Record-breaking annual sales and healthy same-store sales increases are signs that Famous Footwear’s merchandise planning strategy is working.
John Dembinski, vice president of merchandise planning and allocation, said his team did not claim sole credit, but their role was key and constantly evolving. The challenge: Equip each of 1,000 stores with a tailored size-and-style inventory mix that matches local demand driven by climate, region, demographics and market-specific influences such as back-to-school opening dates and tax-free sales events.
When $1.2 billion Famous Footwear adopted planning and allocation software from JDA Software of Scottsdale, Ariz., several years ago, the company also retooled processes and the group’s organizational structure, Dembinski said.
“We went to a concept we call ‘team buying,’ where we took our physical merchandising office layout and had the buyers sitting with their planning support team,” he said. This setup facilitated better communication as individuals became acclimated to the new software tools.
“Everyone sees different pieces of the business,” he said. “We need to make sure they are all talking.”
Product plans, which are linked to the corporate financial plan, are converted to location plans so that inventory is planned on a store-by-store basis, taking into account each unit’s physical size and market conditions. Although plans are created pre-season, they can be adjusted in-season, he said. Assortment is then planned, taking into account other factors such as a store’s sales volume and whether it is located in an urban or suburban market. Finally, the allocation team assigns products to stores based on existing business conditions.
Although many footwear companies have been struggling, Famous Footwear’s comp-store sales increased 3.4 percent in 2006, and rose 3.4 percent for the first quarter of 2007.
With experience, Famous Footwear’s planners have become savvier about demand and can precisely predict the start of the boot- or sandal-selling season, for example, Dembinski said. Also, planning at the store level has revealed category-specific sales performance — such as golf shoe selling patterns in stores near golf courses — that would not be picked up in the aggregate collection of data.
“So it’s been a snowball effect on how we keep building [upon our expertise], season upon season,” he said.
Because all steps are integrated, planners are automatically kept up to date about changes. However, such tight integration means data accuracy is crucial.
“At first, we went, ‘Yay! We are all linked.’ And then at one point in time, we went, ‘Oh no! We’re all linked,'” Dembinski said, laughing. “Everything feeds into one another. Product planning feeds the location, which feeds the assortment as well as the allocation, so if you have a breakdown somewhere along the way, it’s going to cause you a problem” somewhere else down the line.
Integration “helps to facilitate seamless change,” he added, “but the plans have to be accurate.”