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A PROJECT REPORT ON

TO DECREASE THE WORK LOAD WITHOUT


HAMPERING THE NET PROFIT OF THE FIRM
CARRIED OUT AT VAIBHAV AGENCIES
NAGPUR
IN PARTIAL FULFILLMENT OF THE COURSE OF

M.B.A.(SEM-I)
[WINTER PROJECT]
SUBMITTED TO:

THE UNIVERSITY OF PUNE


PREPARED BY:

AGRAWAL VAIBHAV GAJADHAR


DIV: A

ROLL NO: 02

UNDER THE GUIDANCE OF

PROF. SANMATH SHETTY


THROUGH

S.K.N. SINHGAD SCHOOL OF BUSINESS MANAGEMENT.


PUNE-41.
(2010-2011)

ACKNOWLEDGMENT
I have pleasure in successful completion of this work titled
: TO DECREASE THE WORK LOAD WITHOUT HAMPERING THE NET
PROFIT OF THE FIRM
The special environment at S.K.N.SSBM, Pune that always supports
educational activities, facilitated my work on this project.I acknowledge
the support and encouragement extended for this study by Principal
Dr.Rajshree shinde
I greatly appreciate the motivation and understanding extended for the
project work, by Mr.G.G. Agrawal And staff of the surveyed firm, who
responded promptly and enthusiastically to my requested actions
despite their congested schedules. I am indebted to all of the fellow
suppliers to the firm, who helped to implement the project through their
support and suggestions.
I am very much thankful to Prof.Sanmath shetty for his encouragement
and guidance for this project work.
I acknowledge the authors, whose works gave me insight and information
related to this subject.
I am thankful to my father and mother as well the friends who encouraged me
to extend my reach; with their help and support, I have been able to complete
this work.

Signature
Date:

(name of the student)

DISCLOSURE- The abovesaid firm is of my father. I have been a part of it for many years. So I knew
the problems and short-comings before hand. It also gave me liberty and freedom to exercise my
decision fearlessly. Yet I have tried my best to do it absolutely professionally with full dedication.

INDEX

1. INTRODUCTION

2. RESEARCH METHODOLOGY

3. DATA ANALYSIS

4. FINDINGS

5. MEASURES TAKEN

6. CONCLUSION AND SUGGESTIONS

INTRODUCTION
Vaibhav Agencies is a Pharmaceutical Distributorship firm
located in Nagpur.Started in year 2002 it has progressed consistently in terms
of sales and distribution.
With the years passed by, the revenue of the firm increased
consistently and so the work load. Currently there are around 9 people
working in the firm. The total area of the working place is about 10x12 feet.
As far as selling is concerned the number of brands that are
currently sold by the firm ranges about 2500. All the items are sold in cash
only and delivered at the same time. The trade timing is such that almost
90% of the sales takes place in just 4 hours i.e; between 3pm to 7pm. Also all
the bills has to be dispatched at the same time and payment has to be taken
immediately.
Also as regards to purchasing, all items are purchased from the
stockists situated in the same market as it being a centralized one i.e; all the
stockists and sub-stockists are located in the same complex. So it becomes
absolutely necessary to manage stock without hampering the selling process.
Thus its a firm where place is a constraint and where sales
and purchase activities have to be balanced in such a way that customer
doesnt have to wait for long because they have got another supplier waiting
for them very next door.
The firm gets margin ranging from 5 to 10 percent of which 3
to 4 percent gets exhausted in mere billing process. Also it has to pay interest
of about 12% per annum on the bank credit facility used.

RESEARCH METHODOLOGY

As such the problems with the firm were very well explained by
the owner and workers. Also as the student itself has worked there
personally so even he was knowing the short-comings before-hand.
The firm is using a software provided by MICROTEK SOFTWARES
which keeps record of all the transactions that has taken place since the firm
started in a yearly pattern.
Inputs were taken from the customers, workers and some well
known people of the market for their invaluable experience as they are the
key role players.
The owner of the firm itself has a very vast knowledge of business
of about 30 years.
Also having been closely associated with the firm for so many
years even the student himself knows the basics of , if not the whole market,
the firm atleast.
Also a detailed study of data was made using the information
stored in the software used by firm.

DATA ANALYSIS

As already stated the problems of the firm were well


known befor hand. So data analysis was done to take and
implement the decisions and not for finding problems.
Data analysis was done with the help of software as it
had all the information regarding the firm.

FINDINGS

The main problems that were either known before-hand or were


found during the due course of project are as follows.
The financial statements of the firm were not tallied for almost last
seven months.
The physical stock of medicines was not tallying with the stock that has
to be there according to firms inventory software.
The firm was placing problem of space to keep the stock.
The firm was placing problem of space for carrying out day to day
activities as it was overcrowded by workers itself.
Invoice of many customers were not made because of over-crowding
of billing counter leading to sales loss.
The replenishment of stock was not proper.
Also many items could not be found in actual while the software was
showing them to be there in stock.
There were many mistakes done by workers while dispatching items to
the customers in terms of quantity and brand.
Example- if its written in invoice to give 1 strip of certain brand, they
supplied 2 strips as the pack itself is of 2 strips and it looks like that it
should contain only one strip.
Many items were found to be non-moving and very slow moving
leading to blockage of working capital.
Also customers were bit unhappy with the behaviour of the workers
and the policies of the firm regarding expiry and breakage claim
settlements.

MEASURES TAKEN (SOLUTIONS)


The financial statements of the bank were brought and tallied
first. All the entries of cheques,cash deposit,purchases were made and the
discrepancies found in them were settled.
Utilizing Sundays all the formalities for income tax filling were
done and finalized by chartered accountant till year ending 31st march 2010.
All the expired items and the items which were about to expire in
next 3 months were taken off from the shelf and were discontinued from
selling.
It was found that there were lots of non moving items which
were causing blockage of space and working capital.the suppliers were
contacted and were told about the objectives. They understood the situation
and got ready to lend their help.thus all the non moving items were returned
back to them under no profit no loss tag. This helped in clearing working
capital of almost 1.5 lakh rupees and most importantly the space.
In due course it was found that there were many items that were
very cheap in rate and they required a lot of space to store them. Also the
revenue generated by them was not significant either in terms of sales or
profit margin.
Example- A combo pack of 2 strips of brand name DEXONA tablets costs
around Rs 2.64 . The total sales generated by it was around Rs 8000 per
annum. Also there always happened to be shortages of it because of over
supply to customers owing to its packing.
All such items were shortlisted and were discontinued after they
got sold out. It resulted into discontinuance of almost 50 items.
Items of companies like SUN PHARMA were discontinued owing
to very less margin on sales. The net profit on the sales was around 1% only,
while the range was very vast.

Many items were found to be very slow moving which in long


term is actually a loss to firm. The explanation of which is as follows,
Suppose that 10 bottles of xyz syrup takes 3 months to get sold. The firm gets
6% of margin on its purchase. In making invoice atleast 3% of profit gets
exhausted in terms of cash discount. Now the remaining 3% can be taken as a
profit. But if we calculate then we will find that the firm has to pay interest to
bank for using the credit limit. Thus in 3 months the firm end up paying 3%
interest to bank thereby bringing profit on that particular brand to be
theoretically zero.
All such items were either returned off or has been asked to be
discontinued from selling after they get sold off. For avoiding reordering of
such items a dollar sign $ has been put in front of their coding in software.
Example-

xyz syrup

Thus almost 450 items were discontinued combining expired,


non-moving, having negligible margin, slow moving and having cheap value.
This helped in creating a lot of space for keeping items and the
immediate effect that was seen was that the delivery speed of the floor staff
got improved by almost 50%.
Now talking about the loss in net profit it can be seen that the
firm will suffer no loss as far as non-moving and very slow moving items are
concerned.
Now coming to loss in net profit because of discontinuance of
items with very negligible profit margin, it was found that the total revenue
generated out of such items was somewhere around close to RS 3.8 lakh per
annum. Thus the firm was earning Rs.3500 per annum on selling such a vast
range of brands approximately 60 in number. This loss can be taken as being
nullified if we consider the working capital generated out of return of nonmoving items which is approximately 1.5lakh rupees. The interest that will be
saved on it is big enough to cover the abovesaid loss. Also if its utilized
efficiently then it will give return upto 8% following principle of rolling of
working capital.

Now considering the net loss in profit that the firm will incur
due to discontinuance of cheap brands. If we take the total revenue
generated out of these items to be Rs 8 lakhs per annum which is far more
than actual revenue earned out of them, the net profit earned out of these
would amount to Rs 16000 @ 2% profit on sales.
But it can be seen that due to discontinuance of these many
items the work load has decreased drastically and it has actually created an
opportunity for shortening the work force. Work force shortening was infact
necessary as the workers were not having enough space to walk or work
owing to small floor area and the condition gets worse during peak hours.
Thus even if one worker is discontinued, the firm will save Rs.
24000 per annum ( if we consider the very basic salary as Rs 2000 per month)
which alone is capable of nullifying the net loss of abovesaid Rs 16000.
Thus it can be seen that owing to all such measures taken the
work load has decreased drastically while the net profit has infact increased.

TO MINIMISE FAULTS IN DISTRIBUTION


As explained above to minimise the losses due to packaging
problems following steps were taken. The products which are having
quantity of 2 strips in a box has been started to be sold as a box and not in
loose quantity.

Example- Tab Jalra which comes in a box of 2 strips is


now sold as a box only.
Also brands like Tab DECDAN comes in a combo pack of 5
strips joined together which can be cut only by using scissors. Coding of such
items were made in the form of similar to their combo pack. That is now
DECDAN is sold only in the multiples of 5. This helped in reducing delivery
time and also loss due to over supply.

During all these it was found that number of items were


having almost similar brand names. Also the brands were having several subbrands.
Example- TELVAS 40 & TELSAR 40,
DICLOCIN MR & DICLORIL MR,
TELMA 80 & TELMA 80-H etc.
The rates of these items were having huge difference. It was
found that customer were reporting the discrepancy if they get under priced
product but not if its vice versa. Also lot of time used to get waste in
searching for that product and then tallying the stock. So study of such items
were made and those which were either slow moving or cheaper as
compared to other or were generating less revenue as compared to other
were discontinued after they got sold.
To counter balance the loss of revenue due to above activity,
new items were introduced.
Example- Savlon & many OTC products
These products are fast moving and in fact having margin
greater than the discontinued products.
Thus all the above measures were taken to reduce to loss and
workload related to distribution.
CHANGES IN ORDER CYCLE- Prior to project the firm used to give purchase
order only once in a week. Because of these large stock of items used to
come at once and hence it used to become very tacky to tally all these stock
and arrange them in shelf. Also a worker used to go to every shop personally
to give purchase order.
Hence it was decided to give purchase order on
telephone (which is feasible because of group plans of telephone) and that
too twice a week. Also it was decided that some major suppliers will be given
purchase order daily. This helped in maintainance of stock and also
smoothened the purchase process.

CHANGES IN INVOICING- The culture of market is such that one man comes
to do purchasing for almost 5 to 10 customers. Also there are some major
customers who purchases in bulk. Order from such customers and purchasers
was then started to be taken on telephone that too in the lean hours of
morning when the billing is almost nil. This helped a lot in reducing work load
during peak hours and also the delivery got smoothened as by the time they
come to the shop their order gets processed, checked and packed.
STAFF SATISAFACTION- Staff is the backbone of any organization. A happy
employee is necessary for smooth working of an organization. Therefore
considering current inflation the salaries of the staff were increased
proportionately.
CUSTOMER SATISFACTION- The customers were not happy with the expiry &
breakage policy of the firm. To resolve all these, firstly one time settlement
of all their claims were done. Then a cart was installed in front of the shop
for putting expiry & breakage and they were asked to drop the packets of
their expiry and breakage items with the name of their firm inside it in
between 1st to 18th of every month. Thus customer satisfaction was given
priority and efforts were taken to achieve the same.
STOCK VERIFICATION- Stock verification was initiated by taking 3 to 4
companies daily in order to match the actual stock with that shown by
software. As this helps in maintainance of proper inventory and also reduces
the time loss.

CONCLUSION
All the above measures helped in reducing the work load drastically.
Also it was found that the daily turnover had not suffered any drastic decline
owing to discontinuance of so many products. The main reason behind it
being improved sales and purchasing pattern.
The firm has immense potential to improve and capture market if it can find
some solution to the constraint of available space.

SUGGESTIONS
It has been suggested that the firm should go for bulk purchase and avail bulk
discount which is very prominent.
It has been suggested that the firm should keep on searching for products
having prominent margin.
It has been suggested that fast moving items should be purchased in bulk.
It has been suggested that slow moving items with schemes should be
purchased only in one lot of scheme to avoid blockage of space and working
capital.
It has been suggested that all the financial statements should be tallied in the
same month.