Understanding Your Customer – Retail Buyer Buzzwords You Must Know – Part Two

Much of retail is managing inventory to satisfy consumer demand while making a profit.

Here are several key inventory management buzzwords you must know in order to better understand your retail buyer’s motivations.

A,B,C Classifications – A method of determining inventory levels by product to balance customer service and costs. The classification for a product may affect whether a push, pull or demand-driven approach is used for procurement. See the blog post last week for more on those topics.

Safety Stock – The level of inventory predicted to be necessary to avoid running out of inventory in response to expected demand.

OOS – Out of Stocks – A measure of the frequency of not having the inventory item customers wanted. OSS typically runs about 8%, but rising consumer expectations are changing what is acceptable in order to retain customers.

Cross Channel Inventory Availability – having an item a consumer wants available regardless of the shopping and delivery channel chosen by the consumer.

Hold Back Strategy – Sometimes also called postponement strategy. Instead of immediately sending product from distribution centers to stores, hold back strategy is the process of keeping more inventory in distribution centers until demand from stores is either better known from actual purchases or better forecast.

Open to Buy – a budget process for minimizing inventory costs by determining how much to buy during a time period but not necessarily which assortment to buy. It is most often used for fashion merchandise. Procurement with Open to Buy has typically been a monthly process, but weekly and bi-weekly procurement is becoming more common. Open to Buy is not usually appropriate for general merchandise.

Understanding Your Customer - Retail Buyer Buzzwords You Must Know – Part Two by

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