There is no doubt that there is an art to product placement and shelf location: blending consumer preferences and patterns with periodic resetting to encourage new purchasing habits. But, effectively achieving successful shelf-level category management is also a science. This process is incredibly complex and requires detailed financial, consumer, performance and assortment data to produce accurate, localized planograms. Leading manufacturers are implementing steps to automate the shelf-level category management process in order to more successfully meet consumer demand, as well as create greater supply chain planning efficiencies. As a result, these manufacturers are also experiencing a variety of benefits, including:

• Maximized Productivity: There is a tremendous amount of data that is analyzed to create the planograms that instruct stores on how much product to display and where. For example, at Dr Pepper Snapple Group, it used to take 10 people approximately 600 hours to generate cluster-level planograms for its retail customers. By automating the process, the beverage manufacturer now requires only two people and 40 hours of time to generate the same number of planograms. Additionally, all planograms are specifically tailored to each individual store. By aggregating customer, financial and performance data into a single database, Dr Pepper Snapple Group now focuses more on market trends, category analysis and growing its retail customer base, and less on time-consuming planogram production. With a comprehensive database that intuitively ties information together to automate store-specific planograms, companies can reallocate existing resources to more effectively manage product categories and increase profitability.

• Enhanced Customer Focus: Traditionally, planograms have been developed at the cluster-level, meaning that data is gathered from a group of similar stores and used to determine product displays. While this data takes into account general similarities, there are individual store and customer differences that are simply unaccounted for. The result can be too much or too little inventory, greater inventory carrying costs and less-than-optimal store layouts. By leveraging a highly automated planogram process that can account for customer preferences down to a granular level, companies can efficiently create store-specific planograms to satisfy consumer demand and maximize sales. Dr Pepper Snapple Group was able to easily reset its planograms in response to the decline in bottled water sales. Although the push to "go green" and the impact of a down economy were affecting sales, the manufacturer was able to easily adjust product assortments in response to these market trends using an automated solution, increasing carbonated soft drinks, for example.

• Increased Flexibility: Companies generally conduct two major category reviews each year on their products. This means that as new products are introduced, old products are phased out or customer spending shifts, there is little room for adjusting planograms to account for these changes. Either the entire planogram must be rebuilt from the ground up or less-than-optimal interim fixes are made, both of which cost time and money. An automated process enables easy incremental adjustments and provides companies with the ability to gain a competitive edge. For example, as a result of the global recession, consumers are buying in smaller quantities. Two-liter bottles and six packs of soda are seeing increased popularity over 12- or 24-packs. With an automated system, tweaks can be made in real time to shift inventory and product displays to meet changing consumer demands without disrupting the entire process and requiring additional labor. And, if needed, a category review can be added without requiring additional resources. 

• Greater Consistency: When multiple people are analyzing and interpreting detailed financial, consumer, performance and assortment data to generate planograms, human error and varying interpretations are inevitable. As companies experience turnover, these discrepancies can grow exponentially. With an automated planogram generation process, proprietary data is secure and there is greater consistency to maximize the efficient use of retail shelf space.

• Expanded Relationships: Automatically generating planograms based on user-defined information frees up time, allowing manufacturers to dedicate more resources to analyzing category and market trends. Since retailers generally provide a wide variety of products and merchandise, achieving an in-depth understanding of each specific category is virtually impossible. They rely on manufacturers to have their finger on the pulse of consumer demand to determine optimal assortments and product layouts for maximized sales. Automation enables companies to achieve this. Additionally, with the flexibility to mass-produce tailored planograms that can meet the needs of retailers of any size, manufacturers can appeal to both new and existing clients.

The most important area of focus for companies looking to make the shift to automated shelf-level category management is to provide a central store of consumer sales and planogram data. Because fixture, assortment, performance and template data are traditionally stored in disparate systems, gathering this information can initially be a daunting task. Working with an experienced partner can ensure that the right information is collected and the optimal planogram templates are developed.

This paradigm shift towards automated planogram generation offers a variety of cost, resource and customer-service benefits across the supply chain in terms of both planning and execution. A category manager at Dr Pepper Snapple Group made the comparison that making this switch is like filling out a 1040 tax form manually versus the benefit of doing so automatically using intelligent online tax return preparation software. Not only is automated planogram generation quick, easy and accurate, but it also opens the door to a variety of supply chain and business opportunities to drive market share and positively impact profitability as rapidly as possible.

David Johnston is senior vice president of manufacturing and wholesale distribution at JDA Software.

Source: JDA Software