INVENTORY

MANAGEMENT
2
PREFACE

3
 Acknowledgement

I wish to express my sincere thanks to all those individuals

who guided me in a proper direction and providing essential
information regarding report at their part. Without support
and co-operation of all, project would not have been completed

I would like to express my sincere thanks to Ms. Yamini sinha

(HR manager, PepsiCo, Jhagadia) who give us opportunity in
their company to get training over their

I would like to express my gratitude to all of HOD of the

PepsiCo Holdings pvt Ltd who provides me their valuable
information and data which helps me in prepared project
Report; I would like to give special thanks to Chetan Thakar
for providing me production planning and shipping
information.

- Purvesh Kansara

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 Executive Summary

PepsiCo is one of the multinational company having more than

400 brands in 190 countries. In India PepsiCo having 37
bottling Plants.

At Jhagadia Pepsi has started its GRB plant in 1997, PET line
in 2001, Aquafina in 2003. In PepsiCo I have visited Human
Resource Department, Finance Department, Production
Department, Quality Control, Marketing and Dispatch and
Logistic Departments. The company’s Marketing Office at
Ahmedabad.

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 Background Of The Company

PepsiCo Pvt.Ltd. is the world’s most powerful soft drink well

reputed company in the FMCG market. It ranks in the most
six companies in FMCG business, the history of are as under:

 Founder – Mr. Caleb Bradham

 Year of foundation – 1890
 It was originally founded as a cure for Dyspepsia & now,
its name Pepsi soft drink.
 1st plant setup in the year 1905 at America.
 In 1936 company earn $2 billion profit.
 Today its business is spread in more then 190 countries
with 500 companies.
 In Gujarat Pepsi have 1 plant.
( JHAGADIA MEGA G.I.D.C. BHARUCH ).
 1st company of Pepsi in India was started at Jaipur
(Raj.).
 In Jhagadia PepsiCo started first plant in 1997 with GRB
(glass refilling bottle).
 In 2001 PET (poly ethylene tetracycline) was started.
 In 2003 AQUAFINA plant was started in Jhagadia.
 In 2010 SLICE plant was started in Jhagadia.

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 VISION & MISSION STATEMENT

VISION:-

 PepsiCo vision is to be best Consumer Product Company

in the world & wants to become the market leader in the
market. Its main vision is satisfaction of supplier,
customers, consumers, employees.

MISSION:-

 PepsiCo’s mission is to deliver the best quality product in

the market & try to achieve the maximum satisfaction.

MILESTONE SINCE INCEPTION

 In the year 1999 it wins Quality Assurance IQ award.

 In the year 2000 it wins award for 1 million hours
without loss time accident.
 In the year 2000 it wins award for zero loss time
accident.
 In the year 2000 it wins Pepsi Cola International Bronze
Quality award.
 In the year 2001 it wins Pepsi Cola Beverages
International Bronze Quality award.
 In the year 2001 it wins award for zero loss time
accident.

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 TYPES OF COMMUNICATION CHANNELS

In PepsiCo company two types of channels are there :-

 CHAIN COMMUNICATION:-
These communication exists between superior & sub-
ordinate according to there in an organizations.

 FREE FLOW:-
In this communication each person can communicate with
others freely in this network communication fast.

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 PRESENT PRODUCT MIX

Brand 200ml. 300ml. 600ml. 1liter 1.5liter 2liter

Name
Pepsi • • • • •
Mirinda(orange) • • • •
Slice •
7up • • • •
Lehar • •
Aquafina •
Mountain dew • • • •

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 ORGANIZATION CULTURE

Organization culture consist of:-

 Open & transparent.

 Free forum & chain communication.
 Performance linked assessment.
 Mutual trust & respect.
 Non interference in internal matters.
 Team work.

POLICIES OF THE COMPANY

Quality Policy

We shall deliver the best product in the:-

 Market place.
 Highest quality.
 Biggest testing.

Safety Policy

We shall design, construct, maintain & safe operate our

plant so that they are safe for:-
 The people working in the company.
 The assets of the company.
 The environment in & around.

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 COMPANY’S HEADS DETAILS

Mr. Chetan Thakkar (Plant Manager)

Mr. Yashpal Jajodia (Finance Manager)
Mr. Nilesh Borisa (Account Executive)
Ms. Yamini Sinha (HR Manager)
Mr. Zubair Shaikh (HR Executive)
(Quality Head)
(Production Manager)
(Production executive)
(Shipping Head)
(Shipping Executive)

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 ORGANIZATIONAL STRUCTURE

Mr.Chetan
Thakar
(Plant
Manager)

Mr.Yashpal Ms.Yamini
Jajodia Sinha (Production (Quality
(Finance (HR Manager) Control)
Manager) Manager)

Mr.Nilesh Mr.Prakash Mr.Zubair

Borisa Shah Saikh
(Account (Account (HR
Executive) Executive) Executive)

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ORGANIZATION LAYOUT

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 PRODUCTION DEPARTMENT

Manufacture
Manager

Maintains Production
Executive Executive

Utility Production
Associate Associate

 Production department has to plan the production

schedule as per the sales.
 Implementation of the item.
 Achieve the production target.
 Maintain quality with goodwill.
 Safety of machine.
 Organize the training programme.

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 PRODUCT SPECIFICATION

 Pepsi
Colour – Black

 Mirinda
Colour – Orange

 Mountain Dew
Colour – Off Green

 7up
Colour – Like Water (No Colour)

 Aquafina
Colour – Water

 Slice
Colour – Mango

 Lehar
Colour – Like Water (No Colour)

RAW MATERIAL USED

Water, Sugar, Preform, CO2 , Crown, Label.

BOTTLE SPECIFICATION

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 Particular For 200 ml. For 300 ml.
Height (mm) 209.5+1.20 247.7+1.20
Fill Height (mm) 57.2 57.2
Weight (gms) 312 390
Base Diameter (mm) 54.5 59.6

PREFORM SPECIFICATION

Particular Specification
Weight (gms) 25.5+0.3
Wall Thickness (mm) 3.5+0.25
Length (mm) 107.4+1

Types of Material Handling Equipment Used

 Fork lift truck

o 2 for shipping
o 2 for production
o 2 for sugar godown
 Chain conveyer (GRB LINE)
 Belt conveyer (PET LINE)
 Plastic chain conveyer (PET LINE)
 Air conveyer (PET LINE)
 Pumps (WATER TREATMENT)

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  Roller conveyer (GRB & PET LINE)

BRIEF EXPLAINATION OF PRODUCTION PROCESS

(GRB)

GRB LINE (GLASS REFILLING BOTTLE)

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Production process starts from unloading of the empty bottles
from the trucks. These bottles are taken by fork lift trucks
which send in the plant line. Carats from fork lift & put on the
roller conveyer.

 Uncaser Machine

Uncaser Machine keeps the bottle on the automatic

conveyer belt from the carats.
At once it pick up the 48 bottles from the 4 boxes on this
belt 2 chips neck inspection points are set in order to remove
any damage bottle after inspection are do going the further
bottle.

 Bottle washer: (max-43000 bph)

After bottle inspected bottles are goes to bottle washer.

Prejecting
At this point the bottle is entering into the washer machine. At
this time bottle is inwarded into bottles by the jobs. The dust
washed in the prejecting 400 C temperature is maintaining the
capacity.

Detergent 1:
In this stage the tank is filled with washer & this water
contain detergent. At this stage miner dust or oiliness remove.

Detergent 2:
Bottles are passed through detergent-1 to detergent-2 tank.
The capacity of detergent-2 tank is 21800 liters.

Warm Water:

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The bottles are washed by the warm water at the temperature
of 600-630. Here, bottles are sterilized & almost all microbes &
bacteria’s are killed by warm water.

Cold water:
At this stage bottles are washed with cold water of 30 0-350 C.
At this stage the temperature of the bottles is bought down to
normal temperature.

 Refilling Bottles:

Empty bottles are refilled, which are passed through bottles.

Bottles come from 4 inspection stages, the GRB capacity is
36000 bph.

80 valves in the filling bowl. The capacity of the machine is

36000 bottles per hour. The empty bottles are picked up by
the filling bowl & filling automatically.

Then bottles forwarded for sealing machine the bottles are

sealed with the crown. After the bottles are sealed & crowned
they pass through printing machine. Printing machine print
the manufacturing date, time, price after this steps the bottles
are ready to final inspection.

In inspection identified:
o Half fill
o Full fill
o Dirty bottles
o Different crown

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 o Different bottles
The bottles are forwarded by the conveyer.

 Caser Machine:

Caser machine picked up 96 bottles & put into the carats

then through conveyer belt; the carats are arranged into the
pallets & then are arranged for fork lift truck into the finished
goods godown.

GRB PLANT STRUCTURE

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 PET LINE
(POLY ETHYLENE THYLATE)

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 PET line is a line of plastic bottle & its maximum
capacity for 500ml. bottle is 18000 bph, for 1.5 liters its
capacity is 12000 bph, and for 2 liters it is 9000 bph.

The entire machine on PET line is imported & is

purchased from the reputed foreign companies like:

Sidel (FRANCE)
Linker (POLAND)
Paramix (GERMANY)
Krones (GERMANY)

 Blow Moludar:

In blow moludar machine performs are converted into

PET bottles capacity of this machine is 10400 bph. This
machine is made by the Sidel (France Company) & price of this
machine is 7 to 8 crore.
Performs are brought in ‘HOPPER’ from to blow. Moludar
machine through conveyer. The computer controlling the
machine automatically and decides. The temperature of oven.
For controlling the temperature, sensor cameras are installed
which measure the temperature. Camera checking is done
after every 50 performs.
8 models are set in blow in moludar & converted into
expected shape. Bottles are send unscrambler by air conveyer.

 Unscrambler:

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 Main function is store the bottle from ‘BLOW
MOLUDAR’. Bottles are stored because it has two reasons:
It needs large amount of PET bottles continually; PET
bottles are stored in unscrambler machine.

Blow moludar is a very high energy consumption

machine, so electricity, cooling energy & continually and air is
required the unscrambler machine arranges the bottle on
conveyer. Air conveyer takes the bottles into filling hall. The
bottles are washed for one time because some dust is their.

 Filler Bowl:

There are 54 valves in Pet filler bowl. Valves pick the

bottle automatically. Syrup and CO2 are filled up
automatically, stop automatically and after. This crown sealed
done on the bottles.

 Warmer:

The bottle comes out from the filling halls which are
very cold if these cold bottles are forwarded to the “labeler”
then the label can not be fixed properly. The temperature of
bottles is brought up to 200 to 250 C from 40 to 50 C.

 Printing Machine & Labeler:

This label is fixed in particular machine label. Machine

has automatic capacity of 250 bph for 500 ml. & 200 bph for
1.5 liters & 150 bph for 2.0 liters.

 Case Packer Machine:

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 Different sized pet bottles are packed into different size
boxes.
96 valves-500ml
48 valves-1.5litres
27 valves-2litres

 Packaging Boxes:

The boxes are send forward through conveyer & boxes

are going toward boxes sealing station. Here boxes are sealing
automatically & arranged into godown by the lift truck
operator.

SHIPPPING PROCESS

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 AOP
(Annual Operational
Planning)

Target given
to each
Dealer

Order placed
at plant level
by all
Dealers

Transportatio
n
Arrangement

Dispatched of
Order

AOP (Annual Operational planning):

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Name suggest that operational planning would be done on
annual based and split in to monthly based and based on
that production planning would be done, and target are given
to each of all Dealers/Distributors,

How it would be decided:

On the basis of last year sales/forecast data and plus

predefined growth rate and it would be on all plant wise and it
could be decided on its potentiality

Who could be done:

It could be decided at Head-office, Delhi

Why it could be done:

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Meaning:
Inventory can be in the form of Raw-Material (RM), work in process (WIP)
or as Finished-goods (FG)

Purpose of Inventory

Inventory is useful for the following purposes:

 Predictability: In order to engage in capacity planning and scheduling,

you need to control how much raw-material, parts, and subassemblies
you process at a given time. Inventory buffers what you process.

 Fluctuations in demand: Inventory is assist in estimation of demand.

You don’t always know that how much stock you required at any given
time, but you still need to satisfy your customer’s demand on time.

 Unreliability of supply: Inventory kept when there is scarce of resources

or very few suppliers are available,

 Price protection: Buying quantities of inventory at appropriate times

helps avoid the impact of cost inflation. When there is chances of price
rising in future , better to purchase at presently at reasonable price and
avoid price fluctuation cost

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 Quantity discount: often bulk discounts are available if you buy in large
rather than small quantities

 Lower ordering cost: if you buy a larger quantity of an item less

frequently, the ordering costs are less than buying smaller quantities over
and over again.(The costs of holding the item for a longer period of time,
however, will be greater)

Types of Inventory (stock):

Inventory basically falls into overall categories of raw materials, finished

goods and work-in-process.

 Raw Materials: Used to produce partial products or completed goods.

for e.g. sugar, concentrate, performs, labels, closures etc

 Finished Product : This is product ready for current customer sales,

 Work-in-process (WIP): Items are considered to be WIP during the time

raw material is being converted into partial product.

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Other types of inventory:

 Consumables: Light bulbs, Hand towels, computer and photocopying

paper, tape, envelops, cleaning materials, lubricants, and so on.

 Engineering (Service, repair, replacement and spare) items: These are

after-market items used to “keep things going”. As long as a machine or
device of some type is being used and will need service in the future.

 Buffer/Safety inventory: This type of inventory can serve various

purpose, such as:
 Compensating for demand and supply uncertainties.
 Holding it to “Decouple” and separate different parts of your
operation so that they can function independently from one another.

 Transit Inventory: It could be argued that product moving within a

facility is transit inventory. It may also define as the goods moving within
distribution channel between you and outside to the facility user or
provider.

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INVENTORY COST

It has include following cost like ordering, holding cost and stock-out cost

 Ordering cost: It includes all cost incurred from placing order to receive
order and include
 Price of goods
 Salaries of purchase executives
 Transportation cost
 Damage cost

 Holding cost: It include all cost related from receive order to dispatching
products and has
 Rent of factory
 Security cost
 Insurance cost
 Obsolescence cost
 Salaries of Store manager

 Stock-out cost: It said to be cost when there is non availability of

material at a time of processing of finished goods which demanded by
consumer ( loss of consumer)

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TYPES OF INVENTORY SYSTEMS

1. Economic Order Quantity (EOQ) System:

It said to be place the order (in qty) at which ordering cost and carrying
cost would be minimum or said to be equal,

S P
Ordering Cost

C Holding Cost
O
S U EOQ
T

O T

No of orders

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 Ordering cost (OC): It incurred during placing order to receive order
like salaries of procurement, transportation cost, damage cost etc. It said
to high when there are many orders placed and should be optimum so
that frequency of order reduced cost. From above graph OP line it can be
observed that as no of order increased leads to increased in OC

 Holding cost: It incurred after receiving of materials to getting into

process like rent of factory, insurance, security cost and salary of store
manager, it said to be zero when there is no inventories in stores and
increased as store material quantity increased so quantity should be
optimum.

2. ABC Inventory control system:

Large no of firms have to maintain several types of inventories. It is not

desirable to keep the same degree of control on all the items. The firm
should pay maximum attention to those items whose value is the highest.
The firm should, therefore, classify inventories to identify which items
should receive the most efforts in controlling. The firm should be
selective in its approach to control investment in various types of

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 inventories. This analytical approach is called the ABC analysis and
tends to measure the significance of each item of inventories in terms of
its value.

 ‘A items’ represents the high-value items and would be under the

tightest control

 ‘C items’ represents relatively least value and would be under simple

control

 ‘B items’ falls in between above these two categories and require

reasonable attention of management

The following steps are involved in implementing the ABC analysis:

 Classify the items of inventories, determining the expected use in units

and the price per unit for each item

 Determining the total value of each item by multiplying expected units

by its unit price

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 Rank the items in accordance with the total value, giving first rank to the
item with highest total value and so on

 Compute the ratios (percentage) of number of units of each items to total

units of all items and the ratio of total value of each item to total value of
all items.

 Combine items on the basis of their relative value to form these

categories-A,B and C

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 % Cumul Unit Total % Cumul
Item Units Of ative Price Cost of ative
Total % (Rs) (Rs) Total %
1 10,000 10 30.40 3,04,000 38.00
2 5,000 5 51.20 2,56,000 32.00 70
15
3 16,000 16 5.50 88,000 11.00
4 14,000 14 45 5.14 72,000 9.00 90
5 30,000 30 1.70 51,000 6.38
6 15,000 15 100 1.50 22,500 2.81 100
7 10,000 10 0.65 6,500 0.81
Total 1,00,000 100 8,00,000

The tabular and graphs presentation indicate that

 ‘ Item A’ forms a minimum proportion, 15 percentage of total units of all

items, but represents the highest value, 70 percentage

 ‘Item C’ represents 55 percentage of total units and only 10 percent of

total value

 ‘Item B’ occupies middle place and contains 30 percent of total units and
represents 20 percent value of total value

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Items A and B jointly represents 45 percent of total units and 90 percent of
the investment. More than half of the total units are item C, represents
merely 10 percent of total investment

100

80
C
60
O
40 Item
S Item C
Item B
T 20 A

10 30 50 70 90 100
Percentage of units

(3) JUST IN TIME (JIT) SYSTEM:

Japanese firms popularized the just-in-time (JIT) system in the world.

In a JIT system material or the manufactured components and parts
arrives to the manufacturing sited or stores just few hours before they are

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 put to use. The delivery of material is synchronized with the
manufacturing cycle and speed. JIT system eliminates the necessity of
carrying large inventories, and thus, saves carrying and other related
costs to the manufacturer. The system requires perfect understanding and
coordination between the manufacturer and suppliers in the timing of
delivery and quantity of the material. Poor quality material or
components could halt the production. The JIT inventory system
complements the total quality management (TQM). The success of the
system depends on how well a company manages its suppliers. The
system puts tremendous pressure on suppliers. They will have to develop
adequate system and procedures to satisfactory meet the needs of
manufactures.

(4) OUT-SOURCING:

A few years ago there was a tendency on the parts of many companies to
manufacture all components in-house. Now more and more companies
are adopting the practice out-sourcing. Out-sourcing is a system of
buying parts and components from outside rather than manufacturing
them internally. Many companies develop a single source of supply.

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Introduction to Inventory Management
Inventory constitutes the most significant part of current assets of a
large majority of companies in India.
The term inventory refers to the stockpile of the products of the firm
is offering for sale and the components that make up the product.
The various firms in which inventories exist in manufacturing
companies are :
 Raw-materials inventories.
 Work-in-process inventories.
 Finish goods inventories.
Inventory control refers to the process whereby the investment in
materials and parts carried in stock is regulated within predetermined
limits, set in accordance with the inventory policy established by
management.
The production manager favors relatively higher levels of inventory
so that production process runs smoothly. The marketing manager
prefers to have reserves of finished goods so that availability of
product is ensured even if demand for the product keeps fluctuating.
The finance manager justify limited stock levels because of them,
inventory blocks money which doesn’t earn interest.
Raw materials are those basic input materials that are converted into
finished product through manufacturing process. Raw materials

38
inventories are those raw materials inventory units which have been
purchased and stored for future.
Work-in-process represents products that need more work before they
become finished product products for sale.

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Introduction to Inventory Management in PepsiCo India
Holdings (P) Ltd.
A study at PepsiCo India Holdings (P) Ltd. was carried out taking into
consideration the concept f total material control, which significant that
efficiency of any organization is upon having the right quality, right place
in right quantity at right time and at right place in following broad areas:
1. Purchase control.
2. Storage control.
3. Warehouse Accounting.

Purchase Control:
Purchasing is one of the basic functions of inventory
management and forms a major part of it. It needs considerable
expertise not only negotiating but also in the techniques of
competition and studying in large economic trends in respect of
materials to be purchased in large quantity to increase the
profit.
Objective:
o To maintain continuity of production.
o To contribute toward higher productivity.
o To buy for the best ultimate value not necessary at the
lowest initial price.

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 o To contribute towards standardization, variety reduction
and value analysis programs.
Functions:
 Purchase time:-The purchase time indicates the lead
time i.e. time taken to physically receive the material
from the date of its indent.
To find out the lead time five cases different
items have been studied randomly, and analyzed its fact
which indicates that by following the existing
procedure, the administrative lead is very long i.e. 5 to 7
months, while suppliers lead time about 2 to 3 months.
 Purchase quality & quantity:- It has been observed that
the quantity of material is being purchase considering 6
to 12 months consumption that means no economic
order quantity has been fixed for different types of
material.
 Purchase Price:- The price of each item is being
compared with supplier’s quotations considering the
quality of material to be supplied. Also the price and
terms are considered.

Store Control:
The control of materials while in storage is affected
through what is known as the perpetual inventory.

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 Thus main functions of the perpetual inventory system
have been studied which are:
Receipt and issue system
Maintenance of store records.

Warehouse Accounting:
The procedure comes in to operation immediately on receipt of
dispatched documents or dispatched intimation in the stores and
covers on the activities, i.e. clearness, delivery, inspection, stock
charging and preservation, issue and return of materials by the
consumer and ends after striking out of balance from the stock
card and delivery of documents to the account department.
Stores ledger
Physical stock verification.

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An insight in the study

I have selected the topic “INVENTORY MANAGEMENT” as my

special topic of finance department on which I have prepared a mini project
including raw inventories, work-in-process inventories, and finished goods
inventories.
The subject is related with the analysis of the inventory management
for the investment of inventories in the PepsiCo India holdings (P) Ltd.

Objective of the study:

The report includes following main objectives, are as under:

To find out the operation cycle.
To study of the various inventories ratio.
To analysis of inventory management techniques used in the
PepsiCo India Holdings (P) Ltd.
To study and analysis the inventory management system and
control practices at PepsiCo India Holdings (P) Ltd.

The objectives of the report are concerned with an Ideal Inventory

Management. An ideal inventory management give the minimum
storage of the different types of the inventories and maximum sales of

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the product of the company that’s why it increase in the wealth of the
company.

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