Project Description

 

Traditionally, retailers looked at planning, allocation and replenishment as three distinct disciplines within the business. In our opinion, this approach misses a significant opportunity to reduce inventory, improve service levels, and increase revenue. Working together and focusing on a few common metrics, these three groups can dramatically change the value retail companies create for their shareholders.

The Planning, Allocation, and Replenishment Vision

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.

Getting from Here to There

Making the leap from siloed organizations, measured independently and using disparate solutions, to a single process based on product contribution intelligence, is going to take some effort.

The first step is defining the process from end to end and determining the common metrics on which to measure the process. This will depend on the current state of your systems and the visibility and information available to your planners, allocators, and replenishment analysts as they perform their work. This will also depend on the flexibility of your allocation engine and your ability to add variables in to the model.

From an organizational perspective, this change will require buy-in from both the buying/merchandising and supply chain executives in the company. However, they both benefit in the short term. The buying executive gets better visibility to demand and maintains higher service levels, while the supply chain executive reduces overall inventory in the network and carrying costs.

Final Word

It’s incredible the retail industry hasn’t yet solved the problem of eliminating the traditional silo’d nature of planning, allocation, and replenishment. With billions of investment in inventory in the supply chain at any point in time and trillions in logistics costs each year in the US alone, it’s time for a transformational change.

About Parker Avery

The Parker Avery Group is a leading retail and consumer goods consulting firm that specializes in transforming organizations and optimizing operational execution through the development of competitive strategies, business process design, deep analytics expertise, change management leadership, and implementation of solutions that enable key capabilities.

For more details, contact:

Clay Parnell
President & Managing Partner

770.882.2205

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