title 4/6/06 9:58 AM Page 1 "Never forecast what you can calculate." Dr. Joseph Orlicky "When it comes to Retail Supply Chain Management, people are beginning to understand that Demand Planning should start at store level. What we must now agree upon is that Demand Planning should also end at store level. This book is dedicated to that objective." André Martin, Mike Doherty and Jeff Harrop title 4/6/06 9:58 AM Page 2 Advance Praise for Flowcasting the Retail Supply Chain "Very often we read about Supply Chain principles such as Visibility, Collaboration, Flexibility, and Integration. We understand the concepts, agree with the principles, and look for ways to turn concept into reality. Flowcasting brings these prin- ciples to life. Its focus on simplifying Forecasting, combined with the tremendous versatility of time phased planning is both leading edge and exe- cutable today. Andre, Mike, and Jeff have done a great job of demonstrating the practical application ofFlowcasting concepts with everyday Retail challenges. Flowcasting is a great read, and worthy of serious consideration." Geoff Frodsham - Senior Vice President, Canadian Logistics Loblaw Companies Limited title 4/6/06 9:58 AM Page 3 "André Martin has had a dream and vision to inte- grate end-to-end the "extended supply chain" all the way down to the store shelf. The future is now here and what was previously unmanageable in real life is now possible - driving the factory floor from the store shelf. Leveraging collaborative business processes along with the strength of the time series DRP orders forecasting methodology has positioned his dream into the industry's emerging best practice." Robert Bruce - Former Vice President, Supply Chain Strategies Wal-Mart Stores, Inc. "We live in an age of data. More plentiful and richer sources of data continue to emerge. The authors of Flowcasting The Retail Supply Chain have devised a means to make the supply chain visible by utilizing a stream of data to create a Flowcast, a forecast con- structed from detailed demand data. What's remark- able about this concept is its utter simplicity. It's easy to understand and implement, and it can revo- lutionize the kinds of things we can do to improve supply chain operations. This book is an easy read, placing Flowcasting in the context of previous meth- ods, and showing how it can be used to solve com- mon supply chain problems. You will appreciate the potential of this method to cut through supply chain complexity." Franz Dill - Manager Procter & Gamble Beckett Ridge Innovation Center title 4/6/06 9:58 AM Page 4 "The consumer goods retail industry has been con- tinuously challenged to effectively manage Retail Supply Chains from the store to the factory floor. Andre and his team have finally broken the code and conquered the challenge. Flowcasting provides visibility to all trading partners through the busi- ness process they have developed. The benefits extend from the consumer, through retail outlets to the manufacturer and their suppliers. Flowcasting will truly "change the face of industry." William G. Mackie - Managing Principal, Oliver Wight Americas Board of Directors, Oliver Wight International "Most retailers today are flooded with data from which they struggle to extract intelligence about effective management of their stores and the supply chains that replenish them. Flowcasting presents a new approach to forecasting across these supply chains that will go a long way in improving opera- tions and increasing profits. In clear and convinc- ing discussions, the authors describe analytic meth- ods and supporting business processes for imple- menting Flowcasting in any retailing company seeking to improve its competitiveness." Dr. Jeremy F. Shapiro - President, SLIM Technologies Professor of Operations Research and Management, Emeritus Sloan School of Management, MIT Best selling author of "Modeling the Supply Chain” title 4/6/06 9:58 AM Page 5 "I had the distinct pleasure of working with Andre Martin on a concept called LogiCNet some 15 years ago. Andre, who conceived of and delivered on Distribution Resource Planning, believed that the principles of DRP could be applied at retail, using point of sale information as the engine that could drive the entire retail supply chain. It took a few years for DRP to be accepted and adapted by manufacturers and now DRP is broadly used through the manufacturing community. Never one to give up on a dream, Andre and his colleagues Mike Doherty and Jeff Harrop have written "Flowcasting the Retail Supply Chain". The logic is sound, the challenges are significant, with the impor- tance of a collaborative mind set ringing true throughout the book. CPFR® plays a major role in establishing the ground rules, expectations and initial planning that is paramount to successfully implementing Flowcasting. We are hopeful that Andre, Mike and Jeff will see Flowcasting parallel the success that DRP has enjoyed." Joseph Andraski - President & CEO Voluntary Interindustry Commerce Standards Association title 4/6/06 9:58 AM Page 6 "People, processes and technology merge in a hereto- fore impossible linking of the consumer goods indus- try from factory to store shelf thanks to Flowcasting. Andre Martin along with Mike Doherty and Jeff Harrop put in place that piece of the puzzle which forever changes the way executives and practitioners think about and manage the retail supply chain." Dennis L. Groves, P.E., CFPIM, CIRM - Chairman, Oliver Wight Americas President, Oliver Wight International "I strongly recommend reading this new book to improve your understanding of the paradox of cur- rent forecasting practices and eventually how Flowcasting will help you and your trading partners reap all the economic and productivity benefits in your extended supply chain." Thomas H. Friedman - Founder and President Retail Systems Alert Group title 4/6/06 9:58 AM Page 7 FLOWCASTING The Retail Supply Chain Slash Inventories, Out-of-Stocks and Costs with Far Less Forecasting First Edition André Martin Mike Doherty Jeff Harrop Foreword by Thomas H. Friedman Factory 2 Shelf Publishing Winooski, Vermont copyright 4/6/06 9:54 AM Page 1 Flowcasting the Retail Supply Chain © Copyright 2006 by André Martin, Mike Doherty and Jeff Harrop All rights reserved. No part of this book shall be reproduced, stored in a retrieval system or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the authors. No patent liability is assumed with respect to the use of the information contained herein. Although every precaution has been taken in the preparation of this book, the pub- lisher and authors assume no responsibility for errors or omissions. Nor is any lia- bility assumed for damages resulting from the use of the information contained herein. This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice. If legal advice or other expert assistance is required, the services of a com- petent professional person should be sought. ISBN-13: 978-0-9778963-0-1 ISBN-10: 0-9778963-0-7 Library of Congress Control Number: 2006924007 Printed and bound by RJ Communications, LLC Book Design, Layout and Cover Design by Howie Green Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 acknowledgements 4/6/06 9:29 AM Page 1 ACKNOWLEDGEMENTS I first want to thank my co-authors Mike and Jeff. They convinced me to team up and do this. To me this book represents the last chapter of a journey that started sixteen years ago when I took what was supposed to have been a two year sabbati- cal to pursue my dream. Big thanks go to Steve Bennett who, for the third time since 1990, has taken the writings of a crazy French Canuck and made them read- able. And finally, to my dear wife Régine, there are no words that are appropriate to describe the emotional and financial roller coaster I put her through these last six- teen years. If there ever was an example of a woman who stood by her mate come hell or high water she wins the gold medal hands down. Régine this is your book, Mike, Jeff and I were merely conduits. André Martin For a first time writer, there are many people I owe thanks to for their help in writ- ing this book. My co-authors André and Jeff deserve thanks for sharing the passion and the workload. Darryl Landvater, author, consultant, and architect of one of the world’s finest Flowcasting systems, spent many hours over the years with me dis- cussing and debating how to solve supply chain problems using Flowcasting. Section 3 reflects these dialogues. Steve Bennett, a professional word-crafter if there ever was one, deserves special thanks for taking my often disjointed ideas and words and making them flow. My clients and colleagues deserve thanks as well. I continue to learn from them daily. Finally, my wife Kelly deserves the most thanks of all. Thank you for putting up with me and for giving me the space to write. This book is dedicated to you. Mike Doherty To André – Thank you for lending your knowledge, experience and immense cred- ibility to this project. Without it, I don’t think this book would have been possible. To Mike – Thank you for challenging me every day. Virtually all of my thinking on supply chain management (and many other topics) has been shaped by you in one way or another. To Steve Bennett – Thank you for your insight, skill and eternal patience! I would love to have your talent, but I wouldn’t want your job.