Merchandise & Assortment Planning BEST PRACTICE

Merchandise planning is the science of forecasting sales and managing inventory, balanced with the art of identifying the
merchandise that your customers need. On one hand, the retailers suffer from lost opportunities as a result of stock unavailability
and on the other, their margins are squeezed if the unsold merchandise is marked down at the end of a season.
Assortment Planning helps ensure the right products in the right stores at the right time and at the right price. It implies anticipating
what your customers are looking for and building a product mix that attracts the customers. In order to present localized and
customer-centric assortments, merchandisers need to deploy highly customized and customer centric plans.
RELEVANCE
In todays scenario the retail environment is so complex and dynamic that every retailer has the challenge to effectively plan and
execute unique store level assortments that can help him match the local consumer demand. Moreover, manufacturers and
retailers face an even bigger challenge to achieve a sustainable growth and enjoy long term profitability. This is because of the
high product proliferation, rapidly changing consumer priorities and constantly popping up retail outlets in every nook and corner.
The need of the hour for the retailers is to coordinate between various sources to integrate the information, analyse it and apply
this in real time into actionable decision making.
Delivering the right styles, colors and sizes of merchandise to match local demand is critical for retailers to maximize their
profitability. For this they need to continuously re-evaluate the assortment of their merchandise mix with a change in the demand
and supply factors. This involves not only an accurate assessment of the historical performance but also precise forecasting. It
fosters confidence in management about their strategic and financial objectives and helps them invest in the right merchandise
mix to maximize profits.
ADVANTAGES
Following are the benefits of Merchandise and Assortment Planning:
Faster Inventory turnover.
Maximizing sales opportunities and a decline in lost opportunities.
Fewer Markdowns.
Retailers are suggested to develop and implement chain-wide strategies at the company, division, item category and product
group level. Plans are developed at the season, month, and week levels in terms of units and value. These plans are broadly
categorized into Financial and Merchandise Plans. The strategy for developing the plan is as follows.
Store Grading and Store Clustering - Grading and Clustering is done to group the stores according to common characteristics.
This helps in planning, allocation and replenishment for stores that have a large number of chains and are diverse in functioning. It
allows the retailer to bulk purchase for similar stores. The most common way of grading the stores is based on volumes. On the
other hand, store clustering is based on like attributes.
Financial Plans - Financial Plans are developed in a top to bottom approach by establishing annual financial targets; reviewing
and validating strategic directions; developing plans for all the chains, divisions and departments, and refining projections.
Merchandise Plans - Merchandise Plans are developed in a bottom to up approach. This is done by using the assortment plans.
Sales, receipt flow and inventory levels are projected for every single unit. All of these are rolled up to the department, division and
the company.
Reconcile Financial & Merchandise Plans After the respective plans are made they are compared to identify any plan
variances.
Approval Taking into account any additional variables, unit and value plans are fine-tuned and revised if needed. The final plan
is reviewed by the management for approval.
Monitor Results Baseline Merchandise Plan is established and the results are reviewed on a weekly basis. In due course of
review, potential problems as well as success factors are identified. Revision of merchandise plans is done as and when required,
leaving the original baseline unchanged.
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BEST PRACTICE | Retail Industry
www.dynamicverticals.com
Microsoft Dynamics for the Retail Industry
One Solution, One Database, All Microsoft.
www.dynamicverticals.com
Microsoft Dynamics for the Retail Industry
One Solution, One Database, All Microsoft.
BEST PRACTICE |


Merchandise &
Assortment
Planning
Dynamic Vertical Software Pvt. Ltd.
ASIA PACIFIC | EUROPE | MIDDLE EAST | AFRICA | USA
Paras Twin Towers, Tower B, 5th Floor, Sector-54, DLF Golf Course Road,
Gurgaon-122002. Tel.: +91 124 4581000
SOLUTION BY | LS Retail
Today, most retailers are faced with a common challenge i.e. determining the Inventory turnover and developing Inventory
turnover goals. This is extremely important for any retailer since pushing the level of Inventory turnover to the maximum will lead
to frequent stock outs and increased cost, whereas having an inventory level that does not move will mean blocking the capital
that is invested in inventory.
LS Retail is a total Retail Management solution built on Microsoft Dynamics Navision. This integrated solution delivers the
breadth and depth of functionality demanded by the busiest retailers without the need to build, manage and maintain multiple
applications and interfaces. Its unique use of a single application covers everything from the POS terminals, store systems and all
the functions that a retailer would expect to find at the Head office. This sets apart LS Retail from other solutions in the market.
InStore Management, Account schedules, Analysis by dimensions and Open-to-Buy helps retailers to effectively streamline
Inventory controls since issues pertaining to the kind and the volume of merchandise to be purchased are of strategic significance
to every retailer.
LS Retail InStore Management
The LS Retail InStore Management solution provides for lesser staff training time and a more rapid adoption and compliance in a
high-turnover, low-skill market. It further provides the critical process controls to ensure key functions being carried out according
to the organizational standards, with less data entry and fewer costly processing errors. The Head Office database holds updated
stock information for all stores whereas the stores hold stock information for their respective locations.
LS Retail InStore Management helps the retailers to keep their stock on the shelf, associates on the sales floor and the
business competitive. This increases the customer satisfaction as the store becomes more efficient and responsive. The end
result is that the retailers get a better control on the return on investment and can minimize the stock.
Open to Buy
Sales planning is the most critical decision that one has to take. If the sales targets are too low then it becomes a self-fulfilling
prophecy. The store will not have sufficient merchandise to meet higher demand. Conversely, if the sales targets are too high then
the store will have excess of merchandise.
Open-to-Buy module allows the retailer to control the capital invested in products during the sales cycle. It allows the retailer to
plan purchases and make sure that they match the demand for each period and that the money invested in stock is within set
limits.
Gross Margin Return on Inventory Investment (GMROII)
GMROII is an Inventory profitability evaluation ratio that analyzes a firms ability to turn Inventory into cash above the cost of
Inventory. It is a useful indicator that helps retailers analyze the average amount that inventory returns above its cost.
GMROII is particularly important in the retail industry where stock turn (i.e. sales units divided by average inventory units) and
Gross Margin Percentage (simply called margin) can vary heavily in terms of the item, location and time. GMROII can act as the
main driver for the retailers to analyze their products and store offerings.