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AM 270 Final Exam Study Guide

by: luke koppa

AM 270 Final Exam Study Guide AM 270

Marketplace > Colorado State University > Business > AM 270 > AM 270 Final Exam Study Guide
luke koppa
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study guide covering all points on Dr. Yan's sheet.
Merchandising processes
Ruoh-Nan Yan
Study Guide
50 ?




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This 6 page Study Guide was uploaded by luke koppa on Thursday May 5, 2016. The Study Guide belongs to AM 270 at Colorado State University taught by Ruoh-Nan Yan in Winter 2016. Since its upload, it has received 81 views. For similar materials see Merchandising processes in Business at Colorado State University.

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Date Created: 05/05/16
AM 270 Final Exam Study Guide Chapter 7: Planning and Controlling Merchandise Budgets  Components of merchandise budgets o Planned sales o Stock/inventory o Planned reductions o Planned purchases o Open to buy  What is the foundation of a merchandise budget o Planned sales  Two methods for calculating planned sales o Percentage change method= look to previous years and decide how much %  change  Usually an increase to account for growth/inflation/increased profits  Once decide total, distribute on monthly basis by looking at previous  monthly sales stats o Space productivity method  Examine annual sales per square foot generated by competitors  Determine number of square feet allocated  Decide on reasonable estimate of sales per square foot based on research   Sales per square foot and its calculation o Net sales / # square feet  BOM vs. EOM o BOM= beginning of month inventory o EOM= end of month inventory  Equals the BOM of the next month   Stock­to­sales ratio (meaning and how to calculate) o Used to forecast how much inventory is required to attain planned sales  o = BOM / Sales for the same period  o Ideal range between 1 and 2  Three forms of planned reductions o Markdowns   Most common  o Employee discounts o Inventory shortage   From theft (often employee), shoplifting, clerical errors, damaged goods  Difference between overage and shortage o Shortage­ physical inventory< book inventory  More common o Overage­ physical inventory> book inventory  The final stage of the budgeting process­ planned purchases o Amount of merchandise that is adequate to allow the sales and reductions to be  made as well as to provide proper level of EOM o = Planned sales + Planned reductions + planned EOM – Planned BOM  OTB­ definition and its purpose o Open to Buy= amount of money to be spent from an existing budget after some  purchases have been made  o = planned purchases – merchandise on order o Purpose  Allows for adaptation to trends  React to market demand  Take advantage of good buying opportunities   What is “merchandise on order” o Anything in transit or outstanding order that have not yet arrived   Difference between planned purchases and OTB o OTB takes  into account merchandise on order  Calculations for average inventory, planned purchases, and OTB  o See assignment 4 Chapter 8: Planning and Controlling Merchandise Assortments  What is assortment planning o Deciding which products and how many to stock  Various assortment definitions  o Assortment factor= dimensions that define characteristics of a product (referred to as an element in Line Plan Summary) o Stock Keeping Unit (SKU)= unique piece of merchandise defined by specific  assortment factors o Assortment breadth= # of product lines/categories available o Assortment depth= # of items/SKUS within each product line o Assortment volume= total number of units in an assortment  Calculations for assortment volume, volume per assortment factor, volume per SKU  (assignment 5) o Assortment volume = merchandise budget / average retail price of category  o Volume per assortment factor= (assortment volume) x (% assortment distribution  for factor) o Volume per SKU= # units per style x color % x size %  What is assortment diversity? What’s the indicator? How to calculate and interpret VSA o Relationship between assortment volume and assortment depth o Measure by volume per SKU for the assortment (VSA)  Total# of units / $ of SKUS in the same assortment  o Smaller the VSA, the more diverse the assortment   More SKUs, more depth, fewer units per SKU o Larger VSA, more focused assortment  Less SKUs, less depth, more units per SKU  Relationship among VSA, assortment diversity, assortment depth, and potential stockouts o More Diverse  Fewer units per SKU  VSA= usually 5 or less  More chance of stockouts o More Focused  More units per SKU  VSA= usually 10 or larger  Less chance of stockouts Chapter 11: Global Sourcing  What is sourcing o Process of procuring products to meet a company’s objectives o Determine who, where, what, when, how, and for how much $$$  3 options for sourcing and their advantages and disadvantages o Internal manufacturing= using your own factories  More quality control  More expensive up front  Better for stable product lines (basic) o External manufacturing  Less investment up front  Less quality/flexibility   Oversees sourcing­ cultural/communication differences create challenges o Combination of both  Entities that may be involved in sourcing o Sourcing company (who is seeking products) o Contracting company (who is providing/producing products) o Export trading company (intermediary between sourcing company and  contractors) o The Agent  What is the role of an agent in the sourcing process? o Hired by export trading company o Native to contracting company country o Intermediary to interact with both parties  Full package sourcing (FPS) vs. Cut, Make Trim (CMT)­ advantages and disadvantages o FPS­ contractor provides everything required to make garments  Limited technical knowledge required  Limited investment  Higher risk of knockoffs  Less control o CMT­ sourcing company provides design, product specs, and materials, while  contractor only provides labor  Better Control over design and raw materials  Less threat of knockoff  More technical knowledge required   Factors to consider in sourcing decision  o Cost­ includes many aspects including:  Direct labor/materials  Setup for communication  Courier service  Buying office, agent, or staff for quality inspection  Customs brokers  Minimum wage  Consulting (legal, manufacturing, banking, freight)  Currency exchange rate o Capacity o Minimum o Labor skills/productivity o Equipment assessment o Quality evaluation o Throughput time o Competition o Distance o Political/economic environment o Government regulations   What is difference between capacity and minimums o Minimum= smallest order the contractor will accept o Capacity= maximum the contractor can produce  What is throughput time? How can firms reduce it? o Time it takes for an order to be processed from authorization to shipping  o Reduce by producing closer to home, simpler designs, more efficient factories  Why is it common for firms to work with multiple contracting countries o Each country has different factors (cost, quality, distance, government)  Tariffs vs. quotas o Tariffs= taxes charged on goods that are imported o Quotas= limit on quantity of goods that can be produced abroad and sold  domestically  Absolute­ no further imports after quota met  Tariff rate­ higher duty after quota met  What is square meter equivalents SME o Amount of fabrics required to make a garment or group of garments used to  measure tariffs/quotas   Different phases in sourcing process o Select country/countries o Choosing contractor/contractors o Prepare for production o Production o Shipping and importation   Criteria that may be used to evaluate and select a contractor o Samples, price quotes, evaluations   Preliminary inspection certificate (PIC) vs bill of lading vs freight on board FOB o PIC­ authorization of shipment to sourcing company  Issued by sourcing company o Bill of Lading­ receipt from carrier indicating that the goods have been received  for shipment  o FOB­ shipping document specifying which party pays for which shipment and  loading costs   Socially responsible sourcing o Inclusion in purchasing decisions of the social issues advocate by organization  stakeholders (customers, employees, suppliers, shareholders, management)  Articles on canvas about sourcing in China Chapter 12: Customer/Vendor relationships  Process of relationship development­ from awareness to trust o Awareness­ knowledge of contact info/capabilities o Exploration­ develop norms and expectations for further interaction o Expansion­ reaching Trust/commitment or dissolution  Foundation of collaborative vendor partnerships (UPC) o UPC= universal product code which allows for collaboration between parties  Return and cancellation policies­ what is commonly done and what are exceptions o Return authorization number usually required o Exceptions  Items not listed in terms  Damaged items  Early shipments   What is source tagging? Purpose? o Application of Electronic Article Surveillance (EAS) labels into products and  packaging o Used to deter shoplifting   Forms of markdown allowance in vendor relationships o Return agreements o Compensation provided to the retailer for future purchases   Various forms of promotional support in vendor relationships o Product demonstration  o Premiums  Free­ gift with purchase   Paid­ purchase with purchase o Cooperative advertising o Samples o Contests and drawings o Sales training o POS signage and fixtures 


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