Why Plan o Grams?

Why Plan o Grams?

July 7, 2015

Corey Pearson, Sr. Managing Consultant Retail

Introduction

According to the Oxford Dictionary, a plan o gram “Is a diagram or model that indicates the

placement of retail products on shelves in order to maximize sales.“

While accurate, the above definition touches only the surface of what can be accomplished

through the technology available to leverage a plan o gram or the benefits of execution.

In this article I will share what I’ve learned in managing Space and Assortment for a 1,200 store

US grocery chain as well as those insights I’ve gained since working with clients across the US.

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Prepared by Corey Pearson, Sr. Managing Consultant IBM July 7, 2015

Why Plan o Grams

•Customer Experience

•Maximize sales and profit per linear foot

•Maximize shelf space

•Execution

•Leveraging Plan o grams

• Store specific assortment

• Macro Space Planning

• Maximum Set Size

• Shelf Tag Efficiencies

• Auto replenishment

• Promotional Display Optimization

• Tesco Augmented Reality App

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Customer Experience

Plan o grams enhance the customer experience in a number of ways:

1. Minimize out of stock. Retailers on average run 8.3% out of stocks with faster sellers

averaging above 10%*. When confronted with out of stocks up to 43% will purchase that item

at another store and 25% will not buy the item at all.* Out of Stocks cost a typical retailer

approximately 4% of its net sales*. Plan o grams when executed have the ability to drive

space allocation via item movement data. By leveraging movement data and days on hand

requirements each items allocation can be optimized to ensure space meets demand.

2. Shelf principles: Plan o grams give the retailer the ability to define specific visual

merchandising standards. By defining principles such as top shelf top product heights,

private label positioning vs. national brand, air space or how items will be positioned by item

role, the retailer drives a consistent customer experience across the entire store. and while

often subliminal in nature the effects can drive loyalty and top line sales.

3. Aligned to Your Brand: Your shelf principles are part of your brand promise. Driving

consistency across all stores and categories within the store via consistent plan o gram

principles defines a unique customer experience for your stores.

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*Source: GMA 2002 worldwide out of stock study

Maximize Sales and Profit per Linear Foot

Plan o grams drive Sales and Profit per Linear Foot:

1. Right Item: Plan o grams consistently present the right items to the customer based on the

Category Business Plan which identifies the optimum assortment by customer cluster and

geography. The opportunity may exist to vary by season, geography or store as well

maximizing sales.

2. Item position based on the items role in the category will optimize the financial outcome.

• Profit items for example at eye level have been shown to drive higher sales on those items.

• Demand items which are typically more price sensitive will always be found and lessen the profit

drain if positioned on the bottom shelves.

• Positioning Private Brands in such a way that customers find those brands drive more penny profit.

• Giving a National brand that spends more trade funds vs. a competing brand with a lower spend will

also drive higher vendor funding and ultimately profits.

3. Analytics: By having items in plan o grams you now have the ability to measure the effects of

that placement. Most plan o gram tools have reporting features that allow you to evaluate the

performance of the plan o gram down to the item level helping the category manager to make

an informed decision and improve their sales and profitability performance.

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Maximize Shelf Space

Maximizing Shelf Space ensures every linear foot in the store is put to its best use:

1. Analytics: Most merchants believe they know from experience how much space a category

needs. Analytics however drive fact based change of those ideas.

• Supervalu Shoe laces and polish category: Every store had a 4 ft section, however, when analyzed,

the performance calculated the category earned 1 linear ft of space. Typically retailers will combine

the top items from the underperforming category with another category. When discussing with the

team it was suggested to try a power panel. The idea was tested in several stores and found that

the power panel drove 15% higher sales than the best 4ft section in the company.

2. Fixtures: Plan o grams define the proper fixtures to be used, the exact spacing for shelves,

pegs, baskets or security fixtures ensuring that air space is kept to a minimum while item

allocations are maximized. This translates into higher ROI per linear foot of shelf space.

3. Labor Efficiencies: For some retailers case packing drives efficiencies, for others high volume

items stocked on the bottom shelf. In any case, plan o grams can help drive labor efficiency.

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Execution

Store shelves are set either by store personnel, or third party providers. Having a consistent way

to communicate what is expected for every linear foot of space in the store will drive better

execution. Here are other ways that consistent execution can benefit you.

1. Efficiency of shelf resets: Having a consistent communication standard lowers your cost of

execution as test sets establish the time needed to complete a set providing a standard to

those executing and the managers overseeing the work.

2. Shelf Strips: Now that you have a plan o gram you can print shelf strips for major resets. This

is typically a file load to a tag printer that produces a strip the length of the shelf with properly

positioned tags based on the plan o gram. The reset person places the strip into the shelf

molding and then products are aligned to the tag positions. This saves up to 50% of the time

needed to complete a reset vs. reading item by item on the plan o gram while increasing

accuracy to near 100%*.

3. Measurable Standards: The plan o gram provides a measurable standard to evaluate

performance of whether the reset was completed properly. A National Retail Association

Marketing Services benchmark study showed that 100% reset compliance can mean a sales

lift of 7.8% and a profit improvement of 8.1% within two weeks.**

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Source *Vestcom, **NARMS benchmark study

Leveraging Plan o grams

Technology to leverage plan o grams continues to evolve and produce benefits!

• Store specific assortment: Technology exists that allows the retailer to leverage a base plan o

gram and create store specific plan o grams based on sales, customer segmentation or both.

Other applications include application to small stores or stores with varying fixtures. While no

correlated statistics exist, it stands to reason if assortment and allocation are customized by

store that sales and profits will follow.

• Macro Space Planning: Technology that assesses the best use of space across the store

leverages the analytics from both plan o grams and category sales. The result is the right

size of departments, sections and flow of sections customized by store. This is often

constrained with a Merchandising Vision of principles that define the brand.

• Maximum Set Size: Analytics can also help you evaluate by set size where your performance

peaks and where the diminishing point of no return begins. This can help you determine what

the maximum set size should be. Many retailers have oversized stores in their fleet where

section sizes are allowed to grow in order to fill the space. By establishing a maximum set

size by category, the retailer constrains the maximum linear footage driving alternate

solutions for empty space such as pallet drops, or wider aisles. By leveraging plan o grams,

performance, cash flow and the customer experience are all improved.

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Leveraging Plan o grams (cont.)

• Shelf Tag Efficiencies:

• If you’ve ever taken a look at what tags print out in store during price changes you know that the

number of tags printed and tossed is a huge dollar opportunity. Now that you know by store what

items are in every section, you can suppress those tags not needed and only print the ones you do

need. Savings will vary dependent upon the cleanliness of the item file, however a 10% savings is a

conservative estimate based on my experience in implementing this solution.

• Another application is leveraging the plan o gram to create a position location for every item.

Typically expressed in shelf and item position sequence number, by having this on the tags price

changes can be done 20% more efficiently. Additionally, if a tag falls off, it is easily identified what

the item is for tag replacement vs. losing the item by having the stock clerk face over it.

• Auto replenishment: Leveraging the known assortment and space allocation with scan data at

the point of sale can drive effective automatic replenishment of shelves. This not only saves

labor in creating orders but has been found to be more accurate in anticipating sales and

stock needed to carry until the next order cycle.

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Leveraging Plan o grams (cont.)

• Promotional Display Optimization: Plan o gram technology can also be leveraged to display

areas. Envision a line of products on promotion. The right items that sell in a specific store

as well as optimization of space allocated by item on the display will ensure maximum sales

as well as less re-filling between stocking cycles.

• Tesco Augmented Reality App: We talked about measurable standards earlier in the

Execution section. Tesco took this standard to the next level working with IBM on an

application that allows a photo to be taken of the section and through visual recognition,

validates vs. the plan o gram. Audits with this new application are now simplified as is

scoring of the performance and communications with home office.

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