Complete visibility

David Adams takes a look at the latest merchandise planning and stock allocation solutions available to retailers as they look to streamline stock management in a multi-channel environment

Retail technologists could be forgiven for feeling a little wistful if, while watching classic science fiction, they came across that great archetype of the genre: the omniscient spaceship computer. My favourite was the aptly named Zen, the deadpan computer in cult TV series Blake's Seven, who was always in control - right up until he got blown up by the bad guys.

That omniscience is the ideal for which retailers have to aim: complete visibility across the business, from sourcing all the way through merchandise planning, allocation, replenishment and reverse logistics; backed with the capability to gather and analyse supply chain and sales data to inform business decisions. I bet Zen could do it, so why can't we?

Unfortunately, Zen was science fiction, but the new generation of merchandise planning solutions are not. If these solutions are integrated with allocation, replenishment and other related processes across multiple channels, the retailer really would be getting a little closer to that all-seeing, all-knowing ideal.

That might seem even more of a pipedream than usual during a recession, but retailers are continuing to spend and budget to spend in this area. Promotion and markdown optimisation and assortment optimisation are among their top priorities for spending in the foreseeable future, according to the Global Retail CIO Survey 2010. Of the 109 CIOs and IT directors working for retailers in Europe and the Americas interviewed for the survey (conducted by Martec International in association with IBM and Aldata), 36 per cent planned to upgrade promotions management systems, 30 per cent automatic replenishment, 29 per cent assortment optimisation and 26 per cent capacity planning and store replenishment.

"When there's an economic downturn retailers scrutinise what they're doing with stock levels and people, looking at how to make those things more efficient," says Charlotte Kula-Przezwanski, product manager for enterprise solutions at Torex. "It can actually be harder to get people to spend money on these solutions when things are going well, because they feel more comfortable with what they've got."

Chains consisting of a few stores and a small website tend to use spreadsheets for merchandise planning, only moving towards more advanced merchandise planning as their businesses grow and assortment planning becomes more complex. Clothing retailers, facing tricky stock selection and allocation challenges each new season, have led the way.

South African clothing retailer PEP Stores moved from spreadsheets to using a planning and performance management solution supplied by JDA in 2001. "I think the most important advantage that we've found is the freshness of stuff that we can put in our stores now," says Denise Jacques, planning manager. "Back then it was about 25 per cent old stock, now it's only about three per cent. We plan down to a weekly level now, which wasn't possible in the past. We can differentiate from our top stores to our bottom stores and give them a different selection."

Even before the economic downturn, online competition was forcing more clicks and mortar fashion retailers to question long-held assumptions about merchandise and assortment planning, and consider the use of more powerful technology.

Fashion retailer Mexx has invested in Torex planning and allocation technology to centralise control and coordination of merchandise planning and allocation; and to ensure brand consistency across stores, websites, franchises and concessions in the 65 countries where it has a presence. The modular solution enables the retailer to run planning and allocation processes store by store, taking into account the geographical and demographical attributes of each location as well as the size and turnover of each store.

"Mexx might have a store in Spain that's the same size and turnover as one in Finland but obviously they would need completely different assortments," explains Kula-Przezwanski. "We've made that very simple in the system. It's the link to allocation as well. Before, they had to go through 27 different spreadsheets to get the answers by country. So we've simplified and speeded up the process."

The roll-out entailed upgrades of some existing Torex technology and replacement of other solutions and took two years, with the final module going live in January 2010. Other Torex customers include Mothercare, which is using the technology to manage planning and allocation for its international operations.

Customer-centric planning

One of the most important themes in the evolution of planning solutions is the focus on more customer-centric planning, with assortment planned in finer detail at local level. Maple Lake's QuickAssortment solution provides assortment planning, store clustering, product, store and key item planning, as well as allocation and merchandise planning. US footwear retailer Steve Madden is an early adopter.

Other Maple Lake clients include clothing retailer Ted Baker, which has stores and concessions in the UK, US, Dubai, South East Asia, Australia and the Far East. Dustan Steer, head of IT at Ted Baker, explains that the retailer had been using a spreadsheet solution. "This will give merchandise planners a good repository for all their data in a more stable environment," he says. "It's going to make their lives a lot easier, in terms of getting access to the data.

"The problem with planning within Excel spreadsheets was that everybody was using different versions of those spreadsheets. So we're getting some uniformity, moving all our branch planning figures into there as well." Various elements of the solution will come online throughout 2010, with product planning going live in June and branch planning in September.

The Arcadia Group and ASOS are also Maple Lake clients. But Mark Stone, managing director at Maple Lake claims that other types of retailers beyond the usual fashion and apparel segments are also investigating and adopting the technology: "We're getting a great deal of interest from supermarkets and outdoor equipment retailers."

Wayne Usie, senior vice-president, retail, at JDA, sees a broadening appeal of merchandise planning as part of a move towards integration and more customer-centric strategies, driven by the growing importance of the internet channel and the way both it and the current economic climate are influencing and altering consumer behaviour. "These tools now allow retailers to plan by the way the consumer buys - by lifestyle," he says.

But retailers will need to move away from running processes in silos, says Stephen Henly, business development manager for merchandise planning and allocation systems at SAP (EMEA and India). "Many retailers have got pretty sophisticated planning processes - but they are spread across multiple organisational departments or boundaries," he explains.

He points to the well-established pattern of consumers researching online before they visit a physical store and says retailers must find a way to make that trend benefit both channels. "When you're thinking about assortments and collections you have to think very carefully about how to manage inventory, availability and allocation replenishment to ensure you've got the right stock available on the website and in store," he says. Fashion retailers are still at the forefront, but Henly and his colleague Darryl Owen, vice-president, retail and wholesale industries at SAP (EMEA and India), say they are seeing a lot of interest from department stores in the UK and France and highlight a trend in the grocery/supermarket sector towards category management-based processes. For example, in January 2010 Sainsbury's announced its purchase of various solutions from JDA's category management software suite, including item assortment, space planning and shelf assortment solutions.

As retailers try to make planning and allocation processes more customer-centric the next logical step is to link these processes more tightly with various CRM and loyalty scheme initiatives, suggests SAP's Owen. "There's some really interesting stuff starting to happen around social media," he says. "At NRF we showcased some new stuff around Facebook and Twitter."

The technology he's talking about is capable of analysing content on these social networks to "measure sentiment": identifying key words and establishing whether they appear in a positive or negative context. It could then be linked into loyalty schemes, offering customers a way to indicate preferences.

"This could turn the way people think about their collections on its head," says Owen. "The way that fashion retailers plan is around 'we decide what's going to be fashionable'. That's been the mainstay of the planning process forever. But what if you could get instant feedback from your shoppers? Within a year or two we will start to see retailers exploiting this to try and get a better handle on what consumers are doing - and so get a better handle on their planning."

Whether or not he's right about that, there's no doubt that a growing number of retailers of various kinds now see the sense in investing in these technologies, even during these trying times. "It's not a big surprise to see it's one of the highest priorities," says Mark Croxton, managing director at retail/wholesale process optimisation specialist Aldata. "This is core to the challenge of how retailers are going to survive. You've got to become more efficient as a business, yet also respond to customer buying behaviour."

Above all, says SAP's Henly, the most important link is to the customer. "It all comes back to focusing on the right groups of customers," he says. "Historically, retailers used allocation and replenishment to fix the errors in planning. What we're saying is, if you get planning aligned and customer-centric you will send stock to the right place, first time, in the right volumes."

We already know that what the British Army used to say - Prior Planning and Preparation Prevents P*** Poor Performance - is true in retail. But might planning also allow retailers to get a better idea about what might happen in the future? That would be something that

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