Author: Michael Gamper, CEO, ebp Global
In the past, both fashion retail and brand companies have developed their own processes to approach planning. Fashion retail companies used seasonal based merchandise planning processes to plan sales, buying and inventory for each season. Brand companies in apparel and footwear operating extensive supply chains used more traditional supply chain planning processes using standard demand, inventory, capacity, and material planning approaches. As brand companies are migrating into omni channel setups and fashion retail also embrace wholesale channels as well as supply chains, the traditional segregation is becoming a significant issue to effective management of pre-season and in-season planning activities. Today’s omni channel and global supply chain set-ups require a much more integrated approach. This does not invalidate traditional planning components but highlights the need to integrate the various planning components in the right way to maximize opportunity and efficiency in the future. The below diagram depicts the different planning approach used today.
Merchandise planning includes a number of planning components, from pre-season sales planning, range planning assortment planning, to buy planning including initial allocation, to in-season open to buy planning. Merchandise financial planning is omitted from the diagram of traditional approaches but usually represents the first step in the planning process, setting the financial targets for sales, buy and inventory. Except open to buy planning, all planning processes are usually seasonal processes performed once per season. Range planning is used to set the carry over versus new item introductions to the range, which is then used to either buy or develop products. Assortment planning is then assigning the range to store clusters and stores.
Supply Chain Planning
Supply chain planning follows the traditional approach of regular demand, inventory, capacity and material planning. Demand planning is usually statistical forecasting approach well suited for carry over products, and an often like for like approach for new product. Supply chain planning has been developed primarily by brand companies operating either their own factories or source products from external suppliers; but develop their products seasonally. The need to operate extensive global supply chains requires weekly or monthly planning frequency, updating everything from demand, inventory to capacity and material needs.
The Integrated Planning Framework as a cornerstone of an effective Operating Model
Below is a sample framework integrating seasonal and traditional supply chain planning components from both the merchandise and supply chain worlds. Connecting both worlds is required to effectively navigate the challenges of omni-channel sales channels as well as global supply chains. Any company operating in this space must work on this integration.
The impact on a company’s operating model is significant and needs to be calibrated carefully. ebp Global has significant experience in this domain and would be glad to support on this journey.