Managing Your Sell Out The Equal Covers Replenishment Method

For some fashion retailers, it is important that a style sells out everywhere it is stocked at the same time, at least as closely as we can manage it. The equal covers method aims to achieve this as far as possible. This method is commonly used by fashion retailers with collections. It gives all stores a consistent look so if a consumer goes into one store in her lunch break and a different store at home at the weekend, the stores present the same merchandise as far as is reasonably possible.

The algorithm can be programmed in to your replenishment software and some replenishment products have this capability as standard.

Building to Equal Forward Stock Cover Across A Chain of Stores

It works as follows:

  1. Calculate the days cover for each store in the chain, based on the store stock on hand, and previous replenishment or allocation decisions with stock still in transit to the store.
  2. Start with the store with the lowest days of supply (store B in this example).
  3. Store B has 10 days stock cover
  4. Store D has the next lowest cover with 12.5 days
  5. Give Store B 2.5 days cover (i.e. 2.5 x average daily sales in store B) to bring Store B stock to the same level as store D
  6. Then bring Stores B and D up to the same level as Store C. In this case they will need another 2 days of stock (14.5 – 12.5) based on their individual rates of sale.
  7. At any point in this process when you run out of stock to distribute you stop.
  8. If you have brought all stores up to the end of season target and you still have replenishment stock left you can keep going. So, in this example you would bring all the stores up to 17 days cover.
  9. Then you keep going until all the replenishment stock has been used up.
  10. Finally look at the quantity of stock which you will now have in stores at the season end and compare it to your terminal stock target for the season. If the terminal stock is equal to or lower than target, that’s enough. If the resulting terminal stock is too high, then consider a markdown to finish the season with the planned terminal stock.
  11. You can apply this logic just to styles of concern or indeed to the whole collection, so that you achieve the terminal stock target for the complete collection and, as you inject new season styles into the stores you have the preferred visual impact in all stores as near together as possible.

In this example, we started the process 15 days before season end, but this is for illustration only. In practice, most retailers have a view of how much cover they need in stores and let’s say that 8 weeks cover in stores is the goal. If you have a 26 week season, you could start this process at the end of week 18 (26 weeks minus 8 weeks cover).

If you’d like more best practice advice check out our allocation and replenishment e-learning course.

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Posted by Brian Hume
25th July 2018

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