What is Merchandise Planning?

Before we get into best practices, we need to define what we mean by "Merchandise Planning", as this term can mean different things to different people. To Singletree, and all the companies we work with, this is the up-front process of planning one or more of the following items: seasonal or annual budgets, SKU's, style and style color unit projections, sales dollars, and weighted average margins.  More importantly, it is the process which helps keep all pre-production teams marching to the same drummer. It's one thing to hit your calendar dates (which is a topic for another day), but it's more important to hit your plans. For clarification purposes, Merchandise Planning is not your retail assortment planning which occurs much later in the process and is at the retail door level.

• SKU plans - Here the merchants provide the designers with clear SKU targets for the season. This is typically a targeted number of styles by product classification, but some companies will plan the number of style colors as well.  But even more importantly, the merchants recognize that the designers need to create more styles than will end up in the line so they allow for a published over-design percentage.  For example, if the merchants feel they need 10 different sweater styles in the line and allow for a 50% over-design, the design team will come up with 15 designs, of which 5 will not end up in the line.  This gives design more freedom to be creative but also allows for some healthy give and take between them and the merchants. 
• Design is a partner in the planning process - This is something you will see in many successful companies.  The designers are free to be creative but they also know at the end of the day, there is a business to be run.  Therefore, not only do they design based on SKU plans, but they also sit in on planning sessions, advise the merchants on design and fabric trends, and then watch how the incoming sales are tallying against the plan.  These designers are also cost conscious so they will shop for fabrics with specific price ranges in mind, so the merchants can hit the margin targets in their plans.   
• Pre-costing - Apparel companies are costing their products earlier in the process than ever before in order to determine if they can hit their overall margin targets.  These costs are calculated based on vendor quotes and the best approximation of the add-on costs at the time.  These costs are then updated in the Merchandise Plan and measured against the sales price to determine the expected margin.  Sales projections are then used to calculate a weighted average margin by division and category.  This gives these companies an excellent approximation of the margins before any production or fabric commitments are made.  And of course, the more information that is known about the product up front, the better the margins estimate will be.     
• Integrated systems - The above best practices can all be achieved without an integrated system but you will be missing a major opportunity without one.  If your Merchandise Planning application is integrated with your PLM/PDM system, everyone in the pre-production process can march to the same drummer.  How many times have you attended a meeting where you hear "I thought that style was dropped" or "I didn't know that color was in the line"?  An integrated system means that the master information such as styles, colors, fabrics, costs, and pricing is kept in sync at all times and everyone has the same information or to use a very overused term, "there is one version of the truth".  An integrated system allows design, merchandising, tech design, and production to work in their own modules or views but keep up to date with what is in the line.  This integrated system should also enable you to define who can set the plan metrics and who can add key information such as styles so that you can maintain control throughout the process and hopefully exceed your plans.

How Can Singletree help?

Singletree Technologies has an application called Line Plan that can help you use industry best practices and achieve your company goals.  It has been successfully implemented at a variety of world class organizations with very different processes but similar goals.  Line Plan is template driven and can be completely configured to your process or it can help you adopt a better one.  Our integration framework allows us to push or pull data to keep everything in sync with your other systems.  There are many PLM's that have an integrated merchandise planning module but they lack the configurability to map to your process and the ability to integrate with other systems.