The key objective for planning is to achieve business outcomes.

Planning in retail is a staple function

Over 99.6% of retailers employ some form of planning tools. Planning is a well-understood and standard part of a retailer’s regimen. Although there is wide variety in planning formats, processes, and sequences, such as mapping weekly sales, stock, and intake (WSSI) or monthly demand forecasting, the importance of planning remains critical to the retailer. A typical retailer builds a planning process that manages a wide set of factors, including financial targets, inventory, allocation, purchasing, branding, marketing, delivery, capacity, space, assortment, and more. The ability to coordinate across all these factors enables a retailer to be efficient, purpose-driven, and attain strategic goals. The key objective for planning is to achieve business outcomes.

Let’s unpack that. Planning is setting a strategy for a business. This can be executed at many levels, such as planning at the store level, in back-office operations, as part of a supply chain, etc. However, the result of building a strategy is to improve your business and achieve key business goals. As a business, this might mean increasing shareholder value, improved profitability, increased revenue, decreasing costs, or higher operational efficiency. As a retailer, this might mean higher sell-through, lower inventory, higher conversion, faster turnover, greater margins, and improved comp sales.

Planning excellence is the coveted edge

Retailers utilize intelligent tools to achieve planning excellence. For instance, 85.14% of retailers use inventory optimization tools, and 50% use some form of pricing optimization tools. While planning is important, it is only a first step for retail. Exceptional planning provides the retailer with a competitive advantage in the market. By lowering costs below those of competitors or by managing prices to generate higher value, the retailer can capture higher market share, higher profits, and a better market position than competitors through exceptional planning. The ability to drive lower inventory storage, management, and insurance costs translates into higher capital outlay for new store growth or innovation investments. The competitive edge of good planning supports investment in intelligent planning tools, learning, and effort.

Retail is undergoing volatile market pressures

Despite the importance of planning, most retailers do not design planning efforts as one-and-done, and many retailers develop planning for a specific period, usually a year or a season, but repeat this process at regular intervals. However, planning is not discrete. The continuous nature of planning brings inherent challenges driven by macroeconomic factors in a market as well as obstacles nearer to home, such as industry vertical or organizational challenges. The current impact of the larger macroeconomic factors such as labor shortages, the Russia-Ukraine war, inflation, and supply chain issues have had a noticeable impact. As fears of a recession loom, the expectation would be decreasing IT budgets, but only 33% of retailers are looking to reduce specific or overall IT budgets.

The pressures don’t end with macro factors. Data proliferation has become a challenging factor, with retail as the second-highest data-generating industry after media. The retail industry creates almost 4,000 exabytes of data per year, more than enough to convert every tree on earth into a book with writing. What is more astonishing is that retail is generating data at a rate of 26.9% CAGR. The ability to sort through and manage such tremendous amounts of data is critical, and curation must be done in the planning stages.

Simplify planning with intelligence

Retailers must drive planning for the purpose of improving business outcomes. Despite pressure cooker conditions, retailers must increase sales and profits while reducing costs and losses. Technology must deliver on its promise to make the process easier. A simple framework starts with input data from customers and operations. Intelligent retail tools are applied to the data. Based on input data from customers, operations, and tools, intelligent retail helps retail leaders make decisions. The decisions translate into better business outcomes. For example, widely based impacts of demand planning and sales and operational planning can yield a +5%–10% increase in ROI in the first year alone, with up to +20% each year afterward. Assortment planning can yield up to +8% ROI upon go-live. Capacity planning can improve customer satisfaction scores and increase labor productivity. Clearly, the next standard for planning is the opportunity for intelligent retail technology to influence outcomes. Retailers must invest in the tools needed to deliver on the promise of better, more efficient business processes.

What can you do to improve retail planning?

Retailers can leverage retail planning excellence by starting with intelligent retail tools. This doesn’t just mean having tools in place but also the infrastructure, people, and processes to support tool effectiveness. The following steps are good starting points for your intelligent retail planning:

• Get your data house in order: Consolidate siloed data. Enable a single source of truth. Leverage a toolkit that integrates multiple data sources and a holistic view.
• Prioritize your focus: Leverage AI technology to automate and prioritize the most impactful seasonal planning changes. Focus on your most critical strategic goals, whether it’s sell-through or profitability.
• Prepare a planning process and schedule: Initiate a WSSI tracking process. Establish both top-down and bottom-up store-based planning. Ensure your tools are flexible enough to simplify your processes.
• Measure your outcomes: Capture assortment trends and data. Enable smart indicators and KPIs. Ensure that your tools can measure, prioritize, automate, and scale with your business.
• Stick to your plans: Incorporate contingency buying contracts. Build an OTB path that works for your budget. Automate planning and decision-making workflows.

The topic covered in this blog uses data collected by IDC in their InfoBrief Retail Planning Excellence. This important report provides the latest insights on Intelligent Retail Planning, helping retailers to overcome key industry challenges and achieve better business outcomes.

Download the InfoBrief now to learn more about how Intelligent Retail Planning offers a competitive advantage to retail businesses and about the four-step decision-making framework leveraging data, AI, decisions, and outcomes for greater results.