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Module 4
Syllabus Retail management Operations
management--Financial managementHuman resource managementmerchandising management merchandising philosophy plans-logistics-inventory managementretail pricingstrategies Ref: Barry & Evans
Operations Management
Operations management is the efficient and effective implementation of the policies and tasks that satisfy a retailers customers, employees, and management (and stockholders, if it is publicly owned)
Operational Decisions
What operating guidelines are used? What is the optimal format and size of a store?
What is the relationship among shelf space, shelf location, and sales for each item in the store? How can personnel be matched to customer traffic flows? Would increased staffing improve or reduce productivity? What impact does selfservice have on sales?
Operational Decisions_2
What effect does the use of various building
materials have on store maintenance? How can energy costs be better controlled? How often should facilities be renovated? How can inventory best be managed? How can the personal safety of shoppers and employees be ensured?
Operational Decisions_3
What levels of insurance are required? How can credit transactions be managed most
effectively? How can computer systems improve operating efficiency? Should any aspects of operations be outsourced? What kind of crisis management plans should be in place?
Renovations Inventory Management Store Security Insurance Credit Management Computerization Outsourcing Crisis Management
Length of Employment
coordinated? How much inventory should be on the sales floor versus in a warehouse or storeroom? How often should inventory be moved from nonselling to selling areas of a store? What inventory functions can be done during nonstore hours? What are the trade-offs between faster supplier delivery and higher shipping costs? What supplier support is expected in storing merchandise or setting up displays? What level of in-store merchandise breakage is acceptable? Which items require customer delivery? When? By whom?
Store Security
Uniformed security guards
Undercover personnel Brighter lighting
Insurance Issues
Rising premiums
Reduced scope of coverage by insurers Fewer insurers servicing retailers
environmental risks
check or credit purchase? What credit terms will be used? How are late payments or nonpayments to be handled?
Crisis Management
There should be contingency plans for as many
different types of crisis situations as possible Essential information should be communicated to all affected parties as soon as the crisis occurs Cooperation not conflict among the involved parties is essential Responses should be as swift as feasible The chain of command should be clear and decision makers given adequate authority
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$330,000
$180,000 $150,000 $ 95,250 $ 20,000
Total Costs
Net Profit before Taxes Taxes
$115,250
$ 34,750 $ 15,500
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Asset Management
The Balance Sheet Assets Liabilities Net Worth Net Profit Margin Asset Turnover Return on Assets Financial Leverage
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current liabilities. Collection periodaccounts receivable divided by net sales and then multiplied by 365. Accounts payable to net salesaccounts payable divided by annual net sales. Overall gross profitnet sales minus the cost of goods sold and then divided by net sales.
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Mergers, consolidations
Bankruptcies and liquidations Questionable accounting and financial
reporting practices
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Budgeting
Budgeting outlines a retailers planned
expenditures for a given time based on expected performance. Costs are linked to satisfying target market, employee, and management goals.
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Cash Flow
Cash flow relates the amount and timing of revenues received to the amount and timing of expenditures for a specific time. In cash flow management, the usual intention is to make sure revenues are received before expenditures are made. If cash flow is weak, short-term loans may be needed or profits may be tied up in inventory and other expenses. For seasonal retailers, erratic cash flow may be unavoidable.
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Resource Allocation
Capital Operating
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Enhancing Productivity
A firm can improve employee performance,
sales per foot of space, and other factors by upgrading training programs, increasing advertising, etc. It can reduce costs by automating, having suppliers do certain tasks, etc.
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HRM in Retailing
procedures to set up a retail organization
various retail organizational
Figure 11-2:
absenteeism Trace line of authority from top to bottom Limit span of control Empower employees Delegate authority while maintaining responsibility Acknowledge need for coordination and communication Recognize the power of informal relationships
productivity is reached Costs of mistakes made by new, inexperienced employees Loss of customers loyal to departing employees Lost or damaged relationships with suppliers Employee morale and customer perceptions of that morale
Women in Retailing
Issues to address with regard to female workers Meaningful training programs Advancement opportunities Flex time: the ability of employees to adapt their hours Job sharing among two or more employees who each work less than full time Child care
Diversity
Two premises: 1. That employees be hired and promoted in a fair and open way, without regard to gender, ethnic background, and other related factors 2. That in a diverse society, the workplace should be representative of such diversity
Components of Compensation
$ Total compensation $ Salary plus commission $ Profit-sharing
corporate objectives
closely supervised and controlled; only economic inducements motivate Management assumes employees can be self-managers and assigned authority; motivation is intrinsic Management applies self-management approach
Merchandising Management
Activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantity that enable a retailer to reach its goals
Merchandising Philosophy
Sets the guiding principles for all the merchandise decisions that a retailer makes Should reflect Target market desires Retailers institutional type Market-place positioning Defined value chain Supplier capabilities Costs Competitors Product trends
Micromerchandising
Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets
Cross-Merchandising
Retailers carry complementary goods and services to encourage shoppers to buy more
Functions Performed
Merchandising view
All buying and selling functions
Assortments Advertising pricing Point-of-sale displays Employee utilization Personal selling approaches
Buying Advertising Pricing Assortments Point-of-sale displays Employee utilization Personal selling approaches
Forecasts
These are projections of expected retail sales
for given periods Components: Overall company projections Product category projections Item-by-item projections Store-by-store projections (if a chain)
Types of Merchandise
Staple merchandise Assortment merchandise Fashion merchandise Seasonal merchandise Fad merchandise
Staple Merchandise
Regular products carried by a retailer Grocery store examples: milk, bread, canned soup Basic stock lists specify inventory level,
Assortment Merchandise
Apparel, furniture, and other categories for
which the retailer must carry a variety of products in order to give customers a proper selection Decisions on Assortment
Product lines, styles, designs, and colors are
have cyclical sales due to changing tastes and life-styles Seasonal Merchandise: Products that sell well over nonconsecutive time periods
Customer segments Segment customers by dividing merchandise into established-product displays and new-product displays
Responsiveness to consumers
Amount of investment
Customer services Know that high-quality goods require offered personal selling, alterations, delivery, and so on Personnel Employ skilled, knowledgeable personnel for high-quality merchandise
Face reality. Franchises or chain store managers have limited or no control over products; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers
Brands
Manufacturer (national) Private (dealer or store)
Generic
Merchandising Software
General Merchandise Planning Software Forecasting Software Innovativeness Software
Assortment Software
Allocation Software Category Management Software
Logistics
Logistics, also known as physical
distribution, encompasses the activities concerned with efficiently delivering raw materials, parts, semi-finished items, and finished products to designated places. It includes customer service, shipping, warehousing, inventory control, trucking operations, packaging, receiving, materials handling, and plant, warehouse, and store location planning. It affects costs, the value of customer service, its relationship with other functional areas.
may impose a burden on distribution facilities. Logistics planning is related to overall channel strategy. Promotion campaigns must realistically coordinate with potential logistics delivery. Pricing may be the firms differential advantage based on superior logistical service.
high fixed costs due to facility investments. Motor Carriers usually transport small shipments short distances Waterways best for bulk shipments,slow but economical Airways are fast and expensive but move high-value perishable and emergency goods. Speed may provide a differential advantage. Pipelines move gas and petroleum products with low costs.
Inventory Management
Good inventory management matches the quantity of goods
kept in inventory with customer demand. To improve efficiency, many firms use a just-in-time inventory system and electronic data interchange. Four specific aspects of inventory management are stock turnover, when to reorder, how much to reorder, and warehousing. Stock turnover refers to the number of times during a stated period that average inventory on hand is sold. A reorder point depends on lead time, usage, and safety stock. The economic order quantity (EOQ) is the order volume corresponding to the lowest sum of order-processing and inventory-holding costs.
Upscale orientation
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Customary Pricing Everyday Low Pricing Variable Pricing Yield Management Pricing One-Price Policy Flexible Pricing Contingency Pricing Odd Pricing Leader Pricing Multiple-Unit Pricing Price Lining
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their total purchases of an item. This approach can help sell slow-moving and end-of-season merchandise. Price bundling may increase sales of related items.
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Timing Markdowns
Early markdown policy Late markdown policy
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