Oracle Retail Suite supports two calendar configurations: the Gregorian calendar and the 4-5-4 calendar – but – which one is the best option for the retailer’s operation? What needs to be considered when making such a decision? And what are the implications of each calendar model in terms of functionalities and usability? The primarily objective of this post is to help answering some of these questions and create a decision tree that can be applied by the retailer when making such an important decision like this one for its operations.
First – let’s take a look into the concept of each calendar type:
- Gregorian: Regular calendar using the 12-month calendar year. Variations in terms of weeks can happen and time periods are not comparable (ex. Easter week in the previous year is not the same week in the current year, so it is difficult to map these weeks and have a comparison of sales, for example). The figure below is an example of Gregorian calendar and time periods:
- 4-5-4: This calendar is usually adopted by many retailers around the world because it provides a better visibility of the company’s fiscal and operational metrics at week level. Time periods are comparable, meaning that a week has always 7 days and it is possible to compare a week in the previous year with the same week this year (ex. you can check your Easter week sales performance year after year). The first day of week can also be configured (ex. Week always stars on Sunday and finishes on Saturday). A combination of weeks per month can also be defined – example: 4-4-5, 5-4-4, etc… The figure below is an example of 4-5-4 calendar and time periods:
Now – what are the implications of using each calendar in terms of Oracle Retail functionalities?
Below you will find some key implications of using each calendar type split by functional area and applications.
1. Change Management – first thing that needs to be taken into consideration is the impact in the organization. What is the current calendar in your organization? Changing a calendar from Gregorian to 4-5-4 requires a good level of change management in several areas, including merchandising (buyers), operations (supply chain) and finance. External parties are also impacted, such as suppliers (the use of 4-5-4 calendar, for example, might change the way that Deals incomes will be generated to a supplier)
2. Purchasing and Open-to-Buy (OTB)- Purchasing Budgets are defined at week level in a Merchandise Financial Planning solution and then, loaded into Oracle Retail Merchandising tool (RMS) to be used as the open-to-buy information when raising new Purchase Orders – it is a mechanism to control the budget allocated to a specific category throughout a pre-determined period of time. OTB capability can only be used in RMS if the solution is configured with 4-5-4 calendar. In order to use OTB with a Gregorian calendar, modifications to the process and the tool is required.
3. Sales History information –RMS can aggregate sales at week and month levels. If using Gregorian calendar, only month level aggregation is supported. If using 4-5-4 calendar, both week and month are supported and total sales are comparable with previous periods (which is not possible when using Gregorian calendar).
4. Supplier Deals –the negotiations with suppliers (ex. bill-back rebates) are also affected by the calendar. Income and Invoice generation for Deals can be determined at week, month, quarter, half-year or annual. The 4-5-4 calendar supports all these periods, but the week period is not supported at Gregorian calendar. Another thing to be considered is the period that an income will be generated when using 4-5-4 calendar. Example: in a 4-5-4 calendar, a week of a current month can actually end in the first days of the upcoming month – the income will be calculated based on this definition and the supplier needs to understand how the retailer calendar works.
5. Stock Ledger –Stock Ledger records and summarizes the financial results of transactions taking place in the various merchandising processes. Through this recording of transactions, the Stock Ledger keeps track of a retailer’s inventory volume and value. Week and Month Level calculations are supported in 4-5-4 calendar and only month is supported when using Gregorian calendar.
6. Financial Integration (G/L) –this is related to the previous point. It is important to understand how the financial system is currently configured for the retailer. It is recommended that both Oracle Retail and the financial system use the same financial calendar, but this is not always possible. If both applications (Oracle Retail and the financial system) are using 4-5-4 calendar, there are no major issues with the integration to General Ledger (all stock ledger metrics can be calculated in Oracle Retail, such as margins and ending inventory valuation and integrated to the financial system at week level). In case where Oracle Retail is using a 4-5-4 calendar, but the financial system uses a Gregorian calendar (which, depending of the country, the use of Gregorian calendar for financial reports is a legal requirement), a couple of things needs to be considered as follows:
- Stock Ledger transactions needs to be interfaced at day level (this is supported by Oracle Retail);
- Financial application needs to be able to calculate all merchandise financial metrics, such as margins, COGS and any other metric that is usually calculated in Oracle Retail.
7. Planning tools (focus on MFP and RDF) –planning tools also plays an important role when defining the calendar. The configuration templates that come along with MFP and RDF are based on a week calendar (4-5-4). For MFP, Gregorian can be used, but modifications to the base calendar are required. For RDF, forecast is usually defined at week and/or day levels and the use of Gregorian calendar becomes more difficult.
8. Forecast:
- Replenishment –replenishment in Oracle Retail can be run using forecast at week or day level. For Gregorian calendar, forecast should be loaded at day level. When using 4-5-4, forecast can be loaded either at week or day level.
- Allocation –forecast at day level is not supported in Allocation tool. The forecast must be loaded at week level. The implications of using a Gregorian calendar and a forecast at week level should be evaluated. In our experiences, this could represent variations in the Allocation results.
These are not the only impacts and points to be considered when evaluating the calendar configuration for Oracle Retail, but as per our experience from previous customers, these are the key things that should be considered in this process.
We hope that this post will be a helpful input for your projects!
Feel free to share your thoughts about this post.
Thanks,
- Cristiano Szepak.