This document discusses several questions related to inventory management practices of modern retailers like Pantaloon. It addresses how the traditional EOQ model is no longer valid given changing customer demands. It also examines whether ABC classification can still be useful for Pantaloon given its implementation of RFID tracking. The document also provides suggestions for how Kishore Biyani can further reduce lead times and what local small retailers can do to compete against big players. Finally, it defines the inventory turnover ratio and its significance in measuring sales velocity and inventory levels.

1. PANTALOON CASE
Group 6

2. QUESTION 1
 The traditional retailer’s model of inventory
management(EOQ) seems to be rendered obsolete
by contemporary retails stores such as Pantaloon.
Discuss.

3. The EOQ Model is valid under the following assumptions:
 The rate of demand is known, constant and spread evenly
throughout the year.
 Order quantity remains fixed.
 Purchase price of the item is constant i.e., no quantity
dicounts
 The lead time is fixed.
Present scenario of Indian retail:
 Ever changing customer preferences 
(i) order quantity cannot be fixed
(ii) Rate of demand might not be known
 Product lifecycle has become shorter

4. QUESTION 2
 Is there a scope of applying the ABC classification
of inventory in the modern retails stores?

5.  ABC classification is based on annual consumption and
annual value of the items.
 We obtain the quantity of inventory item consumed during the
year and multiply it by unit cost to obtain annual usage cost.
 Then items are arranged in descending order of annual usage
cost.
 Pantaloon has already implemented the RFID project, which
has enabled Pantaloon to:
 Track information like purchase and delivery orders.
 Real time visibility of items during all stages is now possible
easily.
 The quantity of inventory item consumed can easily be
tracked and other related info can be extracted from the RFID
technology being used. Therefore, ABC can be applied.

6. QUESTION 3
 What should Kishore Biyani do further to match
Spanish retailer Zara’s 15 day lead time?

7.  Have his own factories
 Faster manufacturing
 Accurate forecasting of what all trends would be
coming in market.
 Ensure fast arrival of fresh stock

8. QUESTION 4
 What should ‘local small retailers’ do to safeguard
themselves from the onslaught of big players such
as Pantaloon?

9.  Cater to specific needs of the locality by offering
products specific to the locality.
 Increase variety - Increase the width of the products
being offered.
 Avoid inventory pile ups of items less in demand.
 Agility - be responsive to the fast changing consumer
needs.
 Track inventory regularly to analyze buying patterns of
consumers and to replenish inventory at the right time.

10. QUESTION 5
 Discuss the significance of Inventory turnover ratio
in Inventory Management.

11. INVENTORY TURNOVER RATIO - SIGNIFICANCE
 Inventory Turnover ratio = _____ Sales______
Inventory
 This ratio shows how many times a company’s
inventory is sold and replaced over a period.
 A high turnover ratio  strong sales and low
inventory pileup
 A low turnover ratio  poor sales and high
inventory pileup