Buyer & Merchandiser Some Calculations

A fashion buyer needs to be versatile and flexible as the buying schedule may include sitting behind a desk one day writing reports and communicating by phone or email, traveling to identify forthcoming trends.

Liaising with suppliers:-

Buyers liaise with garment suppliers on a regular, often daily, basis. A buyer may spend more time speaking to a representative from one of the company’s manufacturers, probably from the design or sales department, than to another buyer from the same office. It is important therefore to establish strong working relationships with suppliers as a mutually supportive approach will be beneficial to both parties.

Negotiation:-

One of the major aspects of the buyer’s role in dealing with suppliers is to negotiate prices and delivery dates, garment manufacturer’s sales executive, or occasionally the senior designer, submits a ‘cost price’ for a garment, which has been based on the result of a costing process in the factory This may take place in a face-to-face discussion, or in writing. The buyer calculates how much the garment needs to be sold for in the store to achieve the retailer’s ‘mark-up’, which is the difference between the manufacturer’s cost price and the selling price. The cost price is usually multiplied by around 2.5 to calculate the retail selling price for a retailer of branded goods, or three times the cost price for an own label retailer, including Value Added Tax (VAT) in appear from these mark-ups that retailers make a great deal of profit, but their slice of the selling price has to be substantial in order to cover overheads such as store rents, utility bills, shop assistants’ wages and head office costs, including the buyer’s salary, and  it is hoped some net profit for the company.

Buyers should be able to estimate from past experience how much the consumer will expect to pay for a particular garment, and therefore can calculate the optimum cost price which they would be prepared to pay. Initially the supplier approaches the price from a different angle from that of the buyer, working on how much the garment will cost the supplier to produce. An experienced salesperson working for a manufacturer is also able to anticipate how much the buyer expects to pay. The buyer obviously wants to pay as little as possible for the product whereas the salesperson wants to sell it for as much as possible, since both are aiming to make profits for their respective companies. The buyer and salesperson both need to be realistic, however, and use their judgment as to which prices are reasonable. If the buyer cannot achieve the retailer’s target margin the buying manager will probably need to give permission for the garment to be purchased at this price, otherwise the style may be dropped from the range.

A good merchandising should start with some correct things as:-

·        Correct Product

·        Correct Price

·        Correct Place

·        Correct Assortment/Mix

·        Correct Time

·        Correct Quantity

·        Correct Quality

Now, the question is how to do so much correct things perfectly. First step is to analyze the correct merchandise hierarchy. It is nothing but the grouping at different levels. It gives the fair idea about the store’s stock mix. Then, a small visit to stores to check out real stock situation because many a time your software won’t reveal the reality, though it is very difficult to do every time and too if the chain of stores are too big. A close coordination with the buying & merchandising team is very important. The advertising/communication team should also be very important before proceeding into a big buying deal & merchandising plan.

Now I specifically discuss about the OTB (Open-to-Buy) plan. 

Some of the most important aspects of OTB plan are:

Sales Forecast- A sales plan should be there before hand on weekly basis for the entire year. It helps in to react to the variations in sales where one could reschedule deliveries & alter the order accordingly.

Forward Cover- It is the cover maintained on the basis of stock turn. Say if the stock turn is four times a year then the stock holding will be taken equal to three months stock cover.

Stock required- If it is first month then stock required will be sum of forecast sales of 2nd, 3^rd & 4^th month by taking forward cover of 3 months.

Opening Stock- It is an estimate for first month & onwards the closing stock of previous month will be the opening stock of the current month.

Intake requirement- It is the difference between required stock & opening stock.

On order- Stock for which the purchase order already raised but due for delivery.

Open to receive- It is the difference between stock on order & intake requirement.

Closing stock- It is calculated by opening stock subtract sales & add on-order & open-to-receive.

There are some methods through which one could get control on its inventory plan in absence of  ERP software or technology:

Basic Stock Method: Basic Stock Method will be arrived by deducting average monthly sales for the period from the average stock for that period.

Now, average monthly sales for the period by number of months considered in the period. And, average stock for the period could be arrived by division of total planned sales for the period by estimated stock turn rate for the period. Opening stock is arrived by adding planned monthly sales and Basic stock.

Percentage Variation Method: If the stock turns ratio will be more than 6 times and more than percentage variation Method may be used. Where opening stock will be arrived from multiplying average stock for the period with planned sales for the months divided by average monthly sales and then divided it by two.

Now, if you need to plan it weekly than first you have to calculate number of weeks to be stocked it will be arrived by dividing by number in weeks in the period by stock turn rate. Then, average weekly sales must be calculated by dividing estimated total sales for the period by the number of weeks in the period. Now, opening stock will be arrived by multiplying average weekly sales with number of weeks to be stocked.

Sales Ratio Method: Another method is sales ratio method whose first you have to calculate the stock sales ratio which will be arrived by dividing value of stock by actual sales the opening stock will arrive by multiplying stock sales ratio with planned sales.