Planning For A Rainy Day

Software Takes The 'Lumps' Out Of Promotion Planning

Among the applications where companies can especially benefit by leveraging event management systems is in managing promotions.

"Where companies have really excelled with their supply chains in recent years is in the more routine capabilities like standard replenishment activities," says Karin Bursa of Logility Inc. "Promotions are harder, because they're lumpy. They have a beginning and end, and are far less predictable. For this reason, the process of managing them can be very exception-driven.

"One thing companies might do, for example is to set tighter tolerances for inventory levels on promotional products. If a normal tolerance is plus or minus 10 percent on replenishment, during a promotion you might set the tolerance at 7 percent.

"Or you might want to look at shipments of promotional items more closely than usual, to make sure those orders are received in time for quick turnaround to the store. If you know you have a one-week period when sales are going to spike, you want to make sure you absolutely have that product on hand to get to the store," Bursa observes.

On the retail side, tools are also being developed to help operators more intelligently plan promotions. As such expert systems come into play, they should in turn help suppliers access better intelligence from retailers on what sorts of results to expect from promotions, helping everyone further hone their performance.

One such tool is a new Retail Promotion Planning and Optimization program from Oracle, Redwood Shores, CA. The application creates a centralized process to help retailers select categories and items to promote, determines best price and promotional offer, and provides a promotional forecast for the event at the location level.

"It looks at actual store-level performance from past events and uses this data to recommend how promotions should be structured going forward," explains Gladys Lau, senior retail industry director. The system examines not only what sold during prior events, but also what didn't sell, and compares how items sold during different promotions based on their effective price points, to track and analyze how customers reacted to different deals such as buy-one-get-one free vs. a cents off coupon.

"It can also look at what the follow-up sell through was like," Lau notes.

As with event management systems, Oracle's promotion optimization tool gives users wide latitude to define what they want to program to examine, "depending on how the merchant defines success in each instance," she points out.

During benchmarking studies, its new Retail Promotion Planning and Optimization system consistently demonstrated 5 to 15 percent improvements in promotional gross margin, Oracle reports. One specialty retailer achieved a 7 percent increase in gross margin with no loss of sales, the company adds, simply by having the system identify In the case of one specialty retailer, simply by using the system to identify and remove all the offers that in previous promotions had a negative gross margin impact. —C.C.