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.