These two issues were almost equal in significance, with 55% and 53% of respondents respectively branding them a “significant challenge.” Roughly 80% of respondents agreed that these represented some level of challenge. In addition to responses to a number of our other questions about assortment planning tools, these highlight some interesting conundrums.
Spreadsheets Still Rule
For example, in a separate question we asked respondents to indicate the tools/solutions currently used for assortment planning. From our experience prior to starting this research, we believed spreadsheets were widely utilized. But it came as a surprise that a strong majority – roughly 71% – of retailers in our study use spreadsheets for at least some aspect of assortment planning. To be fair, spreadsheets were sometimes coupled with another solution, but this was still a higher proportion than we expected. Custom developed applications were cited as the next most widely used (38.5%). It seems that while most retailers are using a combination of tools, this mixture frequently does not involve a commercial software solution.
Once we looked beyond in-house or custom software, there was no dominant solution vendor named. SAS, JDA, and Oracle all had about the same penetration (between 7 and 8%), followed by minor representation of a dozen other companies. This also came as a bit of a surprise, as some of these prominent retail software providers have had solutions available for a decade or more. Given this longevity in the marketplace, we expected the industry leaders to exhibit more market penetration in this critical functionality.
The results when the panel was asked about clustering were similar. Fully 42% of respondents answered that they performed clustering for assortment planning using spreadsheets as their tool. This was followed by 21% that use their assortment planning tool and 12% that use a commercial clustering tool. Given the complex nature of the calculations required for meaningful clustering, the reliance on spreadsheets for this functionality was even more unexpected. (Clustering is discussed in more detail in a subsequent section of this study.)
These findings beg the questions: Do retailers overwhelmingly utilize spreadsheets for assortment planning because they lack maturity in the discipline, or does this indicate a shortcoming in the product offering of the software provider community? The relative prevalence of custom developed applications would seem to indicate dissatisfaction with commercially available solutions.
New Software is a Consideration
On the other hand, we asked our panel the following question: If you are considering implementing a new assortment planning solution, where are you in the process? 7% of respondents are either currently implementing a new solution or have selected a solution and are implementing it within the year. Another 29% are either currently evaluating solutions or are planning to do so within the next year. While there is no indicator in the question about whether the selected or evaluated solutions are custom developed or commercial software, it is reasonable to expect that packaged software will at least be a candidate for consideration. This may indicate that retailers are becoming more interested in the capabilities of third-party software, at least as an option.
Meanwhile, 37% of respondents have no plans to implement a new assortment planning solution. Given the inferred level of unhappiness with current available solutions, this may reflect a lack of recognition and support among senior executives of the importance of assortment planning to the bottom line.
It comes as no surprise, given the prevalence of spreadsheet use and custom solutions, that lack of integration was the second ranking challenge, with 53% of respondents ranking it a significant challenge. These methods for creating assortment planning tools are notorious for their isolation from upstream and downstream solutions – not tied to either item creation on one side, or purchase order (PO) creation on the other. Improvements in integration, either through the development of mechanisms to transfer data between current solutions or their replacement with newer tools, promise to improve efficiency, reduce errors and ultimately improve profitability.
Yet Integration is Not a Priority
Underpinning the integration challenge were responses about current and planned integration with other systems. We specifically asked about current and planned integration with merchandise financial planning (MFP), purchase order (PO) creation, demand forecasting, item creation, product lifecycle management (PLM), and space planning. We found that the combination of “no integration,” or “not integrated but planning to,” beat responses for “currently integrated” on all systems.
Also, some of the respondents’ comments pointed out several areas where they had attempted to integrate the process, but without the solution integration this was ineffective. This again highlights the difficulty of merging systems and data that are often ill defined or incomplete. Topping the list of solutions currently integrated with assortment planning was merchandise financial planning (MFP) with 44% of respondents citing integration.
If anything is extraordinary here, it is that over half of respondents’ assortment planning solutions are not integrated, and yet many of these retailers seemingly have no plans to integrate with forecasting, product lifecycle management (PLM), purchase order (PO) creation, or space planning systems. More significantly, integration is cited as the second most critical challenge. Another potential factor in lack of plans for integration is that a number of retailers are in the process of core merchandising system replacements or upgrades, thus they are focused on foundational elements, with further integration to come later. Moreover, the lack of integration further escalates challenges with data and solution adequacy mentioned earlier.
There is good news, however, regarding integration in the solution front. We have seen an emerging trend in assortment planning and product lifecycle management (PLM) software integration points, as well as assortment planning solutions that have a much more integrated approach to analysis within the tools.