retail buying hw, case study #2 controlling shortages

CASE STUDY 2 Mr. Abbott takes three steps: CONTROLLING SHORTAGES He decides (though can computers ever be wrong?) to first determine the closing book inventory from the given figures. Gary Abbott, the buyer for The Gift Shop, received the shortage report at the end of Having done that, he adjusts the physical count to the book inventory to determine the shortage percentage. the Fall season. This report revealed that the overall department shortage for this six-month period was 1.3%, or 0.2% less than the previous season. Mr. Abbott was Having satisfied himself as to the accuracy of the shortage percentage, he delighted to notice this decline in shortage, small as it was. As he analyzed the results attempts to determine the possible causes. of the individual stores, he found that Store 01 had a shortage of 1.2% while Store 09 had a 5.0% shortage. If you were the buyer, what causes would you investigate more thoroughly in order to decrease shortages, and why? What effect, if any, would the large shortage percentage Because the store uses a bar code scanning system to take inventory, the accuracy of of Store 09 have on the overall department net profit? the amount of inventory taken is ensured. However, Mr. Abbott reviews the figures for each store before trying to determine the causes of the vast shortage differences. He refers to the following data: Store 01 Store 09 Cost Retail MU% Cost Retail MU % Opening inventory $450,000 52% $300,000 52% Purchases $142,500 $300,000 $71,250 $150,000 (including freight) Reductions $7,000 $4,000 Sales $375,000 $150,000 Shortage 1.2% 5% Store 01 had a physical inventory figure of $363,500, and Store 09's physical count was $288,500. Other differences between these two stores are: 1. Store 01 is one of the oldest existing branches of the chain, while Store 09 is the newest branch, having been opened one year ago. 2. Store 01 is located in a high-income area, while Store 09 is in a medium- income-bracket location. 3. Store 01 is one of the most profitable units of the chain, and because of its high productivity, it enjoys a commensurate sales force. 4. Since 09 is so young, it has been staffed with a minimum permanent sales organization supplemented by part-time employees