Merchandising activities primarily involve direct interaction with buyers and co-ordinating with multiple in-house departments. Performance measurement is a process of collecting and reporting information on the performance of an individual, group or organisations. The fundamental purpose behind measures is to improve performance.
In an order execution cycle, three-fourth of the time is spent on merchandising activities and rest one-fourth on actual manufacturing of the merchandise. The most interesting characteristic of merchandising activities is human-oriented task, completion of which is based on a network of activities, i.e. if one task is delayed due to any reason, multiple tasks succeeding may also get delayed. Unlike manufacturing cycle where task cycles are short enough to have repeatability, thus follows work measurement principle, merchandising tasks which are of long duration and follow project management logic. Measuring performance in such a scenario is primarily time and to be more specific, the right first time.
It is also seen that if merchandising activities are stretched due to any iteration or non-conformance, the manufacturing activity cycle is eventually to be compressed to accommodate the loss of time and meet the overall delivery date. Therefore, performance of merchandising department is critical for the overall performance of the organization. It is important to keep a close look on the speed and accuracy of response by the merchandisers and at the same time keep an eye on the business target of the organization.
This article is by Mausmi Ambastha, Founder and COO of ThreadSol, with several years of experience as a consultant with industry expertise in Sewing, Merchandising, Inventory Control and Supply Chain Management.
Enquiry response time
Enquiry response time is the time taken to respond to the buyer regarding an enquiry or email. This is the percentage of enquiries responded to within the specified time frame. A response must be sent within 24 hours of receiving the request or by the next working day. A costing request should be replied to within 48 hours with possible alternatives.
These timeline targets may vary from one organization to another and each company should define their own standards.
Example: If Rita had to answer 40 enquiries within a month (8 for costing, 9 for patterns, 6 for fabric, 7 for styling, 4 for samples and 6 other enquiries) and she successfully answered 35 of these enquiries within the stipulated time frame, then the enquiry response time is accurate 87.5% (35 / 40 X 100 = 87.5%) of the time.
Further investigations on the late responses reveal that out of the five enquiries that were delayed, four were related to costing. Analyses must be carried out to identify the reasons for the delay in costing and improve on it for future performance.
File handover schedule achievement
File handover schedule achievement is a measure to keep a check on timely handover of files by the merchandising to the production department. The goal should be to deliver files on the exact date as decided. Early handover can be as difficult as a late one. Any change in the schedule disrupts the planning schedule considerably.
This can be calculated as a per week or per month average. This value can also be used to assess performance of merchandisers, buyers, etc. An analysis of the reasons for delay may highlight lead time bottlenecks. A file handover is considered complete only when all the responsibilities of the merchandiser have been fulfilled and the order is ready for production.
Example: Rita had to handover 10 complete files in a month to the production department and was able to handover only 8 on time. This means she is achieving only 80% of the file handover schedule.
In factory XYZ, it was found that file handover schedule achievement was 63% and a major contributor to the delay was the buyer as they were making major changes in the style late in the production cycle, which resulted in file handover schedule delays; further late deliveries and huge overtimes. This was highlighted to the buyer and rules were set to maintain file handover schedules.
Sample delivery percentage
Sample delivery percentage is the time taken from the date of request to the delivery of samples.
Every company has their policy of delivering samples within a certain time period. A proto should be sent within four days or a fit sample within five days. These are the maximum time limits promised as a quick response to the customer.
It is important for every company to keep a tab on these timelines. This information can be valuable in the following areas:
• Judging the performance of merchant.
• In case of a delay from the customer’s end, the company can show evidence if questioned on their delay in delivery.
• A good delivery record can be presented in business meetings to establish performance while asking for future business.
Example: Rita delivered 10 samples in a month. Each sample was sent within the factory stipulated timeline of 4 working days after receiving complete information for the production of the sample. The factory’s sample delivery percentage is, therefore, 100%.
Sample rejection rate
Sample rejection rate is the ratio of samples that are rejected out of the total number of samples sent. This can include proto, fit or any other type of sample, depending on factory requirement. Factories may also wish to have different sample rejection rates with each type of sample. This is a very important figure for merchandisers, both at the buyer’s as well as the manufacturer’s end. They show the performance of pattern makers and the ability of merchandisers to interpret tech packs. A low rejection rate not only shortens development cycle but also instils confidence in the buyer regarding the capability of the merchandising team.
In cases where a high rejection rate is due to frequent changes by the buyer or errors of the merchant at the buyer’s end, the manufacturer can use this information as proof to safeguard themselves.
Example: Rita delivered 10 samples in a month (four proto samples, three 1st fit samples, two 2nd fit samples and one production sample.) Out of these, three samples were rejected by the buyer and further changes were suggested (one proto sample and two 1st fit samples). Therefore, sample rejection rate is 30%.
Further investigation revealed that the proto sample was rejected due to costing issues; one fit sample was rejected due to incorrect pattern and another due to a style change by the buyer.
Sample adoption level
Sample adoption level represents how accurate the manufacturer’s design team’s understanding of the buyer’s tastes, costs and trends of the current season is.
A higher adoption level goes a long way in creating a good relationship with the buyer and a higher chance of receiving production orders for the styles selected from the manufacturer’s range.
Example: Rita, with the help of the factory’s design team, created a range of 20 new samples for the buyer. These were presented and five were selected by the buyer for sampling for next season’s collection. This shows that Rita had 25% success with sample adoption. Another merchandiser, Raj, created 50 samples and five were adopted by the buyer. Raj thus had only 10% success with sample adoption.
Sampling hit rate
Sampling hit rate represents the conversion rate of samples to actual buy orders.
Lower hit rate adds significant costs to the manufacturer, resulting in time delays. If a low hit rate is seen, it should be analyzed thoroughly to resolve the reasons for dropped styles.
Example: Rita received 8 tech packs of Spring/Summer collection from the buyer. She created proto samples, costing, etc. If the factory finally gets orders in 4 of these styles, it means that sampling hit rate is 50%.
Orders handled per unit time
Orders handled per unit time is the number of orders handled by a merchant in a season, month or year, roughly representing the amount of work the merchandiser has had to do in that period. Each order requires the same amount of sampling exercises, whether it’s a small or a large order. This measure can help us judge the workload and performance of the merchandisers.
Example: Rita received 4 orders in the month of June (10,000 pieces each) whereas Raj received 10 orders (4,000 pieces each). Both of them handled the same quantity of 40,000 pieces, but Raj had to do a lot more work to achieve the same quantity.
Value handled per unit time
Value handled per unit time represents the business in terms of value that the merchandiser brings into the company.
Many factories use this parameter to review the performance of their merchandisers as the dollar values relate directly to their revenue stream.
Example: Rita’s orders had an average value of US $ 10. Using the numbers mentioned above, she brought in US $ 4,00,000 worth of business. Raj’s orders had an average value of US $ 6. He therefore, did US $ 2,40,000 worth of business.
It should be noted that although Raj handled more orders, he generated the same amount of business in terms of quantity and lesser business in terms of value, as compared to Rita.