In the world of retailing, inventory management is a critical factor for success: however, many small retail owners do not aheays take the time and effort to ensure they have the right information needed to produce effective buying plans. For some, pur- items in the Greater Toronto area-also uses a POS. system to break out sales plans by month. "We start off with a global view of sales and then we drill downa to the store level and to the department level," says chasing inventory may be more about "gut feel" and less about historical data or sales forecasting, which can lead to poor purchase decisions and high carry- ing costs. Carrying costs associated with retail inven- tory include the price of financing, processing, and handling inventory and have been estimated to represent about 25 percent of the inventory value on hand, which can severely impact cash Bow Fur thermore, inventory that sits on the shelf too long Halpern. By forecasting the level of monthly sales an inventory buying plan is developed by determin- ing the amount of inventory needed at the end of each month to sapport the following month. Halp ern is quick to point out, however, that a buying plan "won't tell you specifically which items to buy, but it does tell you how much money youa have available to spend in order to support your sales plan, and how and where to spend that money at a eventually gets marked down and erodes a retailer's profit margin, which again can cripple a small busi ness, especially one just starting out There are ways, however, that retailers can improve inventory management. A solid inventory buying plan can ensure that retail shelves are fall, merchandise continues to "move or turn over, and. very high level."For example, his buying plan may allocate $200,000 for cookware so using the POs system he can then zero in on that category to see which items are selling best. In this case it might. identify that stainless steel cookware is outselling nonstick, which will then give Halpern an indica- tion of how to spend that allocation. Since inven- tory is usually the biggest invests makes, the more information you have to make a decision, the better you'll be at it. a retailer that new items can be added to draw customers in and ensure repeat visits. An inventory buying plan should be based on historical data and projections QUESTIONS and the best way to collect, track, and access that information is using a Point of Sales (POS) system. Paul Simmonds, owner of three footwear and clothing stores in Fredericton, New Brunswick invested in a POS system for his retail operation, allowing him to organize inventory into catego- 1. Discuss the role that purchasing plays in this type of business. How can this retailer make better purchase decisions? 2. What kinds of factors would be most critical to consider in terms of choosing suppliers ries used to track sales performance, inventory turns, and gross profit. Simmonds says the system. provides a "road map for buying at market that is determined by history of the performance of the inventory and the vendors who provide it." Mark Halpern, owner of Kitchen Stuff Plus-a discount retailer of housewares and home dcor Sourcn Camilla Cornell, Imventory Buying Plans," Indeten det Rtailer, Fall 2010, aailable at http://members.retail. council.org/training/publications/independentretailer/ ir fall2010 pdf, and htp://www.kinchenstuffplus.com. OCusto mas demand jor 3s gunurally not un Scavic intermed day faiod o timu Khat Stauts can be us to bettur math a cempanis capac to punferm Savius dumand to custone thoie surics? In the world of retailing, inventory management is a critical factor for success: however, many small retail owners do not aheays take the time and effort to ensure they have the right information needed to produce effective buying plans. For some, pur- items in the Greater Toronto area-also uses a POS. system to break out sales plans by month. "We start off with a global view of sales and then we drill downa to the store level and to the department level," says chasing inventory may be more about "gut feel" and less about historical data or sales forecasting, which can lead to poor purchase decisions and high carry- ing costs. Carrying costs associated with retail inven- tory include the price of financing, processing, and handling inventory and have been estimated to represent about 25 percent of the inventory value on hand, which can severely impact cash Bow Fur thermore, inventory that sits on the shelf too long Halpern. By forecasting the level of monthly sales an inventory buying plan is developed by determin- ing the amount of inventory needed at the end of each month to sapport the following month. Halp ern is quick to point out, however, that a buying plan "won't tell you specifically which items to buy, but it does tell you how much money youa have available to spend in order to support your sales plan, and how and where to spend that money at a eventually gets marked down and erodes a retailer's profit margin, which again can cripple a small busi ness, especially one just starting out There are ways, however, that retailers can improve inventory management. A solid inventory buying plan can ensure that retail shelves are fall, merchandise continues to "move or turn over, and. very high level."For example, his buying plan may allocate $200,000 for cookware so using the POs system he can then zero in on that category to see which items are selling best. In this case it might. identify that stainless steel cookware is outselling nonstick, which will then give Halpern an indica- tion of how to spend that allocation. Since inven- tory is usually the biggest invests makes, the more information you have to make a decision, the better you'll be at it. a retailer that new items can be added to draw customers in and ensure repeat visits. An inventory buying plan should be based on historical data and projections QUESTIONS and the best way to collect, track, and access that information is using a Point of Sales (POS) system. Paul Simmonds, owner of three footwear and clothing stores in Fredericton, New Brunswick invested in a POS system for his retail operation, allowing him to organize inventory into catego- 1. Discuss the role that purchasing plays in this type of business. How can this retailer make better purchase decisions? 2. What kinds of factors would be most critical to consider in terms of choosing suppliers ries used to track sales performance, inventory turns, and gross profit. Simmonds says the system. provides a "road map for buying at market that is determined by history of the performance of the inventory and the vendors who provide it." Mark Halpern, owner of Kitchen Stuff Plus-a discount retailer of housewares and home dcor Sourcn Camilla Cornell, Imventory Buying Plans," Indeten det Rtailer, Fall 2010, aailable at http://members.retail. council.org/training/publications/independentretailer/ ir fall2010 pdf, and htp://www.kinchenstuffplus.com. OCusto mas demand jor 3s gunurally not un Scavic intermed day faiod o timu Khat Stauts can be us to bettur math a cempanis capac to punferm Savius dumand to custone thoie surics