InventorySlide 2Slide 3SalesIn StockLost SalesService LevelRevenuesCostsMarginsSlide 11Slide 12Slide 13Slide 14Financial Output CorrelationsSlide 16Slide 17In Class Activity – 5 pts.Retail Industrial RevolutionSlide 20Slide 21Model Stock PlanCharacteristics of Staple Mdse.TerminologyMinimum StockMaximum StockMaximum Stock ExampleBasic Stock ListSlide 29HED 460InventoryInitial inventoryUnits on shelf at beginning of season (1,919)HED 460InventoryReplenishment/total inventoryWithin the season (weeks 3-17 out of 20), an additional 3,573 units are received, based on reorders, totaling 5,492HED 460InventoryAverage InventoryShelf stock was 1230 units on average, during the seasonInventory TurnsTotal offering/ average inventory5492/1230 = 4.47HED 460Sales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 460In 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 460Lost 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 460Service Level97% of customers found their first choice SKU in stock for the whole seasonThis is not a customer service variableHED 460Revenues$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 $24.14HED 460CostsWholesale cost of goods was $68,648Additional procurement costs were incurredOrdering, handling, shipping, carrying, overheadHED 460Margins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. = $42.03HED 460Margins% Gross marginGM/NS (total revenue)63949/132,596 = 48.2%% of GM potentialPotential is GM$ obtained if all units sold at initial retailHED 460MarginsAdjusted GMGM – procurement costs63,949 – 14,041 = 49,908HED 460Margins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 GMROIHED 460MarginsGMROISLSince we were only in stock 97.3% of the time, GMROI is adjusted4.16 * .973 = 4.05HED 460Financial Output CorrelationsLS AGM GM GMROIAGM -.76GM -.75 .99GMROI -.90 .96 .96AI -.99 -.75 -.73 -.88HED 460HED 460HED 460In 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 pointsHED 460Retail Industrial RevolutionLarge scale retail growthIncrease in store size and store numbers - problemsFormal retail systemsFrom depot to Marketing – concept of customer serviceHED 460Retail 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 decentralizationHED 460Inventory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 retailHED 460Model 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 plansHED 460Characteristics of Staple Mdse.Imperceptible style changesPredictable sales patternsRelatively short delivery periodRegular and frequent reorder periodHED 460Terminology(R) Rate if Sale(RS) Reserve Stock(DP) Delivery Period(RP) Reorder PeriodHED 460Minimum StockUse unit calculation(RS + DP) * RHED 460Maximum StockMinimum stock plus consideration of reorder periodUse unit calculation(RS+DP+RP) * RHED 460Maximum Stock Example(1+2+1) * 150= 600 Max. stockHED 460Basic 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 = SoldHED 460Basic Stock ListUnit descr.Max. StockOH OO R S OHMoon beams18 6 12 (18-6=12)12 (came in)10 8 (18-10=8)Ultra stone35 27 8 ------ 20 7Ara-bella38