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STOCK MANAGEMENT

STOCK MANAGEMENT. W. Frank Dell II, CMC September, 2003. AGENDA. INTRODUCTION DEPARTMENT / CATEGORY / ITEM REPLENISHMENT PROMOTING. Objectives. Introduce stock organization and management Present the science of buying Identify promotion management. Retail Strategy. Product Quality.

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STOCK MANAGEMENT

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  1. STOCK MANAGEMENT W. Frank Dell II, CMC September, 2003

  2. AGENDA INTRODUCTION DEPARTMENT / CATEGORY / ITEM REPLENISHMENT PROMOTING DELLMART & COMPANY

  3. Objectives • Introduce stock organization and management • Present the science of buying • Identify promotion management DELLMART & COMPANY

  4. Retail Strategy DELLMART & COMPANY

  5. Product Quality DELLMART & COMPANY

  6. Target Market • Socio-demographics • Age • Sex • Education • Income • Household • Single • Married • Multi-generations DELLMART & COMPANY

  7. Supermarket Evolution DELLMART & COMPANY

  8. AGENDA INTRODUCTION DEPARTMENT / CATEGORY / ITEM REPLENISHMENT PROMOTING DELLMART & COMPANY

  9. Department Drivers DELLMART & COMPANY

  10. PERISHABLE Fresh Meat Produce Fish Bakery Prepared Food Package Diary Frozen NON-PERISHABLE Edible Non-Edible Health & Beauty Care General Merchandise Typical Departments DELLMART & COMPANY

  11. Department Size DELLMART & COMPANY

  12. MINIMUM Perishable Non-Perishable OR Random Weight Packaged MAXIMUM Meat Produce Fish Bakery Prepared Food Dairy Frozen Dry Grocery (ambient) HBC GM Number of Departments DELLMART & COMPANY

  13. Department Percents DELLMART & COMPANY

  14. Category Role • Destination - To be the primary category provider and help define the retailer as the store of choice by delivering consistent, superior target consumer value. • Routine - To be one of the preferred category providers and help develop the retailer as the store of choice by delivering consistent, competitive target consumer value. DELLMART & COMPANY

  15. Category Role (Cont.) • Occasional/Seasonal - To be a major category provider, help reinforce the retailer as the store of choice by delivering frequent, competitive target consumer value. • Convenience - To be a category provider and help reinforce the retailer as the store of choice by delivering good consumer target value. DELLMART & COMPANY

  16. Strategies Traffic Building Transaction Building Profit Contribution Cash Generating Excitement Creating Image Creating Turf Defending Characteristics - High share, frequently purchased, high % of sales - Higher Ring-up, impulse purchasing - Higher Gross Margin, turns - Higher turns, frequently purchased - Impulse, lifestyle oriented - Frequently purchased, highly promoted, impulse, unique - Used to draw customer base Category Strategy DELLMART & COMPANY

  17. Category Drivers DELLMART & COMPANY

  18. Category & Sub-Category • Grouping of like products and/or sub-categories DELLMART & COMPANY

  19. Perishable Percents DELLMART & COMPANY

  20. Non-Edible Percents DELLMART & COMPANY

  21. Categories Minimum 1 Maximum 85 Example Juices Sub-Categories Minimum 0 Maximum 9 Example Fruit & Nectars Powdered Tomato Number of Categories DELLMART & COMPANY

  22. Sub-Segment Segment Sub-Segment Sub-Category Sub-Segment Segment Sub-Segment Category Sub-Segment Segment Sub-Segment Sub-Category Sub-Segment Segment Sub-Segment Source: ECR Category Management Segment & Sub-Segment DELLMART & COMPANY

  23. Item Drivers DELLMART & COMPANY

  24. Item Planning • Support category role and strategy • Provide an eye appealing presentation • Minimum of 2 facings • Recommend full case stocking • Minimizes labor • Reduces damage DELLMART & COMPANY

  25. Retail Price & Space Interrelated DELLMART & COMPANY

  26. Shelf Holding Capacity • Average non-promotion movement • Replenishment cycle • Order to shelf time DELLMART & COMPANY

  27. Space Allocation • Software • Apollo • Spaceman • Process • Assign minimum • Add for full case stocking • Adjust for replenishment cycle • Add for profit • Adjust for presentation DELLMART & COMPANY

  28. Assortment • Components • Brands • Flavor, style and color • Size • Research • Excess difficulty to find item and shop • Shortage limits sales and customer satisfaction DELLMART & COMPANY

  29. Measurement • Per linear meter • Per floor square meter • Per display square meter DELLMART & COMPANY

  30. Per Display Square Foot DELLMART & COMPANY

  31. Units Per DSF DELLMART & COMPANY

  32. New Items • Match target market • Should replace existing item • Complete or fill in offering • Increase category sales and profits • Item cannibalization not productive DELLMART & COMPANY

  33. Formats Hypermarket Supermarket Limited assortment Hard discount Warehouse Club Convenience Organic Issues How to manage? Who controls? Managing Multiple Formats DELLMART & COMPANY

  34. Multiple Format – Plan A All Format Buyer • Advantages • Buying power • Lowest cost • Disadvantage • Lose focus • Conflicting decisions DELLMART & COMPANY

  35. Multiple Format – Plan B Format Merchant • Advantages • Buying power • Dedicated focus • Disadvantages • Conflicting decisions DELLMART & COMPANY

  36. Multiple Format – Plan C Format Buyer • Advantage • Greatest focus • Disadvantage • Fragmented buying • Added cost • Increase items • Increase transactions DELLMART & COMPANY

  37. AGENDA INTRODUCTION DEPARTMENT / CATEGORY / ITEM REPLENISHMENT PROMOTING DELLMART & COMPANY

  38. Holding Cost ( Cube * Rate ) + (Cost * Rate) • Cube is the dominate supply chain cost driver • Display space is a scarce resource • Wide range of products • Health & Beauty Care • Paper products DELLMART & COMPANY

  39. Traditional Weekly data Fixed review Vary quantity Recommended Daily data Daily review Fixed quantity Time Vs Quantity DELLMART & COMPANY

  40. Fixed Time DELLMART & COMPANY

  41. Variable Time DELLMART & COMPANY

  42. Supplier Economics 2 * Order Cost --------------------------------------------------------------------------- (Wk Int. Rate * Wk Dollars) * (Wk Cube Rate * Wk Cube) • Economic Order Interval - Weeks • Balance • Holding cost Vs order cost DELLMART & COMPANY

  43. Cycle Stock 2 * Pallet Cost --------------------------------------------------------------------------------------- ((Wk Int. Rate * Wk Dollar) * (Wk Cube Rate * Wk Cube)) * Wk Cases • Quantity = Weeks * Average Movement • Round to warehouse pallet quantity • Balance • Holding cost Vs handling cost DELLMART & COMPANY

  44. In-Stock Probability DELLMART & COMPANY

  45. Safety Stock CPW * (RI +VLT) * (( 1+MMAD / CPW) * (1 + LMAD / LT) ) ** SF - (( RI + VLT) * CPW) • Cases Per Week • Review Interval • Vendor Lead Time • Movement Mean Average Deviation • Lead time Mean Average Deviation • Lead Time • Service Factor DELLMART & COMPANY

  46. Item Order Point (( Rev Int + VLT) * CPW) + Safety Stock • Trigger point for ordering an item DELLMART & COMPANY

  47. Replenishment Model DELLMART & COMPANY

  48. Forward Buy Savings – ( Extra Handling ) Holding Cost • Quantity = Weeks * Average Movement • Excess inventory • Cut off • Management maximum • Next vendor promotion • Product dating • Round to pallets DELLMART & COMPANY

  49. AGENDA INTRODUCTION DEPARTMENT / CATEGORY / ITEM REPLENISHMENT PROMOTING DELLMART & COMPANY

  50. Why Promote ? • Create merchandising excitement • Attract customers • Present savings • Show value • Reward loyal customers • Increase sales DELLMART & COMPANY

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