Flexible Space Planning

By  Lorna Pappas — July 27, 2006

 

 

Successful retailers are automating supply chain, inventory, CRM and other systems, but many overlook space planning and whether or not their selling areas are maximized within every store location. The newest generation of space planning technology takes retailers beyond generic planograms into space analytics and forecasting, with variations of centralized and local control.

 

Todays merchants need to get scientific and automated about the use of space, and the fact that many retailers are not is both a problem and an opportunity, asserts Hung LeHong, retail research analyst for Gartner.

 

LeHong points to an emerging trend toward a hybrid of centralized (headquarters) and decentralized (store level) space planning to better address local needs. He says years ago when retailers moved decentralized space planning into headquarters for better control, cookie cutter presentations resulted, so merchants now are moving to a combination of both central and local control. New technologies provide planners with more analytics and predictive decision support tools that help them create these more localized space planning solutions.

 

While some space planning systems do not allow store managers to change space and assortments, newer systems allow a hybrid of control, providing a centralized planning capability that also allows some decision making by store managers on the local level, notes LeHong. For example, store managers may be permitted to change space by picking items from a pre-selected core list of assortments. Our prediction is that fully centralized retailers will start to loosen up by providing hybrid space planning capabilities. We see several IT strategies responding to this trend, he states.

 

Focusing on Unique Needs

 

Food Lion is at the forefront of both space planning and hybrid control, using Gallerias Automated Micro Assortment Planner and Automated Micro Space Planner solutions to deliver customer centric assortments to its more than 1,200 Food Lion, Bottom Dollar and Bloom stores in 11 Southeast and Mid-Atlantic states.

 

Micro Assortment Planner enables Food Lion to create product assortments at the sub-category level and tailor them to customer demands at a particular store or within a store cluster, while Micro Space Planner calculates the optimal solution base on a set of predetermined criteria and automatically produces cluster or store-specific planograms every fours seconds.

 

Utilizing a single approach in more than 1,200 stores does not provide the ability to remain competitive in todays market, states Dennis Post, vice president of solutions delivery for Food Lion LLC. Our strategy is to focus on the unique needs of our customers in each of these stores, while maintaining a prudent eye on our operating costs. We have created new procedures and designed new system processes to support multiple strategies with our same core team.

 

We are designing these processes and systems to allow us to keep central visibility and control over our assortments but also allow the flexibility to reflect local thinking, Post adds. It is always a tough balancing act to decide how much store level versus centralized control will result in the optimal assortment. Our goal is to have a system that allows us to test, validate and refine our processes over time and tailor them in a way that truly gives us the best customer-based assortment possible.

 

The Galleria space planning solution will roll out at Food Lion in the summer of 2006. Combined with IRIs Apollo space management tool, the strategy is expected to deliver increased sales, increased items per basket and increased customer count, reports Post.

 

Planning Store by Store

 

Bi-Lo, a $4 billion grocery retailer operating 426 Bi-Lo stores and recently acquired Brunos stores primarily in the Southeast, uses JDAs Intactix Space and Floor Planning module to customize its planograms by cluster and format, and create individual shelf profiles for the five different shelving types in the chain.

 

Especially with the new acquisition, we deal in significantly varied market areas with different merchandising needs, and must identify planogams by store area demographics, which we address with the JDA system, reports Tim Cano, director of category management analysis and market research for Bi-Lo. We couldnt deliver shelf assortments tailored toward more specific local customer demand without an efficient space layout and store planning system. The JDA Intactix approach uses 32-bit architecture and a 3D graphics engine, allowing Bi-Lo to better visualize space layouts, merchandising displays and fixturing. Multiple planograms can be managed under one project file, making large planogramming projects easier to maintain and keep consistent and accurate.

 

Though space planning is centralized at Bi-Lo, the chain has a hybrid approach that gives some control to store managers. Our space management efforts are sensitive to local store operations and customers, notes Cano. Centralized category managers continually receive input about local needs from the sales teams, and can quickly approve or disapprove variations in item selections and layout based on local opportunities, either for a cluster of stores or individual location.

 

JDAs Intactix Space and Floor Planning tool also helped Statoil Detaljhandel AB, the Sweden-based retail subsidiary of $50.3 billion Statoil ASA, to improve profits in the soft drinks category by an average of seven percent and increase sales between six and 15 percent in its new concept stores. In addition, weve reduced inventory by removing poor-selling lines and decreased perishable spoilage with faster product turnaround through more efficient shelf planning and configuration, reports Johan Backman, concept manager for Statoil Detaljhadel, which operates about 600 service station stores nationwide.

 

Statoil Detaljhadels new concept stores are built around a convenience space strategy whereby products normally consumed or used together are displayed together on shelves, resulting in co-categories that are split in the store depending on occasions when they are used. By utilizing space management software to measure the assortment (by category, segment and package, at the SKU level) against POS data, weve created smarter shelves that are more uniform and appealing, explains Backman. Weve also aligned convenience with an enticing assortment and made sure that we are giving appropriate space to what makes us money.

 

The space and assortment planning is centralized, but stores can change a certain segment of assortments in the centralized planograms to meet local needs.

 

One Category at a Time

 

Backmans advice to other retailers approaching space planning is to start with one important category in the store, get it implemented, then test it before incorporating your whole assortment. At Bi-Lo, execution is key. Headdquarters can write the most brilliant planogram but the in-store execution team must implement it correctly to make the plan worth its investment, Cano notes.

 

Post, at Food Lion, advises retailers to look for specialized software, whether its grocery retail, mass merchandiser or manufacturer. Because of the specialized needs within most industries, software designed to meet generalized needs will normally fall short of successfully impacting any industrys bottom line, he says. Excellence in a specific area will benefit the software vendor, the client and ultimately the consumer.

 

To start optimizing space, retailers must first have a detailed understanding of the space they currently have, adds LeHong. To do so, they must maintain a detailed inventory of each fixture, shelf, rack and pegboard in every store. This can be a daunting task, but we believe it is worthwhile for retailers to keep an accurate inventory of space to gain the most from this valuable asset. Only then can retailers use advanced software tools that combine space information with inventory data to better plan space usage, he notes.

 

While balancing stock and shelf facings isnt a new concept, retailers need to look more closely at advanced space planning tools that help them maximize the selling area in every store, and as with supply chain, inventory and CRM software allow the decision support to secure the correct balance.

 

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