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Harry Hardwick
Supply Chain Consultant
“Variety’s the spice of life,” they say. And in the material world, we find ourselves, trying to satisfy every whim and wish of your customer seems like a sound assortment planning strategy.
Everyone loves a choice.
Offering that choice means you’ll always have custom.
How much ice cream do you think a shop would sell if they only stocked vanilla? No disrespect to vanilla by the way. That flavour does a lot of unnoticed heavy lifting.
But you can make the same point about your approach to assortment planning. How do you think your sales numbers would look if you only offered one product?
If you sell apparel, but only had one shirt, in medium, in black.
Or sold furniture and stocked just one cabinet, strictly for drinks, in pine.
Your sales potential would be capped, to say the least!
Equally, you can’t offer the world.
And you shouldn’t assume the sky’s the limit with your product assortment. Just as an ice cream parlour wouldn’t stock every flavour known to man, you can’t stock every little thing your customer might want.
Even if you’re Tesco. Do you think their purchasing department says yes to every pitch?
It’s a powerful word.
Use it correctly and it can make a huge difference to your business. The trouble is, many don’t know how to wield it, and even worse, when to.
And so seemingly small decisions like “Hey, should we buy a few tubs of rum n’ raisin? Someone just asked for it…” might get given the go-ahead, because they’re easy yeses to give.
Before long though, you’ve got 35 different flavours, with 30 tubs of each, all needing freezer space, despite the fact you only sell 3 regularly.
But here’s the problem.
Whether you’re Ben and Jerry, or sell sherry to ferries, the issue with large assortments is the huge amounts of money, inflated man-hours and increased stress of keeping things in check.
Reading this guide would be the perfect place to start. And from there?
Well, there’s a helpful assortment planning download at the end of this article to keep you on the straight and narrow.
What’s your business strategy for product assortment decisions? And if you don’t have one, why don’t you?
There’s no chance of you making good choices without a clear strategy. And merely weighing up a product when you have the chance to stock it won’t cut the mustard.
That’s not an assortment strategy. It’s a reactive scramble.
Your entire approach to assortment planning must support your wider business ambitions. For example:
All options are valid. But you can’t pick them all.
Your answers to the questions above can help shape the size, scale & depth of your product assortment. And obviously the wider business strategy along with it.
A good product assortment strategy is like a good joke
It’s all about timing. And delivery’s the most important part.
But here’s the thing. Just like you can’t tell a joke everyone will like, you can’t be all things to all people. And there are some people, namely your top customers, who are worth pleasing, even if it displeases others.
As we’ve seen in the last few years, things can change quickly.
Therefore, your assortment strategy must keep up with your business.
Every month, your assortment strategy should be assessed to see if it still meets the demand of not only your customers but your bank balance.
Where do you draw the line on your product assortment?
Everyone has restrictions. And so does every business. Working out what yours are, will make your assortment planning decisions a lot easier.
Due to the simple fact, that you don’t have unlimited warehouse space, you’ll be restricted to a maximum number of items you can stock at any one time.
Your SKU count can’t grow infinitely and there’s always a point where a line in the sand must be drawn.
But limiting your products per category will ensure focus and prevent stock cannibalisation. That is, a new product is being introduced which limits the sale of an existing item. Like the drip who runs the ice cream shop above.
When it comes to assortment planning, it’s absolutely imperative to have a clear set of rules for which items should be stocked and which shouldn’t be. And when these introductions should take place.
To make logical & informed stocking decisions, you need a clear set of guidelines.
And you need a rulebook.
What’s the strategic importance of the product to your overall goals? Is it crucial? Or is it an add-on which might create a negative outcome at the end of the year?
What is the risk & impacts of stock-outs? If you sell to trade, the importance of getting your stock might be woven into the success of their business too.
Can they wait? And if so, how long will they be willing to wait until they continuously shop elsewhere?
How quickly can your supplier respond to changes in demand?
By reverse-engineering your answers to these questions, you can create a rulebook by which to measure stocking decisions.
At some point, your products need phasing out. Just like you’ll need to introduce new items, so current ones will die in relevance. There are a hundred reasons why it might happen. But it will happen. And you need a plan in place.
For example, when products are no longer profitable, are they immediately phased out. Leaving detection of a decline to chance could mean you’re left with obsolete stock.
Likewise, is there a clear process for phasing items in & out of the assortment?
There’s always lots of excitement around a new product launch.
But, when it comes to dropping a product line, it can be viewed as a failure. Questions are asked from above and no one wants to claim responsibility.
It’s as easy to get carried away and launch a rum n raisin flavour no one wants, as it is to bury your head in the sand when it’s time to retire raspberry ripple.
But it’s far more complicated for most than running a two-person ice cream parlour. You’ve got Sales, Marketing, Management, Ops, Finance and C-suite to please and they’ve all got different questions and motives.
A solid process removes emotion and makes sure the key criteria fit the business as a whole.
Who’s in charge here?
It’s easy to pass the buck on difficult assortment planning decisions.
With every department mentioned above, it’s a pressurised job taking charge of the product assortment. So, the contention over who takes the reins runs on and on.
If it’s not clear who makes the final decision, it won’t get made. So, make the choice carefully.
They should listen to every stakeholder and have a clear, emotionless, strategic route to deciding on the final decision.
Ultimately, this person needs to ‘own’ the assortment and ensure it meets customer expectations and the goals of the business. After all, they’re the two most important cogs in the wheel.
There are a lot of complications when launching a new product which could make life very difficult.
How confident are you that demand for the item will materialise? Can your supplier ramp up supply if it takes off?
What supply issues might affect your ability to continue service after the initial sales are made? And what longevity does this product have in the market
Product life cycles are sometimes impossible to predict. Especially if your forecasting model looks far into the future. How likely is it you can predict the lifecycle of every item you stock?
Life cycles evolve. And so must your assortment strategy remain relevant.
A new product requires a different approach to one at the end of its lifecycle.
Therefore, the ability to track & respond to these shifts is a prerequisite for success.
Top Tip: Its vital you adopt the right strategy for each stage of the product lifecycle. To optimise your approach, check out our complete guide here!
Even the best-laid plans sometimes go wrong.
Like every other part of your business, change and adaptation is a shrewd strategy.
Are important assortment decisions discussed on a monthly basis and are they followed up? Are these regular meetings? And what process is in place to action any analysis?
Even with the most robust process in place, there should always be room for innovation. But true innovation only comes from great ideas.
And great ideas only come if you allow people to offer them. Give them the courage to have their thoughts listened to. And the freedom to challenge decisions they might not agree with.
Spotting success is also important. And celebrating those who create it.
This is where the ‘product review’ aspect of S&OP really comes into its own. And how you can make sure your product assortment is fit for purpose both now, and well into the future.
For more reading, and a detailed analysis of your assortment strategy, download our comprehensive free checklist below.
