This is the 2nd blog part of the SAP Planning for Retail rapid-deployment solution blog series (click here for the 1st blog), and today we are focusing on the most important steps in channel financial planning.
Let’s start with a short recap:
Channel Financial Planning is the process of initially developing a corporate budget at a very high level, usually a 3 to 5 year horizon, based on an increase or decrease in selling location targets across all available sales channels. It leverages historical sales and margin data and allows cross category margin analysis and assessment. Comparable and new store sales planning is included as well as store openings, closures, moves and renovations.
Once the initial plan has been developed, markdown targets and margin expectations are planned, in many cases to the department level. These targets are refined for the upcoming fiscal year, and may be planned to the week level, inclusive of individual store performance. The capability to plan bottom-up or top-down using merchandise plans supports the creation of a financial projection or channel merchandise plan for each selling location. Reconciliation between the different levels and roles is supported with reconciliation reports.
And now some more details on the different workbooks and planning steps:
The channel mix plan could be a starting point for the top-down channel financial planning. The goal is to create a financial plan across all available selling channels leveraging historical and in-season sales and margin data which includes regular, promo, clearance and markdown share. The functionality of highlighting changes makes it pretty easy to overlook the impact of modifications of a single KPI. After finishing a planning version, it’s possible – not only in this plan, but also in all others – to create different working versions and to release then the best one as a base for the subsequent processes and for reconciliation.
Screenshot Channel Mix
Especially in the traditional bricks-and-mortar channels, it’s essential to take store opening, closure, moves and renovations into consideration for the planning. In this worksheet it’s possible to plan and update selling location attributes for next fiscal year means to plan the number of stores for the different channels on a weekly base.
Screenshot Channel Count
Store Area Plan
Changing customer preferences and trends, as well as strategic decisions may also result in the need to modify existing store configurations, means the selling space per department per selling location. By selecting similar store layouts and copies also initial selling space allocation for new locations is easy to maintain. The maintenance of this information is not mandatory for the overall planning process, but it allows calculation of profitability/sqm.
Screenshot Store Area Plan
Channel Plan by Location
After release the channel mix, the next step is about building the plan for a channel based on the corporate financial targets. The key figures are planned on location level whereat the stores are assigned to comparable, non-comparable or new store openings clusters. New stores sales are add estimated based on like store volume. Planning functions allow an fast and easy overall increase or decrease of plan data by percentage. Sales numbers can be maintained on seasonal or monthly level and then distributed to weeks. Or the other way around.
Screenshot Channel Plan
Channel Merchandise Plan
If you wish to plan on location level and at the top two levels of the article hierarchy, division and department, this workbook is the one you would use. It gets the initial values from channel mix, channel plan or merchandise mix targets and works analog to the channel plan – but break-down to division and department. Let me introduce here the four levels of article hierarchy we are using for the planning processes. The article hierarchy in general enables you to group your articles, using a customer-oriented structure. We talk about division as the highest level, e.g. Fashion or Food. The next lower level we call it department, could be for example women, men, children in the fashion division. Class is coming next, e.g. a more refined definition of women fashion like basic, classic, business, evening wear and so on. The lowest level is called subclass, e.g. tops, skirts, dresses, trousers, jeans, knitwear …
Screenshot channel merchandise plan
The merchandise mix planning layout can be feed by the previous described channel merchandise plan and/or by the channel mix. It build sales targets for planners and merchants being the interface to the merchandise planning. The workbook consists of two worksheets, one for the planning on division level, another one for the next detailed level, the department level. It uses inventory turn driven planning methods to calculate EOP/BOP.
Screenshot Merchandise Mix
Image that every responsible planner, if it’s the CFO, the Director of Finance or the Inventory Manager, has finished the planning for his area of responsibility. Finally all the different plans need to come to one truth – and here the reconciliation reports helps you to understand the current status of planning and enables you to adjust plans accordingly based on the overall corporate objectives.
So, now you have done the selling part of your planning, stay tuned to learn more about the buying part in the next blog:
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