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Glossary

  1. Cost of Goods Sold (COGS): Quantity sold* per unit cost of each piece
  2. Rate of Sale (ROS): Average Quantity sold as per the defined duration (daily/weekly/monthly)

Eg., Weekly ROS = (Quantity Sold/No of days exposed)*7 

  1. Gross Margin: Difference between revenue and cost of goods sold divided by revenue. Measures the profitability
  2. Gross Margin Return On Inventory Investment (GMROI): Measures the Profit against the investment in inventory. A ratio higher than 1 denotes that the Brand/Retailer/ Store is making more money through Sales than the cost incurred on the inventory  

GMROI = Gross Margin/Total Inventory Cost

  1. Sell Through:  Ratio of the Sales quantity to the exposed Stock Quantity. Sell through indicates how good the planning is as compared to the actual demand

Sell Through = Sales Quantity/Stock exposed (or) Sales Quantity/(Sales Quantity+ Current Stock)

  1. Days on Hand (DOH): Also known as Stock Cover/ Days Sales of Inventory (DSI)/ (DOC), refers to the no. of days the current inventory is going to last basis the expected sales. 

For Eg., if the current inventory is 1000 units and the expected ROS is 10 units per day, the DOH is said to be 100 days

Indicates how efficiently the inventory is being managed. A high DOH means that the Stock levels are above the ideal amount and a very low DOH could indicate a risk of stock-outs

  1. Merchandise Financial Place (MFP)/ Annual Operating Plan (AOP): Monthly Revenue targets at a Store level.
  2. Gross Margin Return On Footage (GMROF): Measures return Profit per every square foot of the retail space. Indicates how effective the investment in retail space is.

GMROF= Gross Margin/ Area (in Sq ft)

  1. Open To Buy (OTB): OTB plan is the buying plan for Future inventory orders based on the revenue targets (AOP). Helps the merchandisers/ retailers buy the right amount of the right products for the right places
  2. Minimum Order Quantity (MOQ): The minimum amount to be ordered per Style (Often a production constraint from the manufacturer/vendor)
  3. Stock Turns: Stock turns or inventory turns is the number of times during a certain calendar period a retailer sells its inventory and replaces it (turnovers) with new inventory. It is calculated as the cost of goods sold / average inventory
  4. Sales Per Square Foot (SPSF): The store’s average revenue for every square foot of sales space. It determines how efficiently space is being used.
  5. Conversion Rate: Retail conversion rate measures the proportion of visitors to a store that makes a purchase.
  6. Average transaction value (ATV)/ Average bill value (ABV): The total sales for a period by the no of transactions in that period.
  7. Average sale price (ASP): ASP is the average price of a sold product. It’s the total revenue for a period divided by the total unit sales.
  8. Units per transaction (UPT)/ BS (Basket Size): UPT is the average number of items sold per transaction. It’s calculated by the total sales qty for a period divided by the total number of transactions in that period.
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