Crina Mirela Iuga Buying I C.

10

1. How are perpetual inventory systems maintained manually?

It Involves the maintenance of stock levels in relation to changing consumer demand.

2. When can information from perpetual inventory systems provide

misleading information to buyers?

It is very consistent and up to date but does not include past information

3. What are the key advantages that computerized inventory systems

provide when compared with manual systems?

One of the key advantages is that it can be better maintained

4. How can errors occur in computerized inventory systems?

If you didn't have one the store could become overstocked or understocked

5. When do most retailers conduct physical inventories?

Provides info needed to take markdowns by identifying slow-selling merchandise

6. Explain how returns affect inventory counts.

Allow buyers to identify best-sellers early enough so that reorders can be placed to increase total sales
for the department store

7. Why do most retailers use the retail method of inventory valuation?

This method calculates a store's total inventory value by taking the total retail value of the items that
were originally in inventory, subtracting the total sales, then multiplying that dollar amount by the cost-
to-retail ratio (the percentage by which goods are marked up from their wholesale purchase price to
their retail sales price). This method only provides an approximation of inventory value, however, as
some items in a retail store will most likely have been shoplifted, broken or misplaced. Physical
inventory must also be performed periodically to ensure the accuracy of inventory estimates.

8. Describe how shrinkage is determined using inventory control records.

Inventory shrinkage is the excess amount of inventory listed in the accounting records, but which no
longer exists in the actual inventory. Excessive shrinkage levels can indicate problems with inventory
theft, damage, miscounting, incorrect units of measure, evaporation, or similar issues.

9. Using a retail method of inventory, what type of price changes would

increase the value of inventory?
Recording markdown cancellations increases the value of inventory. In some instances, the value of
inventory may be increased by taking additional markups.

10. Using a retail method of inventory, what type of price changes would
decrease the value of inventory?

Markdown, the reduction in the retail price of merchandise already in stock, is the key price change that
must be recorded which decrease the value of the inventory.

11. Why is quick response by suppliers so important to buyers?

The impact of Quick Response can be seen not only above the gross margin line (through increased sales
and decreased markdown), but also below the line, with significant reductions in operating expenses.

12. What are the benefits of scanning to both retailers and their customers?

- faster customer checkout because manual entry of the item information is eliminated

- ability to track merchandise down to the sku level, which reduces stockouts

- elimination of the need to remark merchandise

- increased employee productivity because manual checking and marking procedures are elminated

13. What equipment is required to implement EDI?

Some basic hardware and software is required to implement EDI, included are:

A computer - either your primary business computer or a PC

Communications equipment
Communications software - to handle sending and receiving data transmissions
EDI translation software - to format your data in the X12 or EDIFACT standard
Application software - to create or receive the data you are transmitting and interface to
your in-house systems

14. What are the benefits of using EDI?

Delays due to paper handling are kept to a minimum, accelerating the ordering process, reduction in
clerical and administrative costs associated with data entry and tracking huge volumes of business
documents.

15. Describe specific benefits for businesses using Quick Response.

- Sales: By tracking merchandise on an item level, buyers can quickly react to actual customer demand.
Industry leaders are increasing their in-stock positions from 70 to 80 percent range to more than 95
percent

- Markdowns: by stocking more of what customers want and less of what they do not want, markdown
decrease an average of 30 percent in basic merchandise and 40% in fashion merchandise.

- Administrative expenses: EDI significantly reduces the amount of data entry for both retailers and
vendors. At the same time, clerical costs for the retailers can be cut by as much as two-thirds

- Interest on Inventory: By increasing inventory turns, there are significant savings in inventory carrying
costs