ACKNOWLEDGEMENT

Gratitude is the hardest of emotion to express and often does not find adequate ways to convey the entire one feels.

Summer training is the one of the important part of MBA course, which has helped me to learn a lot of experiences which will be beneficial in my succeeding career.

For this with an ineffable sense of gratitude I take this opportunity to express my deep sense of indebtedness to Respected Dr. Rajeshwari Pathak, Director of Prestige Institute of Management & Research who has provided me an opportunity to learn the corporate culture during my MBA course. At the same time I want to thanks all my faculty members.

I am also very much thankful to Mr. R. K. Gupta, Personnel Manager, J.B. Mangharam Foods Pvt. Ltd. for his interest, constructive criticism, persistent encouragement and untiring guidance throughout the development of the project. It has been my great privilege to work under his inspiring guidance.

Further I would also like to extend my sincere Thanks to Mr. Sur esh Sharma for his valuable guidance, suggestions and outstanding mentorship.I am also thankful to Ms. Priyanka for extending support & guidance. I would have never been able to complete our project in time without the enormous help extended by the whole staff of J.B. Mangharam Foods Pvt. Ltd.

PREFACE
It is said that without theory, practice is blind and without practice theory is meaningless.

Hence practical training has been made integral part of the management education in India. The summer training programmers are designed to give a manager the future of the corporate happenings and work culture.

It exposes the potential of the manager of the future to the actual tune of the working environment present is dynamic organization.

Personnel management is that part of management concerned with the people at work and with their relationships within the organization.

Training is the process of increasing the knowledge and skill for doing a particular job. It is an organized procedure by which people learn knowledge and skill for a definite purpose. The purpose of training is basically to bridge the gap between job requirements and present competency of an employee.

I am fortunate project I tried to find out the working methods and techniques, which is enough to get the opportunity of vocational training at J. B. Mangharam Foods Pvt. Ltd., Gwalior.

DECLARATION
I, Pranita Jain, Student of III Semester (MBA (Finance)), IITM, Gwalior declare that the project on Inventory Management is the result of my own efforts and it is based on data collected and guidance given to me. I have prepared it during my Summer Internship from 22nd May 2009 and the project was completed on 5th June 2009. This report is correct to best of my knowledge and so far has not been published anywhere else.

Pranita Jain

CONTENTS
1. Company profile 2. Theoretical aspects of the Inventory Management Introduction Meaning & types of Inventory Objectives of Inventory Management 3. Research methodology 4. Data analysis 5. Findings 6. Conclusions 7. Bibliography

Company Profile

J. B. MANGHARAM FOOD Ltd.

J. B. Mangharam Pvt. Ltd. is a very old factory; it was established in 1951 under the name of J. B. Mangharam & Company with the objectives of manufacturing of biscuits & confectionary product. The company was restructured in 1969 & 1977 after the death of Seth J. B. Mangharam. In 1983, the company stated manufacturing biscuits for Britannia Industry Limited originally the production started with Marigold & Bourbon varieties if biscuits. To meet increasing volume of production targets and customer satisfaction, the company went into the expansion plan in 1994 and operation shifted to balding with state of art technology in biscuit manufacturing. The old hybrid oven were replaced by LDO (Light Diesel Oil) fired oven & LPG fired ovens. This centre is well known for its quality and consistency in performance and its bench marketed for many activities.

1996 Jim Jam production was started and this is the National Centre for this variety. Beside of these Britannia 50-50 and Britannia Milk Bikis are the two other varities which are manufacturing in the industry.

J. B. Mangharam Foods Pvt. Ltd. is managed by J. B. Mangharam & Company but products are made of Britannia.

At present 4 varieties of biscuits are manufactured in J. B. Mangharam: 50-50 Jim Jam Bourbon Nice Time

Objective of J. B. Mangharam:
Its objective is to upgrade employee performance to the requirement standards through identification of the training needs for developing the skills and improving the employees knowledge.

General:
India is the second largest wheat producing country in the world. It is the second largest most important cereal grain crop in India next to rice and is cultivated on nearly 26 million hectares of land with an annual production of 72 million tones. Important wheat producing states in India are U.P., Punjab, M.P. and Rajasthan. Surplus wheat produced from these states is procured by Central and State Government.

The wheat cultivars grown in Northern India are high yielding with and average yield of 2.5 tones per hectare. The substantial increase in the wheat production in India has been attributed to green revolution, which started in 1967. The aestivum wheat contributes a little over 90% of total production. About 10% of it is processed in roller flour mills to obtain flour (Maida), which is the major raw material for the production of bakery products.

The bakery products are the most important engineered foods in the world. They are increasingly becoming popular due to their ready to eat convenience.

BRITANNIA INDUSTRY LTD.

Company Overview:
The story of one of India's favourite brands reads almost like a fairy tale. Once upon a time, in 1892 to be precise, a biscuit company was started in a nondescript house in Calcutta (now Kolkata) with an initial investment of Rs. 295. The company we all know as Britannia today.

The beginnings might have been humble-the dreams were anything but. By 1910, with the advent of electricity, Britannia mechanized its operations, and in 1921, it became the first company east of the Suez Canal to use imported gas ovens. Britannia's business was flourishing. But, more importantly, Britannia was acquiring a reputation for quality and value. As a result, during the tragic World War II, the Government reposed its trust in Britannia by contracting it to supply large quantities of "service biscuits" to the armed forces.

As time moved on, the biscuit market continued to grow and Britannia grew along with it. In 1975, the Britannia Biscuit Company took over the distribution of biscuits from Parry's who till now distributed Britannia biscuits in India. In the subsequent public issue of 1978, Indian shareholding crossed 60%, firmly establishing the Indianness of the firm. The following year, Britannia Biscuit Company was re-christened Britannia Industries Limited (BIL). Four years later in 1983, it crossed the Rs. 100 crores revenue mark.

On the operations front, the company was making equally dynamic strides. In 1992, it celebrated its Platinum Jubilee. In 1997, the company unveiled its new corporate identity - "Eat Healthy, Think Better" - and made its first foray into the dairy products

market. In 1999, the "Britannia Khao, World Cup Jao" promotion further fortified the affinity consumers had with 'Brand Britannia'.

Britannia strode into the 21st Century as one of India's biggest brands and the preeminent food brand of the country. It was equally recognized for its innovative approach to products and marketing: the Lagaan Match was voted India's most successful promotional activity of the year 2001 while the delicious Britannia 50-50 Maska-Chaska became India's most successful product launch. In 2002, Britannia's New Business Division formed a joint venture with Fonterra, the world's second largest Dairy Company, and Britannia New Zealand Foods Pvt. Ltd. was born. In recognition of its vision and accelerating graph, Forbes Global rated Britannia 'One amongst the Top 200 Small Companies of the World', and The Economic Times pegged Britannia India's 2nd Most Trusted Brand.

Today, more than a century after those tentative first steps, Britannia's fairy tale is not only going strong but blazing new standards, and that miniscule initial investment has grown by leaps and bounds to crores of rupees in wealth for Britannia's shareholders. The company's offerings are spread across the spectrum with products ranging from the healthy and economical Tiger biscuits to the more lifestyle-oriented Milkman Cheese. Having succeeded in garnering the trust of almost one-third of India's one billion population and a strong management at the helm means Britannia will continue to dream big on its path of innovation and quality. And millions of consumers will savour the results, happily ever after.

Britannia in fact is an older company originally incorporated as Britannia Bi scuit Company Ltd. in Kolkatta in 1918. Subsequently they moved to Mumbai during early seventies and finally shifted their headquarters to Bangalore. Currently Britannias

controlling stake is jointly help by Group Danone & Nusli Wadia of Bombay Dyeing. About 83% of the company business is biscuits. Bread constitutes only about 5% of their business and Cake and Rusk about 2%. Britannia as all of us can recollect had a stated Mission to make every third Indian a Britannia Consumer.

The different Biscuits which are manufactured by Britannia are: 50-50, Jim Jam, Bourbon, Good Day, Greetings, Little Hearts, Marie Gold, Milk Bikis, Nice Time, Tiger, Time Pass and Treat. The Bread which is manufactured by Britannia is Premium Bake White Sandwich Bread. The Rusk which is manufactured by Britannia is Premium Bake Cake and Rusk.

Britannia Industries Ltd., constantly on its toes to improve its bottom-line, is working out a product strategy. The company is bullish about the on-the-go segment and is planning to roll out smaller packs under its major sub-brands. It would be gradually expanding its ticki-packs (packs of 2 or 4 biscuits) concepts across its product range. The market today is heterogeneous, hence we need to adopt a segmented approach to reach out to customer, said Ms. Vinita Bali, CEO. Speaking about the on-the-go segment, Mr. Neeraj Chandra, Marketing Head said It is priced in Rs. 1 to 5 range. Britannia hopes to bring our key brand under this packaging. Britannia is lot more than just biscuits. Its other segments: Bread, cakes, rusks and dairy are doing equally well

THE MANAGEMENT TEAM:

Name
Mr. Nusli Neville Wadia Ms. Vinita Bali Mr. Neeraj Chandra Mr. P. Shyam Sunder Mr. Rajesh Kumar Lal Mr. Raju Thomas Mr. Alagu Balaraman Mr. Atul Sinha

Designation
Chairman Managing Director VP & Chief Operating Officer VP & Head of Quality VP & Chief Technology Officer Chief Financial Officer VP- HR & Process Architect VP- New Business Developmen

Logo:
The new logo was born is the core essence of Britannia- healthy, nutritious, optimistic and combining it with a delightful product range to offer variety and choice to consumers.

Then came another logo that is being used now-a-days:

Britannia is a first industry awarded with Certification of ISO-22000.

Similarly, J. B. Mangharam in MP is first to be awarded with this certification.

Milestones:
1892

The Genesis - Britannia established with an investment of Rs. 295 in Kolkata. 1910 Advent of electricity sees operations mechanized. 1921 Imported machinery introduced; Britannia becomes the first company East of the Suez to use gas ovens. 1939-44 Sales rise exponentially to Rs.16, 27,202 in 1939. During 1944 sales ramp up by more than eight times to reach Rs.1.36 crore. 1975 Britannia Biscuit Company takes over biscuit distribution from Parry's. 1978 Public issue - Indian shareholding crosses 60%. 1979 Re-christened Britannia Industries Ltd. (BIL). 1983 Sales cross Rs.100 crore. 1989 The Executive Office relocated to Bangalore.

1992 BIL celebrates its Platinum Jubilee.

1993 Wadia Group acquires stake in ABIL, UK and becomes an equal partner with Group Danone in BIL. 1994 Volumes cross 1,00,000 tons of biscuits. 1997 Re-birth - new corporate identity 'Eat Healthy, Think Better' leads to new mission: 'Make every third Indian a Britannia consumer'. BIL enters the dairy products market. 1999 "Britannia Khao World Cup Jao" - a major success! Profit up by 37%. 2000 Forbes Global Ranking - Britannia among Top 300 small companies. 2001 BIL ranked one of India's biggest brands. No.1 food brand of the country. Britannia Lagaan Match: India's most successful promotional activity of the year. Maska Chaska: India's most successful FMCG launch.

2002 BIL launches joint venture with Fonterra, the world's second largest dairy company. Britannia New Zealand Foods Pvt. Ltd. is born. Rated as 'One amongst the Top 200 Small Companies of the World' by Forbes Global. Economic Times ranks BIL India's 2nd Most Trusted Brand. Pure Magic -Winner of the Worldstar, Asiastar and Indiastar award for packaging.

2003 'Treat Duet'- most successful launch of the year. Britannia Khao World Cup Jao rocks the consumer lives yet again. 2004 Britannia accorded the status of being a 'Super brand'. Volumes cross 3, 00,000 tons of biscuits. Good Day adds a new variant - Choconut - in its range. 2005 Re-birth of Tiger - 'Swasth Khao, Tiger Ban Jao' becomes the popular chant! Britannia launched 'Greetings' range of premium assorted gift packs. The new plant in Uttaranchal, commissioned ahead of schedule. The launch of yet another exciting snacking option - Britannia 50-50 Pepper Chakkar. 2007 Britannia industries formed a joint venture with the Khimji Ramdas Group and acquired a 70 percent beneficial state in the Dubai-based Strategic Foods

International Co. LLC and 65.4% in the Oman-based Al Sallan Food Industries Co. SAOG. Britannia ranks No. 1 Brand in the Metros across all categories. Britannia rated as the No. 1 MOST TRUSTED FOOD BRAND in a survey conducted by AC Nielsen ORG0-Marg and published in Economics Times. 2008 Britannia launched Iron fortified 'Tiger Banana' biscuits, 'Good Day Classic Cookies', Low Fat Dahi and renovated 'Marie Gold'.

Theoretical Aspects Of Inventory Management

INVENTORY MANAGEMENT-AN OVERVIEW

INTRODUCTION
Inventory management, or inventory control, is an attempt to balance inventory needs and requirements with the need to minimize costs resulting from obtaining and holding inventory.

WHAT IS INVENTORY?
Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. It is also used for a list of the contents of a household and for a list for testamentary purposes of the possessions of someone who has died. In accounting inventory is considered an asset. Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting.

Inventory Management provides:

Up-to-date information about data processing resources through the creation and archiving of records in a centralized repository. Financial records specific to a single component, or groups of components. Component Status Indicators to identify a component as Active (A), Redeployed (R ), Donated (D), or Terminated (T). Component Criticality definition (1-5, with 1 being most critical). Service records for all components in the inventory.

 Data used to support configuration diagrams of the hardware and software components contained within specific locations, or the entire data processing environment. Reports can be generated from the Inventory and Asset Management Systems that would project the amount of revenue that can be generated through the sale of surplus equipment, or to define the number of components that have a criticality rating of 1 so that you can project the costs associated with maintaining duplicates of critical equipment at recovery sites. Combining the two reports would allow you to reroute equipment being scheduled for termination to the Recovery Facility and eliminate the additional costs associated with purchasing duplicate Equipment in support of recovery needs.

OBJECTIVES OF INVENTORY MANAGEMENT

There are three main objectives of inventory management, as follows: Provide the desired level of customer service: Customer service refers to a companys ability to satisfy the needs of its customers. There are several ways to measure the level of customer service, such as: (1) percentage of orders that are shipped on schedule, (2) the percentage of line items that are shipped on schedule, (3) the percentage of dollar volume that is shipped on schedule, and (4) idle time due to material and component shortage. The first three measures focus on service to external customers, while the fourth applies to internal customer service. Achieve cost-efficient operations: Inventories can facility cost-efficient operations in several ways. Inventories can provide a buffer between operations so that each phase of the transformation process can continue to operate even when output rates differ. Inventories also allow a company to maintain a level workforce throughout the year even when there is seasonal demand for the companys output. By building large production lots of items, companies are able to spread some fixed costs over a larger number of units, thereby decreasing the unit cost of each item. Finally, large purchases of inventory might qualify for quantity discounts, which will also reduce the unit cost of each item.

Minimize inventory investment: As a company achieves lower amounts of money tied up in inventory, that companys overall cost structure will improve, as will its profitability. A common measure used to determine how well a company is managing its inventory investment (i.e., how quickly it is getting its inventories out of the system and into the hands of the customers) is inventory turnover ratio, which is a ratio of the annual cost of goods sold to the average inventory level in dollars.

WHY KEEP INVENTORY?

Why would a firm hold more inventory than is currently necessary to ensure the firm's operation? The following is a list of reasons for maintaining what would appear to be "excess" inventory. Table 1 January February March April May June Demand 50 50 0 100 200 200 Produce 100 100 100 100 100 100 Month-end inventory 50 100 200 200 100 0 MEET DEMAND: In order for a retailer to stay in business, it must have the products that the customer wants on hand when the customer wants them. If not, the retailer will have to back-order the product. If the customer can get the good from some other source, he or she may choose to do so rather than electing to allow the original retailer to meet demand later (through back-order). Hence, in many instances, if a good is not in inventory, a sale is lost forever. KEEP OPERATIONS RUNNING: A manufacturer must have certain purchased items (raw materials, components, or subassemblies) in order to manufacture its product.Running out of only one item can prevent a manufacturer from completing the production of its finished goods. Inventory between successive dependent operations also serves to decouple the dependency of the operations. A machine or work center is often dependent upon the previous operation to provide it with parts to work on. If work ceases at a work center, then all subsequent centers will shut down for lack of work. If a supply of work-in-process inventory is kept between each work center, then each machine can maintain its operations for a limited time, hopefully until operations resume the original center.

 LEAD TIME: Lead time is the time that elapses between the placing of an order (either a purchase order or a production order issued to the shop or the factory floor) and actually receiving the goods ordered. If a supplier (an external firm or an internal department or plant) cannot supply the required goods on demand, then the client firm must keep an inventory of the needed goods. The longer the lead time, the larger the quantity of goods the firm must carry in inventory. Example: A just-in-time (JIT) manufacturing firm, such as Nissan in Smyrna, Tennessee, can maintain extremely low levels of inventory. Nissan takes delivery on truck seats as many as 18 times per day. However, steel mills may have a lead time of up to three months. That means that a firm that uses steel produced at the mill must place orders at least three months in advance of their need. In order to keep their operations running in the meantime, an on-hand inventory of three months steel requirement would be necessary. HEDGE: Inventory can also be used as a hedge against price increases and inflation. Salesmen routinely call purchasing agents shortly before a price increase goes into effect. This gives the buyer a chance to purchase material, in excess of current need, at a price that is lower than it would be if the buyer waited until after the price increase occurs. QUANTITY DISCOUNT: Often firms are given a price discount when purchasing large quantities of a good. This also frequently results in inventory in excess of what is currently needed to meet demand. However, if the discount is sufficient to offset the extra holding cost incurred as a result of the excess inventory, the decision to buy the large quantity is justified. SMOOTHING REQUIREMENTS: Sometimes inventory is used to smooth demand requirements in a market where demand is somewhat erratic. Consider the demand forecast and production schedule outlined in Table 1. Notice how the use of inventory has allowed the firm to maintain a steady rate of output (thus avoiding the cost of hiring and training new personnel), while building up inventory in anticipation of an increase in demand. In fact, this is often called anticipation inventory. In essence, the use of inventory has allowed the firm to move demand requirements to earlier periods, thus smoothing the demand.

 ACHIEVING EFFICIENT PRODUCTION RUNS: Maintenance of large

inventories helps a firm in reducing the set up cost associated with each production run. For example: if a set up cost is rs.200 and the run produces 200 units, the cost per unit comes toRs.1. In case, the run produce is 2ooo units, the set up cost will stand reduce to Rs. 0.10 per unit. Thus, inventories assists the firm in making sufficiently high runs resulting in lowering down the set up cost.

FUNCTIONS OF INVENTORY
The necessity of holding inventory is due to the following functions of inventory: Specialization: A firm can either produce all the required variety products at a plant at one location, or, produce different products at separate plant locations. Locating separately will enable the firm to select the location of each different product manufacturing plant based on the particular requirements of that product, thus achieving specialization efficiencies like geographical facilities and economies of scale. This specialization approach creates inventory at diverse locations. Also, pipeline inventories are created due to transport linkages required between different manufacturing plants and with distribution warehouses. Balancing supply and demand: Demand depends upon the requirements of customers relating to time and quantity of products, and is not in the control of the producer. Supply, on the other hand is under the producers control, but has to be economized and also paced with the time and quantity requirements of customer demand. In order to ensure that customers are not dissatisfied when they demand the required quantity of products, it is necessary to have adequate inventory of products available at all times. This is the balancing inventory required due to the different rates of manufacturing and consumption. In case of seasonal products when production has to take place for a longer period of time in advance of the season, production throughout the year ensures lower investments in production capacities while increasing inventory. An example is the production of rainwear throughout the year for the sales which will occur only during the rainy season. Another example of balancing is seasonal production during raw material availability and year-round consumption, which also requires inventory. The example of this is seasonal availability of mango fruit and year-round consumption of mango based products.

Economies of scale: Economies of scale are obtained by holding large inventories a) While purchasing, ordering in large quantities provides cost economies and discounts; (b) transportation economies are obtained by transporting in larger quantities; and, (c) during manufacturing, producing in economic batch quantities lower costs. Overcoming uncertainty: Safety stock of inventory is required to overcome uncertainty of customer demand on the one hand; and, purchasing, receiving, manufacturing, and order processing delays on the other. Either of these may result in shortages of products at the time of customer requirements if adequate safety stock of material is not provided for. If such material stock outs are not frequent occurrences, the customer may look elsewhere leading to a last order at the very least, or a lost customer. This uncertainty results in buffer stocks being created between (a) supplier and purchasing, (b) purchasing and production, (c) production and marketing, (d) marketing and distribution, (e) distribution and intermediary, (f) intermediary and customer, in order to avoid stock outs.

CLASSIFICATION OF INVENTORIES
Production inventories: They represent raw materials, parts and components that are used in the process of production. Production inventories include Standard industrial items purchased from outside (also called bought outs) Non-standard items (purchased items) Special items manufactured in the factory itself (also called works made parts or piece parts. MRO inventories: They refer to the maintenance; repairs and operation supplies, which are consumed during process of, manufacture but do not become a part of the product. In-process inventories: They represent items in the semi-finished condition (i.e. items in the partially completed stage) Goods-In-Transit: They represent such materials, which have been paid for but have not yet been received by the stores.

INVENTORY COST
In operating an inventory system manager should consider only those costs that vary directly with the operating doctrine in deciding when and how much to recorder; cost independent of the operating doctrine are irrelevant. Basically, there are five types of relevant costs. Cost of the item. Cost of procuring the item. Cost of carrying the item in inventory. Cost associated with being out of stock when units are demanded but are unavailable (stock outs). Cost associated with data gathering and control procedures for the inventory system. Often these five costs are combined in one way or another, but lets discuss them separately before we consider combinations. Cost of Item: The cost, or value, of the item is usually its purchase price: the amount paid to the supplier for the item. In some instances, however, transportation, receiving, or inspection costs, for example, may be included as part of the cost of the item. If the cost of the item per unit is constant for all quantities ordered, the total cost of items purchased during the planning horizon is irrelevant to the operating doctrine. If the unit cost varies with the quantity ordered, a price reduction called a quantity discount, this cost is relevant. If the facility manufactures the item, the cost of the item is its direct manufacturing cost. Again, constant unit cost mean total costs are irrelevant. Procurement Costs: Procurement costs are the placing a purchase order or the setup costs if the item is manufactured at the facility. These costs vary directly with each purchase order placed. Procurement costs include costs of postage, telephone calls to the vendor, labor costs in purchasing and accounting, receiving costs, computer time for record keeping, and purchase order supplies.

Carrying Costs: Carrying or holding casts are the costs of maintaining the inventory warehouse and protecting the inventoried items. Typical costs are insurance, security, warehouse rental, heat, lights taxes, and losses due to pilferage spoilage, or breakage. The cost of typing up capital inventory is also considered a carrying cost. Stock-out Cost: Stock out cost, associated with demand when stocks have been, takes the form of lost sales or backorder costs. When sales are lost because of stock-outs, the firm loses both the profit margin on unmade sale and its customers good will. If customers take their business elsewhere, future profit margins may also be lost. When customers agree to come back after inventories have been replenished, they make backorders. Backorder costs include loss of good will and money paid to reorder goods and notify customers when goods arrive. As the next example shows, stock-outs can and do occur in the service industries. Cost of operating the information processing system: Whether by hand or by computer, someone must update records as stock levels change, for system in which inventory levels are not recorded daily, the cost is primarily incurred in obtaining accurate physical counts of inventories. Frequently, these operating costs are more fixed than variable over a wide quantity range. Therefore since fixed costs are not relevant to the operating doctrine, we will not consider them further.

INTEGRATED INVENTORY MANAGEMENT SYSTEM

To successfully implement an Inventory Management System, it is necessary to integrate it within the everyday functions performed by company personnel. That is, when a user wants to order equipment or software, they would call up the Inventory Management System screen associated with Acquisition. The same types of processes should be available for Redeployment and Termination of assets. Should a user request the acquisition of a specific type of asset, then it could be possible for the inventory system to determine if the asset is already in surplus, or if it should be purchased under an existing Volume Purchase Agreement with a vendor.

Figure 3: Overview of an integrated Inventory Management System The utilization of Inventory Management Systems to control the purchase and installation of assets can aid in the control of the business environment, while assisting in the assignment of personnel to perform asset related work functions. This methodology will result in a work-flow and asset management system.

TECHNIQUES OF INVENTORY MANAGEMENT

In managing inventories, the firms objective should be in consonance with the shareholders, wealth maximization principle. To achieve this, the firm should determine the optimum level of inventory. Efficiently controlled inventories make the firm flexible. Inefficient inventory control results in unbalanced inventory and inflexibility. The firm may sometimes run out of stock and sometimes may pile up unnecessary stocks. This increases the level of investment and makes the firm unprofitable. To manage inventories efficiently, answers should be sought to the following two questions: How much should be ordered? When should it be ordered?

The first question, how much to order relates to the problem of determining economic order quantity (EOQ) and answered with an analysis of costs of maintaining certain level of inventories. The second question, when to order, arises because of uncertainty and is a problem of determining the reorder point. Economic Order Quantity (EOQ): 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 lots in which it has to be purchase 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 types of costs: (a) ordering costs and (b) carrying costs. The economic order quantity is that inventory level that minimizes the total of ordering and carrying costs. 1) Ordering Costs: The term ordering costs is used in case of raw materials (or supplies) and includes the entire costs incurred in the following activities: Requisition Purchase Ordering Transporting Receiving Inspecting

Storing (store placement)

Ordering costs increase in proportion to the number of orders placed. The clerical and staff costs, however, do not have to vary in proportion to the number of orders placed, and one view is that so long as they are committed costs, they need not be reckoned in computing ordering cost. Alternatively, it may be argued that as the number of order increases, the clerical and staff costs tend to increase. If the number of orders are drastically reduced, the clerical and staff force release now can be used in other departments. Thus, these costs may be included in the ordering costs. It is more appropriate to include clerical and staff costs on a prorata basis. Ordering costs increase with the number of orders, thus the more frequently inventory is acquired, the higher the firms ordering costs. On the other hand, if the firm maintains a large inventory levels, there will be few orders placed and ordering costs will be relatively small. Thus, ordering costs decrease with the increasing size of inventory. 2) Carrying Costs: Costs incurred for maintaining a given level of inventory are called carrying costs. They include storage, insurance, taxes, deterioration and adolescence. The storage costs comprise cost of storage space (warehousing cost), stores handling costs and clerical and staff service costs (administrative costs) incurred in recording and providing special facilities such as fencing, lines, racks etc. Carrying costs vary with inventory size. This behavior is contrary to that of ordering costs which decline with increase in inventory size. The economic size of inventory would thus depend on tradeoff between carrying costs and ordering costs. 3) Re-order point: The reorder point is that inventory level at which an order should be placed to replenish the inventory. To determine the reorder point under certainty, we should know: Lead time Average usage Economic order quantity Lead time: Lead time is the time normally taken in replenishing the inventory after the order has been placed. By certainty we mean that uses and lead time do not fluctuate. Under such a situation reorder point is simply that inventory level, which will be maintained for consumption during the lead time .i.e., Reorder point = Lead * Average usage.

4) Safety stock: The demand for material may fluctuate from daytoday or from weektoweek. Similarly, the actual delivery time may be different from the normal lead time. If the actual usage increases or the delivery of inventory is delayed, the firms can a problem of stockout which can prove to be costly for a firm. Therefore, in order to guard against the stock out, the firm may maintain a safety stock. It is the minimum or buffer inventory as cushion against expected increased usage and/or delay in delivery time.

INVENTORY CONTROL SYSTEM:

A firm needs a inventory control system to effectively manage its inventory.There are several inventory control system in practice.They are from simle system to vaery complicated systems. For eg: a small firm may operate a two bin system. Under this system the company maintains two bins. Once inventory in one bin is used an order is placed , and mean while the firm use inventory in the second bin for a llarge department store the sells hundreds of items, this system is quite unsatisfactory. The departmental store will have to maintain a self operating , automatic computer system for tracing the inventory position of various item and placing order.

ABC inventory Control System:

Large numbers of firms have to maintain several types of inventories. It is not desirable to keep the same degree of control on all the items. The firm should pay maximum attention to those items whose value is highest. The firm should, therefore, classify inventories to identify which item should receive the most effort in controlling. The firm should be selective in its approach to control investment in various types of inventories. This analytical approach is called the ABC analysis and tends to measure the significance of each item of inventories in terms of its value. The high value items are classified as A items and would be under the tightest control. C items represent resp. least value and would be under simple control. B items fall in between this two categori es and require reasonable attention of management. The ABC analysis concentrates on imp items and is known as control by importance and exception (CIE). As the items are classified in the importance of their relative value, this approach is also known as proportional value analysis (PVA). The following steps are involved in implementing the ABC analysis: Classify the items of inventories, determining the expected use in units and the price per unit for each item.

 Determine the total value of each item by multiplying the expected units by its units price. Rank the items in accordance with the total value, giving first rank to the item with highest total value and so on. Compute the ratios (percentage) of nos. of units of each item to total units of all items and the ratio of total value of each item to total value of all items. Combine items on the basis of their relative value to form 3 categories- A, B and C.

Just-In-Time(JIT) systems:
Japanese firms popularize the just-in time (JIT)system in the world. In a JIT system material or manufactured components and parts arrive to the manufacturing sites or stores just few hours before they are put to use. The delivery of material is synchronized with the manufacturing cycle and speed. JIT system eliminates the necessity of carrying large inventories, and thus , saves carrying other related cost to the manufacturer. The system requires perfect understanding and co-ordination between the manufacturer and the suppliers in terms of the timing of delivery and quality of the material. Poor quality material and components could halt the production. The JIT inventory system complements the total quality management (TQM). The success of the system depends on how well a company manages its suppliers. The system puts tremendous pressure on suppliers. They will have to develop adequate systems and procedures to satisfactory meet the needs of manufacturers.

Research Methodology

RESEARCH METHODOLOGY
1. Problem Identification: This is the first an important step in any research this is a very significant step. On the Other hand if the problem is well defined regularly than the research may be useless for the management of the organization for which the research is being conducted. As the researcher has opted finance as her specialization field, her decision of undertaking this research is genuine. One more thing which supports the researchs decision for design is that the finance is the life for any organization so it is also in favor of the organization to do each possible effort in the direction of maintaining a healthy financial position.

2. Type of Research:
The research work being undertaken by the researcher is purely analytical work because the research is an attempt to analyze the financial position of the organization on the basis of the annual reports. 3. Objective of the study: There are various objective of the study which is as follows: I. Primary objectives II. Secondary objectives i. The primary objectives of the study are to prepare the project report successfully was necessary to create some objective so that it helps task to get complete easily and correctly. To highlight the policies and procedure of analysis of working capital & by analyzing various ratios. To make a detailed analysis of the strategies adopted by the company for planning monitoring and financing working capital. To identify the vertical areas where greater attention is needed for better management. To give the feedback to the company for improvement in their strategies. ii. The secondary objectives of this study are as follows: To get some experience of working in an organization. To know the deficiencies in the area of the finances.

4. Research Design:
Before starting the research every researcher should know the objective of the study. The objective is already given to attain it various data is analyzed. Research design is analytical.

5. Sample size:
A sample size cannot be given here because this study is purely based on secondary data and no field study is necessary for this analysis.

6. Analysis:
Analysis of data is most essential and difficult task in the present report an attempt has been made to analyze each & every financial statement of the company effectively so that proper analysis can be made of financial condition of the company.

OBJECTIVE OF THE STUDY:

Objective is must for any study being done. It is an instrument for understanding thing better. Without an object it would be difficult to know how to proceed with the project. The objective gives a direction to the study. To have knowledge about the inventory control measures and it management. To study the problem & future prospect of J. B. Mangharam through inventory control and disposal of scrap / obsolete items

PROBLEM INDENTIFICATION:
J. B. Mangharam is a contract packer of Britannia. Britannia has 100% equity of J. B. Mangharam. J. B. Mangharam is a subsidiary of Britannia and it does the job work for Britannia. Britannia provide all the raw material, packing material whether it is engineering material, ingredients like Maida, sugar, Chemical, Oil, Ghee or Packing Papers etc to J. R. Mangharam. J. B. Mangharam converts it into finished goods and gives it to Britannia; J. B. Mangharam cannot sell any of its Biscuits. Britannia has this right while J. B. Mangharam has to work out the order of Britannia. The staff of the department is from J. B. Mangharam and material provider is Britannia. I met the unit head Mr. S.K. Pandey and Commercial & Finance. Manager Mr. Aldrin Pashana furnished me with complete information of the company and told me that the company has been suffering loss since last Two Years. I was given the task to reduce Inventory Cost and Engineering Cost that the company heads. They gave me all the documentary articles related to the task and asked to reduce the Inventory Cost. There are basically two types of Inventory cost: Raw and packing material Engineering store

Raw and Packaging material: I took the list of closing stock and analysis the trend of its consumption. Though it is analyzed that these are some material which have been bought in bulk but have not been consumed. I went through the papers where I came to know that the company manufactures Biscuits of four varieties Jam Treat, Bourbon, and Britannia 50: 50 & Marie Gold. Further I inspected the stores with a store keeper. Where I saw the inventory which is not in use or hardly use. For instance the stock inventory of Marie Gold. Marie Gold was not being manufactured but it raw material & packing material was still in the store. The stock was sufficient to be brought in use for next 2-3 months. I advice the Production Manager to return the inventory to the supplier so that the blocked fund of that inventory could be fetched. We Identified the stock of such kind and lodged it to another, branch of Britannia where its production is still continuing. The branch in return, gave the equivalent money to compensate the cost of the stock.

METHOD WHICH IS USED BY THE COMPANY

FIFO: The Company is using FIFO method i.e. (First in first out). The FIFO method is
based on the assumption that the oldest items in inventory are used first so that the inventories which remain unsold are the remnants of more recent purchase. Under FIFO basis salesmen are usually advised to .sell the oldest unit first, with certain exception in practice, e.g., the first lot of almonds or cash nuts dumped in a bin will be the last to be taken out. The materials issued "are priced at the oldest cost price and constantly the inventory is valued at the price of the latest purchases. The use of FIFO does not necessarily mean that the unit in the inventory which were longest in the stock are exhausted first but it mean that the oldest cost are first used for accounting purpose. Thus, under this method, the physical flow of good need not necessarily coincide with pattern of cost flow assumptions. But in practice, it is usually found that most firms sell oldest merchandise first as a protection against deterioration. To this extent, when this method is used, there is agreement between cost flow assumption and physically movement of goods. The closing inventory does consist of most recent or latest acquisition.

SYSTEM FOLLOWED BY THE COMPANY

Since inventory management is an integrated function and not single department work but team work of different department. It is necessary to study how different department play an important role in inventory control and management. To study the inventory in detail it is necessary to understand the system being adopted for the procurement of material like Consumable and spares Frequency of buying Payment term to supplier Internal and external lead Handling of material and storage time Carrying cost As all these activities have a direct bearing on the inventory control system and therefore how different department carry on this work is to be studied in detailed ordering to payment receiving to issue and storing to controlling. This including some departments which are as follows: PURCHASE DEPARTMENT: The one and only taste of purchase department is the best benefit of the organization, but this one job is not a single fold job. It comprises of several activities. Indenting to placement of purchase order as internal lead-time and external lead time affects greatly these two activities. To achieve these, purchase department is following guidelines issue from time to time. Efforts have been made to study the present system and collect the document is being presently used. Purchase department activities start the receipt of valid purchase indent either from store or from the actual consumers. PURCHASE INDENT: A purchase indent is raised from source of stock control item from store and for spares and other items by user department. Directly the store raises the indent for an item which is being used by more than one department or which is being used continuously for production (term as order supply items). At J. B. Mangharam the whole system of raising the indent is computerized. The basic document for raising a purchase indent is an inventory review statement". As the name suggest this statement is produced from computer indicating the present stock of items, pending quantity, previous rate purchase.

PROCESSING PURCHASE ORDER: The following Steps are taken to process the purchase order: The proposal is sent to user department for technical recommendation. Classifications are obtained from the supplier regarding payment terms. Delivery terms, discount, specification etc 49. After giving the technical recommendation and obtaining the classification, a draft supply orders (DSO). Proposal is sent to finance department for financial concurrence. After the approval of the authority the purchase department place the order giving detail like bill no, item specification, delivery time, mode of payment, delivery condition. After converting the indent to purchase order the same is sent to the supplier. A supplier delivers the material in specified time which comes to store department. STORE DEPARTMENT: Store department comes into the picture when the suppliers had supplied the material and reaches to the stores. The main job at the store department is to receive, handle carry and issue material. Store at J. B. Mangharam are also responsible for the dispatch of finished material. Store activity can be divided into following areas: Collection of goods: All goods receipt notes/lorry receipt notes after receipt of document from bank or supplier are sent to traffic section of the stores. Traffic section collects the good from transporter or railway station and delivery to receipt section. Receipt of material: As soon as the material is received in the receipt section, it is entered into daily receipt book and given a ORB No in register. It includes the detail like GR No; Number of boxes, Transporter Name, Bill, Challan NO, Date of Delivery, and Purchase Order No, the boxes are then opened and checked with respect of quantity. A receipt voucher is made giving the details of material specification, quantity dispatched as per challan, quantity received and other detail related to this transaction. After making the Receipt Voucher the user department is informed to inspect the material. Materials are inspected and signature obtained on Receipt Voucher then material is sent to store.

ISSUE OF MATERIAL FROM STORE

General Store

Material requisition note from production (raw material/ packing material) concerned shift In charge

Material to be issued as per MRN

Entry in SAP & stock Register (Store In charge)

MRN to be cleared in A shift as far as possible store In charge

Confirmation of receipt from production

Data analysis

RESEARCH METHODOLOGY
Research means a careful investigation or inquiry especially through search for new facts in any branch of knowledge. Thus it is an original contribution to the existing stock of knowledge making for its advancement and research methodology is a way to systematically solve the research problem. An appropriate methodology is an essence of any research work. The success of any project depends upon the method chosen. The project is about the inventory management. NEED OF THE STUDY: To manage the inventory level of J. B. Mangharam Food Pvt. Ltd. to ascertain its financial performance. Here the problem is to ascertain the financial performance with minimal expenditure of efforts, Time and Money in terms of long profitability, efficiency of operations, cost utilization, stability of incomes, growth. OBJECTIVE OF THE STUDY: In this project the objective of the study is inventory management in J. B. Mangharam Identification of the areas or details, which have no more relevance in the report. Identification of the key area on which company performance is dependent. Include all detail which reflects the position of company in current situation. To make someone criteria to fight with the competition. RESEARCH DESIGN: Research design facilitates the smoothness of various research operations there by making research as efficient as possible, yielding maximal information with minimal expenditure of efforts, time and money. Data has been collected through observations.

LIMITATIONS OF STUDY
The study depends on financial data obtained from the office personal & since them were not willing to reveal any information about their inventory system, so an intended error may have crept it. Data transparency is restricted to small sample. The limitation of technique used in analysis cannot be avoided & they are felt well a study. Limitation of the study is up to J. B. Mangharam Food Pvt. Ltd.

OBSERVATIONS
High level of inventories at all stages IS due to the failure of management in the followings areas. Lack of co-ordination among various departments. There is a scope of considerable reduction in inventory level. The nature of competition has changed significantly in the last couple of years. In the past, the company has been operating in the protected market. This has resulted in lot of inefficient practices in machine tools. So it needs drastic changes in the management practices that affect its inventory level. While fixing inventory norms. Company should be sensitive for the problem of the past.

SUGGESTIONS TO THE ORGANISATION

According to me the company should adopted just in time. So that the company should not blocked its fund in extra inventory. The company should higher two or three supplier so that the company can get material as the need arise. The company should not depend only one supplier because it may possible than in some unfavorable the supplier would not be able to supply inventory in proper time. Due to which the company producti0n process can face severe problem. The company can get following benefits if it adopted just in time. The main benefits of using just in time are as follows: Storage cost gradually decreases. No need to maintain the stores. No need to inspect the material at the factory premises. Just in time not only applicable to raw material but also to the Work In Progress & Finished Goods The organizations give proper knowledge & training for unskilled employees about their work. In store department acknowledgement. items should placed their proper sequence &

There should be proper record of wastage. It is good for the company. Store manager give the proper knowledge about engineering & raw materials. Organization should have proper staff in HR/Personnel department. Personnel manager should listen grievances of the employees personnel. So employees could not leave the organization.

Conclusion

CONCLUSION
The goal of the wealth maximization is affected by the efficiency with which inventory is managed. Inventories constitute about 60% of current assets of companies in India. The manufacturing companies hold inventories in the form of raw materials, work in progress and finished goods. Inventories facilitate smooth production and sales operation (transaction motive), to guard against the risk of unpredictable changes in usage rate and delivery time (precautionary motive), & to take advantage of price fluctuations (speculative motive). Inventories represent investment of a firms funds. The objectives of the inventory management should be the maximization of the value of the firm. Therefore the firm should consider: 1. Cost 2. Return 3. Risk factors

In inventory maintenance two types of costs are involved carrying cost & ordering cost .the firm should minimize the total cost (carrying plus ordering cost).The firm follows inventory control techniques as A-B-C technique EOQ & JIT techniques for better holding inventories.

OUTCOMES FOR INVENTORY

After going through the documents I found that most of the company's fund is blocked in the inventory particularly Marie Gold. When I enquired from the production manager that what they do with the extra inventory that is kept in the company store than he suggested me two ways that:

1. Either we can return it to the supplier. 2. Or we can send it to Britannia concern where the production is going on.

After talking to the supplier I came to know that the supplier offering less price than the actual purchase price. Than I gave suggestion to supply the inventory to the Britannia concern because it was easy and beneficial to supply extra inventory to other production unit and no extra document have to be approved for that.

LEARNINGS
How to use classroom knowledge in practical world. Knowing the manufacturing process knowing the organizational event. Interaction & communication with more people. Learned to have patience at the time of training. Interrelationship between the theoretical & practical aspects. I learn how to done entries in SAP when the purchase order come &also learn entries of C-Form (49)

BIBLIOGRAPHY

Annual Report of Britannia Pvt. Ltd.( 2007-08 and 2008-09) Production and Operation Management by B. S. Goel Financial Management by M. Y. Khan and P. K. Jain Financial Management by I. M. Pandey www.scribd.com www.britannia.co.in www.wikipedia.org