Managing the ripple effect of disconnected merchandising decisions

Jul 10, 2024 • 7 min

What’s keeping you up at night as a merchandising leader? Is it margin pressure eating away at profitability? Supplier relationships growing more complex? Promotions that deliver diminishing returns? Or maybe the daily battle with disconnected systems that turn every decision into a cross-functional negotiation?

Merchandising decisions critically impact your entire business, but plans that look good on paper can break down in execution. Financial goals don’t match store realities, promotions overwhelm capacity, or supply chain constraints aren’t factored into merchandising choices. These aren’t just operational hiccups but strategic failures that directly impact your P&L, customer satisfaction scores, and your team’s ability to execute.

Retailers need merchandising capabilities packaged in a unified platform like RELEX to manage the far-flung effects of merchandising decisions and optimize the entire retail value chain.

The hidden cost of disconnected planning

Retailers invest heavily in the teams that drive their business. However, disconnected planning creates visibility gaps between functional teams that can lead to poor decisions that ripple out across the business. And when those ripples collide, the outcome isn’t just inefficiency. They create an all too familiar set of challenges for leaders:

Inventory risk: Are we overbought or underbought in key categories?
Trend prediction: Are we reading the market correctly and adapting fast enough?
Margin pressure: Can we hit profitability targets without leaning too heavily on discounts?
Localization gaps: Do our assortments and store-specific planograms reflect real demand and space constraints?
Data blindness: Are we drowning in data but missing the insights that matter?
Price perception: Do our customers see us as competitively priced — or too expensive?

Like pond ripples, the impacts of merchandising decisions magnify as they travel throughout the retail value chain, meaning poor planning decisions and their associated costs can cascade into significant negative consequences. 

For instance: 

Inadequate merchandising and assortment decisions strain supplier relationships and disrupt procurement, leading to unpredictable product availability and increased costs… 
…causing inventory imbalances, with stores may face overstocks of some items and shortages of others, tying up capital and affecting sales… 
…necessitating last-minute adjustments in logistics, increasing transportation costs, and complicating distribution schedules, which delays product availability to stores… 
…preventing effective promotions and reducing customer engagement, hurting sales and brand loyalty.

Turning ripple effects into cascading advantages

While poor decisions create cascading costs, connected decisions create cascading advantages. To create these advantages, retailers need to make a critical shift: stop treating merchandising, supply chain, and financial planning as separate functions. Instead, they need unified planning, execution, and optimization in one connected platform.

***Fig. 1:*** *Unified planning enables collaboration and data-sharing across multiple functions, from forecasts to store execution.*

Unified, AI-powered merchandising technology transforms disconnects into enterprise-wide impacts:

Assortment aligned with demand ensures the right products, in the right stores, in the right quantities.
Promotions integrated with space planning prevent feast-or-famine swings.
Financial planning tied to daily execution closes the gap between goals and reality.
Store-specific planogramming ensures every shelf reflects both corporate strategy and the needs of the local shopper.

The result: fewer empty shelves, stronger supplier partnerships, faster inventory turns, and more profitable growth.

6 strategies to turn disconnection into cascading advantages

Retailers can’t afford to let inventory risk, margin pressure, or blind spots dictate performance. Here’s how leading merchandising teams are tackling these challenges head-on using advanced planning technology:

1. Reduce inventory risk with AI-powered forecasting

Challenge: Over- or under-buying in key categories.

Solution: AI and machine-learning forecasting capabilities from RELEX analyze real-time demand signals, ensuring the right quantities are bought and allocated to stores, minimizing stockouts and overstocks.

Traditional planning methods are effective to a point, but often lack the speed and precision needed to stay ahead of competitors. Retailers can use AI-powered capabilities to provide real-time insights into emerging trends and consumer behavior. This capability enables category managers to quickly adapt assortments and space plans to ensure inventory aligns with shifting market demands, reducing the risk of unsold stock.

AI also helps retailers streamline the category and assortment review process, automating complex analyses and providing actionable recommendations. Automation reduces the time and effort required for manual evaluations, allowing teams to focus on strategic planning.

Selco Builders Warehouse, a UK leader in the supply of building materials, provides a wide assortment of over 12,000 SKUs, including building materials, flooring and tiling, decorator tools, and outdoor landscaping and fencing materials.  

Selco needed a solution to automate processes and effectively leverage AI for data-driven planning. With RELEX, they have unified their planning across the business with in-store forecasting and replenishment, allocation, space planning, and planogram development.

“RELEX’s unified solution provides full visibility for accurate supply chain and space planning, giving us the flexibility we need to adapt to the differing levels of demand we see from our customers.”
– Ian Kennedy, Operations Director, Selco Builders Warehouse

2. Improve trend prediction with real-time insights

Challenge: Reading the market wrong or adapting too slowly.

Solution: The RELEX solution’s advanced algorithms surface emerging trends early, allowing teams to pivot before competitors and avoid costly misreads.

AI-driven tools analyze sales performance, customer preferences, and seasonal variations to offer precise adjustments to assortments, increasing efficiency and accuracy to better inform decisions and optimize product mixes. AI-powered planning solutions even aid the buying process, predicting future product performance based on historical data and market trends.

3. Align financial planning with execution

Challenge: Merchandise financial plans (MFP) and open-to-buy (OTB) budgets don’t align with day-to-day realities.

Solution: RELEX connects top-down budgets with bottom-up execution, integrating MFP and OTB with space, assortment, and supply chain constraints. The result is dynamic plans that flex with real-world conditions.

Effective planning requires the most recent information, and the effective communication of merchandising changes and decisions to departments like supply chain and marketing is essential to success. Advanced planning technology streamlines communication and collaboration across functions, enabling smooth execution at the customer-facing level.

4. Localize assortments with store-specific planogramming

Challenge: One-size-fits-all assortments that miss local needs.

Solution: RELEX combines store clustering with space-aware assortment planning to automatically generate store-specific planograms. These reflect local demand and capacity, improving sales and reducing waste.

The complexity increases as retailers aim to allocate specific goods to the right locations. Factors such as store size, region, customer behavior, and proximity to distribution centers must be considered, demanding a sophisticated process known as store clustering.

Decisions on assortment or merchandising don’t always align. Category managers determining assortments for specific store sizes sometimes discover that selected items won’t fit on shelves or leave excessive white space. The right planning software can spare category managers from this dilemma, helping them anticipate these issues and establish a real-time feedback loop to address potential errors.

RELEX customers who optimize planograms in combination with assortment removal suggestions can reduce the recurring shelf refill needs by 15%. Category managers who use receipt data can also identify frequently co-purchased products, further informing planogramming decisions.

5. Overcome data blindness with unified visibility
Challenge: Too much data, not enough insight

Challenge: Too much data, not enough insight.

Solution: The RELEX unified platform consolidates data across merchandising, supply chain, and finance — giving leaders actionable intelligence instead of fragmented reports.

Merchandising planning also demands meticulous coordination between retail headquarters and individual store operations. This coordination is crucial for determining the appropriate product mix for each location and timing for product rollouts, ensuring that stores are commercially sustainable.

Integrating supply chain data into merchandising planning helps avoid unprofitable purchasing decisions. Despite the crucial relationship to SKU profitability, category, space, and assortment planning often omits critical supply chain data like costs and efficiency metrics. Category and assortment planning supported by supply chain data helps identify underperforming products, facilitating their removal to reduce inventory levels and increase turnover speed.

Vallarta Supermarkets, a regional U.S.-based grocer, faced the challenge of managing 30,000 SKUs across its 55 stores, considering localization needs and unique shopper preferences.

Using RELEX, Vallarta has data-driven insights to better understand the performance of individual categories and assign the right amount of space to each category and each product in each store. Enhancing store layouts and category/product flows of stores or departments, and optimally placing best-selling items, helps maximize sales, reduce waste, and ensure customer satisfaction.

“We are confident that RELEX will help us to achieve our goals by enhancing our assortment planning and space utilization.”
- John Sellers, SVP of Merchandising, Vallarta Supermarkets

6. Strengthen supplier collaboration to improve price perception

Challenge: Customers question whether your pricing is competitive.

Solution: With RELEX, retailers can share accurate forecasts and identify clear priorities to boost supplier relationships. Transparency builds trust, aligns suppliers, and helps strengthen negotiation power.

With a clear understanding of their optimal assortment and precise demand forecasts, retailers can approach suppliers with concrete data to support their negotiation arguments. They can demonstrate their commitment to specific products and volumes, potentially leading to more favorable commercial terms like better pricing, extended payment terms, or exclusive deals.

Clear plans regarding product placement across assortments and stores help teams strategically prepare marketing initiatives in advance, ensuring smooth operations and resonant promotions throughout the year. This optimized campaign planning process can decrease marketing spend and save it for more effective use, particularly attractive during economic downturns when consumers are especially cost-conscious.

Unified planning for tomorrow’s shelves

Complex product assortments, volatile demand, and rising margin pressure make siloed processes unsustainable. True mastery comes from unified planning that connects assortment, pricing, promotions, supply chain, and financials in real time. 

With an AI-powered platform like RELEX, retailers gain end-to-end visibility, smarter automation, and the ability to anticipate ripple effects before they hit customers. The outcome isn’t just fewer failures — it’s cascading advantages across the business: higher availability, stronger supplier alignment, more efficient operations, and greater profitability. 

This is how today’s merchandising leaders move from constantly reacting to disruption to building resilience and driving profitable growth into every decision.

Learn more about unified, AI-enabled category management