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advantage of staple merchandise
-predictable demand -accurate sales forecast -minimal risk for inaccurate forecasts (can be sold during other time periods)
what buyers determine in staple merchandise management system
-basic stock/assortment plan -level of backup inventory
what system determines in staple merchandise management system
-monitors inventory levels -automatically reorders when inventory gets below specific point
cycle stock
-aka base stop -level goes up and down due to the sales and replenishment process -retailer hopes to reduce to keep inventory investment low -approach to reduce: order from vendor more often (even if increase administrative and transportation costs)
backup stock
aka safety/buffer stock -cushion so it doesnt run out before next order arrives -more backup stock is needed with higher product availability retailer wishes to provide customers, greater fluctuations in demand, longer lead time from vendor, more fluctuation in lead time, lower vendor fill rate
fill rate
% of complete orders received from a vendor
service level
measure used in inventory management to define level of support/level of product available -number of items sold/number items demanded (divided by)
order quantity
when inventory reaches order point, buyer needs to order enough units so the cycle stock isn't depleted and sales dip into backup stock before next order arrives - order point-quantity available
quantity available
quantity on hand + quantity on order
elements of merchandise budget plan
-monthly sales percantage distribution to season -monthly sales -monthly reductions %age distribution to season -monthly reductions -BOM stock-to-sales ratio -BOM stock -EOM stock -monthly additions to stock
value of historical data in the buying process
-provide starting point for determining the % distribution of sales by month -buyer might change to reflect changes in buying patterns or special promotions
sell-through analysis
compares actual and planned sales to determine whether more merchandise is needed to satisfy demand or if price reductions are required -depend on experience with merchandise in the past, plans for featuring merchandise in advertising, and availability of markdown money from vendors
multi-attribute model (vendor ranking)
use 5 steps to evaluate vendor -develop a list of issues to consider in evaluation -importance weights for each issue are determined by buyer/planner - make judgements about each individual brand's performance on each issue -develop overall score (multiply importance of issue by performance of each brand/vendor) -determine vendor's overall rating
ABC analysis
rank merchandise by performance measures such as -sales -gross margin -inventory turnover -GMROI -typically reveals 80% of sales come from 20% of products -identifies the performance of individual SKU's in the assortment plan
A items
5% SKU, represents 70% of sales, should never be out of stock
B items
10% SKUs, represent 20% sales; can go out of stock occasionally
C items
65% SKU, represent 10% sales, carry very limited quantities with special orders available for customer demand
D items
20% SKU, represent 10% sales; should be deleted from the stock selection
national brand advantages
-help retailers build their image and traffic flow -reduce retailers selling/promotional expenses -customers have high loyalty and ask for national brands by name -can resell excessive merchandise
private-label brand advantages
exclusivity of strong private label can boost store loyalty -difficult for customers to compare price with competitors -higher margins -unique merchandise not available at competitive outlet
how large retailers develop private label brands
-identify trends -designing and specifying products -selecting manufacturers to make products -maintaining a worldwide staff to monitor the conditions under which products are made -managing facilities to test the quality of manufactured products
wholesale market centers
-have permanent vendor showrooms that retailers can visit throughout the year -particularly for fashion apparel/accessories -national markets (NYC) and regional markets (Atlanta, Miami)
Trade Shows
typically staged at convention centers not associated with wholesale market centers -vendors from outside US and private brand manufacturers started to attend to learn about market (most participants are national brands) -sometimes celebrities show up, company executives/sales representatives display merchandise in designated areas
global sourcing: Quality control
harder to maintain consistent quality standards than when sourcing domestically -problems can cause delays in shipments and adversely affect a retailers image
global sourcing: time to market
more difficult to perform a collaborative supply chain management approach globally because it's based on -short consistent lead times -vendors provide frequent deliveries of smaller quantities -need strong alliance between vendor and retailer thats based on trust & sharing information
global sourcing: social/political risks
potential violations of human rights and child-labor laws could hurt public image of company/customer loyalty if involved
associated costs of global sourcing
quality control, time-to-market, social/political risks
retailer cost implications of global sourcing
-relative value of foreign currency (can prevent short term fluctuations by buying contracts that lock retailer to a set price but in long run has a strong influence on cost of imported merchandise) -tariffs (gov taxes on imports that increase cost; used to shield domestic manufacturers from foreign competition) -longer lead times (uncertain so retailers have to maintain larger inventories to make sure merchandise is available meaning larger inventory carrying costs) -increased transportation costs
negotiating strategies buyers use
-knowledge -have at least as many negotiators as vendors -choose a good place to negotiate -seperate the people from the problem -insist on objective information -invent options fof mutual gain -let them do the talking -know how far to go -don't burn bridges -dont assume
importance of buyer/vendor open communication
kep for successful relationships -helps to share info, develop sales forecasts together, coordinate deliveries
win/win negotiations
-both parties structure an outcome so they both benefit -consist of collaboration, cooperation, long-term relationship -doesn't mean giving in -enhances vendor trust
slotting allowances
-charges imposed by retailer to stock a new item -when vendor agrees to pay, retailer will stock product, assess its sales and margin, and if successful continue to offer product after trial period -vendor has more info about quality of product so if willing to pay fee it's good b/c they know the product will generate adequate margins during trial period
commercial bribery
-when a vendor offers a buyer "something of value" to influence purchase decisions -illegal unless buyers manager is informed of them -could be trips, fancy dinners, etc
shrinkage
inventory loss caused by shoplifting, employee theft, misplaced/damaged merchandise, poor bookkeeping -shrinkage %=$shrinkage/$net sales
stock-to-sales ratio
-specifies the amount of inventory that should be on hand at the begining of the month to support sales forecast and maintain inventory turnover objective - GMROI/gross margin % -average sales to stock-ratio= 6 months/inventory turnover
BOM stock
amount of inventory planned for the begining of the month monthly sales*BOM sales-to-stock ratio
EOM stock
the BOM stock for the current month is the same as the EOM stock in the previous month
Additions to stock
the amount to be ordered for delivery in each month to meet the inventory turnover and sales objective sales+reductions+EOM inventory-BOM inventory
2 factors that influence global sourcing
foreign currency, fluctuations, tariffs, inventory carrying costs, transportation costs
what events are useful for familiarizing buyers with products, trends, and styles
trade shows
creating specs for products and bidding out the best producer is completed with these
reverse auctions
we anticipate these will have generally lower margins than their retailer created counterparts
national brands
in addition to margin benefits, private labels are generally accepted to increase this factor for retailers
their image
advantage of staple buying systems for buyers
measuring sales data level, forecasting future demand, and order decision rules for restocking
inventory management reports provide this information
velocity, forecasts, inventory availability on orders
amount of inventory below which the quantity available shouldn't go or the item will be out of stock before the next order arrives
order point
financial tool specifies the planned inventory investment in a fashion merchandise category over time
merchandise budget plan
stiff competition among national brand vendors may warrant the introduction of these
private label or owned brands
outcome of theft and human error and varies directly with sales
shrinkage
ratio that specifies the amount of inventory anticipated at the begining of the month to support sales-forecasts and maintain turnover objectives
BOM sales-to-stock ratio
four times as much inventory at the begining of the month as forecasted sales for the motnh
stock-to-sales ratio of 4
briefcases and hair accessories are purchased using this logic
fashion
type of stock that accounts for unpredictable shipping windows from vendors
back up
the ups and downs of inventory are referred to as this type of stock
cycle
factors influencing the level of back up stock
customer service levels, product availability, fluctuations in demand, lead time from vendors, fluctuation in lead time
precent of complete orders to receive from a vendor
fill rate
when allocating stock like Capris to California, planners use this rich marketing research information
geo-demographics
next step after planning and allocating merchandise
analyze performance and make adjustments
tool useful for comparing actual to planned sales and reacting to trends
sell-through analysis
tool useful for ranking vendor performance according to a retailer's standards
multi-attribute model
lower a retailer's promotional expenses
national brands

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