Assortment planning determines the appropriate combination of products to offer customers and is a very powerful tool to obtain a competitive advantage, maximizing efficiency, profitability and sales.
Some months ago, we saw in article Difference between optimizing stock and product assortment the difference between these to processes. In fact, most companies confuse the concept “stock” with “assortment”, being “assortment” a much more complex concept that requires much more difficult elements to manage.
In this article we will explain in detail what the assortment planning process consists of and its 3 main phases, which are:
Demand analysis. Market needs are analyzed.
Product selection. New products are chosen taking into account the analysis of demand and the strategy of each company (type of products sold, application segment that is specialized, etc.).
Supplier selection. Reference numbers associated with the selected products are identified, taking into account brands available on the market, quality, prices, etc.
Surely phase 1, demand analysis, is the most complex of all, because different elements must be available to be able to carry it out, in particular:
Knowledge of the entire domain that we want to analyze, in our case all the market reference numbers.
Data model that defines all the products that exist (it can be a car park definition, a universal product coding, etc.). Among other things, it helps us determine which products you already have and which ones you are missing.
Mechanism to associate market demand with the different products that exist and therefore, be able to accurately calculate the sales potential of all of them.
In phase 2, product selection, we discover new products, prioritizing those that have the most demand in the market, but we also detect, for example, products that are in your assortment and that are potentially obsolete due to their low demand. From all this information you must choose the new products that you want to add and those that you should eliminate from the assortment.
In phase 3, supplier selection, you must carry out a survey of options available on the market, based on databases, supplier catalogs or product search assistants, to determine which is the best to buy or perhaps decide to manufacture the product if you have the capacity to do so.
You should carry out this entire process periodically, ideally once a month, and no less than once a quarter, because levels of demand for products in the market vary permanently and you must be able to maintain an efficient and profitable assortment.
Finally, we remind you that there are many tools on the market to optimize stock, they use universal parameters such as: sales, current stock, minimum stock, etc. These tools do not have specific knowledge of the product domain on which they act and are limited to applying mathematics and/or statistics formulas, which have nothing to do with assortment planning and new product discovery.
NEO system is a specific demand analysis system for auto parts that helps you in a very powerful way in assortment planning. It precisely resolves the 3 phases that we have mentioned and is integrated into your company without the need for you to change your current processes and/or programs.
