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Optimising Inventory Efficiency // A Guide to Calculating Weeks of Supply in Retail Merchandise Planning

In the intricate dance of retail merchandise planning, one crucial metric reigns supreme: Weeks of Supply (WoS).
WoS is a key performance indicator that measures the number of weeks a product is expected to last based on current inventory levels and sales velocity.

In this article, we'll unravel the equation behind WoS and explore how it fits into the broader landscape of assortment planning, merchandise financial planning, and stock replenishment strategies.

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Understanding Weeks of Supply (WoS)

WoS is a fundamental metric in retail inventory management, providing insights into inventory turnover and stock efficiency.

Calculating WoS involves dividing the current inventory level of a product by its average weekly sales rate.

The result is the number of weeks it would take to sell through the existing inventory at the current sales velocity.
The Importance of WoS in Retail Merchandise Planning

WoS serves as a critical tool for retailers in various aspects of merchandise planning:
1. Assortment Planning

WoS helps retailers determine the optimal quantity of each product to stock based on anticipated demand.

By calculating WoS for different product categories, retailers can ensure a balanced assortment that meets customer demand while minimising excess inventory.
2. Merchandise Financial Planning

WoS plays a crucial role in merchandise financial planning by providing insights into inventory investment and turnover.

Retailers can use WoS data to allocate budgets effectively, ensuring that capital is deployed where it can generate the highest returns.
3. Markdown Optimisation

WoS is also instrumental in markdown optimisation strategies.

By identifying products with high WoS values, retailers can implement targeted markdowns to clear excess inventory and avoid stockouts.

This proactive approach helps retailers maximise revenue while minimising inventory holding costs.
4. Stock Replenishment

WoS guides stock replenishment strategies by informing retailers of when to reorder products to maintain optimal inventory levels.

By monitoring changes in WoS over time, retailers can adjust replenishment schedules to align with shifting demand patterns and avoid stockouts or overstocking.
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Calculating Weeks of Supply

The formula for calculating WoS is relatively straightforward:

Weeks of Supply (WoS) = Current Inventory Level / Average Weekly Sales Rate

To calculate WoS accurately, retailers must gather data on both inventory levels and sales rates.

Inventory levels can be obtained from inventory management systems, while sales rates can be derived from point-of-sale (POS) data or sales reports.
Strategies for Optimising Weeks of Supply

To optimise WoS and improve inventory efficiency, retailers can implement the following strategies:
Demand Forecasting
Accurate demand forecasting is essential for calculating WoS effectively. Retailers can leverage historical sales data, market trends, and customer insights to forecast future demand accurately.
Inventory Management
Effective inventory management is critical for optimising WoS. Retailers should regularly review inventory levels, adjust safety stock levels as needed, and implement strategies to minimise stockouts and overstocking.
Markdown Optimisation
WoS is also instrumental in markdown optimisation strategies. By identifying products with high WoS values, retailers can implement targeted markdowns to clear excess inventory and avoid stockouts. This proactive approach helps retailers maximise revenue while minimising inventory holding costs.
Stock Replenishment
WoS guides stock replenishment strategies by informing retailers of when to reorder products to maintain optimal inventory levels. By monitoring changes in WoS over time, retailers can adjust replenishment schedules to align with shifting demand patterns and avoid stockouts or overstocking.
Takeaway

Weeks of Supply (WoS) serves as a crucial metric in retail merchandise planning, offering insights into inventory turnover and efficiency.

By accurately calculating WoS and optimising inventory management strategies, retailers can enhance assortment planning, merchandise financial planning, markdown optimisation, and stock replenishment.

Mastering WoS enables retailers to maintain a competitive edge and drive sustainable growth in the dynamic retail landscape.
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