In Great Britain, space limitations give rise to stores of widely differing shapes and sizes, even within a single chain. That makes store-specific planogramming and product allocation for retailers like Marks & Spencer, London, a challenging one.
To address the challenge, M&S, the venerable retailer that operates more than 300 food and general merchandise stores in the United Kingdom, has partnered with MarketMax, Wakefield, Mass. The partnership has resulted in the development of a space planning tool, Space Optimizer, with which M&S is generating store-specific planograms for its prepared food sections through a 15-person planning department.
"We wanted to deliver store-specific space plans without needing an army of planners," said Pat Farag, head of IT solutions for M&S's food division. With optimized store plans, M&S is better able to "improve the availability of product to drive sales and improve store efficiencies, which is targeted to result in just over $4 million per annum," said Farag.
The chain started using the system, which runs at headquarters, last fall, and is currently applying it to more than 80 stores served by two of its six warehouses, said Farag. She added that, based on the results so far, M&S plans to complete a chainwide application of the software by the end of 2003, usually adding four to six stores per week. Each store's plans are based on its unique computer-aided design (CAD).
Refrigerated foods make up the bulk of M&S's 18 food categories, but the software will be employed for non-refrigerated as well.
M&S has been transmitting revised planograms to stores, for categories that call for revisions, about once every three weeks, Farag said, though weekly changes can be made when necessary. The plans are based on a projection of sales for the next three weeks, based on the previous three weeks, the previous year's performance, or other criteria.
The system, using what are called "genetic algorithms," allows M&S "to lay stores out according to a common set of corporate guidelines," said Farag. Incorporating the chain's aesthetic criteria, this process sifts through thousands of planogram possibilities before selecting the final versions. As a result, stores are able to lay out according to plan with greater efficiency, she said.
The system also enables the chain to keep back-room stock to a minimum, flowing product deliveries directly to store shelves.
For two prepared categories in 60 of the stores using the MarketMax system, M&S has been testing an internally developed store ordering system. The goal is to base replenishment orders on "pull," or consumer demand, rather than on a system where warehouse inventory is "pushed" out to the stores, said Farag.