Lecture Management of retail buying – Chapter 5: Planning and control

In this chapter, you will learn about: How budgets are determined (& checked periodically) for a buying season or dept, stockturn & how to determine the productivity of the merchandise as an investment, staple stock controls, or how stores ensure their basics & best-sellers are always available,…

Ch. 5: Planning & Control • How budgets are determined (& checked  periodically) for a buying season or dept • Stockturn & how to determine the productivity  of the merchandise as an investment • Staple stock controls, or how stores ensure  their basics & best­sellers are always  available Factorstoconsiderwhendealingwith seasonalmerchandise Howtobuyevenwhenthebudgetisvery tight Copyright â 2006 by John Wiley & Sons, Inc All rights rese Determining a Planned Purchase Amount               Sales for the month    +  Markdowns for the month    +  Stock required at end of month (EOM) or       beginning of following month (BOM)     – Stock provided (on hand) at start of month ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­     =  Planned purchase for the month Copyright © 2006 by John Wiley & Sons, Inc All rights rese        Correcting OTB Budget Problems:      Is the Open­To­Buy amount…   Less than what                           More than what     buyer needs?                              buyer needs? • Incorrect forecasting  (planning errors) • Improper distribution of  merchandise mix (buying  errors) • Unsuccessful promotions • Late receipt of goods  (timing errors) • Incorrect forecasting  (planning errors) • Insufficient amounts  purchased (buying  errors) • Unexpectedly successful  promotions • Failure to place orders  on a timely basis (timing  errors) Copyright © 2006 by John Wiley & Sons, Inc All rights rese Keeping Inventory Low (but not too low!) • • • • • • Reduce number of price lines Avoid similar styles or brands Eliminate slow­selling items or lines Buy more frequently, in smaller quantities Reduce staple stock amounts slightly Create a system to mark incoming stock by  date, then mark it down or promote it at  regular, timed intervals to prompt sales Copyright © 2006 by John Wiley & Sons, Inc All rights rese Stock Controls: When & how much to order • The point is to reduce out­of­stock incidences without having too  much merchandise in inventory • Depending on type of merchandise, reordering is done by: Continuous replenishment Long commitment (major initial order) with subsequent                       readjustments to reorders Long commitment with little or no reordering • Facts necessary for stock control of any item: listing and description of item     probable rate of sale  reorder period                            reserve         provision (maximum) amount      unit OTB (minimum)             current stock on hand                 stock on order   Copyright © 2006 by John Wiley & Sons, Inc All rights rese ... Incorrect forecasting  (planning errors) • Improper distribution of merchandise mix  (buying errors) • Unsuccessful promotions • Late receipt of goods  (timing errors) • Incorrect forecasting  (planning errors)...    +  Markdowns for the month    +  Stock required at end of month (EOM) or       beginning of following month (BOM)     – Stock provided (on hand) at start of month ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­... rights rese Stock Controls: When & how much to order • The point is to reduce out of stock incidences without having too  much merchandise in inventory • Depending on type of merchandise, reordering is done by: