Inventory Control pages 488492

1
Chapter 16

• Inventory Control (pages 488-492)

RETAIL MANAGEMENT A STRATEGIC APPROACH, 10th
Edition
BERMAN EVANS
2
Stock Turnover

• The number of times during a specific period
  (usually a year), that the average inventory on
  hand is sold.
• High turnover gt investments are productive -
  fewer losses due to style changes, less interest,
  insurance, breakage/spoilage, warehouse costs.
• 3 formulas units/retail/cost, ensure true
  average is used.

3
When to Reorder

• Reorder point stock level at which new orders
  must be placed. Depends on
• 1. Order lead time period from the date an order
  is placed by a retailer to the date merchandise
  is ready for sale.
• 2. Usage rate average sales per day, in units of
  merchandise.
• 3. Safety stock extra inventory that protects
  against stock-outs due to unexpected demands or
  delivery delays.

4
Figure 16.6a Stock-outs may occur due to
5
Figure 16.6b Stock-outs may occur due to
6
How much to reorder

• Economic order quantity quantity that minimizes
  the total cost of processing orders and holding
  inventory
• Order processing costs computer time, labor,
  handling new merchandise
• Holding costs warehousing, interest on inventory
  investment, insurance, deterioration, pilferage.

7
Figure 16.7 Economic Order Quantity