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Efficient Consumer Response. Efficient replenishment Systems, EDI Fewer stockouts Efficient promotion Promotions based on consumer demand Lean inventory to support promotions. Efficient Consumer Response. Efficient assortment Turnover Profit Enhances brand and retailer perceptions - PowerPoint PPT Presentation
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HED 460
Sourcing Simulator Licenses
Liz ClaiborneWoolrichGlen OaksLebanon ApparelVal D’OrWhisper KnitsBrooks BrothersTropical SportswearFruit of the LoomS&S DistributionVirginia ApparelRed WellDayton Hudson QAVertical ThreadsKellwood CompanyAckermans Ltd.
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NikeNantucket IndustriesPrivate Label ConceptsFederated MerchandiseLevi StraussGaranEdison BrothersContext GroupTannerCuddle TimeChic by HISEagles EyeClaudel LingerieStarter CorpKikomoGoldman Sachs
KmartAztec TradingCharles Gilbert AssocGIDCUNITEWL Gore & AssocVan HuesenPatagoniaDanube KnitwearCapital- Mercury ShirtLord Olord’s IncNat Inst Fashion TechLimited Dist ServicesWolverine WorldwideCajah Mountain HosieryBain & Co.
HED 460
Sourcing Simulator Licenses
Texas A&M UniversityUniversity of Missouri.Colorado State UniversityWestern Kentucky UniversityTexas Christian UniversityMurray State UniversityMichigan State UniversityUniversity of KentuckyOregon State UniversityUniversity of NebraskaSouthern Illinois UniversityIndiana State UniversityIowa State UniversityUNC Chapel HillUNC GreensboroKansas State University
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West Virginia UniversityCornell UniversityBaylor UniversityUniversity of HawaiiTexas Tech UniversityKent State UniversityMiddle TN State UniversityStephens CollegeCalifornia State UniversityUniversity of Rhode IslandSam Houston UniversityOhio State UniversitySouthwest Texas State UniversityU of MassachusettsN Illinois UniversityU of California - Irvine
HED 460
Sourcing Simulator Licenses
Auburn UniversityBall State UniversityClemson App. Res.Delta State UniversityOklahoma State U.East Carolina UTampere UniversityNorth Carolina State UIntegrated ConsultingStonefield JosephsonPrime Tanning CoBayer Clothing GroupMay MerchandisingLogistics Training Int’lExterior Wood, Inc.Firmin HouseGlen Oaks Industries
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American IdentityAndersen ConsultingAdexaBurlington IndustriesCone MillsDillardsDuPont NylonEDSGaley & LordGlen Raven MillsHologix IncIBMMilliken & Co.Russell-Cross CreekSara Lee CasualwearVF CorpWellman Inc.
Bios GroupBurlington Chemical CoCFT ConsultingPricewaterhouseCoopersT-MNA Inc.TimberlandNHK InternationalTwin Star Int’lNordstromBergdorf GoodmanLL BeanWal-MartLands EndThe GapWigwam MillsJBA InternationalBradley Perspectives
HED 460
Efficient Consumer Response
Efficient replenishment Systems, EDI Fewer stockouts
Efficient promotion Promotions based on consumer
demand Lean inventory to support promotions
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Efficient Consumer Response
Efficient assortment Turnover Profit Enhances brand and retailer perceptions
Efficient product introduction Pull strategy for new products Based on unmet needs
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Category Management Technique used by retailers
Product is sub-divided into categories that Reflect purchasing behavior of target customers
Are managed as separate business units
Supermarkets and mass merchandisers
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Categories as SBU’s Department is too broad and less
strategic 150-300 categories vs. 15-20
departments Product/brand is too narrow to
approach strategically 15-20,000 skus in a store and 16,000
new products/year
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Category Management Integration of Buying and
Merchandising responsibilities Management of price, shelf space, merchandising assortment strategy, promo efforts, replenishment
Affects manuf. sales and marketing Team approach between channel
members
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Category Plans Jointly developed by retailers
and suppliers Define strategies and
financial objectives GM Sales/cu ft.
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Buying/Merchandising Decisions
Responsibilities must be integrated Inventory allocation Space allocation/analysis Customer demand
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Category Management Goal - Retailer
Optimize each part of the store Allocate space that maximizes
Gross Margin/unit of space Goal – Supplier
To become the lead supplier or channel captain for that category
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Benefits Increased category sales (5-15%) Increased category margins Assists in creating optimal
assortments Reduction of SKU’s in most cases
For Mfct., move from trade allowances (push) to trade promotions (pull)
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Manco example Merchandising of tape products
was difficult Different buyers bought tape Solution = tape center Later mailing center
Prevented other vendors’ access 19 SKUs to up to 32 feet in office
superstores
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Direct Profit Profitability (DPP)
Profit associated with each category
Per unit Gross Margin minus all variable costs Procurement Distribution Sales
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Defining Categories Consider end uses (frozen, chilled,
deli fresh) Consider substitutablity (fresh/frozen) Consider complimentary purchase
decisions (pasta + sauce) Base decision on how customer buys Same “real estate”
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Dairy category Displayed by brand name Customers shop by type (low fat,
full fat, no fat, fruit) Then individual flavors
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Ready to eat meals category
Type – Chinese, Italian, meat/two vegetables
Cooking method – oven, micro, stove
Low calorie or regular
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Defining Categories What products should be included? Beer Category- decisions
Shelf beer and cold beer part of total Shelf beer = 1 category and cooler =
2nd Sub category of beer/wine/alcohol Beer as a solution (picnic, party, meal)
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Roles/Implied Strategies Destinatio
n Traffic building Turf protecting Transaction building Excitement creation Cash generating Image creator
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Pasta CategoryStrategy ExamplesTraffic builder Std. Packs of dried spaghettiTransaction builder
Parmesan, fresh herbs, pasta sauces
Cash generator Lge. economy packs of dried pasta
Image creator Filled pastas: ravioli, tortellini….Excitement creator
Fresh, less well-known: stelline….
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Roles/Implied Strategies Routine/
preferred Transaction building Profit generating Turf protection
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Roles/Implied Strategies Convenien
ce Transaction building Profit generating Image enhancing
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Roles/Implied Strategies Occasional
/ seasonal Traffic building Excitement creation Profit generating
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Tactics – Traffic building Aggressive pricing on loyalty
products/low margins Media on frequently purchased
items Prominent space
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Case Study - ToothpasteResults Previous Current % Diff.Sales 12.3m 12.64m 2.8%Gross Profit
1.66m 1.52m (8.4%)
GP Margin 13.5% 12% (11%)Turns 12.2 14.5 19%Days supply
30 25.2 (16%)
GMROI 1.9 1.98 4.2%
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Leading Manufacturers – CM
P & G Kraft General Mills Unilever…Ralston Purina…Pillsbury Quaker…Kellogg’s…Coke
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Leading Retailers – CM HEB Safeway Wal-mart Ahold Kroger Wegman’s
