Bop business plan

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Bop business plan

Disadvantages of Stock to Sales Ratio as a Planned Value Only looks to one period of time Stock to Sales Ratio uses a single time value to calculate planned inventory and does not consider the movement of a sales trend over time. The higher the level of time dimension being planned i. Sell Through Percent Sell Through Percent ST allows a planner to understand the rate at which inventory is consumed as compared to sales.

Sell Through Percent represents the ratio of sales to beginning period inventory. ST is calculated by dividing sales for a time period by stock at the beginning of the period. Advantages of Sell Through Percent as a planned value Links inventory consumption to sales Sell Through Percent illustrates the relationship between sales and inventory, providing guidance to historical results and industry standards.

Disadvantages of Sell Through Percent as a planned valu Only looks to one period of time Sell Through Percent uses a single time value to calculate planned inventory and does not consider the movement of a sales trend over time.

Turn Turn, also known as turnover, refers to the number of times during a period that the average inventory is sold and replaced. Turn is a ratio of sales to inventory for a long period of time, usually season or year.

While Turn is the most commonly used Key Performance Indicator, it is best suited for analysis rather than planning, since inventory fluctuations across time are flattened. Turn is typically calculated by dividing sales by the average inventory value. Advantages of Turn as a planned value Provides a starting point to planned inventory In the absence of all other inventory key performance indicators, Turn can provide direction in starting the inventory planning process.

Typically Turn Targets are developed early in the planning process and can be used to roughly estimate inventory levels by month.

Disadvantages of Turn as a planned value Uses average values, thus flattening trends Turn is not an ideal measure from which to calculate planned inventory since Turn is calculated from average inventory. Basic Stock The Basic Stock method of inventory planning calculates a baseline level of inventory that is the same for all months; inventory should not drop below the base level.

Planned sales for each month are added to the basic stock to derive the beginning of period inventory value.

bop business plan

Basic stock value is calculated as average inventory divided by average sales. Advantages of using Basic Stock method to plan inventory Supplies a very conservative method of inventory planning The Basic Stock method of inventory planning is an option to consider for businesses with very consistent sales and inventory levels, meaning there is little seasonality or fluctuation in sales, as the baseline stock is the same for all months.

Disadvantages of using Basic Stock method to plan inventory Uses average values, thus flattening trends Basic Stock is not an appropriate method from which to calculate planned inventory for seasonal business, emerging categories, or products with less predictable selling patterns. Conclusion Based on the advantages and disadvantages of the different methods of planning inventory as described, The Parker Avery Group recommends: Forward Weeks of Supply FWOS is the ideal method for calculating planned inventory levels and should be used in all plans containing the week level of time.

FWOS is the best method of planning inventory to support the projected sales trend across time.

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FWOS is a retail industry best practice inventory planning measure. Stock to Sales Ratio SSR is the most appropriate method for high level, top down inventory plans and other inventory plans that do not contain the week level of time. SSR forecasts the appropriate inventory level required to support projected sales.

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