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RMG 200 (57)
Brent Barr (19)

ch 10

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Retail Management
RMG 200
Brent Barr

CH 10: MERCHANDISE PLANNING SYSTEMS - Retailers use two distinctive types of buying systems: A. A staple merchandise buying system for basics B. A merchandise budget for fashion merchandise STAPLE MERCHANDISE BUYING SYSTEMS - Staple merchandise buying systems are used for merchandise that follows a predictable order receipt order cycle - Factors that determine the level of required backup stock o Product availability the retailer wishes to provide o The greater the fluctuation in demand, the more backup stock is needed o The amount of backup stock needed is affected by the lead time from the vendor o Fluctuations in lead time also affect amount of backup stock o Vendor’s product availability also affects the retailer’s backup stock requirements - Staple merchandise buying systems contain a number of program modules that show how much to order and when - Systems assist buyers by performing three functions: o Monitoring and measuring average current demand for items at the SKU level o Forecasting future SKU demand with allowances made for seasonal variations and changes in trend o Developing ordering decision rules for optimum restocking The Inventory Management Report - Provides information about current sales rate or sales velocity, inventory availability, the amount on order, sales forecast, and most important, the quantity to order for each SKU Basic Stock List - The descriptive and record keeping function of an inventory control system; includes the: o Stock number o Item description o Number of units on hand and on order o Sales for the previous periods Inventory - Planned inventory turnover is based on overall financial goals and drives the inventory Turnover management system Product - The appropriate planned level of product availability for staple merchandise is relatively Availability easy to determine based on past orders Backup Stock - Inventory used to guard against being out of stock when customer demand exceeds forecasts or when merchandise is delayed Forecast - Sales forecasts for staple items are fairly straight forward and mechanical Order Point - The amount of inventory below which the quantity available shouldn’t go or the item will be out of stock before the next order arrives Order point = [(Sales/Day) X {Lead time + Review time)] + (Backup stock) Order Quantity - Order enough so the cycle stock isn’t depleted and sales dip into backup stock before the next order arrives – this is the difference between the quantity available and the order point Order Quantity = Order point – Quantity on hand MERHCHANDISE BUDGET PLAN FOR FASHION MERCHANDISE - Merchandise budget plan: a plan used by buyers to determine how much money to spend in each month on a particular fashion merchandise category, given the firm’s sales forecast, inventory turnover, and profit goals - Actual sales might be differ from sales forecasted in the merchandise budget plan Sales for month = Planned sales for season X Sales % allocation per month BOM = Planned sales for month X Stock to sales ratio Markdown = Planned sales for month X Reduction allocation % per month Purchases = Sales + EOM (next month’s BOM) +Markdown – BOM Retail purchases = Retail BOM – Reductions + Retail EOM + Sales Monthly Sales - Projects what percentage of the total sales is expected to be sold in each month Percentage Distribution to Season Monthly Sales - Monthly sales equal the forecast total sales for the six month period multiplied by each sales percentage by month Monthly Reductions - Shrinkage: an inventory reduction that is caused by shoplifting by employees or Percentage Distribution customers, by merchandise being misplaced or damaged, or by poor to Season bookkeeping - The buyer measures shrinkage by taking the difference between: o The
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