Massmart, owner of Game and Builders, which is working to return to profitability, has hired Argentinian Martin Halle, who spent more than 20 years with Walmart, to come to SA to head up the supply chain revamp.
Halle, Walmart’s supply chain vice-president, explained how Massmart is learning from its owner Walmart and how its newest distribution centre will improve in-store product availability and sales.
What are you gleaning from Walmart as you upgrade your supply chain?
There’s a few aspects that we want to leverage from Walmart.
One of those is actually a machine-learning technology, for demand forecasting. It’s called Smart Forecasting. It typically forecasts [demand for products] based on historical sales. That’s what Pick n Pay does. That’s what Shoprite does. That’s what we do. The beauty with Smart Forecasting is that it actually brings additional features or information into the calculation of demand.
For example, it will take into account a sporting event. If you have Pirates [football team] playing there are certain articles on that specific date that’s going to spike [in demand]. The software has the possibility of incorporating all of that data when it determines product orders. That’s a technology that Walmart has in multiple countries, in the US, in Canada, in Mexico and in the UK. And we want to import it to SA.
Why do you need software to forecast what consumers will be buying?
If there is this [soccer] game, and there’s a potential spike in a certain amount of products at this particular store, you’re going to miss that. When you’re managing articles and store combinations, in multiple locations, it’s millions of combinations of data. It’s very difficult for a human to follow that up. So what this technology does is it gets information from that signal such as a sporting evening in a specific location and it applies that information into the calculation of the product demand.
Does this help with local suppliers and improve stock availability?
If my stock calculation wasn’t correct, Smart Forecasting actually overwrites that calculation, and it provides the correct one, without the need for anybody to do absolutely anything.
It also has the capabilities to predict when a supplier is going to be delivering or if a supplier is not going to be delivering the assortment that we requested.
Why do you need to predict suppliers’ behaviour?
Our suppliers’ performance in SA is definitely not on par with the rest of Walmart. The performance that we have over here is at lax against Mexico or Canada or whatever other market we compare with. So it’s good to have the possibility to predict delivery performance and actually react to that prediction.
What do you mean SA suppliers lag?
Out of 100 orders that we order, we don’t get 100, we don’t get 95, we don’t get 90. We get significantly less. This has to do with market conditions, suppliers’ own supply chains, their own raw materials. Retailers are very dependent upon supplier performance. In markets where performance lags, technology like this one is a massive, massive differentiator.
Don’t supply chain upgrades typically take much longer than planned?
We are targeting at least a very small pilot this year using the smart technology and potentially rolling it out to the whole business next year. That’s an example of us trying to move at a different pace than what it typically takes for supply chains to be upgraded.
You have combined Makro, Builders, Game and Masscash discount stores into single orders. Is it helping?
We were generating potentially up to 18 purchase orders [from the same supplier] in the same truck. So the possibility of consolidating all of that volume and converting those 18 orders into one order brings benefits to the supplier and to all the parts of the supply chain. Everything becomes much more productive.
When CEO Mitchell Slape announced the turnaround plan to restore profitability, he said Game was often out of stock of in-demand products. Have you fixed this?
We are moving a lot of the manual replenishment that we used to have in Game into an automated system. It has significantly increased our availability at Game.
How does your new distribution centre at Brackengate in Cape Town help?
With a capacity of 53,000m², this is the second-largest distribution centre in the Massmart group, and a significant upgrade from the previous airport centre that had a capacity of 19,500m².
That extra square footage at Brackengate allows us the possibility of direct inputs to come through Cape Town. We are starting a pilot study [to test] that. So rather than unloading in KwaZulu-Natal around Durban, and carrying all of those goods inland, we are delivering those directly into the Cape region.
How are your upgrades improving online sales?
We are in a massive process of consolidating our network and transforming it. What that means is we are switching from old legacy warehouses and old depots and converting distribution centres into also [acting as] fulfilment centres.
Distribution centres are mainly built for service [shopping] stores. Generally, we use either pallets or full cases. And typically, fulfilment centres [for online shopping] are single-unit picking, and much more focused on specific customer orders.
So locating those two together is going to be a very significant improvement for Massmart. Last but not least, everything is underpinned by technology.
What I try to tell everyone is that we want to have a tech-enabled supply chain. You cannot run million-article documentation on Excel spreadsheets.
Stock shortages are common due to global supply disruptions and shipping delays thanks to Covid-19?
So right now, the solution that we are applying to the problem is the old tried and tested one. Increase your stocks. With that, you’re going to pass through the crisis with as little disruption as possible.
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