navision mv8 handbook step 5 sales space management

Logistics Processes and IT tools of 51

Navision master version

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Navision MV8 Handbook

Step 5

Sales Space Management

Version 1.0



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This document is developed and produced through collaboration between Inter IKEA Systems B.V. and K3 Business Solutions B.V.

The content of this material is owned and updated by Inter IKEA

Systems B.V in collaboration with K3 Business Solutions B.V.

Inter IKEA Systems B.V

IKEA Concept and IKEA

Business Processes

Final document containing a

description of operating IKEA

business process in Navision

Master Version

Documentation of technical

work steps in Navision

Master Version in a number

of manuals

Documentation of IKEA

business process operations

in a number of manuals

K3 Business Solutions B.V

Navision Master Version



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Revision information

Edition Date Comment Author Verified Approved

1.0 01.04.2018 The document was

created

Ivaylo

Hristov

Ali Sultan



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Table of Contents Revision information .................................................................................... 3

5. Sales space management ................................................................. 5 5.1. Introduction .......................................................................................................... 5 5.1.1. Background ........................................................................................................... 5 5.1.2. Definition of terminology ........................................................................................ 6 5.2. Preplanning and setup ............................................................................................ 6 5.2.1. Setups ................................................................................................................. 6 5.2.1.1. Max Safety Stock Factor ......................................................................................... 6 5.2.2. Sales Method Setup ............................................................................................... 8 5.2.2.1. Min Qty Weeks ...................................................................................................... 8 5.2.2.2. Max Sasp Qty Weeks .............................................................................................. 8 5.2.2.3. Max Buffer ............................................................................................................ 9 5.2.2.4. Calculate Auto Bin ............................................................................................... 10 5.2.3. Replenishment Level ............................................................................................ 11 5.2.3.1. Calculated Replenishment Level ............................................................................. 12 5.2.3.2. Adjusted Replenishment Level ............................................................................... 14 5.2.3.3. Default Replenishment Level ................................................................................. 15 5.2.3.4. Sales Space Type................................................................................................. 16 5.2.3.4.1. Non flexible sales space ........................................................................................ 17 5.2.3.4.2. Flexible sales space .............................................................................................. 18 5.2.3.5. Overview recommended values ............................................................................. 20 5.3. Sales space management of new articles ................................................................ 20 5.4. Maintain sales spaces of selling articles .................................................................. 21 5.4.1. Managing sales spaces ......................................................................................... 21 5.4.2. Defining Sales Space Size ..................................................................................... 21 5.4.3. Safety Stock Calculations ...................................................................................... 26 5.4.3.1. Mathematical Safety Stock .................................................................................... 26 5.4.3.2. Auto Bin ............................................................................................................. 27 5.4.3.3. Maximum Safety Stock ......................................................................................... 27 5.4.3.4. Minimum Safety Stock .......................................................................................... 27 5.4.3.5. Lowest Sales Quantity .......................................................................................... 28 5.4.4. Product Dominance .............................................................................................. 29 5.4.5. Local PQ and MPQ ................................................................................................ 29 5.5. Range allocation in the warehouse ......................................................................... 31 5.6. Follow up ............................................................................................................ 33 5.6.1. Report “Maintain Sales Space - Summary” .............................................................. 34 5.6.2. Report “Maintain Sales Space - Suggestion” ............................................................ 36 5.7. Meetings activities connected to sales space management ........................................ 37 5.8. Performance indicators connected to sales space management .................................. 38 Appendix I – Calculations and Formulas ................................................................................. 39 A.1. Safety stock ........................................................................................................ 39 A.2. Sales Space size limits ......................................................................................... 41 A.3. EOQ calculations .................................................................................................. 45 A.4. Need calculation for internal replenishment ............................................................. 46 A.5. Replenishment Level ............................................................................................ 49



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5. Sales space management

5.1. Introduction

5.1.1. Background

Sales space management ensures that all sales spaces are properly dimensioned

so that they can accommodate incoming deliveries and are stocked with volumes

based on sales forecast. Two of the biggest success factors are making best use

of flexible sales spaces and optimizing the filling rate.

Managing sales spaces is an ongoing task because of constant changes in range

presentation and sales pattern. The objective of sales space management is to

maximize sales and minimize costs. In order to maximize sales the sales space

size must be dimensioned in such a way that the customers are always able to

buy the product they require. In order to minimize costs the sales space size

needs to accommodate the incoming delivery quantities and the safety stock,

which will optimize the door-to-floor goods flow.

The overall responsibility for sales spaces lies

with Sales. Sales is supported by ComIn and

Logistics. Logistics is supporting with

dimensioning of the sales spaces, identifying

sales spaces that do not have products available

the whole day with Navision. The system has all

needed information to predict the stock level in

the store. Based on this information it is possible

to suggest the optimum sales space size. The

sales space is an essential part of the IKEA

supply chain since this is where the article meets

the customer. It is also important for the need calculation, as the sales space size

is a part of the ordering process.

Navision defines the sales space size with help of different algorithms which give

four different sales space quantity limits: Min, MinDir, Suggestion and Max. These

sales space quantity limits are the borders between the different goods flow

classifications: Missing, Too Small, Indirect, Direct and Too Big.

The sales space quantity limits are set according to an optimal on the incoming

quantity and the average sales of an article. However, a main influence is coming



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from the three main parameters Min Qty Weeks, Max Sasp Qty Weeks and Max

Buffer.

Those parameters, if set correctly, will ensure that Navision can provide the

correct information for dimensioning the sales spaces to achieve the overall goals.

5.1.2. Definition of terminology

Sales space management is about dimensioning sales spaces efficiently by taking

into consideration critical elements like commercial needs, range size, sales

expectations, available space and incoming deliveries. It is a condition for selling

large volumes at low costs.

5.2. Preplanning and setup

Before sales spaces can be maintained on a regular - weekly and daily – basis,

some parameters need to be defined and set up in Navision.

To secure the optimal sales space management all sales spaces need to be set up

according to the Global Naming Convention and daily and weekly indices need to

be updated.

5.2.1. Setups

5.2.1.1. Max Safety Stock Factor

Safety stock is part of the sales space. The Max Safety Stock Factor is used in the

calculation of the used safety stock and in sales space management. With this

setup an upper limit of the used safety stock can be defined. Recommended value

is 10. This means the maximum possible safety stock in the sales space can be 10

times the AWS if required. This results in a maximum of 10 weeks of safety stock.



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In order to avoid overstock in the sales spaces the Max Safety Stock Factor (10)

plus Max Sasp Qty Weeks (4) should not be greater than 15 weeks. Otherwise

this article will have the Goods flow classification as “Too Big”.

The KPI “Overstock” within IKEA is defined as the stock value of an article which

is 15 times AWS or more. (see also 5.2.2.2)



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5.2.2. Sales Method Setup

5.2.2.1. Min Qty Weeks

The Min Qty Weeks is the minimum order quantity in weeks that will be ordered if

the sales space size is dimensioned big enough to fit the in-delivered quantity, in

other words: when the sales space is classified as “Direct” or “Too Big”.

The Min Qty Weeks determines the minimum order quantity on Sales Method. The

minimum quantity ordered will be either one pallet quantity or, for multipacks,

the Min Qty Weeks times the AWS, rounded up to the next multipack. The

recommended value is 2.00. This means that the DC has to pick once every two

weeks only. Also the replenishment is done every two weeks.

This keeps the cost within the IKEA supply chain low. This minimum order

quantity will be taken into consideration to dimension and propose the sales space

size. The result of this calculation is MinDir (see 5.4.2).

It can be defined under the Sales Method page.

5.2.2.2. Max Sasp Qty Weeks

The parameter Max Sasp Qty Weeks is used to calculate the Max value. The

defined sales space size for the majority of the articles should not be higher than

Max. Otherwise those articles will have the goods flow classification of “Too big”.

The recommended value is 4.



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In order to avoid overstock in the sales spaces the Max Safety Stock Factor (10)

plus Max Sasp Qty Weeks (4) should not be greater than 15 weeks.

10 + 4 = 14 < 15

Otherwise this sales space would be classified as “Too big” (see also 5.2.1.11).

For Full serve, due to the low forecast of most of the articles, Max Sasp Qty

Weeks can be increased to improve efficiency within the supply chain and internal

replenishment. This decision needs to be balanced out with potential overstock in

the sales spaces.

5.2.2.3. Max Buffer

The Max Buffer is the order quantity in weeks that will be ordered if the sales

space size is not dimensioned big enough to fit the in-delivered quantity, in other

words: when the sales space is classified as “Missing”, “Indirect” or “Too small”.

The quantity ordered will be either one pallet quantity or, for multipacks, up to

Max Buffer times the AWS.

This will reduce the picking at the DC for an article that will anyhow be picked in

the store due to its small sales space. Recommended value is 4.00.

The in-delivered quantity will not fit in the sales space. The stock which cannot be

replenished in the sales space or neighbourhood locations will be back flow and

need to be put into buffer. This backflow is accepted and part of the normal goods

flow process.



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5.2.2.4. Calculate Auto Bin

The auto bin effect is the safety stock needed, when a sales space in the Market

hall has to be bigger than the normal standard (Mathematical Safety Stock + Max

Sasp Qty Weeks). This is done in order to promote sales by having a higher stock

level in the sales space and to create an attractive facing for the customer. The

auto bin should only be used in Market hall for commercial reasons to show

volume in the sales spaces (e.g. soft toys).

The Auto Bin is limited by the max safety stock factor. A sales space should not

have more than 15 weeks of stock (= over stock) in total.

If auto bin is activated, the quantity needed is calculated as soon as the sales

space size is changed for every article taking into account the new sales forecast.

Safety Stock

Auto-Bin =

Safety Stock

Increase



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5.2.3. Replenishment Level

The Replenishment level is used for replenishment of sales spaces. There are

three different types of replenishment levels available:

Calculated Replenishment Level percentage (calculated %)

Adjusted Replenishment Level percentage (adjusted %)

Default Replenishment Level percentage (default %)

Navision will always use the Calculated % in case no Adjusted % is set. Default

Replenishment Level % will only be used in case the article has an assigned sales

method, that is not equal to the three default ones – S, M, F. The used

Replenishment Level is indicated by a bolded font.

In order for the user to have an easy overview on what is the exact limit when

replenishment will be triggered, a Replenishment Point (in unit of measure) and a

Replenishment point External Warehouse (if available) are also calculated. This is

done by multiplying the used Replenishment Level percentage to the Total Sales

Space Size and adding the Product Dominance quantity. When the actual stock in

the picking bin is equal to or below this level, Navision detects a Need for

replenishment.



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All relevant formulas can be found in Appendix I.

5.2.3.1. Calculated Replenishment Level

In order to secure commercial sales spaces at low operational costs, avoid local-

local shortages and support high on-shelf availability, Navision automatically

calculates an optimal replenishment level for each article.

The following parameters are used for this calculation:

Sales Method Default Filling Rate percentage

Multipack Qty and Pallet Qty

Flex factor

Autobin

Minimum Safety Stock

Lowest Sales Quantity

Forecast of next opening day

The replenishment level in unit of measure (pieces or meters) is then divided by

the Total Sales Space Size. The result is called Replenishment Level calculated %.



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As all sales methods are based on specific business rules, Navision is applying

different calculations in order to meet the priorities for each one. Therefore the

logic of Replenishment Level calculated % is based on the SM value (0, 1 or 2).

In order to secure availability, operational efficiency and commerciality for

Markethall and Self Serve areas (Sales Methods 1 and 0), Navision is calculating

in the background the following three sub-Replenishment Levels:

Minimum Replenishment Level

Maximum Replenishment Level

Commercial Replenishment Level

Minimum Internal Replenishment Level secures the availability in the picking

location for the next day by considering the Minimum Safety Stock and Lowest

Sales Quantity (see 5.4.3), and the forecast for the next opening day. As the

Minimum Safety Stock can be manually a by the user, a misuse of the parameter

can lead to an inefficient result of the calculation.

Maximum Internal Replenishment Level supports the goods flow efficiency by

securing that a minimum of one full multipack is always replenished and thus

backflow is minimized.

As suggested by the name, Commercial Internal Replenishment Level aims to

secure commerciality of the sales locations, based on the Default Filling Rate

percentage set for the Sales Method or the Auto Bin value.

Availability in the sales locations is not a priority for Sales Method 2 (Full-Serve),

as replenishment can be done during opening hours. Since customers don’t have



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access to these articles, there is no need to focus on commerciality either. That is

why the replenishment level for Full-Serve is supporting only efficiency, by

securing that the maximum number of full multipacks can be replenished, with a

minimum of the Lowest Sales Quantity or Daily Sales Forecast in order to reduce

replenishment during opening hours. This helps keep the handlings per cubic

meter low.

As handling of full pallets is the most efficient flow, for Total Sales Space

Capacities exceeding the pallet quantity, the Replenishment Point will be reached

as soon as a full pallet can fit in. This helps reduce the manual adjustment of

replenishment levels for items with multiple pallet locations on the sales flor

(Open the Wallet, End Podias, Activity Areas, etc.).

The relevant formulas can be found in Appendix I.

5.2.3.2. Adjusted Replenishment Level

The Replenishment Level calculated % is an optimal result, supporting availability,

efficiency or commerciality, and should be used as frequent as possible. However

it can still be manually overwritten for exceptional cases by manually setting a

percentage value in Replenishment Level adjusted % field (the default value is 0).

If there is an Replenishment Level adjusted % is set for an article, it automatically

becomes the used replenishment level percentage.



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5.2.3.3. Default Replenishment Level

The Replenishment Level default % is equal to the default value set for the Sales

Method. It is a reflection of the decision of the store Commercial Team regarding

the targeted replenishment level that balances between high commerciality and

efficiency.



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The Default Replenishment Level of a Sales Method can be changed under in the

Sales Method page. The recommended values for a standard store are SM 0:

50%, SM 1: 40%, SM 2: 25%.

5.2.3.4. Sales Space Type

The sales space type defines if the sales space is “flexible” or “non flexible”. The

sales space type is a default that will be used if a new article will be created in the

item master. The options are “Non Flexible” or “Flexible”. The articles in Market

hall should always be flexible.

The sales space type need to be defined in Sales Method page.

In case the Sales Space Type for a running article needs to be changed this needs

to be done in the Sales Space Size Adjustment Table or directly in the Item Card.



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5.2.3.4.1. Non flexible sales space

Non flexible sales spaces should be dimensioned for safety stock plus in-delivery

quantity. This is the maximum stock for this article. Every non flexible item has its

own space which is not shared with any others. If the stock sells down until the

next in-delivery arrives, the location will not be 100% full. Having non flexible

sales spaces will lead to an overall empty looking Market hall.



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5.2.3.4.2. Flexible sales space

The flexible sales space concept was implemented to secure a commercial, full

looking Market hall. The general idea is that articles which are located next to

each other share the space for their sales spaces. This will increase the

commercial filling rate and will increase efficiency.

Flexible sales spaces will be dimensioned for average stock, being equal to Safety

stock plus half of the in-delivery quantity. The other half of the in-delivery

quantity will be accommodated in the neighborhood spaces.

Nothing will change when it comes to the stock level over time. At any time some

articles will be closer to maximum and some will be closer to minimum. The

articles with in-delivery must use the space made available by the article being

near minimum.



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The graph above shows the sales pattern of an article between maximum stock

and minimum stock. The idea is that more than one article share space to achieve

an overall higher filling rate regardless if one article is sold down. The available

space of an article which is sold down will be used by an in-delivery quantity of

another article located close by. The sales space size for flexible articles will be

the average stock, for non-flexible it would be maximum stock.

Non flexible sales space Flexible sales space

Flexibility supports better sales space allocation and will enable that more

products can fit in the same sales space. They are more commercial and look

always full because the filling rate is overall higher. Flexible sales spaces are more

efficient as they reduce backflow.



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5.2.3.5. Overview recommended values

Parameter SM 0 SM 1 SM 2

Max Safety Stock factor 10.00

MinQtyWeeks 2.00 2.00 2.00

MaxSaspQtyWeeks 4.00 4.00 4.00

MaxBuffer 4.00 4.00 4.00

Calculate Auto Bin Yes No No

Default Replenishment Level 50% 40% 25%

Sales Space Type Flexible Non flexible Non flexible

Flex Factor 40

Full Pallet Direct Share % 85

EOQ Round %: 70

The above recommended values are meant for stores with sufficient m2 in Market

hall, Self-serve and Full Serve. Stores with over or under capacity can deviate

from the recommendations.

5.3. Sales space management of new articles

The initial forecast of an article needs to be set in order for Navision to support

the sales space dimensioning. Once this field has been populated, Navision will

calculate the sales space quantity limits Min, MinDir, Suggestion and Max. The

Sales department, supported by Sales & Supply Support, has to update the

agreed sales space size in Navision.

The goal is to set the sales space size as close as possible to the "Suggestion"

provided by Navision. As a minimum requirement every store should have the

20% top selling articles set as “Suggestion”, 65% of medium selling articles as

‘Direct’ and the remaining (15%) as ‘Indirect’. This should lead to a minimum

85% Direct flow for Market hall.



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5.4. Maintain sales spaces of selling articles

5.4.1. Managing sales spaces

The sales space of an article should not be considered as static. It needs to be

maintained and adjusted over time in accordance with the sales pattern. By

setting the sales space size as close as possible to the "Suggestion" given by

Navision, one ensures that the goods flow classification will remain “Direct” even

if the sales pattern fluctuates over time. As a result, the door-to-floor percentage

will be as high as possible with a minimum of maintenance. The sales spaces of

the top 20% articles should be planned as ‘Suggested’. The share of articles which

need to be ‘Indirect’ should be the lowest selling articles.

5.4.2. Defining Sales Space Size

The sales space size is part of the sales space where the customer picks the

article for take away. The sales space size contains the in-delivery quantity and

the safety stock.

The sales space size should always consider the actual available physical space on

the shop floor. It should never be bigger than the available space because this will

create backflow. It should also not be smaller as this will leave empty space which

is not commercial.

The sales space size can be given for picking and if applicable for add on space as

well. The sales space size is the sum of these sizes. The sales space size is used

to calculate how many pieces the picking bin can hold.

Sales space size can be changed under the Sales Space Management Fast Tab in

the Item Card.



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In the above examplel the sales space size is 280 which is higher than the MinDir

of 224. This means the Goods Flow Classification for this artilce is ‘Direct’.

In this example above the sales space size is below MinDir but above Min. This

sales space is ‘Indirect’. The classification is not “Direct” because the Sales Space

Size is smaller than MinDir. It is not “Too Small” because it is greater than Min.

This sales space is classified as ‘Too small’ as its size is below Min.

The field Sales Space Size has a drill down page which will enable to adjust the

sales space size and to add or remove Add On locations. After clicking the Total

Sales Space Capacity size (in blue), a window with a list of all bins and quantities

will appear. There should always be one – and only one - Picking Bin and as many

Add-on bins as there are in the store for this article.



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Every Add-on location should be registered individually. The Picking location is the

home location of this product. Navision will sum up the sales space sizes of all

Add-on locations plus the Picking location. This will be the Total Sales Space Size

which is used for the calculation of the need.

In the Ordering Fast Tab you can find the EOQ (Economic Ordering Quantity)

parameters:

Minimum Order Quantity

Result for minimum order quantity according to set parameter MinQtyWeeks.

Maximum Order Quantity

Result for maximum possible order quantity according to set parameter

MaxSaspQtyWeeks.

Maximum Buffer

Result for order for indirect articles according to set parameter MaxBuffer.



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In addition the following parameters can be found:

Full Pallet Mark - if set to “P” Navision or DSP/FF will always order a full pallet.

If set to “M” the article can be ordered picked.

Delivery Type – indication if the article can be picked or delivered on full

pallets based on the supply setup rules.

Maximum Delivery Quantity – the number of pallets that can be ordered as

“flex range” (see 5.4.5.)

Certainty factor - is equal to used Safety stock / EWS. This information is

provided to the supply chain, DSP/FF, and is not used in the stores.

Maximum Delivery Quantity (see 0)

Local Multipack Quantity (see 5.4.5)

Local Pallet Quantity (see 5.4.5)

The sales space size can also be adjusted via the Sales Space Size Adjustment

page.



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In addition to the sales space size the Product Dominance and the Sales Space

Type can be adjusted here. Please note that the default Sales Space Type, which

is defined in the Sales Method Setup is valid for new articles only. In case a user

changes the default value in this setup the Type will not change for the articles,

which are already in Navision. In case a later change is required this can be done

in the Sales Space Size Adjustment page or the Item card.

The field Full Pallet Mark is set manually. The Full Pallet Mark is used to define

that full pallets will be ordered only. If one is set to “P” then full pallets only will

be ordered. The value “M” stands for Multi Packs.



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5.4.3. Safety Stock Calculations

Navision has five different types of safety stock: Mathematical Safety Stock, Auto

Bin, Maximum Safety Stock, Minimum Safety Stock, and Lowest Sales Quantity.

The bold font indicates which of the five is active and actually used by Navision.

The prioritisation rules and formulas for all safety stock calculations can be found

in Appendix I.

5.4.3.1. Mathematical Safety Stock

The Mathematical Safety Stock is used

to cover for uncertainties in the supply

chain and in the buying behaviour of

customers. Its purpose is to secure

availability in the store even if things

do not go according to plan.



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This is the most commonly used safety stock calculation based on Service Level

Classification, Lead time and Lead time variation, sales and sales variation. This

calculation is used if its result is bigger than Minimum Safety Stock, Lowest Sales

Quantity or Auto Bin, but smaller than Maximum Safety Stock.

5.4.3.2. Auto Bin

The purpose of the Auto bin is to

secure a commercial amount of

stock holding in sales spaces, not to

secure availability. Auto Bin is the

automatically calculated Bin effect

to secure a commercial stock

holding in a sales space.

This calculation must secure the filling rate of all sales spaces, whatever their

size. This calculation is used as safety stock if its result is bigger than

Mathematical Safety Stock, Lowest Sales Quantity or Minimum Safety Stock, but

smaller than Maximum Safety Stock. It is controlled on sales method level. It

needs to be defined in Setup/Sales Method per Sales Method if the system should

calculate an Auto Bin.

5.4.3.3. Maximum Safety Stock

This is the upper limit in pieces for

the safety stock calculation. The

used safety stock will never be

higher than the Maximum Safety

Stock, except when the Minimum

Safety Stock or Lowest Sales

Quantity are higher.

5.4.3.4. Minimum Safety Stock

The Minimum Safety Stock can be set manually to secure a minimum amount of

stock in the sales space. The default value is 2.



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The default of 2 is based on the

consideration that 1 piece should

always remain for sell if one item is

lost or damaged. This supports the

goal of On Shelf Availability.

Types of articles that usually need to be revised are:

Articles that are occasionally sold as multiples and Lowest Sales Quantity

does not cover that need should have a higher Minimum Safety Stock as

they should satisfy at least 1 customer’s need (e.g. kitchen fronts, dining

chairs, hard floors, kitchen rails)

Articles with inventory issues – often lost or unsellable quantities Low-

sellers that tend to be damaged

5.4.3.5. Lowest Sales Quantity

Lowest Sales Quantity reflects the

average quantity of an article that

one customer purchases per

receipt, taking into account

deviation from the calculated

average.

This safety stock fulfils the purpose to hold a minimum amount of stock for one

single customer even if the forecast for this article is very low. This could happen

with products like dining chairs or kitchen doors. The forecast of a particular chair

could be as low as 0.1, however if a customer wants to buy a dining chair, he or

she will buy 4, 6 or 8.



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5.4.4. Product Dominance

The Product Dominance is the upper part of the sales space and is not part of the

sales space size. Product Dominance helps visitors to orientate, find products and

reinforces the low-price profile. This level shall always be fully stocked and must

not be part of the sales space size. Therefore it needs to be registered correctly

otherwise the sales space could be empty. It is only used for Sales Method 0

(Market hall) articles.

The Product Dominance can be updated in the Sales Space Management Fast Tab

or the Sales Space Size Adjustment page.

5.4.5. Local PQ and MPQ

Local multipack quantities and local pallet quantities can be set on article level in

the Sales Space Size Adjustment page.



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They will appear in the Item Card under the Ordering Fast Tab in brackets.

The store users can rectify incorrect central values, to secure that the real MPQ

and PQ quantities are reflected in the values in Navision which are used for

internal replenishment. This will reduce handlings in the store as the internal

order process will consider the real values instead of the central ones.

For articles, with the same multipack quantity as pallet quantity, like articles with

distribution method DD, a local MPQ can be set. If the local MPQ is smaller than

the PQ, Navision will be able to replenish this smaller MPQ instead of the PQ. This

supports Sales Space Management and reduces back flow and internal handlings.



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Setting too many local MPQ and ordering internally more MPQ instead of PQ can

increase the internal handlings.

Please note that for replenishment from the external warehouse the local PQ, if

set, will be taken into consideration.

5.5. Range allocation in the warehouse

5.5.1. Range split between Self-serve furniture area and Full Serve

For the range allocation in the warehouse some specifics need to be considered

which are different compared to range allocation in Markethall.

The furniture range needs to be allocated either in Self-serve or Full Serve. Top

selling article should be sold via Self-serve. The related KPI’s to measure this

correct allocation are “volume sold pieces” and “sold volume”.

Minimum 80% of the sold pieces should be sold via Self-serve. This ensures

instant gratification for the customer but also efficiency in the store to keep the

prices as low as possible.

5.5.2. Self-serve

If the range is split between SS and FS it needs to be grouped. In SS the

customer buying process needs to be considered. HFB and product families will be

usually kept together. High selling articles need to be allocated close to the main

aisle. This will help the customer to find their products easier and quicker and will

reduce distances for goods flow replenishment.



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High selling products at the end podia indicate towards the customer which type

of product they can find in which aisles and support big enough sales spaces for

high volume articles.

5.5.3. Full Serve

In Full Serve the picking process needs to be considered. Articles and families

with higher picked frequency should be allocated closer to the merchandise hand

out to keep picking and waiting time for the customer low.

Families should be grouped together to allow for efficient picking process.



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The range split and allocation need to be revised with every PCD split.

5.6. Follow up

It is essential to evaluate the sales space sizes per article on a weekly basis.

There are two reports in Navision to assist the user to maintain the sales spaces:

“Maintain Sales Space - Summary”

“Maintain Sales Space - Suggestion”.

As all reports in Navision MV8, these can be exported in .xls, .pdf, .html and

more, and can also be scheduled to be run at a pre-set time with pre-set criteria.

The responsibility to follow up on sales space sizes lies within the sales

department. The maintenance with the Navision report should be done on a

weekly level.



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5.6.1. Report “Maintain Sales Space - Summary”

The ‘Maintain Sales Space - Summary’ report will give an overview on how the

different Product Areas (PA), Range Area (RA) and Home Furnishing Businesses

(HFB) are performing regarding correct dimensioned sales spaces. It shows the

percentage of ‘direct’ and ‘indirect’ and in each goods flow classification. It will

state the number of articles that are involved, and the percentage.

Missing

Goods Flow Classification for articles without sales space size registered. This

must be corrected as soon as possible as the automated replenishment will never

replenish these sales spaces.

Too small

Goods Flow Classification for articles with a sales space size smaller than the MIN

quantity. Those products are at risk that they will sell out during trading hours.



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Indirect

Goods Flow Classification for articles with a sales space size between the MIN

quantity and the MIN DIR quantity. For these articles the availability is secured

but goods flow is not cost efficient.

Direct

Goods Flow Classification for articles with a sales space size between the MIN DIR

quantity and the MAX quantity. As well availability as efficient goods flow are

secured.

Too big

Goods Flow Classification for articles with a sales space size bigger than the MAX

quantity. The automated ordering system cannot keep this sales place full. The

space can be used to improve the sales spaces of other articles.

At the last page a summary on Sales Method can be found.



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5.6.2. Report “Maintain Sales Space - Suggestion”

After analyzing the Sales Space Summary the report “Suggestion, Sales Space

cap.” can be used to analyze in more detail, on article level. It should be used by

the sales co-worker to analyse specific articles which are not meeting the required

criteria. It is possible to filter on the different Goods Flow Classifications according

to the needs.

All detail information is available on this report. The Sales space size capacity

report shows article details.

Max Min direct Suggestion Min 0 Sales Space

qty limits

Too Big Too Small

Direct Missing Indirect

Report

classifications Indirect Direct

Goods flow

classifications



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5.7. Meetings activities connected to sales space management

The entire Commercial Team is involved in sales space management and has a

role to play. The task, responsibilities and also the meeting structure need to be

agreed in an Internal Service Agreement. The Internal Service Agreement needs

to be reviewed and amended minimum once per year before the catalogue drop.

WHAT WHO WHEN

Follow-up sales space sizes:

Backflow analysis

Goods flow and Sales Daily

Follow-up sales space sizes: Maintain

Sales Space

Sales Weekly

Walk the sales floor Commercial Team Weekly

Follow up on KPIs regarding SSM Sales Weekly

Flexible sales space training Logistics, Sales and Com&In Tertially

Ready to Sell packaging update Commercial Team Tertially

Internal Service Agreement Commercial Team Yearly



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5.8. Performance indicators connected to sales space

management

SM 0 SM 1 SM 2

Direct flow >= 85% >= 70%

Direct Flow Top 100 = 100% >= 80%

Average max density

(m3/m2) >= 0.29 n/a n/a

Internal handling <= 0.8 <= 1.0

Local local shortage <= 0.1

<= 2.0



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Appendix I – Calculations and Formulas

A.1. Safety stock

Mathematical

safety stock =

K-factor * SQRT((Lead Time * (1.25 * Forecast Error))² +

(Expected Weekly Sales² * Lead Time Variation²)

Auto Bin =

Calculation Non-flexible:

Total Sales Space Size – Minimum of (Maximum of (Max SASP

Qty Weeks * Average Weekly Sales and Multipack) and Pallet

Qty)

Calculation Flexible:

Total Sales Space Size – (Minimum of (Maximum of (Max SASP

Qty Weeks * Average Weekly Sales and Multipack) and Pallet

Qty)/2)

Minimum

Safety Stock =

Manually set, default value = 2

Maximum

Safety Stock =

Max Safety Stock Factor * Average Weekly Sales

Lowest Sales

Quantity =

Average sales receipt quantity + 1.25 * Mean absolute deviation

of the sales receipt quantity



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Used Safety

Stock =

Calculation:

Safety Stock1 = Max (Mathematical Safety Stock, Autobin)

Safety Stock2= Min (Safety Stock1, Maximum Safety Stock)

Safety Stock3 = Max (Min Safety Stock, Lowest Sales Quantity)

Used Safety Stock = Max (Safety Stock2 , Safety Stock3)

Example:

Mathematical Safety Stock = 231

Auto Bin = 320

Minimum Safety Stock = 2

Maximum Safety Stock = 612

Lowest Sales Quantity = 3

Safety Stock1 = Max (231, 320) =320

Safety Stock2 = Min (320, 612) = 320

Safety Stock3 = Max (2, 3) = 3

Used Safety Stock = Max (320, 3) = 320

*All results are rounded up to Unit of Measure



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A.2. Sales Space size limits

Min =


Min = Average Weekly Sales

If Min > 2 * Pallet Qty => Min = Average Weekly Sales / 2

[Rounded up to Unit of Measure]

Example Non-flexible:

AWS = 102,4; Pallet Qty = 40; MPQ = 40

Min = 102,4

102,4 > 2 * 40 = 80 ? Yes => Min = AWS/2 = 51,2

Rounded up to pieces => Min= 52


Min = Average Weekly Sales / 2

If Min > 2 * Pallet Qty => Min = Average Weekly Sales/4

[Rounded up to Unit of Measure]

Example Flexible:

Min = 102,4/2 = 51,2

51,2 > 2 * 40 = 80 ? No

Rounded up to pieces => Min = 52

In this examples the result for Min Flexible and Non-flexible is

the same.



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Min Dir =

Calculation Non – flexible:

Min Dir = (Min QTY Weeks * Average Weekly Sales) [Rounded

up to Multipack] + Biggest value of Mathematical Safety Stock

and Lowest Sales Quantity

If Min Dir > 2 * pallet qty=>

Min Dir = Average Weekly Sales / 2 [Rounded up to pallet qty]

with a minimum of two pallets

If Min Dir < Min => Min Dir = Min

Example Non – flexible:

Min Qty Weeks = 2

[2 * 102,4] + 25 = [204,8] + 25 => 240 + 25 = 265

265 > 2 * 40 ? Yes =>

[102,4/2] = [51,2] = 80

80 < 52 ? No=> 80


Min Dir = (Min QTY Weeks * Average Weekly Sales) [Rounded

up to Multipack] / 2 + Biggest value of Mathematical Safety

Stock and Lowest Sales Quantity

If Min Dir > 2 * pallet qty =>

Min Dir = Average Weekly Sales / 4 [Rounded up to pallet qty]

If Min Dir < Min => Min Dir = Min

Example Flexible:

[(2 * 102,4)]/2 + 25 => [204,8]/2 + 25 => 240/2 + 25 = 120

+ 25 = 145

145 > 2 * 40 ? Yes =>



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[102,4/4] => [25,6] = 40

40 < 52 ? Yes => 52

Suggestion =


Suggestion = (Max SASP Qty Weeks + Min QTY Weeks) / 3 *

Average Weekly sales + Mathematical Safety Stock [Rounded

up to Multipack]

If Suggestion > 2 * pallet qty => Suggestion = Average Weekly

Sales / 2 [Rounded up to pallet qty]

If Suggestion < 110% * Min Dir => Suggestion = 110% * Min

Dir [rounded up to next UoM]


[(4 + 2) / 3 * 102,4 + 25] = [229,8] = 240

240 > 2 * 40 ? Yes => [102,4/2] = [51,2] = 80

80 < 110% * 80 ? Yes => = [110% * 80] = 88


Suggestion = (Max SASP Qty Weeks + Min QTY Weeks) / 3 *

Average Weekly Sales / 2 + Mathematical Safety Stock

[Rounded to Multipack]

If Suggestion > 2 * pallet qty => Suggestion = Average Weekly

Sales / 4 [Rounded to pallet qty]

If Suggestion < 110% * Min Dir => Suggestion = 110% * Min

Dir [rounded up to next UoM]

Example Flexible:

[(4 + 2) / 3 * 102,4 / 2 + 25] = [127,4] = 160

160 > 2 * 40 ? Yes => [102,4 / 4] = [25,6] = 40



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40 < 110% * 52 ? Yes => [110% * 52] = 58

Max =


Max SASP Qty Weeks = 4

Max Safety Stock Factor = 10

Average Weekly Sales = 102,4

Max = Max SASP Qty Weeks * Average Weekly Sales [Rounded

up to Multipack] + Max Safety Stock Factor * Average Weekly

Sales [rounded up to the next UoM]


[4 * 102,4] + [10 * 102,4] => 440 + 1024 = 1464


Max = (Max SASP Qty Weeks * Average Weekly Sales)

[Rounded up to Multipack] /2 + Max Safety Stock Factor *

Average Weekly Sales [rounded up to the next UoM]

Example Flexible:

[(4 * 102,40]/2 + [10 * 102,4] = 220 + 1024= 1244



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A.3. EOQ calculations

Minimum

Order

Quantity =

Calculation:

MinQtyWeeks * AWS

[rounded up to the next multipack quantity]

Example:

MinQtyWeeks = 2; AWS = 102,4; MPQ = 40

2 * 102.4 = [204.8] => 240

Max Order

Quantity =

Calculation:

MaxSaspQtyWeeks * AWS


Example:

MaxSaspQtyWeeks = 4; AWS = 102,4: MPQ = 40

4 * 102.4 = [409.6] => 440

Max Buffer = Calculation:

MaxBuffer * AWS


Example:

Max Buffer = 4; AWS = 102,4; MPQ = 40

4 * 102.4 = [409.6] => 440



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A.4. Need calculation for internal replenishment

Total Sales

Space Size

Flex =

Calculation:

Total Sales Space Size + Flex Capacity

Note: Total Sales Space Size (or Capacity) equals the capacity of

the “home” picking bin, including all Add-on bins.

Example:

Total sales space size = 100

Flex Capacity = 40

100 + 40 = 140

Flex

Capacity =

Calculation:

If Total sales space size < Pallet Quantity = >

Total sales space size * Flex Factor / 100

If Total sales space size > Pallet Quantity = >

Pallet Quantity / 2

Example:


Flex Factor = 40

Pallet Quantity = 180

120 > 180 ? No => 120 * 40 / 100 = 48

Example 2:


Flex Factor = 40


420 > 180 ? Yes => 180 / 2 = 90



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Need

identification

=

Calculation:

Stock – Qty sold not posted – Qty going out + Qty coming in <

Total Sales Space Size * Replenishment Level % / 100 + Product

Dominance

Example:

Stock: 100

Product Dominance: 20

Total Sales Space Size: 200

Replenishment Level: 50%

Qty sold not posted = 0

Qty going out = 0

Qty coming in = 0

100 – 0 – 0 + 0 = 100 ? 200 * 50 / 100 + 20 = 120

100 < 120 ? Yes => need identified

Calculation of

the need =


Need = Total Sales Space Size – (Stock – Qty Sold Not Posted –

Product Dominance – Qty Going out + Qty Coming In) [rounded

up to the next Multipack Quantity]

Example Non-flexible:

Stock: 100

Total Sales Space Size: 200

Multipack Quantity = 20



Qty going out = 0

Qty coming in = 30

200 – (100 – 0 – 20 – 0 + 40) = 80



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Need = Total Sales Space Size Flex – (Stock – Sold Not Posted –

Product Dominance – Qty Going Out + Qty Coming In) [rounded

up to the next Multipack Quantity]

Example Flexible:

Stock: 35

Total Sales Space Size Flex: 100




Qty going out = 0

Qty coming in = 40

100 - (50 – 0 – 20 – 0 + 40) = 100 – 30 [rounded up] = 70



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A.5. Replenishment Level

Minimum

Internal

Replenishment

Level =

Calculation:

Maximum of (Minimum Safety Stock and Lowest Sales Quantity)

+ Rounded forecast of next opening day.

Example:

Minimum Safety Stock = 2

Lowest Sales Quantity = 3

Forecast of next opening day = 7,13

Max (2, 3) + 7,13 [rounded to UoM] = 3 + 7 = 10

Maximum

Internal

Replenishment

Level =

Calculation:

Total Sales Space Size Flex – Multipack quantity

Example:

Total Sales Space Size Flex = 100


100 – 25 = 75

Commercial

Internal

Replenishment

Level =

Calculation:

Total Sales Space Size Flex - Rounddown [(Total Sales Space

Size Flex – Maximum (Auto Bin, Default Replenishment Level %

* Total Sales Space Size/100) ) / Multipack Quantity] *

Multipack Quantity

Example:

Total Sales Space Size Flex = 220

Total Sales Space Size = 200

Auto Bin = 120

Default Replenishment Level % = 50


220 – [(220 – Max (120, 50 * 200 / 100)) / 20] * 20 =

220 – (220 – 120) / 20 * 20 = 120



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Calculated

Replenishment

Level =

Calculation for Sales Method 0 or 1:

If Total Sales Space Size < Pallet quantity =>

Maximum of [Minimum of (Commercial Internal Replenishment

Level and Maximum Internal Replenishment Level), Minimum

Internal Replenishment Level]

If Total Sales Space Size > Pallet quantity =>

Total Sales Space Size Flex – Pallet quantity

Example:

Commercial Internal Replenishment Level = 60

Maximum Internal Replenishment Level = 115

Minimum Internal Replenishment Level = 22




100 > 250 ? No =>

Max [Min (60, 115), 22] = 60

Calculation for Sales Method 2:

If Total Sales Space Size < Pallet quantity =>

Total Sales Space Size – Rounddown (Total Sales Space Size /

Multipack Quantity) * Multipack Quantity

If Total Sales Space Size > Pallet quantity =>

Total Sales Space Size Flex - Pallet quantity

Example:




110 > 250 ? No =>

110 – Rounddown (110/ 25) * 25 = 10



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Calculated

Replenishment

Level % =

Calculation:

Calculated Replenishment Level / Total Sales Space Size * 100

Example:

Calculated Replenishment Level = 92


92 / 200 * 100 = 46

Replenishment

Point =

Calculation:

(Calculated Replenishment Level % * Total Sales Space Size) /

100 + Product Dominance

Example:

Calculated Replenishment Level % = 46


Product Dominance = 30

(46 * 200) / 100 + 30 = 122

navision mv8 handbook step 5 sales space management

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