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AM 270 Week 13

by: luke koppa

AM 270 Week 13 AM 270

luke koppa
GPA 4.0

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About this Document

covers beginning of chapter on global sourcing
Merchandising processes
Ruoh-Nan Yan
Class Notes
merchandising, global, sourcing
25 ?




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This 4 page Class Notes was uploaded by luke koppa on Monday April 25, 2016. The Class Notes belongs to AM 270 at Colorado State University taught by Ruoh-Nan Yan in Winter 2016. Since its upload, it has received 21 views. For similar materials see Merchandising processes in General at Colorado State University.

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Date Created: 04/25/16
Week 13 AM 270 Chapter 9 Merchandise Assortment  Assortment Diversity o To examine relationship between assortment volume and assortment depth  o Measured by Volume Per SKU for the assortment (VSA)  Total # of units / # of SKUS in the same assortment  o Based on VSA, merchandisers can determine how diverse or focused an  assortment is  o Given the same assortment volume:  Smaller the VSA, the more diverse the assortment   More SKUs, more depth, fewer units per SKU  Larger VSA, more focused  Less SKUs, less depth, more units per SKU  Example: 150 t­shirts w/ 2 options for set of SKUs  Volume= 150  Depth 1 = (2x2x4)= 16 SKUs o VSA= 150/16= 9.38­ focused   Depth 2 = (3x3x4)= 36 SKUs o VSA= 150/36= 4.17­ diverse o Diverse Assortments  Fewer units per SKU  VSA­ usually 5 or less on average o Focused Assortments  More units per SKU  VSA­ usually 10 or larger on average Chapter 11 Global Sourcing Chapter 11 Global Sourcing  Apparel Imports by Country o China­ 33.5% o Vietnam – 12.5% o Then Bangladesh, Indonesia, India, Mexico o Share from China is decreasing,, Bangladesh is increasing due to China’s  increasing wages and Bangladesh’s low wages  Sourcing o Process of procuring products to meet a company’s objectives   Products include raw materials, labor, findings/trims, finished goods o To determine who, where, what, when, how, and for how much $$$  Domestic or foreign   In the past­ it was almost always the most cost efficient way   Currently­ quality, services, other aspects of production are important   Entities involved o Sourcing company (who is seeking products)  Manufacturer or retailer  o Contracting company (Who is providing/producing the products)  Factory  o Export trading company   Intermediary between the sourcing company and potential contractors  o The Agent  Hired by export trading company   Native to contracting company country   3 options for sourcing o Internal manufacturing  Better quality control  Much more expensive up front   Most suitable for stable product lines  o External manufacturing  Less investment   Less quality/flexibility   Oversees sourcing­ cultural/communication differences create challenges o Combination of both   External Sourcing o Full Package Sourcing (FPS)  Contractor provides everything required to make the garments  Product design, development, raw material sourcing, production,  etc…   Li & Fung  Advantages:  Limited technical knowledge required  Limited investment  o Cut, Make, Trim (CMT)  Sourcing company provides design, product specs, and materials   Contractor provides labor only  Common in the Caribbean Basin (Costa Rica, Jamaica, etc…)  Advantages:  Control over design and raw materials  o Flexibility o Less threat of knockoff  Contract provides greater security  Factors to consider o Cost  Direct labor/materials and manufacturing overhead  Setup for communication   Buy computers, set up internet for factories in order to  communicate   Courier service – moving samples back and forth between factory and  headquarters   Buying office, agent, or staff for quality inspection   Custom brokers – people licensed for international trade   Help with exports of raw materials, cut parts, and finished goods   Minimum wage   Bangladesh­ $39/month  India­ $71/month  China­ $138 ­ $262 /month depending on province   Korea ­ $800/month  Consulting  Legal consultants – help deal with international regulations  Manufacturing technical specialists – monitor manufacturing  capabilities and quality of factories  Banking specialists   Freight specialists  Currency exchange rate­ $1 = 6.5 Chinese yuan   Imports to US from China have become more expensive  o Capacity   Financial­ does factory have $$ to grow if necessary?  Plant Space­ do they have the space to add equipment/laborers if need be?  Workforce­ are workers sufficiently skilled/ can they find new workers if  necessary? o Minimums  Important factor for fashion goods   Sometimes sellability is uncertain­ wouldn’t want to buy a large  quantity  o Labor skills/productivity  o Equipment assessment  o Quality evaluation   Look at products that the factory has made before  Also look at sample, but be aware that samples are sometimes not a true  example of mass production level quality  o Throughput time  Time it takes for an order to be processed from authorization to shipping  merchandise for sale   Basic goods vs. fashion goods  Timing is very important for fashion goods (be in line with current  trends) o Shorter the better


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