The purpose of this study was to explore the interrelationships of selected merchandise performance measures as determined by merchandise plans and merchandise plan errors through development of stochastic computer simulation models. Utilising Sourcing Simulator, a merchandising analysis tool, a total of 4320 data were generated and analysed through path analysis. The findings indicate significant relationships among inventory management, service level, and profitability, which were critically influenced by the internal merchandise planning factors – assortment diversity and merchandise replenishment – and external consumer demand factors – merchandise plan errors. This study identified the significant role of volume per stock-keeping unit for an assortment (VSA) as a guideline of assortment diversity on inventory management, service level, and profitability. Well-integrated merchandise planning, considering the internal merchandise planning factors and the external consumer demand factors, is suggested f...