1.

INTRODUCTION OF INVENTARY
An inventory can be defined as a stock of goods which is held for the purpose of
future production or sales. The stock of goods may be kept in the following forms:
Raw Materials
Partly finished goods
Finished goods.
pare parts etc.
!R
A stock of items held to meet future demand
"nventory is a list for goods and materials# or those goods and materials
themselves# held available in stock by a business.
Variables in an Inventory Problem:
The variables associated with the inventory problems are classified into two
categories.
The $ontrolled variables
The uncontrolled variables
Te variables tat may be !ontrolle"# se$arately or in !ombination are
%ollo&in':
Te ()antity a!()ire" % &y purchase# production# or some other means. The
decision maker may have a control over the production or purchase level.
Te %re()en!y o% timin' o% a!()isition % The decision maker may have control over
how often or when the inventory should be replenished.
Te sta'e o% !om$letion o% sto!*e" items % The decision maker may have a control
over the stage at which the unfinished items be held so that there is no delay in
supplying customers.
Te )n!ontrolle" variables % The variable that may not be controlled in an inventory
problem are divisible into cost variables and others.
Inventory mana'ement:
"nventory management is the branch of business management concerned with
planning and controlling inventories.
'
"nventory is stock of items held to meet future demand.
"t deals with two basic (uestions:
)ow much to order
*hen to order+
Ty$es o% Inventory:
Raw Material
*ork in progress
Finished ,oods
Nat)re o% Inventories
Raw Materials % &asic inputs that are converted into finished product through the
manufacturing process.
*ork-in-progress % emi-manufactured products need some more work before they
become finished goods for sale.
Finished ,oods % $ompletely manufactured products ready for sale.
upplies % !ffice and plant cleaning materials not directly enter production but are
necessary for production process and do not involve significant investment.
Reasons To +ol" Inventory
Meet variations in customer demand:
Meet une.pected demand
mooth seasonal or cyclical demand
Pricing related:
Temporary price discounts
)edge against price increases
Take advantage of (uantity discounts
/
Process 0 supply surprises
"nternal % upsets in parts of or our own processes
1.ternal % delays in incoming goods.
Ob,e!tive o% Inventory -ana'ement
To maintain a optimum si2e of inventory for efficient and smooth production and
sales operations.
To maintain a minimum investment in inventories to ma.imi2e the profitability.
1ffort should be made to place an order at the right time with right source to
ac(uire the right (uantity at the right price and right (uality.
An e%%e!tive inventory mana'ement so)l":.
1nsure a continuous supply of raw materials to facilitate uninterrupted production.
Maintain sufficient stocks of raw materials in periods of short supply and
anticipate price changes.
Maintain sufficient finished goods inventory for smooth sales operation# and
efficient customer service.
Minimi2e the carrying cost and time.
$ontrol investment in inventories and keep it at an optimum level.
An o$tim)m inventory level involves tree ty$es o% !osts:.
Or"erin' !osts:.
3uotation or tendering
Re(uisitioning
!rder placing
Transportation
Receiving# inspecting and storing
3uality control
4
$lerical and staff
/to!*.o)t !ost
5oss of sale
Failure to meet delivery commitments
Carryin' !osts:.
*arehousing or storage
)andling
$lerical and staff
"nsurance
"nterest
6eterioration#shrinkage#
Ta.es
$ost of capital
Dan'ers o% Over investment:.
7nnecessary tie-up of firm8s fund and loss of profit % involves opportunity
cost
1.cessive carrying cost
Risk of li(uidity- difficult to convert into cash
Physical deterioration of inventories while in storage due to mishandling and
improper storage facilities
Dan'ers o% )n"er.investment:.
Production hold-ups % loss of labor hours
Failure to meet delivery commitments
$ustomers may shift to competitors which will amount to a permanent loss to
the firm
May affect the goodwill and image of the firm
9
F)n!tions o% Inventory -ana'ement:.
Track inventory
)ow much to order
*hen to order
0asi! EO1 -o"el
Ass)m$tion
easonal fluctuation in demand are ruled out.
:ero lead time % Time lapsed between purchase order and inventory usage.
$ost of placing an order and receiving are same and independent of the units
ordered.
Annual cost of carrying the inventory is constant.
Total inventory cost ; !rdering cost < carrying cost
Inventory mana'ement:.
T&o system %ollo&e"
Perio"i! revie&
Fi2 or"er ()antity
"n periodic stock position is reviewed periodically rather than continuously. A
new order is always placed at the end of the each review.
"n Fi.ed order (uantity system the stock of an item is continuously reviewed. A
reorder level is decided on. *henever the stock of the item e(uals the reorder level# a
new order is placed. The time between orders can vary. "n this system# the order
=
(uantity ordered is always fi.e and is e(ual to the 1!3. 1!3 >1conomic !rder
3uantity? is calculated by a formula which ensures that the total cost is minimum.
5ead time is the lapsed time between the placement of an order and its actual delivery.
afety stock level is also known as buffer stock. "t is the e.tra (uantity of
merchandise that is stocked to take care of delay in delivery and higher demand
during the lead time.
5ead time is the lapsed time between the placement of an order and its actual
delivery.
afety stock level is also known as buffer stock. "t is the e.tra (uantity of
merchandise that is stocked to take care of delay in delivery and higher demand
during the lead time.
Ty$es o% Inventory
-ovement inventory:.This inventory is known as transit or pipeline inventory
arises due to shipment of inventory items to distribution centres and from various
production centers.
0)%%er inventory:. This inventory is maintained to meet uncertainties of demand
and supply. uch buffer inventory which are in e.cess of those necessary to @ust
meet the average demand during the lead time.
Anti!i$ation inventory:.This is known as seasonal inventories held because of
future demand which is anticipated.
De!o)$lin' inventory:.This is used to reduce interdependence of various stage of
production systems are known as decoupling inventories.
3ot si4e inventory:.These are held for the reason that purchases are usually made
in lots rather than for the e.act amounts which may be needed at appoint of time.
A
5. INTRODUCTION TO 63A7O /-IT+ 83INE
,la.o mith Bline $onsumer )ealthcare 5td. >,B$)? is an "ndian associate of
,la.o mith Bline plc# 7.B.
,B$) is one of the largest players in the )ealth Food 6rinks industry in "ndia.
The $ompany# with its manufacturing plants located in Cabha# Ra@ahmundry and
onepat# has a total workforce of over /DEE people# each driven by a spirit of enterprise.
"ts flagship product# )orlicks# is a highly respected brand# which is over 'EE years old in
"ndia. The $ompany also manufactures and markets &oost# Fiva# Maltova# &iscuits and
in addition promotes and distributes a number of products in diverse categories# including
prominent brands such as 1no# $rocin and "ode..
,B$) has a strong marketing and distribution network in "ndia comprising over
'GEE wholesalers and direct coverage of over 9#EE#EEE retail outlets.
,la.omithBlineHs $onsumer )ealthcare business is based on scientific innovation. The
company has dedicated consumer healthcare R06 centers and takes research as seriously
as marketing e.cellence# offering cutting-edge capability in both.
+I/TORICA3 0AC86ROUND
6la2o /mit 8line Cons)mer +ealt!are 3t". is a pharmaceutical and
healthcare company born out of the merger of two leading international organi2ations
mithBline &eecham and ,la.o*ellcome. ,B $onsumer )ealthcare 5td and ,B
Pharmaceuticals 5td are the two businesses of ,B in "ndia of which former are
head(uartered at 65F ,urgaon and the latter at *orli# Mumbai.
"ts global mission isITo improve the (uality of human life by enabling people to do
more# feel better and live 5onger J.
D
"n the "ndian market# ,B$)Hs @ourney began with )orlicks.
Year Des!ri$tion
19::: "n the early years# )orlicks# a milk product manufactured by
)orlicks 5td. lough# 1ngland was being imported# bottled and
sold in "ndia. 6ue to changes in import policy import stopped.
19:;<:=: A team from the organi2ation visited to e.plore the possibilities of
setting up a plant with the support of Mahara@a of Cabha# )is
highness PRATAP "C,) # and a plant was set up at Cabha.
19:>: !n May 4'# 'K=G )is highness Pratap ingh laid the foundation
stone of the $ompany at Cabha and )industan Milkfood
Manufacturers Pvt. 5td.# was promoted by )orlicks 5td.
19;?: !n /9
th
March 'KAE# the factory went into production.
19;9 : )orlicks ,roup disposed off their holding in "ndia and 7.B. to J
&11$)AM ,R!7P !F "C67TR"1 J. &eecham plc ac(uired
)orlicks 5imited and became the ma@ority shareholder in
)industan Milkfood Manufacturers 5imited. &eecham plc. which
is multinational and owns more than =EE companies in more than
/EE countries engaged in manufacturing of &rylcream# )aircream #
1no fruit salt # Mac5ean # Toothpaste # Pure ilvikrin etc.
G
19=9: &eecham "ndia >Pvt.? 5td. Mumbai merged with )industan Milk
food
Manufacturers 5td. and the name was changed to ).M.M. 5td.
&eecham ,roup Plc.
19>9: &eecham plc# 7B and mithBline# 7A merged in 'KGK to form
mith Bline &eecham plc# with its registered office in the 7B.
)MM 5imited thus became part of mithBline &eecham
$onsumer &randsL one of the three sectors of mithBline &eecham
and its name was changed to mithBline &eecham $onsumer
&rands 5imited.
199@: The name was changed to mithBline $onsumer )ealthcare 5td. to
reassert the companyHs promise of providing )ealthcare to consumers. The
company . 6ecided to do away with its toiletry products and sold its
brands like &rylcream and ilvikrin to ara 5ee.
5???: The $ompany ac(uired MA5T!FA and F"FA brands of nutritional from
Mag@it "ndustries 5td.

A merger took place between mithBline &eecham and ,la.o *ellcome and the
new company ,la.o mithBline >,B? was formed on /D-'/-EE.

5??5: $hange of name took place from /4-E9-E/
5??@: The &ank of Pun@ab has tied up with the company for facilitating
finance on attractive terms to its milk suppliers.
K
Glaxo
mithBline &eecham
-er'e GlaxoSmithKline
!ur new identity# ,B$)# has been created to reflect our shared values towards
scientific research and improving peopleHs lives.
P3ANT 3OCATION/ IN INDIA
Production tations
Food Powder : Cabha# Ra@ahmundry# onepat 0 )amira
&iscuits : ahibabad
1no : Ra@ahmundry
$rocin : &anglore
"ode. : &anglore
PAC8IN6 /TATION/
The company started packing )orlicks in N Bg and 'kg pouches. Packing machines
was imported and installed. As the main market for sale of )orlicks was in the outh and
1ast "ndia# need was felt for the sale of )orlicks in small units of the country. Therefore
was opened at different places. At present )orlicks is dispatched from Cabha in bulk
(uantity to the following packing stations:
Mangaldoi >Assam?
Bompally
&addi >)imachal Pradesh?
PR!67$T PR!F"51
'E
"n line with the increased buoyancy across the FM$, segment# ,B continues to
perform well with sales growth of '=.4O over /E'/.
1. +OR3IC8/: .A T+E 6REAT FA-I3Y NOURI/+ERB
The flagship brand of the company# this product
name is associated with that of the company.
)orlicks# which was restaged the previous year#
following intense market research and product
development activities# with an improved
formulation# which is clinically tested to make
children ITaller# harper 0 trongerP# continues to
grow strong. "ndia forms almost half the worldHs
market for )orlicks. )orlicks sales crossing the 'EEE crores in /E'4.
5. CUNIOR +OR3IC8/
$hocolate )orlicks and Munior )orlicks were
restaged during the tear keeping in mind the
consumer e.pectations from the two brands.
Munior )orlicks was launched in 'KK' in Barnataka
in an attempt to cater to the speciali2ed needs of
certain age groups. This special nourisher# an
"ndian brand was targeted at '-4 years old as a
delicious tasting Milk food drink based on the
international standards of nutrition
D. 0OO/T
&oost was launched in 'KDA as an energy drink in the
&rown Powder segment. &oost along with &oost
$hocoblast# which was launched in the previous year#
continue to deliver as per e.pectations. An "ndian
&rand# this is manufactured at the Cabha Plant. "t is
also e.ported to # countries in *est Asia. Fery popular
''
in the outh# &oost has grown an average growth rate of KO per annum. portsmen like
Firender ehwag and achin Tendulkar back it# making it the secret of !7R 1C1R,QRR
@. -OT+ER +OR3IC8/
Mother8s )orlicks >launched in Covember8KA?# is a special nourisher scientifically
designed to help meet the nutritional needs of pregnant and lactating women# as part of a
healthy diet. "t is made with the natural goodness of )orlicks by a uni(ue spray dried
process# which helps make it easy to digest. "t is enriched with natural honey# and a
combination of vitamins and minerals that not only gives e.cellent flavor but also help in
keeping good health during pregnancy and optimal birth weight of the baby "t is also
essential for physical and mental development of the growing foetus.
=. &"$7"T
The biscuit division has spread its wings and set flight with a =9O increase in the
turnover. )orlicks biscuits are now a truly national brand. The division has a number of
plans for the future growth with the lot of e.citing new variety up its sleeves.
;.ENO
1no is a 'EE years old global brand. "t is a part of
S,astrointestinal category8 1no is the only powder antacid
and has shown favorable growth over the years. This has
been strengthened of the lemon variant and the sachet pack.
=. 6OPI8A 6+EE E0Y PRODUCTF
The main by-product of this company is ,opika ,hee. ,opika ,hee is packed in the
factory itself# rest of the product are bulk packed in containers# which contain 'GA kg of
)orlicks and '/9 kg. of &oost. These are sent to 4 packing stations.
'/
6/8 -I//ION
!ur global (uest is to improve the human life by enabling the people
ATO DO -ORE# FEE3 0ETTER# AND 3IVE 3ON6ERB.
People at ,la.o mith Bline $onsumer )ealthcare limited are dedicated ourselves
to delivering medicines and products that help million of people around the world 5"F1
5!C,1R# )1A5T)"1R AC6 )APP"1R 5"F1.
CU3TURE
uccessful companies have developed something special that supersedes corporate
strategy# market presence# or technical advantage- distinctive culture. *hat it is# whether
it is important or not# what you deal with indirectly. *hy+ &ecause culture is an
intangible shadow. )aving said all that# it is an important issue ,B8s culture is the set of
norms that create powerful precedents for acceptations around acceptable risk# change
orientation# creative and innovation# group versus individuals effort# customers
orientation# e.tra efforts and more. $ulture is a powerful force and can provide an engine
to achieve market success or an anchor pulling the firm toward failure
FINANCIA3 +I6+3I6+T/ :
The $ompany has reported '=O sales growth and /G./O PAT growth for /E'4
over the previous year in its Annual Report. The total Reserves as on 4'-'/-/E'4 stood at
Rs. AE94 Million representing an increase of /E.DO from last year. The $ompany has no
5oan outstanding as on 6ecember 4'# /E'/. Following is the Ratio Analysis of its
financial implications:
'4
TURNOVER ERs. CRORE/F
T7RC!F1R >Rs. crores?
Years T)rnover 6ro&t Rate
/EEK KEK 9
/E'E KG/ G
/E'' 'EGK ''
/E'/ '/'E ''
/E'4 '4K= '=
PROFIT/ ERs. CroresF
Profit &efore Ta. >Rs. crores?
Profit &efore Ta.
O of sales
/EEK 'EE ''
/E'E ''A '/
/E'' 'A/ '=
/E'/ 'K' 'D
/E'4 /9= 'G
This graphs shows that profit before ta. in /E'4 is /9= Millions >appro..? 'GO of total
sales# which is more all the figures of previous four years. This shows that company has
reduced its e.penses to the optimum level as compared to previous years.
This graphs shows that net profit in /E'4 is /9=' Millions >appro..? '/O of total sales#
which is more all the figures of previous four years.
'9
RATIO ANA3Y/I/
Ratio analysis is the powerful tool of financial analysis of accounting data# the
relationship of he figures should be meaningful. "n financial analysis. Ratio is used as an
inde. or yardstick for the performance of the firm. To analysis the working capital
position we here by analysis and interpret the following ratios
$urrent ratio
Absolute li(uid ratio
3uick ratio
$urrent asset turnover ratio
1(uity Ratio
"nventory turnover ratio
6ebtors turnover ratio
1P Ratio
C)rrent Ratio: $urrent Assets T $urrent 5iabilities
>Rs lakhs?
Qear /E'4 /E'/
$urrent Assets 4D'K4.AE /KDDA.=E
$urrent 5iabilities /9K9D.=E /EG==.'E

'=

0
5000
10000
15000
20000
25000
30000
35000
40000
Year
Current Assets
Current
Liabilities
For the year /E'4 For the year /E'/
4D'K4.AET /9K9D.=E /KDDA.=ET/EG==.'E
; '.9K' ; '.9/G
The current Ratio of the company has slightly increased in /E'4# reason being the
increase in current Assets like cash 0 &ank balance# "nventory etc. !n the other hand
current liabilities and provisions has also increased that8s why there is only a .EDO
increase in current ratio. The current ratio of the company does not meet the rule of
thumb re(uirement of /:'.
$7RR1CT RAT"!: >Rs. $R!R1?
$urrent Ratio
Qears $urrent Assets >in millions?
$urrent 5iabilities
>in millions? RAT"!
/EEK 4A4.E 'DD.A /.E9
/E'E 94/.E 'DG.4 /.9/
/E'' 9E'.G 'G/.K /./E
/E'/ /KD.G /EG.A '.94
/E'4 4D'.K /9K.9 '.9K
'A
0
500
1000
1500
2000
2500
Years Current
Assets (in
millions)
Current
Liabilities (in
millions)
RATIO

$urrent Ratio in /E'4 is '.9K which is more than the last year8s $urrent Ratio which is
'.94 and this increase in current ratio is due to increase in current assets is more than
increase in current liabilities.
3i()i" Ratio: 3uick or li(uid Assets T $urrent 5iabilities
3uick or li(uid assets include all the current assets e.cept prepaid e.penses 0 "nventory.
>Rs lakhs?
Qear

Qear
/E'4 /E'/
5i(uid assets 'DD''./E '=/'K./E
$urrent liabilities /9K9D.=E /EG==.'E
'D
0
5000
10000
15000
20000
25000
Year
Liquid assets
Current liabilities

For the year /E'4 For the year /E'/
'DD''./ET/9K9D.=E '=/'K./ET/EG==.'E
; .D' ; .D4
The li(uid ratio of the company has declined in /E'4L it reaches to .D' from .D4 in the
year /E'/. This is mainly due to decrease in li(uid assets like loans and advances and
increase in current liabilities. "t is also short of the rule of thumb li(uid ratio i.e. ':'.
Absol)te 3i()i" Ratio: Absol)te li(uid Assets T $urrent 5iabilties
Absolute li(uid Ratio include cash 0 bank balances# Marketable ecurities
'G
Qear /E'4 /E'/
Absolute li(uid assets K4AA.AE 9DK'.AE
$urrent liabilities /9K9D.=E /EG==.'E
0
5000
10000
15000
20000
25000
Year
Absolute liquid
assets
Current liabilities

ERs la*sF the year /EED For the year /EE=
For year /E'4 For year /E'/
K4AA.AET /9K9D.=E 9DK'.AET /EG==.'E
; .4D= ; .//K
The absolute li(uid ratio of the company in /E'4 has increased as compared to previous
year. The main reason for this is increase in cash and bank balances# but it is still short of
rule of thumb i.e. E.=:'

Inventory t)rnover Ratio: C1T A51 T "CF1CT!RQ

>Rs lakhs?
Qear /E'4 /E'/
Cet sales '/DDG/.GE ''EDGD.'E
"nventory 'K9G/.9E '9==D.4E
'K

0
20000
40000
0000
!0000
100000
120000
140000
Year
"et sales
In#entor$
For the year /E'4 For the year /E'/
'/DDG/.GET'K9G/.9E ''EDGD.'ET'9==D.4E
;A.=A ;D.A'
"nventory Turnover Ratio is A.=A in year /E'4 as compared to D.A' in the year /E'/. "t
shows that company hasn8t been able to convert their stocks into sales as efficiently as
compared to last year.

Inventory !onversion $erio" ;4A= T "TR
/E'4 /E'/
4A=TA.=A 4A=TD.A'
;==.A9 days ;9D.KA days
The inventory conversion period of the company in /E'4 is =A days i.e. the company
convert the inventory into sales within =A days >app? which has increased from the last
year " which it was 9G days. "t shows that the company hasn8t been able to clear its stocks
as effectively as it was in the last year.
Debtors T)rnover Ratio: alesT6ebtors >6ebtorsTR?
> Rs lakhs?
Qear /E'4 /E'/
/E
ales '/DDG/.GE ''EDGD.'E
6ebtors /D4A./ /GEG.=
0
20000
40000
0000
!0000
100000
120000
140000
Year
%ales
&ebtors
For the Qear /E'4 For the Qear /E'/
'/DDG/.GET/D4A./ ''EDGD.'ET/GEG.=
;9A.DE ;4K.9=
6ebtors Turnover Ratio has increased in /E'4 as compared to /E'/ which is good for the
company and shows the efficiency of the management.
Debtors !olle!tion $erio" G 4A= T 6TR
/E'4 /E'/
4A=T9A.DE 4A=T4K.9=
; D.G/ days ;K./= days
The debtor8s collection period of the company in /E'/ is K days but in /E'4 it is decrease
to G days only# it shows that the company is adopting strict debtors8 policy.
E()ity Ratio: hareholders Fund T Total Assets
/'
>Rs lakhs?
Qear /E'4 /E'/
hareholders fund A9A4= =9/D'.K
Total assets AA4AE =AAGE
0
10000
20000
30000
40000
50000
0000
'0000
Year
%(are(olders
)und
Total assets
For the year /E'4 For the year /E'/
A9A4=TAA4AE =9/D'.K T =AAGE
; E.KD ; E.KA
1(uity ratio of the company has slightly increased from E.KA in /E'/ to E.KD in
/E'4. "t shows that the financial position of the company is very strong because app. KDO
of the assets of the company are being funded by the shareholders of the company.
//
Earnin' Per /are: Cet profit >after interest 0 ta.? T Co. of share holders
>Rs lakhs?
Qear /E'4 /E'/
Cet profit 'A/AD.=E '/AK4.9E
Co. of shareholder 9/E.===4G 9/E.===4G
0
2000
4000
000
!000
10000
12000
14000
1000
1!000
Year
"et *ro)it
"o+ o) s(are(older
For the year /E'4 For the year /E'/
'A/AD.=ET 9/E.===4G '/AK4.9ET 9/E.===4G
; Rs. 4G.AG ; Rs. 4E.'G
The 1arning per hare has increased to Rs. 4G.AG in /E'4 from Rs. 4E.'G in /E'/ which
is good for the company and the shareholders.

/4
Ret)rn on /areol"ers F)n": Net $ro%it Ea%ter int. Hta2F /areol"ers %)n"
> Rs lakhs?
Qear /E'4 /E'/
Cet profit 'A/AD.=E '/AK4.9E
hareholders fund A9A4= =9/D'.K
0
10000
20000
30000
40000
50000
0000
'0000
Year
"et *ro)it
%(are(olders )und
For the year /E'4 For the year /E'/
'A/AD.=ET A9A4=U 'EE '/AK4.9ET=9/D'.KU'EE
; /=.'DO ;/4.4KO
/9
:. A0OUT T+E NA0+A P3ANT
,B8s Cabha plant is a huge manufacturing unit. ,la.o mithBline $onsumer
)ealthcare 5td. is having three factories# which are at Cabha# Ra@ahmundry and onepat.
The factory at Cabha is the mother unit and products manufactured by this company fall
under two categories of consumer healthcare:


The food powder >)!R5"$B 0 &!!T? is manufactured in Cabha. The
re(uirement of workforce changes with change in production policy. The plant at present
employs a work force varying from '=EE to /EEE out of which appro.imately ''EE are
permanent. There is a staff and management of about '9= persons. There is a wage
agreement for 4 years. The workers also getting weekly off according to 5abors Act.. The
plant runs 4A= days a years in 4 shifts daily which work from =.'= a.m. to '.'= p.m.# '.'=
p.m. to K.'= p.m. 0 K.'= p.m. to =.'= a.m.. The office opens A days a week.

About D Milk collection centers were opened at a radius of about 9Ekm around Cabha# to
meet the re(uirement of 'E tones of Milk per day. The main purpose of opening collection centers
at village level was to get good (uality of Milk directly from the producer and pay them good
/=
N)tritional
+ealt Drin*s
6astrointestinal ENO Fr)it /alts
+orli!*s an" its
variants
price# thus# raising their standard of living. Cabha and onepat production facility has already
been certified for )A$$P > )a2ard Analysis $ritical $ontrol Point for Food afety ?.
61PARTM1CTA5 !F1RF"1*
The various departments in ,B 5td. Cabha are:
!P1RAT"!CA5
1V$1551C$1
FINANCE DEPART-ENT
/A
37A5"TQ
A7RAC$1
MAC7FA$T7R"C,
PR!$7R1M1CT
1C,"C11R"C,
*AR1)!71
7PP5Q $)A"C
MACA,1M1CT
)R 0 A
F"CAC$1
0
".T.
1CF"!RCM1CT
)1A5T) 0
AF1TQ
Main Functions of Finance 6epartment Are As Follows: -
Fendor payment
*hen an article arrives at the gate# an entry permit is made and they are sent to the
,!!6 "C*AR6 6"PAT$) section >,"6?. A goods inward from >gif? is filled up and
sent to the finance department for payment .the vendor submit the bill to purchase
department .the finance department also receives a hard copy of the corresponding
purchase order >P!?. There is online passing and payment system. This contains a
database of all purchase order issued. These are checked against the bills for the ,"F# P!
references after which the bill is posted for production of the payment slips.
6isbursement of salaries
The )R 6epartment sends a compile list of all employees on the payroll together with
their monthly working records .The salaries are paid mainly through the bank to all the
employee.
Payment to government bodies
1.cise is paid to all suppliers for goods manufactured. The company takes credit of the
payment of e.cise from the govt. According to the $1CFAT. 1.cise is however paid for
the finished goods. Property ta.# insurance and sales ta. are also paid in case of accidentsL
breakdowns are called for assessment# when a claim is filed. FAT is paid to 1.cise and
Ta.ation 6epartment of Pun@ab.
Milk accounting
1very milk supplier has a code# the first two digit indicating whether the milk is from
cow# buffalo and the ne.t three digits indicating the supplier. Payments are made after 'E
days by che(ueTMTT66.
$ashTbanking
There are separate accounts for raw material e.cluding milk# stores# services# capital and
packing material. 1very department submits its monthly cash re(uirement and sends it to
finance where it is consolidated.
Payment of services
The finance department pays for various services like rent# truck hire etc.
/D
DEPART-ENTA3 C+ART OF FINANCE H IT
/G
-ANUFACTURIN6 PROCE//
The Manufacturing process for )orlicks is as Follows:
'. The First step in the production process involves the mi.ing of wheat flour with
Malted &arley.
/. "n The econd step water is added to the above mi.ture and the material is
mashed thoroughly# as a result of which the outer cover of malted barley is moved
and remains after it is called )usk.
4. After mashing the material it becomes thick slurry in which the solid content is
above =EO.
9. The fourth step involves the adding up of water to the above mi.ture.
=. The ne.t stage is the stage of evaporation in which the material is evaporated and
the result is thick slurry of the material in which the solid content is around GEO.
A. After evaporated comes the step of spreading out of material in plates and keeping
them in the oven for about half an hour.
D. !nce the material is completely dried# the plates are taken out from the oven and
the food item is scrapped out# which comes out in the form of thin layers. Then the
vitamins and other essential nutrients are added to the food items which is then
ground and the result is our final product )!R5"$B.
/K
RE/EARC+ -ET+ODO3O6Y
/COPE OF /TUDY
The scope of the study is designed in terms of unit worked# the concept adopted and the
period under focus.
Te )nit
The study is done in the Finance department 0 stores department of ,la.omithBline
$onsumer )ealthcare 5td. at Cabha plant.
Te !on!e$ts
The concept of various tools and techni(ues of general inventory control are used and
analysed.
Te $erio"
The study is supposed to be relating to the period of last year8s consumption i.e. from
April /E'4- March /E'4.
/o)r!es o% Data:
/e!on"ary Data: . The study is based on mainly on the secondary data including Annual
Report# tore Records 0 for theoretical portion various books.
Primary Data: . The only mode of collecting primary data was the non-structured direct
intersection with the concerned persons of Finance 0 tores 6epartment.
3I-ITATION/ TO T+E /TUDY
Te main limitations to my st)"y o% &or*in' !a$ital mana'ement in 6la2o /mit
8line.
+ealt!are limite" are as %ollo&s:
1. 3imite" "ata:
They provide us limited data as they said that it is confidential to them. 5ike in the
estimation of reorder level and reorder (uantity we used whole raw data they didn8t told
us how these levels are fi.ed# on what basis.
5. 3ess Fee"ba!*:
4E
6ue to workload the concerned authorities are unable to feedback us properly on our
(ueries related to the topic.
D. /orta'e o% time:
There was very less time to get the whole analysis of how management of general store
inventory items is done and which techni(ues are applied on them in ,B
O0CECTIVE/ OF /TUDY
The present study has been undertaken in respect of ,la.o mithBline at Cabha the main
ob@ectives of study are as follows: -
To know that how a company apply the controlling techni(ue on the inventory.
To know that how the recategorisation of the inventory is done through the A&$
analysis.
To know that how a company actually get the benefit of the controlling techni(ue.
To know that how other techni(ues can be better applied on the e.isting
controlling techni(ue.
INVENTORY -ANA6E-ENT
1very business needs inventory for smooth working of its activities. "t serves as a
link between production and distribution activities. "nventory the most significant part of
current assets.
5arge si2e of inventory is maintained by firms# a considerable amount of fund is
re(uired to be committed in them. Therefore# one of the most significant decision areas
concerning finance manager is inventory management. "nventories consisting raw
material# *"P# finished goods# maintenance spare parts a significant preparation of total
assets.
"nventory management means preparing the stock of goods at such " level that neither
the stock should be e.cessive or inade(uate. "t is a system# which ensures that right
4'
(uality of material# is available in the right (uantity at right time and right place with the
right amount of investment. 5arge si2e of inventory ensures efficient and smooth
production and sales operations# while minimum investment in inventories ma.imi2es
profitability. &oth the e.treme points are dangerous. An efficient manager always
determines the optimum points in between of the two e.tremes. 1.cess installments in the
inventory pees danger like unnecessary the up of firm8s funds and loss of profit e.cess
carrying cost. Risk of li(uidity and risk of physical deterioration of inventories. !n the
other hand inade(uate investment in inventories seeks to production hold ups failure to
meet delivery commitments. Thus# the aim of inventory management is to balance
between the two and maintain sufficient inventories. According to $urry and Frank:
I&ecause materials constitute such a significant part of product cost and since this cost is
controllable# proper planning# purchasing# handling and accounting are of great
importanceP
61F"C"T"!C !F "CF1CT!RQ
The dictionary meaning of "nventory is Sa list of goods8. "n a wider sense# inventory can
be defined as an idle resource# which has an economical value. "t is however# commonly
used to indicate various items of stores kept in stock in order to meet future demands.
"n any organi2ation# there may be following four types of inventory:
a? Ra& materials H $arts- These may include all raw materials# components and
assemblies used in the manufacture of a product.
b? Cons)mables H /$ares- These may include materials re(uired for maintenance
and day-to-day operations.
c? Ior*.in.$ro'ress- These are items under various stages of production not yet
converted as finished goods.
d? Finise" 'oo"s- These are the goods that are not yet sold or put into use.
O0CECTIVE/ OF INVENTORY -ANA6E-ENT:
The main ob@ectives of inventory management are operational and financial. The
operational ob@ective means that the materials and spares should be available in sufficient
(uantity so that work is not disrupted for want of inventory. The financial ob@ective
4/
means that investments should not remain idle and minimum working capital should be
locked in it.
To minimi2e the idle time caused by shortage of inventory and non- availability of
inventories as per re(uirements# and
To keep down capital investment in inventories# inventory carrying cost and
obsolesces losses.
To avoid both over- stocking and under-stocking of inventory.
To minimi2e losses through deterioration# pilferage# wastage and damages.
INVENTORY CYC3E
"n inventory cycle first of all raw material is purchased and then it is sent for
manufacturing where work in progress is then converted into finished stock which is
readily available for sale.
ame process is followed in ,B but at Cabha plant only manufacturing of
products is to be done whereas a sale finished product is done through the )ead office. "n
,B at Cabha raw material are malted barley# Milk# *heat Flour# Fitamins# etc. And in
,B work in progress is not considered for accounting because it is nit calculated# it is
only that part of production which is in pipelines. And in last finished product is produced
which is filled in 6rums and send to )ead office >,urgaon? for sale.
44
Raw Materials
tock
Finished ,oods
tock
PURPO/EJ0ENEFIT/ OF +O3DIN6 INVENTORY:
Te transa!tion motive: *hich facilitate continuous production and timely e.ecution of
sales orders.
Te $re!a)tionary motive: *hich necessitates the holding of inventories for
meeting unpredictable changes in demand and supplies of materials.
Te s$e!)lative motive: *hich induces to keep inventories for taking advantages of
price fluctuation# saving in re-ordering costs and (uantity discounts# etc.
INVENTORY CONTRO3
49
Raw Material Arrivals
>Restocking?
ales of Finished ,oods
>6estocking?
Manufacturing
*ork in progress
tock
Revenue
"nventory $ontrol is the art and science of maintaining the stock level of a given
group of items# incurring the least total cost# consistent with other relevant targets and
ob@ectives set by the management.
"nventory control refers to Ithe process whereby the investment in material and parts
carried in stock is regulated within predetermined limits set in accordance with inventory
policy established by the managementP >,orden &. $arson?. The activities of "nventory
control# thus# include the following:
6etermination of limits of inventories to be held.
etting out of investment pattern and its regulation as per individual and collective
re(uirements.
Follow-up to e.amine the working of the inventory policy and effecting changes
as and when needed.
I-PORTANCE OF INVENTORY CONTRO3
The primary ob@ective of inventory control is:
To minimi2e the idle time caused by shortage of inventory and non- availability of
inventories as per re(uirements# and
To keep down capital investment in inventories# inventory carrying cost and
obsolesces losses.
Achievement of these ob@ectives will result in more return on capital which is
materially the prime ob@ective of an organi2ation whether commercial or industrial. The
formula given below is helpful in arriving at the return on investment:
RETURN ON CAPITA3 G PROFIT
CAPITA3 INVE/T-ENT
"n normal circumstances# profit margin depends on e.ternal factors like
competition over which the management has little control. )ere the (uestion arises how
4=
the management control over competitiveness+ This is possible through the control over
inventoriesL the total capital in ,B is invested in fi.ed assets such as buildings# plant 0
machinery and a cut in this cannot be effected. &ut a reduction in working capital# high
percentage of which is locked up in inventories# is possible and there is definite
increasing profit earning capacity of the organi2ation.
Thus# efficient inventory management may result in more profit margins since it will
reduce the inventory cost resulted in reduction of production cost# more competitive
capacity# heavy turnover and increased profitability.
/COPE
The scope of inventory management is vast. "t encompasses various functions starting
with determination of the re(uirement of inventory and ending with the supply of finished
products to the users. "n widest sense# functions included in the scope of inventory
management can be summari2ed as:
6etermination of inventory re(uirement and planning its inflow.
Floating tender en(uiries.
"dentifying suppliers and placing orders for the suppliers.
"nspection of items received
tore keeping and stock control.
"ssue# Faluation and tore Accounting.
*arehousing and 6istribution.
All these functions are carried out# one after the other# in close se(uence. First the
periodic re(uirement of inventory is determined on the basis of sales forecasts and
production plan. At the same time tender en(uiries are floated for identifying the sources
of suppliers. !rders are then placed with the suppliers. *hen the inventory consignments
are received they are inspected to ascertain that items supplied are as per the
specifications given in the order. "tems found in order are then stored in bins# racks and
containers to ensure their safety# security and prevent deterioration in (uality. "nventory
items are issued from stores to production and other departments as per their demand.
Proper records are maintained for the receipt and issue of all these items.

4A
INVENTORY -ANA6E-ENT. CON/TRAINT/ H
PRO03E-/
CON/TRAINT/
Constraints o% inventory mana'ement vary %rom or'ani4ation to or'ani4ation
"e$en"in' )$on vario)s variablesK some o% tem are as )n"er:.
aF Ieter te "eman" %or te 'oo"s is one time Estati!F or o% re$etitive nat)re
E"ynami!F. In 6/8 all te non.sto!* items are treate" o% stati! nat)re an"
sto!* items o% "ynami! nat)re.
bF In !ase o% "eman"s o% "ynami! Ere$etitiveF items# &eter %)t)re
re()irements !an be assesse" &it !ertainty or )n!ertainty or )n"er ris*
E$robabilityF. Also# &eter te "eman" is %i2e" over a time or is variable.
!F Ieter te material is man)%a!t)re" in o)se or is to be $)r!ase" tro)'
o)tsi"e s)$$liers.
"F Ieter te lea".time ")rin' &i! material !an be arran'e" is %i2e" or is
variable.
PR!&51M
Tree basi! $roblems asso!iate" &it o$timi4ation o% sto!*s are:
1. Ien to initiate $)r!ase o% te materialsL
5. +o& m)! ()antities are to be $)r!ase" at a timeL
D. Iat so)l" be te sto!* levels o% te "i%%erent itemsL
VARIOU/ INVENTORY -ANA6E-ENT TEC+NI1UE/
a? /ele!tive -ana'ement: - "n this techni(ue# various items of stores are classified
in various classifications depending upon their consumption value# unit price#
criticality for the organi2ation# source of supply# purchasing problems# rate of
withdrawals from the stores# seasonality and stores balances on a particular date.
6ifferent approaches of control are being followed for different types of items.
4D
Two such classifications A&$ 0 FC are followed in ,B
b? -ana'ement by E2!e$tion: - "n this techni(ue# items with certain e.ceptions are
tackled on different points of time. For e.ample# overstock itemsL surplus items
and inactive items may re(uire more attention.
"n ,B management by e.ception is followed for such goods that are stock outs
for some period.
c? Rationali4ation: - Techni(ues of standardi2ation and variety reduction are used to
minimi2e lead-time of the material# and reduce unnecessary inventory carrying
costs.
d? Val)e Analysis: - Functions performed by the materials are analy2ed and
alternative designsTraw materials are suggested to achieve the same function at
minimum cost.
e? Com$)teri4ation: - $omputer outputs can be used for scientific forecast of
demand to solve many inventory models# providing optimum safety and for
controlling funds.
6ENERA3 /TORE INVENTORY
,eneral store is a ma@or part of the inventory in all the concerns. "t provides the
information regarding how much material we can purchase# and how much material we
can keep in store such as it is helpful to provide the information regarding all levels. The
ma@or part of working capital of all the concern spent in ,eneral store inventory.
NATURE OF 6ENERA3 INVENTORY IN 6/8
"nventories are stock of the product a company is manufacturing for sale and components
that make up the product. The various forms in which inventories e.ist in a
manufacturing company are: raw materials# work in progress# finished goods 0 stores
and spares.
Ra& materials are those basic inputs that are converted into finished product
through the manufacturing process. Raw material inventories are those units# which have
been purchased and stored for future productions.
4G
"n ,B Malted &arley# *heat flour# kim Milk Product >MP?# Fine $rystalline ugar
>F$?# Roasted Malted &arley# $alcium# Potassium# odium# Fitamin Flavors etc.# are
main raw materials.
Ior*.in.$ro!ess. The work-in-process is that stage which is in between raw
material and finished goods. The raw material enters the process of manufacture but they
are yet to attain a final shape of finished goods. The (uantum of work-in-process depends
upon the time taken in the manufacturing process. The greater the time taken in
manufacturing# the more will be the amount of work in process.
Cons)mables. These are the materials# which is needed for smooth process of
production. These materials do not directly enter in the production but they act as
catalysts# etc. consumables may be classified according to their consumption and
criticality. ,enerally# consumables stores do not create any supply problems and form a
small part of production cost. There can be instance where these materials may account
for much value than the raw materials The fuel oil may form a substantial part of cost.
"n ,B Cabha Polythene# 6rum eal# Tape roll# 5abel# $leansing Agent# )and gloves#
!il# $hemical# $oal# etc. are e.amples of some consumables.
Finise" 'oo"s. These are the goods# which are ready for the customers. The s
tock of finished goods provides a buffer between production and market. The purpose of
maintaining inventory is to ensure proper supply of goods to customers. "n some
concerns the production is undertaken on the order basis# in general without waiting for
specific orders.
"n ,B main finished goods are )orlicks# &oost# Fanilla )orlicks# 1lachi )orlicks#
&oost intermediate# )orlicks high fat# Munior )orlicks 6)A# mother )orlicks 6)A etc.
are products# which are produced for consumption in "ndia. Mother )orlicks 6M" and
Munior )orlicks 6M" are products manufactured for e.port package and send to
&angladesh.
/$ares. pares also form a part of inventory. The consumption pattern of raw
material# consumables# finished goods are different goods are different form that of
spares. The stocking policies of spares are different from industry to industry. ome
industry like transport will re(uire more spares than other concern. $ostly spare parts like
engines# maintenance spares etc. are not discarded after use# rather they are kept in ready
position for further use. All decision about spares is based on the financial cost of
inventory on such spares and the costs that may arise due to their non-availability
"n ,B e.amples of pares are &arring# F-&olt etc.
4K
6ENERA3 /TORE INVENTORY IN 6/8
,eneral store is that which the part of the production becomes indirectly. *ithout such
inventory no production will be there. This store inventory includes: -
Polythene bags
$onsumables like diesel etc.
$leaning material like nitric acid# caustic soda etc.
Floor cleaning towels
pare parts of the machines
"nventory re(uired under ,MP >,ood Manufacturing Practices? like uniform#
hand gloves# mouth covers# safety shoes etc.
7nder the general store inventory total no. of items are /='D# which have the
A&$ classification. Their total consumption value is Rs. ='D'9'EA.G4. "t includes 9=
items# some of which don8t have any classification because these items are used as and
when re(uired during the year as such do not fall under any category and some are capital
related spares.
A0C ANA3Y/I/
A&$ analysis is a basic analytical materials management tools. Fundamentally A&$
analysis may be applied to any branch of management eith ease and success. "t calls upon
the top management to place its efforts where the result will be greatest. "t is selective
approach popularly known Always >A? &etter >&? $ontrol >$?. The A&$ goes by its
name it always the best# then better and lastly the good.
Manufacturing organi2ations find it useful to divide materials into three categories
for the purpose of e.ercising selective control on materials. An analysis of the materials
cost will show that a smaller percentage of items of materials in the store may contribute
to large percentage of the value of consumption and# on the other hand# a large
percentage of items may represent a smaller percentage of the value of items consumed.
&etween these two e.tremes will fall those items the percentage number of which is more
or less e(ual to their value of consumption. "tems falling in the first category are treated
9E
as IAP items# of the second category as I&P items and items of third category are taken as
I$P items. uch an analysis of material is known as IA&$ ACA5Q"P
This techni(ue of stock control is also known as stock control according to value
method or always better control method or proportional parts value analysis method.
Thus under this techni(ue of stock control materials are listed in IAP# I&P and I$P
categories in descending order based on money value of consumption.
The significance of this analysis is that a very close control is e.ercised over the items
of IAP group which account for a high percentage of costs while less stringent control is
ade(uate for category I&P and very little control would suffice for I$P items.
All types of materials control i.e.# purchase stores and issues are to be strictly applied
in case of the items of IAP group. "n case of the I$P items an elaborate material control is
not e.ercised because these items represent a very small portion of the material costs.
These items can be purchased once a year and various stock levels i.e.# minimum level#
ordering level etc. may not be adhered to. All the time# efforts and costs saved on the $
group items by not having an elaborate control can be usefully utili2ed on the A and &
group items.
A.0.C Analysis: This analysis is based upon PAR1T! PR"C$"P51# according to
which in many situations# ma@ority of the activity >DE to GEO? is governed by very few
>'E to /E? attributes. )ence if all the stock items are analy2ed in terms of their annual
consumption# ma@or part of total consumption value on a ,B >about DE-GEO? is of only
few high consumption value items >say 'E-/EO?. These items may be classified as A
category.
'= to /EO of total consumption is represented by another '= to /EO items that may be
classified as & category.
Remaining = to 'EO consumption is represented by a large no. of small consumption
value items# which may be classified as $ category.
Actually A&$ classification depends upon management decision. "n ,B it is decided
that-
All high consumption value items# which represent DEO of total issues# will be
classified as A category.
"tems# which represent /EO of total issue# will be classified as & category.
All remaining items are of $ category.
9'
For the purpose of "nventory $ontrol# A category items are most important. Therefore#
they are closely monitored at highest level at very fre(uent intervals.

/to!* $ysi!al veri%i!ation in 6/8
For A category items is carried out every si. monthsL
For & category items every year and
!nce in two years for $ category items.
To achieve better inventory turnover ratio# ,B intend to keep average stocks of 4
months# A months and '/ months of A# & and $ category items respectively.
RECATE6ORI/ATION
Recategorisation means to re-classify the items# inventory etc. that already have some
classification.
uch recategorisation is done as per the changed scenario.
7nder the A&$ analysis# recategorisation means to re-classify the particular
inventory# according to the new conditions. Recategorisation helps in knowing the actual
position of inventory. *ithout recategorisation process the benefit of the applied
techni(ue is nil. &ut it should be done at the proper time neither too late nor too early#
because with the Recategorisation the applied techni(ue remains effective.
NEED FOR RECATE6ORI/ATION
The process of categori2ation of inventory in SA8#8&8#8$8 category was initiated in
'KKK. *ith the change in the inventory over the years and with the change in the unit
value and the consumption value of the inventory# the need arises for the recategorisation
of the inventory after some period of time according to the current norms.
Therefore the need of recategorisation the inventory arises essentially due to:
"ntroduction of new items during the period in stores inventory
$hange in the prices of certain items
Revisiting norms set for the previous categori2ation
9/
There can be the obsolesce of certain inventory items
There can be implementation of theP *ritten offP process
There can be change in the value of the e.isting items
-ET+ODO3O6Y
This inventory is based on the following criteria in ,B:
$ategory A: - 7nit value Rs.=EEE 0 above or Annual $onsumption Rs =EEEE
0above
$ategory &: - 7nit value Rs.'EEE 0 above but less than Rs. =EEE or Annual
$onsumption Rs 'EEEE 0 above but less than Rs =EEEE
$ategory $: - 7nit value less than 'EEE or Annual $onsumption less than Rs'EEEE
RECATE6ORI/ATION PROCE//
For doing the recategorisation the whole of the inventory is analy2ed on the basis
of the unit value 0 the consumption value.
RE1UIRE-ENT/:
,eneral inventory items.
The 7nit value
Their annual consumption.
For calculating the unit value any of the following is re(uired
$losing value and closing (uantity
!r
!pening value and opening (uantity
!r
$onsumption value and consumption (uantity
94
Per 7nit Falue ; $losing valueT!pening valueT$onsumption value
----------------------------------------------------------
$losing (ty.T!pening (ty.T$onsumption (ty.
PREPARATION OF PROPO/A3/
For preparing the proposals under the different conditions following steps have been
taken: -
Firstly check that according to the unit value in which category the item is
falling.
ee that according to the consumption value which category is best suited to
the item.
Then out of the two put the items in the upper category.
For e.ample: -
"tem $ode Per unit
value
$onsumption
value
'4E'G GDG.ED 'GD4'.99
Proposed
$ategory
$ &

0
10
20
30
40
50
0
'0
!0
,0
1st -tr 2nd -tr 3rd -tr 4t( -tr
.ast
/est
"ort(
According to 7nit value it should fall in S$8 category but according to $onsumption value
it should fall in S&8 category.
99
Therefore# it will fall in S&8 category.
"tem code Per unit value $onsumption value
AEE'/ '9.9 =9D4=./E
Proposed $ategory $ A

0
10
20
30
40
50
0
'0
!0
,0
1st -tr 2nd -tr 3rd -tr 4t( -tr
.ast
/est
"ort(

According to 7nit value it should fall in S$8 category but according to $onsumption value
it should fall in SA8 category.
Therefore# it will fall in SA8 category.
1.isting status of inventory as on March /E'4
1.isting criteria: Per 7nit Falue Rs. =EEE 0 $onsumption Falue Rs.=EEEE
1. A!!or"in' to No. o% items
9=

General Store Items Existing Cat.A,B,C(Numbers)
1626
60
2!!
11.""#
2.$6#
6".60#
0
200
400
600
800
1000
1200
1400
1600
1800
A B C
Existing %ategor&
N
o
.
o
'

I
t
e
m
s
5.A!!or"in' to Cons)m$tion Val)e

9A
Cate'ory
E2istin' No. o%
items M
A /GG ''.99O
& AE4 /4.KAO
$ 'A/A A9.AEO
T!TA5 /='D
Cate'ory
Cons)m$tion
Val)e M
A 4KD4'AK' DA.G4O
& A=GD9E4 '/.D9O
$ 9KAG4K9 K.A'O
T!TA5 ='D'9'EA
General Store Items Cat.A,B,C((alues)
6. 59
4. 97
39 . 73
10. 53%
15. 6 2%
73. 85%
0
5
10
15
20
25
30
35
40
45
A B C
PER C ENTAGE


C!T1: Total items include
9= items# which have ICo $ategoryP but have consumption value of
Rs.9/AA'G.
PROPO/A3 1:C+AN6E/ FRO- T+E E7I/TIN6 CATE6ORY
T)s te e2er!ise as lea" to movement o% 1DM o% total inventory to AAB
!ate'ory as a'ainst 11M in te e2istin' stat)s &it te little "i%%eren!e in te
$er!enta'e o% items in te sai" !ate'ory. Also tere is movement o% almost 5;.:M
H ;1M o% total inventory to A0B H ACB !ate'ories as a'ainst 5@M H ;@.;M
res$e!tively in te e2istin' sit)ation.
Cate'ory No. o% items EEF M o% e2istin' items No. o% items EPF M o% items
A /GG ''.99O 4/' '/.D=O
0 AE4 /4.KAO AAD /A.=O
C 'A/A A9.AEO '=/K AE.D=O
T!TA5 /='D /='D
9D

C)ASSI*ICA+I,N ,* I+E-S IN+, CA+EG,.IES
66/
2!!
60
1626
21
102$
0
200
400
600
800
1000
1200
1400
1600
1800
A B C
Categor&
N
,
.

,
*

I
+
E
-
S
Existing
Category
Proposed
Category
!n the same way# as per the proposal consumption value of near about G4O of total
inventory shift to IAP category as against D=O in the e.isting status with the little
difference in the percentage of items in the said category. Movement in the I&P 0 I$P
category is almost '/.AO 0 9O as against '/.DO 0 K.AO respectively in the e.isting
category.
Cate'ory
E2istin'
Cons)m$tion M
Pro$ose"
Cons)m$tion M
A 4KD4'AK' DA.G4O 94E4K4=/.=/ G4./4O
0 A=GD9E4 '/.D9O A='/4A'./= '/.=KO
C 9KAG4K9 K.A'O /'A/4K4.EA 9.'GO
T!TA5 ='D'9'EA ='D'9'EA
9G
Com1arison o' %onsum1tion 2alue
$./
6.0$
".$/
6.01
2.16
".0"
0
5
10
15
20
25
30
35
40
45
50
A B C
3E.CEN+AGE
C
,
N
S
4
-
3
+
I
,
N

(
A
)
4
E
(
-
I
)
)
I
,
N
S
)
Existing
category
Proposed
Category
PROPO/A3 E1F: As $er Unit Val)e Rs. =??? H Cons)m$tion Val)e Rs. =????
EANNE7URE 5F
1. A!!or"in' to No. o% items
9K
No. o%
Items M
A /9/ K.A'O
& 4KE '=.=EO
$ 'GD/ D9.GKO
T!TA5 /='D
Criteria 25 General Store items
%at.A,B,C(Numbers)
1!/2
$0
2"2
/".!$#
10.00#
$.61#
0
500
1000
1500
2000
A B C
Items (Cat.A,B,C)
N
o
.

o
'

i
t
e
m
s

5. A!!or"in' to Cons)m$tion Val)e
=E
Cate'ory
Cons)m$tion
Val)e M
A 9'AA'/GK GE.=9O
& =9A'EK' 'E.=AO
$ 9=K'D/A G.KEO
T!TA5 ='D'9'EA
Criteria 25General Stores 3ro1ose6 Items
Cat.A,B,C
"1.66
0."6
".0$
10.20#
12.!2#
/6.$#
0
10
20
30
40
50
A B C
CA+EG,.7 (A,B,C)
C
,
N
S
4
-
3
+
I
,
N

(
A
)
4
E
(
-
I
)
)
I
,
N
S
)
C!T1: Total items in the Proposed $ategory include '4 items# which have ICo
$ategoryP as these are capital related spares and have no consumption value but there
are also 9= items which are used rarely in the production as such are not considered
under any category in spite of having consumption value.
CO-PARI/ON
Thus the e.ercise has lead to movement of K.A'O of total inventory to IAP category as
against ''.99O in the e.isting status with the little difference in the percentage of items in
the said category. Also there is movement of almost '=.=O 0 D=O of total inventory to
I&P 0 I$P categories as against /9O 0 A=O respectively in the e.isting situation with a
large difference in the percentage of items in the said category.
CATE6ORY NO. OF ITE-/EEF M NO. OF ITE-/EPF M
/GG ''.99O /9/ K.A'O
0 AE4 /4.KAO 4KE '=.=EO
C 'A/A A9.AEO 'GD/ D9.GKO
T!TA5 /='D /='D
='
Com1arison (No.o' items)
2!!
60
1626
2"2
$0
1!/2
0
500
1000
1500
2000
A B C
I+E-S(A,B,C)
N
,
.
,
*

I
+
E
-
S
Existing Category
Proposed Category
!n the same way# as per the proposal consumption value of near about G'O of total
inventory shift to IAP category as against DDO in the e.isting status with the little
difference in the percentage of items in the said category. Movement in the I&P 0 I$P
category is almost 'E.=O 0 KO as against '4O 0 KO respectively in the e.isting
category.
CATE6OR
Y CON/U-PTION VA3UEEEF M CON/U-PTION VA3UEEPF M
A 4KD4'AK' DA.G4O 9'AA'/GK GE.=9O
0 A=GD9E4 '/.D9O =9A'EK' 'E.=AO
C 9KAG4K9 K.A'O 9=K'D/A G.KEO
T!TA5 ='D'9'EA ='D'9'EA
=/
Com1arison o' Consum1tion (alues
4.97
6.59
39.73
4.59 5.46
41.66
0
5
10
15
20
25
30
35
40
45
A B C
CA+EG,.7 (A,B,C)
C
,
N
S
4
-
3
+
I
,
N

(
A
)
4
E
(
-
I
)
)
I
,
N
S
)
Existing Category
Proposed Category
CONC3U/ION: The 1.isting criteria applied in stores is correct as it follows the Spareto
principle8 it shows that ma.imum consumption of minimum no. of items comes under SA8
category and minimum consumption value items with ma.imum no. of items falls under
S$8 category. &ut some changes are re(uired in the same as shown above i.e. some items
are re(uired to move between all the three categories.
I-P3E-ENTATION OF T+E PRORO/A3
For actual implementation of the selected proposal again some analysis is carried on.
Pysi!al veri%i!ation:
First of all physical verification of the whole inventory is done. 7nder this each and every
item of the inventory is verified with the books. For this purpose concerned person goes
to the stores and does the verification.
C)rrent YearNs Cons)m$tion:
After the physical verification all inventory is again checked with the current year8s
consumption. "f in case of any particular item .the current year8s consumption changes
corresponding to the previous year8s consumption then it can be proposed in another
category# then that proposal is acceptable.
=4
For instan!e:
"tem $ode: '4E'G
$onsumption in fin. year ending March /E'4 $urrent $ategory
=9KG.GE $
$onsumption in fin. year ending March /E'9 Proposed $ategory
'GD4'.99 &
"n this way all the items are analy2ed and a final report is prepared.
ADVANTA6E/ OF A0C ANA3Y/I/
A strict control is e.ercised on the items# which represent a high percentage of the
material costs . Managerial time is spent on SA8 items whereas clerical staff with
least managerial supervision can handle S$8 items and sometimes S&8 items. 1(ual
attention to all the items of stores is not desirable because it will not be a cost
effective option for the firm. $oncentrating on all the items of stores is likely to
have a defused effect on all the items# irrespective of the value of consumption.
Therefore# A&$ analysis should be followed to give due attention to the items#
which they deserve# keeping in view their value of consumption.
"nvestment in inventory is reduced to the minimum possible level because a
reasonable (uantity of 8A8 items representing a significant portion of the materials
costs is purchased.
To reduce investment in materials# close control of SA8 items contributes much
more than close control of S$8 items.
torage cost is reduced# as a reasonable (uantity of materials# which account for
high percentage of value of consumption# will be maintained in the stores.
*ith the introduction of the A&$ analysis# management time is saved because
attention is re(uired to be paid only to some of the items rather than on all items
"t becomes possible to concentrate all effort in areas# which need genuine efforts.
"t is most effective and economical method as it is based on selective approach.
=9
"t helps in placing the orders# deciding the (uantity of purchase# safety stock# etc.#
thus saving the enterprise from unnecessary stock-cuts or surpluses and their
resultant conse(uences. This may be well shown by an e.ample where average
inventory is one-half of the order (uantity:
$ategory Annual consumption Co. of !rders Average *orking
"nventory
A Rs. 4#EE#EEE 9 4D=EE
& Rs. 4E#EEE 9 4D=E
$ Rs. 4#EEE 9 4D=
T!TA5 Rs. 4#44#EEE '/ 9'A/=
Beeping the same no. of orders per year# vi2.# '/ inventories# can reduced by 4KO merely
by segregating items according to their usage value as shown below:
$ategory Annual consumption Co. of !rders Average *orking
"nventory
A Rs. 4#EE#EEE G 'GD=E
& Rs. 4E#EEE 4 =EEE
$ Rs. 4#EEE ' '=EE
T!TA5 Rs. 4#44#EEE '/ /=/=E
F/N C3A//IFICATION
==
A&$ $lassification is on the basis of consumption value of an item and does not give any
importance to the criticality of the item and therefore# only A&$ $lassification is not
ade(uate. $lassification done on the basis on the movement of the items in the storehouse
is known as FC# where the items are classified as fast moving >F?#slow moving>? and
non-moving>C?#items .This classification is done on the basis of consumption pattern of
the items under analysis. This analysis is useful in case of obsolete items. Previous year
issues is a guiding factor for FC analysis previous two years issues are taken into
consideration for a decision whether the items stocked in storehouse are fast moving
#slow moving or non moving.
Fast movin':."tems being issued more than '= times a year may be placed in SF8
category. $ertainly such analysis and limits of issue vary from one organi2ation to
another organi2ation.
/lo& movin':."tems up to a certain limit say 'E-'= issues in a year may be classified as
S8 items.
Non.movin':."f there is no issues of a particular item during the past few years#
naturally they will be classified as S:ero issue items8 and under this method of analysis
these items will be classified as SC8 items.
In 6/8 items# )n"er F/N !ate'ori4in' is "one on te %ollo&in' !riteria :.
Fast movin' :.The items which are very fre(uently moved in one year are included in the
fast moving category .
/lo& movin' :.The items which are moved from stores for a period of one and a half
year.
Non.movin':.The items which are not issued from stores for more than three years.
"n ,B "nventory8s FC categori2ation of items in stores for the month of May /E'4 in
which K' lacs value items are of non moving nature which are not moved within a period
of three years and 94 lacs value are of slow moving which is moved within a period of
one and a half year and A9 lacs are of fast moving nature that are fre(uently moved.
$ategory "nventory >5acs? Percentage >O?
=A
Con Moving "nventory K' ='
low Moving "nventory 94 49
Fast Moving "nventory A9 '=
Total 'KG 'EE
General Stores In2entor& Com1osition Slo89non9'ast
mo2ing items
"#
10#
01#
ast !o"ing
s#o$ !o"ing
non !o"ing
6" la%s
$1 la%s
" la%s
3EVE3 /ETTIN6
"n order to have proper control over inventory various levels are set to avoid wastages and
for optimum utili2ation of stock. Following levels are set for the said purpose: -
o Re-order 5evel
o Minimum 5evel
o Ma.imum 5evel
o 6anger 5evel
o Average tock 5evel
EAF Re.or"er 3evel: . "t is the point at which if the stock of a particular material in
store approaches# the storekeeper should initiate the purchases re(uisition for fresh
supplies of that material. This level is fi.ed somewhere between the ma.imum and
=D
minimum levels in such a way that the difference of (uantity of material between the re-
ordering level and the minimum level will be sufficient to meet the re(uirements of
production up to the time the time the fresh supply of materials received.
Re-ordering level can be calculated by applying the following formula:-
!rdering 5evel ; Minimum 5evel < $onsumption during the time re(uired to get the
fresh delivery
Re-ordering level ; Ma.imum $onsumption UMa.imum lead time
)ere# ma.imum re-order period means the period taken to get the material once it is
initiated# so that the factory may not stop production in any case due to the shortage of
material.
E0F -inim)m level: .This represents the minimum (uantity of the material# which
must be maintained in hand at all the times. The (uantity is fi.ed so that production may
not be held up due to shortage of material .in fi.ing this level# the following factors are
taken into consideration: -
3ea".time: . "t is the time lag between the indenting and the receiving of material. "t is
time re(uired to replenish the supply.
Rate o% Cons)m$tion of material during the lead-time.
Nat)re o% -aterial:.Minimum level neither is nor re(uired in case of a special material
which is re(uired against customer specific order.
Minimum stock 5evel; Re-ordering 5evel - >Cormal $onsumption U Cormal lead time?
ECF -a2im)m 3evel: . "t represents the ma.imum (uantity of an item# which can be
held in stock any time. tock should not e.ceed this level is fi.ed to avoid over stocking.
Ma.imum 5evel ; Reordering level < Minimum Re-ordering 3uantity - >Minimum
$onsumption U Minimum Re-ordering 5evel period?
EDF Dan'er 3evel: .This means a level at which normal issue of the material are
stopped and issues are made only under specific instructions. The purchase offer will
make special arrangements to get the material# which reach at their danger levels so that
the production may not stop due to the shortage of materials.
6anger 5evel ; >Average $onsumption? U >Ma.imum re-order period for emergency
purchases?
EEF Avera'e sto!* 3evel: .The average stock 5evel is calculated by the following
formula:-
=G
Average stock 5evel ; Minimum stock level < N of re-order (uantity
!R
Average stock 5evel ;'T/>Minimum stock level < Ma.imum stock level?
At ,B all these levels are set by stores department on the basis of the following
re(uirements:-
First of all consumption of the items by different department or according to
production pattern.
!n the basis of lead-time involved on purchase of items.
ECONO-IC ORDER 1UANTITY
6epending upon various variables# different inventory models have been
developed. 6ifferent models take different costs into accounts. !ne of the popular models
developed for items of repetitive nature >dynamic?# future demands for which can be
pro@ected with certainty is 1conomic !rder 3uantity >1!3? model.
"n addition to factors mentioned above# this model assumes that price of the
material remains constant with time and also does not vary with order (uantity. This
model can be developed mathematically by differentiating total cost of inventory
>ordering cost < inventory carrying cost? with respect to 3uantity.
The (uantity to be ordered should be such which minimi2e the carrying and
ordering cost. The order for the material to be purchased should be large enough to earn
more trade discount and to take advantage of bulk transport# but at the same time it should
not be too large to incur to heavy a payment on account of interest# storage and insurance
cost. "f the price to be paid is stable# the (uantity to be ordered each time can be
ascertained by the following formula:-

1conomic !rder 3uantity >1!3? ; W /A!T$
*here#
A ; Annual $onsumption 3uantity
=K
! ; $ost of placing one order >ordering cost?
$ ; Annual inventory carrying cost or holding
1very firm# needs due concentration on two basic (uestions or managing inventories
efficiently#
*hen to purchase+
)ow much to purchase+
The total cost of material usually consists of:-
Total ac(uisition cost >Purchase Falue? < Total carrying cost >)olding $ost?
< Total ordering cost
A!()isition Cost. Total ac(uisition cost i.e. total purchase value through is buying is
unaffected irrespective of the (uantity of material ordered at one time unless (uantity
discounts are available. Thus# when ac(uisition cost of a material remains the same# the
only costs to be taken care of are ordering costs and carrying cots.
+ol"in' !ost < The very fact that the items are re(uired to be kept in stock means
additional e.penditure to the organi2ation. The different elements of costs associated with
keeping stock over time are as follows:
torage costs
RentTdepreciation
5abour
!verheads >e.g. heating# lighting# security?
Money tied up >loss of interest# opportunity cost?
!bsolescence costs >if left with stock at the end of product life?
tock deterioration >lose money if product deteriorates whilst held?
TheftTinsurance
AE
Or"erin' !osts."n large organi2ations like ,B# the demands received are technically
scrutini2ed# in(uiries are issued# tenders are received and evaluated# orders are
progressed# materials are received and inspected and lastly# the payments are arranged.
All these constitute an additional costs to the organi2ation and costs associated with
ordering and receiving an order are:
$lericalTlabour costs of processing orders
"nspection and return of poor (uality products
Transport costs
)olding costs
"C ,B !R61R"C, $!T P1R !R61R $!MP7T16 " APPR!V"MAT15Q Rs. /G
P1R !R61R.
1conomic order (uantity is determined keeping in view the ordering cost and carrying
cost.
At ,B instead of using 1!3 >1conomic !rder 3uantity?# R!3 >Re !rder 3uantity? is
used and this (uantity level is calculated by inventory software and it is revised on the
basis of consumption re(uirements of different departments.
PROPO/A3
tudy and analysis of the inventory of gsk as per the eo( model to know the
difference between the total inventory cost to the organi2ation in comparison to their
actual >ro( method? and total savings# if any# can be made from the three different.
RE1UIRE-ENT/:
,eneral inventory items data.
The 7nit value
1.isting Purchase !rders >P!?
For calculating the unit value any of the following is re(uired:
A'
$losing value and closing (uantity
!r
!pening value and opening (uantity
!r
$onsumption value and consumption (uantity
Per Unit Val)e G $losing valueT!pening valueT$onsumption value
----------------------------------------------------------
$losing (ty.T!pening (ty.T$onsumption (ty.
For calculating e.isting P!8s following method is adopted:
P! >1.isting? ; Purchase 3ty.T R!3
For E2am$le: -
R!3 ; 'E
!pening 3ty. ; 4E units
Purchase 3ty. ; 'EE units
$losing 3ty. ; /E units
o $onsumption 3ty. ; 4E<'EE-/E ; ''E units
"n the absence of opening and closing (ty.# purchases 0 consumption will be the same.
&ut as there are both opening and closing balances the purchase orders are calculated on
purchase (ty.
P!8s ; 'EET'E
; 'E units.
"n this way the whole data is analy2ed and current P!8s are taken out.
ECONO-IC ORDER 1UANTITY
$!MP7TAT"!C 6!C1 F!R:
)olding cost >hc?
!rdering cost >oc?
Po8s proposed
Total inventory cost >ic?
A/
"n gsk resonable assessment on general inventory showes holding cost to be '=O if the
average inventory 0 ordering cost is rs. /= per order.
E2istin' !ost E&it RO1F
T!TA5 )!56"C, $!T >1.isting? ; Price per 7nitT 7nit Falue U'=O
1!3 ; R!7C67P >3RT>>/U!$U$!C7MPT"!C 3TQ.?T)$?# E?
For calculating proposed P!8s following calculation is done:
P! >1.isting? ; Purchase 3ty. T 1!3
Total holding cost 0 ordering costs are computed separately for IAP# I&P# I$P $ategory
items. Total inventory costs are also drawn out for the three categories and savings are
find out from their e.isting inventory costs.

T!TA5 )!56"C, $!T >1.isting?
; >R!3 U 7C"T FA571 U '=O U 51A6 T"M1?T4E
T!TA5 !R61R"C, $!T >1.isting?
; 1V"T"C, P!8s U /G
T!TA5 "CF1CT!RQ $!T >1.isting?
; P7R$)A1 FA571 >A$37""T"!C $!T?<T!TA5 )$<T!RA5 !$
The above criteria is applied on the whole given data and randomly top /=-4= items are
chosen which gives some considerable amount of savingsL to draw out conclusion and
the analysis 0 interpretation drawn from data shows:
IAP $AT1,!RQ
C!.!F "T1M TAB1C; /=
T!TA5 1V"T"C, "CF1CT!RQ $!T; Rs. '9/9G'A=
A4
I&P $AT1,!RQ
C!.!F "T1M TAB1C; /=
T!TA5 1V"T"C, "CF1CT!RQ $!T; Rs. 9=KKA=
I$P $AT1,!RQ
C!.!F "T1M TAB1C; 4=
T!TA5 1V"T"C, "CF1CT!RQ $!T; Rs. 'KAEAK
Pro$ose" E&it EO1F
T!TA5 )$ >Proposed? ; >1!3 U 7C"T FA571 U '=O U 51A6 T"M1?T 4E
T!TA5 !$ >Proposed? ; PR!P!16 P!8s U /G
T!TA5 "CF1CT!RQ $!T >Proposed?
; P7R$)A1 FA571 >A$37""T"!C $!T?<T!TA5 )$<T!RA5 !$
The above criteria is applied on the whole given data and randomly top /=-4= items are
chosen to draw out conclusion and the analysis 0 interpretation drawn from data shows:
IAP $AT1,!RQ
C!.!F "T1M TAB1C; /=
T!TA5 PR!P!16 "CF1CT!RQ $!T; Rs. '9/=449G
I&P $AT1,!RQ
C!.!F "T1M TAB1C; /=
T!TA5 PR!P!16 "CF1CT!RQ $!T; Rs 99K9/'
I$P $AT1,!RQ
C!.!F "T1M TAB1C; 4=
T!TA5 PR!P!16 "CF1CT!RQ $!T; Rs./EG/'4
FINDIN6/ OF T+E PROPO/A3
Cate'ory E2istin' Inventory !ost Pro$ose" Inventory !ost /AVIN6/
A '9/9G'A= '9/=449G ='G4
0 9=KKA= 99K9/' >'E=99?
C 'KAEAK /EG/'4 '/'99
TOTA3 1@9?@199 1@91?9>5 ;=>D
A9
0
10
20
30
40
50
0
'0
!0
,0
1st -tr 2nd -tr 3rd -tr 4t( -tr
.ast
/est
"ort(
Con!l)sion
The study shows that there are savings of Rs.ADG4 if 1!3 model is used instead of R!3.
"n this study only /=-4E items are taken but the total no of items are in thousands in
,B$) so if 1!3 M!6A5 is used it will give more savings to the company.
CU/T IN TI-E INVETORY /Y/TYE-
C)st in time $)r!asin' is te $)r!ase o% material or 'oo"s in s)! a &ay tat
"elivery o% $)r!ase item is ass)re" be%ore teir )se or "eman". C)st in time
$)r!ase re!o'ni4es too m)! !arryin' !ost asso!iate" &it ol"in' i' inventory
levels. Tere%ore# it a"vo!ates "evelo$in' 'oo" relation &it s)$$lier an" ma*in'
timely $)r!ases %rom $roven s)$$liers &o !an ma*e rea"y "elivery o% 'oo"s
available as an" &en nee" arises EO1 EE!onomi! or"er ()antityF mo"el ass)mes a
!onstant or"er ()antity &ere as CIT $)r!asin' $oli!y a"vo!ates a "i%%erent
()antity %or ea! or"er i% "eman" %l)!t)ates. EO1 lays em$asis on or"erin' an"
!arryin' !ost b)t inventory mana'ement e2ten"s beyon" !arryin' an" or"erin' !ost
to in!l)"e $)r!ase !ost# ()antity !ost an" sta*eo)t !ost .CIT $)r!asin' ta*es into
!onsi"eration all tese !ost an" move o)tsi"e te ass)m$tions o% te EO1 mo"el.
There are '=E M"T items in ,B# Cabha.
A6FACTA,1
Investment in inventory is re")!e" be!a)se more %re()ent $)r!ase or"er o%
small ()antities are ma"e
A=
Carryin' !ost is re")!e" as a res)lt o% investment in inventory.
A re")!tion in te n)mber o% s)$$liers. Only $roven s)$$liers &o !an 'ive
()i!* "elivery o% ()ality 'oo"s are 'iven $)r!ase or"er.
1)ality !osts s)! as ins$e!tion !ost o% in!omin' material or 'oo"s# s!ra$s
an" re&or* !osts are re")!e" be!a)se CIT $)r!asin' ass)res ()i!* an"
%re()ent "eliveries o% small si4e or"ers &i! res)lts in lo& level o%
inventories !a)sin' minim)m $ossible &asta'e .
FINDIN6/ AND /U6E//TION/
After conducting a deep study on the whole process of the A&$ Recategorisation 0 1!3
Techni(ue# " found certain facts regarding the A&$ analysis 0 1!3# which are as
follows: -
FINDIN6/:
Many items are there in the stores# which although lying in general stores but
don8t have any category in spite of having consumption value.
AA
ome items have no consumption value but their minimum (uantity is more than
twice.
ome modern techni(ues of inventory management like F16 etc.# which can help
in reducing investment in inventory# is absent.
"tems# which are written off in the books# are lying in the stores and in any year if
again their need arises they are written back in the books.
$apital related spares are placed under 6KK category. These are those spares the
asset value of which becomes 2ero but their spares have value.
!nly few items are come under M"T.
/U6E//TION/:
All the general store inventory items should be recategori2ed especially those#
which have the consumption value during the year.
$ompany should have to go for some other controlling techni(ues like F16# M"T
etc.
The items# which don8t fall under any category# should be treated separately.
The company must treat R!3 0 1!3 separately on their individual effects on the
inventory costs.
The R!3 model should be used as it will give more savings .
Co. of items under M"T should be increased.
AD
CONC3U/ION
From the thorough assessment of my study on I"CF1CT!RQ
MACA,1M1CTP " $oncluded that $ontrolling techni(ues relating to the general
inventory in ,B are developed with the ob@ective of ensuring that the inventory will be
controlled in an effective manner# without having any loss to the inventory.
The study of Recategorisation of the general store inventory of ,B is conducting for
the purpose of knowing the actual status of the inventory in the stores. From this study "
conclude that any techni(ue remains effective only when if it is carried on regularly
means at proper time. This study reveals that through the A&$ analysis# effective control
can be e.ercised on the inventory. "tems# which have more importance to the company#
AG
those come under strict control. &ut all the items should have been categori2ed specially
those# which have consumption value during the year. Co doubt their criteria of
recategorisation is appropriate but still some changes are re(uired in it i.e. some
movements of general stores items are re(uired between three categories. Regarding
1!3 techni(ue# there is need of making effective changes in their present system.
At last " would like to say that there is proper control of inventory in the
organi2ation. "nventory management is done at par. Proper accounts 0 records are
maintained of each and every item# better techni(ues are applied. = techni(ue is
implemented fully in ,B.
AK