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.

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
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4. Graphical Illustration
Sales vs. Stock - Group
Sales vs. Stock - Somerset
Sales vs. Stock - Menlyn
Sales vs. Stock - Eastgate
Sales vs. Stock - Sandton
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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
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 Stock deliveries are taken into stores early in the month, as this effects the stock turn
Forward Stock Cover
(Stock Turn)
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6. Promotional Stock
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 Open to buy must be established for promotional products, so as not to effect basic stocks of cosmetics
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 Promotional stock negotiated on a sale on return basis wherever possible
 Promotional stock purchasing must be based on a sell-out basis
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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
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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
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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
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targeted stock levels are achieved
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 The above method may take longer, depending on the percentage of sales reinvested - but which will
have less of an effect on sales
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10. Store Responsibilities
 Stores to ensure that the cosmetic stock counts are accurate
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 Orders sent through to buyers as required
 Receiving area is checked daily for stock deliveries
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11. Group Buying Team Responsibilities
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 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
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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
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