Host Mike Graen kicks-off Season 3 of the Supply Chain LEAD Podcast with sitting down with Emil Martinez - Managing Partner Retail GTM NA at Tata Consultancy Services - to discuss the state of the industry. In this Part 1 episode, Mike and Emil discuss topics including:

• Retail industry trends and transformation
• Improving customer satisfaction through OSA
• Data sharing challenges and opportunities

Greetings. My name is Mike Graen. Welcome to the

Walton Supply Chain Center focusing on on shelf

availability. 2024 kicks off in a good fashion with my good

friend Emil Martinez. He is the general manager of TCS

consulting spent his lot of his time in retail focused against

retail third party services such as IRI, Nielsen, etc. He and I

sit down and chat about what is the status of retail in 2024.

Let's get started. While we're glad you're

here and Mike, so many folks who have been following your group

are very familiar with who you are. But why don't you start off

by giving an introduction? Tell us about yourself?

Yeah, I'd be happy to thank you. So my name is Mike

Graen, I have spent a career working in the kind of retail

and CPG space. And I've really been focused on on to a couple

different areas. But I started out with Procter and Gamble

spent 25 years with Procter and Gamble. It's actually where I

met my good friend Emile here. We'll get into more of that here

in a second, but spent 25 years at Procter and Gamble and 20 of

those 25 years was working up against the biggest customer we

had, which was Walmart. And you'd love to say, let's go

build a business together. But it was really kind of a negative

kind of confrontational and transactional situation that we

really wanted to create a strategic partnership. So they

sent an IT guy down to our to work with with Walmart, I spent

25 years there, got to do a lot of things with, you know,

connecting solute solutions like emails and putting things on EDI

versus fax machines, believe it or not anymore, you probably

laugh at that. But we literally had all of our purchase orders

and invoices were on fax, when I first got down there, got to be

involved, very actively involved with retail link. Guy actually

worked inside of Walmart for about a year working on retail

Lake, which was a really, really good time. And then in 2003, we

got involved with Walmart on some technology called RFID,

which we'll spend some time talking about today. But I did

that for about 2025 years or so. And then I left and went to

Walmart and I was working on all things on shelf availability

related RFID shelf scanning robots, algorithms, all kinds of

different things. Left Walmart, I guess just a couple years ago,

officially because I was under contract with him for a while.

And now I'm working with other retailers, solution providers

and CPG companies on shelf availability.

Yeah, great stuff, Mike. And Emil, you know,

you and I, I'm amazed have not crossed paths, paths. And in the

years that we both been in the in the Walmart supplier

community, maybe we haven't just don't realize it. But tell us a

little bit about yourself.

I you know, I'm amazed as well, Matt, you'd

think we have at least chewed some of the same earth over the

course of the last 25 years for sure. So my name is Emil

Martinez. I have been in the the the retail industry space for

the last 35 Roughly years. good chunk of it on the syndicated

information side and the last almost 10 years on the

consulting side of the space. So the last nine and a half or so

years I've been with TCS, one of the largest technology and

systems integrators, I lead the consulting organization for the

retail segment globally. For TCS, prior to that I was the

president of buyer I retail, globally. And prior to that, I

was with Dow the second half of what now has become Chicago, the

IRI NPD combination. And then about a 10 year stint with

Nielsen, which is actually where I met Mike, you know, originally

as I was sort of transitioning to UCC net, which was part of

what's now GS one. So I've kind of spent a career in and around

the information services space, but very tethered to retail and

in particular hazard to how retailer retailers and consumer

packaged goods or fmcgs, you know, sort of interoperate, you

know, how data is at the intersection of that process.

And then in my mind, you're on shelf availability, and the data

related to it is just the next evolution or the next iteration

of where data and opportunity sort of meet.

Yeah, great stuff. Listen, I've got some

questions to sort of guide each of you through the this

conversation for our our guests as well. I want to start with

you talk about the world as you see it talk about sort of the

status of the retail industry, broadly talking about some of

the trends that you're seeing, and sort of your opinion broadly

about the current state of the industry.

Sure. So you know, I think the industry is in

kind of a transition. You know, a lot of folks throw around the

term transformation and There's certainly a lot of that going

on. But I see it kind of as transformation is really kind of

kind of the combination of transition and modernization as

they meet each other. So you see this sort of fusion of things

going on. So if you think about we talked heavily about omni

channel, right? Omni channel really is just a fusion of the

physical and the digital world. So call it the physical store in

the E commerce capabilities, bringing them together in a

synchronized fashion, so that they can operate with one face,

I like to talk about, you know, how you think about Amazon, you

know, today, and we're also tethered, you know, to folks

like Amazon, and Walmart, and, you know, and the ability to

leverage their online presence and so on. And the interesting

thing about it, really is that both of them are really just

embracing what Montgomery Ward and Sears did 100 years ago,

through their catalogs, it's a digitized version of the world.

And then you sort of layer around that. So you know, what's

happening around the industry that's that's trending are

things like enhanced data sources, things like Master Data

Management, things like you know, generative AI or AI in

terms of new ways to leverage data, you know, sort of in a

bigger, better, faster, stronger fashion. So at the end of the

day, the trends all kind of go to the same place, it's how do

you get to the customer, you know, at that zero moment of

truth, whether that's physical or digital, in a fashion that

you're in the best informed fashion to have what they want,

when they want it. And very importantly, that it's available

to them, when they want it and where they want it within the

supply chain. Whether that physical, last mile fulfillment

to their home, or whether that's physical fulfillment, in terms

of pickup or in store, shopping experience, at the end of the

day, it's all about the customer.

Yeah, Mike, same question to you, you've

certainly seen an awful lot of change in your 40 years in the

industry. Talk a little bit about the world as you see it.

Yeah. First off, Emil will for all the people

that you just dated, you're going to have to tell them who

Montgomery Ward is just understand just we got a whole

bunch of people that are going to who? Yeah, I think I think

the same thing. So here's my big takeaway. People have more

choices than ever, you have a device in your hand, which was

basically now going to get you the product you want brand

loyalty is key. People want what they want. And the retailers are

struggling, in my opinion, to keep up because I'm not going to

be loyal to a I'll just throw a few names on Walmart or Best Buy

or a target. If Amazon has it, and nobody else has it, I'm

going somewhere else. And I've got the quote. So the bottom

line is, is people are going to find what they want, through

whatever avenues they want. And retailers are going to pay the

consequences if the stuffs not there. So I've got a slide here

from Doug McMillon. I love I love Doug McMillon. He is

extremely good at putting things real simple, but he had this

quote and Sam Walton had a similar code, Doug McMillon, for

those of you don't know, is this President and CEO of Walmart

stores, it's really simple. If you're not meeting the needs and

wants of the customer, you're done. There's a lot of loyalty

there. Right. And he lives by this. And here's the other thing

he lives by, he lives by and he may have changes from Rob since

the last time I talked to him, but he has a copy of his phone,

his screenshot when he first picks up his phone is this

chart. It is a series of from 1950 to 2017, who are the

largest retailers, top 10. Okay, and I'm not going to make any

obvious claims. But Sears was the biggest for a while wall,

then took over. And guess what Sears is now gone. So once you

grow the channel, and you're on top, when you start sliding

down, if you're not meeting the customer's needs, you're done.

And so Doug has a really good way to keep it a real simple,

it's all going to be about the customer, it's got to be about

the associates who are taking care of the customer, etc. So my

perspective that hasn't changed since the first store open, what

has changed is the fact that we all have many computers in our

hands 24/7 days a week, you're gonna get the products we want.

We don't have a lot of loyalty to the retailer, but we do to

the product. So retailers. Are you measuring what you've

gotten? Where's it located? So you can meet them needs? Because

if not, they're gonna go somewhere else.

Yeah, great stuff. Emil a question for you.

You know, this, this summit is really all about people,

processes and technologies that are improving on shelf

availability, talk, talk in terms of each of those three,

though, each of those three things and what are the most

what are the most important what are driving the most most change

right now as you see it in terms of people, processes and technologies.

So you I think, you know, two things are

affecting it and to what Mike just said, you know, and to

Doug's quote, you know, the reality is, you don't mean to

customer where they are, and with what they want, you're

done. Right. So in stock availability is critical path.

So, you know, significant people process technology investments

around, you know, understanding really three aspects of this

one, you know, being really clear about what the item is,

and how you're positioning it, what problem sets how you can

query it, how you can, in essence, meet the customer's

experience. So live where they are, if they're Googling for

something, or, you know, searching for something on your

space, that your master data doesn't serve that query in a

fashion that it gets to get you to it efficiently. You're done.

Yeah. Secondly, you know, if you know if your supply chain isn't

clear about what you have, and where you have it available to

them. Or if by chance, you think you have things that are not

there, and they get purchased, and you then disappoint the

shopper, by an essence having them come to pick it up, and it

becomes substituted or you come to pick it up, and it's not

physically in the store, or it gets caught from your order, or

even worse, it's, it's you actually habit, but your systems

aren't precise enough to be able to let the customer know that

you have it, you've lost that sale potentially forever, and

potentially lost that customer to come back. So you know,

that's sort of the second piece of the puzzle. And then the

third piece of the puzzle is sort of how do you enhance those

things. So it's not just about the systems and the data, it's

about ensuring that you have the the mechanisms that give you the

sensing ability to understand what you have and where you have

it. So the last moment of truth, you know, physically in the

store, the biggest challenge, I think, has always been knowing

what's physically in the store at any point in time. And we've

implemented systems over time, you know, computer assisted

ordering, and you know, those kinds of things. And we've

dabbled with RFID, you know, and in some retailers, they've

embraced it heavily. In some cases, we've embraced robots, to

try to understand physical compliance and done a good job

in those areas. But at the end of the day, I think it's this

constant journey toward really understanding what's in the

store, what's available in what location it is, and how do I

make it the most efficient experience possible for the

customer to get from point A, which is I desire x, or I need

X. Two, I now can now know where that item is, from my limited

consideration set of retail partners that I'm looking

forward in to I now have it physically in my person on my

person, and I can leverage it. However, I saw it in the

shortest possible time. You know, everything from I order it

now and it gets delivered to me and in within an hour for some

of those services to I ordered it now. And I'm going to go pick

it up, you know, within an hour or so what's that short possible

window, I can get that fulfillment model to operate so

that the customer says to themselves, everything is

available to me, sort of in a ubiquitous fashion and on

demand.

Great stuff. Mike availability, formerly known as

in stock is something that the industry has been wrestling with

since since the Earth cooled. Certainly, in my 35 years in

retail, we've been talking about that. And a lot of folks will

say, you know, retail is such a simple business, why are we

still struggling with this or on the other hand, the business has

gotten all kinds of complicated in the last decade, especially

talk in terms of, of on shelf availability, talk in terms of

how things have changed and why it is that it still continues to

be top of mind for for, for the leaders at every retailer.

Yeah, I think there's a couple of different

reasons. First off, just to take an item, any item, got a pair of

glasses here, okay? To be able to get all the raw materials,

the screws, the glass, the metal, the rubber, all the

pieces that go into pair glasses to manufacture that together.

And then seamlessly share that from manufacturing, through

distribution through a warehouse, to the back of a

store to get it on the shelf. You think about all the things

that can possibly go wrong. There's a lot of them, right.

And by the way, it's usually the last 100 yards of the toughest

part. Right. Getting it to this building is usually the easiest

part. I think that's the first one Matt is it's just a

challenge. I think it was a day the first retail store ever

opened up. And it will be the day the last retail store shuts

down that this is going to be an ongoing problem. Problem is

people talk and you know, I'll correct I'm not going to crack

but I will let me just talk to the AMO for a second in stock is

fairly easy to measure, because it's how much do I have and how

much do I think I sell? The problem is that doesn't

accurately reflect what That product is on sale. So a lot of

days they were in stock is good. We got 12. And we think we'll

sell five. So we're in good shape? Well, the reality is the

onhand in the store is probably only about half a percent

accurate anyway, on hand accuracy is a big issue. It's

why a lot of retailers are going to technologies like RFID to fix

that. And the daily demand is a forecast. So I got two numbers

that I know are wrong. I'm using them to measure what do I have

available for the customer? The second one, which is on shelf

availability is is it available for the customer to purchase? Is

it available in the store? Is it available online, go and pick up

in store, otherwise known as bottom line pickup, and so are

both as is going to be available to me. I did my own little

survey, man, I think you'll find this interesting. I actually

there's a lot of statistics about the cost of this, etc. But

I ran my own little statistic on LinkedIn. And I ran it over a

couple of weeks. And I thought this was fascinating. These are,

these are retail professionals, professionals in general. Tell

me about your on shelf availability issues, you know, I

spelt availability wrong, this still bugs me. But anyway,

30 44% respectively said okay, but too many out of stocks are

out of stock. Right? So the problem has not gone away. It's

still out there. The question is, what were one of the things

we'll talk about later is how do you measure on shelf

availability? It's hard to measure. It's really, really

hard to measure. We'll talk about some of that stuff. But

number one, it's a very difficult challenge number two,

if we don't have retailers and CPG companies actively measuring

their on shelf availability, not their in stock, their on shelf

availability, then how in the world do you know how you're

doing? Okay? Everybody measures, labor and all these things. If

you went to reach out, say, what's your on shelf

availability, they probably said while we're in stock is 12, or

whatever the number is, if someone asked you what's

available for the customer, and they'll probably you probably

won't get a really good answer. So I mean, to me, that's the

biggest challenge is you can't measure it real effectively.

It's hard, but it's something I think is critically important

for the industry.

Yeah, Emil back to you given your background at

IRI at Nielsen and TCS? What are some of the current focus areas

regarding data sharing across the retail supply chain? And

what are some of the implications of of that sharing?

So, yeah, interesting journey, you know,

the whole data sharing whole data aggregation, you know,

space has continued to evolve. So I started in the space in in

1989, you know, a long, long time ago, pre laptops, for those

of you that were not understanding Montgomery Ward,

you know, earlier as a reference, you know, so lots of

evolution in terms of data processing capability, data

availability, you know, data cadence, meaning what was the

update, you know, and frequency available of new insights. And

where things seem to be trending right now is towards more of a

data sharing model, but in a monetized fashion. So virtually

every retailer was saying to themselves, you know, like

aggregators have said, for years, the money isn't

necessarily in the process, the money is in the insight that

drives the process. So you know, where historically it's really

been about share, you know, and volume and the related kinds of

things around how a product is moving, you know, from retailer

to consumer packaged goods and out to consumer. Now, we're

trying to measure everything from, you know, the pulse of

inventory, you know, sort of supply chain inventory status,

you know, to on shelf availability, which is, in my

mind, an enormous emerging opportunity to monetize for

retailers, you know, through third parties, I would suggest

using a third party rather than trying to, you know, be a data

organization themselves, lots of opportunities in those areas.

But they're, we're at an inflection point where they're

not quite fully evolved, we got a little bit of piece of this,

and a little piece of that, and some real opportunity here and

some opportunity there. But unlike, you know, sort of the

POS, you know, or consumer panel data sources that have become a

relatively relatively available and somewhat commoditized. These

are really at their infancy the opportunity for, you know, CPG

firms to have insight into what on shelf availability per what

Mike had just described in terms of the differences between in

stock and on shelf availability, you know, available for sale in

a near real time environment where they can start to make

trajectory changes. You know, we're right in the middle of,

you know, sort of the busiest time of the year for retailers

from December to call it February 1, right. Yeah, the

massive, you know, business between, you know, Super Bowls

and holidays and all the kinds of events that drive significant

change. If there's ever a time a year we're understanding what's

available for sale, and connecting the consumer to that

Add process, this is the time of year, this is when the game is

lost or to Doug's quote, you know, if you're not meeting them

where they are, you're done, right? So the opportunity to

take that data, push it into the process in a fashion that makes

everybody bigger, better, faster, stronger, makes the CPG

sharper, makes the retailer sharper is a massive

opportunity, a huge inflection point for the industry that I

think is emerging. We're getting there, I think we're starting to

get reasonable sort of bobblehead doll alignment,

everybody's bouncing their head up and down, saying, Yeah, we

got to do this. But I'm not sure it's really come to fruition.

And a point where, you know, folks have adjusted their sort

of the people and process approaches to how they're

consuming it operationalizing it on a daily basis. But in my

mind, that's where the opportunity lies. And the

implications of it are massive.

As I mentioned, at the kickoff of this

conversation, Mike started and on shelf availability, small

group with us about 18 months ago, a year ago, May, year ago,

this past May, and that small group is not so small anymore.

And the reason for that is because Mike has been hosting a

lot of great conversations sort of reinforcing the importance of

on shelf available availability, as well as talking about some of

the different techniques that companies are using to measure

it. Algorithms and audits and shelf chain robots, RFID, etc.

might talk about the talk about the groups, maybe a little bit,

a different twist, and you're expected on this question, but

talk about the group. Talk about why OSA remains so important,

which you've already sort of alluded to, and then touch on

each of those, each of those techniques for measurement.

Yeah, I think there's a, there's a couple of

things. Let's just go back. Why is this even important? And then

how do you measure it? So we all we all basically said on shelf

availability is important. Why? Well, Doug already said if you

don't keep if you don't meet the needs of your customers, there's

no loyalty there. Just to build on that. Here's a chart that

McKinsey put together. This one was interesting. For those

people who tried to go into prop buy products 62% of could not at

least purchase one of their items. That's 62% of the people

are disappointed every shot, not out of every item but at least

well have a high them of those 60 to 39% switch to a different

brand. So in that environment, if I'm p&g and it was out of

stock, I moved moved to Unilever. p&g lost in that

situation. Number two, they switched to a retailer. So 32%

of the time they went to a different retailer, say forget

this, I'm bringing up my phone, I'm using the retailer's Wi Fi

to Walmart order from Amazon. That's the ultimate slap in the

face. The REITs he helped by the Help Desk customer to buy

something at a competitor 13% weighted and 16 just gave up. So

the problem is real, right? So how do you know what you have?

And where is it located, etc. We've already mentioned the

unstuff though bill is important. How many retailers

can deliver a chart that looks like this, this is on shelf

availability in a retail store. And I'm measuring to make sure

that my goal is 95% on shelf availability, because by the

way, nobody can be 100% Because nobody could afford that it'd be

astronomically expensive. But 95% is a pretty good goal. And

the more you could push that north of that that's good, but

who's measuring saying I'm not meeting target or that target,

not target the store? This is the kind of stuff you need to do

and where you're not meeting goals like sales goal or ROI

goal, etc. Where are you not meeting target? You go and do

plans to meet target. And Amy and I are funny. We've been in

the whole data sharing business a long way. One of my favorite

quotes, I think, Amy, you came up with us. Maybe we came up

with it together. But a number by itself is meaningless unless

you compare it to something. So somebody says I'm 15% higher

than I was I'm 15% increase. What I don't know if that's good

or bad, right? So this compares I target which is 95% to how

you're doing. Well hope you enjoyed part one of our

discussion with Emil Martinez, who is my good friend from TCS

consulting. Please rejoin us next time as we've wrap up our

conversation. Finishing out our conversation with Emil. Take care.