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Definition
| allows a retailer to pay the invoice in advance of the expiration of the cash discount period and earn an extra discount. |
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Term
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Definition
technique for planning dollar inventory investment that allows for a base stock level plus a variable amount of inventory that will increase or decrease at the beginning of each sales period in the same dollar amount as the period’s expected sales; method works best when a retailer has a low inventory turnover rate or sales are erratic; can be calculated as follows:
(1) Average monthly sales for the season = Total planned sales for season/Number of months in season
(2) Average stock for season = Total planned sales for season/Estimated inventory turnover rate for season
(3) Basic Stock = Average stock for the season - Average monthly sales for the season
(4) Beginning-of-Month (BOM) Stock at retail= Planned monthly sales + Basic stock |
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Term
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Definition
| earned by retailers for prompt payment of their bills |
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Term
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Definition
| when the vendor retains the ownership of the goods & usually establishes the selling price; it is payed only when the goods are sold by the retailer. pay from scan is a more recent term that some retailers are beginning to use when describing this term. |
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Term
| cumulative quantity discounts |
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Definition
| a price reduction offered as an inducement to purchase large quantities of merchandise based on the total amount purchased over a time period |
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Term
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Definition
| the loss of merchandise sue to theft, loss, damage, or bookkeeping errors. several types caused by theft are vendor collusion, employee theft, and customer theft |
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Term
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Definition
| refers to the avg number of SKUs (stock-keeping units) within each brand of the merchandise line |
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Term
| End of Month (EOM) dating |
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Definition
| allows for the cash discount & full payment period to begin on the first day of the following month instead of on the invoice date. |
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Term
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Definition
| merely allows the retailer some extra or free days before the period of payment begins |
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Term
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Definition
| negotiated delivery terms that specify where title to the merchandise passes to the retailer, whether the vendor or buyer will pay the freight charges, and who is obligated to file any damage claims |
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Term
| Free On Board (FOB) factory |
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Definition
| the buyer assumes title at the factory and pays all the transportation costs from the vendor's factory |
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Term
| Gross Margin Return On Inventory (GMROI) model |
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Definition
used to analyze the performance of inventory; incorporates into a single measure both inventory turnover and (gross) profit; its formula is
(gross margin/net sales) x (net sales/avg inventory at cost) = (gross margin/avg inventory at cost) |
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Term
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Definition
| a group of products that are closely related bc they are intended for the same end use; are sold to the same customer group; or fall within a given price range |
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Term
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Definition
| a technique that refers to the dollar amount that a buyer can currently spend on merchandise without exceeding the planned dollar stocks; not to be thought of as a fixed quantity that cant be exceeded when consumer needs arise, however, changes in it should be rare |
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Term
| Percentage Variation Method (PVM) |
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Definition
a technique for planning dollar inventory investments that assumes that the percentage fluctuations in monthly stock from avg stock should be half as great as the percentage fluctuations in monthly sales from avg sales; method used when the retailer has a high annual inventory turnover rate (i.e., six or more times a year); calculated as follows:
BOM Stock= avg stock for season x 1/2 [1+ (planned sales for the month/avg monthly sales)] |
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Term
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Definition
| price reduction offered as an inducement to purchase large quantities of merchandise |
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Term
| Reciept of Goods (ROG) dating |
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Definition
| sets the starting date as the date the goods are received by the retailer |
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Term
| Weeks' Supply Method (WSM) |
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Definition
a technique for planning dollar inventory investments; states that the inventory level should be set equal to a predetermined # of weeks' supply (directly related to the inventory turnover rate desired); used by retailers where inventories are planned on a weekly, not monthly basis, and where sales do not fluctuate substantially; in this method, inventory level in dollars varies proportionally w/ forecast sales; it is calculated as follows:
1. # wks to be stocked= # wks in the period/stock turnover rate for the period
2. Avg wkly sales= est total sales for period/# wks in period
3. BOM stock = avg wkly sales x # wks to be stocked |
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Term
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Definition
| can be earned by retailers if they purchase and take delivery of goods in off seasons |
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Term
| vendor profitability analysis |
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Definition
| lists the retailer's purchases w/i the past year, the discount(s) granted by the vendor, the transportation charges paid, original mark-up, markdowns, and the season ending gross margin on each of the vendor's products |
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