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Submitted By:
Pawan Thakar
will be always need for improvement. Apart from this, I hope this
*Introduction of Company
* Company Profile
* History
* Board of Directors
* Awards
* Products
* Research Methodology
PART- II
* Data Collection
* Financial Statements
* Conclusions
* Bibliography
OBJECTIVE OF THE STUDY
Pharmaceutical
The Pharmaceutical segment includes products in the following therapeutic
areas: anti-infective, antipsychotic, cardiovascular, contraceptive,
dermatology, gastrointestinal, hematology, immunology, neurology,
oncology, pain management, urology and virology. These products are
distributed directly to retailers, wholesalers and health care professionals
for prescription use. Key products in the Pharmaceutical segment include:
REMICADE (infliximab), a biologic approved for the treatment of a number
of immune mediated inflammatory diseases; PROCRIT (Epoetin Alfa, sold
outside the U.S. as EPREX), a biotechnology-derived product that
stimulates red blood cell production;
LEVAQUIN (levofloxacin) in the anti-infective field; RISPERDAL CONSTA
(risperidone), a long-acting inject able for the treatment of schizophrenia;
CONCERTA (methylphenidate HCl), a product for the treatment of
attention deficit hyperactivity disorder; ACIPHEX /PARIET , a proton
pump inhibitor co-marketed with Eisai
Inc.; DURAGESIC /Fentanyl Transdermal (fentanyl transdermal system,
sold outside the U.S. as DUROGESIC ), a treatment for chronic pain that
offers a novel delivery system; VELCADE (bortezomib), a product for the
treatment for multiple myeloma; PREZISTA (darunavir) for the treatment
of HIV/AIDS patients; and INVEGA (paliperidone), a once-daily atypical
antipsychotic.
Geographic Areas
The international business of Johnson & Johnson is conducted by
subsidiaries located in 59 countries outside the United States, which are
selling products in virtually all countries throughout the world. The products
made and sold in the international business include many of those
described above under “— Segments of Business — Consumer,”“—
Pharmaceutical” and “— Medical Devices and Diagnostics.” However, the
principal markets, products and methods of distribution in the international
business vary with the country and the culture. The products sold in
international business include not only those developed in the United
States, but also those developed by subsidiaries abroad.
Investments and activities in some countries outside the United States are
subject to higher risks than comparable U.S. activities because the
investment and commercial climate is influenced by restrictive economic
policies and political uncertainties.
Raw Materials
Raw materials essential to Johnson & Johnson’s operating companies’
businesses are generally readily available from multiple sources.
Environment
Johnson & Johnson’s operating companies are subject to a variety of U.S.
and international environmental protection measures. Johnson & Johnson
believes that its operations comply in all material respects with applicable
environmental laws and regulations. Johnson & Johnson’s compliance with
these requirements did not during the past year, and is not expected to,
have a material effect upon its capital expenditures, cash flows, earnings or
competitive position.
Regulation
Most of Johnson & Johnson’s businesses are subject to varying degrees of
governmental regulation in the countries in which operations are conducted,
and the general trend is toward increasingly stringent regulation. In the
United States, the drug, device, diagnostics and cosmetic industries have
long been subject to regulation by various federal and state agencies,
primarily as to product safety, efficacy, manufacturing, advertising, labeling
and safety reporting. The exercise of broad regulatory powers by the FDA
continues to result in increases in the amounts of testing and
documentation required for FDA clearance of new drugs and devices and a
corresponding increase in the expense of product introduction. Similar
trends are also evident in major markets outside of the United States. The
costs of human health care have been and continue to be a subject of
study, investigation and regulation by governmental agencies and
legislative bodies around the world. In the United States, attention has been
focused on drug prices and profits and programs that encourage doctors to
write prescriptions for particular drugs or recommend, use or purchase
particular medical devices. Payers have become a more potent force in the
market place and increased attention is being paid to drug and medical
device pricing, appropriate drug and medical device utilization and the
quality and costs of health care. The regulatory agencies under whose
purview Johnson & Johnson’s operating companies operate have
administrative powers that may subject those companies to such actions as
product withdrawals, recalls, seizure of products and other civil and criminal
sanctions. In some cases, Johnson & Johnson’s operating companies may
deem it advisable to initiate product recalls. In addition, business practices
in the health care industry have come under increased scrutiny, particularly
in the United States, by government agencies and state attorneys general,
and resulting investigations and prosecutions carry the risk of significant
civil and criminal penalties.
PROPERTIES
Johnson & Johnson and its subsidiaries operate 143 manufacturing facilities
occupying approximately 21.4 million square feet of floor space. The
manufacturing facilities are used by the industry segments of Johnson &
Johnson’s business approximately as follows:
Available Information
Square Feet
(in Segment thousands)
Consumer 6,825
Pharmaceutical 6,369
Medical Devices and Diagnostics 8,251
Worldwide Total 21,445
Within the United States, 7 facilities are used by the Consumer segment, 12
by the Pharmaceutical segment and 37 by the Medical Devices and
Diagnostics segment. Johnson & Johnson’s manufacturing operations
outside the United States are often conducted in facilities that serve more
than one business segment.
The locations of the manufacturing facilities by major geographic areas of
the world are as follows:
Russell C. Deyo
Member, Executive Committee; Vice President, Human
Resources and General Counsel (b)
Colleen A. Goggins
Alex Gorsky
Member, Executive Committee; Worldwide Chairman, Medical
Devices and Diagnostics Group (d)
Sherilyn S. McCoy
Member, Executive Committee; Worldwide Chairman,
Pharmaceuticals Group (e)
William C. Weldon
Chairman, Board of Directors; Chairman, Executive
Committee; Chief Executive Officer
History
Robert Wood Johnson, inspired by a speech by antisepsis advocate
Joseph Lister, joined brothers James Wood Johnson and Edward Mead
Johnson to create a line of ready-to-use surgical dressings in 1885. The
company produced its first products in 1886 and incorporated in 1887.
RWJ's granddaughter, Mary Lea Johnson Richards, was the first baby to
appear on a J&J baby powder label. His great-grandson, Jamie Johnson,
made a documentary called Born Rich about the experience of growing up
as the heir to one of the world's greatest fortunes.
Since the 1900s, the company has pursued steady diversification. It
added consumer products in the 1920s and created a separate division for
surgical products in 1941 which became Ethicon. It expanded into
pharmaceuticals with the purchase of McNeil Laboratories, Inc., Cilag, and
Janssen Pharmaceutical, and into women's sanitary products and toiletries
in the 1970s and 1980s. In recent years, Johnson & Johnson has expanded
into such diverse areas as biopharmaceuticals, orthopedic devices, and
Internet publishing. Recently, Johnson & Johnson has purchased Pfizer's
Consumer Healthcare department. The transition from Pfizer to Johnson and
Johnson was completed December 18, 2006.
Johnson & Johnson has been consistently named one of the 100 Best
Companies for Working Mothers by Working Mother.
Along with Gatorade, Johnson & Johnson is one of the founding sponsors of
the National Athletic Trainers' Association.
Almost a century later, Ethicon produces much more than sutures. We have
continuously introduced innovations in all areas where we focus our
expertise including: wound closure; general surgery; biosurgery; women’s
health, and aesthetic medicine. While a lot has changed in healthcare, one
thing has not: Ethicon remains committed to developing the best surgical
solutions to help doctors heal both the wounds you can see and the ones
you can’t. Innovations that Restore Bodies...and Lives. How do we do it?
How do we stay on the cutting edge of science? By way of our greatest
asset: the talented, highly educated, experienced group of professionals
who work at ETHICON - 8,500 gifted professionals around the world come
together every day to advance, innovate, and respond to their customers’
needs. Our commitment to fulfilling the needs of surgeons and their
patients, of transforming surgery, of helping patients heal faster and more
safely is never ending. And so our work must be, too.
Ethicon has a legacy all its own. But we’re part of a broader heritage,
too. As a member of the Johnson & Johnson Family of Companies, we’re
guided by Our Credo: company values that empower all of our employees to
consider first the needs of our customers and patients we serve and to
improve the health, education, and quality of life in the communities where
we work and live.
Caring for the world, one person at a time… inspires and unites the
people of Johnson & Johnson. We embrace research and science - bringing
innovative ideas, products and services to advance the health and well-
being of people. Our 119,400 employees at more than 250 Johnson &
Johnson companies work with partners in healthcare to touch the lives of
over a billion people every day, throughout the world.
Aurangabad
In 1943 our chairman Robert Wood Johnson wrote Our Credo, outlining
our responsibilities to doctors, nurses, patients, consumers,
employees, and the community. During this period we also continued
our overseas growth and began to broaden our efforts in
pharmaceuticals and medical products.
• We expanded into Mexico, South Africa, Australia, France,
Belgium, Ireland, Switzerland, Argentina, and Brazil.
• We introduced MODESS sanitary napkins and JOHNSON’S Baby Oil
and Baby Lotion. We also launched the first U.S. prescription birth
control product, ORTHO GYNOL Gel, in 1931.
• In 1944 we became a publicly traded company.
2. Accounts departments
3. Purchase departments
4. Store department
6. IT department
7. R&D Department
4. Supplies inventory.
INTRODUCTION:
MEANING OF INVENTORY:-
NATURE OF INVENTORIES:-
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:-
FINISHED GOODS:-
SUPPLIES:
MANAGEMENT OF INVENTORY
Inventories constitute the principal item in the working capital of the majority
of trading and industrial companies. In inventory, we include raw materials,
finished goods, work-in-progress, supplies and other accessories. To maintain
the continuity in the operations of business enterprise, a minimum stock of
inventory required. However, the physical control of inventory is the operating
responsibility of stores superintendent and financial personnel have nothing
to do about it but the financial control of these inventories in all lines of
activity in which they comprise a substantial part of the current assets is a
frequent problem in the management of working capital. Management of
inventory is designed to regulate the volume of investment in goods on hand,
the types of goods carried in stock to meet the needs of production, and sales
while at the same time, the investment in them is to be kept at a reasonable
level.
CONCEPT OF INVENTORY MANAGEMENT
The term inventory management is used in two ways- unit control and value
control. Production and purchase officials use this word in term unit control
whereas in accounting this word is used in term of value control. As
investment in inventory represents in many cases, one of the largest asset
items of business enterprises particularly those engaged in manufacturing,
wholesale trade and retail trade. Sometimes the cost of material used in
production surpasses the wages and production overheads. Hence, the proper
management and control of capital invested in the inventory should be the
prime responsibility of accounting department because resources invested in
inventory are not earning a return for the company. Rather, on the other
hand, they are costing the firm money both in terms of capital costs
being incurred and loss of opportunity income that is being foregone.
OBJECTIVES OF INVENTORY
MANAGEMENT
B. Financial Objectives:
TYPES OF INVENTORY
Supplies
Demand
Inventory in
Hand place
Orders
Purchase
dep’t.
Inventory cycle
CONTROL OF MATERIALS:
Rigid control over materials are necessary not only to guard against theft,
but also to minimize waste and misuse from causes such as excessive
inventories, over issue, deterioration, spoilage, and obsolescence. There are
certain prerequisites to an effective control system for materials:
ESSENTIAL OF INVENTORY
CONTROL SYSTEM
For an efficient and successful inventory control there are
certain important conditions that are as follows:
(1) Classification and Identification of inventories: The
usual inventory of manufacturing firm includes raw-
material, stores, work-in-progress and component etc. To
facilitate prompt recording the dealing, each item of the
inventory must be assigned a particular code number and it
must be classified in suitable group or sub-divisions. ABC
analysis of material is very helpful in this context.
(2) Standardization and simplification of inventories:
In order to facilitate inventory control, the inventory line should
be simplified. It refers to the elimination of excess types and
sizes of items. Simplification leads to reduction in classification
of inventories and its carrying costs. Standardization, on the
other hand, refers to the fixation of standards of raw material to
be purchased and specification of the components and tools to
be used.
(3) Setting the Maximum and Minimum limits for each
part of inventory: The third step in this process is to set the
maximum and minimum limits of each item of the inventory. It
avoids the chances of over-investment as well as running a
short of any item during the cost of producing. Reordering point
should also be fixed beforehand.
TECHNIQUES OF INVENTORY
CONTROL
(a) Lead time i.e. time lag between intending and receiving the
material.
But if normal usage and normal lead time is not known then
average usage will be treated as normal usage and average re-
order will be treated as normal re-order period.
(b) Ordering Period: The time taken in preparing the order for
purchase of material is called ordering period. In some concerns
this period may be significant but in large concerns this period is
significant because before placing the order the purchase
manager has to trace out the best suppliers, after that only he
places the order.
Situation2:
When rate of usage is known with certainty and lead time is also
known but is variable:
When the rate of usage and lead time are known and are
variable;
Danger Level
Ordering costs increase with the number of order; thus the more
frequently inventory is acquired, the higher the firm’s ordering
costs. Ordering costs decrease with increasing size of inventory.
1200
1000
800
Q/2
600
Stock 400
200
50
0 2 4 6 8 10 15
Time
Order size
TOC = AO/ Q
2 2
TCC = Qc
2
The total inventory cost, then, is the sum of total carrying
and ordering costs:
TC = Qc + AO
2 Q
Equation (4) reveals that for a large order quantity, Q, the carrying
cost will increase, but the ordering costs will decrease. On the
other hand, the carrying costs will be lower and ordering cost will
be higher with the order quantity. Thus, the total cost function
represents a trade-off between the carrying costs and ordering
costs for determining the EOQ.
Carrying cost
EOQ = 2AO
C
Graphic approach:
Minimum total
Cost
Carrying cost
Costs ordering cost
Reorder Point:
Safety stock:
The carrying costs are the costs associated with the maintenance
of inventory. Since the firm is required to maintain additional
inventory, in excess of the normal usage, additional carrying costs
are involved.
Max. Inventory
Average usage
EOQ
Avg. inventory----------------------------------------------------
Re-order point-----------------------------------------------------
max.usage
The ‘B’ group will consist of the items accounting for the next
largest investment.
The ‘C’ group will consist of a large number of items of inventory
accounting for small investment.
The ‘C’ items can receive the minimum attention: they will
probably be ordered in large quantities in order to obtain them
at the lowest price.
Materials inventory-opening
+ Purchases
VALUATION OF INVENTORIES
OBJECTIVE:
DEFINITIONS
3. Cost of Inventories
The cost of inventories should comprise all costs of purchase,
costs of conversion and other costs incurred in bringing the
inventories to their present location and condition.
4. Costs of Purchase
The costs of purchase consist of the purchase price including
duties and taxes (other than those subsequently recoverable by
the enterprise from the taxing authorities), freight, inwards and
other expenditure directly attributable to the acquisition. Trade
discounts, rebates, duty drawbacks and other similar items are
deducted in determining the costs of purchase.
5. Costs of Conversion
The costs of conversion of inventories include costs
directly related to the units of production, such as direct
labour. They also include a systematic allocation of fixed and
variable production overheads that are incurred in converting
materials into finished goods. Fixed production overheads are
those indirect costs of production that remain relatively
constant regardless of the volume of production, such as
depreciation and maintenance of factory buildings and the cost
of factory management and administration. Variable production
overheads are those indirect costs of production that vary
directly, or nearly with the volume of production such as indirect
materials and indirect labour.
16. The retail method is often used in the retail trade for
measuring inventories of large numbers of rapidly changing
items that have similar margins and for which is impracticable
to use other costing methods. The cost of the inventory is
determined by reducing from the sales value of the inventory
the appropriate percentage gross margin. The percentage used
takes into consideration inventory which has been marked down
to below its original selling price. An average percentage for
each retail department is often used.
17.The cost of inventories may not be recoverable if those
inventories are damaged, if they have become wholly or
partially obsolete, or if their selling prices have declined. The
cost of inventories may also not be recoverable if the estimated
costs of completion or the estimated costs necessary to make
the sale have increased.
22. Disclosure.
PRIMARY DATA –
) Includes reserve for customer rebates of $729 million, $721 million, $710
(1
Total sales
Inventory turn over ratio =
Average inventory
The sale of J&J in year 2007 is 720 million & its investment
on inventory is 126 million.
May
12 10 2.4 240 90 - 199
00 0 0 00 40
24 3 2.0 600 12 - 259
0 0 0 00 40
0 0
0
Jun
10 10 2.4 240 11 - 235
00 0 0 00 40
0
30 2 2.0 404 13 - 275
0 2 0 00 80
0 0
0
Total 1 2.1 417 16 - 351
9 9 00 00 40
0 0
0
0
Where @ is 1000 2.21 2210
Interpretation -
Q R A Q R A Q A
300 9 2700 0
Interpretation:-
The value of inventory under periodic & perpetual inventory system is
different. The value of inventory under perpetual system is more than
periodic system
Re-order period
= 975 units
= 267 units
= 1028 units
Quantity
= 267 units + ½ * 878 units
= 706 units
Interpretation of result : -
1. After calculation the re-order level of J&J is 975 units but the actual re-
order quantity is 878 units.
2. The minimum stock level of J&J is 267 units.
3. The maximum stock level of J&J is 1028 units.
4. The average stock level must be 706 units.
500 0 0 0 0 0
50 2000 0.04 80
Expected stock out cost == stock out cost * probability of stock out .
PROBLEMS AND
SUGGESTIONS
PROBLEMS FACED BY THE ORGANITION
4. Store manager give the proper knowledge about engineering & raw
materials.
CONCLUSION
The goal of the wealth maximization is affected by the efficiency with
which inventory is managed. Inventories constitute about 60% of
current assets of companies in India. The manufacturing companies
hold inventories in the form of raw materials, work in progress and
finished goods. Inventories facilitate smooth production and sales
operation (transaction motive), to guard against the risk of
unpredictable changes in usage rate and delivery time (precautionary
motive), & to take advantage of price fluctuations (speculative
motive).
Respondents):-
1 30 percent of the officials belong to the age group of 35 and 50
qualifications
administrative posts.
Interpretation:
The awareness level among the company officials regarding the
system is high that is 75 per cent, as per the result of the study.
management system?
80%
70%
60%
50%
40% Yes
30% No
10%
0%
Yes 72%
No 20%
Do not know/Can Not say 8%
Interpretation:
respondents who are either not aware or not able to provide any
company?
cent
cent
per cent
cent
cent
Interpretatio
n:
evolved?
Strongly Agree -------------------------------------- 20 per cent
Interpretatio
n:
From the above response, it appears that the inventory
which it was in place. This is evident from the 67 per cent of the
per cent
cent
cent
cent
cent
Interpretatio
n:
inventory management?
50%
45%
40%
35%
30%
25% Yes
20% No
15%
Do not know/Can Not say
10%
5%
0%
Yes 48%
No 30%
Do not know/Can Not say 22%
Interpretatio
n:
inventory?
35%
30%
25%
20%
Skilled and trained
15%
Only skilled but not
10% trained
management?
details management.
Interpretation:
needs.
cent
per cent
cent
cent
Interpretatio
n:
Lack of availability of trained professionals coupled with
your company?
per cent
per cent
cent
cent
Interpretation:
Bibliography
• Advanced Accountancy
Ninth Edition
S N Maheshwari, S K Maheshwari
• Financial Management
Ninth Edition
I M Pandey
• Management Accounting
Third Edition
M Y Khan, P K Jain