Retail Operation Notes

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Buying/Handling
1. Merchandise planning
2. Merchandise control-OTB
3. Inventory planning
4. Managing Inventory
5. Vendor Selection
6. Vendor Negotiations
7. Merchandise Handling

Dollar Merchandise Planning (314)
* (up arrow) inventory cs (down arrow) inventory
* Inventory=largest retail investment
* Buyers responsible for a planning of merchandise requirements * Analyze inventory performance with:
* Gross Margin return on inventory(GMROI): Gross margin divided by average inventory at cost; alternatively, it is the gross margin percent multiplied by net sales. * (gross margin/net sales) x (net sales/average inventory at cost=(gross margin/average inventory at cost) * Step 1: Determine planned sales/period

* Use 1 of 4 methods to plan # invested in stock
-Basic Stock method(BSM): (317)_______________-when you have a real low inventory turnover; sales are high and low * Average monthly sales for the season=Total planned sales for the season/number of months in the season * Average stock for the season=(Total planned sales for the season / Inventory turnover) * Inventory Turnover=estimated inventory-turnover rate for the season * Basic Stock=Average stock-Average Monthly Sales

* BOM at retail=Basic Stock+planned monthly sales
-Percent-Variation Method (PVM) (318)
* BOM stock=Average stock for season x ½ [1+(Planneed sales for the month/average monthly sales)] -Week’s Supply Method(WSM) (319)
* Plan inventory weekly, not by month; Sales don’t fluctuate * Number of weeks to be stocked=number of weeks in the period/stock turnover rate for the period * Average weekly sales=Estimated

-Stock-to-sales method (SSM) (319)

TTL=total

Dollar Merchandise Control-OTB(320)

* OTB=Merchandise needed-merchandise available
* Merchandise needed=Planned EOM inventory + planned sales + planned markdowns * Merchandise available = open inventory + on order
* Open to buy refers to the dollar amount that a buyer can currently spend on merchandise without exceeding the planned dollar stocks 1. Planned sales for February
2. Plus planned reductions for February(markdowns)
3. Plus EOM planned retail stock
4. Minus BOM stock
5. Equals planned purchases at retail
6. Minus commitments at retail for current delivery
7. Equals OTB
Most common buying errors:
1. Product priced too high/low for target market
2. Buying the wrong type of merchandise or buying merchandise that is too trendy 3. Having too much or too little basic stock on hand
4. Buying from too many vendors
5. Failing to identify the season’s hot items early enough in the season 6. Failing to let the vendor assist the buyer by adding new items or new colors to the existing mix (all too often the original order is merely repeated, resulting in a limited selection

Inventory Planning (322)

Start with merchandise plan
* Decide & Spend (OTB)
* Then make inventory plan
* Assist of items=merchandise mix

Merchandise Line: (322)
* Closely related products same end use, similar prices
* Manage GNROI for merchandise line

Optimal Merchandise Mix
* Variety-number of different merchandise lines that the retailer stocks in the store * Breadth (assortment)-number of merchandise brands that are found in a merchandise line * Depth-average number of stock-keeping units within each brand of the merchandise line

Constraining factors
* Dollar-merchandise constraints
* Consignment (pay from scan-when the vendor retains the ownership of the goods and usually establishes the selling price; its is paid only when goods are sold * Extra Dating-allows the retailer extra or interest-free days before the period of payment begins * Space Constraints

* Erchandise0turnover constraints
* Market constraints
* The make it difficult to max mix-variety, depth, breadth * - Adjust mix to...
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