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ALLOCATING

MERCHANDISE TO STORES

By: Boss Dave

Overview  Amount of Merchandise Allocated  Types of Merchandise Allocated  Merchandise Management  Managing the Merchandise Planning Process  Three types of analysis .

the next step in the merchandise management process is to allocate the merchandise purchased and received to the retailer’s store. Afterdeveloping a plan for managing merchandise inventory in a category. Research indicates that these allocation decisions have a much bigger impact on profitability that does the decision about quantity of merchandise to purchase. .

What type of merchandise to allocate 3. . 2. Allocatingmerchandise to stores involves three decisions: 1. How much merchandise to allocate to each stores. When to allocate the merchandise to different stores.

Amount of Merchandise Allocated  Retailchains typically classify each of their stores on the basis of annual sales. allocators consider the physical characteristics of the merchandise and the depth of assortment and level of product availability that firm wants to portray for the specific store. Thus A stores would have the largest sales volume and typically receive the most inventory while C stores would have the lowest sales volume and receive the least inventory for a category. .

Types of Merchandise Allocated  The geodemographics of a store’s trading area are considered in making allocation decisions. The ready to eat breakfast cereal planner would offer different assortments for stores in these . Some stores are located in areas dominated by segments called “Rustbelt Retirees” and other areas are dominated by the “Laptops and Lattes” segment. Consider the allocation decision of a national supermarkets for its ready to eat cereal assortment.

Example of Different Geodemographic Segments .

. To increase inventory turnover in the category. This exhibit illustrates these different regions of the United States. Comparing regions shows that capri sales peak in late July in the Midwest and at the beginning of September in the West. due to seasonality differences and differences in consumer demand.Timing of Merchandise Allocation  In addition to the need to allocate different inventory levels and types of merchandise across stores need to be considered. buyers need to recognize these regional differences arrange for merchandise to be shipped to the appropriate regions when customers are ready to buy.

Sales of Capri Pants by Region .

Analyzing Merchandise Management Performance  The next step in the merchandise planning process is to analyze the performance of the process and make adjustments. lowering prices to increase sales. or changing the assortment and model stock plans. . allocating different assortments to specific stores. such as ordering more or less merchandise.

Three types of analysis related to the monitoring and adjustment steps are: .

.Sell through Analysis Evaluating Merchandise Plan A sell through analysis compares actual and planned sales to determine whether more merchandise is needed to satisfy demand or whether price reductions.

It is used to determine which SKU’s should be in the plan and how much backup stock and resulting product availability are provided for each SKU in the plan.Evaluating the Assortment Plan and Vendors  AnABC analysis identifies the performance of individual SKU’s in the assortments plan. .

This method is similar to the multiattribute approach that can be use to understand how customers evaluate stores and merchandise. .  Itis for evaluating vendors uses a weighted average score for each vendor. The score is based on the importance of various issues and the vendor’s performance on those issues.Multiattribute Method for Evaluating Vendors.

All Advanced Planning functions used to create plans and assortments are dependent on the accuracy and timelines of the information utilized. This fact is especially helpful in Allocation and Replenishment for the merchandise.CONCLUSION   Thistopic provides an overview of the merchandise management planning process. .