Coverage Planner
The Coverage Planner is a PC tool to help inventory buyers plan their purchases
of one-shot or 2-shot items. Such items are ones with long lead times, short selling
life, or both, so there is little or no chance to adjust supplies after an
initial order.
Buyers often use rough rules of thumb for these items, such as, "Buy
X% of the forecast." These rules of thumb leave out many important aspects
of the product, such as its marketing importance, margins, and customer behavior
in the event of stockouts. As an example, typically customers are more tolerant
of stockouts for impulse purchases ("Oh well, it was only an idea.")
than they are for essential items.
Coverage Planner recommends the right purchase to balance
the risks of having too much inventory and having too little. Buyers provide
information on each item's season forecast, retail price, wholesale cost, backorder handling
costs, liquidation value, marketing importance, and similar factors. The system presents its recommended purchase together
with estimates of the likely stockout rate and liquidations to expect. It can also present
what-if graphs showing how these values vary according
to cost levels, forecast uncertainty, and other factors.
Coverage Planner is implemented as an add-in for Microsoft Excel. Its uses include:
- An automated guide to replace buyers' rules of thumb, eliminating
tiresome and error-prone guesswork.
- Training for new buyers.
- A what-if tool to help with policy analyses such as setting in-stock
targets. The program shows consequences in profit, service, and
liquidations.
Installation of the Coverage Planner requires an initial calibration using
historical data from your products' history. Once installed, the models
in the Coverage Planner should be recalibrated every couple of years, or when
there are significant changes in your company's business.
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