Table of Contents

Introduction
Modern CPG Retail: A Daily Miracle, One of the World’s Wonders
Understanding the Retail Value Chain
The Problem: Modern Retail is Dizzyingly Complex
Wisy Platforms: Bringing Visibility to Product Availability in CPG Retail
The Cost of Manual Processes and Waste in CPG Retail
The Team at Wisy Platforms Has Studied This Problem Up Close and Personal
Wisy’s Innovation Harnesses the Power of Exponential Technologies
Technology-Driven Innovation in CPG Retail Supply Chains is Consequential
Why Do Companies Like Walmart and Amazon, and others in CPG Retail Care?
Conclusion

As someone who grew up in Ghana and Nigeria before immigrating to the United States in 1997 to attend college, observing the reaction people in the United States had to bare shelves in retail stores during the peak of the COVID19 Pandemic was eye-opening; It wasn’t till then that I realized most people had no understanding of the number of mind-boggling miracles that make consumer packaged goods (CPG) retail possible.

CPG covers: Perishable and Non-Perishable Food; Non-Alcoholic Beverages; Wine, Spirits, and other Alcoholic Beverages; Household Goods; Beauty and Cosmetics; Fashion and Apparel; Footwear; Accessories; Healthcare and Pharmaceuticals; Toys; Household Appliances; Housewares,and; Tobacco Products. CPG is characterized by goods that are purchased frequently and consumed quickly - sometimes every day.

Modern CPG Retail: A Daily Miracle, One of the World’s Wonders

As we walk up and down the aisles of a large retail store and fill our shopping baskets or carts with products selected from the wide variety from near and far, it is easy for us to overlook the sheer complexity, mind-boggling scale, and outright magic that is modern retail.

What is retail? According to Merriam-Webster, retail is “the sale of commodities or goods in small quantities to ultimate consumers.” The Retail Industry is the group of organizations and businesses that are concerned with such selling. That is to say, it is the industry “of, relating to, or engaged in the sale of commodities at retail.”

A detailed discussion of each function falls far beyond the scope of this blog post. However, some of the standard functions within retail are;

Buying; The Sourcing and procurement of all the goods and products that one finds in a retail store.
Supply Chain Logistics; Managing the warehousing, distribution, and transportation activities that are necessary to ensure the right selection and quantities of goods and products arrive at each store on time, and at the right cost.
Retail; Managing the actual sales of goods and products to the end consumer through the retail organization's sales channels in such a way that customers are satisfied and return, and the organization earns satisfactory profit margins. Retail must work hand-in-glove with Supply Chain Logistics and Buying to ensure that inventory flows meet demand at the right time, at the right place, at the right price, and in the right quantities. Because of the temporal nature of retail, a sale that is not made within a certain financial reporting period is lost to that period forever. For example, infant formula sales that were not made in the 2nd Quarter of 2022 can never contribute to revenues and profit margins for that quarter.
Manufacturing; Vertically integrated retail organizations are those that manufacture most or all of the goods and products that they sell to consumers. Trader Joe’s is one example of a vertically integrated grocery retail company. Such retail organizations have to maintain significant control over manufacturing operations to meet the selection of goods and products on offer in their stores.
Marketing; Retailers have to create a desire in consumers to shop at their store as opposed to a competing retailer’s stores. This is achieved through advertising, promotions, and other tactics.
Human Resources; This function is responsible for developing strategies for recruiting, hiring, training, motivating, and getting the best out of a retail organization’s employees by arming them with the tools necessary to enable them meet consumer’s expectations, and therefore to help the organization maximize sales and profit margins.
Finance & Accounting; This function is responsible for strategically managing the money flows in and out of the organization.
Information Technology (IT); The business of retail is a data and information intensive business. Retail organizations need IT teams that can support every other function within the organization with data, information, and other decision-making and analytics tools to help the organization maximize sales and profit margins. Some of these IT systems may be designed in-house, and others may be obtained from outside vendors who sell the same platform to other retail organizations that may be direct competitors.
Customer Service; This function deals with complaints from consumers and shoppers to keep dissatisfaction at a minimum.
eCommerce; There may be a team of specialists tasked with selling to consumers through digital channels like an ecommerce website, social media.

Retail can be organized as a Multichannel or Omnichannel experience for the consumer. A multichannel retail approach simply provides several different options so that each consumer can choose their preferred shopping channel. An omnichannel retail approach allows the consumer to have one seamless, integrated experience across multiple channels. The different channels could be physical stores, ecommerce websites, electronic catalogs hosted on third party platforms, printed catalogs, social media, etc.

To understand why modern retail is one of the world’s wonders, consider that at any given time a Walmart Supercenter offers up to 142,000 different items, while a Walmart Neighborhood Market offers up to 29,000 different items. Target serves up to “30 million guests” in its stores each week.

The magic in retail occurs when you arrive at a store, or browse an ecommerce portal, and the exact product you are looking for is available for you to buy, at a price that you find acceptable, such that you can either take it home with you instantly, or it can be delivered to you within a matter of minutes or within a few days.

Understanding the Retail Value Chain

The retail value chain is the sequence of steps that different retail organizations take in order to create and deliver value to the consumers who shop at the stores and through their other channels.

Generally speaking, for retail organizations there are 4 steps in the value chain: Sourcing and Procurement is about actually selecting and securing the suppliers of each of the items that will be sold to consumers; Inventory Management is about ensuring that the retailer can meet overall demand for the goods and products it offers; Distribution is about making sure that goods and products are available at the right location in the right quantity for consumers, and; Product Availability is about making sure that the goods and products that shoppers expect to find on retail store shelves are available at the instant each shopper wishes to make a purchase - at the right price, in the right quantities, and in the right varieties.

The Problem: Modern Retail is Dizzyingly Complex

If you are slowly reaching the conclusion that CPG retail is a highly complex endeavor, you are in great company.

To get a sense of the complexity involved in retail, Walmart’s website provides some helpful background on the company's operations - note that this is dated Jan 6, 2005;

A Walmart Supercenter offers up to 142,000 different items in a physical store that occupies roughly 187,000 square feet and employs 350 or more associates. Supercenters feature general merchandise, bakery goods, deli foods, frozen foods, meat and dairy products, and fresh produce. Supercenters also are home to many specialty shops such as vision centers, Tire & Lube Expresses, Radio Grill, McDonald’s or Subway restaurants, portrait studios and one-hour photo centers, hair salons, banks, and employment agencies. Walmart reported more than 2,300 Supercenters in the United States as of 2005. The image below shows that number is now 3,573.
A Walmart Neighborhood Market offers up to 29,000 different items in a space that is roughly 42,000 square feet in size, featuring a wide variety of products, including fresh produce, deli foods, fresh meat and dairy items, health and beauty aids, one-hour photo and traditional photo developing services, drive-through pharmacies, stationery and paper goods, pet supplies, and household chemicals. Walmart reported more than 120 Neighborhood Markets in 2005. The image below shows that number is now 799.
A Walmart Discount Store occupies a space that is roughly 107,000 square feet, employs an average of 225 associates and offers 120,000 items. The stores feature wide, clean, brightly lit aisles and shelves stocked with quality items including: family apparel, automotive products, health and beauty aids, home furnishings, electronics, hardware, toys, sporting goods, lawn and garden items, pet supplies, jewelry, and housewares. Walmart reported more than 1,000 Discount Stores in 2005. The image below shows that number is now 370.

Broadly speaking, in retail value chains Product Availability has two aspects.

First, a CPG manufacturer and supplier or a CPG wholesaler employs sales representatives who visit a number of stores every day to audit the store and ensure that the CPG manufacturer’s interests are protected and that the manufacturer’s goods will in fact be available to consumers at the agreed price, at the agreed location and in the agreed and ideal environment to maximize the likelihood of a purchase, and in the agreed quantities given expectations of consumer demand at that location or for that particular channel. Predominantly, they accomplish this by walking around each store, visually inspecting shelves, and manually counting the relevant items and recording this data on a cloud-enabled device, or on paper for subsequent transcription once they are at a computer.

Second, a retailer employs staff whose responsibility is to ensure that the retailer's shelves are filled with the goods and products the retailer sells to consumers according to whatever agreements govern the retailer’s relationship with its suppliers or wholesalers. These employees are also often responsible for replenishing stock or inventory in the back rooms of physical retail locations.

Taken together, the two issues I have described above form the core of Retail Execution, which is the set of processes and activities that are entirely concerned with ensuring optimal product availability at all times.

As much as the retail industry generally uses highly sophisticated IT systems in significant portions of its supply chain and operations management, there are still critical areas in which the state of the art is manual processes that rely on paper and pen, or paper and pencil, to gather and capture information.

It will not surprise you to learn that for the vast majority of retail organizations, Product Availability is still a highly manual and paper-based process. The COVID19 Pandemic has introduced even more uncertainty into retail operations, and companies like Amazon compete ferociously with traditional retailers for employees in the midst of an eCommerce boom. This and other factors, have increased the risks: That retailers will experience revenue loss due to a lack of real-time visibility into what’s happening on shelves; That retailers will fail to appropriately markdown products nearing expiration in order to induce price-conscious shoppers to buy them, and; That retailers will fail to realize when shoppers are having a difficult time locating products due to poor placement choices, thus failing to optimize sales and profit margins.

Although many people hope that the supply chain distortions the pandemic accelerated and exacerbated are a temporary phenomenon, a growing body of evidence suggests that things will only get worse; In CPG Retail specifically the increasing preference by consumers for the omnichannel experience across retail categories, increased employee turnover due to a number of overlapping factors, logistics network disruptions arising from severe weather events and other climate related phenomena, and other exogenous and endogenous shocks to CPG retail supply chains will increase the severity, frequency, and complexity of inventory distortion.

An aspect of the CPG industry that is not obvious to outsiders is that unsold products represent a financial hit to the manufacturer more so than to the retailer like Walmart or Target since retailers often return unsold products to the manufacturer. This makes it critical for manufacturers to gain better visibility into product availability since this will help the manufacturer determine if there are actions it needs to take in order to perform better relative to its competitors, or to better capture the attention of consumers in order to win a greater share of wallet.

This is where Wisy Platforms comes in.

Wisy Platforms: Bringing Visibility to Product Availability in CPG Retail

Wisy Platforms is building a predictive, decision-analytics retail operations and execution platform to help retailers solve and overcome the product availability challenges that they have lived with until now.

Using Wisy;

Employees performing visual inspection of retail shelves experience an improvement in the amount of time they would otherwise spend doing this task. Practically speaking this is a reduction from 20 minutes of work doing manual inspections to no more than 1 or 2 minutes using Wisy’s AI-enabled platform.
Retailers, CPG manufacturers and brokers experience a 90% or higher improvement in the accuracy of data about product availability on store shelves, and
Retailers, CPG manufacturers and brokers experience revenue gains of between 3% and 10%.

In addition to bringing visibility to Product Availability, Wisy also offers the following:

Price checks,
Real-time share-of-shelf KPIs,
Planogram compliance checks, and
Competitive intelligence: Wisy detects known or unknown competitors' products on the shelves and transforms the data into business intelligence. This is particularly useful for addressing an industry trend where new niche brands gain market share at a much faster rate than established brands. Wisy provides alerts when new competitors come into a category and keeps track of their growth over time and per location.

Wisy is currently working on real-time object tracking using the video mode on mobile phones. This feature makes it easier for users to capture large shelves without the need to take many pictures. Wisy is also developing predictive analytics to optimize product assortment and basket analysis.

The platform enables CPG retailers, manufacturers, suppliers,wholesalers and brokers to make better strategic, tactical, and operational decisions by decreasing the complexity of the systems they have to interact with while introducing simplicity and convenience into their workflows. Employees just have to be able to take pictures or videos of retail store shelves using any mid-range smartphone.

Wisy’s breakthrough is in its ability to instantaneously run all its analytics processes and algorithms on an employee’s mobile device without the need for an always-on internet connection.

Incumbent solutions are complex, difficult, slow, cumbersome, and impractical for the fast pace at which retail execution must move. Most incumbent solutions require a high speed internet connection in order to produce results.

Wisy is lightweight, portable, simple, fast, and affordable. Anyone who can use a smartphone camera can be trained to use Wisy to perform retail operations tasks. The platform works for large multinational CPGs and retail chains, and for smaller CPGs, retail stores and brokers. It works on a stand-alone basis. But, it can also be with retail execution systems, ERP systems, retail data clouds, retail analytics systems and so on. It can be integrated into a retailer, manufacturer or broker’s existing systems - for example, customers of SAP can find Wisy in the SAP App Center.

Using Wisy, employees responsible for retail execution spend less time on tedious, time consuming and manual processes and tasks and instead spend more time on high-value activities such as relationship building, competitive analysis, and in-store consumer research.

The Cost of Manual Processes and Waste in CPG Retail

As the image below shows, the global retail market is enormous.

It is not surprising then, that forecasts for retail technology are robust given the extreme levels of competition that exist at every segment of the retail business.

According to Mordor Intelligence, “The Global Digital Transformation Market in Retail was valued at USD 143.55 billion in 2020 and expected to reach USD 388.51 billion by 2026 and grow at a CAGR of 18.2% over the forecast period (2021 - 2026).” Where Digital Transformation is defined as “. . . a conscious movement from point solutions that deliver incremental value to integrated process and technology solutions that provide transformational outcomes in terms of Customer Experience, Business Efficiency and/or Business Innovation.”

Moreover, in Retail Technology is Transforming a $26 Trillion Industry, the author states that “The average U.S. store operation has an inventory accuracy of only 63%. In a manufacturing setting, this would be catastrophic to revenue; in a retail setting, this is detrimental to customer experience and basket size. Inventory distortion (including shrinkage, stockouts and overstock) is also estimated to cost retailers $800 billion a year globally.”

It is no wonder then that the same article contains the following image laying out the results of a survey about retailers’ attitudes towards retail tech.

While Wisy’s platform certainly does not apply to the entirety of retail tech, the data suggests that this is an entrenched enough problem that retailers and their suppliers are invested in seeking new innovations that solve the issues I have already outlined above in a way that was not possible in the past.

The preceding reference to an annual $800 billion cost to retailers comes from a 2011 market study by the IHL Group and sponsored by Tyco Retail Solutions, Market Study Summary: Inventory Distortion - Retail's $800 Billion Global Problem (Holman & Buzek).

Wisy promises to more effectively help CPG retailers and their suppliers solve the Inventory Distortion problem, which is made up of two primary and distinct components; the Out-of-Stock problem, and the Overstock problem.

Holman & Buzek define the Out-of-Stock problem “as any situation wherein a consumer, entering a retail setting with the intent of making a purchase of a specific item, leaves the store without having made that purchase.” As I have stated previously, because of the temporal nature of CPG retail, out-of-stocks lead to a lost sale and a loss of revenues that cannot be recaptured for that specific and precise point in time for that particular consumer, for that given item. Note that consumers may substitute one brand for another in such a situation - so while the retailer will still earn revenue by making a sale, the manufacturer or brand that was out of stock loses a sale to a direct competitor.

Holman & Buzek outline 5 unique ways in which the Out-of-Stock problem is experienced in retail;

Empty shelf,
Stock Present, but No Help Available - I remember waiting more than 30 minutes in a CVS in my neighborhood in early August when I needed to purchase some COVID19 tests,
Stock Present, but No Access,
Promo Price Mismatch, and
Other - which they describe as “the situation where a consumer left the store without purchasing the item desired for any reason other than the item was less expensive elsewhere (and the four reasons above).”

Holman & Buzek define the Overstock problem “as any situation wherein a retailer has on hand more stock of a particular item than is supported by current demand for that item, and where either discounting or spoilage must take place to reduce that Overstock.”

Holman & Buzek outline 2 unique ways in which the Overstock problem is experienced in retail;

Seasonal, Non-Perishable Items, and
Perishable Items.

Given the preceding definitions of the Out-of-Stock Problem, and the Overstock Problem, Holman & Buzek defines Inventory Distortion “as the absolute value of the sum of Out-of-Stocks and Overstocks.” Furthermore, they state, “We recognize both Out-of-Stocks and Overstocks can occur in both the macro sense (an enterprise-wide situation) and in the micro sense (a store-specific Overstock situation).”

Remember that Holman & Buzek is a market research study that was conducted in 2011. But even then, their estimate of the aggregate is astounding; “Worldwide Inventory Distortion amounts to nearly $800 Billion a year, or just about two companies the size of Walmart. Ponder that for a moment. Two additional companies the size the largest retailer. Or put another way, 16 companies the size of Best Buy. Or perhaps, one more, a loss of nearly $120 for every man, woman, and child on the planet.” (sic)

Holdman & Buzek also state, “The Out-of-Stock component represents 56% of this total, and Overstocks represent the remaining 44%. The interesting aspect of these two numbers has to do with what they represent. In the case of Out-of-Stocks, the $435 Billion represents a transfer of sales transactions among retailers in a given region. Simply, if Retailer A does not have what the Customer is looking for, the Customer will go down the block to Retailer B. Bottom line: the sales are not lost to the industry, but rather transferred amongst the various competing retailers. Obviously, the retailer that gets his Out-of-Stock problem fixed earliest will reap huge benefits, at the expense of his competition.”

They go on to observe that, “In the case of Overstocks, however, the $343 Billion does represent sales lost to the industry. So while the inefficiencies represent $117.92 per human on the planet, competitors recapture about $69 of that loss.”

Moreover, the data in the study makes it plain that this problem is global in nature; “The two most technically mature and efficient regions are North America and EMEA, and they combine for 48.4% of all Inventory Distortion. These two regions, when combined, have a reasonably balanced contribution from Out-of-Stocks (51.6%) and Overstocks (48.4%). On the other hand, the Asia/Pacific and LATAM regions, being less mature from a modern retail standpoint, have contributions of 60% from Out-of-Stocks and 40% from Overstocks.’

Additionally, “To help with the sense of scale (in relation to the Worldwide Inventory Distortion problem being equivalent to two companies the size of Walmart), the North American Inventory Distortion amounts to $165.1 Billion, or the equivalent of Kroger, Costco, and Advanced Auto Parts combined.”

It bears repeating, this is data reflecting the state of retail in 2011. In a more recent research study published in 2015, Retail's $1.1 Trillion Inventory Distortion Problem, Greg Buzek states that, “In total these Inventory Distortion missed opportunities amount to $1.1 Trillion annually worldwide, an amount that is nearly the GDP of Australia!”

The Team at Wisy Platforms Has Studied This Problem Up Close and Personal

Wisy’s founding team comprises;

Min Chen - CEO
Her brother, Ricardo Chen - CTO
Nélida Gómez Quintero - R&D Coordinator, and
Orlando Reyes Jiménez - VP of Sales.

Min Chen is a software engineer and serial entrepreneur with 20 years of experience who holds a masters degree in software engineering from Carnegie Mellon University, after earning her first degree from the School of Electronics, Telecommunication and Information Technology at the University of Panama. She also holds executive certificates and degrees from the Stanford Graduate School of Business and the Haas School of Business at UC Berkeley. She is a Fulbright, IFARHU, LBAN and SENACYT scholarships recipient.

Prior to forming and launching Wisy, Min founded and ran Alcenit Corporation for 12 years, an information technology consulting firm that had clients across a number of legacy industries, including CPG, groceries and retail. In a July 2022 profile published by IEEE Spectrum, Joanna Goodrich points out that “One of Alcenit’s clients - a supermarket chain - was having problems collecting reliable ground-truth data, or data collected at scale from real-world scenarios.” Min, a senior IEEE member, is highly regarded in the field and frequently invited as a speaker at business and innovation events in many countries. She was on the cover of Forbes CA in July 2022.

Min’s brother, Ricardo Chen (Wisy's CTO) had also encountered the problem Alcenit’s clients were grappling with. Min and Ricardo realized that businesses in emerging markets lacked robust information infrastructure to run analytics in real-time, make informed decisions, and streamline operations in the physical world.

They decided to team up, and founded Wisy with a focus on emerging markets but soon realized that companies in developed markets experience the same problem too, and so they decided to expand their sights beyond the shores of their home in Panama.

Ricardo Chen is a self-described autodidact who first taught himself to code in 1997 at the age of 12 when he got his first PC with internet access. Since then, in addition to several roles in which he was responsible for information technology and software development, Ricardo has founded and led startups that operated in eCommerce, Architecture Rendering, Surveillance Systems, and Online Marketplaces. A Founder Institute Fellow, Ricardo studied Computer Engineering at the University of Panama, and has led engineering teams in the United States, Panama, Philippines and Ukraine. Just like Min, Ricardo learned to be driven, self-reliant and resilient from a young age as the children of Chinese immigrants and business owners in Panama who had to restart all over due to political, social and economic instability in the countries where they lived.

Orlando Reyes (Wisy's VP of Sales) and Nélida Gómez (Wisy’s R&D Coordinator) soon joined Min and Ricardo. Orlando brought business connections and insider knowledge, having worked in two of the most competitive industries in Panama: retail and telecommunications. Nelida brought her experience in research and development, and insights on commercialization gained from her prior experience.

After multiple iterations, the team focused on the CPG retail industry because it gave Wisy the biggest opportunity for growth and allowed Wisy to have a direct impact on the world.

Nélida Gómez Quintero has 30 years of experience in knowledge commercialization. She holds a bachelor's degree in chemistry from the University of Panama. She earned a master’s degree in pharmacognosy from the University of Rhode Island, a PhD in chemical ecology from Technische Universität Braunschweig, and a master’s of business in innovation and technology management from the University of Queensland. She’s responsible for Wisy’s intellectual property strategy and management, as well as working with Min and Ricardo on initiatives to win non-dilutive capital to advance Wisy’s work. She also engages in R&D aimed at improving Wisy’s platform features based on evolving and emerging needs in Wisy’s target markets.

Orlando Reyes Jiménez holds a bachelor’s degree as well as a master’s degree in marketing from ULACIT in Costa Rica. He also holds a master’s degree in strategic finance and control from Aden Business School and a master’s of business administration in finance and international management from Universitat Internacional de Catalunya. Orlando has over 20 years of professional experience in sales and marketing positions. His last role prior to joining Wisy was as marketing director for Cable Onda, a Telecom company that sold for $1.4B to Millicom.

The founding team has been working on Wisy together since 2017. This team cohesiveness and longevity is a key contributor to the breakthrough that differentiates Wisy from other software products, platforms, and services that appear similar on the surface.

For example, the team has first hand experience with developing computational technologies and software that must work reliably in physical environments where weak or non-existent internet and telecommunications infrastructure are the norm

The founding team has a multicultural background, a key advantage to tackle this global industry. This is reflected in the design and engineering choices that the team continues to make while building Wisy.

As Wisy announced in April 2022, "Wisy's new in-app AI allows users to process data without an internet connection. The app can process data and produce results in milliseconds without connecting to the internet. Users will get in-flight analytics no matter where they are in the store."

Wisy was accelerated by Carnegie Mellon VentureBridge, SAP.iO, Nasdaq, Google, Plug and Play, and Stanford SLEI. It has won many awards and accolades, such as Cloud Wars Startup of the Year 2022, Grocer Shop Audience Choice 2021, The Coca-Cola Foundation and the Benioff Ocean Initiative 2020 grant, The National Secretariat of Science, Technology and Innovation of the Republic of Panama research grant, and Panama's Chamber of Commerce Innovation of the Year (2020).

Min Chen has been featured in Forbes, Nasdaq, IEEE, Business Insider, Univision, and EFE. Wisy has also been featured in IEEE Spectrum magazine, the Institute of Electrical and Electronics Engineers (IEEE) main publication. It is one of the most internationally recognized sources regarding high-impact, cutting-edge technologies.

Wisy’s Innovation Harnesses the Power of Exponential Technologies

Wisy is benefitting from the accelerating improvements in the technologies on which its innovations depend. They include: Cloud computing; Mobile computing; Edge computing; Computer Vision; Machine Learning, and Deep Learning, among others.

Startups like Wisy that are bringing new innovations to market for various segments of the supply chain and operations management areas in traditional industries often face a lot of skepticism. There have been numerous promises that have failed to stand up to the brutal scrutiny of the real world.

So while it is helpful to hear how the founders talk about what they hope to accomplish, in my opinion all that really matters is if customers love the product and if individual users are getting value and becoming more effective in their jobs as they use the product.

Wisy’s sales pipeline has exploded this year, and now includes many brands that are stalwarts of international business across all categories of CPG retail.

Among other things, Wisy has;

Closed pilots with global CPG companies that would lead to Wisy’s adoption in hundreds of thousands of stores in many countries, millions of data points and new insights in the industry.
Become an integral part of a project by Marea Verde to gain insights into the sources of plastic pollution in Panama City’s Juan Diaz river as part of a global initiative funded by The Coca Cola Foundation and the Benioff Ocean Science Laboratory.
Been featured in this podcast by Acceleration Economy in which Min explains how artificial intelligence is transforming the CPG retail industry, and is also featured in this article by Acceleration Economy about the problems Wisy solves for CPG retailers.

The team is working on a number of new initiatives that will begin to yield fruit in 2023.

Technology-Driven Innovation in CPG Retail Supply Chains is Consequential

As consumers become more aware of the connection between their consumption patterns, impacts on the natural environment and the climate crisis, the CPG Retail industry is coming under increasing pressure to adopt business practices that emphasize sustainability and good environmental stewardship by reducing material waste, harmful greenhouse gas emissions, and toxic chemical pollution throughout their operations organizations, supply chain ecosystems, and value chain networks.

Among other efforts;

Jeff Bezos led Amazon to become a founding signatory of the Climate Pledge, a voluntary commitment about which he stated, “The Climate Pledge is to meet the goals of the Paris Agreement 10 years early. This is really only something that can be done in collaboration with other large companies, because we're all part of each other's supply chains.”
In its inaugural Environmental, Social & Governance (ESG) Report, Walmart outlined how it expects to eliminate 1 Billion Metric Tons of harmful greenhouse gas emissions from its global supply chains by 2030.

A detailed review and analysis of developments related to the issues that CPG Retail must confront in relation to consumer expectations around climate change, environmental stewardship, social sustainability are well beyond the scope of this blog post. The reader seeking to learn more will find no shortage of research reports online. For example, this 2008 Ipsos report, Sustainability Issues In The Retail Sector, should demonstrate that this is a problem the industry has been grappling with well before Amazon and Walmart decided to take public steps to address emerging questions and expectations.

Why Do Companies Like Walmart and Amazon, and others in CPG Retail Care?

On October 22, KnowESG reported that; “The ISSB voted unanimously to require companies to use the current version of the GHG Protocol Corporate Standard to report their Scope 1, Scope 2, and Scope 3 greenhouse gas (GHG) emissions.”

What does that mean?

The International Accounting Standards Board (IASB), is a group of experts who study, select, and set the standards for accounting. These standards are known as the International Financial Reporting Standards (IFRS). IFRS Foundation is “a not-for-profit, public interest organization established to develop high-quality, understandable, enforceable and globally accepted accounting and sustainability disclosure standards.”

The International Sustainability Standards Board (ISSB) is the other standard setting board of IFRS Foundation. ISSB is focused on providing guidance to facilitate “high quality, transparent, reliable and comparable reporting by companies on climate and other environmental, social and governance (ESG) matters.” Specifically, ISSB’s mandate is “to deliver a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions.”

The Greenhouse Gas (GHG) Protocol is a “partnership between World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD)” that “works with governments, industry associations, NGOs, businesses and other organizations” to establish “comprehensive global standardized frameworks to measure and manage greenhouse gas (GHG) emissions from private and public sector” operations, supply chains, value chains, and mitigation actions.

The following explanations of Direct and Indirect Emissions and Scope 1, Scope 2, and Scope 3 Emissions is taken directly from GHG Protocol’s website (accessed on October 26, 2022).

The GHG Protocol defines direct and indirect emissions as follows:

Direct GHG emissions are emissions from sources that are owned or controlled by the reporting entity.
Indirect GHG emissions are emissions that are a consequence of the activities of the reporting entity, but occur at sources owned or controlled by another entity.

The GHG Protocol further categorizes these direct and indirect emissions into three broad scopes:

Scope 1: All direct GHG emissions.
Scope 2: Indirect GHG emissions from consumption of purchased electricity, heat or steam.
Scope 3: Other indirect emissions, such as the extraction and production of purchased materials and fuels, transport-related activities in vehicles not owned or controlled by the reporting entity, electricity-related activities (e.g. Transmission & Distribution (T&D) losses) not covered in Scope 2, outsourced activities, waste disposal, etc.

The connection between the ISSB’s new requirement for IFRS and the actions companies like Walmart, Amazon, and others have taken and will continue to take is obvious; Financial markets will judge them on this data in addition to the traditional financial and accounting data they have historically reported.

But, there is more to this than meets the eye. In a November 2016 article, Starting at the source: Sustainability in supply chains, Anne-Titia Bové and Steven Swartz state that, “To make and sell goods, consumer businesses need affordable, reliable supplies of energy and natural resources, as well as permission from consumers, investors, and regulators to do business. But companies can no longer take those enabling factors for granted.”

They go on to argue that supply chains are the missing link in sustainability, stating “A high-functioning supply chain - the entire hierarchy of organizations, including energy providers, involved in making and distributing goods - can allow a consumer company to manage two types of sustainability-related risks.”

First, “One type of risk has to do with the sustainability impact of providing goods and services to customers. The typical consumer company’s supply chain creates far greater social and environmental costs than its own operations, accounting for more than 80 percent of greenhouse-gas emissions and more than 90 percent of the impact on air, land, water, biodiversity, and geological resources.”

Second, “A second type of risk occurs because sustainability impact can interfere with consumer companies’ supply chains.” In the article they describe a 64% drop in profits for GrainCorp, a large Australian agriculture business, a €300,000,000 annual loss for Unilever due to increasing food costs resulting from water scarcity and declining agricultural productivity.

Bové & Swartz state, “Notwithstanding the sustainability risks that lie in supply chains, relatively few companies are working with their suppliers to manage these risks. As an example, consider how businesses are addressing the climate impact of their supply chains. Of the companies that report their greenhouse-gas emissions to CDP, a nonprofit organization that promotes the disclosure of environmental impact data, only 25 percent say they engage their suppliers in efforts to reduce emissions.”

CPG Retail companies - especially the publicly traded ones, will have to put more effort into gaining visibility into their extended supply chains in order to satisfy regulatory reporting requirements as national accounting bodies update their accounting regulations to align with IFRS, to maintain ongoing access to global capital markets, and to protect their brand reputation in the eyes of consumers - with Apple publicly urging other large corporations to decarbonize their supply chains, peer pressure is building.

Moreover, this is not an entirely new trend, as Kevin O’Marah notes in Walmart and Schneider Electric: Democratizing Renewable Energy with Everyday Tech, published on October 25, the same day Apple made its announcement; “Walmart has been aggressive about sustainability for a long time now, and this new program is a big step forward in terms of shifting from leading by example to leading by enabling others to piggy-back on a good idea. The Gigaton PPA is part of Walmart’s Project Gigaton launched back in 2017 and invites Walmart suppliers to join in collective action. It is also part of Schneider Electric’s massive push to help companies scale their use of renewable energy, and a showcase for Danish renewable power company Orsted who is building the Kansas wind farm that will provide power.”

With the 2022 United Nations Climate Change Conference, COP27 happening in Egypt between November 6 and November 18, the focus on supply chain decarbonization is increasing as it usually does immediately leading up to the annual confab. Two things are worth noting:

First, CNBC quotes Simon Stiell, executive secretary of U.N. Climate Change as saying that “We are still nowhere near the scale and pace of emission reductions required to put us on track toward a 1.5 degrees Celsius world.” (October 26)
Second, CNBC quotes Microsoft President Brad Smith as saying “By our count, 3,470 companies around the world have signed up for a climate pledge . . . That shows that awareness and good intentions have literally spread around the world. Now, what’s bad: there does not yet exist the capacity for most — for almost any company — to, with confidence, turn that pledge into the progress that has been promised.” (October 26)

Inventory Distortion and how it relates to GHG emissions is a permanent problem that creates an opportunity for startups like Wisy to develop easy to adopt and use innovations that offer an attractive value proposition to the most important participants in CPG Retail, and in the process to discover repeatable, scalable, and profitable business models.

We are #ObsessivelyEnthusiastic

As we say at REFASHIOND Ventures, we are #ObsessivelyEnthusiastic about what the team at Wisy Platforms is building. We became investors in September 2022, and have been working very closely with Min as Wisy raises capital to enable it to seize the enormous opportunity that is unfolding before our eyes.

As I have been arguing for sometime, visibility is the backbone of supply chain platforms (FreightWaves, February 2021). There’s a misconception that visibility is just about “knowing where my stuff is” . . . That is wrong.

As I pointed out in Towards Connected Platforms & Ecosystems in Logistics Technology – Creating Customer Value Innovation Footprints, April 2022); Supply Chain Visibility is the process of collecting operations, supply chain, and value chain data, integrating it, extracting intelligence from it, and using that intelligence to make real-time decisions in the context of cross-organizational collaboration and innovation.

That definition, based on one provided by Jonah Saint McIntire in Supply Chain Visibility: From Theory to Practice, gets to the crux of the matter; Physical retail has long suffered from a lack of visibility, and CPG Retail in particular has been a lagard when it comes to visibility about what’s happening inside physical stores, specifically, on store shelves where end consumers interact with products before making a purchase decision.

Wisy solves those problems efficiently and at scale, and opens the door for other innovations to be built on the basis of the increased insight CPG Retail industry participants will gain from the data and information Wisy makes available.

The ultimate goal of Wisy’s innovations in CPG Retail visibility is to make it significantly easier for all participants on the supply-side of CPG retail to more easily spot important patterns in the data and information about what’s happening at the point of interaction with the end consumer, and to take appropriate action on the basis of those insights.

As early-stage investors, we are encouraged that many more downstream investors have awoken to the opportunity in #SupplyChainTech. We couldn’t be more excited to back supply chain technology founders at the early stages of their journey to transform the way the world makes, buys, moves, stores, and consumes the products and services that we all need.

REFASHIOND Ventures champions and invests in startups reinventing global, industrial supply chains through scalable networks, platforms, ecosystems, and information infrastructure; Defensible through economic moats. If you are a startup founder who believes that what you are doing fits our thesis, please fill out our data-intake form. We review submississions on Mondays, Tuesdays, Wednesdays, and Thursdays during our team meetings, and we reach out to the startups from whom we would like more information.

At most venture capital firms, early-stage supply chain technology is a tiny, emerging “area of interest” . . . At REFASHIOND Ventures, it’s our entire world. Startup founders can learn more by reading the For Founders section of our website.