Top Down Bottom Up Interactive

These are three different types of inventory planning that retail business can engage in. The first is top down planning. In this scenario decisions are made at a high level and drilled down in to the planning process. The downside to this is that planning is driven based on management’™s expectations or even the desired profits needed to show stakeholders. Hopefully it would be guided in some measure on past performance. Forced increases or planned decreases are not necessarily driven by market conditions. Decisions are made at a high level where there may be significant distance between the decision maker and the customer.

The second option for planning is bottom up or planning that is dictated by how the customer votes with his/her purchases. This planning reacts to current and past customer demand and is more reflective of current market trends. The downside to this type of planning is that it can miss opportunities that the market has not yet seen. It omits the art side of the buy enabling merchants to take necessary risks to grow their business.

The third form of planning is interactive. It is a blend of top down and bottom up planning. Bottom up planning is at the core of this but it also allows for some guidance from management to make top down decisions. Management One™ believes in a “high tech” “high touch” approach to planning that more closely resembles interactive planning.

How interactive planning works at Management One™

The High Tech ‘“ High Touch approach to Inventory Planning

  • Bottom up planning is based on both short term and long term trends.
  • Analysis is based on opening up opportunities. Forecasting logic reacts to current trends and drives revenue forecasts to feed opportunities and starve problems.
  • Trained planners utilize national and regional trends to impact decision making.
  • Affiliates and clients feedback valuable information to planners to help maximize opportunities.
  • ‘What if’™ scenarios are developed for risk-taking to grow specific areas of the business.
  • Proper balance of inventory is achieved through an effective classification structure
  • Local events that are strong enough to influence the business are considered. For example the strength of a football schedule in a college town can have a dramatic impact on the plan.
  • Turn rates for clients are based on location, type of class, assortments, cash flow considerations, volume and profit potential.
  • Markdowns are considered as a healthy part of planning.
  • Gross Margin and Gross margin dollars are considered as part of a holistic approach to planning. Profit potential that exists in every store is carefully protected so that classes that are essential to the maintenance of the business are not sacrificed.
  • Inventory flow is based on peaking inventories at the right time and maintaining a fresh flow of inventory to ensure customer demand.
  • Flow and balance are key ingredients in growing sales and generating profitable cash flow.
  • Reporting that allows users to make decisions on inventory performance, cash flow planning and to develop meaningful merchandise strategies.
  • Sales forecasting that is dependable and allows management the ability to budget effectively.