Chapter 12 - Managing the Merchandise Planning Process

A retailer wants to know whether their inventory is generating enough profit relative to how much they invested in it. → What metric should they use?

GMROI

A retailer has a high gross margin but very slow inventory turnover. Their GMROI is low. → What should they do?

Increase turnover (reduce inventory, buy smaller quantities, increase sales)

A retailer sells through inventory quickly but makes very little profit per item. → What should they do to improve GMROI?

Increase gross margin (raise prices, reduce COGS, reduce discounts)

A retailer sells basic socks that customers buy consistently every week. → What type of merchandise is this?

Staple Merchandise

A grocery store sells milk and bread that must always be in stock. → What planning system do they use?

Continuous replenishment

A retailer is buying trendy summer dresses that will only be in style for 8 weeks. → What type of merchandise is this?

Fashion merchandise

A buyer orders a new fashion line but cannot reorder once the season starts. → What is the goal of the planning system?

Be as close to out‑of‑stock as possible when the trend ends

A retailer sells snow shovels that only sell well in winter. → What type of merchandise is this?

Seasonal merchandise

A retailer buys swimsuits once per year and cannot reorder mid‑season. → What planning approach is this similar to?

Fashion merchandise buying

A retailer has small, medium, and large stores, each needing different amounts of the same SKUs. → What tool do they use?

Model stock plan

A buyer wants to ensure every store has the exact SKUs customers expect to find. → What plan do they create?

Model stock plan

A retailer wants to increase turnover without reducing the number of SKUs they carry. → What should they do?

Reduce backup stock

A retailer wants to reduce the amount of inventory they hold at once. → What should they do?

Buy smaller quantities more frequently

A retailer wants to increase their sales-to-stock ratio. → What are two ways to do this?

Increase sales or reduce inventory

A buyer overestimates demand for a fashion item and ends the season with too much leftover inventory. → Why did this happen?

Fashion merchandise has short selling seasons and high forecasting risk

A retailer realizes they can easily correct forecasting mistakes for basic T‑shirts but not for trendy jackets. → Why?

Staple merchandise allows reorders; fashion does not

A retailer wants to avoid having leftover Halloween costumes on November 1st. → What is the planning goal?

Sell through inventory by the end of the season

A retailer compares two categories: one with high margin but slow turnover, and one with low margin but fast turnover. → What metric helps them compare?

GMROI

A retailer buys a trendy item that becomes “out of style” quickly. → What type of merchandise risk is this?

Fashion merchandise obsolescence

A retailer uses weekly POS data to automatically reorder toothpaste. → What system is this?

Continuous replenishment system