Unit Planning and Merchandise Lists

Unit planning is an operational management tool to plan the merchandise assortment and support. It is directed at determining the amount of inventory the retailer should carry by items and by units and answers the inventory questions of how many product items or assortment and how many units of each items or support to stock. The process of unit planning involves the use of several merchandise lists which constitute a set of operational plans for   managing the total selection of merchandise. Based on the type of merchandise, the retailer carries, one or more of the following three merchandise lists namely, Basic Stock list, Model stock list and Never-out list.  These merchandise lists represent essentially the ‘ideal’ stock for meeting the consumer’s merchandise needs in terms of assortment and support.

1. Basic Stock List

The “basic stock list” is a planning instrument retailers use to determine the assortment and support for staple merchandise. ‘Staples’ are product items for which sales are either very stable or highly variable but predictable. In either case, estimates of the required assortment of merchandise items and the number of support units for each item can be made with a relatively high degree of accuracy. Thus, in planning for staple merchandise, the retailer can develop a very specific stocking plan. The basic stock list is a schedule or listing of “stock keeping units” (SKU) for staple merchandise. A “stock ­ keeping unit” is a merchandise category for which separate records (both sales and stock) are maintained. A ‘SKU’ can consist of a single merchandise item or group of items. The basic stock list usually identifies each SKU in precise terms. A retailer can use the following product features to distinguish clearly a SKU of staple merchandise: (a) Brand name (b) Style or Model number (c) Product or Package size (d) Product color or Material (e) Retail price or cost price of the product if) Manufacturer’s Name and Identification number. In addition to a complete listing of SKUs. the basic stock list also contains a detailed description of the stock position for each SKU by stock levels-merchandise support or total number of units. This description of ­stock support normally identifies (a) a minimum stock level to be on hand (b) actual stock on hand (c) amount of stock on order (d) planned sales and (e) actual sales. Stock support information is recorded on a  standardized  form at regular and frequent intervals say monthly, quarterly.

The significance of carefully maintaining a basic stock list can not be overstated. Majority of merchandise departments, including those that are fashion oriented contain at least some product items that are basic staples. The simple fact that consumers expect an adequate supply of staple merchandise makes it all the more significant to have an adequate supply. Good many staple items have no totally satisfactory substitutes for many consumers a stock-out of a particular staple forces the consumer to look elsewhere for the item. Budgeting unable to meet the consumer’s need for a basic staple, the retailer not only loses the sale but also damages the store’s assortment image and strains the customer’s goodwill. Additionally, the customer, in the process of looking elsewhere, might decide to switch to a competitor whose stock of staples is well maintained.

2. Model Stock List

Stock planning for fashion merchandise is accomplished through use of the “Model stock list.” It is a schedule or listing of SKUs for fashion merchandise. The model stock-list differs from the basic stock list because it defines each SKU in general than precise terms. The common criteria in identifying a model SKU are general price lines.  The more general character of each SKU is a model stock plan reflects the transience of fashion merchandise, which represents only the currently prevailing style. The likelihood of style changes within a short period and the high probability that market demand will fluctuate considerably, within any selling season require a more general approach to stock planning. In essence, the model stock, list provides general guidelines on the size and composition of an ideal stock of fashion merchandise, without specifying the exact nature of the merchandise assortment or support. The form used to plan the model stock list differs somewhat from the basic stock list form.

3. Never-out List

The “Never-out list” is a specially created list of merchandise items that are identified as key items or best sellers for which the retailer wants extra protection against the possibility of a stock out. As a result of the high level of demand for these items, many retailers establish rigid stock requirements. For instance, a retailer might specify that 99 per cent of all items on the never-out list must be on hand and on display at all times. Stockouts of these key items result in a permanent loss of sales. Typically, the consumer simply will not wait to purchase best-sellers. Never-out lists can include fast-selling staples, key seasonal items, and best selling fashion merchandise. The integrity of the never-out list is preserved thoroughly through regular and frequent revision. The significance of the never-out list is underscored by the fact that many chain units expect individual store managers to have a near-perfect record in maintaining the stock levels for merchandise as the list. Even a moderate number of stockouts of merchandise on the list is considered an indication of poor management.

Credit: Retail Management-AU

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