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Merchandise Planning & Management – II

Issues on hand

While planning inventory, this accessory brand wanted to have a methodical approach to planning stock level in an SKU so as to maximize its chances of selling at full price. Object was to avoid heavy discounts at the end of three months of shelf life.


A number of factors were considered in planning production lot size for the SKU, viz. points of sale where it would be allocated, estimated monthly consumption and lead time it took to reproduce it. All of these with an eye on total stock holding in months cover in relation to the sales volume.


No of SKUs in each product category & sub class were divided successively by groupings of (a) facings allowed on the retail shelf of points of sale (b) sale potential of points of sale. Extensive sales analysis was carried out to decipher average sale volume per SKU across the grouping of point of sale. It was correlated to the facings the points of sale allowed.

A matrix was thus formed that showed the allocation of SKU as well as the volume it could sell in that SKU over a period.



Differing production lot sizes for an SKU emerged as a result as a function of its allocation to points of sale and saleability of these points of sale. Fast movers showed much larger quantity than before and quantity in SKUs for which demand was only in large capacity display counters were asking for much less than usually made. Without hurting the overall quantity demand in a month, the stock mix across the SKUs was re-arranged as a result.