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36421186 ranjana-project-report-on-inventory-management


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36421186 ranjana-project-report-on-inventory-management

  1. 1. INTRODUCTION “Adequate inventories facilitates production activities and help to customers satisfaction by providing good service.”The basic financial aim of an enterprise is maximization of its value. At the same time, a largeboth theoretical and practical meaning has the research for determinants increasing the firmvalue. Most financial literature contains information about numerous factors influencing thevalue. Among those factors is the net working capital and elements creating it, such as the levelof cash tied in accounts receivable, inventories and operational cash balances. A large majorityof classic financial models proposals, relating to the optimum current assets management, wereconstructed with net profit maximization in view. In order to make these models more suitablefor firms, which want to maximize their value, some of them must be reconstructed. In thesphere of inventory management, the estimation of the influence of changes in a firm’s decisionsis a compromise between limiting risk by having greater inventory and limiting the costs ofinventory. It is the essential problem of the corporate financial management. The basic financial inventory management aim is holding the inventory to aminimally acceptable level in relation to its costs. Holding inventory means using capital tofinance inventory and links with inventory storage, insurance, transport, obsolescence, wastingand spoilage costs. However, maintaining a low inventory level can, in turn, lead to otherproblems with regard to meeting supply demands. The inventory management policy decisions,create the new inventory level in a firm. It has the influence on the firm value. It is the result ofopportunity costs of money tied in with inventory and generally of costs of inventory managing.Both the first and the second involve modification of future free cash flows, and in consequencethe firm value changes. Inventory changes (resulting from changes in inventory management policy of thefirm) affect the net working capital level and the level of operating costs of inventorymanagement in a firm as well. These operating costs are result of storage, insurance, transport,obsolescence, wasting and spoilage of inventory. Maximization of the owners’ wealth is the basic financial goal in enterprisemanagement. Inventory management techniques must contribute to this goal. The modifications
  2. 2. to both the value-based EOQ model and value-based POQ model may be seen in this article.Inventory management decisions are complex. Excess cash tied up in inventory burdens theenterprise with high costs of inventory service and opportunity costs. By contrast, higherinventory stock helps increase income from sales because customers have greater flexibility inmaking purchasing decisions and the firm decrease risk of unplanned break of production.Although problems connected with optimal economic order quantity and production orderquantity remain, we conclude that value-based modifications implied by these two models willhelp managers make better value-creating decisions in inventory management. INTRODUCTION OF INVENTORYInventories constitute the most significant part of current assets of a large majority of companies inIndia. On an average, inventories are approximately 60% of current assets in public limitedcompanies in India. Because of the large size of inventories maintained by firms, a considerableamount of feuds is required to be committed to them. It is therefore, absolutely imperative to ménageinventories efficiently and efficiently in order to avoid unnecessary investment. A firm neglectingthe management of inventories will be jeopardizing its long run profitability and may fail ultimately.It is possible for fore a company to reduce its levels of inventories to a considerable degree e.g. 10 to20 percent, without any adverse effect on production and sales, by using simple inventory planningand control techniques. The reduction in excessive inventory carries a favourable impact on acompany’s profitability. MEANING OF INVENTORY:- Inventory is the physical stoke of goods maintained in an organization for its smooth sunning. In accounting language it may mean stock of finished goods only. In a manufacturing concern, it may includes raw materials, work-in-progress and stores etc. In the form of materials or supplies to be consumed in the production process or in the rendering of services. In brief, Inventory is unconsumed or unsold goods purchased or manufactured. NATURE OF INVENTORIES :-
  3. 3. Inventories are stock of the product a company is manufacturing for sale andcomponents that make up the product. The various forms in which inventory exist in amanufacturing company are raw materials, work in progress and finished goods. RAW MATERIALS:- Raw materials are those inputs that are converted into finished product though the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future productions. WORK IN PROGRESS:- These inventories are semi manufactured products. They represent products that need more work before they become finished products for sales. PACKAGING MATERIAL:- Packaging material includes those items which are used for packaging of perfumery product i.e. cap of the bottle, pump, coller,liver, box etc. FINISHED GOODS:- Finished goods inventories are those completely manufactured products whichare ready for sale. Stock of raw materials and work in progress facilitate production. While stockof finished goods is required for smooth marketing operation. Thus, inventories serve as a linkbetween the production and consumption of goods. The levels of four kinds of inventories for a firm depend on the nature of itsbusiness. A manufacturing firm will have substantially high levels of all three kinds ofinventories, while a retail or wholesale firm will have a very high and no raw material and workin progress inventories. Within manufacturing firms, there will be differences. Large heavyengineering companies produce long production cycle products, therefore they carry largeinventories. On the other hand, inventories of a consumer product company will not be large,because of short production cycle and fast turn over. INVENTORY MANAGEMENT
  4. 4. As the cost of logistics increases the manufacturers are looking to inventory management as away to control costs. Inventory is a term used to describe unsold goods held for sale or rawmaterials awaiting manufacture. These items may be on the shelves of a store, in the backroomor in a warehouse mile away from the point of sale. In the case of manufacturing, they aretypically kept at the factory. Any goods needed to keep things running beyond the next fewhours are considered inventory."Inventory" to many small business owners is one of the more visible and tangible aspects ofdoing business. Raw materials, goods in process and finished goods all represent various formsof inventory. Each type represents money tied up until the inventory leaves the company aspurchased products. Likewise, merchandise stocks in a retail store contribute to profits onlywhen their sale puts money into the cash register.In a literal sense, inventory refers to stocks of anything necessary to do business. These stocksrepresent a large portion of the business investment and must be well managed in order tomaximize profits. In fact, many small businesses cannot absorb the types of losses arising frompoor inventory management. Unless inventories are controlled, they are unreliable, inefficientand costly.Inventory management simply means the methods you use to organize, store and replaceinventory, to keep an adequate supply of goods while minimizing costs. Each location wheregoods are kept will require different methods of inventory management. Keeping an inventory,or stock of goods, is a necessity in retail. Customers often prefer to physically touch what theyare considering purchasing, so you must have items on hand. In addition, most customers preferto have it now, rather than wait for something to be ordered from a distributor. Every minute thatis spent down because the supply of raw materials was interrupted costs the company unplannedexpenses DEFINITIONS OF INVENTORY MANAGEMENT 1. Policies, procedure and techniques employed in maintaining the optimum number or amount of each inventory item. 2. Systems and processes that identify inventory requirements, set targets, provide replenishment techniques and report actual and projected inventory status.
  5. 5. 3. Handles all functions related to the tracking and management of material. This would include the monitoring of material moved into and out of stockroom locations and the reconciling of the inventory balances. Also may include ABC analysis, lot tracking, cycle counting support etc. DEFINITIONS OF INVENTORY 1. Inventory”: goods that businesses intend to sell to their customers or raw materials or in- process items that will be converted into salable goods 2. “Inventory is the stock of idle resources which has economic value and is maintained to fulfill the present and future needs of an organization” 3. In Manufacturing Organization : Inventory can be as raw materials, spare parts, components and finished goods etc… 4. In Service Organization : Inventory of any Bank can be broachers, forms, pamphlets and also can be currency notes and coins. Hospitals can have inventory as syringes, glucose bottles, medicines etc. IMPORTANCE OF INVENTORYInventory represents one of the most important assets that most businesses possess, because theturnover of inventory represents one of the primary sources of revenue generation andsubsequent earnings for the companys shareholders/owners.The word inventory can refer to both the total amount of goods and the act of counting them.Many companies take an inventory of their supplies on a regular basis in order to avoid runningout of popular items. Others take an inventory to insure the number of items ordered matches theactual number of items counted physically. Shortages or overages after an inventory can indicatea problem with theft or inaccurate accounting practices. Possessing a high amount of inventory for long periods of time is not usually good fora business because of inventory storage, obsolescence and spoilage costs. However,possessing too little inventory isnt good either, because the business runs the risk of losing outon potential sales and potential market share as well. OBJECTIVES OF INVENTORY MANAGEMENT
  6. 6. The basic managerial objectives of inventory control are two-fold; first, the avoidance over-investment or under-investment in inventories; and second, to provide the right quantity of standard raw material to the production department at the right time. In brief, the objectives of inventory control may be summarized as follows: A. Operating Objectives:(1) Ensuring Availability of Materials: There should be a continuous availability of all types of raw materials in the factory so that the production may not be help up wants of any material. A minimum quantity of each material should be held in store to permit production to move on schedule.(2) Avoidance of Abnormal Wastage: There should be minimum possible wastage of materials while these are being stored in the godowns or used in the factory by the workers. Wastage should be allowed up to a certain level known as normal wastage. To avoid any abnormal wastage, strict control over the inventory should be exercised. Leakage, theft, embezzlements of raw material and spoilage of material due to rust, bust should be avoided.(3) Promotion of Manufacturing Efficiency: If the right type of raw material is available to the manufacturing departments at the right time, their manufacturing efficiency is also increased. Their motivation level rises and morale is improved.(4) Avoidance of Out of Stock Danger: Information about availability of materials should be made continuously available to the management so that they can do planning for procurement of raw material. It maintains the inventories at the optimum level keeping in view the operational requirements. It also avoids the out of stock danger. (5) Better Service to Customers: Sufficient stock of finished goods must be maintained to match reasonable demand of the customers for prompt execution of their orders. (6)Highlighting slow moving and obsolete items of materials.
  7. 7. (7) Designing poorer organization for inventory management: Clear cut accountability should be fixed at various levels of organization. B. Financial Objectives: (1) Economy in purchasing: A proper inventory control brings certain advantages and economies in purchasing also. Every attempt has to make to effect economy in purchasing through quantity and taking advantage to favorable markets.(2) Reasonable Price: While purchasing materials, it is to be seen that right quality of material is purchased at reasonably low price. Quality is not to be sacrificed at the cost of lower price. The material purchased should be of the quality alone which is needed. (3)Optimum Investing and Efficient Use of capital: The basic aim of inventory control from the financial point of view is the optimum level of investment in inventories. There should be no excessive investment in stock, etc. Investment in inventories must not tie up funds that could be used in other activities. The determination of maximum and minimum level of stock attempt in this direction. IMPORTANCE OF INVENTORY MANAGEMENT 1. COUNTING CURRENT STOCK All businesses must know what they have on hand and evaluate stock levels with respect to current and forecasted demands. You must know what you have in stock to ensure you can meet the demands of customers and production and to be sure you are ordering enough stock in the future. Counting is also important because it is the only way you will know if there is a problem with theft occurring at some point in the supply chain. When you become aware of such problems you can take steps to eliminate them. 2. CONTROLLING SUPPLY AND DEMAND Whenever possible, obtain a commitment from a customer for a purchase. In this way, you ensure that the items you order will not take space in your inventory for long. When this is not possible, you may be able to share responsibility for the cost of carrying goods with the salesperson, to ensure that an order placed actually results in a sale. You can also keep a list of
  8. 8. goods that can easily be sold to another party, should a customer cancel. Such goods can beordered without prior approval.Approval procedures should be arranged around several factors. You should set minimum andmaximum quantities which your buyers can order without prior approval. This ensures that youare maximizing any volume discounts available through your vendors and preventing over-ordering of stock. It is also important to require pre-approval on goods with a high carrying cost. 3. KEEPING ACCURATE RECORDSAny time items arrive at or leave a warehouse, accurate paperwork should be kept, itemizing thegoods. When inventory arrives, this is when you will find breakage or loss on the goods youordered. Inventory leaving your warehouse must be counted to prevent loss between thewarehouse and the point of sale. Even samples should be recorded, making the salespersonresponsible for the goods until they are returned to the storage facility. Records should beprocessed quickly, at least in the same day that the withdrawal of stock occurred. 4. MANAGING EMPLOYEESBuyers are the employees who make stock purchases for your company. Reward systems shouldbe set in place that encourage high levels of customer service and return on investment for theproduct lines the buyer manages.Warehouse employees should be educated on the costs of improper inventory management. Besure they understand that the lower your profit margin, the more sales must be generated to makeup for the lost goods. Incentive programs can help employees keep this in perspective. Whenthey see a difference in their paychecks from poor inventory management, they are more likelyto take precautions to prevent shrinkage.Each stock item in your warehouse or back room should have its own procedures forreplenishing the supply. Find the best suppliers and storage location for each and record thisinformation in official procedures that can easily be accessed by your employees.Inventory management should be a part of your overall strategic business plan. As the businessclimate evolves towards a green economy, businesses are looking for ways to leverage this trendas part of the “big picture”. This can mean re-evaluating your supply chain and choosingproducts that are environmentally sound. It can also mean putting in place recycling procedures
  9. 9. for packaging or other materials. In this way, inventory management is more than a means tocontrol costs; it becomes a way to promote your business. SUCCESSFUL INVENTORY MANAGEMENTSuccessful inventory management involves balancing the costs of inventory with the benefits ofinventory. Many small business owners fail to appreciate fully the true costs of carryinginventory, which include not only direct costs of storage, insurance and taxes, but also the cost ofmoney tied up in inventory. This fine line between keeping too much inventory and not enoughis not the managers only concern. Others include: • Maintaining a wide assortment of stock -- but not spreading the rapidly moving ones too thin; • Increasing inventory turnover -- but not sacrificing the service level; • Keeping stock low -- but not sacrificing service or performance. • Obtaining lower prices by making volume purchases -- but not ending up with slow- moving inventory; and • Having an adequate inventory on hand -- but not getting caught with obsolete items. • The degree of success in addressing these concerns is easier to gauge for some than for others. For example, computing ABOUT INVENTORY CONTROLInventory consists of the goods and materials that a retail business holds for sale or amanufacturer keeps in raw materials for production. Inventory control is a means for maintainingthe right level of supply and reducing loss to goods or materials before they become a finishedproduct or are sold to the consumer.Inventory control is one of the greatest factors in a company’s success or failure. This part of thesupply chain has a great impact on the company’s ability to manufacture goods for sale or todeliver customer satisfaction on orders of finished products. Proper inventory control willbalance the customer’s need to secure products quickly with the business need to controlwarehousing costs. To manage inventory effectively, a business must have a firm understandingof demand, and cost of inventory. ADVANTAGES OF INVENTORY CONTROL:
  10. 10. (1) Reduction in investment in inventory.(2) Proper and efficient use of raw materials.(3)No bottleneck in production.(4) Improvement in production and sales.(5) Efficient and optimum use of physical as well as financial resources.(6)Ordering cost can be reduced if a firm places a few large orders in place of numerous small orders.(7)Maintenance of adequate inventories reduces the set-up cost associated with each production Run. INVENTORY COSTSThere are three main types of cost in inventory. There are the costs to carry standard inventoriesand safety stock. Ordering and setup costs come into play as well. Finally, there are shortfallcosts. A good inventory control system will balance carrying costs against shortfall costs. SAFETY STOCKSafety stock is comprised of the goods needed to be kept on hand to satisfy consumer demand.Because demand is constantly in flux, optimizing the Safety Stock levels is a challenge.However, demand fluctuations do not wholly dictate a company’s ability to keep the right supplyon hand most of the time. Companies can use statistical calculations to determine probabilities indemand. ORDERING COSTSOrdering costs have to do with placing orders, receiving and stowage. Transportation and invoiceprocessing are also included. Information technology has proven itself useful in reducing thesecosts in many industries. If the business is in manufacturing, then to production setup costs areconsidered instead. THE COST OF SHORTFALLS
  11. 11. Stock out or shortfall costs represent lost sales due to lack of supply for consumers. Salesdepartments prefer these numbers be kept low so that an ample stock will always be kept.Logistics managers prefer to err on the side of caution to reduce warehousing costs.Shortfall costs are avoided by keeping an ample safety stock on hand. This practice alsoincreases customer satisfaction. However, this must be balanced with the cost to carry goods.The best way to manage stockout is to determine the acceptable level of customer service for thebusiness. One can then balance the need for high satisfaction with the need to reduce inventorycosts. Customer satisfaction must always be considered ahead of storage costs. CYCLICAL COUNTINGMany companies prefer to count inventory on a cyclical basis to avoid the need for shuttingdown operations while stock is counted. This means that a particular section of the warehouse orplant is counted physically at particular times, rather than counting all inventory at once. Whilethis method may be less accurate than counting the whole, it is much more cost effective.Cyclical counting is preferred because it allows for operations to continue while inventory istaken. If not for this practice, a business would have to shut down while counts were taken, oftenrequiring the hire of a third party or use of overtime employees. Cyclical counting usuallyutilizes the ABC rule, but there are other variations of this method that can be used. The ABCrule specifies that tracking 20 percent of inventory will control 80 percent of the cost to store thegoods. Therefore, businesses concentrate more on the top 20 percent and counter other goodsless frequently. Items are categorized based on three levels: • A Category: Top valued 20 percent of goods, whether by economic or demand value • B Category: Midrange value items • C Category: Cheaper items, rarely in demandWarehouse staff can now schedule counting of inventories based on these categories. The “A”category is counted on a regular basis while “B” and “C” categories are counted only once amonth or once a quarter. COMMON INVENTORY VALUATION METHODSThe methods a company uses to value the costs of inventory have a direct effect on the businessbalance sheets, income statements and cash flows. Three methods are widely used to value such
  12. 12. costs. They are First-In, First-Out (FIFO), Last-In First-Out (LIFO) and Average Cost. Inventorycan be calculated based on the lesser of cost or market value. It can be applied to each item, eachcategory or on a total basis. FIFOFIFO operates under the assumption that the first product that is put into inventory is also thefirst sold. An example of this in action can be made when we assume that a widget selleracquires 200 units on Monday for Rs.1.00 per unit. The next day, he spots a good deal and gets500 more for Rs.75 per unit. When valuing inventory under the FIFO method, the sale of 300units on Wednesday would create a cost of goods sold of Rs.275. That is, 200 units at Rs1.00each and 100 units at Rs.75 each. In this way, the first 200 units on the income statement werevalued higher. The remaining 400 widgets would be valued at Rs.75 each on the balance sheet inending inventory. LIFOLIFO assumes instead that the last unit to reach inventory is the first sold. Using the sameexample, the income statement and balance sheet would instead show a cost of goods sold ofRs.225 for the 300 units sold. The ending inventory on the balance sheet would be valued atRs.350 in assets. When this method is used on older inventories, the company’s balance sheetcan be greatly skewed. Consider the company that carries a large quantity of merchandise over aperiod of 10 years. This accounting method is now using 10-year-old information to value itsassets. WEIGHTED AVERAGEAverage Cost works out a weighted average for the cost of goods sold. It takes an average costfor all units available for sale during the accounting period and uses that as a basis for the cost ofgoods sold. To site our example again, we would calculate the cost of goods sold at [(200 x Rs.1)+ (500 x Rs.75)]/700, or Rs.821 each. The remaining 400 units would also be valued at this rateon the balance sheet in ending inventory.
  13. 13. SPECIFIC IDENTIFICATIONA less commonly used, but important method to valuation is called specific identification. Thismethod is used for high-end items that are more easily tracked. In some cases, this method canbe used for more common items, but less value is realized from this accounting method is suchcases. This is because powerful and detailed tracking software is required to employ specificidentification on large numbers of goods. INFLATIONARY EFFECTS ON VALUATIONNo matter how you look at it, you are still coming up with 700 widgets that cost you a total ofRs.575. This would all be well and good if the value of money remained static. However, marketconditions change causing inflationary changes. When this happens, your accounting method canhave a strong impact on how healthy the business looks on income statements and balancesheets. The affects cash flow when businesses seek credit to pay for ongoing operations. RISING PRICESWhen prices are rising, using FIFO will show a greater value on the balance sheet, therebyincreasing tax liabilities but also improving credit scores and the ability to borrow cash forongoing operations. Older inventory is being used to determine the cost of goods sold and newerinventory is being used to report assets. LIFO decreases the value on the income statement, butcan reduce the level of depreciation you are able to take on assets. This is good for taxes but badfor borrowing. Industries most likely to adopt LIFO are department stores and food retailers. Themethod is rarely used in defences.NEED OF THE STUDY:- Inventories are equivalent to cash and they make up an important of the total cost.
  14. 14. It is essential that inventory should be properly safeguarded and correctly accounted.Proper control of inventory can make a substantial contribution to the efficiency of abussiness. The success of a business concern largely depends upon efficient purchasing,storage, consumption and accounting. Inventory plays a vital role in study of inventorymanagement in bulk so I selected the SFP Sons
  15. 15. STATEMENT OF PROBLEM The current system in the company under inventory management system which doesn’tspecify the safety stock which leads to scare for stocks at emergency. The data are not properly updated at the end of each day’s work. Proper data security system is not provided. Annual maintenance contract is not provided. Records are not maintained properly.
  16. 16. INDUSTRY PROFILEThe perfume industry in India has come of age. From a cottage industry it has become full-fledged industry in the last two decades. The industry is growing at 125 percent annually. Thegrowth is attributed to an increase in disposable income.WITH GLOBALIZATION, liberalization and the IT revolution, living standards of the Indianshave increased manifold. The demand for fashionable products has increased too. That is why;all global players are eyeing the subcontinent for business purpose. The illegal flow of lifestyleproducts confirm the great demand for these products in India. The affinity of the Indians forforeign goods also compels the indigenous manufacturers to tie-up with international brands totap this segment of people.The fragrances industry is big business, very big business. It includes much more than retail salesof fragrances. Related industries such as chemical companies supply the chemicals and thefragrances are made from it. Most fragrances chemicals are synthesized from petroleumproducts. Some companies formulate fragrances and flavours for other companies. Marketingand advertising are used to create and promote the image of a fragrance.The perfume industry, basically, was just a cottage industry some two decades ago. But now, dueto the huge demand among the people, it has blossomed into a full-fledged industry. Recently,‘Alcome Perfumes and Cosmetics’, declared a plan to set up a Rs. 100 crore green field perfumeplant in and around Noida Special Economic Zone.
  17. 17. The domestic perfume market is estimated to be worth Rs.300 crore and is growing at around125 percent annually. The forecast is that it may grow at a rate of 200 percent in the comingyears, with fast changing consumer behaviour and habits.Geneva-base International Fragrance association has estimated that the global perfume market isworth $ 40 billion, out of which the mass market has a 70 percent share. In this, India, China hasa considerable share.With the growing demand for fragrance, the Indian perfume companies are planning to changetheir strategies by utilizing their resources mainly for the domestic market and a meager portionfor exports. Apart from that these that these companies are also planning a multiple marketingand distribution strategy to foray into a market with huge potential. The potential is immense asthe middle class is growing rapidly and disposable incomes are increasing.(History of perfume industry)1.1760 1760 - In 1760, in London, James Henry Creed founded the House of Creed. filtered, all byhand in the highest tradition of the founder, James Henry Creed. Creed,cologne,designerperfume, Olivier Creed,Perfume,womens perfume,James Henry Creed,EmpressEugénie,discounted perfume,fragrance,Country,French perfume, perfumeindustry,Jasmine,womens fragrances,shopping cart,originality,scents,Master Perfumer,theFrench.2.1921 1921 - Coco Chanel revolutionised the perfume industry by being the first to make a massmarket scent for every woman when she launched Chanel No5 in 1921. You can still spritz onsome of that vintage glamour today with your own bottle, £46 for 50ml EDT at House of Fraser3.1987 Feb 28, 1987 - When perfumed gloves came into fashion in the 16th century, the towngradually developed a separate perfume industry. ... The Provencal Art and History Museum,
  18. 18. originally the 18th century home of Louise de Mirabeau, houses a fine collection of Provencalart. The 17th century Fragonard.4.1988 Nov 25, 1988 - It is one of the 200 fragrance-related art objects currently on view in the"Scents of Time" exhibit at the Museum of Science and Industry. The exhibit traces the historyand evolution of fragrance, connecting each phase with the social, political and cultural trends ofthe time. ...5. 1991 Feb 17, 1991 - Written in collaboration with Patricia Bayer, the book includes chapters onRene Laliques life, the development of the perfume industry, the history of the Laliquecompany, and collecting tips. An appendix provides information on dating bottles by thesignature .6. 1999 Dec 9, 1999 - of newly fragrances remain on the shelf after a year of launching," saysinternational director for Antonio PUIG perfumes, Eugeni Majo. cosmetics industry is a dynamicone. its competitive and only companies that manage to create an product that differs from therest will remain"7. 2000 Jun 20, 2000 - Halifaxs eight-year-old "No Scents" policy is creating a big stink in theperfume industry. Representatives from the American and Canadian perfume industry were inHalifax Tuesday to launch a counter attack ad campaign as a way of stopping the campaign fromspreading.8.2001 Nov 23, 2001 - hitherto unknown insights into the use of perfumes through the ages andlearn that "the history of perfume is often intertwined with the history ... But, it was the Arabs
  19. 19. who linked "the past and present of the perfume industry", says the portal. "The process ofextracting oils from flowers.9.2002 Apr 11, 2002 - Scented oils and perfumes were stored in elaborate and beautiful pots andjars throughout Egyptian history. ... "Never before has a series of exhibitions in Egypt andabroad been devoted to a single industry, which has resulted in such a wide range of artistic andutilitarian objects,"10.2004 Sep 22, 2004 - It was a scent that changed the American position in the perfumeindustry. Women across this nation began to forsake all of the costly and well- ... She offered hervast store of perfume knowledge and its history with great generosity.
  20. 20. COMPANY PROFILESOMABHAI FULABHAI PATEL (SFP)SFP Sons (India) Pvt. Ltd established in 1992 is one of the leading manufacturers ofPerfumes and cosmetics in India. SFP is located in Special Economic Zone, Chennai and wasFormerly known as S. F. Patel & Sons (India).SFP manufactures wide range of over 1000+products under its own brands Ahsan, Tara, Taibah, Malaki, Salaam, Silent Valley andCrazy Moments. These products are widely available in more than 20 countries. Productrange includes Attars (concentrated perfume oils), Spray Perfumes (EDT, EDP, colognes andbody mists), Perfume Gels, Creams and Gels for Hair and body, Cleansing lotion, ShowerGels, Shampoos, Hair Oil and Talcum powders.SFP is a ISO 9001 certified company and is committed to manufacture quality products.All products manufactured are skin friendly and abide by all international standards laiddown by governing bodies like IFRA, FDA et al. SFP factory is spread over 100,000 sq. ft area andemployees over 400+ people. It houses a well equipped R & D laboratory and highlyqualified team to develop and manufacture high quality products. It has a soundinfrastructure and modern facilities which helps every activity and product of SFP fulfill itsbrand promise and mantra – “BRINGING FRANGRANCE TO LIFE”
  21. 21. SFP processes are managed and controlled through SAP. The SFP team is skilled, trained andequipped to meet and deliver all customer expectations.VISION AND MISSIONCompany vision becomes a globally leading company in perfumes and cosmeticsindustry.Company mission, delivers the quality product with protection of environment and protectThe health of customer.SFP aims at attaining, commanding market position in supply of perfumery andcosmetic product by meeting the needs and expectation of customers and enhancing theirsatisfaction.
  22. 22. MANAGEMENTSFP was started by its present Managing Director Mr. Dinesh S. Patel an entrepreneur withdream and vision to make SFP a globally leading Company in perfumes and Cosmetics industry.He believes hard work, commitment and passion combined can enrich every individuals life.R & D LabSFP has well equipped laboratory and research section, equipped to carry out in-housedevelopment and testing required as per laid down standards. Latest GC, refract meters, SGmeter, Ph meters, Viscometers and other Instruments are manned by trained personnel.SFP iscommitted to quality through its strict quality control methods. Using latest technology everycomponent and product are tested as per international standards at all stages of manufacturing toensure high quality perfumes and cosmetics.BLENDINGSFP also blends some of itsOwn fragrances. It has 8 nosof blending tanks of capacity1 ton with cooling lines.It has DM Water plant and aRO water plant. SFP has twotanks for alcohol storage which can hold 50000 liters.COSMETIC MANUFACTURINGCosmetic products manufacturing is done is wellequipped modern facilities. This plant has oil phasevessel, water phase vessel and a main homogenizingvessel of capacity 1 ton. SFP also has
  23. 23. 50 liter plant to cater to smaller needsDISTILLATIONSFP also houses a unique and traditional perfume oilextraction unit from naturalingredients. Here by distillation oils are extractedwhich are used in fragrance blends.FILLING AND PACKINGProduction facilities are well laid down withseparate buildings for Attars, Sprays, Creams andGels, Hair oils and Talcum powder. A total of 12production lines have a capacity to fill and pack120,000 units every day per shift.WAREHOUSEThe newly constructed ware house has area of over20000 sq. ft and is well arranged to monitor andmove material with ease. All products are bar-codedfor efficient identification. SFP is well connected byroad, sea and air to have excellent supply chain.TRAINING
  24. 24. SFP Training Centre provides trainings to all its employees on regular basis. The training istotally based on skill and personality development to drive individuals and the company forward.SHOWROOMThe showroom within the factory premisesdisplays a range of products. It also displayspackaging material components. Here customerscan select items of their choice for their markets.QUALITY OBJECTIVES OF SFP • On-time delivery of final product to customer.
  25. 25. • Zero level of non-conformity at In-process and final stage of the product. • Zero level of customer complaint to enhance customer satisfaction.QUALITY POLICY OF SFPSFP committed to the aim and objectives of the company to manufacture products that aresatisfy customer’s needs and expectations.SFP shall implement the quality management system to meet agreed requirements to enhancecustomer satisfaction and improve its effectiveness continually.SFP commit to highest levels of integrity and professionalism in all aspect of our business.Credentials of SFP ➢ Raad voor accreditatie, Netherland has licensed SFP Sons (India) Pvt. Ltd and listed
  26. 26. in the bureau’s register of licensees of Quality management system certification in respect of the products and services in accordance with ISO 9001:2008 and also ISO 14001: 2004 for Environment management system. ➢ SFP is a member of export promotion council. ➢ SFP has been recognized as one star export house having the certificate issued by the ministry of commerce & industry, government of India. ➢ In 2007 RAJIV GANDHI national quality award panel has awarded SFP with a ➢ Commendation certificate for quality standard of the company at all India level. ➢ SFP is a member with Essential oil association of India. ➢ SFP is register with IFRA and FDA.FACILITIES AND TECHNOLOGY OF SFP ℵ Well planned perfume blending set up with the required vessels, tanks and all relevant accessories.
  27. 27. ℵ Traditional fragrance extraction set up for manufacturing special attars. ℵ Well-equipped cosmetics manufacturing unit with boiler etc. ℵ D.M. water plant ℵ R.O. water plant. ℵ Well-equipped packaging section having bottles and tubes filing and wrapping machines. ℵ Well-equipped talc manufacturing unit. ℵ Hair oil unit with automatic filling, capping machines, shrink wrapping and labeling machine. ℵ Alcohol(perfumery grade) storage tanks ℵ Quality control laboratory with advanced GC machine and relevant testing apparatuses. ℵ Well-equipped in built R&D centre. ℵ Design and development department which consistently create packaging design which customers’ purpose and also innovates new designs and present to them. ℵ The company has warehouse having a large space and materials handling equipments and forklift. ℵ The plant has 12 filling lines and a capacity of 1, 20,000 bottles per shift. ℵ All the activities of company are done in the world class software SAP business 1. .HUMAN RESOURCECompetence, awareness, trainingAvailable competence level of each employee on the basis of his education skill andexperience is assessed and accordingly training needs are identified and provided competencemap is done for all those who are directly connected to the performance of conformity to
  28. 28. product required directly (or) indirectly.Beside training communication system is established providing relevant informationto enhance the awareness level of personnel in relation to SFP performance required.Effectiveness of the action taken is evaluated organist requirement and correctiveactions/ further improvement oriented actions are taken as on-going exercise.While implementing the above activities it is ensured that personnel are made awareof the relevance and important of their activities considering this an integral requirement fortheir contribution towards achievement of quality objectives.Records of education, training, skill & experience are maintained as long as theemployee is in service roll in SFP. Manpower in SFPEvery department has a highly experienced and qualified team. Company has around 250skilled workers. The company has 120 experienced hands in the line of sales and marketingteam. The company has a fully equipped training hall which accommodates 50 persons at atime and regular training programs are held at different levels. The training is totally based onskill and personality development to drive individuals and the company forwardORGANISATIONAL CHART
  29. 29. DESCRIPTION OF PRODUCTION PROCESS PERFUMERY AND COSMETIC PRODUCTS: Material used: Perfumery compounds, aroma chemical solvents. Cosmetics ingredients, coloringmaterials procured are the raw materials,Stage 1 Procured material as above is subjected to inspection and testing to confirm their meetingspecified equipment.Stage 2 Compounds either as they are with colouring material or a formulated combined of morethan one compound with or without colouring material after subjected to process. Inspection andtesting are send for filling & packaging.Stage 3 Product are then filling in convenient sizes and packaging i9n cartons as per customer’srequirements. During filling operation the containers and the associated accessories are subjected to inprocess inspection to ensure state of conformance to specified requirements.Stage 4 Packaged products undergo final inspection before effecting delivery.
  30. 30. MARKETING➢ SFP has organized tie-up in Dubai to fee the market in U.A.E. and distribution of the premium attars to African countries like, Sudan, Egypt, Somalia, Nigeria, Ghana, Uganda, Zambia, South Africa, Libya, Algeria, Mauritania, morocco, Chad, and Cameroon.➢ In Saudi Arabia the company is having distribution tie-ups in Jeddah, Riyadh, Mecca, Medina, etc.➢ Also the company is having distribution outlets in Kuwait, Muscat, Bahrain, Doha-Qatar, Lebanon, Jordan, Syria, Iran, Iraq, and Afghanistan.➢ The company is also having export market in Sri Lanka, Singapore, Malaysia, Indonesia, Thailand, Myanmar and Bangladesh.➢ In the west the company is having market in Atlanta, New York, New Jersey, Chicago, Las Angeles, London, Spain, and France.➢ In India there are 750 distributors throughout the country.
  31. 31. PRODUCT PROFILEDifferent Brands Manufactured by SFP :
  32. 32. OBJECTIVE OF STUDY:-Primary objective:- To analyze that the existing inventory management system in SFPSONS India objective:- 1. To verify the mismatch between the order and receipt of mate 2. To find out the impact of inventory on working capital. 3. To find out minimum stock level, how much stock should be order.
  33. 33. LITERATURE REVIEW Success of any industrial undertaking depends upon the 6 m’s 1) Money2) Manpower 3) Machine 4) Market 5) Material 6) Management Materials are pivotal importance not less than anyother M’s. Problems have their root in material affects the efficiency of all men, machine,money & marketing decisions of the firms and thus become the grave concern ofmanagement at all levels. If there were too much of material problems like ideal fundslied up in excessive inventory storage and obsolesces difficulties market pressure wouldarise. Thus the importance of inventory management is realized. A number of studies have been done in thefield of inventory management by various researchers. Some of them are given below;1. Author:- Bern at de William year 2008 This study tells that the main focus of inventory management is ontransportation and warehousing. The decision taken by management depend s on thetraditional method of inventory control models. The traditional method of inventorymanagement is how much useful in these days the author tell about it. He is also sayingthat the traditional method is not a cost reducing, it is so much expensive. But themanaging the inventory is most important work for any manufacturing unit.2. Author: - Jon Schreibfeder 1992 He said that it is easy to turn cash into inventory, the challenge is toturn inventory back into cash. In early 1990’s many distributor recognize that theyneeded help controlling and managing their largest asset inventory. In response to thisneed several companies developed comprehensive inventory management modules andsystems. These new package include many new features designed to help distributorseffectively managed warehouse stock. But after implementing this many distributors do
  34. 34. not feel that they have gained control of their inventory.3. Author:-Wolf Bagby, Managing inventory In this study Mr. W.Bagby explains that by managing the inventory itbecomes easier for the organization to meet the profit goals, shorter the cash cycle, avoidinventory shortage, avoid excessive carrying costs for unused inventory, and improveprofitability by decreasing cash conversion and adopt JIT system. According to this studycompanies need to get smart about inventory. Boosting financial performance is another benefit that comes frombetter inventory management. Infect large number of manufacturers enjoy savings andbetter performance by choosing the approach of inventory reduction. For this company needs to maximize the cash flow and profitabilityand this includes keeping a watchful discerning eye on charge in supply and demand4. Author: - Asfaque Ahmed October 12, 2004 (Article from master requirement planning and master production scheduling) He said that most of the manufacturing company vendors have planningand scheduling product which assume either infinite production capacity for calculatingquantities of row material and work in progress (WIP) requirements or infinitequantities of raw material and WIP materials for calculating production capacity. Thereare many problems with this approach and how to avoid these by making sure that theproduct you are buying indeed takes into account finite quantities of required materials aswell as finite capacities of work centers in your manufacturing facilities. 5. Author:- D.Hoopman April 7, 2003 (Article from inventory planning and optimization) In this article he said that inventory optimization recognize that different industry have different inventory profiles and requirements. Research has indicated that solutions are priced in a large range from tens of thousands of dollars to millions of dollars. In this niche market sector price is definitely not an indicator of
  35. 35. the quality of solution, ROI and usability are paramount. 6. Author:-Silver, Edward A Dec22, 2002 (Article from production and inventory management journal) This article considers the context of a population of items for which the assumption underlying the EOQ derivation holds reasonably well. However as is frequently the cash in practices there is an aggregate constraint that applies to the population as a whole. Two common forms of constraints are: 1) the existence of budget to be allocated among the stocks of the items and 2) a purchasing production facility having the capability to process at most a certain number of replenishment per year. Because of the constraint the individual replenishment quantities cannot be selected independently. 5. Author:- Charles Atkinson (A study on inventory management) In the study by Mr. Charles Atkinson, he explained the inventorymanagement and assessment of inventory levels. As per this study inventory managementneed to address two issue Part I. How to optimize average inventory levels.Part II. How to assess (evaluate) inventory levels. This study tells about what the manager should do and not to do, andhow much amount should be order in one placed orders. Average inventory can becalculated by simplistic method.Average inventory = beginning inventory +end inv./28. Author:-Delaunay C , Sahin E, 2007. A lots of work has been done but now if we want to go ahead wemust have good visibility upon this field of research. That is why we are focused onframe work for an exhaustive review on the problem of supply chain management withinventory inaccuracies . The author said that their aim in this work is also to present themost important criterion that allow a distinction between the different type of
  36. 36. managing the inventory. RESEARCH METHODOGY
  37. 37. Research methodology is the way to systematically solve the research problem. Objective of research study is to analysis of inventory of SFP Sons and analyzing of inventory, we determining following inventories- 1. Raw materials inventory, 2. Work in progress inventory, 3. Packaging material inventory & 4. Finished goods inventory In this section of inventories, we should analyze the annual investment in inventories, Valuation of inventory after closing balance of items in inventory. In this manner, we calculate reorder point, safety stock levels, minimum & maximum levels of inventory. Working hypothesis of the objective is that inventories are the stock piles of goods in an organization. SFP invests about 40% of total assets inventory should be analyzed their records. The analysis of inventory according to their data is available in the company. The datacollection of inventory for analysis is by the direct store department. I went to the all inventoriesas raw material, work in progress inventory, finished goods inventory by the proper observationof data’s of the company. The particular method for data collection used direct interview with assistants and telephone interview with friends to known about annual investment of inventories and other important data.PERIOD OF STUDY: The study was conducted in a period between January 2010 to April 2010 during whichthe researcher studied the company’s relationship with dealers and distributors and obtained theirview.
  38. 38. Method of data collection: In analysis of inventory of SFP, We collect the data by the different sources. We collect the primary and secondary data. SECONDARY DATA – The secondary data are those data that are already in presence for specific purpose, we use the secondary data about inventory to look old records of the company .For the daily information about the items are show the MRN, ledger register and daily issue slip of materials, the purchase register and other documentary evidence used for the findings. In the analysis of inventory, the secondary data provided is not sufficient then we collected primary data. PRIMARY DATA – Primary data or fresh data are those data that are originated very first time with the help of primary data we formulated the research objectives. Primary data are the accurate, attainable, reliable and useful data.1. Inventory control techniques used by the company2. Inventory systems as perpetual and periodic systems.3. Stock levels etc.4. Company’s website INVENTORY MANAGEMENT TECHNIQUES In managing inventories, the firm’s objective should be in consonance with the wealth maximization principle. To achieve this, the firm should determine the optimum level of
  39. 39. investment in inventory. To deal with the problems of inventory management effectively, it becomes necessary to be conversant with the different techniques of inventory control. Although the concepts involved in inventory management are production-oriented and are not strictly financial it is important that the financial manager understand them since they have certain built-in financial costs. The different techniques of inventory control may be summarized as follows:(1) Inventory level Technique The main objective of stock control is to determine and maintain the optimum level of stock so that there is neither shortage of any material nor unnecessary investment in inventory. For this purpose, determination of maximum and minimum limits of inventory and ordering level is necessary.(2) Maximum stock Limit: This represents the quantity of inventory above which it should not be allowed to be kept. The main object of fixing this limit is to ensure that unnecessary working capital is not blocked in stores. The quantity is fixed keeping in view the disadvantages of overstocking. RE-ORDERING LEVEL (ORDERING LEVEL) It is the point at which if the stock of the material in stores reaches, the storekeeper should initiate the purchase requisition for fresh supply of material. This level is fixed somewhere between maximum and minimum level is such a way that the difference of quantity of the material between the reordering level and the minimum level will be sufficient to meet requirements of production up to the time of fresh supply of the material. It is fixed after taking into consideration the following factors: ABC ANALYSIS: ABC Analysis is a basic analytical management tool which enables top management to place the effort where the result will be greatest. This technique,
  40. 40. popularly known as always better control or the alphabetical approach, has universalapplications in many areas of managing the inventory. The technique tries to analyze the distribution of any characteristic bymoney value of importance in order to determine its priority.The annual consumption analysis of any organization would indicate that a handful oftop high value items less than 10% of total number will account for a substantial portionof about 75% of the total consumption value and these few vital item are called A class itemswhich need careful attention of the materials manager. Similarly a large number of bottomitems over 70% of total number called the trival many account only for about 10% of theconsumption value and are known as the ‘C’ class. The items that lie between the top andbottom are called the ‘B’ category item. The following facts need to be noted with regard to ABC Analysis:1. Through usually the inventory items are classified into three categories viz AB andC only,but nothing prohihibits a firm to undertake the analysis on the basis of a largercatagorisization.2.It is necessary for an effective ABC analysis that all the items should be included for theClassification.3.Through according to ABC Analysis category C gets only a simple attention, themanagement should nevertheless have to be vigilant in its approach. For example an itemsmay be of small value but may be critical in the sense that its non-availability hampers theproduction process and its supply is irregular. The management has to be extra careful aboutits inventory, even though the items figures in the category C. Thus the ABC analysis not theultimate exercise in inventory management, it needs supplementing with detailed knowledgeand monitoring.4.Price of the items and their physical quantities shouldn’t be made the basis of ABCanalysis. It is rather the usage value of the items which must be used for the purpose ofclassification.
  41. 41. ECONOMIC ORDER QUANTITY TECHNIQUEOne of the major inventory management problems to be resolved is how much inventory should beadded when inventory is replenished. If the firm is buying raw materials, it has to decide lost inwhich it has to be purchased on replenishment. If the firm is planning a production run, the issue ishow much production to schedule (or how much to make). These problems are called orderquantity problems, and the task of the firm is to determine the optimum or economic order quantity(or economic lot size). Determining an optimum inventory level involves two type of costs: (a)ordering costs and (b) carrying costs: The economic order quantity is that inventory level thatminimize the total of ordering and carrying costs. EOQ = √2(annual usage in unit)(order cost) Annual carrying cost per unit VED ANALYSIS:The VED analysis is used generally for spare parts. The requirement and urgency of spare parts isdifferent from that of materials. A-B-C analysis may not be properly used for spare parts. Thedemand for spares depends upon the performance of the plant and machinery. Spare parts areclassified as: Vital (V), Essential (E) and Desirable (D). The vital spares are a must for running theconcern smoothly and these must be stored adequately. The non-availability of vital spares willcause havoc in the concern. The E types of spares are also necessary but their stocks may be kept atlow figures. The stocking of D types of spares may be avoided at times. If the lead time of thesespares is less, then stocking of these spares can be avoided.The classification of spares under three categories is an important decision. A wrong classification ofany spare will create difficulties for production department. The classification of spares should beleft to the technical staff because they know the need, urgency and use of these spares.
  42. 42. JUST-IN-TIME (JIT) SYSTEM: Japanese firms popularized the just-in-time (JIT) system in the world. In a JIT system material or the manufactured components and part arrive to the manufacturing sites or stores just few hours before they are put to use. The delivery of material is synchronized with the manufacturing cycle and speed. JIT system eliminates the necessity of carrying large inventories, and thus, saves carrying and other related costs of manufacturer. The system requires perfect understanding and coordination between the manufacturer and supplier in terms of the timing of delivery and quality of the material. Poor quality material or complements could halt the production. The JIT inventory system complements the total quality management (TQM). The success of the system depends on how well a company manages its suppliers. The system puts tremendous pressure on suppliers. They will have to develop adequate system and procedures to satisfactory meet the needs of manufacturers INVENTORY TURNOVER RATIO: (ITR) In accounting, the Inventory turnover is an equation that measures the number of timesinventory is sold or used over in a period such as a year. The equation equals the cost ofgoods sold divided by the average inventory. Inventory turnover is also known asinventory turns, stock turn, stock turns, turns, and stock turnover. ITR = Cost of goods sold Average inventory INVENTORY MANAGEMENT SYSTEM IN SFP SONS INDIA PVT.LTD. The procurement of inventory is totally depends on order/demand. In first step they getthe order from customer then they write a form that form called indent form by hand writing.After getting order they will send the order to purchase department for buying of RawMaterial and Packaging material. Every time that causes the delay of delivery of goods to thecustomer. After receiving the raw materials from supplier they check the quality, because quality
  43. 43. is more important for them. In whole production process 4-5 times they will check the qualityand after that quality check seal on product. They are using FIFO method for delivery of good to the customers. First In First Out(FIFO) means first order should deliver first and after that continue process. It is good way ofdelivery that make the customer satisfied. Every inspection about available stock is on SAPevery one can know how much stock is available, and how much order should be placed. Forevery order they keep the numbers for identification.Warehouse arrangement There is separate warehouse for keeping the different types of inventory like Raw material, packaging material, semi finished good and finished good. Raw materialsincludes the perfumery liquid, arranging of these things they have rack and rack numbers, andunique code number for each and every liquid for identification. For talcum powder raw materialare the talc powder which they kept in plastic bags in production unit itself. Packaging material include box, cap color, neck etc. which require afterfilling the product in bottles. Finished goods and packaging material they are keeping in samewarehouse left side finished good and right side packaging material. Finished good order wiseand packaging material how to find easily.Each and every data maintained in systems so it is very easy to get the information.SCOPE OF STUDY The scope is to drive meaningful application of theory for actual implementation. Asthe study is focusing on identifying the present potential of the company’s inventory methodsand aims, we identify best set of inventory method to be carried to improve the company’s policyto determine their inventory. This study provides insight to the management of high value item and
  44. 44. low value items. This study also gives the idea about industrial focus and addressal towardsmaintaining inventory..LIMITATION OF STUDY  It consumes more time and requires lots of expenditure. More time is needed to do this study.  Study is based on secondary data only.  The quality of inventory is not compared in analysis.  The analysis is based on figures present in the internal records only.  The study is based on two year reports given by marketing and finance
  45. 45. department that has its own limitation. Working environment didn’t permit more involved way of collecting data.
  46. 46. Table 5.1 Economic order quantityYear EOQ(in units)2010 320.762009 109.53Interpretation: It is infer that the Economic order quantity for the year2009 is 109.53 and 2010 is320.76. Year 2010 EOQ is 2.9 times more than 2009 EOQ.
  47. 47. Chart no.5.1
  48. 48. INVENTORY TURNOVER RATIOYear Sales (X) Inventory(Y) Ratio (X/Y)2010 63130829.65 26297835.5 2.402009 81132216 26336975 3.08 TABLE NO.5.2Interpretation: It shows that the ratio of sales and inventory for the year 2009 is 2.4 and for theyear 2010 3.08. It shows that the inventory sales ratio of year 2009 is higher than year 2010.
  49. 49. Chart no. 5.2
  50. 50. Year Raw material Semi finished Packaging Finished good Total inventory good material2010 7403(in kg) 51026 458522 342912 8598632009 8406(in kg) 43467 549409 301860 903142 Table 5.3 total inventory in quantity Table 5.4 Total inventory in value(in lacks)Year Raw material Semi finished Packaging Finished good Total inventory good material2010 5182325 1275634 9170450 10630287 262586962009 6305141 1086692 9889368 9055774 26336975
  51. 51. Chart no.5.3 Table no.5.5 Percentage of inventory from total inventoryYear RM PM SM FG Total inventory2009 23.94% 37.54% 4.13% 34.38% 100%2010 19.73% 34.92% 4.86% 40.48% 100%
  52. 52. Chart no.5.4
  53. 53. Year Raw material Total inventory Percentage2009 63,05,141 2,63,36,975 23.94%2010 51,82,325 2,62,58,696 19.73% Table no.5.6 percentage of raw material from total inventory
  54. 54. Chart no.5.6
  55. 55. Table no.5.7 percentage of semi finished good from total inventoryYear Semi finished good Total inventory Percentage2009 1086692 26336978 4.13%2010 1275634 26258696 4.86%
  56. 56. Chart no.5.7 Table no.5.8 Percentage of Packaging material from total Inventory.Year Packaging material Total inventory Percentage2009 988936 26336978 37.54% 82010 9170450 26258696 34.92%
  57. 57. Chart no.5.8Table no.5.9 Percentage of Finished goods from total inventory
  58. 58. Year Finished good Total inventory Percentage2009 9055774 26336978 34.38%2010 10630287 26258696 40.48%
  59. 59. Chart no. 5.9 Table no.5.10 ABC classificationGrade No. of items PercentageA 57 31.66%B 65 36.12%C 58 32.22%Total 180 100%
  60. 60. Chart no.5.10ABC Analysis 2008-2009April 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING Apr-2008 - Quantity Apr-2008 - AmountAHSANPerfume Oils 1,02,024 1377038.87 CEau De Perfume 59,544 2301839.13 AEau De Toilette 10,176 362407.12 B
  61. 61. Total 1,71,744 4041285.12TARAItem GroupEau De Perfume 2,080 51452.12 BHair Oil 59,370 366167.65 CTalcum Powder 3,24,528 2219257.5 AEau De ToiletteTotal 3,85,978 2636877.27SILENT VELLYItem GroupHair OilShower GelHair GelBody Splash 2,664 130340.94 BHair CreamShampooLotions 192 9403.66 BTotal 2856 139744.6May 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING May-2008- Quantity May-2008- AmountAHSANPerfume Oils 1,57,224 1588658.94 CEau De Perfume 19,524 956069.47 BEau De Toilette 4,320 157183.01 ATotal 1,81,068 2701911.42TARAItem GroupEau De Perfume 3,200 79157.11 C
  62. 62. Hair Oil 8,856 149517.32 BTalcum Powder 1,60,344 781462.82 AEau De ToiletteTotal 1,72,400 1010137.25SILENT VELLYItem GroupHair Oil 480 30100.41 BShower Gel 144 10593.68 AHair Gel 144 5535.82 CBody Splash 504 24659.1 CHair CreamShampoo 336 26603.93 ALotions 240 13576.62 BTotal 1848 111069.56June 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING June-2008- Quantity June-2008- AmountAHSANPerfume Oils 1,17,576 1318419.85 BEau De Perfume 27,464 1130428.47 AEau De Toilette 2,784 104890.69 CTotal 1,47,824 2553739.01TARA
  63. 63. Item GroupEau De Perfume 480 11873.57 BHair Oil 5,496 154637.41 ATalcum Powder 47,232 497530.23 CEau De Toilette 72 6098.84 BTotal 53280 670140.05SILENT VELLYItem GroupHair OilShower GelHair Gel 432 16607.46 CBody Splash 3,600 176136.4 CHair CreamShampoo 144 11401.69 ALotions 840 62980.09 BTotal 5016 267125.64July 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING July-2008- Quantity July-2008 -AmountAHSANPerfume Oils 97,488 1136365.16 CEau De Perfume 17,448 789353.05 AEau De Toilette 2,208 104389.2 BTotal 1,17,144 2030107.41TARAItem GroupEau De Perfume 800 19789.28 B
  64. 64. Hair Oil 180 6860.69 BTalcum Powder 32,736 384288.54 CEau De Toilette 144 12197.68 ATotal 33860 423136.19SILENT VELLYItem GroupHair Oil 96 6020.08 BShower GelHair GelBody SplashHair Cream 144 13190.38 AShampooLotions 72 2582.85 CTotal 312 21793.31August 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING Aug-2008- Quantity Aug2008-AmtAHSANPerfume Oils 1,87,056 2232981 CEau De Perfume 30,752 1351294.97 AEau De Toilette 192 10781.02 BTotal 2,18,000 3595056.99TARA
  65. 65. Item GroupEau De Perfume 1,600 39578.56 AHair Oil 1,416 31693.94 BTalcum Powder 64,032 898033.68 CEau De Toilette 72 6098.84 BTotal 67,120 975405.02SILENT VELLYItem GroupHair OilShower GelHair GelBody Splash 1,296 63409.11 AHair CreamShampooLotions 360 16284.34 CTotal 1656 79693.45September 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING Sep-2008-Quantity Sep2008-Amt.AHSANPerfume Oils 2,80,656 3643082.56 CEau De Perfume 57,548 2586300.76 AEau De Toilette 5,376 184313.35 BTotal 3,43,580 6413696.67TARA
  66. 66. Item GroupEau De Perfume 3,520 87072.86 BHair Oil 2,232 77912.2 ATalcum Powder 50,472 359785.22 CEau De ToiletteTotal 56,224 524770.28SILENT VELLYItem GroupHair OilShower GelHair GelBody Splash 504 24659.07 AHair CreamShampooLotionsTotal 504 24659.07October 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING Oct2008-Quantity Oct-2008-AmtAHSANPerfume Oils 1,09,836 1225240.16 CEau De Perfume 31,020 1152276.45 AEau De Toilette 672 24671.89 BTotal 1,41,528 2402188.5TARAItem GroupEau De PerfumeHair Oil 4,200 96434.71 A
  67. 67. Talcum Powder 1,16,088 562889.2 CEau De ToiletteTotal 120288 659323.91SILENT VELLYItem GroupHair OilShower GelHair GelBody Splash 1,224 59886.38 AHair CreamShampooLotionsTotal 1224 59886.38November 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING Nov-2008-Quantity Nov-2008-AmountAHSANPerfume Oils 65,520 759450.53 CEau De Perfume 40,324 1509870.84 AEau De Toilette 4,752 191725.56 BTotal 1,10,596 2461046.93TARAItem GroupEau De Perfume 800 19789.28 AHair Oil 1,200 25847.91 BTalcum Powder 56,976 261544.28 C
  68. 68. Eau De ToiletteTotal 58976 307181.47SILENT VELLYItem GroupHair OilShower GelHair GelBody SplashHair CreamShampooLotionsTotalDecember 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING Dec-2008-Quantity Dec-2008-AmtAHSANPerfume Oils 1,44,264 1843142.24 CEau De Perfume 29,584 1231266.38 AEau De Toilette 6,672 236237.42 BTotal 1,80,520 3310646.04TARAItem GroupEau De Perfume 960 22950.16 BHair Oil 2,856 75511.28 ATalcum Powder 1,35,480 692142.97 CEau De ToiletteTotal 139296 790604.41
  69. 69. SILENT VELLYItem GroupHair OilShower GelHair GelBody Splash 360 17025.11 AHair CreamShampooLotionsTotal 360 17025.11January 2008BRAND NAME CONSUMPTION VALUES IN RS GRADING Jan2009-Quantity Jan-2009-AmountAHSANPerfume Oils 1,01,376 1115789.03 CEau De Perfume 22,288 865498.76 AEau De Toilette 5,904 224110.99 BTotal 1,29,568 2205398.78TARAItem GroupEau De Perfume 960 22105.37 BHair Oil 1,800 42702.46 A
  70. 70. Talcum Powder 1,12,656 539000.02 CEau De Toilette 72 5530.54 BTotal 115488 609338.39SILENT VELLYItem GroupHair OilShower GelHair GelBody Splash 144 6439.27 AHair CreamShampooLotionsTotal 144 6439.27Feb 2009BRAND NAME CONSUMPTION VALUES IN RS GRADING Feb-2009-Quantity Feb-2009-AmountAHSANPerfume Oils 60,408 727184.84 CEau De Perfume 25,176 1003806.8 BEau De Toilette 2,064 121175.39 ATotal 87,648 1852167.03TARAItem GroupEau De PerfumeHair Oil 2,400 49233.18 A
  71. 71. Talcum Powder 74,928 673110.8 CEau De Toilette 72 5530.54 BTotal 77400 727874.52SILENT VELLYItem GroupHair Oil 240 14229.32 AShower GelHair GelBody Splash 432 19317.8 CHair CreamShampooLotionsTotal 672 33547.12March 2009BRAND NAME CONSUMPTION VALUES IN RS GRADING Mar-2009-Quantity Mar-2009-AmountAHSANPerfume Oils 84,624 955170.08 CEau De Perfume 19,708 719760.18 AEau De Toilette 480 27802.96 BTotal 1,04,812 1702733.22TARAItem GroupEau De PerfumeHair Oil 4,320 95732.99 ATalcum Powder 20,112 233482.55 CEau De ToiletteTotal 24432 329215.54SILENT VELLY
  72. 72. Item Group Hair Oil 120 6909.44 B Shower Gel Hair Gel Body Splash 216 9204.26 C Hair Cream Shampoo 96 6748.67 A Lotions 48 3669.66 A Total 480 26532.03Financial year 2009-2010April 2009 BRAND NAME CONSUMPTION VALUES IN RS GRADING Apr-2009-Quantity Apr-2009-Amt AHSAN Perfume Oils 2,02,992 2388126.24 C Eau De Perfume 55,416 2451502.23 A Eau De Toilette 11,328 385100.27 B Total 2,69,736 5224728.74 TARA Item Group Eau De Perfume 480 10642.24 C Hair Oil 3,600 96400.8 B Talcum Powder 1,18,968 791687.35 A Eau De Toilette Total 123048 898730.39 SILENT VELLY
  73. 73. Item GroupHair Oil 96 5527.68 BShower GelHair GelBody Splash 2,664 113513.37 CHair CreamShampoo 192 13497.6 ALotions 288 20644.29 BTotal 3240 153182.94May 2009BRAND NAME CONSUMPTION VALUES IN RS GRADING May (2009) - Quantity May-2009-AmountAHSANPerfume Oils 1,47,312 1876017.9 AEau De Perfume 39,480 1511140.04 BEau De Toilette 1,536 49854.72 CTotal 1,88,328 3437012.66TARAItem GroupEau De Perfume 960 21283.2 CHair Oil 7,620 170453.77 BTalcum Powder 71,628 418572.12 AEau De ToiletteTotal 80208 610309.09SILENT VELLY
  74. 74. Item GroupHair OilShower GelHair GelBody SplashHair CreamShampooLotionsTotalJune 2009BRAND NAME CONSUMPTION VALUES IN RS GRADING June-2009-Qnty June2009-AmtAHSANPerfume Oils 1,28,928 1338309.12 CEau De Parfum 6,456 269641.68 AEau De Toilette 1,488 53310.24 BTotal 1,36,872 1661261.04TARAItem GroupEau De ParfumHair Oil 8,880 143501.2 ATalcum Powder 70,320 518095.78 CEau De ToiletteTotal 79200 661596.98SILENT VELLY
  75. 75. Item GroupHair OilShower GelHair GelBody Splash 1,944 82812.7 AHair CreamShampooLotionsTotal 1944 82812.7July 2009BRAND NAME CONSUMPTION VALUES IN RS GRADING July-2009-Qnty July-2009-AmtAHSANPerfume Oils 3,44,772 4730478.96 CEau De Perfume 39,816 1629457.42 AEau De Toilette 5,376 197208.48 BTotal 3,89,964 6557144.86TARAItem GroupEau De Perfume 4,800 107232 AHair Oil 9,972 215067.96 BTalcum Powder 1,71,120 1370713.79 CEau De ToiletteTotal 1,85,892 1693013.75SILENT VELLY
  76. 76. Item GroupHair Oil 96 5559.36 BShower GelHair GelBody Splash 1,440 61948.8 CHair CreamShampoo 96 6803.52 BLotions 144 10444.32 ATotal 1776 84756August 2009BRAND NAME CONSUMPTION VALUES IN RS GRADING Aug-2009-Qnty Aug-2009-AmtAHSANPerfume Oils 3,08,381 3675631.15 CEau De Perfume 46,008 1924019.52 AEau De Toilette 8,352 280743.36 BTotal 3,62,741 5880394.03TARAItem GroupEau De Perfume 1,920 42892.8 BHair Oil 3,300 82202.92 ATalcum Powder 83,064 751192.91 CEau De ToiletteTotal 88,284 876288.63
  77. 77. SILENT VELLYItem GroupHair Oil 144 8339.04 BShower GelHair GelBody Splash 3,240 139384.8 CHair CreamShampoo 96 6803.52 ALotionsTotal 3480 154527.36September 2009BRAND NAME CONSUMPTION VALUES IN RS GRADING Sept-2009-Qnty Sept-2009-AmtAHSANPerfume Oils 1,81,512 2257750.08 CEau De Perfume 38,064 1300500.57 AEau De Toilette 5,424 180467.52 BTotal 2,25,000 3738718.17TARAItem GroupEau De PerfumeHair Oil 948 29043.51 ATalcum Powder 57,600 321958.58 CEau De Toilette
  78. 78. Total 58548 351002.09SILENT VELLYItem GroupHair OilShower GelHair GelBody Splash 3,672 157969.44 AHair CreamShampooLotionsTotal 3672 157969.44October2009BRAND NAME CONSUMPTION VALUES IN RS GRADING Oct-2009-Qnty Oct-2009-AmtAHSANPerfume Oils 1,74,588 2064442.37 CEau De Parfum 52,320 1842301.85 AEau De Toilette 6,192 184397.76 BTotal 2,33,100 4091141.98TARAItem GroupEau De ParfumHair Oil 3,888 96082.56 BTalcum Powder 1,09,200 622351.11 CEau De Toilette 288 21205.44 ATotal 113376 739639.11SILENT VELLYItem Group
  79. 79. Hair Oil 240 13898.4 CShower Gel 192 12706.56 AHair GelBody SplashHair CreamShampooLotionsTotal 432 26604.96November 2009BRAND NAME CONSUMPTION VALUES IN RS GRADING Nov-2009-Qnty Nov-2009-AmtAHSANPerfume Oils 1,15,104 1394237.39 CEau De Parfum 26,496 1147129.2 AEau De Toilette 1,872 55748.16 BTotal 1,43,472 2597114.75TARAItem GroupEau De Parfum 500 13160 BHair Oil 1,680 45901.54 ATalcum Powder 29,184 310958.79 CEau De ToiletteTotal 31364 370020.33SILENT VELLYItem GroupHair Oil
  80. 80. Shower GelHair Gel 360 12110.4 CBody Splash 144 6194.88 BHair CreamShampoo 192 13607.04 ALotions 144 4368.96 CTotal 840 36281.28December 2009BRAND NAME CONSUMPTION VALUES IN RS GRADING Dec-2009-Qnty Dec-2009-AmtAHSANPerfume Oils 1,72,064 1907591.01 CEau De Perfume 55,660 2106838.02 AEau De Toilette 6,864 237369.6 BTotal 2,34,588 4251798.63TARAItem GroupEau De Perfume 5,040 234864 AHair Oil 5,184 147699.05 BTalcum Powder 18,000 280614.5 CEau De ToiletteTotal 28,224 663177.55SILENT VELLY
  81. 81. Item GroupHair OilShower GelHair GelBody Splash 2,592 111442.03 AHair CreamShampooLotionsTotal 2592 111442.03January 2010BRAND NAME CONSUMPTION VALUES IN RS GRADING Jan-2010-Qnty Jan-2010-AmtAHSANPerfume Oils 1,08,288 1063524.96 CEau De Perfume 27,044 1055093.44 AEau De Toilette 3,552 115244.16 BTotal 1,38,884 2233862.56TARAItem GroupEau De Parfum 6,240 290784 AHair Oil 4,560 107697.73 BTalcum Powder 78,600 787035.53 CEau De ToiletteTotal 89,400 1185517.26SILENT VELLYItem GroupHair OilShower GelHair GelBody Splash 1,944 83671.21 A
  82. 82. Hair CreamShampooLotions 2,160 68673.41 CTotal 4104 152344.62
  83. 83. FINDINGSCompany is maintaining zero safety stock it cause production loss.The inventory turnover is in decreasing order in 2008-09 it is 3, but in 2009-2010 it is2.4.By ABC Analysis we can say that there is a little difference between A B & C class itemsso every product is important for company.There is positive correlation between sales to inventory.The percentage of raw material from total inventory is 23.94% in 2009 and 19.73% at2010.The percentage of finished goods, semi finished good, packaging material from totalinventory is 34% ,5%,37% in 2009 but in 2010 40%, 4%, 34%.Company’s aim to achieve more sale it may require huge amount of inventory in future.Company is concentrating on domestic market and first time they achieve the target of 10crore, that is good sign of establishment of domestic market.Economic order quantity (EOQ) in year 2009 is 109.526 units EOQ for year 2010 is320.76 units, it shows that company can place more orders at one time.There is good relationship between company and their distributors, vendors and salesexecutives.
  84. 84. SUGGESTIONS• There can be a system where in periodical review (twice in a month) of inventory could be carried out so that the inventory can be kept under control.• There should be periodical review of movement of items so that any non moving items can be identified and suitable action can be done.• At present the company is maintaining zero safety stock for all items, if the safety stock is maintained for important items, delay in production can be eliminated and orders can be supplied in time which will result in a better credibility in both international and domestic market.• It has been predicted that if company is planning to achieve more sale it may require huge amount of inventory in future. So the company has to arrange capital to meet future requirement.• It is suggested that they can have close monitoring of receipts and issue for A class items in order to have control of inventory.• To increase the inventory turnover ratio by increasing the sales level and maintaining the required level of inventory.• To maintain the Re-order level, Min-stock level and Economic order quantity company should consider the demand of the product.• There should be proper communication between purchase and production department.• There is no communication from dispatch section to store department, about quantity wasted. Feedback about the quantity wasted will help the store department to forecast future requirements and to focus on minimum possible waste.
  85. 85. • Improve the minimum value of product C up to 5%-8% in total sale value by increasing market level of these products. It helps to get min return on investment in these products as soon as possible.• There is one warehouse for keeping the finished good and packaging material and packaging material are not arranged in good manner so it should be in order wise.
  86. 86. CONCLUSION“Inventory control is exercise when you order an item. If you do a poor job then everything afteris inventory correction” GORDON GRAHAMInventory is the physical asset of a company that can create problem if there is shortage, while inproduction and also if it’s in excess even after production. Inventory is constantly changing asquantities are sold and replenished.Hence it can be understood that efficient inventory management can take the company to newheights and inefficient inventory management can ruin the company.Company is highly concentrated on domestic market, it increase the market level of companybecause trend of domestic market is changing.The study on Inventory management in SFP Sons (India) Pvt. Ltd about A BC analysis for itemsis predicting future inventory requirements etc.From the study it is predicted that future sales have to be achieved and inventory level have to bemaintained.ABC Analysis was carried out to identify the fast moving and important items.The company has to periodically review the inventory to avoid production loss.The results of the study can be further extended for future research.BIBLIOGRAPHY
  87. 87. ϕ Financial Management- Theory And Practice- Prasanna Chandra ϕ Management Accounting- R.K. Sharma and Sashi. K. Gupta ϕ Financial Management – I. M. Pandey Ninths Edition ϕ Financial Management –S.C.Kuchhal ϕ MATERIAL MANAGEMENT BOOK – BY RAJENDRA MISHRA ϕ OPERATION AND PRODUCTION PLANNING BOOK ϕ LOGISTICS MANAGEMENT – BY K. SHRIDHARA BHAT ϕ MATERIAL MANAGEMENT – BY S. D. APHALE ϕ PRODUCTION AND MATERIAL MANAGEMENT- P. SARVANAVEL ,S. SUMATHI • WWW.INVENTORY .COM • WWW.INVESTOPEDIA.COM • WWW.WISEGEEK.COM • www.mbaguys.netRajeev Gandhi quality award
  88. 88. Product Profile
  89. 89. Different Brands Manufactured by SFP :
  90. 90. • Pour Homme• Pour Femme • Creams• Magic ○ Antidandruff Night ○ Coconut• Body Mist ○ Herbal ○ Clean Effect ○ Dazzling ○ In Control • Hair Gels ○ Podium ○ Extra Hold ○ Urban Colours ○ Mega Hold ○ Stressed Out ○ Regular Hold ○ Wake Up ○ Styling ○ Fresh Up ○ Wet Look ○ Dazzling • Shower Gels ○ Nutritious ○ Aleo Vera• Lotion ○ Lemon ○ Energizing Rose ○ Rose ○ Firming Olive ○ Herbal ○ Relaxing Aloe Vera • Shampoos ○ Revitalizing Almond ○ Aloe Vera ○ Slimming Multi Vitamin ○ Anti Dandruff Toning Musk ○ Herbal Almond ○ Lemon Rose • Hair Oils• Cleansing Lotion ○ Jasmine