A PROJECT REPORT ON

“ INVENTORY MANAGEMENT SYSTAM
IN”

A SYNOPSIS SUBMITTED TO CHAUDHARY CHRAN SINGH UNIVERSITY MEERUT AWAR OF DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION

(2013-2014)

SUBMITTED TO:
BBA DEPARTMENT SINGH 9945524

SUBMITTED BY
DEEPANKAR ROLL NO:

1

3r SEM BBA

Bhagwant institute of technology

2

DECLARATION

I am DEEPANKAR SINGH student of

3

• BHAGWANT INSTITUTE OF TECHNOLOGY MU!AFFARNAGAR
here by solemnly declare that the project titled “INVENTORY MANAGEMENT
SYSTAM IN COCA COLA ” is the outcome of my own efforts

research is conducted !"u#t$ o%

by me and finally report has been Submitted to:- Mr" ######"" &HAG'ANT INSTIT(TE O TECHNOLOGY M()A

ARNAGAR drawn

by my own creati!ity and s"ills only and the same has not submitted to any other or#ani$ation% institution or uni!ersity in order to #et any other de#ree&

DATE##"" Mr"DEEPANKAR SINGH MBA 3r S$% R&'' N&": PLACE#"" 9945524

4

ACKNO'LEDGEMENT
Presentin# a project of this type is an arduous tas"% demandin# a lot of time& I cannot in full measure appreciate and ac"nowled#ement the "indness shown and help e'tended by !arious persons in this endea!or& I will remember all of them with #ratitude& (y sincere than"s are also due to Mr#######" INSTIT(TE O TECHNOLOGY M()A !"u#t$ o% &HAG'ANT for their si#nificant

ARNAGAR

help e'tended for the successful completion of the project& I hi#hly the help I #ot from them in pro!idin# me and lot of information re#ardin# the functionin# of this or#ani$ation& I am always beholden to my )od% for always bein# with me and showin# me the ri#ht ways% my family% for always doin# fa!ors to me and my friends and collea#ues consistently helped with encoura#ement and criticism throu#hout the project wor"% for always liftin# my si#hts to hi#her !ision% raisin# my personality beyond normal limitation and for reali$in# me my stren#ths and potential% as I did not always welcome her e'hortation% *try a#ain+ you can do better&, -ut this project owes a #reat deal to it . and so do I&

Mr"DEEPANKAR SINGH S$% 9945524
5

MBA 3r R&'' N&":

PREFACE
No professional curriculum is considered complete without work experience. Every individual who is doing management studies has to go this phase of practical study efore he!she considers himself!herself fully "ualified as

potential managers. # got an opportunity to do training with a $inancial company # undertake the training to study “ INVENTORY MANAGEMENT SYSTAM IN COCA COLA" %his study discusses on the various aspects of &tudy human relationship management and its importance in retailing. %he study is ased on "uestionnaire survey results of 'ompany %he study concentrates on the concept of $inance management it is correct to my knowledge.

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CONTENTS • E'ecuti!e summary • Objecti!e of the study • Company profile • Company objecti!e • Product ran#e • In!entory mana#ement • Research methodolo#y • /indin#s • 0ata analysis • 1imitations • Conclusions • Appendi'2 3uestionnaire • -iblio#raphy ) .

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E*EC(TIVE S(MMARY 4ith the on#oin# re!olution in electronic and communication where Inno!ations are ta"in# at the blin" of eye+ it is impossible to "eep the pace with the emer#in# trends& E'cellence is an attitude that that whole of human race is born with& It is the en!ironment that ma"es sure that whether the result of this attitude is !isible or otherwise& A 4ell planned% properly e'ecuted and e!aluated Industrial trainin# helps a lot in inculcatin# a professional attitude& It pro!ides a lin"a#e between the student and industry to de!elop an awareness of industrial approach to problem sol!in#% based on a broad understandin# of process and mode of In!entory of or#ani$ation& 0urin# this period% the student #ets the real e'perience for wor"in# in the actual Industry en!ironment& (ost of the theoretical "nowled#e that has been #ained durin# the course of their studies is put to test here& Apart from this the student #ets an opportunity to learn the latest technolo#y % which is immensely helps in them in buildin# their career & I had the opportunity to ha!e a real e'perience on many !entures% which increased my sphere of "nowled#e to #reat e'tent& I #ot a chance to learn #oes to or#ani$ation& many new technolo#ies and was also interfaced to many instruments& And all this credit + .

O&+ECTIVES O THE ST(DY  To assess the si#nificance of the in!entory mana#ement&  To "now the le!el of in!entory to be "ept&  To "now the amount of in!estment in in!entory& 1. .

MISSION AND VISION OF COMPANY 11 .

which employs nearly #.Mission To refresh the world… In mind. Georgia. employee capability and company The Coca Cola Company is the world leading manufacturer and distributor of non alcoholic beverage concentrates and syrups. The company and its subsidiaries in nearly 200 countries around the world manufacture and over 2 0 other company soft drin! brands. with world head quarters in Atlanta. To creat value and make difference… everywhere we engage. Vision “To create a world class selling organization and a culture of operating excellence to continually improve consumer experience. customer profitability satisfaction.000 people around the world$ %ocal business is authori&ed to bottle and sell company soft drin!s with in the local boundaries and under condition that ensure the highest standards of quality and uniformity. "y contract with the Coca Cola Company and its local subsidiaries. To inspire moments of optimism… through our brands and our actions. 12 . body and spirit.

6r.%A. since no remedy was present at that time4 it was a big question for American people. +roblem at that time was how to cure all these disease. . a new brand named Pepsi Cola in the year *551. -n the beginning this drin! was made with mi<ture of cocaine and alcohol but later on it is named as Coco Cola. /is! diversification 0.ales growth .. -ts history dates bac! to civil war in 3* . -mprovement at every time . -ncrease mar!et share #.o in *55. 13 . 2mploy's satisfaction HISTORY OF SOFT DRINK The history of soft drin!s began with the end of the last century. -nnovation satisfy the customer 1.A in *300. At that time people were suffering from many diseases. 7ohn +aimwarlion who lives in Antonica made a drin! and registered it as T/28C9 :-82 C. .COMPANY’s OBJECTIVE Company's mission must be turned in to special ob(ectives for each level of management ob(ective are) in a system !nown as management by ob(ectives the most common *. +rofitability 2.

pot. was the first -ndian company to introduce a lemon soft drin! this drin! was !nown as %im!a and it was introduce a lemon soft drin! this drin! was !nown as %imca and it was introduced in *310. which introduced the soft drin! named Campa Cola along with arrange and %emon flavors. This soft drin! was named as Gold .print. 9owever before this they had introduced Cola pepine which was withdraw in face of tough competition from Coca Cola. +arle 2<ports +vt. Another company 6ohan mea!ins also came up with a soft drin! named 6ary ? +uch up. There was another company named pure drin!. This drin! was introduce with a mighty saying =happy days are here again> as if happy days went away with Coca Cola.HISTORY OF COCA COLA COMPANY Indian His o!"# Around *3#5 the first branded soft drin! in the -ndian mar!et. "ut in the year *355 +epsi was given permission to sell drin!s in the -ndian mar!et by the Government of -ndia. +reviously there was no competition in the -ndia soft mar!et but with all companies coming in the -ndian mar!et a huge competition was place with college advertisement. Coca Cola also come bac! in the year *33 . -n the year *311 Coca Cola left -ndian mar!et and this brought in an opportunity for various -ndian companies to show their caliber. "efore Coco Cola entered the country to dominate the scene in *3.0. Coca Cola in India# 14 . 7ust after this many more companies entered the soft drin! mar!et. . A soft drin! name double. At this time a new soft drin! was introduced by +arle products and this was color. %td.had been introduced by a company 6orden "a!ers. 6c @owell came with thrillA +ush and .

Coca Cola (oined hands with +arle and to enter -ndia after *1 years by stri!ing a #0 million deal with +arle. +emberton used Afri!a.0. mi<ed up his own concoction of medicinal system in 6ay in the year of *550. -n *3.ld wave have come to -ndian again>. who was a druggist in Atlanta. 9aving the museum location in Atlanta is fitting because long before any one had ever heard of coca cola. Coc! almost made a clear sweep and made its good as =To become all time all occasion drin! not a special treat beverage> -n the year of *330. 15 . Coca Cola come bac! in the year *3 after liberali&ation and was launched at Agra with the slogan =. The full credit must go to Coca Cola for ma!ing soft drin!s popular in -ndian by end *311. percent of mar!et share in -ndia then Coca Cola left -ndian following public regulations the company was required to indianite or operation come to an end in 7uly *311. a doctor by the name of 7ohan . The :orld of Coca Cola. the Coca Cola Company opened up a museum li!e building which was "reton. -ts tribute to the drin! is because it is so popular that it is now served daily in nearly two hundred countries. -t setup four bottling plants at "ombay.The coca cola company entered -ndia in early *3. @r. as were negligible companies in the -ndia mar!et therefore Coca Cola did not faced much competition and they were accepted in -ndian mar!et more easily. The brand was accepted by all age Group. over one hundred years after the soft drin! was invested. Calcutta.0. Banpur and @elhi. as it is called is location in Atlanta.tythe +em. Coca Cola had captured more than #. -t is also said to be a tribute to the countless number of consumers who drin! Coca Cola. At the time +arle was the leader in the soft drin! mar!et and had more than 00 percent of the total shore in soft drin!. Georgia right amidst the tourist district. designed to be tribute to its famous soft drin! product.

the famous soft drin! was bottled in forty countries. man by the name of Asa G. The result was C thic! caramel colored syrup. Coca Cola was bottled in Cuba and in +anama.tates for long. "elgium. True or not. +harmacy in town. "ottling operations were soon started in 9awall the ne<t year. came up with the name of Coca Cola for the syrup from the names of its two basic ingredients. -taly. Coca Cola popularly would not stay with in the Enited . @r. @r. Drance. 1( . 9e as!ed for a glass of Coca Cola to be made with carbonate water instead of plain water and the carbonate version of soft drin! was the born. the pharmacy made C fountain drin! which mi<ed some of the Coca Cola syrup with plain water. 6e<ico. had acquired total control of the Coca Cola became a patented product in the Enited . a boo! !eeper by the name of Dram 6. The first year in *550. which are both strong stimulation in his potion. then in the +hilipines. +emberton poured some of the Coca Cola syrup in to a (ug and too! it to 7acobs. 9aiti and "urma in later years. /obinson. "ermunda. +emberton sold twenty five gallons of his syrup which earned him total revenue of (ust fifty dollars. it has been said that a customer came in to the pharmacy one day complaining or a headache. though because in the year of *300. "y the nest year. The drin! sold to customer for a nic!el a glass. The 9onduras.Bola 8ut e<tracts and Cola leaves. Colombia. Dive years latter. he began to sell of his company. Candlar. because of his poor health condition. The purpose of the potion was to be an effective tonic which would help a person's brain and naves function better. The year of *3#0.tats. @r. +emberton's +artner.

COMPANY $OA%S 1) .

To satisfy the consumers needs through better quality of product. To continuously increase their own share of percentage in soft drin!s.T&e co'pan" (oals a!e# To earn the ma<imum profit. To maintain quality of product best distribution system. 1* . To satisfy the consumer needs through better quality of product.

CA C.%A 2. 2ach of the brands has its own flavors and contents. T9E6..INTROD)CTION OF PROD)CT B!and P!o*ile# The company has si< brand and all them are manufacture at the "/-8@AFA8 ".TT%2/. C. The brands of Coca Cola are named as following *. E+ 1+ . 9aving many profiles the customers vary the different segment of customer prefer different flavor.

8ACEA These are bottled at 9industan Coca Cola "everage +vt %td. @asna Gha&iabad. 7o chahe ho (aye coca cola en(oy T&+'s )p . . 2.want my thunder. .. POP)%AR P)NCH%INES OF COCA CO%A PROD)CTS Coca Cola Thanda mutlab coca cola. @-2T C. DA8TA 0.+/-T2 #. 6AAIA *0. 6-8ET2 6A-@ +/26-E8 . DA8TA A++%2 1.B2 5. :AT2/J B-8%2K ? ".. %-6CA .H 3./A8G2G66+.

Kaari dosti. 6asti !a apna taste %i'ca Ta!e it easy. taa&a maa&a Sp!i @i!hawe pe mat (ao apni a!al lagao.Thums Ep taste the thunder Fan a Buch bhi ho sa!ta hai. .a "ottle me aam maa&a hai naam. ba!i all ba!was 21 . %ime n' lemoni lim!a Maa.prite bu(haye only pyaas.

TYPES O INVENTORY Raw materials5 The purchased items or e'tracted materials that are transformed into components or products& Components5 Parts or subassemblies used in buildin# the final product& 4or"2in2process 64IP75 Any item that is in some sta#e of completion in the manufacturin# process& /inished #oods5 Completed products that will be deli!ered to customers& 0istribution in!entory5 /inished #oods and spare parts that are at !arious points in the distribution system& 22 .

(aintenance% repair% and operational In!entory 6(RO7 in!entory 6often called supplies75 Items that are used in manufacturin# but do not become part of the finished product& 23 .

INDEPENDENT VS. DEPENDENT DEMAND INVENTORY 8ome in!entory items can be classified as independent demand items% and some can be classified as dependent demand items& 4hile we need to ma"e the timin# and si$in# decisions for all in!entory items% we must be careful in the manner in which we ma"e those decisions for these two types of items& Independent demand in!entory item5 In!entory item whose demand is not related to 6or dependent upon7 some hi#her le!el item& 0emand for such items is usually thou#ht of as forecasted demand& Independent demand in!entory items are usually thou#ht of as finished products& 0ependent demand in!entory item5 In!entory item whose demand is related to 6or dependent upon7 some hi#her le!el item& 0emand for such items is usually thou#ht of as deri!ed demand& 0ependent demand in!entory items are usually thou#ht of as the materials% parts% components% and assemblies that ma"e up the finished product& 24 .

REASONS OR MAINTAINING INVENTORY Anticipation In!entory or 8easonal In!entory5 In!entory are often built in anticipation of future demand% planned promotional pro#rams% seasonal demand fluctuations% plant shutdowns% !acations% etc& /luctuation In!entory or 8afety 8toc"5 In!entory is sometimes carried to protect a#ainst unpredictable or une'pected !ariations in demand& 1ot28i$e In!entory or Cycle 8toc"5 In!entory is fre3uently bou#ht or produced in e'cess of what is immediately needed in order to ta"e ad!anta#e of lower unit costs or 3uantity discounts& Transportation or Pipeline In!entory5 In!entory is used to fill the pipeline as products are in transit in the distribution networ"& 8peculati!e or 9ed#e In!entory5 In!entory can be carried to protect a#ainst some future e!ent% such as a scarcity in supply% price increase% disruption in supply% stri"e% etc& (aintenance% Repair% and Operatin# 6(RO7 In!entory5 In!entories of some items 6such as maintenance supplies% spare parts% lubricants% cleanin# compounds% and office supplies7 are used to support #eneral operations In!entory and maintenance& 25 .

O&+ECTIVES O INVENTORY MANAGEMENT There are three main objecti!es of in!entory mana#ement% as follows5 Pro!ide the desired le!el of customer ser!ice& Customer ser!ice refers to a company:s ability to satisfy the needs of its customers& There are se!eral ways to measure the le!el of customer ser!ice% such as5 6.7 percenta#e of orders that are shipped on schedule% 6<7 the percenta#e of line items that are shipped on schedule% 6=7 the percenta#e of dollar !olume that is shipped on schedule% and 6>7 idle time due to material and component shorta#e& The first three measures focus on ser!ice to e'ternal customers% while the fourth applies to internal customer ser!ice& Achie!e cost2efficient operations In!entory& In!entories can facility cost2efficient operations In!entory in se!eral ways& In!entories can pro!ide a buffer between operations In!entory so that each phase of the transformation process can continue to operate e!en when output rates differ& In!entories also allow a company to maintain a le!el wor"force throu#hout the year e!en when there is seasonal demand for the company:s output& -y buildin# lar#e production lots of items% companies are able to spread some fi'ed costs o!er a lar#er number of units% thereby decreasin# the unit cost of each item& /inally% lar#e purchases of in!entory mi#ht 3ualify for 3uantity discounts% which will also reduce the unit cost of each item& (inimi$e in!entory in!estment& As a company achie!es lower amounts of money tied up in in!entory% that company:s o!erall cost structure will impro!e% as will its profitability& A common measure used to determine how well a company is mana#in# its in!entory in!estment 6i&e&% how 3uic"ly it is #ettin# its in!entories out of the system and into the hands of the customers7 is in!entory turno!er In!entory% which is a In!entory of the annual cost of #oods sold to the a!era#e in!entory le!el in dollars& 2( .

&ASIC INVENTORY DECISIONS There are two basic decisions that must be made for e!ery item that is maintained in in!entory& These decisions ha!e to do with the timin# of orders for the item and the si$e of orders for the item& -asic In!entory 0ecisions 9ow much? 1ot si$in# decision 4hen? 1ot timin# decision 0etermination of the 0etermination of the 3uantity to be ordered& timin# for the orders& 2) .

RELEVANT INVENTORY COSTS Rele!ant In!entory Costs Item Costs 0irect cost for #ettin# cost an for item& Purchase outside orders% 9oldin# Costs Costs associated with carryin# items in!entory& in Orderin# Costs /i'ed with an 6either costs placin# order a 8horta#e Costs Costs associated with in!entory not to ha!in# enou#h associated 2* .

&EHAVIOR O COSTS OR DI ERENT INVENTORY DECISIONS 4hen assessin# the cost effecti!eness of an in!entory policy% it is helpful to measure the total in!entory costs that will be incurred durin# some reference period of time& (ost fre3uently% that time inter!al used for comparin# costs is one year& O!er that span of time% there will be a certain need% or demand% or re3uirement for each in!entory item& In that conte't% the followin# describes how the annual costs in each of the four cate#ories will !ary with chan#es in the in!entory lot si$in# decision& Item costs5 9ow the per unit item cost is measured depends upon whether the item is one that is obtained from an e'ternal source of supply% or is one that is manufactured internally& /or items that are ordered from e'ternal sources% the per unit item cost is predominantly the purchase price paid for the item& On some occasions this cost may also include some additional char#es% li"e inbound transportation cost% duties% or insurance& /or items that are obtained from internal sources% the per unit item cost is composed of the labor and material costs that went into its production% and any factory o!erhead that mi#ht be allocated to the item& In many instances the item cost is a constant% and is not affected by the lot si$in# decision& In those cases% the total annual item cost will be unaffected by the order si$e& Re#ardless of the order si$e 6which impacts how many times we choose to order that item o!er the course of the year7% our total annual ac3uisitions will e3ual the total annual need& Ac3uirin# that total number of units at the constant cost per unit will yield the same total annual cost& 6This situation would be somewhat different if we introduced the possibility of 3uantity discounts& 4e will consider that later&7 9oldin# costs 6also called carryin# costs75 Any items that are held in in!entory will incur a cost for their stora#e& This cost will be comprised of a !ariety of components& One ob!ious cost would be the cost of the stora#e facility 6warehouse space char#es and utility char#es% cost of material handlers and material handlin# e3uipment in the warehouse7& In addition to that% there are some other% more subtle e'penses that add 2+ .

to the holdin# cost& These include such thin#s as insurance on the held in!entory+ ta'es on the held in!entory+ dama#e to% theft of% In!entory of% or obsolescence of the held items& The order si$e decision impacts the a!era#e le!el of in!entory that must be carried& If smaller 3uantities are ordered% on a!era#e there will be fewer units bein# held in in!entory% resultin# in lower annual in!entory holdin# costs& If lar#er 3uantities are ordered% on a!era#e there will be more units bein# held in in!entory% resultin# in hi#her annual in!entory holdin# costs& Orderin# costs5 Any time in!entory items are ordered% there is a fi'ed cost associated with placin# that order& 4hen items are ordered from an outside source of supply% that cost reflects the cost of the clerical wor" to prepare% release% monitor% and recei!e the order& This cost is considered to be constant re#ardless of the si$e of the order& 4hen items are to be manufactured internally% the order cost reflects the setup costs necessary to prepare the e3uipment for the manufacture of that order& Once a#ain% this cost is constant re#ardless of how many items are e!entually manufactured in the batch& If one increases the si$e of the orders for a particular in!entory item% fewer of those orders will ha!e to be placed durin# the course of the year% hence the total annual cost of placin# orders will decline& 8horta#e costs5 Companies incur shorta#e costs whene!er demand for an item e'ceeds the a!ailable in!entory& These shorta#e costs can manifest themsel!es in the form of lost sales% loss of #ood will% customer irritation% bac"order and e'peditin# char#es% etc& Companies are less li"ely to e'perience shorta#es if they ha!e hi#h le!els of in!entory% and are more li"ely to e'perience shorta#es if they ha!e low le!els of in!entory& The order si$e decision directly impacts the a!era#e le!el of in!entory& 1ar#er orders mean more in!entory is bein# ac3uired than is immediately needed% so the e'cess will #o into in!entory& 9ence% smaller order 3uantities lead to lower le!els of in!entory% and correspondin#ly a hi#her li"elihood of shorta#es and their associated shorta#e costs& 1ar#er order 3uantities lead to hi#her le!els of in!entory% and correspondin#ly a lower li"elihood of shorta#es and their associated 3. .

costs& The bottom line is this5 lar#er order si$es will lead to lower annual shorta#e costs& 31 .

7 the total annual orderin# cost and 6<7 the total annual holdin# cost& 8horta#e cost can be i#nored because of assumption B& /urthermore% since the cost per unit of all items ordered is the same% the total annual item cost will be a constant and will not be affected by the order 3uantity& 32 .& 0emand for the item is "nown and constant& <& 1ead time is "nown and constant& 61ead time is the amount of time that elapses between when the order is placed and when it is recei!ed&7 =& The cost of all units ordered is the same% re#ardless of the 3uantity ordered 6no 3uantity discounts7& >& Orderin# costs are "nown and constant 6the cost to place an order is always the same% re#ardless of the 3uantity ordered7& A& 4hen an order is recei!ed% all the items ordered arri!e at once 6instantaneous replenishment7& B& 8ince there is certainty with respect to the demand rate and the lead time% orders can be timed to arri!e just when we would ha!e run out& Conse3uently the model assumes that there will be no shorta#es& -ased on the abo!e assumptions% there are only two costs that will !ary with chan#es in the order 3uantity% 6.EO-/ MODEL The EO@ model is a techni3ue for determinin# the best answers to the how much and when 3uestions& It is based on the premise that there is an optimal order si$e that will yield the lowest possible !alue of the total in!entory cost& There are se!eral assumptions re#ardin# the beha!ior of the in!entory item that are central to the de!elopment of the model EO.CLASSIC ECONOMIC ORDER -(ANTITY .!00um1tio20: .

0$mbo#0: 0C annual demand 6units per year7 8 C cost per order 6dollars per order7 9 C holdin# cost per unit per year 6dollars to carry one unit in in!entory for one year7 @ C order 3uantity 33 .EO.

CLASSIC ECONOMIC ORDER -(ANTITY .EO-/ MODEL 4e saw on the pre!ious pa#e that the only costs that need to be considered for the EO@ model are the total annual orderin# costs and the total annual holdin# costs& These can be 3uantified as follows5 A22u!# O3de3i24 Co0t The annual cost of orderin# is simply the number of orders placed per year times the cost of placin# an order& The number of orders placed per year is a function of the order si$e& -i##er orders means fewer orders per year% while smaller orders means more orders per year& In #eneral% the number of orders placed per year will be the total annual demand di!ided by the si$e of the orders& In short% Total Annual Orderin# Cost C 60D@78 A22u!# Ho#di24 Co0t The annual cost of holdin# in!entory is a bit tric"ier& If there was a constant le!el of in!entory in the warehouse throu#hout the year% we could simply multiply that constant in!entory le!el by the cost to carry a unit in in!entory for a year& Enfortunately the in!entory le!el is not constant throu#hout the year% but is instead constantly chan#in#& It is at its ma'imum !alue 6which is the order 3uantity% @7 when a new batch arri!es% then steadily declines to $ero& Just when that in!entory is depleted% a new order is recei!ed% thereby immediately sendin# the in!entory le!el bac" to its ma'imum !alue 6@7& This pattern continues throu#hout% with the in!entory le!el fluctuatin# between @ and $ero& To #et a handle on the holdin# cost we are incurrin#% we can use the a!era#e in!entory le!el throu#hout the year 6which is @D<7& The cost of carryin# those fluctuatin# in!entory le!els is e3ui!alent to the cost that would be incurred if we had maintained that a!era#e in!entory le!el continuously and steadily throu#hout the year& That cost would ha!e been e3ual to 34 .

the a!era#e in!entory le!el times the cost to carry a unit in in!entory for a year& In short% Total Annual 9oldin# Cost C 6@D<7 9 Tot!# A22u!# Co0t The total annual rele!ant in!entory cost would be the sum of the annual orderin# cost and annual holdin# cost% or TC C 60D@78 F 6@D<79 This is the annual in!entory cost associated with any order si$e% @& 35 .

EO-/ MODEL At this point we are not interested in any old @ !alue& 4e want to find the optimal @ 6the EO@% which is the order si$e that results in the lowest annual cost7& This can be found usin# a little calculus 6ta"e a deri!ati!e of the total cost e3uation with respect to @% set this e3ual to $ero% then sol!e for @7& /or those whose calculus is a little rusty% there is another option& The uni3ue characteristics of the orderin# cost line and the holdin# cost line on a #raph are such that the optimal order si$e will occur where the annual orderin# cost is e3ual to the annual holdin# cost& EO@ occurs when5 60D@78 C 6@D<79 a little al#ebra clean2up on this e3uation yields the followin#5 @< C 6<087D9 And finally @ C G<08D9 6This optimal !alue for @ is what we call the EO@7 3( .CLASSIC ECONOMIC ORDER -(ANTITY .

.<&A days SOME O&SERVATIONS A&O(T O(R EO.O.AHH Annual holdin# cost C I.H%HHH units per year Orderin# cost 687 C IJA per order 9oldin# cost 697 C IB per unit per year 1ead time C A days The company operates <AH days per year 6hence% daily demand C .H%HHHD<AH C >H units per day7 Results of computations5 EO@ C AHH units Number of orders placed per year C <H A!era#e in!entory le!el C <AH units Annual orderin# cost C I.AHH Total annual in!entory cost C I=HHH Time between the placement of orders C .ILL(STIRATION IVENTORY Annual demand 607 C .ILL(STINVENTORYN Gi5e2 d!t! Annual demand 607 C .H%HHH units per year Orderin# cost 687 C IJA per order 9oldin# cost 697 C IB per unit per year 3) .E.

<&A days Ob0e35!tio2 67 3* .H%HHHD<AH C >H units per day7 Re0u#t0 o% "om1ut!tio20 EO@ C AHH units Number of orders placed per year C <H A!era#e in!entory le!el C <AH units Annual orderin# cost C I.AHH Total annual in!entory cost C I=HHH Time between the placement of orders C .1ead time C A days The company operates <AH days per year 6hence% daily demand C .AHH Annual holdin# cost C I.

H%HHH items that were ordered o!er the course of the year% so that annual purchase cost will contribute to the total of our in!entory related costs 6orderin# F holdin# F item cost7& 1etLs assume for dement ration In!entory purposes that the item purchase price is I .H%HHH& Our total annual in!entory cost would then be I.AHH F I.ILL(STINVENTORYN Ob0e35!tio2 68 4e disco!ered that our order 3uantity of AHH units would lead to replenishment e!ery .&HH per unit ' .H%HHH units C I.<&A days& 4e projected that we would run out on days .&HH per unit& This would ma"e the total annual purchase cost I.=%HHH& SOME O&SERVATIONS A&O(T O(R EO.<&A% <A% =J&A% AH% B<&A% JA% etc& 4ith a A day lead time% we were smart enou#h to order A days in ad!ance of when we would run out% which had us placin# orders on days J&A% <H% =<&A% >A% AJ&A% JH% etc& 4e only ha!e to watch the calendar to "eep trac" of when those order instants arise so that we can place the orders& An alternati!e to watchin# the calendar would be to watch the in!entory le!els& Recall that the a!era#e daily demand for this item is >H units per day& This means that at the moment we place an order% we ha!e just enou#h in!entory to co!er the demand that will occur durin# the A day lead time& The demand durin# the A day lead time is A days ' >H units per day C <HH units& 8o% all we ha!e to do is "eep our eyes on our in!entory le!el% and when it reaches <HH units% that is the si#nal that it is time to reorder& This le!el of in!entory that tri##ers a reorder is called the reorder point 6R7& 3+ .AHH F I.H%HHH C I.The total annual in!entory cost of I=HHH includes only the annual orderin# cost and the annual holdin# cost& 4e were able to i#nore the shorta#e cost because all of the certainty in our assumptions led to a Kno shorta#eK situation& 4e also i#nored the total annual item cost% since it was a hori$ontal line that had no impact on the optimal si$e of our orders& 9owe!er% we will still ha!e to pay for those .

%ime 4.. .#nventory .evel - 2.

INVENTORY MONITORING APPROACHES Continuous re!iew system5 This approach maintains a constant order si$e% but allows the time between the placements of orders to !ary& This method of monitorin# in!entory is sometimes referred to as a perpetual re!iew method% a fi'ed 3uantity system% and a two2bin system& 4hen the in!entory is depleted to the reorder point% a replenishment order is placed& The si$e of that order is the economic order 3uantity for that item& This type of system pro!ides closer control o!er in!entory items since the in!entory le!els are under perpetual scrutiny& Periodic re!iew system5 This approach maintains a constant time between the placements of orders% but allows the order si$e to !ary& This method of monitorin# in!entory is sometimes referred to as a fi'ed inter!al system or fi'ed period system& It only re3uires that in!entory le!els be chec"ed at fi'ed periods of time& The amount that is ordered at a particular time point is the difference between the current in!entory le!el and a predetermined tar#et in!entory le!el 6also called an order up to le!el7& If demand has been low durin# the prior time inter!al% in!entory le!els will be relati!ely hi#h% and the amount to be ordered will be relati!ely low& If demand has been hi#h durin# the prior time inter!al% in!entory le!els will ha!e been depleted to low le!els% and the amount to be ordered will be hi#her& (in2ma' system5 This approach allows both the order si$e and the time between the placements of orders to !ary& This method of monitorin# in!entory is sometimes referred to as an optional replenishment system& It is a hybrid system that combines elements of both the continuous re!iew system and the periodic re!iew system& It is similar to the periodic re!iew system in that it only chec"s in!entory le!els at fi'ed inter!als of time% and it has a tar#et in!entory le!el& 9owe!er% when one of those re!iew periods arises the system does not automatically place an order& An order is only placed if the si$e of the order would be sufficient to warrant placin# the order& This determination is made by incorporatin# the reorder point concept from the 41 .

continuous re!iew system& At the re!iew period the in!entory le!el on hand is compared to a reorder point for the item& If in!entory has not fallen below the reorder point% no order is placed& 9owe!er% if the in!entory le!el has dropped below the reorder point% an order is placed& The si$e of the order is the difference between the in!entory on hand and the tar#et in!entory le!el& 42 .

4hich su##ests that if you waited until you had AH units left in in!entory before placin# an order for =HH more units% you would be O&O& if the demand durin# the .H &H. <H &H> =H &HA >H &< AH &> BH &< JH &HA MH &H> NH &H.INVENTORY O SA ETY STOCK DETERMINATION D!t!: A!era#e daily demand C AH units per day Operatin# year contains =HH days of operation In!entory 60 C . per unit per year 1ead time C . day Computations5 EO@ 6from EO@ formula7 C =HH units per order Resultin# number of orders per year C AH orders per year Reorder point C AH units 6the a!era#e number of units demanded durin# the . day lead time was .H% <H% =H% >H% or AH? 9owe!er% if the demand durin# the . day lead time7 Additional 0ata 0emand is not always a constant AH units per day& There is !ariability in daily demand accordin# to the followin# table of demands and probabilities5 0aily 0emand Probability .A%HHH units per year7 Orderin# cost 8 C I= per order 9oldin# cost 9 C I. day lead time was BH% JH% MH% or NH you would ha!e had a shorta#e& The si$e of the shorta#e would depend upon how many units were demanded durin# the lead time% 43 .

but the ma'imum possible shorta#e would ha!e been >H units 6if demand was the lar#est possible !alue of NH7& Pou can pre!ent shorta#es by pro!idin# safety stoc" when there is uncertainty in demand& 68afety stoc" can be !iewed as a cushion placed at the bottom of the saw tooth #raph of in!entory fluctuations o!er time&7 If you wanted to #uarantee that you would ne!er ha!e a shorta#e in this situation% you would need >H units of safety stoc" at the bottom of the #raph to Kdip intoK if demand spi"ed to hi#her than a!era#e !alues& -ut% addin# >H units of safety stoc" really mean that you ha!e ele!ated your reorder point& Pou are not waitin# until there are only AH units in in!entory to place your order& Pou are orderin# when there are NH units in in!entory& 6And% of course% NH units is sufficient to co!er the worst case scenario for this problem&7 HO' M(CH SA ETY STOCK IS APPROPRIATE9 44 .

Q chance of that7% you will come up .Q chance7& If you had chosen to carry only =H units of safety stoc" 6order when in!entory drops to MH units7% you will be fine if lead time demand is anythin# up to and includin# MH units& If lead time demand turns out to be NH 6there is a .8er!ice le!el5 The probability that demand durin# lead time will not e'ceed the in!entory on hand when the order is placed& In the pre!ious illustration In!entory% it was su##ested that you mi#ht pro!ide >H units of safety stoc"& If you had done so% you would ne!er e'perience a shorta#e& Pou would ha!e achie!ed a ser!ice le!el of .HHQ& This mi#ht not be a desirable solution for this problem& 4e are carryin# a relati!ely hi#h amount of safety stoc"% and there is a !ery low probability that lead time demand will actually #o as hi#h as NH units 6only a .H units short& -ut% since you had enou#h in!entories to co!er NNQ of the demands that mi#ht ha!e occurred% you achie!ed a NNQ ser!ice le!el& (any people mi#ht opt for this policy% for it will reduce the a!era#e annual le!el of in!entory carried 6i&e&% reduce holdin# costs7 and run only a sli#ht ris" of incurrin# a shorta#e cost& Others mi#ht be e!en more a##ressi!e% and opt for an e!en lower ser!ice le!el& 4e could ha!e achie!ed a NAQ ser!ice le!el with a reorder point of JH 6only <H units of safety stoc"7& 4eL!e lowered our in!entory holdin# costs e!en further% but e'posed oursel!es to e!en more shorta#e cost ris"& 4hile the ser!ice le!el concept is a widely used measure of protection a#ainst shorta#es% it can be a bit misleadin#% as the ne't illustration of In!entory will show& INVENTORY O SHORTAGES 'ITH A GIVEN SERVICE LEVEL 45 .

E'pected !alue of shorta#e H H H H H H &A &M &= . &H> &HA &< &> &< &HA &H> &H.&B Total e'pected !alue of shorta#e per order cycle 4( .H <H =H Probability &H.H <H =H >H AH BH JH MH NH R of units short H H H H H H .HQ of demand will be unsatisfied& Thin#s arenLt really that bad& The NHQ ser!ice le!el really means that on NHQ of the order cycles we will ha!e enou#h to satisfy demand% but on .Continuin# with the pre!ious illustration of In!entory% assume that mana#ement has made a policy decision that the company will achie!e a NHQ ser!ice le!el 6reorder point C BH units7& 8ome incorrectly assume that this means .HQ we will come up short& 1etLs loo" at the e'pected shorta#e on any #i!en order cycle5 In!entory Policy5 8er!ice le!el C NHQ% Reorder point C BH units 1ead time demand .

D< a percent of our annual demand #oes unfilled7& Another way to loo" at this is NN&>JQ of our annual demand is met& This is a lot better soundin# than the NHQ ser!ice le!el mi#ht ha!e led us to belie!e& 4) .&B reflects the lon# run a!era#e per cycle7& )o bac" a few pa#es and refresh yoursel!es on the calculations for the data of this problem& Order si$e 6the calculated EO@7 is =HH units& This order si$e% coupled with the annual demand of .A%HHH units% will ha!e us orderin# AH times per year& On each of those AH order cycles we ha!e an e'pected shorta#e of .A%HHH units% which is MHD.&B units& This means the total e'pected shorta#e for the full year will be AH ' .&B% or MH units of demand per year that we cannot satisfy& This is MH units out of a total annual demand of .AHHH or &HHA= of our demand that #oes unsatisfied& This con!erts to a percenta#e of only &A=Q 6a little more than .This means that the a!era#e shorta#e per order cycle will be .H units% <H units% or =H units& The .&B units& 6Of course% we will ne!er be short .&B units on any order cycle& /or any order cycle% we will be short either H units% .

HO' M(CH CONTROL9 A&C ANALYSIS In!entory Item Number .H IA I.%HHH . Annual I Esa#e IJHH%HHH I. < = > A B J M N .HQ .A%HHH .H%HHH <H%HHH <H%HHH JHH%HHH .H%HHH Item Number B J .H%HHH >%HHH JH%HHH <A%HHH A%HHH =%HHH <%HHH Salue Per Enit I= I> I.<&A J&A .<A%HHH IJA%HHH Q of Items .H I< IA I. IA IA Annual 0ollar Esa#e JA%HHH <H%HHH .<A%HHH A%HHH .HQ <HQ =HQ 4* Cumulati!e A-C Q of Salue ClassT JH M<&A NH A A - Salue JH .HQ .H Annual Esa#e <A%HHH A%HHH .HQ Cumulati!e Q of Q of Items .

HH C C C C C C C T4hen classifyin# the items as A% -% or C items% it can be somewhat subjecti!e as to where the lines are drawn& 4ith the unrealistically small In!entory abo!e% the first <HQ of the in!entory items constitute M<&AQ of the in!entory !alue% so these items 6Items B and J7 will be desi#nated as A items& On the other e'treme% JHQ of the items constitute only .HQ .H M Total I<H%HHH I<H%HHH I<H%HHH I.A%HHH I. &A N< N> NB NJ&A NM&A NN&A .HQ of the items constitute J&A Q of the in!entory !alue% so this item 6Item .< > A N = .HHQ < < < .item& The purpose of the A-C classification was to separate the Kimportant fewK from the Ktri!ial manyK so that the appropriate le!el of control can be assi#ned to each item& A items need the ti#htest de#ree of control% while C items do not need !ery close scrutiny& 4+ .H%HHH I.7 will be desi#nated as a .&A .HQ .HQ .HQ . .H%HHH IA%HHH I.HQ .HQ .HQ >HQ AHQ BHQ JHQ MHQ NHQ .HQ of the in!entory !alue% so these items 6Items <% >% A% N% =% .%HHH%HH H .H% and M7 will be desi#nated as C items& /inally% .

. ./ INVENTORY MANAGEMENT 5.A&C CLASSI ICATION O ITEMS 'umulative / of 0alue 1../ 'umulative / of #tems 1.

HQ to <HQ% without any ad!erse effect on production and sales% by usin# in!entory plannin# and control techni3ues& The reduction in Ue'cessi!e: in!entories carries a fa!orable impact on a company:s profitability& There are at least three moti!es for holdin# in!entories5 .2To facilitates smooth production and sales operation In!entory 6transaction moti!e7& <2To #uards a#ainst the ris" of unpredictable chan#es in usa#e rate and deli!ery time 6precautionary moti!e7& =2 To ma"e ad!anta#e of price fluctuations 6speculati!e moti!e7& 51 .I2t3odu"tio2 In!entories constitute most si#nificant part of current assets% in most of the companies in India& To maintain a lar#e si$e of in!entory% a considerable amount of fund is re3uired& It is% therefore% absolutely imperati!e to mana#e in!entories efficiently and effecti!ely in order to a!oid unnecessary in!estment& A firm ne#lectin# the mana#ement of in!entories will be jeopardi$in# its lon#2run profitability and may fail ultimately& It is possible for a company to reduce its le!els of in!entories to a considerable de#ree% e&#&.

: T:e m!3. E!3#$ m!3. e done y mail1 facsimile1 television signal1 or airline may handle this transportation function. *-.T($ $)&')*+.et.eti24 di0"i1#i2e :!d it0 o3i4i20 i2 t:e e!3#$ 8<t: "e2tu3$ !0 !2 o%%013i24 o% e"o2omi"0. Commodit$ !2!#$0i0 0tudie0 t:e ?!$0 i2 ?:i": ! 13odu"t o3 13odu"t 43ou1 i0 b3ou4:t to m!3. $or example1 any marketing effort must ensure that the product is transported from the supplier to the customer.> %o3 e=!m1#e> t3!"e0 t:e ?!$0 i2 ?:i": mi#. #t soon ecame apparent that organi4ations and individuals market not only goods and services marketing81 and even the organi4ations themselves 7pu lic relations8. i0 "o##e"ted !t i2di5idu!# d!i3$ %!3m0> t3!201o3ted to !2d 13o"e00ed !t #o"!# d!i3$ "oo1e3!ti5e0> !2d 0:i11ed to 43o"e30 !2d 0u1e3m!3. E"o2omi" 0"ie2"e :!d 2e4#e"ted t:e 3o#e o% midd#eme2 !2d t:e 3o#e o% %u2"tio20 ot:e3 t:!2 13i"e i2 t:e dete3mi2!tio2 o% dem!2d #e5e#0 !2d ":!3!"te3i0ti"0.th century1 large companies3 particularly mass consumer manufacturers3 egan to recogni4e the importance of market research1 etter product design1 effective distri ution1 and sustained communication with consumers in the success of their rands. ut also ideas 7social marketing81 places 7location marketing81 personalities 7cele rity marketing81 events 7event 52 . A "ommodit$ !2!#$0i0 o% mi#. #n some industries1 a truck1 while in others it may the same function.et0 %o3 "o20ume3 1u3":!0e. 2ll these institutions perform 2s the study of marketing ecame more prevalent throughout the 2.eti24 !"ti5it$: t:e "ommodit$> t:e i20titutio2> !2d t:e %u2"tio2.eti24 e"o2omi0t0 e=!mi2ed !43i"u#tu3!# !2d i2du0t3i!# m!3.et0 !2d de0"3ibed t:em i2 43e!te3 det!i# t:!2 t:e "#!00i"!# e"o2omi0t0. 5arketing concepts and techni"ues later moved into the industrial6goods sector and su se"uently into the services sector. T:i0 e=!mi2!tio2 3e0u#ted i2 t:e de5e#o1me2t o% t:3ee !113o!":e0 to t:e !2!#$0i0 o% m!3.*/'*+$ &0 %1r2$3*+.

rocess to achieve the organi4ation<s o :ectives follow the marketing mix #t is the process y which a society organi4es and distri utes its resources to meet the material needs of its citi4ens. 5any organi4ations and usinesses assign responsi ility for these marketing functions to a specific group of individuals within the organi4ation. %he strategic phase has three components3segmentation1 targeting1 and positioning 7&%.$5 P'1. Evaluating1 controlling1 and revising the marketing . 53 . %hose who make up the marketing department may include rand and product managers1 marketing researchers1 sales representatives1 advertising and promotion managers1 pricing specialists1 and customer service personnel. 2s a managerial process1 marketing is the way in which an organi4ation determines its est opportunities in the marketplace1 given its o :ectives and resources.8. %he marketing process includes designing and implementing various tactics1 commonly referred to as the “%1r2$3*+. #n contrast1 when there are more goods and services than consumers need or want1 companies must work harder to convince customers to exchange with them. 2 common e viewed as a set of functions in the sense that certain activities are traditionally associated with the ut incorrect view is that selling and advertising are the only roader set of marketing activities. =owever1 marketing activity is more pronounced under conditions of goods surpluses than goods shortages.35 Pr*. >hen goods are in short supply1 consumers are usually so desirous of goods that the exchange process does not re"uire significant promotion or facilitation. %he organi4ation must distinguish among different groups of customers in the market 7segmentation81 choose which group7s8 it can serve effectively 7targeting81 and communicate the central enefit it offers to that group 7positioning8. 9et1 in addition to promotion1 marketing includes a much functions1 including product development1 packaging1 pricing1 distri ution1 and customer service. #n this respect1 marketing is a uni"ue and separate entity.$ 1+ promotion. %he marketing process is divided into a strategic and a tactical phase.R&'$ &0 %1r2$3*+.: 2s marketing developed1 it took a variety of forms. %*456 &r 3($ “4 P-6: 7 Pr& 8. #t was noted a ove that marketing can exchange process.

“S3r13$. #t is more likely that larger organi4ations will serve the larger market segments 7mass marketing8 and ignores niches. %1r2$3*+. $or example1 the personal transportation market consists of people who put different values on an automo ile@s cost1 speed1 safety1 status1 and styling. $urthermore1 some individuals may wish to meet their personal transportation needs with something other than an automo ile1 such as a motorcycle1 a icycle1 or a us or other form of pu lic transportation. 'ompanies must therefore first define which needs3and whose needs3they can satisfy. M1r2$3 +*.($-: &egments can e divided into even smaller groups1 called su segments or niches.$--: %he marketing process consists of four elements? strategic marketing analysis1 marketing6mix planning1 marketing implementation1 and marketing control. $or example1 a ank may speciali4e in serving the investment needs of not only senior citi4ens ut also senior citi4ens with high incomes and perhaps even those with particular investment preferences.*. 2 niche is defined as a small target group that has special re"uirements. No single automo ile can satisfy all these needs in a superior fashionA compromises have to e made. 1+1'9-*-6 M1r2$3 -$. 2s a result1 smaller companies typically emerge that are intimately familiar with a particular niche and speciali4e in serving its needs. Because of such varia les1 an automo ile company must identify the different preference groups1 or segments1 of customers and decide which group7s8 they can target profita ly.%$+3-: %he aim of marketing in profit6oriented organi4ations is to meet needs profita ly. 54 .T($ %1r2$3*+. /r&.

%his is understanda le1 for instance1 with large industrial companies that have only a few ma:or customers.1 or 2merican 2irlines1 #nc.: 2 key step in marketing strategy1 known as positioning1 involves creating and communicating a message that clearly esta lishes the company or rand in relation to competitors. $or example1 %he Boeing 'ompany 7Enited &tates8 designs its )4) planes differently for each ma:or customer1 such as Enited 2irlines1 #nc. %actical marketing involves creating a marketing mix of four components product1 price1 and place1 promotion3that fulfills the strategy for the targeted set of customer needs.D %hey attempt to adapt their offer and communication to each individual customer.3: 7 55 .D &ome products may e positioned as CoutstandingD in two or more ways. M1r2$3*+. P&-*3*&+*+. :" Pr& 8.: =aving developed a strategy1 a company must then decide which tactics will e most effective in achieving strategy goals. 3& *+ *)* 81'-: 2 growing num er of companies are now trying to serve Csegments of one. &erving individual customers is increasingly possi le with the advent of data ase marketing1 through which individual customer characteristics and purchase histories are retained in company information systems.7%*4 /'1++*+. Even mass marketing companies1 particularly large retailers and catalog houses1 compile comprehensive data on individual customers and are a le to customi4e their offerings and communications. $urthermore1 although the company may communicate a particular position1 customers may perceive a different image of the company as a result of their actual experiences with the company@s product or through word of mouth.M1r2$3*+. =owever1 claiming superiority along several dimensions may hurt company<s credi ility ecause consumers will not elieve that any one offering can excel in all dimensions. %hus1 0olvo 2ktie olaget 7&weden8 has positioned its automo ile as the Csafest1D and Faimler6Ben4 2G 7Germany81 manufacturer of 5ercedes6Ben4 vehicles1 has positioned its car as the est Cengineered.

Product development: %he first marketing6mix element is the product1 which refers to the Hffering or group of offerings that will e made availa le to customers. P!".!4i24 t:!t ?i## be mo0t !11e!#i24 to 13o01e"ti5e "u0tome30.!4i24 !2d b3!2di24 !3e !#0o 0ub0t!2ti!# "om1o2e2t0 i2 t:e m!3. I2 mo0t i2du0t3i!#iAed "ou2t3ie0> :o?e5e3> t:e 1!". #n contemporary industriali4ed societies1 products1 like people1 go through life cycles? irth1 growth1 maturity1 and decline. Before assem ling a product1 the marketer@s role is to communicate customer desires to the engineers who design the product or service. Packaging and branding: P!". 5( . #n the case of a physical product1 such as a car1 a company will gather information a out the features and enefits desired y a target market. 2s economies develop1 the range of products availa le tends to expand1 and the products themselves change. #n traditional economies1 the goods produced and consumed often remain the same from one generation to the next3including food1 clothing1 and housing. %his is in contrast to past practice1 when engineers designed a product ased on their own preferences1 interests1 or expertise and then expected marketers to find as many customers as possi le to uy this product.!4i24 o% me3":!2di0e :!0 be"ome ! m!Bo3 1!3t o% t:e 0e##i24 e%%o3t> !0 m!3.ete30 2o? 01e"i%$ e=!"t#$ t:e t$1e0 o% 1!". 'ontemporary thinking calls for products to e designed ased on customer input and not solely on engineers@ ideas. %he development of new products involves all aspects of a usiness3production1 finance1 research and development1 and even personnel administration and pu lic relations. %his constant replacement of existing products with new or altered products has significant conse"uences for professional marketers.eti24 o% ! 13odu"t.!4i24 i2 0ome i20t!2"e0 m!$ be !0 0im1#e !0 "u0tome30 i2 3!2"e "!33$i24 #o24 #o!5e0 o% u2?3!11ed b3e!d o3 0m!## 13odu"e de!#e30 i2 It!#$ ?3!11i24 5e4et!b#e0 i2 2e?01!1e30 o3 1#!"i24 t:em i2 "u0tome30@ 0t3i24 b!40.

Hrdinarily companies determine a price y gauging the "uality or performance level of the offer and then selecting a price that reflects how the market values its level of "uality.$ %he second marketing6mix element is price. 1 -$r)*. 2 5ercedes6Ben4 vehicle is generally considered to e a high6"uality automo ile1 and it therefore can command a high price in the marketplace.M1r2$3*+. 2" Pr*. =owever1 marketers also are aware that price can send a message to a customer a out the product@s presumed "uality level. 3" P'1.3: %he same general marketing approach a out the product applies to the development of service offerings as well. Hn the other hand1 in order to gain market share1 some companies have moved to Cmore for the sameD or Cthe same for lessD pricing1 which means offering prices that are consistently lower than those of their competitors. $or example1 a health maintenance organi4ation 7=5H8 must design a contract for its mem ers that descri es which medical procedures will e covered1 how much physician choice will e availa le1 how out6of6town medical costs will e handled1 and so forth. %his kind of discount pricing has caused firms in such industries as airlines and pharmaceuticals 7which used to charge a price premium ased on their past rand strength and reputation8 to significantly reevaluate their marketing strategies. But1 even if the manufacturer could price its cars competitively with economy cars1 it might not do so1 knowing that the lower price might communicate lower "uality. #n creating a successful service mix1 the =5H must choose features that are preferred and expected y target customers1 or the service will not e valued in the marketplace.$ /r& 8.$: 7 5) .

&ome companies have successfully reduced their sales6force costs y replacing certain functions 7for example1 finding new customers8 with less expensive methods 7such as direct mail and telemarketing8. &$ u0i24 t:i0 ":!22e#> ! %ood m!2u%!"tu3e3 m!. %he ma:or tools are sales force1 advertising1 sales promotion1 and pu lic relations. Broadcast advertisements consist of an audio or video narrative that can range from short 156second spots to longer segments known as infomercials1 which generally last 3. o3 e=!m1#e> t:e ":!22e# o% di0t3ibutio2 %o3 m!2$ %ood 13odu"t0 i2"#ude0 %ood-13o"e00i24 1#!2t0> ?!3e:ou0e0> ?:o#e0!#e30> !2d 0u1e3m!3.0> ?:i": i2 tu32 e0t!b#i0: 3e#!tio20:i10 ?it: 1!3ti"u#!3 "u0tome30. ':e2 ! 13odu"t mo5e0 !#o24 it0 1!t: %3om 13odu"e3 to "o20ume3> it i0 0!id to be %o##o?i24 ! ":!22e# o% di0t3ibutio2.: 2dvertising includes all forms of paid1 no personal communication and promotion of products1 services1 or ideas y a specified sponsor.et0. minutes.$: &ales representatives are the most expensive means of promotion1 ecause they re"uire income1 expenses1 and supplementary enefits.e0 it0 i25e0tme2t 13odu"t0 !5!i#!b#e b$ e2#i0ti24 t:e !00i0t!2"e o% b3o.P#!"e> o3 ?:e3e t:e 13odu"t i0 m!de !5!i#!b#e> i0 t:e t:i3d e#eme2t o% t:e m!3. 2dvertising appears in such media as print ill oards1 flyers8 or roadcast 7radio1 television8. A )$r3*-*+. 2dvertisements 7newspapers1 maga4ines1 typically consist of a picture1 a headline1 information a out the product1 and occasionally a response coupon.e0 it0 13odu"t0 e!0i#$ !""e00ib#e b$ e20u3i24 t:!t t:e$ !3e i2 0to3e0 t:!t !3e %3eCue2ted b$ t:o0e i2 t:e t!34et m!3. &alespeople are trained to make presentations1 answer o :ections1 gain commitments to purchase1 and manage account growth. S1'$.0&r.romotion1 the fourth marketing6mix element1 consists of several methods of communicating with and influencing customers. or (.eti24 mi= !2d i0 mo0t "ommo2#$ 3e%e33ed to !0 di0t3ibutio2.e3!4e :ou0e0 !2d b!2. 5* .et. I2 !2ot:e3 e=!m1#e> ! mutu!# %u2d0 o34!2iA!tio2 m!. 4" Pr&%&3*&+: 7 . %heir a ility to personali4e the promotion process makes salespeople most effective at selling complex goods1 ig6ticket items1 and highly personal goods3 for example1 those related to religion or insurance.

M1r2$3*+.#i24 ?!te3 SA@0 1ub#i" 3e#!tio20 te!m :!d to e20u3e t:!t t:e 4e2e3!# "o20umi24 1ub#i" did 2ot t:e3e!%te3 !utom!ti"!##$ !00o"i!te Pe33ie3 ?it: t!i2ted ?!te3. &everal market factors also have fostered this increase1 including a rise in the num er of rands 7especially similar ones8 and a decrease in the efficiency of traditional advertising due to increasingly fractionated consumer markets.th century. %he use of promotions has risen considera ly during the late 2.e$ !"ti5itie0 i0 to ?o3. &ales promotions often attract rand switchers 7those who are not loyal to a specific rand8 who are looking primarily for low price and good value. ?it: 2e?0 !2d i2%o3m!tio2 medi! to e20u3e !113o13i!te "o5e3!4e o% t:e "om1!2$@0 !"ti5itie0 !2d 13odu"t0.'*. I2 !dditio2> 1ub#i" 3e#!tio20 01e"i!#i0t0 !3e 3e01o20ib#e %o3 mo2ito3i24 t:e0e i2di5idu!#0 !2d 43ou10 !2d %o3 m!i2t!i2i24 4ood 3e#!tio20:i10 ?it: t:em.S1'$. O2e o% t:ei3 . r$'13*&+-: Pub#i" 3e#!tio20> i2 "o2t3!0t to !d5e3ti0i24 !2d 0!#e0 13omotio2> 4e2e3!##$ i25o#5e #e00 "omme3"i!#iAed mode0 o% "ommu2i"!tio2. A2ot:e3 1ub#i" 3e#!tio20 3e01o20ibi#it$ i0 "3i0i0 m!2!4eme2tDt:!t i0> :!2d#i24 0itu!tio20 i2 ?:i": 1ub#i" !?!3e2e00 o% ! 1!3ti"u#!3 i00ue m!$ d3!m!ti"!##$ !2d 2e4!ti5e#$ im1!"t t:e "om1!2$@0 !bi#it$ to !":ie5e it0 4o!#0. P8. %his is due to a num er of factors within companies1 including an increased sophistication in sales promotion techni"ues and greater pressure to increase sales. 2lternatively1 in markets where rands are "uite dissimilar1 sales promotions can alter market shares more permanently. Pub#i" 3e#!tio20 01e"i!#i0t0 "3e!te 1ub#i"it$ b$ !33!24i24 13e00 "o2%e3e2"e0> "o2te0t0> meeti240> !2d ot:e3 e5e2t0 t:!t ?i## d3!? !tte2tio2 to ! "om1!2$@0 13odu"t0 o3 0e35i"e0. It0 13im!3$ 1u31o0e i0 to di00emi2!te i2%o3m!tio2 !2d o1i2io2 to 43ou10 !2d i2di5idu!#0 ?:o :!5e !2 !"tu!# o3 1ote2ti!# im1!"t o2 ! "om1!2$@0 !bi#it$ to !":ie5e it0 obBe"ti5e0./r&%&3*&+: >hile advertising presents a reason to uy a product1 sales promotion offers a short6term incentive to purchase. %hus1 especially in markets where rands are highly similar1 sales promotions can cause a short6term increase in sales ut little permanent gain in market share. *%/'$%$+313*&+: 5+ . o3 e=!m1#e> ?:e2 it ?!0 di0"o5e3ed t:!t ! :!3m%u# ":emi"!#> Sou3"e Pe33ie3> mi4:t :!5e t!i2ted 0ome bott#e0 o% Pe33ie3 01!3.

e#$ to be bette3 !##o"!ted> be"!u0e di%%e3e2"e0 !mo24 13omotio2 too#0 be"ome mo3e e=1#i"it. Ho?e5e3> t:i0 o%te2 3e0u#t0 i2 ! #!". A#te32!ti5e#$> b$ i2te43!ti24 t:e m!3. (. o3 e=!m1#e> ! 13i2t !d5e3ti0eme2t %o3 !2 !utomobi#e m!$ em1:!0iAe t:e "!3@0 e="#u0i5it$ !2d #u=u3$> ?:i#e ! te#e5i0io2 !d5e3ti0eme2t m!$ 0t3e00 3eb!te0 !2d 0!#e0> "#!0:i24 ?it: t:i0 im!4e o% e="#u0i5it$. I20te!d o% i2di5idu!##$ m!2!4i24 %ou3 o3 %i5e di%%e3e2t 13omotio2 13o"e00e0> t:e "om1!2$ m!2!4e0 o2#$ o2e. . ':e2 "om1o2e2t0 o% t:e mi= !3e 2ot !## i2 :!3mo2$> ! "o2%u0i24 me00!4e m!$ be 0e2t to "o20ume30.eti24 e#eme2t0> ! "om1!2$ "!2 mo3e e%%i"ie2t#$ uti#iAe it0 3e0ou3"e0. o% "oo3di2!tio2 bet?ee2 e#eme2t0 o% t:e 13omotio2 mi=.Com1!2ie0 :!5e t$1i"!##$ :i3ed di%%e3e2t !4e2"ie0 to :e#1 i2 t:e de5e#o1me2t o% !d5e3ti0i24> 0!#e0 13omotio2> !2d 1ub#i"it$ ide!0. I2 !dditio2> 13omotio2 e=1e2ditu3e0 !3e #i.

1 the dou ling time is estimated to e slashed to )( days. .&+3*+8*39 ? T($ N$< D*-$>8*'*. 2 strong momentum and apparent inevita ility of glo ali4ation strongly suggest an accentuation of the pace of development. (1 y Gary =amel1 C>e stand on the threshold of a new age J the age of . .$-3 /r1.%1 $ 1'' 3($ *00$r$+.-(&8' *++&)13*&+.$ 1r$ %1r2$35 .3& r$%1*+ *+ .8-3&%$r-5 0&.3r1)$'$ .r$1-*+.3*.1%$ r$>8*r$.&%/$3*3*&+5 3$.Need to Pu0: u## T:3ott#e A:e!d: I+.(+&'&..95 A+ 3(13 (1. -&.&%%$r.(1+.1+2.9 = -&..<*3( 1+ 1.$ *+ 1 <&& 5 1+ I T&&2 3($ &+$ '$-.&0 .$9&+ 3$.*$.*$39" B1+2..$" 2 R&. 3($ .0&r.1+2*+.r1/(*$.3& 1 &/3 *+3$r+13*&+1' .*.rospects for continued escalation of change are awesome? the world<s knowledge ased now dou les every eight years1 ut y 2. 2n impetus through increasing integration of the productive process1 rapid technological advances1 splashing of legal I institutional arriers to glo al trade I a smother flow of glo al capital.*)$r. D*-.r*1: Everything in usiness is always in flux I flow.1 &/3$ '*2$ r*-2 %1+1." T($ +$< .$'$r13$ .+$< -3r13$.$&.3&r (1.1+ %1+9 9+1%*.r&<3(" I+ *1+ .2.*$.(+&'&.$ 1%&+.$r3 Fr&-3 #t is 'ustomary to descri e the unfolding world as of unprecedented change1 of a whirlwind of ideas1 of explosive growth of since6 ased technology.$.$ $3.*+.3& 1.83 -3*'' -&%$ %&r$ 1r$ +$$ $ . But it is necessary to reali4e1 as powerfully argued revolution.$%$+35 $7.$+3 &+ *++&)13*&+1' 3r1+-0&r%13*&+" T<& r&1 . %he "uickening of change 7%a le 181 however1 caused discontinuity I ripples of concern on the oardrooms. Engel<s stressed1 Ce"uili rium is insepara le from motion I all e"uili rium is relative I temporaryD.*$3*$.8. &uch contextual changes recd. 2+&<'$ ..8-*+$--" I%/&r31+3 *%$+-*&+. -$.

6 Knowing IEnderstanding their needs. C&%/$3*3*&+ 6 #ncreased 'ompetition 6 &hortage to surplus Economy 6 &"uee4e in margins leading to cost cuttings.3 &+ B8-*+$-- Change M1r2$3. T$.(+&'&.istening to 'onsumers.*$39 Femanding -ights 6 Governance 'orporate 6 'oncern for social (2 .TABLE :: DIMESIONS OF CHANGES I%/1. 6 $ulfilling 'ustomer<s -e"uirements. 6 'onsolidating I 'onvergence.9 Gradual change to 6 #nnovational "uantum 'hange &hareholders %ransparency.ocal to Glo al 7 #nvestments in #dentifying I &ervicing New markets C8-3&%$r2cceptance to delight 7 . S&.

T$.istening to 'onsumers.9 Gradual change to 6 #nnovational "uantum 'hange &hareholders %ransparency. (3 .3 &+ B8-*+$-- Change M1r2$3.(+&'&. I%/1. 6 $ulfilling 'ustomer<s -e"uirements. 6 'onsolidating I 'onvergence. C&%/$3*3*&+ 6 #ncreased 'ompetition 6 &hortage to surplus Economy 6 &"uee4e in margins leading to cost cuttings.ocal to Glo al 7 #nvestments in #dentifying I &ervicing New markets C8-3&%$r2cceptance to delight 7 .H ligations. 6 Knowing IEnderstanding their needs.

=istorically1 'hanges in society have always een preceded y the flow of ideas1 which provide the cutting Edge of development. (4 .S&.*$39 Femanding -ights 6 Governance 'orporate 6 'oncern for social H ligations. %his is reflected y the fact that though agglomeration I the location of innovative activities are closely related1 important sectoral clusters like textiles 7%riupur81 diamond6cutting 7&urat81 hosiery 7. Fespite the multi6layered any multi6dimensional aspect of u i"uitous change1 most organi4ation still disconcertingly confine themselves to incremental improvement I innovation without trying to alter the rules of the game1 ring a out reakthrough innovation. >hile the de ate over innovation in the world of usiness has raged for long1 innovation has now rapidly emerged as a critical lament of the growth strategy.udhiana81 call centers 7Gurgoan81 auto6companies I automo iles 7'hennai81 with the nota le exception of anglore 7#%8 are largely confined to incremental innovations. #n contemplating the challenges1 the approaches of those enterprise1 which successfully weathered the challenges of this volatile era1 shows that innovation is not only power ut also the key to sustained economic success. 2n urgent policy appraisal is1 therefore1 impulses in anks y radical and discontinuous innovative measures for enhanced performance in this tur ulent era. $urther the listering pace of change "uickly renders existing strategies o solete necessitating fre"uent course corrections. >hat is prognostically alarming is that most companies in the given industry or market tend to follow the same unwritten rules for conducting usiness with limited deviations from de facto strategies.

Hrgani4ational ethos needs to stress innovation as a key driver of growth that surprises I delights the customer with new1 differentiated I relevant enefits..@T($ I++&)13*&+ I%/$r13*)$ ? A.$'$r13*+. %he history of the growth of financial development1 as indeed of all other development1 is intertwined with the growth of innovation. But the definition of innovation as Cacceptance of I readiness to change across the organi4ation1 dedication to continuous improvement processes1 willingness to experiment and explore novel ways1 uilding new relationship I alliance1 esta lishing new approaches to markets1 channels1 customers1 pricing strategies I new I varied approaches to organi4ation1 measurement and performance measurementD is generally a accepta le.1+ G$&. But innovation is particularly important for anking I finance companies. %his is not a clichL ut defining characteristics of the modern cooperate saga.$9&+ T$.r1/(*$-:A %raditionally1 innovation has een defined with focus on traditional concepts of industry research I development I the commerciali4ation of new products and!or process technologies. 'ompelling I incontroverti le cross6country evidence prove that successful innovation is crucial to the competitive edge of all usinesses. Gr&<3( . #nnovation1 which transcends invention1 represents the point of convergence of invention I insight.(+&'&.*$. (5 .

No ?o2de3 ?e %i2d ! 5e3$ i2te3e0ti24 t3e2d i2 t:e 3e"e2t 1!0t i2 t:e I2di!2 b!2. I22o5!tio2 b!2. T:e di3e"tio2 i2 ?:i": t:e I2di!2 b!2. Si2"e !## o34!2iA!tio20 !2d 1eo1#e u0e te":2o#o4ie0> ?e %i2d t:!t ! 2e? 4e2e3!tio2 o% te":2o 0!55$ 1eo1#e eme34i24 i2 ! 5e3$ 0:o3t 01!2 o% E $e!30 i2 e5e3$ 01:e3e o% !"ti5it$ i2%u0i24 d$2!mi0m !2d "3e!ti5it$ #e!di24 to 0e5e3!# i22o5!tio20. T:e t3e2d i0 t:e m!Bo3 0:i%t %3om 3outi2e b!2. G#ob!##$> u0!4e o% te":2o#o4$ i0 5e3$ e=te20i5e i2 t:e %i2!2"i!# 0e"to3 o% ?:i": b!2.i24 Bob0 !3e out 0ou3"e> t:!2.“SURVIVAL IS THE MOTHER OF INNIVATION6 *-an"s can pro!ide inno!ation products and ser!ices to their corporate and retail customers only when creati!e people are in place alon# with latest technolo#y& 8uch people mi#ht pro!ide inno!ati!e ideas to customers and ban"s& -y con!ertin# there acceptable ideas into reality% ban"s can #et an ed#e to compete effecti!ely in the #lobal !illa#e& Indian ban"in# is also chan#in# its shape rapidly by adoptin# inno!ati!e technolo#y% products and ser!ices&.i24 0e"to3 i0 !2 i2te43!# 1!3t.i24. I22o5!tio2 i0 t:e .e$ to 0u""e00 %o3 !2$ !"ti5it$. Sm!## 1#!$e30 ?i## eit:e3 :!5e to %o34e ! me34e3 to be"ome bi4 1#!$e30 o3 e#0e t:e$ ?i## be eit:e3 e=ti24ui0:ed o3 0?!##o?ed b$ #!34e3 1#!$e30 i2 t:e $e!30 to "ome. T:i0 eme34i24 0"e2!3io ?!33!2t0 i22o5!ti5e !113o!": b$ b!2.ee2 o2 13e0e35i24 t:ei3 bottom #i2e0. I2 t:e 1!0t> ! 4e2e3!tio2 4!1 i0 "o20ide3ed to be ?it: ! 01!2 o% !t #e!0t 7< $e!30. Libe3!#iA!tio2 o% t:e I2di!2 e"o2om$ :!0 13o5ided 0"o1e to t:e b!2.i24 u1 mome2tum ?it: t:e !d5e2t o% 870t "e2tu3$. I22o5!tio2 b!2.i24 i0 1o00ib#e o2#$ ?:e2 ?e :!5e i22o5!ti5e 1eo1#e i2 b!2. I2di!2 %i2!2"i!# 0e"to3 :!0 m!de 3!1id 0t3ide0 i2 #!te 7FG<0 !2d e!3#$ 7FF<0 1i". T:e 13e00u3e ?i## eCu!##$ be mo3e o2 t:e e=i0ti24 #!34e 1#!$e30 to 3et!i2 t:ei3 #e!d o5e3 ot:e30. 'e %i2d mo0t o% t:e 3outi2e0 b!2. Di3e"t 0e##i24 !4e2t0 !3e !"ti5e#$ e24!4ed b$ mo0t o% t:e %o3ei42 !2d 2e? 4e2e3!tio2 (( .eti24 o34!2iA!tio2. O2#$ t:e2 t:e 2eeded e2"ou3!4eme2t !2d 0u11o3t i0 4i5e2 to "o25e3t 0u": i22o5!ti5e ide!0 i2 3e!#it$. ':e3e!0 ?it: t:e im13o5eme2t i2 t:e te":2o#o4$ %o##o?ed b$ i2te43!tio2 o% 1eo1#e !2d 1#!"e0 !"3o00 t:e ?o3#d o2 !""ou2t o% 3e5o#utio2!3$ ":!24e0 i2 i2%o3m!tio2 !2d "ommu2i"!tio2.i24 %u2"tio20 to ! 5e3$ !443e00i5e %i2!2"i!# m!3.ee1 t:em0e#5e0 0!i#i24 i2 t:e 0e! o% "om1etitio2.i24 0e"to3 to 3eo3ie2t it0 %o"u0 b$ 0:i%ti24 %3om de5e#o1me2t!# 3o#e ob#i4!ted mo0t#$ b$ 0o"io-1o#iti"!# "o20ide3!tio20 i2to 13o%e00io2!# %i2!2"i!# !4e2"ie0 .i24.i24 i0 t:e3e%o3e 2ot !2 e="e1tio2.0 to !utom!tio2 m!de 1o00ib#e b$ te":2o#o4$. T:e e2ti3e ?o3#d :!0 be"ome 5i3tu!##$ ! 0m!## 4#ob!# 5i##!4e.0 to . Mo3eo5e3> i22o5!ti5e ide!0 o% 0u": 1eo1#e :!5e to be :e!3d !t t:e 3i4:t time b$ t:e 3i4:t 1eo1#e.i24 i0 mo5i24 13e0e2t#$ i2di"!te0 t:!t t:e 13e5!i#i24 "om1etitio2 ?i## #e!d to "o20o#id!tio2 !2d "o25e34e2"e.

i24 01e"i!#i0t0 !#o24 ?it: 3i0. -u!#it!ti5e i201e"tio2 !2d 0u1e35i0io2 o% t:e b!2. 13o"e00 !2d 3!1id te":2o#o4i"!# de5e#o1me2t0> ! :o0t o% "u0tome3 %3ie2d#$ b!2. Simi#!3#$ t:e !udit !2d i201e"tio2 o% t:e "om1ute3iAed b3!2":e0 i0 2o? bei24 do2e i2 m!2$ "!0e0 b$ t3!20%e3 o% d!t! %i#e0 to t:e 0u1e35i0o3$ !2d i201e"ti24 !ut:o3itie0. T:e3e%o3e> b!2.eti24> "o31o3!te !2d 3et!i# b!2.0 o3 :!2ded o5e3 to !2 !uto2omou0 !4e2"$ b$ mo0t o% t:e b!2. ATM0 o% t:e #!34e3 b!2. m!2!4eme2t 13o%e00io2!#0 ?:o ?i## be 3eCui3ed i2 5ie? o% t:e im1e2di24 im1#eme2t!tio2 o% t:e &!0#eII 2o3m0 ?:i": !tt!":e0 0i42i%i"!2t to !00e00me2t !2d m!2!4eme2t o% 3i0. o% I2di! :!0 !#3e!d$ i2iti!ted t:e 3eCui3ed 0te10 to 43!du!##$ di01e20e ?it: t:e 1:$0i"!# 13e0e2t!tio2 o% ":Cue0 !2d 3e1#!"e t:e 0!me ?it: e#e"t3o2i" "#e!3i24 i2 m!Bo3 "itie0. 'it: t:e !utom!tio2 o% t:e 3outi2e ?o3.e.i24 o1e3!tio20> t:e EDI ?:e2 4!i20 mome2tum ?i## 3edu"e t:e de1e2de2"e o% "o31o3!te "u0tome30 o2 t:e b!2. b3!2":e0 to "o2du"t t:ei3 3outi2e b!2.13i5!te 0e"to3 b!2.0 i2 t:e #o24 3u2 u2de3 t:e3e di3e"t 1!$ 3o#e0 ?i## o2#$ be e=1e3t0 !t 0e2io3 #e5e#0 i2 m!3.eti24 !443e00i5e#$ %o3 3et!i# bu0i2e00 #o!20 b$ t$i24 u1 ?it: ! 0e#e"t-3e1uted bui#de30 !2d "o2du"ti24 3o!d 0:o?0 i2 I2di! !2d !b3o!d to #u3e t:e 0!#!3ied 1eo1#e !2d 13o%e00io2!#0. %!"to30 i2 b!2. T:i0 3o#e i0 i2te3medi!tio2 o% t:e b!2.0 :!5e to be i22o5!ti5e to m!i2t!i2 t:ei3 b3!2d 5!#ue0. Sm!## 1#!$e30 i2 ATM0 !3e !#0o t3$i24 to be ! 1!3t o% t:i0 0:!3ed 2et?o3. T:i0 ?i## !#0o e20u3e 0ubmi00io2 o% 0u": 0t!2d!3d d!t! i2 e#e"t3o2i" %o3m !2d 0"!22i24 t:e 1:$0i"!# do"ume2t0 ?:e3e 3eCui3ed. e? de1!3tme2t0 o% t:e 4o5e32me2t .0 "o##e"ti5e#$.0 :!5e !#3e!d$ 0t!3ted m!3.0 i2 t:e 13e1!3!tio2 o% do"ume2t!tio2 !2d e2:!2"i24 t:e #e5e#0 o% !utom!tio2. ?it: 3e4!3d to "#e!3i24 o1e3!tio20> Re0e35e &!2.i24 1#!"e m!i2#$ o2 !""ou2t o% !utom!tio2 ?i## 3edu"e t:e di%%e3e2ti!tio2 i2 t:e 0e35i"e de#i5e3$ 0$0tem0> !0 t:e$ !3e mo0t#$ 0t!2d!3diAed. %o3?!3d to 0ubmi00io2 o% "omme3"i!# do"ume2t0 b$ t:e t3!de i2du0t3$ t:3ou4: EDI i2 t:e 2e!3 %utu3e. T:e3e%o3e> t:e 3e!# "o3e 1eo1#e ?:o ?i## be 3et!i2ed b$ t:e0e b!2.0 %o3 m!3.E#e"t3o2i" D!t! I2te3%!"e/ t:e3e b$ 3edu"i24 t:e m!2u!# t!0.0. o% I2di! i0 m!de 1o00ib#e b$ t:e te":2o#o4$> #e!5i24 t:e 3outi2e !udit ?o3.e3 bet?ee2 t:e bui#de30 !2d 0!#!3ied 1eo1#e !2d () .0 b$ Re0e35e &!2. T:i0 !#0o %!"i#it!te0 0t!2d!3diA!tio2 i2 do"ume2t!tio2 ?it: u2i%o3mit$. e? b!2. T:e3e%o3e> b!2. "u0tom0> i2"ome t!=> "e2t3!# e="i0e> "omme3"i!# t!=e0 !2d 0!#e0 t!=/ :!5e !#3e!d$ i2iti!ted t:e 13o"e00 o% EDI .i24 13odu"t0 ?it: 01e"i%ied t!34et0. I2 t:e #o24 3u2> t:i0 e2!b#e0 e-"omme3"e to 4!i2 mome2tum.0 "!2 !#0o eCu!##$ #oo.i24 13odu"t0 ?it: %#e=ibi#it$ !3e 2o? !5!i#!b#e to o2e !2d !##.0 !3e eit:e3 %u##$ out 0ou3"ed b$ t:e i2di5idu!# b!2.i24 !"ti5it$. b3!2":e0 to 0ubmit t:e do"ume2t0 ?i## be e#imi2!ted. T:e0e de5e#o1me2t0 t!. O2"e t:i0 i0 do2e> t:e 2eed %o3 t:e bu0i2e00 0e4me2t to 1e30o2!##$ 5i0it t:e b!2. ':e2 ATM0 o2 o2e 0ide :!5e 3edu"e t:e de1e2d0 o% i2di5idu!#0 "u0tome30 o2 t:e b!2.4.eti24 !## t:e b!2. to t:e "o2"e32ed i2te32!# !udit de1!3tme2t0 o% t:e i2di5idu!# b!2. b3!2":e0 i2 ! 0imi#!3 %!0:io2.

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!0 ! 0ub0titute %o3 "!0: !2d ":e".e30 A00o"i!tio2 3e1o3ted #!0t De"embe3 t:!t i2 8<<H> %o3 t:e %i30t time> e#e"t3o2i" 1!$me2t0 0u31!00ed "!0: !2d ":Cue0 !0 "o20ume i2 0to3e 1u3":!0e0.2o? !0 0to3ed 5!#ue "!3d0.et :!0 "3e!ted o11o3tu2itie0 bot: %o3 13o5ide30 !2d %o3 u0e30 o% %i2!2"i!# 13odu"t0 !2d t:i0 e5o#utio2 :!5e 13o5e2 be2e%i"i!# to t:e e"o2om$.i24 !""ou2t !2$time o3 2e4oti!te !2 o5e3d3!%t !t 8 !m.i24 !""ou2t0.!2d e=1!2di24 it0 !bi#it$ to 3e!": t:e u2b!2. T:e "e2te3 e5e2 !##o?0 "u0tome30 to o1e2 ! ":e".i24 i2du0t3$. Ho?e5e3> i22o5!tio20 i2 %i2!2"i!# 13odu"t0 !#0o :!5e 4i5e2 3i0e to 0ome 2e? ":!##e24e0 %o3 m!3.e2 1#!"e i2 t:e #!0t de"!de demo20t3!te !4!i2 t:e te":2i"!# ?e!. Em1#o$e30 i2 t:e de5e#o1ed "ou2t3ie0 !3e tu32i24 i2"3e!0i24#$ to e#e"t3o2i" 1!$3o## "!3d0 !0 ! "o0t-e%%e"ti5e ?!$ to 3edu"e t:e bu3de2 o% ?3iti24 !2d 13o"e00i24 ":e".e t:em0e#5e0 mo3e "u0tome3-%3ie2d#$ ?e ?ou#d :!5e 2o doubt0 !bout t:ei3 0t3o24 b!2. A m!Bo3 3e0u#t o% t:i0 %u2"tio2!# be2":m!3. T:e "o2ti2ui24 e5o#utio2 o% t:e b!2. T:e (+ . T:e ":!24e0 t:!t !3e t!.!2 “e5o#utio2 o% 1!$me2t be:!5io3>” t:e A&A 2oted> “d3i5e2 b$ t:e i2"3e!0i24 1o1u#!3it$ o% debit "!3d0.L. Mo2ito3i24 t:i0 t3e2d> t:e Ame3i"!2 &!2.J0 13odu"t0 !2d 0e35i"e0. Comi24 !"3o00 t:3ou4: t:e 1e3%o3m!2"e o% &!2. Te":2o#o4$ i0 3!1id#$ t3!20%o3mi24 t:e b!2.0.i24 m!1.30 13e%e33ed 1!$me2t met:od %o3 i2 0to3e 1u3":!0e0.i24 ?!0 t:e e0t!b#i0:me2t o% ! 8I-:ou3 "u0tome3 0e35i"e "e2te3 t:!t "!2 2ot o2#$ 3e01o2d to Cue3ie0 !2d "om1#!i2t0 but !#0o 13omote !2d 0e## t:e b!2.UINNOSATION IN CE8TO(ER 8ERSICE IN -ANO8: 8atisfied customers are the best #uarantee for the stability and #rowth& Customers will be satisfied only when the ban"s pro!ide the customi$ed and inno!ati!e products and ser!ices at responsible cost& This article focuses on the "ind of ser!ices pro!ided by de!eloped countries and le!el of inno!ati!e ser!ices pro!ided by Indian ban"s& (any inno!ati!e ser!ices are currently a!ailable from Indian ban"s li"e E2-an"in#% AT(s% Anywhere -an"in# etc&% but there is a wastB scope of impro!ement& G#ob!#iA!tio2> t:e buAA?o3d> ?:i": e24u#%ed !## t:e 2!tio20 o% t:e ?o3#d 0i2"e t:e be4i22i24 o% t:e #!0t de"!de o% t:e 1!0t mi##e22ium> did 2ot #e!5e t:e b!2.i24 I20titutio20 o% t:e ?e0t !2d 0eei24 t:ei3 1e3%o3m!2"e i2 t:e u0e o% i22o5!ti5e met:od0 to m!.ed. T:e ATM ?!0 !#0o 3e"o2%i4u3ed %3om me3e "!0: di01e20e3 to ! 5e30!ti#e !2d ti3e#e00 !""ou2t e=e"uti5e.et 1!3ti"i1!2t0 !2d t:ei3 0u1e35i0o30 i2 t:e !3e!0 o% "o31o3!te 4o5e32!2"e !2d "om1#i!2"e. &e!2> . Co20ume30 !3e u0i24 t:ei3 1!$3o## "!3d0 !2d ot:e3 5e30io20 o% 13e1!id debit "!3d.!2 “e5o#utio2 o% 1!$me2t be:!5io3>” t:e A&A 2oted> “d3i5e2 b$ t:e i2"3e!0i24 1o1u#!3it$ o% debit "!3d0.!#0o .i24 i2du0t3$ u2tou":ed.2e00 !2d ?e!.i24 !2d 0e35i"e de#i5e3$ 0$0tem0> !0 it0 mode# %o3 ":!24e.i24 m!i#-o3de3 "om1!2$ L. "o31o3!te 4o5e32!2"e !t ! %e? %i3m0 "!2 d3!m!ti"!##$ ":!24e t:e "o0t o% "!1it!# !2d im1o0e !dditio2!# 3e4u#!to3$ bu3de2 o2 e5e2 ?e## m!2!4ed o34!2iA!tio20.i24 !2d %i2!2"i!# m!3.2o? %o3 it0 0u1e3b o3de3t!. T:e o1e2i24 o% t:e ?o3#d t3!de :!0 b3ou4:t out 0e5e3!# ":!24e0 i2 t:e 4#ob!# b!2.

). He3e "u0tome30 "!2 b3o?0e t:3ou4: 5!3iou0 bit0 !2d 1ie"e0 o% im1o3t!2t 0e35i"e i2%o3m!tio2 #i.e t:e !5e3!4e time to %i2i0: ! t3!20!"tio2 !2d t:e "om1!2$J0 13odu"t0 !2d 0e35i"e0. M!2$ I2di!2 b!2. u1 t:i0 1:o2e !2d 3e#!$ :i0 o3 :e3 "om1#!i20> Cue0tio20> o3 di%%i"u#tie0. I2%o3m!tio2 !bout t:e bu0ie0t d!$ o3 d!$0 i2 t:e b3!2": i0 di01#!$ed 0o t:!t t:e "u0tome30 ?:o ?!2t to !5oid t:e0e 1e3iod0 m!$ do 0o.m!":i2e "!2 e5e2 bu$ !2d 0e## mutu!# %u2d0.0 i2 t:e ?e0t :!5e> 0#edded t:ei3 "o25e30!tio2 “%i2!2"e !2d "o2t3o#” im!4e0> :!5e #i. .0 :!5e !#0o !do1ted 0ome o% t:e0e 0$0tem0.e?i0e !do1ted i22o5!ti5e 0e35i"e 0t3!te4ie0 !2d 13!"ti"e0. P:o2e #i2e0 dedi"!ted to "u0tome3 0e35i"e :!5e bee2 i20t!##ed. A2$ "u0tome3 "!2 1i".0 :!5e e0t!b#i0:ed !2 i2%o3m!tio2 "e2te3 o3 “e2"$"#o1edi!” i2 t:e ?!iti24 #ou24e. I201i3ed b$ LL &e!2> &!2. Ot:e3 b!2. M!2$ &!2.0 1ub#i0:ed ! E<-1!4e "!t!#o4ue to :e#1 "u0tome30 !113e"i!te !2d 0e#e"t %3om it0 mo3e t:!2 7K< %i2!2"i!# 0e35i"e0.

i24 e2!b#e0 2e? 13odu"t0 !2d 0e35i"e0 to be 4e!3ed %o3 01e"i%i" "u0tome30. R$%1r2-: 'e %ee# t:!t %i30t o% !##> i22o5!tio2 i0 3eCui3ed i2 b!2. Esers in anks as we know are not #% professionals and though they are trained in various aspects1 it really makes impractical for them to covers themselves suddenly to new upcoming systems.0> 0m!3t "!3d0> e-"!0: o3 "$be3 "!0:> !utom!ted te##e3 m!":i2e0> ?:i": !3e bei24 e=te20i5e#$ 13!"ti"ed i2 t:e0e "ou2t3ie0. %o remove inflexi ility like lack of users friendly front and environment for ank officialsA 2. i2!##$> ?!t":?o3d i0 0:!3e i2%o3m!tio2L mo2e$ !2d 3e0ou3"e0 .i24 0$0tem :!0 !#0o !do1ted "3edit "!3d0> debit "!3d0> e#e"t3o2i" ":e".i24 0e"to3. Ese of a very technical and proprietary ack and software1 which cannot e customi4ed easily. 'e "!2 1e3%o3m !## t:e b!2. I2te32et b!2.i24 o1e3!tio20> Bu0t o2 t:e "#i". )1 .e 3!2"e !2d (2ited St!te0 ou3 b!2.'8 *+. E#e"t3o2i" b!2.:um!2> 1:$0i"!#> !2d te":2o#o4i"!#/ to im13o5e ou3 b!2. Loo. 'e :!5e 5!3iet$ o% "u0tome30 tod!$ !2d t:e 2eed o% e!": "u0tome3 i0 di%%e3e2t !2d 5!3ied.0 to 3e2de3 bette3 !2d e%%i"ie2t "u0tome3 0e35i"e0. It i0 t:e o2e o% t:e #!te0t e=!m1#e o% IT i2 b!2.i24 to ot:e3 e"o2omie0 #i. 3.C&+-3r1*+3-: %he constraints that need to e removed to make our anking sector progressive are? 1. C&+.i24 0e"to3> %o3 bette3 tomo33o?.i24 i0 i2 5o4ue 2o?!d!$0. o% ! butto2 b$ 0itti24 !t ou3 :ome0.

5/ in the first three years1 which is elow the 1. growth has averaged (.ositive factor include? 28 #mprovement in private corporate sector investments1 B8 . 2n important reason for the lower growth is that investment did not increase in line with availa le investi le resources.1/. .. th plan target of *. )2 . Key weaknesses are identified as follows? :" A.r$.13$ Gr&<3( %hough the plan fixed a target of *.1/1 it is difficulty to achieve the target and the likely growth rate expected to elow )/ during the plan period.“BANKING SCENE: INDIA6 @M* T$r% A//r1*-1' &0 3($ :B3( P'1+ T1r.$3-A %he 5id %erm 2ppraisal of %he 1.lan conducted y the National Fevelopment 'ouncil 7NF'8 noted that in some areas of the economy is doing well and these gains need to e consolidated1 ut there are also important weaknesses1 which if not corrected could undermine even the performance of the economy and pro lems of the economy are assumed as follows? GF. %he ultimate aim should e to consolidate the gains in these developments and to overcome the weaknesses in the economy.ositive international perceptions on #ndia '8 %olerant inflation level F8 'omforta le external payment position with su stantial inflow from a road lending to comforta le foreign exchange position. #ndustrial sector also showed signs of improvement.th .

*1' D$)$'&/%$+3-: Hur social indicators are not only lower then the levels in East 2sian countries1 ut they are lower even in comparison with the levels achieved y these countries twenty6five years ago. &ince we have ample foreign exchange reserves at the moment1 the impacts of the oil prices are not passed on to the users. %here is a need to revamp the entire strategy ad more action is called for to improve the performance in agriculture sector.2/ to 1. 5" S&.2/ points. %he "uality of infrastructure impacts on our a ility to compete glo ally and also to attract $oreign Firect #nvestment. 4" I+3$r+13*&+1' D$)$'&/%$+3: Hwing to high oil prices1 our import outgo is "uite high. 2nother cause of concern is that the downturn in the world economy1 which will affect our export growth considera ly. y . 2griculture Growth has decelerated sharply from 3.2" A.38r$ Pr&. )3 . But if the oil prices remain high1 its impact need to e passed on to the consumer1 which will lead to inflation or fiscal deficit in the country. #t s estimated that every 1 percentage point reduction in our export growth rate will reduce the growth rate of GF.8'38r1' Gr&<3(: 2griculture Growth is very poor over the last two decades..r*. %he social indicators are also show wide disparity in the gender gaps1 large rural and ur an differences and wide variation across states. 3" I+0r1-3r8.+/ etween 1+*.'$%-: #nade"uate infrastructures in oth rural and ur an areas are a ma:or factor constraining on #ndia<s growth.6*1 and 1++56+(.

1 which is among the highest in emerging market economies.$ R$. S$. D" I+$>81'*39 1+ P&)$r39: %hough the poverty has declined the decline was less then targeted.$. th plan pro:ections and this has led to significant under funding in many sectors. )4 . &ome states were a le to reap the in a well performing state also presents a grim picture./ of the GF. E" B1'1+. Neither the center nor the state have een a le to mo eli4e the resources needed to keep outlays in line with 1. Even district ackwardness 9" R$-&8r.*&+1' D$)$'&/%$+3: -egional im alance in the development of different states presents a picture1 which re"uires a focused attention. &tudies ased on data collected from organi4ed and unorgani4ed sectors state that while employment may e increasing in the unorgani4ed sector in response to growth1 there is actually a contraction in employment in the organi4ed sector1 which is the preferred sector for employment y new entrants to the la our force. %he moderate improvement in education ad health indicators implies that access to more productive employment remains limited1 especially in ackward regions and amongst disadvantaged groups.'*. enefits of the economic reforms1 ut some others were not a le to do so. %he consolidated pu lic de t of the 'enter and &tates taken together is a out *.C" E%/'&9%$+3: %his is another area of grave concern.3&r: %he availa ility of resources in the pu lic sector to meet targeted levels of plan expenditure is an area1 which deserves attention.*+ 3($ P8.

4" %he proposed dividend should e paya le out of the current year<s profit.'1r13*&+ &0 D*)* $+ : %he -B# has decided to grant general permission to provided they comply with the following conditions? anks to declare dividends1 Eligibility Criteria :" Hnly those anks1 which comply with the following minimum prudential re"uirements1 would e eligi le to declare dividends without the -eserve Banks prior approval? a8 'apital to risk6weighted assets ratio 7'-2-8 of at least +/ for preceding two completed years and the accounting year for which it proposes to declare dividends 8 Net Non6performing 2ssets 7N. 3" %he ank should comply with the -eserve Bank<s prevailing regulations!guidelines1 including creating ade"uate provisions for impairment of assets and staff retirement enefits1 transfer of profits to statutory reserves1 etc.:B" D$. #t would e eligi le to declare dividend provided1 its net N. 2" %he ank should comply with the provisions of section 15 and 1) of the Banking -egulations 2ct1 1+4+. )5 . #n case any ank does not meet the a ove '-2.norm1 ut is having a '-2.2 ratio is less then 5/.2s8 of less then )/.of at least +/ for the accounting year for which it proposes to declare dividend.

c8 %he financial statements pertaining to the financial year to which the dividend is declared1 should e free of any "ualification y the statuary auditors1 which have an adverse earing on the profit during that year.: T:e 3e0e35e b!2. :!0 !d5i0ed !## 0":edu#ed "omme3"i!# b!2.0 :!5e to %o3mu#!te t:e 0":eme ?it: t:e !113o5!# o% t:ei3 3e01e"ti5e b!2. bo!3d0 !2d 0e2d t:e 0!me %o3 R&I !113o5!#. I2 t:e i20t3ume2t0> et". per cent.5" %he -eserve Bank of #ndia should not have placed any explicit restrictions on the ank for declaration of dividends. Banks1 which fulfill the eligi ility criteria1 may declare and pay dividends1 provided6 a8 %he divined payout ratio does not exceed 4. )( . #n case of any "ualification to that effect1 the net profit should e suita ly ad:usted while computing the dividend pay out ratio. A""o3di24> t:e b!2. %he reserve ank will not entertain any application for a higher dividend payout ratio than the one for which the anks "ualify. 8 #n case the profit for relevant period includes any extraordinary profits!income1 the payout ratio should e computed after excluding such extraordinary items for reckoning compliance with the prudential pay out ratio. 7Fivined pay out ratio should e calculated as a percentage of Cdividend paya le in a yearD 7excluding dividend tax8 to Cnet profit during the yearD.0 to %o3mu#!te ! 0":eme %o3 13o5idi24 0e35i"e0 !t t:e 13emi0e0 o% ! "u0tome3 ?it:i2 t:e %3!me?o3. -egarding the "uantum of dividend1 the -B# made the following stipulations. D&&r7S3$/ B1+2*+.i24 3e4u#!tio2 A"t> 7FIF.> %3om t:e 13emi0e0 o% "e2t3!# !2d 0t!te 4o5e32me2t0 de1!3tme2t0. 0e"tio2 8H o% t:e b!2.

arekh1 the managing partner at consulting ma:or author 2ndersen1D %he ongoing convergence in 7#ndian8 financial markets will result in the emergence of three or four large universal anks. 'ompetition is intense in oth domence at last count there were 1+ pu lic sectors1 34 private sectors1 and 45 foreign anks operating in the country1 and at the time of going to press1 ( companies have secured license from the #-F2 to start operations 7four of these already had8.D 2ds 2shwin . #t has chosen 'orporation Bank and Hriental Bank of 'ommerce1 for investments in their e"uity shares. &o are there Non . #t is logical for the two companies to want to e universal anks. Both . %he usiness per employee and intermediation costs for these two anks are the lowest in the industry. C %he proposed synergy etween the two efficient pu lic sector organi4ations will e mutually rewarding and help . %he . #n the 5angalore ased 'orporation ank are perhaps the iggest gam les over undertaken y the two giants. 'orporation ank incidentally1 is the only pu lic sector ank1 where the recent voluntary retirement schemes has not een implemented1 as it does not have any excess staff to e sent out.erforming 2ssets.#' is a long6term player with long6term resources garnered at a low cost. #t is highly likely that the immediate motivation was the entry of aggressive private sector player into its home6turf1 insurance. $rom a healthy 4/ in 1++(1 this has come down to around 2. #ndian anks have seen there interest speared6 the difference etween the rate at which they lend money and the rate at which they orrow it s"uee4ed over the last 5 years.#' in marketing1 servicing1 and cash flow management.ife #nsurance 'orporations elated attempt to leverage its consideration financial and distri ution muscle could have stemmed from a desire to ecome more ten a insurance company. Ba:pai elieves the 'orporation Bank deal is a win6win one.“ENTRY OF LIC INTO BANKING: A WISE DECISION6 .D %he marriage of anking and insuranceD1 explains -avi %rivedi1 an Executive )) director with consulting firm . %he &tate Bank of #ndia<s decision may have something to do with the state of the anking usiness. %hese two pu lic sector anks have the distinction of turning out superlative performance.#' and &B# >2N% to e serious contenders for the postD. %hat1 despite the state anks status as one of the est6managed ank in the country.)/ now.

%he ank can help it manage this money.*5.D %hat oth companies are serious a out their universal6 anking am itions is evident.#' has started its campaign with the ac"uisition of a significant stake in corporation ank. crore. &ays Ba:apai? C>e have put in a place a very wide array of products and today we are truly financial supermarketD.. T:e S!me E2d0: %he .ife #nsurance 'orporation<s ac"uisition of a 2) percent stake in corporation ank for rs. %oday (5 per cent of &B#<s revenues come from anking1 and almost all of .#' ac"uires an almost in house fund manager for all the -s.* crore8 to 11/1 .#'<s stake in the exceed 4+ per cent. 241(*.4)..1 deposits1 -s. crore it needs to invest in government securities. . Ba:pai has already articulated his desire to up . anks once the government amends the anking companies 2ct1 allowing private holdings in nationali4ed anks to %hanks to the ac"uisition of this stake1 #ndia<s largest insurance company now enefit from 'orporation Bank<s expertise in money management.ricewaterhouse'oopers1Dwill provide anks with a source of long6term funds to manage their short6term lia ilities. By ac"uiring a 33/ stake in corp ank securities1 ...4. )* ..2.#' has made its intent clearA to restructure itself into what Ba:pa terms Ca transnational competitive financial conglomerate of significance to societiesD. croreA net profit1 -s. Both are seeking to reduce this proportion over the next five years.251 .#'<s revenues come form insurance. 2nd y gradually increasing its stake in the profit making Hriental Bank of 'ommerce 72.2.. Hnly1 &B# is seeking to ecome a universal ank through organic means1 while .#' oasts an annual cash flow of around rs. 5anaging a sum of this magnitude will not only ena le 'orporation Bank earn a large management fee1 it will also help it ac"uire a significant clout in the money market. crore does make great usiness sense? 'orporation Bank is among the etter anks in the countryA and a green6filed anking entity will find it difficult to esta lish itself in these trying times..

#'8 in the first lap of what must certainly e a long6distance race.#'1 to its policyholders. Fespite &B#<s strong rand1 si4ea le network1 and huge customer ase1 it does look second est 7to .W(&A. Hne reason is its decision to link the fortunes of its insurance su sidiaries1 &B#6life1 to the a ility of its anking6 ranches to sell insurance policies6the classic B2N'2&&E-2N'E model. &B#1 for instance1 can sell a clutch of offering to its account6holdersA . #ts progress in the insurance usiness has een slow simply ecause the parliament has yet to clear a ill allowing anks to sale insurance. %he strategy has imposed several limitations on &B#. %he decision is a result of its desire to augment its fee6 ased income through commission from the sale of policies. )+ .B$33$rF Fiscounting the overlap that must exist etween the two1 oth companies on their existing customer ase to help them make the transformation to universal ank. %hen there are operational efficiencies to e gained.

D< 4here% AC Annual re3uirement& OC Per order cost& CC Per unit carryin# cost& *.2Orderin# costs5 2 Re3uisition% placin# of order% transportation% and staff ser!ices& Orderin# costs are fi'ed per order si$e increases& <2Carryin# costs5 2 4arehousin#% handlin#% clerical and staff ser!ices% insurance and ta'es& Carryin# cost increases& The firm should minimi$e the total cost 6orderin# cost F carryin# cost7& The economic order 3uantity 6EO@7 of in!entory will occur at a point where the total cost is minimum& The followin# formula can be used to determine EO@5 EO@C6<AODC7V.O&+ECTIVE: 2 In!entories represent in!estment of a firm:s funds& The objecti!e of the in!entory mana#ement should be the ma'imi$ation of the !alue of the firm& The firm should therefore consider5 6a7 6b7 6c7 costs% return% and Ris" factors in establishin# its in!entory policy& Two types of costs are in!ol!ed in the in!entory maintenance5 . .

INVENTORY 'HEN SHO(LD THE REPLENISH 9 IRM PLACE AN ORDER TO The in!entory le!el at which the firm places order to replenish in!entory is called reorder point& It depends on 6a7 the lead time and 6b7 the usa#e rate& Ender perfect certainty about the usa#e rate% the instantaneous deli!ery 6i&e& $ero lead timeH% the reorder point will be e3ual to5 1ead2time TEsa#e rate F8afety stoc"& The firm should stri"e a trade2off between the mar#inal rate of return and mar#inal cost of funds to determine the le!el of safety stoc"& A firm% which carries a number of items in in!entory% which differ in !alue% can follow a selecti!e control system& A selecti!e control system% such as the A2-2C analysis% classifies in!entories in to three cate#ories accordin# to the !alue of item5 A2Cate#ory consists of hi#hest !alue items% -2 Cate#ory consists of hi#h !alue items% C2Cate#ory consists of lowest !alue items& (ore cate#ories of in!entories can also be created& Ti#ht control may be applied for hi#h2!alue items and relati!ely loose control for low2!alue items& *1 .

(NCTION O INVENTORY CONTROL /unctions to be performed in the field of In!entory Control are5 . 8ettin# up norms for carryin# In!entory& < 0eterminin# what items to be stoc"ed& = 8ettin# rules for In!entory replenishments& > Recei!in#% storin# and issuin# in!entory items as needed& A (aintainin# records of in!entory 3uantities and !alues& B Identifyin# and deposin# of slow mo!in#% non2mo!in#% obsolete or dama#e in!entories& J /urnishin# summary information on in!entory position for control purposes& 1ocations of position responsible for performin# each of these functions in or#ani$ation structure #reatly !ary from company to company& In New 9olland /iat India determination of product material or direct wor" order material 6what?7 to be carried in In!entory is more or less automatic result of product desi#n formulation and is #i!en in material forecast for a wor" order& Indirect materials consumed in manufacturin# process such as electrodes% bra$in# alloys% toolin# etc& are usually #i!en by process en#ineerin# or at times by desi#n departments& -alance #reat bul" of indirect materials is made up of repair parts and #eneral supplies& Responsibility for specific 6what?7 items to be carried in in!entory rests with 4or"s En#ineerin#& 4ith respect to raw materials and purchased parts% responsibility for determinin# 6when?7 and how much to buy is a si#n to rele!ant product manufacturin# i&e& production plannin# and material plannin# #roups& 9owe!er a strict bud#etary control and allocation to specific wor" order control on hi#h !alue items is e'ercised by In!entory control department or#ani$ed separately under (aterial (ana#ement& Purchase department attached to manufacturin# department determines 6where?7 to buy& *2 .

0etermination of indirect material 6when?7 and how much to buy and 6where?7% is done by central #roup under (aterial (ana#ement by consolidatin# re3uirements of all sections and while loo"in# at consumption trends o!er a No& Pears& A#ain a strict bud#etary control and control on hi#h !alue items for their allocation is e'ercised by In!entory control #roup& Recei!in# and storin# is done by Central 8tores C8W under (aterial (ana#ement 0epartment& Issuin# In!entory is done by C8W on demand from manufacturin# and is controlled by (aterial Plannin#& A#ain some on 1ine chec"s are proposed to be introduced at raisin# of 8tore Issue !oucher sta#e itself% for hi#h !alue items so that induction is controlled strictly as per re3uirement of production schedule based on lead time for manufacture to "eep 4IP in!entory under control& Records of In!entory are maintained on a main frame computer centrally arran#ed ha!in# shared access from all functions for their specific use& *3 .

T:e I2te32et i2 E-"omme3"e: I25e2to3$ 1#!22i24 !2d o3de3 m!2!4eme2t (ost of the time the job of forecastin# demand and replenishin# in!entory to suit the demand is not accomplished in a manner that is useful& 4eLll tell you how to collaborate o!er the Internet on order mana#ement% in!entory mana#ement% and demand forecastin#% production schedulin# and transportation& 4eLll describe how throu#h collaborati!e plannin# on the Internet% consumer beha!ior can be communicated throu#hout the or#ani$ation& S"e2!3io0: 4hat happens when a customer contacts you and as"s for a product that he wants immediately and you disco!er that your warehouse doesnLt stoc" it at that moment? And if this happens after the item has been lo##ed in as a confirmed order? Are you able to respond in a timeframe thatLs suitable to your customer? 4hat happens if the customer contacts you throu#h telesales% or throu#h online sales on the web? Is your staff able to respond accurately to the customerLs 3uery? In the process are you really ma"in# money in these deals? 4hat do you need to ensure that you are not in a situation where you are in the dar" about orders and in!entories% and maybe e!en customers? 4e "now that customer orders dri!e a supply chain& A primary re3uisite for any e2 commerce business is that it employs systems that mana#e orders and in!entory le!els efficiently& *4 .

4hen customers demand ser!ice throu#h multiple channels% order promisin#% trac"in# and fulfillment become more comple' and intensi!e& (ultiple channels could mean customers callin# in throu#h the web+ phone% fa' or email and usually different people attend to these calls in an or#ani$ation& 0isparate order processin# can lead to serious #aps in demand and fulfillment& If order commitments are not honored throu#hout the enterprise a consolidated order status at any point of time can be difficult to !iew and this difficulty may in turn to be communicated to the customer& Consolidatin# orders into a sin#le interface for submission% trac"in#% routin#% fulfillment% and order status 3ueries% can help all employees access !ital information from a common interface thus ensurin# !isibility in the entire process& And if this !isibility is in turn communicated to the customer% it means that the customer has a complete picture of the status of his order until the final deli!ery& Customer order history implies !iewin# and mana#in# pendin# orders by status% accessin# order numbers by in!oice numbers% trac"in# number or customer& O3de3 m!2!4eme2t 0e35i"e0: Order mana#ement ser!ices are a critical component of customer ser!ice 2 enablin# internal communications within an or#ani$ation and facilitatin# collaboration amon# tradin# partners to ensure that all customer orders are fulfilled and deli!ered when promised& *5 .

Profitable order mana#ement features can afford the followin#5 • • Consolidated order mana#ement that lowers costs in turn& Ad!anced order commitment and trac"in# that can in turn help impro!e customer ser!ice& • Allocation of in!entory and products in a profitable manner& Automation of wor"flows throu#h order mana#ement processesX Order !isibility 6order trac"in#7X • • Optimi$ed price lists and customer 3uotes to ma'imi$e mar#ins X Consolidation of order data to support enterprise forecastin# and replenishment initiati!esX • • 8i#nificant increase in the !isibility of demand and future re3uirementsX Elimination of repetiti!e tas"s and physical paper handlin# X Addition of the !alue of a!ailability to a productX Reduced lead times% reduced administrati!e wor"loads and the use of multi databasesX • • • • Optimi$ation of catalo# price lists for profitability& *( .

I25e2to3$ m!2!4eme2t: One of the lar#est costs to any business is that of in!entory or stoc" at hand& 4hether a manufacturer% retailer or distributor% the amount of in!entory held directly impacts your bottom line in more number of ways than you can ima#ine& 9a!in# too much cash tied up by not stoc"in# up on items that customers need% can ha!e a major impact on your business& A product that is in e'cessi!e demand is usually e'tremely difficult to mana#e& 8upplyin# the ri#ht amount of products implies that an accurate demand forecast is essential& This impacts the entire supply chain& A similar situation e'ists at the warehouse le!el and e!en the manufacturer end& Continuous replenishment in a warehouse can become a mammoth tas" if consumer response is not studied accurately& To facilitate efficient consumer response based on consumer demands% warehouse data% sales forecasts% and in!entory plannin#% it becomes imperati!e that such companies consider in!entory mana#ement seriously& (a"in# accurate demand and supply predictions is an ideal situation that anyone in the supply chain mana#ement arena could dream off& In!entory mana#ement can remo!e barriers between manufacturer and retailers and establish a closer relationship between them& Ideally in!entory mana#ement should be easy as the main aim is to reduce in!entories& If items wanted are not at hand or *) .

& Impro!ed customer ser!ice <& Reduced in!entory in!estment =& Increased producti!ity -enefits of in!entory mana#ement5 • • Complete control of in!entory& Complete information about the !alue of the in!entoryX Complete !isibility on @uantities on hand% @uantities committed and @uantities soldX • • Response time to demand chan#es reducedX Increased sales Onowled#e of the e'act si$e of merchandi$in# in!entoryX /re3uent analysis of purchases% sales and in!entory records& Remo!al of unnecessary use of warehouse space used by unneeded part of in!entory& • • • • ** .e!en if merchandi$e wanted is reordered often% sales will be lost to competitors& Precise control of in!entory is an essential in#redient for a successful company& The = main aims in in!entory mana#ement are5 .

• Reduction in e'cess merchandi$e stoc"& Ta'es and insurance premiums paid on e'cess merchandi$e in!entory a!oided& • -y pro!idin# timely accurate information pertainin# to in!entory location% mo!ement and !aluation% receipt of #oods% sale and return of #oods and profits you can ma"e sure that your in!entory is !isible throu#hout a networ"& 4ith in!entory mana#ement you can set your product catalo# to hide products that are not in stoc"% or chan#e prices based on the amount of products a!ailable in the warehouse& The 3uantity a!ailable can be displayed to the shopper and this can pre!ent unnecessary confusion when the shopper adds items not a!ailable to a shoppin# cart& The store buyer can be automatically notified about low in!entory le!els& IT is a "ey enabler in the transformation of purchasin# into a strate#ic business function& The challen#e is to find a way to put these technolo#ies to use and create !alue and competiti!e ad!anta#e& Contact us for inno!ati!e ideas and solutions in creatin# and buildin# online stores with ad!anced features li"e Order mana#ement and In!entory mana#ement& Chec" out our e2store pac"a#es& *+ .

A113o!": ?it: Com1e20!tio2 Po#i"$/ In the past se!eral years% we ha!e seen !ery rapid #rowth in e2commerce& E!en thou#h online retailin# was still less than .Q of retail economy in .NNN% online retailin# is forecasted to be more than I<H> billion in <HH> YAZ& There are se!eral similarities and differences between online and traditional retailin#& One of the si#nificant differences is that there are many online retailers who do not carry any in!entory& Ob!iously% the stoc"less policy can reduce holdin# cost% and online retailers can ha!e competiti!e ad!anta#es from the policy& 9owe!er% it is ob!ious that stoc"outs will hinder consumersL decision ma"in# for buyin# a product& There are many mar"etin# papers studyin# the relationship between stoc"outs and consumer response& /it$simons ar#ues that when consumers face stoc"outs% consumers react substantially and ne#ati!ely to the stoc"out2they report lower satisfaction with the decision process and show a hi#her li"elihood of switchin# stores on subse3uent shoppin# trips Y=Z& Therefore% there e'ists trade2off between cost sa!in#s and lost sales in the stoc"less policy& Currently% many traditional retailers "eep positi!e stoc" on hand e'cept some special cases 6e&#&% car dealers7& 9owe!er% in e2business% there are many online retailers who are doin# business without carryin# any stoc"& They are just acceptin# bac"orders& The in!entory policies between online and traditional retailers are almost opposite& Then% basic and fundamental 3uestions to as" are Kcan the stoc"less policy be an +.A2 EO.I25e2to3$ M!2!4eme2t i2 e-bu0i2e00 . .

% >Z& There are many papers about lost sales cases and partial lost sales cases& 9owe!er% the stoc"less policy has not been researched fully yet& This paperLs main purpose is to find the stoc"less policyLs sufficient conditions for the optimality and to #enerate some insi#hts from the sufficient conditions& To analy$e and answer the abo!e basic 3uestions% we introduce a new in!entory policy% Compensation policy& In this policy% the only difference from the other in!entory policy occurs when we do not ha!e any stoc" on hand& That means% if we do not ha!e any stoc" on hand% we will offer a compensation% R% to "eep or increase demand rate& Therefore% we compensate consumerLs waitin# time with compensation due to stoc"2 outs& /rom customerLs point of !iew% stoc"2outs will #i!e a ne#ati!e effect& Therefore% some customers may postpone the final purchase or stop by the other stores when they notice that they cannot buy what they want immediately& 9owe!er% with the compensation policy% the customers may still want to buy the product because of the compensation& /urthermore% it is possible that the compensation policy may ha!e hi#her demand rate compare to the demand rate with stoc"& /rom retailerLs point of !iew% as lon# as they can ma"e profits% they want to increase demand rate& Therefore% this in!entory policy is beneficial for both customers and +1 .optimal in!entory policy?K and Kif it can be an optimal in!entory policy% what are the sufficient conditions for the optimality?K It is well "nown that% under the EO@ model with bac"orders% acceptin# only bac"orders cannot be an optimal solution unless bac"order cost is e3ual to H Y.

retailers as lon# as they can #et benefits from the policy& To implementin# this policy is not difficult& In traditional retailin#% if a store will post its compensation rate with waitin# time% it may be attracti!e some customers who are not interested in purchasin# the product at that time& In e2business retailin#% the policy can be implemented more easy way& 0ue to the ad!anced web2technolo#y% we can chan#e our products price !ery easily& Therefore% a store will announce the compensation immediately when its in!entory is out of stoc"& Ender this compensation policy% there is also trade2off& -ecause we will ha!e an additional compensation cost% our total cost will be also increased& 9owe!er% due to the policy% if the demand rate with stoc"2outs will be increased% our total profit will be increased also& /urthermore% we may ha!e different optimal in!entory policy 6e&#&% stoc"less policy7 under certain conditions& In this paper% we consider two types of compensation& One is flat rate and the other is time dependent compensation& Ender the flat rate compensation policy% we will offer a fi'ed compensation re#ardless of waitin# time& Therefore% durin# the stoc"2outs period% all customers who placed bac"orders #et same fi'ed compensation& On the other hand% under the time dependent compensation policy% customers will be compensated accordin# to waitin# time& To in!esti#ate and find sufficient conditions for each in!entory policies% we formulate Compensation models based on the EO@ model with bac"orders& 9owe!er% there are se!eral differences& /irst% we #enerali$e the assumption about demand rate& Ender the EO@ model with bac"orders% the demand rate is always +2 .

same& 9owe!er% in our model% we can ha!e different demand rates between with stoc" and with stoc"2outs& 8econd% if the demand rates are not same% just minimi$in# a!era#e in!entory cost will not #i!e us the solution that will ma'imi$e profit& Therefore% there are two ways to sol!e this problem& One is ma'imi$in# profit function% and the other is minimi$in# a!era#e in!entory cost includin# the effect of different demand rate& In this paper% we introduce new cost% opportunity cost& This cost represents and ta"es into account chan#es of profit due to the difference of demand rate& Therefore% in our model% minimi$in# the a!era#e in!entory cost #uarantee that the solution from our model is also ma'imi$in# the profit function& Our major findin#s from our in!entory policy and models are as followin#s& /irst% the EO@ model with bac"orders and its solution are special case of our model& This result is ob!ious& 4hen we will not offer any compensation and ha!e same demand rates between with stoc" and with stoc"2outs% our model is e'actly same as the EO@ model with bac"orders& 8econd% our model also #enerali$es the EO@ model with bac"orders in case of partial lost sales& This is also our modelLs special case when we will not offer any compensation and ha!e partial lost sales& Third% we found that% without any compensation% the stoc"less policy cannot be an optimal in!entory policy unless bac"order cost is $ero& Therefore% with no compensation% we can ha!e only positi!e stoc" on hand or mi'ture in!entory policy accordin# to our cost structure and demand rates& /ourth% the stoc"less policy can be an optimal solution only with positi!e compensation +3 .

under certain conditions& /ifth% we deri!e sufficient conditions for the three optimal in!entory policies% which are positi!e stoc" on hand% mi'ture in!entory% and stoc"less in!entory policy& These sufficient conditions are simple and easy to understand& /inally% we show the optimal solutions for each case& Therefore% #i!en cost structure and demand rates for a product% we can tell what is the optimal in!entory policy and what is the e'act solution to minimi$e the a!era#e in!entory cost which is e3ui!alent to ma'imi$in# profit function& Throu#hout the rest of this paper% we will re!iew the traditional EO@ model with bac"orders% formulate Compensation models% analy$e these Compensation models% find insi#hts from our research% and discuss further research issues& To our "nowled#e% e'cept the traditional EO@ with bac"orders% all models are new and also the optimal solutions are new& +4 .

RESERACH METHODOLOGY It is the arran#ement of the conditions for collection and analysis of data in a manner that aims to combine rele!ance to the New 9olland /iat India purpose with economy in procedure& The New 9olland /iat India is e'planatory in the be#innin# as the secondary data is collected mostly from the hi#her mana#ement and some from middle mana#ement& This information is able to #i!e "nowled#e about the company and its share in the mar"et& SOURCES OF DATA -oth primary and secondary data were collected to meet the objecti!e+ the data is collected for the last three years from the annual reports of the new holland fiat india& 0ue to non2a!ailability of the accounts of sepaIn!entoryn units& I measure the performance on the base of all a##re#ate units& 0ata is ta"en as per the re3uirements of the study of the in!entory mana#ement& 8econdary data is used for it& Primary data is collected for the purpose of the theoretical part& +5 .

CONCL(SION .& -y studyin# last two years performance of the company% we say that the wor"in# capital of the company is increasin#& <& The operational In!entory performances of the company are continuously risin# because of the increase in the sales of the companies: products& =& The 0ebt E3uity In!entory of the company is increasin# as company is now payin# its debt due to which the company 1i3uidity In!entory is fallin#& +( .

INDINGS • /ormation of specific #roup in each area to identify the wasta#e elements and see" participation of all& • Identification of wasta#e& • /ormulation of action plan to eliminateDminimi$e wasta#e& • Re!iew of status& • Identification of correcti!e actions and their implementation& • 9i#hli#htin# the #ains& +) .

LIMITATION  The study is limited to two month only&  Price le!el chan#es are not considered&  Time is short for deep research&  8eparate records of the all units are not a!ailable&  No comparison made with other firm:s In!entory while durin# the study period and ma"in# conclusion time&  The readjusted and re#roup fi#ure sli#htly affects the In!entory fi#ures&  8tudy is limited with the one unit of New 9olland /iat India Industries limited&  The data is used in the project ha!e been ta"en from annual report only& 9ence% #roupin# and sub #roupin# and annuliasation of data may sli#htly affect the results& +* .

S(GGESTIONSD Althou#h new holland fiat india% has satisfied the In!entory& The followin# are the su##estion bein# made out by me as obser!ed durin# study of the performance throu#h In!entory (ana#ement5  Company should increase its sales of all the production units with increase in the sales of the company that can be able to increase its financial position&  Company should decrease the operatin# e'penses to increase its operatin# profit&  (a'imi$e the production capacity&  (aintain the amount of current sales le!el and try to increase it&  (a'imi$e the utili$ation of fi'ed assets and wor"in# capital&  All other mana#ement% personal and administrati!e su##estion to be incorporated&  To follow the strict credit collection policy&  Reduce the current assets and 3uic" assets In!entory to maintain the standard In!entory&  Cash In!entory performance is poor& 8o ma"e policies to impro!e it&  Return on in!estment is in satisfactory position and they try to maintain it in future&  Try to start those companies% which are closed due to non2a!ailability of funds&  Try to best utili$ation of the a!ailable resources&  Try to maintain the standard In!entory in the financial In!entory& ++ .

Ltd.!!" 'E&. .Edai Paree" Himalya 1.0  (anuals and /iles of New 9olland /iat India& Deep & Deep Publication Pvt. Site0  www&#oo#le&com D Year -2005.&I&LIOGRAPHY &oo. Publishing House Delhi Year .  Principles and Techni3ues of Personnel (ana#ement ..

n c&ain o* co**ee s&ops s+c& as S a!/+c0s1 do "o+ &in0 &e" s&o+ld connec i o &ei! co'pan" na'e2 I* no please ans.e! n+'/e! 31 i* "es please s0ip 4+es ion 3 and (o o 56 Kes 8o 1.!""#$%I& '(#)TI*$) Ho.e!e o open i s o.1 . very often Drequently .ccasionally /arely 8ever I* Coca-Cola . o* en do "o+ p+!c&ase Coca-Cola p!od+c s2 7 /egularly.

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/3-45 /45 or above

Ho. o* en do "o+ p+!c&ase a p!od+c *!o' S a/+c0s2 7

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Ho. do "o+ *eel S a!/+c0s p!od+c s a!e p!iced2 7

1,3

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,lightly overpriced

Appropriately priced

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O &e! &an co**ee1 .&a p!od+c s .o+ld "o+ li0e o &a9e 'ade a9aila/le a co**ee s&ops2 ;cons+'e!s .!i e do.n .&a p!od+c s &e"<d li0e o &a9e 'ade a9aila/le= 7

1,4

8&a 'e &od o* ad9e! isin( do "o+ &in0 .o+ld /e &e 'os e**ec i9e *o! CocaCola<s co**ee s&ops2 7 8illboards Television ads 9agazine:$ewspaper ads ;lyers <adio Through other ,oca-,ola products = on bottles, cans, etc...> Through the promotion of other ,oca-,ola products

1,5

.....8i & !e(a!d o &e a'/ience1 .omedy nights =stand up comedians. etc. #uropean style =outdoor seating.o+ld "o+ li0e o &a9e2 7 @ive music =..> *ther 8o+ld "o+ li0e *o! &e!e o /e en e! ain'en a &e co**ee s&op2 I* "es ans.&a 4+ali ies appeal o "o+ a/o+ co**ee s&ops2 7 )mall and cozy (pper scale and fancy .asual place where you can spend time with friends ?ery social 'uiet atmosphere where you can work. etc.> *ther 1.> Aukeboxes Television <eading nights In store library =selection of books made available to read on location> . read.( .azz nights.e! &e *ollo.in( 4+es ion1 i* no please s0ip o 4+es ion >? Kes 8o 8&a so! o* en e! ain'en . live bands. etc... etc.

o+ld /e con9enien 2 7 In .> $ear work or school $ear home $ear the park In less crowded locations 1.ommon popular areas =malls.Do "o+ &in0 Coca-Cola s&o+ld 'a0e i s o &e! /e9e!a(es a9aila/le a s&op2 &e co**ee Kes 8o Fo! .&a !easons do "o+ 9isi co**ee s&ops2 7 "ersonal:alone time To be with close friends 8efore or after work:school business meetings with the family to socialize *ther In .&a loca ions do "o+ &in0 a co**ee s&op ... outlets etc.) .

&en c&oosin( a co**ee s&op2 Please !an0 &e op ions *!o' @ /ein( &e leas i'po! an o A /ein( &e 'os 6 7 Taste Customer service 9ealth Convenience . li0el" a!e "o+ o p+!c&ase p!od+c s *!o' Coca-Cola<s co**ee s&ops2 7 2<tremely li!ely +retty li!ely +retty unli!ely @efinitely not 1.* .peed %ocation Atmosphere Fariety +rice /an! values must be between * and 3 Ho.in( . i'po! an a!e eac& o* &e *ollo.*ther Ho.

offee:@attes:.8&a p!od+c s a!e "o+ 'os li0el" o p+!c&ase a co**ee s&ops2 7 .appuccinos Tea Bot chocolate . old a!e "o+2 7 42 and under 4C-05 05-D5 D5-15 1..n Kes 8o A!e "o+# 7 6ale Demale Ho. cookies.> *ther Do "o+ /elie9e &a Coca-Cola co**ee s&ops s&o+ld 'a!0e 'e!c&andise1 s+c& as S a!/+c0<s c+ps and co**ee2 &ei! o.+ . etc.onfectionary items =cake..

15 and over 11. .