When considering planning, allocation, and replenishment, we need to think contribution, margin, and service strategy. We need to rethink the traditional approach to allocation against pre-season plans and min-max replenishment models that reward unit sales.
The opportunity includes the following key elements:
- Plan against product net profit contribution
- Reduce pre-allocation processes to only those products that have short cycle times and go direct to store
- Re-calculate net need at the last possible minute in the supply chain to distribute product.
Further, the algorithm used to allocate against net need needs to factor service level by channel, gross margin contribution by location, product life cycle, and capacity. This vision will change the way retailers work and the solutions that enable them.