Assortments for All Seasons

With more than 850 stores operating under six banners, Reitmans' biggest challenge was developing and managing new season assortments and balancing them to merchandising financial plans. The company's planning and allocation directors had reached the limit of the retailer's existing in-house Excel-based tools for doing pre-season assortment planning, says Diane Randolph, director of merchandising business processes.

Reitmans started out as one general store in Montreal, Quebec, and has become Canada's largest women's specialty retailer, operating under six banners, including Reitmans, Smart Set, RW & CO., Penningtons, Thyme Maternity and Addition-Elle.

"Our merchants had a fairly evolved, sophisticated process, but were held back by the limits of the Excel-based system," explains Randolph. To allow the company to move ahead, the Reitmans team created a list of requirements and conducted a search for a new merchandising system. The group chose ProfitLogic's Assortment Execution package. "It was exactly in line with our thinking and methodology," says Randolph.

Reitmans' primary goal for the new system is to better manage assortments at the size level down to the individual store base across a wide range of outlets. "The company has close to 900 stores, ranging from a banner with 32 stores to one with more than 350," says Randolph. With the old system, "It was impossible to understand the difference in the consumer profile in all of our markets across Canada with the tools we had available."

Analyzing Historical Data

During the validation process, ProfitLogic gathered some of the retailer's merchandising data and simulated the analytics that would be performed on an ongoing basis.

"The tool examined our data and determined where we had missed opportunities because of size or pricing decisions," explains Randolph. "We compared these analytics against the merchants' predictions. In most cases the merchants had identified the opportunities, but had underestimated the extent of them €” that validated the tool and its approach."

Following a successful validation phase, Reitmans currently is in the process of defining exact configurations of the application. "None of the people who worked with the system during the decision-making process had any negative surprises. In fact, they have seen even more benefits in terms of really simplifying the merchandising process."

Reitmans will begin an 18-month rollout in early 2006. The implementation process will include integrating ProfitLogic's Assortment Execution suite (including Assortment Optimization, Allocation Optimization, Size Profiling, Optimized Pre-Pack Configuration and Optimized History) with the retailer's customized Retek merchandising system. Size Profiling will enable the retailer to match store size need to customer demand, Optimized Pre-Pack Configuration will ensure the right mix of sizes are included in each pre-pack, and Optimized History will help identify and correct for missed opportunities from past markdowns, store transfers and stockouts.

Selecting the Right Promotions

One key element of the system is assistance with promotion planning. "Within the system, there is a high degree of focus on planning of promotions, and collaboration between merchants, planners, marketing and store operations to help select the right promotions at the right time," says Randolph. "Selecting the right promotions at the right time will yield the maximum results."

Following implementation of the merchandising system, the company's next priority is to focus on supply chain systems that will ensure efficient inventory management from vendor to store. "This is the first step in deciding the products and quantities to buy," says Randolph. "Then we want to make sure we have the optimal level of automation throughout the supply chain."

Automation will enable the retailer to link the planned quantities to the agents and vendors and manage the flow of those orders and goods back into the facility, essentially executing the plan.

"A plan is great, but if you can't execute successfully, the plan has no value," says Randolph. "The ProfitLogic system tells us what the most optimal flow of goods, into the DC and out to stores is, so we want to make sure that when we place orders and commitments, we're respecting those delivery dates."

Currently, there is not a distinct link between or enforcement of the planning of the receipt flow, according to Randolph. "Because of supply chain constraints, we may not be able to get the delivery of an item the way it was originally planned. The system will enable us to look at the profitability and sales ramifications if we were to take a delivery three weeks later than planned. This information allows us to see right away if it's something we want to proceed with, rather than relying on our intuition."

Although adopting and using the automated system is a cultural change for Reitmans employees, Randolph believes the enhanced functionality will bring people on board. "Trusting a forecast that you haven't worked out with a calculator or spreadsheet yourself, definitely requires a different mindset," says Randolph. "But I think we will have good acceptance €” the senior leaders have embraced it quickly. A change is a change, but the system is quite easy to use, so we anticipate a smooth transition."