Description
Topics include purchasing system for fashion merchandise, merchandise budget plan, purchase system for staple merchandise, analyzing merchandise performance.
Product and Merchandise Management
Introduction
• A formal purchasing system helps the purchaser and merchandise planner to determine the quantity of merchandise to be purchased. • Retailers generally use two types of purchasing systems- Fashion merchandise purchasing systems and Staple merchandise purchasing system. • To forecast the sales of a particular sku, the purchaser must have the previous sales record. The same is available for the staple merchandise.
Purchasing Systems for Fashion Merchandise
• Two kinds of systems are used for fashion merchandise : 1. Merchandise Budget Plan 2. Open to buy plan • Merchandise budget plan helps determine the amount of money to be spent every month on a specific fashion merchandise category and Open to buy system helps the merchandise planner to keep track of the merchandise flow in real time.
Merchandise Budget Plan
• The merchandise budget plan helps the category manager to determine the quantity of each product that should be bought every month. • Generally a merchandise budget plan is based on the sales forecasts, inventory turnover and the gross margin return on investment (GMROI) estimates. • It helps the category manager identify if the merchandise is :
– Selling well and is to be replenished – Not selling well and is to be marked down and repositioned.
• A merchandise budget plan helps retailers establish merchandise objectives and plan financial issues of the business in terms of merchandise. • However this plan is not comprehensive as it does not talk about the kind or quantity of merchandise to be purchased. • It only determines how much money should be spent every month in order to support the sales activity and accomplish the objectives of inventory turnover and GMROI.
Open to Buy
• An Open to Buy system helps the category manager to adjust the inventories according to the fluctuations in the actual sales(from the planned sales), as the merchandise flow is recorded real time in this system. • For maximizing the profits and minimizing the markdowns, these calculations must be accurate and timely. • The approach of a retailer towards Open to Buy systems and its calculations varies depending on whether it is being calculated for the previous years, for the present period or for the forth coming seasons.
Purchase System for Staple Merchandise
• An entirely different and more routine Inventory management system is used for managing staple merchandise. • Staple merchandise form a typical order-receipt – order cycle. • Purchasing systems used for planning fashion merchandise are not compatible with systems used for planning fashion merchandise. • This is because the purchasing system for staple merchandise use past sales records to forecast future sales.
Assigning Merchandise to Stores
• The merchandise, either fashion or staple, once purchased must be assigned to the retail stores. • Though every retail chain has its own way of assigning the merchandise to its stores, the assigning pattern should be based on the number of stores present in the chain and their individual sales contribution to the chain. • However, every store of the chain should offer a large proportion of the merchandise assortment similar to that offered by the largest store in the chain.
Analyzing the merchandise performance
• Retailers should evaluate the performance of the stock keeping units, vendors, merchandise categories and the departments so as to determine when to add or eliminate a specific stock keeping unit. • There are three different types of procedures that are usually adopted by the retailers to analyze the performance of their merchandise.Namely • ABC analysis • Sell through analysis • Multiattribute method
ABC analysis
• ABC analysis helps determine the items that should never be out of stock, items that can go out of stock occasionally and the items that should be eliminated from the stock. • This is done by ranking the merchandise on the basis of some performance parameters. • An ABC analysis can be done at any level of merchandise classification, starting from a stock keeping unit to a department.
Sell Through Analysis
• A sell through analysis helps-determine the requirement for early markdowns or the requirement of more merchandise to fulfill the demand by comparing the actual sales with the planned sales. • There is no specific rule to determine the timing of a markdown and reordering of merchandise, the purchaser’s decision depends on his experience in merchandise management.
Multi Attribute Method
• This method is used to evaluate the vendors by assigning a weighted average score for each vendor. • The weighted average score is assigned on the basis of several parameters like – reputation of the vendor, service, on time delivery, quality of merchandise, promotional assistance.
doc_657101165.pptx
Topics include purchasing system for fashion merchandise, merchandise budget plan, purchase system for staple merchandise, analyzing merchandise performance.
Product and Merchandise Management
Introduction
• A formal purchasing system helps the purchaser and merchandise planner to determine the quantity of merchandise to be purchased. • Retailers generally use two types of purchasing systems- Fashion merchandise purchasing systems and Staple merchandise purchasing system. • To forecast the sales of a particular sku, the purchaser must have the previous sales record. The same is available for the staple merchandise.
Purchasing Systems for Fashion Merchandise
• Two kinds of systems are used for fashion merchandise : 1. Merchandise Budget Plan 2. Open to buy plan • Merchandise budget plan helps determine the amount of money to be spent every month on a specific fashion merchandise category and Open to buy system helps the merchandise planner to keep track of the merchandise flow in real time.
Merchandise Budget Plan
• The merchandise budget plan helps the category manager to determine the quantity of each product that should be bought every month. • Generally a merchandise budget plan is based on the sales forecasts, inventory turnover and the gross margin return on investment (GMROI) estimates. • It helps the category manager identify if the merchandise is :
– Selling well and is to be replenished – Not selling well and is to be marked down and repositioned.
• A merchandise budget plan helps retailers establish merchandise objectives and plan financial issues of the business in terms of merchandise. • However this plan is not comprehensive as it does not talk about the kind or quantity of merchandise to be purchased. • It only determines how much money should be spent every month in order to support the sales activity and accomplish the objectives of inventory turnover and GMROI.
Open to Buy
• An Open to Buy system helps the category manager to adjust the inventories according to the fluctuations in the actual sales(from the planned sales), as the merchandise flow is recorded real time in this system. • For maximizing the profits and minimizing the markdowns, these calculations must be accurate and timely. • The approach of a retailer towards Open to Buy systems and its calculations varies depending on whether it is being calculated for the previous years, for the present period or for the forth coming seasons.
Purchase System for Staple Merchandise
• An entirely different and more routine Inventory management system is used for managing staple merchandise. • Staple merchandise form a typical order-receipt – order cycle. • Purchasing systems used for planning fashion merchandise are not compatible with systems used for planning fashion merchandise. • This is because the purchasing system for staple merchandise use past sales records to forecast future sales.
Assigning Merchandise to Stores
• The merchandise, either fashion or staple, once purchased must be assigned to the retail stores. • Though every retail chain has its own way of assigning the merchandise to its stores, the assigning pattern should be based on the number of stores present in the chain and their individual sales contribution to the chain. • However, every store of the chain should offer a large proportion of the merchandise assortment similar to that offered by the largest store in the chain.
Analyzing the merchandise performance
• Retailers should evaluate the performance of the stock keeping units, vendors, merchandise categories and the departments so as to determine when to add or eliminate a specific stock keeping unit. • There are three different types of procedures that are usually adopted by the retailers to analyze the performance of their merchandise.Namely • ABC analysis • Sell through analysis • Multiattribute method
ABC analysis
• ABC analysis helps determine the items that should never be out of stock, items that can go out of stock occasionally and the items that should be eliminated from the stock. • This is done by ranking the merchandise on the basis of some performance parameters. • An ABC analysis can be done at any level of merchandise classification, starting from a stock keeping unit to a department.
Sell Through Analysis
• A sell through analysis helps-determine the requirement for early markdowns or the requirement of more merchandise to fulfill the demand by comparing the actual sales with the planned sales. • There is no specific rule to determine the timing of a markdown and reordering of merchandise, the purchaser’s decision depends on his experience in merchandise management.
Multi Attribute Method
• This method is used to evaluate the vendors by assigning a weighted average score for each vendor. • The weighted average score is assigned on the basis of several parameters like – reputation of the vendor, service, on time delivery, quality of merchandise, promotional assistance.
doc_657101165.pptx