Building a responsive supply chain

NRF Supply Chain 360: Joann and IBM on operationalizing the unexpected
Fiona Soltes
NRF Contributor

The NRF Supply Chain 360 conference and expo was held in Cleveland June 20-21, 2022. It explored the modes and methods needed to build a stronger, more sustainable supply chain and ensure resiliency in challenging times. Learn more about the conference, here.

Attendees of NRF Supply Chain 360 are fully aware that no two days in supply chain are the same.

“But when you take a step back and truly think about that — and realize that the systems out there aren’t designed for that — then it makes you rethink your business,” said Joe Berti, vice president of product, IBM sustainability software, IBM.

Berti took part in the IBM-sponsored keynote session, “Sustainable retail requires sustainable supply chains.” He was joined by Varadheesh Chennakrishnan, CIO of Joann; Scot Case, vice president of CSR and sustainability for NRF, moderated the session’s roundtable discussion.

There’s been a lot of talk about sustainability, Berti noted, but he wanted to cover it from a different perspective: “How do you operationalize, and then what do you do when you’re right in the middle of events that are driven by sustainability?”

Berti touched on black swan theory, which describes a surprise event that has a major effect and is later inappropriately rationalized. “COVID-19, by all measures, was a black swan event,” he said.

Further, we tend to think our future will be like our past — and our past biases tend to confuse our future decisions. “And the more we know about a subject, the more likely we are to get it wrong,” Berti said. “That’s not real encouraging, is it?”

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Also discouraging: Supply chain disruption is becoming increasingly prevalent. Statistically speaking, this is related to geopolitical factors, pandemics (which aren’t new), the growing world population, rationing, inflationary issues, weather events and regulatory pressures.

So, what’s to be done? Supply chains need to be more responsive and intelligent, Berti said. Visibility into a supplier’s suppliers’ suppliers is critical, as is a single view of the truth. There’s a need to proactively manage severe weather events and to use specialized purpose-driven algorithms. Sustainability must become native to future systems and solutions. And there’s a high need to manage on an exception basis in order to scale.

“If you don’t manage by exception, you’re going to have the all-too-common approach of throwing both people and money at the problem,” Berti said. “And nobody has enough people and enough money to solve all of the problems.”

For his part, Chennakrishnan said, coming from a technology background, “we always talk about people, process, technology.” And with COVID, all three were stressed.

“What really mattered was half of our chain was closed to customer traffic,” he said. “As you all know, we didn’t have masks in every store when COVID hit. But we, as Joann, had all the materials you need to make a mask, make a scrub and all of that.”

"If you don’t manage by exception, you’re going to have the all-too-common approach of throwing both people and money at the problem. And nobody has enough people and enough money to solve all of the problems.”

Joe Berti, IBM

Customers were aware of this fact, he said, and because stores were closed, went online for purchases. The resulting traffic was comparable to “three times Black Friday,” Chennakrishnan said — but with systems built for about 1.5 times Black Friday. Joann had to quickly scale its systems to support customer demand, including expanding ship-from-store and buy online, pick up in store capabilities.

COVID offered Joann numerous takeaways. “The one thing that we learned is that anything is possible if we put our minds together, which we did,” Chennakrishnan said. “There was no playbook, so we went ahead and figured out what is important and how we make it happen.”

The ability to pick, pack and ship from the store for ecommerce orders opened opportunities, and the company remains at twice its pre-COVID volume, he said, “which means we need to have a better fulfillment engine within our stores.”

Joann also considered how it could surprise and delight customers picking up online orders; not everyone wants to come inside. Customers can now notify Joann when they’re on the way, and store employees can have their orders ready to go at the doorstep when they arrive. It takes under two minutes average to hand over the order once the customer is there, Chennakrishnan said — and he has experienced it himself as a team member walked out the door just as he drove up.

“We have learned quite a few things that we have looked at as opportunities and have already implemented,” Chennakrishnan said. Joann is opening a new distribution center to support its ecommerce fulfillment and is working to bring its data together to provide the most visibility and increase its decision-making abilities, among other efforts.

Berti, who spoke briefly of IBM’s Environmental Intelligence Suite and Supply Chain Intelligence Suite, said software simply “has to be much, much more dynamic.”

“Despite all the great work IT does,” he said, “you can’t wait two months to get a report with a black swan event.”

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