it looked like RFID wasn't going

anywhere. Then got called back a couple of years later to come

back as a contractor for Walmart. So I've basically been

working with Walmart for about 40 years, 30 years, something

like that. gotten the chance to see both the supplier side as

well as the retailer side as well as spend a little bit of

time at Crossmark, which is a third party service provider

that supports a lot of the work inside of Walmart so been very

actively involved with the unsheltered availabilities,

specifically on retail RFID and retail like, and I'm looking

forward to having this conversation with you, Tony.

Tony D'onofrio: Thank you, and that's excellent back on. And I

also exactly to your point, you actually are typically on the

other side with your own conversation, and retail in

terms of unsheltered mobility, tell the road tell our audience

exactly what their series is about in terms of what you're

trying to deliver through that series.

Yeah, great question. So So one of the

things that I think is fascinating is that retail as

well as never change is always changing, right? I mean, for the

first time, a store got opened up, some of the things that are

very important, such as sales and customer satisfaction, etc.

are always front of mind profitability, some things like

that. One of the things that I think is incredibly important to

the customers who shop in a store is having enough

confidence to know if I leave my house and go into a retail

store, that what I'm going to look for is going to be

available, there's nothing more frustrating than going into a

store and finding out what you're looking for is not

available at that particular store. We're going to spend some

time kind of talking about that later. But on shelf availability

is kind of my strategy. I believe every retailer needs to

be understanding that LSA on shelf availability is one of the

There are key KPIs or key metrics that they need to have.

They have goals for it. They need to be able to measure it.

And by the way, there's a lots of different ways to measure it.

They have to address issues when things are not available for the

customer. Because ultimately, and I'm sure we'll get into

this, customers are choosing every single day where they

spend their money. And if you consistently disappoint them,

they'll find another approach.

Tony D'onofrio: No, that's, that's really interesting. Is

there an A one episode that stood out to you? And can you

tell me why? I mean, I know you've done quite a few way

ahead of me, I think this is only my third and I've lost

count that don't I bring us down but anyone who started stand up

to you?

Boy, that's that's like saying, which one of your

kids do you like the most? That's really it's hard for us

to answer. But I will give you one that I think is really

pivotal. And I'll be interesting Matt Pfeiffer's reaction because

he's been part of every one of these as well. We did one I'm

gonna say about six, eight months ago, that focused on

something called omni channel. So it's the whole idea of

customers having the freedom to buy things in a physical brick

and mortar store or order them online. We call that byline, or

pick it up in store or research online, pick it up and store. I

believe we had Dr. Bill Hargrave who's now the president of the

University of Memphis, Justin Patton, who runs the RFID lab

down in Auburn. And a very special guest by the name of

Deanna Baker, Deanna was the senior vice president at

Walmart, who I worked with for probably 10 of those years, and

I was with Walmart. But she's the one that we'll get into this

a little bit. She's the one that basically said, I don't

understand this technology site. But I can tell you one thing, I

want to be able to have our customers order apparel, in our

stores, and be able to deliver them to customers, just like we

do milk, egg bread, cheese, and by the way, socks, right? And

she wanted to do that. And she said, How do I do that I said,

the first thing is you'll disappoint a lot of customers,

because your on hand is about 50% accurate, and so she and

Chuck created a journey that basically said I gotta figure

out how to get my on hands more accurate. So when somebody

orders it, I don't disappoint them. So my favorite ESPA

episode of all those, was her testimony, you can go back and

listen to the archive, where she said, I realized we had to

change. I didn't believe some of the stuff or didn't, I didn't

want to think about RFID the way we did in the past, which is

some failed attempts that we tried, I'm willing to go back

and re explore it, I have an industry problem. It's not just

my problem. And there's a lot of other retailers that are

leveraging RFID. To do that. It will take a business sponsor who

sees a business problem. RFID is not a technology project it is a

change management project. And it needs to have senior

leadership in the business driving it to be make it

successful. So to me that Deanna Baker is probably more than you

want to know. But that Deanna Baker episode was critical,

because it took a champion like that, and it will learn a little

bit later, when we talk about this. Walmart is making

tremendous strides to expand that capability across the box

Tony D'onofrio: Now, and that's an excellent feedback, ie starts

exactly that somebody's got to stand up and say this is going

to change the business. And that's extremely true. And it

starts with the customer. Well,

let me let me build on that a little bit. Because a

lot of people and I don't mean to put anybody's effort down.

But anytime, any point in time somebody says, we're going to go

into a tech lab and prove that this technology works. I kind of

go wait a minute. This is not a proof of concept. There's no

longer a question whether this technology works. The question

is, do you want to invest what it's gonna take from an

organization standpoint, from a supplier engagement standpoint

to make the changes necessary is not RFID is not a tech project.

RFID is a change management project. It it's going to

require business leadership sponsorship, not something that

in the tech lab somewhere

Tony D'onofrio: Extremely well set up but you also just did an

episode on the state of the industry as a relates to on

shelf availability. How would you summarize where we're at

right now in terms of this journey announced in getting on

shelf availability? gounder control?

Yeah, yeah, this is what uh, this is one of those.

At any point in time with any given retailer with any given

situation, you're either you're either improving or you're

getting worse, but the most important thing is to measure

it, I would say. I would say my my perspective is it's a problem

is right now probably more of a problem than it's ever has been.

I mean, we're still coming out of the global pandemic issue and

supply chain issues and stuff like that feels like most of

that is behind us. There are still things like on hand

accuracy issues, a shortage of labor and enough people to

literally put the product back on the shelf and things like

that. I still think there's a huge opportunity for both

suppliers and retailers to share data in a meaningful way. And

I'm not just talking about EDI transactions, but really sharing

data around demand forecasts and things like that. So we can get

a streamline of it. But But I would say, it's, it's probably

worse than it's ever been. It's a big opportunity. And if we

don't figure out how to get it fixed, the customers are going

to make choices to go other places, because they, at the end

of the day, have options like never before.

Tony D'onofrio: Correct. And the smartphone is actually I guess,

accelerated that because I can actually make that choice while

I'm sitting in your store and say, I'm gonna buy from your

fcompetitor, because you don't have it.

Yeah, you got you got to the retailer, you will go

to buy the product, you want to be loyal to that retailer, they

don't have it. And so you use that retailers, Wi Fi, and pull

out your phone in order from their competitor, right?

Tony D'onofrio: That's correct. I've done that myself a few

times. That's, that's good.

I have as well. And I just wonder how many retailers

realize that that's happening, you're paying for a customer to

actually buy from your competitor using your Wi Fi? I

think that's kind of

Tony D'onofrio: the right, that's it? Well, let's move on.

Let's talk about customers. And and also, this is actually one

of my favorite quotes. That was actually part of your deck. So

tell me, why did you actually have it in your deck?

Well, as part of my journey to relocation down to

Northwest Arkansas, I actually had the honor and privilege to

work with Sam Walton. It was an incredible honor. He was an

incredible leader, very humble individual, but a very strong

leader from a retail standpoint. And we were having some of the

biggest challenges between Procter and Gamble, Walmart,

during the early days, he told me something which I always,

always permit permeated through with me. And this is what he

said, Mike, if you thought of your company, as an extension of

my stores, you would treat us a lot differently. Let me say that

again, if you thought of my company, Walmart, is it

extended, or your your company, Procter and Gamble is an

extension of the stores that you're servicing. I'm really not

the customer, Mike, the customer is the person who's buying Tide

detergent in a Walmart store. And by the way, and that's where

this quote came this one of his quotes came is like, at the end

of the day, are we meeting that customer needs don't think about

meeting my needs, think about meeting a customer's needs is

buying the product in a store. And after that I saw this quote,

I don't think it was because of the discussion we had. But his

comment was very true. And Doug McMillon, the current CEO has

said a very, very similar thing. But basically, customers can

fire you every single day just by spending their money

somewhere else. And that's just as relevant when he said it as

it is today, because we just talked about, if I go into

WalMart, they don't have what I want, I'll use their Wi Fi to

order that product from Amazon and have it delivered to my

house. So the customer ultimately has the choice and

they will find the product, somebody will satisfy that need.

And you can do that a few times. But eventually customers lose

trust in you, and start just changing their shopping habits

to go somewhere else. So that I think this is really important.

Tony D'onofrio: I totally agree with you. And I'm a New Yorker,

it is a great leader, I actually have his 10 rules for business

success. on my wall in my office in a very large poster. I

encourage all of our listeners to actually look those up. They

are down to earth, but man, are they meaningful in terms of how

to actually win in retail. It's down to the basics. But those

basics all pulling to the customer has been at the center

of everything. So again, look him up if you haven't seen him.

Well, Doug, Doug McMillon, the current CEO has

one that's somewhat similar that he said, at the end of the day,

there's not a lot of loyalty there you either meeting the

customer's needs or you're not, there's not a lot of loyalty to

where they get the product, they're going to find the

product. So when an omni channel kind of world, if it's not at a

brick and mortar store, I'll be able to find it in some other

location have it shipped to me and you will end up losing

customers in the process. So I think it's always important to

keep focus on the fact that customer where they spend their

money is where they make a decision to invest it.

Tony D'onofrio: Well, good, good. We're already getting good

engagement for the audience. They loved this quote number

one. Number two, we actually have a retailer asking. How

quickly is RFID moving into other verticals like pharmacy,

outside of apparel, footwear, electronics, where they're

strong. So that's the question coming from the audience. What

do you think?

Well, the question I think is also going getting down because

I'll qualified because I'm familiar with the topic is, is

there going to be a day where a Procter and Gamble source tags

their products with RFID? You believe?

That's a great question. That's a great

question. I wish I had that crystal ball. I don't believe

that there will be a day where all products are RFID tagged in

a big mass merchandiser like a Walmart now, do I believe that a

apparel retailer or a sporting goods retailer, or an electronic

retailer could have all their stuff source tied? Yes, I do. I

I definitely see that as a very much of a potential. When you

start looking at a Costco or Sam's Club or a Target or

Walmart or other kinds of things. Are we really going to

put RFID tags on, you know, cans of soup? I don't think so. All

right, I would get an RFID tag watermelon and cantaloupe. I

just don't think so. And I my personal belief is and we'll get

into some of the use cases here. When you have a high level of

substitutability What do I mean by that? If I go into a Walmart

store, and I have Strawberry Pop Tarts on my list to pick up at

they don't have any Strawberry Pop Tarts. I'm coming home with

pop tarts or Ruthie will be mad at me, right? So it's going to

be Hey, I don't care if it's private label. I don't care if

it's changing from strawberry and blueberry. I'm going to buy

those particular products plus the grocery side it turn so

much, Tony. We were talking about selling multiple a day.

That turn works so well that I don't know that we definitely

need RFID at this point in time for the purpose of inventory

accuracy. Unlike things that are low substitutability. So pop

tarts are high substitutability are going to leave the store

with I may not get what I wanted, but I do know I'm going

to leave the store with PopTarts let me give you another example.

Automotive tires, you have a truck and it takes a certain

size tires and you go into a store like Go Walmart and you

go, I need four tires. And they come back and go, Tony, I got

three, do you want us put three on? No, I don't want you to put

three, do you have any other option? Now, I'm going somewhere

else. substitutability is very, very important. printer

cartridges, those kinds of general merchandise, socks,

shoes, things like that where I need to have the size in the

style that I'm looking for. I don't have a lot of

substitutability options in that store. So at this point in time,

I believe those are the categories where we're going to

go next, which is all the general merchandise. I think

there's use cases for other things like pharmacy and things

like that. But to me in a consumable business like bread

or or grocery or Zillow, or dry grocery or even the tide, Tide

detergent, we've got all kinds of tide on the shelf, do I need

to really put RFID tags on everything? Probably not.

Tony D'onofrio: So we're getting a ton a ton of questions that we

are done. And I will get to some of these questions as we go. But

I want to make sure we also share with you some data,

because as most of you know, I also like to share data in these

types of webinars. So let me move on. So inventory distortion

is a huge problem. The latest research that we just published

by The IHL group, it's 1.77 trillion. What are your thoughts

in terms of inventory distortion?

Well, the the define that 1.7 trillion inventory

distortion that to me, it looks like it's both out of stocks on

Wednesday hand and in overstocks, that feels like a

huge number worth people paying attention to number one. Number

two, I would say it's pretty interesting that it's roughly,

you know, two thirds out of stock and a third of over

stocks, the auto stocks are the ones that are going to

disappoint the customers, right? Having too much of something

will not that will disappoint the retailer because they gotta

store it and stuff like that. So there's clearly advantages for

here's what I here's what I would tell you, every retailer,

and this is hard to do. But I think it's important. Every

retailer needs to know exactly what they have, and exactly

where it is, at all times. That's a nice, easy thing to

say. But the reality is they don't know what they have or

don't have or where it's located. Otherwise they wouldn't

have overstocks and under stocks. So the key is figuring

out how you measure these things, and then put them into

your KPIs. Because I would believe that most retailers

don't know how bad they are out of stock. They don't they don't

even aren't even able to say, what is it you're actually on

shelf availability to the customer? Number one, number

two, how do you measure? Right? Those are? Those are very, very

important questions that are not trivial questions. They're

really hard to measure. But they're very important as well.

Tony D'onofrio: Yeah, that's a good point. And then they

actually list on this chart to the four primary areas in terms

of where the problem exists. And I'm just going to focus on the

top four, which are suppliers, retail personnel, internal

prices, the and theft is also out there. And in fact, there's

a question on in our q&a that says talks about exactly that

theft and how it gets impacted by these types of solutions. So

get any general comments on these sources of the blame for

inventory distortion? Yeah,

this was this one's This one's an interesting one.

From my perspective, supplier issues. That sounds like it's

the supplier, that's the problem. Sometimes that's the

retailer's communication with the supplier. That's the

problem. Like, I don't order I don't order, I don't order all

sudden, I order a whole bunch and I want it next week. I don't

have it. So that looks like a supplier issue. But it's really

more a retailer engaging with the supplier and given them an

accurate forecast and when they want to have it, etcetera. So

they could play in their manufacturing that way. So while

supplier issue looks like while the suppliers need to get their

act together, here's the deal. The suppliers are interested in

selling their stuff as well. I mean, they're not in the

business to not meet the customers expectations, right.

So it's not like they're well, we just don't want to do it

because we don't feel like it today. That's not what they're

doing. What's happening is typically Yeah, there are there

are issues in the supply chain and raw materials and all that

kind of stuff, that stuff. That stuff does happen. Most of the

time. Well, I've seen communication between the

supplier and the retail and not be the way it should. And I

didn't have any idea you were going to order that much. Where

did that come from? I don't have that much product and you always

say that's a supplier should Well, is it really or is it a

retailer not communicating what their expectations are?

personnel issues. I don't know what that means other than store

Tony D'onofrio: I totally agree.

associates not doing what they're supposed to do. I would

argue most retailers are struggling with getting enough

labor in the store to actually do those things, right? So it's

not necessarily a personnel issue. It's literally trying to

find people who want to go and work retail. It's hard work.

It's dirty work. It's very tedious work. Sometimes it's

very exhilarating work when you get to help a customer out. But

there's a lot of stalking and stacking and price changes and a

whole bunch of other stuff that goes with that. So I can

certainly understand the personnel issues. Tony, the

theft one is an interesting one to me. Because I don't know how

we measure that. How do you measure a consumer or a shopper

theft, versus an employee theft, versus I didn't get what I paid

for in a weekend spent a whole four podcasts on just the theft

situation and asset protection, and everybody sees the smashed

and grabs that are going on in stores, and those are real,

those are absolutely positively real. My challenges. And You You

You and I both have a good friend and brand aalverson, who

spent so many years at Walmart, it was like, Well, what

percentage is consumer theft? Well, I'm gonna set this well, I

buy how much is? Exactly? Yeah, here's the deal. Nope. How do

you measure this? My son is a market Asset Protection Manager

for Walmart in Idaho. He does inventories with all the stores

got 10 stores in Oregon and Idaho. He goes in, and he

literally stops and stops, the process counts everything in the

store compares to what he should have. And that gives him a

straight number. And I go, what's that like son goes, it's

kind of like going to California, putting a big piece

of cardboard over my dashboard driving the New York. And by the

time we get back to New York, I pull the sheet off and go, Oh, I

almost ran out of gas. Oh, I almost ran an oil Oh, I was

overheating. I have no idea. Because once a year is when they

get the report card. And certainly we've got to come up

with better ways of measuring consumer theft and employee

theft and receiving issues etc. There's technology out here's

one of the use cases RFID. Every time something comes in the

store, I can measure it without throwing a person at the job

I hope you enjoyed that conversation with Tony and

would literally have an RFID tag read every time something leaves

the store. Whether it leaves the store with a shopper or whether

it leaves the store from an employee. I should be able to

measure that did it go through the register or not go through

the register? So I know we'll get into this but to me the

asset protection loss prevention use case of RFID has an enormous

capability that has not yet been quite realized.

I regarding the RFID. And I hope you enjoyed that conversation

with Tony and I regarding RFID of retail. Join us next time as

we wrap up our discussion of part two of the same discussion

right here at the Walton Supply Chain Center.