Planning Flashcards
What are inventory control measures?
Evaluation of profitability or productivity of merchandise
What is invisible inventory?
Merchandise owned by the company but not physically present in the retail store.
What are the four types of invisible inventory?
Electronic inventory, shortage inventory, repair inventory, and transfer inventory
What is visible inventory?
Merchandise that is owned by the company and physically present in the retail store
What are the five types of visible inventory?
Floor inventory, back-stock inventory, warehouse inventory, inventory on hold, and damaged or defective inventory
How do you calculate average inventory?
(BOM1 + BOM2 + BOM3 + BOM4 + EOM4)/5
What is stock turnover?
The rate during a given period that the average stock is sold and replaced
What are the typical characteristics of low inventory turnover items?
Basic merchandise. Need vs. want. Not time sensitive or fashion sensitive.
What are the typical characteristics of medium inventory items?
Classic fashion products. Change in color or seasonal style modifications. Drastic changes take many seasons to appear.
What are the typical characteristics of high inventory turnover items?
Perishable items, like milk. Also high fashion merchandise.
How do you calculate stock turnover?
Net sales / average inventory
What are the advantages of a fast stock turn?
- Frequent replenishment of inventory
- Lower expenses
- Fresh inventory
- Fewer markdowns
What are some disadvantages of a fast stock turn?
- Missed sales due to lack of stock
- Increased transportation costs
- Less opportunity to take advantage of discounts
What is the stock-to-sales ratio?
Tells how much merchandise is needed to meet sales goals
How do you calculate the stock-to-sales ratio?
BOM/sales for the month
How do you plan inventory using the stock-to-sales ratio?
BOM = planned sales x desired stock-sales ratio
What are the steps to completing the merchandise budget?
- Complete the upper table. Calculate IMU %.
- Calculate total planned sales (using increase/decrease %). Use monthly sales % to find sales $/mo.
- Calculate total planned reductions. Use monthly reduction % to find reduction $/mo.
- Calculate BOM (planned $/mo x stock-sales ratio) for each month.
- Calculate planned purchases retail (planned sales + planned reductions + planned EOM -planned BOM).
- Calculate planned purchases cost (planned purchases retail x cost complement).
- Calculate average stock ((BOM1 + BOM2 + BOM3 + EOM3)/4).
What is the hierarchy of product lines?
- Divisions
- Departments
- Classifications
- Subclassifications
Why do businesses use merchandise hierarchies?
To establish manageable business units and to use for planning and tracking sales and inventory.
How do you increase turnover?
- Reduce average stock
- Increase sales
How do you reduce average stock?
- 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
What are the benefits of using OTB?
- 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
How do you calculate OTB?
Merchandise needed - merchandise available
How do you calculate merchandise needed?
Planned sales + planned reductions + planned EOM
