Exam 15: Implementing Merchandise Plans

Correct Answer:

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A retailer should evaluate merchandise through different methods depending on various factors such as the type of merchandise, the quantity involved, the cost of inspection, and the history of the supplier. Here are the conditions under which a retailer might use inspection, sampling, or description to evaluate merchandise:

1. Inspection:
- When the merchandise is high-value or luxury items where quality and authenticity are critical, such as jewelry, electronics, or designer clothing.
- When the items are perishable or have a limited shelf life, like food products or flowers, and quality must be assured upon arrival.
- When the retailer has had past issues with a particular supplier or product, and there is a need to ensure that the issues have been resolved.
- When the products are custom-made or made-to-order, and specifications must be met precisely.
- When the retailer is receiving a new product for the first time and needs to establish a quality baseline.

2. Sampling:
- When the merchandise is received in large quantities, and it is impractical to inspect every item due to time or cost constraints.
- When the retailer has established a history of consistent quality from the supplier, and only periodic checks are necessary to maintain assurance.
- When statistical quality control methods are in place, and the retailer can infer the quality of the entire lot based on a representative sample.
- When the products are relatively uniform and there is low variability between items, making sampling a reliable method of quality control.

3. Description:
- When the merchandise is standardized and has detailed specifications that can be verified through documentation, such as books, CDs, or other media.
- When the retailer is purchasing commodities or generic items where the product features are well-known and consistent across suppliers.
- When the items are drop-shipped directly to customers, and the retailer relies on the supplier's descriptions and quality assurances.
- When the cost of physical inspection or sampling outweighs the potential risk of non-compliance with product specifications.
- When the retailer has a long-standing and trustworthy relationship with the supplier, and there is a mutual understanding of the expected product quality.

In practice, a retailer may use a combination of these methods to ensure merchandise quality. For example, they might start with a thorough inspection of new products or suppliers, move to sampling as they gain confidence in the supplier's quality, and eventually rely on descriptions for routine orders of standardized products. The key is to balance the cost and effort of evaluation with the risk of receiving substandard merchandise.