Integrated Merchandise, Store and Assortment Planning

If you have looked at the basic planning process, then you’ll know that in our experience this is usually a product-only focused activity.  An integrated planning process is far more broad in its scope than this, and often involves a cross functional team.

An integrated approach considers the distribution and sales side of the business, not just the buying side, and actively looks to reconcile the two as well as find opportunities.

The product side of the planning process is frequently the same as described in the basic approach.  However the initial store planning activity normally happens in parallel as the core merchandise planning activity, and the two are (eventually) balanced.  The more interesting bit happens, when these plans are then crunched against each other to generate a store/class type plan (the levels vary by client but the principle is the same).  Planners then spend some time ‘tweaking’ the detailed plan, but the real goal is to use this data to generate an assortment framework.

The assortment framework is normally created in two stages.  First the stores are clustered.  We can spend a couple of weeks talking about the ins and outs of clustering, but let’s just say for now that they are grouped in some way based on whatever dynamic you feel is necessary for this part of the business (space, sales, climate, demographic, etc.).  The second part is to decide for each cluster how to calculate an ideal number of items for each store cluster – could be space based, sales based, inventory led, etc.  Whichever way you decide to do this, you end up with a framework to build an assortment bottom up.

This is where it gets challenging for the integrated planning retailer.  They will start to build the assortment from the bottom up; selecting the style colors that are to be included.  Some retailers don’t know at this stage what some of the items will be, so they’ll plan placeholder items, and replace them later.  As items are added into the assortment (usually by the buyer), the planner normally has the responsibility of deciding on the distribution of each item – is it going to all stores, or just to clusters A to C?  There’s a lot of ad-hoc analysis goes on here, and a constant attempt to reconcile the bottom up assortment to the top down targets, until finally the items are agreed and purchase orders placed.

For those retailers using systems to support this process (and in most cases it’s hard to do this level of work without a system in place) the item data, purchase order data, and initial allocation information will be exported from the assortment planning environment and automatically posted into the host systems.  This link alone saves a HUGE amount of time of re-keying items, purchase orders and allocations.

Hopefully you can see how the scope of an integrated planning process differs from that of a basic planning approach.  The inclusion of the store’s aspect into the flow generates enormous possibilities for optimizing the plans for localized customer preference.  It is very rare to find a retailer whose stores and customers are all alike from location to location.  They might plan them that way, but the reality is often very different.  So it just makes sense to try and offer the customers more of what they want, where they want it.