A PROJECT REPORT

ON

A DETAILED STUDY ON INVENTORY MANAGEMENT SYSTEM

WITH SPECIAL REFERENCE TO RANBAXY LABORATORIES
LIMITD

Submitted in Partial fulfilment of the requirements

for the award of the Degree of

PGDM IN
OPERATIONS MANAGEMENT

SUBMITTED TO:

INSTITUTE OF MANAGEMENT & TECHNOLOGY

CENTRE DISTANCE LEARNING GHAZIABAD (U.P.), 2020

NAME: ANANT KUMAR

ROLL NO.: 20A1016418

1
 DECLARATION BY THE STUDENT

I ANANT KUMAR bearing Reg. No. 20A1016418 hereby declare that the Project entitled
“A DETAILED STUDY ON INVENTORY MANAGEMENT SYSTEM WITH
SPECIAL REFERENCE TO RANBAXY LABORATORIES LIMITD” has been
prepared by me towards the partial fulfillment of requirement of PGDM Degree under the
guidance of PRASHANT RATHI.

I also declare that this project report is my original work and has not been previously
submitted for the award of any Degree, Diploma, Fellowship, or other similar titles.

Place: New Delhi

Date: 14/03/2022

ANANT KUMAR
20A1016418

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 ACKNOWLEDGEMENT

Many persons have contributed to make this project report on “A DETAILED STUDY ON
INVENTORY MANAGEMENT SYSTEM WITH SPECIAL REFERENCE TO
RANBAXY LABORATORIES LIMITD” a reality. I would especially like to express my
appreciation to PRASHANT RATHI for his unstinted support, encouragement and his
painstakingly and meticulous effort towards developing this project.

I acknowledge the help and cooperation received from the faculty members of Ranbaxy,
Several colleagues and students have contributed directly and indirectly to the contents of
this project, as they had given me numerous ideas. Their criticism gave me the much-needed
hints about the areas that needed elaboration and amendments and also to present them with
greater clarity.

Finally, I wish to express my sincere thanks to all my family members, especially my Parents
for their constant moral support and Encouragement.
I would Welcome Constructive Suggestions to improve this project report, which can be
implemented in my further attempts.

Thanking you!
ANANT KUMAR
20A1016418

CONTENTS
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Chapter Title Page No
1 Introduction 08-32
09
Introduction to the topic
09
Inventory Management
21
Strategic Implications of JIT Systems
30
History of JIT
2 Company Profile 32-42

Introduction to Company 33

Key risks 36

Key competitors 36

SWOT Analysis of Ranbaxy 37

3 Literature Review 43-48

4 Need, Scope and Objectives of the study 50-53

5 Research Methodology 54-58

Methodology 55

Sampling 56

Data Collection 55

Nature of research 56

Research tools applied 57

Limitations 58

6 Data Analysis ,Interpretation and Findings 59-73

7 Recommendations and Suggestions 74-76

8 Conclusions 77-78

9 Bibliography and questionnaire 79-89

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EXECUTIVE SUMMARY

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In this paper, we are examining the implementation of Just-In-Time methodology in
Ford for its latest small car KA; possibly one of the most interesting manufacturing
revolution where companies involved in the production are integrated not only in their
business processes moreover in their physical plants. The concept has been
successfully developed and implemented in Valencia, Spain and is due to be adopted in
other Ford production plants. The case study clearly shows how companies can work
together in a harmonic and synchronized system meeting probably the most idealistic
manufacturing principles (JIT) to produce the best quality product within the shortest
time frame with minimum/no wastage and cost-effective to all parties. Careful
production planning, cost-benefit analysis, adequate outsourcing plans and customer
orientation are being praises as the key success factors of this amazing Just-In-Time
concept.

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 CHAPTER 1

INTRODUCTION

INTRODUCTION

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INVENTORY MANAGEMENT:

Conversion of raw materials into finished goods is the main function of every production
firm. Required raw materials if purchased and stocked in advance, ensures smooth
production process. But, how much should be purchased? How to stock it? How to release
the stock? What costs are involved? How to control the costs of acquiring and storing
materials? All these issues call for Materials Management.
Materials management involves Materials acquiring-purchasing, receiving and storing,
inventory control, disposal of surplus and control on scrap. Effective materials management
is key to a firm‘s profitability. An ideal materials management ensures efficiency in
accountability coordination and performance in the department. Further, it is computerized to
save time and efforts.

MEANING AND NATURE OF INVENTORY:-

In accounting language, inventory may mean the stock of finished goods only. In a
manufacturing concern, it may include raw materials, work-in-progress and stores etc.
Definitions:-
Material management is the flow of materials into an organization to the point where those
materials are converted into the firm‘s end product(s). Bailey & Farmer.

INVENTORY INCLUDES THE FOLLOWING THINGS:-

A. Raw material:- Raw material form a major input into the organization. They are
required to carry out production activities uninterruptedly the quantity of raw
material required will be determined by the rate of consumption and the time
required for replenishing etc., to affect the stock of raw materials.

B. Work in Progress :-The work in progress is that stage of stocks, which are in
between raw material and finished goods. The quantum of work in progress

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 depends upon the time taken in the manufacturing process. The greater the time
taken in manufacturing the more will be the amount of work in progress.

C. Consumables:- These are the materials, which are needed to smoother the process
of production. These materials do not directly enter production but they act as
catalysts. Consumables may be classified according to their consumption and
criticality. Generally consumables stores do not create any supply problem and
the form a small part of production cost. There can be instances where these
materials may account for which they value raw materials. The fuel oil may form a
substantial part of cost.

D. Finished goods:- These are the goods, which are ready for the consumer‘s the stock
of finished goods provides a buffer between production and market.

E. Spares:- The stocking policies of spare differ from industry to industry some
industries like transport will required more spares than the other concerns. The
costly spare parts like engine, maintenance spares etc. are not discarded after use,
rather they kept in ready position for further use.

All decision about spares are based on the financial cost of inventory on such spares and the
cost may arises due to their non-availability.

TYPES OF INVENTORIES

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Depending upon the types of business, generally the Inventories Varies. But in a
manufacturing industry the inventory can be classified into four broad categories:
 Production Inventory: It contains materials purchased from market like raw materials;
Ready made parts, component, spares and also special parts and components
manufactured in their own industry and kept in stock for self-consumption for use in
manufacture.
 Maintenance, Repair & Operating Inventory: Contains materials purchased from vendors
to maintain the production process and these maintenance, repair and operating inventory
do not form part of the finished products.
 Work in progress Inventory: This contains manufactured good kept in stores, warehouse
or retail outlets, Stock Yard for sales to consumers.
To put this into a diagram, the Constituent of Inventory is as follows:

FACTORS INFLUENCING INVENTORY

“How much to buy at onetime‖ and ―When to buy this quality ―. These are two fundamental
things on which inventory control depends. Many factors govern these fundamental things.
The prime factors that govern these two fundamental things are:
 Requirements
 Quality in stock or on order
 Lead time
 Obsolesce.

CONTROL, MAINTENANCE AND MANAGEMENT

The essence of inventory control, broadly speaking consists of revolving the following three
factors:
1. Necessity for stocking items
2. Time for reordering the items
3. Quality per order to be order.
Continuous and periodical review is required in the evaluation of inventory management
and treats it as a continuous process as costs, source of supply, availability of materials;
consumption will vary in the course of time making the previous assessment invalid.
10
This process also helps in standardization of materials for procurement by using near
equivalents and eliminating material, which are discontinued as a regulation, which will
remove obsolescence.

INVENTORY CONTROL TECHNIQUES

Inventory is being maintained as a cushion in supply of materials for continuous production
without causing stock out situation. This cushion should not be suicidal to any organization.
The following scientific techniques and methods are being used in control of inventory.

1. Inventory Management Techniques

2. Standardization
3. Selective Inventory Control
4. Just In Time
5. Perpetual inventory system
6. Inventory turnover ratio

INVENTORY MANAGEMENT TECHNIQUES

1. Economic Order Quantity
If the firm is buying raw materials, it has to decide lots in which it has to be purchased on
replenishment. If the firm is planning a production run, the issue is how much production to
schedule. These problems are called order quantity problems, and the task of the firm is to
determine the optimum or economic order quantity.
 Ordering cost: The term ordering cost is used in case of raw materials and includes
the entire costs of acquiring raw materials.
 Carrying cost: Cost incurred for maintaining a given level of inventory is called
carrying cost.

Economic Order Quantity is given by the formula:

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EOQ =

And the total cost of inventory is given by the formula:

Total cost of inventory = (A×P) + (A×O) + (EOQ×C)
EOQ 2
Where A = Annual consumption (in units)
O = Ordering cost per order (in Rs)
C = Carrying cost per unit (in Rs.)
P = Price per unit (in Rs.)

2. Reorder Point
The reorder point is that inventory level at which an order should be placed to replenish the
inventory. To determine reorder point:
(a) Lead time is the time normally taken in replenishing inventory after the order has been
placed.
(b) Average usage
(c) Economic order quantity

3. Safety stock
The demand for material may fluctuate from day to day. The actual delivery time may be
different from the normal lead time. If the actual usage increases or the delivery of inventory
is delayed the firm can face problem of stock out, which can be costly. So, in order to guard
against the stock out the firm may maintain a safety stock.

FACTORS INFLUENCING INVENTORY

12
―How much to buy at onetime‖ and ―When to buy this quality ―. These are two fundamental
things on which inventory control depends. Many factors govern these fundamental things.
The prime factors that govern these two fundamental things are:
1. Requirements
2. Quality in stock or on order
3. Lead time
4. Obsolesce.

CONTROL, MAINTENANCE AND MANAGEMENT

The essence of inventory control, broadly speaking consists of revolving the following three
factors:
1. Necessity for stocking an items
2. Time for reordering the items
3. Quality per order to be order.
Continuous and periodical review is required in the evaluation of inventory management and
treats it as a continuous process as costs, source of supply, availability of materials;
consumption will vary in the course of time making the previous assessment invalid.
This process also helps in standardization of materials for procurement by using near
equivalents and eliminating material, which are discontinued as a regulation, which will
remove obsolescence.

INVENTORY CONTROL TECHNIQUES

13
Inventory is being maintained as a cushion in supply of materials for continuous production
without causing stock out situation. This cushion should not be suicidal to any organization.
The following scientific techniques and methods are being used in control of inventory.
1. Inventory Management Techniques
2. Standardization
3. Selective Inventory Control
4. Just In Time
5. Perpetual inventory system
6. Inventory turnover ratio

STANDARDIZATION
Standardization is very essential to control the inventory, as by standardization reduction in
variety of material is possible. And because of the reduction in variety the advantages are low
order cost, low inventory, less storage stocks, conservation of materials, variety reduction,
less paper work, easy follow up with suppliers, less number of orders.
The importance of this field has been recognized since the days of F.W. Taylor, who first
drew attention to this fundamental need in any organization. Just as work study is necessary
preliminary to work simplification, and a basic technique for production control, quality
control, materials handling, estimated cost control, etc., ―Standardization ― are preliminary
necessity to design a basic technique on build control and standardization procedure.

SELECTIVE INVENTORY CONTROL MANAGEMENT

Any manufacturing organization consumes few thousand items of stores. A high degree of
control on inventories of each item would, therefore neither be practical considering the work
involved, nor worthwhile since all items are not of equal importance. Hence, it is desirable to
classify or group items to control, commensurate with importance. This is the principle of
selective control as applied to inventories and the technique of grouping is termed as
selective technique.
Selective inventory means variation in the methods of inventory control from items to item
and this differentiation should be on selective basis by classification. A company has to stock
thousands of items of raw materials, standard parts, stores and spares, sub contract items,
14
tools, stationery etc. To have better control over the inventory/ stock on hand, selective
inventory control technique should be used in isolation/ or in conjunction.
Thus selective control means selecting the area of control so that required objective is
achieved as early as possible without any loss of time due to taking care of full area –
 Minimum loss of energy and efforts.
 At minimum cost without loss of time.
There are following selective control techniques:
* ABC Analysis
* FSN Analysis
* XYZ Analysis
* VED Analysis
* HML Analysis

1) ABC ANALYSIS:
ABC analysis is a selective control technique which is required to be applied when we
want to control value of consumption of the item in rupees obviously when we want to
control value of the consumption of the material we must select those materials where
consumption is very high.
In any company manufacturing, there are number of items which are consumed or traded
it may run into thousands.

b) FSN ANALYSIS
This type of analysis is more concerned from the point of view of movement of the item or
issue of the item or issue of the item under this type of analysis.

„F‟ items are those items, which are fast moving i.e. in a given period of time, say a month or
a year they have been issued up till number of items. Although fast moving does not
necessarily mean that these items are consumed in large quantities.

„S‟ items are those items which are slow moving in the sense that in the given period of time
they have been issued in a very limited number of time
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„N‟ non-moving items are those, which are not at all issued for a considerable period of time.

Thus, stores department whose concerned with the moving of items would like to know and
classify that the items are storing in the categories FSN. So that they can manage operate and
plan stores activity accordingly.
For example, for efficient operations it would be necessary that fast moving items as far as
possible should be stored as near as possible to the point of issue. So that it can be issued
with minimum of handling. Also such items must be stored at the floor level avoiding storing
them at high heights.
Similarly, if the items are slow moving or issued once in a while in a given period of time
they can be stored in the interior of the stores and even at the higher heights because handling
of these items becomes very rare. Further it is necessary for stores in charge to know about
non-moving items for various reasons:
1. They mean unnecessary blockage of money and affecting the rate of returns of the
company.
2. Further they also occupy valuable space in the stores without any usefulness and therefore
it becomes necessary to identify these items and go into details and find reasons for their
non-moving and if justified to recommend to top management for their speedy disposal so
that company operations are performed efficiently. Also inventory control to some extent can
also be exercised on the basis of FSN analysis.
For example, fast moving items can be controlled more severely, particularly when their
value is also high. Similarly, slow moving items may not be controlled and reviewed very
frequently since their consumption may not be frequent and their value may not be high.

c) XYZ Analysis
This type of analysis is carried out from the point of view of value of balance stocks lying in
the stores from time to time and classifies all the items as given below.
„X‟ items are those items whose value of balance stocks lying in the stock are very high.
„Y‟ items are those items whose value of balance stock is moderate.
„Z‟ items are those items whose value of balance stock lying in the stocks is very low.

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After knowing this type of classifications and their items can be taken to control the situation
as shown below:
1] From security point of view high value items must be stored and kept under lock and key
or if not possible they should be kept in such a way that they are always under supervision.
Similarly arrangement can be made for y and z items accordingly.
2] From inventory control point of view we must know why there is high inventory for ‗X‘
items. We should review inventory control procedure for each and every high item because
stock should be maintained to take care of lead time consumption and also to provide safety
stocks. For high value items lying in stores we should review the reasons for long lead time
as well as demand variations and see whether lead time consumption and safety stocks can be
reduced. Thus proper inventory control procedures can be developed on the basis of XYZ
analysis.
Thus proper selective control methods should be selected to control the materials and prevent
from facing loss, taking advantage and knowing what exactly is to be done.

d) VED ANALYSIS
VED analysis is carried out to control situation, which are critical. When applied to material
in VED analysis we try to identify material according to their criticality to the production,
which means the material, without which the production will come to stop and so on from
this point of view material classified into three categories.
V-vital,
E-essential,
D- desirable.
Vital categories of the items are those items for the want of which the production will come
to stop. For e.g. Power in the factory. Essential group of items are those items because of
non-availability of which the stock out cost is very high.
Desirable group of items are those items because of non-availability of which there is no
immediate loss of production and stock cost is very less and it may cause minor disruption in
the production for a short time.
E) HML ANALYSIS
This analysis, analysis the material according to their prices and then classifies them as
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H stands for high price,
L stands for low price and
M stands for medium price.
Since price is more concerned of purchase department mostly purchase department people
analyses the material according to HML analysis.
HML analysis must be carried out from any one of the following objectives or some of the
objective as the case may be.
 When it is desire that purchasing responsibility should be delegated to right level of
people.
 When it is desired to evolve purchasing policies then also HML analysis is carried out
i.e. whether to purchase in exact quantities as required or to purchase in EOQ or
purchase only when absolutely necessary.
 When the objective is to keep control over consumption at the department level then
authorization to draw materials from the stores will be given to high level H item, low
level for L items and medium level for M item.
 When it is desired to decide frequency of stock taking then very frequently H
category, very rarely L category and averagely M category.
 When it is desired to arrange security arrangements for the items, then H item under
lock and key, L items keep open on the shop floor and under supervision for M items

Keeping in view the enormous carrying cost of inventory in the stores and go downs,
manufacturers and merchandisers are asking for more frequent deliveries with shorter
purchase order lead times from their suppliers. Now days organizations are becoming more
and more interested in getting potential gains from making smaller and more frequent
purchase orders. In other words, they are becoming interested in just in time purchasing
system. Just in time purchasing (JIT) purchasing is the purchase of material or goods in such
a way that delivery of purchased items is assured before their use or demand.
Just in time purchasing recognizes too much carrying costs associated with holding high
inventory levels. Therefore, it advocates developing good relations with suppliers and
making timely purchases from proven suppliers who can make ready delivery of goods
available as and when need arises. EOQ model assumes a constant order quantity whereas
18
JIT purchasing policy advocates a different quantity for each order if demand fluctuates.
EOQ lays emphasis on ordering and carrying costs but inventory management extends
beyond carrying and ordering costs to include purchase costs quality costs and stock out. Just
in time purchasing takes into consideration all these costs and move— outside the
assumptions of the EOQ model.
Advantages of JIT purchasing
1. Investment in inventory is reduced because more frequent purchase orders of small
quantities are made.
2. Carrying cost is reduced as a result of low investment in inventory.
3. A reduction in the number of suppliers to be dealt with is possible. Only proven suppliers
who can give quick delivery of quality goods are given purchase orders. As a result of this
reduction in negotiation time is possible. The use of long—run contracts with some suppliers
with minimal paper work involved is possible.
4. Quality costs such as inspection cost of incoming materials or goods, scraps and rework
costs are reduced because JIT purchasing assures quick and frequent delivers of small size
orders which results in low level of inventories causing minimum possible wastage.
Therefore, JIT purchasing is frequently applied by organizations dealing in perishable goods.

JUST IN TIME

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JIT is a management philosophy that strives to eliminate sources of manufacturing waste by
producing the right part in the right place at the right time. The Waste results from any
activity that adds cost without adding value, such as moving and storing. The idea of
producing the necessary units in the necessary quantities at the necessary time is described by
the short term Just-in-time.
The implementation of this management philosophy in industries like the automobile
industry can bring about a see saw change in both quality & quantity since in a JIT
system, underutilized (excess) capacity is used instead of buffer inventories to hedge against
problems that may arise.
To gain and maintain a competitive advantage, firms are using the just-in-time (JIT)
philosophy, which is to eliminate waste by cutting unnecessary inventory and removing
delays in operations. The goals are to produce goods and services as needed and to
continuously improve the value-added benefits of operations. A JIT system is the
organization of resources, information flows, and decision rules that can enable an
organization to realize the benefits of the JIT philosophy. Often a crisis (such as being faced
with going out of business or closing a plant) galvanizes management and labor to work
together to change traditional operating practices. Converting from traditional manufacturing
to a just-in-time system brings up not only inventory control issues, but also process
management and scheduling issues. In this chapter we identify the characteristics of JIT
systems, discuss how they can be used for continuous improvement of operations, and
indicate how manufacturing and service operations utilize such systems. We also address the
strategic implications of JIT systems and some of the implementation issues that companies
face. Finally, we discuss the choice of an appropriate production and inventory management
system for a particular environment.

CHARACTERISTICS OF JUST-IN-TIME SYSTEMS

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Just-in-time systems focus on reducing inefficiency and unproductive time in the production
process to improve continuously the process and the quality of the product or service.
Employee involvement and inventory reduction are essential to JIT operations. Just-in-time
systems are known by many different names, including zero inventory, synchronous
manufacturing, lean production, stockless production (Hewlett-Packard), material as needed
(Harley-Davidson), and continuous flow manufacturing (IBM). In this section we discuss the
following characteristics of JIT systems: pull method of material mow, consistently high
quality, small lot sizes, uniform workstation loads, standardized components and work
methods, close supplier ties, flexible work force, line flow strategy, automated production,
and preventive maintenance.

JUST-IN-TIME IN SERVICES:
The just-in-time philosophy also can be applied to the production of services. We have
already discussed some of the elements of the JIT system used in a McDonald's restaurant. In
general, service environments may benefit from JIT systems if their operations are repetitive,
have reasonably high volumes, and deal with tangible items such as sandwiches, mail,
checks, or bills. In other words, the services must involve "manufacturing-like'' operations.
Other services involving a high degree of customization, such as haircutting, can also make
use of JIT systems but to a lesser degree--basically utilizing elements of JIT systems in their
operations.
The focus of JIT systems is on improving the process; therefore some of the JIT concepts
useful for manufacturers are also useful for service providers. These concepts include the
following.

 Consistently high quality: Benchmarking, service design, and quality function

deployment can be used successfully in service operations. Service employees can be
taught the value of providing defect-free services
 Uniform facility loads: Reservation systems and differential pricing are two ways in
which service providers can level the loads on their facilities.

21
 Standardized work methods: In highly repetitive service operations, great
efficiencies can be gained by analyzing work methods and standardizing
improvements for all employees to use. For example, UPS consistently monitors
work methods and revises them as necessary to improve service.
 Close supplier ties: Volume services such as fast-food restaurants and mass
merchandisers such as Wal-Mart and Kmart require close supplier contacts to ensure
frequent, short lead-time and high-quality shipments of supplies.
 Flexible work force: The more customized the service, the greater is the need for a
multi-skilled work force. For example, stereo component repair shops require broadly
trained personnel who can identify a wide variety of problems and then repair the
defective unit. The employees at a sectional center post office have more narrowly
defined jobs because of the repetitive nature of the tasks they must perform, and thus
they do not have to acquire many alternative skills.
 Automation: Automation can play a big role in providing just-in-time services. For
example, banks offer ATMs that provide various bank services on demand 24 hours a
day.
 Preventive maintenance: Services that are highly dependent on machinery can
make good use of routine preventive maintenance. For example, entertainment
services such as Walt Disney World must have dependable people-moving apparatus
to accommodate large volumes of customers.
 Pull method of material flows: Service operations where tangible items are
processed, such as fast-food restaurants, can utilize the pull method.
 Line flow strategy: Managers of service operations can organize their employees
and equipment to provide uniform flows through the system and eliminate wasted
employee time. Banks use this strategy in their check processing operations, as does
UPS in its parcel-sorting process.

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STRATEGIC IMPLICATIONS OF JUST-IN-TIME SYSTEMS
When corporate strategy centers on dramatic improvements in inventory turnover and labor
productivity, a just-in-time philosophy can be the solution. Just-in-time systems form an
integral part of corporate strategies emphasizing time-based competition because they focus
on cutting cycle times, improving inventory turnover, and increasing labor productivity. In
this section we consider competitive priorities and flow strategy, as well as the overall
benefits of JIT systems.

Competitive Priorities:
Low cost and consistent quality are the priorities emphasized most often in JIT systems.
Superior features and volume flexibility are emphasized less often. The ability to provide
product variety depends on the degree of flexibility designed into the production system.
Such is the case with firms using an assemble-to-order strategy. For example, mixed-model
automobile assembly lines allow variety in output in terms of color, options, and even body
style. Production to customized, individual orders, however, usually isn't attempted with a
JIT system. Generally, items produced with a JIT system are standards rather than specials,
produced to support a shipping schedule. The erratic demand and last-minute rush jobs of
customized orders in a make-to-order environment don't link well with a system designed to
produce at a constant daily rate utilizing low inventory buffers.

Flow Strategy
A JIT system involves a line flow strategy to achieve high-volume, low-cost production.
Workers and machines are organized around product flows and arranged to conform to the
sequence of work operations. With line flows, a unit finished at one station goes almost
immediately to the next station, thereby reducing manufacturing lead-time and inventory.
Process repetition makes opportunities for methods improvement more visible.

Operational Benefits Just-in-time systems have many operational benefits. They

 reduce space requirements;
 reduce inventory investment in purchased parts, raw materials, work in process, and
finished goods;
23
  reduce manufacturing lead times;
 increase the productivity of direct labor employees, indirect support employees, and
clerical staff;
 increase equipment utilization;
 reduce paperwork and require only simple planning systems;
 set valid priorities for production scheduling;
 encourage participation by the work force; and
 increase product quality.

One goal is to drive setup times so low that a production size of one end unit or part becomes
economical. Although this goal is rarely achieved, the focus still is on small-lot production.
In addition, constant attention is given to cutting safety stock and WIP inventory between
manufacturing processes. The result is less need for storage space and inventory investment.
Smaller lot sizes and smoothed flows of materials help reduce manufacturing lead times,
increase work-force productivity, and improve equipment utilization.
A primary operational benefit is the simplicity of the system: Product mix or volume
changes planned by the MPS can be accomplished by adjusting the number of kanbans in the
system. The priority of each production order is reflected in the sequence of the kanbans on
the post. Production orders for parts that are running low are placed before those for parts
that have more supply.
Just-in-time systems also involve a considerable amount of work-force participation on the
shop floor. Small-group interaction sessions encourage worker participation and have
resulted in improvements in many aspects of manufacturing, not the least of which is product
quality.

Overall, the advantages of JIT systems have caused many managers to reevaluate their own
systems and consider adapting operations to the JIT philosophy.

24
IMPLEMENTATION ISSUES

The benefits of JIT systems seem to be outstanding, yet problems can arise even after a JIT
system has long been operational. Even the Japanese, who pioneered JIT practices in the
automobile industry, aren't immune from problems: Tokyo is experiencing monumental
traffic jams owing in large measure to truck deliveries to JIT manufacturers--small trucks
make up 47 percent of Tokyo's traffic. In this section we address some of the issues managers
should be aware of when implementing a JIT system.

Organizational Considerations
Implementing a JIT system requires management to consider issues of worker stress,
cooperation and trust among workers and management, and reward systems and labor
classifications.
Human Costs of JIT Systems: Just-in-time systems can be coupled with statistical process
control (SPC) to reduce variations in production. However, this combination requires a high
degree of regimentation and sometimes causes stress in the work force. In a JIT system,
workers must meet specified cycle times, and with SPC they must follow prescribed
problem-solving methods. Such systems might make workers feel pushed and stressed,
causing productivity losses or quality reductions. In addition, workers might feel that they
have lost some autonomy because of the close linkages in materials flows between stations
with little or no safety stocks. Managers can mitigate some of these effects by allowing slack
in the system through the judicious use of safety stock inventories and by emphasizing
materials flows instead of worker pace. Managers also can promote the use of work teams
and allow them to determine their task assignments or rotations within the team's domain of
responsibility.
Cooperation and Trust: In a JIT system workers and first-line supervisors must take on
responsibilities formerly assigned to middle managers and support staff. Activities such as
scheduling, expediting, and improving productivity become part of the duties of lower level
personnel. Consequently, organizational relationships must be reoriented to build close
cooperation and mutual trust between the work force and management. Such cooperation and
trust may be difficult to achieve, particularly in light of the typical adversarial positions taken
25
by labor and management in the past. For example, the Mazda plant in Flat Rock, Michigan,
was experiencing quality problems in August 1988. Greater absenteeism than the Japanese
expected and inexperience of the work force were cited as major contributors. Some people
felt that the real problem was a lack of understanding of the American culture by Japanese
managers. As the president of UAW Local 3000 put it, "To the Japanese, work is the most
important part of life, and they expect everybody to be as dedicated as they are. But to
Americans, the job is there to support your life on the outside."

Reward Systems and Labor Classifications: In some instances the reward system must be
revamped when a JIT system is implemented. At General Motors, for example, a plan to
reduce stock at one plant ran into trouble because the production superintendent refused to
cut back production of unneeded parts; his salary was based on his plant's production
volume.
The realignment of reward systems isn't the only hurdle. Labor contracts traditionally have
reduced management's flexibility in reassigning workers as the need arises. A typical
automobile plant in the United States has several unions and dozens of labor classifications.
To gain more flexibility, management in some cases has obtained union concessions by
granting other types of benefits. In other cases management has relocated plants to take
advantage of nonunion or foreign labor. In contrast, at Toyota management deals with only
one company union, and there are only eight different labor classifications in a typical plant.

Process Considerations:
Firms using J1T systems typically have some dominant materials flows. To take advantage of
JIT practices, firms might have to change their existing layouts. Certain workstations might
have to be moved closer together, and cells of machines devoted to particular families of
components. The single most important factor in successful implementation is changing
product flows and layout to a cellular design. However, rearranging a plant to conform to JIT
practices can be costly. For example, whereas many plants now receive raw materials and
purchased parts by rail, to facilitate smaller, more frequent JIT shipments, truck deliveries
would be preferable. Loading docks might have to be reconstructed or expanded and certain

26
operations relocated to accommodate the change in transportation mode and quantities of
arriving materials.

Inventory and Scheduling:

Firms need to have stable master production schedules, short setups, and frequent, reliable
supplies of materials and components to achieve the full potential of the JIT concept.

MPS Stability: Daily production schedules in high-volume, make-to-stock environments

must be stable for extended periods. At Toyota the master production schedule is stated in
fractions of days over a three-month period and is revised only once a month. The first month
of the schedule is frozen to avoid disruptive changes in the daily production schedule for
each workstation; that is, the workstations execute the same work schedule each day of the
month. At the beginning of each month, kanbans are reissued for the new daily production
rate. Stable schedules are needed so that production lines can be balanced and new
assignments found for employees who otherwise would be underutilized. Just-in-time
systems used in high-volume, make-to-stock environments can't respond quickly to
scheduling changes because little slack inventory or capacity is available to absorb these
changes.

Setups: If the inventory advantages of a JIT system are to be realized, small lot sizes must
be used. However, because small lots require a large number of setups, companies must
significantly reduce setup times. Some companies haven't been able to achieve short setup
times and therefore have to use large-lot production, negating some of the advantages of JIT
practices. Also, JIT systems are vulnerable to lengthy changeovers to new products because
the low levels of finished goods inventory will be insufficient to cover demand while the
system is down. For example, Ford and GM are at a competitive disadvantage because of the
time they need to change from one year's model to the next. GM required 87 days to change
from the 1994 Chevrolet Lumina to the 1995 model, and Ford required 60 days to change
from the 1994 Tempo to the Mystique, its 1995 replacement. In contrast, Toyota changed
from the 1991 Camry to the 1992 version in 18 days, and Honda switched from the 1993

27
According to the 1994 model in only 3 days. Every month that a plant is shut down costs
between $65 million and $85 million in pretax profits.

Purchasing and Logistics: If frequent, small shipments of purchased items cannot be

arranged with suppliers, large inventory savings for these items can't be realized. In the
United States such arrangements may prove difficult because of the geographic dispersion of
suppliers.
The shipments of raw materials and components must be reliable because of the low
inventory levels in JIT systems. A plant can be shut down because of a lack of materials. For
example, in 1992, a strike at the GM plant in Lords town, Ohio, caused the Saturn plant in
Spring Hill, Tennessee, to shut down, losing the production of 1000 cars per day. Lords town
supplies parts to Saturn, which doesn't stockpile the parts because of JIT practices.

MRP VERSUS JIT

Is a choice between a push system and a pull system necessary? Actually, these methods
aren't mutually exclusive, and the best solution often is a hybrid of the strengths of both
approaches.
MRP II systems are good at overall materials planning and data management and can be used
to support the informational needs of various functional areas in the firm.
MRP systems can be used effectively to understand the implications of lot-sizing decisions
and master scheduling changes on overall inventories and capacity. In contrast, JIT systems
are a less expensive, more effective way to control materials flows on the shop floor. A JIT
system can be used to maintain low levels of inventory and to adjust production rates over
time. The nature of the production process determines the appropriate system. For line flows,
order releases don't change from week to week, so a rate-based system such as JIT works
well.
Although MRP is an effective technique for scheduling production on a weekly basis,
scheduling of daily requirements within each specific week is left to production supervisors.
At this level, the shop floor level, a pull system is more useful than MRP In a repetitive
manufacturing environment with reasonably stable but varying schedules, a hybrid system
may be appropriate. MRP could be used for order release, as schedules change, or for
28
coordinating with suppliers on long-lead-time items. Pull methods could be used for actual
materials mows on the shop floor. Names such as synchro-MRP, rate-based MRP II, and
JITMRP have been used to describe these hybrid systems.
In environments where materials flows are complex and demands are highly variable, MRP
is the system of choice. The materials flows are too complex for a JIT system, and pull
techniques can't cope with the demand and lead time variability. In addition, the shop floor
requires sophisticated tracking and scheduling capability.

HISTORY OF JUST IN TIME:

Just-In-Time is a Japanese manufacturing management method developed in 1970s. It was

first adopted by Toyota manufacturing plants by Taiichi Ohno. The main concern at that time
was to meet consumer demands. Because of the success of JIT management, Taiichi Ohno
was named the Father of JIT.
After the first introduction of JIT by Toyota, many companies followed up and around
mid1970s‟, it gained extended support and widely used by many companies. One motivated
reason for developing JIT and some other better production techniques was that after World
War II, Japanese people had a very strong incentive to develop a good manufacturing
technique to help them rebuilding the economy. They also had a strong working ethnic which
was concentrated on work rather than leisure, seeked continuous improvement, life
commitment to work, group conscious rather than individualism and achieved common goal.
This kind of motivation had driven Japanese economy to succeed. Because of the natural
constraints and the economy constraints after World War II, Japanese Manufacturers looked
for a way to gain the most efficient use of limited resources. They worked on "optimal
cost/quality relationship".
Before the introduction of JIT, there were a lot of manufacturing defects for the existing
system at that time. According to Hirano, this included inventory problem, product defects,
risen cost, large lot production and delivery delays. The inventory problems included the
unused accumulated inventory that was not only unproductive, but also required a lot of
effort in storing and managing them. Other implied problems such as parts storage,
29
equipment breakdowns, and uneven production levels. For the product defects,
manufacturers knew that only one single product defects can destroy the producer‘s
creditability. They must create a "defect-free" process. Instead of large lot production -
producing one type of products, they awaked that they should produce more diversified
goods. There was also a problem of rising cost, the existing system could not reduce cost any
further but remember improvement always leads to cost reduction.

Lastly, the existing system did not manage well for fast delivery request, so, there was a need
to have a faster and reliable delivery system in order to handle customers‟ needs. Thus, JIT
manufacturing management was developed based on these problems.

Focus of JIT?
Mainly JIT focuses to eliminate the waste or the non-value added. Thus there are several
types of wastes categorized. JIT usually identifies seven prominent types of waste to be
eliminated:
 Waste from Overproduction
 Transportation Waste
 Processing Waste

JUST IN TIME PRODUCTION

 Waste from Product Defects
 Waste of waiting/idle time
 Inventory Waste

Goal of Just in Time

According to Cheng in Just-In-Time Manufacturing – An Introduction, he explains the
objectives of JIT. There are three main objectives:

30
 1. Increasing the organization‘s ability to compete with others and remain competitive
over the long run. The competitiveness of the firms is increased by the use of JIT
manufacturing process as they can develop a more optimal process for their firms.
2. Increasing efficiency within the production process. Efficiency is obtained through
the increase of productivity and decrease of cost.
3. Reducing wasted materials, time and effort. It can help to reduce the costs.

Other short-term and long-term objectives are:-

1. Identify and response to consumer‘s needs. Customers‟ needs and wants seem to be
the major focus for business now, this objective will help the firm on what is
demanded from customers, and what is required of production.
2. Optimal quality/cost relationship. The organization should focus on zero-defect
production process. Although it seems to be unrealistic, in the long run, it will
eliminate a huge amount of resources and effort in inspecting, reworking and the
production of defected goods.
3. Reduce unwanted wastes. Wastes that do not add value to the products itself
should be eliminated.
4. Develop a reliable relationship between the suppliers. A good and long-term
relationship between organization and its suppliers helps to manage a more efficient
process in inventory management, material management and delivery system. It will
also assure that the supply is stable and available when needed.
5. Plant design for maximizing efficiency. The design of plant is essential in terms of
manufacturing efficiency and utility of resources.
6. Adopt the work ethnic of Japanese workers for continuous improvement.

31
 CHAPTER 2

COMPANY PROFILE

32
 INTRODCTION TO COMPANY

Ranbaxy Laboratories Limited, India's largest pharmaceutical company, is an integrated,

research based, international pharmaceutical company, producing a wide range of quality,
affordable generic medicines, trusted by healthcare professionals and patients across
geographies. Ranked 8th amongst the global generic pharmaceutical companies, Ranbaxy
today has a presence in 23 of the top 25 pharmaceutical markets of the world. The Company
has a global footprint in 49 countries, world-class manufacturing facilities in 11 countries and
serves customers in over 125 countries.

Ranbaxy was incorporated in 1961 and went public in 1973. For the year 2008, the Company
recorded Global Sales of US $ 1,682 Mn, reflecting a growth of 4%. The Company has a
balanced mix of revenues from emerging and developed markets that contribute 54% and
39% respectively. In 2008, North America, the Company‘s largest market contributed sales
of US $ 449 Mn, followed by Europe garnering US $ 330 Mn. Business in Asia has been
going strong with India clocking sales of around US $ 300 Mn with market leadership in
several business segments, backed by strong brand-building skills.

In June 2008, Ranbaxy entered into an alliance with one of the largest Japanese innovator
companies, Daiichi Sankyo Company Ltd., to create an innovator and generic pharmaceutical
powerhouse. The combined entity now ranks among the top 15 pharmaceutical companies,
globally. The transformational deal will place Ranbaxy in a higher growth trajectory and it
will emerge stronger in terms of its global reach and in its capabilities in drug development
and manufacturing.

Company profile

Ranbaxy Laboratories Ltd. is the largest pharmaceutical company in India and one of the
world‘s top 100 pharmaceutical companies. Ranbaxy is specialist in the preparation of
generic drugs; Ranbaxy is also one of the world top 10 in that pharmaceutical category as
well, with India's agreement to apply international patent law at the beginning of 2005,

33
Ranbaxy has begun converting itself into a full-fledged research-based pharmaceutical
company. A major part of this effort has been the establishment of the company's own
research and development center, which has enabled the company to begin to enter the new
chemical entities NCE) and novel drug delivery systems (NDDS) markets.

In November 2008, Daiichi Sankyo completed the acquisition of 63.92% shares of Ranbaxy
and in the process infused. The coming together of Ranbaxy and Daiichi Sankyo is a path-
breaking confluence that, in one sweep, catapults the new, empowered entity to the status of
the world's 15th largest pharmaceutical Company. Individually, the two pharmaceutical
giants are formidable - one, India's largest generics Company and the other, among the
largest innovator companies in Japan.

Ranbaxy is a truly global operation, producing its pharmaceutical preparations in

manufacturing facilities in seven countries, supported by sales and marketing subsidiaries in
44 countries, reaching more than 100 countries throughout the world. The United States,
which alone accounts for nearly half of all pharmaceutical sales in the world, is the
company's largest international market, representing more than 40 percent of group sales. In
Europe, the company's purchase of RPG (Aventis) S.A. makes it the largest generics
producer in that market. The company is also a leading generics producer in the United
Kingdom and Germany and elsewhere in Europe. European sales added 16 percent to the
company's sales in 2004. Ranbaxy's other major markets include Brazil, Russia, and China,
as well as India, which together added 26 percent to the group's sales.

Vision & Mission

The Indian pharmaceutical industry is at the center stage in the global. Pharmaceutical arena
and Ranbaxy is at the forefront in delivering the India centric advantages to the advanced and
developing countries of the world.

The Endeavour at Ranbaxy is to provide value. Value through pioneering work, research &
development and quality pharmaceuticals across the globe. Ranbaxy keeps alive this

34
Endeavour as it steps into the new millennium, and reaffirms its commitment to the
environment, the people and a healthier future.

Ranbaxy Laboratories Limited has excelled in its endeavor in drug research and manufacture,
providing quality products not only at par with global markets but also facilitating the same.

Ranbaxy are committed to provide quality generics at affordable prices to the patients
worldwide with a view to help bring down the healthcare costs. Companies grow from
strength to strength in the global generic space in the years to come. While the company
continues to enhance the momentum of generics business in over 125 markets, they are also
accelerating drug discovery program through collaborations and alliances.

Ranbaxy is driven by its vision to achieve significant business in proprietary prescription

products by 2012 with a strong presence in developed markets. The Company aspires to be
amongst the Top 5 global generic players and aims at achieving global sales of US $5 Bn by
2012.

COMPANY STRATEGIES

For the year 2009, Ranbaxy has a clear strategy to harness its growth potential in emerging
markets, rebuild the US business through a series of actions on products and facilities;
actualize significant revenue upsides through First-to-File and Day-1 launches strengthen
the product / therapeutic pipeline and look for M&A opportunities, complementing our
geographic and therapeutic basket. Our focus will be to resolve regulatory compliance issues
and continue to strengthen cGMP across all locations. Besides this, Ranbaxy and Daiichi
Sankyo will identify key projects to realize synergies at both the front and back ends of the
business, although, there will be much to contend with, considering that the industry is
projected to grow at around 5% in 2009.

Ranbaxy is focused on increasing the momentum in the generics business in its key markets
through organic and inorganic growth routes. The Company continues to evaluate acquisition
opportunities in India, emerging and developed markets to strengthen its business and
competitiveness. Growth is well spread across geographies with focus on emerging markets.
35
Ranbaxy has forayed into new specialty therapeutic segments like Bio-similars, Oncology,
Peptides and Limuses. These new growth areas will add significant depth to the existing
product pipeline.

COMPANY GROWTH

 Consolidated net sales at Rs. 18,884 Mn, a growth of 14% (USD 431 Mn).
 Emerging markets portfolio achieves sales of Rs. 10,644 Mn, with a strong growth of
20%; accounts for 56% of sales (USD 243 Mn).
 Developed markets sales grew by 9% to Rs. 7,089 Mn (USD 162 Mn); accounts for 38%
of sales.
 Earnings before Interest, Tax, Depreciation & Amortization (EBITDA) for the quarter are
Rs. 1,440 Mn (8%). EBITDA for the year to date is Rs. 7,253 Mn reflecting a margin to
sales of 14%.
 Gross margin on year to date basis maintained at 51% despite adverse economic
conditions this year.
 Over the current year there has been a consistent improvement in Working Capital
management with a result that the Company‘s Gross Working Capital has reduced by 5%.

36
COMPETITORS

The pharmaceutical industry is characterized by rapid advances in scientific knowledge and

ability to discover new drugs. The industry is therefore led by large manufacturers and
marketers of drugs investing heavily in research &development, having clinical testing,
marketing and distributing capabilities. Some of the main competitors of Ranbaxy are:

 Sun Pharmaceuticals Industries - It is No. 1 in India in specialty therapy areas like

psychiatry, neurology, cardiology, gastroenterology, diabetology and respiratory.[.It
has brands in 30 markets worldwide and also has a generic presence in the U.S. with
Caraco Pharm Labs, Sun Pharmaceutical Industries Inc.
 Ranbaxy- Ranbaxyis a leader in the domestic retail pharmaceutical market. It also
exports raw materials, intermediates, prescription drugs, over-the-counter products,
and veterinary products to some 180 countries around the world.
 Glaxo smith Kline- It is one of the oldest pharma companies in India and with a
turnover of Rs. 1500 crore is one of the market leaders(market share) in India with a
share of 6.2 per cent Its main portfolios consists of anti- invectives, dermatologicals
and pain management drugs
 Dr.Reddy‟s Laboratories- It is a global pharmaceutical company with its
headquarters in India and a presence in more than 100 countries. In India it the
biggest drug maker by sales.

37
SWOT ANALYSIS

SWOT Analysis

Strengths
1. Strategic Alliances – GSK and Merck.
2. Differentiated Product Offering – Generics, Branded Gx, Branded, OTC. Broad product
portfolio imparting revenue stability.
3. Patents.
4. Strong presence in diverse geographies insulating business risks.
5. Aggressive Marketing.
6. Manufacturing Efficiencies – Labour, Infrastructure and Global Quality Standards.
7. R&D capabilities – skilled scientist pool, research across Generics as well as Innovative
Research (NCE, NDDS, Niche FTF), and Process Chemistry Expertise.
8. Low cost innovation and high quality product flow.
9. Strong CSR programs contributing to a positive reputation in the industry.

Weaknesses
1. High Cost structure related to manufacturing, R&D and distribution.
2. Lack of ethical culture, proven when Ranbaxy submitted improper and falsified
documents to USFDA.
3. Legal and Compliance issues with its manufacturing facilities at Dewas and Paonta
Sahib in India.
4. Tarnishing reputation in the industry because of the above two issues.
5. Nepotism in the organization – high degree of family interference and control.

Opportunities
1. Untapped high-growth emerging markets.
2. Ageing world population can act as a fundamental growth driver by providing increase
in demand for medicines.
3. Possible leverage on Daiichi Sankhyo‘s strengths.
38
Threats
1. High entry barriers – technology and resource intensive.
2. Productivity under pressure – saturated developed markets.
3. Disruptive Technologies challenging established portfolios.
4. Increased regulations on Generic Drugs in developed countries like USA.
5. Unpredictable dollar rate fluctuation.

39
Porter‟s five forces model
Industry competition: High
The Indian pharmaceutical market is highly competitive and fragmented with the top 10
players accounting for 36.1% of the total market share. There are about 250 large units and
about 8000 small scale units (SSIs), which form the core of the pharmaceutical industry in
India (including 5 central public sector units). The concentration ratio for the industry is very
low. More than 20,000 registered units and have increased in the last two decades. The
leading 250 pharmaceutical companies control 70% of the market with market leader holding
nearly 7% of the market share.
Bargaining power of buyers: Low
In the pharmaceutical industry the buyer is influenced by the doctors, who suggest or
recommend the medicines. The buyers are scattered and thus do not have much collective
influence on the price of the product. The concentration among the buyers is lesser than that
of the authority; hence the price sensitivity towards products is low. Prices are regulated by
the government through National Pharmaceuticals Pricing Authority (NPPA).
Power of suppliers: Low
The pharmaceuticals industry depends on several chemicals. These chemicals are largely
similar to commodity products. Chemical industry in turn is very competitive and
fragmented. The suppliers thus have very low bargaining powers and the pharmaceuticals
company can easily shift suppliers without incurring much losses. To overcome this, many
Indian firms are looking at forward integration in the value chain and assume the role of a
pharmaceutical company.
Barriers to entry: Low
Pharmaceutical industry is very easily accessible industry for SSIs and entrepreneurs in
India. At the same time, this industry offers economies of scale and a low capital
requirement. The WTO-TRIPS compliance in 1995 has created a favorable environment for
MNCs with blockbuster or patented drugs to enter the Indian market. The market for generic
drugs is very huge and market share is projected to grow 50% by 2010.
Threat of substitutes: Low

40
The pharmaceutical industry does not have any close substitutes and perceived to be a
continuous and thriving market. The advances made in the field of biotechnology can
contribute to the future attributed threat to the synthetic pharmaceutical industry.

Current situation:
The currently fragmented industry is moving towards consolidation, leaving smaller players
acquired or shut shop in the coming years. The market will contain few large players,
representing a cartel and the barriers to entry will increase.

R&D
Ranbaxy views its R&D capabilities as a vital component of its business strategy that will
provide a sustainable, long-term competitive advantage. The Company has a pool of over
1,200 scientists engaged in path-breaking research.
Ranbaxy is among the few Indian pharmaceutical companies in India to have started its
research program in the late 70's, in support of its global ambitions. A first-of-its-kind world
class R&D centre was commissioned in 1994. Today, the Company's multi-disciplinary R&D
centre at Gurgaon, in India, houses dedicated facilities for generics research and innovative
research. The robust R&D environment for both drug discovery and development reflects the
Company's commitment to be a leader in the generics space offering value added
formulations based on its Novel Drug Delivery System (NDDS) and New Chemical Entity
(NCE) research capabilities.
The new drug research areas at Ranbaxy include anti-infectives, inflammatory / respiratory,
metabolic diseases, oncology, urology and anti-malaria therapies. Presently, the Company
has 8-10 programs including one anti-malaria molecule which has obtained approval from
the Drug Controller General of India to initiate Phase III human clinical trials in India. The
Company has signed collaborative research programs with GSK and Merck.
NDDS focus is mainly on the development of NDA/ANDAs of oral controlled- release
products for the regulated markets. Ranbaxy‘s first significant international success using the
NDDS technology platform came in September 1999, when the Company out-licensed its
first once-a-day formulation to a multinational company.

41
People
The Company‘s business philosophy based on delivering value to its stakeholders constantly
inspires its people to innovate, achieve excellence and set new global benchmarks. Driven by
the passion of its over 12,000 strong multicultural workforce comprising 50 nationalities,
Ranbaxy continues to aggressively pursue its mission to become a Research-based
International Pharmaceutical Company and attain a true global leadership position.

Manufacturing Facilities
An organisations‘ capabilities and intent are strongly reflected in the product it manufactures.
In other words, the manufacturing competencies and facilities echo truly, the R&D extent
and the ability to implement it for the best of the market it targets.
RANBAXY® possesses the manufacturing strengths that have established it as a producer of
world-class generics, branded generics and a major supplier of its range of Active
Pharmaceutical Ingredients for pharmaceutical products of companies worldwide.

42
 CHAPTER 3

LITERATURE REVIEW

43
LITERATURE REIEW
In today‘s world every business tries to strike a balance in inventory between what is needed
and what is demanded, considering the major factor of cost cutting/reduction. This control is
called Inventory management or inventory control. Inventory is basically assets (goods and
materials) which are stock of any business. Inventory management focus on the capacity of
the inventory, the place in which it is located so that one can use it when needed, the supply
chain management of the raw materials and goods. Inventory management deals with the
demand forecasting, asset management of the raw materials and goods, inventory carry cost,
forecast, pricing of goods, validation of goods, to forecast the demand of future. This helps
the top level manger to understand and coordinate with the supply chain management or
production management, and quality management.

The three important objectives of Inventory management are

 Satisfactory level of service: Most company measures the ability to satisfy the customer
by the following 3 factors / methods
a) Number of order which act per schedule
b) Number of order which are shipped as per schedule
c) The idle time in inventory as well as shortage
 Minimizing inventory investments: Most company try to minimize the money
associated with inventory so as to improve profitability of the company. This is measured
using inventory turnover ratio
(Measures how quickly the inventory is getting out of system to the consumer)
Its calculated using formula- Sales / inventory or cost of goods sold / average inventory
 Efficient inventory control
Efficient inventory control includes how the inventory are scheduled properly, no delays
between sniffing of raw materials and goods. The amount of raw materials determines the
workforce and other factors. Every company will incur fixed cost and vertical cost. There
should be a balance between the fixed cost and variable cost.

44
STATEMENT OF THE PROBLEM
Inventory management being a very important concept in all the company‘s having a void
coverage often calls for the managerial attention. In the modern times inventory management
has become the integral part of the all companies. All the firms give special importance for
inventory management. The study was carried to know how inventory management helps in
proper maintenance of working capital.

HISTORY OF RANNBAXY
Ranbaxy was founded by Ranjit Singh and Dr. Gurbax Singh in Amristsar to distribute
Vitamin A and anti-tuberculosis drugs to Japanese Pharmaceutical companies in 1937. First
syllable of Ranjit and last syllable of Gurbax are combined and formed Ranbaxy. In the year
1961 formal company incorporated.
Chronological Milestones of the Company
1966: Two brothers sell their company to their lender Bhai Mohan Singh due huge debt
accrual. After that Dr. Parvinder Singh took the charge of the company.
1973: Company goes public and a multipurpose chemical plant is setup for the manufacture
of Active Pharmaceutical Ingredients (API) at Mohali in India.
1977: The Company took giant leap, first time Company set up a manufacturing plant
outside India to manufacture generic drug for the international market. They set up the plant
with a joint venture with Lagos in Nigeria.
1983: A modern dosage forms facility at Dewas (MP) in India goes on stream.
1985: Ranbaxy set up Ranbaxy Research Foundation and start function its marketing
division, Stancare.
1987: Dr. Parvinder Singh Build up an API plant in Toansa, Punjab to catering the demand
of outside country.
1988: The Company got Food and Drug Administrative approval from US to enter in the US
market.
1990: Ranbaxy is granted US patent for Doxycyline .
1992: The Company made joint venture with Eli Lilly, which was largest drug marketer in
the world and formed Eli Lilly Ranbaxy Ltd (ERL). ERL marketed its branded drugs both in
India, US, Europe etc.
45
1993: the company made another millstone. The company enters into the Chinese market
with a Joint venture with Guangzhou Qiaoguang Pharmaceutical Co. Ltd and forms Ranbaxy
Guangzhou China Ltd (RGCL). It is first JV between two countries.
1995: Ranbaxy acquired of Ohm Laboratories, a manufacturing facility in the US and build
state-of-the-art new manufacturing wing, at Ranbaxy‘s US subsidiary Ohm Laboratories Inc.
1998: Ranbaxy enters USA, world‘s largest pharmaceutical market, with products under its
own name. Ranbaxy filed its first Investigational New Drug (IND) application with the
Drugs Controller General of India (DCGI) for approval to conduct Phase I clinical trials.
1999: Bayer AG, Germany and Ranbaxy sign an agreement where Bayer obtains exclusive
development and worldwide marketing rights to an oral once daily formulation of
Ciprofloxacin, originally developed by Ranbaxy.
2000: Ranbaxy acquires Bayer‘s Generics business (trading under the name of Basics) in
Germany.
Ranbaxy enter into Brazil, the largest pharmaceutical market in South America and achieves
global sales of US $ 2.5 million in this market.
2001: Ranbaxy took a significant step forward in Vietnam by initiating the setting up of a
new manufacturing facility with an investment of US $ 10 million. Ranbaxy USA crosses
sales of US $ 100 million, fastest growing company in the US.
2002: It acquires Aventis in Franc.
2003: The Company enters into a crucial alliance with Glaxo Smith Kline (GSK) for drug
discovery and development.
2005: The Company enters into JV with Nippon Chemiphar in Japan. The company
successfully ventured into foreign market including Canada Spain, Germany, Romania.
2006: Acquires leading Romanian pharma company Terapia and Be-Tabs pharmaceuticals,
5th largest generics company in South Africa.
2007: Ranbaxy‘s Drug Discovery Team achieves significant milestone in GSK research
collaboration – with the candidate selection of compound for Respiratory Inflammation.
Business World ranks Ranbaxy as the Most Respected Company in the pharmaceutical
industry.
2008: Ranbaxy partners with Daiichi Sankyo (DS) (34.4% share) establishing a unique and
powerful Hybrid Business Model; DS becomes a majority partner.
46
2009: Ranbaxy partners with Daiichi Sankyo (DS) establishing a unique and powerful
Hybrid Business Model; DS becomes a majority partner. Ranbaxy commences Phase-III
studies on its anti-malaria combination new drug, Arterolane Maleate + Piperaquine
Phosphate.
2010: Project ―Viraat‖ launched in India – a key initiative to strengthen company‘s
leadership position in India. Ranbaxy delivers Quarterly Sales of over US $ 500 Million for
the first time.
2011: The Golden Jubilee Year – 50 Years of an inspiring, pioneering and historic journey.
2013: The top 10 drug manufacturers (by market value) account for 80 per cent of the
industry‘s market capitalization, much higher than their revenue share of 58 per cent.
2014: Sun Pharmaceutical acquired the entire 63.4% share of Ranbaxy making the
conglomerate world‘s fifth largest specialty generic pharmaceutical company

JUST IN TIME PRODUCTION

July 4, 1939 was a red-letter day for Ranbaxy, when the Father of the Nation, Mahatma
Gandhi, honoured the factory with a visit. He was "delighted to visit this Indian enterprise",
he noted later. From the time Ranbaxy came to the aid of the nation gasping for essential
medicines during the Second World War, the company has been among the leaders in the
pharmaceutical industry in India.

VISITED BY MAHATMA GANDHI

July 4, 1939 was a red-letter day for Ranbaxy, when the Father of the Nation, Mahatma
Gandhi, honored the factory with a visit. He was "delighted to visit this Indian enterprise", he
noted later. From the time Ranbaxy came to the aid of the nation gasping for essential
medicines during the Second World War, the company has been among the leaders in the
pharmaceutical industry in India.

On October 31, 1939, the books showed an all the time high loss of Rs 67,935. That was the
last time the company ever recorded a deficit.

47
In 1942, Dr Hamied's blueprint for a technical industrial research institute was accepted by
the government and led to the birth of the Council of Scientific and Industrial Research
(CSIR), which is today the apex research body in the country.

In 1944, the company bought the premises at Bombay Central and decided to put up a "first
class modern pharmaceutical works and laboratory." It was also decided to acquire land and
buildings at Vikhroli. With severe import restrictions hampering production, the
company decided to commence manufacturing the basic chemicals required for
pharmaceuticals.
In 1946, Cipla's product for hypertension, Serpinoid , was exported to the American Roland
Corporation, to the tune of Rs 8 lakhs. Five years later, the company entered into an
agreement with a Swiss firm for manufacturing foromycene. Dr Yusuf Hamied, the founder's
son, returned with a doctorate in chemistry from Cambridge and joined Ranbaxyas an officer
in charge of research and development in 1960.
In 1961, the Vikhroli factory started manufacturing diosgenin. This heralded the manufacture
of several steroids and hormones derived from diosgenin

Global Presence
Exports for the financial year ended March 31, 2009 amounted to more than Rs. 27,500
million. Ranbaxy exports raw materials, intermediates, prescription drugs, OTC products and
veterinary products. Ranbaxyalso offers technology for products and processes. Technical
know-how/fees received during the year 2008-09 amounted to about Rs. 2200 million
Cipla's manufacturing facilities have been approved by the following regulatory authorities

Food and Drug Administration (FDA), USA Medicines and Healthcare products Regulatory
Agency (MHRA), UK
Therapeutic Goods Administration (TGA), Australia Medicines Control Council (MCC),
South Africa National Institute of Pharmacy (NIP), Hungary Pharamaceutical Inspection
Convention (PIC), Germany World Health Organisation (WHO) Department of Health,
Canada State Institute for the Control of Drugs, Slovak Republic ANVISA, Brazil

48
 CHAPTER 4

NEED, SCOPE AND OBECTIVES OF THE STUDY

49
OBJECTIVES
1. To study the concept of Inventory Management.
2. To study, understand and analyze the inventory of various raw materials, fuel and finished
goods.
3. To study the various inventory control techniques which are followed in Ranbaxy.
4. To suggest the measures for improving the inventory level.
5. To study the inventory management and its effective control through various techniques.

SCOPE:
JIT inventory systems have several advantages over traditional models. Production runs are
short, which means that manufacturers can quickly move from one product to another. This
method reduces costs by minimizing warehouse needs. Companies also spend less money on
raw materials because they buy just enough resources to make the ordered products and no
more.

NEED:
Inventory is very vital to every Company is that without inventory no company would
survive. Inventory is meant for ‗protection‘ and for‗ economy‘ in cost. Keeping inventory of
sufficient stocks will help to face lead times component, demand and supply fluctuations and
any unforeseen circumstances in the procurement of materials. Though to have inventory is
must, inventory is such a thing that will pile up and creep into the area of profits to turn them
as losses and can put the company in red. It is therefore, necessary to have control over
inventory to save the company from piling up of inventories and to avoid losses. Better said
than done is the world that suits the inventory control.

50
BENEFITS
As most companies use an inventory system best suited for their company, the Just-In-Time
Inventory System (JIT) can have many benefits resulting from it. The main benefits of JIT
are listed below.
1. Set up times are significantly reduced in the factory. Cutting down the set up time to
be more productive will allow the company to improve their bottom line to look more
efficient and focus time spent on other areas that may need improvement. This allows
the reduction or elimination of the inventory held to cover the "changeover" time, the
tool used here is SMED.
2. The flows of goods from warehouse to shelves are improved. Having employees
focused on specific areas of the system will allow them to process goods faster
instead of having them vulnerable to fatigue from doing too many jobs at once and
simplifies the tasks at hand. Small or individual piece lot sizes reduce lot delay
inventories which simplifies inventory flow and its management.
3. Employees who possess multiple skills are utilized more efficiently. Having
employees trained to work on different parts of the inventory cycle system will allow
companies to use workers in situations where they are needed when there is a
shortage of workers and a high demand for a particular product.
4. Better consistency of scheduling and consistency of employee work hours. If there is
no demand for a product at the time, workers don‘t have to be working. This can save
the company money by not having to pay workers for a job not completed or could
have them focus on other jobs around the warehouse that would not necessarily be
done on a normal day.
5. Increased emphasis on supplier relationships. No company wants a break in their
inventory system that would create a shortage of supplies while not having inventory
sit on shelves. Having a trusting supplier relationship means that you can rely on
goods being there when you need them in order to satisfy the company and keep the
company name in good standing with the public.
6. Supplies continue around the clock keeping workers productive and businesses
focused on turnover. Having management focused on meeting deadlines will make

51
employees work hard to meet the company goals to see benefits in terms of job
satisfaction, promotion or even higher pay.

52
 CHAPTER 5

RESEARCH METHODOLOGY

53
RESEARCH METHODOLOGY:
Research methodology is a way to solve the research problem in a systematic manner. It may
understand as a science of studying how the research is done significantly. The methodology
may differ from problem to problem, yet the basic approach towards the research remains the
same. The sequence or steps followed have been explained as under:

DATA COLLECTION
The collection of information is done through two principal sources, viz.
 Primary Data:
a) Observation
b) Personal Interviews
Interview and questionnaire have been used to conduct the study. A structured
questionnaire consisting close-ended questions have been made, which is filled by the
trainee during direct interaction with the respondents.
It is the information that will be collected directly without any reference in this study
it is to gather through interviews with concerned officers and staffs either individually
or collectively some of the information will be verify and supplement through
personal observation.

 Secondary Data: The secondary data will be collected from already published
sources such as pamphlets of annual reports, internal records, books, journals,
magazines, and websites.

54
NATURE OF RESEARCH
This is a descriptive research as it will be clarified the doubts about online marketing. It
would give us a clear picture on the effectiveness and reliability of online marketing
compared to the offline form of marketing.

Sample universe
 Basis of sampling: Sample should be a user of internet or should have knowledge
about internet and 50 numbers in all
 Sampling Method: Judgmental Non Probability sampling is used to select the
individual units for better productivity of the questionnaire. A well educated person
may be able to reason out the questions in the better way. Sampling method refers to
the rules and procedures by which some elements of the population are included in
the sample. Some common sampling methods are simple random sampling, stratified
sampling, and cluster sampling.
 Population:
The total element of the universe from which sample is selected for the purpose of
study is known as population, the population of my research is the employee of
Ranbaxy.
 Area of research: New Delhi
 Number of respondents: 50

55
RESEARCH TOOL APPLIED

Research Design: The research design refers to the overall strategy that you choose to
integrate the different components of the study in a coherent and logical way, thereby,
ensuring you will be effectively address the research problem; it constitutes the blueprint for
the collection, measurement, and analysis of data.

Nature of research
The research design used for this study is of the descriptive type. Descriptive research studies
are those studies which are concerned with describing of a particular individual or a group.

Data analysis stage

Data collected through primary & secondary sources will be tabulated and summarized so as
to draw logical conclusions.

Method used to classify data:

Interview and questionnaire have been used to conduct the study. A structured questionnaire
consisting close-ended questions have been made, which is filled by the trainee during direct
interaction with the respondents.

Method used to present the data:

The data collected form questionnaire is edited, tabulated and analyzed. Various graphical
techniques have been used to present the data in more meaningful way.

56
LIMITATIONS
Every scientific study has certain limitations and the present study is no more exception.
These are:
 The time constraint may be one of the major problems.
 The lack of information sources for the analysis part.
 Selection of the people who are under consideration as sample for the study may not
be the best sample selected.
 Sample size will be limited due to the limited period allocated for the survey.
 Getting accurate responses from the respondents due to their inherent Problems,
personality traits, and mood fluctuations will be a very difficult task.
 Some respondents had to be re-contacted as per their convenience of time.
 Some data of customer is not proper. Like their contact number & address.

57
 CHAPTER 6

DATA ANALYSIS, INTERPRETATION AND FINDINGS OF THE

STUDY

58
Raw material turnover ratio:
Raw material turnover ratio is velocity at which raw material converted into goods
ready for sale. If raw material turnover ratio is high then company is efficiency converting
into finished goods.

Formula: Material consumed / Average raw material

Raw Material Turnover Ratio

Year Raw material consumed (Rs) Avg R.M Ratio
2008 576,484,922 53,608,082 10.75
2007 371,223,873 36,137,266 10.27
2006 230,779,236 132,002,490 1.74

Ratio

12
10
8
6 Ratio
4
2
0
2008 2007 2006
Years

Form above graph we come know that raw material turnover ratio is increased rapidly in
2007 from 1.74 in 2006 to 10.27 for 2007. Indicates that company is converting raw material
into finished or semi-finished goods very quickly

59
Holding period of raw material:
It refers to the number of days taken for the production unit to convert raw material to finish
goods.
Formula: 360 /Raw material turnover ratio

Holding period of raw material

Year Total Days Ratio Days
2008 360 10.75 33
2007 360 10.27 35
2006 360 1.74 206

Raw material holding Period

250

200

D 150
A RHP
Y 100
S
50

0
2008 2007 2006
Years

As the raw material turnover ratio is increasing form to 10.27 for 2007 it indicates that firm is
taking less days for conversion as compared to 2006. In 2006 conversion period was 206
days but in decreased to 35 days for 2007. This is shown in above graph.
Before 2007 there was no production process they were converting semi finished
goods into finished products hence to start their own production process they hold the raw
material in 2006

Work in Process Turnover ratio:

60
 Work in process turnover ratio is velocity at which W.I.P converted into goods ready
for sale. If W.I.P turnover ratio is high then company is efficiency converting into finished
goods.
Formula:
Cost of production
Average W.I.P

W.I.P turnover ratio

Year Cost of production Avg W.I.P Ratio
2008 849,054,442 36,720,702 23.12
2007 555,094,500 15,010,347 36.98
2006 361,110,197 9,755,839 37.01

Work in Process Turnover ratio

40
35
30

D 25
A 20 Ratio
Y
S 15
10
5
0
2008 2007 2006
Years

Form above graph we came to know that Work in process turnover ratio is decreasing from
37.01 in 2006 to 23.12 2008. The ratio was high in 2006 as compared to 2007 and 2008. The
ratio was 37.01. Indicates that company is converting semi-finished into finished goods
quickly

Holding period of W.I.P:

61
It refers to the number of days taken for the production unit to convert semi-finished goods
into finish goods.

Formula:
360
W.I.P turnover ratio

Holding period of W.I.P

Year Total Days Ratio Days

2008 360 23.12 15.57

2007 360 36.98 9.73

2006 360 37.01 9.72

Holding period of W I P

18
16
14
12
D 10
A Ratio
8
Y 6
S
4
2
0
2008 2007 2006
Years

As the work in process turnover ratio is increasing form 9.72 in 2006 To 15.57 for 2008 it
indicates that firm is taking less days for conversion. Which shown in above graph

Finished goods turnover ratio:

62
 Finished goods turnover ratio is velocity at which finished goods converted into for
sale. If finished goods turnover ratio is high then company is efficient.
Formula:
Cost of goods sold
Average finished goods

Finished goods turnover ratio

Year cost of goods sold Avg F.G Ratio
2008 849,054,442 26,243,339 32.35
2007 555,094,500 19,858,482 27.95
2006 361,110,197 10,940,008 33.01

Finished Goods Turnover Ratio

34
33
32
31
D 30
A 29 Ratio
Y
S 28
27
26
25
2008 2007 2006
Years

Form above graph we came know that finished goods turnover ratio is decreasing from 33.01
in 2006 to 27.95 for 2007. Indicates that company is selling goods little slowly as compared
to 2006 but it is bit fast as compared to 2008. Where the ratio for that particular period was
32.35 decreased to 11.20 for 2008 it is satisfactory. Which shown in above graph.

Inventory to capital employed:

63
This ratio indicates the relationship between the total capitals employed and inventories it
shows how much capital utilized to invest in the inventories other than the other assets. The
normal manufacturing firms have low ratio of inventory total capital employed in the
organization.
Formula: Inventory / Total capital employed

Inventory to capital employed

Total capital
Year Inventory employed Percentage
2008 197,465,069 301,443,215 65.50
2007 121,558,000 145,492,599 83.54
2006 67,994,623 98,333,324 69.14

Inventory to capital employed

90
80
P
E
70
R 60
C 50
E ICE
N 40
T 30
A
G 20
E 10
0
2008 2007 2006
Years

By observing above graph we can say that the firm investing huge amount in inventories
compared to other assets. It invested 83.54% of its capital in inventory in 2007 where as it
reduced to 65.50% in 2008

64
Inventory to current asset ratio:
This ratio indicates the relationship between the inventory and current assets. It shows the
percentage of inventory to current assets, which helps the organizations in deciding the
current assets policy which also affect the liquidity position of the organization.
Formula: Inventory / Current assets

Inventory to current asset ratio

Year Inventory current assets Percentage
2008 197,465,069 331,314,504 59.60
2007 121,558,000 237,687,684 51.14
2006 67,994,623 117,022,625 58.10

Inventory to current asset ratio

62
P 60
E 58
R
C 56
E 54 Ratio
N
T 52
A 50
G
E 48
46
2008 2007 2006
Years

The inventory to current assets ratio in the year 2006 was 58.10% and it decreased to 51.14%
in the year 2007 but again it increased to 59.60% in 2008. It shows that the firm investing
59.60% of its investment is for inventory only.

65
Inventory to total assets:
This ratio indicates the relationship between the inventory and total assets. The significance
of this ratio is it reflects the portion the inventory as a percentage of the total assets, which
helps the management deciding the utilization remaining resources profitably, since the
inventory will lock up the huge funds and reduces the profitability of the organization
Formula: Inventory / Total assets

Inventory to total assets

Year Inventory Total assets Percentage
2008 197,465,069 990,329,087 19.93
2007 121,558,000 540,916,088 22.47
2006 67,994,623 414,901,234 16.38

Inventory to total assets

25
P
E 20
R
C
15
E
N Ratio
T 10
A
G 5
E
0
2008 2007 2006
Years

During the year 2006 the rate of inventory to total assets was 16.38% it increased to 22.47%
in 2007. But again it reduced to 19.93% in 2008. It indicates that firm investing only 19.93%
in inventory out of total assets.

Inventory to working capital:

66
 This ratio indicates the relationship between inventory to working capital and
it also indicates the amount to inventory tied up in the working capital and it also shows the
efficiency of inventory management.
Formula: Inventory
Working capital

Inventory to working capital

Year Inventory Working capital Percentage
2008 197,465,069 199,345,123 99.05
2007 121,558,000 146,097,210 83.20
2006 67,994,623 46,338,277 146.45

Inventory to working capital

160
P 140
E
R 120
C 100
E
N 80 Ratio
T 60
A
G 40
E 20
0
2008 2007 2006
Years

In the year the ratio was 146.45% in 2006. It decreased to 83.20% for 2007 but it increased it
to 99.05% in 2008. It indicates that firm investing huge amount in inventory

67
Inventory Techniques Followed by the Company

 FSN Analysis:-
In FSN Analysis, items are classified according to their rate of consumption. The
items are proudly classified into 3 groups: F means fast moving, S means slow
moving, N means non-moving. The FSN analysis is conducted generally on the basis
last date of receipt of the items or the last date of the issue of items, whichever is later is
taken into account and the time period is usually calculated in terms of months or number
of days and it pertains to the time elapsed since the last movement was recorded. The
FSN Analysis helps company in identification of the items considered to be ―active‖ may
be reviewed regularly on more frequent basis. Items who stock at hand are higher as
compared to their rate of consumption .Non-moving items whose consumption is ―zero‖
or almost in significant.

Fast Moving:
SL No. Commodity Rank
1 Potassium Chloride 1

Non-Moving:

SL No. Commodity Rank

1 Sodium Chloride 2
2 Magnesium Chloride 3
3 Sodium Acetate 4
4 Calcium Chloride 5
5 Caustic Soda 6
6 Citric Acid 7

68
Statement showing FSN Analysis

Moving Method Commodity

Fast Moving Sodium Chloride

Non Moving Magnesium Chloride

Sodium Acetate

Calcium Chloride
Caustic Soda

Citric Acid

Interpretation:

The chemical potassium chloride is one and only material produced by the industry
and the information collected that the company stopped producing rest of the materials.

69
HML Analysis:

HML Analysis is classified based on their unit prices. Here cost / unit criteria is used
they are categories in 3 groups, where H means high price item, L means low price
items .Objectives of HML analysis is to determine the frequency of stock verification
to keep control over the consumption at the department level, considering buying policy
and delegation of authority.

High Value:
SL No Commodity Rank

1 Potassium Chloride 1

Medium Value:

SL No Commodity Rank

1 Sodium Chloride 2

2 Magnesium Chloride 3

Low Value:

SL No. Commodity Rank

1 Sodium Acetate 4

70
Statement showing HML Analysis

Value Product Rank

High Potassium Chloride 1

Medium Sodium Chloride 2

Medium Magnesium Chloride 3

Low Sodium Acetate 4

Interpretation:
The chemical potassium chloride is considered as a high value material in the industry and
heads the first rank and sodium chloride and magnesium chloride heads the medium value
and it‘s rank will be respectively second and third and the chemical sodium acetate is
considered as a low value material and heads the fourth rank.

71
FINDINGS OF THE STUDY

 Raw material turnover ratio is increased rapidly in 2007 from 1.74 in 2006 to 10.27
for 2007.
 As the raw material turnover ratio is increasing form to 10.27 for 2007 it indicates
that firm is taking less days for conversion as compared to 2006.
 Work in process turnover ratio is decreasing from 37.01 in 2006 to 23.12 2008.
The ratio was high in 2006 as compared to 2007 and 2008.
 As the work in process turnover ratio is increasing form 9.72. in 2006 To 15.57 for
2008 it indicates that firm is taking less days for conversion
 Finished goods turnover ratio is decreasing from 33.01 in 2006 to 27.95 for 2007.
Indicates that company is selling goods little slowly as compared to 2006 but it is
bit fast as compared to 2008.
 Company is selling goods little slowly as compared to 2006 but it is bit fast as
compared to 2008. Where the ratio for that particular period was 32.35.
 The inventory to current assets ratio in the year 2007 was 58.10% and it decreased
to 51.14% in the year 2008 but again it increased to 59.60% in 2008. It shows that
the firm investing 59.60% of its investment is for inventory only.
 During the year 2007 the rate of inventory to total assets was 16.38% it increased
to 22.47% in 2008. But again it reduced to 19.93% in 2009. It indicates that firm
investing only 19.93% in inventory out of total assets.
 In the year the ratio was 146.45% in 2006. It decreased to 83.20% for 2007 but it
increased it to 99.05% in 2008. It indicates that firm investing huge amount in
inventory.
 As the finished goods turnover ratio is increasing form 10.87 in 2007 to 12.86 for
2008 it indicates that firm is taking less days for sale. In 2008 conversion period
was 12.86 days but in decreased to 11.20 for 2008 it is satisfactory.

72
 CHAPTER 7

RECOMMANDATIONS AND SUGGESTIONS

RECOMMENDATIONS
73
a) From the findings it is came to know that in the year 2006 the number of days for
holding Raw material is more, it is not good for the company because it eats unnecessary
investment. To avoid this problem the following points will help.
 Purchase Raw Materials at the time when the stock reaches the minimum level.
 The purchases should not cross the Maximum limit otherwise the stock kept in stores
idle.
 Quantity should be ordered as per the demand. We can assume the demand for the
goods from past experience.
 We can have more Raw materials which are imported from other countries but carry
reasonable stocks which are available locally.
b) If we purchase less quantity of materials at a time it will reduce the carrying cost but
increases the ordering cost and vice versa. Therefore optimum ordering quantity is
necessary, which minimizes the cost.
c) The company should maintain a safety level and also reordering point so that they come
to know at what time they should order for the supply of material and need not to suffer
from short fall of required material.

SUGGESTIONS
 The company has to take remedial measures to control its inventory.
 Firm should take necessary measures to overcome its financial difficulties.
 It must improve its inventory by proper utilization of stock.
 The company is suggested to improve its manufacturing technologies or machineries.
 The firm should adopt appropriate techniques to increase the overall efficiency.
 The company is suggested to have its own vehicle, so that high transportation cost
can be avoided. It will be helpful in bringing raw material to the factory premises.

74
 The machinery should be properly maintained, those who are working on machineries
should be trained properly.
 A small amount of investment of advertisement may increase the sales in long run. As
the unit exists under modern complex world.
 The firm has to show more consideration towards labor welfare measures. And
company should provide more facility to the workers.
 Another important remedy is that the firm should keep an eye on international market
and affective marketing policies.
 The organization can expand their business with the same products are by
diversifying its products.

75
 CHAPTER 8

CONCLUSIONS

76
CONCLUSION

After the study, we can come to a conclusion that, effectiveness of inventory management
should improve in all the aspects, hence the industry can still strengthen its position by
looking into the following.

 The inventory should be fast moving so that warehouse cost can be reduced.
 The finished goods have to be dispatched in feasible time as soon as manufacturing is
completed.
 Optimum order quantity should be maintained, hence cost can be minimized.
 Proper inventory control techniques are employed by the inventory control
organization within the framework of one of the basic models like ABC, HML and
VED etc.

77
 CHAPTER 9

BIBILIOGRAPHY AND ANNEXURE

78
QUESTIONNAIRE

Instructions for filling the questionnaire:

1. This questionnaire contains 4 sections and seeks your opinion pertaining to various facts
concerning to JIT to be filled by any senior person of the Company.
2. Please answer each question carefully.
3. If you have any doubt, do not hesitate to contact me.
4. Data will be kept secret.

SECTION A

Personal Information

1. Name _____________________________ Designation/ Position

___________________
2. Total Experience in this Industry____________________________________________
3. Address _______________________________________________________________
4. Tel. No. _________________ Fax _______________ Email
________________________
5. Whether any sort of JIT training is carried out by you? (Tick) Yes/No

Company Profile

1. Name and Address of the Company_______________________________________

___________________________________________________________________
2. Main Products manufactured____________________________________________
_ __________________________________________________________________
3 Type of company (Tick) Manufacturing/ Process
4. Total investment in the Company on Fixed Assets___________________________
5. Annual Turnover of the Company________________________________________

79
6. Category of the Company (Tick) Large/ Medium/ Small
7. Quality certifications if any
_______________________________________________________________________
_______________________________________________________________________
8. Total Manpower_____________________________________________________
Higher Management__________________________________________
Engineers___________________________________________________
Supervisors_________________________________________________
Skilled Workers______________________________________________
9. Whether JIT implemented in the Company (Tick) Yes/ no

Signature

80
 Section -B
PROBLEMS IN JIT IMPLEMENTATION

Please mark () at appropriate place

1. At what level your company is facing the problems when using JIT system.

Sr.
PROBLEMS 1 2 3 4 5
No.
Problems Concerning to Management
1 Resistance offered from Management
2 Lack of management Participation
3 Lesser interest to innovation and change
4 Lack of training for Managers
5 Problems in the identification of areas where to apply JIT
6 Management resistance to share Authority with employees
7 Lack of transparency in the organization
8 Lack of Co-operation with the Suppliers
9 Lack of mutual trust and Co-operation with the Employees
10 Lack of Communication within the company
11 Lesser knowledge about JIT
Problems Concerning to Employees
1 Lesser awareness of JIT among employees
2 Lack of support from employees
3 Lack of flexible workforce
4 Lesser response to innovation and change by employees
5 Lack of motivated workforce
6 Lack of mutual trust and Co-operation with the management
Problems Concerning to Supplier/ Vendors
1 Lack of knowledge about JIT on part of suppliers
2 Lack of communication and Co-operation with Management

81
3 Lesser support from suppliers
4 Quantity problems with supplied Materials
5 Quality problems with supplied Materials
6 Timing problems with supplied Materials
7 Lack of supplier training and Development
Problems Concerning to Technology/Processes
1 Lack of standardization
2 Lack of performance Measure system
3 Lack of technology
4 Lack of transportation and Material Handling Facility
5 Lack of machinery and Equipment
6 Problems in using Kanban
7 Problems in maintenance

Abbreviations: 1. No Problem
2. Little Problem
3. Problem
4. Big Problem but can be Managed
5. Big Problem and cannot be Managed

82
 Section –C
ELEMENTS OF JIT

1. Which of the following elements of JIT system are important and difficult to implement in your
company?

Degree of Importance Degree of Difficulties

Sr. Element 1 2 3 4 5 1 2 3 4 5 N/A

No.
Elements Concerning to Organization & People
1 Continuous Improvement
2 Customer satisfaction
3 Employee involvement in Decision Making
4 Flexible Workforce
5 Teamwork
6 Quality Circles
7 Quality Function Deployment
Elements Concerning to Plant & Equipment
1 Flow Layout
2 Preventive maintenance
3 Total productive maintenance (TPM)
4 Group Technology
5 Automation
Elements Concerning to Process & Product
System
1 Process flexibility
2 Standardization
3 Product simplification
4 Process simplification

83
 5 House Keeping (tidiness, clarity, cleanliness)
6 Kanban card or system
7 Standard Containers
8 Statistical process control (SPC)
9 Waste Reduction
10 Zero Defect
11 Setup Time Reduction
12 Smooth Flow of Material
13 Work-In-Process Reduction
Elements Concerning to Suppliers/ Vendors
1 JIT Purchasing
2 Buffer Stock Removal
3 Inventory Reduction
4 Lead Time Reduction
5 Small Lot Size

Abbreviations: Degree of Importance Degree of Difficulties

1. Not at all Important 1. Not at all Difficult/ Very Easy

2. Least Important 2. Least Difficult
3. Neutral 3. Neutral
4. Important 4. Difficult
5. Very Important 5. Very Difficult

84
 Section – D
DEGREE OF EXPECTED BENEFITS

1. How much benefit did you expect after implementation of JIT system?

Sr. Benefit 1 2 3 4 5
No.
Benefits Concerning to Organization
1 Improvement in Competitive position
2 Improved customer Relations
3 Improvement in Vendor performance
4 Improvement in Relation with suppliers
5 Reduction in the number of Suppliers
6 Improvement in Equipment efficiency/utilization
7 Reduction in transportation time
8 Improvement in Process flexibility
9 Reduction in Scrap
10 Improvement in Productivity
11 Improvement in System's flexibility
12 Reduction in WIP
13 Reduction in overhead
14 Reduction in inventories
15 Reduction in lot size
16 Reduction in production lead time
17 Reduction in space requirement
18 Increase in Profit
19 Improvement in Manpower utilization and Efficiency
20 Reduction in receiving material inspection
Benefits Concerning to Employees

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1 Improvement in Worker motivation
2 Improvement in team work
3 Improvement in Material handling
4 Improvement in Manpower utilization and Efficiency
5 Reduction in receiving material inspection
Benefits Concerning to Customer
1 Improvement in Product
2 Improvement in Quality
3 Improvement in frequent deliveries

Abbreviations: 1. Not at all Beneficial 5. Highly Beneficial

2. Least Beneficial
3. Beneficial
4. Very Beneficial

5. How satisfied are you with the current policy regarding just in time.

(1) Not at all

(2) Some what
(3) Satisfied
(4) Quite Satisfied
(5) Very Satisfied.

Thank you very much for you valuable time

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BIBLIOGRAPHY

REFERENCES

BOOKS:
1. Balakrishnan, R., Linsmeier, T.J., Venkatachalam, M., 1996. Financial benefits from
JIT adoption: effects of customer concentration and cost structure. The Accounting
Review 71 (2), 183–205.
2. Celley, A.F., Clegg, W.H., Smith, A.W., Vonderembse, M.A., 1986. Implementation
of JIT in the United States. Journal of Purchasing and Materials Management, 9–15.
3. Droge, C., Germain, R., 1998. The just-in-time inventory effect: does it hold under
different contextual, environmental, and organizational conditions? Journal of
Business Logistics 19 (2), 53–71.
4. Foster, G., Horngren, C.T., 1987. JIT: cost accounting and cost management issues.
Management Accounting 6, 19–25.
5. Gilbert, J.P., 1990. The state of JIT implementation and development in the USA.
International Journal of Production Research 28 (6), 1099–1109.
6. Norris, D.M., Swanson, R.D., Chu, Y., 1994. Just-in-time production systems: a
survey of managers. Production and Inventory Management Journal 2, 63–66.
7. Peters, T., 1990. Time-obsessed competition. Management Review 9, 16–20.
8. Bowen D. & Youngdahl W. (1998). Lean Service: In Defence of a Production-Line
Approach, International Journal of Service Industry Management Vol.9 No.3
9. Karlsson C. (1995). Total Effectiveness of Just-In-Time System, International Journal
of Operations & Production Management, Vol 14 No 3.
10. Kochan A. (1997). Ford – Valencia: Just In Time and Just On Site, Assembly
Automation, Vol. 17 No. 1

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 11. Ramarapu N. (1995). A Comparative Analysis and Review of JIT Implementation
Research, International Journal of Operations & Production Management, Vol. 15
No.1.

LINKS:
 www.bdaconnect.com/india/ficci
 www.google.co.in
 www.wikipedia.org
 www.ibef.org
 www.trai.gov.in
 www.scribd.com
 http://www.infoedge.in
 www.rediff.com
 www.marketingterms.com
 www.internetworldstats.com
 http://www.wisegeek.com/
 http://www.truckads.com/
 www.emarketer.com

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