Integrating Assortment Planning and Allocation: The Key to Succeeding in a Dynamic, Customer Insights-Driven Retail Environment

The retail landscape is unquestionably complex: Selling channels are on the rise and customers expect nothing less than to find exactly what they are looking for in the right location and for a price they’re willing to pay. Technology and processes must offer a high degree of flexibility and efficiency for retailers to keep pace in a rapidly evolving industry shaped by shifting customer demand and short-lived trends.

The August issue of Apparel shed light on the urgent need for greater integration between two critical processes that, by and large, are disparately managed: planning and allocation. Advanced retailers are latching onto the concept that planning and execution should no longer be a one-way street; rather, bidirectional processes are critical to facilitate the back-and-forth flow of information.

Despite inherent omni-channel challenges, many retailers have made strides in breaking down planning silos. And it’s common for many organizations to now look at inventory as a single pot for meeting demand across all channels. However, unless further improvements are made to coordinating assortments and allocations, customer and demand trends can be missed, resulting in lost sales and lower customer satisfaction.

For real change to take effect, the Apparel article suggests that retailers must pair new technologies with updated organizational structures. Tearing down divides in merchandising is where it begins.

In a traditional retail organization, planners create assortments and then order inventory. A separate team decides what to do with it when it arrives. Today’s fast-paced omni-channel environment is forcing retailers to rethink this approach. Without clear visibility into both the assortment and allocation processes, retailers risk not being able to cater well to local and cross-channel demand trends. This can be avoided by enabling greater collaboration between planners and allocators, as well as providing a means for both sides of the house to analyze business conditions and revisit their plans based on the latest financial targets, sales activity and forecasts. Deciding how best to implement a checks-and-balances system is critical. Without a cohesive plan, determining how assortments from a shared inventory pot should flow into different channels is difficult, and reacting to sales trends outside the plan can result in brand inconsistencies that wind up confusing potential customers.

The modern merchandising process is seamless and iterative, starting with the financial plan and moving through to assortment planning and finally to allocation. Shared IT solutions enable all members of the retail team to reconcile plans at each step.

The article spotlighted outdoor retailer Kathmandu, which operates about 160 stores across Australia, New Zealand and the U.K. Looking for an integrated solution that would help it better manage its multichannel business, Kathmandu replaced its spreadsheet-based merchandising system with JustEnough Software for assortment planning, demand forecasting, inventory planning and replenishment. The JustEnough solution also fully integrates with its Microsoft Dynamic AX ERP system. In addition, Kathmandu is an early adopter of JustEnough’s pre-season and in-season planning capabilities, which enable its teams to execute to their original assortment plan while remaining flexible about how they replenish the style range once in season.

A new approach to end-to-end planning has resulted in significant gains for the retailer. Kathmandu reports that it has less excess inventory, which it attributes to starting each season with better plans based on more accurate forecasts. In fact, Kathmandu is holding about 10% less stock, and more of the stock it has on hand sells at full-planned margin. The retailer sold 20% less clearance items in the first half of 2016 and had 35% fewer clearance units on hand. Simultaneously, its sales went up just shy of 10% and profits increased 15.8%. Finally, the new system has provided Kathmandu with greater omni-channel customer insights, allowing it to use data from customer orders to stock its shelves appropriately and capitalize on trends it would have otherwise missed.

Success stories like Kathmandu’s underscore how this generation of retail planning systems help businesses embrace customer-centric merchandising, leveraging built-in analytics to tailor assortments to store clusters. As a result, companies can accommodate specific tastes of local markets and online consumers. However, as the article points out, it’s key to have an allocation strategy in place to distribute product based on how that particular item performs in certain locations, whether in-store or online.

Read the full article here, and contact us today to learn how JustEnough can help your organization successfully integrate its assortment planning and allocation processes.