hed 460 inventory initial inventory units on shelf at beginning of season (1,919)
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HED 460
Inventory
Initial inventoryUnits on shelf at beginning of season (1,919)
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Inventory
Replenishment/total inventoryWithin the season (weeks 3-17 out of 20), an additional 3,573 units are received, based on reorders, totaling 5,492
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Inventory
Average InventoryShelf stock was 1230 units on average, during the season
Inventory TurnsTotal offering/ average inventory5492/1230 = 4.47
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Sales
96.5% of the units offered were sold during season
3.5% of goods will be liquidated at season’s end
84.9% of units sold at initial retail price (sell through)
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In Stock
On the average, over the entire season, 97.3% of the SKU’s were in stock
Before 1st markdown, in stock percentage was 99.8%
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Lost Sales
Over the entire season, 2.1% of customers left empty-handed
Nearly all customers found an item to purchase up until the 1st markdown (.0% lost sales)
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Service Level
97% of customers found their first choice SKU in stock for the whole season
This is not a customer service variable
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Revenues $131,042 sales generated from customer sales
$1554 generated from liquidation (jobbing off)
Total revenue is $132,596 Revenue/unit is $132,596/5,492 or $24.14
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Costs Wholesale cost of goods was $68,648
Additional procurement costs were incurred
Ordering, handling, shipping, carrying, overhead
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Margins Gross margin
Total revenue (NS) – COGS132,596 – 68,648 = 63,949
GM/Sq. FootRatio of GM to sales floor space
63,049/1500 sq. ft. = $42.03
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Margins % Gross margin
GM/NS (total revenue)63949/132,596 = 48.2%
% of GM potentialPotential is GM$ obtained if all units sold at initial retail
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Margins Adjusted GM
GM – procurement costs63,949 – 14,041 = 49,908
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Margins GMROI
GM/Average Inventory $ at costAverage Inventory at cost = average inventory * unit cost
1,230 * $12.50 = $15,375$63,949/$15,375 = 4.16 GMROI
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Margins GMROISL
Since we were only in stock 97.3% of the time, GMROI is adjusted
4.16 * .973 = 4.05
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Financial Output Correlations
LS AGM GM GMROI
AGM -.76GM -.75 .99GMROI
-.90 .96 .96
AI -.99 -.75 -.73 -.88
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In Class Activity – 5 pts.
Complete handout with other group members, explaining concepts as you go
Write down group members’ names on paper and hand in at end of class to receive the 5 points
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Retail Industrial Revolution
Large scale retail growth Increase in store size and
store numbers - problems Formal retail systems From depot to Marketing –
concept of customer service
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Retail Industrial Revolution Variations in consumer demand Local demand vs. territory Shifts in marketing channel
relationships Co-operative relationships Purchasing direct from producers
Specialization Centralization to decentralization
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Inventory Asset that did not affect demand Financial rather than merchandising Katz at R.H. Macy
Apply scientific practices Filene – Model Stock Plan 1930
Industrial practices adapted to retail
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Model Stock Plan Establish 3 profitable price points
Allocate 85% inventory to those three Scientific method of forecasting Focus on rapid inventory turnover Adjust inventory levels by
consumer buying habits Plan purchases based on sales and
cash plans
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Characteristics of Staple Mdse.
Imperceptible style changes Predictable sales patterns Relatively short delivery period Regular and frequent reorder
period
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Terminology
(R) Rate if Sale (RS) Reserve Stock (DP) Delivery Period (RP) Reorder Period
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Minimum Stock
Use unit calculation (RS + DP) * R
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Maximum Stock
Minimum stock plus consideration of reorder period
Use unit calculation (RS+DP+RP) * R
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Maximum Stock Example
(1+2+1) * 150 = 600 Max. stock
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Basic Stock List OH = On hand OO = On order R = Received
If DP = 1 then record R in the same week you put it OO
If DP = 2 then record R in the week after you put it OO
S = Sold
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Basic Stock List
Unit descr.
Max. Stock
OH OO R S OH
Moon beams
18 6 12 (18-6=12)
12 (came in)
10 8 (18-10=8)
Ultra stone
35 27 8 ------ 20 7
Ara-bella
38 27