RESEARCH PROPOSALS OF INVENTARY MANAGEMENT

SYSTEM

INTRODUCTION: Inventories are goods held for eventual sale

by a firm. Inventories are thus on of the major element, which
help the firm in obtaining the desired level of sales. From the
profitability point of view the optimal level of average inventory
and the optimal order quantity must be kept lower, other
things remaining constant, this is possible when the
opportunity cost of funds invested in inventory is higher.

In inventory decisions, management has to take into

consideration factors like inventory carrying costs, ordering
costs, cost of stack-outs, rate of return on the investment and
cost of capital. In the case of running enterprises, the decision
is concerned also with the additional investment in order to
estimate and compare additional costs and additional returns
and the net effect on the maximization of valve of the firm.
While the technique of marginal analysis is found suitable in
taking such decisions, the classification of costs into fixed,
variable and relevant is considered essential.
PROBLEMS: Holding of inventories exposes the firm to a
number of problems and costs.
Price decline, product deterioration, obsolescence, material
cost, ordering cost, carrying cost.
Carrying cost includes the expenses for storing the goods. It
comprises storage costs, insurance cost, spoilage costs, cost of
funds tied up in inventories, etc.,
Maintaining a sufficiently a large size of inventory for efficient
and smooth production and sales operations.
Maintaining a minimum investment in inventories to minimize
the direct – indirect costs associated with holding inventories to
maximize the profitability.

COMPONENTS OF INVENTARIES: Inventories can be broadly

classified into three categories as below:
1. Raw materials: these are goods which have not yet been
committed to production in manufacturing firm. They may
consist of basic raw materials or finished components.
2. work - in progress : this includes those materials , which
have been committed to production process but have not yet
been completed.
3. Finished goods: these are completed products awaiting sale.
They are the final output of the production process in a
manufacturing firm. In case of wholesalers and retailer, they
are generally referred to as merchandise inventory.
Stores and spares inventory: 1. nature of the product to be
manufactured and its lead time of manufacture.
2. state of technology involved.
3. consumption patterns .

TECHNIQUES OF THE INVENTORY MANAGEMENT: effective

inventory management necessitates and effective control over
inventories. Inventory control refers a system which ensures
supply of required quantity and quality of inventories at the
required time and same time prevent unnecessary investment
in inventories.
The techniques of inventory control/inventory management are
as follows:
Determination of economic order quantity (EOQ). For which
the order should be place is one of the important problems
concerned with efficient inventory management. (EOQ) refers
to the size of the order which gives maximum economy in
purchasing any item of raw material or finished product. It is
fixed mainly after taking into a/c the following cost.
2. Determination of optimum production quantity.
3. Determination of re-order level.
4. ABC analysis.
NEED OF THE STUDY:
Avoiding losses of sales: if a firm maintains adequate
inventories, can avoid losses on a/c of losing the customers for
non-supply of goods in time.
2. Availing quality discounts.
3. Reducing ordering costs.
4. Achieving efficient production runs.

REVIEW OF LITERATURE:
Inventory refers to the valve of investment made in the
stock of raw material, stock of work-in – process: and the stock
of finished goods. Optimum level of inventories should be
judged in relation to the flexibility of inventories. In calculating
the level of inventories, management must balance the benefits
of economies of production, purchasing and increased product
demand against the cost of carrying additional inventory. ABC
analysis is assumed as the best approach as to exercise
effective.

OBJECTIVES OF THE STUDY:

1. To keep inventory at sufficiently high level to perform
production and sales activities smoothly.
 2. To minimize investment in inventory at minimum level to
maximize profitability.
3. To minimize carrying cost of inventory.
4. To keep investment in inventory at optimum level.
5. To minimize inventory ordering costs.
6. To make arrangement of sale of slow moving items.

SCOPE OF THE SUDY:

To study the operational feasibility and utility of inventory

management system.

METHODOLY:

A research methodology defines the purposes of the

research, how it proceeds, how to measure progress and
what constitute success with respect to the objectives
determined for carrying out the research study.

The appropriate research design formulated is detailed

below:
Exploratory research: this kind of research has the primary
objective of development of insights in to the problem. It
 studies the main area where the problem lies and also
tries to evaluate some appropriate courses of action.

The research methodology for the present study has been

adopted to reflect these realities and help reach the logical
conclusion in an objective and scientific manner. The
present study contemplated an exploratory research.

DATE COLLECTION:

Sources of data: 1).primary data which included the

input received from directly the officials and employees
thru questionnaire and interview.

Secondary data: 2). Secondary data from the books,

journals, and internet etc.,

Method of collecting data: questionnaire schedule and

interview method.
STATISTICAL TOOL USED: the data will be shown with the help
of matrix table and bar diagrams.

PRIMARY DATA ANALYSIS: (Bio-Profile of the respondents):

1. 22% of the officials belongs to the age group of 35 and 50.
2. 58% of the officials belong to the age group of 25 to 34.
3. 69 % are male officials.
4. 31% are female officials
5. 72% are graduates and above.

PERIOD OF STUDY:
JUST IN TIME: is a philosophy that advocates the lowest
possible levels inventory.
J I T, espouses that firms need only keep inventory in the
right quantity at the right time with right quality. The idea
lot size for J I T, is one, even though one hears the term
”zero inventory” used.
Limitations of the study:
1. The firm knows with certanity the annual usage of
demand of the particular items of the inventories.
2. The rate at which the firm uses the inventories or makes
sales is constant throughout the year.
3. The order for replenishment of inventory is placed exactly
when inventories reach the zero level.
 A BRIEF SURVEY OF RESEARCH WORK ALREADY DONE IN
PEDILITE INDUSTRY

COMPANY PROFILE: since its inception in 1959, Pedilite

Industries ltd., has been a pioneer in consumer and specialities
in india. The product range includes adhesives and sealants,
construction and paint chemicals, automotive chemicals, art
materials, industrial adhesives, industrial and textile resins and
organic pigments and preparations.

INVENTORY MANAGEMENT AT PIDILITE: the company has

complete and accurate knowledge of the stock across the units
and inventory management at all units greatly improved post
implementation. It specializes in the areas of specialty
chemicals, consumer products (stationary and art material,
fabric care and maintanance products), construction
chemicals, paints, adhesives and sealants. The company,fast
becoming a global player, recorded revenues of over Rs.1111
cr. In FY 08-09.

To provide basic services related to the supply of material to

maintain their PRE-SO & POST–SO. The product will take care of
all the supply order. Pre supply order is maintained from the
starting FY. It is concern to keep the records of each supply or
which is received from firm, supplying equipments.
CONTROLING INVENTORY: in order to fecilitate this, this firm is
used an ABC approach. It is based on pareto Analysis also
known as the”80/20” rule. By classifying each inventory item as
an A,B,or C the firm can determine the resources to dedicate
each item.
CHALLENGES: single integrated system
Recent industry report show that in cost as a % of total logistics
cost are increased. Despite this rise, many organisations have
not taken full advantage of ways for lowering inventory costs.
There are no. of proven strategies that will provide pay off in
the inventory area, both in client service in financial terms.
Some of these strategies lowering inventory costs involve
having less inventory while others involving, owning less of the
inventory you have. Regardless of which techniques you
employ production inventory management practices will make
a measurable difference in your operations.

Decision to implement sap business one : pedilite looked for a

solution that was universal yet locally adoptable. They
evaluated a few options before deciding on sap business one.

Managing a multi location implementation.

CONCLUSION: inventory is a quantity or store of goods that is
held for some purposes or use . In accurate inventory counts
can cost you sales and delay shipment past the promise date.
Out-of stock items as well as over stocked items in inventory
can be devastating to your business. Additionally an over
stated or under stated inventory valuation can result in
incorrectly reported assets with in your financial statements.
It offers comprehensive reporting capabilities to keep you on
top of inventory status. Centralized inventory management
consolidates inventory information by tracking lot no. on hand
levels and expiration dates, making the reordering process
more efficient. It also enables simultaneous tracking and
documenting supplies during studies to reduce redundant data
entry and increase work flow efficiency.
The biggest challenge pidilite had to deal with was managing
simultaneous implementation across global locations. While
the company put together a competent internal team, they
realized that not many members had firsthand experience
working at these locations nor did they have an understanding
of the capabilities and had local product support at all the
locations considered for implementation.

WHAT CONTRIUTION WOULD THE PROJECT MAKE?

At the feasibility stage it is desirable that two or three
different configurations will be pursued the satisfy the key
technical requirements but which represent different levels of
ambitions and cost. Investigation of these technical alternatives
can be added by approching a range of supplier for preliminary
discussions. Out of all types of feasibility, technical feasibility
generally is the most difficult to determine it may be humbly
submitted that the thesis shall be use ful for forther research as
well as for the related industry for understanding an effective
inventory manage ment system.