Immediacy is a driving force in retail — consumers that want your product need it right away.
However, there is an even greater force – sustainability.
Now more than ever, customers want to know where their products come from and how their purchases impact the environment.
If you want loyal consumers and outpaced competitors, it’s up to you to ensure:
- That products remain available across channels – whether that’s in-store, online or through franchise and wholesale customers.
- That products leave as little environmental damage and waste as possible.
But, getting this continuous availability and sustainability balance right, isn’t so easy.
Here’s where downstream planning – forecasting, allocation and replenishment – is vital. These factors create a system that delivers the right quantity of inventory while avoiding the profit and sustainability pitfalls of underselling or accruing excess stock which negatively impacts margin through markdowns or direct waste.
But this is a Goliath-sized challenge for even the biggest retailers. Find out how to overcome them.
What is Forecasting, Allocation and Replenishment and Why Are They Important?
Different parts of planning require you to be proactive or reactive, both are important depending on where in the process you are. Teams need to be proactive to ensure you plan accurately so you don’t run out of stock.
But when it comes to forecasting, allocation and replenishment it pays to be reactive. Being able to allocate little and often makes a company more agile and flexible to react to external factors out of your control.
Empty shelves mean disappointed consumers and the lost opportunity to sell. It also drives away those that are loyal – consumers who won’t wait for products to come back in stock – to your competitors.
Replenishment involves active anticipation and responsiveness to resupply your inventories with products that meet consumer demands. And there’s two types – store replenishment and vendor replenishment.
Store replenishment is the management of products from distribution centres (DC) to stores, how much product should be withheld or transferred.
Vendor replenishment is the management of reordering products from manufacturers and ensuring never out of stock (NOOS) items are always at optimal levels.
Allocation is the scrutinous process of assigning individual item quantities to each channel based on historical data. Ensuring the exact product types match your customers’ exact needs.
Accurate forecasting means you never miss a beat in retail — it’s what maximises your ability to sell more stock at full price through all parts of your omnichannel. Identify the sizes, styles and collections your customers want in the first place and allocate them to the channels where they will sell best. Forecasting is understanding what sold last season, identifying best sellers and underperformers to adjust what and how much to produce or purchase for the season ahead.
The Challenges of Allocation and Replenishment
Determining optimal inventory timing and quantity for each product in each channel is no easy task. Planners rely on full-bodied analysis derived from data that’s been parted with a fine-tooth comb.
Distributing inventory seems straightforward enough — all you need is product, location, time and channel, right?
It’s actually a lot more complex — there are layers to each category. Take a look at how quickly complexity builds within each data point:
- Product: To avoid selling out or underselling, each SKU needs to go to the right department, division or channel. The problem is, there are thousands of SKUs that must be sorted in varying quantities across these departments, divisions and channels.
- Location: Depending on region, division or channel, every store has differing capacities for new inventory. Inventory levels need to be adjusted based on the products each store already has, plus any current or upcoming promotions.
- Time: To promote effective sales, products must be delivered to stores at precise times throughout the year. This means every checkpoint — from supplier to manufacturer to packing to delivery – has one or more assigned due dates within a season.
- Channels: It’s a headache for companies who don’t plan for channels, which means stores could claim stock that is already allocated for e-commerce, franchise or wholes
With forecasting, planners derive an ideal replenishment schedule for every product from seasonal products to the never-out-of-stock goods. However, planning for the ideal timeline is a balancing act in and of itself, as it requires planners to account for:
- The current state of any given store’s inventory, promotions or in-transit replenishments
- The NOOS products that need to be replenished
Ensuring dwindling products are restocked just in time – for the perfect duration of time – requires meticulous planning and constant attention to changing details. This level of organization is simply unrealistic for merchandisers to execute manually on spreadsheets.
How an AI-Driven Planning Solution Helps
With thousands of products, dozens of locations and a myriad of other details, it’s impossible to manually forecast, allocate or replenish product inventory that is optimal. Achieving accurate product placement means accounting for inventory and channel micro-changes at a very granular level.
A retail planning solution like Centric Planning is an end-to-end planning solution that handles both the upstream and downstream aspects of planning. Invest in a solution that does the heavy-lifting to forecast, allocate and replenish by putting data analysis, automation and high-level visibility on your side.
Centric Planning’s augmented intelligence predicts sales expectations for each product based on historical sales data for each product in each channel – meaning you can prioritize items in locations that have a higher chance of selling at full price.
What this means for you is:
- More precise forecasting with sales estimates for product reorders
- More sustainable practices with less waste and less overproduction
Plus, these predictive models can then be finessed for successive purchase orders for similar products, building intelligent distribution plans over time.
A planning solution minimises the time, money and resources it takes to optimize product placements across stores. Leverage demand patterns, on hand inventory, space and current events to calculate the right distribution to each store and optimize SKUs on a store-by-store, channel-by-channel basis.
Integrating automation enables planners to allocate proactively – not reactively – so you can stop:
- Using local couriers at an increased price to handle these unplanned, urgent transfers
- Designating store staff to pack and unpack transfer stock
- Decreasing customer service by preoccupying your staff with transferring stock
- Decreasing customer satisfaction from loyal customers who cannot find the products they expect to find
When products are better allocated and aligned to where consumers expect to find them, it means there is less transfer stores. A reduction in product movement is a reduction in pollution and when you’re talking about huge retailers this small saving can quickly become significant.
When it comes to accurate forecasting this too means less overproduction, waste and the resources it takes to produce these products.
Although companies would first and foremost invest in a planning solution to reduce excess end-of-season stock and increase the chances of selling more products at full price. Sustainability is an attractive and very important secondary benefit, and a welcome addition to any other sustainability initiatives a business is undertaking.
It’s quite rare that upstream processes like planning, buying and sourcing, work in tandem with and downstream systems like allocating and replenishing. But, using one system like Centric Planning, which utilises the same strategy, engine and logic means teams have complete collaboration and are totally in sync.
Enable your company to predict and learn from past data to maximise product availability and increase sell-through. Invest with Centric Software® to gain agility through one single view of all inventory whilst having the ability to allocate and replenish right down to granular details.