Planning

Question 1

What are inventory control measures?

Answer 1

Evaluation of profitability or productivity of merchandise

Question 2

What is invisible inventory?

Answer 2

Merchandise owned by the company but not physically present in the retail store.

Question 3

What are the four types of invisible inventory?

Answer 3

Electronic inventory, shortage inventory, repair inventory, and transfer inventory

Question 4

What is visible inventory?

Answer 4

Merchandise that is owned by the company and physically present in the retail store

Question 5

What are the five types of visible inventory?

Answer 5

Floor inventory, back-stock inventory, warehouse inventory, inventory on hold, and damaged or defective inventory

Question 6

How do you calculate average inventory?

Answer 6

(BOM1 + BOM2 + BOM3 + BOM4 + EOM4)/5

Question 7

What is stock turnover?

Answer 7

The rate during a given period that the average stock is sold and replaced

Question 8

What are the typical characteristics of low inventory turnover items?

Answer 8

Basic merchandise. Need vs. want. Not time sensitive or fashion sensitive.

Question 9

What are the typical characteristics of medium inventory items?

Answer 9

Classic fashion products. Change in color or seasonal style modifications. Drastic changes take many seasons to appear.

Question 10

What are the typical characteristics of high inventory turnover items?

Answer 10

Perishable items, like milk. Also high fashion merchandise.

Question 11

How do you calculate stock turnover?

Answer 11

Net sales / average inventory

Question 12

What are the advantages of a fast stock turn?

Answer 12

• Frequent replenishment of inventory
• Lower expenses
• Fresh inventory
• Fewer markdowns

Question 13

What are some disadvantages of a fast stock turn?

Answer 13

• Missed sales due to lack of stock
• Increased transportation costs
• Less opportunity to take advantage of discounts

Question 14

What is the stock-to-sales ratio?

Answer 14

Tells how much merchandise is needed to meet sales goals

Question 15

How do you calculate the stock-to-sales ratio?

Answer 15

BOM/sales for the month

Question 16

How do you plan inventory using the stock-to-sales ratio?

Answer 16

BOM = planned sales x desired stock-sales ratio

Question 17

What are the steps to completing the merchandise budget?

Answer 17

1. Complete the upper table. Calculate IMU %.
2. Calculate total planned sales (using increase/decrease %). Use monthly sales % to find sales $/mo.
3. Calculate total planned reductions. Use monthly reduction % to find reduction $/mo.
4. Calculate BOM (planned $/mo x stock-sales ratio) for each month.
5. Calculate planned purchases retail (planned sales + planned reductions + planned EOM -planned BOM).
6. Calculate planned purchases cost (planned purchases retail x cost complement).
7. Calculate average stock ((BOM1 + BOM2 + BOM3 + EOM3)/4).

Question 18

What is the hierarchy of product lines?

Answer 18

• Divisions
• Departments
• Classifications
• Subclassifications

Question 19

Why do businesses use merchandise hierarchies?

Answer 19

To establish manageable business units and to use for planning and tracking sales and inventory.

Question 20

How do you increase turnover?

Answer 20

• Reduce average stock

- Increase sales

Question 21

How do you reduce average stock?

Answer 21

• Find vendors who can rapidly supply best-selling merchandise
• Maintain stock for critical merchandise
• Buy in smaller amounts
• Take rapid markdowns on slow-selling merchandise
• Review price lines regularly
• Set up stock plans

Question 22

What are the benefits of using OTB?

Answer 22

• The retailer can make sure purchasing is following plan
• Buyers can compare plan and actual results and take action
• Prevents being over- or under-bought

Question 23

How do you calculate OTB?

Answer 23

Merchandise needed - merchandise available

Question 24

How do you calculate merchandise needed?

Answer 24

Planned sales + planned reductions + planned EOM

Question 25

How do you calculate merchandise available?

Answer 25

Actual BOM + stock on order

Question 26

How do you calculate OTB in mid-month?

Answer 26

Subtract actual sales/reductions from plan. Use stock on hand instead of BOM.

Question 27

What should the buyer do if he or she is overbought?

Answer 27

• Increase planned sales
• Increase planned markdowns
• Reduce the stock on hand (return goods to vendor or transfer goods to another store or department)
• Postpone outstanding orders to another month
• Cancel outstanding orders
• Increase planned closing stock

Question 28

What is assortment planning?

Answer 28

A projection of the variety and quantity of merchandise to be carried out to meet consumer demand

Question 29

What are the style features of assortment factors?

Answer 29

Size, color, fabrication, detailing, and styles

Question 30

What does SKU stand for?

Answer 30

Stock keeping unit

Question 31

What is a basic stock plan?

Answer 31

A list of items and number of units to be continuously maintained in stock.

Question 32

What is a model stock plan?

Answer 32

Used by buyers of fashion goods. Provides an assortment of stock, broken down according to identifiable selection factors.

Question 33

How do you calculate planned purchases?

Answer 33

Planned EOM + planned sales + planned markdowns - planned BOM