Host Mike Graen continues his conversation with Myron Burke from Divergent Technology Advisors to discuss the impact of serialized items on retail supply chains including:

Supply chain issues and product authentication.

Serialization and its benefits in supply chain management.

Supply chain modernization and collaboration.

Welcome back to the Walton supply chain center

series on on shelf availability. We're rejoining and continue our

conversation with Myron Burke, the CEO of Divergence

Technologies.

All right, good morning, and welcome to

Conversations on Retail. My name is Matt Pfeiffer. And we are so

excited to continue Mike Graen series to focus on on shelf

availability. It is a soggy day in Northwest Arkansas. And we're

back from a bit of an extended break from the holidays. And I

know Mike had been traveling and hitting conferences and so

forth. But we're super excited to be back. Mike's guest today

is our friend Myron Burke. He's the founder and CEO of Divergent

Technology advisors, based here in Northwest Arkansas, and the

two of them are going to be talking today about the impact

of serialized items on retail supply chains.

But no, it's not trivial, you know, and a great

person in this space. And you know him well, John Phillips, he

and I used to have some some just passionate conversations on

this topic. Because, you know, if you take, you know, beverages

like Pepsi or Coke or something like that, or bags of chips and

snacks, you know, the volume on those, it's tremendous, and the

thought of serializing that, you know, if I sell, one can of

intake, your favorite beverage, so one can a million times a

day, well, that just that's one line of data with a quantity

tracker of a million. If I serialize, that that's suddenly

a million lines of data. If I serialize, that by 20 Different

read points, it's 20 million lines of data, right, or I've

got extended fields in the database, they're smarter guys

than me to figure out the database structure. But the

multiplier is tremendous. But I don't need to hold that for a

year, I might be able to look at ways to do hot and cold storage

of that. I think this is where there needs to be a lot more

mind exercises in it. But there's also things that start

to happen with Hey, where does that stuff end up? Do I have

people crossing, you know, legal contracts on bottling rights and

things of that don't have visibility to it today. So I

think the use cases get very different as you move through

different product codes. The complexities are very different

based off volumes. In some companies do serialized, right?

The TVs, the computers, the phones, Apple, Samsung, etc.

They do a lot of that already. So I could link this serial

number to my product manufacturer sharing serial

number, and now I have a direct correlation to all the piece

parts. We've seen the airlines do some of this as well.

Database architecture, I think edge, edge databases are going

to become a big thing. And clearing houses on some of some

of these elements. That says, When do I care about this, I

think you'll see AI generative AI at the edge. This is this is

a slow, methodical move, because of the data out there is is not

good today. But as the data gets better the ability to put edge

AI in a generative method out in space and start looking at the

performance of serial numbers. Hey, these are very consistent

with a normal pattern, we can start to dump those into cold

storage for 30 days, hey, these, these are questionable, we want

to watch this for a return at another store because it didn't

follow the normal travel path. And then these are, hey, this is

an alert, we need some sort of action are we triggering video

to capture additional information here so we can build

a case on a potential organized crime. And tying that together?

So think the sophistication of that what you see in retail

inventory markets, across all the activities that happen and

those are directly connected to the financial markets. I think

you'll see the retail inventory markets start to mirror more of

the financial traceability markets because at the end of

the day, the financial markets are a subset of what happens in

some of these retail wholesale product markets is the asset.

It's moving and causing the financial ability. If we start

tracking the asset, we can get more insights to the financial

crimes that are happening in the background as well.

Yeah, absolutely. So practically, if I think about

the way the retail supply chain works, items are set up,

purchase orders are built, I need 50 of these, and I want

them delivered to this location that's at the UPC level. And

then advanced shippment notifications are, I shipped the

50 and the invoicing I want to be paid for the 50 and it flows

through the supply chain. Now I've got this whole other piece

of data which is I have the 50 or million Pepsi cans I thought

was a really probably a better example does that goes through

traditional kind of EDI platforms. I've heard a lot

about this thing called EPCIS from GS1 bring practically we

have to have a way to be able to store that day and assign those

aptitudes to it as an individual company. But more importantly,

how do we communicate across the supply chain in a common way Is

EPCIS is the right way? Is EDI the right way? How do we how do

we think about that?

So, that's a big, big question. I think there's

some room in this space for some workgroups, you know, we had

EPCIS, which can certainly do this. The problem is it becomes

it becomes a lot more transactions, and you're

defining where you want to serialize data and demand

segment of the ASN. I think there's a lot more opportunity

for machine to machine communication here that says,

hey, here's, here's your PO. We're saying it's full. And

here's the serial numbers, we read in that, can the vendor

supplier relationship, have a machine to machine view that

says, Okay, our machine is going to look at your finalized

outbound bill of lading. And we're going to match our

receiving invoice to that and we'll get a green offer that

match. So I can store it in a partner location. Maybe the

vendor stores that record and the receiver looks up against

it. And a direct relationship that works in an indirect

relationship. There has to be an intermediary that's capturing

that maybe 3PL, but I think this is where you know, groups like

GS1 really strive and getting industry together to talk about,

okay, how should this relationship work? Does

everybody need a physical copy? Or can we do virtual copy, and

we've worked with virtual servers and virtual databases

for a long, long time. So I think the Microsoft, Dells,

Amazons of the world can play in this space as well. To help

define, hey, what's the most efficient way to do this, and

then sort of your your business Action Group start looking at it

and saying, Hey, financially, that works. Because we may do an

assumed receipt anyway. So there's, there's lots of things

depending on the contract relationships, that this can be

done without having to replicate all that data at every location.

But but there's a lot more to discuss there. I don't think

that's a silver bullet that anybody has their arms around,

because it's not enough people are looking at it at the highest

level.

I know there was I think you were involved as well,

there was there was a major study by Auburn University

several years ago called the chip project, the chain

integration project. And that was a nice way of saying,

there's a big bucket of money called claims, claims or banks

basically saying, I asked for 50 of these shirts, and you only

sent 40. So I'm going to claim I'm going to deduct that from my

invoice. There was a product authentication, Hey, am I really

paying for Nike shoes? Or are these are rip off etcetera? It's

potentially you know, pharmaceuticals? Is it really

made from the manufacturer? Do I have that trust? And we really,

I think everybody rallied around it. There was some huge numbers

that were shown, etcetera. But I still haven't seen a real

practical. Hey, I am a retailer, I'm a supplier, I ordered 50 of

these, you shipped me 45. And I can tell you that I didn't get

them all. Well, yeah, you did. Here's the 50, SG 10s that I

sent you the unique serial numbers I sent you go scan your,

if you got them, you got them, I'm not paying the deduction,

because the reality is you just didn't catch them on the read,

but you did get them. So it's the ability to be able to

confirm, you know, basically debate or throw data against

claims or shrink or product authentication issues, etc. But

again, we're several years in since that study, and I think

the industry is still struggling with a way of doing this.

I think they're struggling. But I think at least

from my seat, I am seeing companies actually want to study

that. And I think this is unfortunately, it's a topic that

nobody wants to be public about. It's a little bit like inventory

when we first started that in like, 2007 2005, because nobody

wants to admit that there's inventory is 60% accurate,

because how do I answer you know, how do I answer a question

at a Goldman Sachs conference for Wall Street? About that,

that number? Because I don't have an answer. I think the same

thing is, hey, I've had situations where the vendor

intentionally shipped me short because it was on time in full

or whatever it may be. And I'd rather be have something there

than nothing there because I can't sell nothing, I can sell

70% of the order and make up the difference. I I've seen cases

documented where unfortunately, some suppliers or intermediaries

have substituted a cheap product for a more expensive product and

didn't change the box labeling or the bill of lading. And so

there's, you know, 200 units of the wrong item shipped in the

wrong box that are going to flow through a DC and down to the

store and now I've got 400 units of air because of over and under

right so doubles. And that was done intentionally because of

the pressure of business in a post COVID supply chain. One was

like, Hey, I think we can get away with it. Because nobody, we

don't think anybody's looking. That's bad business and all

aspects. But how do you find that? Well, it doesn't show up

till it's at the store, and then we're post auditing. And then

are we going to open every box on every truck, our codes have

gotten to a place where we're not really wanting to do that.

serialization with EPC starts to give you the capability to do

that free audit check. And to do that green lighting of a PO and

say, Hey, this was clear to pay, everything was great. Or, hey,

we're going to keep this one open on five units. So we'll pay

everything but five, but we've got 28 days on our terms to look

for those five, if they show up, we'll release the rest of the

funds. If they don't, we'll file a claim. I think it makes

business more transparent as to what's going on. And it's the

pressure of human conversations that sometimes we don't want to

have, because we don't have an answer, that the data like this

data, serialized data at this level can tell us, hey, we're

just short, but we're working on it, or hey, we didn't see it.

But we're, we're actively looking for it. Because I've got

a system that's actively looking for it, I'm not having to pull

the cashier off a register to try to go look for something

that they don't know where it is, which is sort of a failure

task to begin with. So I think we're getting there, people are

starting to wrap their head around it. I think, you know,

economics always play into this. You have to have some use cases,

and some audits on the ground to quantify that there's value

there, I think chips started that it opened the door. But

then it's like, okay, well, which of these five issues that

chip identified do I have, and some companies have one or two,

some have five. But they've got to understand how good or bad

they are in their own eyes, and how they start to attack that

without wrecking their company. So you're kind of doing open

heart surgery on the company while the company is awake. And

that's a sensitive space to play. And you want to be great,

but you also don't want to set a separate precedent for yourself.

And that's just the hard part about being CEOs of big

companies. Sometimes you can do something that puts a target on

your back. So I think this has traction over the next 10, 15

years as we look at the leverage from the data. Again, if you if

you go back to the barcode, we're celebrating 50 years of

the barcode, which was developed to sell product. Look at all the

things we do with barcodes, all the things and shipping and

containers and tracking and medicine and documents and files

and records. And now 2d barcodes and menus, nobody thought we'd

be ordering food off a 2d barcode at a restaurant, right,

but we're doing it. So I think we're still learning things from

the barcode virtualization will be 50 years plus of learnings in

a much faster timeline.

Yeah, I was gonna say that's about the only thing

that good that came out of COVID. We all learned how to

scan, 2d barcode for a menu.

Yeah, unfortunately, unfortunately,

now my TV screens covered half the time with the QR code.

That's good point.

That is a great point. That's great point. Well,

here's the we got a few minutes left. And we've had a couple of

questions. And I think we've answered them. So I'm not gonna

go back into those. Here's the here's this, give us the so what

I mean, what are the what are the actual questions? What are

the questions that I didn't ask that I should have been? Where

are we going with this thing? Where do you see the next two to

three to five to ten? years? I mean, you mentioned some of this

stuff? You know, what exactly should we be thinking about?

About? If I'm a retailer, or I'm a supplier? How do I know? Now I

know what serialization serialized data is. I know some

of those potential use cases, how do I get involved to get

more actively involved and start thinking about and actually

implementing some of these solutions?

I think there's a there's kind of a decision tree

is starting to look at Hey, what are the what are the biggest

value points I can get out of serilization, in my business and

in finding those nuggets, sort of like companies did with

sustainability, right? It took some some pushing, and people

found real value and sustainability at the economic

level, not just the moral, the moral level of the company. I

think finding those nuggets for serialization on both the

internal operations and the customer satisfaction,

experience and sales side, partnering with groups, you

know, GS1, having an active proponent in GS1 looking at the

information, learning about that, I think learning from

groups like Auburn, Michigan State and others around these

organizations that have labs and look at things in a very

independent view and talking with solution providers like

what are they doing, what are they offering, bring to the

table solutions and what use cases can they share to get

educated and I think have a team that's on your tech side looking

at, hey, if we move to serialization and keep the

serial number in the event trackers, what do we need to do

from a data architecture perspective? So the architect

teams need to be really involved, and how do we best

manage that, and, and then be able to recall that information

for business value, and then start to think of it

strategically. This, this is a transformation. It is not a

project, you know, a lot of RFID things where, well, it's a

project, we're gonna put tags on product and like, yeah, that's

step one, like, what are you going to do with it after that?

That's the transformational strategy. So the thing now that

we have sunrise 2027, and this becomes a barcode RFID other

potential symbology capability. I'm looking at how do I put

serialization to work in my business? The same way that

companies like, you know, I think I think it's interesting

because fast retailing, said some of this Dillards, they had

a serialized, and others did, they put these yellow stickers

on that serialized a transaction, they scan it after

the sale, they scan the G code they can scan the serial number.

And that was sort of their proof of purchase tracker, almost like

a POS transaction log. And that gave him you know, non receipt,

refund refunds are verifiable of purchase. So I think they've

done serialization in a way that's that's not connected to

RFID, or, or GS1 sunrise initiatives. They've done that

for years. So there's companies that have done it and done it

very well and a different way, it doesn't all have to be the

same way. But once you think about serialization, you want to

make sure you're reserving enough space for how big is the

serial number on an RFID tag? Am I using the same serial number?

Or something different on a QR code? How do I cross reference

those thinking about the architecture in a way that

allows you to use that universally, and then move

faster than barcodes did into a machine to machine engagement?

And then it becomes, hey, a business case for GS1 is hey you

did chip. Now we were to want to look at how do we reconcile this

information? And what's the most effective way to do that, as

subscribers to this industry standards organization, they

because they're very responsive to business interest. And so if

the businesses start showing interest in that, I think they

can really accelerate EPCIS, which is a really big blockchain

model, and other ways to do those types of active queries.

But it's it's getting in the game, and getting allowing

people in your organization and challenging people in your

organization to think about what would we need to do different

systemically if everything we scanned was serialized.

Exactly. Interesting.

that's the the challenge question of today, you

know, to get people to start having that discussion in 2024.

Yeah, yeah. No, I think that makes sense. I mean,

in the early adopter of this, obviously, from 20, 2003, RFID,

as a technology sort of lead the way, because it almost had to be

if you're going to scan something, you got to have a

unique serial number to know how many times did I count you, you

can't just count UPC because I'd never be able to do it, right.

But we still haven't made that leap forward from that to we're

sort of going up that pyramid, starting with inventory

accuracy, then finding products in the store or than asset

protection, we're still in for the most part inside the store,

love to see us get into the upstream supply chain. That's

what Chip was all about. But unfortunately, we are not where

I think I were I was hoping we would be I thought we would be

farther along and there's some great companies that have worked

on it. It's just hard. It's just it's just it's a lot of

difficult stuff to get through.

I think it's hard. And I think when I look back at

most of those programs, it's been great for moving the needle

in the EPC RFID space. In some in the in the in the 2d barcode

space. And I full transparency I sit on an innovation advisory

board for GS1 still and we talk about these things with with

multiple industry partners in the in the board is most of

those projects were around earnest about hey, inventory,

because we're chasing supply chain with COVID inventory

because we're inaccurate, we're disappointing customers. But

most of those the serial number gets dropped off to account.

Because the architecture discussion didn't happen with

the EPC project, they were disconnected. And I think the

learning for me over the years has been if you don't bring the

serial number through the enterprise. There's a point

where it doesn't matter if you had the serial number or not

you're fixing you're putting a bit of a BandAid on a problem

but you're not able to rectify the problem because it's not

going into your forecast because you're dumping off the

intelligence that you had and converting it to just a zero or

a plus one or minus one. And so I think that's the biggest

learning over the year for me is serialization is a an enterprise

Transformation Project. I spent a lot of time at NRF talking

with a lot of the enterprise companies on forecasting and WMS

and ERP systems. And I was asking this, Hey, how's your

company thinking about serialization? And everybody's

like, I don't know if we have that discussion, and that person

is definitely not here. But let's follow up. Yeah. And so,

you know, even even me just kind of probing the pushing, poking

the bear a little bit kind of like, Hey, we got to do a better

job of raising the awareness on this. And so I think, you know,

kudos to you and Matt, for pulling this together, because I

think it's a discussion that kind of sneaks up on people. But

I think it's a really important discussion, because I think our

future of product identity, whether it's barcodes or RFID,

or something else, is in a serialized world, it won't be a

big bang theory, everything won't happen at the same time,

things will happen at different speeds. But if it starts

happening, it's gonna happen across the supply chain, because

we can't run multiple protocols very well, for very long.

Yeah, yeah, when we get when we get those

transitions, success looks like we don't have a data

serialization project or a 2d barcode project or an RFID

project. They just, they're woven into the fact that nobody

has UPC projects in companies anymore. Everything's just It's

foundational, like electricity and water come into a house,

right? It's foundational. We're just not there yet. We got to

get enough case studies where people say, this isn't gonna be

like electricity, we got to make the investment for the

infrastructure to be able to do this, then the use cases make it

much easier because right now, the project seems as it's

plowing new ground, I

think it is, but I'm glad you triggered my

memory, which is getting harder to do these days. I think, I

believe you and I actually sat on a supply chain steering

committee cross functional years ago with Ken Boyd and some

different folks from other other partners in the supplier space.

And we talked about what barcode should be used in the supply

chain on cases and what types of things should we be doing, and

it became an influencing community. And I think we've

lost those a lot of those communities over the years. And

that might be something that we need to try to resurrect with

partnerships from GS1 and ame and the grocery GMA, those

groups, I think, have a lot of power to pull teams together.

But I think having willing participants in the teams to

have the discussion and get people to sit around the table

and talk about it once or twice a year. is really powerful. I

think we've lost a little bit of that over the years. So maybe

it's time we resurrect some history around.

We were on a call this morning, and I can't tell

you who I was on the call with because that would be

inappropriate. But it was all about the Food Safety

Modernization Act 204, which basically says by 20x, with

food, you've got to have traceability, and identification

etc. It's all the way through the supply chain. And everybody

was like, well, everybody can do it there own way I go, that

makes no sense at all. Me if you're gonna do this, I would

think people like Chipotle and McDonald's and Walmart and

Kroger and would all get in a room go, what's the best way to

do this? It's all lock arms and say that's the best way to do

this. That's not collusion that's not antitrust. It's

creating a standard habit, because then adoption by the

supplier community in collaboration makes much more

easy versus everybody's gonna try to do it their own way. I

agree with you, I think. I think there has been a lack of there's

been a lot of really great standards, but there hasn't been

a lot of, of, hey, there's a lot of standards that gives us a lot

of choices. But how are we going to execute the FSMA work for

2004 across the retail supply chain? I think everybody's gonna

kind of struggle with that. Yep. Yeah. As always, wonderful job.

Thank you so much. It's always enjoyable to touch base with

you. Any any parting thoughts? Any of the ways that your your

company can help some of the companies that were struggling

with it?

Well, you know, we're always always willing to

help. You know, I, I think I'll part with this, this thing I

think you'd asked me about in our pre discussion, you know, on

my website, I have this quote around open input and debate are

critical elements to creating strategic direction of a

business. But more importantly, if we all around the table

agree, than most of us aren't necessary. And I think sometimes

we find ourselves in meetings where it's kind of like, yeah, I

don't want to create any friction. I don't necessarily

agree, but I don't want to be that person. And I think we've

got to have the boldness to be able to ask questions and

challenge each other and have have an active professional

debate. It's not personal. It's not not full disagreement. It's

just hey, is this the right thing? Hey, are we thinking

about this? What are we going to do? Why are we getting rid of

this data? What are we going to do when we need it? That helps

people make better decisions and better planning, and that's, you

know, part of the name of my company is Divergent. Because we

try to think about things differently, we think more with

the end in mind, versus the initial project or, or the bogey

of a p&l to go get, we want to get those things that we want to

help people do it in a way that helps set them up for the

future. And that adds cost of rework or tech debt as they go

down the pathway. So always happy, happy to help. Sometimes

it's just lending an ear and listening to people or giving

them like, Hey, why would you think of it that way? type of

challenge. But I think a lot of these things, these will be

solved in collaboration with smart groups and people who want

to who want to be leaders in the space, or maybe some have a

tremendous amount of serialized inventory in their stores. And

they're trying to figure out Wait, why am I not realizing as

much value as I expected? How are you treating the data? You

see? That's a question that yields a lot of fruits. So it's

always a pleasure, Mike. And Matt, thank you for the time and

to the audience. Thank you all for attending and all the things

you do. If we can help in any way, we're certainly happy to do

that.

Awesome. Well, thank you very much, Matt and Myron, I

appreciate it very much incredible discussion. And it

will not be the last time we have a discussion with you. It's

always provocative, it's thinking through it. It's

challenging our thinking. And to your point, there is an

opportunity to be disagreeing without being disagreeable,

because I think if 10 of us are all in the same room, we all

have the same thoughts then some of us don't need to be here.

It's okay to have a conflicting points of view. And I think that

makes us stronger because I don't think you just take one

one person's answer and drive down drive down the road with

it. So thank you very much, Matt. Thank you very much,

Myron. Appreciate it and appreciate the audience for

participating. Take care.