Phasing intake: cover, and the last week that matters

The situation

Deciding how much to sell each week is only half a plan. The other half is deciding when the goods turn up, and they do not turn up weekly. Coats are made in batches and shipped in containers. So a smooth curve of selling has to be fed by a handful of lumpy deliveries. This lesson builds that schedule. Then it reads the one figure everybody judges the stock by. That figure is trustworthy in the middle of a season and quietly misleading at both ends.

Same office, the following Monday. The phased sales plan from lesson 1 is agreed: 47,800 units across eighteen weeks, built by calendar date. What has to be agreed today is when the goods land.

Stanmere buys outerwear in five deliveries, not eighteen. Coats are made in runs, shipped in containers and received in a warehouse that cannot handle a drop every week. So the sales curve is continuous and the intake curve is five steps. Everything difficult about intake phasing comes from that mismatch. None of it comes from the total, which is settled by one line of arithmetic before anybody argues about anything.

The identity, and then the argument

closing stock = opening stock + intake - sales

Intake is the goods arriving. Stanmere opens the season owning 6,800 units of outerwear — carry-over from last season plus early arrivals — and plans to close it owning 6,200, which go into the January clearance. So:

intake = 47,800 + 6,200 - 6,800 = 47,200 units

That number is not in dispute and nobody can improve it. Every remaining decision is when those 47,200 units arrive. The argument is worth having, because the same total delivered in a different order produces a different season.

Money in this lesson is at cost, meaning landed cost: what a unit costs Stanmere once it is in the warehouse, duty and freight included. That is GBP 11.40 a unit on average across the category, so the intake plan is GBP 538,080 of stock moving through eighteen weeks.

Cover, defined before it is used

weeks of cover = closing stock ÷ average planned sales of the weeks ahead

Cover answers one question: at the rate I am about to sell, how many weeks will this stock last? Stanmere reads it on the next four weeks. Two rules go with that, and both matter more than they look:

1. Cover looks forward. It is a statement about the future written in units you own now, so it changes when the forecast changes, even if not one garment moves.
2. Near the end of a season there are fewer than four weeks ahead, so the window shrinks. Stanmere computes cover on whatever weeks remain, and at week 18 there are none. Cover is undefined and the sheet shows closing stock instead. A cover figure computed on one remaining week is not a comfort, and the table below has one.

The intake plan

The cover column looks like the teeth of a saw. It jumps in a delivery week and falls for two or three weeks afterwards, between 4.5 and 7.7. That shape is not a defect. It is what five deliveries and eighteen selling weeks look like. A planner who smooths it is either adding deliveries nobody can receive or holding stock nobody needs.

Cover is short-sighted on purpose, and in week 1 it lies

Week 1 closes on 7.6 weeks of cover, one of the highest readings in the season. Read carelessly, that says Stanmere is over-stocked in August.

It says nothing of the kind. The four weeks ahead of week 1 are the four smallest weeks of the season, so a modest pile of stock divides into a large number. The question that matters in week 1 is not "how many weeks of August do I own". It is "will I be full for week 10" — and that is a different sum. At the end of week 1 Stanmere owns 13,265 units against 21,783 units that weeks 2 to 10 are planned to sell. That is 60.9% of the run-up to the peak, with 32,600 units still to arrive before the end of week 10.

That is the honest reading, and it is not a cover figure. Four-week cover is a good control from about week 5 onwards, when the weeks ahead are a similar size to the ones behind. Before that, and again after week 15, it is measuring something too small to be worth dividing by.

The buying calendar runs ahead of the selling calendar

Line up the two curves and the offset is the whole discipline.

• The biggest delivery is week 7: 11,600 units.
• The biggest selling week is week 10: 4,109 units.
• By the end of week 9, Stanmere has received or already owned 36,000 units — 66.7% of everything the season will ever hold — and has sold 18,609, which is 38.9% of the season.

That gap is not a mistake either. It is the cover policy expressed as a calendar. To own five weeks of forward cover in week 10, the stock has to be in the building in week 7. That means it left the factory around week 1 and was cut before the season opened. A retailer's intake decisions are taken against a forecast, in the order the forecast implies, months before the forecast can be checked. That is the sentence the rest of this course is about.

The last delivery that can still change the season

Here is a test worth carrying out of this course. A delivery adds sales only while you own less than the weeks ahead of you are planned to sell. Past that point every unit that lands displaces a unit you already had, and the surplus is not sales. It is end-of-season stock arriving early.

Apply it to week 13:

• Stock owned at the start of week 13, before the delivery: 17,231 units.
• Planned sales, weeks 13 to 18: 18,231 units.
• The gap: 1,000 units.

The fifth delivery is 7,200 units. 1,000 of them will be sold this season and 6,200 of them will not, and 6,200 is exactly the planned closing stock. The plan is not wrong. The plan is deliberately buying 6,200 units it knows the season will not sell, because Stanmere clears outerwear in January and a January clearance with nothing in it earns nothing. That is a decision, it is priced, and course 17.4 is where it is argued about.

Run the same test on week 15 and it answers itself: 16,781 owned against 10,581 still to sell. Any delivery landing from week 15 onwards is end-of-season stock in its entirety. There is no judgement in that sentence and no forecast in it either. It is subtraction.

What an early delivery does buy, and what a late one costs

It is only fair to price the other direction, because insurance is a real reason to take stock early.

Slip the fourth delivery two weeks, from week 10 to week 12. A vessel delay is the most ordinary thing that can happen to an intake plan. Stanmere does not run out: it enters week 10 owning 17,391 units against a 4,109-unit week. But cover closes week 10 at 3.7 and week 11 at 2.7, and it is at 2.7 in the week before the two biggest weeks of November.

At category level that still looks survivable, and here is the honest part: at category level it usually is. A category of six options and seven sizes rarely sells out in total. What a two-week slip actually produces is a broken size run inside the options that were on that container, in the weeks the customer most wants them. The category number in the table above cannot see it, because the units missing are 12-year-old parkas while the units present are 3-year-old gilets. Cover is a category control. It answers a category question. It is not evidence that a shop has something to sell.

Phasing errors reach intake, which is where they cost money

Lesson 1 produced two curves from the same total. Suppose the naive one had gone forward. Its peak is week 11, so the fourth delivery would have been scheduled for week 11, not week 10. That is what an intake plan built off a sales curve does, mechanically, without anybody deciding anything.

The customer would still have arrived in week 10, because the schools still break up on 27 October. Stanmere would have traded the biggest week of its season on whatever stock it happened to be holding, closing week 10 at 3.7 weeks of cover instead of 6.6. And it would have received the container the week after the week it was for.

Nothing in that sequence is a mistake anybody made. A correct total, a correct cover policy, a correct delivery schedule derived correctly from an incorrect curve. A phasing error is the only kind of planning error that gets executed perfectly.

Act as a retail merchandiser who has to justify every delivery week to a finance director and every cover figure to a buyer. Category and season: [NAME, NUMBER OF WEEKS, OPENING AND CLOSING DATES]. Phased sales plan by week: [PASTE]. Opening stock in units, and planned closing stock in units, with a sentence on what the closing stock is FOR. Landed cost per unit — what a unit costs once it is in your warehouse — and say that money below is at cost. Proposed deliveries: [WEEK AND UNITS FOR EACH]. Cover policy: [THE FLOOR, THE CEILING, AND HOW MANY WEEKS FORWARD COVER IS COMPUTED OVER]. Supplier lead time and the last week a booked quantity can be changed. Do the following. First, check the intake identity — closing equals opening plus intake minus sales — and tell me whether the proposed deliveries add up to it, naming the gap if they do not. Second, build the weekly sheet: opening, intake, sales, closing and forward cover, and beside every cover figure print HOW MANY WEEKS it was divided by. Third, flag every week where the forward window holds fewer than four weeks and say plainly that the cover figure there is closing stock wearing a ratio. Fourth, tell me in which week cumulative intake passes half the season and in which week cumulative sales do, and state the gap between them as the cover policy expressed as a calendar. Fifth, find the last week in which stock owned is still LESS than the sales planned ahead of it, and for every delivery after that point split it into units that will sell this season and units that are end-of-season stock arriving early. Sixth, price two changes: pulling one named delivery earlier, and slipping one named delivery later — for each give me the cover in every affected week, the cash committed earlier or later at cost, and whether the season sells a single extra unit. Do not recommend an early delivery unless you can name the risk it is insuring against.

What this hands to lesson 3

The plan is now a complete object: a weekly sales curve, five deliveries, a cover line and a stated closing position. It is also, at this point, entirely a forecast. Not one week of it has been traded.

Four weeks from now Stanmere will have four weeks of actual sales, and they will not match. The question lesson 3 answers is the one that decides what happens to the 18,000 units of intake still unfixed at that point: is the season smaller than planned, or is it later than planned? Those two readings produce almost the same category number for ten weeks and completely different intake decisions, and telling them apart is the whole job.