Page 148 - DMGT554_RETAIL_BUYING

Unit 10: Purchasing in the Domestic and Foreign Marketplace

necessary to stockpile in order to cope with subsequent surges in demand; again this is reflected Notes
by an increasing stock to sales ratio. In the example of women’s toiletries, the average stock
ratio is 3:0 and is raised and lowered according to the rates of sales.
The stock required to achieve the sales during the month should ideally be present at the
beginning of the month; therefore, the stock position refers to the Beginning of Month (BOM)
stock level. As sales progress through the month, the stock level drops, so that by the end of the
month the stock position could be expressed as (BOM stock-sales). However, in reality, as well
as selling stock, the retailer will also be receiving stock, in order to build required level of stock
for the next month, so that the stock position at the end of a preceding month should be the
required BOM stock of the next month. The difference between the (BOM stock-sales) figure and
the EOM stock figure will be the purchases that have arrived during the month. Figure given
below illustrates this process.
Figure 10.1 : BOM (Stock-sales)

If the plan started in figure explained above is continued, we can see how this process works
through the season (See figure given above seasonal peaks in different product categories).
Expressed as an equation it is as follows:
Planned purchases = EOM stock + Sales – BOM stock
The planned purchases for each month represent the value of stock (at retail price) that the buyer
needs to bring in from suppliers. Some goods may need to be ordered in advance of the season,
whilst others can be topped up immediately; therefore, it is likely that some of the planned
purchase figure will have already been committed to pre-ordered goods suppliers. The remaining
funds are what are left open for the buyer to spend on fast lead-time stock. In this way, the stock
level for the next month is achieved.

10.3.1 Monthly Sales Percent Distribution to Season (Line 1)

Line 1 of the plan projects what percentage of the total sales is expected to be sold in each month.
Thus, in Table 10.3, 21 percent of the six-month sales is expected to occur in April.

LOVELY PROFESSIONAL UNIVERSITY 143