You are on page 1of 48

Abstract:

In the present era, where there is a competitive world in the area of


business it is very important to control various costs to sustain in the
market. And the most importantly customer is to be considered as the most
important part of any business. In such fast moving and rapid environment,
inventory management plays an important role to make a control over the
financial statement of the organization. Inventory involves in the whole
process cycle of the organization as it starts with the shop floor to the top
level management commitment. In this paper, we will discuss and analyze
some of the parameters which directly show the impact of inventory
management to the financial statement of the form. This paper also consists
of different parts where the inventory management concepts are discussed,
different inventory control techniques are discussed, and their
interrelationship with the financial statement of the firm. This paper also
introduces the various costs incurred due to the storage inventory,
economic order quantities, reorder level, shortage costs, and inventory
methods.
Inventory constitutes the most significant part of current assets of
larger majority of Nigerian manufacturing industries. Because of the relative
largeness of inventories maintained by most firms, a considerable sum of an
organizations fund is being committed to them. It thus becomes absolutely
imperative to manage inventories efficiently so as to avoid the costs of
changing production rates, overtime, subcontracting, unnecessary cost of
sales and back order penalties during periods of peak demand. The study
methods employed include the variance analysis, Economic Order Quantity
(EOQ) Model. The answer to the fundamental question of how best an
organization which handles inventory can be efficiently run is provided for in
the analysis and findings of the study. Consequently, recommendations on
the right quantity, quality and timing of material, at the most favorable price
conclude the research study.
As a result to todays uncertain economy, companies are searching for
alternative ways to stay competitive. This study goes through the process of
analyzing the companys current forecasting model and recommending an
inventory control model to help them solve their current issue. As a result,
an Economic Order Quantity (EOQ) and a Reorder Point was recommended
to help them reduce their product stock outs. The shortage of raw material
for production always makes the process discontinuous and reduces the
productivity. The ABC analysis technique for the inventory control system is
first used to identify the most important multiple products and then the

economic order quantity (EOQ) of each product is developed to find their


inventory model equation individually.

Introduction
Inventories are the current assets which are expected to be converted
within a year in the form of cash or accounts receivables. Thus, it is a
significant part of the assets for the business firms. Actually, inventories are
the goods that are stocked and have a resale value in order to gain some
profit. It shows the largest costs for the trading firms, wholesalers and
retailers. Normally, it consists of 2030% of the investment of the total
investment of the firm. Thus, it should be managed in order to avail the
inventories at right time in right quantity. Inventory refers to the stock of the
resources which are held to sales and/or future production. It can be also
viewed as an idle resource which has an economic value. So, better
management of the inventories would release capital productively. Inventory
control implies the coordination of materials controlling, utilization and
purchasing. It has also the purpose of getting the right inventory at the right
place in the right time with right quantity because it is directly connected
with the production.
This implies that the profitability of the firm is directly or indirectly
affected by the inventory management. In this paper, three major steel
manufacturing companies of India are taken for the analysis. Inventory
management is pivotal in effective and efficient organization. It is also vital
in the control of materials and goods that have to be held (or stored) for
later use in the case of production or later exchange activities in the case of
services. The principal goal of inventory management involves having to
balance the conflicting economics of not wanting to hold too much stock.
Thereby having to tie up capital so as to guide against the incurring of costs
such as storage, spoilage, pilferage and obsolescence and, the desire to
make items or goods available when and where required (quality and
quantity wise) so as to avert the cost of not meeting such requirement.
Inventory problems of too great or too small quantities on hand can
cause business failures. If a manufacturer experiences stockout of a critical
2

inventory item, production halts could result. Moreover, a shopper expects


the retailer to carry the item wanted. If an item is not stocked when the
customer thinks it should be, the retailer loses a customer not only on that
item but also on many other items in the future. The conclusion one might
draw is that effective inventory management can make a significant
contribution to a companys profit as well as increase its return on total
assets. It is thus the management of this economics of stockholding, that is
appropriately being refers to as inventory management. The reason for
greater attention to inventory management is that this figure, for many
firms, is the largest item appearing on the asset side of the balance sheet.

Literature Review
Rich Lavely (1998) asserts that inventory means Piles of Money on
the shelf and the profit for the firm. However, henotices that 30% of the
inventory of most retail shops is dead. Therefore, he argues that the
inventory control is facilitate the shopoperations by reducing rack time and
thus increases profit. He also elaborates the two types of inventory
calculations thatdetermine the inventory level required for profitability. The
two calculations are cost to order and cost to keep. Finally, heproposes
seven steps to inventory control. The limitation of this literature is that he
does not outline the calculation method thatactually evaluates the inventory
level and cost of handling it.
James Healy (1998) highlights that the distributors carry 1030% of
additional inventory that is unnecessary. Theseinventories unnecessarily
increase costs and loss of customers, lost of sales and lost profit due to
inefficient inventorymanagement. He points out there is a need to set out
procedures to find out physical inventories to determine the true cost
ofhandling cost of the inventory. He further points out some misconceptions
of the inventory management such as adequacy ofEnterprise Resource
Planning System in handling the inventory, the importance of turns in
measuring the success of the inventorysystem and confidence on
profitability of using the inventory optimization method. The limitation of
this literature is that it doesnot give reasons for the causes of the
unnecessary inventory.
3

Dave Piasecki (2001) presents an inventory model for calculating


the optimal order quantity thatOrder Quantity method. He points out that
many companies are not using EOQ model because ofpoor results resulted
from inaccurate data input. He says that EOQ is an accounting formula that
determines the point at which thecombination of order costs and inventory
costs are the least. He highlights that EOQ method would not conflict with
the JITapproach. He further elaborates the EOQ formula that includes the
parameters such as annual usage in unit, order cost andcarrying cost.
Finally, he proposes several steps to follow in implementing the EOQ model.
The limitation of this literature is thatit does not elaborate further
relationship between EOQ and JIT. It does not associate the inventory turns
with the EOQ formulaand fails to mention the profit gain with the quantity is
calculated.

Methodology and data collection


All data for this paper is secondary data and taken from various
sources. Some of the sources are from journals, articles,magazines and
referred books from the library. Some data are also downloaded from the
internet through different sources likegoogle, money control and emerald.
All financial data are taken from the money control database for the
completion of my paper.From these collected data from different sources of
secondary data, we interpret these and find the impact of
inventorymanagement on the financial condition of the firm. We have taken
three major steel manufacturing companies of India. We will find the
Pearson correlation coefficient and analyze it to show theimpact of inventory
management on the profitability of the firm.
Essential information for this research work were collected through
primary and secondary sources thecombinations include:
(i) Interview with some key personnel in the stores, purchasing,
production and inventory departments of thecompany.

(ii) Observation of the production process was done to see the flow of
goods in the conversion process. Materialshandling and storage were also
observed and so was the patrol / inspection procedures.
(iii) Record analysis of relevant data was obtained from the
companys annual report and journals.
(iv)Theoretical background information was gathered through review
of related literature on inventory management.
The data collected were analyzed using three major quantitative
instruments. The simple variance method, the EOQmodel and the chisquare
distribution method. The simple variance analysis was used to describe the
data presented.
The EOQ model was used to determine theoptimum inventory level
per year, which were considered as the expected value of inventory in the
chisquarecalculation. The chisquare technique was used to draw inference
about the variance of distribution with eachdistribution determined by the
degree of freedom.

Limitations of the Study


There are some certain limitations of this study. It can be listed as:
i. All the data used in this paper are secondary data which has been
taken from different published journals, books andfinancial data are from
money control database. And this paper is related with the financial
variables so there may be some
ii. This study is based on only three major steel manufacturing
companies. So it may reflect some partial view.
iii. In this study only 5 years is taken as the period of time
commencing from 20102014 which is a short period of time.
iv. Also, inflation is the most crucial factor for financial terms. So, it is
not considered in any type of interpretation.
v. Correlation technique is used as statistical tools to interpret the
data.

Inventory Management
There is need for controlling the inventories for any firm in developing
countries like India. A firm must install somebetter inventory control
techniques to improve their financial condition. According to Kotler,
inventory management is thetechnique of managing, controlling and
developing the inventory levels at different stages i.e. raw materials, semifinished goodsand finished goods so that there is regular supply of resources
at minimum costs. According to Coyle, inventory management isthe
management of the materials in motion andat rest. According to Rosenblatt,
the inventory management costs are the price which is paid by the
5

customer but it is the cost tothe owner. Different authors defined inventory
management in different way.Sometimes, inventory and stock are
considered as the same thing. But there is a slight difference between them.
Stock isthe storage of material kept in specified place only. Inventory
management involves all activities which are done for thecontinuous supply
of materials with optimal costs.Basically, inventory management has two
goals. First goal is to avail the goods at right place in right time. Because it
isvery important to keep operations running to give specific service. Second
goal is to achieve the service level against optimalcost. It is very difficult to
achieve goal against optimal cost. All items cannot be stocked, so there is
need to specify the importantgoods to be stocked.
The supplies inventories involves the materials required for the
maintenance, repair and operating that do not go to thefinal product. But it
is also considered as the types of inventories. Thus, inventory management
is also defined as it is the scienceand art of managing the level of stock of
group of items which incurred least costs and also reach the objectives set
by the topmanagement. So, on the final note the primary objective of
inventory management is to improve the customer satisfaction level.The
secondary objective is toincrease the production efficiency. Increasing
production efficiency means that the production control, maintaining the
level ofinventory for efficient materials management.

Some Factors Related To Inventory


Management
There are some factors listed below which are essential to be discused
for understanding the concept of inventorymanagement. These activities
are associated with inventory management and to be considered to achieve
its objectives. Thesefactors are:
1. Costs related to inventory.
2. Inventory costing methods.
3. Inventory models.
4. Inventory control techniques.

Costs related to inventory: There are various costs which are related to
the inventories. These costs are incurred due to the inventories. These costs
are:

Purchase cost: Purchase cost is the cost of purchasing the inventory


items and it depends upon the quantity of the items tobe purchased.
Ordering Cost: It is the cost related to the bringing the inventory to
the production system. It includes all costs which are directly or
indirectly involved in bringing the inventory to the production system.
6

Costs included in ordering costs are tendering cost, quality inspection


cost, transportation cost etc.
Carrying cost: It is the cost which is associated with costs which are
spent to the storage of the inventory items in the store. It depends
upon the quantity and period of time till when the inventory is to be
stored. It includes storage cost, damage cost, depreciation, handling
cost, insurance cost etc.
Shortage cost: Shortage cost simply means the cost due to the
absence of inventory items in the store. It is associated with the lost
sales. Generally, shortage costs incurred for those items which is
more costly and which incurs more handling costs.

Inventory Costing methods: These are the methods which are used for
give the values to the inventories. These valuationmethods can be
explained as:

First In First Out: In this method, the materials coming first will be
considered first and then next consignment will be taken. This method
is useful when the price of material is falling because material charge
to production will be high while the replacement cost will be low.
Last In First Out: It is the method in which materials coming latest
will be considered first. The last consignment is taken first and when it
is exhausted then second last consignment is taken. This method is
more useful when the rice is rising and show a charge to production
which is closely related to current price.
Weighted Average Cost method: In this method, material issued
price is based upon the calculation of weighted average cost of the
material. It is calculated with using formula:

WAC = Value of material in stock/ Quantity in stock


Standard Price method: In this method, a standard price is
predetermined. The price is predetermined for the statedperiod of time
taken in the account all the factors affecting price such as anticipated
market
trends,
transportation
charges
etc.standard
prices
are
predetermined irrespective of purchase price. Any difference between the
predetermined price and actual priceis the material price variance.

Current Price: In this method, material issued is priced at the


replacement or realizable price at the time of issue. So , the cost at
which material could be purchased should be ascertained.

Inventory models:-Among different inventory models EOQ model


is most popular and commonly usedinventory model. These models
are used to determine the economic order quantity of the materials
to be stored.

EOQ Model:-As inventory is determined as the most important factor which


affects the operations, thena mathematical model was developed to control
the inventory levels. The most widely used model is EOQ model. It was first
developed by F.W. Haris in 1913 but still R.H. Wilson is given credit for this
model due to his early in-depth analysis. This model is also known as Wilson
EOQ model. According to this model, some costs like ordering costs are
declined with inventory holdings while some costs like holding costs rise and
thus total inventory cost curve has a minimum point where inventory costs
can be minimized. The economic quantity is the level for inventory which
minimizes the total inventory costs. It is the optimal level of inventories
which satisfies the demand constraints and cost constraints.
Derivation of EOQ formula:The derivation of Economic Order Quantity formula is as follows:

Let us assume,
D = Annual Demand
Co = Ordering cost
Cc = Carrying cost
Q = Quantity
Then,
Annual Stock = Q/2
Total Annual Carrying Cost = Cc.Q/2
No. of orders per annum = D/Q

Fig.1. EOQ model

Annual ordering cost = Co.D/Q


Therefore, total inventory cost = total ordering cost + total carrying cost
Or,
TIC = Cc.Q/2 + Co.D/Q
The order quantity at which the cost will be minimized is obtained by
differentiating total cost with respect to Q. In this problem, Q will be the
economic order quantity.
8

By differentiating, we get,
d(TIC)/dQ = Cc/2 Co.D/Q2
When cost is minimum
thend(TIC)/dQ will be 0.
Then,

Cc/2 Co.D/Q2 = 0
Or,
Q = (2.Co.D/Cc)1/2
Assumptions of EOQ model:There are some assumptions on which EOQ is calculated. These
assumptions are:i. There is known and constant holding cost.
ii. There is a known and constant ordering cost.
iii. The rates of demand are known.
iv. There is known constant price per unit.
v. No stock-outs are allowed.
vi. Replenishment is made instantaneously.
Inventory control techniques:-There are various techniques used by a
firm to control the inventories.Some of these techniques can be explained
as: ABC Analysis:-ABC analysis of inventories represent that the small
portion of material contains bulkamount of money value while a
relatively large portion of material consists less amount of money
value. The money value is ascertained by multiplying the quantity by
unit price. According to this approach, inventory control of high value
items are closely controlled than low value items. Each item is
categorized as A, B and C categories depending upon the amount
spent for the particular item. It may also be clear with the help of
following examples:

A category 5% to 10% of the items represent 70% to


75% of the money value.
B category 15% to 20% of the items represent 15%
to 20% of the money value.
C category 70% to 80% of the items represent 5%
to 10% of the money value.
9

Fig.2. ABC Classification

After classification, the items are ranked by their value and then the
cumulative percentage of the total value against the percentage of item is
noted. A detailed example clearly indicates the figure that 10 per cent of
item may account for 75 per cent of the value, another 10 per cent of item
may account for 15 per cent of the value. The remaining part may account
for 10 per cent of the value. The importance of this tool is that it directs
give attention on the high valued items.

Minimum level:-The minimum level of inventories kept on the


different bases like consumption duringthe lead time, stock-out costs,
customer irritation and loss of goodwill etc. To continue production it is very
essential to maintain optimal amount of inventories. The stock which takes
care for the fluctuation in demand is known as safety stock. It also governs
the ordering point.

Maximum level:-The maximum limit beyond which the quantity of


any item is not normally allowed torise is known as maximum level. It
is the sum of minimum level and EOQ. The amounts to be fixed in
maximum level depend upon the factors like space available, nature of
material etc.

1
0

Reorder level:-It is the level of the stock at which a purchase


requisition is initiated by the storekeeperfor replenishing the stock.
This level is set between the maximum and minimum level in a such
way that before material ordered for are received into the stores. Its
fixation depends upon maximum delivery period and maximum
consumption.

Just In Time system:-Japanese firms popularized this technique in


order to reduce the inventory level upto zero to eliminate the inventory
costs. According to this system, the materials arrive at the
manufacturing sites just few hours before they are going to use. This
system also eliminates the necessity of carrying large inventories.

Outsourcing:-Earlier there was tendency of manufacturing companies


to manufacture all parts in-house.Now, more companies are adopting
outsourcing techniques. Outsourcing is a system of buying parts and
components from other companies rather than manufacturing in
house.

Computerized Inventory Control System:-It is the modern


technique used for controlling theinventories. It enables a company to
track large items of inventories easily. It is an automatic system of
counting inventories, recording withdrawals and balances. There is an
in-built system of placing order as the computer notices that the
reorder point has been reached. The information system of the buyers
and suppliers are linked to each other.

1
1

COMPANYS PROFILE
Introduction of the Coca-Cola Company

The Coca-Cola Company (Coca-Cola), the worlds leading soft drink


maker, operates in more than 200 countries and sells 400 brands of
nonalcoholic beverages. Coca-Cola is also the most valuable brand in the
world. Coca-Cola is a globally recognized successful company. The CocaCola was founded in May of 1886 and continues for more than a century
through the times of war and peace, prosperity and depression and
economic boom and bust. As late as the 1990s, Coca-Cola was one of the
most respected companies in the world, building and known as a very
successful management team. Since 1998, the company has been
struggling with internal weaknesses and external threats.
The purpose of this case study is to assess the current situation of
Coca-Cola and the industry, evaluate the existing resources.

ENTERPRISE HISTORY AND BACKGROUND


HISTORY
1894 A modest start for a bold idea
In a candy store in Vicksburg, Mississippi, brisk sales of the new fountain
beverage called Coca-Cola

impressed

the store's

owner, Joseph

A.

Biedenharn. He began bottling Coca-Cola to sell, using a common glass


bottle called a Hutchinson. Biedenharn sent a case to Asa Griggs Candler,
who owned the Company. Candler thanked him but took no action. One of
his nephews already had urged that Coca-Cola be bottled, but Candler
focused on fountain sales.
1899 The fi rst bottling agreement
Two young attorneys from Chattanooga, Tennessee believed they could build
a business around bottling Coca-Cola. In a meeting with Candler, Benjamin
1
2

F. Thomas and Joseph B. Whitehead obtained exclusive rights to bottle CocaCola across most of the United States (specifically excluding Vicksburg) -- for
the sum of one dollar. A third Chattanooga lawyer, John T. Lupton, soon
joined their venture.
1900-1909 Rapid growth
The three pioneer bottlers divided the country into territories and sold
bottling rights to local entrepreneurs. Their efforts were boosted by major
progress in bottling technology, which improved efficiency and product
quality. By 1909, nearly 400 Coca-Cola bottling plants were operating, most
of them family-owned businesses. Some were open only during hot-weather
months when demand was high.
1916 Birth of the contour bottle
Bottlers worried that the straight-sided bottle for Coca-Cola was easily
confused with imitators. A group representing the Company and bottlers
asked glass manufacturers to offer ideas for a distinctive bottle. A design
from the Root Glass Company of Terre Haute, Indiana won enthusiastic
approval in 1915 and was introduced in 1916. The contour bottle became
one of the few packages ever granted trademark status by the U.S. Patent
Office. Today, it's one of the most recognized icons in the world - even in the
dark!
1920s Bottling overtakes fountain sales
As the 1920s dawned, more than 1,000 Coca-Cola bottlers were operating in
the U.S. Their ideas and zeal fueled steady growth. Six-bottle cartons were a
huge hit after their 1923 introduction. A few years later, open-top metal
coolers became the forerunners of automated vending machines. By the
end of the 1920s, bottle sales of Coca-Cola exceeded fountain sales.
1920s and 30s International expansion

1
3

Led by long-time Company leader Robert W. Woodruff, chief executive


officer and chairman of the Board, the Company began a major push to
establish bottling operations outside the U.S. Plants were opened in France,
Guatemala, Honduras, Mexico, Belgium, Italy, Peru, Spain, Australia and
South Africa. By the time World War II began, Coca-Cola was being bottled in
44 countries.

1940s Post-war growth


During the war, 64 bottling plants were set up around the world to supply
the troops. This followed an urgent request for bottling equipment and
materials from General Eisenhower's base in North Africa. Many of these
war-time plants were later converted to civilian use, permanently enlarging
the bottling system and accelerating the growth of the Company's
worldwide business.
1950s Packaging innovations
For the first time, consumers had choices of Coca-Cola package size and
type -- the traditional 6.5-ounce contour bottle, or larger servings including
10-, 12- and 26-ounce versions. Cans were also introduced, becoming
generally available in 1960.
1960s New brands introduced
Following Fanta in the 1950s, Sprite, Minute Maid, Fresca and TaB
joined brand Coca-Cola in the 1960s. Mr. Pibb and Mello Yello were
added in the 1970s. The 1980s brought diet Coke and Cherry Coke,
followed by POWERADE and DASANI in the 1990s. Today hundreds of
other brands are offered to meet consumer preferences in local markets
around the world.

1
4

1970s and 80s Consolidation to serve customers


As technology led to a global economy, the retailers who sold Coca-Cola
merged and evolved into international mega-chains. Such customers
required a new approach. In response, many small and medium-size bottlers
consolidated to better serve giant international customers. The Company
encouraged and invested in a number of bottler consolidations to assure
that its largest bottling partners would have capacity to lead the system in
working with global retailers.
1990s New and growing markets
Political and economic changes opened vast markets that were closed or
underdeveloped for decades. After the fall of the Berlin Wall, the Company
invested heavily to build plants in Eastern Europe. And as the century
closed, more than $1.5 billion was committed to new bottling facilities in
Africa.
21st Century
The Coca-Cola bottling system grew up with roots deeply planted in local
communities. This heritage serves the Company well today as people seek
brands that honor local identity and the distinctiveness of local markets. As
was true a century ago, strong locally based relationships between CocaCola bottlers, customers and communities are the foundation on which the
entire business grows.

1
5

Mission and Objectives


Mission
Coca-Cola declares the purpose as a company and serves as the standard
against actions and decisions:
To refresh the world
To inspire moments of optimism and happiness
To create value and make a difference.

1
6

Vision
The vision of Coca-Cola is the framework for their guides of every aspect of
its business. It is presented in 6Ps:
1. People: Be a great place to work where people are inspired to be the best
they can be.
2. Portfolio: Bring to the world a portfolio of quality beverage brands that
anticipate and satisfy people's desires and needs.
3. Partners: Nurture a winning network of customers and suppliers, together
we create mutual, enduring value. 4. Planet: Be a responsible citizen that
makes a difference by helping build and support sustainable communities.
5. Profit: Maximize long-term return to shareowners while being mindful of
our overall responsibilities.
6. Productivity: Be a highly effective, lean and fast-moving organization.

coca cola head quarters


The Coca-Cola

Headquarters is

campus

in Midtown

Atlanta, Georgia that is home to The Coca-Cola Company. The most visible
building on the site is a 29-story, 403foot (122.8 m) high One Coca-Cola
Plaza. Located on the corner of North Avenue and Luckie Street, the building
was completed in 1979. The architect was FABRAP and the designer Tom
Pardue.
The building and complex is located across the street from Georgia Institute
of Technology and Midtown Atlanta.
In May 2011, to celebrate the 125th anniversary of Coca-Cola, a
projection screen was made for the building that would display various Coke
ads through the years and also transformed the building into a huge cup of
ice which then was "filled" with Coke.

1
7

In INDIA, its head office is situated in Gurgaon, Haryana

Markets

1
8

Worldwide share and Geographical distribution

1
9

Brand wise Market Share

TARGET MARKET OF COCA-COLA

Coca-Cola takes every customer as target and potential who is thirsty.

All age groups are being targeted but the most potential is the age
group from 18-25 that covers around 40% of total age segment.

AGE: The target market for the Coca-Cola is based on age. The
audience of Coca-Coal is youngster or youth.

2
0

It has wide range of targeting. It ranges from the age of 15-25 and
reaches to 40.

Their targeting is not based gender but the results show that both
genders like this product and use it.

GENDER: Coca-Cola segments INDIAN market with a percentage


ratio of 58% females and 42% males.

Life style; busy life style( face shortage of time) and mobile
generation.

Family; dependent on their family.

Occupation; students and family oriented people.

NATURE:Fun loving and entertainment loving.

SOCIO ECONOMIC STATUS: Upper lower and lower class


MARKET SEGMENTATION OF COCA-COLA

Coca-Cola serves its products using mass market technique. Which


obviously falls in undifferentiated marketing and undifferentiated
marketing means no segmentation, but there are minor factors on
which we can say that the coke segments its products and then
targets the customers somehow.

These factors are as follows.

GEOGRAPHIC SEGMENTATION:

INTERNATIONALLY:Coke segments its products country wise and


region wise.

The most important things is the taste and quality.

It varies according to the taste and income level of the people in that
country. I.e.: third world countries are given low quality and taste

CLIMATIC:In coke marketing, main idea is to serve it cold, so we that


they focus on hot areas of the world.
2
1

i.e.: ASIA and Middle East etc and their sale increase in summer.

LOCALY:In INDIA the coke segments more in urban and suburban


areas as compare to rural areas.

DEMOGRAPHIC:
AGE: Coke segments the small children introducing tastes like
vanilla, lime and cherry. They focus children from 4-12.
Coke specifically target younger than older.
FAMILY TYPE: Coke introduces its economy pack and thats how the
focus family and groups.
INCOME:Coke segments different income levels by packing.
For small income people it has small returnable glass bottle.
For middle people it has small non-returnable bottle.
For higher income people it has Coke Tin.
PSYCHOGRAPHIC:
All psychographics variables the social class, lifestyle, occupation,
level of education and personality Coke segments everyone.
But again its there packaging which is different for different
consumers.
BEHAVIORAL:
OCCASION:Coca-Cola

segments

different

occasions

which

are

celebrated in the country.


EID & DIWALI has become an international event identity of the
culture of INDIA.
The credit for making celebrations available for almost everyone
largely goes to Coca-Cola Company.

2
2

FINANCIALS

2
3

FINANCIAL STATEMENTS

Contd

2
4

2
5

Servings per person

Global Workforce

Market Capitalization

2
6

Investors Info: Stock Information

stock Split History

MEANINGANDDEFINITION:
Theconceptofinventorymanagementasknowntodayisradicallydifferentfr
om

whatitwasjustafewyears

ago.Untillthelast

decade,IndianIndustryneededmaximumproductionsincethereexistedsellersmarketforalmostallp
roducts.Costwasnotseriousproblemthatitistoday,fortherewassomebodyready,willingandabletob
uytheproductsassoonasitwasavailable.
Excessmanufacturingcostsweresimplypassedalongtothebuyerintheform
ofhigherprices.Inthisenvironment,

the

emphasis
2
7

was

onthe

successful

productionmananditwasnotunusualtofindInventoryManagementgettingasecondaryplacewithin
theproductionfunction.
Overthelastdecadeorsowehavebeenwitnessingslowreversalofthissituatio
nasthesupplyiscatchingupwiththedemandandthemarketisturningfromsellerstobuyersmarket.For
thefirsttime,Indianindustryistryingtocompeteintheworldwidemarketswhichdemandlowcostand
highqualityproducts.
Meetingthiskindofcompetitionhasbecomeamajorconcernofbusinesstod
ayandsolutionoftheproblemdemandsmostefficientuseofmanufacturingresourcesofmen,money,
materialscountformorethanhalfthetotalmoneyspentbyanybusiness,inventorymanagementhasas
sumedsignificantimportance.

Prof.PeterF.DruckerhasdefinedthepurposeofbusinessasTocreatethecustomer.Logically,
objectiveofinventory
managementisthentoprovidemaximumcustomerservice,thishowever,cannot
bedonewithoutregardtothecompetitivecapabilityofbusiness,asitisonlythiscapabilitydemandstha
tinventorymanagementensuresmaximumplantefficiencyandminimuminventoryinvestment.
Atypicalinventorymanagementsystemisrepresentedinthefigure.Theprincipleinputstosuchasyste
mare:
Forecastofdemandbothlongtermandshorttermfortheproducts.

2
8

Currentdemandfortheproducts
Measurablecharacteristicsofproductsanditemssuchascost,leadtime,essentiallysetuptimeandsoo
n.
Managementpoliciesasregardcarryingcharges,levelofserviceandrateofresponsetochangesincustomerdemand.

MANAGEMENT POLICIES

Forecastof

Inventory

Demand

ManagementSystem

OrderPoint

Inventory
Control
Syste

OrderQuantityor
Operatinglevel

Characteristics(Cost
,leadtime,bulkEsse
ntiality,setup)

This informationformsthe basisforvarious decisionsconcern the order


quantityandoperatinglevel,whichinturnfromthebasisofinventorycontrolsystem.
Inventoriesareessentialforsales,andsalesarenecessaryforprofits.Actualinventoryco
ntrolisgenerallynotunderthedirectcontrolofthefinancialmanager.Rather,inmanufacturingcompa
nies,productionpeopletypicallyhavecontroloverinventories.Whereasinretailconcernsthiscontro
lisexercisedbythemerchandisingpeople.Howeverthefinancialmanagerisvitallyconcernedwithin
ventorylevels,forheorshehasresponsibilityfortrackingfactorswhichaffecttheoverallprofitabilityo
fthefirmandbecauseinventoriesgenerallyamounttosome2040%ofthetotalassets,poorinventorycontrolwillhurtthefirm`sprofitability.
Inventorymanagementhasanaffectonthecashconversioncycle.Oneofthecomponentsofthecashco
nversioncycleistheinventoryconversionperiod,theaveragelengthoftimerequiredtoconvertrawm
aterialsintofinishedgoodsandthentosellthesegoods.Naturally,thelargertheamountofinventoriesh
eld,theinventoryconversionperiodhencethelongercashconversioncycle.

OBJECTIVESOFINVENTORY:
Inventorymanagementinvolves

the

control

ofthe

current

assets,namelyrawmaterials,workinprogressandfinishedgoods.
Themainobjectistominimizethetotalcostandindirectcostassociatedwithholdinginventories.

PURPOSEOFINVENTORY:
atcompetitiveprices.Holdinginventoryiscosteffectiveandhelpsto
achievethesales

Theotherpurposeofholdinginventoryis:
Toensurepromptdelivery
Toavailquantitydiscounts.
Toreducetheordercosts
Toavoidproductionshortage
Toachieveefficientproductionruns.

WHYFIRMSHOLDINVENTORIES:
Inventoryformsalinkbetweentheproductionandsalesofapro
duct.Amanufacturingcompanymustmaintainacertain
amountofinventory,knownasworkinprogressduringproduction.Althoughothertypesofinventoryi
ntransit,rawmaterialsandfinishedgoodsinventoriesarenotnecessaryinthestrictestsense,theyallow
firmtobeflexible.Inventoryintransit
thatisinventorybetweenvariousstagesofproductionorshortagepermitsefficientproductionschedu
lingandutilizationorresources.
Withoutthistypeofinventory,eachstage

ofproductionwould

havetowait

forthe

precedingstagetocompleteaunit.Thepossibilityofresultantdelaysandidletimegivesthefirmanince
ntivetomaintainintransitinventory.

Avoid LossesofSales
Purchasing

GainQualityDiscounts
FirmsholdInventoryto

Producing
Reducingordercost

Selling

Achieveefficientproduct

CLASSIFIATIONOFINVENTORIES:
Inventoriesareusuallyas:
a) Rawmaterials
b) Bought-outcomponentsorsubassemblies
c) Semifinishedgoodsorwork-in-progressorwork-in-process
d) Consumablestores
e) Maintenancesparesparts
f) Finishedgoodsstoredorintransitwarehouseorcustomers

Therawmaterialinventorycontainsitemsthatarepurchasedbythefirmfrom
othersandareconvertedintofinishedgoodthroughthemanufacturing(productionprocess.Theyarea
nimportantinputofthefinalproduct.Thework-inprocessinventoryconsistsofitemscurrentlybeingusedintheproductionprocess.Theyarenormallys
emi-finishedgoodsthatarevariousstagesofproductioninamulti-stageproductionprocess.
Finishedgoodsrepresentfinalorcompletedproductswhichareavailableforsale.Theinventoryofsuc
hgoodsconsistsofitemsthathavebeenproducedareyettobesold.
Inventory,asacurrentasset,differsfromothercurrentassetsbecauseonlyfinancialmanagersarenoti
nvolved.Rather,allthefunctionalareas,financemarketing,production,andpurchasing,areinvolved
.Theviewsconcerningtheappropriatelevelofinventoryworlddifferamongthedifferentfunctionalar
eas.Thejobofthefinancialmanagersistoreconciletheconflictingviewpointsofthe
variousfunctionalareasregarding
theappropriateinventorylevelsinordertofulfilltheoverallobjectiveofmaximizingtheowner`swealt
h.Thus,inventorymanagementofothercurrentassets,
shouldberelatedtotheoverallobjectivefirm.Asamatteroffact,theinventorymanagementtechnique
sareapartofproductionmanagement.Butafamiliaritywiththemisofgreatofthefinancialmanagersin
planningandbudgetinginventory.

Inventories

constitute

themostsignificantpartofcurrent

assetsof

alargemajority

ofcompaniesinIndia.Onanaverage,inventoriesareapproximately60percentofcurrentassetsinpubl
iclimitedcompaniesinIndia.Becauseofthelargesizeofinventoriesmaintainedbyfirmsaconsiderabl
eamountoffundisrequiredtobecommittedtothem.Itis,therefore,absolutelyimperativetomanagein
ventoriesefficientlyandeffectivelyinordertoavoidunnecessaryinvestment.

MOTIVESINHOLDINGINVENTORIES:
Generallythreemotivesarethereinvolvedinholdinginventories

Transactionmotive:Itemphasizestheneedtomaintain
inventory,tofacilitatesmoothproductionandsalesoperations(calledtransactioninventory).

Precautionarymotive:Itnecessitatestheholdingofinventoriestoguardagainsttherisksofunp
redictablechangesindemandandsupplyprocess(calledprecautionaryinventory).

Speculativemotive:Itinfluencesthedecisiontoincreaseorreduceinventorylevelstotakeadva
ntageorpricefluctuations(calledspeculativeinventory).

BENEFITSOF HOLDING INVENTORY:


Thesecond

element

intheoptimum

inventorydecisiondeals

withthebenefits

associatedwithholdinginventory.Themajorbenefitsofholdinginventoryarebasicfunctionsofinve
ntory.Inotherwords,inventoriesperformcertainbasicfunctionsofwhicharecriticalimportanceinth
efirm`sproductionandmarketingstrategies.
Thebasicfunctionofinventoryistoactasabuffertodecoupleoruncouplethevariousactivitiesofafirm
sothatalldonothavetothepursuedattheexactlythesamerate.Thekeyactivitiesarepurchasing,produ
ctionandselling.

Benefitsinpurchasing:

Inthefirstplaceafirmcanpurchaselargerquantitiesthaniswarrantedbyusageinproductionorthesale
slevel.Thiswillenableitavailofdiscountsthatareavailableonbulkpurchases.Moreover,itwilllower
theorderingcostsasfeweracquisitionswouldbemade.Therewill,thusbeasignificantsavinginthecos
ts.Secondfirmcanpurchasegoodsbeforeanticipatedorannouncedpriceincreases.
Inventoriesthusservesasahedgeagainstpriceincreasesaswellasshortageofrawmaterials.Finished
goodsinventoryservestouncoupleproductionandsale.Thisenablesproductionandsales.Thatisprod
uctioncanbecarriedonataratehigherorlowerthanthesalesrate.Thiswould
advantagetothe

firmwith

seasonalsalespattern.

bespecial
Thus

inventory

helpsafirmtoreducethecostofdiscontinuousintheproductionprocess;thisispossiblebecauseprodu
ctioniskeptasinventorytomeetfuturedemands.Thus,inventoryhelpsfirmtocoordinateitsproductionschedulingsoastoavoiddisruptionsandaccompanyingexpenses.

Benefitsinsales:
Themaintenanceofinventoryalsohelpsafirmtoenhanceitssalesefforts.Foronething,iftherearenoin
ventoriesoffinishedgoods,thelevelofsaleswilldependuponthelevelofcurrentproduction.Afirmwi
llnotbeabletomeetdemandinstantaneously.Thusinventoryservestobridgethegapbetweencurrentp
roductionandactualsales.Arelatedaspectisthatinventoryservesasacompetitivemarketingtooltom
eetcustomersdemand.
Byholdingfewerinventories,costcanbeminimizedbutthereisariskthattheoperationswillbedisturb
edastheemergingdemandscannotbemet.Theappropriatelevelofinventoryshouldbedeterminedint
ermsofatrade-offbetweenthebenefitsandcostassociatedwithmaintaininginventory.

3
0

TYPESOFINVENTORYCOSTS:
Thecostfactormustbeconsideredwhiletakingdecisionregardinginventories.Inventorycostin
cludesorderingcost,carryingcost,outofstockorshortagecost&capacitycost.
Eachofthesecomprisesseveralelementsasshownbelow:
Ordering Costs:
a) Preparingapurchaseorder.
b) Processingpayments.

INVENTORYCONTROLDECISION:
Oneofthemajorconcernsofapurchasemanageristoreducethecostofinventory.Atthesametimetooli
ttleofinventorymightresultinshortageandconsequentproductionholdup.Henceoneofthemajordec
isionsinpurchaseistheoptimumquantityoforder.Duetoenvironmentalinfluencesbeyondthecontro
lofmanager,theperformanceandactivitiesoftendonotadheretoplannedtargets.Controlistherefore
broughtin,throughfeedback,sothatcorrectiveareinitiated,whereverdeviationexceedsacceptedlim
its.
Inventorycontrolmaythereforebedefinedasapplicationofcontroltheoryinmanagin
ginventorywithpredeterminedlevels.Inventoryisstorageofgoodsandmaintainingofstocks.Inman
ufacturing,inventoriesmeankeepingitemsinstocks.Consideredunderthissense,inventorycontrolc
anbevisualizedastechniquesofmaintainingstockkeepingitemsatdesiredlevels.Aschematicinvent
orycycleisshownbelow.

INVENTORY CYCLE

Production

Stores

Demand
Duesin

Inspect&accept
Supplies

Receiving

InventoryIn
Hand

Place
Order

Netorder

Issues

Quantity

tenders

Receive
quotation

INVENTORYCONTROLTECHNIQUES:

Tender
evaluation

Inventorycontroltechniquesareemployedbytheinventorycontrol
organizationswithintheframeworkofoneofthebasicinventorymodels,viz.,fixedorderqu
antitysystemorfixedorderperiodsystem;Inventorycontroltechniquesrepresenttheopera
tionalaspectofinventorymanagement&control.
Severaltechniquesofinventorycontrolareinuse&itdependsonthe
convenienceofthefirmtoadoptanyofthetechniques.Thetechniquesshouldcoveralltheite
msof inventory and all the stages,i.e., from the stageof receipt fromsuppliersto
thestageoftheiruse.Thetechniquesmostcommonlyusedthefollowing:

I.
II.

Always better control (ABC) classification.

High,medium & low (HML) classification.

III.

Vital,essential & desirable (VED) classification.

IV.

Scarce,difficult & easy to obtain (SDE).

V.
VI.

Fast moving, slow moving & non-moving (FSN).


Economic orderquantity(EOQ).

VII.

Max-Minimumsystems.

VIII.

Twobinsystem

DATA PRESENTATION ANALYSIS


The inventory policy of Nigeria Bottling Company PLC, Ilorin can only be appreciated
in the context of its peculiar circumstances as the leading soft drink bottling company
and one of the seventeen functional plants of the company within the country. It then
implies that whatever policy is adopted at the plant level must take into consideration
the overall companys objectives. The main determinant of the companys inventory
policy is the national economy itself in which the demand of their product stands as
another factor. According to Ilorin Plant managers, the company is constantly
reviewing performance as a unit of the economy; thus what happens in the economic
environment affects the policies and strategies of the company as a whole and the
plants as subsets.
The companys objective is to maintain quality, increase market shares and
profitability. This implies that enough inventories should be available to enhance
continuous production. This fact also determines the levels of inventory, which the
company keeps. Storage space is no barrier to operational activities of the industry as
it has avery large storage space located within the plant premises. Orders for
materials are obtained by request or by direct allocation from the head-quarters office
in Lagos.
The company operations three sets of stores, the raw material stores the finished
goods stores and the spare parts machinery stores. A store manager who
operationally works in conjunction with production manager, since most of the
products are used by his department alongside with bottling department heads the
raw material store. However, the store manager is responsible directly to the plant
manager and the bottling manager.
The finished goods store is headed by the sales manager assisted by the bottling
manager. The bottling manager helps to confirm the total of bottles produced on
regular basis. The sales manager takes responsibility as soon as production is
completed.
The spare parts store is headed by the Plant engineer, the raw materials that are
stored include the following: (a) Sugar: This is obtained locally from Dangote Nigeria Ltd. And sometimes
imported from oversea if need be. They are stored in bags, which are stacked in
pellets arranged in such a way as to facilitate easy stock taking. A maximum of 10,000
bags of sugar can be stored. Insectucotors are installed in the store keep off bees and
other insects.
(b) Concentrates: The concentrates are got from Coca-Cola international while their
chemicals are imported from Levants London. They come in syrup forms stored in
bottles and put in worms, which are built within the materials store at temperature of
between 40c and 100c.
(c) Crown Corks: They are supplied locally by Crown Product Limited, Ijebu-Ode. The

Crown Corks are kept in polythene bags and tore in cases, safe from dust and
moisture, which bring about rusting.

Data Presentation and Interpretation


The preceding section dwells on quantitative information of the plant. Here the data
are entirely quantitative as collected from the accounts department, bottling
department and the store.
Table 1 show the total sales of the company in Naira value for five years (20002004). The company witnessed a surplus for the five years

Table1:Sales(inMillions)
Years
2000

BudgetedSales

ActualSales

inmillions(N)

inmillions(N)

85.00

2001

94

2002

100

2003

110

Variance(N)

86.45

95
101.25
11
3.14

1.45
1
1.25
3.14

understudy, because there was a positive variation in each of the years. Positive
variation indicates good performance on the part of the company while negative
variation indicates poor performance, since the basic objective of any profit-making
company is to maximize sales.
Table 2 show the volume of production of the brands of the company's products that
is coke, fanta, and sprite. The variance reflects the inability of the company to meet its
target for a period of four years (2001-2004) out of the five years understudy. Upon
interview, the operations manager explained that this had no negative impact on the
overall profit, as it is part of the company's policy to plan in excess of forecast so that
even when actual production does not equal budget, it is of no negative consequence.
Table2:Salesincreates(VolumeofProduction)
Years

BudgetedSales

ActualSales

inmillions(N)

inmillions(N)

Variance(N)

2000

4,500,000

4,500,000

2001

4,750,000

3,950,000

800,000

2002

4,900,000

4,700,000

200,000

2003

4,950,000

3,756,621

1,193,397

2004

5,150,000

5,100,000

50,000

Table 3 show the overall production cost in value. It reveals that the actual cost of
production for the five years under study were above the budgeted cost. This was due
to in-crease in the prices of raw materials, incessant increase in fuel price, technology
and labour and the resulting effect of inflation in the Nigeria Economy. This has gone a
long way to affect
Table3:Productioncost(inMillionsofNaira)
Years

BudgetedSales

ActualSales

Variance(N)

inmillions(N)

inmillions(N)

2000

12

12.50

0.5

2001

20

21.76

1.76

2002

27

28.50

1.50

2003

35

36.14

1.14

2004

41

41.50

0.5

company's profit negatively during those periods of sky-rocketing inflation level.

Data Analysis and Hypothesis Testing


The data in tables 4, 5, 6 show the usage rate of Nigeria Bottling Company's raw
materials (that is sugar, concentrates and crown cork / bottles). The data were used to
determine the observed frequency value using the economic order quantity (EOQ)
formula. The expected frequency was determined by finding the average of all the
observed frequency. The chi-square value was then determined at 5% confidence level
and 4 degree of freedom, see tables 4, 5 and 6.

Table4:Sugar
Years

Annual No.of
demandin orders
(000)

2000
840
2001
900
2002
950
2003
1010
2004
1070
2=0.3095

3
3
3
3
3

Materials Ordering
unit
costper
cost
order
(000)
320
360
410
480
520

Carrying
costasa
%ofunit

7
8
9
11
12

4%
4%
5%
6%
6%

Ordering
costper
order
(000)

Carrying
costasa
%ofunit

8
10
12
13
20

3%
3%
4%
4%
5%

{N}
value

12.8
14.4
20.5
28.8
31.2

EOQ
(000)
O

(000)
E

(000)
(OE)2

30.31
31.62
28.89
27.78
28.69

29.46
29.46
29.46
29.46
29.46

0.72
4.67
0.32
2.82
0.59

EOQ
(000)
O

(000)
E

(000)
(OE)2

35.80
42.64
42.73
44.16
50.60

43.19
43.19
43.19
43.19
43.19

54.61
0.30
0.21
0.94
54.91

(000)
(OE)2
E
0.0244
0.1585
0.0109
0.0957
0.0200

Table5:Concentrates
Years

Annual
demandin
(000)

2000
450
2001
600
2002
700
2003
720
2004
800
2=2.5646

No.of Materials
orders
unit
cost
3
3
3
3
3

210
220
230
240
250

{N}
value

6.3
6.6
9.2
9.6
12.5

(000)
(OE)2
E
1.26
0.0069
0.0049
0.0218
1.271

PERPETUAL INVENTORY SYSTEM:


The Chartered Institute of Management Account. London, define the perpetual
inventory as A system of records maintained by the controlling department, which
reflects the physical movements of stock and their current balance. Bin cards and the
stores ledger help the management in maintaining this system as they make a record
of the physical movements of the stock on the receipts and issues of the materials
and also reflect the balance in the stores. To ensure the accuracy of perpetual
inventory records (i.e. bin cards stores ledger), physical verification of the stores is
made by a programmer of continuous stocktaking.

AVOIDABLE CAUSES:
Clericalmistakes,i.e.wrongposting,nonpostingofentries,wrongcastingetc.sucherrorscanbecorrectedandactualbal
ancecanagreewithbookbalancebymakingtherequiredcorrectioninbincards
ofstoresledger.

Pilferageinmaterialhandling.

Carelessnessinmaterialhandling.

Shortorover-issueofmaterials.

UNAVOIDABLE CAUSES:

ActualBalancesmaybelessduetoshrinkageandevaporation.

Actualbalancemaybemoreduetoabsorptionofmoisture.

Actualbalancemaybelessduetobreakdownoffire,riotsetc.

Materialsmaybelostduetobreakingupbulkmaterialintosmallerpartsforissue.

Forexample,someironislostduetobreakingupbigrodsintosmallerparts.

Adecreasingviewisobservedintheperiodofholdingunderaboveanalysisoftheinventories.This

INVENTORY TURNOVER RATIO:

InventoryTurnoverratio

Costofgoodssold
Averageinventory

CostofGoodsSold

AverageInventory

Sales-GrossProfit

(OpeningStockInventory+ClosingStockInventory)

2
Particulars

2008-2009

2009-2010 2010-2011

2011-2012

2012-2013

Sales

1061

1187

1382

1576

1872

GrossProfit

173

144

69

62

207

CostofGoodsSold(Sal

888

1043

1313

1514

1665

OpeningStock

69

127

195

157

198

ClosingStock

127

195

157

198

162

AverageInventory

98

161

176

178

180

9.06

6.47

7.46

8.50

9.25

esGrossProfit)
Inventory:

Inventory
TurnoverRatio

INVENTOR
TIO

Interpretation:
Theinventoryturnoverratiohasdecreasedfrom9.06to6.47fromtheyear20082009to2009-2010whichshowstheefficientmanagementofinventory.
TheInventoryTurnoverratiohasincreasedfrom6.47to7.46fromtheyear20092010to2010-2011whichshows that theinventoryis efficiently managed.
TheITR(InventoryTurnover Ratio) has increased from7.46 in theyear20102011
to
8.50
inthe
year20112012thisindicatesthattheinventoryismanagedinagoodmanner.Inthesimilarway
theITRhasincreasedfrom8.50intheyear2011-2012to9.25intheyear20122013whichindicatedthattheinventoryhasbeenmanagedeffectively.

Findings
The findings as presented above in all the three cases show that we should
reject the alternative hypotheses andaccept the null hypotheses. Our
analysis also shows that the company operates a policy of making orders on
aquarterly basis within a period of one year. Also it can be as well observed
that the company does not always adopt theEOQ model in placing orders for
its raw materials and this account for the variations between the calculated
EOQ andthe expected order sizes of the company. For at least three years
out of the five years under study, the expected valuewas greater than the
observed value for each product. We, thus, concluded that inventory usage
depends on sales that means as sales increases, inventory usagesshould
also be on the increase.
The researchers have found that Cement and sand is fast moving throughout
the year. It is also very clear that Gravel, Bricks and Steelare given less
importance in the stock. Materials management unit should also pay
attention to sales growth over the years and thus take intoconsideration.
More sophisticated techniques may be used to handle inventory
management problem more efficiently and effectively. It is vividthat the EOQ
of Bricks is high during the month March and low in October. During the
month of July the EOQ of Gravel is high and Steel islow. Also during
November EOQ of Steel is high and Sand is low. EOQ of Cement is high in the
month of April and low in February.
The salesand marketing department of the company should pay closer
attention to the growth pattern of inventory usage and incorporate it in
salesforecasting techniqueThe researchers have found that Steel being more
valuable is considered high among the inventory. Cement comes under the
averagecategory. Bricks, Sand and Gravel are in the lowest category of the
inventory. The management can expand the Godown for storing
theinventory. Effort must be made by the management to strike an optimum
investment in inventory since it costs much money to tie down capitalin
excess inventory.The management can take some measures for controlling
wastage of raw inventories.Emphasis can be normally placed on the
economic order quantity model because it was seen to be in the best interest
of organization to maintainan optimal level of materials in store. ABC may be
maintained strictly.

Conclusion And Recommendations


Inventory is the most important part of any business especially for
manufacturing companies. It is hidden costs whichare to be controlled for
sustaining in present competitive market. Apart of costs, customer
satisfaction is also the mostimportant factors for the businesses. Inventory
management also improves the level of customer satisfaction because
customerwants product at least time as possible. So, a manufacturing firm
must install the optimal inventory control techniques orimprove their asset
turnover as much as possible. Also, by different analysis it is concluded that
inventory turnover ratio iscorrelated with the net profit of the companies.
The inventory turnover ratio of JSW Steel is better than the other
twocompanies. Hence, from different findings it is concluded thatthere is
impact of inventory management on the financial condition of the firm.Some
recommendations are also for these companies according to the
interpretation of the data available.
Inventory management has become highly developed to meet the rising
challenges in most corporate entities andthis is in response to the fact that
inventory is an asset of distinct feature.The inventory management situation
of the Nigeria Bottling Company, Ilorin Plant has been revealed using theEOQ
model. It was also seen that the company through a wellbuilt policy is able to
handle its idle stock withoutincurringunnecessary costs. A basis for inventory
planning and control was also provided in this study. Though looking
throughthe inventory policy of the company, it can be said to be dynamic to
some extent but the analysis and findings haverevealed the need to remedy
some situations in the company's management of inventory.
The study thus suggests some recommendations to remedy certain defects
in the company inventory policy and ifthese recommendations are
implemented, the company's inventory management situation will attain a
greater height.First, emphasis should be normally placed on the economic
order quantity model because it was seen to be in the best interest
ofmanufacturing companies to maintain an optimal level of materials in
store, the level that minimizes total cost of investment ininventory. To
achieve this successfully, different costs, which are associated with

inventory, should be segregated and accumulatedin such a way that EOQ


can be easily determined.
Secondly, in the analysis we also mentioned that there was a positive
relationship between inventory and sales andbetween inventory and
production cost. This does not imply that inventory automatically determines
production costsor sales and viceversa. However, it does show that inventory
levels can be a useful indication of what level of sales toexpect. It is thus
recommended that the sales and marketing department of the company
should pay closer attention tothe growth pattern of inventory usage and
incorporate it in sales forecasting technique.