THE PROFIT LAB // Top 10 Ways to Pull Profit from Allocation

Introduction

Thank you for your interest in this series. Allocation is one of the most often overlooked areas to optimize retail and gain profit margin. I will be taking you through some successful strategies that will help you find the dollars, understand your customers and achieve efficient and strategic allocation execution.

- Greg Wilson
Director of US Field Strategy, Quantum Retail

Allocation – Your Best Opportunity to Improve Revenue and Profit

With the economy changing the way consumers are behaving and the pace of change accelerating all the time, it’s become much more challenging to get the products our customers are looking for into the right locations. What can retailers do to improve our ability to meet the expectations of our customers better in such a dynamic environment?

Large retail merchants go through a series of product activities in the process of fulfilling their customers’ expectations.

These include:

1. Selecting

2. Ordering

3. Allocating

Which of these three processes can be improved most?

Incorrect assumptions

Selecting product is often the first area retailers assume we should work on. This is usually due to the fact that it’s generally the starting point of in the retail lifecycle and selecting good products is a key factor in success. Ordering the right quantity typically follows when using this time-line based logic. Unfortunately, the allocation of product to stores is often relegated to being the last area given attention. However, this critical component of success is imperative and when it is overlooked, retailers risk failing even when everything else is right.

A significant impact on store and product performance

Allocating product is our last chance to impact what our customer has to choose from. When we’re making allocation decisions we’re making as many decisions as we have stores, for every receipt of every SKU that’s carried. That means hundreds, or thousands of decisions per product, each of which can have a significant impact on how well products and stores perform.

Get these decisions right and you can maximize returns for good products and reduce the pain of the inevitable poor products. Get them wrong and you can stifle the potential of good products and turn poor products into devastating losses.

Get the most out of your merchandise

Unlike the heavily artistic side of product selection, allocation decisions are one of the best points to leverage data and apply analysis to getting the most out of your merchandise and stores. Better understanding of product, location and ultimately customer behavior is an invaluable foundation to support improvements not only in allocation, but also in ordering and assortment decisions as well.

There are multiple process steps and related decision points that can be improved upon in allocation:

Traditional allocation systems allow you to select a base of historical data to use as either a foundation of allocating, or to create a plan to allocate into. Allocators select the products, locations and times to consider. They also choose calculations to apply and constraints to impose. They then review system-generated results and make changes. Each of these process steps and related decision points can be improved upon in any environment.

Over the next 10 weeks, we will be deconstructing the allocation process and exploring opportunities to improve within your current allocation processes and technology limitations. We will also review key areas to think about if you are considering investing in improved allocation capabilities.

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For resources on allocation, visit: http://quantumretail.com/solutions/allocation-replenishment/resources

Get back in the game //

Are you ready to know exactly what your customers are asking for at every location and to have the ability to react as their wants change? If you are looking for a solution that can drive momentum for your business this year, check out the solutions offered by Quantum Retail.

Our customers see valuable results in 8 to 12 weeks and our implementation approach gives your team access to the system from early on, so you can manage changes to your processes with ease. Quantum Retail continues to help all of its clients drive positive business value more rapidly than anything seen in retail.

Get resources on how to adapt to today’s retail market HERE»

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