INVENTORY MANAGEMENT

ws
INVENTORY MANAGEMENT

(WITH SPECIAL EMPHASIS ON VARIOUS TECHNIQUES OF

INVENTORY CONTROL)
A training report submitted in partial fulfillment of the requirement for the degree

OF
MASTERS OF BUSINESS ADMINISTRATION
(2008-2010)
Submitted by:
POOJA
ROLL NO: 80904317039

CHITKARA SCHOOL
OF
MANAGEMENT STUDY

INVENTORY MANAGEMENT

ACKNOWLEDGEMENT
I consider it pleasant privilege to express my heartiest gratitude and indebtedness to those who
have assisted me towards the completion of my project report. The project wouldnt have seen
the light of day without the help and guidance of many people I take an opportunity to convey
my deepest gratitude to all those individuals.
My first words of thanks go to Mr. Jagdish Rao (General Manager) & Mr. Arup
Chakrobarty (Manager Finance & IT) for giving me the opportunity to work on this project.
I feel highly obliged and indebted to my learned guide Mr. Rixon Singla, Mr. Sunil Sharma,
Mrs. Pooja Sharma,Mr.Usman Ali,Mr.Sumit Bansal of Finance department, and also to Mr.
Anil Aggarwal, Mr. Ravinder Jindia & Mr. S.K.Kapoor (Stores Department) GSK for not
only providing all the moral and organizational support but also for inspiring encouragement
during the course of this work. Without their help it wouldnt have been possible for me to
accomplish this task in time.
Words at my command are inadequate both in form and spirit to express my sincere and
profound gratitude to all these persons for their meticulous guidance, keen supervision,
constructive criticism. Friendly attitude and whole-hearted help throughout the course of this
project. Their unforgettable, positive approach and freehand acumen made this project
possible.
I owe my special regards to my parents and my elders for their blessings and good wishes.
Last, but definitely not the least, I would also like to thanks Mr. S.R Taneja
for providing us the proper guidelines to make this project report.
Under this able guidance I have increased my capacity to understand and work in a demanding
environmet.

Pooja
2

INVENTORY MANAGEMENT

PREFACE
The problem of unemployment is one of our major problems. This problem has been troubling us
ever since we gained independence. One reason for growing unemployment in the country is our
faulty education system. Students are given bookish knowledge without any training for specific
jobs. To solve this problem to some extent training programmes are being introduced. This helps
the students to increase their job perspective. Training can be done in industries, business-houses,
sales and income tax department of various central, state, local, government societies etc.
A project work programme in industry is to get an overall view and exposure of the industry and
its working environment. It enhances the confidence and boosts the morale of the students who go
for their project in the industry. These programmes are included in the curriculum of studies for
development of the personality of the finance students and get a first hand experience about the
working of the industry.

INVENTORY MANAGEMENT

EXECUTIVE SUMMARY
1st part of the report contains introduction to GSK, which includes company profile showing
the company status, ISO certification etc., Historical background which shows how GSK
comes into being? Then various Packaging stations, Manufacturing process which shows how
Horlicks is manufactured in company? After that there is Supply chain process which shows
that how the Horlicks reaches to the final consumer?
It contains the brief information about the GSK Nabha plant like no. of employees, shift
timings, milk collection centers etc. After this there is product profile, which shows range of
products offered by GSK Consumer Health Care Ltd., Department overview, which shows how
various departments works for the company, Then comes GSK mission which shows
companys dedication towards the society and an overview about its financial and marketing
implications.
2nd part contains the Research Methodology, which includes justification about the topic
selected, the objective of the study, Unit where the study is conducted, time period for which
the study is conducted. Scope of the study and sources of information (primary as well as
secondary). It also includes various limitations during the course of the project.
3rd part contains the introduction to topic Inventory Management this includes the
information, as to what is Inventory Management all about, the aspects of Inventory
Management, its importance, the objectives for Inventory Control and scope, Inventory Control
techniques, etc. and all this is well supported with the data of GSK.
4th part is about the analysis of the data which includes the present scenario of inventory
management in GSK , NABHA, the ways in which inventory could be utilized, the various
inventory control tacts such as ABC, FSN, Level Setting, and last but not the least about the
5S Housekeeping.

INVENTORY MANAGEMENT
5th part of this report is about the findings and suggestions, the various proposals that the
company could apply for maintaining the inventory and the suggestions for the improvement in
inventory control that could be helpful to the organization, some techniques for practicing good
inventory control management.
The last part of the report is that of Bibliography in which the various books, web sites and
articles consulted for the preparation of this report are mentioned.

COMPANY PROFILE
Company

Glaxo SmithKline Consumer Healthcare

Ltd

Head office

Gurgaon (Haryana)

Registered Office

Nabha(Punjab)

Status

Multinational Company.

Originally U.K. Firm

Quality Status

OHSAS 18001:2007
ISO 9001:2008
ISO 22000:2005
ISO 14001:2004
ISO14001Accreditation and SA8000
Nabha & Sonepat Plant certified for
HACCP (Hazard Analysis Control
Point for Food safety).
6

Turnover (2011)

Rs.28,32,10 (Lakhs),

Profit(Before Tax)(2011)

Rs.5,40,26.13(lakhs)

Export To

Bangladesh, Myanmar, Sri

Lanka, Middle east, Nepal,
Hong Kong, Malaysia, Fiji

INTRODUCTION TO GSK

GlaxoSmithKline Consumer Healthcare Ltd. (GSKCH) is an Indian associate of

GlaxoSmithKline plc, U.K.
GSKCH is one of the largest players in the Health Food Drinks industry in India. The
Company, with its manufacturing plants located in Nabha, Rajahmundry and Sonepat, has
a total workforce of over 2700 people, each driven by a spirit of enterprise.
Its flagship product, Horlicks, is a highly respected brand, which is over 100 years old in
India. The Company also manufactures and markets Boost, Viva, Maltova, Biscuits,foodles
and in addition promotes and distributes a number of products in diverse categories,
including prominent brands such as Eno, Crocin,Iodex and Sensodyne.
GSKCH has a strong marketing and distribution network in India comprising over 4800
wholesalers and direct coverage of over 7,00,000 retail outlets.

HISTORICAL BACKGROUND
GlaxoSmithKline Consumer Healthcare Ltd. is a pharmaceutical and healthcare company
born out of the merger of two leading international organizations SmithKline Beecham and
GlaxoWellcome. GSK Consumer Healthcare Ltd and GSK Pharmaceuticals Ltd are the two
businesses of GSK in India of which former is headquartered at DLF Gurgaon and the latter
at Worli, Mumbai.

Its global mission is

To improve the quality of human life by enabling people to do more, feel
better and live Longer ".

PLANT LOCATIONS IN INDIA

PRODUCTION STATIONS

FOOD POWDER

NABHA, RAJAHMUNDRY &

SONEPAT

BISCUITS

SAHIBABAD

ENO

RAJAHMUNDRY

CROCIN

BANGLORE

IODEX

BANGLORE

PACKING STATIONS
The company started packing Horlicks in Kg and 1kg pouches. Packing machines were
imported and installed. As the main market for sale of Horlicks was in the South and East
India, need was felt for the sale of Horlicks in small units of the country. Therefore was
opened at different places. At present Horlicks is dispatched from Nabha in bulk quantity to
the following packing stations:

10

 Mangaldoi (Assam)
Kompally
Baddi (Himachal Pradesh)
Hamira (Punjab)
Parson

The marketing of the company's products is done through various Regional Sales Offices
(RSO) situated at:
North (New Delhi office)
West (Mumbai office)
East

(Kolkata office)

South (Chennai office)

The company has its head office in Gurgaon. Bulk-malted food manufactured in Nabha is
dispatched to different packing stations in drums for packing in units container or gusseted
pouches (GPs).

GSK MISSION
Our global quest is to improve the human life by enabling the people
TO DO MORE, FEEL BETTER, AND LIVE LONGER.

11

People at Glaxo SmithKline consumer healthcare limited are dedicated ourselves to

delivering medicines and products that help million of people around the world LIVE
LONGER, HEALTHIER AND HAPPIER LIVES.

CULTURE
Successful companies have developed something special that supersedes corporate strategy,
market presence, or technical advantage- distinctive culture. What it is, whether it is
important or not, what you deal with indirectly. Why? Because culture is an intangible
shadow. You cannot garb hold of culture. it has no handles, nothing you can touch directly.
Having said all that, it is an important issue GSKs culture is the set of norms that create
powerful precedents for acceptations around acceptable risk, change orientation, creative and
innovation, group versus individual effort, customers orientation, extra efforts.

ABOUT THE NABHA PLANT

GSKs Nabha plant is a huge manufacturing unit. Glaxo SmithKline Consumer Healthcare
Ltd. has three factories, which are at Nabha, Rajahmundry and Sonepat. The factory at
Nabha is the mother unit and products manufactured by this company fall under two
categories of consumer healthcare:
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Nutritional
Health Drinks

Horlicks and its

variants

Gastrointestinal

ENO Fruit Salts

The food powder (HORLICKS & BOOST) is manufactured in Nabha. The requirement of
workforce changes with change in production policy. The plant at present employs a work
force varying from 1500 to 2000 out of which approximately 1100 are permanent. There is
a staff and management of about 145 persons. There is a wage agreement for 3 years. The
workers also get weekly off according to Labours Act.. The plant runs 24*6and there are 3
shifts from 5.15 a.m. to 1.15 p.m., 1.15 p.m. to 9.15 p.m. & 9.15 p.m. to 5.15 a.m.The
office opens for 6 days in a week.Production capacity of Nabha Plant is about 99500 MT pa.
About 7 Milk collection centers were opened at a radius of about 40km around Nabha, to
meet the requirement of 70 tones of Milk per day. The main purpose of opening collection
centers at village level was to get good quality of Milk directly from the producer and pay
them good price, thus, raising their standard of living. Nabha and Sonepat production facility
has already been certified for HACCP ( Hazard Analysis Critical Control Point for Food
Safety ).During the year the

Nabha site received The Best Environment Protection

Initiative 2006 award from the Punjab Pollution Control Board.

5S is a tool that aims to create and maintain an organized,clean and high performance
workplace.This tool has been efficiently utilized by nabha unit and it has lead to reduce the
records retrieval time drastically.
SORT
SHINE
STORE

DEPARTMENTAL OVERVIEW

13

The various departments in GSK Ltd. Nabha are:

OPERATIONAL
EXCELLENCE

MANUFACTURING
ENVIORNMENT
HEALTH &
SAFETY
ENGINEERING

HR & A
QUALITY
ASSURANCE

FINANCE
&
I.T.
PROCUREMENT

WAREHOUSE
SUPPLY CHAIN
MANAGEMENT

MAIN FUNCTIONS OF FINANCE DEPARTMENTS

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FINANCE DEPARTMENT
Main Functions of Finance Department Are As Follows: -

Vendor payment
When an article arrives at the gate, an entry permit is made and they are sent to the GOODS
INWARD DISPATCH section (GID). A goods inward form (gif) is filled up and sent to the
Finance Department for payment.The vendor submits the bill to Purchase Department.The
Finance Department also receives a hard copy of the corresponding purchase order (PO).
There is online passing and payment system.This contains a database of all purchase orders
issued.These are checked against the bills for the GIF,PO references after which the bill is
posted for production of the payment slips.

Disbursement of salaries
The HR Department sends a compiled list of all employees on the payroll together with their
monthly working records .The salaries are paid mainly through the bank to all the employees.

Payment to government bodies

Excise is paid to all suppliers for goods manufactured. The company takes credit of the
payment of excise from the govt. According to the CENVAT. Excise is however paid for the
finished goods. Octroi is paid to Local authorities for goods arriving from outside Nabha.
Property tax, insurance and sales tax are also paid in case of accidents; breakdowns are called
for assessment, when a claim is filed. VAT is paid to Excise and Taxation Department of
Punjab.

Milk accounting

15

Every milk supplier has a code, the first two digit indicating whether the milk is from cow or
buffalo and the next three digits indicates the supplier. Payments are made after 10 days by
cheque/MT/DD..

Payment of services
The finance department pays for various services like rent, truck hire etc.

Capital budgeting
Every department submits an annual budget, which is allocated quarter wise . The concerned
department also sends a capital investment proposal, which has to be approved in different
forums depending on the investment required.

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MANUFACTURING PROCESS

The Manufacturing process for Horlicks is as Follows:

1. The First step in the production process involves the mixing of wheat flour with
Malted Barley.
2. In The Second step water is added to the above mixture and the material is mashed
thoroughly, as a result of which the outer cover of malted barley is moved and
remains after it is called Husk.
3. After mashing the material it becomes thick slurry in which the solid content is above
50%.
4. The fourth step involves the adding up of water to the above mixture.
5. The next stage is the stage of evaporation in which the material is evaporated and the
result is thick slurry of the material in which the solid content is around 80%.
6. After evaporation comes the step of spreading out of material in plates and keeping
them in the oven for about half an hour.
7. Once the material is completely dried, the plates are taken out from the oven and the
food item is scrapped out, which comes out in the form of thin layers. Then the
vitamins and other essential nutrients are added to the food items which is then
grounded and the result is our final product HORLICKS.

17

SUPPLY CHAIN PROCESS

The supply Chain Process at GSK,Nabha is as follows:
Horlicks manufactured at the Nabha plant, after it is put in drums with a capacity of 184 kgs.
Is either bottled or packed in pouches and then sent to sales depots situated across the
country. Its chain is as follows:
Drums(at Factories)
Consumers

Bottles and GPs (at packing stations)

Retailers

Sale Depots
Wholesalers

Consumer

Drums(at factories)

Retailers

Bottles

(at

packing

stations)

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Wholesalers

Sale Depots

RESEARCH METHODOLOGY
OBJECTIVES OF STUDY
The present study has been undertaken in respect of Glaxo SmithKline at Nabha.The main
objectives of study are as follows:

To know that how a company apply the controlling technique on the inventory.

To know that how the recategorisation of the inventory is done through the ABC
analysis.

To know that how the purchase orders have an impact on inventory and how it
simplifies the complexity.

To know that how a company actually get the benefit of the controlling technique.

To know that how other techniques can be better applied on the existing controlling
technique.

SCOPE OF STUDY
The scope of the study is designed in terms of unit worked, the concept adopted and the
period under focus.

19

The unit
The study is done in the Finance department & stores department of GlaxoSmithKline
Consumer Healthcare Ltd. at Nabha plant.

The concepts
The concept of various tools and techniques of general inventory control are used and
analysed.
The period
The study is supposed to be relating to the period of last years consumption i.e. 2011.

Sources of Data:
Secondary Data: - The study is based on mainly on the secondary data including Annual
Report, Store Records & for theoretical portion various books.

Primary Data: - The only mode of collecting primary data was the non-structured direct
intersection with the concerned persons of Finance & Stores Department.

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INVENTORY
MANAGEMENT
(SPECIAL EMPHASIS ON
ABC ANALYSIS OF
INVENTORY CONTROL)

21

INVENTORY MANAGEMENT
Every business needs inventory for smooth working of its activities. It serves as a link
between production and distribution activities. Inventory is the most significant part of
current assets.
Large size of inventory is maintained by firms, a considerable amount of fund is required to
be committed in them. Therefore, one of the most significant decision areas concerning
Finance Manager is Inventory Management. Inventories include raw material, WIP, finished
goods, maintenance spare parts which are a significant preparation of total assets.
Inventory management means preparing the stock of goods at such level that neither the
stock should be excessive nor inadequate. It is a system, which ensures that right quality of
material, is available in the right quantity at right time and right place with the right amount
of investment. Large size of inventory ensures efficient and smooth production and sales
operations, while minimum investment in inventories maximizes profitability. Both the
extreme points are dangerous. An efficient manager always determines the optimum points
between two extremes. Excess installments in the inventory pees danger like unnecessary the
up of firms funds and loss of profit excess carrying cost. Risk of liquidity and risk of
physical deterioration of inventories. On the other hand inadequate investment in inventories
seeks to production hold ups failure to meet delivery commitments. Thus, the aim of
inventory management is to balance between the two and maintain sufficient inventories.
According to Curry and Frank:

22

 Because materials constitute such a significant part of product cost

and since this cost is controllable, proper planning, purchasing,
handling and accounting are of great importance.

OBJECTIVES OF INVENTORY MANAGEMENT

The main objectives of inventory management are operational and financial. The operational
objective means that the materials and spares should be available in sufficient quantity so that
work is not disrupted for need of inventory. The financial objective means that investments
should not remain idle and minimum working capital should be locked in it.
Ensure sufficient stocks of raw materials in periods of shortage to ensure continuous
supply of materials,spares and finished goods so that production may not suffer at any
time and the customers demand is adequately met.
To avoid both over- stocking and under-stocking of inventory.
To maintain investments in inventories at the optimum level as required by the
operational and sales activities.
To keep material cost under control so that they contribute in reducing cost of production
and overall costs.
To eliminate duplication in ordering or replenishing stocks. This is possible with the help
of centralizing purchases.

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DEFINITION OF INVENTORY
The dictionary meaning of Inventory is a list of goods. In a wider sense, inventory can be
defined as an idle resource, which has an economical value. Inventories are stock of the
product a company is manufacturing for sale and components that make up the product.
It is however, commonly used to indicate various items kept in stock in order to meet future
demands.
In any organization, there may be following four types of inventory:

a) Raw materials & parts- These may include all raw materials, components and
assemblies used in the manufacture of a product. Raw materials are those basic inputs
that are converted into finished product through the manufacturing process. Raw
material inventories are those units, which have been purchased and stored for future
productions.In GSK Malted Barley, Wheat flour, Skim Milk Product

(SMP), Fine Crystalline Sugar (FCS), Roasted Malted Barley, Calcium,

Potassium, Sodium, Vitamin Flavors etc., are main raw materials.
b) Consumables & Spares- These may include materials required for maintenance and
day-to-day operations.

Consumables. These are the materials, which are needed for smooth process of
production. These materials do not directly enter in the production but they act as
catalysts, etc. Consumables may be classified according to their consumption and
24

criticality. Generally, consumables stores do not create any supply problems and
form a small part of production cost. There can be instance where these materials
may account for much value than the raw materials The fuel oil may form a
substantial part of cost.

In GSK Nabha Polythene, Drum Seal, Tape roll, Label, Cleansing Agent,
Hand gloves, Oil, Chemical, Coal, etc. are examples of some consumables.

Spares. Spares also form a part of inventory. The consumption pattern of raw
material, consumables, finished goods are different from that of spares. The
stocking policies of spares differ from industry to industry. Some industries like
transport will require more spares than other concern. Costly spare parts like
engines, maintenance spares etc. are not discarded after use, rather they are kept in
ready position for further use. All decision about spares is based on the financial
cost of inventory on such spares and the costs that may arise due to their nonavailability

In GSK examples of Spares are Barring, V-Bolt etc.

c) Work-in-progress- These are items under various stages of production not yet
converted as finished goods. The work-in-process is that stage which is in between
raw material and finished goods. The raw material enters the process of manufacture
but they are yet to attain a final shape of finished goods. The quantum of work-inprocess depends upon the time taken in the manufacturing process. The greater the
time taken in manufacturing, the more will be the amount of work in process.
In GSK at Nabha there is no work in progress.
d) Finished goods- These are the goods that are not yet sold or put into use. These are
the goods, which are ready for the customers. The s tock of finished goods provides
a buffer between production and market. The purpose of maintaining inventory is to

25

ensure proper supply of goods to customers. In some concerns the production is

undertaken on the order basis, in general without waiting for specific orders.
In GSK main finished goods are Horlicks, Boost, Vanilla Horlicks, Elachi
Horlicks, Boost intermediate, Horlicks high fat, Junior Horlicks DHA, mother
Horlicks DHA etc. are products, which are produced for consumption in India.
Mother Horlicks DMI and Junior Horlicks DMI are products manufactured for
export package and send to Bangladesh.
Stock of raw-material, work-in-process and stores and spares facilitate production, while
stock of finished goods is required for smooth marketing operations. Thus inventories serve
as a link between the production and consumption of goods.

INVENTORY CONTROL
Inventory Control is the art and science of maintaining the stock level of a given group of
items, incurring the least total cost, consistent with other relevant targets and objectives set
by the management.
Inventory control refers to the process whereby the investment in material and parts carried
in stock is regulated within predetermined limits set in accordance with inventory policy
established by the management (Gorden B. Carson). The activities of Inventory control,
thus, include the following:

Determination of limits of inventories to be held.

Determination of inventory policies.

Setting out of investment pattern and its regulation as per individual and collective
requirements.

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To minimize the idle time caused by shortage of inventory and non availability of
inventories as per requirements.

To keep down capital investment in inventories,inventory carrying cost and

obsolesces losses.

Achievement of these objectives will result in more return on capital which is

materially the prime objective of an organization whether commercial or industrial. The
formula given below is helpful in arriving at the return on investment:
RETURN ON CAPITAL =

PROFIT
CAPITAL INVESTMENT

In normal circumstances, profit margin depends on external factors like competition over
which the management has little control. Here the question arises how the management
control over competitiveness? This is possible through the control over inventories; the total
capital in GSK is invested in fixed assets such as buildings, plant & machinery and a cut in
this cannot be effected. But a reduction in working capital, high percentage of which is
locked up in inventories, is possible and there is definite increasing profit earning capacity of
the organization.

SCOPE
The scope of inventory management is vast. It encompasses various functions starting with
determination of the requirement of inventory and ending with the supply of finished
products to the users. In widest sense, functions included in the scope of inventory
management can be summarized as:

27

 Determination of inventory requirement and planning its inflow.

Floating tender enquiries.
Identifying suppliers and placing orders for the suppliers.
Inspection of items received
Store keeping and stock control.
Issue, Valuation and Store Accounting.
Warehousing and Distribution.
All these functions are carried out, one after the other, in close sequence. First the periodic
requirement of inventory is determined on the basis of sales forecasts and production plan. At
the same time tender enquiries are floated for identifying the sources of suppliers. Orders are
then placed with the suppliers. When the inventory consignments are received they are
inspected to ascertain that items supplied are as per the specifications given in the order.
Items found in order are then stored in bins, racks and containers to ensure their safety,
security and prevent deterioration in quality. Inventory items are issued from stores to
production and other departments as per their demand. Proper records are maintained for the
receipt and issue of all these items. The stores department also maintains the finished goods
inventory. Finally these items are issued to the distributors and dealers as their purchase
orders, after obtaining instruction from the sales department.

INVENTORY MANAGEMENTCONSTRAINTS & PROBLEMS

CONSTRAINTS

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Constraints of inventory management vary from organization to organization depending

upon various variables; some of them are as under:a) Whether the demand for the goods is one time (static) or of repetitive nature
(dynamic). In GSK all the non-stock items are treated of static nature and stock items
of dynamic nature.
b) In case of demands of dynamic (repetitive) items, whether future requirements can be
assessed with certainty or uncertainty or under risk (probability). Also, whether the
demand is fixed over a time or is variable.
c) Whether the material is manufactured in house or is to be purchased through outside
suppliers.
d) Whether the lead-time during which material can be arranged is fixed or is variable.

PROBLEMS

On one hand, inventories are idle and valuable resources i.e. capital remains locked up in
the inventories, which can be used for other productive purposes, but on the other hand
they are desirable to satisfy manufacturing, maintenance or operation requirement of the
organization. Hence basic problems of Inventory Management is to optimize the stock
levels of different materials so that their stocks are maintained at optimum levels without
affecting the production or day to day maintenance.

Three basic problems associated with optimization of stocks are:

1. When to initiate purchase of the materials?
2. How much quantities are to be purchased at a time?
3. What should be the stock levels of the different items?

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VARIOUS INVENTORY MANAGEMENT

TECHNIQUES
Various techniques employed for controlling stock levels are:
a) Selective Management: - In this technique, various items of stores are classified in
various classifications depending upon their consumption value, unit price, criticality
for the organization, source of supply, purchasing problems, rate of withdrawals from
the stores, seasonality and stores balances on a particular date. Different approaches
of control are being followed for different types of items.

Two such classifications ABC & FSN are followed in GSK

b) Management by Exception: - In this technique, items with certain exceptions are
tackled on different points of time. For example, overstock items; surplus items and
inactive items may require more attention.

In GSK management by exception is followed for such

goods that are stock outs for some period.
c) Rationalization: - Techniques of standardization and variety reduction are used to
minimize lead-time of the material, and reduce unnecessary inventory carrying costs.

d) Value Analysis: - Functions performed by the materials are analyzed and alternative
designs/raw materials are suggested to achieve the same function at minimum cost.

30

e) Computerization: - Computer outputs can be used for scientific forecast of demand

to solve many inventory models, providing optimum safety and for controlling funds.

GENERAL STORE INVENTORY

General store is a major part of the inventory in all the concerns. It provides the information
regarding how much material we can purchase, and how much material we can keep in store
such as it is helpful to provide the information regarding all levels. The major part of working
capital of all the concern spent in General store inventory.
General store is that which the part of the production becomes indirectly. Without such
inventory no production will be there. This store inventory includes:

Polythene bags

Consumables like diesel etc.

Cleaning material like nitric acid, caustic soda etc.

Floor cleaning towels

Spare parts of the machines

Inventory required under GMP (Good Manufacturing Practices) like uniform, hand

gloves, mouth covers, safety shoes etc.

Under the general store inventory total no. of items are 2581, which have the ABC
classification. Their total consumption value is Rs. 43,471,622.14. It includes 30 items,
some of which dont have any classification because these items are used as and when
required during the year as such do not fall under any category and some are capital
related spares.

ABC ANALYSIS
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ABC analysis is a basic analytical materials management tools. Fundamentally ABC analysis
may be applied to any branch of management eith ease and success. It calls upon the top
management to place its efforts where the result will be greatest. It is selective approach
popularly known Always (A) Better (B) Control (C). The ABC goes by its name it always the
best, then better and lastly the good.
Manufacturing organizations find it useful to divide materials into three categories for the
purpose of exercising selective control on materials. An analysis of the materials cost will
show that a smaller percentage of items of materials in the store may contribute to large
percentage of the value of consumption and, on the other hand, a large percentage of items
may represent a smaller percentage of the value of items consumed. Between these two
extremes will fall those items the percentage number of which is more or less equal to their
value of consumption. Items falling in the first category are treated as A items, of the
second category as B items and items of third category are taken as C items. Such an
analysis of material is known as ABC ANALYSIS
This technique of stock control is also known as stock control according to value
method or always better control method or proportional parts value analysis method. Thus
under this technique of stock control materials are listed in A, B and C categories in
descending order based on money value of consumption.
The significance of this analysis is that a very close control is exercised over the
items of A group which account for a high percentage of costs while less stringent control
is adequate for category B and very little control would suffice for C items.
All types of materials control i.e., purchase stores and issues are to be strictly applied
in case of the items of A group. In case of the C items an elaborate material control is not
exercised because these items represent a very small portion of the material costs. These

32

items can be purchased once a year and various stock levels i.e., minimum level, ordering
level etc. may not be adhered to. All the

time, efforts and costs saved on the C group items by not having an elaborate control can be
usefully utilized on the A and B group items.

A-B-C Analysis: This analysis is based upon PARETO PRINCIPLE, according to which in
many situations, majority of the activity (70 to 80%) is governed by very few (10 to 20)
attributes. Hence if all the stock items are analyzed in terms of their annual consumption,
major part of total consumption value on a GSK (about 70-80%) is of only few high
consumption value items (say 10-20%). These items may be classified as A category.
15 to 20% of total consumption is represented by another 15 to 20% items that may be
classified as B category.
Remaining 5 to 10% consumption is represented by a large no. of small consumption value
items, which may be classified as C category.
Actually ABC classification depends upon management decision.
In GSK it is decided that

All high consumption value items, which represent 70% of total issues, will be
classified as A category.

Items, which represent 20% of total issue, will be classified as B category.

All remaining items are of C category.

For the purpose of Inventory Control, A category items are most important. Therefore, they
are closely monitored at highest level at very frequent intervals.

33

Stock physical verification in GSK

For A category items is carried out every six months;

For B category items every year and

Once in two years for C category items.

To achieve better inventory turnover ratio, GSK intend to keep average stocks of 3
months, 6 months and 12 months of A, B and C category items respectively.

ABC ANAYSIS PATTERN

SR.NO. SUMMARY OF CONTROL ITEMS A

ITEMS B
Moderate

ITEMS C

Control

Tight

Loose

Requirement

Exact

Exact

Estimate

Postings/Recording

Individual/
Complete

Individual/
Complete

Group/
None

Check of revisions

Close

Some

Little

Quality Control

Exact

Exact

Approximate

Expediting

Regular

Some

No

Requirement for Recategorisation Process

General Inventory Items
Their Unit Value
There annual Consumption

34

PREPARATION OF PROPOSALS
For preparing the proposals under the different conditions following steps have been taken: Firstly check that according to the unit value in which category the item is falling.
See that according to the consumption value which category is best suited to the
item.
Then out of the two put the items in the upper category.

For example: Item Code

IS97004
Proposed
Category

Per unit
value
147.2.
C

Consumption
value
12355.20
B

According to Unit value it should fall in C category but according to Consumption value it
should fall in B category.
Therefore, it will fall in B category.

Item code
S99471
Proposed Category

Per unit value

46.2916
A

Consumption value
147896.91
B

35

According to Unit value it should fall in A category but according to Consumption value it
should fall in B category.
Therefore, it will fall in A category.

Proposal for the year 2008

In the year 2008, this proposal is prepared to recategorise the inventory according to the
current inventory Zstock, taking into consideration the changes in the unit value and the
consumption value of the inventory. The results of the proposal for the year April 2008March 2009 are as follows:-

PROPOSAL (1): As per Unit Value Rs. 5000 & Consumption Value Rs. 50000
(ANNEXURE 1)
1.

According to No. of Items

Category
A
B
C
TOTAL

Proposed No. of items

270
456
1757
2483

% of items
10.87%
18.37%
70.76%

36

2. According to Consumption Value

Category
A
B
C
TOTAL

Consumption Value
44745851.09
5985626.63
3607747.29
54339225.01

%
82.35%
11.01%
6.63%

37

NOTE: Total items in the Proposed Category include 8 items, which have No Category
as these are capital related spares and have no consumption value but there are also 30 items
which are used rarely in the production as such are not considered under any category in spite
of having consumption value.

38

Existing status of inventory as on March 2009

Existing criteria: Per Unit Value Rs. 7000 & Consumption Value Rs.70000

1. According to No. of items

Category
A
B
C
TOTAL

Existing No. of
items
295
573
1615
2483

%
11.88%
23.07%
65.01%

39

2. According to Consumption Value

Category
A
B
C
TOTAL

Consumption
Value
44147223
5818917.82
4373084.19
54339225.01

%
81.29%
10.7%
8.05%
100

PROPOSAL 1:CHANGES FROM THE EXISTING

CATEGORY

Thus the exercise has lead to movement of 10.87% of total inventory to A category as
against 11.88% in the existing status with the little difference in the percentage of items
in the said category. Also there is movement of almost 18.37% & 70.76% of total

40

inventory to B & C categories as against 23.07% & 65.01% respectively in the

existing situation.

Category
A
B
C
TOTAL

No. of items (E)

% of existing items

No. of items (P)

295
575
1615
2483

11.88%
23.07%
65.01%

270
456
1757
2483

% of items
10.87%
18.37%
70.76%

On the same way, as per the proposal consumption value of near about 82.35% of total
inventory shift to A category as against 64.49% in the existing status with the little
difference in the percentage of items in the said category. Movement in the B & C
category is almost 11% & 6.63% as against 23.5% & 12% respectively in the existing
category.

Category
A
B
C
TOTAL

Existing
Consumption
44147223
5818917.82
4373084.19
54339225.01

%
64.49%
23.5%
12.01%
100

Proposed
Consumption
44745851.09
5985626.63
3607747.29
54339225.01

%
82.35%
11.01%
6.63%
100

41

PROPOSAL (1): As per Unit Value Rs. 10,000 & Consumption Value Rs.
1,00,000 (ANNEXURE 2)

1.

According to No. of items

42

A
B
C

No. of
Items
177
283
2023

TOTAL

2483

Category

%
7.11%
11.39%
81.50%
100%

2. According to Consumption Value

Category
A
B

Consumption
Value
42927988.50
6162067.21

%
79.02%
11.34%

43

C
TOTAL

5249169.30
54339225.01

10.51%
100.00%

NOTE: Total items in the Proposed Category include 8 items, which have No
Category as these are capital related spares and have no consumption value but
there are also 30 items which are used rarely in the production as such are not
considered under any category in spite of having consumption value.
Thus the exercise has lead to movement of 7% of total inventory to A category as
against 11.88% in the existing status with the little difference in the percentage of items in
the said category. Also there is movement of almost 11% & 81% of total inventory to B
& C categories as against 23% & 65% respectively in the existing situation with a large
difference in the percentage of items in the said category.

COMPARISON OF ITEMS
Category
A
B
C
TOTAL

No. of items (E)

% of existing items

No. of items (P)

295
575
1615
2483

11.88%
23.073%
65.01%

177
283
2023
2483

% of items
7.11%
11.39%
81.5%

44

On the same way, as per the proposal consumption value of near about 79% of total
inventory shift to A category as against 64% in the existing status with the little
difference in the percentage of items in the said category. Movement in the B & C
category is almost 11% & 10% as against 23% & 12% respectively in the existing category.

COMPARISON OF CONSUMPTION VALUE

Category
A
B
C
TOTAL

Existing
Consumption
44147223
5818917.82
4373084.19
54339225.01

%
64.49%
23.5%
12.01%
100

Proposed
Consumption
42927988.50
6162067.21
5249169.30
54339225.01

%
79.02%
11.34%
10.51%
100

45

CONCLUSION: The Existing criteria applied in stores is correct as it follows the pareto
principle it shows that maximum consumption of minimum no. of items comes under A
category and minimum consumption value items with maximum no. of items falls under C
category. But some changes are required in the same as shown above i.e. some items are
required to move between all the three categories.

46

IMPLEMENTATION OF THE PROROSAL

For actual implementation of the selected proposal again some analysis is carried on.

Physical verification:
First of all physical verification of the whole inventory is done. Under this each and every
item of the inventory is verified with the books. For this purpose concerned person goes to
the stores and does the verification.

Current Years Consumption:

After the physical verification all inventory is again checked with the current years
consumption. If in case of any particular item .the current years consumption changes
corresponding to the previous years consumption then it can be proposed in another
category, then that proposal is acceptable.
For instance:
Item Code: S05013
Consumption in fin. year ending March 2007
49527.62
Consumption in fin. year ending March 2008
53054.09

Current Category
B
Proposed Category
A

In this way all the items are analyzed and a final report is prepared.

47

ADVANTAGES OF ABC ANALYSIS

A strict control is exercised on the items, which represent a high percentage of the
material costs . Managerial time is spent on A items whereas clerical staff with least
managerial supervision can handle C items and sometimes B items. Equal
attention to all the items of stores is not desirable because it will not be a cost
effective option for the firm. Concentrating on all the items of stores is likely to have
a

defused

effect

on

all

the

items,

irrespective

of

the

value

of

consumption.Therefore,ABC analysis should be followed to give due attention to the

items, which they deserve, keeping in view their value of consumption.
Investment in inventory is reduced to the minimum possible level because a
reasonable quantity of A items representing a significant portion of the materials
costs is purchased.
To reduce investment in materials, close control of A items contributes much more
than close control of C items.
Storage cost is reduced, as a reasonable quantity of materials, which account for high
percentage of value of consumption, will be maintained in the stores.
With the introduction of the ABC analysis, management time is saved because
attention is required to be paid only to some of the items rather than on all items
It becomes possible to concentrate all effort in areas, which need genuine efforts.
It is most effective and economical method as it is based on selective approach.

48

 It helps in placing the orders, deciding the quantity of purchase, safety stock, etc.,
thus saving the enterprise from unnecessary stock-cuts or surpluses and their resultant
consequences. This may be well shown by an example where average inventory is
one-half of the order quantity:
Category

Annual consumption

No. of Orders

Average Working

Rs. 3,00,000
Rs. 30,000
Rs. 3,000

4
4
4

37500
3750
375

12

41625

Inventory
A
B
C
TOTAL

Rs. 3,33,000

Keeping the same no. of orders per year, viz., 12 inventories, can reduced by 39%
merely by segregating items according to their usage value as shown below:
Category
Inventory
A
B
C
TOTAL

Annual consumption
Rs. 3,00,000
Rs. 30,000
Rs. 3,000
Rs. 3,33,000

No. of Orders

Average Working

8
3
1

18750
5000
1500

12

25250

OTHER BENEFITS:
Complexity reduction
Optimum utilization of time
Reduction in operating expenses
Reduction in stock outs
Reduction in refusals
Quantity discounts

49

FSN CLASSIFICATION
ABC Classification is on the basis of consumption value of an item and does not give any
importance to the criticality of the item and therefore, only ABC Classification is not
adequate. Classification done on the basis on the movement of the items in the storehouse is
known as FSN, where the items are classified as fast moving (F),slow moving(S) and nonmoving(N),items .This classification is done on the basis of consumption pattern of the items
under analysis. This analysis is useful in case of obsolete items. Previous year issues is a
guiding factor for FSN analysis previous two years issues are taken into consideration for a
decision whether the items stocked in storehouse are fast moving ,slow moving or non
moving.
Fast moving:-Items being issued more than 15 times a year may be placed in F category.
Certainly such analysis and limits of issue vary from one organization to another
organization.
Slow moving:-Items up to a certain limit say 10-15 issues in a year may be classified as S
items.
Non-moving:-If there is no issues of a particular item during the past few years, naturally
they will be classified as Zero issue items and under this method of analysis these items
will be classified as N items.
In GSK items, under FSN categorizing is done on the following criteria :Fast moving :-The items which are very frequently moved in one year are included in the
fast moving category .
Slow moving :-The items which are moved from stores for a period of one and a half year.

50

Non-moving:-The items which are not issued from stores for more than three years.
In GSK Inventorys FSN categorization of items in stores for the month of May 2007 in
which 91 lacs value items are of non moving nature which are not moved within a period of
three years and 43 lacs value are of slow moving which is moved within a period of one and
a half year and 64 lacs are of fast moving nature that are frequently moved.

Category

Inventory (Lacs)

Non Moving Inventory

Slow Moving Inventory
Fast Moving Inventory
Total

91
43
64
198

Percentage (%)
51
34
15
100

General Stores Inventory Composition Slow/non/fast

moving items
fast moving

91 lacs

15%
51%

43 lacs

slow moving

64 lacs

34%

non moving

LEVEL SETTING
51

In order to have proper control over inventory various levels are set to avoid wastages and for
optimum utilization of stock. Following levels are set for the said purpose: o Re-order Level
o Minimum Level
o Maximum Level
o Danger Level
o Average Stock Level

(A) Re-order Level: - It is the point at which if the stock of a particular material in store
approaches, the storekeeper should initiate the purchases requisition for fresh supplies of that
material. This level is fixed somewhere between the maximum and minimum levels in such a
way that the difference of quantity of material between the re-ordering level and the
minimum level will be sufficient to meet the requirements of production up to the time the
time the fresh supply of materials received.
Re-ordering level can be calculated by applying the following formula:Ordering Level = Minimum Level + Consumption during the time required to get the
fresh delivery
Re-ordering level = Maximum Consumption *Maximum re-order period
Here, maximum re-order period means the period taken to get the material once it is initiated,
so that the factory may not stop production in any case due to the shortage of material.

(B) Minimum level: -This represents the minimum quantity of the material, which must
be maintained in hand at all the times. The quantity is fixed so that production may not be

52

held up due to shortage of material .in fixing this level, the following factors are taken into
consideration: Lead-time: - It is the time lag between the indenting and the receiving of material. It is time
required to replenish the supply.
Rate of Consumption of material during the lead-time.
Nature of Material:-Minimum level neither is nor required in case of a special material
which is required against customer specific order.
Minimum stock Level= Re-ordering Level - (Normal Consumption * Normal Re-order
Period)

(C) Maximum Level: - It represents the maximum quantity of an item, which can be
held in stock any time. Stock should not exceed this level is fixed to avoid over stocking.
Maximum Level = Reordering level + Minimum Re-ordering Quantity (Minimum Consumption * Minimum Re-ordering
Level period)

(D) Danger Level: -This means a level at which normal issue of the material are stopped
and issues are made only under specific instructions. The purchase offer will make special
arrangements to get the material, which reach at their danger levels so that the production
may not stop due to the shortage of materials.

53

Danger Level = (Average Consumption) * (Maximum re-order period for emergency

purchases)

(E) Average stock Level: -The average stock Level is calculated by the following
formula:Average stock Level = Minimum stock level + of re-order quantity
OR
Average stock Level =1/2(Minimum stock level + Maximum stock level)
At GSK all these levels are set by stores department on the basis of the following
requirements: First of all consumption of the items by different department or according to
production pattern.
On the basis of lead-time involved on purchase of items.

54

ECONOMIC ORDER QUANTITY

Depending upon various variables, different inventory models have been developed.
Different models take different costs into accounts. One of the popular model developed for
items of repetitive nature (dynamic) ,future demands for which can be projected with
certainty is Economic Order Quantity (EOQ) model.
In addition to factors mentioned above, this model assumes that price of the material remains
constant with time and also does not vary with order quantity. This model can be developed
mathematically by differentiating total cost of inventory (ordering cost + inventory carrying
cost) with respect to Quantity.
The quantity to be ordered should be such which minimise the carrying and ordering cost.
The order for the material to be purchased should be large enough to earn more trade
discount and to take advantage of bulk transport, but at the same time it should not be too
large to incur to heavy a payment on account of interest, storage and insurance cost. If the
price to be paid is stable, the quantity to be ordered each time can be ascertained by the
following formula:Economic Order Quantity (EOQ) = 2AO/C
Where,
A = Annual Consumption Quantity
O = Cost of placing one order (ordering cost)
C = Annual inventory carrying cost or holding

55

Every firm, needs due concentration on two basic questions or managing inventories
efficiently,
When to purchase?
How much to purchase?

The total cost of material usually consists of:Total acquisition cost (Purchase Value) + Total carrying cost (Holding Cost) + Total
ordering cost
Acquisition Cost- Total acquisition cost i.e. total purchase value through is buying is
unaffected irrespective of the quantity of material ordered at one time unless quantity
discounts are available. Thus, when acquisition cost of a material remains the same, the only
costs to be taken care of are orderinf costs and carrying cots.

Holding cost The very fact that the items are required to be kept in stock means additional
expenditure to the organization. The different elements of costs associated with keeping stock
over time are as follows:
Storage costs
Rent/depreciation
Labour
Overheads (e.g. heating, lighting, security)
Money tied up (loss of interest, opportunity cost)
Obsolescence costs (if left with stock at the end of product life)
Stock deterioration (lose money if product deteriorates whilst held)
Theft/insurance

56

IN GSK THE RESONABLE ASSESSMENT OF INVENTORY CARRYING COSTS IS

ESTIMATED TO 15% PER YEAR OF THE AVERAGE INVENTORY HOLDING. IT
IS AGAIN CLARIFIED HERE THAT THESE COSTS ARE NOT NORMALLY
REFLECTED IN OUR ACCOUNTING SYSTEM.
Ordering costs-In large organizations like GSK, the demands received are technically
scrutinized, inquiries are issued, tenders are received and evaluated, orders are progressed,
materials are received and inspected and lastly, the payments are arranged. All these
constitutes an additional costs to the organization and costs associated with ordering and
receiving an order are:
Clerical/labour costs of processing orders
Inspection and return of poor quality products
Transport costs
Holding costs

IN GSK ORDERING COST PER ORDER COMPUTED IS APPROXIMATELY Rs. 25 PER

ORDER.

Economic order quantity is determined keeping in view the ordering cost and carrying
cost.

At GSK instead of using EOQ (Economic Order Quantity), ROQ(Re Order Quantity)is
used and this quantity level is calculated by inventory software and it is revised on the
basis of consumption requirements of different departments.

57

PROPOSAL
STUDY AND ANALYSIS OF THE INVENTORY OF GSK AS PER THE
EOQ MODEL TO KNOW THE DIFFERENCE BETWEEN THE TOTAL
INVENTORY COST TO THE ORGANIZATION IN COMPARISON TO
THEIR ACTUAL (ROQ METHOD) AND TOTAL SAVINGS, IF ANY, CAN
BE MADE FROM THE THREE DIFFERENT.

For implementing the proposal the whole data of the inventory is analyzed as follows and
following conclusions are drawn:
REQUIREMENTS:
General inventory items data.
The Unit value
Existing Purchase Orders (PO)
For calculating the unit value any of the following is required
Closing value and closing quantity
Or
Opening value and opening quantity
Or
Consumption value and consumption quantity

58

Per Unit Value = Closing value/Opening value/Consumption value

---------------------------------------------------------Closing qty./Opening qty./Consumption qty.

For calculating existing POs following method is adopted:

PO (Existing) = Purchase Qty./ ROQ
For Example: ROQ = 10
Opening Qty. = 30 units
Purchase Qty. = 100 units
Closing Qty. = 20 units
So Consumption Qty. = 30+100-20 = 110 units
In the absence of opening and closing qty., purchases & consumption will be the same. But
as there are both opening and closing balances the purchase orders are calculated on purchase
qty.
POs = 100/10
= 10 units.
In this way the whole data is analyzed and current POs are taken out.

59

ECONOMIC ORDER QUANTITY

COMPUTATIONS DONE FOR:
HOLDING COST (HC)
ORDERING COST (OC)
POs PROPOSED
TOTAL INVENTORY COST (IC)
IN GSK RESONABLE ASSESSMENT ON GENERAL INVENTORY SHOWES
HOLDING COST TO BE 15% IF THE AVERAGE INVENTORY & ORDERING COST IS
Rs. 25 PER ORDER.
TOTAL HOLDING COST (Existing) = Price Per Unit/ Unit Value *15%
EOQ = ROUNDUP (SQRT((2*OC*CONSUMPTION QTY.)/HC), 0)
For calculating proposed POs following calculation is done:
PO (Existing) = Purchase Qty./ EOQ
Total holding cost & ordering costs are computed separately for A, B, C
Category items. Total inventory costs are also drawn out for the three categories
and savings are find out from their existing inventory costs. (ANNEXURE 3,4,5)

TOTAL HOLDING COST (Existing)

= (ROQ * UNIT VALUE * 15% * LEAD TIME)/30

TOTAL ORDERING COST (Existing)

= EXISTING POs * 25
60

TOTAL INVENTORY COST (Existing)

= PURCHASE VALUE (ACQUISITION COST)+TOTAL HC+TORAL OC

The above criteria is applied on the whole given data and randomly top
40-50 items are chosen which gives some considerable amount of
savings; to draw out conclusion and the analysis & interpretation drawn
from data shows:

A CATEGORY
NO.OF ITEMS TAKEN= 40
TOTAL EXISTING INVENTORY COST= Rs. 61,36,034

B CATEGORY
NO.OF ITEMS TAKEN= 40
TOTAL EXISTING INVENTORY COST= Rs. 15,10,368

C CATEGORY
NO.OF ITEMS TAKEN= 50

TOTAL EXISTING INVENTORY COST= Rs.6,59,387

Similarly, proposed total HC & OC are calculated like as follows:
TOTAL HC (Proposed) = (EOQ * UNIT VALUE * 15% * LEAD TIME)/ 30

61

TOTAL OC (Proposed) = PROPOSED POs * 25

TOTAL INVENTORY COST (Proposed)
= PURCHASE VALUE (ACQUISITION COST)+TOTAL HC+TORAL OC
The above criteria is applied on the whole given data and randomly top 40-50 items are
chosen to draw out conclusion and the analysis & interpretation drawn from data shows:

A CATEGORY
NO.OF ITEMS TAKEN= 40
TOTAL PROPOSED INVENTORY COST= Rs. 61,09,275

B CATEGORY
NO.OF ITEMS TAKEN= 34
TOTAL PROPOSED INVENTORY COST= Rs 14,97,927

C CATEGORY
NO.OF ITEMS TAKEN= 40

TOTAL PROPOSED INVENTORY COST= Rs.6,47,832

FINDINGS OF THE PROPOSAL

Category Existing Inventory cost Proposed Inventory cost SAVINGS

62

A
B
C

6136034
1510368
659387

6109275
1497927
647832

26759
12441
11555

TOTAL

83,05,789

82,55,034

50,755

(SEE ANNEXURE 3,4,5)

BENEFITS
IF THE ORGANIZATION STARTS PLACING THEIR PURCHASE ORDERS AS PER
THE EOQ METHOD THEY CAN SAVE SOME AMOUNT OF MONEY FROM THEIR
ACTUAL TOTAL INVENTORY COSTS, AS THIS CAN HELP THEM IN SAVING THEIR
WORKING CAPITAL ALSO.

FINDINGS AND SUGGESTIONS

After conducting a deep study on the whole process of the ABC Recategorisation & EOQ
Technique, I found certain facts regarding the ABC analysis & EOQ, which are as follows: -

63

FINDINGS:

Many items are there in the stores, which although lying in general stores but dont
have any category in spite of having consumption value.

Some items have no consumption value but their minimum quantity is more than
twice.

Some modern techniques of inventory management like JIT, VED etc., which can
help in reducing investment in inventory, is absent.

Items, which are written off in the books, are lying in the stores and in any year if
again their need arises they are written back in the books.

Capital related spares are placed under D99 category. These are those spares the asset
value of which becomes zero but their spares have value.

SUGGESTIONS:

All the general store inventory items should be recategorized especially those, which
have the consumption value during the year.

Company should have to go for some other controlling techniques like VED, JIT etc.

64

The items, which dont fall under any category, should be treated separately.

The company must treat ROQ & EOQ separately on their individual effects on the
inventory costs.

CONCLUSION
From the thorough assessment of my study on INVENTORY MANAGEMENT I
Concluded that Controlling techniques relating to the general inventory in GSK are

65

developed with the objective of ensuring that the inventory will be controlled in an effective
manner, without having any loss to the inventory.
The study of Recategorisation of the general store inventory of GSK is conducting for the
purpose of knowing the actual status of the inventory in the stores. First Recategorisation
was done in the year 1999 and after that it was conducted during the year 2005. From this
study I conclude that any technique remains effective only when if it is carried on regularly
means at proper time. This study reveals that through the ABC analysis, effective control can
be exercised on the inventory. Items, which have more importance to the company, those
come under strict control. But all the items should have been categorized specially those,
which have consumption value during the year. No doubt their criteria of recategorisation is
appropriate but still some changes are required in it i.e. some movements of general stores
items are required between three categories. Regarding EOQ technique, there is need of
making effective changes in their present system.
At last I would like to say that there is proper control of inventory in the organization.
Inventory management is done at par. Proper accounts & records are maintained of each and
every item, better techniques are applied. 5S technique is implemented fully in GSK.

66

BIBLIOGRAPHY
SECONDARY DATA:
ANNUAL REPORT OF THE COMPANY
BOOKS
GUPTA SHASHI K., SHARMA R.K., FINANCIAL MANAGEMENT, Kalyani
Publishers, Edition 2005, pp 10.41-10.54
JAIN S.P., NARANG K.L. & DHINGRA T.R., COST ACCOUNTING-Principles
and Practices, 1974, pp 8-25
CHANDRA

PRASANA,

FINANCIAL

MANAGEMENT-

THEORY

&

PRACTICE, Tata Mc-Grew Hill, New Delhi, 4th edition, 2004.

SHARMA

K.R.,

QUANTITATIVE

TECHNIQUES

AND

OPERATIONS

RESEARCH, Kalyani Publishers, 1990, pp 589-631.

PRIMARY DATA:

67

WEB SITES:

www.gsk.com

www.gsk-India.com

www.Glaxosmithkline-ConsumerHealthcareindialtd.html

68