Importance Of Zara Buying

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Recommended: Supply chain management techniques used by zara

In order for a retail company, like Zara to produce good sales results it is dependent on the level of stock on hand. If Zara has too much inventory in a given store it can slow the stores cash flow as well as reduce profit due to markdowns. Therefore, excellent inventory control is of high importance to Zara in order to realize sales targets. Studying the open-to-buy has allowed me to realize it’s tremendous importance as well as usefulness for a buyer. As one of the two major tools of merchandise planning, the open-to-buy plan is used by many retailers today as an inventory management tool, in order to determine the quantity of inventory that needs to be bought. This is generally done on a monthly basis in order to reach revenue projections. …show more content…

The merchandise available comprises of inventory on hand and the merchandise on order. While the merchandise needed consist of planned sales, end of month inventory and planned stock. If a Zara buyer has OTB it means that his or her merchandise need is greater than his or her merchandise available. If it is the reverse, whereby the buyer has overbought and therefore has more merchandise available then it needs the Zara buyer does not have OTB. This implies that there are missed sales opportunities and therefore are not as profitable. Learning about how the OTB is calculated is of great value to a buyer because they can benchmark their profitability and sales performance based on …show more content…

Therefore, if a buyer at Zara has not received this data he or she has to obtain this information first. She can calculate the stock on hand through the retail method of inventory. Alternatively, the stock on hand can also be obtained by a physical inventory count, which is the process of counting all the products in your store at a given time period (relevant to the OTB).
If a Zara buyer faces a situation whereby it has overbought an item like velvet jackets. Which was anticipated to be a popular trend item for the season, but failed to live up to its promise. The OTB can be used as a tool for the buyer to correct the mistake of purchasing too many velvet jackets. As I learned the buyer will be able to correct him or herself by increasing the OTB. The OTB can be increased through several methods of correction. But these methods also apply if the buyer has insufficient OTB to make the purchases it wants or needs to make. By either decreasing the merchandise available or increasing the merchandise needed the buyer is able to create funds to make purchases for additional

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