Enterra Insights

Sales & Operations Planning Must be Inclusive

Back in 2011, John Westerveld penned a two-part blog that discussed "a new way to think about S&OP." ["Thoughts from Kinexions – A new way to think about S&OP, Part 1 and Part 2," The 21st Century Supply Chain, 21 and 24 October 2011] The old way of thinking about S&OP, he explained, involved a team that used some kind of demand planning system to create forecasts which were then bounced off a traditional ERP system to see if the forecasts were doable. One of the problems with this method, he noted, was the assumption "that you will only need to evaluate a single demand plan." Anyone familiar with forecasts knows that they are seldom accurate enough to survive in the real world. Westerveld explained in Part 2 of his post that an S&OP process that could match the vagaries of the real world required six different functionalities. They are:

1. You need a system that allows you to create 'what-if' scenarios instantly, and provides the ability to collaborate with these scenarios.
2. You need to have both collaborative demand planning and complete supply planning in the same tool. The supply planning tool needs to accurately emulate the planning done by your ERP system.
3. You need to be able to drive the supply planning system from the demand plan.
4. Further, you need to be able to configure which forecast stream (or combination of streams) forms the demand plan (and therefore drives the supply planning process). This combined with #1 will allow you to evaluate and compare different demand planning scenarios.
5. You need excellent reporting tools that allow you to understand supply issues, their cause, and potential resolutions.
6. You need excellent reporting tools that allow you to present the recommended S&OP plan, the issues, and alternative resolutions to the executive team.

There are a few words in those six functions I would like to highlight; namely: collaborate, collaborative, and the repeated use of the word "supply." Although the word "supply" isn't found in "Sales & Operations Planning," the supply chain clearly plays an essential role in ensuring that any plan (or plans) can be implemented. That's why I was surprised when I read a headline declaring "The 'S' in S&OP Can Stand for Supply Chain, Too." [Becky Partida, IndustryWeek, 18 April 2013] It seemed odd to me that business executives needed to be reminded that their supply chains undergird their businesses. Partida, who is a supply chain management research specialist with APQC, notes, "Sales and operations planning (S&OP) has the potential to promote visibility within the enterprise and foster collaboration among business functions. However, the functions involved in the S&OP effort can vary from organization to organization. " Notice that the word "collaboration" is once again used when discussing S&OP. She reports that analysts at her company asked a number of organizations to tell them what functions they included in their S&OP processes. The results are shown in the following graph.

One thing struck me immediately upon viewing the chart: Some companies appear to be conducting "sales and operations" planning without involving "sales and marketing,"  manufacturing," and/or "logistics." I'm not sure how that's done. You would have thought that all those categories would have been 100%! Part of the answer may be that some companies simply don't have an S&OP process, which means nobody is involved. Malory Davies, editor of Supply Chain Standard, reports, "The concept of Sales and Operations Planning is hardly new, but a surprisingly large number of companies, 72 per cent, have only started to make use of it in the past five years, according to a survey by consultants Bearing Point." ["All going to plan?," 30 April 2013] Davies goes on to report, "The survey, which focused on process industries in western Europe, also found some significant weaknesses in how S&OP is implemented, notably the supporting IT systems and a lack of S&OP integration to risk management to the finance function as well as to supply chain partners." One of the recommendations made by Bearing Point was improving "collaboration across the company."

By now you should get the idea that S&OP processes need to be much more collaborative than they have been in the past. Peter Balbus, Managing Director of Pragmaxis, LLC, defines S&OP "as a set of integrated corporate-wide planning processes that enable senior management to strategically direct operations with the intent to achieve superior levels of performance on a sustained, long-term basis." ["How S&OP is Changing the Face of Advanced Supply Chain Management," Dustin Mattison's Blog, 5 May 2013] He went on to explain:

"It means integrating customer-focused sales plans, historic trend data and predictive analytics with supply chain management to enhance customer fulfillment capabilities, drive efficiency, improve resiliency and maintain agility to respond rapidly to changes in customer, market and supply dynamics. Successful S&OP processes align operations with the corporate business strategy. As companies have become more global and face rising complexity, volatility and uncertainty, the importance of S&OP is increasing. Especially in those industries that are well-served and where we see growth is flattening, S&OP becomes critical to competitive survival."

I appreciate the fact that Balbus mentioned corporate alignment. You simply can't align an organization if some parts of the organization are excluded from S&OP process. That's why I insist that S&OP must be inclusive. Rich Sherman, a Supply Chain Discipline Expert at Trissential, insists, "Collaboration is the key ... to unlocking the hidden wealth in supply chain operations. For that, S&OP is among the most important best practices and processes a company can implement." ["Sales & Operations Is Only the Tip of the Iceberg," SupplyChainBrain, 13 March 2013]

Balbus also reinforces a point that Davies made earlier. He told Mattison, "The overwhelming majority of companies today have ongoing S&OP initiatives, significantly fewer have fully implemented these planning processes and even fewer are reporting successful outcomes among those that have." I suppose another way of stating that would be, "Companies know S&OP is important but they don't have a clue about how to implement it." Balbus notes that one market survey indicated that "90% of companies responding believe that a strong S&OP process improves supply chain agility and efficiency. All well and good. But only 13% of these same companies report having effectively tied S&OP planning to execution activities!" Balbus concluded his interview with Mattison by sharing a few thoughts about how companies can better implement S&OP processes.

"The key to any successful S&OP initiative is the ability of the organization to align demand, supply, inventory and financial plans easily and seamlessly against the overall business strategy. This requires a technology layer to enable demand translation -- that is, the modeling of changing product mix, and the visualization of equivalent units. This technology layer then becomes the system of record tying together the multiple S&OP plans. However, this alone is not sufficient to sense and define a response to buy- and sell-side market changes. All too often, plans are built on enterprise data – and not external market data. In addition, the process definition is inside-out (where enterprise data is used to predict future market shifts) rather than outside-in (where market data used to sense and shape responses based on market shifts). The most effective S&OP processes use both buy- and sell-side market data to bi-directionally align the organization from market-to-market. As the company shifts from inside-out to outside-in, data models must to be redefined and the technologies re-architected to reflect this profound change in orientation. These are fundamentally different data models. Another common barrier to achieving S&OP excellence is that companies are not sufficiently deliberate in their statement of goals, definition of governance practices, or the definition and alignment of key performance metrics. While companies universally state that they want to improve their S&OP processes and want to be agile, they often struggle to define what this means specifically for their company to make it 'actionable'."

Supply chain analyst Lora Cecere has been touting, for some time, the notion that organizational strategies need to be more outside-in rather than inside-out. If you haven't done so, you should join her Supply Chain Insights Community. Outside-in demand visibility often involves big data. Nari Viswanathan, Vice President of Product Management at Steelwedge, reports that companies are collecting more product, supply, demand, and finance data; but, "are not actually leveraging this data in their S&OP processes, thereby leaving 'blind spots' in their decision making processes around critical supply/demand trade-offs." ["Big Data Is Becoming a Big Deal for Agile S&OP," SupplyChainBrain, 13 March 2013] The biggest blind spots of all, however, can come from within an organization if planning isn't an inclusive activity. Partida concludes:

"Because S&OP affects the entire supply chain, organizations should give serious thought to involving representatives from the supply chain functions in this process. Organizations should consider whether any additional costs incurred in the planning process would be offset by increased efficiency or costs savings generated within the procurement, manufacturing, or logistics functions. It may be that involving the supply chain in S&OP is worth the investment."

I might have put it another way, "Is excluding parts of your organization from the S&OP process worth the cost?" The simple answer is, "No."

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 4, What Lies Ahead?

To get a glimpse of what lies ahead for smart cities, one need only to look to Singapore. As Mark Fischetti reported last year, "LIVE Singapore uses real-time data recorded by myriad communications devices, microcontrollers and sensors to analyze the pulse of the city, telling residents how they can reach their homes fastest, reduce their neighborhood’s energy consumption and find a taxi when a rainstorm hits." ["The Smartest Cities Will Use People as Their Sensors," Scientific American, 17 April 2011] The following short video, created by MIT's SENSEable City lab, gives you a glimpse of the future.

Looking to the future, Jemima Kiss, writes, "From transport to entertainment, work to education, our lives are already being transformed by high-speed internet that will help create the fully wired city. Within 10 years, faster, comprehensive, wired and wireless networks will not only become the norm, they will become free, says Gerd Leonhard, chief executive of the business thinktank The Futures Agency. The reason? The enormous benefits to government and education." ["City design: A digital revolution," The Guardian, 2012] While I agree that networks will continue to grow in importance, especially in urban environments, I'm not as sanguine as Kiss that ubiquitous connectivity will be free a decade from now. As connectivity increases, concerns over privacy issues will also rise, but Leonhard told Kiss, "While the debate about appropriate use of our personal data will continue, consensual services could be to our benefit." Among the benefits referred to by Leonhard is targeted marketing. "You'll walk past a department store and the window will show a personalised display with your size and preferences," says Leonhard.

Most smart city initiatives are not primarily focused on shopping experiences. Carlo Ratti and Anthony Townsend report that a number of countries are trying to create utopian urban environments. The furthest along is "Masdar in the United Arab Emirates, a walled community intended for 50,000 residents in the desert outside of Abu Dhabi, in which every building, streetlight and personal electric 'pod' vehicle has been preplanned and preloaded with high-tech gear, largely to maximize energy efficiency." ["Harnessing Residents' Electronic Devices Will Yield Truly Smart Cities," Scientific American, 17 April 2011] To learn a bit more about Masdar, read my posts entitled Abu Dhabi's Masdar Plan and Update on Masdar City. Ratti and Townsend continue:

"At Masdar, as well as New Songdo City in South Korea and PlanIT Valley in Portugal, real estate developers, global information-technology companies and governments are attempting to build urban centers from scratch that are filled with technologically enhanced infrastructure and services. The designers say their grand conceptions will determine how future cities will be built. But as models, these top-down projects pale in comparison to the emergent form of intelligence that is bubbling up from millions of newly cyber-connected residents. Truly smart—and real—cities are not like an army regiment marching in lockstep to the commander's orders; they are more like a shifting flock of birds or school of fish, in which individuals respond to subtle social and behavioral cues from their neighbors about which way to move forward."

Ratti and Townsend claim that this bottom-up view of smart city evolution represents "an immensely powerful, democratic and organic alternative vision of the smart city." They explain:

"Rather than focusing on the installation and control of network hardware, city governments, technology companies and their urban-planning advisers can exploit a more ground-up approach to creating even smarter cities in which people become the agents of change. With proper technical-support structures, the populace can tackle problems such as energy use, traffic congestion, health care and education more effectively than centralized dictates. And residents of wired cities can use their distributed intelligence to fashion new community activities, as well as a new kind of citizen activism."

Ratti and Townsend call this effort "going beyond urban efficiency." They note that "over the past decade digital technologies have begun to blanket our cities, forming the backbone of a large, intelligent infrastructure." They believe that this backbone holds the key to the future for all cities, not just planned developments like Masdar. They explain:

"Broadband fiber-optic and wireless telecommunications grids are supporting mobile phones, smartphones and tablets that are increasingly affordable. At the same time, open databases—especially from the government—that people can read and add to are revealing all kinds of information, and public kiosks and displays are helping literate and illiterate people access it. Add to this foundation a relentlessly growing network of sensors and digital-control technologies, all tied together by cheap, powerful computers, and our cities are quickly becoming like 'computers in open air.'"

Rather than embedding sensors in infrastructure, for many daily activities, Ratti and Townsend believe that mobile devices and cooperative owners will drive smart applications. They write:

"An ideal beginning is to leverage the growing array of smart personal devices we all wield and recruit people as the sensors of a city rather than relying only on formal systems embedded into infrastructure. The traffic function on Google Maps is a good example. Instead of building a costly network of dedicated vehicle sensors along roadways, Google constantly polls a large network of anonymous volunteers whose mobile devices report their up-to-the-minute status, which reveals where traffic is flowing, slowed or stopped. The information is delivered to drivers via mobile mapping applications in various ways—as colored overlays indicating traffic speeds, as estimated driving times that account for delays or as a factor in determining alternative routes. ... Bottom-up approaches to sensing can also provide rapid, cheap deployment of new kinds of sensors that measure and record data about people's activities, movements, surroundings and health."

Michael Durham claims that "Smart cities have always existed in people's heads." ["City design innovation," The Guardian, 2012] He asserts, that from the time that Plato wrote his Republic, "people have dreamed of the perfect community, where citizens live in harmony, life is good, technology is harnessed and everything works. Today, big ideas about improving city life continue to pour forth from futurologists, academics and thinktanks." Terry Kirby provides his own view of a future smart city. He writes:

"Imagine life for the citizen of the smart city: you awake in your sustainably built home, and take your morning shower in recycled industrial waste water, cost-efficiently heated overnight. Eating breakfast, you scan the flat screen, fed by maximum bandwidth internet, where the special, easy click local neighbourhood menu allows you to compare your daily energy use with other houses in the area, confirm your webcam appointment with your doctor, top up the balance of your all-purpose travelcard, order your groceries and leave messages for your child's teacher. You can even watch television on it. Outside, your electric car is waiting. On the edge of the central congestion zone, you park in a charging area and, paying with your travelcard, get into a three-wheeled utility vehicle which, via a network of special lanes and sensor-controlled pedestrianised areas, delivers you to another parking dock at your workplace." ["City design: Transforming tomorrow," The Guardian, 2012]

To me that sounds a bit like something out of The Jetsons cartoon show; but Kirby claims that "this is not some Dan Dare meets Minority Report fantasy of life in the future, where we all walk around in metallic jumpsuits. Smart thinking is here already." The problem, of course, is that cities aren't going to start over. London, for example, has had the same basic street layout (and some of the same buildings) for hundreds of years. We need to make sure that smart city initiatives help real people, living in existing dwellings, and carrying on with normal daily activities. Fortunately, Kirby is correct that smart thinking is already here and thinking about those challenges as well. He admits that smart city initiatives are "not simply about integrated transport or sustainable housing." He writes:

"The accumulation of electronic data online, digitally accessible and searchable, creates other opportunities for the consumer to know more about their neighbourhoods and the wider world we live in, and to use that information on a daily basis. It also allows local government, architects, transport bodies and utility companies to work together in partnerships to make the most of these technologies."

Simply accumulating and accessing data doesn't provide the answers or insights needed to make smart city initiatives successful. Big data analytics and other cognitive reasoning technologies are required to make sense of mountains of data being generated every minute of every day. Michael Durham claims, "In 40 years' time cities will not just be smart, they will be so brainy it hurts." ["Forty years from now ...," The Guardian, 2012] Most of that brainpower will be supplied by artificial intelligence. Among the smart people contemplating how to create smart cities are scientists at the Massachusetts Institute of Technology. MIT's City Science website notes:

"The world is experiencing a period of extreme urbanization. In China alone, 300 million rural inhabitants will move to urban areas over the next 15 years. This will require building an infrastructure equivalent to the one housing the entire population of the United States in a matter of a few decades. In the future, cities will account for nearly 90% of global population growth, 80% of wealth creation, and 60% of total energy consumption. Developing better strategies for the creation of new cities, is therefore, a global imperative. Our need to improve our understanding of cities, however, is pressed not only by the social relevance of urban environments, but also by the availability of new strategies for city-scale interventions that are enabled by emerging technologies. Leveraging advances in data analysis, sensor technologies, and urban experiments, City Science will provide new insights into creating a data-driven approach to urban design and planning. To build the cities that the world needs, we need a scientific understanding of cities that considers our built environments and the people who inhabit them. Our future cities will desperately need such understanding."

The following video discusses some of the interesting and exciting things that are being developed at MIT.

Achieving the objectives of smart city initiatives won't be easy (and probably won't be cheap). That is why public/private partnerships will be required. Smart city initiatives begin with people because their goal is to make cities more livable for people. If smart people fail to get the fundamentals right, technologies and processes that support smart city initiatives won't be able to overcome that shortfall.

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 3, Where Things Stand

"What makes a city?" That is a question asked on IBM's Smarter City website. The company believes that a city is "an interconnected system of systems" that rests on three pillars: infrastructure, operations, and people. The site goes on to state that a city is "a dynamic work in progress, with progress as its watchword. A tripod that relies on strong support for and among each of its pillars, to become a smarter city for all." That definition may be a bit too cheery for some because they know that for years many inner cities have not progressed but languished or deteriorated. That entropic trend must change, because the world is becoming more urbanized every day. If tomorrow's cities are not going to become vast areas of poverty and decay, we have to be smarter about how they are planned, managed, and maintained. In a special issue about smart cities, the editors of Scientific American wrote:

"Many otherwise lucid thinkers, from Tho­mas Jefferson to Frank Lloyd Wright to President Gerald Ford, tended to think of cities as centers of poverty, crime, pollution, con­gestion and poor health. In recent years, though, the thinking has shifted along with the demographics. Many experts have come to realize that people are better off when they live in a city. This is not to dismiss the problems of urban life; cities, particularly fast-growing ones in the poorer parts of Asia and Africa, can be places of great human suffering. But even a city slum has benefits that you won't find on the farm or in the village. The move from the country leads, for instance, to dramatic changes for many women. As Kavita N. Ramdas of the Global Fund for Women notes in Stewart Brand's Whole Earth Discipline (Penguin, 2010), 'In the village, all there is for a woman is to obey her husband and relatives, pound millet, and sing. If she moves to town, she can get a job, start a business, and get education for her children.' Indeed, the city has come to look less like a source of problems than as an opportunity to fix them. Investments in sanitation and water have turned many cities in the developed world from places of disease and pestilence into bastions of health. City folk are at lower risk of death from motor vehicle accidents and suicide by firearms (although they are overstressed). From the stand­point of the metropolis, climate change also seems less intractable. Because city residents rely less on cars and live in more compact dwellings than suburbanites, they tend to leave smaller carbon footprints. The challenge is to extend the efficiency of the urban center to the wider conurbation, embracing the city center, suburbs and satellite towns. Although climate is bigger than any one fix, how we build our cities, and how efficiently we live in them, is going to factor large in our response." ["Street-Savvy," 17 April 2011]

In Part 1 of this series, I discussed suggestions from experts on how to begin smart city initiatives. One of those experts, Dr. Boyd Cohen, created a model he calls the Smarter Cities Wheel. IBM has also developed a model that is reminiscent of Dr. Cohen's Wheel. The IBM model shows how it believes the three pillars of a city discussed above are interconnected.

Like most organizations involved in smart city initiatives, IBM believes that data collection and analysis is the undergirding that makes such initiatives useful. IBM's site states:

"As demands grow and budgets tighten, solutions also have to be smarter, and address the city as a whole. By collecting and analyzing the extensive data generated every second of every day, tools such as the IBM Intelligent Operations Center coordinate and share data in a single view creating the big picture for the decision makers and responders who support the smarter city."

In Part 2 of this series, I noted that participants in a study published by the Institute for the Future expressed some concern that companies like IBM are trying to establish data monopolies that could be used to hold cities hostage in the decades ahead. IBM obviously sees itself as providing a much-needed service that cities can't provide for themselves. The company offers a nifty interactive Smarter Cities experience that can be explored at your leisure. Of course, IBM isn't the only global company that sees business opportunities in helping cities operate more efficiently. Oracle has its own interactive website that highlights its solutions for smart cities. The launch page for that interactive site also shows how Oracle sees connectivity within an urban setting (with business and citizens being the focal point).

Although the site explains that "Oracle offers a complete, integrated set of solutions to meet the complex needs of local government," some people, like Greg Lindsay, believe that companies like Oracle, IBM, and Cisco are "offering 'smart city in a box' solutions" that don't take into account the nuanced complexities that make each city unique. ["The Battle for Control of Smart Cities," Fast Company, 16 December 2012] See Part 2 of this series to learn more about Lindsay's concerns. Cisco's offering is called Smart+Connected Communities. Cisco's Shane Mitchell explains, that "the main barrier to adopting [smart city] solutions is the complexity of how cities are operated, financed, regulated, and planned." ["Smart City Frameworks: A Systematic Process for Enabling Smart+Connected Communities," Cisco Blog, 10 October 2012] Rather than offering a set of solutions, Cisco begins with "a 'Smart City Framework' designed to move the Smart City debate from merely an academic or esoteric discussion to a call for action." The framework is shown below.

Mitchell explains, "The Smart City Framework ... describes a potential process that will help key stakeholders and city/community participants 1) understand how cities operate, 2) define city objectives and stakeholder roles, and 3) understand the role of ICT within physical city assets." I agree with Mitchell that all stakeholders must be involved in smart city initiatives. As I wrote in Part 2 of this series, the only way to move forward is to embrace public/private partnerships that benefit both sectors." Terry Kirby agrees with that position. He writes, "When it comes to achieving the high-tech, sustainable, and smart cities of the future, there is one word that sums up the pathway to success: partnership." ["Getting smart cities connected," The Guardian, 2012] He continues:

"Imaginative and collaborative partnerships between local authorities, utilities, universities and the private sector – whether it is bus companies or software providers – are the defining characteristics of 'smart thinking', according to leading figures in cities around UK and Europe. All agree that so-called 'smartness' – which at its most basic level is about using new technology to improve lives – is necessary to adapt to the demands of urban growth. ... These kind of partnerships can range from multi-agency infrastructure ventures aimed at transforming the lives of millions, to simple projects improving digital access for everyday users of public services. They include new ways of using mobile phones and smartcards to pay for a wide range of goods and services, to schemes designed to recycle waste water for heating."

The editors at Scientific American conclude:

"The most hopeful impact of city life may be its effect on the mind. Humans are social animals; we draw stimulation from other minds close at hand. Plato and Socrates both lived in fifth-century b.c. Athens, a city-state. Galileo and Michelangelo lived in Renaissance Florence. Steve Jobs and Steve Wozniak grew up in a western U.S. conurbation that includes Silicon Valley. The young, agile minds at work on the next Big Thing are probably tweeting—they live, as author William Gibson points out, ... in a kind of digital meta city. Chances are, they are living in a physical city, too. Technology is reshaping city life and making it more intellectually productive, but it will not soon replace the easy interchange of ideas that comes from casual proximity, the cornerstone of city life."

While some pundits believe that smart city initiatives may drain city centers of their vitality, I agree with the editors at Scientific American that making cities more livable will actually increase the vitality of cities and make urbanization a boon rather than a bane to mankind. Gerd Leonhard, chief executive of the business thinktank The Futures Agency, agrees. He told Jemima Kiss, that "the more digitised our lives become, the more we will value real experiences. 'The landscape of the cities of the future will be a huge place to do the things that don't work in digital form – food, culture, contemplation. Digital tools drive us to want to have the actual experience much more than before.'" ["City design: A digital revolution," The Guardian, 2012] The thing I appreciate most about the smart cities movement is its optimism. There are enough Cassandras in the world warning us of impending doom. Optimists bring about progress and, as the IBM website states, progress is the watchword.

Same-Day Delivery: Is It Worth the Cost?

According to analysts at the Boston Consulting Group (BCG), "Same-day delivery, a concept that bombed during the dot-com era of the late 1990s, is back on the loading dock." ["Same-Day Delivery: Not Yet Ready for Prime Time," by Vlad Lukic, Robert Souza, and Meldon Wolfgang, bcg.perspectives, 2 April 2013] They explain:

"Today, same-day delivery has returned—with a new set of propulsive forces. The online retail market is now much larger. Traditional retailers are under pressure from online shops such as Amazon to offer fast delivery, and carriers are facing competition from upstart same-day companies such as Shutl, Zipments, Instacart, and Postmates. In conversations with BCG, executives at retailers and carriers said that they feel compelled to respond to these threats."

Google certainly hopes that same-day delivery doesn't bomb this time around. It recently announced that it "is dipping its toe into the retail space, announcing that it is testing same-day delivery service of online goods in the San Francisco Bay Area." ["Google testing same-day delivery service," by Hayley Tsukayama, Washington Post, 28 March 2013] Tsukayama continues:

"According to a Web site posted by the company, a small number of testers (ages 18 and up) will be able to purchase goods online from partners such as Target, Staples and Walgreens and get same-day delivery through a Google courier service. ... The company said that testers can browse local stores to find what they need, and just have to select a delivery window to receive their goods on the same day."

Tsukayama notes that Google's same-day delivery service places "the company in direct competition with Amazon and eBay as well as retailers like Wal-Mart." Speaking of Wal-Mart, in one of the more interesting storylines in the same-day delivery arena, the company "is considering a radical plan to have store customers deliver packages to online buyers, a new twist on speedier delivery services that the company hopes will enable it to better compete with Amazon.com Inc." ["Wal-Mart mulls getting customers to deliver packages to online buyers," Reuters, NBC News, 28 March 2013] The article continues:

"A plethora of start-ups now help people make money by renting out a spare room, a car, or even a cocktail dress, and Wal-Mart would in effect be inviting people to rent out space in their vehicle and their willingness to deliver packages to others. Such an effort would, however, face numerous legal, regulatory and privacy obstacles, and Wal-Mart executives said it was at an early planning stage. Wal-Mart is making a big push to ship online orders directly from stores, hoping to cut transportation costs and gain an edge over Amazon and other online retailers, which have no physical store locations. Wal-Mart does this at 25 stores currently, but plans to double that to 50 this year and could expand the program to hundreds of stores in the future. Wal-Mart currently uses carriers like FedEx Corp for delivery from stores - or, in the case of a same-day delivery service called Walmart To Go that is being tested in five metro areas, its own delivery trucks."

Although the idea of having customers serve as couriers is intriguing, it raises a lot of questions. How would "courier customers" be vetted to ensure that they don't just drive off with the goods or use them as a pretext to get vulnerable individuals to open their doors so other nefarious activities such as robbery and rape can take place? The article notes that vetting is possible. It reports, "Zipments was founded in 2010 as a crowd-sourced delivery network that allowed anyone over 18 years old with a vehicle, a text-enabled phone, and a PayPal account to bid on courier services for local businesses. Such online match-making businesses often push legal boundaries - and a Wal-Mart crowd-sourced delivery program would be no different." A similar company called Deliv uses an "extensive filtering process" before hiring local drivers. ["Deliv’s same-day delivery service may finally give retailers a fighting chance against Amazon," by Ricardo Bilton, VentureBeat, 12 April 2013] Bilton claims, "Between background checks, a tough certification process, audits, and a ratings system, Deliv is doing a lot to ensure that its drivers are professional ones." The Reuters article continues:

"Wal-Mart would offer a discount on the customers' shopping bill, effectively covering the cost of their gas in return for the delivery of packages, he added. 'This is at the brain-storming stage, but it's possible in a year or two,' said Jeff McAllister, senior vice president of Walmart U.S. innovations. Indeed, the likelihood of this being broadly adopted across the company's network of more than 4,000 stores in the United States is low, according to Matt Nemer, a retail analyst at Wells Fargo Securities."

Scott Kirsner believes that "same-day service is just the beginning of a new wave of experimentation that could pose yet another Darwinian challenge to brick-and-mortar businesses of all sizes." ["Same-day delivery a new threat to retailers," Boston Globe, 7 April 2013] I'm not sure that's true. If, like the Google plan, local stores are used as fulfillment centers for online orders, same-day delivery may actually give local stores new life. According to Kirsner, "EBay is building its own network of 'shopping valets' for its eBay Now mobile app, launched in August. They fetch merchandise from chain stores like Nordstrom and Best Buy, and deliver it for $5. Consumers can follow their progress on a map, and get an estimate of arrival time." It wouldn't take much effort to get mom-and-pop stores involved in such a network. Nevertheless, smaller stores see cause for concern. One of the biggest concerns is cost. Kirsner reports, "Forrester Research analyst Sucharita Mulpuru believes that all of today's same-day services are operating at a loss, and that most consumers wouldn't be willing to pay the full price if it was passed on to them."

That fact raises the questions that the BCG analysts wanted answered: Is the compulsion retailers and carriers are feeling to implement same-delivery justified? To find out, they "surveyed 1,500 U.S. consumers about what would cause them to buy more online." What they discovered was that "most consumers care more about low-cost merchandise and free delivery and returns than same-day delivery." That result led the analysts to conclude:

"Retailers and carriers will need to carefully segment the market by customer, product, and 'buying moment' in order to make same-day delivery work. In creating mass-market strategies, retailers would be better off focusing their efforts on improving other aspects of their multichannel offerings, and carriers should focus on creating seamless and enhanced delivery and routing services while they beta-test the operating requirements and revenue benefits of same-day delivery."

Because same-day delivery cannot be justified using either financial or demand arguments, the BCG analysts recommend that it only be implemented when small profit margins can be maintained. They believe there is some money to be made if same-day delivery in implemented in that way. They write:

"In 2013, same-day delivery could conceivably generate between $425 million and $850 million in delivery fee income. That estimate assumes that consumers are willing to pay shipping fees of between $6 and $10 per purchase and that up to 2 percent of all orders are delivered on the same day. Offering the service at this price will leave very limited margin for retailers and parcel carriers. For the carrier industry, which generates $70 billion in annual revenues from parcel shipping, the projected revenue from same-day shipping is relatively modest — especially for the big companies. Thus, same-day delivery will likely remain a highly segmented niche market in the absence of subsidies from carriers or retailers. In any scenario, carriers and retailers will have to play large roles in creating, shaping, and energizing the service."

The analysts believe the targeted demographic for same-day delivery service should be "'affluent Millennials' — consumers aged 18 to 34 with household incomes exceeding $150,000. Affluent Millennials are 56 percent more likely to purchase same-day delivery than the average online consumer. They are also big spenders, buying $840 worth of goods online per quarter per person, compared with $289 for the average online consumer." The analysts admit that some companies may offer same-day delivery service for reasons other than profit (such as enhancing brand perception or differentiating themselves from the competition), but these "soft benefits" are limited. Their bottom line: "Economics and history suggest that retailers and carriers should go slowly in developing same-day delivery services."

Food Security Requires Implementing Complementary Strategies

Mankind has been trying to control the weather since the dawn of time. Historically, this intervention has taken the form of sacrifices, offerings, dances, and prayers to the gods who supposedly control such matters. There have also been more scientifically-based attempts to make rain, such as cloud seeding. Needless to say, these attempts have generally fallen short of the desired goal. Yet, as Keith A. Wheeler, chairman and CEO at ZedX Inc., reports, "All farmers, no matter their size, depend on the weather to the grow crops that feed the world, while providing a livelihood for their families and communities. This makes them among the most vulnerable to the changing climate. By 2050, if farmers are not assisted to meet these changes, agriculture yields will decrease with impacts projected to be the most severe in Africa and South Asia, with productivity decreasing by 15% and 18% respectively. Therefore, strategies to adapt to the significant shifts in weather patterns are greatly needed." ["Building resilient food systems in a world of climate uncertainty," The Guardian, 21 December 2012]

In other words, if we can't change the weather then the weather needs to change us. The irony of this situation is that "agriculture today accounts for 14% of total greenhouse gas emissions, with another 17% attributed to land use change linked to deforestation." That means that farmers are in some measure contributing to the climate variability with which they must contend. So one of the first strategies recommended to help shore-up food security involves empowering "farmers with the knowledge, practices and technologies needed to adapt and reduce agriculture's contribution to global warming." Fortunately, Wheeler reports, "Amidst these colossal challenges there is hope." He explains:

"Technological innovations are at the forefront of meeting the world's growing food demands, while reducing carbon emissions. High tech methods such as Precision Agriculture, for example, calculate the exact amount of fertilizer required by the soil on your farm, preventing over application and the release of unnecessary greenhouse gases, while simultaneously improving yields. Other practices, such as integrated pest management and pest information systems, improved training for farmers at all levels and new finance and risk management tools for smallholder farmers will all go a long way to building more resilient food systems. The thread that ties all of these innovations together is greater access for farmers to research, information and extension."

The need for better food security is becoming increasingly evident. "Pressure on the world’s resources is intensifying," writes Paul Polman, CEO of Unilever. "Increased competition for these resources has been compounded by the effects of severe weather conditions." ["Now is the time for action," Financial Times, 21 November 2013] He explains:

"Since 2000, food prices have more than doubled because of soaring demand, with desertification, floods and drought adding significant volatility to the trend of food price inflation. To make matters worse, it is countries with already high rates of malnutrition that tend to be worst hit. People in Chad, Ethiopia and Angola spend up to 60 per cent of their weekly budget on food – much of it imported. The most vulnerable are hit the hardest by price rises."

Polman admits there are no silver bullet solutions to the food security challenge. But he offers three strategies that he believes should be taken immediately. "First, we should eliminate the use of unsustainable biofuels." By "unsustainable" he means biofuels derived from food crops (such as corn) or feedstock that is grown on ground that could be used to produce food crops. "Second, we need increased investment in those parts of Africa and Latin America where the last remaining serious agricultural expansion potential lies, or wherever current yields are threatened." On this point, he agrees with Wheeler. Finally, he asserts that "developing country governments need to create long-term partnerships with the private sector, donors and civil society, to stimulate investment in commercial agriculture. The Copenhagen Consensus concluded that an investment in fighting malnutrition would benefit people more than any other type of investment – with a return of $30 for every $1 invested. And the World Bank found that an investment in nutrition can translate to a 2-3 per cent increase in a nation's GDP each year, breaking the cycle of poverty that traps families and nations."

Another recommended strategy for creating better food security is reducing food waste. The Institution of Mechanical Engineers asserts "the world wastes from one-third to one-half of the four billion metric tons of food it produces each year." ["The World Wastes As Much As Half Its Food, New Study Finds," by Jeff Spross, Climate Progress, 14 January 2013] If the waste itself is not bad enough, Spross reminds us, "Because any item of food also represents an entire chain of production, wasted food also translates into wasted fresh water, wasted energy, wasted cropland, and further contributions to global warming with no discernible counter-balancing benefit." And one shouldn't forget the amount of wasted money represented by wasted food. With the global population continuing to swell, wasted food puts greater pressure on rising food prices. Although the causes of wasted food are different in the developing and developed worlds, the problem is global. The report explains:

"In less-developed countries, such as those of sub-Saharan Africa and South-East Asia, wastage tends to occur primarily at the farmer-producer end of the supply chain. Inefficient harvesting, inadequate local transportation and poor infrastructure mean that produce is frequently handled inappropriately and stored under unsuitable farm site conditions. As the development level of a country increases, so the food loss problem generally moves further up the supply chain with deficiencies in regional and national infrastructure having the largest impact. […] In mature, fully developed countries such as the UK, more-efficient farming practices and better transport, storage and processing facilities ensure that a larger proportion of the food produced reaches markets and consumers. However, characteristics associated with modern consumer culture mean produce is often wasted through retail and customer behavior."

Since the causes of food waste are different, the strategies for reducing such waste must adapt to the situation. The report points out that controlling waste is beyond the capability of any single stakeholder (i.e., farmer, distributor, retailer, or consumer). Fortunately, it reports, "In most cases the sustainable solutions needed to reduce waste are well known. The challenge is transferring this know-how to where it is needed, and creating the political and social environment which encourages both transfer and adoption of these ideas to take place." Brad Plumer reviews a few of the solutions that could be implemented. ["How the world manages to waste half its food," Washington Post, 12 January 2013] He writes:

"For poorer countries, simply building better food-storage buildings could cut down massively on waste in places like Pakistan or Ghana (which lost 50 percent of its stored maize in 2008). Better harvesting technology and techniques could also help, although the report suggests that some nations like India will need more sweeping societal and political changes to cut down on waste. Meanwhile, wealthier regions like the United States and Europe will need to think harder about not throwing out so much perfectly good food. ... One small step, which Britain has been exploring of late, is to rethink their use of food labels, which often encourage supermarkets to toss out food long before it actually goes bad."

Another irony that we confront when discussing food security involves dietary habits. As food security improves so does the economic condition of impoverished people. As their wealth increases, their eating habits change and that can have a profound effect on food production. For one thing, studies have shown that as people scratch their way out of poverty their taste for meat grows. Raising livestock, however, is not the most efficient way to provide the protein that we need to be healthy. It takes a lot of land, feed, and water to raise livestock. Livestock, particularly cattle, also produce a lot of methane gas. You can't blame (or prevent) those who have struggled to survive from wanting a more varied and enriched diet; but, we need to realize that our dietary choices have an impact. In the end, changing human behavior may be the most difficult challenge we face in striving for better food security.

For an excellent discussion on the challenges that lie ahead and some of the strategies that can be used to meet them, watch the video of a panel discussion held at The Aspen Institute last year. The first speaker, Jon Foley, Director, Institute on the Environment, University of Minnesota, stated that if we don't get agriculture right nothing else really matters. Foley offers five recommendations for improving global food security. The first recommendation he offered is to stop deforestation and halt agricultural expansion. This would help reduce agriculture's carbon emission footprint. Second, he recommended closing "yield gaps" on underperforming lands. There are huge opportunities in Eastern Europe where farms are producing only 20 percent of what could be produced. Third, he recommended improving cropping efficiency. That is, ensure that resources like water and fertilizers are being used to maximum efficiency. Israel, for example, uses water 100 times more efficiently than Pakistan. Fourth, he says we need to shift dietary preferences. Finally, as discussed above, we need to reduce waste. Polman concludes, "Securing the future of agricultural development needs individual commitment and action on the ground. All of us, individuals, companies, policy makers and consumers, have a responsibility to act together, and the time to act is now."

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 2, Moving Forward

In Part 1 of this series, I discussed recommendations about how urban areas can begin efforts to make their cities smarter and more efficient. In this post, I discuss why moving forward is more controversial than one might think and how some of the concerns can be addressed. Greg Lindsay asks, "Who will own the brains of smart cities--citizens or corporations?" ["The Battle for Control of Smart Cities," Fast Company, 16 December 2012] My first reaction is, "Does it matter?" Lindsay believes it does. He writes:

"At stake is an impending massive trove of data, not to mention issues of privacy, services, and inclusion. The battle may be fought in the streets between bands of Jane Jacobs-inspired hacktivists pushing for self-serve governance and a latter-day Robert Moses carving out monopolies for IBM or Cisco instead of the Triborough Bridge Authority. Without a delicate balance between the scale of big companies and the DIY spirit of 'gov 2.0' champions, the urban poor could be the biggest losers. Achieving that balance falls to smarter cities' mayors, who must keep the tech heavyweights in check and 'frame an agenda of openness, transparency and inclusiveness.'"

Those are not just his conclusions, but conclusions of a Rockefeller Foundation-sponsored study entitled "The Future of Cities, Information, and Inclusion" that was published by the Institute for the Future. Lindsay reports that authors of the study conclude, "Without this catalyst for cooperation, we may repeat the devastating urban conflicts of the 20th century that pitted central planners like Robert Moses against community activists like Jane Jacobs." Lindsay continues:

"Befitting the Foundation's focus on the world's poorest and what it calls 'smart globalization,' the report's emphasis is on smartening up cities in the developing world--cities that lack both data about their swelling populations and the tools needed to make sense of it. The roster of expert contributors comprises a who's who of ubiquitous computing and gov 2.0 types, including MIT Senseable City Lab director Carlo Ratti, Everyware author Adam Greenfield, the Santa Fe Institute’s Nathan Eagle, Intel Labs Director Genevieve Bell, Microsoft Research’s Jonathan Donner, and San Francisco CIO Chris Vein. Together, they highlight five 'technologies that matter' for cities in 2020: mobile broadband; smart personal devices, whether they're dirt-cheap phones or tablets; government-sponsored cloud computing (modeled on the U.K.'s national 'G-cloud' initiative); open-source public databases to promote grassroots innovation, and 'public interfaces.' Instead of Internet cafés, imagine an outdoor LED screen and hacked Kinect box allowing literally anyone to access the Net using only gestures."

I admit the list of participants is impressive and their concerns certainly deserve consideration. The fact of the matter is, however, that not all data that could benefit smart cities is publicly owned or available. The World Economic Forum has declared data to be a new asset class, like gold or oil, and organizations that own that data are counting on benefiting from it. Does that somehow make them evil or uncompassionate? Of course not. The current global economic morass also demonstrates that reliance on public programs can result in national debts that inevitably hurt the poor more than the rich. The only way to move forward is to embrace public/private partnerships that benefit both sectors.

In first segment of this series, I noted that even when governments are offered programs created by civic-minded activists that have an obvious benefit for their citizens, politicians have often been hesitant to implement them. It's hard to imagine that something as important as smart city initiatives should be placed solely in the hands of government or ceded to unstructured populist movements. Both structure and broad-based support are required. Everyone seems to agree that the sine qua non for good smart city initiatives is the availability of data (BIG data). But you can't raise the subject of big data without also raising privacy concerns. Anthony Townsend, director of technology development at IFTF and the report's lead author, told Lindsay, that "those tensions come up in every discussion, whether it's privacy versus the public good, collecting data versus parsing it, and guaranteeing access to all citizens versus carving out virtual gated communities and corporate enclaves." Townsend pointed out how the same data could be used to promote good initiatives or could be used to obstruct initiatives. "There are ways," he told Lindsay, "all of these can play out as either dystopia or utopia."

Lindsay states that the report "is the highest-profile critique to date of the bright green rhetoric from companies like IBM, Siemens or Cisco, which have seized the chance to pad their top lines with government sales while corporate IT customers stockpile mountains of cash." Lindsay obviously has strong feelings on this subject. He could have written something like this: "The report is critique of smart city initiatives from companies, like IBM, Siemens, or Cisco, that see an opportunity to grow their businesses while helping cities become more efficient and effective." But that sentence wouldn't have raised your hackles nor have presented large corporations in a negative light -- an impression that Lindsay obviously wants to impart. Lindsay continues with a discussion of arguments presented in the report:

"Global technology companies are offering 'smart city in a box' solutions. Governments are responding to their pitch: a smarter, cleaner, safer city. But there is no guarantee that technology solutions developed in one city can be transplanted elsewhere. As firms compete to corner the government market, cities will benefit from innovation. But if one company comes out on top, cities could see infrastructure end up in the control of a monopoly whose interests are not aligned with the city or its residents."

Those concerns are certainly valid, but they are also addressable. They certainly shouldn't be used as arguments to prevent smart city initiatives from moving forward. Lindsay admits that cities need global technology companies to help them achieve more efficient operations; but, he writes: "Government officials just need to avoid being sold a bill of goods." Of course, they should. Townsend, too, admits that grassroots efforts aren't "scalable or sustainable yet, and that's what these corporate campaigns bring to the table." Smart city initiatives need to get all stakeholders involved.

Usman Haque, founder of Pachube.com, agrees that we need to move forward with smart cities initiatives but he believes that the current offerings of global technology companies haven't gone far enough. "For almost a decade, corporate giants like IBM and Cisco have been banging the smart city drum and," he writes, "frankly, the beat is getting a little boring. We've long been promised great things: more energy efficient power grids, an end to traffic jams and even rubbish bins that let you know when they're full." ["Surely there's a smarter approach to smart cities?" Wired, 17 April 2012] He continues:

"The truth is, all of these 'smart city" initiatives actually only reflect the most basic functionalities of the Internet of Things (IoT). The true potential for smart cities is so much greater, so much more interesting, and so much more important."

I couldn't agree more. With the world becoming more urbanized every day, pursuing smart city initiatives is important. Haque agrees with Lindsay that it also represents big bucks, which is why "every major IT company is looking for its slice of the smart city pie." He lists a few of those corporate initiatives, like IBM's Smarter Planet and Cisco's Smart+Connected Communities. He writes, "Despite the subtle differences in these approaches, in both IBM and Cisco's eyes, smart cities predict the convergence of smart information and communication technologies to improve the efficiency and effectiveness of urban systems and services." Haque doesn't quibble about the goals of smart city initiatives, but, like Lindsay, he rejects one-size-fit-all approaches. He believes such initiatives approach "the evolution of smart cities from fundamentally the wrong direction. "Their strategies focus on the city as a single entity, rather than the people -- citizens -- that bring it to life."

I agree with Haque that cities are too complex to be seen as a homogeneous entity. An approach to smart city planning that uses something like Enterra Solutions' Sense, Think/Learn, Act™ technology and advanced analytics could differentiate the needs of individual neighborhoods. Haque states, "Any adequate model for the smart city must focus on the smartness of its citizens and encourage the processes that make cities important: those that sustain very different -- sometimes conflicting -- activities." The very complexity of cities requires that technology be used, but used more effectively. Haque continues:

"Cities are, by definition, engines of diversity so focusing solely on streamlining utilities, transport, construction and unseen government processes can be massively counter-productive, in much the same way that the 1960s idealistic fondness for social-housing tower block economic efficiency was found, ultimately, to be socially and culturally unsustainable. We, citizens, create and recreate our cities with every step we take, every conversation we have, every nod to a neighbour, every space we inhabit, every structure we erect, every transaction we make. A smart city should help us increase these serendipitous connections. It should actively and consciously enable us to contribute to data-making (rather than being mere consumers of it), and encourage us to make far better use of data that's already around us."

That is very well argued. In first segment of this series, I referred to Dr. Boyd Cohen's Smart City Wheel. At the hub of the wheel, you find smart people, smart government, smart economy, smart environment, smart mobility, and smart living. I believe that Cohen's Wheel, and its associated indicators, take into account the concerns and recommendations expressed by Lindsay and Haque. Haque believes it all starts with (and will move forward because of) smart people. He writes:

"The 'smartness' of smart cities will not be driven by orders coming from the unseen central government computers of science fiction, dictating the population's actions from afar. Rather, smart cities will be smart because their citizens have found new ways to craft, interlink and make sense of their own data. Smart cities cannot be defined by one application, or central organising body, that sets pre-programmed limits. They will be defined by individual citizens, who are anxious to collaborate with each other -- to create devices and applications that solve specific local problems. Smart cities will be places that foster creativity, where citizens are generators of ideas, services and solutions, rather than subservient and passive recipients of them."

Haque says that we should abandon the dream of ubiquitous sensors and extraordinary networks because for most of the world such initiatives will be unaffordable for a long, long time. "Even if [cities] could find funding for the sensor hardware and installation costs, the on-going maintenance would be enormous," he writes. "The sheer volume of accessible data being transmitted would force huge investment in data centres and other IT infrastructure." So what should we concentrate on? He says that companies like IBM and Cisco should concentrate on developing "a flexible system that can dynamically adjust to changes, one that responds to unpredictable phenomena in a way that is not planned, and that harnesses the creative capacity of inhabitants." Rather than a one-size-fits-all solution, "citizens should be able to adjust and rewire the smart city as needed to solve problems and overcome obstacles in their own lives."

Haque agrees that both "corporations and governments ... have a major role to play in the smart city." But his belief is that they should make "data openly available for coders to build upon." Frankly, that's not likely to happen for a lot of data. Proprietary data remains too valuable an asset. I do, however, agree with his suggestion that corporations and governments should "make it easy for citizens themselves to create and contribute their own data." Haque concludes:

"The entry of pervasive computing into the city cannot be seen as a 'one-stop-shop' that will solve all of our problems from pollution to traffic management. Despite the best intentions of Cisco and IBM, connecting systems and bridging data will not by itself solve tough issues. At best, such systems will likely just provide greater visibility of urban problems. However, empowering citizens to find and build their own solutions dynamically may yet allow the full potential of smart cities to be realised."

I agree with Haque that all stakeholders must be engaged and stay engaged. That means that they must see tangible benefits from the initiatives that are implemented; especially if we expect them to continue to create and contribute their own data.

Socially Responsible Packaging

Bruce Horovitz, a marketing reporter for USA Today, recently penned an article discussing how more companies are becoming socially responsible. He credits much of this trend to the Millennial generation, a "trend-setting, if not free-spending group of 95 million Americans, born between 1982 and 2004." ["Millennials spur capitalism with a conscience," 27 March 2013] He continues:

"In an ultra-transparent world, where information zips from Facebook to Twitter to Instagram, just about everything a company does is out in the open, says John Mackey, co-founder of Whole Foods, a ground-breaking company in local community support. 'If everything you're doing is seen,' he says, 'it's human nature to do things that people would approve of.' But it's no longer just outliers such as Ben & Jerry's and Whole Foods doing the right thing. Big consumer brands such as Panera, Starbucks and Nordstrom are members in good standing of the Do-Gooder Society. More likely sooner than later, corporate kindness that doesn't have its origins in the public relations or human resources department may become as common as coupons. Even in a dicey economy, kindness sells."

It's not just kindness and compassion that Millennials are concerned about. They seem to be a generation much more attuned to making the world a better place in many ways, including environmentally. Over the past couple of years, sustainability has become a hot topic in supply chain circles. Packaging plays a significant role in promoting sustainability. Too much packaging is both wasteful and costly. Too little packaging, on the other hand, can result in product damage that also results in waste and monetary loss. In addition to protection and security, designing the perfect package must also take into account consumer aesthetics. After all, manufacturers produce and retailers sell products in order to make a profit. Products that sit unsold on a shelf help no one. Rosemary Grabowski, Global Marketing Director, CPG-Retail, Dassault Systèmes, reports, "As anyone involved in the consumer packaged goods (CPG) industry already knows, the role of packaging in driving sales cannot be understated. Viewing products on a store shelf is still the leading way for consumers to be aware of what products are available. Eighty-five percent of shopping decisions are made in-store — and most shoppers make their purchasing decisions within 5-8 seconds of seeing the product on the shelf. The package design, color and artwork chosen serve to stop, hold and close the shopper to select the product that is right for them." ["Designing the Perfect Package Better, Faster and Smarter than your Competition!" Consumer Goods Technology, 11 September 2012] She continues:

"With the increased importance of packaging in the overall success of a product, companies across the globe are pouring additional resources into understanding their consumer base and what exactly they want in a product. CPG companies, their packaging suppliers and the retailers that distribute these products need to start their processes by understanding the total consumer experience. What features and functions are most important to my consumers? How can I make my product stand out from the rest? What colors catch the eye? What is the optimal shelf placement? This is about defining the key elements of what is required to maximize the ability to stop, hold and close the consumer. Answering these questions with facts and insights will help improve our success in breaking through the clutter on shelf and deliver a more pleasant overall product experience."

As Millennials become the prime target for marketers, how "green" a package is will likely become more important. Grabowski points out that package design is becoming increasing complex. "Packaging design itself is full of contradictions," she writes. "The package must be tamper-proof, yet easy to open. It must be attractive, yet strong enough to handle transportation and storing. Packaging must be designed with sustainability in mind, yet secure enough to protect the product inside. And packaging must meet many regulatory requirements, yet still draw a consumer's attention at shelf." She notes that package design can no longer be "a siloed process, held completely separately from manufacturing and production."

If you think that too much fuss is being made over packaging, just consider how much is spent on packaging in two sectors: consumer packaged goods and food. According to the Procurement Leaders staff, "The global consumer goods (FMCG) packaging market will reach $436.5bn in 2013, as emerging markets demand FMCG products." ["Consumer goods packaging market tops $436bn," 23 September 2012] And the Modern Materials Handling staff reports, "Food packaging is approximately a $340 billion industry worldwide. In the U.S., about a third of household waste is food packaging, and much of this cannot be recycled." To address challenges like this, the "Rochester Institute of Technology will help to create the Center for Sustainable Packaging, an education and research center dedicated to the development and use of sustainable packaging." ["Center for Sustainable Packaging created at Rochester Institute of Technology," 18 September 2012] A report issued last fall by the consulting firm Deloitte reaffirms the need for more research and development of sustainable packaging. "Achieving breakthrough improvements in sustainable packaging is more difficult than simply substituting one material for another," Deloitte reports. ["You Need to Completely Re-Think Your Approach to Packaging, Report Says," SupplyChainBrain, 29 October 2012] The report, entitled "Thinking Outside the Box: Throw Away Your Current Approach to Packaging," points out that "many companies are seeking to improve product stewardship, achieve waste-reduction goals, and save money through sustainable packaging." The report concludes:

"The next frontier in this area requires a radical re-think of the value chain, thus achieving 'disruptive' improvements that not only reduce waste, energy and raw materials but also improve time-to-market, quality and margins. Sustainable packaging requires a healthy dose of creativity, strategic flexibility, and coordination across multiple functions of the organization. This may involve designers, manufacturers, merchandisers, buyers, suppliers, logistics providers and marketers — all challenging each other to break free from traditional conceptions of what constitutes packaging and working through the interdependencies that new product delivery models require. Companies that can embed sustainable packaging considerations throughout their supply chain management processes, from demand-and-supply planning to delivery and returns, can realize substantial environmental and economic benefits."

As the global middle class continues to increase, demand for packaged goods will also grow. The Procurement Leaders staff notes, "Packaged goods are often viewed as superior quality and more hygienic, explaining emerging market consumers’ preference for them." As the demand for packaged goods grows, the importance of sustainable packaging also increases. The dMass staff reports, "There are a lot of ideas for reducing the waste associated with packaging, from reducing the amount of materials needed for packaging, to making it easier to recycle packaging or using recycled materials as inputs. Designer Aaron Mickelson's concept is different: make packaging 'disappear' altogether." ["Resource Fix: Integrating packaging with products," dMass, 18 February 2013] Mickelson's ideas include printing packaging information right on the surface of products using ink that washes off, eliminating the need for outer packaging, and letting the product serve "double-duty as packaging." The article concludes, "Incorporating packaging right into products would reduce the amount of resources used for delivering products, as well as resources used to dispose of or recycle packaging." Tom Szaky reports on another zero waste packaging idea: edible packaging. He writes:

"Innovation is not just emerging in the form of reuse and redesign of product packaging, but in the form of a new initial purpose. For as long as we know, packaging is the part of the product that gets thrown away. Now there are several scientists working to create 'edible packaging' for products to help eliminate waste. The idea is controversial, and would require our society to adjust its norms about what is and isn’t considered edible." ["Giving packaging a second chance at life," Packaging Digest, 1 April 2013]

Szaky insists that "most consumers are blissfully ignorant of [the] important tasks" that packaging performs. Lora Cecere agrees. She writes, "It is pretty on the shelf, but it can be a problem for the sustainable supply chain. But in fact, unsuspecting consumers would never guess at the issues that the package on the shelf represents for the sustainable supply chain." ["Pretty is as Pretty Does?" Supply Chain Shaman, 17 December 2012] Despite consumer ambivalence to what goes into packaging decisions, Szaky believes that the challenges associated with package design also represent opportunities. He writes:

"Most product packaging has several aspects to it which provide reasons for a product's life to end. Physical life, functional life, technical life, economical life, legal life, and loss of desirability lead to products being thrown out or recycled. However, instead of looking at these in a negative way, we can look at each 'form of life' individually and find ways to extend them. ... In addition to the obvious fact that finding new uses for and redesigning product packaging is beneficial to the environment and supports innovation, it can also be good for business. Brand logos are printed all over product packaging, so if it just gets thrown out or recycled, people will no longer see it, and brand equity is lost. Packaging that is redesigned or designed for reuse helps to preserve the brand equity of those products for a little longer. ... Reduce, reuse, recycle … redesign. Redesign is the fourth 'R' of the future when it comes to eliminating waste. Whether it's redesigning packaging to be completely edible, creating no waste, or finding a way to design product packaging for new purpose and extend its life long term, there is no doubt that we are taking steps towards innovation in the future of waste management."

All of this attention to sustainable packaging is good news for the environment as well as the bottom lines of businesses that successfully achieve an optimally designed package. As the Millennial generation exerts even greater influence on the marketplace, companies that offer sustainable packaging are going to be ahead of the game.

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 1, Getting Started

On Friday, for the next several weeks, I'll be posting a series of articles examining how the world is becoming more urbanized and how governments, businesses, and citizens must adapt to ensure that urban growth is done intelligently. I'll discuss how big data can help influence city planning and operations as well as help manufacturers and retailers ensure that their products and services are available to urbanites. These topics are generally grouped together under the topic of smart cities.

In the post entitled Hurricane Sandy and the Resilience of Cities, I indicated that I had more to say about cities and how to make them more resilient. I believe that resilient cities are smart cities. Dr. Boyd Cohen, a climate strategist, believes "the smart-cities movement is being held back by a lack of clarity and consensus around what a smart city is and what the components of a smart city actually are." ["What Exactly Is A Smart City?, Fast Company, 21 September 2012] He continues:

"While some people continue to take a narrow view of smart cities by seeing them as places that make better use of information and communication technology (ICT), the cities I work with ... all view smart cities as a broad, integrated approach to improving the efficiency of city operations, the quality of life for its citizens, and growing the local economy."

Although I'm a technology guy, I agree with Cohen that a broad definition of what constitutes a smart city is better than a narrow one. To show how various city sectors come together to make a smart city, Cohen has developed what he calls the Smart City Wheel. At the hub of the wheel, you find smart people, smart government, smart economy, smart environment, smart mobility, and smart living.

Cohen admits that his "model has been inspired by the work of many others." The fact that many others are working to make cities smarter should be encouraging, especially in the light of the fact that urbanization is occurring at an historical rate. Cohen indicates that "there are over 100 indicators to help cities track their performance with specific actions developed for specific needs" behind the model. He says that efforts to create a smart city should begin with three steps. They are: 1) Create a vision with citizen engagement; 2) Develop baselines, sets targets, and choose indicators; and, 3) Go lean.

Rick Robinson, an Executive Architect at IBM specializing in emerging technologies and Smarter Cities and a self-labeled Urban Technologist, has his own ideas about to get a smart cities program started. ["How Smarter Cities Get Started," The Urban Technologist, 26 July 2012] He writes:

"Many of the environmental, social and economic forces behind the transition to Smarter Cities are common everywhere; however, the capabilities that enable cities to act in response to them are usually very specific to individual cities. They depend on factors such as geographic location, the structure and performance of the local economy, the character of local communities, and the approach of leaders and stakeholders across the city. The relationships between those stakeholders and communities are crucial. Cities may aspire to encourage economic growth amongst small, high-technology businesses; or to stimulate innovation in service delivery by social enterprises; or to switch to more sustainable patterns of travel and energy usage. To act successfully to achieve any of these aims, long and complex chains of connections between individuals need to work effectively, from city leaders, through their organisations, to community and business associations such as small business forums, neighbourhood communities, and faith groups, to individual companies, their employees and citizens across the city."

Robinson makes an important point about the uniqueness of each urban area's situation. The only way to discover that uniqueness, and the connections that are critical for improving society, is through analysis of big data. As Robinson notes in his article, a "complex web of city systems" must be woven into a cohesiveness system working together towards the same objectives. He doesn't claim to have all of the answers about how this can be done, but he writes that there are observable "patterns in the behaviour of the cities who have made the most progress." He states it all starts with a plan.

"Cities already have plans, of course. In fact, often they have lots of plans – for the economy, for housing, for public service transformation, for marketing and for many other aspects of urban systems. What is really required in a Smarter City context, though, is a single plan that captures the vision and means for transformation; and that is collectively defined and owned by stakeholders across the city; not by any single organisation acting alone. It needs to be consistent with existing plans within individual domains of the city; and in time needs to influence those plans to develop and change."

While working in the risk management area several years ago, we noticed that, because large organizations have departmental silos, each department usually maintains its own mitigation and recovery plan. Because those plans aren't coordinated, actions necessary to make one plan work (like shutting down a system) could negatively impact the mitigation plans of other departments. Only through effective coordination could the overall objective of protecting the organization be realized. The same thing holds true when developing a plan for a smart city; plans must be coordinated (if not integrated) so that various groups aren't working at cross purposes. Technology, like the Sense, Think/Learn, Act™ system being developed at Enterra Solutions, can be used to code natural language plans and then analyze them to discover conflicts, redundancies, non-obvious connections (inferences) and so forth. The same technology can be used to discover the unique qualities of neighborhoods and the important connections between stakeholders that are often not easy, or obvious, to understand. Robinson continues:

"A Smarter City plan needs to set out a vision that is clear and succinct, often expressed in a single sentence capturing the future that the city aspires to. That vision is usually supported by a handful of statements that summarise its impact on key aspects of the city – such as wealth creation, inclusivity and sustainability. Together these statements are something that everyone involved in the city can understand, agree to and promote. ... To make the vision deliverable, a set of quantified objectives against which progress can be measured are vital. In IBM as we work with cities to establish these measures, we're learning that social, financial, environmental, strategic and brand values are all important and related. They could include improvements in education attainment; creation of jobs; increase in the GDP contribution by small businesses in specific sectors; reduction in carbon impact in specific systems or across the city as a whole; improvements in measures of health and well-being; and may include some qualitative as well as quantifiable criteria. It is against such objectives that specific programmes and initiatives can be designed in order to make real progress towards the city’s vision.

In other words, Robinson agrees with Cohen that creating a vision is a critical first step towards a smarter city. Robinson believes that the vision is also critical for aligning stakeholder actions for achieving success. To ensure that stakeholders stay engaged and motivated, Robinson recommends "a mixture of long and short-term projects across city domains; and in particular that [the plan] includes some 'quick wins' – in attempting to work in new partnerships to achieve new objectives, nothing builds confidence and trust like early success." Like Cohen, Robinson believes that everyone must be engaged for a plan to succeed. He writes:

"Once stakeholders from a city ecosystem have come together to define a vision and a plan to achieve it, it's vital that they maintain a regular and empowered decision-making forum to drive progress. The delivery of a Smarter City plan relies on many separate investments and activities being undertaken by many independent individuals and organisations, justified on an ongoing basis against their various short-term financial obligations. Keeping such a complex programme on track to achieve cohesive city-level outcomes is an enormous challenge. Such forums are often chaired by the city's local authority; and they often involve representatives from local universities who act as trusted advisors on topics such as urban systems, sustainability and technology. They can include representatives from local employers, faith and community groups, institutions such as sports and retail centres, and trusted partners in domains such as technology, transport, city planning, architecture and energy. The broader the forum, the more completely the city is represented; but these are 'coalitions of the willing', and each city begins with its own unique mix. In fact, a formative event or workshop that brings such city stakeholders together for the first time, is often the catalyst for the development of a Smarter City plan in the first place."

Like many projects, initial excitement for smart city initiatives can be high and then taper off over time. Keeping people engaged is absolutely essential. That won't happen if the smart cities movement is viewed as a passing trend. Ben Rooney writes, "In the pantheon of Next Big Thing trends, the concept of 'smart cities' is one of the trendiest." ["'Smart City' Planning Needs the Right Balance," Wall Street Journal, 27 September 2012] Rooney's fear is that smart cities initiatives will be driven by well-meaning, but clueless, governments and that "there is a fear that such top-down programs may threaten the very vitality that attracts people to cities in the first place." Done correctly, smart cities should increase the vitality of cities not diminish it. That's why Cohen and Robinson are so insistent that all stakeholders need to be engaged.

Rooney agrees that smart cities initiatives are generally based on data analysis. He claims, however, that doing so is nothing new. He explains:

"One of the first uses of data to drive civic policy was more than 150 years ago when during the 1854 London cholera outbreak surgeon John Snow plotted cases on a map. He traced the outbreak to a water pump in Broad—now Broadwick—Street. When the pump handle was taken off, the number of cases immediately began to decline."

Imagine that kind of analysis being applied to urban challenges based on enormous amounts of data and using today's massive computer power. Health and safety are very important areas where connectivity and analysis can play a vital role. This value was recently demonstrated during the investigation that followed the terrorist bombings in Boston. Video and photographic evidence were critical in catching the perpetrators. Enterra Solutions has helped install a system at the Port of Philadelphia that has been recognized for helping make the port more secure. Holt Logistics' Chief of Security, Kurt Ferry, praises the system as "an example of a successful collaboration between private and public sector organizations using grant funds to enhance regional maritime security." ["Security Grants Help Improve Domain Awareness: A Success Story," The Beacon, Winter 2011] According to Rooney, cities of the future (like one being built in Portugal) will be even more connected. He writes:

"PlanIT is a €10 billion, four-year project to build a new smart city in Portugal to house some 225,000 people. With sensors built into every building it presents itself as an urban utopia where smart buildings can sense our presence and anticipate our needs. But behind this drive for efficiency is a fear that optimizing for data will drive out the inefficiencies that imbue cities with their humanity; cinematic history is littered with cautionary urban dystopias, from Fritz Lang's 'Metropolis' to the Wachowski brothers' 'The Matrix.' As Ben Hammersley, the U.K. prime minister's ambassador to Tech City, told the audience at the recent WSJ Tech Cafe event, optimizing is a dangerous thing unless you are quite clear on what exactly you are optimizing."

You recall that one of Cohen's first steps was to "go lean." Rooney is warning that you can go too lean. I agree. Hammersley an adviser to the Danish city of Aarhus, gave the Tech Cafe audience a specific example of what he was talking about. He told him:

"'Most smart-city initiatives are about optimizing the route for commuters getting to the office,' he told the audience. 'But Aarhus, which has the highest number of pavement cafés in the country—it is essentially one huge café—doesn't want to optimize that. The lesson is be careful what you measure because you may end up optimizing on the wrong thing.'"

That's where big data analysis and relationship discovery technology can play a major role in helping cities become the best they can be. Rooney labels the use of big data as "a bottom-up" approach to smart city planning. He writes:

"A very different kind of smart-city initiative has had success in cities as diverse culturally and geographically as San Francisco and Singapore, and is coming to Europe. Called Urban Prototyping, the movement approaches cities from a bottom-up—not top-down—viewpoint. Peter Hirshberg, who lives in San Francisco, is the man behind the drive, which aims to bring together programmers, planners, activists, and even artists to use data and technology to solve problems in cities. 'There needed to be a dialog between people doing interesting things and the folks running the city,' he said. 'San Francisco is awash with data, but it turned out that inside the bus system the guys use Walkie Talkies and clipboards to track busses that break down.' Over one weekend in July 2011 ... developers built an iPad app to solve this problem. 'Everyone wants the busses to run properly. This was a case of citizens getting together and solving a problem.' He cites dozens of other examples. 'We had a festival called "The Summer of Smart". The head of public works for San Francisco came along with a proposal. "Where I see public art I don’t see graffiti," he told us. "Where I see graffiti, I don’t see public art."' The result was a project called Art Here that brings together the two."

Although it sounds great, Rooney admits that even the best-intentioned efforts need champions who can make things happen. He reports that nine months after the bus app had been developed for the city, it still hadn't been implemented. That kind of underwhelming response can trigger both anger and ambivalence. As Rooney put it, "City Hall has proved to be the movement’s biggest challenge." He concludes, "If this movement is to make a real impact on the lives of city dwellers it will take more than some well-intentioned hackers and a lot of pizza."

I'm speculating that is why one of the main sectors on Cohen's Smart Cities Wheel is Smart People. Based on advertisements run during the last political season, it's clear that we could use a lot more smart people in government. Robinson agrees that "it’s impossible to understate the importance of individual people in making cities Smarter. The functioning of a city is the combined effect of the behaviour of all of the people within it; and Smarter City systems will not change anything unless they engage with and meet the needs of those individuals." Fortunately, I'm an optimist. I believe that technology can be used to create a better future and smarter cities.

In Stock, Out of Stock, and On-Shelf Availability

Every retailer knows that they can't sell what they don't have. If a product is not on the shelf when a customer wants it, the likely result is a lost sale. Dan Gilmore, Editor-in-Chief of Supply Chain Digest, believes that the out of stock (OOS) "problem is getting worse for many retailers." ["A Unified Theory of Out-of-Stocks?" 19 April 2013] Gilmore calls this situation "amazing" considering all of the technology currently available. He continues:

"E-commerce has added a wrinkle to the retail OOS challenge, as now the issue isn't just products not being on the store shelf, but now potentially 'not in stock' at the e-store as well. An OOS there likely has an even bigger impact in terms of lost sales than it does at brick and mortar retail."

Gilmore points out that in this instant-gratification world, consumers don't ask for "a rain check at a brick and mortar store for sale items that go out-of-stock" like earlier generations did. Gilmore points out that today's consumers "go elsewhere, or don't buy at all. So the penalty for OOS rises." I wonder how many younger shoppers even know what a rain check is? He goes on to note, "Out-of-stocks are not at all only a retail issue, it is a core supply chain and inventory challenge for virtually every company." In his article, Gilmore refers to a research paper written by Jesper Aastrup and Herbert Kotzab, entitled "Forty years of Out-of-Stock research – and shelves are still empty." [The International Review of Retail, Distribution and Consumer Research, Volume 20, Issue 1, 2010] Gilmore states that the study's title pretty well sums up his feelings.

To underscore how difficult the out-of-stock challenge can be, Gilmore notes that Walmart, widely recognized as a leader in supply chain innovation and implementation, still struggles with the problem. He writes, "[If] mighty Walmart's supply chain is mightily challenged with OOS, no wonder the rest of us are too." To learn more about Walmart's struggles, Gilmore points to an earlier Supply Chain Digest article entitled, "Walmart US Chief Says Sales are Suffering Because of Challenges in Keeping Stores Shelves Stocked." [4 March 2013] Gilmore continues:

"Here's why this issue is so complex: it is an equation that involves forecasting, 'long tail' management, retail in-store execution, uncertain and/or difficult to calculate financial impacts, different impacts depending on product category, different impacts on retailers versus manufacturers, the Bullwhip Effect, the Perfect Order, vendor variability, store inventory accuracy, overstocks, collaboration, etc."

In other words, there is no one cause that can be pointed out as the culprit creating out-of-stock situations. A large part of the problem, however, is the fact that there is not enough information sharing among stakeholders. One frequent result of information starvation is the Bullwhip Effect mentioned by Gilmore. The Bullwhip Effect is characterized by the depletion and rapid restocking of inventory. Loretta Chao and Lorraine Luk explain:

"This frustrating phenomenon occurs when falling customer demand prompts retailers to under-order so as to reduce their inventories. In turn, wholesalers under-order even further to reduce theirs and the effect amplifies up the supply chain until suppliers experience stock-outs – and then over-order in response. The effect can ripple up and down the supply chain many times." ["Acer Reassesses Inventory Policies," Wall Street Journal, 6 June 2011]

Until true demand driven supply chains are implemented, the best that can be hoped for is better collaboration that will help dampen the consequences of the bullwhip effect. Brent Nagy of TMC, offers "5 tips for successful Demand Smoothing":

"1. Dedicated Assignment. Asking a supply chain or transportation employee(s) to fit this forecasting and planning responsibility in amongst their day-to-day tasks typically does not work well. Assign someone who has time to make it a priority.

"2. Supplier and Carrier Collaboration. Give ample warning to vendors and Tier 1 carriers so they know what's coming. Often, they can make their own adjustments to help with surges in your demand.

"3. Metrics Monitoring. Understanding route guide and tender, fill rate, CWT and visibility by way of track and trace and potential late loads all act as ways to manage and isolate areas of concern and success. ...

"4. Use Proven Modeling Tools. While it seems simple, there is a science to Demand Smoothing. There are TMS-related technologies and processes that can be powerful tools.

"5. Project 100 Days Out. Work with sales and manufacturing teams on the inside and with suppliers and carriers on the outside to create a Demand Smoothing plan that looks out 100 days." ["Planning for the Bullwhip Effect," TMC Managed TMS Blog]

Walmart must believe that better collaboration with suppliers will help with its out-of-stock challenges. It recently announced "suppliers who receive appropriate training will be able to use their smartphones to perform many of the functions that currently require assistance from a store associate armed with a bulky Telxon tracking device." ["Walmart Gives Vendors Access to Backroom Inventory Data," by Tom Ryan, RetailWire, 15 April 2013] Ryan reports, "Beyond real-time access to data, suppliers and third-party merchandising firms will be trained to use the devices to handle basic practices such as printing missing shelf labels for items, stocking their products, and ensuring their displays are correct."

My company, Enterra Solutions, offers a few products that can help address some of the challenges associated with out-of-stock situations. Our Pre-Inventory Prediction (Available to Promise) and EnterraConnect™ modules represent critical components of Enterra’s Supply Side Visualization capabilities. Pre-Inventory Prediction utilizes advanced predictive capabilities. The system can monitor your vendor supply chain prior to warehouse delivery in order to detect shipping delays and identify the perturbative effect on customers. It then recommends remedies to minimize the impact of delivery delays, and it proactively assists with avoiding order cancellations through the renegotiation of cancel dates or by suggesting an alternative product. In addition, the system helps to reduce customer service time further by automating the tedious task of allocating limited-availability inventory across multiple order lines, purchase orders, and deliveries. This not only helps your organization meet current demands, but supports future growth by creating a positive experience for the customer. EnterraConnect extends supply chain visibility to the manufacturing vendor by tracking key milestones around production. This solution monitors supply chain prior to warehouse delivery to minimize the impact of delivery delays.

• Attempts to mitigate "product not available" issues
• Monitors shipping vessels, trucks, and rails to detect shipping issues
• Predicts the effects of shipping delays or production delays on customer orders
• Recommends remedies to minimize the impact of delays
• Suggests container unpacking priorities
• Allows for pre-allocation of future inventory deliveries (Available to Promise)
• Automates the task of allocating limited-availability inventory
• Extends milestone tracking to manifesting vendors to detect and respond to production delays.

Enterra's In-Flight Optimization offering addresses challenges in fast-paced sectors such as food, where risk of spoilage and daily replenishment factors are critical, having a system that can identify in-flight process optimization opportunities can mean the difference between realizing a highly profitable supply chain or having no supplies at all. Enterra’s In-Flight Supply Chain Optimization Module is designed to predict risks associated with delivery delays and inventory decline to protect against product deterioration and/or depletion. The offering optimizes time-critical supply chains to reduce product expiration and improve delivery results.

• Predicts intra-day at-risk customer service issues
• Reduces possible goods spoilage
• Allows for more frequent inventory replenishment
• Enables dynamic production changes to maximize deliveries
• Allows for intra-day optimization in fast-paced sectors such as food

In today's fast-paced world, more frequent inventory replenishment is becoming a necessity. Robert J. Bowman, Managing Editor of SupplyChainBrain, notes, "For retailers, the bar just keeps getting raised. Supply-chain excellence used to be about filling orders seasonally. Then weekly. Then daily. Now we hear of merchandise being replenished multiple times a day." ["In Modern Retail Replenishment, Once a Day Isn't Enough," 15 April 2013] He concludes:

"Intra-daily replenishment isn't easy to do, despite the wealth of data that flows through a typical retailer’s supply chain today. Merchandisers face two discrete challenges. One is technological, involving the systems needed to wed real-time demand data with planning. The other is physical – are the store and its distribution centers set up to pick, load and move product multiple times throughout the day, within extremely narrow windows? ... Intra-day replenishment isn’t only for brick-and-mortar operations. E-commerce merchandisers can become more agile in their fulfillment strategies as well. ... Intra-day replenishment might seem exotic to U.S. retailers today. As with every other advance in supply-chain efficiency, however, it’s likely to become a critical part of many merchandising strategies. While the future is impossible to predict, you can count on one thing: retail supply chains aren’t going to get slower."

Another Enterra product that can help with inventory management is our Productive Inventory Module, which helps to maximize the relationship between manufacturer and retailer by helping to determine the optimal product mix for your customer base. By integrating a menu of syndicated data, such as detailed store-related factors, local demographics, point of sale information, and other various historical data, the solution is able to identify underperforming products and better predict demand, which helps your organization maximize its shelf space. This product maximizes the productivity of shelf space and helps to optimize the retailer/manufacturer relationship.

• Eliminates or fixes underperforming products
• Looks for "turned off" products
• Helps to better predict demand
• Reduces spoilage

Even when a product is "in stock" if it isn't on the shelf and readily available to consumers, sales can still be lost. That's why Professor Jim Crowell, director of the Supply Chain Management Research Center at the University of Arkansas, reminded the editorial staff at SupplyChainBrain, "the notion of 'in stock' is quite different from that of 'on-shelf availability'." ["Why On-Shelf Availability Is Critical for Retailers," 17 August 2012] Crowell stated that knowing a product is in the building "might seem like a valuable metric, [but] it misses out on the complexity of retailing today." The article concludes:

"Add in the realities of technology and e-commerce, and it becomes increasingly difficult to determine exactly what constitutes a 'shelf.' 'In-stock could mean an item is on the premises but is in the back room,' says Crowell, adding that there exists 'a great abyss' between the mere presence of product and its availability to the consumer. Studies by the Grocery Manufacturers Association and participating retailers have helped to define some of the complexities involved in making stocking determinations today. Beyond the physical shelf, retailers are beginning to offer order and pickup services that bypass traditional store setups. Response to online orders can be as quick as two to three hours. 'Folks are starting to say, "Let's get the inventory as close to the customer as we can,"' Crowell says. In theory, consumers can pick up product at multiple locations. Such a broad network of options is expected to become more prevalent in the years ahead. For multichannel retailers, the challenge becomes how to support both kinds of order streams. Retailers are still grappling with the question of how to manage fulfillment to physical stores as well as the growing volume of internet orders. In addition, they are experimenting with different sizes of stores - yet another complication when it comes to executing efficient inventory management."

Dan Gilmore is probably correct that that out-of-stock situation is getting worse as supply chains get more complex. Unfortunately, there are no silver bullet solutions for inventory management; but, new technologies are available that can help.

Personalization and Targeted Marketing, Part 2

In the first segment of this two-part series on personalization and targeted marketing, I discussed the views of a number of analysts who believe that getting to know customers better and then providing them with tailored offers represents the future of advertising. Despite the almost unanimous opinion that personalization is going to be the differentiator that sets successful businesses apart, studies show that many companies have been sluggish to adapt their business models to include an effective digital path to purchase. One of the reasons for this delay may be that they don't know where to begin or how to proceed. Joel Rubinson, who labels the way ahead "behavior marketing," offers five cornerstones that will "equip your organization for behavior marketing." ["From mind marketing to behavior marketing," Joel Rubinson on Market Research, 14 March 2013] They are:

1. Build interactivity into your brand communications creative [endeavors]. TV advertising should encourage digital and second screen behaviors. Facebook stories should encourage return to the fan page, etc.
2. Build brand audiences so you have an annuity from your marketing investments. Encourage people to like and follow your brand, sign up for e-mails, and to download branded apps.
3. Create media targeting strategies that are based on behavior first and only use demos as a last resort for more scale.
4. Master mobile. It is not too soon to get ahead of the curve and soon will be too late. Mobile is likely to account for 10-20% of your total ad spend by 2020.
5. Build an insights and brand tracking strategy that converts digital and social behaviors into brand KPI metrics.

Many of the actions contained in Rubinson's cornerstones involve what Laurent Faracci, the U.S. chief strategy and marketing officer for packaged-goods giant Reckitt Benckiser, labels "calls to action." He states that if he had his way, "100% of our digital media would have a call to action." ["Years After Ditching the Click, CPG Marketers Embrace Web Ads With 'Calls to Action'," by Jack Neff, Ad Age, 25 February 2013] As you can see, behavior marketing must embrace both previous and contemplated consumer behavior. Francesco Banfi, Andrea Ghizzoni, Eric Hazan, and Andrea Travasoni, analysts with McKinsey & Company, believe that corporate digital advertising budgets are "often allocated inefficiently. At best, consumer companies evenly distribute their advertising resources across all consumer segments. At worst, they spend the majority of their budgets on the consumer segments with the least conversion potential." ["Digital intelligence: Profiles to profits in a new consumer landscape," Telecom, Media, and High Tech Extranet, 10 April 2013] To optimize marketing spend, they recommend a much more refined approach. The McKinsey & Company approach is based on four key pillars. Their first pillar involves user profiling:

"A profiling algorithm that uses semantic analysis classifies the content of the Web sites that Internet users visit. The algorithm tracks their histories and profiles them using up to 200 variables based on the content of the Web sites they visited and their purchasing behavior. Specifically, each user is automatically scored on each area of interest based on his or her browsing behavior (e.g., daily visits to travel Web sites or time spent reading travel articles). Additionally, online purchases for each product are tracked for at least one month, including whether the user was exposed to online ads. The profiling algorithm makes it possible to create highly descriptive profiles based on analyzing click-through and conversion rate data, which include user interests and sociodemographic descriptors."

Gabby Griffith agrees with the McKinsey analysts that the best way to provide a personalized digital path to purchase for consumers is "by gathering as much customer data as possible and building user profiles which can be updated as more data is received." ["Personalisation of ecommerce," eSeller, 18 March 2013] She warns, however, "This kind of use of data is viewed by some as an invasion of privacy so ... be careful not to go too far. But done correctly, personalisation can lead to a better customer experience and improved conversion rates for ecommerce businesses." The second pillar offered by the McKinsey analysts involves segment-product matching. They write:

"Using the relationship between product conversion rates and profiling variables, consumer companies can then employ a statistical algorithm to identify specific user segments for each product. These segments are defined by their appetites for and propensity to buy a certain product and are characterized by a well-defined and homogeneous profile. This makes it possible to create user microsegments that are potentially interested in a certain product."

Analysts at the marketing firm Compete agree. They write, "More work is ... needed to understand and personalize the mobile experience to different segments." ["Aligning Mobile Marketing With Consumer Behavior," Compete Pulse, 11 March 2013] Caspar Craven also agrees. He states that "knowing which segments of their target audience is engaging with what content, allows you to achieve three things." They are:

• Attribute the real value that marketing generates to the 'sales' process.
• Segment their target audience and reach out to key targets with the right messages at the right time.
• Build stronger relationships through enhanced client insights.

Craven adds, "We're seeing much more sophisticated measurement, reporting and analysis coming through, and the plethora of tools will continue to increase." Judi Hand, however, believes that segmentation doesn't go far enough. ["Three Ways to Use Customer Data to Drive Marketing Relevance," Customer Experience Blog, 12 March 2013] She writes:

"Adaptive marketing programs are in tune with customers because they use next-generation analytics to extract valuable insights from mountains of data. They gain ground by leveraging intelligence to segment customers and evaluate their engagement patterns as well as their total customer lifetime value. Marketing masters know that although segmentation has long been a key component of a successful strategy, it shouldn't be the only analytical engine driving the effort. Customer engagement analytics and predictive models are also critical."

The next pillar discussed by the McKinsey analysts involves targeted advertising. They write:

"Once the relationship between products and users has been identified, digital advertising can be pushed to only the most relevant segments using tailored messages. This approach optimizes advertising budget allocation and significantly increases ROI. McKinsey's pilot shows that the solution can improve digital campaign ROI by 250 percent thanks to accurate targeting and ad tailoring."

A 250% improvement in ROI is a big number and it makes you wonder why some companies have been slow to adapt a good digital path to purchase strategy. According to Hand, one of the reasons that a better ROI can be achieved through targeted marketing is that fragmentation of markets is no longer the barrier it used to be. She explains:

"The one-size-fits-all marketing approach is dead, and influential marketers are using psychographic profiles to develop value propositions that resonate with each customer type. But, how do they efficiently generate marketing materials that are as unique as their customers? They use adaptive engagement technologies to do it all for them—automatically. Gone are the days when markets were considered too fragmented to penetrate cost effectively. Smart marketers use technology-driven marketing solutions to automatically evaluate and create custom-tailored campaigns for each person's unique needs. These solutions analyze customer data across all communication channels and dynamically generate customized content based on personal profiles and buying behavior. The most intelligent solutions shift strategies based on customer online activity, purchases, and other trigger events."

The final pillar discussed by the McKinsey analysts is easy implementation. They explain:

"This solution can easily be integrated into ad servers. Once the algorithm is rolled out, targeted campaigns can be both continuously run and continuously improved - ensuring that only those Web users with the greatest potential for conversion will be targeted. Beyond advertising, this solution can be used to achieve other objectives, such as optimizing a merchant Web site so that it better fits visitor characteristics. Examples of this include customizing Web site layout, offering tailored promotions and prices, and displaying products to maximize sales conversion. Companies can even enrich their CRM databases to enhance their relevance by using Web behavior information to design more sophisticated multichannel campaigns."

Although McKinsey's algorithm is proprietary, the pillars they discuss are applicable to similar solutions offered by other companies. Hand, for example, pushes her TeleTech's solution. She writes:

"True marketing powerhouses collect multichannel data (including social and mobile), deploy adaptive marketing technologies to extract customer insights, and automatically generate personalized content for each segment. While many companies get bogged down in building their own architecture to execute customer-centric marketing strategies, leaders leapfrog their competition by involving their IT partner and by working with customer experience companies to deploy all-in-one cloud solutions for the data-driven marketing of tomorrow."

My company, Enterra Solutions, can also provide powerful digital path to purchase solutions for companies. I agree with Joel Rubinson that "paid advertising WILL change in fundamental ways in our digital, social, and mobile future." The companies that will do best will be those that start now to understand as much as they can about this digital future.