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Cosmetics Sales & Stock Analysis Report

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A strategic analysis and proposals document for a premier department chain store group in ZA. The proposal is designed in such a way as to illustrate (through the design), a strategic direction for a …

A strategic analysis and proposals document for a premier department chain store group in ZA. The proposal is designed in such a way as to illustrate (through the design), a strategic direction for a stumbling department within the chain.

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  • 1. Cosmetics Sales & Stock Analysis October 2008
  • 2. Stuttafords Group Cosmetics Stock Analysis Index Executive Summary............................................................................................................................................................................ 3 Graphical Illustration ........................................................................................................................................................................ 4 Sales versus Stock - Group ....................................................................................................................................................5 Sales versus Stock - Somerset ........................................................................................................................................... 6 Sales versus Stock - Somerset ............................................................................................................................................ 7 Sales versus Stock - Eastgate .............................................................................................................................................. 8 Sales versus Stock - Sandton ............................................................................................................................................. 9 Forward Stock Cover ................................................................................................................................................................... 10 Promotional Stock ......................................................................................................................................................................... 11 Bottom-up Stock Planning ..................................................................................................................................................... 12 Ordering System ............................................................................................................................................................................. 13 Overstocked Stores ....................................................................................................................................................................... 14 Store Responsibilities .................................................................................................................................................................. 15 Group Buying Team Responsibilities .............................................................................................................................. 16 Way forward ....................................................................................................................................................................................... 17
  • 3. Executive Summary  Cosmetic stocks end September 2008; R48 million cover approximately 23 weeks  Cosmetic stocks end September 2008, excluding consignment R37 million cover approximately 18 weeks  Cosmetic stockholding objective must be to reach R30 million, including consignment by end March 2009  Current ordering system labour and time consuming; up to one day to process an order  Automated procurement system rollout commencing immediately; completed by 10 November 2008  Automated procurement system will work on minimum and maximum model stockholding  Automated system to run manually until electronic connections are established with suppliers  Model stockholding values established by store and group, including promotional purchases  Stock turn objective set at 4.3 to be met by end June 2009  Stock mix needs to be redefined by store  Procurement procedures documented for clarity in the group  Cosmetic sales 16.8% of sales aim to move up to 25% of group sales  Staff duties re-established once the system is operational  Current ordering system is laborious and time consuming 3
  • 4. Graphical Illustration Sales vs. Stock - Group Sales vs. Stock - Somerset Sales vs. Stock - Menlyn Sales vs. Stock - Eastgate Sales vs. Stock - Sandton 4
  • 5.  Targeted forward stock cover for the group will be 12 weeks forward sales  12 weeks forward cover translates as a 4.3 stock turn       Stock deliveries are taken into stores early in the month, as this effects the stock turn Forward Stock Cover (Stock Turn) 5
  • 6. Promotional Stock   Open to buy must be established for promotional products, so as not to effect basic stocks of cosmetics   Promotional stock negotiated on a sale on return basis wherever possible  Promotional stock purchasing must be based on a sell-out basis 6
  • 7. Bottom-up Stock Planning  Basic stock cover need to be established by cosmetic house, by store  Basic stock quantities and extended rand values of minimum cover  Basic stock never out of stock (NOOS) products must be identified by brand  Basic stock NOOS products will vary from store to store, as each consultant will have her preferred products  Basic stock normally works on the 80/20 principle being that 80% of the sales will come from 20% of the products 7
  • 8.  Group ordering of all cosmetics  Cosmetic turn around time of orders is critical to ensure minimum out of stock  Supplier delivery schedules to stores  Delivery frequency is important when establishing basic minimum stock cover  Suppliers will normally have minimum Rand value per order due to delivery costs  Christmas basic stock orders completed by Friday 21 November 2008  Christmas basic stock deliveries in store by Friday 5 December 2008  Christmas fills in orders up to when relevant supplier closes  Christmas gift sets credited by end of December  Christmas orders 50% into November/50% into December 2008  Christmas orders future 40% into November/60% into December Ordering System 8
  • 9. Overstocked Stores  Stores that are overstocked need to be addressed carefully, as the balancing exercise can have a detrimental effect on sales  Phased-in balancing of stock must be agreed upon  Time period to achieve targeted stock levels, normally 3 - 4 months  The first method is to request of suppliers to balance overstocks  Suppliers may agree to the uplifting of stock and the equivalent Rand value replaced with basic stock   targeted stock levels are achieved     The above method may take longer, depending on the percentage of sales reinvested - but which will have less of an effect on sales 9
  • 10. Store Responsibilities  Stores to ensure that the cosmetic stock counts are accurate   Orders sent through to buyers as required  Receiving area is checked daily for stock deliveries 10
  • 11. Group Buying Team Responsibilities   Stock turn objectives are met 4:3 stock turn or 16 weeks by end March 2009  Stores have balanced basic and promotional stock  Promotional and slow-moving stock is returned to suppliers or addressed, to ensure sell through  Procurement procedure manual minimum: max model on dolphin  Turn around time on orders - maximum 4 days, Estee Lauder 7 days  Model stock levels checked against sell through and adjusted accordingly  Cosmetic Sale to ensure sell through of slow, soiled and aged stock  Top 20% of sellers identified by brand, never out of stock (NOOS)  Promotional stock balanced distribution  Handling fees are negotiated prior to returning stock to suppliers, as some suppliers charge up to 25% of the value of the return  New cosmetic houses must be able to achieve minimum of R180 000 per annum  fad fragrances 11
  • 12. Way Forward  Automated service introduced by 15 November 2008  Cosmetic stock turn objectives established and communicated to stores  Cosmetic stores and brands reassessed with the view to consolidation  Training programme formulated  Automated system extended to direct ordering with suppliers  Development of an action plan  Quarterly review of progress 12

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