1. Supply Chain Management in the Real World
Why did I write a series of articles on this topic? Because I’ve never come
across a decent guide for retailers on Supply Chain Management. There are libraries
covering supply chains for manufacturers and logistics operators but precious little
relating to stock management within a chain store network. The books purporting to
cover this part of the Supply Chain seem to be academic or theoretical rather than
practical. Nobody who has ever been involved in the sharp end of the retail supply
chain ever seems to go into print.
Why do supply chain managers from the retail industry not record their
knowledge? They can’t all be illiterate. One theory is that there is more money to be
paid by selling experience by the day as a consultant. Or perhaps retail supply chain
people do not feel qualified in their own area of expertise. Like me, they struggle to
understand the books currently on the market, which all seem to be teeming with
esoteric algorithms and have nothing to do with the mundane business of keeping the
shelves full. The academics all make us seem amateurs in our own profession.
In my career I’ve worked for an international retailer with chains in 35
countries. I’ve formed and trained supply chain teams across Europe and Asia. In this
respect, I’ve searched long and hard for books which could help me to teach the
subject. In the end, I had to give up and write my own. My books are mainly aimed at
supply chain practitioners in a retail business. If suppliers or other parties in the
marketing mix want to get an idea of how retailers think, these articles may be of
interest. If you simply want to know how retailers manage the complex task of
bringing thousands of items to the customer, this should give you an insight.
Supply Chain skills have an enormous impact on a retail business. It’s quite
common for a lowly paid clerk in the Supply Chain team to be responsible for $100m
of goods. This is the equivalent of the entire budget for a Hollywood film being given
to an intern. If a junior Supply Chain clerk orders too much or too little stock the
impact on the business can be huge. It’s therefore rather important that supply chains
are run by people who know what they are doing.
Despite this, the knowledge base on the market is amazingly thin. The supply
chain degree courses available are geared towards manufacturing, and as with the
literature, bear little relationship with the day-to-day job in a retail environment. Once
recruited into a retail team, I’ve found that graduates with supply chain degrees need
as much training as other candidates, often more. They know all about mass
movement of goods and supplying trade customers, but nothing at all on the
replenishment of stock within a chain store environment.
In fact, Supply Chain staff are usually recruited from inside the business and
lack any basic training in replenishment techniques. Even in retailing, which is not the
most appealing career for a graduate, Supply Chain is a department of last resort.
Everybody wants to be a buyer, not a number-cruncher. Graduates only stay with the
supply chain until something more exciting turns up, and it’s often necessary to fill
the ranks with staff press-ganged from other parts of the business. The reluctant
volunteers need to be trained from scratch, usually by other people, like me, who have
learned on the job.
What are my credentials? What qualifies me to write on Supply Chain? Well,
I’m not a mathematician and I do not have a MBA or any sort of qualification in
logistics. What I’ve learned about supply chain was picked up by ear. In fact, I have a

2. degree in English Language and Literature, which, if it helps to impress you, was
obtained at Oxford University.
Looked at another way, my whole life was a preparation for a role in
replenishment. I started my training at the age of 13, when I took a spare time job as a
‘bottler-up’ in the local pub. This involved carrying crates of beer up from the cellar
and stacking the shelves. This was my first lesson in the basics of replenishment. The
manager of the bar gave me few instructions. Rotate the stock, he said. Put the new
stock at the back and bring the old stock forward. Make sure you give the right
amount of space for each type of drink, especially on the cold shelf where the space is
limited. If not, the bar staff will run out of stock on Friday and Saturday nights when
the pub is busiest.
Bob, the manager, didn’t give me a mathematical formula for this. He just told
me to use my common sense. If the shelves were empty on a Sunday morning it
meant that the stock had run out the night before, so I should increase the facings. If I
noticed that there were always bottles of a certain brand left over, I should cut its
space. Looking back, this was probably the most important lesson I ever received as a
supply chain manager. Bob’s law - Fill, observe, adjust, fill. What else did I ever need
to know?
After six months doing this, I was given additional responsibility. I was
entrusted with the stock ordering. The drinks were all purchased from the brewery and
a weekly order had to be raised. Looking back, this seems a lot of responsibility to
give 14 year old boy who was too young to even buy a drink in the pub. Bob gave me
a pretty simple system. Each brand of beer was stacked up on the floor in the cellar.
There was a chalk mark on the wall for the minimum level, and a chalk mark for the
maximum. All I needed to do was estimate how many crates to order reach the upper
line of chalk. Bob didn’t invent this system, by the way. It had probably been applied
in the pub over many generations. Years later, when I learned about the concept of
‘min max’ stock replenishment, I thought back to the chalk marks on the brick wall of
the beer cellar and knew exactly what it meant.
Over time, I learned a few more complexities about stock replenishment in the
licensed trade. Seasonal demand was a learning curve. Lager sold better in the
summer, stout in the winter. Certain items followed a specific customer demand. If a
rock band was playing, the Light and Bitter sales would spike; if a dance band was
booked, the older generation would drive the Brown and Mild sales. Male strippers
caused a run on Babysham. ( Of course, this was in the late 60’s in the UK, and
nobody under the age of 50 will remember any of these exotic drinks. I’m just
showing my age. ). The lesson I was learning, albeit unknowingly, involved
promotional forecasting techniques.
Christmas was the biggest learning curve of all. My first year on the job, Bob
took me round the cellar when he placed the pre-Christmas order. I thought he was
crazy at the time. The order seemed impossibly high. When the stock arrived, it filled
up the entire cellar and spilled out onto the yard. I had to climb up on boxes to reach
the top layers. But sales at Christmas reached their peak and the brewery went on
holiday for a week, so the surge had to be planned. The next year, when I ordered the
stock myself, I spent many anxious days watching the Bass Pale Ale stack getting
lower and lower, and hoping that the stock would survive until New Year’s Eve.
At the age of 16, I was running the bar and organizing outside events. This
meant that I had to stack up the trolley and push the barrels and gas pumps down the
road to the Village Hall. Another lesson in replenishment; reverse logistics. If I
ordered too high there were a lot of full barrels to heave back the next day.

3. Availability targets were also a painful lesson. If I under-ordered and ran short, the
customers would give me an earful on the night. Drunken customers at a weekend
party are not the most forgiving clientele when out of stocks occur. This was my first
experience in retail management. I had to serve the customers, balance the till and
make sure the takings were correct. This gave me a basic education on retail
accounting and stocktake policy. My training in the fundamentals of retailing came at
the wage of fifty pence an hour, with a £1 bonus if the event made money. Slave
labour, or valuable internship?
Even through university, I had summer jobs which unknowingly prepared me
for my future career. For several weeks, I worked in a potato warehouse as a manual
labourer. This taught me that it would be a good idea to get a degree and not have to
stack spuds for a living. On the practical side, life in the warehouse made me familiar
with fork lift trucks and pallets and the hard facts of physical distribution. In
commercial terms, I learned the basics of supply and demand, something that the
grammar school neglected to teach. The price of potatoes, it seemed, was a matter of
timing and depended on when the farmer planted the crop and decided to dig it up.
The early crops were more valuable, and the new potatoes commanded a premium.
Weather had an effect on prices, as did imports from other countries. Demand and
supply had to be managed so that the old crop lasted until the new crop was available.
Some people profited by selling early, and others by holding back. Stock, it seemed,
could be a liability or an asset depending on timing and circumstances.
My next lesson in supply chain management was on a building site. I took on
summer jobs on a site with 400 houses under construction. Again, this involved
physical labour. I carried hods to the bricklayers ( just-in-time supply ) and unloaded
trucks of window frames and doors. But because I was a college boy, and presumed to
be intelligent, I was made the understudy for the stores manager who controlled the
inventory of materials for the site. When he was on holiday, I ran the supplies yard. I
supervised deliveries and recorded the new stock in the books. When the painters and
the chippies withdrew their materials, I signed the chits and adjusted the stock
records. Computers were not in general use at the time. In fact, calculators were a
rarity. The whole exercise took place on stock and order cards with manual
arithmetic. The process had probably not been changed from the middle ages, but it
seemed to work well enough. One thing I’ve learned since becoming an IT Director is
that software doesn’t change the basic process, it just makes it faster or more accurate
( or sometimes the reverse ).
I made one spectacular cock-up by ordering 300 gallons of paraffin instead of
diesel. The fork lift trucks almost ground to a halt before I corrected the mistake, and I
always wondered what happened to all the unwanted paraffin. Later in life I would be
the victim of many egregious mistakes in ordering by junior staff, so cosmic karma
has certainly paid me back for this early crime.
After finishing my English Degree, I took a job as a copywriter for an
advertising agency. The year was 1977. Nothing was further from my mind than
working in the Supply Chain area, but copywriting wasn’t my forte either, and after a
few months I switched to sales.
My sales career lasted nine months, and provided valuable lessons in the
replenishment area. I was given a car and an area of North London to sell frozen food
for Findus, a subsidiary of Nestle. My customers were small grocery stores in the
main, but there were also several supermarkets on the patch, and with these the job
was slightly different. In those days, frozen food was a fast-growing market, and the
supermarkets allowed the big suppliers to provide a dedicated service. My job as a

4. salesman would be to visit the stores, check the stock and decide what products to
order to fill up my proportion of the freezer. Nowadays we would call this Vendor
Managed Inventory, but the term was not in vogue then.
This part of the job involved some tricky calculations. The delivery would be
made one or two days later, so it was necessary not only to guess how much stock it
would take to fill the cabinet, but how much additional sales would be made in the
interim. If I under-ordered, I would lose sales; but if I over-ordered, the stock would
not fit in the freezer. Gradually, I came to realize that there was a third variable
consisting of the amount of stock that could be stolen by the truck driver. Many
stores failed to check the unloading, and this made them vulnerable to short
deliveries. One driver named Peter regularly helped himself to nearly half the drop for
the less vigilant stores. I was really caught out when Peter had a sick day, and all my
orders were too big for the cabinets. The lesson I learned here was very valuable when
I later worked in the retail trade. Van sales and direct store deliveries are responsible
for a huge amount of shrinkage, and whenever goods change hands in the supply
chain, the transaction costs and vulnerabilities are extensive. And if something goes
wrong, blame it on the IT system.
After nine months on the road I moved to head office and joined the marketing
department. I became a Product Manager for Beefburgers and Fish Fingers. The sexy
part of the job involved advertising and packaging design, promotional campaigns and
incentives, but demand forecasting was also involved. The Product Manager had to
liaise with production and provide sales forecasts. This was my first experience in
forecast management. Some of the report formats I used have stayed with me all these
years. The key takeout was that the Marketing people are always hopelessly
optimistic and over-forecast the sales. The Production people know this, and always
scale back the runs. The Marketing staff second-guess the degree to which Production
cut their forecasts, so they inflate them even further, and so on, ad infinitum.
Forecasting is not a science; it’s a game of poker where different players try to bluff
each other out. Even when computers are involved, rules of the game are essentially
the same. Forecasting is commercial politics, not science. Marketing people always
lie.
My first real lesson in replenishment techniques took place at when I was
working as a product manager for a canned foods company. A consultant by the name
of Hugh drew me a diagram that looked like a factory roof. He explained that it was a
visual depiction of stock over time. Stock goes up when you have a delivery and goes
down over time when you use it ( or sell it ) until it the next delivery comes in again
and the next spike occurs.

5. This lesson must have made a big impression on me, because I remember the
scene in the portacabin where it took place, and can even visualize the blue suit that
Hugh wore at the time. It was a lesson that I’ve passed down countless times over the
years to trainee supply chain staff.
Hugh gave me was a simple algorithm.
Order = Avg Weeks Sales x ( Review Time + Lead Time + Buffer Time) - ( Stock
on hand + Stock on order )
In simple terms, he expressed this as ‘Order enough stock to last until your
next delivery arrives – plus a bit extra as a buffer, minus any stock you have already
or have already ordered.’ Now this struck me as common sense, but I’d never
appreciated that it could be written as a formula before. It neatly described the
intuitive calculations that I’d made when ordering beer for the pub or frozen peas for
the stores on my sales route. Once learned, this was a simple idea that I’ve carried in
the tool kit ever since.
By the end of the 1980’s I did not regard this as very important because
Supply Chain was not my career. By then I was working for Tesco as a Buyer. I’d
changed from being a supplier to a retailer, which was a poacher to gamekeeper type
of switch. At Tesco, I flew all over the world buying canned goods by the millions of
cases. This made me very popular with suppliers. I didn’t need to involve myself too
much with the supply chain side, however, because Tesco was a big operation and had
a replenishment team that magically handled all that boring side of the business. I
negotiated, I designed new products, and I was wined and dined a lot. Job done. The
stock got to the stores somehow without my involvement.
Then, in 1991 I moved to Hong Kong. A company called A.S.Watsons
headhunted me to become a corporate consultant. My first task involved planning a
new warehouse operation. This didn’t seem a natural fit with my experience, but
Hong Kong sometimes works like that. I had to manage the set-up of a new 200,000
sq ft warehouse for fast-moving groceries. The company was installing a new
warehouse IT system and this job also landed on my desk. Somehow, within a year I
managed to close these projects down and escape back into Buying roles for
ParknShop.
At the time, ParknShop had around 200 stores and was the No. 2 supermarket
chain in Hong Kong. I cut my teeth running the Non-Food department, and then ran
the entire Fresh Food area. I was quite happy doing this, until one day in 1995 it was

6. decided that a Supply Chain department would be set up and I was the man for the
job. My earlier dabble in Logistics and IT projects made me the ideal candidate,
apparently. I refused at first, and it was a close run decision whether to stay or return
to the UK.
Supply Chain Management, at the time was the Big New Thing. SCM was
sweeping through Europe and the USA and Hong Kong wanted to be a fast follower. I
took up the role for ParknShop, and also served on the industry-level board that was
trying to promote SCM in Hong Kong. I became Chairman of the committee that
standardized the local pallets. There were 14 variants in the market, and it was
something of a challenge to bring the industry into alignment.
ParknShop ( PNS ) was on a dramatic expansion push at the time. It was a
supermarket business that was moving into the hypermarket area. This posed
interesting challenges. The warehouse had to move from handling 5,000 items, mainly
sourced locally, to 25,000 mainly from overseas. In the end, I managed this without
any increase in warehouse space. PNS increased sales fourfold over several years
without additional capacity. The trick involved moving to cross-docking and auto
replenishment. I put all these processes into place as a complete amateur, inventing
each stage of the process as I went along. If I’d bothered to have read books I might
have found that other people had implemented these concepts already; equally I might
have been side-tracked by any number of fancy but inappropriate techniques. Luckily,
I never did find any books at the time which purported to explain how to apply cross-
docking or auto ordering in a retail chain. Or, if I did, I certainly didn’t understand
them.
There were other challenges along the way. Hong Kong people prefer to buy
their fish still alive and swimming, so the logistics of moving fish to stores had to be
overcome. There was also the challenge involved in collecting pigs from the
slaughterhouse in the early hours of the morning, and getting them cut and delivered
to stores within four hours. Hot foods and sushi also had to be handled, and there was
certainly no manual available to help in these areas.
AS Watsons went on a huge expansion programme from 2001-2005. This
involved buying retail operations in Europe and Asia. By the end of this period, ASW
operated in 35 countries, with 10,000 stores. After spells as Business Process
Director, and COO in Hong Kong, I took the role of IT and Logistics Director for the
Group on a worldwide basis.
In terms of replenishment, I’ve racked up a lot of air miles. I’ve switched 20
or more businesses from manual to automated ordering, implemented cross-docking
in multiple locations, and changed store systems several countries at a time. This
coverage included supermarkets, electrical outlets and wine stores in Hong Kong,
hypermarkets in China, food outlets and health and beauty stores in numerous
countries ( Turkey, Russia, UK, Thailand, Latvia and Malaysia to name a few ), and
luxury outlets throughout Europe from Romania to the UK. The operations ranged
from 4 stores to 1,400, including wholesale channels, internet and home delivery set-
ups. One way or another, I’ve played in every aspect of the retail business from the
start to the end of the supply chain.
The western managers that I meet often look down on Hong Kong or Asia,
thinking that the retail scene must be very backward, or that supply chains are behind
the times. Think again. The emerging economies in Asia have often leapt over their
western counterparts. They have less baggage, fewer unions and a can-do attitude.
True, automation is not always the best approach, because labour is often cheap, but
change, when it happens often goes from primitive to world class in a single bound.

7. Things get done in Asia or Eastern Europe far more quickly than in the old world,
where every manager in the room will give you a dozen reasons why it can’t be done.
Look at China and e-commerce. The speed of change is breath-taking.
With AS Watsons I worked extensively in Europe, and then with Dairy Farm
I’ve worked all over Asia again. The speed of change in Supply Chain is amazing.
Multi-channel retailing is changing the game. Voice pick and pick to light are
replacing paper in the distribution centres at a prodigious pace. Automated
replenishment is becoming commonplace.
And yet…. somehow we’re all making it up as we go along. There’s no rule
book. There’s a Tesco way and a Carrefour way and a Wallmart way, and they’re
very different. Oracle will sell you one sort of solution and SAP will sell you another,
and they’re likely to be out of date by the time you’ve installed them. The big
consulting companies will tell you all the options, let you pick the wrong ones, and
charge you for doing the obvious thing in the first place. Looking around the market, I
see some hugely over-engineered solutions; retailers who would use a computer to
count their own fingers and still come up with the wrong answer; who spend so much
to build a portal for suppliers that it would be cheaper to send the Purchase Orders by
courier. And at the other extreme, there are retailers on a massive scale whose
systems are so primitive or entangled that they can’t report an accurate margin or
know how much stock they have in their stores.
Sometimes, I think, we just need to draw breath. If I’ve learned anything, it’s
that the simplest solutions are the best. Some things are basic. We just have to get the
stock to the shelves. There’s no point to using algorithms and black box systems that
nobody understands. We don’t need a forecast engine to tell us that sales go up at
Christmas. We just need to understand our customers, understand our products and
deliver them on time.
On reflection, I do not have many qualifications to write about supply chains
and replenishment in retailing. Most of what I’ve picked up over the years has been
self-taught. Everything I’ve learned has been based on practical experience, and from
trouble-shooting across a wide variety of businesses. It helps to have a broad
perspective in the Supply Chain. Having worked as a labourer, a copywriter, a
salesman, a marketing man and a buyer; having implemented Finance and Store, HR
and distribution systems; having worked for suppliers and agencies as well as
retailers, all helps to get a understanding of how a supply chain works. It’s not just
about moving products from A to B; it’s about understanding the behavior of all the
participants and interest groups who stand in the way. The politics are always more
important than the numbers. Sometimes you can’t learn this from books, especially
when it comes to the last few yards, the retail interface where the customer and the
supply chain finally collide.
Whatever my qualifications in the Supply chain are, perhaps the most
important lessons I ever learned were not made from books, but were picked up in the
beer cellar, the potato warehouse and the building site. Replenishment is simple stuff,
really. It’s not rocket science. It’s performed by ordinary people with common sense
and it’s just about keeping the shelves full.