ML0011 - Buying and Merchandising

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Summer 2013

Master of Business Administration- MBA Semester 3

ML0011 - Buying and Merchandising

Q1. Explain the various principles of an ideal merchandising giving suitable examples for each?

(Meaning of Ideal Merchandising – 2, Detail explanation of 14 principles - 8 marks) 10 Marks

Answer : Ideal Merchandising :

Merchandising is a term used in marketing to denote all those sales- promotion activities that aim to generate the customer’s interest in the product or service other than conventional press and television advertising, direct mail or the use of PR. The purpose of merchandising is to bring product and customer into the closest possible proximity in order that the attributes of the merchandise may become fully apparent and, in effect, sell themselves.

Q2. Enumerate the category management strategies that are used by retailers to ensure a smooth category management process.

(Meaning of category management – 2 marks, Detail explanation of 7 steps – 8 marks) 10 Marks

Answer :  Category management :

Category management is a retailing and supply management concept in which the range of products purchased by a business organization or sold by a retailer is broken down into discrete groups of similar or related products; these groups are known as product categories (examples of grocery categories might be: tinned fish, washing detergent, toothpastes).

Q3. Discuss the concept of open-to-buy system. How do you calculate open- to-buy for the past and current period?

(Detail explanation on the concept of OTB system - 3 marks, Calculation of OTB for past period – 2 marks, Calculation of OTB for current period - 5 marks) 10 Marks

Answer :  Open to buy system :

An open-to-buy is a tool that in the hands of a fully committed small retailer can profoundly improve financial performance. It allows a retailer to manage inventory, plan purchases, and budget effectively. The clearest and simplest definition is that it is a financial budget for retail merchandise. Let's look at this more closely.

Q4. Enumerate some merits and demerits of Formal Buying Organization, Informal Buying Organization, Centralized Buying & Decentralized Buying along with diagrammatic representation of functions and attributes of the buying department.

(Diagrammatic representation of functions and Attributes of the buying department – 2 marks, Merits and Demerits of formal buying – 2 marks, Merits and Demerits of informal buying – 2 marks, Merits and Demerits of Centralized buying – 2 marks, Merits and Demerits of Decentralized buying – 2 marks)  10 Marks

Answer : Diagrammatic representation of functions and Attributes of the buying department:

Purchasing is a key activity in the supply chain. It can significantly influence the overall success of an emergency response depending on how it is managed. In humanitarian supply chains, procurement represents a very large proportion of the total spend and should be managed effectively to achieve optimum value. Procurement works like a pivot in the internal supply chain process turning around requests into actual products/commodities or services to fulfill the needs

Q5. Enumerate the first 5 steps in Merchandise Buying and Handling Process.

 (Explanation of first 5 steps – 8 marks, Diagram - 2 marks) 10 Marks

Answer : First 5 steps in Merchandise Buying and Handling process :

Once a retailer develops a strategy for handling merchandise, a reorder procedure must be developed. This procedure depends on various factors like the time taken by the retailer to process the order, the time taken by the vendor to fulfill the order, the inventory turnover rate, the financial expenditure and the cost of holding inventory versus the cost of ordering merchandise. The retailer should re-evaluate the complete merchandising process periodically.

Q6. ‘Selecting an appropriate vendor is the key step in the success of an enterprise’.

(Detail explanation of five steps - 9 marks, Diagram – 1 mark) 10 Marks

Answer: Steps in selection of an appropriate vendor :

1. Analyze the Business Requirements:

Before you begin to gather data or perform interviews, assemble a team of people who have a vested interest in this particular vendor selection process. The first task that the vendor selection team needs accomplish is to define, in writing, the product, material or service that you are searching for a vendor. Next define the technical and business requirements

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