Merchandising Diagnostic tool

1. Stock management – Getting the most out of your most expensive resource - Stock

1. Are you happy with your merchandising?

1. How many weeks stock do you have made up on average (stock turn)? a. Can you split that down per season – at least current, previous and older stock? b. Can your business support the cash flow in the level of stock you currently own? c. Does your business implement stock targets? – recommended

As a rule of thumb 10 – 20 weeks can be acceptable depending upon size of business and their type of operation – (generally bigger weekly sales expect less cover) you are looking for the terminal stock (previous and older seasons to be much smaller as a stock holding value (say a max of 15% of total) , (will not necessarily be less weeks cover) If the overall figure is too high or they are not happy with it (poor cash flow) then will need to find ways to buy less or increase sales.

2. What is your stock margin for current stock – split down into - All seasons (total), current season, previous season and older season

You are looking for discount levels. If the margin is too low for a company to sustain on the older stock there is a problem – either in the buying (product failed) or merch - buying too much for the market

3. What factors do you consider when deciding to buy stock for a season or a given sales period

1. Do you link your stock buying to your financial plan? - recommended 2. Does it include allowance for a previous seasons carryover of stock? - recommended 3. Do you operate open to buy policy? – recommended

To link stock buying back to financial plan, they will need to know and have some understanding of the financial plan. Particularly the selling value of sales and selling value of cost of reduction for the given period.

Sales from the financial plan will be made up of revenue from of all stock seasons as will COR so when calculating what value of stock to buy they will need to estimate what % of sales and COR are for the new season. Also some sales may come from the previous financial period and this will need to be estimated – but not double counted!:-

Sales from financial plan (new season only) + pre season sales (new season) + COR (of new season only) – OTB – breaking stock value of all older seasons stock = buying value of new season

4. Do you have reports that show stock holding per channel?

This could indicate a lack of management reporting. Look for average cover – again looking for no more than 8 - 12 weeks in each channel (outside of main warehouse) if heavier too much stock being tied into unprofitable channels and allocation may be an issue. Level of sales is definitely an issue.

5. Do you know what your overall size availability is?

1. Do you know what your average size ratio is in sales (volume and value) 2. Do you know per channel and per product? 3. Is your customer happy with your level of availability per product?

You are looking here for awareness of the important issues for the customer and are you making the most out of your investment in stock - sales are not maximized if bought or delivered in a poor size ratio. Also can indicate a lack of management reporting or merchandising focus.

6. How well does your new stock (intake) flow into the business?

1. Does it support your product launches and promotions well enough? 2. Do you plan your intake with the cash flow in mind

What I am looking for here is a balance in production planning. It must achieve both the things detailed above. This takes real control and constant review by the merchandisers witgh help