assortment optimization for omni retail
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ASSORTMENT OPTIMIZATION FOR OMNI RETAIL
Stop Second-Guessing Assortment. Our Science Works.Assortment planning has long been considered more art than science. While experience, judgment, and anticipation can be key aspects of assortment planning, our science enhances the state of the art.
www.4rsystems.com
TOO GOOD TO BE TRUE?OUR OPTIMIZER BALANCES PHYSICAL CONSTRAINTS WITH PRESENTATION MINIMUMS. RESULTS? BETTER CUSTOMER EXPERIENCE AND INCREASED PROFIT.
PROFIT OPTIMIZED ASSORTMENT PLANNING4R Assortment Optimization enables you to model, optimize, deploy and monitor the performance of your assortment, at any level and frequency you choose. The solution provides three key outputs to drive your assortment planning:
1. Attribute-based demand model for each location, including substitution patterns
2. Optimal assortments for each location, including projected revenue and margin
3. Benefit of increasing degree of localization
4R not only uses machine learning to uncover correlations between product attributes and sales. It also models the underlying system that drives consumer demand for your products. We refer to this as systems analytics. This enables you to make better decisions on what products to sell in each of your locations.
Assortment Optimized for Your BusinessThe algorithms used in 4R Assortment Optimization were developed by 4R co-founder Dr. Marshall Fisher of the Wharton Business School. He and his team employed these algorithms in a variety of research projects for leading retailers. The algorithms provided results so compelling we now incorporate them into a complete assortment optimization solution for retail.
The algorithms have never failed to improve assortment management, and more importantly, increase profit. Optimal assortments can be adjusted to fit your business. When external data is available, we use inputs such as economic and demographic statistics, plus physical constraints such as space limitations and presentation minimums.
4R Assortment Optimization improves your merchandise planning, enabling categories to be monitored year round and reviewed on demand. Our optimizer lets you control the aggressiveness of the forecast for new SKUs so you can feel comfortable with the projected results!
Knowing What Your Customers WantOptimizing your assortment is a two step process. The first step is to build a model of true demand for SKUs in a category based on product attributes. Our modeler uses predictive analytics to help you construct the consumer decision tree that best aligns with recent sales history. It also calculates demand transference—what happens when a shopper’s first choice is not available? The result is an unbiased, quantified picture of the demand for different types of products in each location.
The second step is to determine the optimal assortment for each location based on the demand model. Once the sales potential for various combinations of attributes is calculated, the solution can determine the product mix with the best sales results for each location. Advanced analytics are employed to cluster stores for operational efficiency and maximum business results. You can even determine the level of localization that best fits your needs.
4R CLIENTS REALIZE 1% TO 3% PROFIT INCREASE BY PLACING THE RIGHT PRODUCTS AT THE RIGHT PLACE AT THE RIGHT TIME.
Real Benefits4R’s Assortment Optimization produces measurable results for retailers. In one example, sales for a $140m category were projected to grow to $182m, a 30% increase, by deploying optimal assortments to their stores. This translated to a nearly $9m profit increase. Another client saw store revenues increase 3% to 6% by implementing a small percentage of the changed recommended by 4R.
Demand Modeling4R Assortment Optimization finds the product attributes that drive sales. It does this by understanding the underlying system dynamics of demand for those products. This gives you the information you need to drop the SKUs that aren’t performing, then introduce SKUs that will be winners. It can also tell you how much benefit those SKUs will contribute. By constantly measuring performance of your assortments, 4R collects feedback that helps keep the demand models in tune with consumer demand preferences.
LocalizationWhat is the right level of localization? How many choices are too many? With 4R Assortment Optimization, you can find the answers to those questions that fit your business. 4R quantifies the benefits additional assortment clusters so you never waste resources on unprofitable localization.
Demand TransferenceWhat happens when a customer’s first choice is unavailable? With 4R Assortment Optimization, you can know exactly how often they substitute, and how often they don’t purchase anything. This knowledge can enable you to reduce the assortment breadth or replace some SKUs with more profitable ones without losing sales.
OperationalizationKnowing what products you should sell is half the battle. Implementing the changes is the rest of the story. 4R Assortment Optimization has a work flow to manage ongoing assortment planning activities. It also provides tools to pilot, deploy, and monitor the performance of assortment changes.
CustomizationAssortment planning has to deal with real world constraints. 4R supports that by enabling users to customize assortments at the cluster and store levels. Whether it is reducing the number of SKUs offered, retaining a slow-moving SKU purchased by loyal customers, or adding a SKU that is commonly found in large purchases, you can customize 4R's recommended assortments to meet your business needs.
ASSORTMENT PLANNING IS AN ONGOING EFFORTTraditional assortment planning is done on a project basis and on a set schedule. 4R's solution is designed to increase profit because its processing power enables you to monitor performance of your categories year round, and prioritize resets accordingly. This feedback loop provides valuable learning that improves the accuracy of your modeling and forecasting over time.
Once the demand model is constructed and an optimal assortment defined, 4R monitors performance and will alert you if results are below a set threshold. You can set your own schedule for reviewing the model and updating the optimal assortment to match your supply chain logistics. This proactive approach ensures performance is constantly maximized.
4R Assortment Optimization can simplify implementation of the recommended changes to your assortments. Our tools help with piloting these changes in test and control stores, deploying changes to stores, and automatically detecting when the new assortments have been implemented. The result is a solution that helps you keep your assortment tuned for maximum performance.
www.4rsystems.com
4R’s inventory as an investment approach is designed to maximize the profit opportunity of your number one asset: inventory!
4R Systems801 Cassatt Road, Suite 202 Berwyn, PA 19312 USA
+1 610-644-1234
KEYWORDSAssortment planning,
merchandising, machine learning, localization, demand modeling
Replenishment Assortment
PromotionsMarkdownAllocation
Multi-Echelon Planning
Seasonal Allocation &
Buying
eCommerce & Catalogue
Cloud-Based
Profit Optimized Inventory
Wholesale/Stores
Stores & DC
Hub & Spoke Models
Value-Add Analytics
Machine Learning
Full Omni Retail
Capability
Forecast & Demand Planning