Next Year’s Inventory Order for Lovely Accessories

MEMORANDUM

TO: Rachael Dubois and Michelle Long

FROM: Wassim Zhani

DATE: June 14, 2012

SUBJECT: Recommendations for Next Year’s Inventory Order

As per your request I have investigated past sales and determined the recommendations for next year’s
inventory purchases.

Recommendation

I recommend that lovely accessories increase unit purchases for next year’s inventory those items that
show a steady increase in sales volume over the past four years, and decrease the units purchased of those
items that showed a decrease in sales over the same time period. Lovely Accessories increase next year’s
stock of the following inventory items; pearl necklaces by 69 units, Jamaican hair clips by 4 units, opal
rings by 175 units, wooden bracelets by 1 unit, glass necklaces by 7 units, Gucci purses by 46 units,
mosaic broaches by 33 units, amethyst rings by 2 units, Swatch watches by 29 units, and Batik scarves by
1 unit. Lovely Accessories should decrease next year’s inventory for the following items; silk scarves by
2 units, tri-metal bracelets by 5 units, gold hair combs by 3 units, and silver leaf pins by 5 units. The next
paragraphs describe the method by which I based my recommendations.

Method of Determination

I gathered sales data over the past four fiscal years for all of the items that Lovely Accessories currently
stocks to determine the projections for next year’s gross sales. I analyzed overall trends in sales for each
item to determine if next year’s inventory should be increased or decreased. An upward trend indicates an
increase in sales volume over time, and a downward trend shows a decrease in sales volume. The
percentage of increase or decrease among years was then determined and used to project future sales with
special consideration given to those items with the largest contribution to the profit margin, and to the
company’s five percent average return rate. Recommendations were made based on overall performance
in sales and percentage of increase or decrease per item. The following outlines the trend, and percentage
increase or decrease in sales volume for each item.

Pearl necklaces showed an upward trend indicating an increase in sales over the past four years, and an
increase in sales from the previous fiscal year of nearly one percent. Jamaican hair clips also an upward
trend with an increase of 14 percent. Opal rings demonstrated an upward trend with a 26 percent increase
as did wooden bracelets with a 17 percent increase. The performance of Glass necklaces indicated another
Lovely Accessories Future Purchases June 14, 2012 2

increase in sales over time with 19 percent. Gucci purses offered favorable trend with 24 percent increase.
Mosaic broaches were another item category that showed upward trend at 30 percent. Amethyst rings also
performed well with a sales trend increasing at 29 percent over four years. Swatch watches increased 4
percent. Batik scarves showed a 7 percent increase.

There were four items that displayed negative movement in trend over the past four fiscal years. Sales of
silk scarves decreased by 14 percent, tri-metal bracelets by 117 percent, gold hair combs showed a70
percent decrease, and silver leaf pins had a 5 percent decrease. Table 1 depicts the data for each of the
inventory items for the past four fiscal years.

Table 1

The sales and trend data for the past four fiscal years for Lovely Accessories, and recommended increase
or decrease in order purchases for the next year are depicted in Table 1.

Lovely Accessories sales, and trend for 2008-2012 with recommendations for next year’s order by item

Percentage
Average Recommended
Increase or
Percentage Forecast of Increase or Order Increase
of Increase Decrease
Item Next Year Sale Decrease in or Decrease by
or Decrease From in Units Unit Sale Unit
in Unit Sale Previous
during 4 Fiscal Year
Years
Pearl necklaces 26% 1% 474.82 increase 69
Jamaican hair clips 27% 14% 35.73 increase 4
Opal rings 27% 26% 1050.60 increase 175
Wooden bracelets 61% 17% 25.28 increase 1
Glass necklaces 24% 19% 33.25 increase 7
Gucci purses 27% 24% 437.39 increase 46
Mosaic brooches 26% 30% 166.51 increase 33
Silk scarves 25% -14% 12.08 decrease -2
Amethyst rings 23% 29% 14.14 increase 2
Swatch watches 26% 4% 190.65 increase 29
Tri-metal bracelets 27% -117% 5.15 decrease -5
Batik scarves 36% 7% 426.16 increase 1
Gold hair combs 29% -70% 2.36 decrease -3
Silver leaf pins 23% -5% 16.57 decrease -5

Data Source. Primary

Lovely Accessories Future Purchases June 14, 2012 3

You will notice upon review of Table 1 that some items performed better over time than others. The
Table shows the percentage of increase or decrease over the years from 2008 through 2012 as well as the
percent of change between the past year and the previous year. Recommendations of increase or decrease
for each item for next year’s order are indicated by unit.

In summary, I recommended the purchases for next year’s inventory based on previous years’ fiscal data
dating back four years. Special consideration was made for average return rate, and profit margin for each
item. Those items showing upward trend and large contribution to profit were selected for
recommendation for an increase in inventory for next year’s stock order. Items that demonstrated a
negative trend or that showed very little profit margin overall were recommended for decrease in
inventory order.

I was pleased to work with both Rachael Dubois and Michelle Long on this planning project. I
appreciated the opportunity to recommend the composition of the order for next year’s inventory for
Lovely Accessories. I can be reached by email at wassimzhani@gmail.com or by cell phone at (212) 500-
2100.