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Allocation Planning Explained

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Published: Reading time: 10 min
o9 Solutions The Digital Brain Platform
o9 SolutionsThe Digital Brain Platform

Retail Planning Definition

Retail Allocation Definition

Retail Planning & Allocation Challenges

When to Use Planning & Allocation

How to Improve Resource Allocation Process?

How to Enhance the Resource Allocation Strategy?

Resource Allocation Software Advantages


The effective management of inventory in retail relies on two essential things: allocation and replenishment. These processes collaborate to guarantee the presence of appropriate products in optimal quantities at store locations where they are most likely to sell at their full price. Precise planning of merchandise allocation is paramount for achieving strategic objectives, maximizing profitability, enhancing efficiency, and ensuring customer satisfaction.

Despite ongoing disruptions in the supply chain, retailers must refine their retail allocation plans to reduce expensive stock transfers and enhance sell-through rates from the outset. But what strategies can they employ to achieve this goal? That’s the question we explore in this blog, looking at when to use planning and allocation and how to enhance the strategy.

What is Retail Planning?

Retail planning involves utilizing data-driven strategies to fulfill consumer demand effectively, minimize excess inventory, and enhance return on investment (ROI). This is achieved by strategically delivering suitable products to various channels at optimal prices, thereby minimizing the reliance on discounts and optimizing product margins.

What is Retail Allocation?

Commonly referred to as merchandise allocation, retail allocation is a component of the in-season process within the retail planning cycle. Its primary objective is assigning individual item quantities to specific stores or channels at the right time. The overarching aim is to enhance inventory allocation, ensuring it will meet customer demand while minimizing surplus inventory and stockouts to maximize profitability.

Executing effective retail allocation poses a formidable challenge. Retailers rely on a thorough analysis of sales data, market trends, and various influencing factors to make informed decisions. Leveraging advanced analytics is crucial for accurately forecasting future demand and allocating inventory accordingly.

One frequently asked question is: What are the most effective approaches for tackling forecasting and inventory concerns across different product categories?

Effective inventory management plays a crucial role in enhancing retailer profitability. However, this financial impact is accompanied by a substantial amount of effort. Choosing the most suitable forecasting and purchasing strategy for each product category can significantly improve overall performance and reduce the need for manual interventions.

Despite the importance of historical sales data, relying solely on it for retail planning and allocation decisions may prove insufficient. Retailers must take into account additional factors such as store dimensions, location, and customer demographics to make well-rounded decisions.

What are the Challenges of Retail Planning and Allocation?

Inventory allocation involves the meticulous process of distributing specific quantities of individual items to each channel based on past data, ensuring that the product types precisely align with the exact needs of customers. Allocators face the challenge of balancing numerous competing demands, data inputs, and responsibilities to optimize inventory management. Some of their key challenges include:

Dealing with Extensive and Complex Data: Allocators grapple with managing vast amounts of intricate data throughout the supply chain. This includes historical sales data, inventory levels, store performance metrics, and market trends. This can be challenging to handle and analyze, especially for retailers with numerous stores and channels or those operating in diverse geographic regions. Conventional tools such as spreadsheets and outdated reporting solutions fail to adequately support the demands of the modern retail landscape, intensifying the complexity of the allocation process.

Analyzing Distinctive Customer Demand Patterns: Each store location exhibits unique customer demand patterns, necessitating allocators to discern and adapt their decisions accordingly. This entails leveraging extensive data alongside a profound comprehension of local market conditions, customer preferences, and the competitive landscape.

Balancing Inventory Levels: Allocators face the challenge of maintaining optimal inventory levels and avoiding overstocking or stockouts. This involves meticulous planning and forecasting, coupled with the ability to swiftly modify decisions in response to shifts in demand or market conditions.

Streamlining Replenishment Processes: Close collaboration between replenishment teams and allocators is essential for promptly adjusting decisions and ensuring timely and efficient restocking of inventory. Vigilant monitoring of inventory levels and lead times proves crucial in optimizing stock availability.

Facilitating Communication and Collaboration: Allocators must forge strong ties with stakeholders, including store managers, merchandising teams, and suppliers. Effective communication and collaboration are pivotal to ensuring alignment on retail planning and allocation decisions across the board.

When to Use Planning and Allocation?

While both replenishment planning and P&A (Planning and Allocation) solutions can be applied to various types of merchandise, certain characteristics make some products more suitable for P&A solutions.

Limited Reorders: If an item is expected to have minimal or no vendor reorders after the initial purchase order, P&A is the preferred choice. Allocation, also known as pre-distribution, can be employed to distribute the acquired product over multiple periods. The key parameter to monitor in this context is the number of forecasted vendor purchase orders.

No History or Unique Item: If the item is unique, sales patterns are not expected to match other items, and there is no demand history available for creating a forecast, P&A is the preferred approach. Unique items often require buyer review and demand forecast management, minimizing the benefits of automatic demand forecast updates provided by replenishment systems. This category also includes items with unpredictable sales (or even lost sales) or rapidly trending products.

Promotionally Driven Categories: Items or categories that benefit from merchandise planning variables such as price and margin are better suited for a P&A methodology. Replenishment solutions typically do not account for the impact of pricing. For this reason, P&A solutions become more appealing when managing retail prices to align with corporate goals is a significant factor in category decisions.

Highly Fashion-Oriented/Short Life Cycle Items: Products strongly influenced by variables that are challenging to integrate into a software solution are ideal candidates for a P&A solution. Given that replenishment solutions may require user intervention to adapt to rapidly changing trends, the inherent flexibility of P&A makes it a more viable option in such cases.

How to Improve Resource Allocation Process?

Clearly outline the project scope: Defining a clear scope of work (SOW) is crucial for establishing a robust resource allocation plan. This ensures that all requirements are considered, preventing the team from taking tasks they don’t have time for. 

Develop detailed project plans: Utilize the SOW as the basis for your project plan. Break down each line item in the project scope into tasks and subtasks. The more detailed the plan, the easier it becomes to allocate resources effectively.

Identify resources for each step: Avoid the common mistake of planning project stages at a macro level without sufficient attention to the specific resources needed for each subtask. Thoughtfully consider each step to accurately identify the resources required.

Coordinate people and project schedules: Acknowledge that your project is likely one of many competing priorities for your team members. Prior to task assignments, understand their involvement in other projects, scheduled meetings, or planned time off. Flexibility is key to working around conflicting priorities.

Monitor timelines closely: Since adjusting timelines is a significant challenge in resource allocation, keep them at the forefront of your attention. Regularly check on schedule—preferably daily or multiple times per week—to ensure that everything aligns.

Consider project and task dependencies: Anticipate task dependencies in advance to address issues upstream when necessary. Regularly assess the progress of critical tasks to prevent potential projects from derailing.

Track time: Allocate time based on informed estimates. Tracking the time spent on tasks provides valuable data for accurate estimates in future project plans.

Review post-project reporting: Utilize look-back reports to gain insights that can enhance future resource allocation planning. Consider reporting on tasks completed on time, identifying trends contributing to missed deadlines, availability of allocated resources, and comparing allocated time to actual time spent.

Implement resource allocation software: If you currently use spreadsheets for resource allocation, contemplate transitioning to resource management software. Look for software, such as Mosaic, that takes into account schedules, skills, availability, and dependencies to automatically suggest staff for project teams, streamlining the merchandise planning, staffing, and management of people and projects.

How to Enhance the Resource Allocation Strategy?

While devising a resource allocation strategy may seem straightforward, numerous factors can complicate plans. These include changes to timelines, scope, and schedules, as well as limited availability, capacity, and visibility.

Adjustments to Timelines: In an ideal scenario, a project's timeline would be established at the project's outset and adhered to rigorously. However, the reality is far from perfect. Schedules change, new steps may be introduced, or major milestones might be missed. Project and resource managers must consistently review and adapt timelines to account for these fluctuations.

Changes to Scope: Not only do timelines frequently shift, but the project's scope itself can also undergo modifications. Requirements may change, additional revision rounds may be added, or extra steps may be requested. Approximately half of all projects experience some form of alteration to their original scope, necessitating adjustments to the resource allocation plan

Task Dependencies: Complications arise from task dependencies, where the completion of a parent task directly impacts all subsequent tasks. For instance, if a project consists of planning, design, and development stages, the design cannot commence until the merchandise planning is finished, and the development is contingent on the completion of the design. Delays in one area can have a knock-on effect on the entire project and its allocated resources.

Skill Sets: Certain project steps may require specialized skill sets, complicating the allocation of team members. While there may be several team members capable of completing a set of tasks, project nuances may limit this to just one person. Juggling such scenarios becomes challenging, especially when that individual is simultaneously needed across multiple projects.

Resource Availability: A major challenge in resource allocation is ensuring that all required resources are available when needed. While managing tools is relatively straightforward, dealing with human resources becomes complex, particularly when there is insufficient visibility into who is working on what and when. Team members have finite capacity and deal with competing priorities, risking burnout and turnover if their workload is consistently overloaded.

Advantages of Resource Allocation Software

Implementing resource allocation software streamlines the merchandise planning and distribution of resources, enhancing overall manageability. This software facilitates the automation of various resource management processes, enabling a more strategic and efficient approach.

Accelerate project planning and execution: By utilizing templates, duplicating projects, and swiftly adjusting dependent timelines, resource allocation plans can be generated much more quickly. What once took hours can now be accomplished in minutes.

Enhance organizational transparency: The software provides comprehensive visibility into ongoing tasks across the organization, complete with detailed organizational charts and skill matrices. This transparency simplifies the identification and assignment of available resources.

Optimize resource utilization: Ensuring that team members are aware of their current and upcoming tasks becomes more straightforward. When everyone is engaged in appropriate billable work, there is a noticeable improvement in profitability.

Mitigate staff burnout and boost employee retention: Features such as demand-capacity analysis allow for a clear understanding of individual team members' workloads. This insight aids in ensuring that each team member has a satisfying and productive workload, preventing burnout.

Elevate client experience: Improved merchandise planning and more intelligent execution contribute to timely and budget-friendly project completion and maintain future performance goals. Ultimately, this results in satisfied clients, making the investment in software a mutually beneficial choice.

Immediate efficiency gains are evident with resource allocation software, particularly in terms of streamlined processes. Meanwhile, long-term benefits, such as improved employee retention and client satisfaction, may take time to materialize, but the eventual payoff justifies the investment.

Allocation Planning Best Practices by o9 Solutions

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About the author

o9 Solutions The Digital Brain Platform

o9 Solutions

The Digital Brain Platform

o9 Solutions is a leading AI-powered platform for integrated business planning and decision-making for the enterprise. Whether it is driving demand, aligning demand and supply, or optimizing commercial initiatives, any planning process can be made faster and smarter with o9’s AI-powered digital solutions. o9 brings together technology innovations—such as graph-based enterprise modeling, big data analytics, advanced algorithms for scenario planning, collaborative portals, easy-to-use interfaces and cloud-based delivery—into one platform.


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