One of the most delicate balancing acts retail suppliers must maintain is accurate inventory levels. Not enough inventory can result in lost sales and loss of customer loyalty. Too much inventory can lead to markdowns and loss of modular space due to low customer demand.
To avoid either scenario, proper planning by both suppliers and retailers is needed to balance inventory. The end goal is to have enough items on-hand to meet customer demand and to understand how fast the items move to allow for accurate replenishment.
To prevent inventory issues and to support supply chain decisions, suppliers and retailers can use a ladder plan. As we will examine in this article, an effective ladder plan provides the insight needed on current inventory as well as data on past performance to support forecasting for future inventory adjustments.
What Is a Ladder Plan?
A ladder plan in retail tracks how a supplier’s items move through the supply chain from when merchandise arrives at a store or warehouse until it is purchased. It is also valuable in tracking prices, sales, and forecasting measurements to prepare for upcoming events based on item performance.
What Information Is In a Ladder Plan?
For suppliers, a ladder plan is essential for effective forecasting and production management. The goal of using this tool is to ensure the supplier keeps their buyer (the retail store) fully stocked with the right amount of merchandise to meet customer demand. To do this, the ladder plan may provide the supplier with:
- Available inventory
- Pricing
- Product ordering
- Past sales data
- Forecasting of future sales
- Upcoming sales events
- Schedule for product manufacturing
- Information on future production
Other information included in a ladder plan may vary by supplier or retailer depending on information specific to their business.
Benefits of Using a Ladder Plan
Using a ladder plan takes the guesswork out of controlling current inventory levels and planning for the future. Specifically, an effective ladder plan helps the supplier:
Forecast for Future Events
Whether it is a store event specific to one retailer or a national holiday, there are times to anticipate larger inventory orders. Using a ladder plan helps suppliers easily forecast for upcoming events and plan for which items to manufacture and stock well in advance.
Track POS Data
There are a number of ladder plan tools that are connected to POS (point-of-sale) at the retail register. Being able to track POS data instantly allows suppliers to make more effective inventory decisions sooner. Adjusting inventory ordering aligned with real-time sales is effective in preventing overstocks and shortages, as well as aiding in forecasting. Plus, the order process can be automated.
Monitor Network Activity
Monitoring merchandise activity over a shared network gives a supplier timely inventory control. Suppliers can access a retailer’s inventory of the product in real-time and make adjustments based on how the items are moving along the ladder system. Being able to see how fast or slow items are going from store arrival to purchase will aid suppliers in fixing production schedules and delivery issues.
Understand Pricing Decisions
Suppliers need to understand why a retailer makes store-level adjustments to item pricing. Drastic price cuts to move items and reduce inventory can have a negative impact on shelf space allotted to an item and future ordering.
With a ladder plan, a supplier can review an item’s sales history as compared to the current sales. Seeing the slow-moving items can help plan for fewer price reductions in future orders. If a supplier can see that an item is not moving or has slow sales, they can make recommendations for adjustments to the inventory flow and possibly encourage the retailer to order items that are moving faster.
Ladder Plans for Walmart Suppliers
Walmart holds its suppliers to a high standard for keeping costs low. The company provides many tools and scorecards to help suppliers perfect their supply chain in an effort to keep expenses low, items in stock, and the ability to quickly identify and correct issues. One of the tools Walmart provides suppliers with each week is a ladder plan tool.
Suppliers receive not only their ladder plan tool from Walmart each week, but also the raw sales data. The data includes everything the supplier needs to complete the ladder plan from items mentioned above to data specific to Walmart (i.e., Walmart item numbers). The supplier is responsible for putting the data into the ladder plan tool every week.
After putting the weekly sales data in the tool, it is time to analyze the information. The analyst is responsible for correcting any errors or locating missing information. Any updates or corrections can be made directly on the ladder plan tool supplied by Walmart.
The Bottom Line
Running an effective supply chain and keeping expenses low comes down to planning. As a supplier, there are many tools and resources to help fix each link in the supply chain, and monitoring a ladder plan is an ideal one for maintaining healthy inventory levels.
8th & Walton’s team of advisors have a combined 300+ years of experience working with and for Walmart stores. Our experts help Walmart suppliers improve supply chain efficiency and become better partners with Walmart.
The first step in improving your Walmart business is as simple as scheduling a free 15-minute consultation. We look forward to connecting with you!
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