Subject: MerchandisingSession:9Content: Open to Buy, Assortment Planning, Model Stock Planning. Open to Buy, Assortment Planning: Principles of Assortment planning, Characteristics of a good assortment, Factors affecting Assortment Planning decisions, Model Stock Planning

Jagriti Mishra, NIFT, Gandhinagar

Assortment Plan

• The term merchandise assortment refers to a collection of varied types of related merchandise.

• Assortment Plan is a comprehensive and detailed listing of all the merchandise that carried in the stock during a given period classified by size, type and price line.

The assortment plan (Model Stock List)

• The assortment plan gives an indication of width and depth within each category and subcategory of range that should be available with a retailer’s outlet.

• It is essentially a list of product types that are planned to be stocked at a particular time, hence the term model stock list.

Key to assortment planning

Valid pricing structure

Tailor made classification

system to reflect the

needs of customers

Carefully planned Dollar merchandise

plan

External factors,

fashion trends

Past Experience

Merchandising policies

Key to Assortment

planning

Merchandising policies• Price range offerings-high, moderate, low or very

lowest

• Quality standards-finest quality, serviceable, unspecified quality or imperfect

• Breadth and depth of an assortment-narrow and deep or broad and shallow

• Brand offerings-private, national or unbranded

• Exclusivity-emphasized or not

• Fashion leadership-fashion leader, middle of the road or fashion follower

• Maintenance of basic assortments-always in stock, usually in stock or basic stock unimportant.

Gathering facts and figures on past experience

• Study records of what was sold, bought and marked down in the corresponding past seasons.

• Determine the best selling items, slowest selling items, and the most and least popular styles, fabrics, prices, sizes, classifications, kinds, colors and sizes of merchandise.

Researching factors and trends that influence assortment planning

• External Factors: Economic conditions, social conditions, local competition

• Internal factors: Store area, extent and type of promotional activities

• Fashion trends: changing trends, styles, trends, colors

Developing a tailor made classification system

• Classification is an assortment of units or items of merchandise that are reasonably substitutable for each other regardless of who made the item, material or the part of store in which it is offered for sale.

• Whether the classification system meets the need of the customers or not

Setting your pricing structure

Setting up a pricing structure that complies with the store’s merchandising policies and attracts the store’s target customers.

Working with a carefully planned budget

• It indicates the minimum sales objectives of the store or department

• Hence acts as guide in planning purchases

• Guide in planning expenditure

Stock Control

• Aim: To keep an optimum level of stock in a store

• Too little stock: Keeps the stock restricted

• Too much stock: Means the retailer is paying for unsold stock

Unit Control

• Unit Control records describe the total history of a particular merchandise item or style, show the number of units purchased, sold, ordered, returned and in stock and help you to gauge and predict buying trends.

• Type of information recorded:

• Net sales in number of units

• Stock on hand and stock on order in number of units.

• Additional break down of this sales and stock information in whatever details is considered relevant, such as cost, price line and/or price range, style number, size, vendor, classification and sub classification, season code, and in multiunit stores, the store unit involved.

Unit Control Systems

• There are two basic types of unit control systems:

• Perpetual control

• Periodic stock count

Perpetual control

• In a perpetual control system, purchase order, receipt of merchandise and sales are recorded as they occur by individual numbers.

• An automated unit control system is simply a computerized version of a manual unit control system, the records in which are updated daily, weekly or as transactions occur.

Periodic stock count control

• A unit control system in which stock is counted and recorded at regular intervals and the result is used to compute sales for the intervening period.

• This type of control system is used for merchandise that is moderately priced and less subject to change than ready-to wear.

Merchandise Budget Plan

• Plan for the financial aspects of a merchandise category

• Specifies how much money can be spent each month to achieve the sales, margin, inventory turnover, and GMROI objectives.

• Not a complete buying plan--doesn’t indicate what specific SKUs to buy or in what quantities.

Six-Month Merchandise Budget Plan for Men’s Tailored Suits

Steps in Preparing Plan

• Forecast Six Month Sales for Category• Breakdown Total Sales Forecast into Forecast for each

Month (lines 1, 2)• Plan Reductions for Each Month (lines 3, 4)• Determine Beginning of the Month (BOM) Stock to

Sales Ratio (line 5)• Calculate BOM Inventory (line 6)• Calculate EOM Inventory (line 7)• Calculate Monthly Additions to Stock (line 8)

Open to Buy

• Monitors Merchandise Flow

• Determines How Much Was Spent and How Much is Left to Spend

Open-to-buy for Past Periods

• Projected EOM stock = actual EOM stock• Open-to-buy = 0• There is no point in buying merchandise

for a month that is already over.

Open-to-Buy for Current Period (May)

• Projected EOM stock = 66,590

• Actual BOM stock = 59,500

• + Actual monthly additions to stock (what was actually received) + 7,000

• + Actual on order (what is on order for the month) + 18,000

• - Plan monthly sales - 15,600

• - Plan reductions for the month - 2,310

Open-to-Buy for Current Period (II)

• Open-to-buy = 2,050

• Planned EOM stock (from merchandise budget plan 68,640

- Projected EOM stock (based on what is really happening) 66,590

Considerations in Determining How Much to Order

• Basic Stock Plan

• Present Inventory

• Merchandise on Order

• Sales Forecast– Rate of Sales of SKU (Velocity)– Seasonality

Assortment Planning

•Variety is the number of different merchandising categories within a store or department•Assortment is the number of SKUs within a category.•Product availability defines the percentage of demand for a particular SKU that is satisfied.

Determining Variety and Assortment

• Profitability of Merchandise Mix

• Corporate Philosophy Toward Assortment

• Physical Characteristics of Store

• Complementary Merchandise