What are the Key Elements of a Merchandise Planning system?

As I have suggested in the previous article in this series, the Merchandise Planning process is a strategic one. As such we need to create systems that lead us seamlessly and in an integrated way from top level strategy to tactical action. In creating a holistic system it is helpful to realise that we can split the planning process into four logical sections

  • Review
  • Financial merchandise planning
  • Range planning
  • Space planning


The review process consists of two separate activities. Firstly we carry out a Pre-Season Review of performance history to identify opportunities and problems. Secondly we “normalise” it. Normalisation is the process of looking at history and ironing out the “bumps” to make it useful as a basis for planning.

Financial Merchandise Planning

The first element in the merchandise plan is the Strategic Plan. This is normally high level, with perhaps a five year timescale. It is used to set the critical success factors for merchandising in terms of sales, margins & stocks. Next we would create a Channel Sales Budget. This would allow us to take into account the effect of new channels, new stores, closures and refits. Once complete we would create a Category Level Margin Plan. Here we are creating a weekly version of the strategic plan at category level for sales, margins and markdowns.

We are now starting to get input from the individual merchandisers, and gap analysis between these plans and the strategic plan will ensure that we stay on course. At the same level we create a Category Level Weekly Sales, Stock & Intake Plan. It is here that we create our Open to Buy, normally the first significant win in the implementation of a planning system. These category level plans create the box within which the range plan will be created

Range Planning

We begin here with the Assortment Plan. In this plan we break down the goals of the merchandise plan into specific lines, or sometimes SKUs. The system should be capable of extending the results so that we can see the effect on overall margin mix, for example, of a change in cost price of an item.

Once the assortment plan is underway we can start Distribution Planning. The lines that we plan are here given a distribution profile. From this we should be able to see both which stores a line is ranged to, and which lines a given store will receive. The link between available physical space and ranging done here is a key determinant of merchandise performance.

In the ideal world we would now create a Line Level Weekly Sales, Stock & Intake Plan This would be the category level W.S.S.I., broken down by line to provide a detailed forecast of sales and stock requirements. However, volume & time constraints means that this may be for key items only.

At a basic level this provides us with the means to monitor and react to consumer demand

At a more sophisticated level this provides us with the hard currency that can make efficient consumer response systems function effectively. The advent of e-commerce has increased the value and importance of line level forecasts shared with our suppliers.

There is another sort of assortment plan emerging now. This is the Graphical Range Plan. This sort of plan moves out of the purely numeric type of planning that has been used up until now and starts to allow the range to be put together in a visual way. Typically digitally stored images are manipulated into collage type storyboards.

Space Planning

Space planning systems can be split into two types – numeric and visual. Numeric planning systems simply allow users to take account of space available and to calculate ratios like return on space. Visual systems allow users to create 3 dimensional walk-through models of the stores and to preview the look of a store once ranging decisions have been made.


A system that included all of the above would have taken a strategic vision and translated it into a tactical plan taking into account the constraints imposed by available space and investment capital.

This is how planning should be done!

Verified by MonsterInsights