Once the assortment has been planned down to the size level, the next step in the process is fulfilling the store inventory need, which is referred to as allocation. The term “allocation” is defined as the process of distributing inventory to the retail locations and fulfillment centers in an effort to fulfill future customer demand, whether it be in store or online. Allocation is one of the most critical pieces of the process. The goal of allocation is to ensure the right product is going to the right stores, at the right time to optimize inventory investments to maximize profitable sales, reduce missed opportunities, and avoid having to mark inventory down to clearance.
Once a buyer places an order with a vendor, also referred to as a purchase order, the vendor then either sends the inventory to the retailer’s distribution center or directly to the retail locations. The decision to send products to certain locations is based on a handful of factors and also depends on the retailer’s process. The first factor is the initial vision of the merchant’s assortment plan. As you will recall, assortment plans are typically planned by clusters of locations and a vision of the assortment the buyer was curating. Therefore, allocation is executing to this vision by sending the product to these locations either once the inventory arrives at the distribution center or before the vendor sends the inventory directly to the retail locations.
The initial allocation ...