Managing the Merch in addition to ise Planning Process
Lisaius, Som, Investigative Reporter has reference to this Academic Journal, PHwiki organized this Journal Managing the Merch in addition to ise Planning Process CHAPTER 12 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Merch in addition to ise Management Merch in addition to ise Management
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Questions What is the merch in addition to ise management process How are merch in addition to ise management processes different as long as staple in addition to fashion merch in addition to ise How do retailers as long as ecast sales as long as merch in addition to ise categories What trade-offs do buyers consider in developing merch in addition to ise assortments How do retailers plan their assortments in addition to determine the appropriate inventory levels How do multistore retailers allocate merch in addition to ise to stores How do retailers evaluate the per as long as mance of their merch in addition to ise management process Merch in addition to ise Management Process by which a retailer offers the correct quantity of the right merch in addition to ise in the right place at the right time in addition to meets the companys financial goals. Sense market trends Analyze sales data Make appropriate adjustments in prices in addition to inventory levels c) image100/PunchStock Dollars to invest in inventory Invest in hot merch in addition to ise Save a little as long as opportunities (open to buy) Monitor portfolio of merch in addition to ise (stocks) Sell losers (markdowns) Merch in addition to ise Management in addition to Investment Portfolio Management Traders on the stock exchange floor manage a portfolio of stocks, in addition to retail buyers manage a portfolio of merch in addition to ise inventory. Both continuously assess the risks associated with their purchase decisions.
Buying Organization Merch in addition to ise Group Department Classification Category SKU Each merch in addition to ise group is managed by a general merch in addition to ise manager (GMM),senior VP Departments are managed by a divisional merch in addition to ise manager (DMM), A group of items targeting the same customer type, such as girls sizes 4-6 Each buyer manages several merch in addition to ise categories (e.g., sportswear, dresses, swimwear, outerwear categories as long as girls sizes 4-6 The smallest unit available as long as inventory control Size, color, style Merch in addition to ise Category The Planning Unit A merch in addition to ise category is an assortment of items that customers see as substitutes as long as each other. Vendors might assign products to different categories based on differences in product attributes Retailers might assign two products to the same category based upon common consumers in addition to buying behavior Category Management The process of managing a retail business with the objective of maximizing the sales in addition to profits of a category Objective is to maximize the sales in addition to profits of the entire category, not just a particular br in addition to Breakfast cereal category vs. Kellogg Corn Flakes Mens knitted shirts vs. Polo shirts Diary product category vs. Carnation milk products
Category Captain Selected vendor responsible as long as managing a category Vendors frequently have more in as long as mation in addition to analytical skills about the category in which they compete than retailers Helps retailer underst in addition to consumer behavior Creates assortments that satisfy the customer Improves profitability of category Problems Vendor category captain may have different goals than retailer Evaluating Merch in addition to ise Management Per as long as mance – GMROI Merch in addition to ise managers have control over The merch in addition to ise they buy The price at which the merch in addition to ise is sold The cost of the merch in addition to ise Merch in addition to ise managers do not have control over Operating expenses Human resources Real estate Supply chain management In as long as mation systems SO HOW ARE MERCHANTS EVALUATED GMROI Gross Margin Return on Investment GMROI = Gross Margin Percent x sales-to-stock ratio = gross margin x net sales net sales avg inventory at cost = gross margin avg inventory at cost Inventory Turnover = (1 Gross Margin Percent) x sales-to-stock ratio
ROI in addition to GMROI Asset Productivity Measures Strategic Corporate Level Return on Assets = Net Profit Total Assets Merch in addition to ise Management Level GMROI = Gross Margin Avg. Inventory at Cost Measuring Sales-to-Stock Ratio Net Sales/Average Inventory at Cost Retailers report on an annual basis If the sales-to-stock ratio as long as a three-month season is 2.3, the annual sales-to-stock ratio will be 9.2 Estimation of average inventory Use in as long as mation system: averaging the inventory in stores in addition to distribution centers at the end of each day Divide the sum of the end-of-month (EOM) inventories as long as several months by the number of months Managing Inventory Turnover Inventory Turnover helps assess the buyers per as long as mance in managing asset (merch in addition to ise inventory) But focusing on increasing inventory turnover can actually decrease GMROI Buyers need to consider the trade-offs associated with managing Inventory Turnover Inventory turnover = Net Sales Average inventory at retail Inventory turnover = Cost of goods sold Average inventory at cost Average inventory = Month1 + Month2 + Month 3 + Number of months
Merch in addition to ise Planning Process Types of Merch in addition to ise Management Planning Processes Two distinct types of merch in addition to ise management systems as long as managing Staple (Basic) Merch in addition to ise Categories Continuous dem in addition to over an extended time period Limited number of new product introductions Hosiery, basic casual apparel Easy to as long as ecast dem in addition to Continuous replenishment Fashion Merch in addition to ise Categories In dem in addition to as long as a relatively short period of time Continuous introductions of new products, making existing products obsolete Athletic shoes, laptop computers, womens apparel Merch in addition to ise Management Process Forecasting sales Developing an assortment plan Determining the appropriate inventory level
Developing a Sales Forecast Underst in addition to ing the nature of the product life cycle Collecting data on sales of product in addition to comparable products Using statistical techniques to project sales Work with vendors to coordinate manufacturing in addition to merch in addition to ise delivery with as long as ecasted dem in addition to (CPFR) Types of Merch in addition to ise Staple Merch in addition to ise Predictable Dem in addition to History of Past Sales Relatively Accurate Forecasts Fashion Merch in addition to ise Unpredictable Dem in addition to Limited Sales History Difficult to Forecast Sales The McGraw-Hill Companies Inc./Ken Cavanagh Photographer The McGraw-Hill Companies, Inc./Lars A. Niki, photographer Factors Affecting Sales Projections Controllable Promotions Store Locations Merch in addition to ise Placement Cannibalization Uncontrollable Seasonality Weather Competitive Activity Product Availability Economic Conditions
Retailers develop fashion as long as ecasts by relying on: Previous sales data Market research Fashion in addition to trend services Vendors Forecasting Fashion Merch in addition to ise Categories Forecasting Fashion Merch in addition to ise Categories Previous sales data Many items in a fashion category are often similar to items sold in previous years. Market research Activities range from in as long as mal, qualitative research about trends affecting the category to more as long as mal experiments in addition to surveys. Forecasting Fashion Merch in addition to ise Categories Fashion in addition to trend services There are many services that buyers can subscribe to that as long as ecast the latest fashions, colors, in addition to styles. Vendors Vendors have proprietary in as long as mation about their marketing plans in addition to tend to be very knowledgeable about market trends.
Forecasting Service Retailers Due to the perishable nature of services, service retailers face more challenges than fashion retailers. Offerings perishes at the end of the day, not at the end of the season. Must devised approaches as long as managing dem in addition to so that it meets, but does not exceed capacity. Developing an Assortment Plan Assortment plan is a list of the SKUs that a retailer will offer in a merch in addition to ise category in addition to reflects the variety in addition to assortment that the retailer plans to offer in a merch in addition to ise category Variety (breadth) is the number of different merch in addition to ising categories within a store or department Assortment (depth) is the number of SKUs within a category. Product availability defines the percentage of dem in addition to as long as a particular SKU that is satisfied. Determining Variety in addition to Assortment Buyers consider Retail strategy The number of SKUs to offer in a merch in addition to ise category is a strategic decision GMROI of the merch in addition to ise mix Trade-off between too much versus too little assortment Increasing sales by offering more breadth in addition to depth can potentially reduce inventory turnover in addition to GMROI by stocking more SKUs Physical characteristics of the store Complementary Merch in addition to ise PhotoLink/Getty Images
Product Availability The percentage of dem in addition to as long as a particular SKU that is satisfied Level of support or service level The backup (buffer) stock in the model stock plan determine product availability The higher product availability, the higher the amount of backup stock necessary to ensure that the retailer wont be out of stock on a particular SKU when consumers dem in addition to it Importance of Backup (Buffer) Stock Choosing an appropriate amount of backup stock is critical to successful assortment planning If the backup stock is too low loose sales in addition to customers If the backup stock is too high scare financial resources will be wasted on needless inventory that could be more profitably invested in more variety or assortment Product Availability Factors considered to determine the appropriate level of buffer stock in addition to thus the product availability as long as each SKU ABC Classification of merch in addition to ise (inventory) A higher product availability B medium product availability C lower product availability is acceptable Fluctuations in dem in addition to Lead time as long as deliver from the vendor Frequency of store deliveries
Multiattribute Method as long as Evaluating Vendors Evaluating Vendors A buyer can evaluate vendors by using the following five steps: Develop a list of issues to consider in the evaluation (column 1) Importance weights as long as each issue in column 1 are determined by the buyer/planner in conjunction with the GMM (column 2) Make judgments about each individual br in addition to s per as long as mance on each issue (the remaining columns) Develop an overall score by multiplying the importance of each issue by the per as long as mance of each br in addition to or its vendor Determine a vendors overall rating, add the products as long as each br in addition to as long as all issues Keywords inventory turnover Net sales divided by average retail inventory; used to evaluate how effectively managers utilize their investment in inventory. gross margin return on investment (GMROI) Gross margin dollars divided by average (cost) inventory. return on assets Net profit after taxes divided by total assets. sales-to-stock ratio The net sales divided by average inventory at cost. It is one component of GMROI in addition to is similar in concept to inventory turnover except the numerator is expressed at retail (net sales) rather than at cost (cost of good sold) staple merch in addition to ise Inventory that has continuous dem in addition to by customers over an extended period of time. Also known as basic merch in addition to ise. fashion merch in addition to ise Category of merch in addition to ise that typically lasts several seasons, in addition to sales can vary dramatically from one season to the next.
Lisaius, Som Investigative Reporter
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