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51 Cards in this Set
- Front
- Back
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Purpose of Merchandising Budget
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Retail method to account for inventory ie. value of inventory determined by retail prices, not by cost
$10,000 inventory or retail price |
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Foundation of Merchandising Budget
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By dept. / category/ class
season/ month/ week based on 1st Price* |
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1st Method for calculating planned sales
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1. Percent Change Method (the increase/decrease from last years sales) usually increase from inflation
- factors to consider: econ., remodeling, competition TY sales-LY sales/ LY sales (incre) LY-TY/LY (decrease) |
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2nd Method for calculation planned sales
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2. Space Productivity Method
-based on sales per sq. foot -by merchandise classification -determine # of sq ft in store NET SALES/SQFT= sales per sq ft |
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STOCK
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Planning controlling inventory
-fulfill sales goals -avoid stockouts -prevent stockouts -min. inventory investment -max gross margin & inventory turnover |
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Inventory-to-sales ratio
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Amt of inventory on hand to support sales
-most approp for fashion items/seasonal TOTAL INVENTORY FOR PERIOD/ SALES FOR SAME PERIOD i.e. $10000 inventory/ $5000 sales= 2 ratio WANT: b/w 1 and 2 |
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BOM vs. EOM
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BOM= amt of items you have on hand at beginning of month
EOM= amt of items at end of month, BOM for next month AVERAGE INVENTORY= (BOM FOR EACH MO. IN PERIOD + EOM FOR LAST MONTH IN PD.) / # OF MO. IN THE PD+1) Feb= BOM 10,000+ 7,000/ 2 |
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Planned Reductions
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Anything other than sales that reduces the retail value of the inventory
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3 Forms of Planned Reductions
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1. Markdowns (lgst.)- temportary/permanenet
2. Employee discounts (stable)' 3. Inventory Shortage- theft, damaged items |
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Book Inventory vs. Physical Inventory
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Retail value that should be on hand according to computer
- actual physical count to see amt in store -book<physical=overage -book>physical=shortage |
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Planned Purchases
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Amount of merchandise that is planned for delivery to store during given period.
-w/o exceeding EOM for pd -Amt must be accurate to cover everything & still have enough for planned EOM to occur PLANNED PURCHASES=PLANNED SALES+PLANNED REDUCTIONS+EOM-BOM |
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Open to Buy
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Amount of $ remaining to be spent from an exsisting budget after some purchases have been made
OTB= PLANNED PURCHASES-MERCHANDISE ON ORDER |
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Merchandise on Order
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Anything in transit that has been ordered and not yet arrived
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Assortment Planning
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the range of choices to be made at given time
*primary merchandising function Occurs at 3 levels: 1. Wholesale (help put line together) 2. Manufacturing( assortment early) 3. Retail (locations might be diff) |
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Assortment Factor
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dimensions of line that define it's characteristics
i.e. color or totes vs. backpacks |
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Stock Keeping Unit
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SKU- smallest unit
-unique piece of merchandise -define by assort. factors -most freq. reason for stock outs? SIZE |
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Assortment Breadth
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- the # of lines carried in company
- # of categories available, more categories=more bredth |
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Assortment Depth
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- of of items carreied w/in each line
- # SKUS w/in each category |
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SKU vs. Assortment Depth
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-higher amt of SKUs more assortment depth
-more SKUs= more to choose from -more difficult to keep all unique pieces of merchandise in store, likely to have stock outs |
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Assortment Volume
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Total # of units in an assortment
-Based on budget & retail price of merchandise MERCHANDISE BUDGET/ AVERAGE RETAIL PRICE i.e. $20000/10 (per item)= $2,000 |
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Model Stock
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ideal amt of each assortment factors in assortment
-refers to line plan summary -not to specifically i.d. what merchandise will fill out the merchandise plan |
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Assortment Dimensions
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precent thats allocated w/in each assortment factor
-an estimate based on rate of sale for each style, color, size -sales history & customer preference |
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Volume per Assortment Factor
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-# units per assortment factor(style)
ASSORTMENT VOLUME X ASSORTMENT DISTRIBUTION % |
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Volume per SKU
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-# units for each SKU assortment
3 x 5 x 4= 60 -based on model stock, assort. distr. & volume per assort. factor # UNITS PER STYLE x % COLOR x % SIZE |
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Assortment Diversity
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-relationship b/w volume & variety (depth)
-volume per SKU for assortment -AVERAGE # UNITS/ SKUS IN SAME ASSORTMENT i.e.- 100 units w/ 50 skus=2(more diverse) 1000 units w/ 5 skus=20 (more focused) * smaller VSA, more diverse * larger VSA, more focused |
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Sourcing
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- process of getting products to meet a companies marketing objectives
- materials, production, finished goods - determine where, when, how (domestic/foreign) Cost Effective -Internal, External, Combo |
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Internal Sourcing
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- manufacturing products in the firms own domestic/ international plants
-disad.=Huge capital investment -advan.= more control, quality, QR |
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External Sourcing
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-outside contractors
disadv.= higher cost to travel, language barriers, insurance, shipping delays, customs advan:- less financial invest, lower labor, sources of expertise |
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Production Cost Index
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standard allowed minutes, wages and fixed/variable costs
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2 Forms of external sourcing
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1. Full package sourcing: contractor provides everything to make garments
AD: limited manuf. knowledge, little investment (letter of credit) 2. Cut, Make Trim: Sourcing company provides desgin, fabrics, trims -primary contribution of contractor is labor AD: flexible, reduced invest, control over design & fabrics, less threat of knockoffs |
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Factors to Consider in Sourcing Decisions
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Cost, Capacity, Throughput time
- financial, plant space & workforce -Minimums (important for fashion items) - Labor skills & equip. assessment (quality) -Infrastructure (availablility) -Quality standards -Competition (leader vs. follower) - Distance, Govt. regulations, political environ., human rights |
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Role of Agent in Sourcing
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help as liaison b/w our company and contractor
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Cost of Sourcing
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Direct labor/ materials & manuf. overhead
- setup for communication -courier service -buying office, agent, quality inspection -custom brokers -consulting( legal, merch, specialist, banking, freight) |
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Throughput/ Leadtime
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time it takes for production to occur and processed from authorization to shipping
-shorter better for fashion merchandise -reduce ti,e: automation system, careful selection of contracting country, transportation system |
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Government Regulations with sourcing
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multiple contracting countries may be necessary
-expertise in various products -fashion vs. basic resources -tarrifs -quotas: limit # items -embargo: shut down on quotas |
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Square Meter Equivalents
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limits on # items allowed into country based on units, weights
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Phases in Sourcing Process
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1. select country/countries(review potential resources)
2. choosing a contractor (samples, price quotes, evaluation) 3. prepare for production (tech, specs!!, preliminary inspection certificate) 4. Shipping & importation(bill of lading) 5. production (quality assurance inspection, 'PIC) |
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Preliminary Inspection Certificate
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PIC- during and following production, authorizes shipment
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Bill of Lading
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Received Shipment
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Letter of Credit
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written document issued by bank by buying authorizing a seller to claim payment in accordance with terms/conditions
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Socially Responsible Sourcing
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when purchasing being aware of social issues advocated by organizational stakeholders
AD: Way to Mkt a product, happier workers=better quality, proud to be part of company, new innovation DISAD: Bad reputation & consumer perception, loss of employees, partners & customers, decrease sales |
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Steps to Establish a Socially Responsible Program
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1. Define goals
2. Designate Member specific to SRS 3. Educate Suppliers 4. Monitor Suppliers 5. Qualified suppliers 6.Communicate to stakeholders 7. Receive feedback |
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Purpose of Vendor Relationships
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Control, communication, collaboration among retailers, wholesales and manufactors
- better efficient supply chain (shorter lead time) - better inventory control - final profit increase (reduce inventroy= less carrying costs) - improve GM return on investment |
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Vendors Standards Manual
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guidelines for professional interactions b/w retailer and vendor
1.tech. requirements 2. purchase order 3. distribution plan 4. markdown allowance 5. promotional support |
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Universal Product Code
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UPC- foundation for good vendor partnerships
- 12 digit, unique product |
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Electronic Data Interchange & UPC
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computer to computer exchange business info
- establish database for analysis - fast communication -reduce paperwork and data entry - lower weeks of supply |
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Purchase Order
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commercial document by buyer to seller
-type/ quantities/ prices dating terms and instructions (discounts, timely) -return policies, backorders |
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Weeks of Supply
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amt of stock you need to have on a weekly basis to not have a stockout
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Source Tagging
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EAS labels, anti theft labels done at manufacturer
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Markdown Allowance in Vendor Relationships
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you vendors share risk of markdowns on merchandise
-return agreements -compensation provided to retailer for markdowns |
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Promotional Support
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Cooporative Advertising-share expense
-product demos -premieums (Gift With Purchase GIP) or (Purchase w/ purchase PWP) -Samples, contests, drawings, displays |
