6 Macro Space Optimization @Sub-Category Task

The Macro Space Optimization @Sub-Category task is used to allocate optimum space to the POG sub-categories under a POG department. For more information on Macro Space Optimization, see "Introduction to Macro Space Optimization" in Chapter 5.

This task has the following steps:

• Review Category Scorecard Step

  Review the targets set in the Category Plan and Merchandise Financial Plan to align MSO output to them.

• Set Up and Review Optimization Step

  Define the constraints, run MSO, and review the output.

• Approve Optimization Results Step

  Approve the MSO output.

Create the Macro Space Optimization @Sub-Category Workbook

To create the workbook:

1. Select the New Workbook icon in the Macro Space Optimization @Sub-Category task.

   Figure 6-1 Macro Space Optimization @Sub-Category Task

   
   

   The workbook wizard opens.

2. Select the domain name or departments and move it to the Selected Items box. Click Next.

   Figure 6-2 Workbook Wizard Select Domain or Departments Page

   
   

3. Select the quarter and move it to the Selected Items box. Click Next.

   Figure 6-3 Workbook Wizard Select Quarter Page

   
   

4. Select the trading area and move it to the Selected Items box. Click Next.

   Figure 6-4 Workbook Wizard Select Trading Area Page

   
   

   The workbook is created.

Review Category Scorecard Step

Use this step to review the Category Scorecard. The Category Scorecard presents the category plan and merchandise financial plan details.

Use the targets and goals (in the form of roles, strategies, tactics, sales, gross profit, average inventory, turns, and so on) that were set as part of Category Planning and/or Merchandise Financial Planning as a reference while defining the constraints for MSO and generating the results.

The Category Scorecard is presented on the POG hierarchy in MSO tasks, unlike in other tasks, such as Category Planning and Assortment Planning, where it is presented on the PROD hierarchy. The target plan information available on the PROD hierarchy must be transformed into the POG hierarchy.

The mapping between the PROD and POG hierarchies is maintained in Category Management Administration and is used to transform product hierarchy-based targets (from the Category Planning task and MFP application) into POG hierarchy-based targets.

For example, for a supermarket format store, in the product hierarchy, Juices is a single category or sub-category, but in the POG hierarchy based on the product packaging, it is divided into Bottled Juices and Tetra-pack Juices POG categories or POG sub-categories. In such a scenario, the mapping between the PROD and POG hierarchies needs to be defined in the Category Management Administration workbook.

Prior to starting this step:

• An approved category plan with various targets, roles, strategies, and tactics must be available.

• A merchandise financial plan must be available and must be imported into RCM.

• The POG to PROD hierarchy mapping must be defined in Category Management Administration.

• Like Sub-Category mapping must be done in Category Management Administration in case new sub-categories are introduced.

After completing this step:

• Proceed to the next step in this task, 1. Set Up and Review Optimization @Sub-Category View, to run MSO.

Custom Menu Option

Use the Transform PROD to POG Hierarchy custom menu to transform the category plan and merchandise financial plan from the PROD hierarchy to the POG hierarchy.

Note that all the activities in the MSO tasks are done on the POG hierarchy only. Therefore, there is a need to transform (or convert) PROD hierarchy-based targets (received from the Category Planning task and MFP application) to the POG hierarchy-based targets.

Review Category Scorecard @Sub-Category View

Use this view to review the approved category plan (targets, roles, strategies, and tactics) and merchandise financial plan targets. The targets are in the form of Sales R, Sales Units, Gross Profit R, Average Inventory, Turns, and so on, sourced from the Category Planning task (OP measures) and MFP application (MFP measures).

Roles, strategies, and tactics that come from the Category Plan provide direction for the MSO process. They reflect the importance of a sub-category in category management, which helps ascertain the amount of space that must be allocated to any sub-category under a department. Space tactics, in particular, suggest the required increase or decrease in space required for a sub-category.

The idea is to align the allocation of space to sub-categories in MSO to these business plans.

For example, the following table shows the role, strategies, and tactics assigned to a set of sub-categories under a department:

Department	Category	Role	Sub-Category	Strategy	Tactics
					Assortment	Space
Beverages	Coffee	Destination	Ground	Cash Generating	Increase	Increase
			Instant	Profit Generating	Maintain	Maintain
			Single Serve	Excitement Generating	Maintain	Maintain
			Whole	Turf-Defending	Increase	Maintain
	Tea	Routine
	Juice	Convenience
	Beer and Cider	Occasional

Per the preceding table, the ground coffee sub-category's space must be increased keeping the space the same (maintain - space tactics value) for all other sub-categories under the Coffee category. This should be kept in mind while defining the MSO run constraints.

The measures constituting a category plan and merchandise financial plan are available in the PROD hierarchy and must be mapped to the POG hierarchy in this view.

Run the Transform PROD to POG Hierarchy custom menu option after checking the WP Transform PROD to POG flag measure in order to populate the plan measures in this view at the POG hierarchy level.

Figure 6-5 shows an example of different measures sourced from the Category Planning task in RCM and the MFP application.

Figure 6-5 Review Category Scorecard @Sub-Category View

Table 6-1 lists the measures available in this view.

Table 6-1 Review Category Scorecard @Sub-Category View Measures

Label	Description
MS WP Transform PROD to POG	Flag measure that must be checked prior to running the Transform PROD to POG custom menu option.
OP Strategy Assignment	Strategy assigned to a sub-category or a category in the original plan in Category Planning. The strategy represents the overall approach to attain the assigned role to a category.
OP Assigned Role - Industry Model A	Final role assigned to the category per Industry Model A in the approved working plan version of the category plan, known as the original plan.
OP Assigned Role - Industry Model B	Final role assigned to the category per Industry Model B in the approved working plan version of the category plan, known as the original plan.
OP Tactic Assignment	Approved and targeted tactics assignment to a sub-category at the trading area level in the category plan.
MS WP Sales R	Working plan's sales retail value defined in the POG hierarchy optimization for the POG Sub-Category. An LY version of this measure (MS LY Sales R) is also available.
MS WP Sales U	Working plan's sales units defined in the POG hierarchy optimization for the POG Sub-Category. An LY version of this measure (MS LY Sales U) is also available.
MS WP Sales AUR	Working plan's average unit retail value defined in the POG hierarchy for the POG Sub-Category. An LY version of this measure (MS LY Sales AUR) is also available.
MS WP Gross Profit R	Working plan's gross profit value defined in the POG hierarchy for POG Sub-Category. An LY version of this measure (MS LY Gross Profit R) is also available.
OP Sales R	Original plan assortment's (approved category plan's) sales retail value. It is used in assortment planning and MSO as the target sales retail value.
OP Sales U	Original plan assortment's (approved category plan's) sales units. It is used in assortment planning and MSO as the target sales units.
OP Gross Profit R	Original plan assortment's (approved category plan's) gross profit value. It is used in assortment planning and MSO as the target gross profit retail value.
OP Sales AUR	Original plan assortment's (approved category plan's) average unit retail value. It is used in Assortment Planning and MSO as the target average unit retail value.
OP Promo Sales R	Original plan's (approved category plan's) promotional sales retail value. It is used in Assortment Planning and MSO as the target promo sales retail value.
OP Promo Sales U	Original plan's (approved category plan's) promotional sales units. It is used in Assortment Planning and MSO as the target promo sales units.
OP Promo Sales AUR	Original plan's (approved category plan's) average unit retail value. It is used in Assortment Planning and MSO as the target average unit retail value.
OP Private Label Sales R	Original plan's (approved category plan's) sales retail value from private label products. It is used in Assortment Planning and MSO as the target sales retail value for private label products.
OP Private Label Sales U	Original plan's (approved category plan's) sales units from private label products. It is used in Assortment Planning and MSO as the target sales units for private label products.
OP Private Label Sales AUR	Original plan's (approved category plan's) average unit retail value from private label products. It is used in Assortment Planning and MSO as the target average unit retail value for private label products.
OP Private Label Gross Profit R	Original plan's (approved category plan's) gross profit retail value from private label products. It is used in Assortment Planning and MSO as the target gross profit retail value for private label products.
OP Avg Inv R	Original plan's (approved category plan's) average inventory retail value carried. It is used in Assortment Planning and MSO as the target average inventory retail value.
OP Turn	Original plan's (approved category plan's) turns. Turns represent the number of times the average inventory carried can be sold over in a specified period of time. This measure is used in Assortment Planning and MSO as the target average inventory retail value.
MS WP Sales C	Working plan's sales cost value defined for the POG Sub-Category. An LY version of this measure (MS LY Sales C) is also available.

Custom Menu

Use the Transform PROD to POG Hierarchy custom menu in this view to transform the PROD hierarchy-based plan (category plan and merchandise financial plan) measures to the respective POG hierarchy measures.

This custom menu uses the mapping defined between the PROD and POG hierarchies by the administrator in the Category Administration task to come up with POG-based plan measure values.

Note that the measures in this view are only populated after the custom menu runs.

Set Up and Review Optimization Step

Use this step to run MSO and review the optimization results.

MSO is used to derive and allocate optimum space to the sub-categories under a category in a store. An algorithm in the form of special expression ASOSpace is used through a custom menu trigger to identify the appropriate space and corresponding profit, while keeping the constraints set in this view under consideration. Space and Profit tables, containing data on space-to-profit variance based on historical data, are used by the algorithm and form the basis of the optimization results.

There are two types of MSO:

• Space-based: For a given set of space constraints, optimization recommends the maximum profit.

• Financial parameter-based: For a given set of gross profit targets, optimization recommends the optimum space.

MSO can be run at the store, store cluster, or trading area level for a set of POG sub-categories mapping to a POG department.

To run MSO and review the results:

1. Set the constraints for optimization mechanics:

   • Optimization Type and Target Alignment Type: There are two optimization types: Space-based and financial parameter-based. Space-based optimization type has the target alignment type of Less than or Equal to. For Financial parameter-based, the two options include Max Profit Up and Max Profit Down. The combined options include the following:

     • Space - Less than or Equal to

     • Financial - Max Profit Up

     • Financial - Max Profit Down

   • Financial Target Metric and Optimization Method: The optimization can be based on the different financial target metrics, which include MFP Gross Profit R and OP Gross Profit R. There is one optimization method available: Optimal.

2. Set the space constraints:

   • Upper guard rail % or Upper guard rail space: Upper guard rail space is used in optimization to define the upper limit of space allocation for any sub-category, so as to keep the optimization results within an upper bound value of space. It can be defined as a percentage of the current space.

   • Lower guard rail % or Lower guard rail space: Similar to the upper guard rail, lower guard rail space is defined as the lower limit of space allocation for any sub-category and can also be defined as a percentage of current space.

   • Max and min space: Max and min space values represent the highest upper limit and lowest limit of space that can be made available to any sub-category. The optimization process picks the lower of the max space and upper guard rail space and the higher of the min space and lower guard rail space as inputs while setting the range of optimization results.

   • Current space, total available space, and space increments for POGs: Current space represents the space allocated to any sub-category in the current store layout. Total available space represents the space made available to the POG department to which a set of POG sub-categories map to in an the upcoming space plan. Space increments are based on the planogram specifications, which determine the minimum length by which current space can be changed.

3. Set the optimization scope per the business requirements:

   1. Select the sub-categories to be included in the optimization.

   2. Select the mandatory sub-categories. Mandatory sub-categories must definitely be part of the final assortment. Checking the mandatory flag for a sub-category ensures that it gets a higher priority in space allocation from the available space.

   3. Lock the current space for sub-categories.

4. After setting the previously mentioned constraints, run the Optimize Sub-Category custom menu.

5. Review the optimization results in the form of recommended space and respective gross profit by comparing them with the set space constraints and targets in the category scorecard.

6. Review the optimization results using the histogram formats.

Prior to starting this step:

• Review the targets in the Category Scorecard.

• Ensure that the space profit tables are populated.

After completing this step:

Proceed to the Approve Optimization Result step to approve the optimization results.

This step has the following views:

• 1. Set Up and Review Optimization @Sub-Category View

• 2. Review Space and Profit Histograms @Sub-Category View

Custom Menu Option

Use the Optimize Sub-Category custom menu to run the optimization at the sub-category level once all the constraints have been defined.

1. Set Up and Review Optimization @Sub-Category View

Use this view to do the following:

• Set the constraints for MSO for the sub-categories mapped to a department.

• Run MSO using the Optimize Sub-Category custom menu.

• Review the results from the optimization in the form of recommended space and gross profit retail.

Define the following constraints:

• Optimization type constraints: These constraints define the mechanics of MSO. The following measures must be defined: MS WP Optimization and Target Alignment Type, and MS WP Financial Target Metric.

• Space constraints: Space constraints define the range (upper and lower limits) of space allocation, current space of a sub-category, and total available space for the department to which the sub-categories maps. The measure list to be defined consists of the following: MS WP Total Available Space Linear Units, MS WP Space Increment, MS WP Current Space Linear Units, MS WP Min. Space, MS WP Max. Space, MS WP Lower Guard Rail %, MS WP Upper Guard Rail %, MS WP Lower Guard Rail Space, and MS WP Upper Guard Rail Space.

  The optimization algorithm triggered by the custom menu picks the following inputs when it comes to determining the range of space allocation:

  • The lower limit of the space allocation range is the higher value of the two measures: MS WP Max. Space and MS WP Upper Guard Rail Space.

  • The upper limit of space allocation range is the lower value of the two measures: MS WP Min. Space and MS WP Lower Guard Rail Space.

• Optimization Scope constraints: This set of measures is used to define the scope of MSO for the sub-categories under a department. The measures that must be defined here consist of the following flag measures: MS WP Include POG Sub-Category, MS WP Lock Space, and MS WP Mandatory.

  For details on the measures, see Table 6-2.

Display this view at the POG sub-category and POG department levels in outline view mode. The optimization can be run at the following levels:

• Store, cluster, or trading area level on the location hierarchy.

• Quarter, half year, or year level.

Figure 6-6 shows an example of the set constraints and derived optimization results at the POG department level.

Figure 6-6 1. Set Up and Review Optimization Parameters @Sub-Category View

Table 6-2 lists the measures available in this view.

Table 6-2 1. Set Up and Review Optimization Parameters @Sub-Category View Measures

Label	Description
MS WP Optimization and Target Alignment Type	Used to define the type of MSO and target alignment from a drop-down selection. The following options are available for selection: Space - Less than or Equal to, Financial -Max Profit Up, and Financial - Max Profit Down.
MS WP Financial Target Metric	Used to assign the target metric to be used as the basis for MSO at the POG Sub-Category. The following options are available: MFP Gross Profit R and OP Gross Profit R.
MS WP Optimization Method	Method adopted by MSO is defined through this measure. There is one optimization method available: Optimal.
MS WP Total Available Space Linear Units	Represents the total available space in linear units for a POG department to which the POG sub-categories map for the upcoming space plan or the working plan.
MS WP Space Increment	Represents the incremental value of space in linear units by which the space should be increased or decreased for a POG Sub-Category. This is based on the predefined size of POGs for different sub-categories designed per the store layout, shelves, and fixture specs.
MS WP Current Space Linear Units	Represents the current space in linear units, assigned to a POG Sub-Category at a store.
MS WP Aisle Number	Used to identify the location or placement of a sub-category in a store. An aisle is a passage for customer to walk through. A store consists of multiple aisles with merchandise displayed on either side. This is first coordinate of the three coordinates used to identify the location of a sub-category on the store floor.
MS WP Aisle Sequence	Used to identify the position sequence of a sub-category in an aisle. This acts as the second coordinate in identifying the sub-category on the store floor. See the store layout diagram in Figure 6-7.
MS WP Aisle Side	Used to identify the side on which a sub-category is placed in an aisle while walking through the aisle in the direction of expected customer traffic movement. This acts as a third coordinate to identify a sub-category's location on the store floor. See the store layout diagram in Figure 6-7.
MS WP Include POG Sub-Category	Flag measure used to mark the POG Sub-Categories which should participate in MSO for space allocation.
MS WP Lock Space	Flag measure used to lock space for a POG Sub-Category in the MSO run. It is used to maintain the current space allotted to the POG Sub-Category in the upcoming space plan or working plan. The current space of the locked POG Sub-Category is deducted from the total available space for the respective POG Department to calculate the effective total available space used for allocating space for the rest of the POG Sub-Categories participating in MSO.
MS WP Mandatory	Flag measure used to mark the mandatory POG Sub-Categories, which should be given higher priority in space allocation from the total available space by MSO.
MS WP Lock Space Selection Error	Used to present the error messages in case the Lock Space measure is checked for a POG Sub-Category without including it (through the Include flag measure) for an MSO run.
MS WP Mandatory Selection Error	Used to present the error messages in case the Mandatory measure is checked for a POG Sub-Category without including the sub-category (through the Include flag measure) for an MSO run.
MS WP Min. Space	Minimum amount of space that can be allocated to a POG Sub-Category.
MS WP Max. Space	Maximum amount of space that can be allocated to a POG Sub-Category.
MS WP Lower Guard Rail %	User-defined lower limit space percentage output for a POG Sub-Category required from an optimization run. It is expressed as an absolute percentage of current space of a POG Sub-Category. It is used to control the lower limit of recommended space output for a POG Sub-Category, from an optimization run, so as to keep it within the range per the business requirements.
MS WP Upper Guard Rail %	User-defined upper limit space percentage output for a POG Sub-Category required from an optimization run. It is expressed as an absolute percentage of the current space of a POG Sub-Category. It is used to control the upper limit of the recommended space output for a POG Sub-Category, from an optimization run, so as to keep it within the range per the business requirements.
MS WP Lower Guard Rail Space	User-defined lower limit space output for a POG Sub-Category required from the optimization run. It can be directly entered or calculated on the basis of MS WP Lower Guard Rail %. It is used to control the lower limit of the recommended space output from an optimization run, so as to keep it within the range per the business requirements.
MS WP Upper Guard Rail Space	User-defined upper limit space output for a POG Sub-Category expected from the optimization run. It can be directly entered or calculated on the basis of MS WP Upper Guard Rail %. It is used to control the upper limit of the recommended space output from an optimization run, so as to keep it within the range per the business requirements.
MS WP Space Result String	Used to present the error messages applicable at the aggregate level in an optimization run. For example: Max Capacity is invalid.
MS WP Sub Result String	Used to present the specific error messages in the optimization run. It specifically points to the POG Sub-Category where some user-defined constraints are off-the-mark. For example: Invalid Min Max Constraints for a specific sub-category.
MS WP Recommended Space	Recommended space output for a sub-category from an MSO run corresponding to the recommended gross profit retail. The CP version of the measure is used to store the approved results.
MS WP Space Change	Difference between the recommended space and current space for a POG Sub-Category.
MS WP Recommended Gross Profit R	Recommended gross profit retail output for a POG Sub-Category from an MSO run corresponding to the recommended space. The CP version of the measure is used to store the approved results.
MS WP Gross Profit Change	Difference between the recommended gross profit and working plan gross profit retail for a POG Sub-Category.

The following diagram shows an example of a store layout. Table 6-3 describes the aisles in the diagram.

Figure 6-7 Store Layout Diagram

Table 6-3 Aisle Description of Store Layout Diagram

	Aisle Number	Aisle Position Sequence	Aisle Side
Bread	7	1	Right
Patisseries	7	1	Left
Cakes & Tarts	7	2	Left
Cleaning Tools & Gloves	6	1	Right
Cleaning	6	1	Left
Air Fresheners	5	1	Right
Household Sundries	5	2	Right
Food Storage	5	3	Right

Custom Menu Option

This view supports the Optimize Sub-Category custom menu, which is used to run MSO at the sub-category level. A set of sub-categories mapping to a department are allocated space using this custom menu. This custom menu uses an embedded special expression/API to recommend the most appropriate space and gross profit retail values in-line with the defined constraints and on the basis of the space profit tables.

Once the constraints are set, use this custom menu to run MSO to generate recommended space and gross profit retail values for the sub-categories.

2. Review Space and Profit Histograms @Sub-Category View

Use this view to review the MSO results in the form of histograms. Histograms represent a series of results in the form of cumulative recommended space and gross profit retail values. These results are derived by the special expression/API while allocating space to individual POG sub-categories from the total available space.

The histograms here graphically represent the relation and variation between space allocated and respective gross profit retail return for the POG sub-categories under a POG department.

Figure 6-8 represents a sample histogram for a set of optimization results.

Figure 6-8 2. Review Space and Profit Histograms @Sub-Category View

Table 6-4 lists the measures available in this view.

Table 6-4 2. Review Space and Profit Histograms @Sub-Category View Measures

Label	Description
MS WP Histogram Space	Cumulative recommended space output from an MSO run while allocating space to individual POG Sub-Categories under a department.
MS WP Histogram Profit R	Cumulative recommended gross profit retail output corresponding to the recommended space from an MSO run while allocating space to individual POG Sub-Categories under a department.

Approve Optimization Results Step

Use this step to approve the MSO results. Optimization results consist of the recommended space and gross profit retail value. Once approved, the optimization results are shared with the assortment planning process so that the assortments for the sub-categories can be planned in-line with the allocated space.

Prior to starting this step:

MSO must conducted and the results obtained from it, in-line with the targets.

After completing this step:

This is the last step in the MSO process. With the approval of the MSO results, the next step in the overall business process flow involves beginning the assortment planning process.

This step has one view.

Custom Menu Option

Use the Approve Sub-Category custom menu to approve the optimization results for the POG sub-categories.

Approve Optimization Results @Sub-Category View

Use this view to approve the optimization results from the MSO run. The optimization results consist of the recommended space and gross profit retail.

Mark the POG sub-categories that must be approved and run the Approve Sub-Category custom menu to complete the approval process. Once approved, the results stored in the working plan measures are copied to the CP version measures. Once approved, the optimization results are conveyed or passed onto the assortment planning task. These measures appear in the assortment planning scorecard view so as to ensure that the assortment plans being created for the sub-categories are in alignment to the space allocated to them.

Figure 6-9 Approve Optimization Results @Sub-Category View

Table 6-5 lists the measures available in this view.

Table 6-5 Approve Optimization Results @Sub-Category View Measures

Label	Description
MS WP Recommended Space	Recommended space output for a POG Sub-Category from an MSO run corresponding to the recommended gross profit retail. The CP version of the measure (MS CP Recommended Space) is used to store the approved results.
MS WP Recommended Profit R	Recommended gross profit retail output for a POG Sub-Category from an MSO run corresponding to the recommended space. The CP version of the measure (MS CP Recommended Profit R) is used to store the approved results.
MS WP Approve	A Boolean flag measure which needs to be checked before running the Approve Sub-Category custom menu.
MS WP Approved By	User ID of the approver for the POG Sub-Category level optimization results.
MS WP Approved Date	The date on which the POG Sub-Category level optimization results were approved.

Custom Menu Option

Use the Approve Sub-Category custom menu to approve the optimization results for the POG sub-categories. On approval, the custom menu copies the optimization results stored in the WP measures to the CP version measures.