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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 mnage 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 companys profitability.
DEFINITIONS OF INVENTORY:
1. Inventory: goods that businesses intend to sell to their customers or raw materials or in-process items that will be converted into salable goods 2. Inventory 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 materials, spare parts, components and finished goods etcIn Service Organization: Inventory of an y Bank can be broachers, forms, and pamphlets and also can be currency notes and coins. Hospitals can have inventory as syringes, glucose bottles, medicines etc.
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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 the Became 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, culler, 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.
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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. 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.
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MEANING OF INVENTORY
THE DICTIONARY MEANING OF INVENTORY IS STOCK OF GOODS, OR A LIST OF GOODS. INVENTORY
MEANS ALL THE MATERIALS, PARTS, SUPPLIES, EXPENSE TOOLS AND IN PROCESS OR
FINISHED PRODUCTS RECORDED ON THE BOOKS BY AN ORGANIZATION AND KEPT IN ITS STOCKS, WARE HOUSES OR PLANT FOR SOME PERIOD OF TIME.
INVENTORY INCLUDES THE FOLLOWING THINGS: RAW MATERIAL WORK-IN-PROGRESS CONSUMABLES FINISHED GOODS SPARES THE FOLLOWING ARE A FEW EXAMPLES OF THE TYPE OF INVENTORY HELD BY VARIOUS ORGANIZATIONS. SINCE
THE FINAL PRODUCT (OUTPUT) OF A SERVICE ORGANIZATION SUCH AS BANK, HOSPITAL, ETC.
CANNOT BE STORED FOR USE IN THE NEAR FUTURE; THE CONCEPT OF INVENTORY CONTROL FOR THEM IS ASSOCIATED WITH THE VARIOUS FORMS OF PRODUCTIVE CAPACITY.
Type of inventories held Raw materials; spare parts; semi-furnished goods, furnished goods Number of beds; stock of drugs; specialized personnel Cash reserves; tellers Seating capacity, spare parts, specialized maintenance screw
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THE SPECULATIVE MOTIVE WHICH INDUCES TO KEEP INVENTORIES FOR TAKING ADVANTAGE OF
PRICE FLUCTUATIONS, SAVING IN REORDERING COSTS AND QUANTITY DISCOUNTS, ETC.
TYPES OF INVENTORY
MOVEMENT INVENTORIES/ TRANSIT OR PIPELINE INVENTORIES: THEIR EXISTENCE OWES TO THE FACT THAT TRANSPORTATION TIME IS INVOLVED IN TRANSFERRING
SUBSTANTIAL AMOUNTS OF RESOURCES.
FOR EXAMPLE, WHEN COAL IS TRANSPORTED FROM THE COALFIELDS TO AN INDUSTRIAL TOWN BY
TRAINS, THEN THE COAL, WHILE IN THE TRANSIT, CANNOT PROVIDE ANY SERVICE TO THE CUSTOMERS FOR POWER GENERATION OR FOR BURNING IN FURNACES.
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BUFFER INVENTORIES
BUFFER INVENTORIES ARE HELD TO PROTECT AGAINST THE UNCERTAINTIES OF DEMAND AND SUPPLY. AN ORGANIZATION GENERALLY KNOWS THE AVERAGE DEMAND FOR VARIOUS ITEMS THAT IT NEEDS. HOWEVER, THE ACTUAL DEMAND MAY NOT EXACTLY MATCH THE AVERAGE AND COULD WELL EXCEED
IT.
TO MEET THIS KIND OF A SITUATION, INVENTORIES MAY BE HELD IN EXCESS OF THE AVERAGE FOR
EXPECTED DEMAND. SIMILARLY, THE AVERAGE DELIVERY TIME (THAT IS, THE TIME ELAPSING BETWEEN PLACING AN ORDER AND HAVING THE GOODS IN STOCK READY FOR USE, AND TECHNICALLY CALLED AS THE LEAD TIME) MAY BE KNOWN.
BUT UNPREDICTABLE EVENTS COULD CAUSE THE ACTUAL DELIVERY TIME TO BE MORE THAN THE
AVERAGE.
THUS, EXCESS STOCKS MIGHT BE KEPT IN ORDER TO MEET THE DEMAND DURING THE TIME FOR WHICH
THE DELIVERY IS DELAYED.
THESE INVENTORIES WHICH ARE IN EXCESS OF THOSE NECESSARY JUST TO MEET THE AVERAGE DEMAND (DURING THE AVERAGE LEAD TIME PERIOD), HELD FOR PROTECTING AGAINST THE FLUCTUATIONS IN
DEMAND AND LEAD-TIME ARE KNOWN ALSO BY THE TERM SAFETY STOCKS.
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ANTICIPATION INVENTORIES
ANTICIPATION INVENTORIES ARE HELD FOR THE REASON THAT A FUTURE DEMAND FOR THE PRODUCT IS
ANTICIPATED.
PRODUCTION OF SPECIALIZED TIMES LIKE CRACKERS WELL BEFORE DIWALI, UMBRELLAS AND
RAINCOATS BEFORE RAINS SET IN, FANS WHILE SUMMERS ARE APPROACHING; OR THE PILING UP OF INVENTORY STOCKS WHEN A STRIKE IS ON THE ANVIL, ARE ALL EXAMPLES OF ANTICIPATION INVENTORIES.
DECOUPLING INVENTORIES
THE IDEA OF THE DECOUPLING INVENTORIES IS TO DECOUPLE, OR DISENGAGE, DIFFERENT PARTS OF THE
PRODUCTION SYSTEM.
INVENTORIES IN BETWEEN THE VARIOUS MACHINES ARE HELD IN ORDER TO DISENGAGE THE PROCESSING
ON THOSE MACHINES. IN THE ABSENCE OF SUCH INVENTORIES, DIFFERENT MACHINES AND PEOPLE CANNOT WORK SIMULTANEOUSLY ON A CONTINUOUS BASIS.
WHEN SUCH INVENTORIES ARE HELD, THEN, EVEN IF A MACHINE BREAKS DOWN, THE WORK ON OTHERS
WOULD NOT STOP.
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CYCLE INVENTORIES
CYCLE INVENTORIES ARE HELD FOR THE REASON THAT PURCHASES ARE USUALLY MADE IN LOTS
RATHER THAN FOR THE EXACT AMOUNTS WHICH MAY BE NEEDED AT A POINT OF TIME.
OF COURSE, IF ALL PURCHASES ARE MADE EXACTLY AS AND WHEN THE ITEM IS REQUIRED, THERE
WOULD BE NO CYCLE INVENTORIES.
BUT, PRACTICALLY, PURCHASES ARE MADE IN LOTS, THE REASON BEING THAT IF PURCHASES ARE MADE
FREQUENTLY AND IN SMALL NUMBERS, THEN THE COST INVOLVED IN OBTAINING THE ITEMS WOULD BE VERY LARGE.
INVENTORY COSTS
THE CLASSICAL INVENTORY ANALYSIS IDENTIFIES FOUR MAJOR COST COMPONENTS. PURCHASE COST ORDERING COST/SET-UP COST CARRYING COST STOCK OUT COST
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PURCHASE COST
THIS REFERS TO THE NOMINAL COST OF INVENTORY. IT IS THE PURCHASE PRICE FOR THE ITEMS THAT ARE BOUGHT FROM OUTSIDE SOURCES, AND THE
PRODUCTION COST IF THE ITEMS ARE PRODUCED WITHIN THE ORGANIZATION.
THIS MAY BE CONSTANT PER UNIT, OR IT MAY VARY AS THE QUANTITY PURCHASED/PRODUCED
INCREASES OR DECREASES.
QUITE OFTEN, SITUATIONS ARE FOUND WHEN IT MAY BE STIPULATED THAT, FOR EXAMPLE, THE
UNIT PRICE IS RS.20 FOR AN ORDER UP TO 100 UNITS AND RS.19.50 IF THE ORDER IS FOR MORE THAN 100 UNITS.
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Carrying Cost
Also known as the holding cost or the storage cost, carrying cost represents the cost that is associated with storing an item in inventory. It is proportional to the amount of inventory and the time over which it is held.
The elements of carrying cost include the opportunity cost of capital invested in the stock; the costs directly associated with storing goods (like store men's salary, rates, heating and lighting, racking, protective clothing, stores transport etc.); the obsolescence cost (including scrapping and possible rework); deterioration costs and costs incurred in preventing deteriorations; and fire and general insurance etc.
The carrying cost is usually expressed as a rate per unit or as a percentage of the inventory value. It is taken to be fixed for each unit of a certain item of inventory held for a unit time.
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Basically, there are two inventory management systems, viz, Fixed order quantity system/the re-order point system: As soon as the stock level reaches the re-order level point, an order for a predetermined number of units is placed. Periodic review system: In this system inventories are replenished at fixed intervals of time. Whereas the size of order is fixed in the previous system and the time is not, in this system the time after which the supplies are ordered is fixed but not the quantity to be ordered.
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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.
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A. Operating Objectives: 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.
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.
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.
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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.
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. Highlighting slow moving and obsolete items of materials.
Designing poorer organization for inventory management: Clear cut accountability should be
fixed at various levels of organization.
B. Financial Objectives:
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.
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.
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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 pay checks 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 big 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.
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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: 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 slow-moving inventory; 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
ABOUT INVENTORY CONTROL:
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 companys success or failure. This part of the supply chain has a great impact on the companys ability to manufacture goods for sale or to deliver customer satisfaction on orders of finished products. Proper inventory control will balance the customers 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.
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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 companys 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.
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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:
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 A category is counted on a regular basis while B and C categories are counted only once a month or once a quarter.
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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 companys 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.
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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.
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.
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STATEMENT OF PROBLEM:
The current system in the company under inventory management system which doesnt specify the safety stock which leads to scare for stocks at emergency. The data are not properly updated at the end of each days work. Proper data security system is not provided. Annual maintenance contract is not provided. Records are not maintained properly.
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OBJECTIVE OF STUDY
Primary objective:
To analysed the existing inventory management system in BK AGRO MART PVT LTD
Secondary objective:
To verify the mismatch between the order and receipt of mate to find out the impact of inventory on working capital To find out minimum stock level, how much stock should be order.
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SCOPE OF STUDY
The scope is to drive meaningful application of theory for actual implementation. As the study is focusing on identifying the present potential of the companys inventory methods and aims, we identify best set of inventory method to be carried to improve the companys 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 addresses towards maintaining inventory
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LIMITATION OF STUDY
It consumes more time and requires lots of expenditure. More time is needed to do this study Study is based on secondary data only. The quality of inventory is not compared in analysis. The analysis is based on figures present in the internal records only. The study is based on three year reports given by marketing and finance Department that has its own limitation. Working environment didnt permit more involved way of collecting data.
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RESEARCH METHODOGY:
Research methodology is the way to systematically solve the research problem. Objective of research study is to analysis of inventory of AGRO MART Sons and analyzing of inventory, we determining following inventories Raw materials inventory, Work in progress inventory, Packaging material inventory & 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 are the stock piles of goods in an organization.
AGRO MART invests about 40% of total assets inventory should be analyzed their 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 datas 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.
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The standardization of packaging norms that is likely to be implemented by the Government by Jan 2013 is expected to increase cost of beverages, cereals, edible oil, detergent, flour, salt, aerated drinks and mineral water. Steadily rising fuel costs, leading to increased distribution costs. The present slow-down in the economy may lower demand of FMCG products, particularly in the premium sector, leading to reduced volumes. The declining value of rupee against other currencies may reduce margins of many companies, as Marico, Godrej Consumer Products, Colgate, Dabur, etc who import raw materials.
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INDUSTRY OVERVIEW
Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year. Products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper and chocolate bars. White goods in FMCG refer to household electronic items such as Refrigerators, T.Vs, Music Systems, etc. Fourth Largest sector in the economy with total market size of $18.1bn and expects to rise to $33.4bn by 2015 Presence of many MNCs and intense competition between organized and unorganized segment. Low operational cost, availability of Raw materials, cheap labour gives India a competitive edge. Penetration of markets is yet to reach maturity level, as rural markets are still untapped. Growth is likely to come from matured product categories as more than 200mn people would shift to processed foods by 2010 Automatic investment approval for FDI up to 100% Economy growing by more than 6% which would increase the buying power of the consumers. Recent survey showing 47% of Indias 1+billion people are under age 20, among which 160mn are teenagers which has14000crs of discretionary income and their families spend an additional 18500crs on them every year. By 2015 Indians under age 20 are estimated to make up55% of the population and would have proportionately higher spending power. The FMCG sector in India is expected to grow at a compounded annual growth rate (CAGR) of 9%.
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BACKGROUND
Company Profile: BHARAT Agro mart & BK Construction Company is a group of BK Agro mart Pvt. Ltd.
Which was established in year 2003, they manufacture some truly peerless edible oil, tea & other FMCG products. Their refined oil and tea are highly regarded in the market. They are among the most successful FMCG products manufacturers, established in India.
ABOUT COMPANY:
The main object of the company is to supply quality products and services to their esteemed customers and these they have achieved by maintaining their quality process. All their products are analyzed deftly before their packing in their fully equipped laboratory. At this company, employees are treated like their own partners. This enables them to manage a pretty good communication with their clients. At their company they personally take care of all the activities like production and distribution in their quality control set up. They take pride in genuine and authentic production of Tea & Refined which is extract from best quality seed of plants. The leaves are taken from the most famous garden in Darjeeling, Assam and Nilgiri is available in convenient attractive packaging. Since Their establishment they have a dedicated team of professionals who work with sincerity to maintain the quality of every product, Company established itself as one of the renowned name in the market of FMCG products. This Company is increasing with a hope to achieve the best position in the market.
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A CLEAR DIRECTION:
The four pillars of our vision set out the long term direction for the company where we want to go and how we are going to get there . . . We work to create a better future every day. We help people feel good, look good and get more out of life with brands and services that are good for them and good for others. We will inspire people to take small everyday actions that can add up to a big difference for the world. We will develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact. We've always believed in the power of our brands to improve the quality of peoples lives and in doing the right thing. As our business grows, so do our responsibilities. We recognise that global challenges such as climate change concern us all. Considering the wider impact of our actions is embedded in our values and is a fundamental part.
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Musterd Oil:
5 lit. 2 lit. 1 lit. 500ml 250 ml
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THE PROMOTERS
BOARD OF DIRECTOR: DIRECTOR CEO Marketing Head (UP.) Operation Manager (UP.) H.R. Manager (UP.) Sales Area Manager (UP.) Purchase Department Head(UP.) : : : : : : :
Mrs. Kalavati Chaudhari. Mr. Kishor Kumar. Mr. Bhanu Pratap Mr. Dharampal Mr. Dharampal Mr. Raj Kumar Mr. Kishor Kumar
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BANDHAN TEA:
MUSTURD OIL:
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PRODUCTS
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DETERGENT POWDER
History of Detergent Powder in India:
HLL entered India in 1957 and was the undisputed leader in detergent space. Surf was the most selling detergent in India. However in 1980's Surf suffered huge losses at the hands of a new and small firm, Nirma Chemicals. Nirma was launched in 1969 and its primary focus was to create a good, branded product at affordable prices. The product was priced far lower than the market leader Surf. Nirma caught the attention of the middle-class and lower middle class customers and had such great sales that it evicted HUL's Surf from the No. 1 position in 1985. HLL then had a look at the situation and found that there was a large market segmentation in detergent space and then came up with lower priced Wheel (green) and Rin (blue) detergent powders targeted at different market segments. This segmentation helped HLL regain part of its lost market.
This post deals with price wars which are becoming an essential part of business. But a cut in price is the last resort in a price war. We will discuss more on various tactics to fight a price war. I will primarily focus on price wars in the detergent space; will also chip in with more examples as and when suitable. Before I delve into more theories and strategies, lets have a look at some stats and series of events: The detergent market in India can be divided into premium (Surf, Arial), mid-price (Rin, Henko, Tide) and popular segments (Ghari, Wheel, Nirma, Mr. White). They account for 15%, 40% and 45% of the market share, which is 60% of the total market. Regional and small unorganized players still account for the 40% market. Per-capita consumption of detergent in India at 2.7 kg is the lowest in the world.
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In 1987, Ghari was launched by RSPL (Rohit Surfactancts Pvt. Ltd.), the product was also less priced and targeted at the rural customers, middle class and lower-middle class customers. It also had more or less the same positioning strategy as Nirma. In 1988, HUL launched Wheel to take on Nirma.
In early 2000's Wheel beats Nirma and takes the No.1 spot. In late 2011 and early 2012, Ghari beats Wheel and takes the No.1 spot in Indian detergent industry. Currently, Ghari is the market leader with a market share of 17.3%, Wheel is at number 2 with a share of 16.9%, Tide is 3rd with a market share of 13.5%. Nirma has market share of less than 6% now. Interesting facts. HUL is still the overall market giant with Wheel, Rin and Surf (one product for each segment) doing well. But Ghari is now the overall market leader. Ghari has grown from strength to strength with its target market segment and affordable pricing. Ghari has spread its distribution network to more states now and directly reaches rural markets, which is its biggest audience. The company has entered 10 more states in the last three years and now peddles its ware in 19 states, through more than 3,500 dealers. It has 21 manufacturing units, 15 of which were added since 2006.
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15%
45%
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Sun & Lemon Jasmine & rose Natural 200gms, 1Kg, 2Kg, 3.5Kg & 6Kg
MUSTARD OIL
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TEA
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QUALITY POLICY OF AGRO MART: AGRO MART committed to the aim and objectives of the company to manufacture products that are satisfy customers needs and expectations. AGRO MART shall implement the quality management system to meet agreed requirements to enhance customer satisfaction and improve its effectiveness continually. AGRO MART commit to highest levels of integrity and professionalism in all aspect of our business. Credentials of AGRO MART: GRO MART is a member of export promotion council. AGRO MART 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 AGRO MART with a Commendation certificate for quality standard of the company at all India level. AGRO MART is a member with Essential oil association of India. AGRO MART is register with IFRA and FDA.
AND TECHNOLOGY OF AGRO MART: 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. Page 51
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. Bandhan Det. Powder. 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.
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ORGANISATIONAL CHART
TOP LEVEL
MIDDEL LEVEL
LOW LEVEL
HEAD STORE
HEAD WORKS
HEAD FORMULATION
MANAGEMENT REPRESENTATIVE
HEAD TRAINING
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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 customers 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.
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MARKET
AGRO MART has organized tie-up in Channai to fee the market in U.A.E. and distribution of the premium attars to African countries like, Sudan, Egypt,. In Saudi Arabia the company is having distribution tie-ups in Mathura Agra Etowah Faizabaad, etc. Also the company is having distribution outlets in Kanpur Bareli Meerut Ajamghar Gonda Basti etc. The company is also having export market in Chennai Sirlanka Siligudi etc the company is having market in .Lucknow Bahraich Devariya Kusinagar etc In India there are 200 distributors throughout the country.
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MARKRTING STRATEGIES
Marketing strategies serve as the fundamental underpinning of designed to fill market needs and reach marketing objectives. Plans and objectives are generally tested for measurable results. Commonly, marketing strategies are developed as multi-year plans, with a tactical plan detailing specific actions to be accomplished in the current year\
Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. See strategy dynamics.
Marketing strategy involves careful scanning of the internal and external environments. Internal environmental factors include the marketing mix, plus performance analysis and strategic constraints.
External environmental factors include customer analysis, competitor analysis, target market analysis, as well as evaluation of any elements of the technological, economic, cultural or political/legal environment likely to impact success.
A key component of marketing strategy is often to keep marketing in line with a company's overarching mission statement.
Once a thorough environmental scan is complete, a strategic plan can be constructed to identify business alternatives, establish challenging goals,
determine the optimal marketing mix to attain these goals, and implementation.[
A final step in developing a marketing strategy is to create a plan to monitor progress and a set of contingencies if problems arise in the implementation of the plan.
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It received National Safety Council, Kerala Chapter Award (2001) for outstanding performance in Industrial Safety as Runner Up by achieving the lowest frequency rate of accidents in Gr. III(B) Engineering Industries. Future plans: Tata Tea is going in for an image makeover to attract youth consumers through its 'jaago re' campaign , its retail initiative of 'Chai Unchai' and by launching newer products like ready-to-drink beverages. Red label: We at Brooke Bond understand you as a homemaker and we know how concerned you are about your familys health and well being. That is why we use our expertise in tea blending and tea science to unleash the goodness of tea and help you brew the magic of healthy living. At Brooke Bond, we believe that great taste can go with good health Our variants: Red Label: Has the goodness of natural flavonoids that helps improve blood circulation and keeps you healthy. Red Label Natural Care: Has a mix of 5 Ayurvedic ingredients like Tulsi, Ashwagandha, Mulethi, Ginger and Cardamom that are proven to improve immunity and help you fall ill less often. Red Label Dust: Has strength, taste and comes with the Red Label promise of great quality. Red Label Special: Has 15% extra long leaves to give you great taste, colour and superior aroma.
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Product
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Taj Mahal Tea Over the years, Brooke Bond Taj Mahal Tea has been a choice of the discerning as a symbol of the best of India.
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Our master blenders and tasters painstakingly select the finest teas to create a robust, full-bodied brew with a lingering aroma that makes you say .. Wah Taj. Cheer your senses as you experience this exclusive brew during those precious moments with special people.
Taj Ginger Flavoured Tea Bags Great way to liven up Monday mornings and make evenings more interesting. Treat your senses to the lingering flavour of Ginger aromatically blended with the finest
Golden tea
Golden Tea Time is such a cute tea house. The moment you walk into the "Grandma" decorated home, your senses are given a party...the smells of home cooking, so many things to observe, marabou boas to touch, Page 63
groups of ladies gossiping and giggling, and of course the tastes. A friend of mine and I met my sister and niece here on Friday for high tea; this is their favorite place as it is close to home and they love walking on the river after tea. The owner has watched my niece grow up and knows exactly what she wants. For all of this I wish I could give Golden Tea Time more stars. However, to be fair to my other high tea reviews, I need to review Golden Tea Time . -High Tea is $15.00 and includes tea, a fruit cup, and a single platter of 2 finger sandwiches, 1 small croissant sandwich, a small heart shaped scone, a cookie, a cheesecake tart, and a chocolate fudge bite. There were two tea choices and if you know other teas they serve, you can ask for them. The food is very good and filling but the one small plate and choices seemed so small in comparison to other places that I had to take one star off. If I was to judge by their menu, I would have given Golden Tea Time one more star as they had nice luncheon platters and tea
combinations which seemed more popular and reasonable. I will definitely come back for tea and scones or a leisurely lunch with my sister and niece.
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Products:
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Mohani Tea Leaves Pvt. Ltd. (MTL) is synonymous with the finest tea company in the industry. The company was established with the resolution that its reputation must be based on the quality of its products. We maintain commitment to quality. It manifests itself in the imaging, branding and packaging of its entire product range and has helped us achieve sales target across several states in India and reach out to millions of satisfied customers.The company provides excellent value added quality tea to its esteemed customers.With a combination of outstanding service to our business associates and value for money products to our customers, Mohani Tea Leaves Pvt. Ltd. has rapidly gained faith of a chain of highly supportive business channel partners and satisfied customers, enabling our business to grow and flourish.
Product:
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GOVERNMENT POLICY
A policy is typically described as a principle or rule to guide decisions and achieve rational outcomes.
The term is not normally used to denote what is actually done, this is normally referred to as either procedure or protocol Policies are generally adopted by the Board of or senior governance body within an organization whereas procedures or protocols would be developed and adopted by senior executive officers. Policies can assist in both subjective and objective decision making. Policies to assist in subjective decision making would usually assist senior management with decisions that must consider the relative merits of a number of factors before making decisions and as a result are often hard to objectively test e.g. work-life balance policy. In contrast policies to assist in objective decision making are usually operational in nature and can be objectively tested e.g. password policy
A Policy can be considered as a "Statement of Intent" or a "Commitment". For that reason at least, the decision-makers can be held accountable for their "Policy The term may apply to government, private sector organizations and groups, and individuals. Presidential executive orders, corporate privacy policies, and parliamentary rules of order are all examples of policy. Policy differs from rules or law. While law can compel or prohibit behaviors (e.g. a law requiring the payment of taxes on income), policy merely guides actions toward those that are most likely to achieve a desired outcome
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MAJOR PROBLEMS
Products often cater to 3 distinct but usually wanted for aspects like necessity, comfort, luxury. They meet the demands of the entire cross section of population. Price and income elasticity of demand varies across products and consumers. Individual items are of small value (small SKU's) although all FMCG products put together account for a significant part of the consumer's budget. The consumer spends little time on the purchase decision. He seldom ever looks at the technical specifications. Brand loyal ties or recommendations of reliable retailer/ dealer drive purchase decisions. Limited inventory of these products (many of which are perishable) are kept by consumer and prefers to purchase them frequently, as and when required. Brand switching is often induced by heavy advertisement, recommendation of the retailer or word of mouth.
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ACHIEVEMENT
he Company has work in Four States; UP, Uttarakhand, Bihar & Chennai. The company covers Approx 40 Districts market. The company has succeeded to make a big market segment in rural area. In rural area customer prefers its product. Company has more than... 38 Districts 480 Distributers 121 Super Stockist 37 Area Sales managers
68 Sales Officers 115 Sales Representatives 1 Crore Turnover from September 2012
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SWOT ANALYSIS
Strengths:
Low operational costs Presence of established distribution networks in both urban and rural areas Presence of well-known brands in FMCG sector
Weaknesses:
Lower scope of investing in technology and achieving economies of scale, especially in small sectors Low exports levels "Me-too products, which illegally mimic the labels of the established brands. These products narrow the scope of FMCG products in rural and semi-urban market.
Opportunities:
Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers Large domestic market- a population of over one billion. Export potential High consumer goods spending
Threats:
Removal of import restrictions resulting in replacing of domestic brands Slowdown in rural demand Tax and regulatory structure
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PERIOD OF STUDY
The study was conducted in a period between January 2010 to April 2010 during which the researcher studied the companys relationship with dealers and distributors and obtained their view.
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. Primary data are the accurate, attainable, reliable and useful data. Inventory control techniques used by the company Inventory systems as perpetual and periodic systems. Stock levels etc. Companys website
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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 C class. The items that lie between the top and bottom are called the B category item. The following facts need to be noted with regard to ABC Analysis: Through usually the inventory items are classified into three categories viz A, B and C only, but nothing prohihibits a firm to undertake the analysis on the basis of a larger catagorisization. .It is necessary for an effective ABC analysis that all the items should be included for the Classification. .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 Page 74
ultimate exercise in inventory management, it needs supplementing with detailed knowledge and monitoring. Price of the items and their physical quantities shouldnt 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 nonavailability 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.
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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.
SDEANALYSIS:
S-Scarce Material i.e. hardly available
SDE analysis is done based on purchasing problems associated with items on day-to-day basis.
S Class Materials:
These materials are always in shortage and difficult in procurement. These materials sometimes require government approvals ,procurement through government agencies. Normally one has to make the payment in advance for sourcing these materials .Purchase policies are very liberal for such materials
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D Class Materials: These materials though not easy to procure but are available at a longer lead times and source of supply may be very far from the consumption. Procurement of these materials requires planning and scheduling in advance.
E Class Materials: These materials are normally standard items and easily available in the local market and can be purchased anytime.
KANBAN SYSTEM:
Kanban is a visual signal thats used to trigger an action. The word kanban is Japanese. Roughly translated, it means card you can see.) Toyota introduced and refined the use of kanban in a relay system to standardize the flow of parts in their production lines in the 1950s. Kanban was one of several tools Toyota developed to ensure that inventory was based on actual customer orders rather than managerial forecasts. (See lean production.) Kanban starts with the customers order and follows production downstream. Because all requests for parts are pulled from the order, kanban is sometimes referred to as a "pull" system. At its simplest, kanban is a card with an inventory number thats attached to a part. Right before the part is installed, the kanban card is detached and sent up the supply chain as a request for another part. A part is only manufactured (or ordered) if there is a kanban card for it. There are six generally accepted rules for kanban: 1. Downstream processes may only withdraw items in the precise amounts specified on the kanban. 2. Upstream processes may only send items downstream in the precise amounts and sequences specified by the kanban. 3. No items are made or moved without a kanban. 4. A kanban must accompany each item at all times. 5. Defects and incorrect amounts are never sent to the next downstream process. 6. The number of kanban should be monitored carefully to reveal problems and opportunities for improvement Page 77
FSN Analysis:
Based on consumption pattern of the items.
N= Non-moving items
The non moving items (usually not consumedover a period of two years)are of greatimportance to determine their creative use or hasto be disposed off.
HML Analysis :
The cost per item (per piece) isconsidered for this analysis.High Cost Item (H)Medium Cost Item (M)Low Cost Item (L)HML help in bringing control over consumption atthe departmental level.
SOS Analysis:
In this analysis, theclassification of existing inventory is basedon nature of supply of items. They areclassified as seasonal and off- seasonalitems
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INVENTORY MANAGEMENT SYSTEM IN AGRO MART B.K. AGRO MART PVT. LTD.
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 include 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 Badhan Powder. raw material are the talc powder which they kept in plastic bags in production unit itself. Packaging material include box, cap colour, 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.
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EOQ =
2*384000*100 18.75
= =
4096000
2023 Kg.
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Cost
Ordering cost
Q*
Order size Q
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Interpretation: It shows that the ratio of sales and inventory for the year 2011 is lowest i.e 2.48 in comparison to 2012 2010.
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Year
Raw material
Finished good
Total inventory
Interpretation: inventory in value as well as quantity is less in 2010 and more in the year 2012 company maintain moderate inventory in the year 2011.
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{4}.Interpretation of various inventory in percentage of total inventory Year % of Raw material 2010 2011 2012 0.86 0.93 0.89 % of Semi finished good 5.93 4.81 6.48 % of Packaging material 53.33 60.83 64.87 % of Finished good 39.88 33.42 27.76 Total inventory 100 100 100
70 60.83 60 50 39.88 40 30 20 10 0 2010 2011 5.93 0.86 4.81 0.93 33.42 53.33
64.87
Interpretation: Company has store the minimum raw material. Company has increase our packaging material in all year.
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Year 2010
Percentage 23.94%
2011
51,82,325
2,62,58,696
19.73%
2012
7105432
26630854
26.68
Raw material
30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2010 2011 2012 Raw material
Interpretation: it is shows that company raw material year of 2011 is lowest comparison to 2010-2012
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{7}.Contribution of inventory to total current assets Inventory= 528.57 Current assets= 1013.94
528.57/1013.94*100 =52.13
Column1
47.87 52.13
Inventory other
Interpretation: This analysis shows that the inventory has a major part in current assets. i.e: inventory 52.13% other assets 47.87%.
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purchase inventory
25%
Interpretation:
This analysis shows that mostly company purchase inventory. 25%cash & 75%credit
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25.75%
52.15% 22.10%
Interpretation:
It figure shows that company has more cash & bank from the debtors and inventory
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finished goods
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010 2011 2012 34.38 40.48 33.6 finished goods
Interpretation:
It figure shows that finished goods of total inventory is increase 40.48% year of 2011 comparison to 2010-2012
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Interpretation: Type A: It is 25% of total Inventory, but has 48.17% of total value of Inventory. Type B: it is 30% of total inventory, but has 32.33% of total value of inventory Type C: it is 45% of total inventory, but has 19.50% of total value of inventory
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FINDINGS
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.
The percentage of raw material from total inventory is 23.94% in 2011 and 19.73% at 2012 26.63. Company purchase inventory 25% in cash and 75% in credit. . Companys 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 1 crore, that is good sign of establishment of domestic market.
Economic order quantity (EOQ) for year 2012 is 2023 kg, 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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SUGGESTIONS
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.
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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.
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CONCLUSION
Inventory control is exercise when you order an item. If you do a poor job then everything after is inventory correction B.K. AGRO MART Inventory is the physical asset of a company that can create problem if there is shortage, while in production and also if its 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 B.K. Agro Mart 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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BIBLIOGRAPHY
Financial Management- Theory And Practice- Prasanna Chandra
Management Accounting- R.K. Sharma and Sashi. K. Gupta Financial Management I. M. Pandey Ninths Edition Financial Management S.C.Kuchhal
MATERIAL MANAGEMENT BOOK BY RAJENDRA MISHRA OPERATION AND PRODUCTION PLANNING BOOK LOGISTICS MANAGEMENT BY K. SHRIDHARA BHAT MATERIAL MANAGEMENT BY S. D. APHALE PRODUCTION AND MATERIAL MANAGEMENT- P. SARVANAVEL ,S. SUMATHI
WWW.INVENTORY .COM WWW.INVESTOPEDIA.COM WWW.WISEGEEK.COM
www.mbaguys.net
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ANNEXURE
Balance Sheet
Mar '11 12 mths 766.88 269.32 497.56 11.92 519.23 460.58 202.46 26.08 689.12 461.81 166.33 1,317.26 0.00 539.05 535.36 1,074.41 242.85 82.95 1,354.51 1,075.89 6.33
Mar '10 12 mths 687.23 236.28 450.95 23.31 348.51 298.44 130.48 48.80 477.72 348.94 115.11 941.77 0.00 471.73 440.10 911.83 29.94 2.74 855.45 173.48 8.64
Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 883.23 297.90 585.33 25.12 552.72 528.57 224.17 261.20 1,013.9 4 603.61 30.09 1,647.6 4 0.00 695.70 592.40 1,288.1 0 359.54 53.83 1,576.5 4 1,337.8 2 7.48
Data collected from the trading and profit & loss a/c (figure in lac); Page 96
Particular
2012
2011
2010
Net sale
1326.46
1142.80
1016.32
Fixed assets
636.12
631.32
633.87
Current assets
1013.94
689.12
477.72
Current liabilities
695.70
539.05
471.73
Gross profit
291.82
251.41
223.59
Raw material
9435 kg
8406 kg
7403 kg
68465
43467
51026
Packaging material
685675
549409
458522
Finished goods
293445
301860
342912
inventories
528.57
460.58
298.44
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