Business management
Angela gomez
assignment8.docxQuestion 8b- Recommendations
In companies which have several hundreds of SKUs, profit analysis is important to know which ones fall outside the bounds of acceptable profitability or are decreasing in profitability. At store 9857, it is recommended that floor space should be reduced for classes of products that have the lowest total gross profit contributing around 5%. According to table 1, these classes include shelf liner core, appliances-core, kitchen organization, reusable bags, dinnerware-core, glass/ceramic servicing-core, closet/bath/STOR non-core, dinnerware non-core, and mops/brooms/clean non-core.
Evidence show that these classes of products are actually not so profitable. Such aggressive stocking of these least profitable products will lead to low profits, weakened brand images and increases in hidden and control cost through high holding costs.
Table 1: Pivot Table Showing both $ and % of Gross Profit
|
Row Labels |
Sum of Gross Profit $ |
Average of Gross Profit % |
|
MOPS/BROOMS/CLEANING-CORE |
$ 34,703.50 |
69% |
|
PLASTICS-CORE |
$ 27,135.00 |
59% |
|
QUICK CLEAN |
$ 12,957.30 |
57% |
|
LIGHT BULBS-CORE |
$ 11,309.10 |
65% |
|
PLASTIC/FOOD CORE |
$ 11,018.00 |
63% |
|
CLOSET/BATH/STORAGE-CORE |
$ 7,017.60 |
57% |
|
COOK/BAKEWARE-CORE |
$ 5,755.80 |
72% |
|
GADGETS-CORE |
$ 4,489.10 |
75% |
|
SHELF LINER-CORE |
$ 2,440.60 |
67% |
|
APPLIANCES-CORE |
$ 1,708.70 |
57% |
|
KITCHEN ORGANIZATION |
$ 970.10 |
69% |
|
REUSABLE BAGS |
$ 410.50 |
63% |
|
DINNERWARE-CORE |
$ 380.90 |
59% |
|
GLAS/CERAMIC SERVING-CORE |
$ 268.50 |
59% |
|
CLOSET/BATH/STOR NONCORE |
$ 54.90 |
63% |
|
DINNERWARE NONCORE |
$ 51.00 |
63% |
|
MOPS/BROOMS/CLEAN NONCORE |
$ 35.70 |
68% |
|
Grand Total |
$ 120,706.30 |
65% |
Figure 1: A chart showing Gross Profit $ Vs. Gross Margin %
Although marketers argue for more product line extensions to serve an increasingly segmented marketplace, the focus must be on the total gross profits a class of products brings to the business. In this regard, it is recommended that floor spaces at store 9857 should be expanded for those classes of products that provide 80% of the total gross profit. As shown on table 1, these classes are mops/brooms/cleaning core, plastics-core, quick clean, light-bulbs core and plastics/food core.
If store 9857 will focus on these classes of product by allocating more floor space to them, they can expand margins and market share. Also, store 9857 need to maintain this controlled approach so as to align products stocked with customer needs, achieve repeat purchases, and create stronger margins that can be reinvested in true customer value.
Store 9857 should maintain the other stores spacing as it provides moderate level of total gross profit.
Gross Profit $ Vs. Gross Margin %
Sum of Gross Profit $ MOPS/BROOMS/CLEANING-CORE PLASTICS-CORE QUICK CLEAN LIGHT BULBS-CORE PLASTIC/FOOD CORE CLOSET/BATH/STORAGE-CORE COOK/BAKEWARE-CORE GADGETS-CORE SHELF LINER-CORE APPLIANCES-CORE KITCHEN ORGANIZATION REUSABLE BAGS DINNERWARE-CORE GLAS/CERAMIC SERVING-CORE CLOSET/BATH/STOR NONCORE DINNERWARE NONCORE MOPS/BROOMS/CLEAN NONCORE 34703.5 27135 12957.3 11309.1 11018 7017.6000000000104 5755.8 4489.1000000000004 2440.6 1708.7 970.1 410.5 380.9 268.5 54.9 51 35.700000000000003 Average of Gross Profit % MOPS/BROOMS/CLEANING-CORE PLASTICS-CORE QUICK CLEAN LIGHT BULBS-CORE PLASTIC/FOOD CORE CLOSET/BATH/STORAGE-CORE COOK/BAKEWARE-CORE GADGETS-CORE SHELF LINER-CORE APPLIANCES-CORE KITCHEN ORGANIZATION REUSABLE BAGS DINNERWARE-CORE GLAS/CERAMIC SERVING-CORE CLOSET/BATH/STOR NONCORE DINNERWARE NONCORE MOPS/BROOMS/CLEAN NONCORE 0.69295054448632398 0.58942285190059995 0.57063096510853095 0.64782919365435299 0.63390617779492298 0.56501271419614096 0.71552770906015395 0.74574247283790396 0.6697304491498 3604 0.57235787381658798 0.688239405232553 0.62585193889541701 0.59156785243741805 0.59077733860342596 0.63321799307958504 0.63118811881188097 0.68390804597701205
Product Class
Gross Profit $
Gross Margin %
Question 8b
-
Recommendations
In companies which have several hundreds of
SKUs, profit analysis is important to know
which ones fall outside the bounds of acceptable profitability or are decreasing in profitability.
At store 9857, it is recommended that floor space should be reduced for classes of products that
have the lowest t
otal gross profit
contributing around 5%.
According to table 1, these classes
include shelf liner core, appliances
-
core, kitchen organization, reusable bags, dinnerware
-
core,
glass/ceramic servicing
-
core, closet/bath/STOR non
-
core, dinnerware non
-
core, and
mops/brooms/clean non
-
core.
Evidence show that these classes of products are actually not so profitable. Such
aggressive stocking of these least profitable products will lead to
low profits,
weakened brand
images
and
increases in hidden and control cost
through high holding costs.
Table 1: Pivot Table Showing both $ and % of Gross Profit
Row Labels
Sum of Gross Profit $
Average of
Gross Profit %
MOPS/BROOMS/CLEANING
-
CORE
$ 34,703.50
69%
PLASTICS
-
CORE
$ 27,135.00
59%
QUICK CLEAN
$ 12,957.30
57%
LIGHT BULBS
-
CORE
$ 11,309.10
65%
PLASTIC/FOOD CORE
$ 11,018.00
63%
CLOSET/BATH/STORAGE
-
CORE
$ 7,017.60
57%
COOK/BAKEWARE
-
CORE
$ 5,755.80
72%
GADGETS
-
CORE
$ 4,489.10
75%
SHELF LINER
-
CORE
$ 2,440.60
67%
APPLIANCES
-
CORE
$ 1,708.70
57%
KITCHEN ORGANIZATION
$ 970.10
69%
REUSABLE BAGS
$ 410.50
63%
DINNERWARE
-
CORE
$ 380.90
59%
GLAS/CERAMIC SERVING
-
CORE
$ 268.50
59%
CLOSET/BATH/STOR NONCORE
$ 54.90
63%
DINNERWARE NONCORE
$ 51.00
63%
MOPS/BROOMS/CLEAN NONCORE
$ 35.70
68%
Grand Total
$ 120,706.30
65%
Question 8b- Recommendations
In companies which have several hundreds of SKUs, profit analysis is important to know
which ones fall outside the bounds of acceptable profitability or are decreasing in profitability.
At store 9857, it is recommended that floor space should be reduced for classes of products that
have the lowest total gross profit contributing around 5%. According to table 1, these classes
include shelf liner core, appliances-core, kitchen organization, reusable bags, dinnerware-core,
glass/ceramic servicing-core, closet/bath/STOR non-core, dinnerware non-core, and
mops/brooms/clean non-core.
Evidence show that these classes of products are actually not so profitable. Such
aggressive stocking of these least profitable products will lead to low profits, weakened brand
images and increases in hidden and control cost through high holding costs.
Table 1: Pivot Table Showing both $ and % of Gross Profit
Row Labels Sum of Gross Profit $ Average of
Gross Profit %
MOPS/BROOMS/CLEANING-CORE $ 34,703.50 69%
PLASTICS-CORE $ 27,135.00 59%
QUICK CLEAN $ 12,957.30 57%
LIGHT BULBS-CORE $ 11,309.10 65%
PLASTIC/FOOD CORE $ 11,018.00 63%
CLOSET/BATH/STORAGE-CORE $ 7,017.60 57%
COOK/BAKEWARE-CORE $ 5,755.80 72%
GADGETS-CORE $ 4,489.10 75%
SHELF LINER-CORE $ 2,440.60 67%
APPLIANCES-CORE $ 1,708.70 57%
KITCHEN ORGANIZATION $ 970.10 69%
REUSABLE BAGS $ 410.50 63%
DINNERWARE-CORE $ 380.90 59%
GLAS/CERAMIC SERVING-CORE $ 268.50 59%
CLOSET/BATH/STOR NONCORE $ 54.90 63%
DINNERWARE NONCORE $ 51.00 63%
MOPS/BROOMS/CLEAN NONCORE $ 35.70 68%
Grand Total $ 120,706.30 65%
