Poor forecasting can lead to numerous problems including excess inventories, high markdowns, low margins and unhappy customers who can't find the styles and sizes they want. But by using solutions for sharing, manipulating and monitoring information, brands and retailers can minimise the negative effects of unpredictability. Stacy Baker reports.

 

The old saying "two heads are better than one" is proving to be true, at least in the technology arena.

 

Collaborative assortment planning - the concept of brands and retailers working together to create the perfect merchandise mix - is made easier with the help of solutions specifically designed to perfect what's offered to consumers on the retail floor, plus speeding the time it takes to get there.

 

"Collaborative assortment planning technology is designed to help retailers and manufacturers to figure out in advance what assortment will make it to which stores and when," says Hung LeHong, director of research for Gartner/G2.

 

"It allows manufacturers to know ahead of time what retailers' intentions are for their stores so they're better able to fulfil product at the start of the season, plus they'll have more confidence that what they produce in advance will be what the retailer wants.

 

"This early communication has a great impact on sales and margins." This is because at the end of the day, there are fewer overages and markdowns because both parties together perfected the assortment at the onset of the planning cycle.

 

Difficult task
Predicting assortments is no easy task because it's based on less-than-predictable consumer behaviour, which is easily influenced by everything from pop culture and celebrities to economics and global, national and regional style trends.

 

Poor forecasting can lead to numerous problems including excess inventories, high markdowns, low margins and unhappy customers who can't find the styles and sizes they desire.

 

But by providing a platform for sharing, manipulating and monitoring information, users are able to minimise the negative effects of unpredictability.

 

Specifically, these collaborative planning tools offer a variety of functionalities including: sharing lists of assortment plan images, dollars and quantities pre-market, formalising processes between partners, providing workflow tools and a holding facility for early assortment plans, serving as a single trackable system of record and more.

Speed to market benefits
Perfecting assortment is just one result of the tool. Speed to market is another.

"The development portion of the product lifecycle can take up to 10 months, and vendors need demand visibility as early as possible," says Louise Chazen, president of 7thOnline, a US-based collaborative assortment planning technology provider with more than 36 brand divisions on the vendor side, including Jones Apparel Group, Liz Claiborne, Kellwood and Danskin, and more than 450 retailer users from Federated/May, Dillard's, Kohl's and Saks Inc.

"This technology speeds time to market because it allows partners to have visual access to real-time product information and images so that they can understand plans, as well as financial targets, classification percentages, expectations and more.

"We've found that lack of visibility between partners accounts for poorly matched supply and demand and wasted time and money."

This technology puts retailers in the position to release POs to vendors far earlier than in the past, sometimes as much as six weeks earlier from a cycle time point of view.

This means manufacturers won't have to scramble with last-minute retail orders after they've forecasted other assortments, and ultimately they're better prepared to fulfil retailer needs.

"When retailers and manufacturers work collaboratively, vendors aren't seeing buyers' plans for the first time when they come to market. Accordingly, they're able to pull the trigger on decisions much more quickly," says Chazen.

"When you get the redundancies and inefficiencies out of the process and provide real-time visibility to all parties involved, decision-making happens in a fluid, accelerated fashion."

Same-system efficiencies
Efficiencies are also gained when all players are using the same system, rather than a series of Excel spreadsheets housed by all parties.

When Ethel Austin implemented UK-based Torex Retail's Compass solution, the retailer had more than 30,000 spreadsheets and was unable to flow figures from top to bottom and vice versa, nor have immediate access to updated real-time information.

The company also sourced 70 per cent of products in Asia, meaning it needed to commit to assortment months in advance and lacked the flexibility to tweak decisions or buy in-season.

Implementing the solution allowed Ethel Austin greater visibility, consistency and flexibility, which freed up money held in stock, reduced markdown and ensured product availability.

"One of the key reasons that retailers have difficulty in responding quickly to changes in consumer demand is a combination of inflexible systems and a lack of timely information," says Terry Osborne, marketing manager for Torex.

"Turning data into actionable real-time information is one of the biggest challenges faced by most businesses today. Reams upon reams of data are available at our fingertips, but only a very small proportion of that is useful, profitable information.

"For retailers, the ability to turn knowledge, trends and transactional data into an effective buying and merchandising plan is crucial."

Technology evolution
The next evolution of the technology may be that brands have more impact on the entire category of what gets offered in stores, just like in the grocery arena.

"In the grocery industry, you have category captains, brands that have proven to consistently raise margins, who show they have a pulse on the market," says LeHong. "Retailers come to trust those manufacturers to decide the merchandise mix beyond their own brands, so they end up influencing products in the entire category."

Although LeHong doesn't recommend this for fashion apparel, particularly because of the influence of trends etc, we may see this for commodities and/or accessories, like belts and white T-shirts.

One of the biggest challenges is teaching merchants to deal with the idea of sharing their product mix intentions too early in the season, but for those willing to take the risk, the rewards will likely pay off.

"This is simply a change management challenge," says LeHong. "One of the problems with CPFR was that manufacturers and retailers were not confident about sharing forecasts - they had no clue how many of X they wanted but didn't want to be embarrassed sharing it ahead of time.

"The technology is not a roadblock, it's really just a change in mindset for any retailer who wants to do it. With no collaboration, vendor needs come as a surprise. And if a manufacturer could produce anything at a moment's notice and a retailer could pick everything correctly, the industry wouldn't need such technology. But that's not reality."

In terms of the technology product lifecycle, Chazen says many large companies are aggressively rolling out assortment planning solutions.

"Most companies in the industry have successfully implemented financial planning systems and in order to extend the value of these investments, they are implementing assortment planning platforms to translate financial plans into door-level product plans," she says.

"There is tremendous excitement around these initiatives. The available technology allows both retailers and vendors to more effectively manage inventory, reduce the administrative costs related to the assortment planning process, and to drive more effective assortments at the store level, ultimately resulting in increased profitability."

By Stacy Baker.