The Healthy Tension Model for Retail Demand Planning Success

Balancing the four tensions in retail planning to drive successful outputs.

Connecting top-down operational goals with bottoms-up demand signals remains the driving force behind almost every retail integrated business planning process. For retailers, the new normal also includes accelerated delivery expectations and a need to adapt quickly to radical swings in both consumer appetites and market pressures. 

So, what sets industry-leading retailers apart from the rest? Not only have they matured their ability to connect this top-down and bottom-up thinking, but they have done so in a way that creates efficiency and increases their organizational agility. In other words, they leverage all the dimensions of healthy tension to power their execution strategies and accelerate market responsiveness. 

The Healthy Tension Model

The “healthy tension” model helps illustrate the delicate balancing act between the four tensions in retail planning that, when provided equal input, will ultimately drive successful outputs. This output is optimal growth in the form of the right products at the right volume & price, at the right time, and in the right place.



The Healthy Tension Model in Retail Demand Planning
"Healthy Tensions" in Retail Demand Planning

The focal points are the customer demand view, coupled with your company's reality of what can feasibly be achieved. It’s no small feat, but here’s a breakdown of how each tension factors into this equation:

Vertical Tensions: Bottom-Up Consumer Demand & Top-Down Strategy Functions

We begin with a view of the unconstrained consumer demands, pushing from the bottom-up and surfacing the question: "what does the market want?" This view is most often provided by your typical Demand and Assortment Planning functions. 

Offsetting that bottom-up view is the top-down strategy—the reality of what you can feasibly provide as informed by your Merchandise Financial Planners.

Lateral Inward Tensions: Qualitative & Quantitative Functions

Complimenting the top-down tension is the introduction of capacity and supply chain planning inputs. This tension brings with it a quantitative view of how targets will execute across multiple products and multiple channels.

Finally, the qualitative view from brands and sales planning help to ensure that products are landing in the right place and getting to the consumers with the most demand.

Finding that perfect tension takes constant dialing, an ability to recognize and respond to consumer and operational signals, and a connection across multiple functions. When achieved, the power of the tension powers operational growth and consumer loyalty.

So how can you ensure that your retail organization is benefiting from the power of this healthy tension? By 1. exploring your existing functional interaction model and then 2. assessing your organizational maturity, you will be well on your way to propelling a successful strategic retail planning process.

1. Explore Your Existing Retail Functional Interaction Model

Dimensions
Functional Area Goal Input (Accountability)
Merchandise Financial Planning Cross-functional alignment on Top Down Strategy, Financial and Product Plans Brand strategy (80% getting functions aligned – start of line planning for merchandising, base for supply chain and base for finance). Accountable for Finance, Merch, Sales, Planning, and Capacity Plan Alignment & dollar, margin, style-color mid-level targets
Merchandising (Merchandise Planning) Translate MFP into Line Framework and create Assortments, Product Strategy Accountable for Margin (MSRP) & Product Trend Insights & SKU Productivity
Demand Planning Forecast unconstrained consumer demand and plan final style-color inventory quantities Inventory volume & Forecast accuracy, Consumer Demand Quantitative Insights
Finance Revenue and Profit Plans + financial stakeholder management Top line Revenue and Profits (including overall margin mix impact on revenue)
Sales Deliver on Revenue/ profitability goals, maximize full price sales and sell through Market / consumer insights & in-season execution
Retail Capacity Planning & Supply Chain Ensure manufacturing capacity to produce products at volumes and locations to meet consumer demand Capacity Constraints & Geography import restrictions/ considerations
Promotions Identify markdowns / adjustments Promo sales guidance
Distribution Centers Define lead times Receipt capacity

Key questions to consider: 

  1. How are you creating healthy tension between two core perspectives: financial and channel planning? 
  2. How are you deepening competing insights to inform other teams, such as sales, as they forecast and establish targets?

2. Assess Your Organizational Maturity

Engaging the right functions and elevating their unique dimensions is only the first step. Where industry leaders set themselves apart is how they structure those rules of engagement and find ways to drive efficiency, create consistent and accurate forecasts, and streamline both data and partner inputs.

The good news is, no matter where you are on the journey to optimize your planning inputs, by focusing on engagement, collaboration, and integration, you can advance your capabilities and ensure your competitive advantage across processes, systems, and cross-functional engagement. 

Maturity Process & Systems Cross-Functional Engagement Recommended Focus
Stage 1 Manual data calculations and coordination across cross-functional partners Ad-hoc, inconsistent, and unstructured cross-functional insights Engage – build a robust, repeatable, clearly defined way of engaging cross-functional partners
Stage 2 Manual and system calculations, with well-orchestrated hand-offs between functions Consistent and semi-structured approach to gathering and incorporating insights Collaborate – well-coordinated, aligned, and clearly sequenced top-down plans and bottom-up forecasts
Stage 3 Data inputs are clearly defined, governed, and easily sourced by functional partners and systems Functional insights and accountabilities across functions are well defined Integrate – implement an integrated planning system that leverages technology to streamline insights

Key questions to consider:

  1. How often are inconsistencies in alignment or cross-functional partnership slowing down your ability to effectively plan? Are you focusing too much on reactive levers?
  2. Where are top-down or bottom-up insights introduced at the wrong time – creating considerable re-working of plans?
  3. Analytics – are you automating the science and allowing your people to bring the art to the data analysis (how real-time are the tools for quantitative and qualitative to bring healthy tension throughout the lifecycle)

Summary: Establish Healthy Tension, Then Mobilize Your Data

Maximizing efficiency and reaching full maturity only comes when your organization can transition its manual and siloed way of working into an integrated planning system that automates data insights, integrates partner insights, and optimizes outcomes.  

We will explore just such a success story in our next blog, where we uncover the best practices for sourcing and implementing an integrated planning system.

Special thanks to Propeller Alumni KC (Kassandra) Cassily for contributing to this article.

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