Think back over the last three years: a global pandemic, ongoing supply shortages, the Great Resignation, war in Europe, the return inflation, and the threat of recession. Then think about your current merchandise financial planning approach: starting with previous year’s performance before spending countless hours trying to understand emerging trends and reconciling across departments and company goals.

Two flaws in this approach really stand out. The first is the over reliance on historical data. The last three years should have taught us that history never repeats. The second flaw is the amount of manual effort taken to build the perfect plan, only to see that plan crumble when it meets reality.

The impact can be seen across retail supply chains everywhere. Excess inventory dragging down financial performance and poor availability leading to lost sales. Consider the stock write downs that hit retailers in 2022. McKinsey tells us that inventories in 2022 rose by 12% in the U.S. alone, a staggering $78 billion of liability and potential markdown, while Supply Chain Brain reports that 5% of a retailer’s stock on hand – and 25% of returned items – is non-productive excess.

It all comes back to changing shopper demand. In the months before your merchandise team builds their perfect plan, adjusting previous years plans while expecting history to more or less repeat, shoppers are reacting in real time to changing events: fears of recession, stalled wages, poor shopping experiences, all compounded by the increasingly common hybrid shopper who refuses to define themselves by your channel plan.

When shoppers change their preferences in-season, it really hurts. Simultaneous markdowns, stranded inventory, additional warehouse space and labor costs, while your merchandise team attempt to explore solutions across multiple systems in spreadsheets, with answers rarely satisfying every department, and often redundant by the time they are designed.

In a perfect world, merchandise financial planning would be either faster to complete, or more accurate.

But what if you could have both?

That is exactly the question Blue Yonder asked itself when designing the next generation Cognitive Merchandise Financial Planning capability.

Evolving and converging technologies have allowed us to re-define the process of merchandise financial planning. Widespread acceptance of the value of predictive artificial intelligence (AI) has given retailers pause to consider use cases beyond demand forecasting, while generative AI and cloud data platforms have allowed decisions to be made across a single connected pool of data, accessed in real time, allowing planners to spin up situation rooms and make in-system decisions in real time, with the ability to compare the impacts across departments and goals.

The result? Less time building the perfect imperfect plan, with faster and more accurate insight into changing seasonal demand and evolving promotional plans, with in-system solutions driven by shared data and AI-assisted decision making, all the while offering insight-driven planning around today’s omni-channel shopper.

Merchandise financial planning has been stuck in a rut, constrained by both legacy systems and thinking. Blue Yonder promises a new path: a transformative approach to merchandise financial planning that connects pre-, in- and end of season in a single connected place, with users freed up from the unproductive task of seeding plans and reconciling data, while creating an achievable and realistic merchandise plan based on the shifting sands of shopper demand. Cognitive Merchandise Financial Planning will genuinely change the way retailers will make decisions.

Are you ready to re-think the way you approach merchandise financial planning? You can access the solution guides for Cognitive Merchandise Financial Planning and Cognitive Merchandise Forecasting, or book some time to speak to our industry experts.