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Vignana Jyothi Institute of Management,

Bachupally, Hyderabad.


Pratheeka. P ± 09159

Sarath chand. A- 0409011

Pankaj kumar-0409008

Solomon victor.k- 0409014


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1. INTRODUCTION: .............................................................................................................. 3
INVENTORY MANAGEMENT: ........................................................................................... 3

OBJECTIVES OF INVENTORY MANAGEMENT ............................................................... 5

TYPES OF INVENTORY....................................................................................................... 6

NATURE OF INVENTORY ................................................................................................... 6

REASONS FOR MAINTAINING INVENTORY ................................................................... 7

2. INVENTORY MODELS IN MANUFACTURING INDUSTRIES: ..................................... 8

i. CONSUMER DURABLES: ............................................................................................. 8

DELL COMPUTERS ................................................................................................... 8

NOKIA ....................................................................................................................... 14
ii. FMCG PRODUCTS (PERISHABLE PRODUCTS) ................................................... 17

a) BEVERAGES (SOFT DRINKS) .................................................................................... 17

COCA-COLA ............................................................................................................. 17
b) DAIRY PRODUCTS .................................................................................................. 21

AMUL: ....................................................................................................................... 21
3. CONCLUSION..................................................................................................................... 29
4. BIBILOGRAPHY: ............................................................................................................ 30

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Inventory is defined as a stock of goods that are maintained by a business in anticipation

of some future demand. Inventory management is primarily about specifying the size and
placement of stocked goods. I{ has an impact on all business functions, particularly operations,
marketing, accounting, and finance. It is required at different locations within a facility or within
multiple locations of a supply network to protect the regular and planned course of production
against the random disturbance of running out of materials or goods. Inventory management
refers to all the activities involved in developing and managing the inventory levels of raw
materials, semi-finished materials (work-in- progress) and finished goods so that adequate
supplies are available and the costs of over or under stocks are low. The cost of maintaining
inventory is included in the final price paid by the consumer. Good in inventory represents a cost
to their owner. The manufacturer has the expense of materials and labour. The wholesaler also
has funds tied up.

The major objective of inventory management and control is to inform managers how
much of a good to re-order, when to re-order the good, how frequently orders should be placed
and what the appropriate safety stock is, for minimizing stock outs. And also inventory
management should involve to balance the conflicting economics of not wanting to hold tool
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. Thus, the overall goal of inventory is to have what is needed, and to minimize the
number of times one is out of stock.

The scope of inventory management also concerns the fine lines between replenishment
lead time, carrying costs of inventory, asset management, inventory forecasting, inventory
valuation, inventory visibility, future inventory price forecasting, physical inventory, available
physical space for inventory, quality management, replenishment, returns and defective goods

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and demand forecasting. Balancing these competing requirements leads to optimal inventory
levels, which is an on-going process as the business needs shift and react to the wider

If a manufacturer experiences stock-out of a critical 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 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 company¶s 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.

Essentially, inventory management, within the context of the foregoing features involves
planning and control. The planning aspect involves looking ahead in terms of the determination
in advance:

(i) What quantity of items to order; and

(ii) How often (periodicity) do we order for them to maintain the overall stock coordination in
an economically efficient way?

The control aspect, which is often described as stock control involves following the
procedure, set up at the planning stage to achieve the above objective. This may include
monitoring stock levels periodically or continuously and deciding what to do on the basis of
information that is gathered and adequately processed. Effort must be made by the management
of any organization to strike an optimum investment in inventory since it costs much money to
tie down capital in excess inventory. In recent time, attention was focused on the development of
suitable mathematical tools and approaches designed to aid the decision-maker in setting
optimum inventory levels.

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There are three main objectives of inventory management, as follows:

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Customer service refers to a company¶s ability to satisfy the needs of its customers.
There are several ways to measure the level of customer service, such as: (1) percentage
of orders that are shipped on schedule, (2) the percentage of line items that are shipped
on schedule, (3) the percentage of dollar volume that is shipped on schedule, and (4) idle
time due to material and component shortage. The first three measures focus on service
to external customers, while the fourth applies to internal customer service.


| PR |

Inventories can be facility for the cost-efficient operations in several ways.
Inventories can provide a buffer between operations so that each phase of the
transformation process can continue to operate even when output rates differ. Inventories
also allow a company to maintain a level workforce throughout the year even when there
is seasonal demand for the company¶s output. By building large production lots of items,
companies are able to spread some fixed costs over a larger number of units, thereby
decreasing the unit cost of each item. Finally, large purchases of inventory might qualify
for quantity discounts, which will also reduce the unit cost of each item.



As a company achieves lower amounts of money tied up in inventory, that company¶s

overall cost structure will improve, as will its profitability. A common measure used to
determine how well a company is managing its inventory investment (i.e., how quickly it
is getting its inventories out of the system and into the hands of the customers) is
inventory turnover ratio, which is a ratio of the annual cost of goods sold to the average
inventory level in dollars.

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 Raw aterials The purchased items or extracted materials that are transformed into
components or products.
 ets Parts or subassemblies used in building the final product.
 Ërkiress Ë
P) Any item that is in some stage of completion in the
manufacturing process.
 iished ds Completed products that will be delivered to customers.
 istributi ietry Finished goods and spare parts that are at various points in the
distribution system.
 aiteae, reair, ad eratial R) ietry te alled sulies)
Items that are used in manufacturing but do not become part of the finished product.

deedet s eedet ead
etry Some inventory items can be
classified as independent demand items, and some can be classified as dependent demand
items. While we need to make the timing and sizing decisions for all inventory items, we
must be careful in the manner in which we make those decisions for these two types of

deedet dead ietry ite Inventory item whose demand is not related to
(or dependent upon) some higher level item. Demand for such items is usually thought of
as forecasted demand. Independent demand inventory items are usually thought of as
finished products.
 eedet dead ietry ite Inventory item whose demand is related to (or
dependent upon) some higher level item. Demand for such items is usually thought of as
derived demand. Dependent demand inventory items are usually thought of as the
materials, parts, components, and assemblies that make up the finished product.

  : Adding Value through Inventory

|Y - inventory can be a ³buffer´ against poor quality; conversely, low inventory
levels may force high quality

 P - location of inventory has gigantic effect on speed

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|Y - location, level of anticipatory inventory both have effects

 | - Direct: purchasing, delivery, manufacturing

Indirect: holding, stock out.



: The time lags present in the supply chain, from supplier to user at every stage,
requires that you maintain certain amounts of inventory to use in this "lead time." and
also to provide effective customer service.
|Y: Inventories are maintained as buffers to meet uncertainties in
demand, supply and movements of goods.
   : Ideal condition of "one unit at a time at a place where a
user needs it, when he needs it" principle tends to incur lots of costs in terms of logistics.
So bulk buying, movement and storing brings in economies of scale, thus inventory.

P |

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 |RY Inventory are often
built in anticipation of future demand, planned promotional programs, seasonal demand
fluctuations, plant shutdowns, vacations, etc.
 | |

 |RY R  |Y | Inventory is sometimes
carried to protect against unpredictable or unexpected variations in demand.

 |RY R Y | Inventory is frequently bought or
produced in excess of what is immediately needed in order to take advantage of lower
unit costs or quantity discounts.
 |R PR| |
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 |RY Inventory is used to fill the
pipeline as products are in transit in the distribution network.
 P |
 |RY Inventory can be carried to protect
against some future event, such as a scarcity in supply, price increase, disruption in
supply, strike, etc.

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 |RY Inventories
of some items (such as maintenance supplies, spare parts, lubricants, cleaning
compounds, and office supplies) are used to support general operations and maintenance.



The manufacturing industries which we consider are divided in to two, one is non-
perishable products and second one is perishable products. Under non-perishable products,
consumer durables are under taken and under perishable products, FMCG products like
beverages (soft drinks) and milk products are considered.



DELL, as is currently the world's personal computers and servers in the market-leading
computer company, one of its competitive advantage lies in its lowest in the industry cost
structure, and this cost structure due in part to DELL raw materials management strategy.

DELL has established a complete information system throughout the entire materials
management has always been the ultimate goal is that apart from being between the suppliers
and the delivery of the original DELL accessories, the inventory of raw materials removed all the
supply chain, so that the original parts without going through inventory directly assigned to the
all aspects of production, effectively to replace inventory with information. While its Internet
ordering and procurement and supply systems also enables companies to achieve
synchronization of demand and supply, through the balance of supply and demand additional
minimize obsolete inventory for DELL tremendous cost advantage. As for the raw material
suppliers, DELL with its sharing of critical data, so that they can grasp the latest trends in
demand for the original parts information, and self-prediction and provide exactly the quantity
and quality to meet the needs of DELL original accessories.

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Behind the direct sales model in the DELL is its excellent supply chain management, and
its success in supply chain management has its unique origin of the raw materials management
1. Raw material procurement strategies
2. e-VMI and JIT management techniques in combination
3. The total purchase volume discounts Strategy

` Raw aterial rureet strateies

DELL company's strategic choice of pre-purchase of raw materials is the ERP management
technology, this is as a way to integrate external resources, but can not be proven ERP helps
companies to achieve this goal, so the company turned to a combination of VMI and JIT raw
material procurement management techniques.

| aaeet tehiques i biati

VMI and JIT procurement of raw materials a combination of the specific process technology,
are: first through the establishment of supply chain information platform, the use of information
systems to receive orders from customers; and then through the supply chain management
platform will be the news of the various orders passed to each of the original parts suppliers ; At
the same time, DELL timely demand forecasts, three times a day the results of the latest forecasts
available to the core of the network providers, informing them of the relevant information
required for parts, while suppliers can be based on the forecast results of the production of timely
and relevant organizations and rapidly organized shipments to the assembly plant, thus ensuring
the production of DELL. In this process, DELL speed in order to ensure the supply of raw
materials, its entire process through the Internet or other electronic devices to carry out, so that it
to take the management of technology is the combination of electronic VMI and JIT technology.

DELL in the purchase of raw materials on the use of such technology can not only sensitive to
respond to changes in market demand, there is increasingly conducive to achieving zero stocks
of spare parts; the same time make DELL inventory burden on the purchase and distribution of

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the original parts to shift the burden to the supplier, thereby reduced inventory risk and cost of
storage of the original parts; the same time using e-procurement management technology, and
expand the scope of the procurement market, shortening the distance between supply and
demand, simplify the procurement process, shortening the procurement time, reduce
procurement costs, thereby increasing work efficiency.

However, in actual operation of the process, the management there are still some risks and
disadvantages: First, management techniques such as enterprise information systems and the
supply of the operational requirements of the business are particularly high; Second, because
technology is the purchase of raw materials such as low-volume, multi - frequency of purchase,
making it difficult to enjoy volume discounts, and purchase too many times, it will certainly
increase the cost of procurement; And then there are thanks to increasingly zero inventory, the
company is not available for the buffer stock of raw materials, then once experienced
management, network, or other errors , it may lead to the production disruptions and losses.

To deal with these shortcomings, DELL purchasing volume, supplier selection, as well as the
absence of buffer stocks against disruption caused by the issue of making the corresponding
adjustments, select a reasonable response strategies through the following three strategic co-
ordination, better control of a result of the introduction of electronic VMI and JIT technology
combining the management of risks to make up for its shortcomings to ensure timely and
accurate implementation of the production.

  |he ttal urhase lue disuts tratey

DELL trend of raw materials due to the implementation of zero inventory, and therefore can
not be through the introduction of large-scale procurement of raw materials to enjoy volume
discounts, replaced by small-scale multi-frequency purchases. DELL In response to such small-
scale procurement of multi-frequency brought about the rising costs of procurement problems,
develop strategies to reach out a total order, namely suppliers to commit to a total amount of the
annual purchase of raw materials, in order to obtain a total amount of the total volume discounts.
Would not only avoid this kind of increase in procurement costs, while also help with suppliers

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to maintain "long-term cooperative" relationship.

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For suppliers, DELL require not only that they have a strong R & D, manufacturing, finance
and quality, cost control, can respond to a fast paced DELL; while also requiring them to have a
broad vision, a wide range of customers, and thus matter sorted out market remains very closely
linked. Not only that, DELL suppliers also set up a special evaluation team evaluation of each
vendor in terms of cost, technology, and service performance, and a day appraisal scores
published on the Internet, so that suppliers can improve the shortage of time, to be progress and

Information on alternative inventory strategies and to balance supply and demand

strategies. DELL small quantities of raw materials procurement, the trend of raw materials to
achieve zer ietry, but it also could easily lead to the absence of buffer stocks, as well as
production interruptions caused by imbalance between supply and demand risks. To solve this
problem, DELL selected information alternative inventory strategies, namely, by setting up a
special organization, the use of efficient information system to collect the world's supply of
computer parts and components possible emergencies, and its possible time, the degree of the
specific circumstances leading to an accurate forecast to predict to ward off risks. DELL is also
the same time, in line with the strategic balance between supply and demand, when the raw
material procurement and supply can not meet the online ordering system, its low cost will be
temporarily out of date or additional materials to manipulate other similar requirements, and
thereby to adjust the balance between supply and demand.

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DELL trend of raw materials to zero inventory strategy in their production factories to save at
the most productive use for the 8-hour parts inventory, the whole production process all orders

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and there is absolutely no more than 3 days. Chemo tactic zero inventory strategy has led to
savings of storage space and cost of raw materials, but such a strategy to DELL stock itself and
its suppliers, staff have put forward a very high demand; and because the residence time of raw
materials of such a strategy is very short, requires the supply of operators can make a quick
response to production needs, while the supply of products to protect the high quality of
reliability; And then there are such strategies require DELL must ensure that the lowest failure
rate of production machinery and equipment replacement time for each process should be carried
out quality inspection, the only way to ensure smooth production.

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DELL use of orders due to post-production (build-to-order) and JIT (just-in-time) mode of
production, its assembly plant does not set any storage space, so the original parts are directly
sent to the assembly line, and through "Kanban management" technology in the supply chain on
various aspects of the distribution. That is based on customer demand for product analysis of
each distribution of raw materials in various processes, then all processes from raw materials to
the production line of table near the point of receiving on-demand inventory to suppliers
instructions issued by the supply of various raw materials. This Kanban allocation of raw
materials, it can be to ensure the procurement and distribution of the DELL products only the
required number of raw materials, does not give the same time, the upstream will strictly control
the quality, not to bad raw materials available to the process, and strictly control the quantity and
quality of to prevent the waste of raw materials will help to achieve a balanced production, to
keep the turnover rate of raw materials to achieve zero inventory trend.

P| |
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Dell created a supply chain management (SCM) system that ensured that the right computer
parts were always available when and where needed. Dell has developed a strong relationship
with both its suppliers and customers that allow it to ensure that computer components are
available from suppliers to meet customer demands. It also ensured that a system was in place to

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get the product shipped and delivered to the customer effectively and efficiently. This direct
customer focus resulted in Dell¶s competitive advantage.

Dell utilizes database software, which is effective and efficient with customer
relationship management. These particular databases store tables of data that can be mined for
information about clients and used to generate promotional campaigns. The databases would
include customer information, their interests, and products. The customer database helps increase
profits because the database contains client information that helps determine effective and
efficient ways to target and segment the customers. Dell¶s business strategy focuses on creating
one of the most effective supply chain management systems via the i2, which would streamline
the supply chain process by linking Dell¶s suppliers and planners together to meet demand and
customer requirements. The software that Dell uses to increase relationship marketing is made by
Hotlink. Hotlink is a marketing automation software program used to aid e-marketers in
³effective targeting, efficient marketing communications, and real-time monitoring of customer
and market trends´ . This program strengthens the sales-customer relationship. This also gives
Dell free advertising ± word of mouth. The bottom line to CRM systems is that it directly
impacts its customer base, ensuring that better service is offered. A second type of software that
Dell uses is a transparent online system called ³Premier Pages,´ which are custom-designed Web
pages containing purchase data. This system also has a paperless ordering process, with the
customer¶s existing technology configurations already captured. Dell states that the idea behind
Premier Pages was to ³gain less information about customers ± they already know about them ±
and more to create a real win-win situation´. The process of knowing the customer begins when
the customer orders a PC. The PC is built after the customer orders it. This means that Dell has
to have a direct relationship with the customer. The final system that Dell is using to maximize
CRM is implementation of an enhanced CRM system with the help of IS Partners, an
information systems company. ³ProClarity offers in-depth analytical abilities, resulting in
positive and negative areas of business being clearly highlighted. Sales are also broken down by
region, with an overview of each sales team, enabling Dell to measure trends and successes´
Sales, marketing, financial and management segments benefit significantly from this software.
The Dell staff has easy access to the detailed demographic information about customers,
customer sales history and trade relationships. Sales management can track activity within

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accounts, and lapsed quotes can be acted on. The marketing department can track customer
activity, product sales, and marketing mixes. In addition, Dell deployed the e-Business software
i2 Supply Chain Planner, i2 Collaboration Planner, and i2 Factory Planner to meet it supply
chain needs. This new i2 technology was used to coordinate the build-to-order processes from
order placement to customer support. By using the software Dell is able to profile customers,
target them using their medium of preference, and also measure the results. Dell integrated the
supply and demand side of the business by using unique software that would eliminate inventory
overages. The i2 system enables Dell to pull material into its factories every two hours based on
real time customer orders. This system tracks backlog numbers, stock status, and supplier
commitments. It lets the supplier know what parts to deliver to which factories and be assembled
to meet customer demand.


Nokia is an active member of Tele management Forum Board and the OSS through Java
Initiative, which brings a new level of openness and interoperability to network and service
management environments. This work reflects Nokia¶s commitment to encouraging
standardization and industry collaboration in order to gain new efficiencies through plug and
play OSS solutions.

Nokia is the world leader in mobile communications, driving the growth and
sustainability of the broader mobility industry. Nokia is dedicated to enhancing people¶s lives
and productivity by providing easy-to-use and secure products like mobile phones, and solutions
for imaging, games, media, mobile network operators and businesses. Nokia is a broadly held
company with listings on five major exchanges.

Operators face a fragmented business environment in which organizations; processes and

information are divided into silos. There is no end-to-end, consistent view of networks and
services, information is difficult to access, process automation is limited and existing resources

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are not used efficiently. To improve the situation, operators are consolidating their inventory in
long, complex projects that have no guarantee of success.

The Nokia Siemens Networks Inventory solution offers an end-to-end view of fixed,
mobile and converged networks. It allows you to maximize end-user quality of experience while
achieving cost savings. Deployment and integration times are reduced considerably, due to a
new, modern architecture suitable for complex multi-vendor networks, together with the
combined Telco and software integration expertise of Nokia Siemens Networks.


The last few years have seen Communication Service Providers (CSPs) being acquired or
merging, changing organizations significantly and fragmenting processes and systems.
CSPs need to operate multi-vendor and multi-technology access, transport, switching and IP
networks, as well as find resources to support an ever increasing number of product and service

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offerings. A very dynamic and complex business environment with high costs emphasizes the
need for accurate data on how resources are used.

Nokia inventory solution offers CSPs a simple and efficient way to access all types of
information about networks, services and subscribers from a single, consistent data repository.
This keeps them informed about, for example, network capacities and investments as required by
the Sarbanes Oxley Act.

Flexibility is fundamental for inventory. As a critical part of a future-proof network and service
management concept, nokia inventory solution not only models the network¶s existing
technologies but is also open to the integration of any future technology.

The solution has the flexibility to meet customer requirements and processes. It provides
uniform information management in multi-vendor and multi technology communication
networks, harmonizing existing inventory systems. A modern object-oriented and scalable
architecture allows fast introduction of new technologies, interfaces and functionality. This,
together with our combined telco and software integration know-how, cuts deployment and
integration times considerably.

The main benefits of nokia inventory solution are:

‡ Significantly reduced deployment times compared to systems based on traditional

‡ Highest flexibility for new technologies and new equipment due to future proof
‡ Complete object orientation guarantees fast modeling of highly complex data structures
and easy integration of applications
‡ Experienced integration experts and telco specialists available worldwide
‡ Mature and feature rich solution: tools to manage the network in all dimensions, from
cable to services, subscribers and handsets, with end-to-end and multi-technology views
‡ High data quality through excellent data synchronization capability

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Inventory management, as the core of customer-centric service management, enables a high
quality experience through, for example:

‡ Improved customer care and network quality of service

‡ Enhanced service portfolio that better reflects end-users life styles
‡ Reduced service provisioning times.

A better quality of experience for end-users improves the rate of retention and acquisition of both
consumer and business users.





ala is a carbonated soft drink sold in stores, restaurants, and vending

machines internationally. The Coca-Cola Company claims that the beverage is sold in more than
200 countries. It is produced by The Coca-Cola Company in Atlanta, Georgia, and is often
referred to simply as ke (a registered trademark of The Coca-Cola Company in the United
States since March 27, 1944). Originally intended as a patent medicine when it was invented in
the late 19th century by John Pemberton, Coca-Cola was bought out by businessman As a Griggs
Candler, whose marketing tactics led Coke to its dominance of the world soft-drink market
throughout the 20th century.

The company produces concentrate, which is then sold to licensed Coca-Cola bottlers
throughout the world. The bottlers, who hold territorially exclusive contracts with the company,
produce finished product in cans and bottles from the concentrate in combination with filtered
water and sweeteners. The bottlers then sell, distribute and merchandise Coca-Cola to retail

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stores and vending machines. Such bottlers include Coca-Cola Enterprises, which is the largest
single Coca-Cola bottler in North America and Western Europe. The Coca-Cola Company also
sells concentrate for soda fountains to major restaurants and food service distributors.

The Coca-Cola Company has, on occasion, introduced other cola drinks under the Coke
brand name. The most common of these is Diet Coke, with others including Caffeine-Free Coca-
Cola, Diet Coke Caffeine-Free, Coca-Cola Cherry, Coca-Cola Zero, Coca-Cola Vanilla, and
special editions with lemon, lime or coffee.

     


Coca-Cola will use AIM to help 6 { warehouse operations at its plant by
determining warehousing processes and physical aspects of stock management that can be
streamlined for greater efficiency. QAD, a provider of enterprise solutions for global
manufacturers, Coca-Cola plant will implement the QAD Advanced Inventory Management
(AIM) solution to enhance its deployment of QAD's enterprise application, MFG/PRO, and
achieve greater flexibility in warehouse and stock management.

AIM provides real-time management of warehouse operations, helping extend traditional

inventory management capabilities and increase supply chain responsiveness. Users are able to
control inventory management processes in more sophisticated ways, utilizing technologies such
as barcode scanners and radio frequency systems and leveraging user-definable put-away and
picking algorithms. Intermec radio frequency equipment supplied by Proscan is being used with
this implementation.

Advanced Inventory Management will help them to manage their manufacturing

operations; AIM will provide a system that is information and not material flow driven. A
paperless system, enabled via the introduction of bar coding and scanning equipment as elements
of the system, will replace manual recording activities.

As a basis for most data collection that enables total traceability of all products in the
warehouse, the bar coding will play a vital role in the total process. Communication to

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employees will be conveyed via handheld scanning screens. Overall, AIM should interoperate
seamlessly with our MFG/PRO deployment, effectively eliminating a layer of hardware,
software and labour dedicated to warehousing, for more efficient operations."

Coca-Cola will work closely with QAD to design the AIM implementation and efficient
processes to help the company reduce the time lapse from order receipt to shipment of goods. By
collecting inventory movement data in real-time, Coca-Cola expects to achieve greater inventory
accuracy and reduce the need for periodic manual inventory counts. The manufacturer expects to
fully deploy AIM by April 2004.

QAD Advanced Inventory Management helps manufacturers bring greater

efficiency to the warehouse, where real-world business conditions put supply chain initiatives to
the test. This warehousing solution will help customers drive efficiency at a crucial point in their
supply chains."

Advanced Inventory Management (AIM) will help Coca-Cola plant to automate and
streamline all aspects of warehousing, including inventory control, replenishment, put-away and
picking logic, and labour management. User-defined rules ensure inventory stock movement and
related processes are configured to minimise time to distribute and replenish goods, so that
inventory can be allocated for prioritised shipping, and total inventory holdings can be 
to reduce cost of operations.

 |RY R  

Coca Cola ‘{  came to  

 their vending machine inventory process. Coke has
a vast number of vending machines, both new and in various states of reconditioning, which are
housed at various remanufacturing facilities throughout the U.S. Prior to joining forces with Bar
Code Software, the inventories on this machinery were performed manually a time-consuming,
labor-intensive task, to say the least. Information on each of their vending machines, i.e.,
location, state of condition, etc., was already housed in Coke¶s mainframe computer system. By

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working with this existing information, Bar Code Software was able to design an inventory
system that worked with their mainframe database, without causing any changes to it. |he new
system    ³Track It.´ t consists of specialized software that pulls the information from
Coke¶s mainframe database and transfers it to handheld termina  {  {    This
is ho { |  { { 6  6 6 

Printed bar code labels are generated and placed on every machine, old and new. The bar
code indicates the machine¶s special asset number, as assigned by Coke. When it is time to
perform a physical inventory, Track It pulls information on existing inventory from Coke¶s
mainframe using ³queries´ and ³ODBC´ drivers. This process generates a record on each piece
of machinery with all pertinent information. Next, this information is transferred from the PC in
its entirety to each handheld s 
|  { specialized software. Multiple
terminals are used simultaneously to scan the bar codes on each machine throughout Coke¶s
remanufacturing facilities. As each vending machine¶s bar code is scanned, the asset number is
compared to each number on the list that had been downloaded from Track It. A report listing
those assets found and not found is then displayed on the handheld terminal¶s display. The new
information is then transferred from all of the portable terminals back to Track It, and the
database on the PC is automatically updated. Reconciliation inquiries and reports are now
available at the click of a mouse.

Coca Cola Enterprises reports that the new system has cut physical inventory time at their
larger remanufacturing facilities from days to mere hours. Because they were able to develop this
system without affecting any of the information or data structures on Coke¶s mainframe, they
avoided the use of their information services department, saving them even more money and
manpower. This illustrates the ability to use the customer¶s existing databases and integrate the
latest bar code technology to improve performance and save our customer¶s time and money
while delivering value and also to mange the inventory.

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Amul (Anand Milk Union Limited), formed in 1946, is a dairy cooperative movement in
India. It is managed by Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF).
Established in Gujarat, India, Amul is the leading manufacturer of dairy and food products in
India competing with several players in the dairy industry. These include several largest dairy
products and manufactures. Amul¶s diary plant manufactures a varied range of dairy products
including dairy ingredients for food industries such as cheese, milk fat and cream, milk powder;
foodservice cheese from all regions of the country; foodservice milk cream and butter. Amul
aims to be the first choice suppliers of all dairy product users in the country. Their market
leadership is evidenced by the numerous accolades they have received from the Official
Agencies and the Government of India.

AMUL is {  largest food brand in India and world's Largest Pouched Milk Brand Every
day Amul collects 447,000 liters of milk from 2.12 million farmers (many illiterate) and it
converts the milk into branded, packaged products, and delivers goods worth Rs 6 crore (Rs 60
million) to over 500,000 retail outlets across the country. Its supply chain is easily one of the
most complicated in the world.

It all started in December 1946 with a group of farmers keen to free themselves from
intermediaries, gain access to markets and thereby ensure maximum returns for their efforts.
Based in the village of Anand, the Kaira District Milk Cooperative Union (better known as
Amul) expanded exponentially. It joined hands with other milk cooperatives, and the Gujarat
network now covers 2.12 million farmers, 10,411 village level milk collection centers and
fourteen district level plants (unions) under the overall supervision of GCMMF(Gujarat
Cooperative Milk Marketing Federation). There are similar federations in other states. Right
from the beginning, there was recognition that this initiative would directly benefit and

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transform small farmers and contribute to the development of society. Markets, then and even
today are primitive and poor in infrastructure. Amul and GCMMF acknowledged that
development and growth could not be left to market forces and that proactive intervention was

|w key requireets were idetiied

The first, that sustained growth for the long term would depend on matching supply and
demand. It would need heavy investment in the simultaneous development of suppliers and
consumers. Second, that effective management of the network and commercial viability would
require professional managers and technocrats.
To implement their vision while retaining their focus on farmers, a hierarchical network
of cooperatives was developed, it forms the robust supply chain behind GCMMF¶s endeavors.
The vast and complex supply chain stretches from small suppliers to large fragmented
markets. Management of this network is made more complex by the fact that GCMMF is
directly responsible only for a small part of the chain, with a number of third party players
(distributors, retailers and logistics support providers) playing large roles. Managing this supply
chain efficiently is critical as GCMMF's competitive position is driven by low consumer prices
supported by a low cost system.

eeli dead lw st stratey

At the time Amul was formed, consumers had limited purchasing power, and modest
consumption levels of milk and other dairy products. Thus Amul adopted a low-cost price
strategy to make its products affordable and attractive to consumers by guaranteeing them value
for money.

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Beginning with liquid milk, GCMMF enhanced the product mix through the progressive
addition of higher value products while maintaining the desired growth in existing products.

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Despite competition in the high value dairy product segments from firms such as Hindustan
Lever, Nestle and Britannia, GCMMF ensures that the product mix and the sequence in which
Amul introduces its products is consistent with the core philosophy of providing milk at a basic,
affordable price.


Amul products are available in over 500,000 retail outlets across India through its
network of over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer
inventory of the entire range of products. GCMMF transacts on an advance demand draft basis
from its wholesale dealers instead of the cheque system adopted by other major FMCG
companies. This practice is consistent with GCMMF's philosophy of maintaining cash
transactions throughout the supply chain and it also minimizes dumping. Wholesale dealers
carry inventory that is just adequate to take care of the transit time from the branch warehouse
to their premises. This |

|) strategy improves dealers Return
on investment (ROI). All GCMMF branches engage in route scheduling and have dedicated
vehicle operations.

brella bradi stratey

The network follows an umbrella branding strategy. Amul is the common brand for most
product categories produced by various unions: liquid milk, milk powders, butter, ghee, cheese,
cocoa products, sweets, ice-cream and condensed milk. Amul's sub-brands include variants
such as Amulspray, Amulspree, Amulya and Nutramul. The edible oil products are grouped
around Dhara and Lokdhara, mineral water is sold under the Jal Dhara brand while fruit drinks
bear the Safal name. By insisting on an umbrella brand, GCMMF not only skillfully avoided
inter-union conflicts but also created an opportunity for the union members to cooperate in
developing products.


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Even though the cooperative was formed to bring together farmers, it was recognized that
professional managers and technocrats would be required to manage the network effectively and
make it commercially viable. A typical supply chain network spans several levels of suppliers,
manufacturers/assemblers, distributors, wholesalers, and retailers. It is now quite well
recognized and well documented that cooperation among the members is necessary to manage
such chains effectively and efficiently. Increased cooperation among network members has
resulted in a number of changes at all levels -- operational, tactical and strategic, and has led to
the emergence of practices and strategies

For improving the chain's performance most prominent among these include the following:

rati shari: often dynamically, to improve planning and execution. Sharing of
POS data is a classic example for minimizing the distortions due to bull-whip effect and
reducing perceived variability of demand by the partners in the chain. Typically,
information sharing extends to costs as well.

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(ii) Focus on core competence of each player in the chain. The objective is to ensure that each
task is performed by the entity best suited for it. As a result, firms have become willing
partners in ceding control to a network partner for improving performance. VMI in many
industries is a direct result of such change in management thinking. Similarly, the role of
third parties for providing specific expertise such as logistics has grown substantially with
emphasis on supply chain.
(iii) Help network partners in improving their capability and making them competitive. Again,
this represents a sea change from the past when such entities were viewed as rivals in a
zero sum game. The new thinking is motivated by the recognition that helping partners
become competitive will make the chain more effective and lead to higher growth in
revenues and profits, thus leading to a win-win situation for all parties. Helping suppliers
with process improvements and implementation of JIT methods are examples of such
initiatives leading to overall improvement.

Given the large number of organizations and entities in the supply chain and decentralized
responsibility for various activities, effective coordination is critical for efficiency and cost
control. GCMMF and the unions play a major role in this process and jointly achieve the
desired degree of control. Buy-in from the unions is assured as the plans are approved by
GCMMF's board. The board is drawn from the heads of all the unions, and the boards of the
unions comprise of farmers elected through village societies, thereby creating a situation of
interlocking control. The federation handles the distribution of end products and coordination
with retailers and the dealers. The unions coordinate the supply side activities.
These include monitoring milk collection contractors, the supply of animal feed and other
supplies, provision of veterinary services, and educational activities.

aai |hird Party erie Priders:

From the beginning, it was recognized that the core activity for the Unions lay in
processing of milk and production of dairy products. Accordingly, the Unions focused efforts
on these activities and related technology development These include logistics of milk

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collection, distribution of dairy products, sale of products through dealers and retail stores,
provision of animal feed, some veterinary services etc. It is worth noting that a number of these
third parties are not in the organized sector, and many are not professionally managed. Hence,
while third parties perform the activities This is a particularly critical issue in the logistics and
transport of a perishable commodity where there are already weaknesses in the basic

stablishi best raties

A key source of competitive advantage has been the enterprise's ability to continuously
implement best practices across all elements of the network: the federation, the unions, the
village societies and the distribution channel. In developing these practices, the federation and
the unions have adapted successful models from around the world. It could be the
implementation of small group activities or quality circles at the federation. Or a TQM program
at the unions. Or housekeeping and good accounting practices at the village society level. More
important, the network has been able to regularly roll out improvement programs across to a
large number of members and the implementation rate is consistently high.

For example, every Friday, without fail, between 10.00 a.m. and 11.00 a.m., all employees of
GCMMF meet at the closest office, be it a department or a branch or a depot to discuss their
various quality concerns.
Examples of benefits from recent initiatives include reduction in transportation time from the
depots to the wholesale dealers, improvement in ROI of wholesale dealers, implementation of
er tk ut through improved availability of products at depots and also the
implementation of usti|ie in finance to reduce the float.

aizes at the unions have helped improve the quality of milk in terms of acidity and
sour milk. (Undertaken by multi-disciplined teams, Kaizens are highly focussed projects, reliant
on a structured approach based on data gathering and analysis.) For example, Sabar Union's
records show a reduction from 2.0% to 0.5% in the amount of sour milk/curd received at the

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Amul is a leading player in the dairy industry in India. It offers a wide range of dairy
products including all Milk products, foodservice cheese etc. To support its impending growth,
Amul integrated its operations with an Enterprise Resource Planning (ERP) solution. It also
needed item tracking and expiration management capabilities to better manage its range of dry,
chilled and frozen produce, by which improve its sales and distribution system, warehouse
management and inventory control. Amul also gains the capabilities to meet accounting and tax
legislative requirements. Increased management control and visibility enables more informed
and faster decision making.

As one of the fastest growing dairy manufacturers, Amul is operating in a highly

competitive environment. In this context of, the Amul¶s needs to meet the demands of fast-
changing consumer preferences and tough competition from other players. Amul recognized that
to become a major industry player, it faced a number of problems with its existing information
systems which had to be resolved. Essentially, the system¶s user interfaces were cumbersome, it
was difficult to integrate it with other company systems, and proving to be expensive to modify
and maintain due to the legacy technology used.

To sharpen its competitive edge in the fast-growing and competitive marketplace, the Amul¶s
Management saw the importance of replacing its existing core system with a quality Enterprise
Resource Planning (ERP) package to support its impending business and integrate it with the rest
of its systems. So a system was design so that it would address the long-term business and IT
needs of the Amul Keeping many challenges in mind, Amul also initiated a review of its existing
system and notified several challenges to be addressed such as: comprehensive survey of the
ERP implantation vendors and four major reasons: 1) a 100 percent Microsoft specialists, 2) an

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easy and quick implementation of ERP module experience 3) excellent support, and 4) Scalable
and cost effective than other competitors.

Coordinating disparate contributing agencies is often crucial to resolving problems.

Working with this end in view. The business processes in sales and Distribution was re-designed
in a manner that incorporates best-of-breed practices. The processes were also designed scalable
enough to accommodate changes easily Enabled the deployment of newer SD, CRM and
Inventory Management modules across the corporate infrastructure of Amul. Considering the
size of the client and the scope of its activities, this was a complicated exercise in itself, Amul
conceptualized, defined and implemented the solution.

Amul implemented the Finance, Sales, Purchase, Warehouse Management, Order

management System of ERP and assured the client of their ability to meet its day-to-day
demands During the implementation, Amul team worked well with the internal project team to
understand the business needs and quickly overcome any issues that arose during the
implementation Amul developed solution to define and manage various master entries such as
divisions, departments, inventory, locations, reason codes for products return, expiry return,
expenses reasons etc to control inventory costs, as well as monitor the utilization of resources has
implemented cost effective ERP solution that are customized to suit Amul¶s diary manufacturing
industry requirements.

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Inventory management has become highly developed to meet the rising challenges in
most corporate entities and this is in response to the fact that inventory is an asset of distinct
feature. 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. In manufacturing industry the
effective inventory management can make a significant contribution to a company¶s 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 manufacturing
industries which here consider are divided in to two, one is non-perishable products and second
one is perishable products. Under non-perishable products, Consumer Durables (Dell, Nokia) are
under taken and under perishable products, FMCG products like beverages (soft drink- coco
cola) and Dairy products (Amul) are considered. The different inventory models have been using
by the above manufacturing industries to mange their inventory at different stages.

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k Reerred

David Simchi-Levi, Philip Kaminsky, Edith Simchi- Levi, Ravi Shankar ³DESIGNING AND

Ëebsites .co. in

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