Inventory Planning: Start Broad, Then Break Down by Channel
As a multichannel retailer planning out inventory for various marketing channels, you should start with an all-encompassing financial plan, then work your way down to individual channels to ensure that each — retail, catalog and Internet — is appropriately stocked. Ray Goodman, vice president - technology for inventory management software solutions provider Direct Tech, described how to best go about multichannel inventory planning in a session at last week’s National Retail Federation conference in New York.
Start the process by conducting an overall financial plan at the top level for each channel and by setting goals for the year. Then, by channel:
1. Determine what’s needed to support each channel; conduct an assortment plan.
2. Conduct demand planning for each channel; look at the respective channels’ sales curves and break down what you think you can sell, when and at which channel.
3. Commence purchasing by determining allocations for each channel as well as the appropriate replenishments.
The planning process, Goodman said, necessitates an historical analysis, close attention to seasonality and an assortment plan. Assortment planning requires close attention to brand identity across channels. “Be consistent across channels with the same types of merchandise and goals,” he said. “Plan by merchandise hierarchy — by department and classification — and be sure it supports an open-to-buy plan.”
In making a financial plan, senior executives should set company and channel goals on at least a quarterly basis, Goodman said, although “a lot of larger companies conduct a constant review.” Then, review plans by channel and use that as a basis for generating your open-to-buy plan.”
In open-to-buy planning, company level plans must be balanced against channel plans. Channel plans are then balanced against merchandise hierarchy plans. “Make sure they’re tied up to channel plans,” Goodman advised, “by locking them in and bringing them altogether.”