Automated Space Optimization: A Strategic Transformation

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To build customer loyalty and compete more efficiently, retailers are increasingly pursuing strategies

to localize assortments and reduce operating costs. To achieve these goals, many have turned to

space optimization – where the needs of assortment breadth, inventory, and space are balanced in

the most economical way. However, full potential often remains unrealized. Effectively scaling

requires adopting new technologies and transitioning from manual efforts to a more strategic

approach that emphasizes planning. Crucially, this transition involves relinquishing direct control

over outputs, embracing broader metrics of success, and aligning stakeholder expectations. While

the shift may initially provoke fears of job displacement or resistance to change, the long-term

rewards far outweigh the growing pains.

Optimization delivers measurable benefits by consistently balancing assortment, inventory, and

presentation needs; automation is the only way to scale across hundreds of stores. The approach

enables more tailored assortments, reduced restocking costs, and enhanced product exposure

based on each stores selling patterns. These systems ensure planograms align with store fixtures

and store level assortments while accommodating brand commitments like shelf exposure and

listing goals and support easier restocking while staying in-stock and reducing backroom

dependency. Despite its complexity, automation enhances operational efficiency and can drive

better outcomes for both retailers and suppliers.

The project structure for optimizing retail space involves key factors like merchandising, inventory,

and labor. A steering committee, including representatives from category management, supply

chain, store operations, finance, and technology, should meet regularly to share insights and

strategies. Over time, committee members recognize opportunities to leverage these optimization

capabilities within their own teams, multiplying benefits. The project team itself must have dedicated

resources from the space planning group to be successful. The team needs to periodically update

executive leadership, who need to actively sponsor the project, messaging its importance and

recognizing there will be challenges to overcome.

Introducing optimization is as much about people as it is about technology. The transition shifts

focus from execution to planning, necessitating upfront alignment on goals and clarity on exceptions.

Historically, planograms prioritized assortment breadth over inventory efficiency, often misaligning

with optimization goals. Addressing these challenges requires recalibrating scorecards to include

carrying costs, replenishment efficiency, and other metrics while managing stakeholder

expectations proactively.

Major software providers like Blue Yonder and Relex offer distinct approaches. Blue Yonder enables

granular control through specialized coding, ideal for precise needs but costly and less scalable

while requiring very specialized staff. Relex simplifies the process with command-based

automation, making it more accessible for legacy teams but without as much detailed control.

Regardless of the platform, successful deployment hinges on rigorous project management, strong

merchant buy-in, cross functional inclusion, realistic timelines, and attention to data quality.

Simplified requirements and multi-year roadmaps facilitate adoption while ensuring scalability, and

ensure plans are driving towards a long-term goal.

Effective implementation begins with prioritizing categories based on value and complexity. Early

focus on simpler categories supports steady learning and progress without biasing outcomes.

Running manual efforts parallel to automated optimization provides insights to refine processes.

Transparency in sharing results, both positive and challenging, builds trust and fosters collaboration

among internal teams and suppliers.

Scaling depends on both the efficiency of processes and demonstrated benefits. Gradual expansion

allows teams to adapt, share lessons, and improve training. Close collaboration with store

operations ensures alignment with on-the-ground realities, while time savings from automation

enable deeper strategic planning and partnerships. Over time, optimization becomes normalized,

fostering enthusiasm for continued change.

Not all categories may require optimization, but ongoing reviews ensure continuous improvement

and refresh the long-term roadmap. Maintaining a strong partnership with software providers helps

refine tools and leverage best practices. Successful optimization empowers retailers to localize

assortments more effectively and adapt to individual market needs. Moreover, it highlights the

organization's capacity for transformation, creating a template for future initiatives. Implementing a

robust test-and-learn process will build organizational knowledge to shape merchandising rules,

requirements, and exceptions.

Through thoughtful planning, robust technology, and cultural adaptation, automated space

optimization becomes a transformative force, enhancing efficiency, profitability, and organizational

resilience – but like any transformation, it requires the right mix of patience, people, adaptiveness,

and technology.