FM325 Final Exam
Strategic Plan
- 3-5 year plan incorporating high-level planning into the TDPP. - Focuses on long-term vision or direction of the company. - Provides goals to the organization at least 2 months prior to the longest lead-time requirements.
Planning Levels
- Administrative - Strategic or Financial - Top Down (TDPP) - Middle Out (MOPP) - Bottom Up (BUPP) - Key Item (KIPP)
Steps for Planning Margin
- Initial markup (IMU) - maintained markup (MMU) - gross margin - gross margin return on investment (GMROI)
Variable Characteristics (there are 5 of these!)
- Normal - Average - Non-spread - Opening - Closing
What are the most common types of plans?
- Strategic - Merchandise or Product plan - Key Item plans
Structural Dimension
- any dimension other than the measure dimension. - has a hierarchy - product, calendar / time, and organization dimensions
What are the common ways to develop a pre-season plan?
- comp vs. non-comp - inventory plan - margin plan - KIPP can include the additional step of planning by attribute
KIPP - Product before Key Item
- key items are developed after product plans - key items must fall within the financial parameters defined in the product plan and not exceed them
KIPP - Key items before Product
- key items are identified prior to beg. The product planning process - the consolidation of the key item metrics must be visible in the product plan, to ensure the product plans are created accordingly
In-season planning pros
- never set in stone - adjust your plans as you obtain more sales data - allows you to bring inventories in line with actual sales The more closely you monitor your plans, the fewer $ you will keep tied up in inventory
Considerations for Creating a Strategic Vision
- new, refurbished or closed stores - product direction - key item definition and financial requirements - price ranges - promotional strategy - life cycle time frames
What information is needed for each month of the season to maintain OTB?
- planned sales projections - actual sales - planned EOM - actual month inventory - planned MDs - actual MDs - outstanding purchase orders
Impacts of EP
- product flow (units & dollars) - receipts - cash flow - promotions - resource management (inventory turn)
TDPP Considerations for Planning Sales (Step 1)
- sales performance coming into the season - monthly promotions - how is my customer changing? - economic factors
What are the different ways you can enter data into EP planning?
- type data into a cell - type data into the edit bar - enter calculations into the edit bar
Economic Factors
- unemployment rates - interest rates - dollar value fluctuations - inflation any factors that affect your customers will also affect their purchases solution: reduce prices, source new suppliers or adjust your forecasts
What should you take into account when building your key item plans?
- volume, quantity, margin, and price components balanced w product strategy - initial allocation floor set requirements - fixture or display quantity requirements - space restrictions
Identifying key items
1. Analyze target customer, promotions, competition and market trends 2. Review corporate definition 3. Analyze performance of current key items 4. Analyze other items that perform to the KIPP criteria
Performing Qualitative Analysis (Pre-season planning steps)
1. Customer profile analysis 2. Department analysis 3. Key department trends 4. Major vendor analysis 5. Advertising review 6. Visual Presentation analysis
Key item planning process (steps)
1. Identify key items 2. Plan 3. Review 4. Distribute
What are the only 2 ways to increase stock turn?
1. Increase sales 2. Decrease inventory
Pre-Season Planning Process (Steps)
1. Plan Sales 2. Plan Inventory 3. Plan Margin 4. Review Plan 5. Approve Plan
Planning Process (steps)
1. Plans are created 2. Orders are placed 3. Merchandise is allocated 4. Merchandise is sold 5. Sales data is recorded
Cell
A unit in a spreadsheet used to store or display data
Adjustments
Any value that changes the inventory portions not accounted for in sales, receipts, markdowns, and shrink. Could also include employee disc.
Markup
Difference between the wholesale price and the retail-selling price Markup $ = selling price - cost price Markup % = markup $ / retail price MU% = retail - cost / retail
Life cycle planning (key items)
Includes - ramp up - full price - plateau management - terminal stock targets - productivity measures for each stage - drop dead date / exit strategy
Why might a buyer not spend all of their OTB for each month?
It is common practice to leave dollars available for opportunity purchases and to act as a buffer if sales don't reach plan
Key item considerations
Key items should be planned in order to understand gross profit opportunities and should be planned using a full set of business measures They must be planned when setting strategic targets, during product plan in and prior to assortment planning
Typical Plans
Large organizations can have several different plans based on the company needs; ranging from high-level plans to more detailed lower level plans.
GMROI
Measures gross margin based on turnover Analyzing gross margin and turn combined allows you to determine the most profitable item to Carry
Stock turn
Measures the rate at which merchandise is sold compared to on hand. Inventory turnover = net sales / average inventory at retail
Shrinkage
Merchandise lost due to shoplifting, internal theft, damages, paperwork errors, etc
Markdowns
Reductions in selling price that are used to increase customer interest in the promoted products and to improve store traffic 1. Permanent markdowns (PMD) 2. Point of sale markdowns (POS)
Open to buy (OTB)
Using this is the best way to adjust inventories due to changes in actual sales from the original plan. Usually calculated on a month-month basis and must be accurate and timely in order to maximize profits and / or minimize markdowns
Versions
WP - Working plan ("what if") OP - Original plan (pre-season approved) RP - Revised plan (in-season approved)
Defining Company Policy
a clear idea of what your company wants and how it wants to be seen by its customers should include: - company vision (long-term or big picture) - company image - merchandise quality - marketing - profit margins - customer service levels
Variety
a good mix of products (broad)
Assortment
a good mix of sizes and colors within product lines. (detail)
Plan
a model of business activity over a period of time, made up of a name, structures or dimensions, modules and views.
Rule sets
a rule plus all of its inverses affects your calculartions
Normal Variables
act according to the standard in the plan when data is entered. 1. Normal Consolidation 2. Normal Spreading
In-season
adjusting your plans in-season; allows you to make adjustments based on current trends. some companies don't adjust their plans in-season because they are unable to take action - it might not be possible to cancel inventory mid-season.
Benefits of planning sales by Comp vs. Non comp stores
allows a planner to get a better understanding of potential performance because store openings and closings are planned separated from stores with historical info
Adjustments
any value that changes the inventory position that is not accounted for in sales, receipts and markdowns. not often planned, can vary between companies. common planned examples are: RTVs, damaged goods, store samples.
Variables
assigned characteristics that control how the spreading and consolidations are performed.
Undo all
causes the contents of all changed cells to revert to the values they held after the last calculation; this also affects changed cells in the current module.
Undo cell
causes the current cell to revert to the value it held after the last calculation; this can only be done to a changed cell
Bar chart
chart that displays data values in the form of bars; available in 2D, 3D, and 2D horizontal format.
Reconcile plans
combining classes will provide the strategy for each department, combining departments will provide the total company plan, which produces the overall objective.
Calculating
complex task governed by rules and their ordering
Cumulative OTB
considers everything that has occurred thus far in a planning season. cumulative otb = planned ending inventory - projected ending inventory
Corporate Views
created by the admin; they aren't saved with plan and module information so that they can be used across the company with any plan and module. they are provided to users to ease in the planning process.
Spreading
data entered at higher levels are spread to lower levels
Consolidation
data entered at lower levels are summed to higher levels
Exception
data value that falls outside of the min., max., or range set for a selected array of data
open to buy (OTB)
difference between planned purchases and on order. this is the dollar amount the buyer can spend for a specific period. a negative OTB results in an overbought situation 2 OTB calculations: - monthly - cumulative
gross margin
difference between the net sales and cost of goods sold
Down Dimensions
displayed on the left side of the view
Locking / unlocking cells
done to prevent entry into or recalculation of a cell at any time. once this is done, the cell is treated by protection processing. these cells are pink by default. (use toggle lock button)
Bottom up product plan (BUPP)
each class of merchandise has its own plan
Dimension
entity that provides part of the information about each cell in a module - each module contains a time dimension, a measure dimension, and one or more structural dimensions which identifies each item of data.
Rules
equations used to calculate results for variables using other planned or actual values they are always calculated between variables at the same level of the hierarchy
planning reductions (markdown and shrink)
figures that reduce ending gross margin and must be considered when calculating profitability. they affect inventory levels, so they must be projected to ensure enough merchandise is on hand to attain forecasted sales levels
Merchandise Plan
financial blueprint for each merchandise category, including sales projections, inventory and margins. allows for financial success by reaching a single financial goal.
Online help
for assistance, you can click on the "Help" button which is in the upper right corner with a question mark and blue circle. this allows you to access help online regarding a particular topic or EP function.
Stock-to-sales method
forecasts how much inventory is required to attain a monthly sales projection. a ratio of the amount of inventory on hand to sales.
Freezing Members
freezes data for members so that the calculation process no longer affects them. you can freeze one or more bottom-level members of any structural dimension, but you cannot freeze a member of the time dimension
Administrative plan
houses the "master copy" for all of the user plans and is only used for creating the planning setup. no modules or data are stored in the admin plan
What is the main objective of Merchandising Planning?
improving profit
Backup stock
inventory or stock in reserve
Shrink / Shortage
inventory reduction that is commonly caused by theft and damaged merchandise. normally varies based on sales and can be planned as a %
Cell note
line of text that can be added to any cell in a spreadsheet view; can be used as warnings or reminders.
Data (Spreadsheet view)
located in the cell and the values are determined by the down dimension, the across dimension and the off-grid dimensions
Measure Dimension
made up of variables and versions; this dimension is non-structural
Key Item Product Plans
many different detailed merchandise plans are developed to focus on particular merchandise areas, that allows the planner to micro manage. should be developed using measures similar or the same as the product plan.
Monthly OTB
measurement of planned receipts for a month in comparison with the current on order for the month monthly OTB = planned receipts - on order
BOP & EOP Inventory
measures used for tracking the value and / or quantity of merchandise for a point in time. the appropriate amount of inventory is necessary to support sales and stock turn targets
Spreadsheet Views
most common type of view used in planning; contains slices, across dimensions, down dimensions, and data.
Stock turn
number of times within a given period that the average inventory is sold and replaced measures the rate at which merchandise is sold compared to the on hand. the higher the stock turn = better cash flow = greater opportunity for increasing profits. this is used to analyze the effectiveness of the inventory investment
Slices
off-grid dimensions in a view that displays information one member at a time, as if this is a page in a book. what you view on the screen is one _____, and when you move through them you are effectively turning the pages of an electronic book.
% Participation
percentage the cell's value represents of the total value.
Permanent markdowns
permanent reduction of the retail value of inventory
Pre-season
planning prior to the start of your season and before placing orders
Markdowns
price reduction from the normal selling price two types: POS and Permanent
Point of Sale (POS) / Promotional Markdowns
price reduction taken for a specified period only - like a sale or promotion. normally generated at the cash desk
Protection Processing
processing that is carried out every time the value of a cell is changed to determine what the effect on other cells will be. protects certain cells so no changes can be made to them.
Planning inventory
receipt and inventory plan developed to support the sales plan. planners are responsible for maintaining the right balance of inventory without over-investing or sacrificing too many sales. considerations: - floor sets or visual presentation - marketing / promos - competitive factors - timing / shifts for holidays - market / economic factors
gross margin return on investment
reflects the movement of inventory relative to profitability GMROI is needed to ensure that the appropriate amount of GM is being earned, compared to the inventory investment.
Receipts
retail value of purchases added to the inventory - they should flow over time to support sales and inventory
Comp store sales (same store)
sales generated by stores that have been open more than a year, have not repositioned, and have historical data
key item product planning (KIPP)
set specific targets for key items
Non-comp stores
stores that have been open less than a year or have been permanently repositioned, and have no historical data
Planning
the act of predicting the future in order to prepare an organization for what lies ahead, provide key planned indicators for the business, prepare a set of plans to act on, and provide a set of plans to compare with. based on sales history and forecasting.
planning receipts (purchases)
the buyer's first open-to-buy estimate .. two ways to calculate: 1. planned purchases = eom + sales + reductions - bom 2. planned purchases = (bom-sales-reductions) subtracted from eom factors to be considered: - advertising calendar must be reviewed - receipts are planned to be in line with ads and promos to ensure that there is sufficient inventory in stock for the promos - allow for vendor lead times, in-transit times to the stores and the amount of time needed to set the floor
Seasonal Setup
the creation of the season planning environment by the system admin. includes seeding the plan with sales history to provide a basis for your plans, as well as executing demand forecasts prior to planning
Initial markup (IMU)
the first markup from cost to retail price
Calculation
the process of deriving values in a module by spreading the valuation of rules and consolidation
What is the goal of a planner?
to get the best ROI as possible by trying to balance a good variety, assortment, backup stock and company financial goals.
Top Down Product Plan (TDPP)
total company figures --> department level
Exception view
type of view used to set limits for measures and to check for measure that fall outside the limits or contain empty / errored values
Average Variables
use averages when data is entered.
Demand forecasts (DF)
use exponential smoothing and / or statistical analysis to weight past periods to forecast future periods
Views
used to analyze, plan and manipulate data within a module. in EP, this is a window that contains a selection of data from a module. can be in the form of a spreadsheet, exception, chart, or calculation sequence.
Calculation methods
used to calculate your data; various of these may be used depending on how the measure dimension was set up
Version Variances
used to contrast two versions of your planning data: - WPLY - working plan / last year - LYTY - last year / this year - WPTY - working plan / this year - BUTD - bottom up / top down
Module
used to plan different parts of the business; also refers to the repository for data with the associated measures and structures.
Calculation Sequence View
used to view the calculation sequence for data changes you enter in a plan / module
Normal Spreading
values entered higher in the hierarchy are spread proportionally across lower levels
Average Spreading
values entered higher in the hierarchy are spread proportionally across lower levels in all dimensions
Average Consolidation
values entered lower down the hierarchy are averaged across time and summed up the other hierarchies
Normal Consolidation
values entered lower down the hierarchy are summed to higher cells.
Opening & Closing variables
variables that have the same value at different levels in the Time hierarchy
Non-spread variables
variables that should not or can't be spread because they do not sensibly consolidate. two types: forced and flexed examples: markdown % and receipt margin %
Chart sheet view
view that displays data as a chart
Across Dimensions
viewed across the top of the view
Maintained markup (MMU)
weighted average of the markup
Calculating
when you want to apply the effects of your changes to the data in a module, you must calculate the module.
