A MINOR PROJECT REPORT

ON

―Inventory Management at Pantaloons‖

SUBMITTED IN THE PARTIAL FULFILLMENT FOR THE AWARD OF

THE DEGREE OF BACHELOR IN BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF:

Ms. NITIKA SHARMA

Assistant Professor, RDIAS

SUBMITTED BY:

Name of the Student – MOHIT WADHWANI

Enrollment No. 04115901711
BBA, Semester 3
Batch 2011 – 2013

RUKMINI DEVI INSTITUTE OF ADVANCED STUDIES

NAAC Accredited „A‟ Grade Category Institute
High Grading 81.7% by joint Assessment
An ISO 9001:2008 Certified Institute
(Approved by AICTE, HRD Ministry, Govt. of India)
Affiliated to Guru Gobind Singh Indraprastha University, Delhi
2A & 2B, Madhuban Chowk, Outer Ring Road, Phase-1, Delhi-110085

1
 Inventory
Management
at
Pantaloons

2
 STUDENT „s DECLARATION

This is to certify that I have completed the Project titled ―INVENTORY

MANAGEMENT IN PANTALOONS‖ under the guidance of ―Ms.

NITIKA SHARMA‖ in the partial fulfillment of the requirement for the

award of the degree of ―Bachelor in Business Administration‖ from

―Rukmini Devi Institute of Advanced Studies, New Delhi.‖

This is an original work and I have not submitted it earlier elsewhere.

Name of the Student – MOHIT WADHWANI

Enrollment No. - 04115901711

Class & Section- BBA – 2 -3 SEMESTER

3
 CERTIFICATE OF GUIDE

This is to certify that the project titled ―INVENTORY MANAGEMENT IN

PANTALOONS‖ is an academic work done by ―MOHIT WADHWANI‖
submitted in the partial fulfillment of the requirement for the award of the
degree of ―Bachelors in Business Administration‖ from ―Rukmini Devi
Institute of Advanced Studies, New Delhi.‖ under my guidance and
direction.

To the best of my knowledge and belief the data and information presented
by him / her in the project has not been submitted earlier elsewhere.

Name of the Faculty – Mohit Wadhwani

Designation of the Faculty

RDIAS

4
 ACKNOWLEDGEMENT

I offer my sincere thanks and humble regards to Rukmini Devi Institute Of Advanced Studies,
GGSIP University, New Delhi for imparting us very valuable professional training in MBA.

I pay my gratitude and sincere regards to “Ms. Nitika Sharma”, my project Guide for giving me
the cream of his knowledge. I am thankful to him as he has been a constant source of advice,
motivation and inspiration. I am also thankful to him for giving his suggestions and
encouragement throughout the project work.

I take the opportunity to express my gratitude and thanks to our computer Lab staff and library
staff for providing me opportunity to utilize their resources for the completion of the project.

I am also thankful to my family and friends for constantly motivating me to complete the project
and providing me an environment which enhanced my knowledge.

Name of the Student – Mohit Wadhwani

Enrollment No. - 04115901711

Class & Sec – BBA-2-3 SEMESTER

5
 CONTENTS

Chapter I

Plan of the Study

1.1 Introduction to topic

1.2 Objective of the study
1.3 Literature review And/or Theoretical Background

Chapter II

Company Profile / Industry profile or details

Chapter III

Research Methodology

3.1 Purpose of the study

3.2 Research Objectives of the study

3.3 Research Methodology of the study

3. 3.1 Research Design

3.3.2 Data Collection Techniques

3.3.3 Sample design

3.3.4 Method of data collection

3.3.5 Limitations

Chapter IV

Data Analysis and Interpretation

Chapter V

Findings & Conclusions

6
 Chapter VI

Suggestion/ Recommendation

BIBLIOGRAPHY

ANNEXURES

7
 Chapter 1
Introduction

8
 INTRODUCTION TO INVENTORY MANAGEMENT

INVENTORY

Inventory means a list compiled for some formal purpose, such as the details of an estate
going to probate, or the contents of a house let furnished. This remains the prime meaning in
British English. In the USA and Canada the term has developed from a list of good
and materials to the goods and material available in stock by a business; and this has become
the primary meaning of the term in North American English, equivalent to the term "stock"
in British English. In accounting, inventory or stock is considered an asset.

INVENTORY MANAGEMENT

Inventory management is primarily about specifying the shape and percentage of stocked
goods. It is required at different locations within a facility or within many locations of a
supply network to precede the regular and planned course of production and stock of
materials.

The scope of inventory management 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, 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 environment.

Inventory management involves a retailer seeking to acquire and maintain a proper

merchandise assortment while ordering, shipping, handling, and related costs are kept in
check. It also involves systems and processes that identify inventory requirements, set
targets, provide replenishment techniques, report actual and projected inventory status and
handle all functions related to the tracking and management of material. This would include
the monitoring of material moved into and out of stockroom locations and the reconciling of
the inventory balances. It also may include ABC analysis, lot tracking, cycle counting
support, etc. Management of the inventories, with the primary objective of

9
determining/controlling stock levels within the physical distribution system, functions to
balance the need for product availability against the need for minimizing stock holding and
handling costs.

DEFINITION OF INVENTORY MANAGEMENT

Inventory management is primarily about specifying the size and placement of stocked
goods. Inventory management 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. 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 and
demand forecasting.

10
The reasons for keeping stock
There are three basic reasons for keeping an inventory:

1. Time - 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.
However, in practice, inventory is to be maintained for consumption during
'variations in lead time'. Lead time itself can be addressed by ordering that many days
in advance.
2. Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand,
supply and movements of goods.
3. Economies of scale - 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.

All these stock reasons can apply to any owner or product

Special terms used in dealing with inventory

 Stock Keeping Unit (SKU) is a unique combination of all the components that are
assembled into the purchasable item. Therefore, any change in the packaging or product
is a new SKU. This level of detailed specification assists in managing inventory.
 Stock out means running out of the inventory of an SKU.
 "New old stock" (sometimes abbreviated NOS) is a term used in business to refer to
merchandise being offered for sale that was manufactured long ago but that has never
been used. Such merchandise may not be produced anymore, and the new old stock may
represent the only market source of a particular item at the present time.

11
Typology

1. Buffer/safety stock
2. Cycle stock (Used in batch processes, it is the available inventory, excluding buffer
stock)
3. De-coupling (Buffer stock held between the machines in a single process which
serves as a buffer for the next one allowing smooth flow of work instead of waiting
the previous or next machine in the same process)
4. Anticipation stock (Building up extra stock for periods of increased demand - e.g. ice
cream for summer)
5. Pipeline stock (Goods still in transit or in the process of distribution - have left the
factory but not arrived at the customer yet)

Inventory examples
While accountants often discuss inventory in terms of goods for sale, organizations -
manufacturers, service-providers and not-for-profits- also have inventories (fixtures,
furniture, supplies, etc.) that they do not intend to sell. Manufacturers', distributors', and
wholesalers' inventory tends to cluster in warehouses. Retailers' inventory may exist in a
warehouse or in a shop or store accessible to customers. Inventories not intended for sale to
customers or to clients may be held in any premises an organization uses. Stock ties up cash
and, if uncontrolled, it will be impossible to know the actual level of stocks and therefore
impossible to control them.

While the reasons for holding stock were covered earlier, most manufacturing organizations
usually divide their "goods for sale" inventory into:

 Raw materials - materials and components scheduled for use in making a product.
 Work in process, WIP - materials and components that have began their transformation
to finished goods.
 Finished goods - goods ready for sale to customers.
 Goods for resale - returned goods that are salable.

12
For example:

Manufacturing

A canned food manufacturer's materials inventory includes the ingredients to form the foods
to be canned, empty cans and their lids (or coils of steel or aluminum for constructing those
components), labels, and anything else (solder, glue, etc.) that will form part of a finished
can. The firm's work in process includes those materials from the time of release to the work
floor until they become complete and ready for sale to wholesale or retail customers. This
may be vats of prepared food, filled cans not yet labeled or sub-assemblies of food
components. It may also include finished cans that are not yet packaged into cartons or
pallets. Its finished good inventory consists of all the filled and labeled cans of food in its
warehouse that it has manufactured and wishes to sell to food distributors (wholesalers), to
grocery stores (retailers), and even perhaps to consumers through arrangements like factory
stores and outlet centers.

PURPOSE
Inventory proportionality is the goal of demand-driven inventory management. The primary
optimal outcome is to have the same number of days' (or hours', etc.) worth of inventory on
hand across all products so that the time of run out of all products would be simultaneous. In
such a case, there is no "excess inventory," that is, inventory that would be left over of
another product when the first product runs out. Excess inventory is sub-optimal because the
money spent to obtain it could have been utilized better elsewhere, i.e. to the product that just
ran out.

The secondary goal of inventory proportionality is inventory minimization. By integrating

accurate demand forecasting with inventory management, replenishment inventories can be
scheduled to arrive just in time to replenish the product destined to run out first, while at the
same time balancing out the inventory supply of all products to make their inventories more
proportional, and thereby closer to achieving the primary goal. Accurate demand forecasting
also allows the desired inventory proportions to be dynamic by determining expected sales

13
out into the future; this allows for inventory to be in proportion to expected short-term sales
or consumption rather than to past averages, a much more accurate and optimal outcome.

Integrating demand forecasting into inventory management in this way also allows for the
prediction of the "can fit" point when inventory storage is limited on a per-product basis.

Applications

The technique of inventory proportionality is most appropriate for inventories that remain
unseen by the consumer, as opposed to "keep full" systems where a retail consumer would
like to see full shelves of the product they are buying so as not to think they are buying
something old, unwanted or stale; and differentiated from the "trigger point" systems where
product is reordered when it hits a certain level; inventory proportionality is used effectively
by just-in-time manufacturing processes and retail applications where the product is hidden
from view.

One early example of inventory proportionality used in a retail application in the United
States was for motor fuel. Motor fuel (e.g. gasoline) is generally stored in underground
storage tanks. The motorists do not know whether they are buying gasoline off the top or
bottom of the tank, nor need they care. Additionally, these storage tanks have a maximum
capacity and cannot be overfilled. Finally, the product is expensive. Inventory proportionality
is used to balance the inventories of the different grades of motor fuel, each stored in
dedicated tanks, in proportion to the sales of each grade. Excess inventory is not seen or
valued by the consumer, so it is simply cash sunk (literally) into the ground. Inventory
proportionality minimizes the amount of excess inventory carried in underground storage
tanks. This application for motor fuel was first developed and implemented by Petrol soft
Corporation in 1990 for Chevron Products Company. Most major oil companies use such
systems today.

14
Roots
The use of inventory proportionality in the United States is thought to have been inspired by
Japanese just-in-time parts inventory management made famous by Toyota Motors in the
1980s.

High Level Inventory Management

It seems that around 1880 there was a change in manufacturing practice from companies with
relatively homogeneous lines of products to horizontally integrated companies with
unprecedented diversity in processes and products. Those companies (especially in
metalworking) attempted to achieve success through economies of scope - the gains of
jointly producing two or more products in one facility. The managers now needed
information on the effect of product-mix decisions on overall profits and therefore needed
accurate product-cost information. A variety of attempts to achieve this were unsuccessful
due to the huge overhead of the information processing of the time. However, the burgeoning
need for financial reporting after 1900 created unavoidable pressure for financial
accounting of stock and the management need to cost manage products became
overshadowed. In particular, it was the need for audited accounts that sealed the fate of
managerial cost accounting. The dominance of financial reporting accounting
over management accounting remains to this day with few exceptions, and the financial
reporting definitions of 'cost' have distorted effective management 'cost' accounting since that
time. This is particularly true of inventory.

Hence, high-level financial inventory has these two basic formulas, which relate to the
accounting period:

1. Cost of Beginning Inventory at the start of the period + inventory purchases within
the period + cost of production within the period = cost of goods available
2. Cost of goods available − cost of ending inventory at the end of the period = cost of
goods sold

15
 The benefit of this formula is that the first absorbs all overheads of production and raw
material costs into a value of inventory for reporting. The second formula then creates the
new start point for the next period and gives a figure to be subtracted from the sales price to
determine some form of sales-margin figure.

Manufacturing management is more interested in inventory turnover ratio or average days to

sell inventory since it tells them something about relative inventory levels.

Inventory turnover ratio (also known as inventory turns) = cost of goods sold / Average
Inventory = Cost of Goods Sold / ((Beginning Inventory + Ending Inventory) / 2) and its
inverse
Average Days to Sell Inventory = Number of Days a Year / Inventory Turnover Ratio = 365
days a year / Inventory Turnover Ratio

This ratio estimates how many times the inventory turns over a year. This number tells how
much cash/goods are tied up waiting for the process and is a critical measure of process
reliability and effectiveness. So a factory with two inventory turns has six months stock on
hand, which is generally not a good figure (depending upon the industry), whereas a factory
that moves from six turns to twelve turns has probably improved effectiveness by 100%. This
improvement will have some negative results in the financial reporting, since the 'value' now
stored in the factory as inventory is reduced.

While these accounting measures of inventory are very useful because of their simplicity,
they are also fraught with the danger of their own assumptions. There are, in fact, so many
things that can vary hidden under this appearance of simplicity that a variety of 'adjusting'
assumptions may be used. These include:

 Specific Identification
 Weighted Average Cost
 Moving-Average Cost
 FIFO and LIFO.

Inventory Turn is a financial accounting tool for evaluating inventory and it is not necessarily
a management tool. Inventory management should be forward looking. The methodology

16
applied is based on historical cost of goods sold. The ratio may not be able to reflect the
usability of future production demand, as well as customer demand.

Business models, including Just in Time (JIT) Inventory, Vendor Managed Inventory (VMI)
and Customer Managed Inventory (CMI), attempt to minimize on-hand inventory and
increase inventory turns. VMI and CMI have gained considerable attention due to the success
of third-party vendors who offer added expertise and knowledge that organizations may not
possess.

Accounting for inventory

Each country has its own rules about accounting for inventory that fit with their financial-
reporting rules.

For example, organizations in the U.S. define inventory to suit their needs within US
Generally Accepted Accounting Practices (GAAP), the rules defined by the Financial
Accounting Standards Board (FASB) (and others) and enforced by the U.S. Securities and
Exchange Commission (SEC) and other federal and state agencies. Other countries often
have similar arrangements but with their own accounting standards and national agencies
instead.

It is intentional that financial accounting uses standards that allow the public to compare
firms' performance, cost accounting functions internally to an organization and potentially
with much greater flexibility. A discussion of inventory from standard and Theory of
Constraints-based (throughput) cost accounting perspective follows some examples and a
discussion of inventory from a financial accounting perspective.

The internal costing/valuation of inventory can be complex. Whereas in the past most
enterprises ran simple, one-process factories, such enterprises are quite probably in the
minority in the 21st century. Where 'one process' factories exist, there is a market for the
goods created, which establishes an independent market value for the good. Today, with
multistage-process companies, there is much inventory that would once have been finished
goods which is now held as 'work in process' (WIP). This needs to be valued in the accounts,
but the valuation is a management decision since there is no market for the partially finished
product.

17
Financial accounting
An organization's inventory can appear a mixed blessing, since it counts as an asset on
the balance sheet, but it also ties up money that could serve for other purposes and requires
additional expense for its protection. Inventory may also cause significant tax expenses,
depending on particular countries' laws regarding depreciation of inventory, as in Thor Power
Tool Company v. Commissioner.

Inventory appears as a current asset on an organization's balance sheet because the

organization can, in principle, turn it into cash by selling it. Some organizations hold larger
inventories than their operations require in order inflating their apparent asset value and their
perceived profitability.

In addition to the money tied up by acquiring inventory, inventory also brings associated
costs for warehouse space, for utilities, and for insurance to cover staff to handle and protect
it from fire and other disasters, obsolescence, shrinkage (theft and errors), and others.
Such holding costs can mount up: between a third and a half of its acquisition value per year.

Businesses that stock too little inventory cannot take advantage of large orders from
customers if they cannot deliver. The conflicting objectives of cost control and customer
service often pit an organization's financial and operating managers against its sales and
marketing departments. Salespeople, in particular, often receive sales-commission payments,
so unavailable goods may reduce their potential personal income. This conflict can be
minimized by reducing production time to being near or less than customers' expected
delivery time. This effort, known as "Lean production" will significantly reduce working
capital tied up in inventory and reduce manufacturing costs (See the Toyota Production
System).

18
Role of inventory accounting
By helping the organization to make better decisions, the accountants can help the public
sector to change in a very positive way that delivers increased value for the taxpayer‘s
investment. It can also help to incentivize progress and to ensure that reforms are sustainable
and effective in the long term, by ensuring that success is appropriately recognized in both
the formal and informal reward systems of the organization.

To say that they have a key role to play is an understatement. Finance is connected to most, if
not all, of the key business processes within the organization. It should be steering the
stewardship and accountability systems that ensure that the organization is conducting its
business in an appropriate, ethical manner. It is critical that these foundations are firmly laid.
So often they are the litmus test by which public confidence in the institution is either won or
lost.

Finance should also be providing the information, analysis and advice to enable the
organizations‘ service managers to operate effectively. This goes beyond the traditional
preoccupation with budgets – how much have we spent so far, how much do we have left to
spend? It is about helping the organization to better understand its own performance. That
means making the connections and understanding the relationships between given inputs –
the resources brought to bear – and the outputs and outcomes that they achieve. It is also
about understanding and actively managing risks within the organization and its activities.

19
FIFO vs. LIFO accounting
When a merchant buys goods from inventory, the value of the inventory account is reduced
by the cost of goods sold (COGS). This is simple where the COGS has not varied across
those held in stock; but where it has, then an agreed method must be derived to evaluate it.
For commodity items that one cannot track individually, accountants must choose a method
that fits the nature of the sale. Two popular methods that normally exist are: FIFO and LIFO
accounting (first in - first out, last in - first out). FIFO regards the first unit that arrived in
inventory as the first one sold. LIFO considers the last unit arriving in inventory as the first
one sold. Which method an accountant selects can have a significant effect on net income
and book value and, in turn, on taxation. Using LIFO accounting for inventory, a company
generally reports lower net income and lower book value, due to the effects of inflation. This
generally results in lower taxation. Due to LIFO's potential to skew inventory value, UK
GAAP and IAS have effectively banned LIFO inventory accounting.

Standard cost accounting

Standard cost accounting uses ratios called efficiencies that compare the labour and materials
actually used to produce a good with those that the same goods would have required under
"standard" conditions. As long as actual and standard conditions are similar, few problems
arise. Unfortunately, standard cost accounting methods developed about 100 years ago, when
labor comprised the most important cost in manufactured goods. Standard methods continue
to emphasize labor efficiency even though that resource now constitutes a (very) small part
of cost in most cases.

Standard cost accounting can hurt managers, workers, and firms in several ways. For
example, a policy decision to increase inventory can harm a manufacturing
manager's performance evaluation. Increasing inventory requires increased production, which
means that processes must operate at higher rates. When (not if) something goes wrong, the
process takes longer and uses more than the standard labor time. The manager appears
responsible for the excess, even though s/he has no control over the production requirement
or the problem.

20
In adverse economic times, firms use the same efficiencies to downsize, right size, or
otherwise reduce their labor force. Workers laid off under those circumstances have even less
control over excess inventory and cost efficiencies than their managers.

Many financial and cost accountants have agreed for many years on the desirability of
replacing standard cost accounting. They have not, however, found a successor.

Theory of constraints cost accounting

Eliyahu M. Goldratt developed the Theory of Constraints in part to address the cost-
accounting problems in what he calls the "cost world." He offers a substitute,
called throughput accounting, that uses throughput (money for goods sold to customers) in
place of output (goods produced that may sell or may boost inventory) and considers labor as
a fixed rather than as a variable cost. He defines inventory simply as everything the
organization owns that it plans to sell, including buildings, machinery, and many other things
in addition to the categories listed here. Throughput accounting recognizes only one class of
variable costs: the truly variable costs, like materials and components, which vary directly
with the quantity produced

Finished goods inventories remain balance-sheet assets, but labor-efficiency ratios no longer
evaluate managers and workers. Instead of an incentive to reduce labor cost, throughput
accounting focuses attention on the relationships between throughput (revenue or income) on
one hand and controllable operating expenses and changes in inventory on the other. Those
relationships direct attention to the constraints or bottlenecks that prevent the system from
producing more throughput, rather than to people - who have little or no control over their
situations.

21
National Accounts
Inventories also play an important role in national accounts and the analysis of the business
cycle. Some short-term macroeconomic fluctuations are attributed to the inventory cycle.

Distressed Inventory
Also known as distressed or expired stock, distressed inventory is inventory whose potential
to be sold at a normal cost has passed or will soon pass. In certain industries it could also
mean that the stock is or will soon be impossible to sell. Examples of distressed inventory
include products that have reached their expiry date, or have reached a date in advance of
expiry at which the planned market will no longer purchase them (e.g. 3 months left to
expiry), clothing that is defective or out of fashion, music that is no longer popular and old
newspapers or magazines. It also includes computer or consumer-electronic equipment that is
obsolete or discontinued and whose manufacturer is unable to support it. One current
example of distressed inventory is the VHS format.

In 2001, Cisco wrote off inventory worth US $2.25 billion due to duplicate orders. This is
one of the biggest inventory write-offs in business history.

Inventory Credit
Inventory credit refers to the use of stock, or inventory, as collateral to raise finance. Where
banks may be reluctant to accept traditional collateral, for example in developing
countries where land title may be lacking, inventory credit is a potentially important way of
overcoming financing constraints. This is not a new concept; archaeological evidence
suggests that it was practiced in Ancient Rome. Obtaining finance against stocks of a wide
range of products held in a bonded warehouse is common in much of the world. It is, for
example, used with Parmesan cheese in Italy. Inventory credit on the basis of stored
agricultural produce is widely used in Latin American countries and in some Asian
countries. A precondition for such credit is that banks must be confident that the stored
product will be available if they need to call on the collateral; this implies the existence of a
22
reliable network of certified warehouses. Banks also face problems in valuing the inventory.
The possibility of sudden falls in commodity prices means that they are usually reluctant to
lend more than about 60% of the value of the inventory at the time of the loan.

The Importance of Inventory Management

The inventory management is needed as being a portion of supply chain network to guard the
manufacturing program towards any type of disturbance. Moreover, it also prevents the
system from working out of stock, components and products. Basically, inventory handling
focuses on asset management, replenishment lead time, inventory forecasting, inventory
valuation, inventory carrying price, forecast of potential asset management rates, inventory
visibility, physical inventory and the space available for its accommodation, desire
forecasting also as return of defective products.
The principal goal of inventory managing is always to strike a balance amongst the
contending specifications for attaining ideal inventory ranges. Because the process is
continuous, it demands a shift from business wants. This also assists in accommodating the
wants of bigger environment. Inventory handling tries to take care of a considerable
collection of merchandise. Furthermore, inventory management also assists in controlling
troubles like shipping, ordering and dealing with supplies. In addition, the material
management and tracking areas of inventory managing also include feature like supervision
of components which are moved in or out of warehouses and reconciliation of inventory
balances. Other locations of inventory management include great deal monitoring and cycle
counting help. Regardless of what is the nature or measurement of your respective enterprise,
inventory management often delivers an aggressive edge. Given that the practice assures goal
fulfillment, visibility and efficient management, it allows comparative pricing on a customer-
to-customer basis. In addition, inventory management helps business proprietors in making
strategic selections concerning the form of inventory that ought to be carried for
accommodating inventory management procedures. Not simply does inventory management
improve the amount of satisfied clients for a business, but in addition aims at minimizing the
working charges. Moreover, inventory handling facilitates the management of your enterprise

23
with inventory standards as well as fees. Organizations operating in processing and
manufacturing industries need complex as well as simplified processes of management
control. Inventory management helps in streamlining such issues by way of effective
distribution at the same time as compliance for development of software and other methods.
Very last but not the minimum, inventory dealing with also will help in establishing a
replenishment strategy for various products current in warehouses. Moreover, additionally, it
outlines specified recommendations by controlling ongoing lifeless stock and excess
inventory. Within a nutshell, it could not be unfair to state that inventory management
imparts a strategic aggressive benefit to organizations by delivering a user-friendly stock
evaluation tool that provides prompt data.

24
 OBJECTIVE OF INVENTORY MANAGEMENT IN
PANTALOONS
The main objective to study inventory management is
1. To keep inventory at sufficiently high level to perform production and sales activities
smoothly.
2. To minimize investment in inventory at minimum level to maximize profitability.

Through the efficient Management of Inventory of the wealth of owners will be maximized.
To reduce the requirement of cash in business, inventory turnover should be maximized and
management should save itself from loss of production and sales, arising from its being out
of stock. On the other hand, management should maximize stock turnover so
that investment in inventory could be minimized and on the other hand, it should keep
adequate inventory to operate the production & sales activities efficiently. The main
objective of inventory management is to maintain inventory at appropriate level so that it is
neither excessive nor short of requirement Thus, management is faced with 2 conflicting
objectives.

(1) To keep inventory at sufficiently high level to perform production and sales activities
smoothly.

(2)To minimize investment in inventory at minimum level to maximize profitability.

Both in adequate & excessive quantities of inventory are undesirable for business. These
mutually conflicting objectives of inventory management can be explained is from of costs
associated with inventory and profits accruing from it low quantum of inventory reduces
costs and high level of inventory saves business from being out of stock & helps in running
production & sales activities smoothly.

The objectives of inventory management can be explained in detail as under:-

(i) To ensure that the supply of raw material & finished goods will remain continuous so that
production process is not halted and demands of customers are duly met.
(ii) To minimize carrying cost of inventory.

25
(iii) To keep investment in inventory at optimum level.

(iv) To reduce the losses of theft, obsolescence & wastage etc.

(v) To make arrangement for sale of slow m-oving items.

(vi) To minimize inventory ordering costs.

26
 LITERATURE REVIEW

There is need for installation of a proper inventory control technique in any business
organization in developing like Nigeria.

According to Kotler (2000), inventory management refers to all the activities involved in
developing and managing the inventory levels of raw materials, semi-finished materials
(working-progress) and finished good so that adequate supplies are available and the costs of
over or under stocks are low. Rosenblatt (1977) says: ―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‖. Therefore, the basic goal of the researchers is to maintain a level of inventory
that will provide optimum stock at lowest cost.

Morris (1995) stressed that inventory management in its broadest perspective is to keep the
most economical amount of one kind of asset in order to facilitate an increase in the total
value of all assets of the organization – human and material resources.

Keth et al. (1994) in their text also stated that 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. Thus, the overall goal of inventory is to have what is needed, and to
minimize the number of times one is out of stock.

Drury (1996) defined inventory as a stock of goods that is maintained by a business in

anticipation of some future demand. This definition was also supported by Schroeder (2000)
who stressed that inventory management has an impact on all business functions, particularly
operations, marketing, accounting, and finance. He established that there are three motives
for holding inventories, which are transaction, precautionary and speculative motives. The

27
transaction motive occurs when there is a need to hold stock to meet production and sales
requirements. A firm might also decide to hold additional amounts of stock to cover the
possibility that it may have under estimated its future production and sales requirements. This
represents a precautionary motive, which applies only when future demand is uncertain. The
speculative motive for holding inventory might entice a firm to purchase a larger quantity of
materials than normal in anticipation of making abnormal profits. Advance purchase of raw
materials in inflationary times is one form of speculative behaviour.

28
 Chapter 2
Company Profile

29
 OVERVIEW

As India‟s leading retailer, Pantaloon Retail inspires trust through innovative offerings,
quality products and affordable prices that help customers achieve a better quality of
life every day. We serve customers in 85 cities and 60 rural locations across the country
through over 15 million square feet of retail space.

Pantaloon Retail India Limited (PRIL) was incorporated on October 12,1987 as ‗Manz Wear‘
Private Limited under the stewardship of Mr.KishoreBiyani.Pantaloons ranks amongst the
top five retailers in India. The Company was converted into a Public Limited Company on
September 20,1991 and on September 25,1992 the name was changed to Pantaloon Fashions
(India) Limited and the same time it went public. Today it has approximately 14,000
shareholders. It changed its name to Pantaloon Retail (India) Limited on 7th July 1999.

From a humble beginning in 1987, Pantaloon has today evolved as a leading manufacturer-
retailer in the country with 13 departmental stores and 5 hypermarkets operating across the
country. It has been a remarkable journey for PRIL as it evolved from a manufacturing to a
completely integrated player controlling the entire value chain. It has been a pioneer in
introducing the concept of Mega Retail Stores in India called 'Pantaloons' for the entire
family. It has diversified, and has come up with its new concept with Big Bazaar and Food
Bazaar. In an extremely price-sensitive market like India, the Pantaloons chain of stores has
been successful in maintaining the equilibrium between quality and price.

The company has aggressive growth plans to achieve scale of economy and take leadership
position in this evolving industry. PRIL's ability to evolve from smaller format into large
format retail stores is well proven. With aggressive growth plans the company has identified
many locations across the company to roll out stores in the future. The company plans to

30
increase the retail space under control from 2 lakhs in 02 to more than 1 million square feet
over the next 3 years to emerge as a 'Godzilla' of the Indian Retail Industry.

BASIC INFORMATION

Corporate Mission
"We share the vision and belief that by improving our performance through innovative spirit
and dedication, we shall serve our customers and stakeholders satisfactorily."

Major Milestones

During its evolution, the company achieved various milestones and demonstrated
innovativeness and leadership by pioneering concepts that has now become industry
standards. Some of the major milestones achieved by the company in its life span of 14 years
are enumerated below:

S. No. Brand Name Year Product

1 The Pantaloon 1987-88 Trousers
2 Bare 1989-90 Indian Jean brand
3 John Miller 1993-94 Shirt inspired by America -
Formal shirt
4 The PantaloonShoppee 1993-94 Exclusive menswear store
in franchisee format
launched across nation
5 Pantaloons 1997-98 India's Family Store
launched

31
BRANDS UNDER PANTALOONS

John Miller Shirts - The shirt inspired by America

Pantaloon - India's No.1 trousers

Annabelle -Western wear for the contemporary modern woman

Ajile - More than Sportswear

32
 Honey - T-2000 best trousers of the country

Bare Kids - For children from age group of 3-14 age group

Disney - Kids wear

Popeye Kids clothing - Priced very reasonably

33
 AWARDS

CISO Award 2012

 Future Group was felicitated for using Information security technology in the most
effective and innovative manner.

Golden Spoon Awards 2012

 Most Admired Food and Grocery Retailer of the Year for its Private Labels in Big
Bazaar – Future Group.
 Retail Professional of the Year for innovation in Private Brands-
Mr.DevendraChawla, President – Food & FMCG Category.

Images Fashion Awards (IFA) 2012

 Most Admired Private Label Retailer - Pantaloons.

ET Retail Awards 2012

 FedEx Most Trusted Retailer of the Year Award – Big Bazaar.

 TRRAIN Retail Employee of the Year Award – Mr.JitendraKalyani, Big Bazaar .

Recognition by CMO Council, USA and CMO Asia

 Master Brand Award - Future Supply Chains.

 Retail Icon of the Year- Mr.Anshuman Singh, MD & CEO, Future Supply Chains.

Bloomberg UTV B-School Excellence Award

 Best educational institute in Retail- Future University.

34
 LEADERSHIP

KISHORE BIYANI – MANAGING DIRECTOR

Kishore Biyani is the Managing Director of Pantaloon Retail (India) Ltd and the Group Chief
Executive Officer of Future Group. Considered a pioneer of modern retail in India, Kishore‘s
leadership has led Pantaloon Retail‘s emergence as India‘s leading retailer operating multiple
retail formats that cater to the entire basket of Indian consumers.

Kishore Biyani led the company‘s foray into organised retail with the opening of the
Pantaloons family store in 1997. This was followed in 2001 with the launch of Big Bazaar, a
uniquely Indian hypermarket format that democratized shopping in India. It blends the look
and feel of the Indian bazaar with aspects of modern retail like choice, convenience and
quality. This was followed by a number of other formats including Food Bazaar, Central and
Home Town.

2006 marked the evolution of Future Group that brought together the multiple initiatives
taken by group companies in the areas of Retail, Brands, Space, Capital, Logistics and
Media.

Kishore Biyani advocates ‗Indianness‘ as the core value driving the group and the corporate
credo ‗Rewrite Rules, Retain Values.‘

35
Regularly ranked among India‘s most admired CEOs, he is the author of the book It
Happened in India. He has won numerous awards from government bodies and the private
sector in India and abroad and is on the board of a number of bodies, including the National
Innovation Foundation in India and the New York Fashion Board.

SHAILESH HARIBHAKTI - CHAIRMAN

Shailesh Haribhakti is the Chairman and Non-Executive Independent Director of the

Company. He is the Managing Partner of Haribhakti& Co., Chartered Accountants and the
Chairman of BDO Consulting. He is the Chairman of the Banking, Finance and Insurance
Committee of the Indian Merchant‘s Chamber and Member of the Adhoc Advisory
Committee for Master‘s Degree in Management Studies, University of Mumbai. He is on the
Board of several public limited companies, including ACC Ltd., Mahindra Lifespace
Developers Ltd. and Raymond Ltd.

He is a Chartered Accountant, Cost Accountant, and a Certified Internal Auditor.

RAKESH BIYANI – EXCECUTIVE DIRECTOR

RakeshBiyani is an Executive Director of the Company. He is actively involved in category

management, retail stores operations, information technology and exports.

VIJAY BIYANI - EXCECUTIVE DIRECTOR

Vijay Biyani is an Executive Director of the Company. He brings more than 25 years of
experience in textile, yarn and ready-made apparels business. He is actively involved in the
financial and administrative functions of the Company.

36
KAILASH BHATIA – EXCECUTIVE DIRECTOR

Co-founder of the ColorPlus brand, Kailash has over three decades of experience in the
fashion business and is considered a stalwart in the Indian fashion industry. Before joining
Pantaloon Retail, he was associated with Weekender, Arvind Mills and Mafatlal Industries,
among other companies

GOPIKISHAN BIYANI – NON-EXCECUTIVE DIRECTOR

GopikishanBiyani is a Non- Excecutive Director of the company and looks after the
manufacturing operations, He has more than two decades of experience in the textile business

V.K CHOPRA – NON-EXCECUTIVE INDEPENDENT DIRECTOR

Vijay Kumar Chopra is a Non-executive Independent Director of the Company. He has over
31 years of experience in the banking industry. He was Chairman and Managing Director of
SIDBI and Corporation Bank. His last assignment was with SEBI as Whole-time Member.
He is on the Board of a number of public limited companies like Rolta India Ltd. and Havells
India Ltd. among others.

He is a fellow member of the Institute of Chartered Accountants of India (ICAI) by

profession and is a Certified Associate of Indian Institute of Bankers (CAIIB).

37
BALA DESHPANDE – NON-EXCECUTIVE INDEPENDENT DIRECTOR

BalaDeshpande is a Non-executive Independent Director of the Company. She has multi-

industry exposure and has worked with FMCG companies like Bestfoods, Cadburys Ltd. and
ICI. She was also nominated to the Women Leadership forum held in Bestfoods, New York.
She is on the Board of Info Edge (India) Ltd.

She holds a Masters degree in Economics and Masters in Management Studies from the
Jamnalal Bajaj Institute of Management, Mumbai.

ANIL HARISH – NON-EXCECUTIVE INDEPENDENT DIRECTOR

Anil Harish is a Non-executive Independent Director of the Company. He is a partner at

D.M. Harish & Co., Advocates & Solicitors. He specialises in Income Tax, FEMA and
property matters. He is on the Board of a number of public limited companies like Hotel
Leela Ventures Ltd. and Mahindra Lifespace Developers Ltd. among others.

He holds an LLM degree from the University of Miami, USA.

S DORESWANY- NON-EXCECUTIVE INDEPENDENT DIRECTOR

S Doreswamy is a Non-executive Independent Director of the Company. He has vast

experience in banking and finance. He retired as Chairman and Managing Director of Central
Bank of India. He is Chairman of CanFin Homes Ltd. and is also on the Board of Ceat Ltd.,
Rama Newsprint & Paper Ltd. and Hexaware Technologies Ltd.

He holds a Bachelors degree in Science and Law.

38
Dr. DARLIE KOSHY- NON-EXCECUTIVE INDEPNDENT DIRECTOR

Dr.DarlieKoshy is a Non-executive Independent Director of the Company. He has served the

National Institute of Design (Ministry of Commerce, Govt. Of India) as Director for two
terms. Prior to this, he was the founding Chairperson of Fashion Management at the National
Institute of Fashion Technology (Ministry of Textiles, Govt. Of India). He is currently
Director General and CEO of ATDC Network of 58 Institutes / Centres and two premier
campuses of Institute of Apparel Management under the aegis of AEPC (Sponsored by
Ministry of Textiles, GOI). Dr.Koshy received the Delhi IIT Alumni Award for his
contributions to National Development in 2008. Dr.Koshy has also been conferred with the
‗Star of Italian Solidarity‘, one of the highest civilian awards bestowed by the Government of
Italy. Dr.Koshy is the author of three pioneering books, including the much acclaimed Indian
Design Edge.

He holds a PhD from IIT Delhi, besides an MBA degree.

39
 MEDIA RELATIONS

PRESS RELEASE

Launches its first high end Concept Store

Ludhiana, January 11, 2012: Pantaloons, India‘s leading fashion retailer, a part of Future
Group, today launched its first store in Ludhiana at 108, Surya Tower, Mall Road. This
marks the advent of Pantaloons ―Next Gen‖ Journey in Ludhiana. Currently, Pantaloons
boasts of 65 stores across India including both metros and tier II and tier III cities.

Spread across an area of 14,970 sq. ft, this store has been uniquely designed to create an
international shopping experience for customers. The aesthetic, creative and prestigious
ambience gives its patrons a chance to interact with the merchandise through touch and feel.

The store offers comprehensive lifestyle experience with the best and trendy fashion
merchandise. Pantaloons features ready to wear collections for men, women and kids, a full
range of men‘s and women‘s accessories which includes a selection of ladies bags, belts,
watches, sunglasses apart from cosmetics and perfumes.

Speaking on this occasion, Mr.Kailash Bhatia,CEO and Director Pantaloons

said,―Ludhiana is the fastest emerging city of Punjab and is growing to become one of the
mega city of Northern India. We are delighted to launch our first store in this promising city
and hope that Pantaloons with its innovative offerings, international experience and exclusive
‗fresh fashion‘ merchandise becomes the fashion destination in Ludhiana.‖

Pantaloons apparel appeals to every individual and is apt for different occasions. In western
wear, the brands for Men include John Miller, Lombard, Urbana, Scullers, Indigo Nation,
RIG, UMM, BARE Denim, BARE Leisure, and JM Sport. Women can take their pick from
Annabelle, Honey, RIG, UMM, Ajile and Chalk, BARE, RIG & Lee Cooper Junior for Kids.
In Ethnic wear customers can opt for in-house brands like Rangmanch, Trishaa and Akkritti
along with trying hands on brands like Biba.
40
What‘s more, Pantaloons exclusive loyalty programme promises customers an inimitable
shopping experience. Positioned at reiterating and strengthening Pantaloons partnership with
its customers, Pantaloons Green Card – My Card My Way offers a range of unique privileges
and value added services to its members. The membership to this programme is open to all
the shopping enthusiasts at no extra cost. Through this membership, customers not only have
access to exclusive sale preview days but also can get instant discounts on every purchase,
relaxed return policy, complimentary home delivery and a plethora of exciting benefits.

The store offers a unique shopping experience. The interior walls are made up of dark wood
and tiles giving it a contemporary look. The lighting plays an important role in the
showroom, climatically increasing its beauty with strategic accented highlights while the
colour scheme used in the store is bright. The floor has been done in modern Italian tiles to
provide just the right amount of sheen to the store. Display of merchandise has been spaced
out uniformly giving its customers room to walk around at their leisure and enjoy their
shopping experience.

With a host of exclusive offerings coupled with exceptional customer service and an inviting
atmosphere, Pantaloons promises to be the heaven for all shopaholics in Ludhiana.

Pantaloons celebrates its foray in Visakhapatnam in style

With a power packed evening

Visakhapatnam, January 9, 2012: Pantaloons, India‘s leading fashion retailer, a part of

Future Group celebrated the launch of its first store in T Subbarami Reddy Plaza with a lot of
fanfare in the presence of some of the most reputed and admired faces of Vizag.

The high voltage evening saw Hon Dr T Subbarami Reddy, Member of Parliament;
actors GauriMunjal& Sonia; Hon P JanardhanRao, Mayor, Visakhapatnam &Mr. P
Sampath Kumar, CEO Park Hyatt Hotel, Hyderabad under one roof.

They waved out at their admirers who had gathered at the store as they walked across its five
levels. They were all praise for the aesthetic ambience of the store and the unique layout of

41
merchandise. The distinguished guests were glad that the residents of Vizag would now be
exposed to an international shopping experience.

The customers at the store were delighted to see their favorite personalities walk across the
store. They felt humbled when their beloved stars willingly signed autographs and posed with
their fans.

It was an evening that the people of Vizag will remember for a lifetime.

42
 Milestones

2009

 Pantaloon Retail celebrates its first Shopping Festival across all retail formats in key
Indian cities.

2008

 Big Bazaar crosses the 100-store mark, marking one of the fastest expansions of the
hypermarket format anywhere in the world.

2007

 Pantaloon Retail wins the International Retailer of the Year award at US-based
National Retail Federation convention in New York, and Emerging Retailer of the
Year award at the World Retail Congress held in Barcelona.

2006

 Home Town, the home building and improvement products retail chain, is launched
along with consumer durables format Ezone and furniture chain Furniture Bazaar.

2004

 Pantaloon Retail launches India‘s first seamless mall, Central, in Bangalore.

2002

 Food Bazaar, the supermarket chain is launched.

2001

43
  Pantaloon Retail launches three Big Bazaar stores within a span of 22 days in
Kolkata, Bangalore and Hyderabad.

1997

 Pantaloon Retail enters modern retail with the launch of the first 8000-sq. ft. store
Pantaloons in Kolkata.

1994

 The Pantaloon Shoppe, our exclusive menswear store in a franchisee format is

launched across the nation. The company starts distribution of branded garments
through multi-brand retail outlets across the nation.

1992

 Pantaloon Retail India Ltd. makes an Initial public offer (IPO).

1991

 BARE, an Indian denim brand is launched.

1987

 The company is incorporated under the name of Manz Wear Private Ltd.
 Pantaloons, one of India‘s first formal trouser brands, is launched.

44
 ACHIVEMENTS

2012
CISO Award 2012
 Future Group was felicitated for using Information security technology in the most effective
and innovative manner

Golden Spoon Awards 2012

 Most Admired Food and Grocery Retailer of the Year for its Private Labels in Big Bazaar –
Future Group
 Retail Professional of the Year for innovation in Private Brands- Mr. Devendra Chawla,
President – Food & FMCG Category

Images Fashion Awards (IFA) 2012

 Most Admired Private Label Retailer - Pantaloons

ET Retail Awards 2012

 FedEx Most Trusted Retailer of the Year Award – Big Bazaar
 TRRAIN Retail Employee of the Year Award – Mr. Jitendra Kalyani, Big Bazaar

Recognition by CMO Council, USA and CMO Asia

 Master Brand Award - Future Supply Chains
 Retail Icon of the Year- Mr. Anshuman Singh, MD & CEO, Future Supply Chains

Bloomberg UTV B-School Excellence Award

 Best educational institute in Retail- Future Innoversity

2011
Designomics Awards 2011 - Recognising Businesses that build value through Design
 Winning Designomist at the World Brand Congress 2011 - Future Group

CNBC AWAAZ Consumer Awards 2011

 Most Recommended Modern Retail Brand of the Year in the Popular Choice category- Big
Bazaar

Brand Equity‟s Most Trusted Brands 2011 awards

 Most Trusted Retailer - Big Bazaar

Images Retail Awards 2011

 Most Admired Retailer of the year 2011 in the Home Products Category-HomeTown

45
 Excellence Awards & Recognition – 2011 for Finance & Accounting Transformation
through Shared Services
 Best Shared Service Centre (SSC) for the category of Shared Service Centre Servicing
Clients in an Indian Sub-Continent- nuFuture Digital India Ltd. (NDIL)

Golden Spoon Awards 2011

 Most Admired Food & Grocery Retailer of the Year: Private Labels – Food Bazaar
 Most Admired Retail Professional in Food & Grocery category – Mr. Damodar Mall, Head,
Integrated Food Strategy.

Marketing Excellence Awards 2011 held by Indira Group Of Institutes

 Best Employer Of The Year - Future Supply Chains

DNA and Stars of the Industry Group Innovative B-school Awards

 Star News National B-School Award for being an outstanding B School with an Industry
Related Curriculum – Future Innoversity

ACE (Awards for Customer Excellence) 2011

 2011 SAP ACE award in the Best-Run Business in Mobility Adoption - Pantaloon Retail

Franchise India Expo 2011

 Best Food And Grocery Chain Of 2011 - Food Bazaar
 Best Value Retailer of 2011 - Big Bazaar
 Best Brand Licensee In FMCG - Walt Disney Brands By Future Consumer Enterprises

Industry Institute Partnership Symposium

 Appreciation for contribution to placement of over 75 rural Below Poverty Line youth at
McDonalds – Mr. Ayan Thankur, Future Learning

Star News Brand Excellence (B.E.) Awards

 Brand Excellence (B.E.) Awards in the Retail Sector - Future Group

ICAI Awards 2011

 CFO - Service Sector category – Mr. C.P.Toshniwal

Food Retail & SCM and Agro Logistics: Summit & Awards 2011
 Food Supply Chain Company Of The Year In Retail Category - Food Bazaar

46
ADVERTISING CAMPAIGNS

47
 Chapter 3
Research Methodology

48
 Research Methodology

Research is a logical and systematic search for new and useful information on a particular
topic. It is an investigation of finding solutions to scientific and social problems through
objective and systematic analysis. It‘s a search for knowledge, that is, a discovery of hidden
truths. Here knowledge means information about matters. The information might be collected
from different sources like experience, human beings, books, journals, nature, etc. A research
can lead to new contributions to the existing knowledge. Only through research is it possible
to make progress in a field. Research is done with the help of study, experiment, observation,
analysis, comparison and reasoning. Research is in fact ubiquitous. Research methodology is
a systematic way to solve a problem. It is a science of studying how research is to
be carried out. Essentially, the procedures by which researchers go about their work of
describing, explaining and predicting phenomena are called research methodology. It is also
defined as the study of methods by which knowledge is gained. Its aim is to give the work
plan of research.

Purpose of studying Research Methodology

The purpose of research is to discover answers to questions through the application of

scientific procedures. The main aim of research is to find out the truth which is hidden and
which has not been discovered as yet. Though each research study has its own specific
purpose, we may think of research objectives as falling into a number of following broad
groupings:

1. To gain familiarity with a phenomenon or to achieve new insights into it (studies with this
object in view are termed as exploratory or formulative research studies);

2. To portray accurately the characteristics of a particular individual, situation or a group

(studies with this object in view are known as descriptive research studies);

3. To determine the frequency with which something occurs or with which it is associated
with something else (studies with this object in view are known as diagnostic research
studies);

4. To test a hypothesis of a causal relationship between variables (such studies are known as
hypothesis-testing research studies).

49
RESEARCH OBJECTIVE:
Any task without sound objectives id like trees without roots. Similarly in case of any
research study undertaken, initially the objectives of the same are determined and
accordingly the further steps are taken on. A Research study may have many objectives but
all these objectives are revolve around one major objective which is the focus of the study.
In this study , the focus is on the emergence of the rural markets as the most happening
market on which every marketer has an eye. And so this study will be based on studying the
emergence of rural markets in various context.

The main objective of the study is-

 This project was undertaken to have an insight into the inventory management of
Pantloons.
 The study also aims to investigate the minute details of the inventory management.
An analysis of the various facts and figures has been done to arrive at logical
recommendations.
 To study the method of inventory management & control in Pantaloons.
 To study the problems in inventory management & control in Pantaloons.

RESEARCH METHODOLOGY

3.3 METHODOLOGY OF STUDY

Research methodology is considered as the nerve of the project. Without a proper well-
organized research plan, it is impossible to complete the project and reach to any
conclusion. Therefore, research methodology is the way to systematically solve the research
problem. Research methodology not only talks of the methods but also logic behind the
methods used in the context of a research study and it explains why a particular method has
been used in the preference of the other methods

3. 3.1 Research design:

50
Research design is considered as a "blueprint" for research, dealing with at least four
problems: which questions to study, which data are relevant, what data to collect, and how to
analyze the results. The best design depends on the research question as well as the
orientation of the researcher. Research design is important primarily because of the increased
complexity in the market as well as marketing approaches available to the researchers. In
fact, it is the key to the evolution of successful marketing strategies and programmers. It is an
important tool to study buyer‘s behavior, consumption pattern, brand loyalty, and focus
market changes. A research design specifies the methods and procedures for conducting a
particular study. According to Kerlinger, ―Research Design is a plan, conceptual structure,
and strategy of investigation conceived as to obtain answers to research questions and to
control variance.

Types and Methods of Research

Research is a process of collecting, analyzing and interpreting information to answer

questions. But to qualify as research, the process must have certain characteristics: it must, as
far as possible, be controlled, rigorous, systematic, valid and verifiable, empirical and
critical. Every Research needs lots of dedication from the researcher‘s part-the amount of
dedication mainly depends on the subject matter of the research. Before undertaking any
research in any subject areas one must be sure about the intended purpose of the research-this
purpose determines what type of research one is going to undertake. Any scientific research
may fall into the following three broadly categories:

Descriptive vs. Analytical: Descriptive research includes surveys and fact-finding enquirie
of different kinds. The major purpose of descriptive research is description of the state of
affairs as it exists at present. In social science and business research we quite often use the
term Ex post facto research for descriptive research studies. The main characteristics of this
method are that the researcher has no control over the variables; he can only report what has
happened or what is happening. Most ex post facto research projects are used for descriptive
studies in which the researcher seeks to measure such items as, for example, frequency of
shopping, preferences of people, or similar data

51
Applied vs. Fundamental: Research can either be applied (or action) research or
fundamental (to basic or pure) research. Applied research aims at finding a solution for an
immediate problem facing a society or an industrial/business organization, whereas
fundamental research is mainly concerned with generalizations and with the formulation of a
theory.―Gathering knowledge for knowledge‘s sake is termed ‗pure‘ or ‗basic‘ research.
―Research concerning some natural phenomenon or relating to pure mathematics are
examples of fundamental research.

Quantitative vs. Qualitative: Quantitative research is based on the measurement of quantity

or amount. It is applicable to phenomena that can be expressed in terms of quantity.
Qualitative research, on the other hand, is concerned with qualitative phenomenon, i.e.,
phenomena relating to or involving quality or kind. For instance, when we are interested in
investigating the reasons for human behaviour (i.e., why people think or do certain things),
we quite often talk of ‗Motivation Research‘, an important type of qualitative research. This
type of research aims at discovering the underlying motives and desires, using in depth
interviews for the purpose.

Conceptual vs. Empirical: Conceptual research is that related to some abstract ideas or
theory. It is generally used by philosophers and thinkers to develop new concepts or to
reinterpret existing ones. On the other hand, empirical research relies on experience or
observation alone, often without due regard for system and theory. It is data-based research,
coming up with conclusions which are capable of being verified by observation or
experiment. We can also call it as experimental type of research. In such a research it is
necessary to get at facts firsthand, at their source, and actively to go about doing certain
things to stimulate the production of desired information. In such a research, the researcher
must first provide himself with a working hypothesis or guess as to the probable results

3.3.2 Data collection and Techniques

Data Collection

Data collection is a term used to describe a process of preparing and collecting data, for
example, as part of a process improvement or similar project. The purpose of data collection
is to obtain information to keep on record, to make decisions about important issues, or to

52
pass information on to others. Data are primarily collected to provide information regarding a
specific topic. Data collection usually takes place early on in an improvement project, and is
often formalized through a data collection plan which often contains the following activity.

1. Pre collection activity — agree on goals, target data, definitions, methods

2. Collection — data collection
3. Present Findings — usually involves some form of sorting analysis and/or
presentation.

Techniques of Data Collection-

Primary data is the data that you collect yourself using direct observation, surveys,
interviews etc. It is the data that has been collected from first-hand-experience.
Primary data has not been published yet and is more reliable, authentic and objective.
Primary data has not been changed or altered by human beings; therefore, its validity
is greater than secondary data.
Secondary data is data collected by someone other than the user. Common sources
of secondary data for social science include censuses, surveys, organizational records
and data collected through qualitative methodologies or qualitative research. It is
collected from external sources such as TV, radio, internet, magazines, newspapers,
articles, reviews etc.

3.3.3 Sample design

The data used here by me is collected by primary and secondary sources. Primary data: it will
be collected with the help of a self administered questionnaire. This questionnaire aims to
gather information related to various Branded products. Secondary data: it will be collected
with the help of books, research papers, magazines, news papers, journals, Internet, etc.

Questionnaire design:

As the questionnaire is self administrated one, the survey is kept simple and user friendly.
Words Used in questionnaire are readily understandable to all respondent. Also technical
jargons are avoided to ensure that there is no confusion for respondents.

53
In addition to that, analysts of social and economic change consider secondary data essential,
since it is impossible to conduct a new survey that can adequately capture past change and/or
developments.

In this project -

RESEARCH DESIGN:
Exploratory research design

SAMPLE DESIGN:
Sample size
30 employees
15 suppliers
9 distributors
6 visiting parties

SAMPLING TECHNIQUE:
Interview and Questionnaire

SOURCE OF DATA:
PRIMARY SOURCE:
HINDALCOINDUSTRIESL4
Personal interview
Employees
Distributors
Questionnaire
Employees of pantaloons

54
SECONDARY DATA:
 Annual report of Pantaloons Fy2010-11, 2011-12.
 Internet.
 Induction guide.
 Inventory Management Books

LIMITATIONS OF THE STUDY:

1- Some of the respondents refused to fill questionnaire during the research work.

2- Some of the lower level store department employees were not well educated.

55
 Chapter 4
Data Collection &
Analysis

56
SWOT Analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It involves
specifying the objective of the business venture or project and identifying the internal and
external factors that are favorable and unfavorable to achieve that objective. The technique is
credited to Albert Humphrey, who led a convention at Stanford University in the 1960s and
1970s using data from Fortune 500 companies.
A SWOT analysis must first start with defining a desired end state or objective. A SWOT
analysis may be incorporated into the strategic planning model. Strategic Planning has been
the subject of much research.

1- Strengths: characteristics of the business or team that give it an advantage over others
in the industry.
2- Weaknesses: are characteristics that place the firm at a disadvantage relative to others.
3- Opportunities: external chances to make greater sales or profits in the environment.
4- Threats: external elements in the environment that could cause trouble for the
business.

57
Strengths:

1- Pioneer in the industry, largest market share and capitalization.

2- Reputation for value for money(Competitive pricing), convenience and a wide range
of products all in one store.
3- Presence in major cities.
4- Highly Strategic human resource management and development. It invests time and
money in training people, and retaining them.
5- Most trusted and respected brand by the consumers.
6- Being financially strong helps pantaloons retail India deal with any problems, ride
any dip in profits and out perform their rivals.
7- Development and Innovation are high at Pantaloons India with regards to it products
and consumer preferences and lifestyle changes which keep its ahead of its
competitors.

Weaknesses:

1- Pantaloons does not function internationally, which has an effect on success, as they
do not reach consumers in overseas markets.
2- PRIL is the World‘s largest grocery retailer and control of its empire, despite its IT
advantages, could leave it weak in some areas due to the huge span of control.
3- Since Pantaloons Retail India Ltd sell products across many sectors, it may not have
the flexibility of some of its more focused competitors.
4- Each business line faces competition from specialty companies. Fashion segment,
Shoppers Stop, Trent, Lifestyle. In hypermarket-RPG (Spencer‘s),Trent (Star India
Bazaar) In Food business, Reliance Fresh, Spinach, Food World.

58
Opportunities:

1- Huge untapped market(The Indian middle class is already 30 Crore & is projected to
grow to over 60 Crore by 2010 making India one of the largest consumer markets of
the world).
2- Organized retail is only 3% of the total retailing market in India. It is estimated to
grow at the rate of 25-30% p.a. and reach INR 1, 00, 000 Crore by 2010.
3- To take over, merge with, or form strategic alliances with other global retailers,
focusing on specific markets
4- New locations and store types offer PRIL opportunities to exploit market
development.(Diversification into insurance , property, and variety of products and
stores)
5- Opportunities exist for PRIL to continue with its current strategy of large, super
centers.

Threats:

1- Being number one means that you are the target of competition.(Extra competition
and new competitors entering the market could unsteady pantaloons retail India).
2- A slow economy or financial slowdown could have a major impact on pantaloons
retail India business and profits.
3- Consumer lifestyle changes could lead to less of a demand for pantaloons retail India
products/services.
4- Price wars between competitors, price cuts and so on could damage profits for
pantaloons retail India.
5- The actions of a competitor could be a major threat against pantaloons retail India, for
instance, if they bring in new technology or increase their workforce to meet demand

59
IMPORTANT FACTORS:

1- Product categories in Pantaloons.

2- Location of Pantaloons.
3- Types of inventories maintained.
4- Decision of how inventories are maintained.
5- Reorder points of inventories.
6- Uncertain demands of customers.
7- Area of Maintenance.

60
NOTATIONS:

Some general notations used in inventory models:

1- r = Demand rate.

2- K = Production rate.

3- C = Average total cost per unit time.

4- t = Time interval between two consecutive replenishments of

inventory.

5- z = Order level or stock level use the following general notations in

inventory models:

6- I = the cost of carrying one rupee in inventory for a unit time.

7- C1 = Holding cost per unit time.

8- C2 = Storage cost per unit time.

9- C3 = Set up cost per production run.

10- q = Lot size per production run. (I.e. The quantity produced per pro

11- L = lead time.

12- q*, t*, z* = Optimal values of q, t, z respectively for which the cost C is minimum.

61
After communicating with the respondents we found the following
average results:

Q1- What is the store capacity of your warehouse?

A- 45000 units

Q2-What is the annual demand?

A- 400000 unit

Q3- What is the average carrying cost to carry the inventory?

A- 10%

Q4- What is the setup cost of the inventory?

A- Rs.4000

Q5- What is the average lead time?

A- 3days

Q6- What is the ordering cost to place an order of 1 unit?

A- Rs.4

62
Some important formulas to solve

1- Optimal Lot Size, Q* = √

2- The Optimal Order cycle time, t* =

3- The Minimum yearly variable inventory cost, TVC = √

4- The Minimum yearly total inventory cost, TC* = TVC* + DC

63
Solution :

1- Optimal Lot Size, Q* = √ = √ = √ = 400 Units/ year

2- The Optimal Order cycle time, t* = = = 0.001 year

3- The Minimum yearly variable inventory cost, TVC = √ =

√ = Rs. 4000/year

4- The Minimum yearly total inventory cost, TC* = TVC* + DC = 4000+ 400000*200
= Rs. 8 Cr 4 thousand/ year.

64
 Chapter 5
Findings & Conclusions

65
Finding The Study:

1- There is a lot of old stock which has not any use.

2- At the time of issue they have to do many entries as they have computerized system
in store.

3- One the time of issue store-keeper issues some quantity from old stock & some from
new stock. In this way they use the old stock.

4- No exact idea that how much quantity of yarn is required.

5- There is a lot of wastage. Store-keeper said that after the completion of production the
excess material which is remained unused that is not returned to the store-keeper.

6- If there is any defected piece, then they have to find again the matching yarn.

7- Workers don‘t use material properly; there is a lot of wastage. The reels, lace couldn‘t
be used again due to that.

8- For valuation of the stock they use Average method.

9- They resale the waste material in the market.

10- They purchase the material from their own subsidiaries & from local market.

11- The main motive behind inventory management system is smoothen operation of
factory.

66
Benefits of Inventory Management to Pantaloons

1. Inventory Balance. Good inventory management helps you figure out exactly how

much inventory you need. This makes it easier to prevent product shortages and keep just

enough inventory on hand without having too much.

2. Inventory Turnover. You need to keep a high inventory turnover ratio to ensure your products
aren‘t spoiling, becoming obsolete or sucking up your working capital. Calculate how many times
your inventory sells in a year and see where you can make better use of your resources.

3. Repeat Customers. Good inventory management leads to what every business owner

wants – repeat customers. You want your hard-earned customers to keep coming back to

your business to meet their needs. One way to do this is to make sure you have what they’re

looking for every time they come.

4. Accurate Planning. Using smart inventory management, you can stay ahead of the

demand curve, keep the right amount of products on hand and plan ahead for seasonal

changes. This goes back to keeping your customers happy all year long.

5. Warehouse Organization. If you know which products are your top sellers and what

combinations of products your customers often order together, you can optimize your

warehouse setup by putting those products close together and in easily accessible places.

This speeds up the picking, packing and shipping processes.

6. Employee Efficiency. You can empower your employees to help you manage inventory.
Training employees to use barcode scanners, inventory management softwareand other tools
helps them make better use of their time, and it helps your business make better use of its
resources, both human and technological.

67
 Chapter 6
Suggestions &
Recommendations

68
Suggestions:
1- No doubt lead time is important but other factor like availability is also important. So
they should also give proper consideration to this.

2- They follow safety & bulk purchases for cost reducing. But they should follow the
JIT system. As they are in fashion industry so this is the best method. As they will
purchase the goods according to the order, so there will no stock obsolescence.

3- According to the store-keeper there is lack of space. The boxes of yarn & other
material are not properly stored. So there should be proper racks for the boxes.

4- The store department should be computerized so that the recording can be easy. The
issuing of yarn is recorded manually.

5- Wastage should be controlled. The remaining material, after the completion of

production, should returned to the yarn store. Production manager should take care of
this.

69
Conclusions:
1- It has been a great experience focussing on the live project of Management Science
Decision Making (MSDM). Our place of interest was the retail giant Pantaloons. We
found great support in the shop in Rajouri Garden. We have found that Pantaloon‘s
inventory is well equipped and their cost is under their control due to the short cycle
time of ordering and buffering. Their inventory cost is very high because of their
stocking of various products. Their product range varying from mere Rs.5 to Rs.50,
000. Hence their range satisfies one and all.

2- In future their inventory is well equipped if it sees any fundamental changes on the
demand of the products, be it desired or undesired. Their inventory is quickly refilled
which is one of their strengths and also they take less than a day to fully make their
inventory a wide spectrum.

70
 BIBLIOGRAPHY
Internet: Websites

1- www.google.com

2- www.wikipedia.org/

3- http://wiki.answers.com

4- http://www.slideshare.net

5- www.futurebazaar.futuregroup.com

6- www.wikipedia.org/inventory

7- www.pdfsearchengine.com/inventory

8- www.scribd.com

Books:

1- Introduction to operation Research By Hamdy A.Taha

2- Introduction of operation Research By J.K.Sharma

3- Learning operation Research By S.K Jaiswal

71
Annexure
(Questionnaire)

72
 PANTALOONS RETAIL LIMITED

__________________________________________________________________

__________________________________________________________________

PERSONAL DETAILS
(these details are required for communication purposes only and will not be disclosed)

NAME:

POSITION:

BUSINESS UNIT/DIVISION:

CONTACT DETAILS

TELEPHONE:

EMAIL:

73
Q1) What is the store capacity of your warehouse?

i) >15000 units ii) >25000 units iii) >35000 units iv) >45000 units

Q2) What is the annual demand?

i) >100000 units ii) >200000 units iii) >300000 units iv) >400000 units

Q3) What is the average carrying cost to carry the inventory?

i) >10% ii) >20% iii) >30% iv) >40%

Q4) What is the setup cost of the inventory?

i) > Rs1000 ii) > Rs2000 iii) > Rs3000 iv) > Rs4000

Q5) What is the average lead time?

i) >3 days ii) >5days iii) >7days iv) >9days

Q6) What is the ordering cost to place an order of 1 unit?

i) > Rs2 ii) > Rs3 iii) > Rs4 iii) > Rs5

74