Host Mike Graen is joined by Myron Burke, Founder and CEO of Divergent Technology Advisors, for a discussion about the impact of serialized items on retail supply chains including:

• Barcode Technology
• Inventory Management
• Loss Prevention

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All right, good morning, and welcome to

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

excited to continue Mike Graen's 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 has 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.

Well, Myron and I have known each other a long,

long time. I'm gonna let him introduce himself here in a

minute. But we go back to the early days when Myron and I was

at Procter and Gamble. And you were at Walmart, and I think it

was around the 2002-2003. You said, Yeah, we're thinking about

doing this technology that allows us to track pallets and

cases through the supply chain. And when you and I had a chance

to work back then and then. And then I got the chance to work

with you for many years, which I absolutely enjoyed most of it.

Some of it was challenging. But that's okay. It made me grow for

sure. In a good way, in a good way. We get into some of the

stories later, but Myron go ahead and introduce yourself to

our guests.

Yeah, good morning. It's great to be with you, Mike,

and lots of memories there. So briefly, been in Northwest

Arkansas since 1999, here with my wife and kids, and spent 26

years with Walmart, an amazing career, where I was able to

really create my own path through the mentoring of many

great leaders, started in clubs came in to finance and tax

compliance and became a problem solver in those areas of sort of

automating redundant work that people don't really want to do

for a very long period of time. And build a career out of that.

Working through the first innovation team. The

International side was three years in Japan, business process

and engineering team. We've built that from the ground up,

We're here to talk a little bit about the whole idea

of serialized data and serialized supply chain. And

Myron has been a huge advocate of this. And just as background

of this for years and years, I think we've we've celebrated the

fact that the UPC is now officially 50 years old and what

while we recognize that it has been a huge help for things like

look it up being eliminating him to price every individual item

and doing inventory and all this stuff. I mean, you can't imagine

life without a UPC today. It's been an integral part of what

we've had to do. But there is some limitations to the UPC. And

one of the limitations is, for years, we've looked at the UPC

of an item and the quantity that we have. So I've got a

Strawberry Pop Tarts. This is the UPC, and I've got 20 of

them, which has been great. But unfortunately, we are moving to

a platform that we need to have individual understanding of not

just the fact that we have a UPC and quantity. But we also want

to have some attributes about each one of those individual

selling units. And so we've talked a lot about RFID and 2d

barcodes, we're not going to spend much time talking about

those as concepts, because those are the way you capture the data

either through scanning it, or potentially an RFID. One, what

we want to spend a little bit of time talking about is the idea

of we're moving to a serialization and I think some

people already know this. They've heard of this before.

But what does that mean really well, what that means is a

couple things. Number one, we still have the basic UPC, which

is what is the selling unit. But for each one of the selling

units, we're going to have a unique serial number tied to

that UPC example. I've got 20 I've got 50 Strawberry Pop

Tarts, the UPC will be the same, but I will have a unique serial

number on each one of those so I can really identify all 50 are

different items, but they all roll up to the same UPC and

we'll show you some of the some of the benefits of that here in

a little bit. But I think That's really important. So when you

think about that all the systems legacy systems between suppliers

and retailers now have this unique thing, which is the

unique serial number, which is tied to every one of the items.

So how do we take advantage of that is really the kind of the

question. So, Myron, anytime you can back, stop me but what we've

got here is we've got two ways that we can do this. One is we

can leverage RFID data capture as a way of capturing that

unique serial number. And the other one is, as part of the GS1

standards for Sunrise 2027, we'll be able to capture that

same thing with an actual 2d barcode. What's the been the

value proposition from your perspective of the UPC? And what

do you say is that differentiating value

proposition for serialized data? I think that'd be helpful to get

your perspective.

Yeah, I, you know, it's, I was thinking about this

the other day, that with my parents, and they both passed

away, but you know, what's the mark of being 50 years old, my

parents passed away at the age of 80, is they said 30 years of

their life without a barcode, even as a thought, and in

commerce. And then I sort of grew up when the Garvey gun,

sticking price stickers on every single can of soup, and every

can of soda and things in a grocery store was was on its way

out. And then we moved into this barcode scanning aspect at that

point of sale. And I look back, you know, over over my

generation, and think about my parents and like, if you look at

how fast we move product, and the level of automation we have,

through structured symbologies, whether that be the numbers that

make up the barcode, the company prefix and the item reference

those numbers at the bottom, that get translated into a

symbology. Whether that's a linear barcode, what could be a

QR code, or even things in an RF structure today, without line of

sight, we've changed the the amount of data that we can flow

and the rate at which we can flow data and enabled machine to

machine communication on things that used to be human to asset

asset to human communication in every instance. You know, making

a product boxing a product, shipping a product, unloading a

product, stocking a product, checking out a product was all

human to product relationships. And today, almost all of those

are machine to machine automated. And I think the

barcode has enabled the speed of commerce that we have around the

world, not just regionally in a way that I think we've never

fathomed before. And I think today with Sunrise 2027

serialized barcodes. And I think this is where it's tough for

some folks to get their head around it. We are now actually

approaching a generational shift in data and automation

capabilities. That I believe for, you know, 20 years or 30

years with the barcode we didn't believe was even fathomable. And

I equate it to sort of the checkbook in an aspect of, you

know, when you when you put serialization into it, it's

like, oh, I have a check. I have a name on it have an account

number, but also have a check number. And that check number,

could you imagine writing checks without a check number I grew

up, my parents had blue and red checks that were counter checks,

and they used to use those, it was a pain to track my check

numbers, can you imagine writing a check without check numbers.

And then imagine not imagine using a credit card without a

security number. And so I think the serial number for product

becomes that tertiary check and balance that allows us to add an

unlimited number of attributes and unlimited number of state

and status indicators as to the lifecycle of that product. The

warranty service ability, that's the authenticity of that, and a

lot of things that we'll talk about today that if you haven't

spent time in the space and thinking about it, it is way

beyond inventory, counting the value of what the serial number

brings to the marketplace.

So we've got actually a slide that I've

borrowed from GS one, a several of these are GS one slides, but

I think this one is pretty good. It's a pretty broad slide. But

let's Okay, so great. So serialized items are basically

the UPC and a unique serial number to add to and track and

be able to provide attributes for a single item rather than

this UPC quantity. Here's a big bunch of broad kind of user

cases, inventory management, traceability, etc. So, okay,

that's great. I have the ability to be able now serialized items,

what are some of the really practical in retail on some of

the practical in retail supply chain? What are some of the

practical applications for that?

I think if you look at the retail supply chain,

obviously inventory inventory A shrink. The whole inventory

management bucket is, is such a big deal and a big topic right

now, I think it's a big topic because we're running up against

some of the gaps in general accounting principles between

retail accounting versus cost accounting. And if you think

that compare Walmart and Target releases around shrink to Sam's

Club, and Costco, they're quite contrasting as to what they're

experiencing. Because it becomes accountability to the item

level. And what serialization gives us is that accountability

to the item level, beyond inventory, I now have this

authenticity, I can also authenticate things with the

manufacturer in doing that matching, I can do the

traceability of where it went in the lifecycle, how long it spent

at that location, where it may have stopped in the middle by

tying a serial number to a pro number on a trailer and

connecting the pro number to the GPS on a tractor. And so there's

this Internet of Things that starts to connect that's in

here. And it's not about the case, it's about the actual item

unit that a consumer will buy that goes in that case, or maybe

didn't go in that case, we've seen situations of where that

can be safety related to temperature management on

insulin, or in COVID. We saw a lot of things with temperature

management on COVID drugs. Safe handling G force impacts, for

potential breakage of things, internal circuits could be

damaged with certain G force impacts, if something was in an

accident box looks okay. But the products not things like that

can be tracked, tracked and traced and warrantied, or

recalled and ensure you get all of those back. This

sustainability effort, I think, is probably the most

misclassified. One, there's a lot of things, and I don't want

to dismiss it. But there's a lot of discussion about RFID tags or

different types of symbology indicators and say, Well, are

they sustainable or not. But I think those processors give us

the ability to actually track where does packaging go after

it's used. And is that getting recycled? With the extended

serial number, we can actually link that serial number to how

should I handle this type of recyclable versus, you know,

trying to train 300 million people in America to read what

the recyclable codes mean. And they do change. So they have to

change with it, automating that, where I could just scan it, and

it gives me a disposition with my phone, or I can have a

scanner on a trash compactor. And it gives me the disposition

of, you know, recyclable, non recyclable, and then tracking

that I think makes a bigger dent in the recyclable and recircular

economy than we could ever make. Just off of, you know, human

trust alone. Because financials get in the way, I think

corporately financials get in the way. And so being able to

track that and trust that becomes very, very

opportunistic, both in the recycling of packaging. In the

ownership of packaging, there's a lot of companies who make

products for I talked about the oil industry a lot, the oil

industry generates oil. They buy most of their packaging, but if

you buy a case of motor oil, somebody else maybe DuPont or

somebody built the package, there's no tracker on the

package, but there's a G10 for the oil, will who's responsible

for the sustainability of that product and the recyclability of

that product, it should be both companies, the creator and the

person putting product in it. It's a little bit like the DVD

industry, when it was around, you were buying content on a

disk, the disk was nothing but an immediate carrier. But the

recyclability of those discs became a challenge. And we've

moved through that by moving to digital media. But I think

there's other products that follow that same work structure,

that serialization can really help move the needle on. But

sitting back and thinking this far ahead into the future, when,

you know, we're still at the early days of sustainability and

recycling and how to actually drive through packaging

improvements, and understand the p&l cost or impact of those

things. I think serialization is what gives us that next level

intelligence as to what happens with the billions and billions

of water bottles, where do they end up? How do they end up in,

you know, a plastic island in the Indian Ocean? Where does

that stuff come from? And some of it's trash that we export,

because we'd rather deal with it somewhere else in their own

country. And that's, that's an unfortunate reality. It's hard

to quantify because we don't have that. But again, it gives

you this visibility from the authentication at the

manufacturer side, all the way down to the packaging, and the

points of safety information. If there's a formulation change,

and that could create an allergy change. You can actually allow

users to scan that and understand it, versus reprinting

all your packaging, you can actually send alert to known

users and your user group from your sales and management, CRM

devices. So there's lots of interconnectedness that this

serial number opens up across all business and commerce.

Wow, that's a lot. That's that's a lot of different

opportunity for sure. I thought I put together a couple of

examples that might be really helpful that that people could

relate to. And it's interesting, Myron, because Matt Shell was on

the one of the participants of this thing. And he and I kind of

talked about this when he was still at Walmart and you as

well. So here's kind of a really live example of what things

could be done. You mentioned state and status. And that's

really an interesting way of doing this. So what I got here

is, is basically the number six the current system thinks I have

six specific television sets, let's just call this a Samsung

television set, right, I got six of them in the store. Well, we

all know that that's inventory, accuracy is always a challenge.

So many retailers are implementing RFID, to adjust

that on hand to reflect what I actually have. So they do an

RFID scan. By the way, RFID, by default by industry standards is

a serialized item. So I count all those and I go, I really

don't have six, I really have five, so I really have five on

hand. However, as you look through these particular items,

what you see is some of these items may be in the store, but

they're not available for sale. So So for example, I may have

items that are in damaged locations, a customer has bought

a television didn't work for whatever reason, brought it back

into the store returned it is now back in the claims

department. It's physically in inventory, but it's really not

available for sale, I may have a different display. There's an

example here with TVs on a display, they may be showing a

movie or whatever they are in inventory, but really not

available for sale unless somebody wants a discount, etc.

So you can kind of get down to what each one of those have a

have a UPC, I don't know how many I have available for sale,

I have a unique serial number that I can tell you each one of

the ones that are not available for sale, this one's in claims,

and this one's on the display. And this one's maybe move it

around a customer's cart, I really only have one available

for sale. So that's an example. Myron, I think you mentioned

state and status, which is I can get down to that unique serial

number and go I'll tell you, how many are actually available to

go pick up versus how many I have in the store. Example A

fair example?

Yeah, I think you know, I think it's a great

example. And one we probably collaborated on, you know,

around what was just inventory states. Right? All right, what

what I have in the building, and I think there's one that's even

missing here, as we look at where the digital economy is

with, you know, store shoppers, and, and pickup today. There's

stuff that's in the inventory system and could be sitting on a

shelf, that an order picker will pick up and put in a basket. But

until that basket gets picked up, that may be sitting in the

store inventory, but not available on the shelf. You also

have inventory that's in a customer's cart, walking around

the store, while she is shopping, that is still in the

store inventory, but it's not available for sale. So if five

people in the store have one in their cart, that's five units of

on hand that are not available for sale, but are still in the

inventory system. And so this inventories inventory states

concept starts to give you the impression of, hey, what are the

different states of inventory that I actually have in here,

you've got five or six different one on ones on the screen

between claims, display, store use, open box, somebody doesn't

want to buy an open box if they want a brand new TV, regardless

because they think it may be missing something or may have an

issue. And then what on hand but not available, because it's

committed to a customer. And I see see a day where you can

reserve product by serial number for a customer who's willing to

pay you in advance for that because there's limited

quantity, you can go on and secure that for them and then

blocked at a point of sale. We see that we've seen the same

thing in bakery where we did we've done work where I link the

date code to a serial number. So I won't allow anything that has

a serial number date code link is that is today, so I won't I

won't allow anything to be scanned. That is expiring as of

today. So you can start to capture and quantify short,

dated or outdated product in advance as well. So there's,

there's tremendous opportunities to build this inventory state

model out not just across consumer electronics, but even

consumer packaged goods and food products

represent 100% Great, great examples. So we're

talking a lot about serialization, which is great.

What gives me a unique serial number talk a little bit about

okay, but in addition to that, whether I use a data capture

like RFID, or 2d barcode, there's additional additional

attributes that you can assign to the serialized item that you

can't assign to the UPC. Give us some examples of that, because

that would be helpful for the audience as well.

Well, if you know with digital links that's

becoming somewhat of an infinite and that's a GS1 standard of

digital link, it's becoming somewhat infinite capability,

using you know, the internet and HTML code linkages. What would

be either integrated or connected database bases within

a company so I can start to manage receipt date, I can look

at first in first out, I can look at last in first out so

date rotations, I can look at temperatures across travel and

put floors or ceilings on that to say, did it ever break a

temperature zone? I'd mentioned G force earlier as its ever is,

it's a sensitive product has it ever exceeded the G force

aspect, confirmation of sale and start warranty timers around

that. The other thing is you start to now have a new data set

in this retail vendor partner relationship that says, hey,

what percent of volumes are leaving? What stores at what

time? And then how do you start to move pricing investment money

or promotional money into markets that it really moves the

needle more. So I can start to look at ROI on these types of

different investments. And say, if I've got to store marketing

money, and I'm distributing it across all stores on price, I

may have stores directly out of stock. And I don't know it

because PI is so bad. So I just apply it universally versus

putting more money in the stores where maybe people are traveling

further because they're in an electronics desert or a food

desert and they really want they really need the stipend. And

that will actually grow more sales. You know, I work with

some startups where we we test this is like, Hey, can I get

people to go do an exercise for a buck? In some places in

California, where they're walking down the beach, if

there's a store there? Sure they'll walk in and do it for a

buck, if they're gonna get in their car and drive, but they

will for five bucks? Well, the same thing applies to product.

Can I move? Can I move short, dated product? If the discounts

deep enough? Yes. So some stores 10% 20% might move the needle

because she's shopping anyway, or he shopping anyway. And I'm

gonna make hamburger tonight. But if I have to get my car and

go, I won't go for 20%. But I'll go for 50. So now you're able to

start to make these thresholds and like know the quantity know

your actual stand, set a budget update for that, put it into

finance, and then go quantify your sales versus markdown

performance. And then all that. And this is the magical part, I

think we just cut the long tail short. All of that goes back

into your forecast. Now your forecast gets smart, because

you're using real data as to price point time and action that

drove sales. Then if you have any type of customer loyalty

program or CRM, or you're using, you know, digital transaction

information, you know, what household will move at what

price point? So now you know how to talk to your customers from a

price relevancy perspective. And serialization enables all of

that to the item level.

Yep. practical example. Grocery stores that

baked bread, that product has a certain shelf life before you

have to, you have to get rid of it. If if and by the way, I'm

stealing this from Chris Brown from TSA, he just shared this

dynamic pricing based upon the item status, if it just made its

full price, if it's three or four days old, or whatever it is

it automatically dynamically for that item, because we know what

day it was made on can mark it down for 25% off. So that

ability to be able to leverage that unique serial number. It's

not just UPC quantity price, it's a variable price based upon

potentially the age of the product, right.

Which goes back to your point of state and status,

right? Yep, the state of that brand is it's more than two

hours old. And if we don't move it, we mark it, we mark the ride

off, right. So it's better to move it at 50% than to throw it

away. And I think that's a great example.

I get it's a great example and by the way, there's

a lot of labor that goes into picking up each loaf of bread

and looking at the date which eventually goes away maybe you

just say hey if it's if it's if it's reached its day where we

can sell it we're gonna automatically sell it for 25%

less we don't have to go mark each one down as a CVP or

normally you just call it CVP but a mark down price so, a

great example Chris great example. Another one that I

think that pretty interesting example and then we'll get into

some of the how's and from my standpoint, Myron spent quite a

bit of time especially recently kind of focusing in against the,

what I'm going to call the loss prevention, asset protection

kind of space, I got an example here, I'd love to get your

reaction to because you're hearing about organized retail

crime, you're hearing about the fact that shrink is at an all

time high. Nobody knows exactly where their shrink comes from.

But today, uh, give you an example. And Macy's, Joe Colon

Macy's has been very public about this, because it's all got

the unique serial numbers, every single item. And that's

leveraging, frankly, RFID as they are, they're able to be

able to look at what sold at the register, obviously, at the UPC

level, or G10. Level, and take those UPCS and match them up

against exits, items that are leaving that's at the serialized

level. And then in post, be able to say, here's what left the

store that didn't get paid for it. But here's the problem, what

we're doing is we're trying to compare what sold at the UPC or

G10. level, to the serial number. And if, if five left the

store and five got paid for we're in good shape, if none

were paid four and five, left the store, then they're all

potentially a POS bypass. The challenge is if you sold two of

them, but four of them left the store, which two didn't get paid

for we don't know, all we can do is match it to the serial

number. So how is actually serialization, and by the way,

some people are spending hardware to put RFID readers

over points sale that has got some success, but has some cost,

and obviously has some how has a unique serial number, this

particular problem that we've got?

Well, I think when you're able to leverage a serial

number to your point of sale, and hold on to that serial

number. And that's the key point, I think of this data

discussion with serialization that you want to hold on to this

number. Because then you can keep track of when that number

moved when that number was scanned. And with Sunrise 2027.

That obviously gives you interoperability between an RFID

serial number and a barcode printed serial number. So I can

have a tag on a pair of jeans and read it through the supply

chain all the way out to the sales floor. And then I can

monitor through POS by scanning the serialized barcode when it

was scanned out at the register. And I know which ones were

scanned, style, size, color. So when you have group assortments

or standard assortments that are just you know, different sizes,

different colors to a generic UPC, it's really a blind

operation all the way back to sales and forecast. When you

have serialization, you can actually track that information

and know what sizes are being stolen, that walk out the door

and get read what sizes are being paid for. What styles are

that's happening to, is it a certain color that's happening

to? So you can start to understand these different

demand patterns and influence patterns. You can use that to

reorder but you can also use that to start looking at

profiles within your store that could be based off of, I'll use

a simple example here that just just kind of tongue in cheek, if

I've got Bentonville versus Rogers, and I'm losing T shirts.

Well, it's interesting because I'm losing black T shirts and

Bentonville and blue T shirts and Rogers. But when I look at

the reason I'm just losing T shirts, because black and blues

in this assortment group. But there's a differentiation

because it's like, hey, there's a group that's taking black T

shirts because of the regional Association of Black T shirts.

And it could just be for fun, right? It could be a little, you

know, high school high school trick that they put that goes

viral and Tiktok that happens in the world today. But you're able

to start understanding what's happening on a store by store

basis. And then you can actually dig into further that further if

you have different forms of computer vision in your store.

So the interoperability between the serialization and other

systems is tremendous. The ability to use the barcode when

you need line of sight without putting new capital into your

business, if you're changing out 20, 30, 40 front end registers

to RF, that's a big expense. It's also really hard to control

the RF field of view so you get overeat and different things.

Using the barcode. We know that works we know how to do that

people are trained well on that that works with scan and go that

works with customer pickup orders. That works with a

traditional cash register. So now I have a discreet point of

sale view. And I can link other choke points in the store

through that with any RF reader capability. In some cases I may

use optical where I'm scanning cases going out to the back room

some companies scan their cases as they pick them from the back

room. Well through the the The case, case, item hierarchy of

GS1 standard, I can connect a case pack and know what serial

numbers were put into that case from the manufacturer. So when I

scan the case, I could know that those subordinate serial numbers

are going through the sales floor. And then I know what I'm

looking for it POS, because of what's going to the sales floor,

if I see something that goes through the register, that

hasn't moved to the sales floor, that could be a sign of an

internal or organized theft situation where stuff is

actually going out from the back room and not hitting the sales

floor. So now I can know I need to look at employee profiles and

things. And unfortunately, that happens. So I think in this

case, there's a lot to unpack and sit down and really kind of

to kind of whiteboard these things. And it doesn't happen

when you just bring in the technology, I bring in RFID or

RFID tags or bring in a serial number, you have to apply the

data throughout your enterprise. And I love this conversation.

Because this is some of the stuff that we've kind of talked

and thought about over the years with folks is, Hey, you can't

take a serial number and convert it to account and just keep PI

the way you had it for the last 40 years, you've got to hold on

to the serial numbers. Some of those serial numbers, you'll

want to keep longer than others, if I'm doing it on a bag of

chips, or produce or bakery, I may only need that number and

history for 90 days because the lifecycle of that product and

turns are so high. But if I'm doing TV, electronics and higher

warranty items, I might want to keep that for a year. So now my

data storage starts to become a little dynamic based off of

those profiles as well.

100%. And even this example, right here, I've got a

situation where a matching a G10 to an SG10. And I'm gonna get it

wrong, because there's kind of a one to many relationship. You

talked about that 2d barcode, and I think in the future, we're

going to look at something that looks much more like this, which

is we're going to not put a UPC on the product, we're going to

put a 2d barcode. And that's the unique serial number, that

unique UPC and serial number combination is what's going to

be scanned into your point, if they just throw away that

serialized data, which they probably very easy to do,

because all they want is a UPC to look up the price, they lose

the opportunity to say, what actually left the store versus

what actually got sold at the serialized level. You throw away

that that opportunity. So you're 100% right. Here's the here's

the challenge. If I'm a retailer of a supplier, etc. My entire

platform, my legacy system has been built on UPC quantity. This

is the tough part Myron how in the world do you fundamentally

change the legacy systems to incorporate this unique serial

number number one, it's a whole lot more data. Number two, how

do I how do I think about transmitting that throughout the

supply chain? Because we've always been UPC quantity based.

How do you make that transition because that's not trivial.

Well, I hope you enjoyed that discussion with Myron Burke.

Join us next time as we continue the conversation right here.