NetSuite
NetSuite

Personalization and Customer Experience at Dylan's Candy Bar

  • Topic: Digital Business
  • |
  • Partner: NetSuite
Erica Stevens, CIO, Dylan's Candy
Erica Stevens
Vice President of Supply Chain and Information Technology
Dylan's Candy Bar
Michael Krigsman, Founder, CXOTalk
Michael Krigsman
Industry Analyst
CXOTALK
 

This post was originally published at ZDNet

The retail industry is undergoing intense change, driven by e-commerce and shifting consumer expectations. Certainly, selling candy in stores and online appears like a commodity business, but retailer Dylan’s Candy Bar has found a way to differentiate its business with a unique customer experience.

Founded by Dylan Lauren, daughter of the famous fashion designer, Ralph Lauren, Dylan’s Candy Bar has distinguished itself by offering a “retailtainment” experience.

The company’s stores attempt to create a Will Wonka-style experience that touches customers emotionally. Bright colors and a warm environment make shoppers feel good, while advanced technology, such as on-demand 3D printing and personalization, offer features and capabilities that other retailers cannot easily replicate. The flagship store in New York receives over 2 million visitors per year.

An important part of the company’s strategy involves extending that emotional connection and customer experience from stores to online shopping. Accomplishing that translation is one of the firm’s most significant challenges: creating an emotional bond with the consumer online, using a combination of technology and smart design.

For Dylan’s Candy Bar, the end-goal is building an integrated and consistent experience through all its channels. This multi-layered combination of retailing, customer experience, and e-commerce shape the company’s core strategy and goes beyond typical notions of the customer journey.

It’s a fascinating story, so I invited the company’s Vice President of Supply Chain and IT, Erica Stevens, as a guest on CXOTALK. In effect, Erica functions as a CIO and is responsible for the technology that underlies the Dylan’s Candy Bar strategy.

In the short clip embedded above, Erica discusses how Dylan’s Candy Bar creates a seamless experience across retail stores and online commerce. 

Transcript

Erica Stevens: For us, it’s as much of an experience as it is in just selling the product. You could buy candy, frankly, anywhere. A Kit-Kat bar can be found within a block of most of us. So, to us it’s not just that we’re buying traditional candy, it is the candy world. You can form people into…it is as if they feel like they’re in Willy Wonka’s Chocolate Factory when they come into our stores.

It’s very hard to bring some of those components like the crazy music that’s all about candy, and the smells we can’t translate online. But what we do there is we still have the vibrant colors, the amazing products,

The other part is, personalization and customization. One of the things [are] when you come into our store, you can walk in and find these amazing bulk bins, where you can choose, in bulk, up to 500 different types of candy. And then you can mix and match to your heart’s content in a giant gummy bear, or a pink can, or some other vessel. So, in our online environment at the beginning, we were doing five or six mixes of candy that were really popular, but we wanted to bring that experience of choosing all of your favorites. So, we launched this year what we call “Design Shop” that allows you to truly customize your candy with not just the candy that you want inside of it, but also, you can upload a picture, and you can put that on the label of the pink can, or the chocolate bar, everything’s on the chocolate bar, the perfect gift [laughter], right? So, we are doing lots of those more interactive things online.

Michael Krigsman: So, the user experience for the whole thing is foundational to the success of what you’re trying to do.

Erica Stevens: Absolutely! People walk by our store and they see this amazing environment, and come in. But for us online is about keeping that experience going. First impressions are amazing, but we want to make them leave just as excited as when they walked in the door, or finish the checkout process.

Michael Krigsman: Dylan’s Candy Bar is about the customer experience in the store, and the customer experience and the user experience on the web, and from the customer perspective, that seamless transition, go here, go to the store, go to the web, is pretty simple and pretty obvious, and yet, from a behind-the-scenes point of view, it is very difficult to do.

Erica Stevens: We have people that are experts in retail and building that experience, we have people that are experts in the world of e-commerce and the traditional ways that you do e-commerce, and bringing all groups to the table and doing what makes sense is something that we strategically do, and I think that the technology needs to follow. So, a lot of retailers that are trying to get into both spaces, they are letting technology guide how they do things in those spaces, rather than saying, “Ok, we need to customize, we need to tell the technology what to do in this regard and think outside of the box as far as the mode in which we operate, to bring in this other channel that is working alongside it.

Michael Krigsman: What advice do you have for other retailers who want to create this kind of customer experience that’s also highly differentiated so that they, as you do rise up above the crowd; stand above/rise above the competitive noise?

Erica Stevens: First of all always stepping back and looking at what is our actual customer experience? Because I think that, you know, we all have so much to do and we all tend to get a little siloed in “this is how this works in theory”, or “this is how it works over there in that other department, that’s how that works”, but does it really? And is the customer seeing a seamless process, or do they get on the website and it could be a different company?

So, for me, in my professional career, a lot of it has been, “Yeah I know you’re not completely on board with these changes that need to be made, this investment that needs to be

Erica Stevens: For us, it’s as much of an experience as it is in just selling the product. You could buy candy, frankly, anywhere. A Kit-Kat bar can be found within a block of most of us. So, to us it’s not just that we’re buying traditional candy, it is the candy world. You can form people into…it is as if they feel like they’re in Willy Wonka’s Chocolate Factory when they come into our stores.

It’s very hard to bring some of those components like the crazy music that’s all about candy, and the smells we can’t translate online. But what we do there is we still have the vibrant colors, the amazing products,

The other part is, personalization and customization. One of the things [are] when you come into our store, you can walk in and find these amazing bulk bins, where you can choose, in bulk, up to 500 different types of candy. And then you can mix and match to your heart’s content in a giant gummy bear, or a pink can, or some other vessel. So, in our online environment at the beginning, we were doing five or six mixes of candy that were really popular, but we wanted to bring that experience of choosing all of your favorites. So, we launched this year what we call “Design Shop” that allows you to truly customize your candy with not just the candy that you want inside of it, but also, you can upload a picture, and you can put that on the label of the pink can, or the chocolate bar, everything’s on the chocolate bar, the perfect gift [laughter], right? So, we are doing lots of those more interactive things online.

Michael Krigsman: So, the user experience for the whole thing is foundational to the success of what you’re trying to do.

Erica Stevens: Absolutely! People walk by our store and they see this amazing environment, and come in. But for us online is about keeping that experience going. First impressions are amazing, but we want to make them leave just as excited as when they walked in the door, or finish the checkout process.

Michael Krigsman: Dylan’s Candy Bar is about the customer experience in the store, and the customer experience and the user experience on the web, and from the customer perspective, that seamless transition, go here, go to the store, go to the web, is pretty simple and pretty obvious, and yet, from a behind-the-scenes point of view, it is very difficult to do.

Erica Stevens: We have people that are experts in retail and building that experience, we have people that are experts in the world of e-commerce and the traditional ways that you do e-commerce, and bringing all groups to the table and doing what makes sense is something that we strategically do, and I think that the technology needs to follow. So, a lot of retailers that are trying to get into both spaces, they are letting technology guide how they do things in those spaces, rather than saying, “Ok, we need to customize, we need to tell the technology what to do in this regard and think outside of the box as far as the mode in which we operate, to bring in this other channel that is working alongside it.

Michael Krigsman: What advice do you have for other retailers who want to create this kind of customer experience that’s also highly differentiated so that they, as you do rise up above the crowd; stand above/rise above the competitive noise?

Erica Stevens: First of all always stepping back and looking at what is our actual customer experience? Because I think that, you know, we all have so much to do and we all tend to get a little siloed in “this is how this works in theory”, or “this is how it works over there in that other department, that’s how that works”, but does it really? And is the customer seeing a seamless process, or do they get on the website and it could be a different company?

So, for me, in my professional career, a lot of it has been, “Yeah I know you’re not completely on board with these changes that need to be made, this investment that needs to be made, but go and try to return something to the distribution center when you brought it in the store. What happens?” And to think through every step for the customer, there’s often a lot of lightbulbs to say “Oh, wait a minute, how would that work?\

And if we don’t know how that works, then the customer is definitely not going to have a good experience in making that work.” So it’s that, again, the technology, guiding the technology rather than letting it guide you in your decision making. To some degree, we always have to make decisions based on some capabilities, however, looking for that flexibility and not having those brainstorming sessions outside of, “Well, it’s not going to work because the system won’t do that.” Let’s figure out a way to do that if we find out it’s most important to our business and our customers.

Innovation in Omni-Channel Retail

  • Episode: 195
  • |
  • Topic: Digital Business
  • |
  • Partner: NetSuite
Erica Stevens, CIO, Dylan's Candy
Erica Stevens
Vice President of Supply Chain and Information Technology
Dylan's Candy Bar
Michael Krigsman, Founder, CXOTalk
Michael Krigsman
Industry Analyst
CXOTALK

Retail is among the most visible industries undergoing change as a result of digital transformation. The most sophisticated retailers use technology to create closer relationships with customers, drive new sources of revenue, and innovate all aspects of their business.

In this episode, we explore the business goals and enabling technology that Dylan's Candy Bar uses to create an omni-channel retail experience. Our guest, Erica Stevens, is Vice President of Supply Chain and Information Technology at Dylan's Candy Bar.

Transcript

Michael Krigsman: Welcome to Episode 195 of CXOTalk. I’m Michael Krigsman, I am an industry analyst, and really have the pleasure and the honor of hosting this CXOTalk series.  CXOTalk brings together the most innovative, creative business leaders so we can learn from their wisdom, their insight, their experience. And, I want to say thank you to NetSuite for sponsoring today’s episode. It’s a very exciting episode and we are grateful to NetSuite for sponsoring this episode. It is a very exciting episode and we are grateful to NetSuite for being involved. Today we are talking about innovation in retail, and retail marketing, and retail operations. And, our guest is Erica Stevens, who runs IT, who runs supply-chain, and is really responsible in a sense for operations in Dylan’s Candy Bar. Erica, how are you?

Erica Stevens: I’m great! How are you?

Michael Krigsman: I am excellent! And thank you so much for joining us! Erica, so tell us about Dylan’s Candy Bar.

Erica Stevens: We’ve been around for almost 15 years now. We started in 2001, Dylan Lauren pioneered the creation of the largest confection emporium and lifestyle brand. Our mission is to merge the world of art, fashion, and pop culture with candy, and Dylan has innovated the way we see and experience candy today. We have seven stores; free standing stores. We have nine licensed shops, two shop-in-shops: you can find us in Nordstrom, Nieman-Marcus, Barnes and Noble; and we have big plans to move into other areas both domestically and internationally.

Michael Krigsman: So when you say that you merge lifestyle, fashion, with candy, what does that mean? Elaborate on that for us.

Erica Stevens: Sure! So, in our stores, in each one of our stores, you can see a giant-sized lollipop train, spinning candy canes, and six foot tall rock candy sticks. So, lots of pop art in our stores. And also, through our products, carry both lifestyle brands such as tote bags, and tech equipment like whirly pop ear buds and phone cases, and things like that. Anything candy-related in mediums not just in candy. But we carry lots of candy as well.

Michael Krigsman: You carry lots of candy as well. Like, 7,000 different kinds of candy, as I understand it.

Erica Stevens: Yeah, we do. So we have about 7,000 SKUs total, so that ranges from … Nostalgic candy is very important to us, so Goo Goo Clusters and the nostalgic packaging for our Hershey’s almond bar, but then we also carry international candies; all over the world, lots from Asia and Europe; so lots of new finds there. And we have more traditional chocolates. We have sea salt caramel chocolate bars, and pizza-flavored chocolate bars, and potato chips and fun foods like that. So, we do the whole gamut.

Michael Krigsman: Ok, well, next time we’re going to do CXOTalk from one of your stores.

Erica Stevens: Yes!

Michael Krigsman: So, how many stores do you have right now? I just want to get a sense of the context, and we’ll talk about your store experience and the interesting things you’re doing with retail and online. So how many stores do you have right now?

Erica Stevens: We have seven free-standing stores. And nine licensed, and nine when you have some shop-in-shops as well.

Michael Krigsman: And I know that you’re expanding pretty rapidly at the same time.

Erica Stevens: We are, we are. We hope to open up at least 4-5 a year! So we are on-target for 2017 to go on to some new cities.

Michael Krigsman: Ok, so you have said that you have tried to create a Disney kind of experience in the stores. How do you do that? What do you mean by that, and what is the experience that you’re creating for the consumer?

Erica Stevens: It is ultrasensory. So you walk into a store and see vibrant colors, you’ll see… you’ll smell some amazing smells, partially from our chocolate fountain that you can try. Candy-themed music playing in the background, we’re gonna hitch in in all directions

Michael Krigsman: Welcome to Episode 195 of CXOTalk. I’m Michael Krigsman, I am an industry analyst, and really have the pleasure and the honor of hosting this CXOTalk series.  CXOTalk brings together the most innovative, creative business leaders so we can learn from their wisdom, their insight, their experience. And, I want to say thank you to NetSuite for sponsoring today’s episode. It’s a very exciting episode and we are grateful to NetSuite for sponsoring this episode. It is a very exciting episode and we are grateful to NetSuite for being involved. Today we are talking about innovation in retail, and retail marketing, and retail operations. And, our guest is Erica Stevens, who runs IT, who runs supply-chain, and is really responsible in a sense for operations in Dylan’s Candy Bar. Erica, how are you?

Erica Stevens: I’m great! How are you?

Michael Krigsman: I am excellent! And thank you so much for joining us! Erica, so tell us about Dylan’s Candy Bar.

Erica Stevens: We’ve been around for almost 15 years now. We started in 2001, Dylan Lauren pioneered the creation of the largest confection emporium and lifestyle brand. Our mission is to merge the world of art, fashion, and pop culture with candy, and Dylan has innovated the way we see and experience candy today. We have seven stores; free standing stores. We have nine licensed shops, two shop-in-shops: you can find us in Nordstrom, Nieman-Marcus, Barnes and Noble; and we have big plans to move into other areas both domestically and internationally.

Michael Krigsman: So when you say that you merge lifestyle, fashion, with candy, what does that mean? Elaborate on that for us.

Erica Stevens: Sure! So, in our stores, in each one of our stores, you can see a giant-sized lollipop train, spinning candy canes, and six foot tall rock candy sticks. So, lots of pop art in our stores. And also, through our products, carry both lifestyle brands such as tote bags, and tech equipment like whirly pop ear buds and phone cases, and things like that. Anything candy-related in mediums not just in candy. But we carry lots of candy as well.

Michael Krigsman: You carry lots of candy as well. Like, 7,000 different kinds of candy, as I understand it.

Erica Stevens: Yeah, we do. So we have about 7,000 SKUs total, so that ranges from … Nostalgic candy is very important to us, so Goo Goo Clusters and the nostalgic packaging for our Hershey’s almond bar, but then we also carry international candies; all over the world, lots from Asia and Europe; so lots of new finds there. And we have more traditional chocolates. We have sea salt caramel chocolate bars, and pizza-flavored chocolate bars, and potato chips and fun foods like that. So, we do the whole gamut.

Michael Krigsman: Ok, well, next time we’re going to do CXOTalk from one of your stores.

Erica Stevens: Yes!

Michael Krigsman: So, how many stores do you have right now? I just want to get a sense of the context, and we’ll talk about your store experience and the interesting things you’re doing with retail and online. So how many stores do you have right now?

Erica Stevens: We have seven free-standing stores. And nine licensed, and nine when you have some shop-in-shops as well.

Michael Krigsman: And I know that you’re expanding pretty rapidly at the same time.

Erica Stevens: We are, we are. We hope to open up at least 4-5 a year! So we are on-target for 2017 to go on to some new cities.

Michael Krigsman: Ok, so you have said that you have tried to create a Disney kind of experience in the stores. How do you do that? What do you mean by that, and what is the experience that you’re creating for the consumer?

Erica Stevens: It is ultrasensory. So you walk into a store and see vibrant colors, you’ll see… you’ll smell some amazing smells, partially from our chocolate fountain that you can try. Candy-themed music playing in the background, we’re gonna hitch in in all directions with [an] exciting, Disney-type experience, so it’s not just the traditional shopping.

Michael Krigsman: And why is it so, so deeply important to Dylan’s candy bar in what you’re trying to achieve?

Erica Stevens: For us, it’s as much of an experience as it is in just selling the product. You could buy candy, frankly, anywhere. A Kit-Kat bar can be found within a block of most of us. So, to us it’s not just that we’re buying traditional candy, it is the candy world. You can form people into…it is as if they’re feeling like they’re in Willy Wonka’s Chocolate Factory when they come into our stores.

Michael Krigsman: And what are the … how do you create that experience and I know online is an extremely important part of your business as well, so how do you make the translation from a physical retail store to the online environment?

Erica Stevens: It’s obviously different. We are seen as leaders in retail-tainment. It’s very hard to bring some of those components like the crazy music that’s all about candy, and the smells we can’t translate online. But what we do there is we still have the vibrant colors, the amazing products, and then we have Dylan’s World. So it’s an insider’s view into Dylan’s inspiration. She is a quintessential candy queen, the brains behind the operation, the creative force, the visionary that has brought this company to where it is. So she has amazing ideas and Dylan’s World, we can see what inspired her to do this amazing collection, for example. So, we try to bring just a new element to that.

The other part is, personalization and customization. One of the things [are] when you come into our store, you can walk in and find these amazing bulk bins, where you can choose, in bulk, up to 500 different types of candy. And then you can mix and match to your heart’s content in a giant gummy bear, or a pink can, or some other vessel. So, in our online environment at the beginning, we were doing five or six mixes of candy that were really popular, but we wanted to bring that experience of choosing all of your favorites. So, we launched this year what we call “Design Shop” that allows you to truly customize your candy with not just the candy that you want inside of it, but also, you can upload a picture, and you can put that on the label of the pink can, or the chocolate bar, everything’s on the chocolate bar, the perfect gift [laughter], right? So, we are doing lots of those more interactive things online.

Michael Krigsman: So, for you, this personalization is the key. So you take that personalization form the store, online, back again, so how does that work?

Erica Stevens: So, pretty amazing technology [laughter]. So, we have developed some proprietary software where we can develop this interactive experience with our customers. So that we are bringing Instagram and Facebook and those pictures that you’re taking with your friends as well as those things that are quintessential to Dylan’s Candy Bar,  and, for us the customer experience is the absolute most important. We had a lot of learnings as we were launching the program. A lot of our competitors in the personalization space, not only just candy, it can be a tedious process in choosing everything online. So we tried to make it fun and exciting, try to brand our brand, not have to click wherever you needed to go. Where we’re striving to go is to have the experience of buying personalized candy as easy and quick as it is to buy on Amazon, or our website where you’re just doing a stock item. And we want to, most importantly in my world, fill it just as quickly, and have something completely as personalized to that individual as a stock item that we sell.

Michael Krigsman: So, the user experience for the whole thing is foundational to the success of what you’re trying to do.

Erica Stevens: Absolutely! People walk by our store and they see this amazing environment, and come in. But for us online is about keeping that experience going. First impressions are amazing, but we want to make them leave just as excited as when they walked in the door, or finish the checkout process.

Michael Krigsman: So I want to talk about the technology, but before we get there, tell us about your business model and personalization, and how does this notion of customization and personalization feed into the way you think about the company as a business?

Erica Stevens: Yeah, so we are, in some ways you could say, have the business model of a traditional retail company. And, we are involved in retail, wholesale, and online channels. We also do some really exciting stuff like host parties in our stores, as well as at customer locations. And, in our larger flagship stores, we have candy cafes. You can get candy cocktails for both adults and children versions, so, within that, we are infusing this idea of personalization. Each component we’re doing a little bit differently, but each customer we want to be able to personalize their experience with us in the products that they’re getting.

Michael Krigsman: And you allow them to do things like print gummy bears, special types of gummy bears, photos of gummy bears, things like that.

Erica Stevens: Yeah! In our stores as well as online, you can make a truly personalized gummy, so that can be a picture that you upload from Instagram, from online, from a selfie, it can be words, it can be drawings, it can be anything from our 3-D printers.

So, you are using 3-D printers, as well as anything in the store, presumably in some type of fulfillment environment online.

Erica Stevens: Yes. Our warehouse and fulfillment process is amazing. Because we’re handling food, we’re and SQF-certified facility, SQF stands for “Safe Quality Foods”, and it’s a very important piece what we do for customer experience. We need to have the best quality products, and never have anything go wrong with that, so, as people are thinking about distribution centers and fulfillment centers, our facility, it is pristine, it is food-grade, but we also carry notebooks and apparel! So it’s an interesting take on traditional warehousing.

Michael Krigsman: We have a question from Twitter. Arsalan Khan asks a question that actually I was going to be asking you in a moment, so thank you Arsalan for that question. Great minds think alike I suppose. And he’s asking about the metrics that you use, customer experience metrics, and also metrics that you use for supply chain, so generally, the metrics question.

Erica Stevens: Yeah, that’s my world so I’m excited to talk about that. So, a number of different ways we’re doing metrics and data analysis. So one way is we have customer experience surveys that we ask all of our customers to take. We do secret shopping in our stores to ensure that everything is happening the way that we expect, and we’re meeting all of our priorities for a great experience. For our customer experience, we pay a lot of attention to Yelp, to Tripadvisor, to online forums to get the pulse of what our customers are experiencing. Along with that, we look at KPIs on all sorts of different levels. The speed at which we’re fulfilling orders, the number of returns that we have, the number of keeping the particulars of personalization, the number of particular points that have gone wrong to ensure the customer gets the product that they wanted, and quickly. So, those are the big metrics that I’m looking at on a pretty regular basis.

Michael Krigsman: Let’s talk about technology, and I’m really wondering how you organize all of this. It’s a complicated operation. From the outside it looks like, “Oh,  look at this nice store with all kinds of candy,” but there’s a lot of technology in place in the store, in the back office, in coordinating with your logistics or supply chain, and of course, your ecommerce. So let’s parse this. I think in the beginning you were talking about 3-D printing, and that’s kind of left-field for most of us to be thinking about in your candy environment. So, tell us about the 3-D printers, that is so interesting.

Erica Stevens: Yeah! So all proprietary software, 3-D printing along time ago, at the beginning of its inception, was about CAD drawings. And we don’t want to bring CAD drawings into the world of gummy candy. So, technology has improved tremendously. So our partners in 3-D printing developed this software, and the great gummy candy that we’re printing, developed software for those printers. So it makes is much easier that it will automate the upload of a selfie into determining where those lines go, when there’s so much in the background. For example, where I am now, earlier generations of software would not do well with all this background and all of the colors against my face. So we have the technology that knows, “Look at my face and take away all of this behind me,” cleaning it up that way.

Michael Krigsman: And how much of this, again we’ll come back to the technology, but how much of this was Dylan’s original vision. How does this fit within her original idea?

Erica Stevens: I think it fits very well. For her, it was making our customers feel as though they are being transported into a modern-day Willy Wonka’s Chocolate Factory. So, where in 2001, this was not part of the plan, but finding new ways to bring candy into people’s world is exactly the mission and the vision of the organization. So, we try very hard to wow people, to bring things that are unexpected, to wow people in their store experiences as well.

Michael Krigsman: So when you were designing software on printing candies, basically creating 3-dimensional candies, printing them, essentially customizing them and personalized, how did you go about doing that? Because there is very specialized expertise, and especially to do it on a production scale such as you have.

Erica Stevens: Yes. So, for me, the most important thing is the architecture, and having a solid plan in place with our technology. We don’t assume one system will give us everything, but we need to make sure that the data being transferred is as correct, as efficient, so there are no holes in that process. So that’s where a lot of my day comes in. So, we start, the hub is with Netsuite, it is our system of record, it is our system of truth, it is where we make all the decisions, and we have systems that feed into it and feed information out of Netsuite, in that regard. So, it’s very important to me that we don’t have two systems that are speaking to one another without Netsuite in the middle. Um, that’s where my sanity comes in. [laughter] So with this, we have developers that are experts in 3-D printing, that are working on that software. We are web developers where we decided, when we designed our website three years ago, we were looking for a flexible platform that, that we weren’t looking at personalization at that point, but we wanted to have something that we knew we could grow [with] all the crazy ideas that we have to wow our customers. We wanted to make sure that we had a platform that could do that and grow with us. So, that’s the strategy.

Michael Krigsman: How have you architected the flows of data? Because it sounds like even though you’re a very small company, your operations are very complex, you have a lot of moving parts going on here.

Erica Stevens: Yes. Yes, so again that’s where we have Netsuite come in, and for me, my biggest concern is reconciliation between systems. So the more we can ensure that we have everything coming into one space to be reconciled is important, and that we’re all gathering information from the same location. So, you don’t grab all of your analytics from that system and I could be grabbing it from this system and there could be variables that could be making those different. It’s an area where a lot of companies struggle, where “this is my Order Management System, this is my WMS, and they sort of talk to each other but not. And you could also put information into this third place and so I never know how much money I’m making.” So…[laughter]

Michael Krigsman: So, can you connect this back, then, to this unique customer experience. So how does all this technology and technology architecture come back to support the core mission of Dylan’s Candy Bar?

Erica Stevens: My goal is for my customers to never have to think about any of this. So, where we’re always striving to be is that someone who is customer-facing never says, “Well, my systems wouldn’t allow for that.” And to me, there’s a true omnichannel experience where you can go into a store and return something from the web that you can use gift cards, both online and in-store that the systems will allow for that, so that the customer experience is always a great one, because regardless of the medium in which they are interacting with us, they’re going to get the same information, they’re going to get the same level of excitement that they are engaging with us.

Michael Krigsman: So your goal is to be completely seamless between the retail store and the online environment.

Erica Stevens: That’s our goal. We’re continually figuring out, reassessing ways to do that better. Traditionally, technology doesn’t always allow for that. Your website doesn’t have the same features and compatibility with your POS. Therefore, we are working very hard in building up that hub of NetSuite, and we have a POS that is build directly upon NetSuite. We have a highly integrated e-commerce experience and the data is falling; if someone joins our loyalty program, gives us our information onto the website, it will come into the POS and the customer can bring up a customer record, get points for their dollars spent in both locations and it feels like we’re one, unified company.

Michael Krigsman: I want to remind everybody that you’re watching Episode 195 of CXOTalk. We are speaking with Erica Stevens, who is responsible for supply chain and IT at the famous Dylan’s Candy Bar. And I especially want to thank NetSuite for sponsoring this episode, so NetSuite, if you are out there, we are really grateful and we really do appreciate it.

So we’re talking about omnichannel and I just want to drill down into this further: Dylan’s Candy Bar is about the customer experience in the store, and the customer experience and the user experience on the web, and from the customer perspective, that seamless transition, go here, go to the store, go to the web, is pretty simple and pretty obvious, and yet, from a behind-the-scenes point of view, it is very difficult to do. So what are the challenges that a retailer like yourself, a fast-growing retailer faces, and how do you overcome those challenges so that the consumer never sees it?

Erica Stevens: So, it’s difficult, because we have people that are experts in retail and building that experience, we have people that are experts in the world of e-commerce and the traditional ways that you do e-commerce, and bringing all groups to the table and doing what makes sense is something that we strategically do, and I think that the technology needs to follow. So, a lot of retailers that are trying to get into both spaces, they are letting technology guide how they do things in those spaces, rather than saying, “Ok, we need to customize, we need to tell the technology what to do in this regard and think outside of the box as far as the mode in which we operate, to bring in this other channel that is working alongside it.

Michael Krigsman: And when you say, “not have the technology lead you,” can you be more [specific]? Give us some examples of how you can get caught up in the technology and how you’re trying to not do that.

Erica Stevens: So, gift cards is a great example. Gift cards are generally…the way that you do gift cards is generally very different in e-commerce with an e-gift card than a retail environment where you have those physical cards. And a lot of third parties that people use might not work well with the other space. So, that’s been a challenge. How do we use the requirements of two different systems of POS and a web platform and make them work nicely together? And, we’re working in cloud environments. I want to be able to do anything from anywhere, and that’s what NetSuite and our platform and POS allow us to do. We’re truly cloud based. But that means, where do you say I want real-time calls and have information be updated immediately without taking up bandwidth and making sure the transaction is very speedy, and that you don’t have multiple servers that might be weighing things down, and where do you say that we’re going to batch some information that maybe it’s speedier, and maybe they don’t have access to their gift card or their loyalty information immediately because the batching is happening in regular intervals.

Michael Krigsman: So all of your software is based on the cloud?

Erica Stevens: It is, yeah.

Michael Krigsman: And how does it work from a performance standpoint? Because, of course, one of the things that you monitor carefully is the performance standard of your site. So how does it play out?

Erica Stevens: It’s part of our vetting process. So, we have had technologies where they were built on platforms and using servers that would have a tendency to go down, to slow the process, and we have – and everything is highly interconnected. So something happens in one area, and then, let’s say, our POS is connected through a series of things there, and that slows down printing a receipt. It is looking at the big picture in every single detail, and for us, performance is part of the vetting process, making sure we design the program this way, what are the pros and cons, will this slow anything down? Because, when we’re talking about finishing a transaction or speed of fulfillment in our warehouse, customers have a lot of expectations of us, and as we’re in the business of providing an amazing experience, it is as speedy as possible.

Michael Krigsman: And we have another question from Twitter, and that is from Chris Peterson. And he is wondering, did you look at open source software at all as you were evaluating the systems to use?

Erica Stevens: No! [laughter]

Michael Krigsman: Ok that is a simple answer! Is there any reason why you didn’t? Or it just wasn’t on the radar at all?

Erica Stevens: Um, I mean I definitely see that value of open-source, absolutely. It’s just, being a small company and needing to rely on our partners tremendously. So, you know, with our web platform, I have people that I can kind of source that out. I did end up developing the architecture but I don’t have to worry as much about those details. So, I’m just not an open-source person.

Michael Krigsman: So with the cloud, essentially what you’re doing is outsourcing major components, all of the back-end of your systems, you’re essentially outsourcing so you don’t have to deal with it.

Erica Stevens: Yes. Or I would say I could focus more, the company could focus more on how all of this outsourcing is interacting with the other components. And so, it’s still very time-consuming absolutely, but it allows me to focus in different areas.

Michael Krigsman: When you are, I feel like I’m hitting you rapid-fire with all of these questions, but we’ve got about ten minutes, or a little bit left and there’s so much that I want to ask you. So, as you’re clearly technology is integral to what you’re doing with the company to create the goal of an entirely seamless omnichannel retail environment, the company is planning for its next steps, how do you think about technology in those conversations, where does technology start to enter into it? How do you think about technology from the ground up?

Erica Stevens: I strategically look at it as the second step. We have such as strong vision coming from Dylan in creating this amazing experience, these amazing products, our biggest challenge is we have too many ideas, and how do we accomplish them? How do we prioritize them? But, I don’t want to use a piece of technology because its available to me. I want to use it strategically to accomplish a goal. I think that technology is essential to what we do, but to me it’s a tool to make this grand vision happen. So it is Step #2, not that it’s second in importance, but it’s Step #2, and where we take that then is, how do we do this most efficiently? How do we have the fewest people touch this so that we can automate, make customers’ expectations…you know doing personalization and shipment within a couple days, that’s pretty amazing with personalization today. So, we want to keep getting better and better with that, and finding ways that technology can continue to wow. But, the technology is not what’s wowing the customers, it’s the lollipop tree in our stores.

Michael Krigsman: So the experience is the thing that creates that customer delight, and it’s the technology that enables you to present that experience both in the stores, like with 3-D printing of selfies on candy, for example. It’s the technology that lets you do it but it’s all in the service of that vision.

Erica Stevens: Absolutely. Very well-placed.

Michael Krigsman: So you mentioned Dylan a number of times, and as she’s thinking about the concepts, how does the tech enter into it? And very briefly, as we only have a few minutes left, tell us who is this mythical Dylan of which we have heard [while] talking about Dylan’s Candy Bar? And how does technology figure into her thinking as well?

Erica Stevens: So, Dylan is our candy queen. She is the face of the brand and she’s a creative force, she is involved in every single product we have in stores and online. She is the daughter of the legendary fashion icon Ralph Lauren and author Vicky Lauren. So, grew up in a very unique environment and being exposed to the world of art and fashion. She’s got a degree in Art History from Duke University, and this is a childhood dream for her to open up Dylan’s Candy Bar and it’s been a tremendous success, being in business for 15 years. And, we’re going strong and we’re growing like crazy. So she is Dylan’s Candy Bar.

Michael Krigsman: Ok. And very quickly, how does technology fit into her envisioning what can be? How does technology fit in that early stage?

Erica Stevens: She has a vision of what the outcome is, and then it’s my job and a lot of team members’ jobs to make it happen. So, she’s looking to make, without getting too much in the details, making sure that it’s happening in the way that it will delight our customers.

Michael Krigsman: So she has an idea for something that will delight your customers, enhance the experience and so on, and she is envisioning at the start, the kinds of technology that may enable it, essentially?

Erica Stevens: Yeah, the way in which we would make that happen. So, it’s not deciding on NetSuite, but it’s making sure that we have a method of delivering to our customers in every store and in every channel.

Michael Krigsman: Ok. And we have a question from Twitter, and again I’ll ask you to answer pretty quickly because we’re running out of time. So, Lauren 6031 on Twitter, and Lauren, I’m not sure if that’s your last name (it’s not!). So, Lauren 6031 on Twitter asks, as far as investment goes and growth, is it online or is it in the brick and mortar stores? That is a good question. Really good question.

Erica Stevens: Yeah, absolutely. It’s both. Dylan believes strongly in brick and mortar, and it’s the greatest translation to our vision. But, we also want to interact with customers throughout their lifetime, and when people don’t live near one of our stores, that’s where the e-commerce comes in.

Michael Krigsman: We’re hearing all kinds of sounds.

Erica Stevens: Sorry, it’s New York! [laughter]

Michael Krigsman: Oh it’s New York, OK. All kinds of horns. So gain, just as we move towards closing up here, again, unfortunately I wish we had lots of time, the technology you have mentioned a few times having a single system and using netwuite is critically important for this. Explain why a single system is so important for your operation.

Erica Stevens: It has to do with getting the data quickly and easily as possible to form a whole picture in order to make a decision. We are very data-driven, and we also move quickly. So, we also want to get the whole picture from one single source. So, rather than grabbing some e-commerce statistics from one place, and store statistics from others and having to merge them and reconcile them, having this architecture is the way that we can pivot quickly.

Michael Krigsman: So it’s a matter of having seamless data flows. And Netsuite is of course a suite, and which modules of NetSuite are you using right now?

Erica Stevens: As many as possible.

Michael Krigsman: As many as possible. You know, that sounds like, for a relatively small company, that’s a big statement, NetSuite covers a lot of ground.

Erica Stevens: Yeah. You know, we use order management, we actually run our warehouse from all of our fulfillment, all of our manufacturing is coming from NetSuite, or through NetSuite. POS is built directly on NetSuite, our e-commerce platform we just have an integration there. We’re just looking for data analytics, all of our reporting is done through NetSuite. You know, future goal, I want to make a more robust reporting system for us, but right now we’re doing pretty well on what we’ve got.

Michael Krigsman: Ok. And my last question is: So you’ve been doing this now for a while, and what advice do you have for other retailers who want to create this kind of customer experience that’s also highly differentiated so that they, as you do rise up above the crowd; stand above/rise above the competitive noise? What advice do you have for those folks who are trying to do that to succeed?

Erica Stevens: It think it is, first of all always stepping back and looking at what is our actual customer experience? Because I think that, you know, we all have so much to do and we all tend to get a little siloed in “this is how this works in theory”, or “this is how it works over there in that other department, that’s how that works”, but does it really? And is the customer seeing a seamless process, or do they get on the website and it could be a different company? So, for me, in my professional career, a lot of it has been, “Yeah I know you’re not completely on board with these changes that need to be made, this investment that needs to be made, but go and try to return something to the distribution center when you brought it in the store. What happens?” And to think through every step for the customer, there’s often a lot of lightbulbs to say “Oh, wait a minute, how would that work? And if we don’t know how that works, then the customer is definitely not going to have a good experience in making that work.” So it’s that, again, the technology, guiding the technology rather than letting it guide you in your decisionmaking. To some degree, we always have to make decisions based on some capabilities, however, looking for that flexibility and not having those brainstorming sessions outside of, “Well, it’s not going to work because the system won’t do that.” Let’s figure out a way to do that if we find out it’s most important to our business and our customers.

Michael Krigsman: So really, being very rigorous about looking at it all through the eyes and discipline, looking at it all through the eyes of the customer. Sounds like that’s the bottom line.

Erica Stevens: Yeah. Absolutely.

Michael Krigsman: Ok. Well, we have been talking today on Episode number 195 of CXOTalk with Erica Stevens, who is responsible for supply chain and technology IT for Dylan’s Candy Bar. And this episode has been sponsored by the wondrous NetSuite, because we really appreciate your sponsorship. And also I want to acknowledge our video partners at Livestream because you guys are also awesome. Erica, thank you very, very much for taking the time and speaking with us today!

Erica Stevens: Thank you!

Michael Krigsman: Everybody, I hope that you will come back next week where we’re going to have an incredibly good show, at least, I hope it’s incredibly good! We’re speaking with the Chief Information Officer for the World Health Organization, and so that’s going to be a lot of fun. Thanks everybody so much and have a great weekend. Bye-bye.

Innovation and Transformation with Roddy McKaig, CIO, Shaw Industries

  • Episode: 178
  • |
  • Topic: Leadership
  • |
  • Partner: NetSuite
Roddy McKaig, VP and CIO, Shaw Industries
Roddy McKaig
Vice President and Chief Information Officer
Shaw Industries
Michael Krigsman, Founder, CXOTalk
Michael Krigsman
Industry Analyst
CXOTALK

Virtually all industries are being transformed by digital technology and changing consumer expectations. On this show, we learn about changes in the flooring industry with Roddy McKaig, CIO of Shaw Industries, a $4.5 billion flooring manufacturer owned by Berkshire-Hathaway.

Roddy McKaig has over 30 years of experience in Information Technology leadership. In 2008 he was appointed Vice President and Chief Information Officer at Shaw Industries, located in Dalton, Georgia. In this position he has complete responsibility for the corporation’s world-wide technology services and support, as well as the Corporate Administrative Services groups. These areas are comprised of a staff of 400 professionals, supporting the company’s 23,000 associates in over 200 locations. Roddy took this position after serving 12 years as Director of Systems Development for Shaw. Shaw Industries is one of the world’s largest flooring manufacturers, with complete product offerings of both hard and soft surface products. Shaw has been a member of the Berkshire Hathaway family since 2001.

Before coming to Shaw, Roddy held director level positions at the Bibb Company, an Atlanta, Georgia textile company, and Salem Carpets which was based in North Carolina. He also spent several years in technology leadership at two companies providing technology services in Chattanooga, Tennessee.

Transcript

Michael Krigsman:

Welcome to episode number 178 of CXOTalk. I’m Michael Krigsman and today's show we're going to be talking about transition and change, the impact on business and technology in a large traditional manufacturing organization. My guest today is Roddy McKaig, who is the Chief Information Officer of Shaw Industries. Roddy how are you today?

Roddy McKaig:

Good afternoon, good to be with you Michael.

Michael Krigsman:

Well thank you so much and I especially want to thank NetSuite, who is sponsoring this episode. Roddy, tell us about Shaw  Industries. What do you do, how big is the company, how long have you been in business, how long have you been working there. So give us some background and context.

Roddy McKaig:

Okay, Shaw Industries is a 50 year old company. We are a complete flooring provider, both hard surface products and soft surface products. And then custom made rugs is another soft area that we're.

Michael Krigsman:

So Roddy to tell us about the changes that have taken place in the industry and what has the impact been on Shaw.

Roddy McKaig:

Well the industry has been through a lot of changes for some years now, started back in the 80s with consolidation when most of the flooring in this country was broadloom carpet. And in all the residential carpet now, a lot of mergers and acquisitions through the 80s and 90s. Today there's probably there's just a handful of companies that are in the broadloom carpet business and there’s two major ones, Shaw being one of them.

Then in the late 90s hard surface products started coming more of a preference and that trend is continuing even today. Probably pick up a little bit of pace so you've seen all the big players including Shaw transitioning a lot of their capacity and the manufacturing areas to hard surface products. Carpet still dominates our business. We’re the largest carpet manufacturer in the world. The largest carpet manufacturer in North America, but hard surface is definitely an area that is gaining more and more preference from the consumers. And a lot of creativity and a lot of design improvements over the last several years in that area. And we expect that trend is going to continue to increase as we go forward.

Michael Krigsman:

So this major change has taken place among consumers. Their expectations of you and so what are the implications been on Shaw from a business standpoint and therefore from a technology perspective with you as the CIO.

Roddy McKaig:

Well a lot of changes happened during the recession in 2008 when the big recession hit and any of your listeners listen to the news you know what it did to housing. And housing is a huge part of the floor and business, so it had a dramatic impact on Shaw and our competitors. But that we've seen consumer tastes change. One of the things they went to cheaper products during that time.

A lot more PEP based products were so which were cheaper material. You probably don't get the quality and and endurance that you get out of some other type products. But we seen that trend and Shaw just like most providers you've got to sell what the customer wants to buy. So we went through some transitions there in our plants and capacity to make certain kinds of products and reduced other kinds of products.

So that has changed a lot and we’ve seen you know over the years we’ve seen the amazon dot com’s of the world really picking up steam more and every year. You hear about how much more Christmas shop is done online, well that's finally started to get in our industry. You're not seeing huge sales on the internet yet but you're seeing huge marketing efforts and you see in consumers just like buying a new car.

Most people do a lot of their shopping online before they go to the store to actually make the sale. And by the time they go in they know pretty much what they want. So we're having to cater to that change in consumer trends. And one thing we're trying

Michael Krigsman:

Welcome to episode number 178 of CXOTalk. I’m Michael Krigsman and today's show we're going to be talking about transition and change, the impact on business and technology in a large traditional manufacturing organization. My guest today is Roddy McKaig, who is the Chief Information Officer of Shaw Industries. Roddy how are you today?

Roddy McKaig:

Good afternoon, good to be with you Michael.

Michael Krigsman:

Well thank you so much and I especially want to thank NetSuite, who is sponsoring this episode. Roddy, tell us about Shaw  Industries. What do you do, how big is the company, how long have you been in business, how long have you been working there. So give us some background and context.

Roddy McKaig:

Okay, Shaw Industries is a 50 year old company. We are a complete flooring provider, both hard surface products and soft surface products. And then custom made rugs is another soft area that we're.

Michael Krigsman:

So Roddy to tell us about the changes that have taken place in the industry and what has the impact been on Shaw.

Roddy McKaig:

Well the industry has been through a lot of changes for some years now, started back in the 80s with consolidation when most of the flooring in this country was broadloom carpet. And in all the residential carpet now, a lot of mergers and acquisitions through the 80s and 90s. Today there's probably there's just a handful of companies that are in the broadloom carpet business and there’s two major ones, Shaw being one of them.

Then in the late 90s hard surface products started coming more of a preference and that trend is continuing even today. Probably pick up a little bit of pace so you've seen all the big players including Shaw transitioning a lot of their capacity and the manufacturing areas to hard surface products. Carpet still dominates our business. We’re the largest carpet manufacturer in the world. The largest carpet manufacturer in North America, but hard surface is definitely an area that is gaining more and more preference from the consumers. And a lot of creativity and a lot of design improvements over the last several years in that area. And we expect that trend is going to continue to increase as we go forward.

Michael Krigsman:

So this major change has taken place among consumers. Their expectations of you and so what are the implications been on Shaw from a business standpoint and therefore from a technology perspective with you as the CIO.

Roddy McKaig:

Well a lot of changes happened during the recession in 2008 when the big recession hit and any of your listeners listen to the news you know what it did to housing. And housing is a huge part of the floor and business, so it had a dramatic impact on Shaw and our competitors. But that we've seen consumer tastes change. One of the things they went to cheaper products during that time.

A lot more PEP based products were so which were cheaper material. You probably don't get the quality and and endurance that you get out of some other type products. But we seen that trend and Shaw just like most providers you've got to sell what the customer wants to buy. So we went through some transitions there in our plants and capacity to make certain kinds of products and reduced other kinds of products.

So that has changed a lot and we’ve seen you know over the years we’ve seen the amazon dot com’s of the world really picking up steam more and every year. You hear about how much more Christmas shop is done online, well that's finally started to get in our industry. You're not seeing huge sales on the internet yet but you're seeing huge marketing efforts and you see in consumers just like buying a new car.

Most people do a lot of their shopping online before they go to the store to actually make the sale. And by the time they go in they know pretty much what they want. So we're having to cater to that change in consumer trends. And one thing we're trying to learn more about consumers and what their preferences are and what they're going to be wanting in the future.

Michael Krigsman:

What are the implications for the culture inside the company? What are the implications for as CIO what you're doing with technology as a result of these changing expectations and changing consumers changing how they shop?

Roddy McKaig:

Right well you know at Shaw technology has one purpose, and that’s to server a business need and as  consumers want to shop more online, then we've got to be in a position where we can provide them with what they need to see online, and to make them want to go to the store and buy our products.

A lot of that will be more detailed imaging of our products so that they can get a very good feel for what that product would look like when your mind flooring, especially carpet. The one thing you can't get there is the touch, because everybody wants to feel that soft product.

But as far as we can go with giving them clear images of the products, all the specs of the products what they can expect when they go pick that product up and have it put in the floor. So all the web marketing is very very important.

Our customers who sell to consumers they need us to do more to support their sales to that consumer too, especially in some of the online. We're seeing a little bit more of the hard surface product, the palletized goods can be sold easier online, especially hard surfaces. And our customer’s need us to be able to support their consumers with samples or whatever they need that close the after sale. So we've been doing a lot of work over the last year preparing to support that part of our business better to.

Michael Krigsman:

So it seems from what you're describing there is a kind of two parts to this there is the business changing its understanding what consumers want and adapting itself along with the technology changes at the same time.

Roddy McKaig:

Yeah there is, and we have to support the business in that. You know with the way the world is today depending on technology, whatever a business needs to do, that it dictates that we're gonna have to do something with the technology to support that business change. And we're seeing a lot of that.

You know just we now have people in the company whose sole job is to understand and learn more about consumers, and used to we didn't worry about that. We just sold to the retailers and they worried about the consumers. But if you think about our business, and we have thousands of very small customers around the country that have very small foreign stores and they do not have the manpower or the know-how to provide all this technologies to consumers. So it's really come back to the manufacturers are going to have to do that. And Shaw is stepping up on that and really pressing that, trying to get better at that, and to provide their customers, our customers customers, what they need to get them into those stores to buy our products.

Michael Krigsman:

So you're the manufacturer and then you have thousands of stores through which you sell and so you're considering with the needs of both your customers - the stores, as well as the end buyer.

Roddy McKaig:

Absolutely, you know we thought the more we know about the consumer the better we can market to them, that we can help our customers market to them also. And we're even going to the point of helping our customers with technology in their stores are web presence to support their individual retail stores. So all that helps us to; the more the better job our customers can do selling to the consumers a better job we're doing for the overall company.

Michael Krigsman:

So there's this shift among consumers in terms of how they want to buy which has forced your customers, the thousands of stores to adapt and change. And as the kind of big fish behind the scenes you're helping them through that transition.

Roddy McKaig:

Absolutely right and a lot of it is you know they just don't have the manpower or the know how to do it. A lot of them have no technology expertise on staff at all and you know we have to help because they're our success depends on their success. So we we’re actively in several ways out there trying to support them and trying to give them better digital marketing materials for their websites, and to support them all we can to to be a better retailer to the consumers.

Michael Krigsman:

So that's on the marketing side, but when you talk the people viewing may not realize that when you talk about hard versus soft flooring you're talking about goods that are palletized vs say carpets on rolls. So maybe can you explain that distinction, and then let's talk about the implications on manufacturing.

Roddy McKaig:

Well when a typical roll of carpet comes out of a plant it will be 12 foot wide and it will be somewhere 125 to 150 foot long. And that could end up being sold to 10 or 12 customers, or it may go to one customer depending on what their orders are. So it is a long roll, 12 foot wide carpet for the most part that’s cut up into room size pieces and then installed around houses around the US.

Palletized goods, all the hard surface products for the most part whether it’s wood, laminate, luxury vinyl tile, or common stone is palletized, because they come in either strips or tiles, square tiles or rectangle tiles and they’re box and palletized. And they can be shipped a lot easier. And as far as the plant’s there's no comparison whatsoever.

A plant that makes carpet cannot make vinyl tiles and carpet plant  on a point cannot make hard surface. It takes totally different manufacturing equipment and processes and systems to support those environments.

So you know, it's a matter if you have a shift in demand between carpet and hard surfaces, you're looking at the potential for slowing down the carpet capacity and growing the hard surface capacity, and we've been through a lot of that over the years to. We have to shift the capacity in our plants to meet the demand that’s coming in. And you know we have to sell the products that the consumers are wanting, so we're constantly adjusting our capacities with our plants to manufacture what we need for sales.

Michael Krigsman:

Okay, so you are changing your manufacturing mix based on the demand that comes in, and at the same time though you need to be increasingly agile adaptable in terms of your ability to do this quickly. And I’m assuming that the recession that hit in 2008 must have had a big impact as well. So how do you do that and maybe talk us through some of the technologies that enable you to adapt and change in ways that in the past you didn't have to.

Roddy McKaig:

Well part of the story is you've gotta plan ahead you know you don't start up a new plant we're in the process right now building three new plants for various product lines, and that's not something you do in a few weeks or a few months. You've got to predict where your business is going to be a couple years ahead of time, because at best it's probably going to take you about a year to get that plant built and get all the equipment ordered and installed and up and running. So it's predicting where your future’s going to be is critical when you're talking about making that kind of changes in your capacity.

So you know once you get a set of technology set up for a new kind plant, we’re building right our first rug through vinyl tile plant and we have developed a modified systems to handle all that. In some cases we have new systems that handles that new product category. Once we get that, open up another one won't be nearly as time-consuming on our part; on the technology part, as it will on the people who are building a plant and installing the equipment in it. So the key part, the critical path of any new capacity like that is what kind of manufacturing equipment you need. Those odds are I can get technology in a lot quicker than they can get manufacturing equipment ordered from a supplier and onsite and installed.

Michael Krigsman:

And I know you're using automation, you're using sensors, you have a lot of advanced technology in your plant.

Roddy McKaig:

We do, we spend a lot of years of open manufacturing and distribution. We have a very big distribution process. we have a regional DC's all around the country where we will ship products from from Dalton to those locations, and then they will deliver to our customers, all Shaw owned, all our distribution centers are highly automated with conveyor belts and all the lift trucks have computers on them and a better computer drilling. And when they go pick up a roll of carpet and drop it off, we call them where to go to get the next product and move it. So at all that automation is there.

Manufacturer's the same way. We spend a lot of money on automating our plants you know, there's there's three things that we find very very important in our company. And one is our service. We pride ourselves on providing the best service in the industry. The second one is quality. There again we pride ourselves on selling the very best products that we possibly can and some of the best in the industry.

And then the cost. The lower we can keep our costs, the better it gets for our customers and then ultimately consumers. So automation helps us in all three of those areas in manufacturing distribution, to making sure that we're getting the best value out of our products, and the best quality of our products. So all that automation it either reduces labor or we have automation on our manufacturing lines that are constantly checking temperatures where temperature is critical critical. Checking moisture rates where moisture’s critical. Checking the speed of the lines. All our product specification says how fast the machinery ought to be running and what the temperatures are to be and all that.

And we have sensors that will alert people if those get out of sync on where they should be, because if they do you run the risk of starting to have quality problems. And when you've got a big manufacturing line running carpet at a very high rate of speed you can produce a lot of off quality real quick like that. So sensors and knowing what is going on in the actual manufacturing equipment is very very important to us in our quality.

Michael Krigsman:

So Shaw is an old company. It’s been around for a long time.

Roddy McKaig:

Fifty years.

Michael Krigsman:

So it's a $4 million company, it's been around for 50 years and that means that the company has gone through many changes with historical traditional processes. So as you've been going through this shift building automation in, shifting to the cloud which we're going to talk more about in a few minutes, what have the workforce implications been, what have the cultural implications been? What were some of the challenges that you faced in making these transitions and how did you overcome these challenges? How did you address them?

Roddy McKaig:

It's been interesting. You know we often talk about years ago in our industry when you wanted to put in some automation most of our users in the plants and the DCs were afraid of it. They didn't want automation because they didn't know anything about it. Where the new generation love automation, so today you know they're constantly, they're ready for the new automation or whatever technology you want to provide them.

So that culture has changed the whole lot and I think it's just to the way our country has gone and then fell in love with technology when kids are old enough to reach a computer mouse or whatever. But the trend has changed the whole lot. We have a lot of people that will help us know where technology ideas. Where it used to we had to come up with all those ideas. And we made tremendous progress with the people in the plants and the people in the distribution center.

Now one challenge you know, we talk about jobs in this country and everything, but it sometimes it's hard not only to find technology people working in our technology group but even in operations. It's hard to keep a hold of staff sometimes, and with all of automation that is going into our plants and into our distribution centers, that workforce needs to be better educated. They’ve got to have technical skills and be able to use computers and be able to use lift trucks that are automated and to read sensor readouts and that sort of thing. So we have to have a higher degree of education.

I’m not saying it takes a college education, but we're looking for more educated people as every year goes past because we got more and more automation and that their jobs  include that they will have to know how to use certain technologies and sometimes that can be a challenge on finding enough of those kind of resources.

We’re always just about always hiring and got openings in our operations where we need more people. So that's a little bit of a challenge you know, as you implement more technology, your workforce has got to grow and be able to take advantage of that technology and we have things that we do as a company to try to support the college's, local colleges and even high schools in encouraging the kids to get more of a technical education. So they'll be ready for the jobs when they come out of the school and into the workforce.

Michael Krigsman:

What about the impact on IT inside IT, because I'm sure that the skill sets have changed both the type of equipment as well as you've moved to the cloud.

Roddy McKaig:

Yeah, I mean we seeing just dramatic changes. I’ve  been here a little over 20 years and we've seen dramatic changes in the technology we use. But for the most part the people who go into the technology field and go to college to study technology love it. They love the next new thing.

So it's not as much of a challenge for the technology people to learn the next thing that we're going to be using in manufacturing and distribution or even inside the offices here at Shaw. But they usually are excited about the next big thing coming in and eager to get their hands on it an learn it. So it's not as big challenge.

You know sometimes finding resources, there again I think most people who are involved with technology around this country know that it's getting harder and harder to find technology resources to. There's such a demand and a lot of it is what I was just talking about. More and more companies are putting more and more technology out there, and as you do that you got to have more technology savvy people in the workforce, and that's becoming more of a challenge I think for the colleges and universities around the country.

Michael Krigsman:

What about just the overall impact on IT, how is IT changed over the last call 10 years say for example.

Roddy McKaig:

Well I think a lot of it, that’s several ways one that we talked about a lot is the person who is in IT. I remember the day when a technology person was somebody that was in the back room and they just did the stuff and send it out people start using it. But today most of our technology people are out in the business. They're out in the plants, they’re out in the office buildings, they're out in the distribution centers working with the user's hand in hand on putting in the new automation or fixing the new automation, upgrading the automation. So people skills are a big part of what we do today and 20 years ago you didn't worry too much about that unless you were a manager or something, so that's been a drastic change.

We have a lot more types of technology that we have to take care of today. Very different mix than we had 20 years ago and most companies that I know of. There's so much more technology, the high-speed networks, the Internet. Communication is critical, wireless everywhere in every facility. So just a lot more responsibility and today the technology can very easily bring a company to his knees if everything is not working correctly, so it's a lot more pressure I think and a lot more responsibility on technology groups I think probably just better company.

Michael Krigsman:

Let's talk about the cloud. You're  a large company again $4.5 billion dollars in revenue, your owned by Berkshire Hathaway and so tell us about what you're doing with the cloud which I know is quite quite significant.

Roddy McKaig:

It's growing, you know most of our systems we host in our data center where they've been for probably close to 30 years now. We're very customized operation. Historically ERP systems have not catered to the carpet business in particular it's a very unique inventory and and they just could not handle the inventory systems that we needed. So over the years we have built a set of customized systems that is specifically what our industry needs.

Over the last few years we have started using the cloud options where it makes sense to us. Cloud is another option. It's another tool. It's not a destination that we're striving to get to but it's also not a destination that were afraid to embrace.

We always look for what solution do we need for the business that will provide the best service at the best cost, and if that's hosted in our data center here in Georgia that's fine. Or if it’s in the cloud with one of our service providers that's fine too.

We do have a number of things in the cloud now. One of our first big moves was we moved the Google Mail and Docs, probably be about the three - three and a half years ago and have been very successful for us. We have nothing on our mail or docs here in our data center anymore. It's all in Google's environment. When we started an international expansion about three years ago, I knew we were going to need a different set of systems for that because our customized system here were developed strictly for the US dollar and the English language. And we had a companywide initiative that we were going to be focused on international expansion around the world. So I knew I was going to have a different solution and after careful search we chose a company called NetSuite to use their ERP for everything outside of North America as far as our ERP system goes. That is 100% cloud base SaaS true SaaS  system that's hosted in the cloud.

So we're running operations in China. We're running operations in Australia and we're running operations about to go into Europe and all those are hosted in the cloud on the NetSuite system in the US and been very successful with that.

We use Concur, which a lot of companies do for expense management that's in the cloud, big salesforce dot com to support our sales force that's all in the cloud, and have a couple of apps from HR that's hosted in the cloud also.

Michal Krigsman:

So why do you like the cloud?

Roddy McKaig:

Well I wouldn't say I like it, but I'm not afraid of it and it is you know being a creature of habit, if it's all in my data center I have complete control. But the best cloud vendors have gotten very good at this, and what it let’s you do is take our international expansion for instance. If we hadn’t have went cloud then I would have been looking at putting software and hardware and people in every country we go in. And we're all over Asia, where in Australia, We’re in South America, about to go in Europe and that would be a huge undertaking to put hardware, software and staff locations to take care of that hardware and software in all the countries we’re in and all the countries were going into.

By going to the cloud with NetSuite, you know I don't have to do any of that. I just bring up another subsidiary within NetSuite, set up a set of the languages that I need and the currency I need and any localization rules that I need, and I'm up and running. So it instead of been up to a year event to go into a new country, you just know in just 2-3 months we can be live in another country.

So that's one reason I like the cloud for that area because it's very flexible, it's very quick. Once you get the original install done it's very quick to add and expand on it then. So that's one reason we like it a lot for that part of our business.

Michael Krigsman:

So have you created a shall we say a kind of a template that you use to roll out new offices or new countries.

Roddy McKaig:

Well we have processes and a road map will use but with with NetSuite you know

everything runs off the same instant. It's not like you're bringing up another version or another server. We just plug in more data and more rules and it just adds to the existing instance. So everything we're running on NetSuite runs on one instance. You know a lot of software companies if you go with a traditional system, everywhere you go you have another version of it. That's not the case with the cloud, a true SaaS app, you have one version and you just set up new rules for what you want the language preferences or the currency or whatever the case may be, and you're up and running. So it's very quick compared to the old way of doing it and getting in a new location up and new business.

Michael Krigsman:

So it sounds like you're interest in cloud is a combination of a cost and ease. I'm sure there are also staffing implications, you don’t have to buy as you said, you don't have to buy the equipment, you don't have to send people over there. So it sounds like its combination of all of those things.

Roddy McKaig:

There again that's cost absolutely. Speed is important to us and then service. You know I don't even like to talk about service because we demand great service from all our providers, and it if they don't provide the service then they're not an option whatever. It don't matter how much it cost if you get poor service. So we assume service when we go with our cloud suppler or any supplier really. So it's all about speed and cost with us and what's the best solution for our business.

Michael Krigsman:

What about security. I've spoken with CIOs, much smaller companies than yours who have made the argument, well we're nervous to go to the cloud because we want to have the control and we're going to manage all of that ourselves so what about that argument.

Roddy McKaig:

Well you know I can understand that, but you’ve got to keep in mind I think a lot of it depends on who your client partner is. I would wager a bet that there's probably not too many countries in the world that has better security, and more security expertise, and people than Google.

You'd be hard-pressed to be a better secure site than Google can provide just because of their manpower and expertise and money that they put into that, because it's critical to their reputation. NetSuite is the same way. They're very very good, we’ve had it done very strongly before we went with them because that to be honest that was one of our only concern to. And I think you can, it is a valid concern if you don't pick your partners careful.

You can get in a mess because if your cloud partner is not got all the tools and expertise they need to secure your data, your equipment when you are at risk. But I would wager also the bet that there's a lot of companies around this country that are not as secure as they think they are. You know, hackers can get in just about anywhere and if you listen to the news some of the places they’ve got into nowhere bulletproof.

But I do think that the cloud providers have gotten much much better over this and in this in the last few years and the big players, the true SaaS suppliers like Google, like NetSuite are very very good at it. And we've grown to trust them completely.

Michael Krigsman:

So you feel that the major cloud providers can do a better job with security and securing your data than you can.

Roddy McKaig:

I think so because they have more resources and more people expertise to do it. I don't know how many customers Google got, NetSuite’s got over 30,000 customers Google has got more than that sure I’m sure. When you’ve got that much and that much responsibility you're going to be the best you can possibly be. And we vetted both of them very closely on security before we went with them, and we were very very comfortable with where they, and where they're going.

Michael Krigsman:

So you're owned now by Berkshire Hathaway, and as you were choosing your cloud software was their interaction with the folks from Berkshire Hathaway? Did they have a view on cloud at all?

Roddy McKaig:

Not really you know the stories you hear about Berkshire Hathaway is pretty much true you know mr. Buffett always says he wants to buy good companies that are managed well and leave me alone. That's pretty much what they have done. They do not intercede or interfere with operations of our company whatsoever. They do offer advantages sometimes with volume discounts or whatever, but no, as far as technology decisions and things like that it's up to us as a company what we think is best for company. Now they do audit us like they do all the other kind of companies quite often and that's good because that helps us get stronger and better. But we will go through probably three or four audits a year from something from Berkshire Hathaway’s auditors, and that's all good. But no, they do not dictate or tell us what technology we should or shouldn't use.

Now if we were going to do something really out on the edge or something, we would probably feel obligated to make sure they were okay with it. But we don't do that anyway so they let us run the company the way we always run it and doing what we think is best for Shaw. And they don't claim to know what's best for all the companies they own and they look to us to make those decisions.

Michael Krigsman:

So I think people are interested in this. I certainly am, so Berkshire and Warren Buffett, it sounds like pretty much the way they present themselves on the news, on television.

Roddy McKaig:

We found nothing but that to be true. You know Warren Buffett has been here a few times and spoke to our management team and he's no different than the image that you read about and see on the news. He just that person and he runs the company and all the companies they own just like he says he does. He finds good companies and leaves them alone, and as long as they're doing a good job on running them he does not interfere with it. And he lets them make the decisions because they feel like they're closer to the business and make the right decisions. Fortunately, our management team has always done that at Shaw. So his image is real as far as we’re concerned.

Michael Krigsman:

So he comes across in person as he does on the news or what have you.

Roddy McKaig:

Absolutely, 100%, no different.

 Michael Krigsman:

So getting back to the cloud are their sections, parts of your business of your data that you would be hesitant or reluctant to put into the cloud for any particular reason?

Roddy McKaig:

We're more comfortable with that today than we were five years ago or three years ago. You know, there again I think the key is picking the right partners and somebody you really feel good about and can trust. But as time goes on we’ve put more and more of our data in the cloud. And we don't have it all up there today because we don't have a business reason to do it, but as business reasons come up to move more data I will not be hesitant to do that. And like I said as long as we feel good about partner we're going to entrust to take care of that data.

Michael Krigsman:

So for you the issue with moving to the cloud has to do with business case given the equipment, the software, the manpower and so forth that you have. It has nothing to do with concerns about security, and so therefore as you said really what it comes down to is do you trust the cloud vendor the cloud supplier.

Roddy McKaig:

Yeah as far as you know we run the bulk of our work in our data center, but that's because we've had it there for 30 years. We built our systems exactly the way we want them. We have all that expertise to take care of our networks and hardware and software, and staff. And once you get that environment built you've got to have a good reason - financial reason to dismantle that, because it costs you money to do it a drastically different way. And we pulled off pieces of it over the years, but the bulk of its still here because we have no reason to move it. It would take a business reason, a pretty good magnitude to financially justify that kind of changed. Now if it comes up we will address it and we will embrace it. But I’m not against that but from a service and financial viewpoint right now, it just makes all the sense in the world for us to keep the environment we got, because it works very very well. It's already highly appreciated and it's paid for itself many times over and we don't have a business reason to dismantle it at this point in time.

Michael Krigsman:

But you did have a business reason on the international side so again in this context, can you just summarize why did you decide to do it with international whereas domestic you're staying on premise with your existing systems.

Roddy McKaig:

Well if you think about it historically you know, high nineties percent of everything we did was in North America. We did a little bit of business overseas but it was strictly export. When we announced we were going into international expansion and one of the first big moves was to build a carpet manufacturing plant in Nantong China, I knew we had to have another system because our systems wouldn't handle Chinese language and the Chinese currency and all the localization rules that the Chinese government has. So we did not have any option enhancing our systems to handle all that wasn't an option. We could not have got it done in anywhere close to the timeframe that we we’re going to need it.

And so I knew we had to have a different solution, and to be honest with you,  I really wanted a cloud option because I did not want to have people everywhere we were going around the world. And luckily at that point I had never really heard of NetSuite other than one thing.

We have bought a little company probably about 11 years ago in Australia that used a product called NetSuite, and I was not even familiar with it but they loved it. So when the China deal come up, I called them back and they said yeah we still use it. You're not going to take it away from us are you? I said no, we we will look at it a little closer actually. So that's one reason we actually knew about it when we chose NetSuite. But they were the only true cloud SaaS option that we had on the table. You know you had Oracle you had SAP, J.D. Edwards, Microsoft. But none of them were true SaaS, and when NetSuite went out functionality and price over the others, than I got the SaaS as a by-product of that which I was pleased with.

 Michael Krigsman:

We have just a few minutes left and so what advice do you have for companies who are undergoing the kind of change that your industry has undertaken and that the company has undertaken?

Roddy McKaig:

Well I would say probably the sooner you start looking at it in the future the better you'll be; a strategic planning, and thinking about your future is critical because it gives you more time to adjust, and to make your plans to get where you need to go.  Technology is changing very rapidly and I don’t think that's going to slow down. I think we're going to go on see that continue to accelerate.

The the more you can get out in front of what your company needs and get your plans and thoughts gathered and ready, the better off you'll be.

I would advise to be open-minded. Don't turn your back on the cloud because I do believe we're going to continue to see the transition to the cloud in all areas of Technology. A lot of it is just going to be the timeliness, the cost, and the staffing. You know technology resources are getting harder and harder to find. If I was starting a company from scratch today I would look 100% cloud. I would not even look at anything on premise.

I would suggest that people think long term as your active short time. You know you’ve got to keep up with the day-to-day business, but keep your mind and your thoughts on what you need long-term to support your company. And as any technology that you're considering but especially cloud, I would advise you to pick your technology providers very very careful.

I think your success is dependent on the partners you pick, and if you can pick a true partner not just a provider but a partner, your chances of success will be much better. And once you go cloud you need to be careful because it's hard to back out. If you go cloud and you dismantle your own premise staff, you dismantle your own premise hardware it's hard to go back. So you need to be very careful on that and I’m not saying don't do it. I'm just saying be careful as you do it.

But think long term especially on negotiations, because you think about it, you move to the cloud but a very long commitment to that provider. And if you don't have your negotiations where you have house protection ongoing, at some point in time you can have a bad story with them.

Michael Krigsman:

So very briefly because again we're almost out of time, give us your advice on negotiation since you brought that up.

Roddy McKaig:

Well I think you know, if you don't ask you're not going to get it. And I think having a good partner who wants you to be successful, and they want to be successful is a big big step. If you have a partner that they're just in it for every dollar they can then that can be a concern. You bet, it should be a red flag it goes up. But if they are truly wanting a long-term partnership with you then they should be willing to put something in the contract that will protect you and give you predictability going forward, especially in a cloud environment. Because you are very dependent on them, more so than if you've got hardware and software in your data center because you can fire them and get a third party take care of it. But if you're in a cloud environment, you can’t fire them unless you move completely away from them.

Michael Krigsman:

So there's a closeness that ends up happening between the cloud vendor and the customer that doesn't happen with on premise is what you‘re saying.

Roddy McKaig:

I think it's a necessity that worse than that we’re failing. You know a lot of our technology on premise providers are just that; they're providers. But true partners for the most part are in a SaaS environment, and that's a necessity because we’re completely in bed with them. I mean we're committed to them, we’re committed to us. And that's a very hard partnership to undo.

Michael Krigsman:

Okay well this has been really quite a glimpse inside a changing and evolving manufacturing business. We’ve been talking with Roddy McKaig, who is the CIO of Shaw Industries, and Roddy thank you very much for taking time to talk with us today.

Roddy McKaig:

You're very welcome. I appreciate for inviting me.

Michael Krigsman:

Next week, no let me take that back. On this coming Friday our guests on episode number 179 is Michelle Dennedy, who is the Chief Privacy Officer of Cisco Systems, so join us on Friday. And a big thank you to NetSuite for sponsoring this show and also thank you to livestream our video distribution partner. Thanks so much everybody and we will see you on Friday.

           

Companies mentioned in today’s show:

Shaw Industries           https://shawfloors.com

Concur                         www.concur.com

Google                         www.google.com

NetSuite                      www.NetSuite.com    

Oracle                         www.oracle.com

Salesforce                   www.salesforce.com