Merchandising Planning

7/26/2019 Merchandising Planning

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Prof. Manohar Pandit


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Basic stock is defined as the minimum stock thatshould be maintained at all times

Advantages Provides some assortment from which customers may

select merchandiseProtects department against stock contingencies

Recommended when annual stock turnover is 6 turnsor less per year, at higher stock turns the basic stockmethod results is an unrealistic basic stock figure

Most suited when stores has high proportion of non-fashion merchandise

Assumption is the basic inventory on hand remainsconstant regardless of the rate of sale


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BOM Stock = Sales for the month + Basic stock Basic stock = Avg stock Avg monthly sales

Sales for the season

Avg stock for the season =------------------------------Stock Turnover for seasonA dept stores has a planned stock turnover of 4 and planned sales of

Rs.160,000 for six months season. Plan BOM stock for Apr if planned sales forApr are Rs.20,000

Avg stock for season = 160,000/4 = Rs.40,000(Sales for season/Stock turnover for

season)

Avg Monthly sales = 160,000/6 = Rs.26,667 (Sales for season/No. months in season)

BOM Stock = 20,000+(40,000-26,667) (Sales for month + Basic stock)

= 20,000+ 13,333

= Rs. 33,3233


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Stocks-Sales Ratio is stock on hand at the beginning of themonth or sometimes end of the month to the projectedretail sales for that month

If the ratio is known for the planned period then the

amount of stock that should be on the hand at thebeginning of the month can be planned

Stocks-Sales Ratio = BOM Retail Stocks / Sales for the month

Determine Sales Stock Ratio when BOM stock is Rs.50,000 and retailsales are Rs.35,000?

Stocks-Sales Ratio = Rs.50,000 / Rs. 35,00= 1.4286

The stores must have merchandise of Rs.143 in order to sell worth

Rs.100


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BOM stocks that is needed can be determined ifplanned sales and desired stock-sales ratio are

known

BOM Stokes = Planned Monthly Sales X Stock-Sales Ratio

The stores has planned sales of Rs.60,000 for the month of Apr.

Past records indicate a stocks-sales ratio of 5.4. What shouldbe the planned BOM stock for Apr?BOM Stock = Planned Monthly Sales X Stocks-Sales Ratio

= Rs.60,000 X 5.4

= Rs. 324,000


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Planning ReductionsReductions reduce retail value of the inventory and include

markdowns, discounts to employees and customers,

and stock shortagesIn developing merchandise plan reduction percents areestimated on the basis of past experience as well ascurrent factors that may increase or decrease those

percents. Reductions must be realistic.Reductions are expressed as a percent of net salesMarkdown % = Rs. Amount of Merchandise / Net Sales

Planned Rs. Markdown = Planned Sales X Planned Markdown %


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Objective of merchandising planning is to assist buyer intiming the purchase of goods in order to maintain abalance stocks and sales through the season

Planned purchases are the amount of merchandise thatis planned for delivery during a given period withoutexceeding the planned closing stock for that period

Should be adequate to cover sales and reductions to be

made during the month as well as provide inventorythat will allow the following months sales to be made Purchases must be based on planned sales, stock and

markdown figures


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Planned Purchases at Retail= Sales + EOM Stock + Markdowns BOM Stock

Determine planned purchases for the month of Sept, given thefollowing information

Sales for Sept Rs.190,000Stock for Sept 1 Rs.318.200Markdowns Rs. 16,500Stocks for Oct 1 Rs.304,800

SolutionPlanned Purchases at Retail

= Sales + EOM Stock + Markdown + BOM Stock= 190,000+304,800 +16,500 318,200= Rs.193,100


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Determine planned purchases for the month of Jun, Jul, Aug,Sep, given following information

Month Planned Sales Planned BOM Stock Planned MarkdownJun 12,500 42,000 1,900Jul 17,400 39,000 2,800

Aug 19,000 43,000 2,200Sep 20,500 44,000 1,600

SolutionPlanned Purchases at Retail

= Sales + EOM Stock + Markdowns + BOM Stock

Jun Jul AugPlanned Sales 12,500 17,400 19,000+ Planned EOM Stock 39,000 43,000 44,000+ Planned Markdowns 1,900 2,800 2,200- Planned BOM Stock -42,000 -39,000 -43,000Planned Purchases 11,400 24,200 22,200


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Converting Retail Value to Cost Value

Planned purchases are determined at retail and must

be converted to cost if cost value is desired

Planned Purchase at Cost = Planned Purchase at RetailX (100% - Planned Markup%)

If planned retail purchases for the month were Rs.208,000 andthe planned markup was 45%, determine planned purchasesat cost?

Planned Purchase at Cost = 208,000 X (100%-45%)= 208,000 X 55%= Rs. 114,400


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Merchandising Planning

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