Allocation and Replenishment is complex – and getting it right just isn’t easy! Sending the wrong stock to stores, or more commonly sending the wrong quantities to stores, is super common in retail. But it doesn’t have to be! Read on and learn how a systemic solution for allocation and replenishment can support you in this increasingly complex task.
As customers, most of us will know when there has been a problem with replenishment or allocations as it becomes visible. There might be rails filled to bursting so you can’t even get your hand in between the hangers, or worse still, only two units on an arm, gently swinging in the breeze. This customer experience mainly describes the immediate, physical attributes we associate with ‘getting it wrong’. However, the longer-term and probably larger impact of poor availability is the influence it has on a customer’s buying behaviour and loyalty towards a brand. People simply won’t come back if they don’t find what they are looking for.
Wrong stock, wrong place, wrong time… the merchandiser’s nightmare in Allocation and Replenishment
Deciding exactly how many units to allocate per store sounds like a pretty simple calculation to make. However, this gets more complex when you talk about 100+ stores, then layer on varying delivery frequencies, and then layer on the desire to re-calculate replenishment quantities for over- or under-performance … plus you may have a limited or short-delivered stock package … It quickly gets too complicated to action without a systemic solution.
Optimum replenishment is about speed: speed to market, speed to react to a surge in demand, speed to make the relevant data visible and speed to make an informed decision based on that data. This is exactly what a systemic solution can provide! Making faster decisions saves stock and enables you to focus the right stock on your best stores.
Then there is the question of when best to launch new product ranges. Over the past few years, big bang seasonal drops of newness have become less important, and a series of regular, smaller drops of newness has become king to give the frequent shopper the injection of novelty they are looking for. So, knowing when to launch product ranges becomes a key part of the allocation and replenishment strategy.
Knowing when to stop replenishment to stores in favour of keeping a web site fully stocked is also a frequent debate. How do you best strike the balance between availability for a small, selected number of customers who shop in stores versus the availability for everyone on the internet?
The key point we’re making here is: There are too many factors, dimensions and interdependencies for retailers to consider to achieve an optimum allocation and replenishment plan without a systemic solution.
Good news: Complex doesn’t have to be painful!
The biggest investment in most retail businesses is stock, so targeting ways to reduce this investment or making it as efficient as possible is often high on a retailer’s agenda. Imagine if you could save 5% of your working capital costs or reduce your total stock by 10%. These seem like small numbers, but they will have a huge impact on the P&L. This is a key upside, but not the only one: There is wider positive impact on the business, such as minimising operational costs, maximising availability, reducing markdown, improving brand perception etc. Looking at the costs of getting to this point, it becomes clear that an investment in a systemic solution can rapidly pay for itself.
The modern-day approach to getting it right recognises it’s important to consider a whole bunch of factors, decide which of these factors are key to the needs of the business and then build a solution around them.
The key benefit of a systemic solution is that you don’t need to limit the decisions to a couple of metrics. Solutions like Board and Jedox are multi-dimensional, which means they can optimise an allocation strategy made from as many requirements or company nuances as you can think of – for as many different selling channels as you can think of, such as stores, multiple web sites, franchise models, outlets, concessions, click & collect … you name it.
At this point it’s important to talk about the spectrum of complexity. You can apply some pretty basic logic to the allocation and replenishment solutions that will already save you huge amounts of time. Taking it to a different level, smarter AI-driven logic can support you by making recommendations. And then there is everything that sits in between – depending on your individual needs and requirements. Solutions based on the Board and Jedox platforms are fully flexible and can be tailored to meet the current and future requirements of any business.
Better decisions, faster
The key benefits of such a solution will be having accurate data, reported in an easily digestible way, so you will be able to make better decisions, faster. This advantage very much comes to life in an allocation & replenishment solution; for example, it will enable a retailer to respond to customers’ demand for newness as soon as the new stock gets a reaction either online or in store. It can automate decisions to ensure the best-selling stores continue to get replenished, while stores performing poorly are ‘turned off’ when distribution centre stock is limited.
There are loads of benefits that come with the technology, and they will bring with them further upsides, like the freed-up time to make better decisions. Ultimately, it’s the reduction in working capital, combined with the improved customer experience that will deliver stronger profits, higher customer retention and brand success.
So, can we help you with allocation & replenishment?
Are you interested in more retail topics? Read our blog on Assortment Planning now!
