From silos to synergy: Integrated business planning for retail

Retailers need to be more agile, integrated, and automated in their planning and decision-making to execute and win in this market. Watch this session for a demo on Deloitte’s retail integrated business planning (IBP) solution and a deep-dive into how clients have leveraged Anaplan to drive value.

Vishnu Narins 0:00:03.8:

Specifically today we’ll talk about what does it mean for integrated business planning in retail, so happy to be here, and Haley?


Haley Hoekstra 0:00:11.8:

I’m Haley Hoekstra. I’ve been spending the past decade in finance transformation and connected planning overall, with the past seven years in focus in Anaplan, focus on retail and consumer products. Excited to talk to you all today about what we’re seeing as retail trends and how we bring it all together, not just in silos.


Vishnu Narins 0:00:31.7:

Great, so today what we wanted to cover is just to take a step back. There are three topics we wanted to cover. One is what are we seeing in the market, and what does it mean when we say integrated business planning and retail? Second, what’s the value? Because everyone wants to talk about value. What does it mean both from a qualitative value and also quantitative value? What do we see in the market in terms of benchmarks? Finally, we wanted to talk about actually how does Anaplan as a platform, how can you leverage Anaplan to get those benefits? We’ll walk you through a case study, and if we can, we’ll talk about one of our solutions. Even though we cannot do a live demo, we could probably do some of the walkthrough of the solution. With that, to take a step back, if you think about retailers right now in the marketplace, the demand is very volatile. They are facing a lot of challenges in terms of retail. The demand is volatile because consumer preferences have changed. Also, they’re expecting an omnichannel experience, so there’s a lot more about supply chain disruptions. The retailer is also facing price pressures, margin pressures because of competition, and we think about even inventory. This is a big challenge in terms of stockpiles of inventory that the retailers have. How do you really balance demand and supply?


Vishnu Narins 0:01:48.9:

Finally, it’s also about the consumer experience. Even we as consumers, we are having this discussion with one of the retailers right now. If you’re thinking about promotions, people do want to look at promotions online. They want to buy from their mobile, and then they even want to pick it up from the store, so it’s more of an omnichannel experience. How do you provide promotions that are somewhat similar with digital as well as in stores, but also how do you think about maybe customizing it to the regions? Even if it is a specific region and specific holidays in certain countries, how do you truly create that customer experience? There’s a lot more uncertainty. The bottom line is, how do we create an integrated agile experience, and specifically, how do we leverage planning to drive that? With that, let’s talk a little bit, and this sets the stage for what we call integrated business planning. When you look at this picture of integrated business planning, you see this end-to-end view, both upstream and downstream. It’s not just only contained to the four walls within an organization, it’s beyond even the organization. If you look at the far left of the upstream process, the retailers are working with suppliers, with manufacturers, with distributors, because they’re looking at the cost of the product, they’re looking at the supply of the product, so that’s at the one end.


Vishnu Narins 0:03:17.2:

The other end of it is with your partners, with your consumers, looking at demand specific to your consumers. If you’re a wholesaler, you’re also working with some of the retailers. How do you truly look at this end-to-end picture? Within the organization, there are so many functions who are touching this. You’re looking at your merchandising function, your product development function, finance, marketing, supply chain. Truly when you think about the demand planning, the supply planning piece and planning, it’s not such an easier, I would say, capability. It is an end-to-end capability that’s truly cross-functional. That’s what we refer to as integrated business planning, is how do you think about this end-to-end planning capability that’s truly cross-functional, that gets you aligned to a common plan? When we say a common plan, it doesn’t necessarily mean it’s just one plan that everyone is using. It could be varying levels of detail, because your finance team might be looking at it maybe at a brand level. Your supply chain team is going to look at it at the SKU level. Your merchandising team, if they’re looking at a merch financial plan, it probably goes to a store category level. Then you have store level plans, but having some level of commonality or a way to connect from one plan to another so you can be more agile, nimble, perform scenarios, and really model scenarios as there are changes in demand.


Vishnu Narins 0:04:39.3:

That’s what we refer to as IBP, and truly when you look at a maturity within an organization, it’s hard to say, oh, I am completely integrated. Most organizations are not, which is why we are introducing the concept. It takes a scale of maturity to get from, what does it mean for improving from an operational process standpoint to where do you want to be as a North Star? If you think about the different steps, where usually organizations start with is maybe in one of the functions. Maybe in one of the functions, let’s say in merchandising, maybe they are standardizing the process. It’s not just about tool, but how do you standardize the process and how do you leverage tool to enable that process? Maybe you start with, let’s say a merch financial planning or an assortment planning use case within a particular function. Then the most important thing that we’re hearing is, how do you leverage analytics to drive better accuracy or better scenario modelling, so better hindsighting?


Vishnu Narins 0:05:35.4:

The next set of maturity, what we are saying is using machine learning or analytics to drive a little bit more granular forecasting, more accurate forecasting. Finally, if we can get to more of an integrated experience, when we say integrated now, it’s truly connecting the merchandising function to the supply chain function. That’s where people want to get to, but it takes a maturity scale, and this is where we will talk about how Anaplan as a platform can enable that throughout this journey. It’s not just the first foundational part, but how do we embed analytics within Anaplan? This is something that Haley will talk about, and also how do you connect the different functions even within a platform like Anaplan, because it’s truly cross-functional? With that, let’s just talk a little bit about the value case, and maybe Haley, you can talk a little bit about the benefits that we are seeing when we talk about integrated business planning. Because everyone is going to ask, so what? How is it going to help both top line, bottom line? Haley, can you talk a little bit about this?


Haley Hoekstra 0:06:35.2:

Right, so I think what Vishnu really said is it’s coming down to when people are thinking of these tools, they’re really thinking through the process, and how do all of these teams come together to bring it together? When you think about the three pillars, it’s really operational, financial, and then the part once we get those two pillars down is how do we think strategically about how we react to consumers? How do we be better with our data and smarter, to drive better decisions? When we think about operational, it’s really what can we do, take out of Excel, because majority of people are in Excel? How do we make those key metrics? How are we looking at them the same? How are we rolling up our stores? How are we rolling up our materials? How do we connect that across the different groups talking different languages? If I’m a merch planner, how do I tell supply chain correctly that these are the store groups I’m looking at, this is how I need to distribute it, and then, finance, by the way, here’s how we’re rolling up on our numbers against the targets you gave us? What does that look like end-to-end? Starting with the operational, where we’re really seeing clients starting to have that functional conversation of this is how we’re going to run the business day-to-day. That’s then letting us actually react to financial metrics, and this is where we’re able to see our AURs. We’re able to see our average per stores, being able to roll that up in the same way to say, okay, this store is doing really well. We’re seeing regions, our e-commerce is doing things better, and then we’re also able to make strategic pricing decisions.


Haley Hoekstra 0:07:59.3:

Those teams are coming together to see the financial impacts, now that we have that operational together. They’re able to see from that top line, what is that key metric, and then also divvying out the roles and responsibilities. Which then gets us into where, as we set these foundations, a more strategic place of how do we think about predictive trends? How do we think about optimizing our channels and supply chain distributions? We think about that. What we see a lot of clients now, one client we’re working with right now is going, how do we really optimize our promotion schedule? How do we influence our pricing teams, knowing that we have historical analytics from when we ran promotions last year, the timings of what we did? We’re able to use price elasticity to say that this year, and with our external factors of what we know is going to happen with GDP, what we know from consumer trends, we think we should be running these promotions in-store, and we think we should be running these in e-comm. Anaplan is actually helping them to visualize when they should run the promotions, and it’s using optimization to say this is how you will decrease your inventory and increase your gross margin. This is when we start to think about the strategic things, what our clients are thinking about, and keeping up with their competitors too when we’re thinking through these fast market trends.


Vishnu Narins 0:09:16.8:

A couple of comments here in terms of industry benchmarking range. We’ve listed from a top line sales improvement. If we are looking at a better plan, it also starts with pre-season. If you’re looking at a seasonal product, you first want to make sure that pre-season, you have a good plan, and then that is what you’re executing as a part of in-season. From an industry benchmark standpoint, we see up to a two per cent increase in your top line sales, even as we are thinking about better planning in terms of merch financial planning. When we also look at it from a margin improvement standpoint, you can get to 300 basis points. It’s pretty significant when we think about each basis point at a retailer, and when you look at inventory, this is one of the biggest challenges that we see from our organizations, is how do I manage my inventory? How do I look at my omnichannel inventory, not just for the stores, but also digital? That’s something where we can see up to five per cent improvement. This is something that you can continue to measure as we look at the maturity curve. This is probably not what you’re going to see. It’s step one when we’ve talked about the maturity curve, the foundational process. As you’re getting analytics embedded, as you’re getting to that integrated planning, this is what we expect retailers to see. With that, let’s talk a little bit about our solution that we have.


Haley Hoekstra 0:10:39.0:

We said typically we’ll start one place, so today we’ll put on our merch planner and buyer type lens. What are they doing pre-season and in-season to manage, and how are we thinking about the merch financial plans, how that comes together to create the assortment? Then as we go through some of the screenshots we have, we can talk through how integration comes into this from the other functions that we talked about as well. When we are showing this, we’re really putting on our buyer and planner lens, and so we can go to the next slide. When they start their season, they’re really thinking through, I have targets that I’ve gotten from my merch financial planners. I have to be able to hindsight what my assortment is going to be, make sure I’m reacting to the consumers, what they want from a diversity and selection standpoint, but also make sure that we’re maximizing margins and also putting our constraints on supply chain into this.


Haley Hoekstra 0:11:31.4:

When they first log in, they’ll think through, here’s my targets that I have for this season across the months. How I’m trying to flow out my assortment to keep it different, and also maximize what I’m getting from finance. As they’re putting the plan together, they’ll have targets by attributes, and there’s also some predictive in here. Thinking through based on what we saw last year, the diversity of the assortment should be around 20 CC. There’s predictive analytics in here to say hindsighting from what we did last year, plus what we’re expecting this year based on the attributes, we think that we should have a selection of about 20. It does that by class at the top, and then it also will do it by channel. You’ll see that right here this is brick and mortar, but you can also set up e-commerce, different store groups as needed as well. That’s how the buyers and the planners will start thinking, and they get the inputs from finance and their merch planners, and then also their know of flow of delivery from supply chain. Just to start thinking as they go into their next, as they’re actually putting together what the assortment in the buy looks like.


Vishnu Narins 0:12:30.5:

One comment here is that as organizations have evolved in their maturity, there are three things that help you make up the plan. One is the targets, the financial targets that Haley talked about. One is hindsighting, to look at historically, how did my products perform? I can just think about hindsighting to help create the plan for this month. The third one which also organizations are starting to see is demand forecasting. How do I look at external factors, not just hindsighting on what happened last season, but how do I look at my current demand forecast, my current market conditions, and how that bottom-up forecast also drives my pre-season plans? Really having all these three come together to look at my pre-season plan, so it’s a little bit more informed, versus just top-down targets driving a pre-season plan. Some of the discussions we are having is if it’s more of a financial target, saying this is where I want to be, and we create a preseason plan, this is where we end up with a lot more inventory. This might not just be completely aligned to the targets, but it’s also how do we incorporate the feedback, what we’re seeing in the marketplace?


Haley Hoekstra 0:13:42.1:

That goes into, how do we actually set up the assortment when I’m a planner? I have my targets, I know what I’m trying to get from an attribute standpoint. With Anaplan, we’re able to think through, here are my styles. This is where I’m expecting them to come from. This is the expected margin, my expected commerce; what I’m going to make from both in-store and omnichannel, so what I’m going to make e-comm versus brick and mortar. Then as we’re going through, putting in predictive math to be able to roll up on how many units of this should we buy, and then furthermore, I think we’ll go to the next one. How do I flow this out and really think through, what can I do from a floor standpoint, and react with supply chain’s availability on the styles as well? Along with marrying that up with the targets that I had from finance to make by month. What you’ll see at the top is really what we’re seeing is we have the buy, we have math that’s generating recommendation by quantities based on what we’re making available, both e-comm and in-store. The planners are taking that time to really think about, what does the consumer want? What do we need? As they flow that up and be able to say when we want to make that available, they’re able to see the distribution of what that means from a financial target and financial roll-up at the top. Then at the bottom, they’re able to see, this is how I would flow it out across the different delivery channels I have, and make sure that I’m able to provide this to the supply chain team, to make sure what I’m actually doing is available.


Haley Hoekstra 0:15:13.5:

There are settings within the tool that help you think through, this is when it would be available, this is my delivery dates that supply chain says I can go through, and then be able to say that overall, this is my overall expected by week. One other thing I think is important too here is that it’s also what we talked about earlier on, also thinking through the price and what can be recommendations for that. It’s also saying based on when you’re going to put things throughout the season, so when you’re thinking preseason, you know that you’re at the first trying to optimize the margin. As you go through the season, it’s really a goal to think through, let’s clear the inventory, make sure that we’re not having a lot of sell through at the end. We want our sell through to be as high as possible. What this is thinking through on here as well, that’s not as visible to the eye, is that you’ll see it’s more of a bell curve. It’s getting your product launched. You’re seeing an uptick, and at the end you’re dropping prices near the end to be able to get yourself through up and offset your inventory cost.


Haley Hoekstra 0:16:19.0:

If we go to the last, and then at the end, as well as the planners thinking through it, they’ll be able to see overall, what’s my units I’m going to sell in total? What’s my variances to target? What does that receipt mean, and what’s my overall margin as well? This is just another view that the planners may think through as they’re rolling up too, that before they go into the flow that they can think through this is what my variance to target is. We also have scenario modelling built in here inherently too. Let’s say that I want to change a few styles, that actually I think the pink sweater is going to sell better at the beginning of the front, because February is here versus we’re in March now, and I think I’m going to up the green. If we see trends like that, they’re able to react to that and see how it flows and reacts too, before they make their final. Scenario planning becomes really important for those planners as well, as they may get different situational things that they have to react to.


Vishnu Narins 0:17:09.2:

I’m going to go back to the overall solution, because we only showed a small portion of it. When we think about integrated business planning, we showed this connected assortment side of things, and how do you take a financial plan and targets and create your assortment for a seasonal product for retailers? If you look at the end-to-end, like what we talked about integrated business planning, it’s also your demand forecasting where you’re forecasting and predicting your demand based on machine learning or statistical modelling. You’re merch financial planning, you’re connecting with your supply plans, and you’re also optimizing decisions to say, like Haley was saying, what pricing decisions do you have to make, promotions that you would have to run. It’s more the decision-making side of it as well, and that truly connects it more end-to-end. We showed a very small portion of it, but we are happy to take any questions, any other comments that you have as you think about this as an end-to-end solution of integrated business planning. Questions from the group.


Audience 0:18:17.6:

I apologize, this is completely foreign to me, because I do nothing in the merchandise planning space. Question on the dynamics of the model that you’ve shared with us here. Specifically, some of the attributes that you have set up from a system standpoint, how flexible are they? One, things change over time, right? We need to be completely agile, but two, how do you actualize some of the data that you were showing from a forecast refining standpoint?


Haley Hoekstra 0:18:49.3:

Yes, completely fair question. It’s what a lot of our retailers struggle with. I think the first is having strong core attributes, the ones that are going to be foundational to what you’re doing throughout, and most of those we’ll get from their material master. We’ll say those are like style, color, class; really setting up those hierarchies up front, but there’s always going to be different needs based on which group you’re working with, right? Someone in supply chain is going to care more about floor set date where you’re shipping from, versus someone in the merch planning is going to care more about what is going to be the groupings that I’m using? What are the programs I’m executing?


Haley Hoekstra 0:19:23.0:

I think as you work through, what we normally see is that you have a central, these are our core attributes, these are what’s going to be for everyone. These are the hierarchies we’re going to stick to and roll up to, and we work with each group, because a financial planner, like Vishnu said earlier, they won’t care if they’re planning at a SKU level. They really want to know, what’s the class doing overall? Versus a merch planner will care more about, what’s the color choice styles I’m getting? Supply chain is like, how many am I going to size these out, and what’s the actual SKUs I’m sending? Having those core attributes established, and then as we work through the use cases, that’s normally where we would work through, hey, these are very important merch planning attributes, these are financial attributes we need, but keeping that at a core data structure and governance around that is where we see that typically.


Vishnu Narins 0:20:07.5:

I think the second part of the question was around actuals, and how do you integrate actuals in it? I would say that what we showed was primarily pre-season, meaning it’s a seasonal product. You’re planning ahead of time for a pre-season. As you get into in-season, we’ll refresh weekly actuals to see how actuals versus plan is trending. Perform variance analysis so that you can think about adjusting more during the season, to see if there are certain changes that we’ll have to make. If there are certain, let’s say, products that we have to shift to another store category because that’s performing better, or there are certain products where you have to apply more promotions. That’s going to be happening in-season, during the season, and that’s where I think the power of the platform is. You would want to react very quickly, because it’s not like we have five weeks for us to create a plan and then think through what promotions we have to run. Every week as data is coming in, analyze the data, and then look through what actions can we take within the season?


Haley Hoekstra 0:21:07.0:

Yes, and I think one other thing to layer on top is that there’s really a maturity curve on where your data is at, right? Most powerful that you’re going to be building off of is material in store, and people may be doing different groupings even of store as well. I think that’s where too, when we think about the analytics that come in and what can we do from predictive, what can we do from guessing out price, talking about store eligibility on styles? What can finance do from giving some better predictive top-down targets? That’s where really we look at the maturity of the data, where we need to go as well and think through that. What we’re getting out of material in store level, which may not always be available, especially if you have some stores that are more remote, etc.


Audience 0:21:52.0:

In working with your retail clients, to what degree does your team offer any thought leadership and what’s possible within Anaplan, and how much are they contributing to, hey, we need to have this type of drill down or this type of work, versus what your team offers?


Haley Hoekstra 0:22:10.4:

What I’d say is, and Vishnu, feel free to jump in. The solution you actually saw was built with both our Anaplan experts and our retail process experts. I’d say any Anaplan tool you look at, it’s only as good as your process in the backbone, so we always look at that first and work in conjunction and really work through, what’s mock-ups? What do we actually have from a data standpoint, like we talked about? What’s the user experience? Because if they don’t adopt it, it’s not going to work. We really think about process data and then who our personas are that we’re serving, and so our practice comes together with our retail practice and our Anaplan practice to bring both of those together. It’s a partnership on, well, we could do that, that’s great, but do we actually have the data to support that? Or maybe we need to relook at this a different way, because a merch planner would look at it this way versus a financial planner needs to see this roll out.


Vishnu Narins 0:23:01.6:

The reason why we built the solution is we didn’t want to take over, lift and shift off; this is your Excel process or this is how you’re doing it in Excel, let’s put it in Anaplan. We said this is how we would want to embed analytics as you’re actually thinking about that end-to-end process. In each step of the way that Haley walked through, even when you do the initial setup of targets, it has analytics built in to say, what should the math be in terms of buy? It also has analytics built in to say, okay, which store should you actually make these products eligible? How do you even flow through in terms of weeks within a season? All of this has analytics built in, and that’s the benefit of working with our retail practice, to say what has worked in the past with other retailers, and getting some of those benefits and putting it in terms of Anaplan.


Haley Hoekstra 0:23:45.0:

I think thought leadership, you asked about that too, and I wasn’t sure if I addressed that quite. Retail is constantly changing, right? It’s in a constant change of state, so we’re trying to keep up with the trends. I know we built this initial solution in 2017, and I can tell you we’ve updated it a ton. We’ve done store eligibility, the inventory flow that you saw today was just there in the past two years, and the price predictions. There’s a ton that we’re changing as we learn more, and we’re trying to build these platforms flexible enough where we can react to the changing market conditions and bring in that expertise as well.


Audience 0:24:24.6:

You mentioned injecting analytics throughout the process. How do you navigate the change management with the client to make them feel more comfortable with a new way of doing things? That tends to be a black box for a lot of people, and if they don’t trust it, they don’t adopt it.


Vishnu Narins 0:24:44.1:

A couple of things. When we think about analytics as a black box, what we try to do as much as we can is at least provide visibility and transparency to the drivers of analytics. Even if we don’t say that we’re going to show all the machine learning algorithms in the back end, we’ll show the drivers. What are the drivers that are predicted, and how does it contribute to the final outcome? That’s something that we want to provide visibility, so people don’t think for the same reason that it’s a black box. Change is going to be always a big conversation, irrespective of analytics, in any new platform. I think one of the biggest challenges that we have with our clients any day is when the transformation program is change and adoption, change adoption, and how do we start early on? This is where when we are going through even the merchandising solution or the pricing and promotion solution, we start day one on change to say, how do we really think about change in terms of who is it pertaining to? How do we truly manage change? How do we look at top-down leadership, truly communication to say that everyone is bought in to the transformation program? There’s a lot of factors that go in I would say day one from a change strategy standpoint, and analytics is probably one component of it, but it’s a broader any technology platform play.


Audience 0:26:07.6:

I’m in 100 per cent e-comm space, and I find that a lot of solutions built for retail are thinking so much about omnichannel or store level that a lot of the e-comm specific challenges kind of get left out, like not having all the SKUs in an order in the same DC, or like back orders. Just like operational efficiency that doesn’t necessarily impact your margin, but impacts your expenses further down on the P&L. I’m wondering if you are working with anyone 100 per cent e-comm or have adapted the solution for that business case at all.


Vishnu Narins 0:26:44.5:

It’s a very good point. I think we’re working much more with folks omnichannel to say, okay, how do we look at both? That also has been a challenge from an inventory standpoint. More recently, we were having conversations to say we only have one set of inventory when we look at the DC, and then we have to allocate it based on digital or based on stores. That’s been a bigger challenge. I think when you have more of an omni experience that people are looking at, that has been more complex. I would say that when we think about pure e-commerce, maybe it has a different set of challenges, but I think it would be something that we’d have to cater the solution specific to e-comm.


Haley Hoekstra 0:27:22.8:

Yes, and I will say some of the things that I’ve been in conversations on about e-comm is I think the way we think about supply chain is totally different. We’re really thinking about distribution channels, what’s the demand, and how do we allocate that? I would say the supply chains are definitely tailored different, and then the metrics we just put in there are different. You may have saw APS on the screen, but when we also do e-comm, I didn’t show it on the screen, but we think about average weekly sales instead. Where are we getting the sales in from, from a user perspective? There are things when I’ve had those conversations, even when we’ve talked some of the omnichannel stuff, we may put in different logic for e-comm just because it is different. Especially on the supply chain side, that’s where I see the biggest differences.


Audience 0:28:07.5:

A two-part question, and maybe you already answered the first one. As retailers roll this out and implement this, does this solution cover 80 per cent, 70 per cent, 90 per cent of the requirements? Secondly, left to right, where do they normally start with? What do you see as the thing that drives them first to get involved with?


Vishnu Narins 0:28:30.5:

I’d say there’s always an 80/20 rule, because it’s hard for us to get 100 per cent of the requirements done. Also, I think about it in terms of configuration, because the solution doesn’t have all the master data or the customer hierarchy and the brand hierarchy. That’s something that we still have to update, to make sure that it’s connected. I would say data is a big configuration that we need to do, to bring in the data from their source systems into Anaplan, into the solution. We have to make sure that the metadata and the attribution is set up, so that needs to be set up anyways. Outside of that, I would say there’s some level of customization that people require, because the processes could be slightly different. How we at least get that 80 per cent done is what we are focusing on, so I would say more the 80/20 rule. I think your second part of the question was focused around, can you remind…?


Haley Hoekstra 0:29:22.1:

I can take that one, Vishnu. It was around who do you go to first, right? The change thing kind of comes back into perspective. Every organization is different, but the things that I think about is who’s ready for process change, who has data, who has user buy-in, and who’s maybe even more tech savvy in some cases? Who’s going to be able to take it on? I’ve seen one retailer where they just had – who’s going to get the value, that’s another one. They had complete supply chain issues, they felt like they had a decent process and assortment planning and merch financial planning, so they started with supply chain. They went through the full, how do we do the distribution? How do we do the logistics? Found a ton of value there, where then merch financial planning and assortment planning were like, well, we want on. We want to feed it in, we also want to feed the distribution to manage in-season. They started with supply chain, did merch planning. Another client we had, had an assortment planning solution that was home-grown, built. They wanted to get rid of it, it was becoming super hard to maintain. They had major buy-in from their wholesale group and they started with merch planning, and now they’re looking to go into more supply chain, kind of reverse. Those are the things I really think about. Recapping it is value, who’s willing to do change management, who’s tech savvy, and who’s ready to even rethink through their process stuff and optimize.


Haley Hoekstra, Senior Manager, Deloitte Consulting LLP

Vishnu Narins, Managing Director, Deloitte Consulting LLP