Common mistakes in production lot-size volume planning in Retail

Retail 360

Common mistakes in production lot-size volume planning in Retail

By ashwini

October 19, 2021

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Typical practice to decide how much to produce in each product/design/option is to grade each into ‘A’,’B’, ‘C’ and allot standard production lot size according to each grade. Then the total estimated volume across all product/design/options is tallied against the overall sales target. If there’s a mismatch, the lot sizes are proportionately adjusted to bridge the gap to reach the desired sales target level.

Although there is previous sales data available with which one can revalidate the assumption made on lot size, this step is often sacrificed for meeting budgets. One hopes that the next season will fare better, thanks to effective marketing, more sales locations, improved sales force & focus, and other initiatives.

The biggest oversight in this method of planning is to ignore the facings available on retail shelves. All retail shelves do not have a uniform number of item facings. For example, some locations may have facings for a category at 50, some others at 80, and the rest at 120. In such a scenario, it is but obvious that only 50 product/design/options can be allotted to all sale locations, the next 30 to limited sale locations, and the balance 40 only to those who have 120 facings available on their retail shelves.

The solution is to take cognizance of the facings available and cluster various sale locations under facings. This can be then further qualified by sale potentials of these locations, effectively creating multiple combos of ‘sale potential of location x no. of facings available’. This significantly helps in getting better at arriving at production volume requirement for the product/design/option than blanketing everything under a certain given grading.

In ‘Pravah’, our supply chain transformation solution, we actually reduce the dependence of Demand forecasting to a bare minimum by building agility in production to respond to real demand as it unfolds in the market.

Write to us if you’d like to learn more.