merchandize planning retail budgeting

8/20/2019 merchandize planning retail budgeting

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McGraw-Hill/IrwinRetailing Management, 7/e © 2008 by The McGraw-Hill Comanie!, "ll right! re!er#e$%

Chapter 13

Merchandise Planning Systems


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Merchandise Management

RetailPricing

Chapter 15

RetailCommunication

MixChapter 16

MerchandisePlanningSystems Chapter 13

ManagingMerchandiseAssortmentsChapter 12

BuyingMerchandise

Chapter 1


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Questions

■ How does a staple merchandise buying systemoperate

■ !hat are a merchandise budget plan and open-

to-buy systems" and how are they de#eloped■ How do multi-store retailers allocate

merchandise to stores

■ How do retailers e#aluate their merchandisingper$ormance


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&ypes o$ Merchandise Management Systems

Staple Merchandise

Predictable 'emand

(elati#ely )ccurate *orecasts

Continuous (eplenishment

!ashion Merchandise

+npredictable 'emand

'i$$icult to *orecast Sales

Merchandise ,udget Planpen-to-,uy

"he Mc#ra$%&ill Companies 'nc()*en Ca+anagh Photographer " h e M c # r a $ % & i l l C o m p a n i e s ,

' n c ( ) - a r s A ( . i / i ,

p h o t o g r a p h e r


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Staple Merchandise Planning

■ ,uyer 'etermines/ ,asic Stoc0 or )ssortment Plan e#el o$ ,ac0up n#entory

■ System/

Monitors n#entory le#els )utomatically reorders when in#entory gets

below a speci$ied le#el


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n#entory e#els $or Staple Merchandise

Cycle 4base5 stoc0/ in#entorythat goes up and down due tothe replenishment process

,ac0up 4bu$$er" sa$ety5 stoc0n#entory needed to a#oid stoc0out


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n#entory e#els $or Staple Merchandise

(etailers try to reduce the stoc0 le#el to 0eepn#entory n#estment low by reordering and recei#ing

merchandise o$ten but without increasedadministrati#e and transportation costs with $re7uentreorders


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,asic Stoc0

ndicates the 'esired n#entory e#el $or 9ach S:+

Cost o0 Carrying'n+entory

-ost Sale ue

to Stoc/out


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*actors 'etermining ,ac0up Stoc0

■ Higher product a#ailability 4ser#icele#el5 retailer wishes to pro#ide tocustomers

■ o$ completeorders recei#ed $rom a #endor5

More

Bac/upStoc/s.eeded

$ith


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(elationship between n#entoryn#estment and Product )#ailability

Product A+ailaility Percent4

6

5

3

2

1

5 7 75 1


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Staple Merchandise ManagementSystems

Staple merchandise planning systems pro#ide in$ormationneeded to assist buyers by per$orming three $unctions/

■ Monitoring and measuring current sales $or items at the

S:+ le#el

■ *orecasting $uture S:+ demand with allowances made$or seasonal #ariations and changes in trend

■ 'e#eloping ordering decision rules $or optimumrestoc0ing


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Staple Merchandise Management

Ryan Mc8ay)#etty 'mages

Most merchandiseat homeimpro#ementcenters arestaples@


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n#entory Management (eport$or (ubbermaid Merchandise

n#entory a#ailable

sales rate

Per$ormance measures

,ac0up stoc0 $or desired product a#ailability

desired product a#ailability

Sales $orecasts

Appropriate ordering decisions


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rder Point

the point at which in#entory a#ailable should not go below orelse we will run out o$ stoc0 be$ore the neAt order arri#es

rder point B salesday 4lead time D re#iew time5 D bu$$er stoc0

■ )ssume ead time B 3 wee0s" re#iew time B 1 wee0" demand B 1?? unitsper wee0

rder point B 1?? 43D15 B %??

■ )ssume ,u$$er stoc0 B .? units" then

rder point B 1?? 43D15 D .? B %.?!e will order something when order point gets below %.? units@


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Calculating the rder Point

)#ocado ,ath Mat

n a situation in which the lead time is twowee0s" the buyer re#iews the S:+ oncea wee0" 18 units o$ bac0up stoc0 areneeded to maintain the producta#ailability desired" and the sales rate $orthe neAt $our wee0s is .@%3 per day@rder Point

rder Point B 4'emand'ay5 A 4ead &ime D(e#iew &ime5 D ,ac0up Stoc0

132 units B E.@%3 units A 41% D 6 days5F D 18 unitsSo ,uyer Places rder !hen n#entory in Stoc0 'rops ,elow 132 units


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rder Quantity

!hen in#entory reaches the order point" the buyerneeds to order enough units so the cycle stoc0isn=t depleted and sales dip into bac0up stoc0

be$ore the neAt order arri#es@

rder Quantity B rder Point G Quantity )#ailable


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n#entory Management (eport $or(ubbermaid S:+s

)#ocado ,ath Mat

Quantity a#ailable B Quantity on Hand D Quantity on rder B ;?rder Quantity B rder Point G Quantity )#ailablerder Quantity B 132 G ;? B %2


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*ashion Merchandise Management Systems

&he system $or managing $ashionmerchandise categories is typically called

a Merchandise ,udget Plan


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Merchandise ,udget Plan

■ Plan $or the $inancial aspectso$ a merchandise category

■ Speci$ies how much moneycan be spent each month to

achie#e the sales" margin"in#entory turno#er" and


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Steps in 'e#eloping a Merchandise ,udget Plan

■ Set margin and in#entory turn goals

■ Seasonal sales $orecast $or category

■,rea0down sales $orecast by month■ Plan reductions G mar0downs" in#entory loss

■ 'etermine stoc0 needed to support $orecastedsales

■ 'etermine Jopen to buyK $or each month


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SiA Month Merchandise Plan$or Men=s Casual Slac0s


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Monthly Sales Percent 'istribution to Season4ine 15

1( Sales : istriution to Season 6 mo( data April May ;une ;uly Aug Sept

1(: 21(: 12(: 12(: 17(:21(: 15(:

&he percentage distribution o$ sales by month is based on

L Historical dataL Special promotion plans


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Monthly Sales Percent 'istribution toSeason 4ine 15 Continued

(etail sales are #ery seasonal@ &he Christmas season o$tenaccounts $or more than %?> o$ a retailer=s annual sales@


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Monthly Sales4ine 25

Sales : istriution 1( Month 6 mo( data April May ;une ;uly Aug Sept

1??@??> 21@??> 12@??> 12@??> 1;@??> 21@??> 1.@??>2( Mo( Sales


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Monthly (eductions Percent 'istribution4ine 35

3( Reduction : istriution to Season

6 mo( data April May ;une ;uly Aug Sept 1??@??> %?@??> 1%@??> 1@??> 12@??> 1?@??> 8@??>

&o ha#e enough merchandise e#ery month to support themonthly sales $orecast" buyers need to consider $actorsthat reduce the in#entory le#el in addition to sales made

to customersMar0downsShrin0age'iscounts to 9mployees


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Shrin0age

n#entory loss caused by shopli$ting" employee the$t"merchandise being misplaced or damaged and poorboo00eeping@

(etailers measure shrin0age by ta0ing the di$$erence between1@ &he in#entory recorded #alue based on merchandise bought

and recei#ed

2@ &he physical in#entory actually in stores and distributioncenters

Shrin0age > B shrin0age

net sales

M thl ( d ti


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Monthly (eductions4ine %5

Reduction : istriution3( Month : 6 mo( data April May ;une ;uly Aug Sept

1??@??> %?@??> 1%@??> 1@??> 12@??> 1?@??> 8@??>( mo(

reductions


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,eginning o$ Month 4,M5 Stoc0-to-Sales(atio 4ine .5

5( B9M Stoc/ to Sales Ratio 6 mo( data April May ;une ;uly Aug Sept ( 3(6 ( ( ( 3(6 (

Stoc0-to-Sales (atio speci$ies the amount o$ in#entory 4in retail

dollars5 that should be on hand at the beginning o$ the month tosupport the sales $orecast and maintain the in#entory turno#erobecti#e $or the category

(etails o$ten use a related measure" !ee0s o$ n#entory

St i ' t i i


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Steps in 'eterminingthe Stoc0-to-Sales (atio

Step 1/ Calculate Sales-to-Stoc0 (atio


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Steps in 'eterminingthe Stoc0-to-Sales (atio Continued

Step 2/ Con#ert the Sales-to-Stoc0 (atio ton#entory &urno#er

n#entory &urno#er B Sales-to-stoc0 ratio A 41 G 1??5

n#entory &urno#er B2@63 A 41 G %.1??5 B 1@.?

St i ' t i i


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Step 3/ Calculate )#erage Stoc0-to-Sales (atio

)#erage Stoc0-to-Sales (atio B monthsn#entory turno#er

B 1@. B %

St i ' t i i


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Step %/ Calculate Monthly Stoc0-to-Sales (atio

L Monthly stoc0-to-sales ratios #ary in the opposite directiono$ sales

L &o ma0e this adustment" the buyer considers theseasonal pattern" pre#ious years= stoc0-to-sales ratios

,M St 0


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,M Stoc04ine 5

6( B9M 'n+entory 6 mo( data April May ;une ;uly Aug Sept ;828? ;828? 8%? 8%? ;88?? ;828? 8???

,M Stoc0

B monthly sales 4line 25 A ,M stoc0-to-sale ratio 4line .5

B 26"3?? A 3@

B ;8"28?

9 d $ M th 49M5 St 0


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9nd-o$-Month 49M5 Stoc04ine 65

=( >9M 'n+entory 6 mo( data April May ;une ;uly Aug Sept 56 66 66 2=5 72 = 656

&he ,M stoc0 $or the current month B the 9M stoc0 inthe pre#ious month

Monthl )dditions to Stoc0


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Monthly )dditions to Stoc04ine 85

( Monthly additions to stoc/ 6 mo( data April May ;une ;uly Aug Sept 1132 26 1=71 6 261 6= 2

)dditions to stoc0

B Sales 4line 25 D (eductions 4line %5 D 9M Stoc0 4line 65

G ,M Stoc0 4line 5

)dditions to stoc0 4)pril5

B 26"3?? D "?? D 8"%? - ;8"28? B %"2?


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9#aluating the Merchandise ,udget Plan

■ n#entory turno#er


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pen-to-,uy System

&he &, system is used a$ter the merchandise is purchasedMonitors Merchandise *low

'etermines How Much !as Spent and How Much is e$t toSpend

Photo-in/)#etty 'mages Photo-in/)#etty 'mages


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SiA Month pen-to-,uy


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)llocating Merchandise to Stores

)llocating merchandise to stores in#ol#es threedecisions/

■ how much merchandise to allocate to each store

■ what type o$ merchandise to allocate

■ when to allocate the merchandise to di$$erentstores

n#entory )llocation ,ased on Sales


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n#entory )llocation ,ased on SalesNolume and Stoc0-to-Sales (atios

Smaller stores re7uire a proportionally higher in#entoryallocation than larger stores because the depth o$ theassortment or the le#el o$ product a#ailability is toosmall" customers will percei#e it as being in$erior@


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&ype o$ Merchandise )llocated to Stores

(etailers classi$y stores according to the characteristics o$the stores= trading area

&he assortment o$$ered in a ready-to-eat cereal aisle should matchthe demands o$ the demographics o$ shoppers in a local area

&ype o$ Merchandise )llocated to Stores


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&ype o$ Merchandise )llocated to Storescontinued

9#en the sales o$ di$$erent apparel siOes can #arydramatically $rom store to store in the same chain@

&iming o$ Merchandise )llocation to


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&iming o$ Merchandise )llocation toStores

Seasonality di$$erences and consumer demand di$$erences

)nalyOing Merchandise Management


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)nalyOing Merchandise ManagementPer$ormance

&hree types o$ analyses related to themonitoring and adustment step are/

■ Sell through analysis

■ ),C analysis o$ assortments

■ Multiattribute analysis o$ #endors

Sell &hrough )nalysis


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Sell &hrough )nalysis9#aluating Merchandise Plan

) sell-through analysis compares actual and plannedsales to determine whether more merchandise is neededto satis$y demand or whether price reductions arere7uired@


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),C )nalysis

)n ),C analysis identi$ies the per$ormance o$ indi#idualS:+s in the assortment plan@

(an0 - orders merchandise by some per$ormance

measure determine which items/ should ne#er be out o$ stoc0 should be allowed to be out o$ stoc0 occasionally should be deleted $rom the stoc0 selection@

■ ) items/ .> o$ S:+s" represent 6?> o$ sales

■ , items/ 1?> o$ S:+s" represent 2?> o$ sales

■ C items/ .> o$ S:+s" represent 1?> o$ sales

■ ' items/ 2?> o$ S:+s" represent 1?> o$ sales

),C )nalysis (an0 Merchandise


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),C )nalysis (an0 Merchandise,y Per$ormance Measures

■ Contribution Margin

■ Sales 'ollars

■ Sales in +nits

■


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Multiattribute Method $or 9#aluatingNendors

&he multiattribute method $ore#aluating #endors uses aweighted a#erage score $oreach #endor@ &he score isbased on the importance o$#arious issues and the #endor=sper$ormance on those issues@

C S?uared Studios)#etty 'mages

Multiattribute Method $or 9#aluating


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Multiattribute Method $or 9#aluatingNendors


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9#aluating Nendors

) buyer can e#aluate #endors by using the $ollowing $i#e steps/

1@ 'e#elop a list o$ issues to consider in the e#aluation4column 15

2@ mportance weights $or each issue in column 1 are

determined by the buyerplanner in conunction with the


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Home 'epot=s Nendor 9#aluation

Home 'epot ta0e #endor e#aluations seriously@ Home 'epot=s #endor analysis scorecard gi#es e#eryone a 7uic0 #iew o$ how the #endor is doing@

merchandize planning retail budgeting

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