How Receipt (Ladder) Planning can Help
By Jim Lewis, CEO
Receipt (ladder) planning is more relevant than ever before. It is a weekly plan for sales, inventory and profitability. Based on actual trends, the original plans get revised. It has always been a key facet in our Discipline of a Planner checklist. While weekly inventory health reporting is essential, receipt planning provides a mechanism to conduct “what-if” modeling. It gives a more realistic view of where sales, inventory and profitability are headed based on current trends. For even greater visibility, reconcile both retail and wholesale inventory side by side. Buyers especially like to see that so they can act before something becomes a problem. You can see the impact delayed shipments will have on sales. Moving around the dates and quantities of factory orders in the plan helps your decision making as you estimate possible risks or rewards. For seasonal items it is critical.
Many planners use spreadsheet-based tools, but they lack smart features. Smart systems unlock the full potential of historic POS sales and inventory data by providing greater visibility and a more accurate forecast. One example is the ability to correlate the relationship between price points and the rate of sale. A system that utilizes price elasticity can adjust the sales plan based on sale price and promotions. Sure, you can do the analysis by hand, but it will take you hours. Maybe days.
Receipt planning is also an effective tool for determining if profitability goals will be met. It can be used early in the negotiating process. If you know the promotional plans a smart system can build different models to show possible outcomes (margins). Different costs show how much wiggle room there is to make the goal. It can even tell you what the cost must be to make the goal (the optimal cost). We wrote such a feature into our Item Planner software. Conducting more “what-if” scenarios on sales provides more realistic expectations so there are no surprises. It has helped many suppliers from getting stuck in a common trap- taking a program so they have some revenue without fully understanding how big a check might have to be written at the end of a season.
Receipt planning provides information to virtually all functions of retail- financial planning, merchandising and design, and production. The CFO understands efficient inventory flow is essential in optimizing productivity and cash flow. Production has more insight to adjusting factory orders. And merchandisers and designers can see how well particular products are selling. A good planner who provides management with well-informed options is worth a king’s ransom. Giving them the tools to work smarter and faster is priceless.
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