AM 270 Final Exam Study Guide
AM 270 Final Exam Study Guide AM 270
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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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