Wednesday, 2 February 2011

using WSSI and OTB in a mail order environment

High street retailers set great store on the basis os their WSSI reports. WSSI stands for Weekly Sales & Stock Intake (pronounced Whizzy). OTB stands for Open to Buy (the amount of stock that can be bought)

On the face of it, it's a fiarly simple calculation:
Opening Stock + Receipts - Sales = Closing Stock.

The plan is that closing stock should be enough to cover X trading periods (days, weeks or months). If it is not enough then you have an Open to Buy position - the buyers are permitted to order more stock. This is fine in a bricks an mortar environment because if it is not in stock then it is normally a lost sale. In Mail Order, provided the delay is not too long, the sale will go into backorder (sometimes known as To-follow) and will be sent when stock becomes available. The issue with this is that the longer the item is on back order, the more of the potential sales will be cancelled. Mail order also has a high returns rate compared to high street and this needs to be factored in when considering how much stock is required for order. To add to the cmoplications, returns are delayed by a time period and so need to be correlated to sales from a previous period. If the item was out of stock then there will be no returns for the period + X.

Factor that in with the fact that the product may appear in a number of different catalogues and that most catalogues are front loaded on their demand (i.e. a high proportion of the sales will occur in the first few weeks - typically 60-80% in 1st 4 weeks then remainder in last 16-20 weeks) and the peaks and troughs in demand can swing wildly during a season.


I have built a spreadsheet in Excel 2003 that factors in returns, demand decay on back orders and stock in overlapping catalogues. If you think it might be useful to you, drop me a line and we can discuss it.

3 comments:

  1. Hey ! i came across this blog while researching on wssi and i wanna know more about the demand decay you were mentioning? Can you tell me more about it plz ! ?

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  2. Hi Aaron,
    Can you send me a copy of this spreadsheet?
    I will be using Office 2007 but I am sure it will work then too.
    Much appreciated.
    Thanks
    Chris

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  3. Anyway to get a copy of your spreadsheet as a starting point for my WSSI? Can't find a solid example anywhere!

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