Case Study : Developing an Assortment Plan for Hughes - submit here

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Review Case 23 which starts on page 516 of our textbook: Developing an Assortment Plan for Hughes. Answer the three discussion questions. I have provided a plan for the silk rugs, so follow that example and create a plan for the wool and cotton rugs. Since this will be a more complicated assignment, I will appreciate all efforts.

Decide how to distribute the allotted opentobuy dollars among the available sizes, colors, and fabrications. Since it's an overseas manufacturer, consider additional costs such as duty and shipping, which also need to be covered by the allocated opentobuy dollars.

Exhibit 1 below provides the wholesale prices in columns 1 to 3 and adjusted prices in columns 4 to 6. We have assumed a 9 percent ocean freight charge and Ghuman will absorb the duty. Of course, you can make any assumption about these charges.

Exhibit 2 is a sample assortment plan for silk. It was developed from one large spreadsheet. For purposes of illustration, we will examine the assumptions and calculations for Exhibit 2:

1. Column 2 is taken directly from Exhibit I in the case.
2. Column 3 is the product of column I times the percent of sales in silk. Thus, the percent of silk in a 3' by 5' rug is .15 x.2 =. 03.
3. Column 4 is the approximate amount of money to be invested in each SKU. Thus, the amount of money to be invested in silk 3 by 5 rugs is .03 (column 3) times the total opentobuy of $66,200 = $1,986. Note that students can assume other opentobuy figures.
4. Column 5 is the approximate number of SKUs. The approximate number of silk 3 by 5 rugs is the approximate amount of money to be invested ($1,986) divided by the adjusted cost from Exhibit 1 ($436) equals 4.56 rugs.
5. Column 6 is the adjusted number of SKUs. Naturally, the buyer cannot purchase 4.56 rugs. So adjustments are made, both up and down, to whole numbers. In this case, we adjusted upward to 5 units.
6. Column 7 is the adjusted cost for the silk 3 by 5 rugs. It is the adjusted number of SKUs (Column 6) times the adjusted cost from Exhibit 15 times $436 = $2,180.

Exhibit 1 Cost Information

SILK COST	WOOL COST	COTTON COST	SILK COST ADJUSTED	WOOL COST ADJUSTED	COTTON COST ADJUSTED
400	250		436	0	272.5
700	500	200	763	218	545
850	700	275	926.5	299.75	763
1200	1000	350	1308	381.5	1090
1400	1300	500	1526	545	1417

Exhibit 2 Assortment Plan for Silk Rugs

SIZES	% OF SALES	SILK %	SILK $	SILK UNITS	SILK UNITS ADJUSTED	SILK $ ADJUSTED
3 by 5	0.2	0.03	1986	4.56	5	2180
4 by 6	0.4	0.06	3972	5.21	5	3815
6 by 9	0.15	0.225	1489.5	1.61	2	1853
8 by 10	0.1	0.015	993	0.76	1	1308
9 by 12	0.15	0.0225	1489.5	0.98	1	1526
TOTAL		0.15	9930			10682