a project report on inventory management | Inventory | Perfume

INTRODUCTION ³Adequate inventories facilitates production activities and help to customers satisfaction by providing good service.

´ The basic financial aim of an enterprise is maximization of its value. At the same time, a large both theoretical and practical meaning has the research for determinants increasing the firm value. Most financial literature contains information about numerous factors influencing the value. Among those factors is the net working capital and elements creating it, such as the level of cash tied in accounts receivable, inventories and operational cash balances. A large majority of classic financial models proposals, relating to the optimum current assets management, were constructed with net profit maximization in view. In order to make these models more suitable for firms, which want to maximize their value, some of them must be reconstructed. In the sphere of inventory management, the estimation of the influence of changes in a firm¶s decisions is a compromise between limiting risk by having greater inventory and limiting the costs of inventory. It is the essential problem of the corporate financial management. The basic financial inventory management aim is holding the inventory to a minimally acceptable level in relation to its costs. Holding inventory means using capital to finance inventory and links with inventory storage, insurance, transport, obsolescence, wasting and spoilage costs. However, maintaining a low inventory level can, in turn, lead to other problems with regard to meeting supply demands. The inventory management policy decisions, create the new inventory level in a firm. It has the influence on the firm value. It is the result of opportunity costs of money tied in with inventory and generally of costs of inventory managing. Both the first and the second involve modification of future free cash flows, and in consequence the firm value changes. Inventory changes (resulting from changes in inventory management policy of the firm) affect the net working capital level and the level of operating costs of inventory management in a firm as well. These operating costs are result of storage, insurance, transport, obsolescence, wasting and spoilage of inventory. Maximization of the owners¶ wealth is the basic financial goal in enterprise management. Inventory management techniques must contribute to this goal. The modifications

to both the value-based EOQ model and value-based POQ model may be seen in this article. Inventory management decisions are complex. Excess cash tied up in inventory burdens the enterprise with high costs of inventory service and opportunity costs. By contrast, higher inventory stock helps increase income from sales because customers have greater flexibility in making purchasing decisions and the firm decrease risk of unplanned break of production. Although problems connected with optimal economic order quantity and production order quantity remain, we conclude that value-based modifications implied by these two models will help managers make better value-creating decisions in inventory management. INTRODUCTION OF INVENTORY Inventories constitute the most significant part of current assets of a large majority of companies in India. On an average, inventories are approximately 60% of current assets in public limited companies in India. Because of the large size of inventories maintained by firms, a considerable amount of feuds is required to be committed to them. It is therefore, absolutely imperative to ménage inventories efficiently and efficiently in order to avoid unnecessary investment. A firm neglecting the management of inventories will be jeopardizing its long run profitability and may fail ultimately. It is possible for fore a company to reduce its levels of inventories to a considerable degree e.g. 10 to 20 percent, without any adverse effect on production and sales, by using simple inventory planning and control techniques. The reduction in excessive inventory carries a favourable impact on a company¶s profitability. MEANING OF INVENTORY:Inventory is the physical stoke of goods maintained in an organization for its smooth sunning. In accounting language it may mean stock of finished goods only. In a manufacturing concern, it may includes raw materials, work-in-progress and stores etc. In the form of materials or supplies to be consumed in the production process or in the rendering of services. In brief, Inventory is unconsumed or unsold goods purchased or manufactured. NATURE OF INVENTORIES :-

Inventories are stock of the product a company is manufacturing for sale and components that make up the product. The various forms in which inventory exist in a manufacturing company are raw materials, work in progress and finished goods. RAW MATERIALS:Raw materials are those inputs that are converted into finished product though the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future productions. WORK IN PROGRESS:These inventories are semi manufactured products. They represent products that need more work before they become finished products for sales. PACKAGING MATERIAL:Packaging material includes those items which are used for packaging of perfumery product i.e. cap of the bottle, pump, coller,liver, box etc. FINISHED GOODS:Finished goods inventories are those completely manufactured products which are ready for sale. Stock of raw materials and work in progress facilitate production. While stock of finished goods is required for smooth marketing operation. Thus, inventories serve as a link between the production and consumption of goods. The levels of four kinds of inventories for a firm depend on the nature of its business. A manufacturing firm will have substantially high levels of all three kinds of inventories, while a retail or wholesale firm will have a very high and no raw material and work in progress inventories. Within manufacturing firms, there will be differences. Large heavy engineering companies produce long production cycle products, therefore they carry large inventories. On the other hand, inventories of a consumer product company will not be large, because of short production cycle and fast turn over. INVENTORY MANAGEMENT

As the cost of logistics increases the manufacturers are looking to inventory management as a way to control costs. Inventory is a term used to describe unsold goods held for sale or raw materials awaiting manufacture. These items may be on the shelves of a store, in the backroom or in a warehouse mile away from the point of sale. In the case of manufacturing, they are typically kept at the factory. Any goods needed to keep things running beyond the next few hours are considered inventory. "Inventory" to many small business owners is one of the more visible and tangible aspects of doing business. Raw materials, goods in process and finished goods all represent various forms of inventory. Each type represents money tied up until the inventory leaves the company as purchased products. Likewise, merchandise stocks in a retail store contribute to profits only when their sale puts money into the cash register. In a literal sense, inventory refers to stocks of anything necessary to do business. These stocks represent a large portion of the business investment and must be well managed in order to maximize profits. In fact, many small businesses cannot absorb the types of losses arising from poor inventory management. Unless inventories are controlled, they are unreliable, inefficient and costly. Inventory management simply means the methods you use to organize, store and replace inventory, to keep an adequate supply of goods while minimizing costs. Each location where goods are kept will require different methods of inventory management. Keeping an inventory, or stock of goods, is a necessity in retail. Customers often prefer to physically touch what they are considering purchasing, so you must have items on hand. In addition, most customers prefer to have it now, rather than wait for something to be ordered from a distributor. Every minute that is spent down because the supply of raw materials was interrupted costs the company unplanned expenses


1. Policies, procedure and techniques employed in maintaining the optimum number or amount of each inventory item. 2. Systems and processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and projected inventory status. 3. Handles all functions related to the tracking and management of material. This would include the monitoring of material moved into and out of stockroom locations and the reconciling of the inventory balances. Also may include ABC analysis, lot tracking, cycle counting support etc. DEFINITIONS OF INVENTORY 1. Inventory´: goods that businesses intend to sell to their customers or raw materials or inprocess items that will be converted into salable goods 2. ³Inventory is the stock of idle resources which has economic value and is maintained to fulfill the present and future needs of an organization´ 3. In Manufacturing Organization : Inventory can be as raw components and finished goods etc« 4. In Service Organization : Inventory of any Bank can be broachers, forms, pamphlets and also can be currency notes and coins. Hospitals can have inventory as syringes, glucose bottles, medicines etc. IMPORTANCE OF INVENTORY Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholders/owners. The word 'inventory' can refer to both the total amount of goods and the act of counting them. Many companies take an inventory of their supplies on a regular basis in order to avoid running out of popular items. Others take an inventory to insure the number of items ordered matches the actual number of items counted physically. Shortages or overages after an inventory can indicate a problem with theft or inaccurate accounting practices. materials, spare parts,

Possessing a high amount of inventory for long periods of time is not usually good for a business because of inventory storage, obsolescence and spoilage costs. However, possessing too little inventory isn't good either, because the business runs the risk of losing out on potential sales and potential market share as well.

The basic managerial objectives of inventory control are two-fold; first, the avoidance over-investment or under-investment in inventories; and second, to provide the right quantity of standard raw material to the production department at the right time. In brief, the objectives of inventory control may be summarized as follows:

A. Operating Objectives:
(1) Ensuring Availability of Materials: There should be a continuous availability of all types of raw materials in the factory so that the production may not be help up wants of any material. A minimum quantity of each material should be held in store to permit production to move on schedule. (2) Avoidance of Abnormal Wastage: There should be minimum possible wastage of materials while these are being stored in the godowns or used in the factory by the workers. Wastage should be allowed up to a certain level known as normal wastage. To avoid any abnormal wastage, strict control over the inventory should be exercised. Leakage, theft, embezzlements of raw material and spoilage of material due to rust, bust should be avoided. (3) Promotion of Manufacturing Efficiency: If the right type of raw material is available to the manufacturing departments at the right time, their manufacturing efficiency is also increased. Their motivation level rises and morale is improved. (4) Avoidance of Out of Stock Danger: Information about availability of materials should be

made continuously available to the management so that they can do planning for procurement of raw material. It maintains the inventories at the optimum level keeping in view the operational requirements. It also avoids the out of stock danger.

(5) Better Service to Customers: Sufficient stock of finished goods must be maintained to match reasonable demand of the customers for prompt execution of their orders. (6)Highlighting slow moving and obsolete items of materials. (7) Designing poorer organization for inventory management: Clear cut accountability should be fixed at various levels of organization.

B. Financial Objectives:
(1) Economy in purchasing: A proper inventory control brings certain advantages and economies in purchasing also. Every attempt has to make to effect economy in purchasing through quantity and taking advantage to favorable markets. Reasonable Price: While purchasing materials, it is to be seen that right quality of material is purchased at reasonably low price. Quality is not to be sacrificed at the cost of lower price. The material purchased should be of the quality alone which is needed. (3) Optimum Investing and Efficient Use of capital: The basic aim of inventory control from the financial point of view is the optimum level of investment in inventories. There should be no excessive investment in stock, etc. Investment in inventories must not tie up funds that could be used in other activities. The determination of maximum and minimum level of stock attempt in this direction.


1. COUNTING CURRENT STOCK All businesses must know what they have on hand and evaluate stock levels with respect to current and forecasted demands. You must know what you have in stock to ensure you can meet the demands of customers and production and to be sure you are ordering enough stock in the future. Counting is also important because it is the only way you will know if there is a problem with theft occurring at some point in the supply chain. When you become aware of such problems you can take steps to eliminate them. 2. CONTROLLING SUPPLY AND DEMAND

Whenever possible, obtain a commitment from a customer for a purchase. In this way, you ensure that the items you order will not take space in your inventory for long. When this is not possible, you may be able to share responsibility for the cost of carrying goods with the salesperson, to ensure that an order placed actually results in a sale. You can also keep a list of goods that can easily be sold to another party, should a customer cancel. Such goods can be ordered without prior approval. Approval procedures should be arranged around several factors. You should set minimum and maximum quantities which your buyers can order without prior approval. This ensures that you are maximizing any volume discounts available through your vendors and preventing overordering of stock. It is also important to require pre-approval on goods with a high carrying cost. 3. KEEPING ACCURATE RECORDS Any time items arrive at or leave a warehouse, accurate paperwork should be kept, itemizing the goods. When inventory arrives, this is when you will find breakage or loss on the goods you ordered. Inventory leaving your warehouse must be counted to prevent loss between the warehouse and the point of sale. Even samples should be recorded, making the salesperson responsible for the goods until they are returned to the storage facility. Records should be processed quickly, at least in the same day that the withdrawal of stock occurred. 4. MANAGING EMPLOYEES Buyers are the employees who make stock purchases for your company. Reward systems should be set in place that encourage high levels of customer service and return on investment for the product lines the buyer manages. Warehouse employees should be educated on the costs of improper inventory management. Be sure they understand that the lower your profit margin, the more sales must be generated to make up for the lost goods. Incentive programs can help employees keep this in perspective. When they see a difference in their paychecks from poor inventory management, they are more likely to take precautions to prevent shrinkage.

Each stock item in your warehouse or back room should have its own procedures for replenishing the supply. Find the best suppliers and storage location for each and record this information in official procedures that can easily be accessed by your employees. Inventory management should be a part of your overall strategic business plan. As the business climate evolves towards a green economy, businesses are looking for ways to leverage this trend as part of the ³big picture´. This can mean re-evaluating your supply chain and choosing products that are environmentally sound. It can also mean putting in place recycling procedures for packaging or other materials. In this way, inventory management is more than a means to control costs; it becomes a way to promote your business. SUCCESSFUL INVENTORY MANAGEMENT Successful inventory management involves balancing the costs of inventory with the benefits of inventory. Many small business owners fail to appreciate fully the true costs of carrying inventory, which include not only direct costs of storage, insurance and taxes, but also the cost of money tied up in inventory. This fine line between keeping too much inventory and not enough is not the manager's only concern. Others include: y y y y y y Maintaining a wide assortment of stock -- but not spreading the rapidly moving ones too thin; Increasing inventory turnover -- but not sacrificing the service level; Keeping stock low -- but not sacrificing service or performance. Obtaining lower prices by making volume purchases -- but not ending up with slowmoving inventory; and Having an adequate inventory on hand -- but not getting caught with obsolete items. The degree of success in addressing these concerns is easier to gauge for some than for others. For example, computing

Inventory consists of the goods and materials that a retail business holds for sale or a manufacturer keeps in raw materials for production. Inventory control is a means for maintaining

the right level of supply and reducing loss to goods or materials before they become a finished product or are sold to the consumer. Inventory control is one of the greatest factors in a company¶s success or failure. This part of the supply chain has a great impact on the company¶s ability to manufacture goods for sale or to deliver customer satisfaction on orders of finished products. Proper inventory control will balance the customer¶s need to secure products quickly with the business need to control warehousing costs. To manage inventory effectively, a business must have a firm understanding of demand, and cost of inventory.

(1) Reduction in investment in inventory. (2) Proper and efficient use of raw materials. (3)No bottleneck in production. (4) Improvement in production and sales. (5) Efficient and optimum use of physical as well as financial resources. (6)Ordering cost can be reduced if a firm places a few large orders in place of numerous small orders. (7)Maintenance of adequate inventories reduces the set-up cost associated with each production Run.

INVENTORY COSTS There are three main types of cost in inventory. There are the costs to carry standard inventories and safety stock. Ordering and setup costs come into play as well. Finally, there are shortfall costs. A good inventory control system will balance carrying costs against shortfall costs. SAFETY STOCK

Safety stock is comprised of the goods needed to be kept on hand to satisfy consumer demand. Because demand is constantly in flux, optimizing the Safety Stock levels is a challenge. However, demand fluctuations do not wholly dictate a company¶s ability to keep the right supply on hand most of the time. Companies can use statistical calculations to determine probabilities in demand. ORDERING COSTS Ordering costs have to do with placing orders, receiving and stowage. Transportation and invoice processing are also included. Information technology has proven itself useful in reducing these costs in many industries. If the business is in manufacturing, then to production setup costs are considered instead. THE COST OF SHORTFALLS Stock out or shortfall costs represent lost sales due to lack of supply for consumers. Sales departments prefer these numbers be kept low so that an ample stock will always be kept. Logistics managers prefer to err on the side of caution to reduce warehousing costs. Shortfall costs are avoided by keeping an ample safety stock on hand. This practice also increases customer satisfaction. However, this must be balanced with the cost to carry goods. The best way to manage stockout is to determine the acceptable level of customer service for the business. One can then balance the need for high satisfaction with the need to reduce inventory costs. Customer satisfaction must always be considered ahead of storage costs. CYCLICAL COUNTING Many companies prefer to count inventory on a cyclical basis to avoid the need for shutting down operations while stock is counted. This means that a particular section of the warehouse or plant is counted physically at particular times, rather than counting all inventory at once. While this method may be less accurate than counting the whole, it is much more cost effective. Cyclical counting is preferred because it allows for operations to continue while inventory is taken. If not for this practice, a business would have to shut down while counts were taken, often

requiring the hire of a third party or use of overtime employees. Cyclical counting usually utilizes the ABC rule, but there are other variations of this method that can be used. The ABC rule specifies that tracking 20 percent of inventory will control 80 percent of the cost to store the goods. Therefore, businesses concentrate more on the top 20 percent and counter other goods less frequently. Items are categorized based on three levels:
y y y

A Category: Top valued 20 percent of goods, whether by economic or demand value B Category: Midrange value items C Category: Cheaper items, rarely in demand

Warehouse staff can now schedule counting of inventories based on these categories. The ³A´ category is counted on a regular basis while ³B´ and ³C´ categories are counted only once a month or once a quarter. COMMON INVENTORY VALUATION METHODS The methods a company uses to value the costs of inventory have a direct effect on the business balance sheets, income statements and cash flows. Three methods are widely used to value such costs. They are First-In, First-Out (FIFO), Last-In First-Out (LIFO) and Average Cost. Inventory can be calculated based on the lesser of cost or market value. It can be applied to each item, each category or on a total basis.

FIFO FIFO operates under the assumption that the first product that is put into inventory is also the first sold. An example of this in action can be made when we assume that a widget seller acquires 200 units on Monday for Rs.1.00 per unit. The next day, he spots a good deal and gets 500 more for Rs.75 per unit. When valuing inventory under the FIFO method, the sale of 300 units on Wednesday would create a cost of goods sold of Rs.275. That is, 200 units at Rs1.00 each and 100 units at Rs.75 each. In this way, the first 200 units on the income statement were

valued higher. The remaining 400 widgets would be valued at Rs.75 each on the balance sheet in ending inventory. LIFO LIFO assumes instead that the last unit to reach inventory is the first sold. Using the same example, the income statement and balance sheet would instead show a cost of goods sold of Rs.225 for the 300 units sold. The ending inventory on the balance sheet would be valued at Rs.350 in assets. When this method is used on older inventories, the company¶s balance sheet can be greatly skewed. Consider the company that carries a large quantity of merchandise over a period of 10 years. This accounting method is now using 10-year-old information to value its assets. WEIGHTED AVERAGE Average Cost works out a weighted average for the cost of goods sold. It takes an average cost for all units available for sale during the accounting period and uses that as a basis for the cost of goods sold. To site our example again, we would calculate the cost of goods sold at [(200 x Rs.1) + (500 x Rs.75)]/700, or Rs.821 each. The remaining 400 units would also be valued at this rate on the balance sheet in ending inventory.

SPECIFIC IDENTIFICATION A less commonly used, but important method to valuation is called specific identification. This method is used for high-end items that are more easily tracked. In some cases, this method can be used for more common items, but less value is realized from this accounting method is such cases. This is because powerful and detailed tracking software is required to employ specific identification on large numbers of goods. INFLATIONARY EFFECTS ON VALUATION

No matter how you look at it, you are still coming up with 700 widgets that cost you a total of Rs.575. This would all be well and good if the value of money remained static. However, market conditions change causing inflationary changes. When this happens, your accounting method can have a strong impact on how healthy the business looks on income statements and balance sheets. The affects cash flow when businesses seek credit to pay for ongoing operations. RISING PRICES When prices are rising, using FIFO will show a greater value on the balance sheet, thereby increasing tax liabilities but also improving credit scores and the ability to borrow cash for ongoing operations. Older inventory is being used to determine the cost of goods sold and newer inventory is being used to report assets. LIFO decreases the value on the income statement, but can reduce the level of depreciation you are able to take on assets. This is good for taxes but bad for borrowing. Industries most likely to adopt LIFO are department stores and food retailers. The method is rarely used in defences.


Inventories are equivalent to cash and they make up an important of the total cost. It is essential that inventory should be properly safeguarded and correctly accounted. Proper control of inventory can make a substantial contribution to the efficiency of a bussiness. The success of a business concern largely depends upon efficient purchasing, storage, consumption and accounting. Inventory plays a vital role in study of inventory management in bulk so I selected the SFP Sons pvt.ltd.


The current system in the company under inventory management system which doesn¶t specify the safety stock which leads to scare for stocks at emergency. The data are not properly updated at the end of each day¶s work. Proper data security system is not provided. Annual maintenance contract is not provided. Records are not maintained properly.


The perfume industry in India has come of age. From a cottage industry it has become fullfledged industry in the last two decades. The industry is growing at 125 percent annually. The growth is attributed to an increase in disposable income. WITH GLOBALIZATION, liberalization and the IT revolution, living standards of the Indians have increased manifold. The demand for fashionable products has increased too. That is why; all global players are eyeing the subcontinent for business purpose. The illegal flow of lifestyle products confirm the great demand for these products in India. The affinity of the Indians for foreign goods also compels the indigenous manufacturers to tie-up with international brands to tap this segment of people. The fragrances industry is big business, very big business. It includes much more than retail sales of fragrances. Related industries such as chemical companies supply the chemicals and the fragrances are made from it. Most fragrances chemicals are synthesized from petroleum products. Some companies formulate fragrances and flavours for other companies. Marketing and advertising are used to create and promote the image of a fragrance. The perfume industry, basically, was just a cottage industry some two decades ago. But now, due to the huge demand among the people, it has blossomed into a full-fledged industry. Recently, µAlcome Perfumes and Cosmetics¶, declared a plan to set up a Rs. 100 crore green field perfume plant in and around Noida Special Economic Zone. The domestic perfume market is estimated to be worth Rs.300 crore and is growing at around 125 percent annually. The forecast is that it may grow at a rate of 200 percent in the coming years, with fast changing consumer behaviour and habits. Geneva-base International Fragrance association has estimated that the global perfume market is worth $ 40 billion, out of which the mass market has a 70 percent share. In this, India, China has a considerable share. With the growing demand for fragrance, the Indian perfume companies are planning to change their strategies by utilizing their resources mainly for the domestic market and a meager portion

for exports. Apart from that these that these companies are also planning a multiple marketing and distribution strategy to foray into a market with huge potential. The potential is immense as the middle class is growing rapidly and disposable incomes are increasing.

(History of perfume industry)
1.1760 1760 - In 1760, in London, James Henry Creed founded the House of Creed. filtered, all by hand in the highest tradition of the founder, James Henry Creed. Creed,cologne,designer perfume, Olivier Creed,Perfume,womens perfume,James Henry Creed,Empress Eugà ©nie,discounted perfume,fragrance,Country,French perfume, perfume industry,Jasmine,womens fragrances,shopping cart,originality,scents,Master Perfumer,the French. 2.1921 1921 - Coco Chanel revolutionised the perfume industry by being the first to make a mass market scent for every woman when she launched Chanel No5 in 1921. You can still spritz on some of that vintage glamour today with your own bottle, £46 for 50ml EDT at House of Fraser 3.1987 Feb 28, 1987 - When perfumed gloves came into fashion in the 16th century, the town gradually developed a separate perfume industry. ... The Provencal Art and History Museum, originally the 18th century home of Louise de Mirabeau, houses a fine collection of Provencal art. The 17th century Fragonard. 4.1988 Nov 25, 1988 - It is one of the 200 fragrance-related art objects currently on view in the "Scents of Time" exhibit at the Museum of Science and Industry. The exhibit traces the history and evolution of fragrance, connecting each phase with the social, political and cultural trends of the time. ... 5. 1991

Feb 17, 1991 - Written in collaboration with Patricia Bayer, the book includes chapters on Rene Lalique's life, the development of the perfume industry, the history of the Lalique company, and collecting tips. An appendix provides information on dating bottles by the signature . 6. 1999 Dec 9, 1999 - of newly fragrances remain on the shelf after a year of launching," says international director for Antonio PUIG perfumes, Eugeni Majo. cosmetics industry is a dynamic one. it's competitive and only companies that manage to create an product that differs from the rest will remain" 7. 2000 Jun 20, 2000 - Halifax's eight-year-old "No Scents" policy is creating a big stink in the perfume industry. Representatives from the American and Canadian perfume industry were in Halifax Tuesday to launch a counter attack ad campaign as a way of stopping the campaign from spreading. 8.2001 Nov 23, 2001 - hitherto unknown insights into the use of perfumes through the ages and learn that "the history of perfume is often intertwined with the history ... But, it was the Arabs who linked "the past and present of the perfume industry", says the portal. "The process of extracting oils from flowers. 9.2002 Apr 11, 2002 - Scented oils and perfumes were stored in elaborate and beautiful pots and jars throughout Egyptian history. ... "Never before has a series of exhibitions in Egypt and abroad been devoted to a single industry, which has resulted in such a wide range of artistic and utilitarian objects,"


Sep 22, 2004 - It was a scent that changed the American position in the perfume industry. Women across this nation began to forsake all of the costly and well- ... She offered her vast store of perfume knowledge and its history with great generosity.

SFP Sons (India) Pvt. Ltd established in 1992 is one of the leading manufacturers of Perfumes and cosmetics in India. SFP is located in Special Economic Zone, Chennai and was Formerly known as S. F. Patel & Sons (India).SFP manufactures wide range of over 1000+ products under its own brands 'Ahsan', 'Tara', 'Taibah', 'Malaki', 'Salaam', 'Silent Valley' and 'Crazy Moments'. These products are widely available in more than 20 countries. Product range includes Attars (concentrated perfume oils), Spray Perfumes (EDT, EDP, colognes and body mists), Perfume Gels, Creams and Gels for Hair and body, Cleansing lotion, Shower Gels, Shampoos, Hair Oil and Talcum powders. SFP is a ISO 9001 certified company and is committed to manufacture quality products. All products manufactured are skin friendly and abide by all international standards laid down by governing bodies like IFRA, FDA et al. SFP factory is spread over 100,000 sq. ft area and employees over 400+ people. It houses a well equipped R & D laboratory and highly qualified team to develop and manufacture high quality products. It has a sound infrastructure and modern facilities which helps every activity and product of SFP fulfill its brand promise and mantra ±

SFP processes are managed and controlled through SAP. The SFP team is skilled, trained and equipped to meet and deliver all customer expectations. VISION AND MISSION

Company vision becomes a globally leading company in perfumes and cosmetics industry. Company mission, delivers the quality product with protection of environment and protect The health of customer. SFP aims at attaining, commanding market position in supply of perfumery and cosmetic product by meeting the needs and expectation of customers and enhancing their satisfaction.

SFP was started by its present Managing Director Mr. Dinesh S. Patel an entrepreneur with

dream and vision to make SFP a globally leading Company in perfumes and Cosmetics industry. He believes hard work, commitment and passion combined can enrich every individual's life.

R & D Lab
SFP has well equipped laboratory and research section, equipped to carry out in-house development and testing required as per laid down standards. Latest GC, refract meters, SG meter, Ph meters, Viscometers and other Instruments are manned by trained personnel.SFP is committed to quality through its strict quality control methods. Using latest technology every component and product are tested as per international standards at all stages of manufacturing to ensure high quality perfumes and cosmetics.

SFP also blends some of its Own fragrances. It has 8 nos of blending tanks of capacity 1 ton with cooling lines. It has DM Water plant and a RO water plant. SFP has two tanks for alcohol storage which can hold 50000 liters.

Cosmetic products manufacturing is done is well equipped modern facilities. This plant has oil phase vessel, water phase vessel and a main homogenizing vessel of capacity 1 ton. SFP also has 50 liter plant to cater to smaller needs

SFP also houses a unique and traditional perfume oil

extraction unit from natural ingredients. Here by distillation oils are extracted which are used in fragrance blends.

FILLING AND PACKING Production facilities are well laid down with separate buildings for Attars, Sprays, Creams and Gels, Hair oils and Talcum powder. A total of 12 production lines have a capacity to fill and pack 120,000 units every day per shift.

WAREHOUSE The newly constructed ware house has area of over 20000 sq. ft and is well arranged to monitor and move material with ease. All products are bar-coded for efficient identification. SFP is well connected by road, sea and air to have excellent supply chain.

SFP Training Centre provides trainings to all its employees on regular basis. The training is totally based on skill and personality development to drive individuals and the company forward.


The showroom within the factory premises displays a range of products. It also displays packaging material components. Here customers can select items of their choice for their markets.

QUALITY OBJECTIVES OF SFP y y y On-time delivery of final product to customer. Zero level of non-conformity at In-process and final stage of the product. Zero level of customer complaint to enhance customer satisfaction.

QUALITY POLICY OF SFP SFP committed to the aim and objectives of the company to manufacture products that are satisfy customer¶s needs and expectations. SFP shall implement the quality management system to meet agreed requirements to enhance customer satisfaction and improve its effectiveness continually. SFP commit to highest levels of integrity and professionalism in all aspect of our business.

Credentials of SFP  Raad voor accreditatie, Netherland has licensed SFP Sons (India) Pvt. Ltd and listed in the bureau¶s register of licensees of Quality management system certification in respect of the products and services in accordance with ISO 9001:2008 and also ISO 14001: 2004 for Environment management system.  SFP is a member of export promotion council. 

SFP has been recognized as one star export house having the certificate issued by the ministry of commerce & industry, government of India.  In 2007 RAJIV GANDHI national quality award panel has awarded SFP with a  Commendation certificate for quality standard of the company at all India level.  SFP is a member with Essential oil association of India.  SFP is register with IFRA and FDA.

FACILITIES AND TECHNOLOGY OF SFP ‚ Well planned perfume blending set up with the required vessels, tanks and all relevant accessories. ‚ Traditional fragrance extraction set up for manufacturing special attars. ‚ Well-equipped cosmetics manufacturing unit with boiler etc. ‚ D.M. water plant ‚ R.O. water plant. ‚ Well-equipped packaging section having bottles and tubes filing and wrapping machines. ‚ Well-equipped talc manufacturing unit.

‚ Hair oil unit with automatic filling, capping machines, shrink wrapping and labeling machine. ‚ Alcohol(perfumery grade) storage tanks ‚ Quality control laboratory with advanced GC machine and relevant testing apparatuses. ‚ Well-equipped in built R&D centre. ‚ Design and development department which consistently create packaging design which customers¶ purpose and also innovates new designs and present to them. ‚ The company has warehouse having a large space and materials handling equipments and forklift. ‚ The plant has 12 filling lines and a capacity of 1, 20,000 bottles per shift. ‚ All the activities of company are done in the world class software SAP business 1.

.HUMAN RESOURCE Competence, awareness, training Available competence level of each employee on the basis of his education skill and experience is assessed and accordingly training needs are identified and provided competence map is done for all those who are directly connected to the performance of conformity to product required directly (or) indirectly. Beside training communication system is established providing relevant information to enhance the awareness level of personnel in relation to SFP performance required. Effectiveness of the action taken is evaluated organist requirement and corrective actions/ further improvement oriented actions are taken as on-going exercise.

While implementing the above activities it is ensured that personnel are made aware of the relevance and important of their activities considering this an integral requirement for their contribution towards achievement of quality objectives. Records of education, training, skill & experience are maintained as long as the employee is in service roll in SFP.

Manpower in SFP Every department has a highly experienced and qualified team. Company has around 250 skilled workers. The company has 120 experienced hands in the line of sales and marketing team. The company has a fully equipped training hall which accommodates 50 persons at a time and regular training programs are held at different levels. The training is totally based on skill and personality development to drive individuals and the company forward











Perfumery compounds, aroma chemical solvents. Cosmetics ingredients, coloring materials procured are the raw materials, Stage 1 Procured material as above is subjected to inspection and testing to confirm their meeting specified equipment. Stage 2 Compounds either as they are with colouring material or a formulated combined of more than one compound with or without colouring material after subjected to process. Inspection and testing are send for filling & packaging. Stage 3 Product are then filling in convenient sizes and packaging i9n cartons as per customer¶s requirements. During filling operation the containers and the associated accessories are subjected to in process inspection to ensure state of conformance to specified requirements. Stage 4 Packaged products undergo final inspection before effecting delivery.

SFP has organized tie-up in Dubai to fee the market in U.A.E. and distribution of the premium attars to African countries like, Sudan, Egypt, Somalia, Nigeria, Ghana, Uganda, Zambia, South Africa, Libya, Algeria, Mauritania, morocco, Chad, and Cameroon. 

In Saudi Arabia the company is having distribution tie-ups in Jeddah, Riyadh, Mecca, Medina, etc.  Also the company is having distribution outlets in Kuwait, Muscat, Bahrain, Doha-Qatar, Lebanon, Jordan, Syria, Iran, Iraq, and Afghanistan.  The company is also having export market in Sri Lanka, Singapore, Malaysia, Indonesia, Thailand, Myanmar and Bangladesh.  In the west the company is having market in Atlanta, New York, New Jersey, Chicago, Las Angeles, London, Spain, and France.  In India there are 750 distributors throughout the country.

PRODUCT PROFILE Different Brands Manufactured by SFP :

OBJECTIVE OF STUDY:Primary objective:To analyze that the existing inventory management system in SFP SONS India pvt.ltd. Secondary objective:1. To verify the mismatch between the order and receipt of mate 2. To find out the impact of inventory on working capital. 3. To find out minimum stock level, how much stock should be order.


Success of any industrial undertaking depends upon the 6 m¶s 1) Money 2) Manpower 3) Machine 4) Market 5) Material 6) Management

Materials are pivotal importance not less than any other M¶s. Problems have their root in material affects the efficiency of all men, machine, money & marketing decisions of the firms and thus become the grave concern of management at all levels. If there were too much of material problems like ideal funds lied up in excessive inventory storage and obsolesces difficulties market pressure would arise. Thus the importance of inventory management is realized. A number of studies have been done in the field of inventory management by various researchers. Some of them are given below; 1. Author:- Bern at de William year 2008 This study tells that the main focus of inventory management is on transportation and warehousing. The decision taken by management depend s on the traditional method of inventory control models. The traditional method of inventory management is how much useful in these days the author tell about it. He is also saying that the traditional method is not a cost reducing, it is so much expensive. But the managing the inventory is most important work for any manufacturing unit. 2. Author: - Jon Schreibfeder 1992 He said that it is easy to turn cash into inventory, the challenge is to turn inventory back into cash. In early 1990¶s many distributor recognize that they needed help controlling and managing their largest asset inventory. In response to this need several companies developed comprehensive inventory management modules and systems. These new package include many new features designed to help distributors effectively managed warehouse stock. But after implementing this many distributors do not feel that they have gained control of their inventory.

3. Author:-Wolf Bagby, Managing inventory In this study Mr. W.Bagby explains that by managing the inventory it becomes easier for the organization to meet the profit goals, shorter the cash cycle, avoid inventory shortage, avoid excessive carrying costs for unused inventory, and improve profitability by decreasing cash conversion and adopt JIT system. According to this study companies need to get smart about inventory. Boosting financial performance is another benefit that comes from better inventory management. Infect large number of manufacturers enjoy savings and better performance by choosing the approach of inventory reduction. For this company needs to maximize the cash flow and profitability and this includes keeping a watchful discerning eye on charge in supply and demand 4. Author: - Asfaque Ahmed October 12, 2004 (Article from master requirement planning and master production scheduling) He said that most of the manufacturing company vendors have planning and scheduling product which assume either infinite production capacity for calculating quantities of row material and work in progress (WIP) requirements or infinite quantities of raw material and WIP materials for calculating production capacity. There are many problems with this approach and how to avoid these by making sure that the product you are buying indeed takes into account finite quantities of required materials as well as finite capacities of work centers in your manufacturing facilities. 5. Author:- D.Hoopman April 7, 2003 (Article from inventory planning and optimization) In this article he said that inventory optimization recognize that different industry have different inventory profiles and requirements. Research has indicated that solutions are priced in a large range from tens of thousands of dollars to millions of dollars. In this niche market sector price is definitely not an indicator of the quality of solution, ROI and usability are paramount.

6. Author:-Silver, Edward A Dec22, 2002 (Article from production and inventory management journal) This article considers the context of a population of items for which the assumption underlying the EOQ derivation holds reasonably well. However as is frequently the cash in practices there is an aggregate constraint that applies to the population as a whole. Two common forms of constraints are: 1) the existence of budget to be allocated among the stocks of the items and 2) a purchasing production facility having the capability to process at most a certain number of replenishment per year. Because of the constraint the individual replenishment quantities cannot be selected independently. 7. Author:- Charles Atkinson (A study on inventory management) In the study by Mr. Charles Atkinson, he explained the inventory management and assessment of inventory levels. As per this study inventory management need to address two issue Part I. How to optimize average inventory levels. Part II. How to assess (evaluate) inventory levels. This study tells about what the manager should do and not to do, and how much amount should be order in one placed orders. Average inventory can be calculated by simplistic method. Average inventory = beginning inventory +end inv./2 8. Author:-Delaunay C , Sahin E, 2007.

A lots of work has been done but now if we want to go ahead we must have good visibility upon this field of research. That is why we are focused on frame work for an exhaustive review on the problem of supply chain management with inventory inaccuracies . The author said that their aim in this work is also to present the most important criterion that allow a distinction between the different type of managing the inventory.


Research methodology is the way to systematically solve the research problem. Objective of research study is to analysis of inventory of SFP Sons and analyzing of inventory, we determining following inventories1. Raw materials inventory, 2. Work in progress inventory, 3. Packaging material inventory & 4. Finished goods inventory In this section of inventories, we should analyze the annual investment in inventories, Valuation of inventory after closing balance of items in inventory. In this manner, we calculate reorder point, safety stock levels, minimum & maximum levels of inventory. Working hypothesis of the objective is that inventories records. The analysis of inventory according to their data is available in the company. The data collection of inventory for analysis is by the direct store department. I went to the all inventories as raw material, work in progress inventory, finished goods inventory by the proper observation of data¶s of the company. The particular method for data collection used direct interview with assistants and telephone interview with friends to known about annual investment of inventories and other important data. PERIOD OF STUDY: The study was conducted in a period between January 2010 to April 2010 during which the researcher studied the company¶s relationship with dealers and distributors and obtained their view. are the stock piles of goods in an

organization. SFP invests about 40% of total assets inventory should be analyzed their

Method of data collection:

In analysis of inventory of SFP, We collect the data by the different sources. We collect the primary and secondary data. SECONDARY DATA ± The secondary data are those data that are already in presence for specific purpose, we use the secondary data about inventory to look old records of the company .For the daily information about the items are show the MRN, ledger register and daily issue slip of materials, the purchase register and other documentary evidence used for the findings. In the analysis of inventory, the secondary data provided is not sufficient then we collected primary data. PRIMARY DATA ± Primary data or fresh data are those data that are originated very first time with the help of primary data we formulated the research objectives. accurate, attainable, reliable and useful data. 1. Inventory control techniques used by the company 2. Inventory systems as perpetual and periodic systems. 3. Stock levels etc. 4. Company¶s website Primary data are the


In managing inventories, the firm¶s objective should be in consonance with the wealth maximization principle. To achieve this, the firm should determine the optimum level of investment in inventory. To deal with the problems of inventory management effectively, it

becomes necessary to be conversant with the different techniques of inventory control. Although the concepts involved in inventory management are production-oriented and are not strictly financial it is important that the financial manager understand them since they have certain built-in financial costs. The different techniques of inventory control may be summarized as follows: (1)

Inventory level Technique The main objective of stock control is to determine and maintain the optimum level of stock so that there is neither shortage of any material nor unnecessary investment in inventory. For this purpose, determination of maximum and minimum limits of inventory and ordering level is necessary.


Maximum stock Limit: This represents the quantity of inventory above which it should not be allowed to be kept. The main object of fixing this limit is to ensure that unnecessary working capital is not blocked in stores. The quantity is fixed keeping in view the disadvantages of overstocking.

RE-ORDERING LEVEL (ORDERING LEVEL) It is the point at which if the stock of the material in stores reaches, the storekeeper should initiate the purchase requisition for fresh supply of material. This level is fixed somewhere between maximum and minimum level is such a way that the difference of quantity of the material between the reordering level and the minimum level will be sufficient to meet requirements of production up to the time of fresh supply of the material. It is fixed after taking into consideration the following factors:

ABC ANALYSIS: ABC Analysis is a basic analytical management tool which enables top management to place the effort where the result will be greatest. This technique, popularly known as always better control or the alphabetical approach, has universal applications in many areas of managing the inventory.

The technique tries to analyze the distribution of any characteristic by money value of importance in order to determine its priority. The annual consumption analysis of any organization would indicate that a handful of top high value items less than 10% of total number will account for a substantial portion of about 75% of the total consumption value and these few vital item are called A class items which need careful attention of the materials manager. Similarly a large number of bottom items over 70% of total number called the trival many account only for about 10% of the consumption value and are known as the µC¶ class. The items that lie between the top and bottom are called the µB¶ category item. The following facts need to be noted with regard to ABC Analysis: 1. Through usually the inventory items are classified into three categories viz AB andC only, but nothing prohihibits a firm to undertake the analysis on the basis of a larger catagorisization. 2.It is necessary for an effective ABC analysis that all the items should be included for the Classification. 3.Through according to ABC Analysis category C gets only a simple attention, the management should nevertheless have to be vigilant in its approach. For example an items may be of small value but may be critical in the sense that its non-availability hampers the production process and its supply is irregular. The management has to be extra careful about its inventory, even though the items figures in the category C. Thus the ABC analysis not the ultimate exercise in inventory management, it needs supplementing with detailed knowledge and monitoring. 4.Price of the items and their physical quantities shouldn¶t be made the basis of ABC analysis. It is rather the usage value of the items which must be used for the purpose of classification.


One of the major inventory management problems to be resolved is how much inventory should be added when inventory is replenished. If the firm is buying raw materials, it has to decide lost in which it has to be purchased on replenishment. If the firm is planning a production run, the issue is how much production to schedule (or how much to make). These problems are called order quantity problems, and the task of the firm is to determine the optimum or economic order quantity (or economic lot size). Determining an optimum inventory level involves two type of costs: (a) ordering costs and (b) carrying costs: The economic order quantity is that inventory level that minimize the total of ordering and carrying costs.

EOQ = ˜2(annual usage in unit)(order cost) Annual carrying cost per unit

VED ANALYSIS: The VED analysis is used generally for spare parts. The requirement and urgency of spare parts is different from that of materials. A-B-C analysis may not be properly used for spare parts. The demand for spares depends upon the performance of the plant and machinery. Spare parts are classified as: Vital (V), Essential (E) and Desirable (D). The vital spares are a must for running the concern smoothly and these must be stored adequately. The non-availability of vital spares will cause havoc in the concern. The E types of spares are also necessary but their stocks may be kept at low figures. The stocking of D types of spares may be avoided at times. If the lead time of these spares is less, then stocking of these spares can be avoided. The classification of spares under three categories is an important decision. A wrong classification of any spare will create difficulties for production department. The classification of spares should be left to the technical staff because they know the need, urgency and use of these spares. JUST-IN-TIME (JIT) SYSTEM:

Japanese firms popularized the just-in-time (JIT) system in the world. In a JIT system material or the manufactured components and part arrive to the manufacturing sites or stores just few hours before they are put to use. The delivery of material is synchronized with the manufacturing cycle and speed. JIT system eliminates the necessity of carrying large inventories, and thus, saves carrying and other related costs of manufacturer. The system requires perfect understanding and coordination between the manufacturer and supplier in terms of the timing of delivery and quality of the material. Poor quality material or complements could halt the production. The JIT inventory system complements the total quality management (TQM). The success of the system depends on how well a company manages its suppliers. The system puts tremendous pressure on suppliers. They will have to develop adequate system and procedures to satisfactory meet the needs of manufacturers INVENTORY TURNOVER RATIO: (ITR) In accounting, the Inventory turnover is an equation that measures the number of times inventory is sold or used over in a period such as a year. The equation equals the cost of goods sold divided by the average inventory. Inventory turnover is also known as inventory turns, stock turn, stock turns, turns, and stock turnover.

ITR = Cost of goods sold Average inventory


The procurement of inventory is totally depends on order/demand. In first step they get the order from customer then they write a form that form called indent form by hand writing. After getting order they will send the order to purchase department for buying of Raw Material and Packaging material. Every time that causes the delay of delivery of goods to the customer. After receiving the raw materials from supplier they check the quality, because quality

is more important for them. In whole production process 4-5 times they will check the quality and after that quality check seal on product. They are using FIFO method for delivery of good to the customers. First In First Out (FIFO) means first order should deliver first and after that continue process. It is good way of delivery that make the customer satisfied. Every inspection about available stock is on SAP every one can know how much stock is available, and how much order should be placed. For every order they keep the numbers for identification. Warehouse arrangement There is separate warehouse for keeping the different types of inventory like Raw material, packaging material, semi finished good and finished good. Raw materials includes the perfumery liquid, arranging of these things they have rack and rack numbers, and unique code number for each and every liquid for identification. For talcum powder raw material are the talc powder which they kept in plastic bags in production unit itself. Packaging material include box, cap color, neck etc. which require after filling the product in bottles. Finished goods and packaging material they are keeping in same warehouse left side finished good and right side packaging material. Finished good order wise and packaging material how to find easily. Each and every data maintained in systems so it is very easy to get the information.


The scope is to drive meaningful application of theory for actual implementation. As the study is focusing on identifying the present potential of the company¶s inventory methods and aims, we identify best set of inventory method to be carried to improve the company¶s policy to determine their inventory. This study provides insight to the management of high value item and low value items. This study also gives the idea about industrial focus and addressal towards maintaining inventory.



i It consumes more time and requires lots of expenditure. More time is needed to do this study. i Study is based on secondary data only. i The quality of inventory is not compared in analysis. i The analysis is based on figures present in the internal records only. i The study is based on two year reports given by marketing and finance department that has its own limitation. i Working environment didn¶t permit more involved way of collecting data.


Company is maintaining zero safety stock it cause production loss. The inventory turnover is in decreasing order in 2008-09 it is 3, but in 2009-2010 it is 2.4. By ABC Analysis we can say that there is a little difference between A B & C class items so every product is important for company. There is positive correlation between sales to inventory. The percentage of raw material from total inventory is 23.94% in 2009 and 19.73% at 2010. The percentage of finished goods, semi finished good, packaging material from total inventory is 34% ,5%,37% in 2009 but in 2010 40%, 4%, 34%. Company¶s aim to achieve more sale it may require huge amount of inventory in future. Company is concentrating on domestic market and first time they achieve the target of 10 crore, that is good sign of establishment of domestic market. Economic order quantity (EOQ) in year 2009 is 109.526 units EOQ for year 2010 is 320.76 units, it shows that company can place more orders at one time. There is good relationship between company and their distributors, vendors and sales executives.


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There can be a system where in periodical review (twice in a month) of inventory could be carried out so that the inventory can be kept under control. There should be periodical review of movement of items so that any non moving items can be identified and suitable action can be done.


At present the company is maintaining zero safety stock for all items, if the safety stock is maintained for important items, delay in production can be eliminated and orders can be supplied in time which will result in a better credibility in both international and domestic market.


It has been predicted that if company is planning to achieve more sale it may require huge amount of inventory in future. So the company has to arrange capital to meet future requirement.


It is suggested that they can have close monitoring of receipts and issue for A class items in order to have control of inventory.


To increase the inventory turnover ratio by increasing the sales level and maintaining the required level of inventory.


To maintain the Re-order level, Min-stock level and Economic order quantity company should consider the demand of the product.


There should be proper communication between purchase and production department.


There is no communication from dispatch section to store department, about quantity wasted. Feedback about the quantity wasted will help the store department to forecast future requirements and to focus on minimum possible waste.


Improve the minimum value of product C up to 5%-8% in total sale value by increasing market level of these products. It helps to get min return on investment in these products as soon as possible.


There is one warehouse for keeping the finished good and packaging material and packaging material are not arranged in good manner so it should be in order wise.


³Inventory control is exercise when you order an item. If you do a poor job then everything after is inventory correction´ GORDON GRAHAM

Inventory is the physical asset of a company that can create problem if there is shortage, while in production and also if it¶s in excess even after production. Inventory is constantly changing as quantities are sold and replenished. Hence it can be understood that efficient inventory management can take the company to new heights and inefficient inventory management can ruin the company. Company is highly concentrated on domestic market, it increase the market level of company because trend of domestic market is changing. The study on Inventory management in SFP Sons (India) Pvt. Ltd about A BC analysis for items is predicting future inventory requirements etc. From the study it is predicted that future sales have to be achieved and inventory level have to be maintained. ABC Analysis was carried out to identify the fast moving and important items. The company has to periodically review the inventory to avoid production loss. The results of the study can be further extended for future research.


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