This is the third and last part of the SAP Planning for Retail rapid-deployment solution blog series (click here for the 1st blog and here for the 2nd blog), and today we take a closer look to the most important steps in the second key process delivered via the package: the merchandise planning.
Let’s start with a short recap:
In the blog about channel financial planning we started with the sales side of the planning, and we ended with the merchandise mix including already inventory related KPI’s on division and department level.
Let’s assume, that the channel financial plan is now agreed on all levels and the next step, the merchandise plan can start.
The goal of the merchandise plan is to provide a plan broken down to the lowest levels of the merchandise hierarchy to build a receipt budget by week that is used for open-to-buy purposes. KPIs include, but are not limited to, markdowns, reductions, and inventory and above/below the line adjustments to gross margin, receipts and inventory. Plans are usually developed in value with average unit retail prices for inventory, receipt and sales added to understand unit volumes at a high level. The sales flavors regular, markdown, promotional and clearance sales KPIs are planned individually including the average retail price of the sales type. In-season plan updates recalculate open-to-buy budgets based on trend. With that the analysis of business trends to identify variances to plan are possible on a weekly basis and allow stakeholders to take action.
Merchandise Planning – OTB and Unit Flow Plan
The merchandise Planning includes several workbooks for the different levels of the article hierarchy. The workbooks look very similar, but addressing different roles in the organization, like VP of Planning, Planning manager, merchandise manager, or however your organization is set up. One very nice feature is, that the solution provides you flexibility depending on your set-up, if you have planners for all the different levels (you remember: division, department, class and subclass), or if you just want to plan for example on division and break it down from there to class and subclass.
All workbooks consist of two worksheets – one for open-to-buy plan and a second one for the unit flow plan based on average unit costs.
It’s possible to distribute – in case you prefer the top-down approach, or to aggregate data between the different levels via predefined planning functions.
Screenshot Merchandise Planning
Assume now, that the first round planning is done on all levels. With the Reconciliation Report, you can reconcile merchandise open-to-buy plans against merchandise financial targets. In case of deviations, the plans can be adjusted accordingly.
And finally, the report allows you to release the Open-to-buy, markdown budget and promotion budget to e.g. ERP for execution. With this step you finished the pre-season part of the planning process.
Screenshot Merchandise Reconcilitation
Now time passes by, you are executing on the plan, you are placing purchase orders, getting goods receipts and you are selling your goods. Now you would like to know, how you do against your plan and if you need to take actions to reach your company goals.
You can use the weekly updated in-season plan to review plan versus forecast and to adjust plan accordingly to your corporate objectives, anticipated order deliveries, approved markdowns and promotional activity.
This version, containing the actuals from the already past weeks and adjusted forecast for the remaining weeks of the year is also a very good starting point for next years planning. And so the cycle starts again.
Let me summarize the key advantages of the merchandise Planning. With this process, you are able to reduce need for markdowns, reduce out-of-stock and over stock rates, you are able to analyse business trends weekly to identify variances to plan, and you can react on that!
So, now we covered also the second key process of SAP Planning for Retail rapid-deployment solution and have reached the end of this blog series. I hope you learned a lot about this package and see the benefits like predefined business processes based on industry best practices, fixed scope, fixed time and fixed price, extendible – a perfect starting point for your project in retail planning.
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