Slides from our joint talk with Princess Auto about their successful Flowcasting implementation in retail, helping to transform the business

1. January 25 2018
TRANSFORMING THE BUSINESS
USING FLOWCASTING
Ewen McIlraith, SVP Supply Chain & Customer Marketing, Princess Auto
Mike Doherty, Partner, Demand Clarity
Jeff Harrop, Partner, Demand Clarity

2. FLOWCASTING IMPLEMENTATION
Objectives
• Outline the Flowcasting process
• Provide an understanding of the Princess Auto Flowcasting
implementation
• Share insights on how this implementation has helped transform
the business and enable us to be customer centric
2

3. WHAT IS FLOWCASTING?

4. HISTORY/EVOLUTION OF FLOWCASTING
1964 1977 1983 1986 1994 1995 1997 1999 2006 2008 2009 2013 2016
Joe Orlicky
MRP
Andre Martin
DRP
DRP
Book
First
Retail DRP
Pilot
Infopartnering
Book
Pilot
Of Store
Planning
Commercial
Software
Full
Scale
Retail DRP
Flowcasting
Book
CPG
Retail
Pilot
Flowcasting
For SONY
Stores
CPG
Retail
Pilot
Flowcasting
Full Scale
Rollout

5. THE PHILOSOPHY OF FLOWCASTING
Flowcasting is based on a simple, yet powerful idea: “Never forecast what you can calculate.”
In the retail supply chain, there is only one point of true demand – at the specific time and location
when a consumer buys a specific product.
All prior product movements are dependent on the true demand and can be calculated rather than
forecasted.
Retail
Store
Retail
DC
Manufacturer
DC
Manufacturer
Plant
Raw Material
Supplier
Forecast
Calculate
The Consumer Demand “pulls” inventory through the Supply Chain based on Planned Arrivals

6. PLANNING CHALLENGES

7. HOW FLOWCASTING PLANS –SALES
Promo Sales Fst
LLY Sales
LY Sales
This year’s
Forecast

8. HOW FLOWCASTING PLANS - REPLENISHMENT
Projects OH into the future
Planned
Arrivals

9. ORDER PLANNING – FLOWING INVENTORY
Store is planned to receive 10 units in the week of 5/16 and 20 units in the week of
5/23 to avoid violating safety stock and the 20 units is in support of the event
Regular
replenishment:
10 Units
Promo
replenishment:
20 Units

10. CONSUMER DRIVEN SUPPLY CHAIN
RETAIL DC Wk
1
Wk
2
Wk
3
Wk
4
Wk
5
Wk
6
Wk
7
...
Wk
52
Store Planned Orders 48 24 48 528 312 96 ...
In Transits 192 ...
Projected On Hand 260 236 188 236 116 212 212 ... 164
Planned Arrivals 576 192 192 ...
Planned Orders 576 192 192 ...
STORE 12 Wk
1
Wk
2
Wk
3
Wk
4
Wk
5
Wk
6
Wk
7
...
Wk
52
Total Forecast 33 44 40 46 383 229 49 ... 50
In Transits ...
Projected On Hand 102 106 66 68 69 80 79 ... 71
Planned Arrivals 48 48 384 240 48 ...
Planned Orders 48 48 384 240 48 ...
STORE 29 Wk
1
Wk
2
W
k 3
Wk
4
Wk
5
Wk
6
Wk
7
...
Wk
52
Total Forecast 18 14 12 14 123 89 14 ... 22
In Transits 24 ...
Projected On Hand 47 33 45 31 52 35 69 ... 64
Planned Arrivals 24 144 72 48 ...
Planned Orders 24 144 72 48 ...
MFG DC Wk
1
Wk
2
Wk
3
Wk
4
Wk
5
Wk
6
Wk
7
...
Wk
52
RDC Planned Orders 576 192 192 ...
In Transits 576 ...
Projected On Hand 784 784 592 400 400 400 400 ... 400
Planned Arrivals 576 ...
Planned Orders 576 ...
Calculate
Supplier
Scheduling
To Master Production Schedule
Forecast
Calculate DC Scheduling

11. Product ID Description Mfg. Code Source Location Destination3/30/2015 4/6/2015 4/13/2015 4/20/2015 4/27/2015 5/4/2015 5/11/2015 5/18/2015 5/25/2015 6/1/2015 6/8/2015
8359184 1009V 99 0 0 0 0 0 0 0 0 0 0 0
140242 CENTURY 80GL GUN AND CABLE 9SS25532-111114V 99 0 0 0 0 0 0 0 0 0 0 0
140243 MARKER METAL STREAK SILVER 96006 1114V 99 0 0 0 0 0 0 0 0 0 0 0
6410016 REFILLS ROUND SILVER STREAK 96007 1114V 99 0 0 24 0 0 72 0 48 0 0 120
6410017 MARKER PAINT WHITE VALVE ACTIO 96800 1114V 99 0 0 0 0 0 0 0 0 0 0 0
6410018 MARKER PAINT YELLOW VALVE ACTI 96801 1114V 99 0 0 0 0 0 0 0 0 0 0 0
6410033 MARKER PAINT RED VALVE ACTION 96802 1114V 99 0 0 0 0 0 0 0 0 0 0 0
6440023 PAINTSTICK QUIK STIK WHITE 61067 1114V 99 0 0 0 0 0 0 0 0 96 0 96
8119364 FLUX PASTE REGULAR 4OZ 22194 1114V 99 0 0 0 0 0 0 0 72 0 120 0
8119372 MARKER PROLINE WHITE FINE 96857 1114V 99 0 0 0 0 0 0 0 0 0 0 48
8119430 MARKER PROLINE YELLOW FINE 96858 1114V 99 0 0 0 0 0 0 0 0 0 0 0
8119497 TRADESMARKER W/ 5COLOR REFILLS 96000 1114V 99 0 48 0 144 0 0 48 0 144 0 72
8281636 SOAPSTONE HOLDER W/5 REFILLS 80142 1114V 99 0 0 0 0 0 0 0 0 0 0 0
8281644 PAINTSTICK B WHITE 3PK 80295 1114V 99 0 0 0 0 0 0 0 0 0 0 0
8537417 PAINTSTICK B YELLOW 3PK 80296 1114V 99 0 0 0 0 0 0 0 0 0 0 0
8537433 MARKER DURA-INK RETRACT RED 96581 1114V 99 0 0 0 0 0 0 0 0 0 0 0
8592834 MARKER DURA-INK RETRACT BLACK 96580 1114V 99 0 0 0 0 0 0 0 0 0 0 0
3890581 SPRAY HEATBARRIER COOLGEL 16OZ 11513 1156V 97 0 0 0 0 30 0 0 50 0 0 60
3890892 TOWELS SHOP WHITE 50PC STW-50P 1156V 97 0 0 0 0 0 0 0 0 0 0 0
8153595 RAGS SHOP NEAR-WHITE 10LBS SXN-10C 1156V 97 0 0 0 48 0 0 72 0 0 72 0
8377590 CLOTHS DETAIL MICROFIBER 5PC RMF-1414/5R1156V 97 0 0 0 0 0 0 0 0 0 0 0
8377616 BRUSH TELESCOPING FLOW-THRU BT-1.8 1156V 97 0 0 0 0 0 0 0 0 0 0 0
8491557 CHAMOIS 4 SQUARE FEET RMFPU-4 1156V 97 0 0 0 0 0 0 0 0 0 0 0
SUPPLIER SCHEDULE EXAMPLE
Ship Date Wk1 Wk2 Wk3 Wk4 Wk5 Wk6 Wk7 Wk8 ..Wk25 Wk52
Quantity 144 192 96 96 144 1680
Weekly, vendors receive a forward looking 52 week schedule by product and ship to location

12. ABOUT PRINCESS AUTO

13. ABOUT PRINCESS AUTO
• Proudly Canadian hard-goods retailer
• 45 stores including 11 e-Fulfillment stores
• Key categories:
1. Workshop: Garage and shop equipment
2. Driveline: Motors & engines, and hydraulics
3. Trailer: Repair and upgrade trailer
4. All Seasons: Tarps, fans, pumps, log splitters, generators, etc.
5. Surplus: “Fun and Unique” - variety of overstocks, discontinued
and factory-reconditioned items

14. WHO ARE OUR CUSTOMERS?

15. Value Drivers:
WHAT DO CUSTOMERS WANT FROM US?
15

16. THE FLOWCASTING IMPLEMENTATION

17. IMPLEMENTATION OVERVIEW
Entities Planning Scenarios
• 43 stores
• 15,000 products
• 3 DC’s
• 420 vendors
• 18 replenishment
analysts initially;
now 9 demand
planners and 9
replenishment
analysts – no
additional
headcount
1. Regular
2. Promotions
3. Seasonal
4. One time buys
5. Surplus products
6. New products
7. Discontinued products
8. New stores
9. New DC
10. Capacity planning
11. Financial planning
(early stage S&OP)
Timeline (MAY 2014 – JUN 2016)
• 19 months – initial implementation
• 6 months – S&OP, Capacity planning
Business Consultants
• 1 person – initial implementation
• 2 people – S&OP, Capacity planning
System Consultants
• 1/2 of one resource
PAL Team
• 4 business team members
• 1.5 IT team members (50% of time)

18. • Instill a new way of working:
• Forecast sales at the shelf
• Use time-phased plans from supplier to store
• Flow product to the shelf
• Automated ordering at a single lead time
• Managing by exception
• Working to a single set of numbers (for PAL and suppliers)
• ‘Silence is Approval’
IMPLEMENTATION PHILOSOPHY

19. THE APPROACH
INSTILL
DEVELOPENGAGE
Vision
Current
State
Educate
Project
Plan
Team
Education
Process &
Solution
Design
Process Labs,
Pilots
Implement
Institutionalize
Sustain&
Improve
BEHAVIOUR CHANGE
(Ongoing education, learning, training, coaching)
Technology
People don’t believe what you tell them.
They rarely believe what you show them.
They often believe what their friends tell them.
They always believe what they tell themselves.

20. Inventory accuracy
Visibility
Retail S&OP
RETAIL OPERATIONS
Date based priority planning
Visibility
Retail S&OP
SUPPLY CHAIN OPERATIONS
Consumer demand forecast
Integrated time phased planning
Supplier scheduling
DEMAND PLANNING & REPLEN
Assortment planning
Sales plans & strategies
Retail S&OP
MERCHANDISING
Supplier scheduling
One lead time, sensible LTs
Silence is approval
VENDORS
NEW MENTAL MODEL

21. 1. It’s about changing behaviors and the
mental model
2. Big leaps are easier when they’re
intuitive
3. Collaboration is simpler, more natural
with consumer demand and a single
set of numbers
4. Software should be largely invisible
to the effort
LESSONS LEARNED

22. TRANSFORMING THE BUSINESS

23. IN-STOCK DASHBOARD
• Improving performance will require a focus on:
• Store inventory accuracy
• On time performance, including vendor performance
• Right-sizing store inventory models (planogram determinations)
• Improved spreading of aggregate promo forecast to stores
• Start: May 2014
• Live pilot: Jul 2015
• Phase 1: Jan 2016
• Phase 2: Jun 2016

24. 24
SALES TO INVENTORY RATIO
• Start: May 2014
• Live pilot: Jul 2015
• Phase 1: Jan 2016
• Phase 2: Jun 2016

25. Demand Sales Projection Outbound Volumes
Inventory Inventory Level Projection Space Requirements
Supply Purchases Projection Inbound Volumes
Projections in Units:
Demand, Inventory, Supply
Cash Flow Forecast
Margin Analysis
Projected Inventory Costs
Rough Cut Capacity Planning
Manpower Planning
Space Planning
Transportation Planning
Multiply by
Price/Cost
Multiply by
Cubic Feet or
Weight
AGGREGATE PLANNING

26. Wk1 Wk2 Wk3 Wk4 …. Wk52 Total
Category
Cat1 - … $$ $$ $$ $$ $$ $$ $$
Department
Dept1 - … $$ $$ $$ $$ $$ $$ $$
Sub-department
Sub-dept1 - … $$ $$ $$ $$ $$ $$ $$
Class
Class1 - … $$ $$ $$ $$ $$ $$ $$
Total $$ $$ $$ $$ $$ $$ $$
Annual
Plan
Wk1 Wk2 Wk3 Wk4 …. Wk52 Total
Category
Cat1 - … $$ $$ $$ $$ $$ $$ $$
Department
Dept1 - … $$ $$ $$ $$ $$ $$ $$
Sub-department
Sub-dept1 - … $$ $$ $$ $$ $$ $$ $$
Class
Class1 - … $$ $$ $$ $$ $$ $$ $$
Total $$ $$ $$ $$ $$ $$ $$
Forecast
Item/Store
(rolling 52
weeks)
Tactics
(Promos, New
Items, New
Stores)
Identify where plan is at risk
CONTINUOUS PLAN VALIDATION

27. CONSENSUS PLANNING
• Sales plan vs Flowcasting forecast
Period 6 to Period 11 Inclusive
Category 390 410
Sales Plan $25,277,025 $22,105,901
Flowcasting Forecast $27,156,706 $22,794,756
• Buyers and Demand Planners are working together, speaking the same language: sales
• Together, for the first time, the can get an ongoing projected view of aggregate sales
forecasts compared to plan:
• If they don’t like the projections, change the strategies and tactics, re-forecast and
re-plan and review
• Significantly improved control of the business

28. OPERATIONS PLANNING
Network Planning Capacity Planning
DC/Transportation/
Store Scheduling
• Guides the long-term
evolution of the HD network
based on Long Term business
plans
• Ensures the Supply Chain
network has sufficient
capacity and resources to
address future needs
• Budgeting of costs
• Produces detailed DC
schedules based on actual
order lines
• Designs transportation routes
and loads based on actual
order lines
Description
• Buy, build, lease new facilities
• Decommission existing
facilities
• Upgrade existing facilities
• Add shifts
• Article path assignments
• DC labour requirements
• DC shifts/hours
• 3PL resources requirements
• Transportation resource
requirements
• Scheduled orders
• DC Pick schedules (waves)
• DC receiving schedules
• DC door assignments
• DC work assignments
• Driver, equipment
assignments
• Store receiving schedules
Key decisions
• Horizon: 5-10 years.
• Frequency: 3-5 years (with
annual adjustments)
• Granularity: Year, Quarter
• Horizon: 12 to 18 months
• Frequency: Monthly
• Granularity: Month, Week
• Horizon: 24 hours +
• Frequency: Daily (at least)
• Granularity: Minute
Typical planning
horizon,
frequency,
granularity
• Supply Chain Optimization
software
• TBD • Order management system
• Transportation planning
• DC scheduling
• Etc, etc,
Technology
Production Planning
• Fine tunes the capacity plans
• Product slotting decisions
• Pick face replenishments
• Some carrier tendering
• Store delivery dates
• Horizon: 1-4 weeks
• Frequency: Daily
• Granularity: Daily, Shift
• TBD

29. DC CAPACITY PLANNING OBJECTIVES
Operational Efficiencies driven by available capacity
• Prevent congestion
• Allows prioritization of processes and labour
• Efficient use of assets
• Reduce rework
Important Input Into Budgeting
• Inventory, receipts, shipments by facility
• Labour and MHE
• Offsite and 3PL arrangements
• Event Planning:
- Promo Event
- Seasonal
- Line Review

30. OMNI-CHANNEL FULFILLMENT : FROM - TO
30
Stores
Retail DC
Ecommerce
Fulfillment DC
Stores
Retail DC
FROM TO

31. OMNI-CHANNEL PLANNING USING FLOWCASTING
31

32. YESTERDAY
Regional
Stock
Reactive
Functional Silo
Relationship and Responsibility
CREATING A SIMPLE “FROM – TO” PICTURE
TODAY & TOMORROW
National
Flow
Planned
Integrated Processes
Analytical and Accountabilities
32

33. Thank You!