Benefits of WSSI as a merchandise planning tool – part 1

This is an interview with our Advisory Board member John Hobson. The discussion is about “WSSI” – a planning and reporting concept very often used in fashion and other areas of retail where demand is seasonal and SKUs often change.

People sometimes talk about WSSI and Open to Buy interchangeably – what is the difference between them?

Well, the Open to Buy is really just one result of the WSSI process. WSSI stands for Weekly Sales Stock and Intake planning, although today most retailers also plan margin and markdowns. When optimal sales and stock levels have been forecast by week it is possible to derive the required stock intake. Once existing committed purchases have been netted off the resulting figure is commonly referred to as the “Open to Buy” for the week. However, this is a bit of a misnomer as it is in fact an “Open to Receive”, and the purchases will have to be committed at different times depending on variable lead times. As people have been using the term “Open to Buy” for half a century now, I doubt anyone is going to change that terminology any time soon. Anyway, the main point is that the Open to Buy is an output of the WSSI process.

What is the business benefit of using WSSI and open-to-buy?

I think we need to differentiate here between the planning and in-season control phases. In pre-season planning the WSSI is one component of a much bigger process – the corporate strategic plan. This plan works by breaking down high level strategic plans into lower level plans, like the WSSI, Store P&L plans etc, until eventually these plans get broken down further via the range & assortment plans to drive tactical actions like product allocation. From this perspective the main benefit is that the WSSI plan is an enabler of the strategic vision. By creating forecasts, which act as limits or constraints for downstream activity, the WSSI plan ensures that the strategy is executable.

As regards the Open to Buy component, setting this with relation to forecasts which mirror upstream strategic requirements ensures that there are no cash-flow surprises, and ensures that the right volumes of stock are available at the right time, and that the use of working capital is optimized without the risk of over-trading.

When we come to in-season activity the focus (and the benefits) become more tactical. The WSSI is the principal control document for the merchandise department and allows the merchandiser to “trade” his or her department. By monitoring the KPIs involved the merchandiser gets a rapid indicator of tactical activity required and can quickly dive down to make decisions on mark-downs, promotions, push allocations, inventory consolidations and the like.

How does a WSSI help a retailer to improve profitability?

Overall the main benefit of the WSSI process is that it is a planning and control document that facilitates the optimization of Gross Margin Return on Investment (GMROI). It does this by balancing the impacts of margin and stock turn and providing levers to the merchandiser to impact these. For example, to improve stock turn the merchandiser can do several things. In the long term, if they believe the business can sustain the decrease, they can reduce purchase volumes. In the short term they can promote or markdown product. This will increase sales velocity but at the expense of margin, so there is a tricky balancing act to perform.

Read part 2 of this article here.