Location Clustering
- Location Grading
- Location Type
- Assortment Grading
- Replenishment Grade
- Location Plan
- Offer Matrix
- Summary
The AGR Location Clustering module is a part of the AGR Planning suite. The module is used to group locations together in clusters and create space planning.
AGR Location Clustering is classified as a standalone module which means that it is independent of other functionality within AGR and has its own inputs and outputs although it can work well with other modules.
Clusters of stores can be based on common store and demographic characteristics and there are many possibilities on how stores can be grouped together. These can be both performance and non-performance based. For example, a performance-based cluster are stores with similar sales performance that would then be placed in the same group. A non-performance-based cluster could consider store characteristics such as geographical location, store size and store type. A non-performance-based clusters could also consider customer demographics such as ethnicity, income level, age group and so on. There are therefore many ways to group stores together in a cluster.
There are many benefits to grouping similar stores together. It is especially useful for retailers that have large number of stores as it can be hard to manage each and every store. The result of good clustering is also an improved ability to provide a customer-centric merchandise environment, meaning sending the right products to the right locations.
Location Grading
Location Grading is the workspace where we define criteria for our stores and group stores together in clusters. All stores that have the same criteria go into the same store cluster and therefore receive the same product range.
Location clusters can be done on product group level which allows us to define each location by product group, because not all product groups within the same location have the same size of space, same sales performance etc.
In our standard AGR solution we have three criteria used to group stores together in clusters. These are Location Type, Assortment Grade and Replenishment Grade which can be seen in the green columns below.
Location Type
Location Type can be used to group locations which have for example the same customer profile, store characteristic or geographical location. In this example we have used City Centre stores vs. Countryside stores to distinguish between the product offers stores might receive based on where they are located. The location type can be different for each product group and does not have to be used for all product groups.
Assortment Grade
The Assortment Grade defines the ‘width’ of the offer (i.e. average the number of options that will be on sale at any time) for each location and the space required to display it.
All locations belonging to the same Assortment Grade will, in principle, be planned to receive the same number of options. The offer size and space requirement for each Assortment Grade is set in the Offer Matrix (see below) or read from other systems if the information is available.
Replenishment Grade
The Replenishment Grade groups locations which are the same Location Type and in the same Assortment Grade into bands of similar turnover. All locations in a Replenishment Grade belong to the same Assortment Grade and will therefore be planned to receive the same number of options. The replenishment grade is calculated based on the Sales Value over last 12 months, which can be read from other forecasting systems, read over from AGR Financial Planning module (if being used) or manually entered in AGR.
All these criteria can either be done in AGR or we can read them over if the information is available elsewhere. After these criteria for each store have been defined the system combines them and creates a cluster name.
Location Plan
We can also see the total clusters for each store by product group. In this workspace we have the locations in the drop down, focusing on one store.
We have a list of our product groups so we can see how the same store can have different clusters down to product groups. The reason being, not all product groups within the same location have the same size of space and same sales performance and that are many other factors that could be different between product groups.
Offer Matrix
The Offer Matrix is where the offer size and space required for each Assortment Grade for a product group is defined.
The Assortment Grade defines the size of the offer (i.e. average the number of options) for the location. In this case the top grade (Grade A) represents the maximum offer. The number of Assortment Grades is determined for the business and represents the number of different sizes of offer that they want to be able to provide. The Space Required shows the number of square meters, linear metres or whatever form of measurements used by the company, that are required to display the offer.
When creating the Location Grading the user will set the Assortment Grade for a location based on the total space available in that location and on its overall sales potential. It is possible that there will be no locations set to receive some grades of offer.
In this example we have set that all A grade stores should receive 24 different options in this particular product group. Four options will be placed on each shelf, so the system calculates that six shelfs are required for the 24 options. Now the unit of space can be square meters, shelves, cubic meters or whatever form of measurements you would like to use.
Summary
The AGR Location Clustering module is used to create location clusters and create space planning down to product groups. The main output from this module are location clusters that can be used as an input into the AGR Store Assortment module where products are ranged to store clusters. These two standalone modules work well together but can also be used separately.