FM225 Final - Ch 14

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  1. Favorable nonprice vendor agreements can...
    • Increase gross margin
    • Decrease processing expenses
    • Improve cash flow
  2. Purchase order
    • A contractual salesa greement between a retailer and vendor
    • Merchandise, prices, delivery dates, and payment terms are specified
  3. Types of purchase orders
    • Advance order: commitment to buy in future
    • Back order: ordered but never shipped
    • Complete order: totally shipped by vendor
    • Fill-in order: replenishes sold-out inventory
    • No-Order: merchandise shows up but was never ordered
    • Past-due order: still not received by expected delivery date
    • Reorder: for previously ordered good
    • Rush order: replenish fast-selling merchandise
    • Special order: for an individual customer
    • Standing order : outstanding order to which additional items can be added
  4. Discounts
    Special price reductions in the price of merchandise
  5. Quantity discount
    • A reduction in price based on the amount of merchandise purchased
    • Cumulative: applies to orders placed over time
    • Noncumulative: applies to each order placed
  6. Seasonal discount
    • A reduction in price for orders placed in advance of the normal ordering period
    • "Early bird specials"
  7. Cash discount
    • A reduction in the amount due on an invoice when payment is made on or before a specified date
    • Isn't applied until all other discounts have been deducted
    • % taken at billed cost
  8. Net payment period
    Begins on the cash discount date and ends on the specified net payment date
  9. Regular dating
    Assumed the DOI as the first day of the payment period
  10. EOM notation
    • The payment period begins at the end of the month in which the invoice is dated
    • Invoices dated on or after the 25th of a month count as if they were dated the first of the following month
  11. Extra dating
    • Adds additional days to the discount and payment periods
    • 2/10, 60X
  12. Cash dating
    No discount or payment periods
  13. Cash on delivery and cash in advance are beneficial to...
    Companies who don't have credit yet
  14. Consignment
    • Not paid for until they are sold
    • Minimize the retailer's risk: positive cash flow, capital not tied up in inventory
    • Title ofo goods passed from vendor to consumer (never retailer)
  15. Memorandum
    The title of goods passes from the vendor to the retailer, usually when the goods are shipped, then passes to the consumer at the point of sale
  16. Long-term impact of discounts
    • Can dramatically impact a retailer's profitability over time
    • Increase gross margin and net profit
    • Retailers often borrow money to take cash discounts
  17. Transportation
    • Arrangements are made by retailer
    • Should be cost-effective in order to minimize the cost of goods sold, and maximize gross margin and net profit
    • Time and cost are bigges factors
  18. Transportation costs are a function of...
    • The weight and bulk of the merchandise shipped
    • The distance between the vendor's and retailer's distribution centers
    • The mode of transportation used
  19. Transportation terms
    • Identify the bearer of the cost of shipping goods from the vendor to the retailer
    • Identify the point at which the title of the goods passes from one to the other
    • Responsibility of the buyer
  20. FOB
    • Free on board
    • Word that follows (origina, factory, etc) refers to the point to which a vendor pays transportation charges and the point at which the title of the goods passes from vendor to retailer
    • Is freight collected (from retailer) or prepaid (by vendor)?
  21. Modes of transportation
    • Motor carriers (truckres)
    • Railroads
    • Airlines
    • Water carriers
  22. Intermodal transportation
    The combination of two or more modes of transportation
  23. Common carrier
    Establishes uniform rates and schedules for all shippers
  24. Contract carrier
    Negotiates individual agreements with shippers or small groups of shippers
  25. Private carrier
    Some organizations operate as private carriers, shipping goods with their own transportation equipment
  26. Types of transportation firms
    • Common
    • Contract
    • Private
  27. Consolidators
    • Freight forwarders
    • Combine less-than-truckload shipments from multiple vendors into truckload shipments
    • Contract carriers to deliver the truckload shipments to their retail destinations
  28. Distribution center
    • Performs critical inventory management functions
    • Expidites processing to ensure the timely arrival of goods in stores
    • Works closely with buyers to resolve issues related to damaged receipts, short shipments, and vendor substitutions
  29. Vendor partnerships
    • Collaborations between retailers and their vendors
    • Often involve strategies for pumping goods through the distribution channel more rapidly and efficiently
    • Floor-ready merchandise
    • Markdown allowances
    • Promotional support
  30. Floor-ready merchandise (FRM)
    Negotiated agreement whereby the vendor agrees to package, case, fold, hang, and/or ticket merchandise so that it is ready for hte selling floor upon arrival
  31. Radio frequency identification (RFID)
    • Tagging system
    • Tags have silicon chipps embedded with bar code information (vendor, style, color)
  32. Electronic data interchange (EDI)
    A partnership between a retailer and a vendor that involves a backward flow of customer purchase information through the distribution pipeline beginning at the retailer's point of sale
  33. Vendor matrix
    • A list of preferred vendors selected at conglomerate level
    • Some organizations limit their buyers to conducting business only with matrix vendors, thereby limiting the number of vendors with whom they do business by as much as 50%
  34. Vendor relations
    • Individual profit objectives of retailers and vendors conflict
    • Higher profit for vendor = lower profit for retailer
    • Vendors and retailers sometimes partake in bribery
Card Set
FM225 Final - Ch 14
FM 225
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