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Inventory

Inventory. Initial inventory Units on shelf at beginning of season ( 1,919 ). Inventory. Replenishment/total inventory Within the season (weeks 3-17 out of 20), an additional 3,573 units are received, based on reorders, totaling 5,492. Inventory. Average Inventory

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Inventory

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  1. Inventory • Initial inventory • Units on shelf at beginning of season (1,919) HED 460

  2. Inventory • Replenishment/total inventory • Within the season (weeks 3-17 out of 20), an additional 3,573 units are received, based on reorders, totaling 5,492 HED 460

  3. Inventory • Average Inventory • Shelf stock was 1230 units on average, during the season • Inventory Turns • Total offering/ average inventory • 5492/1230 = 4.47 HED 460

  4. 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) HED 460

  5. 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% HED 460

  6. 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) HED 460

  7. Service Level • 97% of customers found their first choice SKU in stock for the whole season • This is not a customer service variable HED 460

  8. 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 HED 460

  9. Costs • Wholesale cost of goods was $68,648 • Additional procurement costs were incurred • Ordering, handling, shipping, carrying, overhead HED 460

  10. Margins • Gross margin • Total revenue (NS) – COGS • 132,596 – 68,648 = 63,949 • GM/Sq. Foot • Ratio of GM to sales floor space • 63,049/1500 sq. ft. = $42.03 HED 460

  11. Margins • % Gross margin • GM/NS (total revenue) • 63949/132,596 = 48.2% • % of GM potential • Potential is GM$ obtained if all units sold at initial retail HED 460

  12. Margins • Adjusted GM • GM – procurement costs • 63,949 – 14,041 = 49,908 HED 460

  13. Margins • GMROI • GM/Average Inventory $ at cost • Average Inventory at cost = average inventory * unit cost • 1,230 * $12.50 = $15,375 • $63,949/$15,375 = 4.16 GMROI HED 460

  14. Margins • GMROISL • Since we were only in stock 97.3% of the time, GMROI is adjusted • 4.16 * .973 = 4.05 HED 460

  15. Financial Output Correlations HED 460

  16. HED 460

  17. HED 460

  18. 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 HED 460

  19. 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 HED 460

  20. 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 HED 460

  21. 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 HED 460

  22. 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 HED 460

  23. Characteristics of Staple Mdse. • Imperceptible style changes • Predictable sales patterns • Relatively short delivery period • Regular and frequent reorder period HED 460

  24. Terminology • (R) Rate if Sale • (RS) Reserve Stock • (DP) Delivery Period • (RP) Reorder Period HED 460

  25. Minimum Stock • Use unit calculation • (RS + DP) * R HED 460

  26. Maximum Stock • Minimum stock plus consideration of reorder period • Use unit calculation • (RS+DP+RP) * R HED 460

  27. Maximum Stock Example • (1+2+1) * 150 • = 600 Max. stock HED 460

  28. 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 HED 460

  29. Basic Stock List HED 460

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