At this pivotal time, one of the most powerful factors influencing how the new financial year will start, is how this financial year is going to end.
The closing stock of one time period becomes the opening stock of the next.
This means that how we finish up FY19 is vitally important to how we start FY20;
and how we finish FY19 is directly linked to what we do right now.
Time is of the essence to understand:
What is the profile of your stock?
What is the health of your stock?
What are the levels of your stock?
What are the risk and opportunities inherent in your stock?
And I don’t just mean what your stock looks like right NOW, I mean that you should have a very clear view (right now) of what your stock WILL look like, as at June 30th …
This is the time continuum in which Planners must function; simultaneously operating in the reality of today, pulling levers to influence an anticipated future state, and navigating the ever changing path between now and then.
This is a critical Merchandise Planning concept
“The end is the beginning”
We are already writing the reality of the next 6 to 9 months, and we have the ability to influence, even design, that reality.
What would you design? Leaner stock levels to drive an equivalent sales outcome? A more profitable result through better margin management? What are your pain points (pain habits) that sneak up on you year after year, and why?
The solution requires taking a pre-emptive and long range view – understanding that stock flow from one period into the next is continuous; understanding which metrics to focus on when, and how to impact them.
The way to assess and influence this is through:
the visibility created by a Merchandise Plan
leveraging the Merchandise Planning framework, and
understanding, monitoring and driving the right KPIs
I’m often asked which metrics or KPIs are most important, and the truth is that I don’t believe in looking at anything in isolation.
Assuming a robust sales and margin plan, the stock related metrics in a Merchandise Plan should give you a really good idea of what lies ahead -
Closing stock positions, referenced against targets and previous relevant time periods
Forward Weeks of Cover, with meaningful comparison points and understanding of business context
Full price and aged stock mixes
Seasonal vs core line mixes
Closing stock margins, and
These are a few of my favourite things …. in particular the last two.
Taken together, I have found Closing Stock Margins and Freshness % to be extremely reliable in predicting the ability to achieve forecast margin levels.
Capture actual performance into the Merchandise Plan and compare to what you set out to achieve.
What are the numbers telling you now?
Planning, by definition, is only a “plan”. The end point is moving, which means the starting point is moving, so we must keep revisiting and realigning.
Deviations from the plan, don’t necessarily mean it can’t be achieved; perhaps just not in the way you originally thought. That’s where determination, collaboration and innovation, come into play.
Knee jerk reactions too close to EOFY - a singular focus on a particular number in isolation of others, last minute attempts to clean stock and close with an acceptable figure on the books - can be costly, and sadly, repetitive.
It takes both expertise and time to alter the profile and health of stock, and maintain margin in the process.
However once you know where you are, and where you are heading, you are in a stronger position to course correct and drive the required outcome.
Back in my university days, we had our own version of “The 5 P’s”, which wraps up the concept quite simply: “Prior Planning Prevents Poor Performance” (our uni version was slightly less suitable for a professional platform and included an extra P to drive home the message of just how bad that performance might be).
In other words …
“The unlock lies in timing”
Despite my insistence on starting the process early, I’ll re-emphasise the importance of staying nimble.
Given the connected and continuous nature of stock management, it is clear that this is anything but a “set and forget” situation. Every decision, every change, whether planned or spontaneous, is impacting the future position.
Retail is dynamic, and the Plan should be too
Now you know why, and you know how -
Are you setting yourself up for a head start or a false start in FY20?