ChainLink Research: Making Allocations Smarter
Allocation processes and their supporting technology are getting a fresh look by retailers of late.
So, why are Allocations so important? Spotting the big product trends is critical for the retailer’s brand. But just as important is ensuring merchandise gets to the right channels and store locations in the appropriate quantities to gain happy customers and higher revenues.
Allocations Today are Dynamic, Not Static
Past models often managed Allocation as a one-time process to assign product volumes to a particular channel or store locations during the first release or push of the product. The math formulas were rudimentary. Today’s competitive marketplace requires more precision and flexibility to manage the “first push” as well as replenishment needs in a much more effective manner.
Currently, the concept of an in season or rapid refresh that responds to current demand is not an allocation practice within many retail organizations. This drives shoppers elsewhere translating to lost sales opportunities.
The retail information environment has become more dynamic, lively, with daily, often hourly, updates about shoppers and conditions that might affect shopping for the season, or today, such as weather, events, promotions, competition, and so on. This information can provide a more nuanced view of the retail picture that can inform and impact the allocation for a location.
Understanding these dynamics requires a more flexible information environment that can be responsive to changing demand as well as enable retailers to create a process over the longer term that allows the flow of information and decisions through the various stages, from planning through execution, to improve quarterly and annual sales growth.
Making Allocations Dynamic and Smarter
There are several key areas today where retailers can use a dynamic allocation approach, making the process smarter, to support real demand now and sales over time. Since most retailers lack key data to get the most out of their people and systems some of these recommendations are about building a foundation of information that supports the current season and allows the organization to learn from past decisions.
There are two fundamental areas retailers can focus on to get more results out of allocations: