Professional Documents
Culture Documents
INTRODUCTION OF INVENTORY
Inventories constitute the most significant part of current assets of a large majority of companies in
India. On an average, inventories are approximately 60% of current assets in public limited
companies in India. Because of the large size of inventories maintained by firms, a considerable
amount of feuds is required to be committed to them. It is therefore, absolutely imperative to ménage
inventories efficiently and efficiently in order to avoid unnecessary investment. A firm neglecting
the management of inventories will be jeopardizing its long run profitability and may fail ultimately.
It is possible for fore a company to reduce its levels of inventories to a considerable degree e.g. 10 to
20 percent, without any adverse effect on production and sales, by using simple inventory planning
and control techniques. The reduction in excessive inventory carries a favourable impact on a
company’s profitability.
MEANING OF INVENTORY:-
Inventory is the physical stoke of goods maintained in an organization for its smooth sunning. In
accounting language it may mean stock of finished goods only. In a manufacturing concern, it
may includes raw materials, work-in-progress and stores etc. In the form of materials or supplies
to be consumed in the production process or in the rendering of services.
NATURE OF INVENTORIES :-
Inventories are stock of the product a company is manufacturing for sale and
components that make up the product. The various forms in which inventory exist in a
manufacturing company are raw materials, work in progress and finished goods.
RAW MATERIALS:-
Raw materials are those inputs that are converted into finished product though
the manufacturing process. Raw materials inventories are those units which have been
purchased and stored for future productions.
WORK IN PROGRESS:-
These inventories are semi manufactured products. They represent products that need
more work before they become finished products for sales.
PACKAGING MATERIAL:-
Packaging material includes those items which are used for packaging of
perfumery product i.e. cap of the bottle, pump, coller,liver, box etc.
FINISHED GOODS:-
The levels of four kinds of inventories for a firm depend on the nature of its
business. A manufacturing firm will have substantially high levels of all three kinds of
inventories, while a retail or wholesale firm will have a very high and no raw material and work
in progress inventories. Within manufacturing firms, there will be differences. Large heavy
engineering companies produce long production cycle products, therefore they carry large
inventories. On the other hand, inventories of a consumer product company will not be large,
because of short production cycle and fast turn over.
INVENTORY MANAGEMENT
As the cost of logistics increases the manufacturers are looking to inventory management as a
way to control costs. Inventory is a term used to describe unsold goods held for sale or raw
materials awaiting manufacture. These items may be on the shelves of a store, in the backroom
or in a warehouse mile away from the point of sale. In the case of manufacturing, they are
typically kept at the factory. Any goods needed to keep things running beyond the next few
hours are considered inventory.
"Inventory" to many small business owners is one of the more visible and tangible aspects of
doing business. Raw materials, goods in process and finished goods all represent various forms
of inventory. Each type represents money tied up until the inventory leaves the company as
purchased products. Likewise, merchandise stocks in a retail store contribute to profits only
when their sale puts money into the cash register.
In a literal sense, inventory refers to stocks of anything necessary to do business. These stocks
represent a large portion of the business investment and must be well managed in order to
maximize profits. In fact, many small businesses cannot absorb the types of losses arising from
poor inventory management. Unless inventories are controlled, they are unreliable, inefficient
and costly.
Inventory management simply means the methods you use to organize, store and replace
inventory, to keep an adequate supply of goods while minimizing costs. Each location where
goods are kept will require different methods of inventory management. Keeping an inventory,
or stock of goods, is a necessity in retail. Customers often prefer to physically touch what they
are considering purchasing, so you must have items on hand. In addition, most customers prefer
to have it now, rather than wait for something to be ordered from a distributor. Every minute that
is spent down because the supply of raw materials was interrupted costs the company unplanned
expenses
2. Systems and processes that identify inventory requirements, set targets, provide
replenishment techniques and report actual and projected inventory status.
3. Handles all functions related to the tracking and management of material. This would
include the monitoring of material moved into and out of stockroom locations and the
reconciling of the inventory balances. Also may include ABC analysis, lot tracking, cycle
counting support etc.
DEFINITIONS OF INVENTORY
1. Inventory”: goods that businesses intend to sell to their customers or raw materials or in-
process items that will be converted into salable goods
2. “Inventory is the stock of idle resources which has economic value and is maintained to
fulfill the present and future needs of an organization”
IMPORTANCE OF INVENTORY
Inventory represents one of the most important assets that most businesses possess, because the
turnover of inventory represents one of the primary sources of revenue generation and
subsequent earnings for the company's shareholders/owners.
The word 'inventory' can refer to both the total amount of goods and the act of counting them.
Many companies take an inventory of their supplies on a regular basis in order to avoid running
out of popular items. Others take an inventory to insure the number of items ordered matches the
actual number of items counted physically. Shortages or overages after an inventory can indicate
a problem with theft or inaccurate accounting practices.
Possessing a high amount of inventory for long periods of time is not usually good for
a business because of inventory storage, obsolescence and spoilage costs. However,
possessing too little inventory isn't good either, because the business runs the risk of losing out
on potential sales and potential market share as well.
(2) Avoidance of Abnormal Wastage: There should be minimum possible wastage of materials
while these are being stored in the godowns or used in the factory by the workers. Wastage
should be allowed up to a certain level known as normal wastage. To avoid any abnormal
wastage, strict control over the inventory should be exercised. Leakage, theft, embezzlements
of raw material and spoilage of material due to rust, bust should be avoided.
(3) Promotion of Manufacturing Efficiency: If the right type of raw material is available to the
manufacturing departments at the right time, their manufacturing efficiency is also increased.
Their motivation level rises and morale is improved.
(4) Avoidance of Out of Stock Danger: Information about availability of materials should be
made continuously available to the management so that they can do planning for
procurement of raw material. It maintains the inventories at the optimum level keeping in
view the operational requirements. It also avoids the out of stock danger.
(5) Better Service to Customers: Sufficient stock of finished goods must be maintained to
match reasonable demand of the customers for prompt execution of their orders.
(6)Highlighting slow moving and obsolete items of materials.
(7) Designing poorer organization for inventory management: Clear cut accountability should
be fixed at various levels of organization.
B. Financial Objectives:
(1) Economy in purchasing: A proper inventory control brings certain advantages and
economies in purchasing also. Every attempt has to make to effect economy in purchasing
through quantity and taking advantage to favorable markets.
(2) Reasonable Price: While purchasing materials, it is to be seen that right quality of material
is purchased at reasonably low price. Quality is not to be sacrificed at the cost of lower price.
The material purchased should be of the quality alone which is needed.
(3)Optimum Investing and Efficient Use of capital: The basic aim of inventory control from
the financial point of view is the optimum level of investment in inventories. There should be
no excessive investment in stock, etc. Investment in inventories must not tie up funds that
could be used in other activities. The determination of maximum and minimum level of stock
attempt in this direction.
IMPORTANCE OF INVENTORY MANAGEMENT
All businesses must know what they have on hand and evaluate stock levels with respect to
current and forecasted demands. You must know what you have in stock to ensure you can meet
the demands of customers and production and to be sure you are ordering enough stock in the
future. Counting is also important because it is the only way you will know if there is a problem
with theft occurring at some point in the supply chain. When you become aware of such
problems you can take steps to eliminate them.
Whenever possible, obtain a commitment from a customer for a purchase. In this way, you
ensure that the items you order will not take space in your inventory for long. When this is not
possible, you may be able to share responsibility for the cost of carrying goods with the
salesperson, to ensure that an order placed actually results in a sale. You can also keep a list of
goods that can easily be sold to another party, should a customer cancel. Such goods can be
ordered without prior approval.
Approval procedures should be arranged around several factors. You should set minimum and
maximum quantities which your buyers can order without prior approval. This ensures that you
are maximizing any volume discounts available through your vendors and preventing over-
ordering of stock. It is also important to require pre-approval on goods with a high carrying cost.
Any time items arrive at or leave a warehouse, accurate paperwork should be kept, itemizing the
goods. When inventory arrives, this is when you will find breakage or loss on the goods you
ordered. Inventory leaving your warehouse must be counted to prevent loss between the
warehouse and the point of sale. Even samples should be recorded, making the salesperson
responsible for the goods until they are returned to the storage facility. Records should be
processed quickly, at least in the same day that the withdrawal of stock occurred.
4. MANAGING EMPLOYEES
Buyers are the employees who make stock purchases for your company. Reward systems should
be set in place that encourage high levels of customer service and return on investment for the
product lines the buyer manages.
Each stock item in your warehouse or back room should have its own procedures for
replenishing the supply. Find the best suppliers and storage location for each and record this
information in official procedures that can easily be accessed by your employees.
Inventory management should be a part of your overall strategic business plan. As the business
climate evolves towards a green economy, businesses are looking for ways to leverage this trend
as part of the “big picture”. This can mean re-evaluating your supply chain and choosing
products that are environmentally sound. It can also mean putting in place recycling procedures
for packaging or other materials. In this way, inventory management is more than a means to
control costs; it becomes a way to promote your business.
Successful inventory management involves balancing the costs of inventory with the benefits of
inventory. Many small business owners fail to appreciate fully the true costs of carrying
inventory, which include not only direct costs of storage, insurance and taxes, but also the cost of
money tied up in inventory. This fine line between keeping too much inventory and not enough
is not the manager's only concern. Others include:
• Maintaining a wide assortment of stock -- but not spreading the rapidly moving ones too
thin;
• Increasing inventory turnover -- but not sacrificing the service level;
• Keeping stock low -- but not sacrificing service or performance.
• Obtaining lower prices by making volume purchases -- but not ending up with slow-
moving inventory; and
• Having an adequate inventory on hand -- but not getting caught with obsolete items.
• The degree of success in addressing these concerns is easier to gauge for some than for
others. For example, computing
ABOUT INVENTORY CONTROL
Inventory consists of the goods and materials that a retail business holds for sale or a
manufacturer keeps in raw materials for production. Inventory control is a means for maintaining
the right level of supply and reducing loss to goods or materials before they become a finished
product or are sold to the consumer.
Inventory control is one of the greatest factors in a company’s success or failure. This part of the
supply chain has a great impact on the company’s ability to manufacture goods for sale or to
deliver customer satisfaction on orders of finished products. Proper inventory control will
balance the customer’s need to secure products quickly with the business need to control
warehousing costs. To manage inventory effectively, a business must have a firm understanding
of demand, and cost of inventory.
INVENTORY COSTS
There are three main types of cost in inventory. There are the costs to carry standard inventories
and safety stock. Ordering and setup costs come into play as well. Finally, there are shortfall
costs. A good inventory control system will balance carrying costs against shortfall costs.
SAFETY STOCK
Safety stock is comprised of the goods needed to be kept on hand to satisfy consumer demand.
Because demand is constantly in flux, optimizing the Safety Stock levels is a challenge.
However, demand fluctuations do not wholly dictate a company’s ability to keep the right supply
on hand most of the time. Companies can use statistical calculations to determine probabilities in
demand.
ORDERING COSTS
Ordering costs have to do with placing orders, receiving and stowage. Transportation and invoice
processing are also included. Information technology has proven itself useful in reducing these
costs in many industries. If the business is in manufacturing, then to production setup costs are
considered instead.
Shortfall costs are avoided by keeping an ample safety stock on hand. This practice also
increases customer satisfaction. However, this must be balanced with the cost to carry goods.
The best way to manage stockout is to determine the acceptable level of customer service for the
business. One can then balance the need for high satisfaction with the need to reduce inventory
costs. Customer satisfaction must always be considered ahead of storage costs.
CYCLICAL COUNTING
Many companies prefer to count inventory on a cyclical basis to avoid the need for shutting
down operations while stock is counted. This means that a particular section of the warehouse or
plant is counted physically at particular times, rather than counting all inventory at once. While
this method may be less accurate than counting the whole, it is much more cost effective.
Cyclical counting is preferred because it allows for operations to continue while inventory is
taken. If not for this practice, a business would have to shut down while counts were taken, often
requiring the hire of a third party or use of overtime employees. Cyclical counting usually
utilizes the ABC rule, but there are other variations of this method that can be used. The ABC
rule specifies that tracking 20 percent of inventory will control 80 percent of the cost to store the
goods. Therefore, businesses concentrate more on the top 20 percent and counter other goods
less frequently. Items are categorized based on three levels:
Warehouse staff can now schedule counting of inventories based on these categories. The “A”
category is counted on a regular basis while “B” and “C” categories are counted only once a
month or once a quarter.
The methods a company uses to value the costs of inventory have a direct effect on the business
balance sheets, income statements and cash flows. Three methods are widely used to value such
costs. They are First-In, First-Out (FIFO), Last-In First-Out (LIFO) and Average Cost. Inventory
can be calculated based on the lesser of cost or market value. It can be applied to each item, each
category or on a total basis.
FIFO
FIFO operates under the assumption that the first product that is put into inventory is also the
first sold. An example of this in action can be made when we assume that a widget seller
acquires 200 units on Monday for Rs.1.00 per unit. The next day, he spots a good deal and gets
500 more for Rs.75 per unit. When valuing inventory under the FIFO method, the sale of 300
units on Wednesday would create a cost of goods sold of Rs.275. That is, 200 units at Rs1.00
each and 100 units at Rs.75 each. In this way, the first 200 units on the income statement were
valued higher. The remaining 400 widgets would be valued at Rs.75 each on the balance sheet in
ending inventory.
LIFO
LIFO assumes instead that the last unit to reach inventory is the first sold. Using the same
example, the income statement and balance sheet would instead show a cost of goods sold of
Rs.225 for the 300 units sold. The ending inventory on the balance sheet would be valued at
Rs.350 in assets. When this method is used on older inventories, the company’s balance sheet
can be greatly skewed. Consider the company that carries a large quantity of merchandise over a
period of 10 years. This accounting method is now using 10-year-old information to value its
assets.
WEIGHTED AVERAGE
Average Cost works out a weighted average for the cost of goods sold. It takes an average cost
for all units available for sale during the accounting period and uses that as a basis for the cost of
goods sold. To site our example again, we would calculate the cost of goods sold at [(200 x Rs.1)
+ (500 x Rs.75)]/700, or Rs.821 each. The remaining 400 units would also be valued at this rate
on the balance sheet in ending inventory.
SPECIFIC IDENTIFICATION
A less commonly used, but important method to valuation is called specific identification. This
method is used for high-end items that are more easily tracked. In some cases, this method can
be used for more common items, but less value is realized from this accounting method is such
cases. This is because powerful and detailed tracking software is required to employ specific
identification on large numbers of goods.
No matter how you look at it, you are still coming up with 700 widgets that cost you a total of
Rs.575. This would all be well and good if the value of money remained static. However, market
conditions change causing inflationary changes. When this happens, your accounting method can
have a strong impact on how healthy the business looks on income statements and balance
sheets. The affects cash flow when businesses seek credit to pay for ongoing operations.
RISING PRICES
When prices are rising, using FIFO will show a greater value on the balance sheet, thereby
increasing tax liabilities but also improving credit scores and the ability to borrow cash for
ongoing operations. Older inventory is being used to determine the cost of goods sold and newer
inventory is being used to report assets. LIFO decreases the value on the income statement, but
can reduce the level of depreciation you are able to take on assets. This is good for taxes but bad
for borrowing. Industries most likely to adopt LIFO are department stores and food retailers. The
method is rarely used in defences.
Inventories are equivalent to cash and they make up an important of the total cost.
It is essential that inventory should be properly safeguarded and correctly accounted.
Proper control of inventory can make a substantial contribution to the efficiency of a
bussiness. The success of a business concern largely depends upon efficient purchasing,
storage, consumption and accounting.
Inventory plays a vital role in study of inventory
management in bulk so I selected the SFP Sons pvt.ltd.
STATEMENT OF PROBLEM
The current system in the company under inventory management system which doesn’t
specify the safety stock which leads to scare for stocks at emergency.
The data are not properly updated at the end of each day’s work. Proper data
security system is not provided. Annual maintenance contract is not provided.
Records are not maintained properly.
INDUSTRY PROFILE
The perfume industry in India has come of age. From a cottage industry it has become full-
fledged industry in the last two decades. The industry is growing at 125 percent annually. The
growth is attributed to an increase in disposable income.
WITH GLOBALIZATION, liberalization and the IT revolution, living standards of the Indians
have increased manifold. The demand for fashionable products has increased too. That is why;
all global players are eyeing the subcontinent for business purpose. The illegal flow of lifestyle
products confirm the great demand for these products in India. The affinity of the Indians for
foreign goods also compels the indigenous manufacturers to tie-up with international brands to
tap this segment of people.
The fragrances industry is big business, very big business. It includes much more than retail sales
of fragrances. Related industries such as chemical companies supply the chemicals and the
fragrances are made from it. Most fragrances chemicals are synthesized from petroleum
products. Some companies formulate fragrances and flavours for other companies. Marketing
and advertising are used to create and promote the image of a fragrance.
The perfume industry, basically, was just a cottage industry some two decades ago. But now, due
to the huge demand among the people, it has blossomed into a full-fledged industry. Recently,
‘Alcome Perfumes and Cosmetics’, declared a plan to set up a Rs. 100 crore green field perfume
plant in and around Noida Special Economic Zone.
The domestic perfume market is estimated to be worth Rs.300 crore and is growing at around
125 percent annually. The forecast is that it may grow at a rate of 200 percent in the coming
years, with fast changing consumer behaviour and habits.
Geneva-base International Fragrance association has estimated that the global perfume market is
worth $ 40 billion, out of which the mass market has a 70 percent share. In this, India, China has
a considerable share.
With the growing demand for fragrance, the Indian perfume companies are planning to change
their strategies by utilizing their resources mainly for the domestic market and a meager portion
for exports. Apart from that these that these companies are also planning a multiple marketing
and distribution strategy to foray into a market with huge potential. The potential is immense as
the middle class is growing rapidly and disposable incomes are increasing.
2.1921
1921 - Coco Chanel revolutionised the perfume industry by being the first to make a mass
market scent for every woman when she launched Chanel No5 in 1921. You can still spritz on
some of that vintage glamour today with your own bottle, £46 for 50ml EDT at House of Fraser
3.1987
Feb 28, 1987 - When perfumed gloves came into fashion in the 16th century, the town
gradually developed a separate perfume industry. ... The Provencal Art and History Museum,
originally the 18th century home of Louise de Mirabeau, houses a fine collection of Provencal
art. The 17th century Fragonard.
4.1988
Nov 25, 1988 - It is one of the 200 fragrance-related art objects currently on view in the
"Scents of Time" exhibit at the Museum of Science and Industry. The exhibit traces the history
and evolution of fragrance, connecting each phase with the social, political and cultural trends of
the time. ...
5. 1991
Feb 17, 1991 - Written in collaboration with Patricia Bayer, the book includes chapters on
Rene Lalique's life, the development of the perfume industry, the history of the Lalique
company, and collecting tips. An appendix provides information on dating bottles by the
signature .
6. 1999
Dec 9, 1999 - of newly fragrances remain on the shelf after a year of launching," says
international director for Antonio PUIG perfumes, Eugeni Majo. cosmetics industry is a dynamic
one. it's competitive and only companies that manage to create an product that differs from the
rest will remain"
7. 2000
Jun 20, 2000 - Halifax's eight-year-old "No Scents" policy is creating a big stink in the
perfume industry. Representatives from the American and Canadian perfume industry were in
Halifax Tuesday to launch a counter attack ad campaign as a way of stopping the campaign from
spreading.
8.2001
Nov 23, 2001 - hitherto unknown insights into the use of perfumes through the ages and
learn that "the history of perfume is often intertwined with the history ... But, it was the Arabs
who linked "the past and present of the perfume industry", says the portal. "The process of
extracting oils from flowers.
9.2002
Apr 11, 2002 - Scented oils and perfumes were stored in elaborate and beautiful pots and
jars throughout Egyptian history. ... "Never before has a series of exhibitions in Egypt and
abroad been devoted to a single industry, which has resulted in such a wide range of artistic and
utilitarian objects,"
10.2004
Sep 22, 2004 - It was a scent that changed the American position in the perfume
industry. Women across this nation began to forsake all of the costly and well- ... She offered her
vast store of perfume knowledge and its history with great generosity.
COMPANY PROFILE
Perfumes and cosmetics in India. SFP is located in Special Economic Zone, Chennai and was
Formerly known as S. F. Patel & Sons (India).SFP manufactures wide range of over 1000+
products under its own brands 'Ahsan', 'Tara', 'Taibah', 'Malaki', 'Salaam', 'Silent Valley' and
'Crazy Moments'. These products are widely available in more than 20 countries. Product
range includes Attars (concentrated perfume oils), Spray Perfumes (EDT, EDP, colognes and
body mists), Perfume Gels, Creams and Gels for Hair and body, Cleansing lotion, Shower
SFP is a ISO 9001 certified company and is committed to manufacture quality products.
All products manufactured are skin friendly and abide by all international standards laid
employees over 400+ people. It houses a well equipped R & D laboratory and highly
qualified team to develop and manufacture high quality products. It has a sound
infrastructure and modern facilities which helps every activity and product of SFP fulfill its
industry.
Company mission, delivers the quality product with protection of environment and protect
cosmetic product by meeting the needs and expectation of customers and enhancing their
satisfaction.
MANAGEMENT
SFP was started by its present Managing Director Mr. Dinesh S. Patel an entrepreneur with
dream and vision to make SFP a globally leading Company in perfumes and Cosmetics industry.
He believes hard work, commitment and passion combined can enrich every individual's life.
R & D Lab
SFP has well equipped laboratory and research section, equipped to carry out in-house
development and testing required as per laid down standards. Latest GC, refract meters, SG
meter, Ph meters, Viscometers and other Instruments are manned by trained personnel.SFP is
committed to quality through its strict quality control methods. Using latest technology every
component and product are tested as per international standards at all stages of manufacturing to
ensure high quality perfumes and cosmetics.
BLENDING
SFP also blends some of its
COSMETIC MANUFACTURING
DISTILLATION
SFP also houses a unique and traditional perfume oil
WAREHOUSE
TRAINING
SFP Training Centre provides trainings to all its employees on regular basis. The training is
totally based on skill and personality development to drive individuals and the company forward.
SHOWROOM
Credentials of SFP
➢ Raad voor accreditatie, Netherland has licensed SFP Sons (India) Pvt. Ltd and listed
in the bureau’s register of licensees of Quality management system certification in
respect of the products and services in accordance with ISO 9001:2008 and also ISO
➢ SFP has been recognized as one star export house having the certificate issued by the
➢ In 2007 RAJIV GANDHI national quality award panel has awarded SFP with a
➢ Commendation certificate for quality standard of the company at all India level.
accessories.
ℵ Traditional fragrance extraction set up for manufacturing special attars.
ℵ Well-equipped cosmetics manufacturing unit with boiler etc.
ℵ D.M. water plant
ℵ R.O. water plant.
ℵ Well-equipped packaging section having bottles and tubes filing and wrapping machines.
ℵ Well-equipped talc manufacturing unit.
ℵ Hair oil unit with automatic filling, capping machines, shrink wrapping and labeling
machine.
ℵ Alcohol(perfumery grade) storage tanks
ℵ Quality control laboratory with advanced GC machine and relevant testing
apparatuses.
ℵ Well-equipped in built R&D centre.
ℵ Design and development department which consistently create packaging design
which customers’ purpose and also innovates new designs and present to them.
ℵ The company has warehouse having a large space and materials handling equipments
and forklift.
ℵ The plant has 12 filling lines and a capacity of 1, 20,000 bottles per shift.
ℵ All the activities of company are done in the world class software SAP business 1.
.HUMAN RESOURCE
Competence, awareness, training
Available competence level of each employee on the basis of his education skill and
experience is assessed and accordingly training needs are identified and provided competence
map is done for all those who are directly connected to the performance of conformity to
product required directly (or) indirectly.
Beside training communication system is established providing relevant information
to enhance the awareness level of personnel in relation to SFP performance required.
Effectiveness of the action taken is evaluated organist requirement and corrective
actions/ further improvement oriented actions are taken as on-going exercise.
While implementing the above activities it is ensured that personnel are made aware
of the relevance and important of their activities considering this an integral requirement for
their contribution towards achievement of quality objectives.
Records of education, training, skill & experience are maintained as long as the
employee is in service roll in SFP.
Manpower in SFP
Every department has a highly experienced and qualified team. Company has around 250
skilled workers. The company has 120 experienced hands in the line of sales and marketing
team. The company has a fully equipped training hall which accommodates 50 persons at a
time and regular training programs are held at different levels. The training is totally based on
skill and personality development to drive individuals and the company forward
ORGANISATIONAL CHART
DESCRIPTION OF PRODUCTION PROCESS
PERFUMERY AND COSMETIC PRODUCTS:
Material used:
Stage 1
Procured material as above is subjected to inspection and testing to confirm their meeting
specified equipment.
Stage 2
Compounds either as they are with colouring material or a formulated combined of more
than one compound with or without colouring material after subjected to process. Inspection and
testing are send for filling & packaging.
Stage 3
Product are then filling in convenient sizes and packaging i9n cartons as per customer’s
requirements.
During filling operation the containers and the associated accessories are subjected to in
process inspection to ensure state of conformance to specified requirements.
Stage 4
Primary objective:-
Secondary objective:-
3. To find out minimum stock level, how much stock should be order.
LITERATURE REVIEW
RESEARCH METHODOGY
Research methodology is the way to systematically solve the research problem.
Objective of research study is to analysis of inventory of SFP Sons and analyzing of
inventory, we determining following inventories-
Working hypothesis of the objective is that inventories are the stock piles of goods in an
organization. SFP invests about 40% of total assets inventory should be analyzed their
records.
The analysis of inventory according to their data is available in the company. The data
collection of inventory for analysis is by the direct store department. I went to the all inventories
as raw material, work in progress inventory, finished goods inventory by the proper observation
of data’s of the company.
The particular method for data collection used direct interview with assistants and
telephone interview with friends to known about annual investment of inventories and other
important data.
PERIOD OF STUDY:
The study was conducted in a period between January 2010 to April 2010 during which
the researcher studied the company’s relationship with dealers and distributors and obtained their
view.
Method of data collection:
In analysis of inventory of SFP, We collect the data by the different sources. We collect the
primary and secondary data.
SECONDARY DATA –
The secondary data are those data that are already in presence for specific
purpose, we use the secondary data about inventory to look old records of the company .For
the daily information about the items are show the MRN, ledger register and daily issue slip
of materials, the purchase register and other documentary evidence used for the findings.
In the analysis of inventory, the secondary data provided is not sufficient then we collected
primary data.
PRIMARY DATA –
Primary data or fresh data are those data that are originated very first time
with the help of primary data we formulated the research objectives. Primary data are the
accurate, attainable, reliable and useful data.
In managing inventories, the firm’s objective should be in consonance with the wealth
maximization principle. To achieve this, the firm should determine the optimum level of
investment in inventory. To deal with the problems of inventory management effectively, it
becomes necessary to be conversant with the different techniques of inventory control.
Although the concepts involved in inventory management are production-oriented and are
not strictly financial it is important that the financial manager understand them since they
have certain built-in financial costs. The different techniques of inventory control may be
summarized as follows:
The main objective of stock control is to determine and maintain the optimum level of stock
so that there is neither shortage of any material nor unnecessary investment in inventory. For
this purpose, determination of maximum and minimum limits of inventory and ordering level
is necessary.
(2) Maximum stock Limit: This represents the quantity of inventory above which it should not
be allowed to be kept. The main object of fixing this limit is to ensure that unnecessary
working capital is not blocked in stores. The quantity is fixed keeping in view the
disadvantages of overstocking.
It is the point at which if the stock of the material in stores reaches, the storekeeper should
initiate the purchase requisition for fresh supply of material. This level is fixed somewhere
between maximum and minimum level is such a way that the difference of quantity of the
material between the reordering level and the minimum level will be sufficient to meet
requirements of production up to the time of fresh supply of the material. It is fixed after
taking into consideration the following factors:
ABC ANALYSIS:
ABC Analysis is a basic analytical management tool which enables top
management to place the effort where the result will be greatest. This technique,
popularly known as always better control or the alphabetical approach, has universal
applications in many areas of managing the inventory.
The technique tries to analyze the distribution of any characteristic by
money value of importance in order to determine its priority.
The annual consumption analysis of any organization would indicate that a handful of
top high value items less than 10% of total number will account for a substantial portion
of about 75% of the total consumption value and these few vital item are called A class items
which need careful attention of the materials manager. Similarly a large number of bottom
items over 70% of total number called the trival many account only for about 10% of the
consumption value and are known as the ‘C’ class. The items that lie between the top and
bottom are called the ‘B’ category item.
The following facts need to be noted with regard to ABC Analysis:
1. Through usually the inventory items are classified into three categories viz AB andC only,
but nothing prohihibits a firm to undertake the analysis on the basis of a larger
catagorisization.
2.It is necessary for an effective ABC analysis that all the items should be included for the
Classification.
3.Through according to ABC Analysis category C gets only a simple attention, the
management should nevertheless have to be vigilant in its approach. For example an items
may be of small value but may be critical in the sense that its non-availability hampers the
production process and its supply is irregular. The management has to be extra careful about
its inventory, even though the items figures in the category C. Thus the ABC analysis not the
ultimate exercise in inventory management, it needs supplementing with detailed knowledge
and monitoring.
4.Price of the items and their physical quantities shouldn’t be made the basis of ABC
analysis. It is rather the usage value of the items which must be used for the purpose of
classification.
ECONOMIC ORDER QUANTITY TECHNIQUE
One of the major inventory management problems to be resolved is how much inventory should be
added when inventory is replenished. If the firm is buying raw materials, it has to decide lost in
which it has to be purchased on replenishment. If the firm is planning a production run, the issue is
how much production to schedule (or how much to make). These problems are called order
quantity problems, and the task of the firm is to determine the optimum or economic order quantity
(or economic lot size). Determining an optimum inventory level involves two type of costs: (a)
ordering costs and (b) carrying costs: The economic order quantity is that inventory level that
minimize the total of ordering and carrying costs.
VED ANALYSIS:
The VED analysis is used generally for spare parts. The requirement and urgency of spare parts is
different from that of materials. A-B-C analysis may not be properly used for spare parts. The
demand for spares depends upon the performance of the plant and machinery. Spare parts are
classified as: Vital (V), Essential (E) and Desirable (D). The vital spares are a must for running the
concern smoothly and these must be stored adequately. The non-availability of vital spares will
cause havoc in the concern. The E types of spares are also necessary but their stocks may be kept at
low figures. The stocking of D types of spares may be avoided at times. If the lead time of these
spares is less, then stocking of these spares can be avoided.
The classification of spares under three categories is an important decision. A wrong classification of
any spare will create difficulties for production department. The classification of spares should be
left to the technical staff because they know the need, urgency and use of these spares.
JUST-IN-TIME (JIT) SYSTEM:
The procurement of inventory is totally depends on order/demand. In first step they get
the order from customer then they write a form that form called indent form by hand writing.
After getting order they will send the order to purchase department for buying of Raw
Material and Packaging material. Every time that causes the delay of delivery of goods to the
customer. After receiving the raw materials from supplier they check the quality, because quality
is more important for them. In whole production process 4-5 times they will check the quality
and after that quality check seal on product.
They are using FIFO method for delivery of good to the customers. First In First Out
(FIFO) means first order should deliver first and after that continue process. It is good way of
delivery that make the customer satisfied. Every inspection about available stock is on SAP
every one can know how much stock is available, and how much order should be placed. For
every order they keep the numbers for identification.
Warehouse arrangement
There is separate warehouse for keeping the different types of inventory like
Raw material, packaging material, semi finished good and finished good. Raw materials
includes the perfumery liquid, arranging of these things they have rack and rack numbers, and
unique code number for each and every liquid for identification. For talcum powder raw material
are the talc powder which they kept in plastic bags in production unit itself.
Packaging material include box, cap color, neck etc. which require after
filling the product in bottles. Finished goods and packaging material they are keeping in same
warehouse left side finished good and right side packaging material. Finished good order wise
and packaging material how to find easily.
Each and every data maintained in systems so it is very easy to get the information.
SCOPE OF STUDY
This study provides insight to the management of high value item and
low value items. This study also gives the idea about industrial focus and addressal towards
maintaining inventory.
LIMITATION OF STUDY
It consumes more time and requires lots of expenditure. More time is needed to do
this study.
2010 320.76
2009 109.53
Interpretation:
It is infer that the Economic order quantity for the year2009 is 109.53 and 2010 is
320.76. Year 2010 EOQ is 2.9 times more than 2009 EOQ.
Chart no.5.1
INVENTORY TURNOVER RATIO
TABLE NO.5.2
Interpretation:
It shows that the ratio of sales and inventory for the year 2009 is 2.4 and for the
year 2010 3.08. It shows that the inventory sales ratio of year 2009 is higher than year 2010.
Chart no. 5.2
Year Raw material Semi finished Packaging Finished good Total inventory
good material
April 2008
Item Group
Eau De Perfume 2,080 51452.12 B
Hair Oil 59,370 366167.65 C
Talcum Powder 3,24,528 2219257.5 A
Eau De Toilette
Total 3,85,978 2636877.27
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 2,664 130340.94 B
Hair Cream
Shampoo
Lotions 192 9403.66 B
Total 2856 139744.6
May 2008
Item Group
Eau De Perfume 3,200 79157.11 C
Hair Oil 8,856 149517.32 B
Talcum Powder 1,60,344 781462.82 A
Eau De Toilette
Total 1,72,400 1010137.25
SILENT VELLY
Item Group
Hair Oil 480 30100.41 B
Shower Gel 144 10593.68 A
Hair Gel 144 5535.82 C
Body Splash 504 24659.1 C
Hair Cream
Shampoo 336 26603.93 A
Lotions 240 13576.62 B
Total 1848 111069.56
June 2008
Item Group
Hair Oil
Shower Gel
Hair Gel 432 16607.46 C
Body Splash 3,600 176136.4 C
Hair Cream
Shampoo 144 11401.69 A
Lotions 840 62980.09 B
Total 5016 267125.64
July 2008
Item Group
Eau De Perfume 800 19789.28 B
Hair Oil 180 6860.69 B
Talcum Powder 32,736 384288.54 C
Eau De Toilette 144 12197.68 A
Total 33860 423136.19
SILENT VELLY
Item Group
Hair Oil 96 6020.08 B
Shower Gel
Hair Gel
Body Splash
Hair Cream 144 13190.38 A
Shampoo
Lotions 72 2582.85 C
Total 312 21793.31
August 2008
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 1,296 63409.11 A
Hair Cream
Shampoo
Lotions 360 16284.34 C
Total 1656 79693.45
September 2008
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 504 24659.07 A
Hair Cream
Shampoo
Lotions
Total 504 24659.07
October 2008
Item Group
Eau De Perfume
Hair Oil 4,200 96434.71 A
Talcum Powder 1,16,088 562889.2 C
Eau De Toilette
Total 120288 659323.91
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 1,224 59886.38 A
Hair Cream
Shampoo
Lotions
Total 1224 59886.38
November 2008
Item Group
Eau De Perfume 800 19789.28 A
Hair Oil 1,200 25847.91 B
Talcum Powder 56,976 261544.28 C
Eau De Toilette
Total 58976 307181.47
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash
Hair Cream
Shampoo
Lotions
Total
December 2008
Item Group
Eau De Perfume 960 22950.16 B
Hair Oil 2,856 75511.28 A
Talcum Powder 1,35,480 692142.97 C
Eau De Toilette
Total 139296 790604.41
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 360 17025.11 A
Hair Cream
Shampoo
Lotions
Total 360 17025.11
January 2008
Item Group
Eau De Perfume 960 22105.37 B
Hair Oil 1,800 42702.46 A
Talcum Powder 1,12,656 539000.02 C
Eau De Toilette 72 5530.54 B
Total 115488 609338.39
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 144 6439.27 A
Hair Cream
Shampoo
Lotions
Total 144 6439.27
Feb 2009
Item Group
Eau De Perfume
Hair Oil 2,400 49233.18 A
Talcum Powder 74,928 673110.8 C
Eau De Toilette 72 5530.54 B
Total 77400 727874.52
SILENT VELLY
Item Group
Hair Oil 240 14229.32 A
Shower Gel
Hair Gel
Body Splash 432 19317.8 C
Hair Cream
Shampoo
Lotions
Total 672 33547.12
March 2009
Item Group
Eau De Perfume
Hair Oil 4,320 95732.99 A
Talcum Powder 20,112 233482.55 C
Eau De Toilette
Total 24432 329215.54
SILENT VELLY
Item Group
Hair Oil 120 6909.44 B
Shower Gel
Hair Gel
Body Splash 216 9204.26 C
Hair Cream
Shampoo 96 6748.67 A
Lotions 48 3669.66 A
Total 480 26532.03
April 2009
Item Group
Eau De Perfume 480 10642.24 C
Hair Oil 3,600 96400.8 B
Talcum Powder 1,18,968 791687.35 A
Eau De Toilette
Total 123048 898730.39
SILENT VELLY
Item Group
Hair Oil 96 5527.68 B
Shower Gel
Hair Gel
Body Splash 2,664 113513.37 C
Hair Cream
Shampoo 192 13497.6 A
Lotions 288 20644.29 B
Total 3240 153182.94
May 2009
Item Group
Eau De Perfume 960 21283.2 C
Hair Oil 7,620 170453.77 B
Talcum Powder 71,628 418572.12 A
Eau De Toilette
Total 80208 610309.09
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash
Hair Cream
Shampoo
Lotions
Total
June 2009
Item Group
Eau De Parfum
Hair Oil 8,880 143501.2 A
Talcum Powder 70,320 518095.78 C
Eau De Toilette
Total 79200 661596.98
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 1,944 82812.7 A
Hair Cream
Shampoo
Lotions
Total 1944 82812.7
July 2009
Item Group
Eau De Perfume 4,800 107232 A
Hair Oil 9,972 215067.96 B
Talcum Powder 1,71,120 1370713.79 C
Eau De Toilette
Total 1,85,892 1693013.75
SILENT VELLY
Item Group
Hair Oil 96 5559.36 B
Shower Gel
Hair Gel
Body Splash 1,440 61948.8 C
Hair Cream
Shampoo 96 6803.52 B
Lotions 144 10444.32 A
Total 1776 84756
August 2009
Item Group
Eau De Perfume 1,920 42892.8 B
Hair Oil 3,300 82202.92 A
Talcum Powder 83,064 751192.91 C
Eau De Toilette
Total 88,284 876288.63
SILENT VELLY
Item Group
Hair Oil 144 8339.04 B
Shower Gel
Hair Gel
Body Splash 3,240 139384.8 C
Hair Cream
Shampoo 96 6803.52 A
Lotions
Total 3480 154527.36
September 2009
Item Group
Eau De Perfume
Hair Oil 948 29043.51 A
Talcum Powder 57,600 321958.58 C
Eau De Toilette
Total 58548 351002.09
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 3,672 157969.44 A
Hair Cream
Shampoo
Lotions
Total 3672 157969.44
October2009
Item Group
Eau De Parfum
Hair Oil 3,888 96082.56 B
Talcum Powder 1,09,200 622351.11 C
Eau De Toilette 288 21205.44 A
Total 113376 739639.11
SILENT VELLY
Item Group
Hair Oil 240 13898.4 C
Shower Gel 192 12706.56 A
Hair Gel
Body Splash
Hair Cream
Shampoo
Lotions
Total 432 26604.96
November 2009
Item Group
Eau De Parfum 500 13160 B
Hair Oil 1,680 45901.54 A
Talcum Powder 29,184 310958.79 C
Eau De Toilette
Total 31364 370020.33
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel 360 12110.4 C
Body Splash 144 6194.88 B
Hair Cream
Shampoo 192 13607.04 A
Lotions 144 4368.96 C
Total 840 36281.28
December 2009
Item Group
Eau De Perfume 5,040 234864 A
Hair Oil 5,184 147699.05 B
Talcum Powder 18,000 280614.5 C
Eau De Toilette
Total 28,224 663177.55
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 2,592 111442.03 A
Hair Cream
Shampoo
Lotions
Total 2592 111442.03
January 2010
Item Group
Eau De Parfum 6,240 290784 A
Hair Oil 4,560 107697.73 B
Talcum Powder 78,600 787035.53 C
Eau De Toilette
Total 89,400 1185517.26
SILENT VELLY
Item Group
Hair Oil
Shower Gel
Hair Gel
Body Splash 1,944 83671.21 A
Hair Cream
Shampoo
Lotions 2,160 68673.41 C
Total 4104 152344.62
FINDINGS
There is good relationship between company and their distributors, vendors and sales
executives.
SUGGESTIONS
• There can be a system where in periodical review (twice in a month) of inventory could
be carried out so that the inventory can be kept under control.
• There should be periodical review of movement of items so that any non moving
items can be identified and suitable action can be done.
• At present the company is maintaining zero safety stock for all items, if the safety
stock is maintained for important items, delay in production can be eliminated and orders
can be supplied in time which will result in a better credibility in both international and
domestic market.
• It has been predicted that if company is planning to achieve more sale it may require huge
amount of inventory in future. So the company has to arrange capital to meet future
requirement.
• It is suggested that they can have close monitoring of receipts and issue for A
class items in order to have control of inventory.
• To increase the inventory turnover ratio by increasing the sales level and maintaining
the required level of inventory.
• To maintain the Re-order level, Min-stock level and Economic order quantity
company should consider the demand of the product.
• There is one warehouse for keeping the finished good and packaging material and
packaging material are not arranged in good manner so it should be in order wise.
CONCLUSION
“Inventory control is exercise when you order an item. If you do a poor job then everything after
is inventory correction”
GORDON GRAHAM
Inventory is the physical asset of a company that can create problem if there is shortage, while in
production and also if it’s in excess even after production. Inventory is constantly changing as
quantities are sold and replenished.
Hence it can be understood that efficient inventory management can take the company to new
heights and inefficient inventory management can ruin the company.
Company is highly concentrated on domestic market, it increase the market level of company
because trend of domestic market is changing.
The study on Inventory management in SFP Sons (India) Pvt. Ltd about A BC analysis for items
is predicting future inventory requirements etc.
From the study it is predicted that future sales have to be achieved and inventory level have to be
maintained.
ABC Analysis was carried out to identify the fast moving and important items.
The company has to periodically review the inventory to avoid production loss.
The results of the study can be further extended for future research.
BIBLIOGRAPHY
ϕ Financial Management- Theory And Practice- Prasanna Chandra
• WWW.INVENTORY .COM
• WWW.INVESTOPEDIA.COM
• WWW.WISEGEEK.COM
• www.mbaguys.net
•
• 20ml Spray
○ Blossom Cool
○ Blossom Love
○ Blossom Nature
○ Blossom Pleasure
○ Blossom Romance
• 30ml Spray
Golden Magnet ○ Only Ahsan
○ Pearl for Women
○ Pleasures for Men
• 60 ml Spray
○ Pleasures for Women
○ New Man
○ Romantic for Men
○ New Women
○ Romantic for Women
○ Attraction
○ Sandal
○ Freedom
○ White Flower
○ Ajooba
• 50ml Spray
○ Ahsan for Men ○ Perpetuity
○ Charm 16 ○ Fresh