driving accuracy with merchandise financial planning · driving accuracy with merchandise financial...

Toni Robinson & Robert Graser March 26, 2014

Driving Accuracy With Merchandise Financial Planning�

Agenda�

•  Charming Charlie Overview�

•  Mobilizing for Success��

•  Achieving Success��

•  Lessons Learned��

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Welcome to Charming Charlie!�

Charming Charlie Introduction

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Who is charming charlie?

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We are one of the fastest growing, award winning, specialty retailers in the United States:��

•  2013 ACE Awards Specialty Retailer��

•  2010 ICSC Hot Retailer of Year��

•  2010 Ernst & Young Entrepreneur of the year – Charlie Chanaratsopon CEO��

Company Overview

Charming Charlie is the irresistibly fun authority on Finding Your Fabulous �

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•  Rapidly growing destination retailer of fashion jewelry and accessories��

•  Fun, Friendly and Fabulous permeate store experience, online experience and culture��

•  The Experience: Feels like an upscale boutique, with upbeat music and friendly sales associates��

•  The Merchandising: Assortment of approximately

9,000 choices per store��

•  The Value: Guilt-free shopping experiences with

prices from $5 to $50��

•  281 stores across 40 states as of March 2014 ranging from 3,500 to 15,000 square feet��

Manifesto

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Explosive Domestic Growth

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Charming Charlie U.S. Geographic Regions�

Explosive Domestic Growth

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Agenda�

•  Charming Charlie Overview��

•  Mobilizing for Success�



The History: Six Planning Tools in Six Years��

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Merchandise Financial Planning Process: Pre-Oracle Highlights

RETAIL Open-‐to-‐

Buy

2007 2008 2009 2010 2011 2012


Buy


Buy


Buy


Buy


Buy

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•  Running “what if” scenarios was time consuming��•  No systemic plan review process and guardrails in place; approvals

required extensive manual effort, receipts placed weekly to fill an Open to Buy��

•  Seasonal sell down of old clearance challenging to manage��•  Planners manually planned comp versus total sales with no bottoms up

method to achieve accuracy��•  No view of shrink impact to inventory over time��

•  Additional learning curve for on-boarding of new talent ��

•  Manual entry by Planner for administrative data such as store counts��

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Existing planning processes had significant limitations�


Excel based Open to Buy planning tools and were often inaccurate��

•  Forward inventory and turn calculations did not include all necessary metrics to be accurate��

•  Extremely limited visibility to units, especially inventory��

•  Calculated markdown impacts to GM were highly understated��

•  Excel difficult to lock down from end user over-writes��

•  Manual aggregation of plans at Division and Total Company Level used Excel reporting��

•  “Versions” were not systemically linked or controlled��

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Merchandise Financial Planning: Pre-Oracle Tool Limitations

Clear business priorities were identified early�

•  Support the rapid growth of our brand by enabling the business to better react to trends and the provision of better tools to handle a large SKU count��

•  Accurate view of financial metrics including retail, cost, and units at Regular Price and Markdown��

•  Drive speed by streamlining activities, tailored views for key tasks and supplanting manual activity with automation such as locking and spreading to speed plan updates ��

•  Achieve process stability after six planning implementations in as many years��

•  Enable process consistency via elements such as standardized formulas, comparable sales factors and shrinkage accrual methods��

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Business Priorities

The Bridge: Excel prototype to solidify math��

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Buy

2007 2008 2009 2010 2011 2012

Regular & Markdown In

Excel

2013


Buy


Buy


Buy


Buy


Buy

A pre-implementation future state build out was constructed in Excel and utilized for 4-5 months prior to Oracle Merchandise Financial Planning design.��•  All forward inventory and gross margin calculations were corrected��

•  Total, Regular Price, and Markdown inventory visibility at the week level��

•  Streamlined entry points to complete a plan��

•  Planners planned total sales with comp sales automatically calculated��

•  Initial Process Flow developed to complete a plan��

•  View of Adjusted Inventory utilizing forecasted shrink accrual��

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Merchandise Financial Planning Process: Process: Pre-Oracle Highlights

Oracle MFP Implemented in 2013��

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Buy

2007 2008 2009 2010 2011 2012

Regular & Markdown In

Excel

2013

ORACLE Merchandise Financial Planning

2013


Buy


Buy


Buy


Buy


Buy

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A robust business & IT partnership, with strong senior executive support, enabled a lean team to drive success�

Approach Element� Description�

“Three in the Box”�� Consistently leveraged combined skills from the business, IT and our Systems Integrator for key roles��

Shared Accountability�� Joint sponsorship from the SVP Planning and Allocation, Applications Director and SI Partner��

Joint Delivery Responsibility��

Shared delivery leadership from the Business Lead, IT Project Manager and SI Manager��

Lean Team�� One dedicated Business SME leveraging deep SI expertise and the strong IT partnership��

Program Organization

MFP Implementation Schedule

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The program spanned 8 months�

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Agenda�



•  Achieving Success�


Key Success Factors: Focus on User Adoption�

Process First�

Empowered Team�

“User Champion” Engagement�

Extensive Prototyping�

Iterative development approach� 20��

Plan review cadence, calendar, meeting format, and priority review measures were enacted well in advance of the system implementation��

Clearly assigned decision rights within the team allowed us to move quickly and maintain a high level of engagement��

“User Champion” enthusiasm established positive buzz throughout the organization��

Much of the process and math was developed and trained in advance in the interim Excel solution��

Ensured sufficient incorporation of user input into the final release to foster a high degree of acceptance��

Key Success Factor� Contribution to Success�

Keys to Success

Early consensus on key design decisions was essential�

•  Cost accounting method continuation to align with Finance��

•  Hybrid Planning Approach: Plan fully balanced set of metrics for Regular Price and Markdown to achieve accurate sales mix forecasting��

•  Visibility to retail, units, and cost for most measures improved plan accuracy��

•  Administrative management of store counts, comparable sales factors, and shrink accrual %’s by class simplified the end user planning process��

•  Planning of Discount percent versus POS as a percent of Sales��

•  Channel Placeholders for future International and New Concepts to support future growth��

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Design Decisions

Significant challenges were overcome to achieve success�

•  Entrepreneurial company with a relatively new team��

•  Culture of creativity: Many unique planning perspectives pre-rollout ��

•  Fast annual store growth rate��

•  Large number of measures��

•  Unique hybrid planning method��

•  Future company roadmap not fully defined��

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Challenge� Mitigation Approach�•  “Run before you run fast” approach. Accept that

some will not get it.��•  Fostered consistency in the planning process in

both the calendar and the measures used for financial review. ��

•  Removed user responsibility for managing store counts. Added additional average store measures to monitor growth��

•  Built several process views that minimized the number of measures needed to complete a planning step. ��

•  Built out a full planning tool prototype of the math in Excel to ensure accuracy as well as train planners before Oracle MFP implementation.��

•  Added flexibility for growth by having future channel placeholders��

Challenges

Hybrid Planning

Charming Charlie utilizes a hybrid planning method with a combination of retail, cost and unit metrics�

WHAT IS HYBRID PLANNING?��

Hybrid Planning is a planning method that utilizes Retail, Unit, and Cost measures as well as the Cost Method of Accounting for inventory valuation. Charming Charlie’s cost never changes with a permanent markdown which means we have wide variations in assortment markups. This puts more pressure on accurately forecasting our selling down to the lowest level possible for our business.��

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Hybrid Planning

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Four planning methods were considered�Method� Pro’s� Con’s� Best For�

Plan at Total – Enter Selling MU%��

§  Simplest��§  Lowest staffing needs��

§  Lowest accuracy��§  Highly judgmental (guessing)��

Not recommended��

Plan by Attribute (e.g. Floor Set)��

§  Detailed floor set plans provided��

§  Difficult to vary markdown timing within floor sets ��

§  Attribute maintenance��§  Challenging to move

inventory between attributes��

Not recommended��

Plan by Item�� §  Most detail��§  Plan to fixture capacity��§  Simplified calculations��

§  Highest staffing needs��§  Challenging Financial plan

reconciliations��

Minimal SKU count with emphasis on key items��

Plan by Price Status (RP & MD)��

§  Simplified method��§  High accuracy��

§  Requires additional inventory movement calculations��

§  Challenges with mid-week markdowns��

High SKU count and fashion driven��

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Agenda�




•  Lessons Learned�

New System and Processes have been a success �

•  Roll-out was very successful with typical expected post go live refinements��

•  User adoption is very high with planners completing plans in no additional time and in many cases faster than before��

•  Plan accuracy is very high with refined math formulas and measure consistency geared towards our Hybrid Planning method—Planning and Finance in SYNC��

•  Enhanced plan consistency achieved via elimination of user capabilities to override formulas and edit the basic functionality of the system��

•  Well positioned for significant domestic growth with use of average store measures��

•  Well positioned for global growth with additional channel placeholders��26��

Outcomes

Focus first on process and the user experience�•  Process First! Extensive Discovery and Design is critical��

•  Understand what you want your user experience to be—how much time to complete a plan, speed of calculations, and ad hoc need��

•  Understand your math and what you want to drive calculations��

•  Achieve early positive “buzz”—start the PR early and explain the “why”��

•  Start the process change before the system/tool—the learning curve for process adoption is longer��

•  Highly involve “User Champions” in testing and final acceptance—use them to sell adoption to their peers��

•  Foster user adoption with extensive “shoulder to shoulder” coaching��27��

Lessons Learned

Thank You�

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driving accuracy with merchandise financial planning · driving accuracy with merchandise financial...

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