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A study of Inventory Management

PART-A
1.

INDUSTRY PROFILE

History of Textile or cloths can be drawn back to the dawn of civilization as understandable. Textile word comes from Latin textiles which means women. The term comes from verb texture to weave in textile since, however a textile is freely defined as any product any product made from fiber. People no longer buy cloths to keep their body warm and cozy. They buy them because of the way fabric makes them feel masculine, feminine, young, glamorous, different etc. buying cloths has become an emotional experience. Business of textiles market now is selling excitement rather than clothing. It is well known that textile industry is one of the oldest and the largest industry in the world. From ancient eras until the eighteenth century, all fabrics were constructed and decorated by hand weaving which was organized at home or in small workshops. Some artist weavers of those centuries achieved great skills and many surpassed such beautiful examples as oriental carpets and rags, huge tapestries, porting intricate scenes and early Coptic textile, now hang in museum all over the world as measured exhibits. Textile industry represents the rich culture, tradition, heritage and economic well-being of country with diversified range and versatility. At the same time industry is competitive enough to fulfill different demand patterns of domestic and global markets.

Textile Industry in India


India Textile Industry is one of the leading textile industries in the world. Though was predominantly unorganized industry even a few years back, but the scenario started changing after the economic liberalization of Indian economy in 1991. The opening up of GSSSIETW, Dept of MBA ,MYSORE Page 1

A study of Inventory Management economy gave the much-needed thrust to the Indian textile industry, which has now successfully become one of the largest in the world. Textile industry in India provides great contribution for the development of economy. It is the second largest industry in the world after china. It provides ample employment opportunities to people belonging to all classes. After agriculture this provides employment to maximum number of people in India employing 35 million people. India textile industry largely depends upon the textile manufacturing and export. It also plays a major role in the economy of the country. India earns about 27% of its total foreign exchange through textile exports. Further, the textile industry of India also contributes nearly 14% of the total industrial production of the country. It also contributes around 3% to the GDP of the country. India textile industry is also the largest in the country in terms of employment generation. It not only generates jobs in its own industry, but also opens up scopes for the other ancillary sectors. India textile industry currently generates employment to more than 35 million people. It is also estimated that, the industry will generate 12 million new jobs by the year 2012. India textile industry is one of the leading in the world. Currently it is estimated to be around US$ 52 billion and is also projected to be around US$ 115 billion by the year 2012. The current domestic market of textile in India is expected to be increased to US$ 60 billion by 2012 from the current US$ 34.6 billion. The textile export of the country was around US$ 19.14 billion in 2006-07, which saw a stiff rise to reach US$ 22.13 in 2008-09. The share of exports is also expected to increase from 4% to 7% within 2012. Following are area, production and productivity of cotton in India during the last six decades. If there is any industry, which is truly representative on India in all its hues, contracts unity, conflicts, history and enterprise hard work- it is the textiles. The very first textile mill was started in India in 1854 with the establishment of Bombay spinning and weaving mills. Till 1920 the total extension of textile industry was concentrated around Mumbai but gradually it spread all over India. A major role is being GSSSIETW, Dept of MBA ,MYSORE Page 2

A study of Inventory Management played by textile industry constitutes around 9% of GNP, and the export of textile constitutes 35% of the total export earnings. Looking at the ancient history from the economies, social or simply physical angles and comparing it to the way it operates, elsewhere in the world one cannot fail to how in this country. Be it in the Vedic, mogul, British or the current democratic era, our textile industry has not only drawn rich lessons from each of them extensively, but also has even kept pace with the changing times. Presently the Indian textile has grown at phenomenal pace and today it accounts for 25% of the total exports from the country. Similarly, the RMG export sector is the thrust area of export contribution, up to 8% of total export from India. Today when the nation is facing financial crisis, the role of the textile industries become more important in increasing export from the country and earns valuable foreign exchange. More than one core of persons are connected with textile industry and earns their livelihood. It constitutes 25% to countrys industrial production.

Current Facts on Indian Textile Industry


India retained its position as worlds second highest cotton producer. Acreage under cotton reduced about 1% during 2008-09. The productivity of cotton which was growing up over the years has decreased in 2008-09. Substantial increase of Minimum Support Prices (MSPs). Cotton exports couldn't pick up owing to disparity in domestic and international cotton prices. Imports of cotton were limited to shortage in supply of Extra Long staple cottons.

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A study of Inventory Management

2. COMPANY PROFILE
2.1 BACKGROUND AND INCEPTION OF THE COMPANY
The S.Kumars Group was set up in 1948 by shri. Abhaya Kumar, S. Kaslival and shri. Shambhukumar S. kaliwal. It has been a forerunner in the industry for the last five decades and is regarded as one of the most reputed business houses in the country. The group established the S. Kumars brand, they set up a nationwide distribution network in the 1960s, a first textile companies to have ushered in the widespread use of polyester and polyester blends in the country. Reid & Taylor (India) Ltd. is a subsidiary of SKNL. Synonymous with British tradition, Reid & Taylor has been styling the world's elite for over 170 years. It all began in the 1830's with Alexander Reid, an enterprising Scottish gentleman, embarking on a journey to make his vision a reality. Using locally available Cheviot wool he created Cheviot cloth that soon caught on the fancy of the landed gentry. As the clientele and reputation grew, he was joined by financer Joseph Taylor. Thus, began the enduring partnership of creating finest cloths in the world, which today is better known as Reid & Taylor. Reid & Taylor continues the journey to create the finest fabric passionately and has thus carved out a distinguished name for itself in the industry. Reid & Taylor was launched by SKNL in India in 1998 with the inauguration of a state-ofthe-art fabric plant at Mysore. The discerning consumers in India now can experience international-quality garments in their own cities and towns. Today, Reid & Taylor has emerged as a leading brand in the worsted suiting segment. Reid & Taylor is the first brand in India to offer both fabrics and apparel under one label. The fine quality of garments and sharp styling has created a space for itself in the customers mind. The apparel range includes formal and casual daywear suits, jackets, trousers, shirts ties and accessories along with a wide selection of T-shirts, jeans, and other weekend wear.

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A study of Inventory Management Produced by Reid & Taylor at a dedicated facility in Bangalore, the apparel range upholds the finest tradition of quality and cuts in outfitting.
19 Textile business founded. 48 19 Pioneered the use of the S Kumars brand name in the textile trade 60 19 Established a nation wide distribution network. 70 19 Established textile manufacturing facilities at various locations. 80 19 Consolidated the Groups textile business by establishing S Kumars Synfabs ltd as the 90 flagship company for textile business. 19 Technology and Marketing collaboration with Reid & Taylor of Scotland. 95 19 Acquired a stake in Reid & Taylor of U.K, thereby acquiring usage of the Reid 96 brand name for the worsted fabrics range.

& Taylor

19 Commissioned a state of the art worsted computer near Mysore One of the best in the 99 world. 200 Setting up the most modern computer for high value fine cotton fabrics launching Ready to 0 wear apparels.

Environment Policy
1. Use of eco- friendly dyes and chemicals.

2. Integrated Effluent Treatment Plant; discharge maintains Greenbelt spread over 1,


15,000 square meters, comprising over 2000 trees.

3. Substantial water conservation through reuse of 300 KL/day (out of total


requirement of 750 KL/day) 4. Rain water harvesting in use. 5. Adhering to all State Pollution control Board norms. 6. ISO 14001 Certified Environmental system Management.

Quality Policy

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A study of Inventory Management 1. They are committed to be a world-class company by consistently designing and manufacturing suitings to the highest standards and customer expectations. 2. They shall operate in a just and ethical manner, providing opportunity to employees and associates to realize their potential to the fullest extent. 3. They are committed to comply with ISO 9001 and for continual improvement of the Quality Management System (QMS).

Human Resources

Competent, experienced team led by technocrats with average industry experience of 30 years. Right mix of youth and experience. Work force of over 1100 persons b) c) 96 officers, 51 junior officers and 30 trainees. 808 workmen.

a)

14 team leaders with 92 second line managers

Team trained in house for greater productivity. Team Reid & Taylor is respected across industry for innovation and productivity. Cordial employee relations and adequate training provided to enhance skills sets.

2.2 NATURE OF THE BUSINESS CARRIED


Reid and Taylor Industry belong to the allied group of the United Kingdom and have a heritage of over 150 years of excellence in the fabrics business. The Reid and Taylor product range is synonymous with hi-fashion premium clothing and superlative fabrics in the segment and the company is widely recognized as a world leader in fabrics for menswear.

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A study of Inventory Management With a plan for a major thrust in global textile markets, S. Kumars forged a strategic tieup with Reid and Taylor. As alliance, S. Kumars has made available to the Indian market a range of the worlds highest quality fabrics confirming to Reid and Taylor specifications. Reid and Taylor project is an Rs.245.71 crores project, envisaged as Indias most modern, best equipped and completely world-class fabric manufacturing facility. The Reid and Taylor is the brand focused towards the premium segment associated this brand with the icon of James Bond, Reid and Taylor had successfully promoted itself in the Indian sub- continent, a powerful multimedia blitz and had firmly established Reid and Taylor as the brand for people with class and style. Maintaining, synergy across brands and their markets is the centralized brand management department. Through this focus, the company continuously initiates new brand management strategies with the aim of maintaining brand dynamism in a competitive market scenario. The Reid and Taylor started its commercial production in the month of December 1998 with a production capacity of 50 lakhs meters per annum. The plant has 12,960 spindles and a captive power generating capacity of 7MW. All the machineries are imported from Germany, France, Italy, Switzerland and England. The range of products varies from medium to higher range. The 25% of its production is exported to foreign country like U.K., middle-east, Japan and U.A.E., etc. Over 1500 (approximately) design both export and domestics are being offered with blends of polyester wool 65:35, 40:55:45 and 100% wool. The company has provided employment opportunity to 1,200 workmen including staff and indirect employment to about 200 persons. The workmen are employed as company apprentice or training period of 2 years and over 95% of the workmen are recruited from in and around Nanjangudu and adjoining villages. Effluent treatment plant in textile industry for the usage of water per day of various processing. In their effluent treatment plant 100% of industry effluent is treated and after the treatment the treated effluent is used for gardening, Negotiation etc... The plant in fact is a zero discharge plant.

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A study of Inventory Management

2.3 MISSION STATEMENT


SKNL aims to be a model company incorporating the best work ethics and corporate governance. The companys mission is to grow extensively without compromising on quality. It aims to be amongst the top 3 players in every area of operations. It benchmarks achievements against international quality standards and every milestone achieved as the stepping- stone to the reach zenith. The company continues to pursue growth both organically and inorganically to contribute to the development of the Indian Economy. SKNL believes in fair play, thereby creating value for its stake holders, employees and customers to maximize shareholders value. Instilling in its employees, the need to offer best products and services to its consumers, SKNL has created a world class enterprise managed by seasoned professionals. SKNL will continue to operate in all product categories catering to different segments of the market. To blend modern technology with traditional values in our endeavor to be a word class Indian Company global. To provide every opportunity to our business associates and employees to realize their potential to their fuller extent. To pursue our goals in just and ethical manner. To ensure the consumer remains the focal point of all our activities by offering him high value for money.

Business Objectives

To be Indias leading textile group and a world class entity. To continue and expand the position in uniforms and workday materials. To consolidate and expand the position in shirtings and pants. To enter made-ups and value added products. To expand exports to 20% of group activity. Page 8

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A study of Inventory Management To enter relating of apparent and soft goods country wide in a big way. To become a global player in textile.

2.4 PRODUCTS/ SERVICE PROFILE


In 1830s Alexander Reid an enterprising Scottish gentlemen had a vision. Using locally available cheviot wool, he created cheviot cloth that soon was favored so much that he invited financier Joseph Taylor to join him, creating an enduring partnership that is known as Reid and Taylor. The mill won accolades and gold medals for its quality of fabric. It was and is in this pursuit of developing some of the finest cloth in the world that the Reid and Taylor have carved a very distinguished name for itself. Reid and Taylor exquisite clothes are made from the best wool in the world including Australian merino, lambs bale, the rare blue Ross- shire cheviot, Chinese Kashmir and most recently the incredible New Zelandbred Escorial. The Escorial wool today is so rare that Reid and Taylor make only 200 meters of this fabric- and always only on order. In June 1999 while the cricket world cup was on, it was Indias textile market that had caught the fever. After more than 20 years there was a new player in the worsted market. In million years of homes across the country, it was Reid and Taylor that eye from the many ads that were being aired. And the reason was Bond. James Bond. However, post the initial success there was some stagnation in the growth of the brand. The conclusion of brand research by A.C. Neilson was that the brand needed to reach a wider audience in India. That meant going beyond metros without losing the premium ness associated with the brand. The challenge required a brand ambassador, who is a style icon for Indians, is equally popular with both the masses as well as the elite and has a personally befitting the brand. Amitabh Bachchan clearly fits this role. In fact the deliberation phase, other names, too, was discussed but none was found to be as appropriate. The choice of Amitabh Bachchan as the new brand ambassador was unanimous. GSSSIETW, Dept of MBA ,MYSORE Page 9

A study of Inventory Management While it is too early to quantify the result the new campaign, business associates including the trade are extremely excited about Amitabh Bachchans another example of product innovation is the Reid and Taylor polyviscose range. Virtually crease proof, it aims at increased convenience and includes quality such as Zephyr, pearl, Mistral, and Vogue.

Market
The fabric market for menswear in India primarily comprises of polyviscose (PV) and polywool suiting fabric. While no retail audit has been conducted so far, industry estimates project the market in three main segments. At the top end the worsted (polywool) segment is estimated Rs. 12 billion while the total polyviscose market is projected at Rs. 80 billion of the total PV market the branded segment account for Rs.20 billion while the unbranded is worth approximately Rs.60 billion. Typically in India, unlike most developed countries, fabric is retailed across the counter. This is because custom tailoring in India significantly cheaper than in developed countries and the ready-to-wear segment is still not fully geared up. Reid and Taylor (a Scottish brand, based in Langholm) launched its Indian chapter in 1998 by setting up the state-of-the art plant at Mysore. This meant that international quality was now available customized for Indian conditions. This new initiates brought about renewed excitement in the worsted industry that was stagnating pre- 1998. The launch of Reid and Taylor is considered an important landmark in the Indian fabric industry. Today with a sales turnover of Rs.2200 million, Reid and Taylor has emerged as a clear number two in the worsted segment with an 18% market share.Reid and Taylor are growing at 25% per annum.

Products
GSSSIETW, Dept of MBA ,MYSORE Page 10

A study of Inventory Management Each bold of Reid and Taylor cloth is still made with the same painstaking attention to detail and minutiae that was established by its founders over 170 years ago. The advantages that it enjoys today are the availability and the innovative use of technology as well as state-of-art production processes. Reid and Taylor press them all into service. The brand has been able to get some of the worlds leading houses as clients an outstanding testimony to its policies of design and customization. Keeping certain factors in mind Reid and Taylor has developed a wide range of fabrics. Primary amongst these was the need to combat the misconception that worsted suiting is suitable only for winter. Reid and Taylors research and product development demonstrate that every meter of fabric produced by it can be worn and maintained with ease in any climate. With a clear understanding of major user segments and usage environments, the product offering has been created to exceed customer expectations, rewriting the rules with dynamic colors, attractive selvedge and competitive pricing.

A)Fabrics
Reid & Taylor fabrics are acclaimed for their high wear ability, ease of maintenance, and superior shape of retention. The range includes pure wool super fine fabrics made from fine merino fleece in high counts like 90s, 100s, & 130s, fabrics in wool / linen and wool / silk, wool/ silk/ polyester and other blends. The brand has recently launched high quality fine fabrics that include the super 230s, machine washable all wool fabrics and 100% cashmere suitings and jacketing fabrics. Reid & Taylor has also introduced blended fabrics like wool-silk, cashmere-cotton, bamboowool (70:30), cotton-wool(70:30) easy care all wool-high twist and machine washable, for special occasion.

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A study of Inventory Management The rare Escorial fabric is the worlds finest naturally grown wool and has been selected from the finest fleece measuring 16 micron or finer. Its natural spiral shape traps air and lends a remarkable elasticity, making the fabric wonderfully light, naturally flexible and stunningly erase resistant. Reid and Taylor manufacturers a wide range of worsted and premium suitings including:

All wool super fine Poly wool blends Wool cashmere blends Wool linen and wool silk polyester blends Polyester Viscose blends Polyester Viscose worsted Value added polyester viscose blends Wrinkle resistant suitings ECOFRESH suitings

B) Apparel
In the ready to wear segment, Reid & Taylor has launched suits, jackets, trousers and shirts under the label of Reid and Taylor legends, a range of fine formal clothing aimed at the premium segment. The Reid and Taylor leisure comprises.

Linen suits Cotton trousers Shirts T-shirts Golfing etc.

Promotion
Flying in the face of conversion is a habit with Reid and Taylor. Launching a worsted suiting brand in the middle of the Indian summer was considered inappropriate. Just GSSSIETW, Dept of MBA ,MYSORE Page 12

A study of Inventory Management before the start of the Cricket World Cup in 1999 Reid and Taylor did exactly that. The launch strategy and strategic association with James Bond. The role out was planned to perfection the media strategy and its reach, the advertising support and the radical trade promotion were all synchronized like a good military campaign. Each component was designed to ensure optimum utility. The truth is that even today, after all these years the James Bond blitz is remembered. Customers immediately connected with the brand position of Bond with the Best.

Advertising
The advertising campaign had many firsts, including a media strategy that used television as the thrust medium with press playing a secondary role. Shorter duration commercials ensured branding and clearly differentiated it from the other players in the market. Reid and Taylor collaborated with S. Kumars launched their fabric in May 1999. Most of the people were not aware of the product. Advertisements were making to promote the sales of their product. The advertising aspect i.e., regarding the advertising of Reid and Taylor is under taken by the parent company itself. As the company is a recently established on there is no separate advertising department in the company. Main objectives of Reid & Taylor behind advertisement are as follows

To create awareness Positioning the product in the market To separate in to the market To create completion To overcome the existing completion.

After they have determined their objectives the next question before them was how to advertise. They choose four main media to advertise the product that are as follows;

Television Print media Page 13

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A study of Inventory Management Hoardings Sales promotion After deciding the media in order to create awareness there next aim was to penetrate in to the market and positioning the product in the market. It was an important brand, which is already enjoying elite status expect India, and further company put word luxury to put in the image for the product in upper middle and upper classes people. The next question arises was who will be the brand ambassador? To make the image of high value product they search for the right icon. The problems before them was to select the celebrity or non-celebrity and finally they shoes Amitabh Bachchan as there icon or model they choose this person because of his class and attitude as, Reid & Taylor is a fabric of class, as they say Reid & Taylor Bond with best.

Advertising through Television


After selecting the right icon, they awaited for the right opportunity to advertise their product. Frequent advertisement were put in the television to capture the audience in large more and more people come to know about the product. The advertisement was not only shown in channels like DO and Star Plus, but also in other regional channels so that people can be aware of the product. As television acts as an important media through which the promotion of product is done, Reid and Taylor first advertise their product on television to create awareness among maximum number of people.

Print media
Print media is also one of the media, which helps in reaching the target audience. As most of the people are not in the habit of watching TV, Newspapers and other forms of print media acts as their close supplement. In this regard, Reid & Taylor selected a few of the popular dailies having wide circulation to put up their advertisements. In the earlier stages, GSSSIETW, Dept of MBA ,MYSORE Page 14

A study of Inventory Management they preferred full-page advertisements were put-up at the regular intervals. As the advertisement gained popularity the size of the advertisement was reduced to half a page. Their advertisement was also up in specialized paper like Economic Time and Financial Express. The advertisement were also exhibited in magazines like The Week, India Today, A and M, Frontline and others.

Outdoor Advertising
Hoardings are structures erected to carry advertisements. This is also one of the prominent forms of advertisements. Hoardings are cheaper forms of advertising when compared to TV and print media. Large sized hoardings in prime locations provide better publicity to the product. Reid & Taylor have displayed attractive and reasonable larger size hoardings in prime locations in order to gain the attention of people passing by. The hoardings exhibited by Reid & Taylors are bright and colorful. It carries the companys logo along with the slogan Bond with the Best

Visual Merchandising
Shop boards are another prominent form of advertising shop boards are large placards kept at prominent places in front of the shops. They are the most effective forms of advertisements as they influence the customers at the point of purchases. The shop boards used by Reid & Taylor are of two types. 1. Glow signboard 2. Posters The glow signboards use by Reid & Taylor are attractive and colorful, they are usually hanging boards. The glow signboards used by Reid & Taylor. Posters are large printed pictures displayed at prominent places inside the shops. The Posters used by Reid & Taylor are comparatively costlier when compared to those used by other textile industries. This is one the promotion strategy of Reid & Taylor to eliminate completion and gain popularity. GSSSIETW, Dept of MBA ,MYSORE Page 15

A study of Inventory Management

Distribution
The company adopts a three tied traditional form of distribution channel, it primarily comprises of agents wholesalers and Tag Retailers, apart from this the company also appoints direct retailers it also has exclusive showrooms. The percentage offered is as follows: Agents W/S - 3 percent on the net sales value - 25% on e mill + duty 10%

Direct Retailer- 40% to 50% on EX mill + duty 10% A company sponsored study revealed that Reid and Taylor enjoyed a high recall (80%) immediately after the 1999 Cricket World Cup. Live like Bond a nationwide consumer promotion was held in association with Reid and Taylor. In fact, agents and retailers have often found customers asking for the Amitabh-Wala suiting. Reid and Taylor have been uniquely positioned as a luxury suiting, differentiating it from the other so called premium suiting brands than available. Blending with the promise of Bond with the Best this positioning has created a unique brand and even today remains distinct and unchanged. In five years so far; the Reid and Taylor range has the width and depth to meet the growing demand of a mobile India. Today, it is available in more than 3,000 outlets and through twelve exclusive stores.

Management

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A study of Inventory Management The S. Kumars group is managed and direct by two generations of Kasliwal family, who founded it over fifty years ago. They provide entrepreneurial dynamism, vision and professional governance to the group; it has a sharply defined management structure with the team of seasoned professional is their own right constitutes supervisory board. And is responsible for identifying growth areas, planning, strategy, farming policies setting goals, monitoring operations and overseeing other key functions. The essence of the groups management stance, quite simply, consists of a sagacious combination of east and west: a harmonious blend of technology and tradition, todays imperatives balanced by yesterdays values. Progress is sacrosanct; equally, age-old virtues are scared. S. Kumars synfabs Ltd Today India Tomorrow the world.. More than 50 years it was founded S. Kumars finds itself among top few textiles companies in India, with a product mix which embraces virtually every kind of fabric, from polyester blended suitings and cotton suitings to home linen and wool suitings, it is also an exporter of many variety of fabrics and will soon emerge as a garment manufacture. It has textile manufacturing units in Dewas, Ghaziabad, Indore, Mumbai and Mysore wide distribution network, easily the biggest and organized in India.

2.5 AREA OF OPERATION GLOBAL / NATIONAL/ REGIONAL


It all began with a small trading company. In 1948, Mr. S.S. Kaslival and his elder brother Mr. A.S Kaslival set up S. Kumar and company in Mumbai to trade in textiles. Thereby planning the seeds of what is today, a large business group with a portfolio of activities ranging from textiles and power to leisure and information Tech services a diverse conglomerate, unified by a business.

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A study of Inventory Management Philosophy that lays particulars emphasis on fair play, corporate transparence and professionalism led by two generations of the Kasliwal family and professionally managed the group is a global player in textiles, with a growing presence in energy and power, ecommerce, Information Tech services, leisure, relating, garments, infrastructure development and Tyres, and is known popularly all over India, simply and successfully as S. Kumar.

Growing global
The last few years have seen a high degree of growth and diversification at S. Kumars and one of the major thrust areas has been globalization, a small beginning was made with acquisition of strategic take in Reid and Taylor, Scotland makers of the worlds most luxurious cloths for mens accessories as also open boutique in the U.S, thereby buttressing S. Kumars globalization objectives; in addition the group has plans to make several strategic investments in textiles in Europe, the CIS and U.S and Latin America. Perhaps, Asias most modern textile facility, setup in association with Reid and Taylor, Scotland, makers of the worlds most preferred wool worsted suiting, with an annual production capacity of 5 million miters. S. Kumars began exporting fabrics from India as far back as 1967 on today export a variety of fabrics, including home lines, chiefly to Europe and the Middle East; in pipeline are wool worsted and polyester/wool as a part of its effort to become world players in textiles.

2.6 OWNERSHIP PATTERN


BOARD OF DIRECTORS SHRI ANEES FAZALBHOY CHAIRMAN

MANAGING DIRECTOR GSSSIETW, Dept of MBA ,MYSORE Page 18

A study of Inventory Management NITHIN S. KASLIWAL ANIL CHANNA DEPUTY MANAGING DIRECTOR

A.K.CHOUDHARY M.H.KULKARNI

DIRECTOR (NOMINEE OF IDBI)

ANISH MODI DENYS FIRTH

DIRECTOR (NOMINEE OF INDIA DEBT MANAGEMENT PRIVATE LIMITED)

VIJAY KALANTRI MARTIN HENRY DARA D. AVARI COL.S.K. RAJE YOTHI N.KASLIWAL DIRECTORS

AUDITORS

M/S. HARIBHAKTI & CO.,

2.7 COMPETITORS INFORMATION


To understand Indias position among the textile producing countries, it is necessary to look at its export rates in detail. Although the textile industry contributes 9% of GDP & 35% of foreign exchange earnings, Indias share in global exports is only 3% (China

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A study of Inventory Management 13.75%). Expressed in US dollars, Indias exports value $10billion, in sharp contrast to Chinas $77 billion. While India is still concerned with its fine tuning policy, China seems to have its sights on a more strategic dimension. It is believed that China is vacating the commodity end comprising yarn & gray fabric, & moving into high value processed fabrics, with sizeable investments in value added processes. Meanwhile, India is still in the phase of upgrading at the commodity end. Indeed, an Indian textile delegation has scheduled a visit to China in March 2002 to scout for business opportunities in lower value intermediates.

Domestic competitors with their fast moving brands


1. Raymond. 2. Dig jam 3. OCM 4. Dinesh 5. Grasim

Table 1.1 Market Share of Different Domestic Companies in 2010


Percentage (In %) 51 21 9 5 5 2 7 100

Brands Raymond Reid & Taylor Digjam OCM Dinesh Grasim Others (BSL, J.Hamstede, etc.,) Total

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Table 1.2 Market Share of Different Domestic Companies in 2011


Percentage (In %) 60 25 15 100 The market share of Reid and Taylor brand

Brands Raymond Reid & Taylor Others (OCM, Grasim, Dinesh, Digjim) Total 2010 to 2011.

has been increasing from year to year. It has increased from 21% to 25% from the year

International Competitors
1. 2. 3. 4. 5. 6. 7. 8. 9. Bobby Jones Tehama Cutter & Buck Tommy Bahama Eagle Dry Goods Tricots St Raphael Colonel Littleton American Alligator The Presidential collection Armani

10. City Scarves 11. Enro 12. Peards Gourmet 13. Fly.

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2.8 INFRASTRUCTURE FACILITIES


About 40 acres of land purchased for the purpose of setting up a factory. The production Block is occupying about 10 acres of the area. The supply of electrical power from own DG house wherein 4 generator sets, of 2.5, 2.5, 1, 1, MW totaling 7.0 MW capacity. The steam to be supplied by two oil fired boilers. The total area covered for DG sets and Boilers about 3.5 acres. The effluent and the polluted water form out of the process to be treated in E.T.P, covering an area of about 4 acres. The man power recruitment for the plant is about 900 workers and 300 staff. The company is guarded 24 hours by 4 security supervisors and 32 guards. The guards are supplied by a security agency from Mysore.

2.9 ACHIEVEMENTS/ AWARDS


Reid and Taylor were launched in Indian in 1998. The worsted industry was then going through a phase of stagnation and was loaded with a number of established players. It was in this delicately poised environment that Reid and Taylor was launched. The launch, through a strategic association with James Bond, rekindled excitement in the market. Thanks to instant customer response and trade support the brand established itself as a leading player in the field. In 2002, a study conducted by A.C. Nielson revealed that Reid and Taylor enjoyed a high recall (84%)and was in the top three with an ad recall of 52% (source A.C. Nielson).

Recent Developments
Reid & Taylor manufactures suit lengths in 100s super fine merino fleece and superfine polyester, executive wears in 70s wool and polyester and other popular blends. The GSSSIETW, Dept of MBA ,MYSORE Page 22

A study of Inventory Management composition, too, is more adventurous. Linen Kraft is a unique combination of linen with 10%polyester for the unruffled look. Specially developed for ceremonial wear is Silk Ovation- a 100% silk fabric. Leading fashion trends are Crespo and Jet set which are both high twist fabric qualities. These have been developed especially to cater to the vast number who wants a clean silhouette and shapely drape. The James Bond film the world is not enough. The winners visited the locations of the film and lived in places where bond stayed. A best windows Display contest on the Bond theme was also held for retailers. The winners went to Thailand for a holiday including a visit to James Bond Island. Making the entire process more involving at the consumer level various promotions were held where buyers of Reid and Taylor received movie tickets, VCDs and other gifts. Within a year of launch, Reid and Taylor become the second most remembered brand in unaided recall. However certain issues crept up. To identify and address these, the company commissioned A.C. Nielson to do a national study. While aspiration scores were consistently high, relevance and empathy were lower than desired. Also in certain non-metros the sophistication parameter had led to Reid and Taylor being seen as an expressive suiting. Immediately after the research, the company developed alternative solutions. Given the brands success in the past with James Bond it was felt that the brand needed a suitable, high profile Indian personality. Amitabh Bachchan, who was finally selected as the brands ambassador, had achieved a brand fit score 9.5.

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2.10 WORK FLOW MODEL

Dying

Spinning

Weaving

Mending Finishing

A) Dying
The raw material what is got is usually white this has to be converted into different shades dyeing is the process by which the fibers will be dyed in different shades. There are 3 years of dyeing that is:

Top dyeing Fiber dyeing Yarn dyeing

In top dyeing the raw material that is polyester and wool are dyed separately and then blended. But in fiber dyeing the fibers is make it is dyed in yarn dyeing the yarn is dyed in GSSSIETW, Dept of MBA ,MYSORE Page 24

A study of Inventory Management required color. Fibers are dyed in respective shades keeping in mind the required blend of fabric i.e.55/45, 65/35, 40/60 i.e. polyester and wool are blended in different percentage as required.

B) Spinning
Spinning is a process where raw materials (polyester and wool) are converted into yarn. The spinning process comprises of three-sub process Re-combining Spinning preparatory Spinning

C) Weaving
Fabric is the final main product and weaving is the process of converting yarn into fabric. Fabric is just interring placement of yarn or thread in called WARP or ends and transverse threads are called WEFT or picks. The threads, which have to be separated individually and for this each thread is drawn through healed eye of the healed and all the healed together mounted on a shaft and there healed shafts can be mounted on loon where fabric is made. There are different count spun like 1/24, 1/32, 1/38, 1/48, 1/56, 1/60, 1/70, 1/80, etc. The yarn are said to be twisted into S or Z twist depending upon the direction. Clockwise direction of twist is S twist and anti-clockwise of twist is Z twist. The weaving process Shedding Opening of the wrap sheet, the wrap sheets have to be lifted as per the weave to insert the weft. One set of wrap is lifted and the other is kept down. Picking In section of weft through open sheet, as soon as the wrap sheet opens one rapier brings weft in the center and the other rapier takes up the weft to the other end. comprises of 3 different motions on the loom Primary motion

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Beat-up Beating weft to the fall of the fabric as soon as the second rapier reaches and of the fabric, the reed pushes the weft in the direction of the previous weft and insures the weave of the required thickness. Secondly Motion Let off: release of wrap in a fabric the weft should be arranged uniformly they should not be too tight or loose. After picking the wrap should advance to accommodate the next pick. Take up: take a fabric on the roller. This motion corresponds to the wrap has to have the required tension on the loom. So when the let off motion takes place the fabric is taken up on the roller. Auxiliary Motion Wrap stop Motion When any of the ends break the machine stops the drop wire on the wrap drops and completes a circuit tripping the machine. Weft stops Motion The mended fabrics are sent finishing. This is the process by which the fabric attains its own handle; aesthetic feel comforts etc. for this different chemical heat treatment are given. First of all the fabrics will have protruding fibers. A process called SINGEING removes these. Then the fabric has to be washed to remove dust, stains, and tint and to make it clean. When the weft breaks the machine stops in case of ample the yarn is wrapped on a Suzuki machine. After the completion of wrapping, the beam is taken to the weaving section where it is drawn manually, it is then fixed on the loom and the sample fabric is woven.

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D) Mending
The purpose of the marketing department is to identify and mend the faults/defects encountered in the fabric after weaving. The fabric is inspected in detail on the tables by the menders and the fault if mendable is mended after this one more check is done on the fabric, on the grey perch to check for any mendable fault. From here the fabric is given to the finishing department.

E) Finishing
The mended fabrics are sent finishing. This is the process by which the fabric attains its own handle; aesthetic feel comforts etc. for this different chemical heat treatment are given. First of all the fabrics will have protruding fibers. A process called SINGEING removes these. Then the fabric has to be washed to remove dust, stains, and tint and to make it clean.

2.11 FUTURE GROWTH AND PROSPECTS


A birds eye view into distant horizons The future plans includes expansions of home linen and terry towel production jointly with an oversees company and the including of Denim, industrial fabrics knit wear in the groups products range, as well as garments and fine cotton fabrics. A special facility to produce fine cotton is planned to build near New Delhi.

3. McKENSYS 7s FRAME WORK


The 7S framework has first appeared in the book The Art of Japanese Management by Richard Pascal and Antony Athos in 1981. The two authors were looking at how Japanese industry had been so successful, at around the same time Tom Peter and Robert waterman were exploring what made a company excellent. The 7S Model was born at a meeting of the four authors in 1978. It then appeared in the book In search of Excellence by Peters and Waterman in 1982. Subsequently, it was taken up as a basic tool by the Global Management Consultancy Company Mc Kinsey to diagnose the cause of GSSSIETW, Dept of MBA ,MYSORE Page 27

A study of Inventory Management organizational problems and to formulate programs for improvement, then on it became famous as Mc Kinsey 7S Model. The 7-S-Model is better known as McKinseys 7S. This is because the two person who developed this model. TOM peter & Robert waterman have been consultants at McKinseys & Co at that time. They published their Books The Art of Japanese management and In search of the difficulties of organization changes. The model shows that the organizational immune systems and many interconnected variables involved makes change Complex and therefore an effective change effort must address many of these issues simultaneously.

What is 7-S-Model?
The seven-S are a framework for analyzing organization and their effectiveness. It looks at the seven key elements that make the organizations successful, or not. i.e., Structure, Skills, Style, Strategy, Systems, Staff & Shared values.

Work for Analyzing and improving organizations


Seven-S formula- A comprehensive guide is to analyze the Culture and Behavior of Corporations. Those seven elements are distinguished in so called hard Ss and soft Ss. The hard elements (green circles) are feasible and easy to identify. They can be found in strategy statements, corporate plans, organizational charts and other documentations. The four soft Ss however, are hardly feasible. They are difficult to describe since capabilities, values and elements of corporate culture are continuously developing and changing. They are highly determined by the people at work in the organization. Therefore it is much more difficult to plan or to influence the characteristics of the soft elements. Although the soft factors are below the surface, they can have a great impact of the hard Structures, Strategies and Systems of the organization.

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A Systematic approach to improving organization: The 7-S Model is a tool for managerial analysis and action that provides a structure with which to consider a company as a whole, so that the organizations problems may be diagnosed and a strategy may be developed and implemented. The McKinsey 7-S frame work should be through of as a set of seven compasses. When the needled are aligned, the company is Organized. When they are not, the company is not really organized even if its structure looks right. Those seven elements are distinguished in so called hard Ss and soft Ss. The hard elements are feasible and easy to identity. They can be found in strategy statements, corporate plans, organizational charts and other documentation.

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1. Strategy:
Strategies are the actions a company plans in response to or anticipation of changes in its external environment. It also includes purposes, Mission, Objectives, Goals and major action plans and polices. Some of the strategies of Reid and Taylor as follow, Customer oriented Attracting and retaining customers Uses non-traditional marketing strategy Behavioral psychology Used young population as strategic blessings Movie centric promotions Two time offers are provided in a year More organized floors Employee oriented Consider biggest assets Employee welfare Employee growth /training programs The employee suggestion plan Standardization of staff room up gradation for education

2. Style:
The leadership style of Reid & Taylor is flat in nature. For Reid & Taylor, the divisions are dying, spinning, weaving, mending, finishing. For management Finance, Marketing, Human Resource, Purchasing departments are created separately which works independently.

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3. Structure:
In general structure is referred as the framework in which the activities of the organizations members are coordinated. The four basic structural forms are the functional form, divisional structure, matrix structure and network. Some of the structures of various departments of Reid and Taylor are as follows,

Structure of Finance Department:


Unit Head

Head Commercial

Commercial Manager I [Capital Equipment]

Commercial Manager II [Coordination & License]

Finance Manager [Accounts]

Finance Manager [MIIS]

Finance Manager [Costing]

Finance Manager [Bank & Treasury]

Finance Manager [Bill Passing]

Finance Manager [Imports & Exports]

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Quality Assurance Department:

QA - HEAD

QQA Manager 3

EMS (Environmental Management Services)

QMS Manager

4. Skills:
Skills refer to the fact that employees have the skills needed to carry out the companys strategy. Skills can be acquired by Experience, Training and Development it ensures people known how to work and stay update with the latest techniques. Certain standard skills are required in employees in order to perform or carry out the company strategy. Reid & Taylor gives more stress on quality of the brands. In order to maintain better quality there will be two sessions for continues improvement for the skill up gradation. Main intension is continues improvement in products and processes. Following are the different skills, which the employee should possess at different levels of Organization:

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Basic Skills: Developed capacities that facilitate learning and rapid acquisition of Knowledge for the purpose of Active learning, Listening, Speaking, writing, Critical thinking. Complex Problem solving Skills: Developed capacities used to solve illdefined problems in complex, real-world settings for the purpose of Complex problem solving. Resource Management Skills: Developed capacities used to allocate resource efficiently for the purpose of Management of Financial, Personal and Material Resources and Time Management. Social Skills: Developed capacities used to Work with people to achieve Goals for the purpose of Coordination, Instructing, Negotiation, Persuasion, service orientation and social perceptiveness. System Skills: Developed capacities used to understand, monitor and improve socio-technical system for the purpose of Judgment and decision making, System analysis and Evaluation. Technical Skills: Developed capacities used to Design, set-up, operate and correct malfunctions involving Equipment Maintenance, Selection, Installation, operation Monitoring and Analysis, Programming, Repairing, Trouble shooting and Technology Design.

Training: According to Flippo Training is as act of increasing the knowledge and skills of an employee for doing a particular Job ON THE JOB TRAINING: For Fire Fighting, Cutting machine Setting, Grinding, Turning, Milling, Regeneration process, Heater Operation, Crane Operation. OFF THE JOB TRAINING: For Effective communication, safety about chemical, housekeeping, tank chemicals and its safely, safety, basic hydraulic, ISO internal auditors course, handling storage and preservation, manufacturing strategy and communication skill, ISO documentation, supplier development. GSSSIETW, Dept of MBA ,MYSORE Page 33

A study of Inventory Management

5. Systems:
In general systems refer to The formal and informal procedure, including innovation systems, compensation systems, management information systems and Capital allocation systems that govern everyday activity. Systems in the 7S framework refer to all the rules, regulations and procedures both format and informal that complement the organization structure. It includes all the processes and information flows that link the organization together, consisting of management information system, production planning and control systems, cost accounting procedures, capital budgeting systems recruitment, training & development systems, planning & budgeting systems, performance evaluation systems.

6. Staff:
A STAFF MEANS a group or team formed to carry out a particular function or a task. That the company has hired able people trained them well and assigned them to the right jobs. This is done by the process of Selection, Training, Reward and Recognition, Retention, Motivation and assigning to appropriate work are all key issues. Here in the Reid & Taylor there are permanent employees and temporary employees, and are classified by giving grades on the basis of the seniority and superiority in the company.

7. Shared Values:
Shared values are what engender Trust and link an organization together. Shared values are also the identity by which an organization is known throughout its business areas. Thus, some of the values that are shared by both the employees and the management at big bazaar are as follows Product and service quality Page 34

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Productive efficiency Team work concept Customer satisfaction TPM (Total Productive Management) TQM (Total Quality Management)

4. SWOT ANALYSIS
SWOT analysis is the technique, which is used for identifying the company Strength, Weakness, Opportunity and threats. SWOT analysis not only result in the identification of a corporations distinctive competencies, the particular capabilities and resources that a firm possesses and the superior way in which they are used. But also in the identification of opportunities, the firm is not currently able to take advantage due to a lack of appropriate proven to be the most enduring analytical technique used in strategic management. This reflects an important issue facing strategic managers should we invest more in our Strengths to make them even stronger or should we invest in our weakness to make them competitive.

Strengths

Vast textile production capacity Large pool of skilled and cheap work force Entrepreneurial skills Efficient multi-fiber raw material manufacturing capacity Large domestic market Enormous export potential Very low import content Flexible textile manufacturing systems

Weaknesses
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A study of Inventory Management Increased global competition in the post 2005 trade regime under WTO Imports of cheap textiles from other Asian neighbors Use of outdated manufacturing technology Poor supply chain management Huge unorganized and decentralized sector High production cost with respect to other Asian competitors

Opportunities
Could develop new products. Local competitors have poor products. Profit margins will be good. End-users respond to new ideas. Could extend to overseas.

Threats

Legislation could impact. Environmental effects would favors larger competitors. Existing core business distribution risk. Market demand very seasonal. Retention of key staff critical.

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5. ANALYSIS OF FINANCIAL STATEMENT

BALANCE SHEET
AS AT 31 MARCH 2011
ST

Rs. In Lakhs

Particulars SOURCES OF FUNDS SHAREHOLDERS FUNDS Share Capital Reserves & Surplus LOAN FUNDS Secured Loans DEFERRED TAX LIABILITIES(NET) Total APPLICATION OF FUNDS FIXED ASSETS Gross Block Less: Depreciation/Amortization Net Block Add: capital work in progress(including capital advances) DEFERRED TAX ASSETS(NET)

Schedule A B C 5,383.89 125,940.12

31.03.2011 5,203.47 94,826.65

31.03.2011

131,324.01 42,392.81 152.51 173,869.33

100,030.12 22,212.34 122,242.46

D 11,594.31 3,094.75 8,499.56 21,866.48 30,366.04 11,436.26 2,258.68 9,087.58 5,863.14

14,950.72 10.99 0.10

0.10 15,848.53 29,279.69 6,006.19 68,338.15 119,472.56 5,951.46 6,240.45 Page 37 12,191.91 143,503.19 173,869.33

INVESTMENTS E CURRENTS ASSETS, LOANS & F ADVANCES Inventories 28,480.30 Sundry Debtors 48,646.18 Cash and Bank Balance 7,013.03 Loans and Advances 79,402.37 Total (I) 163,541.88 Less: CURRENT LIABILITIES & G PROVISIONS Current Liabilities 6,216.20 Provisions 13,822.49 GSSSIETW, Dept of MBA ,MYSORE Total (II) 20,038.69 NET CURRENT ASSETS (I)-(II) Total

107,280.65 122,242.46

A study of Inventory Management

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31-03-2011


AS AT 31 MARCH 2011
ST

Rs. In Lakhs

Particulars
INCOME
SALES AND SERVICES CHARGES OTHER INCOME

Schedule 31.03.2011 31.03.2010 H I T


OTAL

INCREASE / (DECREASE) IN STOCK EXPENDITURE RAW MATERIALS CONSUMED / FABRIC PURCHASE MANUFACTURING EXPENSES
PERSONAL EXPENSES

98,493.78 5,628.49 10,898.36 115,020.63

65,260.34 3,885.68 2,192.15 71,338.17 29,961.73 4,294.13 2,817.89 1,242.70 7,171.98 109.88 2,712.02 1,585.40
49,895.73 21,442.44 (21.98) (6,887.87) (65.35) (1.05) (51.29) (37.70) 14,377.20

ADMINISTRATIVE EXPENSES SELLING AND DISTRIBUTION EXPENSES


RESTRUCTURED FINANCIAL COSTS AMORTISED

J K L M N D TOTAL

INTEREST AND FINANCIAL CHARGES DPRCATION / AMORTISATION PROFIT / (LOSS) BEFORE TAX PRIOR PERIOD (EXPENSES)/ INCOME PROVISION FOR TAX CURRENT TAX
FRINGE BENEFIT TAX

60,593.47 4,707.30 3,212.67 1,333.42 7,112.05 219.76 5,144.25 856.02


83,178.94 31,841.69 (11,315.81) (1.11) (163.50) (67.43) 20,293.84

WEALTH TAX
DEFERRED TAX ASSETS/(LIABILITIES)

TAXATION

FOR EARLIER YEARS

PROFIT AVAILABLE FOR APPROPRIATION

APPROPRIATIONS BALANCE BROUGHT FORWARD FROM PREVIOUS YEAR BALANCE CARRIED OVER TO BALANCE SHEET

17,123.64 37,417.48

2,746.44 17,123.64

EARNING PER SHARE BASIC DILUTED

38.77 38.77

31.04 30.84

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Ratio Analysis and interpretation


Ratio Analysis is a technique of interpretation of financial statements of the company. The analysis of the financial statement in the form of ratio indicates the financial strength and weakness of the company.

Key Ratios
Ratios Current Ratio Quick Ratio Debt Equity Ratio Fixed assets to Net worth Ratio Solvency Ratio 2011 8.16 : 1 6.74 : 1 0.047 : 1 0.06 : 1 0.12 : 1 2010 9.79 : 1 8.50 : 1 0.12 : 1 0.09 : 1 0.09 : 1

1. Current Ratio Ratio is the ratios which expresses the relationship between current assets current liabilities. In short current assets are asset which are converted in to cash within a year. Current liabilities refer to all short term obligations which are required to be repaid with a period of 1 year. The current ratio of the company for the year 2010 is 9.79:1 and for 2011 it is 8.16:1. 2. Quick Ratio It affords the real test of the liquidity of the enterprise. It expresses the relationship quick assets & current liabilities. Quick ratio indicates the ability of the firm to settle all its current obligations. The standard of quick ratio is 1:1 considered as the fair indication and liquidity position of the business firm. The quick ratio of the company for the year 2010 is 8.50:1 and for 2011 it is 6.74:1.

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A study of Inventory Management 3. Debt Equity Ratio The debt equity ratio reflects the relative contributions of creditors and owners of business in its financing. It is an index of the degree of production of creditors has the ratio less than the standard which indicates that there is a smaller claim of creditors. The debt equity ratio of the company for the year 2010 is 0.12:1 and for 2011 it is 0.047:1. 4. Fixed Assets to Net worth Ratio This ratio is used to measure the efficiency of utilizing fixed assets. The fixed assets turnover ratio of the company for the year 2010 is 0.09:1 and for 2011 it is 0.06:1. 5. Solvency Ratio This ratio indicates the relationship between the total liabilities to outsiders to total assets of the firm. The solvency ratio of the company for the year 2010 is 0.09:1 and for 2011 it is 0.12:1.

6. LEARNING EXPERIENCE
Project training created a sensory impression in my mind putting across what actually is an organization and how it operates to serve the public along with the fulfillment of their objectives. This sensory impression guide in production units theoretical concepts. The Management concepts were difficult to analyze. But, after plant training me felt empowered with confidence and understood different management concepts in pragmatic manner.

I came to know the importance of different management functions such as planning, organizing, staffing, directing and controlling which guide the organization in facing stiff competition from competitors.

I got to know how centralized structure is doing through others and with others work and things.

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A study of Inventory Management I understood the way in which, the workflow model helps in organizing work by determining authority and responsibility for staff.

The In-plant training helped me in knowing the importance of group effort when compared to individual effort in organization. Also importance of human relations was known which help in getting things done through others.

Through this training I was able to understand company is having sufficient number of employee/ workers with different skills, talents, abilities, attitudes etc. and how they are being utilized in optimum manner in achieving organization goals.

I learnt the importance of leadership traits which guide in achieving personal as well as organization goals.

I came to know how individual should be dynamic in corporate sector which guides in career planning and development.

I manage to know how information technology and various systems have reduced the time of an activity and documentation also.

The marketing department bridges the gap between organization and customer by various promotion tools as well as regular feedback from customers.

I came across the importance of time management, which helps the entire organization in meeting delivery dates of customers.

I also learned that how quality control and assurance guide the entire organization in providing quality brands to customer, thereby improving loyalty from customer side.

At last, I feel that in plant training has shaped my personal skill, talent, ability, attitude etc. that guide me in contributing to organization as well as nation by working efficiently and effectively.

PART-B
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A study of Inventory Management

GENERAL INTRODUCTION The necessity of effective inventory management is being increasingly realized in industrial and non-industrial organization both in India and abroad. This realization has come about because of increasing complexity of the task of managers and administrators. In most organization, the problem of effective inventory control is now viewed as the most critical problem with changes in social climate. While these can be great assets to the organization, they become problems if the organization is not able to manage inventory properly. Liquidity and profitability are the two vital aspect of corporate business. Any business cannot run without these two. A firm may run without profits for some time but with no liquidity, the firm cannot run their business. That is why management of inventory is an integral part of corporate planning in business life. The proper inventory control system leads to an optimum utilization of Resources, Idle materials are of a financial burden to the organization. Thus proper, inventory management directly assists in efficient functioning of the company. S.L. Goel says Take care of the forest, the tree will take care of itself, it should be the main motto of an inventory controller. In inventory management, various methods and techniques can be adopted to control the inventory like, prompt maintenance of registrars, proper raw material arrangement, and fixation of various control levels and application of inventory control techniques and bin card system etc, which are relevant for inventory control in stores department. IMPORTANCE OF THE STUDY Today, growth and continued existence of business are largely depends on competitive advantage. The risk of competitive advantage inside an increasingly global market place has forced firms to consider habits of improving the modern practices. Severe contests

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A study of Inventory Management make it necessary to endlessly bring in new products and new design of products and this will lead to significant shorter existence series. The problem of competition is increasing in global market place. It has forced the firm to consider ways of improving the manufacturing practices. Now a day every company will face the competition. Because of that every company will maintain a flexible manufacturing and distinction system. It will depend on how the company will respond to the fast changing market needs, customer expectations and technological advancement. STATEMENT OF THE PROBLEM: The problem selected to the analysis is to study the effectiveness of inventory control system at Reid and Taylor. The effectiveness of the prevailed inventory system is analyzing simultaneously. The variation of the prices of raw materials are also analyzing with their effects on the over all working of the unit. The literary meaning of the word Inventory is stock of goods. Every enterprise needs inventory for smooth running of its activities. It serves as a link between production and distribution process. The unforeseen fluctuation in demand and supply of goods also necessitates the need for inventory. It also provides a cushion for future price fluctuations. The purpose of inventory management is to ensure availability of materials in sufficient quality and quantity as and when required and also to minimize investment in inventories. Thus it is very essential to have proper control and management of inventory. Inventories play a vital role in operation of manufacturing industry. The inventory ensures operational smoothness. In almost all the organizations the substantial part of capital is invested in inventories. Inventory refers to stock of products a firm is having for manufacturing or for sale and also the components that make up the product. Usually, inventories constitute a major portion, about 60% of total current assets. Hence, management of inventory becomes crucial to the successful management of overall working capital of a business enterprise.

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A study of Inventory Management The management of inventory is necessary for prevention of leakage, spoilage, deterioration, obsolescence, wastage of materials. It aims at improving material handling, saving in material cost, increased production and large profits. The inventory management is a part of planning budget, which often falls within financial area. The financial manager is playing an important role in determining the nature performance of inventories.

OBJECTIVES OF THE STUDY:


I. The project study is aimed to evaluate the inventory control system of Reid and Taylor Company. II. To know the efficiency of Inventory Management in Reid and Taylor Company, with respect to ABC Inventory system that company follows. III. Finally the study also tries to find out the correlation between Inventory Turnover Ratio and Return on Investment.

OBJECTIVE 1: TO EVALUATE THE INVENTORY CONTROL SYSTEM OF REID AND TAYLOR COMPANY.
This objective of the project is to analysis existing practice of the inventory management, to ascertain the inventory control methods adopted by the company and to identify the problems in managing inventory.

INVENTORY MANAGEMENT SYSTEM Meaning and Definition: Several authors have defined the term inventory. The more popular of them are, the term inventory includes Raw materials, work-in progress, finished packaging, spares and others in order to meet an unexpected demand or distribution in the future.

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A study of Inventory Management It can be used to refer to the stock of raw materials unhand at particulars, goods in process of manufacturing, finished products, merchandise, purchased for relate and others like tangible assets measured and counted in connection with financial records and accounting records, the reference may be the stock of goods owned by an enterprise at a particular time. OBJECTIVES INVENTORY MANAGEMENT: The main objectives of inventory management are operational and financial. Listed below are some of the main objectives of inventory management. To have stock available as and when required. To maintain adequate accounting and understanding of inventory. To avoid both overstocking and under stocking of inventory. To ensure right quality goods at reasonable price. To design proper organization for inventory management. To bring down the inventory carrying cost. To facilitate furnishing of data for short term and long term planning and control of inventory. To minimize losses through deterioration, pilferage, wastes and damages. To avoid duplication in ordering or replenishing stocks. To facilitate purchasing economies. To decide which item to stock and which item to procure on demand?

TECHNIQUES OF INVENTORY CONTROL Inventory control techniques are employed by the inventory control organization. Inventory control techniques represent the operational aspect of inventory management and help realize the objectives of inventory management & control several techniques of inventory control are in use and it depends on the convenience of the firm to adopt any of the techniques. What should be stressed however is the need to cover all items of inventory

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A study of Inventory Management & all stages from the stage of receipt from suppliers to the stage of their use the techniques most commonly used are the following: 1. Always better, control (ABC) classification. 2. High, medium and low (HTML) classification. 3. Vital essential and designable (VED) classification. 4. Scarce difficult and easy to obtain (SDE) 5. Fast-moving, slow moving and non-moving (FSN) 6. Economic order quantity (EOQ) 7. Maximum minimum system. 8. Two-bin system. 9. Materials requirements planning (MRP) 10. Just in time. (JIT)

ABC (Always better control) classification


One of the widely used techniques for control of inventories is ABC always better control and analysis the objectives of ABC analysis is to very the expenses associated with maintaining appropriate control to the potential savings associated with a proper level of such control. Logically we expect to maintain strong controls over the H items taking whatever special actions needed to maintain availability of these items hold stocks at the lowest possible levels consistent with meeting demands, frequent ordering expenditure etc., because of the low amounts in this area, thus with the C group we may maintain some what, higher safety sticks order more months of supply except lower levels of customer service. It is for this selective approach, ABC analysis is often called the selective inventory control. (SIM)

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A study of Inventory Management ABC analysis enables to exercise selective control when the materials manager is confirmed with a large number of items. The significance of this analysis is that it spot light attention to be given in respect of the areas like: Loss. Wastage. Scrap. Quality. Price variance. Usage variance. Inventory turnover etc. It also helps to determine safety stocks frequently of ordering preparing of control statements sources from which material is to be procured etc., Hence ABC analysis is one of the best techniques of inventory control.

HML CLASSIFICATIONS
The high, medium and low classification follow the same procedures as 1 adopted in ABC classification only difference is that in HML classification unit value is the criterion and not the annual consumptions value the items of inventory should be listed in descending order of unit value and it is up to the management to fix limits for the three categories. The HML analysis is useful for keeping control over consumptions at department levels, for deciding frequency of physical verification and for controlling purchases.

VED (Vital Essential and Desirable) classification


While in ABC classification, inventories are classified on the basis of their consumption value and in HML analysis, unit value is the basis; criticality of inventories is the basis for VED categorization. The VED analysis is done to determine the criticality of an item and GSSSIETW, Dept of MBA ,MYSORE Page 47

A study of Inventory Management its effect on production and other services. It is specially used for classification of spare parts. If a Part is vital, it is given V classification, if it is essential, then it is given E classification and if it is not so essential, then it is given D classification. For V items, a large stock of inventory is generally maintained, while for D items, minimum stock is enough.

Just-In-Time (JIT):
The concept JIT means that, virtually no inventories are held at any stage of production and the exact numbers of units are brought to each successive stages of production at the right time. It is also called, Zero inventories. The concept JIT was started in the Motto Machi plant of Toyota Corporation, Japan, where the system has been perfected and results achieved. The plant has a long line of Trucks waiting outside with full load of automobile parts for the assembly line. As soon as one truck comes out from one end of the plant, another truck gets inside. There is no warehouse for the parts. In India, the Maruti Udyog Ltd. has adopted JIT.

Fixing the minimum and maximum limits of inventory


In order to have proper check on the investment in inventory, it is necessary to fix the minimum and maximum limits of inventory so that there should be no over stocking of materials nor shortage of raw materials, in fixing the levels of inventories, the following two factors should be kept in mind. a. time. b. Rate of consumption during lead time. Time lag between indenting and receiving of the raw materials i.e., lead

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A study of Inventory Management Under this system, an order of sufficient size is placed when a minimum point in inventory to the maximum point, past experience may help the fixing of minimum and maximum points in inventories.

Re-ordering level or ordering level


It is a point [if material reaches at this point] where orders for fresh suppliers are placed with suppliers, the point is fixed somewhere in between the maximum and minimum point in such a way that the quantity available between the minimum level and this Point is sufficient to meet requirement of production upon the time fresh suppliers are received. Re-ordering level = minimum level + [time in acquiring material * rate of Consumption]

Economic order quantity


EOQ is an important factor in controlling the inventory. It is a quantity of inventory which can reasonably by ordered economically at a time, in determining this point ordering cost and carrying costs are taken into consideration. The annual expenditure of the purchasing department of a company can be considered to be on the purchase orders it places during a year. The present ordering cost as followed at Reid & Taylor works out to be between Rs. 75/- and Rs. 125/- per order. Cost of Inventory Carrying: This cost is measured as a percentage of the unit cost of the item. This measure therefore gives a basis for estimating what it actually costs a firm to carry stock. This works out approximately to 20% of the unit price. The cost of ordering is considered to be independent of the order-size (but increases with the number of orders). EOQ = 2 (Annual usage in units) (Order Cost)/ (Annual Carrying cost per unit) GSSSIETW, Dept of MBA ,MYSORE Page 49

A study of Inventory Management 1. EOQ for Grease in Weaving Department is calculated as below: =2*60*125/1 = 122 Kg 2. EOQ for a chemical known as HYSPIN EP 15 in Spinning Department

= 2*2520*125/8 = 280 Liters 3. EOQ for a Transfer Label in Packing Department 2*57600*125/.006 = 154919 Numbers 4. EOQ for a Chalk Piece in Weaving Department 2*600*12/10 =122 Box 5. EOQ for a ALUM in Utl Department 2*18000*125/1.128 = 1922 Kg. 6. EOQ for Cello Tape in Packing Department 2*600*125/2.4 =250 Numbers. 7. EOQ for Nylon Bump Press Cord in Spinning Department GSSSIETW, Dept of MBA ,MYSORE Page 50

A study of Inventory Management 2*1200*125/56 = 73 Kg. 8. EOQ for Washing Powder in Spinning Department 2*240*125/3.5 = 131 Kg.

Two bin system


Under this system all inventory items are grouped under two categories, in the first group a sufficient supply is kept to meet the current requirement over a designed period of time. In the second group or bin, a safety stock is maintained to meet the requirement of inventory times when sock in the first bin is exhausted and re-ordering occurs.

Order cycling system


In this system, a review of each item of inventory is made from time to time depending upon the critically of the item to have the predetermined level of inventories critical item may required a short review cycle and on the other hand, lower cost non-critical item may require longer review cycle, at each review date, a required quantity of inventory is ordered to bring it to the pre-determined level.

Statistical inventory control system


Statistical modes are used by some firms to find out their widely distribution system with the help of computers, it helps the management in taking the inventory management decisions. But this system is valid only in the sufficient information for cost comparison is available and the data has accurately been complied otherwise it is otherwise to find out the alternatives. GSSSIETW, Dept of MBA ,MYSORE Page 51

A study of Inventory Management

Budgetary control system


Under this system, inventory budgets are prepared and then compared with the actual consumptions figures. Though budgets, inventory consumption and leaves are co-ordinates with the expected usage, it serves the purpose of controlling cash and debtors. The inventory budget is a plan for inventing funds in stock at regular intervals via raw materials, work in progress and finished stocks.

Various levels of materials:


1. 2. 3. 4. Minimum stock level. Maximum stock level. Re-ordering level. Danger level.

1.

Minimum stock level:

This represents the minimum quantity of stock that should be held at all times, stock level is normally not allowed facing below this level. This level of stock is buffer stock for use during emergencies. Fall 1 stock level below minimum level will indicate potential danger to this business. These extra efforts have to be taken to expedite the supply. Minimum stock level is: Re order level [Normal consumption * Normal re-orders period.] The following factors are to be considered in fixing the minimum level. a. b. Nature of items of materials. Minimum time required for delivery. Page 52

GSSSIETW, Dept of MBA ,MYSORE

A study of Inventory Management c. d. etc. Rate of consumption of materials. Stock-out costs which include loss of contribution margin, loss of goodwill

2.

Maximum Stock Level:

Maximum level indicates maximum quantity of an item of material. It is this level above which stocks are not allowed to rise, maximum level is calculated as: Re-order level + Re-order quantity * minimum consumption *minimum re-order period.

In fixing minimum stock level the factors to the consider are: Maximum requirement of the stock for production at any point of time. Storage space available. Storage and insurance costs. Available of funds. Price advantage arising out of bulk purchase. Economic order quantity also affects the maximum level.

3.

Re-order Level:

It refers to the quantity to be purchased in a single purchase order. It is nothing but economic order quantity. GSSSIETW, Dept of MBA ,MYSORE Page 53

A study of Inventory Management

4.

Danger level:

This level is fixed usually below the minimum level emergent purchase actions are initiated if stock below danger level.

Benefits of Inventory Management and Control:


Proper management and control of inventories will result in the following benefits for the organization: stores. Perpetual inventory values provide consistent and reliable basis for preparing financial statements. Major Dangers of Over-Investments in Inventory: Block of firms funds in Inventory. Excessive carrying costs. Page 54 Inventory control ensures an adequate supply of materials, stores, etc., minimizes It keeps down investment in inventories, inventory carrying costs and obsolescence It facilitates economical purchasing through the measurement of requirement on the It eliminates duplication in ordering or in replenishing stocks by centralizing the It permits a better utilization of avoidable stocks by facilitating inter-department It provides a check against the loss of materials through carelessness or pilferage. It facilitates cost allotting activities by producing a means for allocating material It enables management to make cost and consumption comparison between It serves as a means for identifying and disposal of inactive and obsolete items of stock-out and shortages and avoids costly interruptions in the operations. losses to the minimum. basis of recorded experience. sources from which purchase requisitions emanate. transfers within a company.

cost to production department or other operating accounts. operations and consumption comparison between operations and periods.

GSSSIETW, Dept of MBA ,MYSORE

A study of Inventory Management

Risk of Liquidity. The excessive level of inventories consumes the funds of the firm and cannot be

used for any other purpose. The carrying cost such as the cost of storage, handling, insurance, recording and inspection also increases in proportion to the volume of inventory. Excessive inventories carried for a long period brings down the liquidity of the firm.

OBJECTIVE 2: TO KNOW THE EFFICIENCY OF INVENTORY MANAGEMENT IN REID AND TAYLOR COMPANY, WITH RESPECT TO ABC INVENTORY SYSTEM THAT COMPANY FOLLOWS. ABC CLASSIFICATION OF R & T's Materials Name of the Item SUESSEN RING FRAME TUBE OPTIC ELECTRONIC SENSOR CONTACT ROLLER ASSLY SUESSEN ALUMINIUM LATERAL SUPPORT FINE FILTERS APRON 79.401.1 END NYLON BUMP PRESS CORD VALVE GUIDE 6050-19H 29 CONNECTING ROD BRG60601-15H TAPER BRUSH REED 21 DPI X 172 CM PINNING DEVICE COMP.SET NON RETURN VALVE 40 NB CONOCITY GERAR BOX WITH GUARD APRON 95X42X1.1 SKI CYLINDER CDU6-30D CONVEYOR BELT 18450X110 DUMMY ROLLER WITH BUSH OB STACLE SENSOR DELIVERY HOSE 63 MM DIA SEPARATOR U/M NO NO NO NO NO NO KG NO NO NO NO SET NO NO NO NO NO NO NO NO NO Annual Consumption 23675 5 55 100 20 3565 200.8 6 3 100 3 1 2 1 660 7 2 44 4 5 1150 Rate / Unit 10.34 18624.8 1493.11 792.17 2747.1 14.95 258.29 8592.07 15756.85 380 4856.52 14262 7052.77 14073 20.58 1935.56 6498.02 290.55 3174.68 2290 9.84 Page 55 Amount 244799.5 93124 82121.05 79217 54942 53296.75 51864.63 51552.42 47270.55 38000 14569.56 14262 14105.54 14073 13582.8 13547.52 12996.04 12784.2 12784.2 111450 1131.6

GSSSIETW, Dept of MBA ,MYSORE

A study of Inventory Management CONVEYOR BELT 4505X150 PULLEY CORD WITH CLIP BEARING UN 3213 O-RING-60501 19H17 NO NO NO NO 1 10561.57 280 37.27 100 101.96 48 210.57 Total amount of "A" Items U/M NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO MTR MR NO NO MTR NO NO NO NO NO NO NO Annual Consumption 250 60 6 864 200 2 100 480 60 96 470 50 1 12 6 2 12 40 13.9 3 2 165 1 10 11 8 6 1 3 Rate/Unit 40.21 158.11 1563.51 10.78 42.78 4186.3 83.6 16.95 130.26 61.77 12.53 117.13 5729.65 458.05 898.5 2669.45 442.5 129.71 369.2 1686.68 2527.47 30.47 4995.97 490 441.36 600 765 4527.46 1463.55 Page 56 10561.57 10435.6 10196 10107.36 963248.99 Amount 10052.5 9486.6 9381.06 9313.92 8556 8372.6 8360 8136 7815.6 5929.92 588.1 5856.5 5729.65 5496.6 5391 5338.9 5310 5188.4 5131.88 5060.04 5054.94 5027.55 4995.97 4900 4854.96 4800 4590 4527.46 4390.65

Name of the Item PULLEY FOR PULLEY BLOCK CASTOR WHL RGBV/PT/CT/125/R/TG WEFT SCISSORY-3701 APRON 79X36X1.1 END RING AS 0032-11 NON RETURN VALVE 25NB BEARING 627 NIZ APRON 79X36X1.1 SKI CASTOR WHL RGBV/F/CT/125/R/TG BEAM BEARING BOLT HARNESS MAIL SLAY COATING-430478 INDG SAFETY START UP VALVE MS SUCTION BEND 919 PADESTAL PS 1910 THRUST PIECE(PIN) 6080109H-24 ALUMINIUM PULLEY WELDING CABLE 400A LIFTING TAP WITH STEEL WIRE 15 EMPTYES TUBE CONVEYOR SOLENOID VALVE PU TUBE 6MM X 4MM TOOTHED BBELT 16T5X2050 DB BEARING RSTO 6 MAGNET COIL 36 VOLT SAVIO DOFFER BRACKET VOLT METER O RING 61440-02H 04 RUBBER RING FOR TURBO PUMP

GSSSIETW, Dept of MBA ,MYSORE

A study of Inventory Management WEFT FEEDER SYMMETRICAL TUCK IN SCISSOR RHS FLANGE SUPPORT ALUMINIUM LIFTING TAPE 1300 x 20 x 2 TOOTHED 25 t 10 x 2500 FLEXIBLE HOSE 2" TUCKING NEEDLE RH GASKET 61202 29H 31 TEFLON STRIP 20X4X17L BEARING 6308 2ZR BURNER NOZZLE TOOTHED BELT 16T5X4250 OIL FILTER TUCK IN SCISSOR LHS LOCKING ELEMENT 328321 INDG TOOTHED BELT 32 AT 10X1360 BEARING 3306 2RS FRC LEVER ROTARY SHAFT SEAL 6150403H 16 O RING 540.016 SPIRAL FLEXIBLE HOSE 4" SILICON CORD 16MM DIA SOLENOID VALVE VK 31205DO-M5 GILLBOX BRUSH

NO ST NO NO NO MR NO NO NO NO ST NO NO NO NO NO NO NO NO NO NO NO NO NO

6 2 30 2 1 30 15 6 45 13 1 1 4 2 86 2 3 6 1 2 15.5 6.1

728 2180.42 14.48 2119.36 4238.25 140 275.61 668.13 90 308.81 4000 3963.66 973.64 1809.38 42.07 1779.69 1163.25 575 3369.25 1677.3 216 532.79

4368 4360 4244.4 4238.72 4238.25 4200 4134.15 4128.78 4050 4014.53 4000 3963.66 3894.56 3618.76 3618.02 3559.38 3489.75 3450 3369.25 3354.6 3348 3250.02 3235.65 3210 275214

1 3235.65 6 535 Total amount of "B" Items Annual Consumption 200 10 5 1 1 3 2

Name of the Item NYLON DUMMY RING WITH DERLIN B PVC HOSE 5" FLOW CONTROL SNF00025 CARBON RING 72X55X16 VS BELT 40X1325 COTS 55X75X245 WORM WHEEL

U/M NO MR NO NO NO NO ST

Rate/Unit 16.05 310 358 1765.11 1727.48 565.52 825

Amount 3210 3100 1790 1765.11 1727.48 1696.56 1650

GSSSIETW, Dept of MBA ,MYSORE

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A study of Inventory Management TENSION SPRING PNEUMATIC SLENOID VALVE BLOWER BUSH SAW BLADE VS BELT 40X1300 V BELT SPZ 1737 COVER-ALU BEARING 627 Z BEARING 6203 2RS O RING 61203-20H 29 GEAR SPINDLE TAPE 2440X 11MM METALIC GASKET 2MM STY 20 V BELT A-105 BEARING 6309 2ZR TUCK-IN NEEDLE LHS SAVIO ROLLER BEARING 6309 SPIRAL HOSE SPRING WITH NYLON KNOB CPL ECCENTRIC COVER WITH PIN WEFT RELEASER-BIG BEARING 3203 BEARING 6308 MINIATURE CYLINDER DOUBLE ACTI ROUND NUT-SUZUKI ALLEN SCREW M8X30 SPACER RING SETP NO.504 MS FLANGE 4" SLIDING PIECE-TEFLON YARN TENSIONER AS 0241-13 FILTER REGULARTOR WITHOUT GAUGE GEAR 43 T SUESSEN TEFLON STRIP 17X4XFT SHIFTING SEGMENT 03.066 BEARING 6310 2ZR C3 TOOTHED BELT 16T 10X1010 NO NO NO NO NO NO NO NO NO NO NO KG NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO 25 1 10 75 1 6 4 20 21 2 2 87 9.4 6 3 5 2 3 1 7 1 1 2 4 1 42 250 2 2 27 25 1 1 16 1 2 2 65.74 1641.2 161.67 21.37 1601.91 253.06 375 71.86 67.82 704.26 704.17 15.97 147.8 226.57 441.63 264.4 650 432.15 1290 180 1258.29 1248 608.53 297.93 1189.5 24 4.03 498.97 497.25 36.67 39.28 975.9 975 59.18 933.92 462.07 50.72 Page 58 1643.5 1641.2 1616.7 1602.75 1601.91 1518.36 1500 1437.2 1424.22 1408.52 1408.34 1389.39 1389.39 1359.42 1324.89 1322 1300 1296.45 1290 1260 1258.29 1248 1217.06 1191.72 1189.5 1008 1007.5 997.94 994.5 990.09 982 975.9 975 946.88 933.92 924.14 912.96

GSSSIETW, Dept of MBA ,MYSORE

A study of Inventory Management GASKET 61202-29H 30 BEARING 6305 2ZR HYLAM PIECE 7X10X15 WASHER TOOTHED BELT 25T 10X1210 CARBON PLATE 44 X68.5X3 PLATE AS4250/12 BEARING 6311 BEARING 6210ZZ RUBBER DIAPHARM SS BALL VALVE 1/2" SEALING RING 61504-03H 29 BEARING 6302 2ZR COTS 55X75X295 V BELT B108 FRONT GUIDE GN 13750AP ALLEN BOLT M 6X30MM HEX BOLT M 6X30MM REAR GUIDE GN 13746 AM CAM LH GN 13609 AJ CAMRH GN 13610 AA FRONT BRAKE GN 13751 BEARING PULLER BEARING 6202 2ZR ROLLER LOCK PIECE-ALU BOLT &NUT NYLON BRAIDED HOSE PIPE 1/2" SPROCKET VALVE SEAT SPARE-100NB ROLLER CHAIN BEARING 6200 2ZR GEAR 24T SUESSEN VALVE SEAT SPARE -65NB SPIDER L-150 WIRE ROPE SEALING RING 61504-03H 28 DOWEL PIN NYLON SHEARING PIN 6MM TOOTHED BELT 6T 5X340 BEARING 6305 2RS NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO 18 7 164 23 1 2 3 2 3 1 3 2 8 1 2 4 100 300 4 4 4 4 2 12 78 200 20 1 1 10 10 1 1 9 1 2 31 200 5 3 129.8 5.5 34.77 799.03 392.5 255.5 376.48 249.78 743 243.5 355.18 87.94 693.44 693.44 314.26 156.39 6.25 2.07 152.99 152.98 152.98 150.88 300 49.82 7.5 2.92 28.93 575 574.11 55 54.94 525 521.92 57.88 450 223.25 14.16 2.18 86.87 143.49 Page 59 908.6 902 799.71 799.03 785 766.5 752.96 749.34 743 730.5 710.36 703.52 693.44 693.44 628.52 625.56 625 621 611.96 611.92 611.92 603.52 600 597.84 585 584 578.6 575 574.11 550 549.4 525 521.92 520.92 450 446.5 438.96 436 434.35 430.47

GSSSIETW, Dept of MBA ,MYSORE

A study of Inventory Management V BELT B-78 SUESSEN BRACKET OIL SEAL 25X52X7 KEY KEY ROD HEX BOLT M M6X25 ENTRY GUDIE BEARING 6005 2RS NYLON BEARING CENTRING DISC 59-650-34 BEARING 6000 2RS BEARING 6201 2RS BEARING 6303 ZZ SS BALL VALVE 1" WATER FILTER ASSY SUESSEN EYE BOLT V BELT B59 CRC SPRING WORM GEAR GUN METAL GRINDING WHEEL 4" SPRING PB 14164 AJ REAR BRAKE LH GN 13748 AL REAR BRAKE RH GN 13749 AY TRAVERSE UNIT-SPOOL WINDING M/ TROLLEY PIN BEARING 6202 2RSR FALLER RING GC-15 OVER LOCK GODA PRESSURE GAUGE KGS/SQ.CM ALLEN SCREW M5X25 BEARING 6206 ZZ ALLEN SCREW M6X25 GUIDE BUSH ALLEN SCREW M5X40-243 O RING 2223406-33 BEARING 6205-ZZ DESOL WIK STRIPS ROUND BELT 723006 WASHER GN-2037 AN NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO 2 1 19 9 9 100 1 4 4 24 4 7 4 2 1 25 2 2 1 9 1 2 2 1 1 6 100 4 1 100 2 100 2 48 6 2 30 91 3 6 215.2 425 22.34 46.98 46.67 4.19 418.1 102.72 100 16.27 96.88 55.21 95.47 190 380 15 182.08 180 357.5 39.31 353.54 175.34 175.34 350 350 57.97 3.46 86.25 343 3.18 158.52 3.16 150 6.11 48.66 143.1 9.51 2.74 82.3 38.43 Page 60 430.4 425 424.46 422.82 420.03 419 418.1 410.88 400 390.48 387.52 386.47 381.88 380 380 375 364.16 360 357.5 353.79 353.54 350.68 350.68 350 350 347.82 346 345 343 318 317.04 316 300 293.28 291.96 286.2 285.3 249.34 246.9 230.58

GSSSIETW, Dept of MBA ,MYSORE

A study of Inventory Management WOODEN STICK FOR BUMPRESS JOINT ADHESIVE R10 ENDLESS BELT 1050X12MM O RING 60801-09H 04 PIN GREASE GUN ADOPTER FRC CLUTCH LINER VOLKOLENE THRUST PAD ABS PULLEY 300X 40 X 45MM WELDING HOLDER 600 A OILSEAL 50 X 35 X10 BEARING 6208 Z WHEEL O RING 223406-36 WASHER M6 BEARING 624 ZZ BEARING DL 2516 RETAINING RING 61504-03H LONG DAMPER GN 16102AV BEARING 6004 ZZ HEX BOLT 6X16 O RING 223406-28 O RING 223406-29 O RING 223408-08 ALUMINIUM ADAPTOR DISTANCE BAR-INDO HANDLE BALL-STEEL V BELT B 49 TUBE CLEANING BRUSH 1 V BELT B 40 BEARING NA 4901 CLAMPING PIECE AL CAM AS 0351-7 GUN METAL BUSH HYDRAULIC PIPE TEFLON WASHER 40X 25 X 3.8 ACTUATING LEVER 218-610 SS WASHER M8 MS ELBOW 40 NB BEARING DL 4020

NO ML PCS NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO

6 20 1 8 2 4 2 6 1 1 2 1 1 5 750 2 2 1 1 2 83 4 4 4 15 1 6 1 3 1 1 3 2 2 1 1 1 30 3 1

38.01 11.1 213.01 26.53 106 52.5 100 33.07 198.05 197.5 98 190.38 190 37.84 0.25 93.67 93.6 171.25 168.6 82.82 1.9 37.84 37.84 37.76 10 150 25 148.57 48.6 135.3 135 45 62.94 62.57 125 75 71.76 2.21 22 65.93 Page 61

228.06 222 213.01 212.24 212 210 200 198.42 198.05 197.5 196 190.38 190 189.2 187.5 187.34 187.2 171.25 168.6 165.64 157.7 151.36 151.36 151.04 150 150 150 148.57 145.8 135.3 135 135 125.88 125.14 125 75 71.76 66.3 66 65.93

GSSSIETW, Dept of MBA ,MYSORE

A study of Inventory Management OIL SEAL 22 X 40 X 7 SAND PAPER SHEET NO NO 2 2 Total of "C" Items 32.43 32 64.86 64 137607

Table 1.3 ABC Items of Reid and Taylor Classification A B C Total No. of Items 27.00 54.00 189.00 270.00 % of Items 10 20 70 100 Amount 963248.99 275214.00 137607.00 1376069.99 % of Amount 70.00 20.00 10.00 100

OBJECTIVE 3: TO FIND OUT THE CORRELATION BETWEEN INVENTORY TURNOVER RATIO AND RETURN ON INVESTMENT. In order to analyze the financial position of a company there are various tools and techniques. Among them, one of the most popular way of analysis and interpretation of financial statement is Ratio analysis. Ratio analysis is one of the techniques of analysis and interpretation of financial statement. These are point or indicators of financial strength, soundness, position and weakness of an enterprise and helps in concluding the exact financial position of concern. It is powerful tool of financial analysis used to diagnose the financial health of the firm. Inventory Turnover ratio at Reid and Taylor Table 1.4 Inventory Turnover Ratios (Rs in Lakhs) Years Sales Average Inventory Ratio

GSSSIETW, Dept of MBA ,MYSORE

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A study of Inventory Management 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 46,250.25 50,960.00 55,980.25 57,145.38 60,345.80 65,260.34 98,493.78 4,211.10 5,306.31 4,435.72 5,458.65 6,181.99 7,199.19 8,194.74 10.98 Times 9.60 Times 12.62 Times 10.64 Times 9.76 Times 9.06 Times 12.01 Times

SCOPE OF THE STUDY


The scope of the study is extended to materials department in particular and purchases and stores department in general further the study confiner to the Reid and Taylor Company. This study was mainly concentrated on inventory management adopted by the company. The mode of selecting of the vendors, managing the orders and further actions for satisfying the requirement are analyzed. The companys purchase procedure will influence more on the level of inventory of the company. So the study of purchase has vital roll to understand the efficient system of the company.

METHODOLOGY Location of the study


The study has been conducted in Reid and Taylor a textile company located in Thandavapura Industrial Area, Nanjanagud Taluk, Mysore District, Karnataka.

Sources of Data
The methodology followed for collecting information is based on GSSSIETW, Dept of MBA ,MYSORE Page 63

A study of Inventory Management 1) Primary data 2) Secondary data

Primary Data:
The method which, was adopted to collect the primary data, is personal Interview and Survey. In order to collect the information, direct personal interview and discussion was made with different personnel of purchase departments, stores department and other departments. So for information is collected through exploratory research design. There is no formal design or structured questionnaire is used in the study.

Secondary Data:
For gathering secondary data various other sources were used. They are: 1. Different accounting records of the company 2. Annual reports of company 3. Textbooks, Internets and other case studies.

Information needed to achieve the objective


Different records in purchase department like; record of stock maintenance, inventory records, sales and purchase records were analyzed to gather information.

LIMITATION OF THE STUDY


The study has encountered following limitations as this is a study undertaken to fulfill the academic requirements, it is bound to have certain limitations. The most prominent among them are It was not possible to make a competitive analysis due to inability in getting information and data relating to other companies in textile Industry GSSSIETW, Dept of MBA ,MYSORE Page 64

A study of Inventory Management

Further, in order to maintain the confidentiality of certain aspects a few alterations have been made without hampering the authenticity of the data. As the study is purely for academic purpose the inexperience of the author make the analysis less processed when compared with the professional analysis.

SUMMARY OF FINDINGS The Company is following a stores manual with which the stores manager-is being guided. The stores manual contains: The procedure for receiving materials. The Inspection methods followed in the company. The procedure for processing the purchase order. . How the materials are issued to each department. Storing of old materials, damaged materials, obsolete materials and scrap, and accounting. How to classify the materials under ABC Classification. Value Engineering. Procedure for issuing Returnable and Non Returnable Gate Passes. Determining Re-Ordering Level and Economic Order Quantity. Generating reports on inventory. Preparing statutory forms, which are submitted to the Tax Offices.

A copy of Purchase order is sent to the stores, indicating quantity and delivery date. Arranging the purchase order in a chronological sequence. Receiving the advice note from the supplier. Manager will prepare GRN, which helps to communicate the arrival of goods to the various departments. Physically goods are verified using weighbridges, measuring devices, tapes, etc. GSSSIETW, Dept of MBA ,MYSORE Page 65

A study of Inventory Management

Damage / Discrepancy Note will be prepared if the goods are received in bad or damaged condition. And it will be sent back to the supplier. For storing the materials under FSN, ABC, HML Classifications. And maintaining Bin card. Issue of MIRN to control the outgoing of materials to various departments. Manager has a responsibility of checking-of quantity of materials and ensures that the materials are received in time. According to the stores manager "stretch your hand at every point of time, at any place and justify for your salary". Inspecting the materials at the time of receiving, choosing appropriate sample. The company is following the FIFO method of stores accounting. The company has adopted periodic and continuous verification. They are generating around Rs.5 Lakhs per month from sale of scrap. The EOQ is calculated for almost all the materials used by the company for further production. The ordering Cost for the materials is Rs.125/ item. The carrying cost is calculated at 20 per cent of the materials price. The ABC Classification is used in the company for control of inventory costs. The ABC Classification is done in the following basis. Listing out 10 per cent of the items which covers 70 per cent of inventory and classify them as class A. Listing out remaining 20 per cent of the items to cover 20 per cent of the inventory value and call it as class B. Rest all 70 per cent of the items to cover just 10 per cent of the inventory may be classified as class C. For calculations purpose taken 270 items, have been taken, out of which 27 items covering 70 per cent of the total amount is classified as 'A' items. 54 items covering 20 per cent of the total amount is classified as B items. And the rest i.e., 189 items are classified as C items, which is 10 per cent of the total inventory sample selected for ABC Classification. Company is using Tally software for keeping inventory record The Company has more than 8,000 types of materials in the stores.

GSSSIETW, Dept of MBA ,MYSORE

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A study of Inventory Management

CONCLUSION AND RECOMMENDATION:


CONCLUSION According to findings, stores manual plays a very important role in the organization. It is easy to manage things in stores for anyone using stores manual. It gives each and every information about receiving materials, Inspection methods, processing the purchase order, storing of old, damaged, obsolete and scrap materials in the plant. Stores should ensure availability of right materials in right place as per stock ledger during inventory checking by the statutory auditors. The company's procedure for receiving materials, handling them, storing them at the places nearer to their use, shows the efficiency of the stores manager. The company is generating revenue around Rs.5lakhs per month from the sale of scrap. So the stores manager has got to have an eye accounting of scrap. The inspection method followed by the stores manager is effective because, the respective department heads whose materials are received will do the inspection for quality, and for the quantity inspection the stores manager is in charge. The efficiency of stores manager is also depicted in the verification process followed by him. ABC analysis for the company is as follows: out of 270 items selected out of which 27 items covering, 70% of the total amount is classified as 'A' items. 54 items covering 20 per cent of the total amount is classify as B items. And the rest i.e., 189 items are classified as G items, which is 10 per cent of the total inventory sample selected. The plant has more than 8,000 types of materials as inventory. It is around 35 per cent of the gross working capital of the firm.

RECOMMENDATIONS The company has calculated the EOQ three years ago. Ordering cost and carrying cost should be recalculated and then EOQ should be determined. Which will GSSSIETW, Dept of MBA ,MYSORE Page 67

A study of Inventory Management obviously help the stores manager in determining the order quantity and reorder level? This will help in reducing the cost of inventory handling in the stores. The company is using Tally 6.3 as their inventory software package. The plant is having around 8,000 types of materials. Tally is not a compatible software package for such a huge inventory. So the company may think of switching the software package for some indigenously built software. A review of the ABC Codes for the parts1 in stores should occur quarterly. Improper coding of parts may result in incomplete investigations of more expensive parts, improper storage, poor decisions on obsolescence and scrap, and fess than adequate lot size Graph no. 1.1 Market share in 2010

Source: Table 1.1

GSSSIETW, Dept of MBA ,MYSORE

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A study of Inventory Management

Graph no. 1.2 Market share in 2011

Source : Table 1.2

GSSSIETW, Dept of MBA ,MYSORE

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A study of Inventory Management

Chart 1.3 ABC Classification of Inventory system

Source : Table 1.3

GSSSIETW, Dept of MBA ,MYSORE

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A study of Inventory Management

Chart 1.4 Inventory Turnover Ratios

Source :Table 1.4

GSSSIETW, Dept of MBA ,MYSORE

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A study of Inventory Management

BIBLIOGRAPHY Company Manual Company Annual Report Effective Inventory and Stores Management-Senior Officier in the Field WEBSITE:
1. http://WWW.Indiainfoline.com// Reid and Taylor/ 2. www.bondwiththebest.com 3. www.reidntaylors.com 4. www.google.com

GSSSIETW, Dept of MBA ,MYSORE

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A study of Inventory Management

GSSSIETW, Dept of MBA ,MYSORE

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