There are three common pitfalls that companies face with merchandise planning that can lead to failure or disappointing results:
1) Complexity - Companies often try to implement overly complex plans with too many metrics before gaining experience, overwhelming planners and wasting time.
2) Lack of process and structure - Without a defined planning process and strategy, it is difficult to set goals and timelines. Role and responsibilities need to be clear.
3) Poor adoption and buy-in - Effective change management through communication, training and executive support is needed to increase adoption of new planning processes within the organization.
Are you getting the most out of your Merchandise Planning
1. Are you getting the most out of your Merchandise Planning?
3 Common pitfalls why companies do not succeed
Unfortunately many companies fail entirely and others have disappointing results with the
practice of merchandise planning. Upon close examination one can quickly establish some
commonalities.
-Complexity- To explain this I am going to use the analogy of a tech novice purchasing the most
expensive laptop loaded with the latest and most sophisticated apps. One month after the
purchase they barely use the laptop because they lack the knowledge to truly utilize most of
the applications on it. Now imagine a company new to merchandise planning and/or with
minimal internal experience purchasing sophisticated planning software and then adding
alternate planning hierarchies and 20 or so additional metrics to plan!! It becomes an
overwhelming and time consuming task for an inexperienced organization. Often times many
of these additional metrics are difficult to measure and sometimes have no impact on the
bottom line. They are “nice to have” but have no real value. In this scenario Merchandise
Planners spend all their time managing the plan rather than analyzing the business and
producing real action plans.
-Process and Structure- In this instance one has invested in the technology but lacks in
structure and the necessary strategy, process and methodology. Without a roadmap to follow
one cannot get easily to the destination. Merchandise planning is a systematic approach to
planning financial targets. In order to do that effectively and in a timely manner one requires a
defined planning process that brings together Finance, Merchants and Operations. The
planning process should include strategy meetings (goal setting), planning calendar, milestones
and final sign off. There may be other steps to add depending on the individual company
structure. Effective and timely process management is critical to being successful. Without
strategy and process there is no starting point and no finish line.
A company that does not invest in a planning structure with clearly defined roles and
accountabilities will likely fail and/or have disappointing results. There can be no grey area for
who does what, who owns which part of planning process and who is responsible/accountable
for which metrics. Planners and Merchants need to be aligned on the strategy and the budget.
Each brings a different perspective and skillset to the process. There should be meaningful and
challenging discussions between the two parties. While they need to be a functional working
team; accountability and ownership need to be clearly defined. Without clear definition one
can expect to have conflict and missed opportunities for the business.
-Adoption – buy in- Change management is typically an area of difficulty in most organizations.
You have got the technology and a structured planning process but you just cannot seem to
achieve the desired results. One must not underestimate the time and effort needed to
2. effectively communicate, coach and train all parties involved in the planning process. This
includes not only Planners but also Merchants, Operators and Finance Associates.
Transparency and a clear understanding of the process and goals will greatly increase the
adoption within the organization. Consistent strong support from the senior executive team
will further improve the adoption. Change management needs to become engrained in your
culture and daily activities.
Any one or any combination of these pitfalls is typically why a company is not successful in the
practice of merchandise planning. A company that invests time, effort and resources in each of
these individual components will realizes the financial rewards. Notice I did not mention
Technology! That is because it is almost never the reason for lack of success. It might hinder
one from developing more sophistication and more complexity but it will not be the cause of
poor results or total failure.