A Re ‘Tale’ as Old as Time – Part 1

You have the place and you have the merchandise. But, do you have your merchandise in the right place, at the right time to serve your customers? This is a tale as old as time, yet retailers continue to struggle on a daily basis. The ability to properly align available merchandise at the time and point of demand will determine how well you compete in this dynamic market. Solving this challenge branches across all specialty retail stores to department stores, mass merchants, vertically integrated retailers, etailers and manufacturers.

Your Goal: Reduce your markdowns and inventory carrying costs while maximizing margins to ensure your customers are best serviced with the right inventory in the right place at the right time. In part one of this two part series we will discuss five elements to help boost your retail performance and turn this old tale into a new dream for success.

1. Plan High, Allocate Low

Retailers tend to execute their merchandise planning at high levels for key variables such as inventory dollars, sales dollars and gross margin. However, allocation occurs at a much more granular level. You need to apply changes made at higher planning levels down to individual items, locations and times. You then need to incorporate store specific trend projections and individual store size needs up the hierarchy to serve the target customer shopper.

2. Automate, Automate, Automate

Most retail planning assortment and allocation teams tend to focus on the proverbial squeaky wheel instead of spending their limited resources and valuable time on strategic actions to drive the business forward. Leading retailers leverage automated workflows and eliminate duplicate data-entry into multiple systems. The key is to work with a powerful planning platform that is flexible enough to automate your unique allocation process to free up 50 percent more of allocator time. With the right solution you can automate more than 80 percent of your allocation and replenishment with greater precision and accuracy.

3. Handle Uncertainty

Retail merchandise allocation can be a daunting process when dealing with seasonality, new product introductions, fast fashion and localized demand segmentation. Your allocations must be responsive to short term trends at the most micro level. You need the ability to project each item’s performance by modeling it on existing items, relevant product groups or categories using their mean or median sales numbers.

4. Manage by Exception

Alerts and advanced analytics quickly draw attention to high priority areas so they can be resolved. The retail allocation system must provide the ability to establish and automate business rules that reflect how your unique enterprise operates including priority channels, regions, assortments and target performance to name a few.

5. ‘What-If’ Scenarios

It is often impossible to anticipate the different outcomes from implementing one plan versus another, but manually generating multiple plans and comparing their effectiveness is labor and time intensive. This leads allocators to use an approach they are comfortable with, though it may not be the best one. The ability to create a digital twin and model multiple scenarios to evaluate alternative sales and stock plans (without IT involvement) allows planning teams to identify and select the best course of action to support profitable goals and satisfy customers.

Stay tuned for part two where we will discuss more tips on how to optimize your retail allocation process.

Additional Reading:

• White Paper: Navigating the Next Steps in AI-Powered Retail Planning
• Analyst Research: Making Planning Real: How Merchandise Plans Drive Enterprise Success
• White Paper: Five Building Blocks for Retail Consumer Centric Success