What Is Assortment Planning?

In order to be profitable, every e-commerce company must think about profitability — and in order to stock the correct inventory at the correct locations at the right time, you’ll need expert assistance.

A second method for lowering costs is through assortment planning. Businesses may effectively plan their inventory and catalog around changes in demand and sales volumes throughout the year to satisfy clients and optimize profitability.

In this post, we’ll go through what assortment planning is, when to do it, how to get started, and how a logistics platform like Launch Fulfillment may help you improve your assortment planning in order to grow your company.

What is assortment planning?

Assortment planning is the process of deciding which items to sell at a specific time period and how to distribute them between various locations and/or sales channels in order to maximize earnings.

In a nutshell, assortment management is about determining which products to offer and where to sell them depending on the seasons and demands at various locations.

A company may switch between selling T-shirts and fleece coats in order to appeal to a variety of consumers.

If a company’s primary product is coats and jackets, but the majority of their customers live in a warm climate where the coat or jacket necessary for that season are available all year round, they may choose to stock just those goods at that store.

When to consider assortment planning

Many e-commerce firms may not think about assortment planning until they begin to have good earnings. However, variety planning is an essential component of inventory management, particularly if your company is facing the following difficulties.

Uncontrolled SKU proliferation

SKU proliferation is a necessary component of growth, but having too many SKUs might eat into your earnings. Assortment planning helps you rationalize SKUs, minimize inventory expansion, and focus your resources on the most profitable products.

Excessive obsolete inventory

If you’re dealing with outdated inventory all the time, it’s an indication that your assortment planning is inadequate. This will assist you in more accurately forecasting your inventory expenditures and avoid putting money into products that are slow to sell or for which demand is low.

Regular stockouts

Stocking out, however, is a concern. If you tend to sell out specific items when demand for them is still high, you should improve your assortment planning so that you don’t have to replenish things as often to keep up with sales volume.

Insufficient storage space

Because your company grows, you may run out of room to store all the items you sell. Assortment planning enables you to use your storage space most effectively by strategically arranging it around warehouse capacity and shelf space.

How to get started with assortment planning

It’s vital to profitability, but assortment planning might be tough. Make sure you have a firm understanding of the following best practices for assortment planning before you start.

Use data to make informed decisions

The assortment planning procedure becomes pure guesswork if data is not used. This method of trial and error is at best time-consuming and, worst of all, harmful to your earnings.

Customer data, such as demographics, trends in the seasons and with respect to products, should always be a focal point in your assortment planning activities since it can assist you make well-informed and logical decisions about what to stock where and when. The following metrics are among the most important to track for assortment planning:

  • Inventory turnover rate
  • Historical sales data
  • Lead times
  • Cost per unit for each SKU
  • Revenue per unit for each SKU
  • Set realistic goals

Even the most carefully developed assortment plan may result in deadstock or stockouts if customer demand and sales trends are unpredictable.

Knowing this, your aim should not be to develop a supply plan that perfectly accounts for demand; instead, you should create an effective, practical strategy that takes all of the data you have into account.

Setting smaller objectives, such as increasing product selection for a single product category, improving sales in one location or sales channel, is a good approach.

Consider improving your supply chain

Your supply chain should be able to keep up with your plan. If you frequently deal with long lead times and limited supplier capacity, or if you want to start multichannel retailing, you may need to adapt or strengthen your supply chain in order to guarantee the required product quantities at the correct locations for the appropriate seasons.