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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