In our previous blog post, we mentioned that cross-merchandising is best communicated using planogram software and that cross-merchandising has an impact on how stock replenishment software does its job. It's not just cross-merchandising though, the entire space planning process has an impact on stock replenishment.
Product space re-allocations, new line introductions and cross-merchandising etc. all have a significant impact on stock replenishment. The logical conclusion is that planogram software and stock replenishment software need to integrate with each other in order to make retail operations more efficient and effective.
Here are some specific issues where the use of planogram software can assist stock replenishment software to make more efficient decisions:
1. Initial orders
Initial orders refer to the amount of stock that will need to be ordered (Outside of an automated replenishment system) to ensure that shelves appear fully stocked. Initial orders are usually placed when there's a new line introduction, significant changes in product space allocations and new store openings.
Space planners regularly update planograms with new sales data, which often results in changes in product space allocations. New line introductions have a “Space Occupied” knock-on effect to existing lines. Where these changes are significant, Initial Orders need to be placed in order to optimise product/store performance.
Planogram software, like DotActiv CatMan Enterprise, considers stock at the store, stock at the distribution centre and changes in product quantity required (as a result of either product space allocation changes or new line introductions) to calculate the "additional demand" that will need to be met in order to successfully implement the planograms.
2. Slow-moving lines
Usually, FMCG retailers get most of their revenue from 20% of their listed products. This leaves retailers with more slow-moving products than fast-moving products... The below graph shows a category that gets 80% of its sales from 38 of the 133 products:
The challenge is that 71% of the products are actually slow-moving and if their minimum display quantity (based on their space allocation and product attributes) aren't considered as part of the stock ordering process then the shelves may end up appearing semi stocked and messy.
3. Product Minimum Display Quantity
We touched on this in a point above but only in the context of ordering enough but not too much for slow-moving lines. Below we dive into the psychology, science and result of catering for minimum display quantities in a more general context:
The psychology - Ever wanted to buy the last product on the shelf? Me neither. Shoppers naturally feel more enticed to buy when there's a minimum display of the product on the shelf.
The science - Planogram software sends "capacity" for each product in each store to stock replenishment software. This capacity is calculated as follows: Actual Facings (the number of facings the product will get for a particular store) multiplied by Minimum display depth (the minimum number of products behind each other in order to look good in-store). This ensures that the minimum number of units required to stock a shelf to an aesthetically pleasing level is accounted for.
The result - Store shelves always look well stocked with each product which leads to more enticing product displays for consumers which encourages additional in-store sales.
4. Cross Merchandising
Cross merchandising is a practical tactic that category managers use to drive additional in-store sales. They do this by including a product in a category even though the product doesn't actually belong in the category.
If a product is found in a second location there will be an effect on the total amount of stock needed in order to successfully implement both planos.
The decision to cross merchandise an item cannot be anticipated by auto-replenishment. Planogram software, like DotActiv Enterprise, can provide the accurate total capacity values required to improve both the initial orders as well as the auto-replenishment decisions made.
As a retailer, both store space and stock are your biggest assets. And if managing them to perfection is your goal, you'll need to integrate the tools that you use to manage them.