The document discusses key concepts in merchandise planning and purchasing for retail stores. It explains that large stores plan purchases monthly while small stores do so seasonally. It provides the formula for calculating planned purchases and defines related terms like markups, discounts, expenses, dollar plans, and open-to-buy amounts. The open-to-buy is a tool buyers use to control future inventories based on planned purchases, sales, and stock levels.

1. MERCHANDISE PLAN BY G.HARI SHANKAR PRASAD ASSOCIATE PROFESSOR NATIONAL INSTITUTE OF FASHION TECHNOLOGY

3. SUPPLEMENTAL ELEMENTS: MARK UP : DIFFERENCE BETWEEN THE COST PRICE AND THE RETAIL PRICE OF THE MERCHANDISE. RETAIL PRICE – COST PRICE RETAIL MARK UP % = ---------------------------------------- RETAIL PRICE RETAIL PRICE – COST PRICE COST MARK UP % = ---------------------------------------- COST PRICE INITIAL MARK UP : THE DOLLAR DIFFERENCE BETWEEN THE DELIVERED COST OF MERCHANDISE AND THE RETAIL PRICE PLACED ON IT, WHEN IT IS BROUGHT INTO STOCK IS CALLED INITIAL MARK UP. THE RETAIL STORES INITIAL MARK UP % TO ENSURE THAT THE INCOME DERIVED FROM

5. CASH DISCOUNTS : THESE ARE PERCENTAGES OR PREMIUMS ALLOWED BY MANUFACTURERS OFF THEIR INVOICES IF PAYMENT OF INVOICE IS MADE WITHIN CERTAIN SPECIFIED PERIOD OF TIME. CASH DISCOUNTS EARNED ARE AN IMPORTANT SOURCE OF ADDITIONAL INCOME FOR A STORE OR DEPARTMENT. CASH DISCOUNTS INCREASE GROSS MARGIN, BECAUSE THEY REDUCE ACTUAL COST OF MERCHANDISE PURCHASES. TERMS OF SALE: THE COMBINATION OF ALLOWABLE DISCOUNTS ON PURCHASES AND TIME ALLOWED FOR TAKING SUCH DISCOUNTS IS REFERRED TO AS TERMS OF SALES. STOCK SHORTAGES AND OVERAGES: DOLLAR DIFFERENCE BETWEEN BOOK INVENTORY AND PHYSICAL INVENTORY. STOCK SHORTAGE : BOOK INVENTORY MORE THAN PHYSICAL INVENTORY.

8. OPEN TO BUY: A MAJOR TOOL USED BY RETAIL BUYERS TO CONTROL FUTURE INVENTORIES IS A DEVICE CALLED OPEN TO BUY , WHICH MAY BE DEFINED AS THE AMOUNT OF MERCHANDISE, EITHER AT COST PRICE OR AT RETAIL, THAT THE BUYER IS OPEN TO RECEIVE INTO INVENTORY DURING A CERTAIN TIME PERIOD BASED ON THE PLANS FORMULATED. IT MAY BE PREPARED WEEKLY OR MONTHLY AND PROVIDES A METHOD OF ALLOCATING PURCHASES SO THAT PLANNED STOCK LEVELS MAY BE MAINTAINED. IT MAY BE BROKEN DOWN ACCORDING TO A SEPARATE MERCHANDISE CATEGORIES WITHIN A DEPARTMENT.

9. OTB MAY BE CALCULATED EITHER IN DOLLARS OR IN UNITS. FOR EXAMPLE, A BUYER HAS PLANNED PURCHASES FOR THE MONTH OF AUGUST AT $ 2000. BY AUG 20, THE BUYER HAS SPENT $ 1500 FOR MERCHANDISE THAT HAS BEEN RECEIVED OR THAT WILL BE RECEIVED INTO THE DEPARTMENT BEFORE THE END OF MONTH. THIS LEAVES $ 500 FOR THE BUYER TO SPEND DURING THE REMAINING TIME. THERE FORE THE BUYER IS OPEN TO BUY $ 500 WORTH OF MERCHANDISE ON AUGUST 20. PLANNED PURCHASES = $ 2000 -- MERCHANDISE ON ORDER = $ 1500 = OPEN TO BUY = $ 500

10. IN PRACTICE, HOWEVER, THE OPEN TO BUY FORMULA IS MORE COMPLICATED. ADJUSTMENTS ARE OFTEN NECESSARY DUE TO FLUCTUATIONS IN REDUCTIONS, SALES AND AVAILABILITY OF GOODS. ALSO, MERCHANDISE ORDERED BUT NOT YET RECEIVED MAY FURTHER COMPLICATE THE OPEN TO BUY FIGURE. PLANNED SALES : 50,000 + PLANNED REDUCTIONS:10,000 +PLANNED EOM STOCK : 40, 000 -------------- TOTAL NEEDS OF THE MONTH : 100,000 -- BOM STOCK 25,000

11. PLANNED PURCHASES = 75,000 -- MERCHANDISE ON ORDER = 30,000 = OPEN TO BUY : 45,000 THE OPEN TO BUY FIGURE SHOWS HOW MUCH MERCHANDISE MAY BE RECEIVED INTO A PARTICULAR DEPARTMENT DURING THE COURSE OF A MONTH WITHOUT EXCEEDING THE PLANNED INVENTORY AT THE END OF THE MONTH.

12. THANK YOU