If retail executives realized how much critical information resides in planograms, they would want space planning apps on everyone’s desktop. Planograms are the source of 5 critical retail triggers. And retailers who use them, win at the shelf.
Efficient Shopper Routes
Talk about customer-centric! Build loyalty by respecting shoppers. Shoppers want retailers to be their advocates. They are already in your stores. Combine planograms and floor plans to give customers shopping assistance. Make it easy for shoppers to find what they need. Shoppers select their favorite store, then use their phones to direct them along the most efficient path to complete their purchase. You’re rewarded with lifetime loyalty.
Walmart , Target and Home Depot help customers find where products within any store (down to the aisle and section.) They even feature it in TV ads. A customer-friendly use for floor planning and planogram data combines shoppers’ lists with the most efficient shopping path. This is a game-changer for covid-era shoppers who want to limit their exposure in stores.
As one client said recently, ” This is how Brick and Mortar wins!”
This is how brick & mortar wins!
Store to SKU Authorization
Too many retailers rely on an inventory allocation system (or worse yet, a buyer’s spreadsheet) to authorize which SKU’s go to which stores. Then, it is a complete disruption at the store when the product arrives without a home location. Product sits in the backroom or get placed “somewhere on the floor” frustrating shoppers and store associates. Meanwhile, buyers and suppliers worry as they miss initial sales forecasts.
But using planograms as the authorizing trigger to allocate a SKU to a store eliminates that problem. Planograms provide future initial order quantity visibility and can be shared with execution teams in advance to calculate their workload. (See triggers #3 & #4.) Additionally, discontinued SKU’s planograms can trigger immediate clearance markdowns to eliminate store inventories prior to planogram changes.
As an integrated planning and execution system, planograms are the single source of truth for the store to SKU relationship and can trigger actions across a series of other systems.
Shelf Holding Capacity
The decision to authorize a new item to a store usually triggers the initial order. Most retailers have some kind of a “free case” discount for their initial order. But whether you do or not, the initial order can be created using the planogram capacity calculation. That quantity, plus DC safety stock, should be the initial order.
Planograms can have automated regulators for shelf capacity. For example:
- Maximize shelf inventory (Fill all facings as deep as the shelf will hold) or
- Minimize shelf inventory (Fill to the forecasted weekly sales rate or fill to one and a half cases.)
Because planograms typically use the minimum ship-to-store quantities (like inner packs) the initial order can be much more precise than standard “one case per store” estimates.
Then, the reset total investment can inform Financial Planning. (See trigger #5.)
Labor Hour Budget Requirements
The most advanced retailers integrate planogram changes with labor estimates. Going beyond the simple “swap”, “minor reset”, “major reset” buckets most retailers use to estimate the time to execute a planogram change. They apply time motion studies that are standard for warehouse management systems to planogram changes. They tie the time to clear a shelf, remove price labels, remerchandise peg hooks directly to a planogram change.
When a planogram is approved, they run a standard planogram difference report using the labor estimates to build a precise labor budget per store. Roll up the chain to charge labor costs to reset categories. Or, roll up to districts and regions to help control costs.
Inventory Open to Buy Requirements
A hardlines retailer recently got a nasty surprise: During category line reviews, Merchant VP’s signed off on strategic changes to invest in higher quality assortments for several categories. Merchandise Financial Planning did not have accurate forecasts about the impact to the Open To Buy budget. As the resets occurred, there were hard trade-off decisions for the inventory team who had to reduce safety stock and increase store out of stocks in order to execute the buys for more expensive offerings across so many businesses.
To clarify, planogram reporting could have easily forecasted that risk down to the penny. Closing out every planogram cycle should include before and after reporting for planogram fill costs. Using Shelf Holding Capacity and COGS, it is easy to calculate the inventory cost to make every planogram change.
Of course, there are more than these 5 critical retail triggers. Are you a savvy retailer using planogram data creatively? Which ones do you feel we overlooked?