January 31, 2008, 12:00 AM

Planning Ahead

Planogram applications help chain retailers effectively disseminate merchandising and other planning information to every store.

Many shoppers love to meander through bookstores, seeking out the physically relaxing and mentally stimulating atmosphere found browsing shelves of the latest hardcover titles, paperback bargains, DVDs and CDs. It’s no wonder many bookstores now double as reading lounges and cafes.

But behind the peaceful and engaging presentations of thoughts on paper and sounds on discs lies a mad scramble to update these offerings weekly or even more frequently. “Best-sellers change every week,” says Michael Steele, director of store operations at Borders Group Inc., which operates more than 1,100 stores worldwide.

That means thousands of changes to store content on a nearly constant basis. Merchandise buyers and category managers at headquarters dive into market trends and new product data and, with input from suppliers, combine it with expected regional and local demand at groups of stores and individual locations. They take all that information and plan product assortments and ways to promote them across the Borders chain.

Depending on what’s hot or at least expected to be hot-a Grammy-winning CD or the latest Stephen King novel, for example-merchandise managers at Borders will distribute plans for promoting and displaying products in each store.

But things don’t always go as planned. All chain retailers face what can be endless hurdles to store operating plans. Store employees get incorrect or insufficient information, promotional materials don’t arrive on time, prices are marked incorrectly, or a store’s product display areas aren’t spacious enough to hold planned promotions.

Executing planograms

To address these challenges, Borders and other retailers are deploying web-enabled execution management systems for distributing and managing planograms-graphical layouts of store selling space that show exactly how products are to be displayed on shelves-along with other store operations plans and policies.

And thanks to web technology, planograms have become universally accessible and more user-friendly, with graphical user interfaces that let merchandise managers at suppliers and retailers drag and drop product images into shelf outlines to illustrate how products should appear in stores. Borders and other retailers distribute planograms to stores as part of online execution management systems designed to ensure that store employees execute planograms as well as other store operating procedures as planned by headquarters.

The store-planning technology market consists of web-enabled execution management systems from companies like RedPrairie Corp. and Reflexis Inc., which typically run within suites of workforce management applications that include recruiting, labor scheduling and time-and-attendance recordkeeping. There also are companies specializing in store planograms, including Shelf Logic Software Products and Galleria Retail Technology Solutions Ltd. And there are companies offering planogram applications as part of broader enterprise suites, including the Marketmax division of SAS Institute Inc., DemandTec Inc. and JDA Software Group Inc.

These systems are designed to help retailers avoid failure to carry out corporate merchandising and promotional plans, failure that can result in lost sales and extra operating costs as well as damage to a retailer’s brand, experts say.

“If you don’t have accurate, clear plans distributed to stores you waste human resources and adversely impact the customer,” says Paula Rosenblum, managing director at RSR Research LLC and a former retail executive. “You really want to know if people responsible for store tasks are executing them the way management wants them done.”

Many retail chains, however, lack a single, effective method for getting headquarters’ instructions to stores and confirming compliance. When an August-September 2007 survey by RSR Research asked 160 retailers to name the three top barriers to improving task management, the most frequently mentioned problem, cited by 55% of respondents, blamed multiple directives to stores coming from “too many people using too many methods.”

Managing tasks

An increasing number of retailers are addressing this problem with web-enabled execution management systems, RSR says. 38% of retailers in the 2007 survey said they used execution management systems, up from 31.6% in 2006.

The planning process starts with store planograms-the blueprints for how to arrange products and promotions that are issued by suppliers, tweaked by retail managers and implemented by store personnel. Headquarters has traditionally distributed planograms on paper or computer discs, which could get misplaced. Worse yet, multiple versions of these planograms could leave employees with outdated or inaccurate copies. Moreover, planograms often don’t account for the actual merchandising display space, labor availability or customer demand unique to each store.

Although many chains try to build nearly identical store layouts, there often are local discrepancies that go unnoticed by corporate merchandise planners. “A store might have a building support column taking up shelf space, making it impossible to display products the way headquarters wants,” says Mark Shapiro, CEO of Gladson Interactive, a company that manages product data and imaging for store planograms on behalf of retailers and manufacturers.

Borders, for example, may have some stores with larger cafes, forcing a rearrangement of product display areas. And many stores and groups of stores cater to different consumer groups, calling for particular assortments of book genres and titles that may not be reflected in initial planograms.

Web-fortified planograms

Now, however, store planograms are becoming more effective as part of broader store execution management systems. These systems incorporate web and other technologies that allocate shelf or floor space for each product and connect with applications that assign tasks to store employees related to displaying products. In addition, integrating these systems with labor management and inventory management applications enables retailers to ensure product display needs are supported by available staff and inventory. Distribution in a web-enabled, integrated environment makes planograms more effective, experts say.

The combined technology creates planograms that determine product depth and location by store based on available shelf space along with objectives such as expected profit margins and inventory turns of each product, with the fastest-moving, highest margin products usually getting the most space. But the ability of local store managers to inject their knowledge of local market demand and current store layouts also is crucial. Universal web access to planograms enables chains to easily include and leverage local management expertise, experts say. “Local retailers can take a planogram and make it right for their stores,” says Paul Waldron, Gladson’s executive vice president.

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