merchandising math – Flashcards
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merchandisers goal
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to maintain an inventory assortment that will be suffiecient to meet suomer demand and yet small enought to ensure a reasonable return on the store's investment in inventory.
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stock-sales-ratio
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involves maintaining inventory in a specific ratio to sales. calculated by dividing the dollar value of stock by actual sales in dollars.
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stock turnover rate
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one way to track the success of the balance between sales and inventory. How fast merchandise is sold, replenished, and sold again determines stock turnover.
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stock sales ratio formula
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stock sales ratio = value of stock / sales
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stock turnover rate formula
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stock turnover rate = sales / average stock
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sales formula
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sales = stock turnover rate x average stock
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merchandise planning includes
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-sales/profits -inventory/stock
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merchandising plans
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help the merchandiser maintain a proper proportion between sales and inventory levels to ensure profits.
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six month merchandising plans
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divide the year into two six month planning periods: 1. feg - july 2. aug - jan -large stores may plan by department or product line and then combine -small stores may plan for the entire store
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steps in developing a 6 month plan
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1. planning sales: -first and most important step -basis for determining stock levels, reductions, purchases 2.determine amount of stock needed to meet the planned sales -basic stock -percentage-variation -weekly supply -stock-sales-ratio 3.planned reductions Includes: - predicting (forecasting) -what consumers will buy -how much they will buy
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sales can be planned
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-top-down -bottom-up -combination
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sales are affected by
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-internal factors -external factors
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calculating planned sales
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planned sales = last years sales x (100% + change for this year) ex: if last years sales were 1,834,900 and a 9% sales increase is planned for this year whatare the planned sales? 1834900 x (100%+ 9%)= 200,004 (round to whole #'s)
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planned monthly sales formula
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planned % of total sales x planned total sales = planned monthly sales ex: feb = 11.5% x $95,700 = $11,005
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stock to sales ratio method
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defines the relationship between planned BOM inventory for a given month and the planned sales for the month
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calculating stock-to-sales ratio
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stock-to-sales ratio = retail stock / sales ex: feb 1st boy dept had a retail stock level of 120,000. the planned sales for the month were $20,000. what was the stock to sales ratio for feb? 120,000/20,000 = 6 < mean 6 times that amount.
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BOM stock formula
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BOM stock = planned monthly sales x stock-to-sales ratio ex: the linen dept. planned sales of $40,000 for july. from past experience the merchandise knows that an 8.2 stock to sales ratio was successful. what should the planned BOM stock be for july? 40,000 x 8.2 =$328,000
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planned reductions
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retail reductions are the differences between the original retail value of merch, and the final sales value.
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major types of reduction are:
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-markdown -employee and customer discounts -inventory shortages
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steps in planning reductions
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1. determine the total reduction amount for the period as a % of the total seasons sales 2.convert the planned reduction from % of sales to total DOLLAR amount for the season 3.divide the total dollar amount planned for reductions by month
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planned purchases
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-calculated to provide the $ amount available to purchase new merchandise each month -purchases are generally preplanned for each month at RETAIL value and then converted by formula to a cost amount
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planned purchases at retail =
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+ planned sold + planned EOM + planned reductions - planned BOM
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stock turnover
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-the speed at which merchandise moves into and out of a department or store
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understanding turnover is important to:
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-make better use of capital investment -control inventories -maximize profit
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calculating turnover
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turnover = net sales for period / average stockfor same period ex: infants dept. had net sales of $2,000,000 for the year. the average stock during the period was $500,000. what was the rate of stock turn? $200,000,000 (net sales) / 500,000 (stock)= 4
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calculate sales goal
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sales = stock turn x avg. stock ex: planned an avg stock level for march $95,000 and a stock turn of 4.5.
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average stock formula
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average stock = sales / turnover rate ex: sales during first 6 mo. period were $532,000. turnover rate was 3.2. what was the avg stock for the period? 532,000 /3.2 = 166,250
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calculating average stock
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sum of beginning inventory + ending inventory for given period / # of inventories
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calculating average stock when monthy inventories are known
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average stock is the sum of the retail inventories at the beginning of each year, season, month , or week, added to the ending inventory and divided by the # of inventories used. ex: sales = 140,000 BOM =195,000 / 13 = 15,000 turnover = netsales / avg stock = 14,000 / 15,000 = 9.3
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open to buy (OTB)
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the amount of money available to spend at market
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main purposes of OTB
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-to assure the planned relationship between stock on hand and planned sales in maintained - to allow for adjustments in merchandise purchases to reflect changes in sales and reduction
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tracking OTB available should:
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- limit overbuying and underbuying -prevent loss of sales due to inedequate amound of stock -keep purchases within planned amounts -reduce markdowns -increase sales -improve stock turnover -ensure money to reorder fast-selling merchandise
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OTB in planning process
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-OTB is equal to the planned purchases amount on the 6 month plan. - as purchases are made, their value is subtracted from the planned purchases amount -the unspent balance is the remaining OTB
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calculating OTB at beginning of planning season
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ex: a review of a 6month plan showed the following plan for august: sales: 10,000 BOM: 31,000 EOM: 33,600 reduct: 1,000 if the orders for merch to be delivered in aug total 5,000 what is the remaining OTB? 10,000 +33,600 +1,000 - 31,000 = 13,600 (planned purch/OTB) - 5,000 (merch on order) OTB remaining = $8,600
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calculating amount to spend at market
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during a 6 month planning period only a portion of the OTB (planned purchases) will be spent during the initial buying trip
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OTB to save formula
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OTB to save = planned purch x % of planned purch. to save
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$ amount to spend formula
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$ amount to spend = planned purch - OTB to save
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OTB balance
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-planned purchases for the period -merch recieved -merch on order ex: planned = 17,000 - merch rec'd = 8,300 - on order merch=700 OTB balance = 8,000
