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51 Cards in this Set

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  • Back
Purpose of Merchandising Budget
Retail method to account for inventory ie. value of inventory determined by retail prices, not by cost

$10,000 inventory or retail price
Foundation of Merchandising Budget
By dept. / category/ class
season/ month/ week
based on 1st Price*
1st Method for calculating planned sales
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)
2nd Method for calculation planned sales
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
STOCK
Planning controlling inventory
-fulfill sales goals
-avoid stockouts
-prevent stockouts
-min. inventory investment
-max gross margin & inventory turnover
Inventory-to-sales ratio
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
BOM vs. EOM
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
Planned Reductions
Anything other than sales that reduces the retail value of the inventory
3 Forms of Planned Reductions
1. Markdowns (lgst.)- temportary/permanenet
2. Employee discounts (stable)'
3. Inventory Shortage- theft, damaged items
Book Inventory vs. Physical Inventory
Retail value that should be on hand according to computer
- actual physical count to see amt in store
-book<physical=overage
-book>physical=shortage
Planned Purchases
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
Open to Buy
Amount of $ remaining to be spent from an exsisting budget after some purchases have been made
OTB= PLANNED PURCHASES-MERCHANDISE ON ORDER
Merchandise on Order
Anything in transit that has been ordered and not yet arrived
Assortment Planning
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)
Assortment Factor
dimensions of line that define it's characteristics
i.e. color or totes vs. backpacks
Stock Keeping Unit
SKU- smallest unit
-unique piece of merchandise
-define by assort. factors
-most freq. reason for stock outs? SIZE
Assortment Breadth
- the # of lines carried in company
- # of categories available, more categories=more bredth
Assortment Depth
- of of items carreied w/in each line
- # SKUS w/in each category
SKU vs. Assortment Depth
-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
Assortment Volume
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
Model Stock
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
Assortment Dimensions
precent thats allocated w/in each assortment factor
-an estimate based on rate of sale for each style, color, size
-sales history & customer preference
Volume per Assortment Factor
-# units per assortment factor(style)
ASSORTMENT VOLUME X ASSORTMENT DISTRIBUTION %
Volume per SKU
-# 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
Assortment Diversity
-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
Sourcing
- 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
Internal Sourcing
- manufacturing products in the firms own domestic/ international plants
-disad.=Huge capital investment
-advan.= more control, quality, QR
External Sourcing
-outside contractors
disadv.= higher cost to travel, language barriers, insurance, shipping delays, customs
advan:- less financial invest, lower labor, sources of expertise
Production Cost Index
standard allowed minutes, wages and fixed/variable costs
2 Forms of external sourcing
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
Factors to Consider in Sourcing Decisions
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
Role of Agent in Sourcing
help as liaison b/w our company and contractor
Cost of Sourcing
Direct labor/ materials & manuf. overhead
- setup for communication
-courier service
-buying office, agent, quality inspection
-custom brokers
-consulting( legal, merch, specialist, banking, freight)
Throughput/ Leadtime
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
Government Regulations with sourcing
multiple contracting countries may be necessary
-expertise in various products
-fashion vs. basic
resources
-tarrifs
-quotas: limit # items
-embargo: shut down on quotas
Square Meter Equivalents
limits on # items allowed into country based on units, weights
Phases in Sourcing Process
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)
Preliminary Inspection Certificate
PIC- during and following production, authorizes shipment
Bill of Lading
Received Shipment
Letter of Credit
written document issued by bank by buying authorizing a seller to claim payment in accordance with terms/conditions
Socially Responsible Sourcing
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
Steps to Establish a Socially Responsible Program
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
Purpose of Vendor Relationships
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
Vendors Standards Manual
guidelines for professional interactions b/w retailer and vendor
1.tech. requirements
2. purchase order
3. distribution plan
4. markdown allowance
5. promotional support
Universal Product Code
UPC- foundation for good vendor partnerships
- 12 digit, unique product
Electronic Data Interchange & UPC
computer to computer exchange business info
- establish database for analysis
- fast communication
-reduce paperwork and data entry
- lower weeks of supply
Purchase Order
commercial document by buyer to seller
-type/ quantities/ prices
dating terms and instructions (discounts, timely)
-return policies, backorders
Weeks of Supply
amt of stock you need to have on a weekly basis to not have a stockout
Source Tagging
EAS labels, anti theft labels done at manufacturer
Markdown Allowance in Vendor Relationships
you vendors share risk of markdowns on merchandise
-return agreements
-compensation provided to retailer for markdowns
Promotional Support
Cooporative Advertising-share expense
-product demos
-premieums (Gift With Purchase GIP) or (Purchase w/ purchase PWP)
-Samples, contests, drawings, displays