You run a business and want to translate your 5-year retail strategy into a buy plan. That sounds like a big ask, but with the right systems and processes in place, it doesn’t have to be. So read on and follow the 4 key steps in turning a 5-year retail strategy into a buy plan for your business!
STEP 1: MFP
Let’s start with the MFP (Merchandise Financial Plan). The MFP is the first step in merchandise planning: you translate company strategy into financial targets and eventually buy plans. It provides clarity across the business at both a location level (country / market) and a product level (department / category) and can be as detailed as you like.
Typically, this would include the usual metrics of sales, profit, margins, markdown, stocks, intake, OTB, all by channel, country & department. But it can also include Like for Like (LFL) growth, store portfolio growth and any other measures that will help you define success. The MFP can be shaped to whatever level provides your business with the right measures to best translate your strategy. This is usually planned at a season level for the next 2-5 years.
STEP 2: WSSI
Then the WSSI (Weekly Sales Stock & Intake) comes into play, which is the merchandising cornerstone of every good retail business. This is an area where the over-reliance on Excel has, in many businesses, rightly been replaced by a systemic solution. A WSSI can be planned at both a location and product hierarchy level, although the product level should dominate as this translates directly into what products are bought.
WSSI planning is, as the name suggests, done at a weekly intervals level and should also be planned at a channel level too. Sales from the MFP in most cases can be phased against last year’s (LY) sales curve with this year’s planned numbers. However if you know LY was a freak year, then an alternative profile can be set up or another historical year can be compared.
STEP 3: OTB
Once you’ve phased your sales and markdowns (MD) and you’ve set your target stocks, the WSSI is used to drive out Open to Buy (OTB). This defines how much the buyers can spend at a category / class level for you to achieve your sales, profits and stock targets for the season.
For fashion businesses there is a little more to it as the category levels are broken down further into seasonality (usually SS, AW, continuity, old) to improve the management of terminal stocks and the transition from one season to the next.
STEP 4: LINE PLANS
This process then goes on further, taking the category plans you’ve created in the WSSI and converting these into line plans. This allows you to apply the focus needed to make sure you stay in stock of your bestselling lines. You can choose to line plan every line or just the continuity lines, or to focus on the 80/20 rule.
How can it be that easy?
The above process describes what it’s like to use a retail planning solution in a software platform like Board. A systemic solution doesn’t just make the process simpler, the other upsides are huge. Where to start?? Version control, no overtyping of each other’s work, no cells not calculating properly – these are just the basics of not using Excel. On top of that, you can plan with alternative time hierarchies and introduce multiple planning versions … not just forecast and budget, but apply however many ‘what if’ scenarios you want.
Introduce multiple approval levels, where management provide a high-level guidance and the merchandising teams (who know the detail) build the bottom-up plans. Take your MFP numbers and then push them through the WSSI (with one button 😊). There are loads of time-saving measures of going systemic, and the freed-up time can be used to finally think up those new ideas that can really drive your business forward.
Line plans are created in a similar way from a ‘one button’ seeding from the WSSI with all historical data already populated, the ability to plan a group of lines or focus on the best of the best. Exception reporting is simple to implement on the back of the line cards to see where your biggest risks and opportunities lie.
There’s also input into the strategy in a 360-degree sort of way. Once the MFP has been updated and growth plans are in at a category level, it’ll be easy to identify what’s driving the growth. So, for example, you might be expecting a resurgence of denim over the next 2-3 years. This can be converted into units and therefore give direction to your sourcing strategy, e.g. does your existing factory base have the capacity to cover the increased demand in denim, or do you need to find additional factories? Bringing visibility like this to life early on can provide a real competitive advantage in the market.
The MFP and WSSI solutions we implement are totally configurable, so if there are quirks to your business like operating a disposal budget as part of terminal stock management or wanting to plan multiple time hierarchies – no problem.
So you see, it’s actually not that complicated! With a powerful software platform like Board, MFP & WSSI help translate the high-level financial strategy into actionable buy plans. You get visibility and control to stock levels regardless of the complexities of your business. We know stock is the largest investment in most retail companies, so what would it mean to you if you were able to decrease the working capital you have tied up in inventory by 10%, 15%, 20%…?
When you look at it like this, the cost of the technology soon pays for itself.
Are you interested in more retail topics? Read our blog on Assortment Planning now!
