June 1, 2023

Scenarios and Reconciliation: Strategies for Effective Retail Planning Process Management



Peter Leith
VP of Product

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Every planner gets asked a similar question when building out the merchandise plans, “what if we grew department X by 10%”. The question may seem simple, but in reality, the planner is being asked to provide a holistic view of their business segment, accounting for potential scenarios of growth or shrink in demand, changes in costs, introduction of new categories, and a multitude of other factors.

Traditionally, many planners would use Excel spreadsheets enabling them to create a new version relatively quickly and adjusting key metrics to estimate the impact of a change in plan. While this process is not new, the ability to reconcile those spreadsheets and share visibility within the organization is difficult and in some cases requires hours of work combining views just to determine whether further changes are necessary.

Adding to the complexity today, different business verticals will have their own plans. Finance for instance may set their top line strategic targets, store planners may be looking at store performance and planning for new openings and merchandise planners may have different people providing their own product-focused perspectives. With all these inputs, reconciliation between plan types and team members can turn into a confusing mess where individual decisions quickly work in conflict with strategic targets for the organization.

Here are some strategies for managing complex planning processes through scenarios and reconciliation.

Create a single version of the truth

While this may seem like it goes against the concept of creating scenarios, it is important for all planners to understand that while they can utilize the flexibility of scenario planning, they have the responsibility to merge their preferred scenario back to a master plan, which will act as the single version of the truth at any point in time. Anyone in the organization should be able to reference the master plan to understand the current view of the plans.

Ideally, a master plan should never be edited directly. Instead, any changes are “promoted” through the merging process. This provides an audit trail of who and when changes were made.

Additionally, having a single version of the truth in the master plan allows for other business functions like allocation or assortment planning to reference the master plan for rollup and comparison purposes.

Define the scenario process

One issue with the ability to create numerous scenarios is the confusion it may create. Planners tend to create a new scenario every time they want to evaluate a change and can end up with hundreds of scenarios that cause a data explosion and difficulty in finding the relevant scenario for comparisons.

Instead, planning teams should create a process to guardrail when, why and how scenarios are both created and deleted. Here is a recommended process:

  • Define the parameters that justify new scenario creation - Planners should evaluate whether a change they are making requires a whole new scenario. In many cases scenarios are created as a backup rather than to evaluate the impact of a change. Regular snapshots can eliminate the requirement to create a scenario. Ideally a scenario should only be created when there is a requirement to compare and contrast two versions of the plan.
  • Maintain a “Planner Master Scenario” - While the master plan should be the single version of the truth for the organization, an individual planner should maintain their own master scenario, this will allow them to keep control over their change management process and streamline their own internal reconciliation between scenarios.
  • Delete old scenarios - Ideally, scenarios should be deleted as soon as they are no longer needed. However, this doesn’t always happen and the ability to specify a life of a scenario allows planners to set and forget the scenario, knowing it will automatically be deleted after a period of time.
  • Ideal number of scenarios - typically an individual planner should expect to maintain no more than three to five scenarios. This number should give them the flexibility needed and ensure no overload in terms of data or process.

Determine the multiplan approach

In more complex organizations the ability to support location plans and finance plans independently becomes key. With this in mind, it is important that the various plans are orientated towards the goals of the organization. For instance, Finance may take a top line view of sales and margin initially. Meanwhile, the merchandise planners should focus on their own sales targets but also the inventory to support it. And lastly, the location planners need to focus on store growth and sales/inventory mix in season. While each part of the organization has their own needs for a plan, it is important that ultimately these plans are reconciled and therefore:

  • Determine the level of commonality between the plans. Merchandise plans may plan a lower level of detail from a product perspective while a location plan will plan at a lower level from a location perspective driving all the way down to individual stores. The important objective is to define a level that the two plan versions can be reconciled, for instance Channel Level and Department.
  • Define which metrics are to be planned in each: plan, sales, inventory, receipts etc. Don’t plan metrics that will not drive a decision or allow for objective monitoring of the organization's goals.
  • Determine the direction of reconciliation. If finance is setting top line sales targets, the goal would be to ensure that the merchandise plan is going to hit those targets. Going the other direction, merchandise planning should determine and reconcile the inventory requirement back to the finance plan to make finance aware of the investment needed to hit the plan.

Reconcile collaboratively

With multiplan types defined, the direction of reconciliation determined and the scenario strategy set, the reconciliation process should be conducted in a way that provides visibility to all stakeholders before committing the reconciled plans to the master. To achieve this, define the scenario that will be reconciled and duplicate a version of the plan specifically for the reconciliation process. This allows the team the flexibility to compare the current plan with a version reconciled between finance and locations for instance.

Once the reconciliation process is complete, usually monthly or quarterly, the reconciled version of the plan (after any additional adjustments) can be merged into the master plan, creating a new single version of the truth for the organization to follow.

Conclusion: Embracing Technology for Robust Planning Processes

To support a robust planning process with multiple planning perspectives reconciled to generate a single version of the truth, organizations should embrace technology that will allow for this. Unfortunately completing this process in Excel would be highly inefficient and could cause inaccuracies in targets across the organization.

Ensure the solution you select supports multiple plan types, supports planning in different calendars and supports the ability to reconcile at a level of commonality between the plans efficiently with sufficient flexibility to move with the rhythm of the planning team.

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