This is where some of the cool stuff comes into play!! You should really have read the basic planning process and the integrated planning process pages before you start to dabble in the exotic and strange world of advanced planning. Enter at your peril…
The starting point and end points are roughly the same, it’s just the bits in the middle that make this really different. Most advanced retailers will still start with an overall corporate strategy that is fed/compared to the divisional/departmental plans. There are store plans, there is clustering, there are assortment frameworks, and there are assortment plans with items, PO’s and allocations. It’s really the details of what goes on within these stages that differentiates this from the integrated approach.
Some of the things that go on here that make this an advanced approach include:
- Attribute Planning
- Many advanced retailers will take their merchandise plans and develop them across additional dimensions in order to validate the accuracy of the overall plans as well as to develop a buying strategy. For example, to break out the category plans by vendor, or by colour, by brand, by price point. Lots of retailers will either do this analysis as a post mortem to last season, or as a roll up of the proposed assortments, but very few include it as a guide to strategic direction to the development of the assortment in the first place.
- Everyone forecasts. This isn’t what we mean. What we mean is that advanced retailers will use a number of mathematical or modeling tools to analyse past and projected performance to develop a system generated suggested forecast. This is usually used in-season to project demand for the remainder of the season, however, the same concepts can also be applied in generating the original plan. Smart huh?
- Multi-Level, Multi-Dimensional Clustering
- Let’s deal with one of the basics before we get into the clever stuff. There is no such thing as a grade 1 store. Sorry, but it’s true. Grading stores on their overall performance is a misnomer in today’s environment. A store can be a grade 1 for denim, but it’s then unlikely to be a grade 1 in every other department (unless it’s a flagship store because they are super-special).
- OK, back to the plot. By multi-level clustering we mean having an initial clustering based on climate for example, then subdividing these clusters on space, and then dividing these based on sales for example. This allows you to create a very detailed plan but still be able to take decisions about products at a higher level.
- Oh, and multi-dimensional refers to using several clustering dynamics, but not nesting them. It gets very tricky, and we’re running out of space on this page.
- Lifecycle Planning
- Often it’s hard enough just to get to the assortment level and plan all of the items without going insane. However, at this level there are still further opportunities to be had. One area is in the planning and management of the product life. Advanced retailers are using algorithms and trending patterns to develop a weekly flow forecast, which accounts for not only the sales at full price, but models the likely pattern of markdowns as well. This enables the business firstly to optimize the inbound receipt flow based on anticipated demand for each item, but also to calculate a significantly more accurate markdown forecast for each week.
- Store/Size Analysis
- This is one of the hot potatoes in the assortment planning world, and if you get it right, the potential is very significant. The basic goal is to plan to tune the distribution of each at item at size level based on the store specific demand. So you need detailed history for a start (SKU/store/week), and knowledge of the sales (at full price) as well as the inventory available – you can’t assess the demand if there was no choice available. Then, with a little magic fairy dust and a following wind, retailers will optimize the buy and effectively pre-allocate each item as well as ensure that the buy is sized correctly at the purchase order level. Oh and then you throw pre-packs into the equation, but let’s not even go there for now…
- Visual Assortments
- One of the most underrated components of an advanced planning approach, is actually one of the easiest! Just attach /sites/S1/Image to each item, and see what it looks like! It’s amazing what you spot when you lose the ‘number blindness’ for a while. It’s particularly interesting to see how the assortment reduces as you go down the clusters, until the smallest stores have a relatively unappetizing assortment. And then you wonder why the sales aren’t great in these small stores.
So these are just some of the sneaky, advanced activities that some retailers are doing as part of their planning process. Most retailers are actually doing bits of some or all of these in parts of the business, but very rarely is it included in single, joined-up system, and as part of a well defined process.
That’s where we come in…