How to create product hierarchy for related items

Hi, we are setting up a replenishment plan that consider item substitutions.

To analyze the item substitution in the replenishment plan we want to create a product hierarchy where, under a category, there are all the item substitutable with each other.

To do this, we would like to know if this steps are correct:

1. Create a Catalog in functional area "planning" controlled at master level
2. Create categories and associate categories to the item in PIM
3. Go to Supply Chain Planning → task list → Manage Analysis Hierarchy for related item → create a product hierarchy (only give name and description) → click on "Create analysis Hierarchy" as show the screen attached below.