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2013-14

KC-SYBMS

INVENTORY MANAGEMENT RITIKA NICHANI

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BISLERI INTERNATIONAL

PRIVATE LIMITED

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ACKNOWLEDGEMENT

I would like to thank all my team mates for their invaluable

contribution which they have made for this project. It would not

be possible without my team members to complete this project

successfully.

We would like to thank Miss. RITIKA NICHANI, for her

invaluable guidance, suggestions and her constant support from

the project budding stage to its current maturity.

She always provides a helping hand and shared her

valuable technical guidance about the project. The smooth

completion of the project would not be possible without her.

We would also like to thank our class mates, friends and

family to support us throughout the project without which this

would have not been possible.

In the end we would also like to thank Bisleri International

Pvt. Ltd. for their efforts without which our industrial visit

would have been impossible. Special thanks to Mr. Atul

Raorane (Logistics Manager) and Mr. Sameer Sahakar (Business

Analyst) who gave us proper guidance throughout our visit.

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INDEX

SR NO. TOPICS PAGE NO.

REMARKS

1. INTRODUCTION

2. BISLERI INTERNATIONAL PVT LTD.

3. WHY BISLERI

4. POINTERS

5. TYPES OF INVENTORIES

6. INVENTORY POSITION

7. BUFFER STOCK

8. INVENTORY HANDLING

9. INVENTORY PROCESSING

10. SOURCING OF INVENTORY

11. LAYOUT

12. KIND OF INVENTORIES

13. LOGISTICS

14. NATURE OF INVENTORY

15. INVENTORY COSTS

16. INVENTORY RECORDS

17. STOCK CARD

18. INVENTORY STORAGE

19. KEY MESSAGES

20. BIBLIOGRAPHY

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Presented by:-

ROLL NO:

NAME

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INTRODUCTION

WHAT IS INVENTORY?

Inventory is defined as the raw materials, work-in-process

goods and completely finished goods that are considered to be

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ANSARI SUFIYAN

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MANISH KANCHANDANI

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ALPESH MAJERI

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BHARTI NARALE

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ROHIT SAMDANI

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ASHNI SHAH

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NAMRATA SWETTA

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the portion of a business’s assets that are ready or will be ready

for sale. It is a complete list of items such as property, goods in

stock or the contents of a building. Inventory represents one of

the most important asset that most business posses, because the

turnover of inventory represents one of the primary sources of

revenue generation and subsequent earnings for the company’s

shareholder or owner.

WHAT IS INVENTORYMANAGEMENT?

Inventory management is primarily about specifying the

size and placement of stocked goods. It is required at different

locations within a facility or within many locations of a

supply network to protect the regular and planned course of

production against the random disturbance of running out of

materials or goods. The scope of inventory management also

concerns fine lines between replenish lead time, carry costs of

inventory, asset management, inventory forecasting, inventory

valuation, inventory visibility, future inventory price

forecasting, physical inventory, available physical space for

inventory, quality management, replenishment, returns and

defective goods. It can

also be defined as the left out

stock of any item used in an

organization.

Inventory management

involves a retailer seeking

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to acquire and maintain proper merchandise assortment while

ordering, shipping, handling and related costs are kept in

check. It also involves systems and processes that identify

inventory requirements, set targets, provide replishment

techniques, report actual and projected inventory status and

handle all functions related to the tracking and management

of material. This would include the monitoring of material

moved in and out of the stockroom locations and reconciling

of inventory balances. Management of inventories, with the

primary objective of determining/controlling stock levels,

functions to balance the need for product availability against

the need for minimizing stock holding and handling costs.

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BISLERI INTERNATIONAL PRIVATE LIMITED

Bisleri is a brand of bottled drinking water in India. Bisleri was

originally an Italian company created by Felice Bisleri. He was the one

who brought the idea of selling bottled water in India. In 1965 it was

bought over by Jayantilal Mohanlal Chauhan. Bisleri then was

introduced in Mumbai in glass bottles in two varieties-bubly and still in

1965. Parle bought over Bisleri (India) Ltd. in 19 69 and started bottling

water in glass bottles under the brand name ‘Bisleri’. Later Parle

introduced PET containers. Later in 1995 Ramesh J Chauhan started

expanding in Europe.

Bisleri has 36% of market share in packaged drinking water in India. It

is available in 8 pack sizes for example 250 ml, 500 ml, 2 litre, 5 litres

and 20 litres gallon. Its operations run throughout the subcontinent of

India and are one of the leading bottled water supplying companies in

India. Bisleri has 18 plants, 13 franchisees and 58 contract packers all

over India. The brand name Bisleri is so popular that it is used as

‘generic name’ for bottled water.

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WHY BISLERI?

Bisleri is a potential client.

It is one of those products which need no description at all.

It’s not just a product but has become a brand.

Also because Bisleri is one of the most well known brands,

known for the goodwill in the competitive market, good

quality by/among the customers (being the most preferred)

and for its systematic cautions and organised planning,

processing and handling by staff and workmen.

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INVENTORY DEFINITION

Inventories consist of raw material, work-in-process and finished goods

which are held by a business in ordinary course of business, either for

sale or for the purpose of using them in the process of producing goods

and services.

TYPES OF INVENTORY

RAW MATERIAL

Raw material is a type of inventory which acts as the basic constituent

of a product. For example cotton is raw material for cloth production

and plastic is raw material for production of toys. Raw material is

usually held by manufacturing companies because they have to

manufacture goods from raw material.

WORK-IN-PROCESS

Work in process is a type of inventory that is in the process of

production. This means that work-in-process inventory is in the middle

of production stage and it is partly complete. Work-in-process account

is used by manufacturing companies.

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FINISHED GOODS

Finished goods is a type of inventory which comes into existence

after the production process in complete. Finished goods is

ready for sale inventory.

In financial accounting we are usually concerned with merchandise

inventory. The other types of inventories are studied in cost

accounting.

COST OF INVENTORY

When inventory is purchased, the cost of inventory includes the

purchase price, delivery costs, excise and custom duties etc. less any

discount that is obtained. When inventory is manufactured, its cost

includes the production cost plus any cost which is incured on making

the inventory saleable for example packing cost.

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Inventory exist s in the supply chain because of a mismatch between

supply and demand.

The mismatch is also intentional at a retail store where inventory is

held in anticipation of future demand.

An important role that inventory plays in the supply chain is to

increase the amount of demand that can be satisfied by having

product ready and available when the customer wants it.

Inventory is spread throughout the supply chain from raw materials

to work in process to finished goods those suppliers,

manufacturers, distributors, and retailers hold.

Inventory is a major source of cost in a supply chain and it has a

huge impact on responsiveness. If we think of the responsiveness

spectrum, the location and quantity of inventory can move the

supply chain from one end of the spectrum to the other.

For example, an apparel supply chain with high inventory levels at

the retail stage has a high level of responsiveness because a

customer can walk into a store and walk out with the shirt they

were looking for. In contrast, an apparel supply chain with little

inventory would be very unresponsive.

THE ROLE OF INVENTORY IN SUPPLY CHAIN

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BUFFER STOCK

Buffer stock, also called buffer inventory, excess inventory or safety

stock, is a cushion of supply in excess of forecast demand.

Buffer stock may be found at all stages of the supply chain, and is

intended to reduce the incidence or severity of stock-out situations

and thus provide better customer service.

Buffer stock is used in production or other inventory situations to

ensure that exceptional or out of the ordinary events or demands

can be met with some degree of certainty .

BUFFER STOCK

Physical inventories usually are categorized by position in the value

stream and by purpose. Raw materials, work-in process, and

finished goods are terms used to describe the position of the

inventory within the production process.

Buffer stocks, safety stocks, and shipping stocks are terms used to

describe the purpose of the inventory.

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LEAD TIME

The time between the initiation and completion of a

production process.

Lead time is the period between a customer’s order

and delivery of the final product.

Lead time is the time elapses between the placing of

an order

For example if a supplier cannot supply the required

goods on demand then the client firm must keep an

inventory of the needed goods.

The longer the lead time the larger the quantity of

goods the firm must carry .

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INVENTORY CONTROL

Inventory control is concerned with the acquisition, storage, handling and use of inventories so as to

ensure the availability of inventory whenever needed,

providing adequate provision for contingencies,

deriving maximum economy and minimizing wastage

and losses.

Hence Inventory control refers to a system, which ensures the supply of required quantity and quality of inventory at the required time and at the same time

prevent unnecessary investment in inventories.

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INVENTORY PROCESS

It includes any business process that involves goods going

in or coming out of a firm’s inventory

It generally includes receiving, temporary storage labeling

and storage withdrawal issue and movement of the item

through work in process in routine.

It also involves tracking the items movement at various

stages and maintaining records of those events and their

effects.

For inventory processes almost all the reputed companies

use BARCODE system, by using barcode scanner.

Sometimes they also use counting scales due to their 100%

percent accuracy.

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What is sap? System application products in data processing

No.1 enterprise application software

No.3 in overall worldwide

Market leading software for large n mid sized companies

In this function: Check the availability of the ordered goods and

Publish the demand in material planning

If the ordered goods are out of stock:

In house production

External production

Third party procurement

rejection

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LAYOUT Warehousing was supposed to disappear with Lean

Manufacturing. This has rarely occurred but the nature of warehousing often does change from storage-dominance to transaction dominance.

Warehousing buffers inbound shipments from suppliers and outbound orders to customers. Customers usually order in patterns that are not compatible with the capabilities of the warehouse suppliers. The amount of storage depends on the disparity between incoming and outbound shipment patterns.

In addition, the trend to overseas sourcing has increased the need for warehousing and its importance in the supply chain.

Design Strategies One key to effective design is the relative dominance of picking or storage activity. These two warehouse functions have opposing requirements.

Techniques that maximize space utilization tend to complicate picking and render it inefficient while large storage areas increase distance and also reduce picking efficiency. Ideal picking requires small stocks in dedicated, close locations. This works against storage efficiency.

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IMPORTANCE OF INVENTORY MANAGEMENT

Inventory is a highly visible target on balance sheets. While essential to ensuring

customer service and revenue growth, inventory is a drain on capital. Bisleri is

especially challenging, where regional preferences and larger demands increase

inventory holdings. This makes forecasting more difficult than in large

homogeneous markets like the Multinational corporations. Since the quality of

inventory decisions is directly tied to the quality of demand prediction as well as

the quantity to be supplied, getting it right is important. With inventory for

packaged goods companies typically comprising between 25% and 40% of current

assets, it is a carefully watched financial metric.

WAYS TO MANAGE INVENTORY

Establish an inventory management policy

Reduce your inventory while improving your customer service

Balance service and safety stock implications

Understand inventory flow of costs and carrying inventory

Better forecast your true inventory needs

Utilize the ordering and planning philosophies that suit your goals

Plan and reduce lead-time cycle components

Attain a higher level of inventory record accuracy

Select the appropriate way to conduct inventory management

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FACTORS AFFECTING INVENTORY MANAGEMENT

Inventory management depends on several factors. These factors may be external or internal, controllable or incontrollable. Some of the factors are listed below: 1. Availability of Raw materials:

It is very essential to have enough raw materials in order to fulfill demands as well as to have buffer stock needed in case in emergencies. Planning plays a very important role in this.

2. Nearness to the market : Location plays an equally important role, sine, if longer distances have to be covered, more expenses are involved.

3. Availability of power: If there is no continuous supply of power in case of firms working 24*7, the firm will face problems in fulfilling demands.

4. Transport: For transportation, a good number of vehicles should be present to help in flexible delivery.

5. Suitability of climate: Climate may not affect all types of units, but, it does affect the supply in some cases.

6. Availability of labour: It is very essential for any firm to have a good amount of manpower, since the different departments in a firm require constant supervision.

7. Civic amenities for workers: Basic measures should be taken for the safety and requirements of the workers.

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REASONS FOR INVENTORY MANAGEMENT

1. Improves customer service :

Inventory management helps in delivering goods on time, hence enabling the firm to improve customer service.

2. Economies of purchasing: Reduced costs for larger businesses in buying inputs, such as raw materials and parts, or of borrowing money because of a larger discount given to a larger purchase than smaller businesses can make. Purchasing goods in bulk creates an economy of scale by allowing a lower cost per unit and contributing to lower production costs.

3. Economies of scale: They are the cost advantages that enterprises obtain due to size, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

4. Transportation saving: If inventory if properly managed it also helps save transportation cost.

5. Hedge against future: Proper inventory management actually gives us a hedge against the future since no difficulties can be faced because of pre planning.

6. Unplanned shocks: Inventory management is of major use at the time unplanned shocks such as strikes, natural calamities, surges in demand, etc.

7. To maintain independence of supply chain: To maintain the efficient working of a firm, it is essential to maintain independent supply chain, so as to not be dependent on others.

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INVENTORY COST

The cost of holding goods in stock. Expressed usually as a percentage of

the inventory value, it includes capital, warehousing, depreciation,

insurance, taxation obsolescence, and shrinkage costs.

TYPES OF INVENTORY COST

PURCHASE COSTS

The most basic type of inventory cost is the purchase price. Some

businesses, such as retailers, buy finished goods inventory that is ready for resale as soon as they receive it. Other companies purchase component parts and assemble them into new products for sale. Still others purchase raw materials directly and either resell the materials or assemble materials into semi-finished or finished goods before sale.

The key to keeping inventory purchase costs low is to develop long-term, mutually beneficial partnerships with reliable suppliers. Suppliers can offer you price/volume discounts or price contracts to keep your costs at a reasonable level.

PROCESSING

Some businesses perform work on inventory they purchase before it is ready for sale. Consider a computer manufacturer, for example; the manufacturer is likely to buy component parts such as microchips,

displays and input devices, then assemble various components into individual machines. Assembly processes incur labor costs for assembly workers and additional utilities expenses for workspaces.

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DISTRIBUTION

Inventory items have to be shipped a number of times before they

turn into sales revenue.

Purchased inventory must be shipped from the supplier to your

company, which, while usually covered by the supplier, can

sometimes be the buyer's responsibility.

Larger businesses will generally house new inventory at a warehouse

or distribution center before shipping it on to a specific retail store or

other outlet.

And some inventory must be shipped to consumers, as is the case

with online retailers and businesses with a national or international

reach.

Types of inventory transport costs include freight trucking, shipping

by rail or air transport, as well as light-vehicle deliveries in local

areas.

INVENTORY HOLDING COSTS

Storing inventory either in a warehouse or in a sales outlet incurs

additional costs.

Holding inventory incurs labor costs for handling duties, additional

utilities and rent/mortgage costs due to the physical spaces required.

The just-in-time or JIT inventory purchasing model can reduce

inventory holding costs by ordering inventory exactly when it is

needed, preventing storage backups and freeing up employees' time

to focus on more productive tasks.

SHRINKAGE

Shrinkage refers to anything that renders inventory unfit for sale or return to a supplier.

Inventory that has already been paid for can disappear due to theft from employees or consumers.

Perishable inventory items can spoil if not sold on time, making it impossible to recoup the costs.

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INVENTORY ACCOUNTING SYSTEMS

Maintaining accurate inventory records is important because

everything else hinges on the ‘on hand’ values being correct.

If your ‘on hand’ values are wrong nothing else works. You stock out

unexpectedly, you overstock your inventory, and you create extra

work for all concerned.

The implications of any of these outcomes can be significant: wasted

money, additional downtime, exorbitant expediting costs, and

inefficient labor to name a few.

.The two most widely used inventory accounting system are the

periodic and the perpetual.

Perpetual: The perpetual inventory system requires accounting records to show the amount of inventory on hand at all times. It maintains a separate account in the subsidiary ledger for each

good in stock, and the account is updated each time a quantity is added or taken out.

Periodic :In the periodic inventory system, sales are recorded as they occur but the inventory is not updated. A physical inventory must be taken at the end of the year to determine the cost of goods

Regardless of what inventory accounting system is used, it is good

practice to perform a physical inventory at least once a year.

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INVENTORY VALUATION METHODS - PERPETUAL

The perpetual system records revenue each time a sale is made.

Determining the cost of goods sold requires taking inventory. The most commonly used inventory valuation methods under a periodic system are:

1. FIRST IN FIRST OUT (FIFO) 2. LAST-IN FIRST-OUT (LIFO) 3. AVERAGE COST OR WEIGHTED AVERAGE COST

1. FIRST-IN, FIRST-OUT (FIFO):

Under FIFO, the cost of goods sold is based upon the cost of material bought earliest in the period, while the cost of inventory is based upon the cost of material bought later in the year. This results in inventory being valued close to current replacement cost. During periods of inflation, the use of FIFO will result in the lowest estimate of

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cost of goods sold among the three approaches, and the highest net income.

2.LAST-IN, FIRST-OUT (LIFO):

Under LIFO, the cost of goods sold is based upon the cost of material bought towards the end of the period, resulting in costs that closely approximate current costs. The inventory, however, is valued on the basis of the cost of materials bought earlier in the year. During periods of inflation, the use of LIFO will result in the highest estimate of cost of goods sold among the three approaches, and the lowest net income.

3. WEIGHTED AVERAGE:

Under the weighted average approach, both inventory and the

cost of goods sold are based upon the average cost of all units

bought during the period.

When inventory turns over rapidly this approach will more closely

resemble FIFO than LIFO.

Firms often adopt the LIFO approach for the tax benefits during

periods of high inflation, and studies indicate that firms with the

following characteristics are more likely to adopt LIFO - rising prices

for raw materials and labor, more variable inventory growth, an

absence of other tax loss carry forwards, and large size.

When firms switch from FIFO to LIFO in valuing inventory, there is

likely to be a drop in net income and a concurrent increase in cash

flows (because of the tax savings). The reverse will apply when firms

switch from LIFO to FIFO.

Given the income and cash flow effects of inventory valuation

methods, it is often difficult to compare firms that use different

methods. There is, however, one way of adjusting for these

differences.

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MISTAKES MADE DURING INVENTORIES (SOLUTIONS)

.So what are the top inventory mistakes made, and how can they be avoided?

1. Inadequate Store Preparation

By and large, this is the most common mistake of all inventories, no matter the retailer. Preparing for an inventory goes far beyond ensuring that you have enough people to count. A few questions to ask yourself include: are your products priced correctly? Are you stores and racks well organized? Is all of your product out and available for counting? Have you checked your fixtures to ensure that no product is hidden from view?

Another sign of inadequate preparation is the lack of a floor or stockroom map which highlights the countable sections, and the order in which they should be counted in. While this may seem elementary, this small bit of preparation can save you hours of headaches down the road.

2. Inadequate Counter Preparation

Hand in hand with adequate store preparation is counter preparation. If employees (or outsourced services) responsible for counting the product were not appropriately trained on what they are supposed to count, and how they are supposed to count it, your inventory is almost guaranteed to be inaccurate.

Another common mistake seen is that oftentimes, management counts alongside employees (or the outsourced provider) in the effort to be helpful and the get the inventory done. However, store management is more helpful and effective when they allow their employees to conduct the initial count.

3.Lack of Early Audit Verification

Make sure that you have a process in place to check

your counters at least an hour into the inventory

process to review for errors, questions, or issues that

might affect your count.

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4. Lack of Preparation for Flash Inventories

For those retailers that conduct flash (or burst) inventories, it is crucial for accuracy that a clear cutoff date is established for the movement of inventory. Any documents pertaining to the transfer or shipment of inventory should be closed and resolved prior to the inventory, and should be available for the reconciliation process afterwards.

5. Relying On Your Hired Service To Know What To Do

For those retailers who rely on outsourced services to conduct their inventories for them, we recommend to be as prepared as you would be with your own staff when handling an inventory.

For example, be sure to speak to your service prior to the inventory to confirm all logistical details, procedures for special circumstances and error resolution, and more. This is also the time to review any changes made to your inventory procedures since your last count with the service. As you are the most familiar with your product and store layout, the inventory service will only benefit from your input and guidance.

6. Not Controlling Your Inventory Environment

While most of us would prefer to conduct an inventory while the store is actually closed, it doesn't always happen that way. In any instance where an inventory must be conducted while the store is open, a control system should be in to account for items that have not been counted and have been sold.

7. Not Resolving Unmarked Inventory

Last but not least, the resolution of what to do with unmarked inventory should be worked out prior to the inventory and communicated to the counters during their training process. To help manage errors, make a 'trouble area' somewhere on your store floor for unmarked pieces, and assign a counter to be responsible for the items on it.

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KEY MESSAGES

Here are a few tips to help make your inventory a better process, every time around:

• Remember that inventory is truly an everyday event, not a process that occurs only once or twice a year. Help your preparation by keeping the stores organized, practice proper pricing techniques, and establishing a process for your counters.

• Procedures for your inventory process should be easily on hand (either through your inventory service or internally) for reference. These procedures should be reviewed prior to every inventory to ensure that it is still an adequate process for your stores.

• Always do a final walk-through of the store prior to closing an inventory.

• Always check the checker, or rather, always practice count verification.

• To ensure a smooth inventory process, clearly communicate the delegation of duties prior to the start of your inventory

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BIBLIOGRAPHY

www.invetopedia.com

www.bisleri.com

en.wikipedia.org/wiki/bisleri

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