Planogram and Processes for Replenishment of Non-fast movers – Part 2


L.R.Natarajan, Partner- Strategy and Systems Consulting

 LRN has worked at senior level positions in companies like Eicher Motors, Hero Motors, Greaves Cotton, Ashok Leyland, and Hindustan motors. His last employer was Titan Company limited. Eleven years in Titan Company limited (eight years in Tanishq) and retired as CEO for the new business division. LRN was also heading the innovation council at Titan and was an active member of Tata Group Innovation Forum.

LRN had successfully spearheaded the TOC implementation in Tanishq retailing.LRN had started a school for Innovation in Titan and the school had produced over 400 trained innovators.

LRN also undertakes consulting assignments from corporate companies on Strategy, Retail excellence and Innovation. He has recently authored two books, a book on Innovation titled “The 9 Nuggets of Innovation” and a book on retailing titled “Demystifying Retail” – The Four golden rules.

Prabhakar Mahadevan, Founder Director of Strategy and Systems Consulting & Focus and Flow

Technologies Pvt Ltd

Prabhakar is a certified Theory of Constraints consultant (TOC) by Goldratt Schools Israel, certified expert on TOC by TOCICO (www.tocico.org) & is associated with TOC for the last 22+ years.

 Through his consulting companies,Prabhakar and his colleagues are involved in several comprehensive TOC consulting projects across several industry verticals such as fashion jewellery, fast moving consumer goods, consumer durables, automotive OEM, capital machinery, pharmaceutical, heavy engineering, fashion retail etc.

In our last article we have seen the methodology for arriving at the Ideal Planogram. In this article we will understand the processes suggested for maintaining the Ideal planogram by having the right replenishment process.

1. Replenishment Process (for large retailers)

For the merchandise selling under the category of fast-mover, we had explained in the earlier article how the replenishment is to be done. I will explain here, the methodology to be followed for replenishment against sale of a non-fast-mover.

To implement the suggested process, the pre-requisite lies in creating a Design bank. Therefore, let us first try and understand everything about the Design bank.

1. What is Design bank?
2. What should be the size of a Design bank?
3. What are the pre-selection processes for a design to appear in the design bank?
4. The process of replenishment using the design bank
5. The advantages of using the design bank
6. How to keep the design bank Dynamic?

1. Design Bank

What is a Design bank?

A design bank is a collection of pre-selected designs (with three agencies short listing) to improve the probability of sale. The design bank should cover all the line items (Category/ Sub- Category/ Weight band level = Line item) appearing in the largest show room in the retail group

What Should be the size of Design bank

To arrive at this number, for the largest store, one should refer to the sales from non-head age band, line item wise for the last one year. Having done this, the design bank should have options to cover, line item wise 6 months sale. For example, for a line item, Bangle/ Filigree/ 10-12 grams, the sale from non-head age band is 40 in a year, the design bank should have 20 varieties of design.

The computation as per the example given above must be done for all the line items appearing in the Ideal Planogram of the largest store.

If the 6 months requirement for some of the line item is less than 3, the design bank should have a minimum of 3 design variants.

What are the selection processes for a design to appear in the design bank

For a given line item if the computed number of designs to appear in the design bank is 20 (1x), then the vendor base should be asked to showcase 60 designs (3x). These 60 designs should be reviewed by the Senior store staff and the senior merchandiser in bringing it down to 40 (2x). The shortlisted 40 designs again need to be filtered through a customer meet in picking the final 20 (1x) designs to be showcased in the design bank. By repeating this process for all the line items the design bank can be made ready with a set of designs with much higher probability of selling.

The Process of replenishment using the design bank

Once the design bank is in place, all the stores should replenish their line- item wise non-head sale only from the design bank. It is important for the store to replenish the line item sold (at Category/ Sub- Category/ Weight band level) only with the similar variant belonging to the same line item from the design bank.  Example: if a design variant belonging to Bangle/Filigree/10-12 grams has got sold in the non-head age band, then the store should pick an alternate design variant only from design options listed under Bangle/Filigree/10-12 grams. 

Also, there should be appropriate software (or excel) for capturing each design variant wise pick and sale from the design bank (as and when designs from design banks are picked against sale of a variant from non-head age band happens).  Over a period, design bank will have line item wise/ variant wise pick and sale data which will be a valuable guide for stores in selecting the variants with higher probability of sales.

The advantages of using the design bank for replenishing sale from non-head age band

How to keep the design bank dynamic

After computing the design bank size and selecting designs based on multi-tiered selection process explained above, retailer should build the design bank with first with 50% of the design variant requirement. After this, every alternate month, 17% of design bank size should be added. But doing this, the design bank requirement will be met by the end of 6th month.  From the 8th month onwards, when new designs equivalent to 8% of design bank size is added, the same number of non-performing designs from the design bank should be removed.   This process ensured the design bank is kept dynamic and the size would also be around (after addition and deletion) the 6-month non-head sale requirement. 

Example: Design bank size for Bangle/Filigree/10-12 grams is 50 designs. In month 0, build the design bank with 25 designs and get started with doing alternate replenishment from the design bank. In months 2, 4, and 6, add 8 new designs to the design bank.  So, by the end of month 6, design bank size would be 49. In month 8, when 8 new designs are added, remove 8 old non-performing designs which was added in month 0. Repeat this process every alternate month and keep the design bank fresh and dynamic. 

Summing up

To achieve the best inventory effectiveness, besides the processes suggested for fast-movers, two things are to be done:

1. One must arrive at the right planogram, by doing 2 X 2 analysis
2. A Design Bank showcasing merchandise-wise unique designs should be made visible to showrooms ((along with sales and pick data). This will enable the individual showrooms to pick the merchandise with good sales history, when a non-fast-mover sells.

Happy Retailing

L.R. Natarajan

M. Prabhakar