A range matrix - stop the chaos in assortment management!
Fortunately, the chaotic approach to the formation of the assortment is becoming less common. In making decisions, the category manager relies on specialized tools for analyzing and managing the assortment. They work with general data, but none of them gives a complete picture of what is happening with the goods. The real salvation is a properly composed assortment matrix. Let's figure out how to compose it, what solution allows you to keep the data up to date, and establish operational management of the assortment matrix.
What is an assortment matrix?
Imagine the situation: the central office (CO) decided to sell headphones. I did the work on forecasting the demand for products, formed and sent an order to the supplier, worked out the logistics, and distributed it to the stores. But whether the goods are presented in the store and what quantity, they can track only upon the fact of sales. How can a category manager plan something in such chaos?
The assortment matrix helps to streamline processes and establish management with high accuracy and control. This is an ordered set of information about all SKUs in the network: sold, planned for input/output, and excluded from the assortment. The tool displays data in the "product-shop" link. As a rule, this data array contains a list of SKUs and stores/clusters. It can be a document or a spreadsheet implemented using different software.
The assortment matrix gives the category manager an understanding of how many and what products are already sold in the store. Based on such data, the CM can analyze and decide whether to introduce new SKUs or, on the contrary, to withdraw them, as well as perform other assortment management actions. A correctly compiled assortment matrix gives a clear list of goods in the context of the outlet, which should be ordered, the logistics chain should be brought, and the store should sell.
Retailers create a product matrix of stores and spend considerable resources on working with it. But how to turn it into an effective tool for retail? Read on.
We invite you to check the business processes of category management: download the MCM checklist and see where and what can be improved.
The secret of forming an assortment matrix
Proper formation and maintenance of the relevance of the assortment matrix enable the category manager to conveniently and quickly work with information and make decisions.
The simplest example of a grocery store assortment matrix displays products linked to an outlet with a yes/no status. Simply put, it gives an understanding of which SKUs are sold or not sold at a particular outlet. This option is applicable when managing the assortment of a dozen, maybe up to 20 stores.
When the number of outlets in the network approaches a hundred, it becomes very difficult and labor-intensive to efficiently maintain an assortment for each store. You need to think about grouping stores into groups. By what principle this is done is determined by the network itself. For example, these can be groups by size: small, medium, hypermarkets, and supermarkets. And already for these groups to assign an assortment.
But in order not to miss sales and cover the needs of network buyers, it is necessary to carry out clustering. This process will help identify groups/clusters of stores that are similar in demand within a product category. For example, you can track how beer is sold in retail outlets and identify sales clusters: a local drink, inexpensive beer in large liters, and imported beer. We get 3 clusters consisting of different stores. Then you can consider milk sales and highlight your clusters, and so on. We get the formation of an assortment matrix for the category of goods.
An example of an assortment matrix is shown on the screen. Within each category, there are several assortment options, and several stores are attached to each assortment option. It turns out that the assortment of the store is built from the point of view of the category when the representation of the SKU on the shelf is selected taking into account the demand for these products in this particular store.
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Building an assortment matrix
The correct construction of the assortment matrix and keeping the data up to date gives the category manager an understanding of what is happening with a certain SKU, that is, it allows you to track the product life cycle.
For convenience, the following statuses can be assigned in the assortment matrix:
- new product - in the case when a new SKU is introduced, it is not in stock in stores and warehouses of the network. Such an SKU must-have status. At the same time, the category manager needs to understand how many goods are ordered and are on the way;
- active – sold online, available at the DC (distribution center), available in stock at the store and open for sale;
- a product for withdrawal is assigned if the distribution network, after analyzing sales, turnover, and margins of the SKU, has decided to complete sales of it;
- temporarily blocked – the product is in stock and the network does not plan to withdraw it. But the product is not in the store balance. The reason there may be problems with the delivery or some kind of delay. Such SKU will be closed for purchase, but the available balances will be sold;
- withdrawn – a product that we plan to withdraw, but it is still on the balance in the store;
- out of circulation – it is not in the balance either in the store or at the distribution center, the product is not ordered and is closed for sale.
This is an example of a set of statuses that an assortment matrix should contain. In Excel, building a commodity matrix is possible - the question is labor costs. It is not difficult to create it in a spreadsheet editor, but keeping the information and product statuses up to date is resource-intensive and impractical. Using the table editor, you can create a primitive version, where two or three statuses are displayed, for example, a product is on or off. Such information about the products is not enough for the category manager to make the right decisions quickly.
How to establish effective management of the assortment matrix?
To decide to add or withdraw a product, a category manager needs to look at a huge amount of information: quotas, available shelf space, stock in stores, SKU sales, revenue, and more. Usually, all this information is stored in different systems. If there is no solution for the operational management of the assortment matrix, then the category manager has to perform many routine actions and spend numerous working hours on this.
For example, to assess the feasibility of introducing a product, it is necessary to take into account the rules for the formation of an assortment matrix and evaluate a considerable amount of data:
- available space: information about the linear dimensions of the shelf, giving an understanding of how much space the product can take. If a retailer uses planogramming services, they provide complete information about the use of shelf space;
- predicted sales: the number of purchases that the target audience is likely to make over some time;
sales plan: what profit the network plans to receive from the sale of goods, how many pieces of this article need to be sold for this; - quotas: a quantitative norm, calculated based on an understanding of the need for a certain type of goods;
- planned delivery dates: if the supplier is local, then delivery times can be measured in days, but for imports, you need to take into account the time for logistics.
At the same time, for the withdrawal of the SKU, it is necessary to take into account:
- information about the balances in stores: if the product is being withdrawn, and it is in the balance for the month of sales, then there is no point in withdrawing it now, you need to launch another promo or action so that the residues are washed out faster;
- how it was sold: that is, you need to understand the dynamics of demand and the availability of goods on the shelf over some time. Perhaps it will be possible to identify the cause of low sales and decide on the appropriateness of its presence in the assortment;
- how to withdraw it: we sell it, write it off, return it to the supplier or the distribution center, transfer it to another outlet.
All this information should be at hand, easily accessible, and preferably in one window. For this, the C4R team has a special solution in its portfolio.
Solution for the operational management of the assortment matrix
The work of the C4R team is the implementation of IT solutions for automating retail business processes. Since 2015, the company has implemented 200+ projects of various sizes, among which there were many projects in the field of category management. Based on best-practice and their own experience, C4R specialists have developed software for the operational management of the assortment matrix.
As a result of the implementation of the system, you get a full amount of information, the whole picture of what is happening in the category, and complete management of the product group.
The solution supports integration with all business automation systems:
- provides communication with the central ERP system;
- transfers assortment data to planogram systems and from them receive information on the extent of SKU representation on the shelf;
- sends data to the auto-order system.
All data is in one source, and a simple and intuitive interface provides a visual representation. Allows you to quickly make decisions on working with the product and assortment: expanding or reducing the product range, rotating, understanding where the product is needed. As a result, saving time and labor employees costs.
For demo presentation of C4R solutions, services and products, write to our consultants at [email protected] or fill out the form below. We will gladly answer all your questions.
The author of the material is Polina Leonenko,
MCM Consultant Consulting for Retail