Let's assume that a retailer has two different buyers working on a specific merchandise category (i.e., Buyer 1 and Buyer 2).
The table below contains information on the effectiveness of each buyer by providing you with the inventory left at the end of each month (for a six-month period). The dollar amount associated with this inventory reflects what the retailer had to pay for the inventory (i.e., the retailer's cost). In addition to EOM (end-of-month) inventory at cost, you also have the sales and COGS associated with each buyer's purchasing decisions.
1. What is the average inventory at cost for each buyer?
2. Utilize the information in the table to compute the sales-to-stock ratio for each buyer.Another retailing metric that is important during the merchandise planning process is gross margin return on inventory (or GMROI).
3. Utilize the data provided in the table to calculate GMROI for each buyer.
4. Which buyer is doing the best job? Why?
5. What is the key difference between GMROI and sales-to-stock ratio? What does each number tell you about a buyer's merchandise decisions?
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Buyer 2
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Month
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EOM Inventory at Cost
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EOM Inventory at Cost
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Jan
|
$22,000
|
$15,000
|
|
Feb
|
$25,000
|
$22,000
|
|
March
|
$15,000
|
$18,500
|
|
April
|
$30,000
|
$23,750
|
|
May
|
$45,000
|
$38,850
|
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June
|
$42,500
|
$38,225
|
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COGS
|
$400,667
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$500,648
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Sales (or Revenue)
|
$5,100,337
|
$6,800,39
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