CASE STUDY 2 PLANNING FOR EFFECTIVE BUYING You were recently promoted to the position of buyer for the hosiery department in a large specialty store. Your market is about to open, and in anticipation of this you must be prepared with certain dollar goals for the coming season. It is the policy of your store that the buyer be responsible for the formulation of the departmental dollar six-month plan. You know that if this plan is to be of value, the figures established must be ones that you can actually achieve. You also know that despite your inexperience you will have to be prepared to explain and justify the plans and strategies you will use as guidelines when merchandising for the period under consideration Where shall you begin? You know a sound basis for future planning is to analyze the past results of your new department. So before you develop your plan for Fall, you decide to review the following figures, which show the performance achieved by the hosiery department for Fall of last year. Mont EOM STOCK Saree August $456.500 $75.000 $2.000 Septombor $850.000 $205.000 $2.000 October $550.000 $135.000 $7,500 November $600,500 $135.000 57.500 December S850.000 $220.000 $8.300 January $440,000 $120,000 $24.000 February $456,000 Total S000,000 $51.300 Turnover for period Markdown Your divisional merchandise manager (DMM) informed you that though the sales increases for the Fall season of last year had been greater than planned, there were other areas in the overall operation that needed improvement You are aware of the following facts: The nationwide economy is moving briskly top management has planned on an overall storewide sales increase of 7% legwear has had a strong surge of sales for the first six-month period (sales were planned with a 15% increase but actually were ahead 23% over the year before): fashion influences of long, lessy looks with slits in dresses and skirts continue as important appure looks the rising trend for legwear in the Spring season, after four dismal years, also 1.5 5.7% CASE STUDY 2 PLANNING FOR EFFECTIVE BUY . saw the revival of body suits, which has stabilized to a fair contribution of total sales, The textured hosiery introduced in the Spring retailing at 20% higher retail prices expected to create big business Your DMM requested a meeting with you to discuss your projected goals for the six months before they are finalized. You want to address the following issues in prope ration of your meeting How should the LY figures be used in preparation for your plan for the Fall season of this year? It would seem as if the sales trend in your department lends itself to a further increase of wales. Why must you estimate as accurately as possible (neither too high nor too low) the amount of sales you can generate during this season? As the buyer what three strategies can you plan in order to achieve the sales gain you propose? Having set your projected sales figures, you now want to adjust your stocks to the proper size in order to achieve the planned monthly sales figures Your DMM gave you August 1 stock figures of S460,000 and February 1 stock figures of $450,000. He told you to work out the BOM stock figures for each of the other months in your six-month plan. There are three approaches to planning the amount of stock necessary for projected sales figures. Which will you choose? Why? After you have determined all BOM stock figures for the entire period, what measurement will tell you how well you balanced your stock and sales for the entire period? In addition to planning sales and stocks, the markdown amounts are to be included. The typical markdown percentage in the industry for a hosiery department is 8%. The amount taken by your predecessor was 5.7%. In planning the amount of reductions for the entire period, how will you plan the markdowns on your current plan? In dollars? In percentages? Higher! Lower? Because your predecessor achieved a turnover of only 15, and the typical turnover in the industry for your department is 3.7. you realize that this was one of the areas that needs improvement." How can you show an increased turnover on the dollar plan you are going to submit at present? It is September 15. The following table shows the figures of your six-month plan. Should you make any revisions in your plan in light of the fact that your department for August had a 10% decrease in planned sales? If so, why and what revisions) would you make! If not, why not? . R 5: SIX MONTH PLANNING AND COMPONENTS Aug Sept. Oct Nov Dec Jan $100.00 $235.00 $165.00 $165.00 $265.00 $150.00 $175.00 $205.00 $135.00 $135.00 $130.00 $120.00 $100.00 $235.00 $165.00 $165.00 $285.00 $150.00 $90.00 Seasonal total $1.000.00 $900,00 $1,080.00 Sales LY Plan Actual Revised BOM stock LY Pian Actual Revised Outstanding orders $460.00 $840.00 $525.00 $655.00 $860.00 $410.00 $455.50 $850.00 $550.00 $600.50 $850.00 $440.00 $480.00 $840.00 $525.00 $655.00 $860.00 $410.00 $200.00 $250.00 $450.00 From this information, calculate the OTB figure for November. What could cause the OTB figure for September to change after it is established? Can you convert an overbought condition to an OTB position? If so, how? If not, why not? During the course of the six-month period, as you review your actual sales perfor- mance, should the actual results be compared to last year's sales or to the planned sales figures, or to both, in order to have a meaningful comparison? Explain your answer. Month August September October November December January February Total BOM stock $455,500 $850,000 $550,000 $600,500 $850,000 $440,000 $454,000 $900,000 Sales $75,000 $205,000 $135,000 $135,000 $230,000 $120,000 Markdowns $2,000 $2,000 $7,500 $7,500 $8,300 $24,000 $51,300 Turnover for period Markdown % 1.5 5.7% Aug Sept Oct. Nov. Dec. Jan $100.00 $235.00 $165.00 $165.00 $265.00 $150.00 $175.00 $205.00 $135.00 $135.00 $130.00 $120.00 $100.00 $235.00 $165.00 $165.00 $265.00 $150.00 $90.00 Seasonal total $1,080.00 $900.00 $1,080.00 Sales LY Plan Actual Revised BOM stock LY Plan Actual Revised Outstanding orders $460.00 $840.00 $525.00 $655.00 $860.00 $410.00 $455.50 $850.00 $550.00 $600.50 $850.00 $440.00 $460.00 $840.00 $525.00 $655.00 $860.00 $410.00 $200.00 $250.00 $450.00 CASE STUDY 2 PLANNING FOR EFFECTIVE BUYING You were recently promoted to the position of buyer for the hosiery department in a large specialty store. Your market is about to open, and in anticipation of this you must be prepared with certain dollar goals for the coming season. It is the policy of your store that the buyer be responsible for the formulation of the departmental dollar six-month plan. You know that if this plan is to be of value, the figures established must be ones that you can actually achieve. You also know that despite your inexperience you will have to be prepared to explain and justify the plans and strategies you will use as guidelines when merchandising for the period under consideration Where shall you begin? You know a sound basis for future planning is to analyze the past results of your new department. So before you develop your plan for Fall, you decide to review the following figures, which show the performance achieved by the hosiery department for Fall of last year. Mont EOM STOCK Saree August $456.500 $75.000 $2.000 Septombor $850.000 $205.000 $2.000 October $550.000 $135.000 $7,500 November $600,500 $135.000 57.500 December S850.000 $220.000 $8.300 January $440,000 $120,000 $24.000 February $456,000 Total S000,000 $51.300 Turnover for period Markdown Your divisional merchandise manager (DMM) informed you that though the sales increases for the Fall season of last year had been greater than planned, there were other areas in the overall operation that needed improvement You are aware of the following facts: The nationwide economy is moving briskly top management has planned on an overall storewide sales increase of 7% legwear has had a strong surge of sales for the first six-month period (sales were planned with a 15% increase but actually were ahead 23% over the year before): fashion influences of long, lessy looks with slits in dresses and skirts continue as important appure looks the rising trend for legwear in the Spring season, after four dismal years, also 1.5 5.7% CASE STUDY 2 PLANNING FOR EFFECTIVE BUY . saw the revival of body suits, which has stabilized to a fair contribution of total sales, The textured hosiery introduced in the Spring retailing at 20% higher retail prices expected to create big business Your DMM requested a meeting with you to discuss your projected goals for the six months before they are finalized. You want to address the following issues in prope ration of your meeting How should the LY figures be used in preparation for your plan for the Fall season of this year? It would seem as if the sales trend in your department lends itself to a further increase of wales. Why must you estimate as accurately as possible (neither too high nor too low) the amount of sales you can generate during this season? As the buyer what three strategies can you plan in order to achieve the sales gain you propose? Having set your projected sales figures, you now want to adjust your stocks to the proper size in order to achieve the planned monthly sales figures Your DMM gave you August 1 stock figures of S460,000 and February 1 stock figures of $450,000. He told you to work out the BOM stock figures for each of the other months in your six-month plan. There are three approaches to planning the amount of stock necessary for projected sales figures. Which will you choose? Why? After you have determined all BOM stock figures for the entire period, what measurement will tell you how well you balanced your stock and sales for the entire period? In addition to planning sales and stocks, the markdown amounts are to be included. The typical markdown percentage in the industry for a hosiery department is 8%. The amount taken by your predecessor was 5.7%. In planning the amount of reductions for the entire period, how will you plan the markdowns on your current plan? In dollars? In percentages? Higher! Lower? Because your predecessor achieved a turnover of only 15, and the typical turnover in the industry for your department is 3.7. you realize that this was one of the areas that needs improvement." How can you show an increased turnover on the dollar plan you are going to submit at present? It is September 15. The following table shows the figures of your six-month plan. Should you make any revisions in your plan in light of the fact that your department for August had a 10% decrease in planned sales? If so, why and what revisions) would you make! If not, why not? . R 5: SIX MONTH PLANNING AND COMPONENTS Aug Sept. Oct Nov Dec Jan $100.00 $235.00 $165.00 $165.00 $265.00 $150.00 $175.00 $205.00 $135.00 $135.00 $130.00 $120.00 $100.00 $235.00 $165.00 $165.00 $285.00 $150.00 $90.00 Seasonal total $1.000.00 $900,00 $1,080.00 Sales LY Plan Actual Revised BOM stock LY Pian Actual Revised Outstanding orders $460.00 $840.00 $525.00 $655.00 $860.00 $410.00 $455.50 $850.00 $550.00 $600.50 $850.00 $440.00 $480.00 $840.00 $525.00 $655.00 $860.00 $410.00 $200.00 $250.00 $450.00 From this information, calculate the OTB figure for November. What could cause the OTB figure for September to change after it is established? Can you convert an overbought condition to an OTB position? If so, how? If not, why not? During the course of the six-month period, as you review your actual sales perfor- mance, should the actual results be compared to last year's sales or to the planned sales figures, or to both, in order to have a meaningful comparison? Explain your answer. Month August September October November December January February Total BOM stock $455,500 $850,000 $550,000 $600,500 $850,000 $440,000 $454,000 $900,000 Sales $75,000 $205,000 $135,000 $135,000 $230,000 $120,000 Markdowns $2,000 $2,000 $7,500 $7,500 $8,300 $24,000 $51,300 Turnover for period Markdown % 1.5 5.7% Aug Sept Oct. Nov. Dec. Jan $100.00 $235.00 $165.00 $165.00 $265.00 $150.00 $175.00 $205.00 $135.00 $135.00 $130.00 $120.00 $100.00 $235.00 $165.00 $165.00 $265.00 $150.00 $90.00 Seasonal total $1,080.00 $900.00 $1,080.00 Sales LY Plan Actual Revised BOM stock LY Plan Actual Revised Outstanding orders $460.00 $840.00 $525.00 $655.00 $860.00 $410.00 $455.50 $850.00 $550.00 $600.50 $850.00 $440.00 $460.00 $840.00 $525.00 $655.00 $860.00 $410.00 $200.00 $250.00 $450.00