Planning Gross Margin % and other Ratio metrics at levels above the bottom level
Pretty much everyone would agree that Gross Margin % (GM%) is a REALLY important metric when planning your business. It’s a key performance indicator for healthy past performance, and a key driver for future investment decisions and performance management. Employees are frequently bonused on revenue and margin goals – so all eyes are on this metric.
In Retail, as in other industries, we are challenged to achieve our goals in a multi-dimensional world – we have product goals over time, that have geography and market nuances, and we serve our customer through multiple channels – retail, online, wholesale etc., and we manage our high margin new/core product separately from our markdown product. Many times, we have specific goals at combinations of these dimensions.
At a recent client deployment, we were planning in 5 dimensions: Product (5 levels to Class), Market or geography (3 levels), Channel (Online, Store) (2 levels), Price Type (Blended/Markdown) (2 levels) , Time (Yr/Half/Qtr/Month/Week). GM% is not manipulable above the bottom level. The challenge is how to enable the ability to plan GM% at an OMNI/Dept/Month level, or a Region/Class/Total price type level etc.
Our client had Avg initial retail, avg unit cost, sales build, shrink $ %, shrink U %, receipt avg unit cost as ratio metrics that required the ability the plan at aggregate levels. Solutions that enable the entry of ‘overrides’ at required interesections lead to hundreds of extra line items at the desired intersections (see attached powerpoint), with complex rule sets to perform the appropriate allocations - and then the need to run an ‘action’ to apply the changes, which, on a large model with hundreds of users is a risk - it's a challenging configuration, and is poor from a user experience perspective.
In Retail, market leading planning systems have enabled this type of ‘inverse’ or ‘ratio’ metric planning for decades as part of the planning engine - which means there is a very experienced user base that ‘expects’ this type of functionality. The absence leads to unintended distractions from the benefits of the Anaplan platform.
I'd propose that the ability to plan ratio metrics at levels above the module floor is a very desirable feature for any company that requires the flexibilty to enter targets based on ratios, and is a critical ‘must have’ in particular for the Retail industry.
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