Nama : Fadila Elsa Prim

NIM : 18059179

Prodi : Manajemen Dual Degree

CHAPTER 12

1. How and why would you expect variety and assortment to differ between a
traditional bricks-and-mortar store and its Internet counterpart?
Answer :
If I were to use a clothing store as my type of ‘store’, I would expect the variety
and assortment of a traditional bricks-and-mortar store to have different limitations based
upon store physical charteristics, items GMROI, and they would need to continually
refine their model stock plan, to ‘cater’ to the most common and largest percentage of
items in sizes that most people are, with fewer items in uncommon sizes. In the internet
counterpart, I would expect almost an endless array of items available, with the store
maintaining a perpetual inventory, producing or buying wholesale or small lots of items
only when their shows a demand. However it would be smart for the internet based
stores to offer larger variety, since they wouldn’t necessarily have to store or warehouse
much of the assortment offered, ordering to fill in the event that sales dictate.

2. Simply speaking, increasing inventory turnover is an important goal for a retail

manager. What are the consequences of turnover that’s too slow? Too fast?
Answer :
A good company condition is where the company has inventory and rotation in
balanced conditions. If the value of inventory turnover is too high, then the company has
a small amount of inventory and can cause shortages so the company cannot meet the
demands of consumers (customers). Otherwise if the value low turnover, it will hurt the
company such as the risk of damage to inventory and cause a decrease in the selling price
of an item so that it can reduce profitability. other than that with a large amount of
inventory the company will also bear the costs relatively large storage so that it will
reduce the profitability of the company. The company tries not to always get a turnover
rate the highest, but the most profitable turnover rate.
 Thus it can be concluded that inventory turnover is the ratio used to assess and
measure the number of times the inventory rotates in one period. The higher it is
inventory turnover, the better for the state of the company, because it shows performance
the company runs effectively and efficiently and productively in the use of inventory.
Conversely the lower inventory turnover will make the company's condition is not good,
This is because it increases the losses received by the company due to falling prices,
additional inventory storage and maintenance costs.

3. Assume you are the grocery buyer for canned fruits and vegetables at a five-store
supermarket chain. Del Monte has told you and your boss that it would be
responsible for making all inventory decisions for those merchandise categories. Del
Monte will now determine how much to order and when shipments should be made.
It promises a 10 percent increase in gross margin dollars in the coming year. Would
you take Del Monte up on its offer? Justify your answer.
Answer :

The supermarket is a small five store chain and can assume that is may not have
all sufficient resources, the advancement in market research, or inventory management in
place. Looking into this offer and making the decision would be based on daily turnover,
traffic patterns, and specifically on customer demands. Doing a partnership with Del
Monte would provide many benefits, more experience, and customer insight. With this
help the chain could be more active with customers and improve performance and even
sales. They can also help with brand awareness through its promotions and national
advertising.

On the other side, there could be many issues that can arise before the proceeding
can be arranged. Del Monte could take advantage of their position and control the
information and inventory. They could also make their own decisions that can profit more
to them. If Del Monte stocks more of their own products/brands and will have no space to
put other products customers may need/want. Consumers could possibly be deprived of
good assortments and brand choice.
 Del Monte can offer many advantages and help the company strive successfully,
but it could also come with several risks. There is a benefit that includes a ten percent
increase in the gross margin, but once again can be cautious in negotiating a deal with the
chains interest. I would personally develop a contract which would include doing a “test
run” with Del Monte for a short term contract term. I would also want the contract to list
specific areas of the cooperation and be promised the ten percent increase in margins. I
think it is important to list specifics that you are wanting from the partnership and not
walking into this blindsided.

4. A buyer at Old Navy has received a number of customer complaints that he has
been out of stock on some sizes of men’s t-shirts. The buyer subsequently decides to
increase this category’s product availability from 80 percent to 90 percent. What
will be the impact on backup stock and inventory turnover? Would your answer be
the same if the product category were men’s fleece sweatshirts?
Answer :

If product availability was increased then backup stock as well would have to be
increased. Inventory turnover decreases since inventory investment is increasing.
In this case if the buyer is implementing a quick response inventory system, backup stock
can be reduced since the lead time is much less. Inventory turnover rises since inventory
investment falls, and sales climb since the retailer is out of stock less often.

5. Variety, assortment, and product availability are the cornerstones of the

merchandise planning process. Provide examples of retailers that have done an
outstanding job of positioning their stores on the basis of one or more of these
issues.
Answer :

Variety is the number of different merchandise categories within a store or

department. Assortment is the number of SKUs within a merchandise category, also
 known as depth of merchandise. Product availability is a measurement of the percentage
of demand for a particular SKU that is satisfied.

Amazon does well with all three of these topics. It has a wide variety of different
categories that it offers to its customers spanning from electronics to clothing and even
groceries. The assortment within those categories is deep as well. There are hundreds and
hundreds of items available within each of Amazon’s categories. As for product
availability, the most popular of products are highly stocked to meet the demands of
people all over the world.

6. The fine jewelry department in a department store has the same GMROI as the
small appliances department, even though characteristics of the merchandise are
quite different. Explain this situation.

Answer:

Jewelry, apparel, and housewares have the highest gross margin percentages.
Jewelry has a relatively low sales to stock ration because the jewelry department knees to
be stocked with many different items to satisfy customers who want to consider many
items before making a decision. Housewares, (small appliances) have a higher sales
volume, and a smaller assortment, and a smaller profit ration, however they will have
approximately the same GMROI because they sell more items in its department,with less
profit.

7. Calculate the GMROI and inventory turnover given annual sales of $20,000,
average inventory (at cost) of $4,000, and a gross margin of 45 percent.
Answer :

GMROI = (gross margin) / (average inventory at cost)

GMROI = (9,000) / (4,000) = $2.25

Inventory Turnover = (sales) / (inventory)

 Inventory Turnover = (20,000) / (4,000) = 5

8. As the athletic shoe buyer for Sports Authority, how would you go about forecasting
sales for a new Nike running shoe?
Answer :

As an athletic shoe buyer for Sports Authority, you would be dealing with a staple
merchandise category, which is a category that is in continuous demand over an extended
time period. Sports Authority’s athletic shoe sales should be relatively consistent from
year to year. This will allow for the shoe buyer to use historical sale data to predict future
sales for a new Nike running shoe. As an athletic shoe buyer, one must take into account
factors including the pricing of the new shoe, stores opening/closing rates, promotions or
discount offers of shoes that will impact sales of the new Nike shoe.

9. Using the 80-20 principle, how can a retailer make certain that it has enough
inventory of fast-selling merchandise and a minimal amount of slow-selling
merchandise?
Answer :

The 80-20 principle, implies 80% of a retailer’s sales are generated from 20% of the
products. A retailer must have a good understanding of their customers and the products
customers value the most. This understanding of customers buying behavior, can
produce more positive results and help retailers in knowing what they need more of,
fast-selling merchandise, and what they need to stock less of, slow-selling merchandise.
With this understanding, retailers should concentrate on the products that provide the
biggest returns, doing so retailers should divide inventory into A, B, or C rankings
depending on each products level of value. The A category are products which hold the
highest value to retailers. Retailers should make sure A categories items are stocked at
all times as these items hold the highest value to the store. Meanwhile, the C category
are those items which do not hold a high value to retailers, and suggest retailers should
try to only special order these items for specific customer orders and needs.
10. A buyer at a sporting goods store in Denver receives a shipment of 400 ski parkas on
October 1 and expects to sell out by January 31. On November 1, the buyer still has
350 parkas left. What issues should the buyer consider in evaluating the selling
season’s progress?
Answer :
Some issues that the buyer should consider are:
- Environmental factors: It is still early in the season to expect to sell a large amount
of stock. The winter season as barely begun and as the season becomes colder; the
winter parka sales should see an increase.
- Early in season: Only one month has passed since the buyer purchased the parkas.
The buyer still has 3 months (remainder of November, December and January) to
potentially see an increase in sales. The buyer could try to promote the items, or
putting them in a more favourable spot within the store. They have ensured that the
product is available when the demand increases, but it is only November where the
cold still hasn’t made an effect on sales.
Some things the buyer should consider in evaluating are the inventory turnover, model
stock plan, and pricing of merchandise.

11. A buyer is trying to decide from which vendor to buy a certain item. Using the
information in the table below, determine from which vendor the buyer should buy.

Answer :
Good reputation and price points are key criteria buyers use when searching
for vendors. One factor many buyers use might surprise you, however. Shared
values are often an extremely important aspect of vendor choice. Anyone can
offer a product–it's the companies that “stand for something” that are the most
memorable.
Buyer should buy in vendor A, because vendor A has better and higher
performance skills than vendor B. Therefore the buyer must consider the
performance of the vendor