Analysis and Control Flashcards
What are some factors to consider when selecting vendors?
Merchandise, reliability of delivery, steady source of supply, markup, past history, vendor support, vendor distribution practices, amount of vendors, and vendor managed inventory
What are advantages of having many vendors?
- Broader assortment of merchandise
- Changes from season to season
- Minimizes risk of supply interruption
What are advantages of having few vendors?
- Easier to build good relationships
- Good for smaller retail stores
- Less time and effort
- Large orders can be placed (quantity discounts)
- Fewer shipping costs (merch from same location)
What are the categories of vendors?
A-E
What is the 80-20 principle?
20% of vendors generate 80% of sales, 80% generate 20% of sales.
What classifies an A vendor?
A vendor that secures substantial sales and profitability
What classifies a B vendor?
A vendor that generates satisfactory sales and profits
What classifies a C vendor?
A vendor from which a retailer purchases a small amount
What classifies a D vendor?
A vendor from whom the retailer would like to buy but the vendors do not currently sell to
What classifies an E vendor?
A vendor with whom the retailer has an unproductive relationship
What are the guidelines for profitable vendor relationships?
- Avoid quick judgment.
- Be aware of the profitability of each vendor.
- Develop good relationships with the most important vendors.
- Review the performance of all vendors on a regular basis.
- Maintain written records on vendors.
- Be available to see vendors.
- Be aware of unexpected vendors can produce top-selling merch.
- Know sales people and top management.
- Before placing orders, check competition.
- Before purchasing odd lots or seconds, be sure they fit the store’s image.
- Do not make unreasonable demands.
- Maintain an open door policy.
How do you calculate sell through units?
Sell through = (# of items sold/# of items received) x 100
How do you calculate sell through dollars?
Sell through = ($ sales /$ received) x 100
What is an invoice?
The bill that is associated with the shipment of merchandise
What is the billed cost?
The purchase price as it appears on the invoice
Who usually pays transportation costs?
The retailer
What does FOB stand for?
Free On Board
What does FOB mean?
The point where ownership of the merchandise transfers, thus there is a shift in responsibility of shipping expenses
What does FOB factory mean?
The retailer pays transportation costs from the moment the merchandise leaves the factory
What does FOB destination mean?
The vendor pays transportation costs until the merchandise reaches the store.
What are quantity discounts?
A reduction in price based on the quantity purchased
What are seasonal discounts?
A reduction in price for orders placed in advance (or at the end) of the normal ordering period
What do the terms of sale specify?
Agreement on shipping and transportation costs, payment arrangements, cash discounts, and other discounts.
What does net 30 mean?
The buyer has thirty days from the date of the invoice to pay it in full.
What does 2/10/N30 mean?
The buyer can get 2% off for ten days after the invoice. He or she has 30 days to pay the invoice in full.
What does 8/10 EOM mean?
The buyer can get 8% cash discount until 10 days after the end of the month. The billing month usually begins five days before the end of the month.
What does 2/10-60X mean?
The buyer can get a 2% cash discount until 70 days after the invoice.
What does 2/10/N30 ROG mean?
The buyer’s payment cycle begins at the receipt of goods.
What does 2/10/N30 as of May 1 mean?
The buyer has 10 days after the date noted to receive the cash discount
What is penetration?
A measure of the performance of a single business unit as a percentage of the aggregate performance of all similar business units.
What’s the difference between internal standards and industry standards?
Internal standards are derived from within an organization. Industry standards are derived from outside an organization.
What is a deviation?
A discrepancy between actual performance and a standard.
Why is it important to use multiple standards?
Multiple standards reveal problems veiled by single standards. Ex: a store is up 7% to plan, but the company is up 14% to plan.
How do you determine percent deviation?
Percent of deviation = (amount of deviation/standard) x 100
What is the difference between qualitative and quantitative controls?
Qualitative controls measure performance descriptively. Quantitative controls measure performance numerically.
What is an exception report?
Includes only major deviations from standards. (+/-10%)
What are the classifications of purchase orders?
- Regular orders
- Orders for new merchandise
- Special orders (usually for just one item, i.e. a specific shoe size for a customer)
- Advance orders
- Reorders for fast selling merchandise
What type of report was generated for Danielle’s Department Store?
An annual turnover report. Issues can be traced to sales and/or average inventory.
What type of report was generated for Tie One On?
A monthly stock-to-sales ratio report. Penetration of inventory should closely match penetration of sales.
What type of report was generated for Betty’s Boutique?
A vendor sales report. Report of sales by major vendor. Compares WTD, MTD, STD, and YTD.
What type of report was generated for Steinert’s?
A sales by category report.