InventoRy MAnAgeMent

Operations Research and Management

A report on

Submitted By:-
Prax_sarvz
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Introduction
You are in trouble if you have to keep telling customers, "I'm sorry
we're out of that size. May we order it for you?" Even though the shirts are
selling briskly, you will lose customers if you don't have an item in stock.
When the customer spends, you have got to be ready with the goods. This is
what inventory management is all about.
In many retail and wholesale operations, the single largest asset is
inventory. Control of this investment is vital. It will eliminate a number of
the problems associated with capital shortages and will also provide capital
to permit expansion of operations for increased sales and profit.

Literature Review

Inventory Management
Inventory management can be briefly described as:
· Acquiring an adequate supply and assortment of merchandise from which
customers can buy.
· Providing safety stocks to meet unexpected demand or delays in inventory
replenishment.
· Maintaining clear, correct, and current records.
· Purchasing the proper assortment of goods in quantities that will maintain
inventory levels consistent with business requirements, while providing
adequate safety stocks.
· Reducing excessive inventories promptly, so that the dollars realized from
clearing overstocks can be invested in merchandise with a greater market
potential.

Inventory Investment Control

Inventory investment control is accomplished in two ways:
· Prompt elimination of overstocked items.
· Inventory replenishment in anticipation of customer demand. Whenever a
particular item is overstocked, the overstock should be reduced as promptly
as possible. Naturally, the most effective and profitable way is to sell it to
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customers, even at a discount. However, there are other possibilities. There
may be a wholesale market available for certain kinds of inventory.
Excessive consumer goods inventories are often sold to "bargain basements"
or warehouse outlets. Perhaps you can even arrange wholesale sales to a
competitor. Frequently, it is wiser to scrap inventory that shows no sales
activity for an extended period of time. In this way, you reduce a misleading
overstatement of inventory on your company's books. At the same time, you
make space available for inventory that can be sold at a profit.

Inventory Replenishment

The key to successful inventory management is adherence to procedures for

inventory replenishment. Your ability to anticipate customer demand for
certain items will help you plan your inventory purchases so that sufficient
stocks are on hand to accommodate sales volume without excesses that
cause other problems. Planning your purchases will also help you avoid
shortages that can only be filled through forfeiture of discounts or absorption
of premium shipping charges.
Determining purchasing requirements involves answering two questions:
· What to buy?
· How much to buy?
Both questions can be answered by establishing an inventory target for any
item you carry expressed as so many days', weeks', or months' sales.
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Answers to questions given, on the basis of our

visit to Big- Bazaar.

In order to complete the project, we went on a survey to Big Bazaar.

Product categories in Big Bazaar

Big Bazaar generally deals in national level brands like Lee, Levis etc, Other
than this it also deals in some Private label brands DJ&C in apparel, KORIA
in electronics etc. Then we asked about the product categories , that are
:FMCG, FOOD & NON- FOOD junction , Staple items , fruits &
vegetables , fashion & apparels ,chill section , home decorator , footwear ,
book zone, CDs etc

Location of Big Bazaar

Considering all the facts which we have studied, and seeing the strategic
location of Big Bazaar, we can say, that the location is the best, it could have
in ............ Firstly it is in the heart of the city. Secondly it is in a shopping
mall, which has all types of customers coming in and their, footfalls, being
easily converted into sale, by the efficient employees of big bazaar.
Moreover it is at the place where traffic inception is always high. It is near
station, which gives it another competitive advantage over its competitors.
Transportation is also good, as one can easily reach big bazaar through auto,
private vehicles etc.

Types of inventories maintained.

The inventories maintained in the outlet, are of different product category.

Mainly Cycle inventory is maintained for FMCG product category & Food
Category, Safety level of inventory for FMCG Products, and for Apparel,
Seasonal inventory is maintained, because of fluctuation in demand.
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Decision of how inventories are maintained

Then coming to how the store manager decides the level of inventory, the
store manager inspects the stocks time to time and also the demands of
customers. Manager maintains the Stock – in & Stock – out, so that he can
decide the level of inventory. He, also has seen the trends in the requirement
of inventories, as for eg. he told that apparels are ordered approximately
after 45 days. For every sample of clothes they have a back up of 10 pieces.
However in case, if more number of pieces are required, they first ask other
big bazaar location such as that of Patia etc. but if, even then they fail to
meet the demands of customers, they go for “Transfer of Interest”. In this
they prefer sending the customers to pantaloons, as it is also of Future
Group, instead of losing them.
He also told that recently big bazaar has undergone tremendous
technological advancement, as its supply chain has become completely
computerized. Once the product is sold, automatically, the computer sends
the request for back up.

Reorder points of inventories

The manager in charge told us that there is no such reorder points. Orders
are placed as and when required. However he told that there are no such
measures, except in a few items. Previously apparels were ordered once
there stock fell below 4 per item piece. For general merchandise, which
includes, food and non-food items, it was 7 days. However they always keep
in mind the transit time of 2 days. Vegetables are taken on a daily basis,
form local vendors.

Uncertain demands of customers

As discussed earlier, the uncertain demands are met by either by getting it

through other outlets of big bazaar or through transfer of interest, to other
outlets of future group, like Pantaloons.

Supply chain of perishable and imperishable goods

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Perishable goods like vegetables are maintained with great care. Vegetables
are bought on daily basis on the basis of demand, and seasonal item. It is
also ascertained that damaged vegetables are sold at a low cost to some other
channels. Whereas imperishable goods like utensils and staple goods and
electronic items are brought from ............. The distribution channel used in
supply chain process is operated by Central Distribution Channel, which is
located in ……... From there goods are supplied to every Big Bazaar Store.
The modes of transportation which are used in supply chain process are
Truck & Rails, but in case of emergency, flights are also being used. The
transportation is outsourced. Mainly the carriers for Big Bazaar are Quick &
Safe, Gati, Deluxe Roadways, and TNT.

Operational strategies followed by retail outlet to attract more

customers

When we raised the question of strategy for attracting customers, the

manager was not willing to answer us. However after convincing him a lot,
he gave us some generalized strategies. He told us that mostly they give
discount offers. Discount offers are basically given by manufacturers to
them, and after keeping a safe margin of profit, they release the items on
discounts. They also give ads in television, go for promotional activities and
put banners on road sides.
However once the customers is inside the store, then also strategies
keep changing. They keep thing in places where they see for longer duration,
for eg. near corners of turning, on cash counters etc.

Area of Maintenance

Since the store is fully computerized, in the sense, like billing, inventory
management, electronic equipments near the gates, to check thieves, it has to
take proper care of machines. Food items are to be regularly checked.
Inventory room has to be checked regularly for any sort of leakages. Air-
conditioners have to be regularly checked. Electrical wirings have to be
closely monitored. Short circuit cameras have to be checked regularly as it is
a major factor in security arrangement.
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Quality of Food-items

Food items are kept in a separate place, both in inventory and at store. Food
items which are required to be kept at cold places, like cold-drinks, cheese,
milk products, milk, fruits, etc. are kept in refrigerators, whereas those
which can be kept anyway, are kept on proper shelves.

The Questionnaire that we have prepared is as follows:-

P.T.O.
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Questionnaire

Please put (tick) on a scale of 1-5, where 1 = "Never", 2 =

“Seldom”, 3 = “Can’t say”, 4 = “Often”, 5 =
"Always"

1. How satisfied are you overall with the service you received?

1 2 3 4 5

2. How satisfied are you with the speed in which the service/product was
delivered?

1 2 3 4 5

3. How satisfied are you with the ease of contacting the person you needed?

1 2 3 4 5

4. How satisfied are you with the clarity of information or advice provided?

1 2 3 4 5

5. How satisfied are you with the time taken to respond to your queries?

1 2 3 4 5

6. Are you satisfied with the quality of products you buy from Big- Bazaar?

1 2 3 4 5

7. Are you satisfied with the cleanliness of the store?

1 2 3 4 5

8. How satisfied are you with the total management of the store?

1 2 3 4 5
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The responses were collected from 10 people, who have been to Big Bazaar.

Methodology:-

Sampling technique used- Convenient Sampling

Sample size- 10
Statistical method used- Mean, Standard Deviation, Bar-graph, Line-
graph Software- SPSS
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Findings:-

Descriptive Statistics
N Range Minimum Maximum Sum Mean Std. Deviation
VAR00001 10 2.00 3.00 5.00 41.00 4.1000 .73786
VAR00002 10 2.00 3.00 5.00 41.00 4.1000 .73786
VAR00003 10 2.00 3.00 5.00 40.00 4.0000 .81650
VAR00004 10 2.00 3.00 5.00 42.00 4.2000 .63246
VAR00005 10 3.00 2.00 5.00 41.00 4.1000 1.10050
VAR00006 10 3.00 2.00 5.00 38.00 3.8000 1.03280
VAR00007 10 2.00 3.00 5.00 41.00 4.1000 .87560
VAR00008 10 1.00 4.00 5.00 47.00 4.7000 .48305
Valid N (list wise) 10

Bar-Graph

4.8

4.6

4.4

4.2

4.0

3.8
Mean

3.6
VAR00001 VAR00003 VAR00005 VAR00007
VAR00002 VAR00004 VAR00006 VAR00008
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Line-Graph

1.2

1.1

1.0

.9

.8

.7
Standard Deviation

.6

.5

.4
VAR00001
VAR00003 VAR00005 VAR00007
VAR00002
VAR00004 VAR00006 VAR00008
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Analysis

Here the 8 variables stand for the 8 questions asked to the respondents. After
calculating the mean, we can see that overall the mean is above 4, which
means that the customers are “Often” satisfied with the services they receive
at the store. As the mean of question number 8 is highest we can infer that
the customers are happy with the way the store is managed. However since
the mean of question number 6 is lowest, we can infer that the customers are
not happy with the quality of the products the buy from the store. They think
that it is due to the low price of the products available there. The same is
shown in the bar graph.
But when we look at the standard deviation of the data, we see that the
standard deviation of the responses is highest for question number 5, where
as it is the lowest for question number 8. It signifies that, the response of
question number 5 differs in opinion among customers. Some are satisfied
with the time taken to respond to there queries, whereas some are not.
However, question number 8 has a unanimous response, and so it has the
lowest deviation from the standards. It is everyone’s opinion that the
management of Big-Bazaar has to be given all kudos for efficient
functioning and customer satisfaction.