Project Report On INVENTORY MANAGEMENT AT HYPERCITY by Sanjay Gupta

Project Report On

INVENTORY MANAGEMENT AT HYPERCITY For Partial Fulfillment Of The Requirements for The Award Of Master of Business Administration MBA

Acknowledgement On this threshold of my life when I look back to thank a few people who helped me immensely in completion of my tasks, a few word seem to less. May be I should thank a many people who have made me what I am today Every piece of creation is originated by zeal of hard work and determination and to put effort into action . A lot many factors may influence. Nothing concrete can be achieved without optimum inspiration and perspiration. It gives me immense pleasure to express my deepest gratitude towards all those persons who have been a vital part of this creation. But thanking them all specifically seems to be impossible . So in order to fit into framework of words and acknowledgement . I would like to thank the following people for their precious guidance and support.

First and the foremost I would like to thank Almighty for giving me energy and courage for guiding my thoughts and for giving me direction to do this project.

I would like to add word of thanks for Mr. Sudesh Kumar , Principal, Swami Satyanand College Of Management and Technology for providing all the facilities and extending unconditional support and guidance throughout the project. I am thankful to my worthy teacher Prof. Sudesh Kumar Head Department of Management . Apart

from

her extremely

wise

words

about

the subject. Her

wholesome personality diligence, zeal for work and piquancy for her job was a great motivation and support.

I am extremely thankful to Mr. XYZ, Assistant Manager and XYZ Stock controller of Hypercity ,Amritsar under whose supervision this project completed its process from initial to successfully running stage. His way of being encouraging guide apart from being a true professional in terms of skill was the appreciable virtue that helped me in creating this piece of software.

Last but not least I express my deep felt gratitude to my parents and friends without whose moral support and encouragement I would never been able to bring this project to completion that too successful.

With deepest gratitude xyz

Chapter 1

Introduction to Retail Sector Meaning of retail : Retail means selling directly to the consumers in small quantities. Retail Sector is the most booming sector in the Indian economy. Some of the biggest players of the world are going to enter into the industry soon. It is on the threshold of a big revolution after the IT sector. Although organized retail market is not so strong as of now, but it is expected to grow manifolds by the year 2010. The sector contributes 10% of the GDP, and is estimated to show 20% annual growth rate by the end of the decade. The current growth rate is estimated to be 8.5%, but CRISIL report says that the retail market is most fragmented in the world and only 2% of the entire retailing business is in the organized sector. There are about 300 new malls, 1500 supermarkets and 325 departmental stores being built in the cities very soon. The retail boom will face a strong competition from the 12 million mom-and-pop stores, which are easily accessible and approachable and provide services like free home delivery and goods at credit. But buying from Malls, Supermarkets and Department stores like Subhiksha, Marks & Spencers, etc gives a different feeling and the environment of pick and choose from a variety of products. A number of retail giants are also going to explore the market such as Reliance Retail Ltd and Wal-mart. The revolution is driven by large expectations where both domestic and international players will be channel through which other large stores in India are spreading themselves across the country The Retail Sector of Indian Economy is going through the phase of tremendous transformation. The retail sector of Indian economy is categorized into two segments such as organized retail sector and unorganized retail sector with the latter holding the larger share of the retail market. At present the organized retail sector is catching up very fast. The impact of the alterations in the format of the retail sector changed the lifestyle of the Indian consumers drastically. The evident increase in consumerist activity is colossal

which has already chipped out a money making recess for the retail sector of Indian economy. With the onset of a globalized economy in India, the Indian consumer's psyche has been changed. People have become aware of the value of money. Nowadays the Indian consumers are well versed with the concepts about quality of products and services. These demands are the visible impacts of the Retail Sector of Indian Economy. The growth factors of the retail sector of Indian economy: •

Increase in per capita income which in turn increases the household consumption

•

Demographical changes and improvements in the standard of living

•

Change in patterns of consumption and availability of low-cost consumer credit

•

Improvements in infrastructure and enhanced availability of retail space entry to various sources of financing

The future trends of the retail sector of Indian economy: •

The retail sector of Indian economy will grow up to 10% of total retailing by the year 2010.

•

No one single format can be assumed as there is a huge difference in

•

cultures regionally.

•

The most encouraging format now would be the hypermarts

•

The hypermart format would be further encouraged with the entry of the TNC's

Introduction to Indian Retail Industry

The retail industry can be extremely competitive and one of the biggest challenges is managing a storeâ&#x20AC;&#x2122;s retail inventory. Businesses need to have space to store a wide number of products along with a wide variety. If a retail store does not carry enough of a product, then they are losing potential customers who will shop elsewhere. Retail inventory is different from other forms of inventory because of the quantities needed. Retail chains need warehouses to keep all of their stock and the means to transport it to their stores. Keeping up with such large quantities can be difficult for anyone, even with the help of an automated system. To track a companyâ&#x20AC;&#x2122;s products, a retail inventory management system needs to be successfully implemented. The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of the countryâ&#x20AC;&#x2122;s GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast paced industries with several players entering the market. But all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry. The total concept and idea of shopping has undergone an attention drawing change in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retailing has entered into the Retail market in India as is observed in the form of bustling shopping centers, multi-storied malls and the huge complexes that offer shopping, entertainment and food all under one roof. A large young working population with medium age of 24 years, nuclear families in urban areas, along with increasing working women population and emerging opportunities in the services sector are going to be the key factors in the growth of the organized Retail sector in India. The growth pattern in organized retailing and in the consumption made by the Indian population will follow a rising graph helping the newer businessmen to enter the India Retail Industry.

Future Of Retail Industry In the context of retail industry, cloud computing is particularly efficient in collection and analyses of huge volumes of sales data and in real time inventory management. In retailing, points of sales generate large amounts of data each day. The sales data can be obtained through loyalty cards and discount coupons also. Most low and medium level retailers do not have the necessary resources to capture or utilize such enormous amounts of data. Cloud provider in retail can collect such data from sophisticated server networks connected to the supply chain to independent cash registers at family owned small stores and store it for the retailer. Such stored data may be accessed from anywhere, provided internet is accessible. A cloud computing provider can track performance of products in comparison to previous time periods. The cloud provider can identify the trend and seasonality component of each product, brand or category and identify and monitor the performance. Then it can provide analytical results to the retailers. The provider of the service can serve many retailers at the same time, without making each retailer do it individually for themselves. The sales data collected from the point of sales is currently under-utilized. It is more due the incompatibility between volume of data and the processing power of the system. Such time consuming analyses fail to provide any useful insight in to customer behavior or trends in sales. The cloud provider can utilize high power computing resources and statistical models to analyse data in much shorter time. In a recently concluded Power Breakfast meeting on Retail industry, in New Delhi, the “Ideas for Growth” were discussed by the top management of various Retail and Realty sector players. The emphasis was on to various verticals like service, manpower, attrition rates, footfalls, brand building, human behavior etc. The mark of the morning was the sincere sharing of case studies and the seriousness towards growth of the industry. The interesting fact discussed was the grading system of cities where everyone agreed that tier based system has flaws as the target audience for retail sector is spread across cities. According to Manjula Tiwari, COO, Esprite, “The growth in food and apparel will not stop in retail sector, as the women are the main revenue generators and it will keep on going up.”This reflected at how much the new age Indian women is contributing to a booming sector

Chapter 2. A STUDY OF INVENTORY MANAGEMENT AT HYPERCITY Company Profile Hypercity Retail (India) Ltd. is part of the K. Raheja Corp. Group, a leader in the Indian retail sector. K Raheja Corp helped create retail boom in India with Shoppers' Stop, In Orbit Mall and Crosswords apart from their successes in Realty and hospitality. Hypercity is a hypermarket in the true sense and offers its customers a dominating assortment of quality products at great value in a large, modern and exciting format. It also offers other value added services like consumer finance, ATM facility, telecom services, pharmacy, Bakery and Restaurants etc under one roof to make the shopping experience more rich, convenient and complete. Hypercity launched its first store in Malad, Mumbai, Which is spread over 1,20,000 sq ft. Hypercity offers over 44,000 Products sourced from both local & global markets to choose from & boasts of Quality, Distinctive, Dominant Assortment at Great Value. Hypercity promises Convenience of everything under one roof & International Shopping Ambience that rivals the best in the world. Spread over 7 locations across the country viz. Malad, Vashi & Thane in Mumbai; Jaipur, Cyberabad, Amritsar & Bangalore; Hypercity feels proud to have more than 6 Lakh customers visit its' stores every month Hypercity , Indiaâ&#x20AC;&#x2122;s finest hypermarket chain launched its 1st store in Amritsar. The sprawling 1,20,000 sq. ft. store is situated at AlphaOne, on Main G.T. Road, Amritsar and offers a wide selection of innovative products sourced from both local and global markets, giving residents of Amritsar a chance to enjoy a truly international shopping experience. The store will have merchandise across categories viz. Food, grocery items, home appliances, clothing, childrenâ&#x20AC;&#x2122;s toys, games and sports goods.

Speaking on the inauguration, Mr. BS Nagesh, Vice Chairman, Hypercity Retail (I) Ltd. said, “We feel truly blessed to launch Hypercity in Amritsar and offer the finest hypermarket experience in India. This is our first store in Punjab and also marks our foray into North India. Our brand promise of ‘There’s more to Discover’ is truly leveraged in our unique offering of quality products across categories, at unbelievable prices and we’re confident that Hypercity will resonate with the Amritsar customers”. Spread across 1, 20,000 square feet of shopping area, the new Hypercity store will provide the audience of Amritsar an international ambience where they can shop in comfort in a large, modern and exciting environment. Hypercity in Amritsar will carry a range of over 45,000 branded products catering to needs of the entire family. Customers will have the option to choose from a wide array of products in every category ranging from Fresh Produce, Food & Grocery, Home Care Products, Electronics & Home Appliances, Home-ware, Furniture, Apparel and Accessories, Lifestyle Products, Footwear and much more. At Hypercity , one can get a taste of a scrumptious selection of breads, gourmet meats, seafood and foods from all over the world. At Hypercity , customers can ‘discover’ something new and exciting every time they walk into the store. The furniture section offers a range of stylish and contemporary furniture for your home at great value. Fully fitted concept rooms offer home solutions and ideas to customers. Sports enthusiast and health fitness conscious will find an exhaustive range of sports equipment from leading brands. With its wide selection of fashion clothing, accessories and footwear, Hypercity offers everything that the customer needs to step out in style. Hypercity houses well-acclaimed international brands like Waitrose and Raleigh. The store has developed a suite of exclusive brands across all categories viz; Fresh Basket in Food, Ebano and Avorio in Home-ware, Maxit in Sports, Technix in Appliances, City, RiverInc in Fashion among others. They are available exclusively at Hypercity ...

Speciality Areas Exclusie imported food- From Waitrose, UK Gaming Zone- with latest gaming equipment Demo Kitchen-get product demos, taste recipes created by master chefs CricketNet- where you can select and test your cricket gear. Home Theatre Demo Room-for sound-proof audio testing Facilties And Features ATM facility-convenient cash withdrawal Consumer finance-enables easy purchase of consumer durables Disabled access to store & toilets -socially responsible - wheelchair facilities available Trial rooms-enables you try before you buy Free gift wrapping-makes gifting convenient & hassle-free Faster check-outs without queues-30 check out counters

Organization Chart

General Manager

Dy General Manager

Assistant Manager

SOM (Food, Non food)

SOM (Checkout , CSD )

SOM (Staples, personal care )

Service Manager

SM (Receiving )

Branches Of Hypercity

Hypercity – Malad

Hypercity – Jaipur

Hypercity – Vashi

Hypercity – Hyderabad

Hypercity – Thane

Hypercity – Amritsar

Hypercity – Bangalore

Vision Of Hypercity To be the integral part of customer lives by offering them a high quality shopping experience through great products at ever better prices … John Wilcox - Chief of Operations John is the Chief of Operations at Hypercity and is responsible for the overall profitability and effective operational cost management of the business. John joined Hypercity in October 2006 and brings with him a rich experience of over 26 years in retail operations. The first 6 years of his retail career were spent with Tesco, he later moved to Sainsbury where he progressed to General Store Manager and during this time he gained valuable experience managing each of their store formats. John has a proven track record of delivering tough and challenging results through operational efficiency in a highly competitive market. Siddarthan M, Head – Operations Hypercity believe that "Our people are our most valued assets and we recognize the fact that our real strength and the foundation of our business is our people". Our uniqueness lies in our professionalism, ethics and excellence in service to our customers – Both

Internal and external. We also provide an environment which helps every associate in not just setting up, but also in achieving organizational and personal goals Esha Anand, Head - Marketing & Visual Merchandising An MBA from the University Department of Management Studies, Pune in Marketing, Esha is currently responsible for creating marketing and communication strategies for the brand. Her prior experience spans across retail and a stint with Shoppers Stop, where she was responsible for marketing and brand communication. Prior to this, she has dabbled across industries, from handling product & channel development for India's largest real estate portal, to stints with media at Rediffusion DY&R and the Times of India Dharmendar Jain, Vice - President, Head - Finance & Business Development Dharmendar is a qualified professional and holds various degrees - M. Com, FICWAI, MFM, DBF, and CMA (AUS). He has over 18 years of experience in various areas of finance, logistics, project management across various viz. engineering, plastics, media & entertainment - and retail. Dharmendar is associated with the groups since last 9 years and leads strategic and business planning, corporate finance & business development function and is member of Core Executive Committee. Global Management Learning’s from across the world is shared through systematic knowledge sharing practices. This includes enrollment / membership with international institutions, providing world-class knowledge, training from consultants from within the country and abroad.

International Awards Hypercity , Mumbai won The Award of Merit for Large Format Specialty Store at the United States International Design Awards in New York on 15th January, 2007. This is the first time that an Indian Company has received an award like this Hypercity was voted as India's top retail store by ‘Retail Week’, a leading U.K. magazine revered by retailers world wide. It was voted as the ‘100 Shops You Must Visit’, across the world and was featured amongst internationally renowned stores such

as Bloomingdales New York, Selfridges U.K, Louis Vuitton Paris and Carrefour Shanghai.. The report was based on a survey carried out by ‘Retail Week’ amongst key players in the retail industry consisting of businessmen, analysts, retail consultants, editors and top shoppers around the globe. Domestic Awards Coca Cola Golden Spoon Awards 2009 - Images award for excellence in food retailing awarded Gourmetcity as "Most Admired Food Retailer of the Year" & "Innovative Retail Concept

Brands At Hypercity Food and Grocery Brands Terzo: The Power of Super clean is now in your hands. Introducing Terzo Home cleaners with power of 3! The range comprise of power cleaners, Everyday Cleaner, Toilet cleaner, Floor Cleaner & Utensil Cleaner Fresh Basket: Every Fresh Basket product guarantees freshness and quality on a daily basis, with all the goodness locked in. Fresh Basket offers the freshest selection of meat, seafood, fresh produce, freshly baked breads, specialty bread, etc Hypercity : Hypercity is dedicated to bring wholesome food to your family at great prices. Hypercity encompasses everyday foods like cereals, spices, flour, pulses, dry fruits and other products. Waitrose: Voted the top supermarket chain in UK. Exclusively available at Hypercity . Come and taste the best of teas, coffees, juices, jams and more.

Home Ebano: Discover stylish essentials for your home with Hypercity ’s exclusive brand e b a n o. e b

a n o presents a selection of basic products with a modern appeal. Bringing your home to life with contemporary designs. Avorio: Make your home a more luxurious place with Avorio, the exclusive brand from Hypercity . AVORIO offers exclusive, versatile and classic designs to enhance your lifestyle Everyday: The range includes everything you need for your office - office accessories, writing instruments, paper stationery, etc

Fashion Joojoobs: Discover Fashion for your little ones!! The Joojoobs range of comfortable garments for infants includes designer infant wear and infant western wear. CITY Sense: Comprises of a basic line of value packs at super duper prices; covering value packs of tees, socks, briefs, vests, basic denim, etc., for men, women & kids CITY Life: Everyday wear for men, women, kids and footwear, styled for value CITY Style: Offers the latest trends in clothing in the market, at prices that are affordable

Appiliances Technix: Our Technix range of appliances will be available across microwaves, cook-tops and mixer-grinders

Sports Raleigh & MaxIT: The Raleigh Series of bicycles are available exclusively at Hypercity . Raleigh is one of the worldâ&#x20AC;&#x2122;s biggest brands in Bicycles.These are top most brands .

Services

Hypercity Discovery Club : Now, shopping at Hypercity is an even more rewarding experience. The Hypercity Discovery Club brings you great savings, exclusive promotions, special previews and a whole lot more. Earn Discovery Reward points and redeem them against purchases. Daily Diamonds: A range of Diamonds perfectly cut for your pocket. Discover affordable prices & great deals on an exquisite range of diamond jewellery. Crossword: Pick your favorite books, magazines, movies or the monthâ&#x20AC;&#x2122;s bestsellers at Hypercity Pressto: Pressto is a global leader in high quality dry cleaning, with more than 500 stores in over 20 countries and over 100 million satisfied customers. Now leave your clothes in safe hands while you shop at Hypercity . Hypercity Extended Warranty: Our electronics come with a unique feature. Peace of mind! Pay a nominal fee. We'll cover mechanical & electrical breakdown. Get the benefit of genuine parts. Free parts and no labor charge. Home Delivery: Home Delivery : Hypercity is committed to extending high standards of customer service even beyond shopping through our Home delivery service. Our aim is to delight our customers through timely delivery of goods, every time.

Repairs & Warranty: Comprehensive after-sales services are provided through an exclusive Service Centre backup facility, on products that have a guarantee or service warranty. Parking Facility: Parking facility is available at Hypercity and charges will be levied as under: 4-wheelers : Rs.20 2-wheelers : Rs.10 This money will be refunded to customers, upon purchases of Rs.100 and above, on the same day itself. Restaurants & CafĂŠs: Sit down for a relaxing cup of coffee, pick a wine, enjoy a good meal & freshly baked cakes & savories or unwind post shopping at Desicafe, CafĂŠ Coffee Day, Kwality Swirls, Gelato, Turkish Delights, Living Liquidz & Fresh Basket bakery at Hypercity

What is Inventory Inventory is an important asset for many companies as it is often a large asset on the company’s financial statements and represents a source of revenue in the near future through sales of the goods. This excel-based template provides a number of business activities and related control objectives for each activity. Within the questionnaire you can document items such as whether the control exists; whether it was designed properly; related test procedures; and management action plan for deficiencies. Inventory is a list of goods and materials, or those goods and materials themselves, held available in stock by a business.Inventory means all the materials, parts ,supplies, expense tools and finish products rrecored on the books by ab organisation.It is the essential part of every organisation.every business/organisation whether big or small has to maintain inventory in the system.Inventory serves as a link between production and distribution processes. In accounting language inventory mean stock of finished goods only. Inmaufacturing Concern ,it may include raw materials, work in process and stores etc.

Definiton of Inventory : “Inventory are the piles of raw materials and finished goods in the warehouse”. “Inventory is a detailed list of names, quantities and/or monetary values of all or any groups of items”.

Characteristics of Inventory : 1.

Inventories Serve As A Cushion To Absorb Shocks: There is always fluctuations in demand and supply of the items which disturbs the schedule inventory absorbs these fluctuations.

2. Inventory Provides Production Economies : Stocks brings economy in purchase of various inputs due to discounts on bulk purchase. 3. Inventory Is A Necessary Evil: Inventory require valuable space and consumes taxation and insurance charges. This leads to considerable investment and causes opportunity loss.

Why keep Inventory Inventory is essential part of every organisation. A firm needs to maintain inventories to reduce ordering costs and avail quantity discounts etc. there are three main purposes or motives of holding inventories: a) The Transaction Motive which facilitates continuous production and timely execution of sales orders. b) The Precautionary Motive which nbecessitates the holding of inventories for meeting the unpredictable change in demand and suppilies of materails. c) The Speculative Motive which induces to keep inventories for taking advantage of price fluctuations ,saving in re ordering costs and quantity discounts etc Other more important Reasons to maintain inventory in the organization are: a) Predictability: In order to engage in capacity planning and production scheduling ,we need to control how much raw material , parts and subassemblies we process at given time. b) Fluctuations in Demand :In market there is always fluctuations in demand so if the inventory is kept then these fluctuations can be met easily and demand of the customers can be fulfilled easily . c) Unreliability of supply: Inventory Protect us from unreliabiltiy of suppliers and when an item is scarce and it is difficult to ensure the steady supply .Whenever possible unreliable suppliers should be replaced. d) Price Protection : Buying inventories of inventory at appropriate time helps avoid the impact of cost inflation .

Inventory Classification : Inventory classification in accounting is an aspect of the treatment of material costs. It forms the basis of inventory control, which involves ordering, purchasing, receiving, storing, issuing and monitoring inventory. The first step in controlling inventory is classifying it. This helps to determine the purpose and nature of inventory-information that is critical to the production process. Inventory is classified as follows: a) Raw Materials b) Work in progress c) Finished goods d) Spare parts/ consumables  Raw Material : Raw material form a major input into the organization . They are required to carry out the production activities uninterruptedly.  Work-in-Process: The work in process is that stage of stock which are in between raw material and finished goods.The greater the time taken in maufacturing ,the more will be the amount of work in process.  Finished Goods: These are the goods tat are ready for the consumers .the stock of finished goods provides a bufffer b/w production and market. Finished goods are those that are ready for sale.  Spare parts: Inventory does not always relate to materials that are used in the production process, but also materials used for the production process. Spare parts for machinery, tools or equipment used in the production process are also an important part of inventory-part of the material costs (indirect) of production.  Consumables: These are the materials which are needed to smoothen the process of production. Consumables may be classified acc. to their consumption and criticality

Inventory control 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.It can also be referred as Internal Control - An accounting procedure or system designed to promote efficiency or assure the implementation of a policy or safeguard assets or avoid fraud and error etc. Inventory control is concerned with minimizing the total cost of inventory. In the U.K. the term often used is stock control. The three main factors in inventory control decision making process are: â&#x20AC;˘

The cost of holding the stock (e.g., based on the interest rate).

â&#x20AC;˘

The cost of placing an order (e.g., for row material stocks) or the set-up cost of production.

â&#x20AC;˘

The cost of shortage, i.e., what is lost if the stock is insufficient to meet all demand.

Inventory control - Supervision of supply, storage and accessibility of items in order to insure an adequate supply without excessive oversupply.

Definitions Of Inventory Control : Inventory control is a system of ordering based on the maintenance of the stock in a store using a re-order rule based in the stock level. Inventory control is the technique of maintaining the size of the inventory at some desired level keeping in view the best economic interests of an organisation. Inventory Control means keeping a track of inventories , so that items are available when they are needed.This is achieved by: a) Purchasing items at economic price at a proper time and in sufficient quantity. b) Provision of suitable and secured storage location with sufficient space.

c) Inventory identification system d) Upto date and accurate record keeping by a responsible staff e) Appropriate requisition procedures. There are several schools of thought that view inventory and its function differently. Firms that carry hundreds or even thousands of different part numbers can be facedwith the impossible task of monitoring the inventory levels of each part number. Inorder to facilitate this, many firm's use an ABC approach. ABC analysis is based on Pareto Analysis, also known as the "80/20" rule. The 80/20 comes from Pareto's finding that 20 percent of the populace possessed 80 percent of the wealth. From an inventory perspective it can restated thusly: approximately 20 percent of all inventory items represent 80 percent of inventory costs. Therefore, a firm can control 80 percent of its inventory costs by monitoring and controlling 20 percent of its inventory. But, it has to be the correct 20 percent. By classifying each inventory item as an A, B or C the firm can determine the resources (time, effort and money) to dedicate to each item.

Objectives of Inventory Control: The objective of an inventory-control system is to make inventory decisions that minimize the total cost of inventory, which is distinctly different from minimizing inventory. It is often more expensive to run out of an item (and thus be forced to obtain it through more expensive channels) than simply to keep more units in stock. a) Protections against fluctuations in Demand. b) Better use of men, machines and material c) Protection against fluctuations in output d) For production ecomies e) Control of stock volume f) Control of stock Distribution Several models have been proposed in the literature for minimizing the total cost of inventory through the use of an economic order quantity, which attempts to balance

the carrying costs of inventory with the cost of running out of an item. Most pharmacy inventory decisions involve replenishment--how much to order, when to decide to order, and when to place the order.

Inventory costs There are three types of Inventory costs ordering costs and holding costs and set up costs.â&#x20AC;Ś

Relevant Inventory Costs

Ordering Costs

Holding Costs

Set up Costs

Ordering Costs: These costs come about regardless of the actual value of the goods . these costs include the salaries of those purchasing the product , cost of expediting the inventory, and so on. These are the costs which are associated with the purchasing or ordering of materials . These costs include : 1. Costs of staff posted for ordering of goods . 2. Expenses incurred on transportation of goods purchased . 3. Inspection costs of incoming materials 4. Cost of staionery ,typing ,postage , telephone charges etc. These costs are callled buying costs and will arise only when some purchases are made .The ordering costs are totalled up for the year and then divided by the number of orders placed each year .

Holding Costs These also called carrying costs, are the costs that result from maintaining the inventory. Inventory in excess of current demand frequently means that

its holder must provide a place for its storage when not in use. This could range from a small storage area near the production line to a huge warehouse or distribution center. A storage facility requires personnel to move the inventory when needed and to keep track of what is stored and where it is stored . these include the cost of capital tied up in the inventory ,storage costs such as rent and costs of handling the product such as equipment , warehouse and stockkeeping staff, stock wastage ,taxes and so on.

Set up Cost : Set up costs are the costs incurred from getting a machine ready to produce the desired good. In a manufacturing setting this would rewuire the use of skilled technician(a cost ) who disassembles the tooling that is currently in use on the machine .the technician then takes the currently needed tooling from the tool room and brings it to the machine . There the technician has to assemble the tooling on the machine in the manner required for the product to be produced(this is known as set up). Then the technician has to calibrate the machine so that it can run . All the while machine is idle and not producing any part (opportunity cost ) If the firm purchases the part or raw material, then an order cost, rather than a set-up cost, is incurred.

Other Inventory costs : The holding of inventories involves blocking of a firmâ&#x20AC;&#x2122;s funds and incurrence of capital and other costs .The various costs and risks involved in inventory are : Capital costs : Maintaining of inventories results in block of firâ&#x20AC;&#x2122;s financial resources. Therefore firm has to arrange for additional funds to meet the cost of inventories. The funds can be arranged from put side sources but in both the cases the firm incurs the cost Storage and handling costs: Holding of inventories also involves costs on storage as well as handling of materials. The storage costs include the rental of the godown , insurance charges etc.

Risk of price decline : there is always a risk of reduction in the prices of inventories by the supplilires in holding inventories . this may be due to increased market supplies , competition or general depression in the market .

INVENTORY MANAGEMENT Inventory Management System deals with the maintenance of equipments. Inventory Management is a discipline that encompasses the principles, concepts and techniques for determining what to order, when to order and how much to order. The right amount of inventory involves the balance between what is required to service your customers and what is financially practical control and safeguarding of inventory is an essential task for a successful, well-organized company; businesses require timely and accurate information oninventory location, movement, and valuation. The Inventory Management module for Sage MAS 90 and Sage MAS 200 ERP systems provides data pertaining to the receipt of goods, the movement of goods within or between locations, the sale, removal, or other disposition of goods, kitting capabilities, lot and serial tracking and the precise valuation and status of goods remaining in inventory at any point in time. When used in conjunction with other Sage MAS 90 and 200 modules, Inventory Management is the cornerstone of an effective manufacturing or distribution solution. Inaccurate inventory counts can cost you sales and delay shipments past the promise date. Out-of stock items as well as overstocked items in inventory can be devastating to your business. Additionally, an overstated or understated inventory valuation can result in incorrectly reported assets within your financial statements. Inventory Management offers comprehensive reporting capabilities to keep you on top of inventory status. Generate reports on item pricing, stock status, detailed sale history, backorder information, reorder points and recommendation, valuation, turnover, sales analysis, and much more. And adding the Business Alerts module can keep your staff on top of quantity changes to critical inventory items, to keep stocking levels precisely where you want them. the Inventory Management module can help bring about the formulation of new or improved

purchasing policies, sales policies, pricing methods, and even enhanced customer Service . . Inventory Management could also provide your company with an additional edge over competitors who are unable to access the same strategic information. The investment in inventory is very high in most of the undertakings engaged in manufacturing, wholesale and retail trade. The amount of investment is more in inventories than in other assets. In industries like sugar , the raw material cost is as high as necessary for every management .to give proper attention to inventory management .An efficient system of inventory management will determine : a) What to purchase b) How much to purchase c) When to purchase d) From where to purchase e) Where to store etc.

Purpose/Objectives of Inventory Management : The main objectives of inventory management are operational and financial . The operational objectives mean that materials and spares shouls be available in sufficient quantity so that work is not disrupted for want of inventory. The financial objectives means that investments in inventories should not remain idle and minimum working capital should be locked in it .The following are the objectives of inventory management: 1) To ensure the continuous supply of materials, spares and finished goods so that production should not suffer at any time anmd customers demand should also be met. 2) To keep material cost under control so that they contribute in reducing cost of production and overall costs. 3) To minimize lossesthrough deterioration , pilferage ,wastages and damages .

4) To eliminate duplication in ordering or replenishing stocks. This is possible with help of centralizing purchases. 5) To design proper organization for inventory management . 6) To ensure perceptual inventory control so that materials shown in stock ledgers should be actually lying in the stores.

Benefits Of Inventory Management . 1. Centralized inventory management consolidates inventory information by tracking lot numbers, on-hand levels and expiration dates, making the reordering process more efficient. 2 .Enables simultaneous tracking and documenting supplies during studies to reduce redundant data entry and increase workflow efficiency. 3. When multiple officials are involved in a case, the statistical report accurately correlates the supplies used with the correct user, eliminating mis-charges and appropriately tracking resources. 4. Provides stand-alone inventory management system for the institution with the capacity to integrate with a hospitalâ&#x20AC;&#x2122;s existing inventory system, significantly reducing go-live times and improving departmental efficiency. 5. Optional interface to institutionâ&#x20AC;&#x2122;s/companyâ&#x20AC;&#x2122;s material management system significantly reduces ongoing inventory maintenance, and ensures accurate pricing data for case cost reports and auto-decrements supply levels. 6. Comprehensive inventory reports help automate key administrative responsibilities, such as tracking inventory item usage by vendor and physician, maintaining in-stock value of consignment verses non-consignment items, and providing notification of items with upcoming expirations.

Inventory Control Techniques Inventory is maintained as a cushion in suppy oif material for continous production without causing stockout situation .This cushion should not be suicidal to any organization. The following techniques are being use for controlling the inventory 1. Inventory Management Techinique 2. Perceptual Inventory system 3. Selective Control Techniques 4. Inventory turnover Ratios 5. Classification and Codification of inventories

Inventory Management Techniques 1. Economic Order Quantity:

EOQ is the point at which the ordering costs

and carrying costs are equal.this is the quantity of amterial which can be purchased at minimum costs. This model includes two costs: Ordering Costs Carrying Costs Ordering Costs: These are the costs which are associated with the purchasing or ordering of materials . These costs include : 5. Costs of staff posted for ordering of goods . 6. Expenses incurred on transportation of goods purchased . 7. Inspection costs of incoming materials 8. Cost of staionery ,typing ,postage , telephone charges etc.

These costs are callled buying costs and will arise only when some purchases are made .The ordering costs are totalled up for the year and then divided by the number of orders placed each year . Carrying Costs : These are the costs for holding the inventories . these costs will not be incurred of inventories are not carried. These costs include: 1. The cost of capital invested in inventories. An interest will be apid on the amount of capital locked-up in inventories. 2. Cost of storage which could have been used for other purposes. 3. Insurance cost. 4. Cost of spoilage in handling of materials. The ordering costs and carrying costs has reverse relationship .the ordering cost goes up with the increqase in number of orders placed. On the other hand carrying costs go down per unit with the increase in number of units purchased and stored . Assumptions of EOQ: 1. The supply of goods is satisfactory . the goods can be purchased as and when they are needed. 2. The quantity of be purchased by the concern is certain. 3. The prices of goods are stable. It results to stabilise carrying costs . Total cost of inventory = (A x P)+(A xO)/EOQ+(EOQ x C)/2 Where A= Annual consumption in units O= Ordering Cost per unit P= Price per unit C=carrying cost per unit

2. Selective control techniques Selective control means selecting the area of control so that required objective is achieved as early as possible without any lost of time due to taking care of full area-

â&#x20AC;˘

Minimum lost of energy

â&#x20AC;˘

At minimum cost without loss of time

There are following selective Techniques A.B.C Analyisis V E D analysis XYZ analysis

ABC Analysis Indicators that classifies a material as an A,B or C part according to its consumption value .The classification process is known as the ABC analysis. The three indictors have the following meanings: A-important part , high consumption value B-less important , medium consumption value C-relatively unimportant part , low consumption value The ABC classification process is an analysis of a range of items, such as finished products or customers into three categories: A - outstandingly important; B - of average importance; C - relatively unimportant as a basis for a control scheme. Each category can and sometimes should be handled in a different way, with more attention being devoted to category A, less to B, and less to C. Usually this means that the firm monitors A items very closely but can check on B and C items on a periodic basis (for example, monthly for B items and quarterly for C items). The third element is the most difficult to measure and is often handled by establishing a "service level" policy, e. g, certain percentage of demand will be met from stock without delay. The ABC classification system is to grouping items according to annual sales volume, in an attempt to identify the small number of items that will account for most of the sales volume and that are the most important ones to control for effective inventory management. Class A B C

No. of Items (%) 10 20 70

Value Of items (%) 70 20 10

XYZ analysis This type of analysis is carried out form the point oif view of balance of value stocks lying in the stock from time to time and classifies all the items as given below. X items are those items whose value of balance stocks lying in the stock are vary high. Y items are those items whose value of balance stocks are moderate Z items are those items whose value of balance stocks lying in the stock is low . After knowing this type of classification and their items can be taken to control the inventory as below : 1. From security point of view high value items must be stored and kept onder lock and key .Items should be kept in such a way that they are always under supervision 2. From inventory point of view we must know why there is high inventory for â&#x20AC;&#x2DC;Xâ&#x20AC;&#x2122; items. We should review inventory control procedure for each and every item because stock should be maintained to take acre of lead time consumption and also to provide as safety stocks. For high value items lying in the stores we should review the reasons for long lead time as well as demand variations and see whether safety stocks can be reduced. Thus proper inventory control procedures can be developed on the basis of XYZ analysis.

VED Analysis The VED analysis is used generally for spare parts. The requirements and urgency of spare parts is different from that of materials. From point of view of material it is classified into three categories V - Vital B - Essential D - Desirable Vital categories of the items are those for the want of which the production

Come to stop. For exp. Power in the factory. Essential group of items are those items because of non availability of which the stock out cost is very high. Desirable group of items are those items because of non availability of which there is no immediate loss of production and stock cost is very less and it may cause minor disruption in the production for short time .

3. Inventory Turnover Ratio: Inventory turnover ratios are calculated to indicate whether inventories have been used efficiently or not. The purpose is to ensure the blocking of only required minimum funds in inventory. The Inventory turnover ratio ia also known as stock velocity. Inventory Turnover Ratio=

Cost of goods sold Average Inventory at cost

4. Perceptual Inventory System The chartered Institute of Management Accountants , London, defines the perceptaul inventory â&#x20AC;&#x153; a system of records maintained by controlling department , which reflects the physical movements of stocks and their current balance â&#x20AC;&#x153; . Bind cards abd the stores ledger help the movemnets of the stock on the receipts and in maintaining this system as they make a record of to physical movements of the stocks on the receipts and issues of material and also reflect the balance in the stores . Thus it is a system of ascertaining balance after every receipt and issue of material through stock record to facilitate regular checking and to avoid closing down the firm for stocktaking . to ensure the accuracy of perceptual inventory records physical varification of the stores is made by bin cards and stores ledger may differ from the actual balance of stock as ascertained by the physical verification .

5. Classification and codification of inventories

The inventories of a manufacturing concern may consist of raw material , work in process, finished goods, spares, consumables stocks etc. for proper recording and control of inventory , proper classification of various types of items is essential.the inventories should first be classified and then codde numbers should be assigned for their identification. The identification of short names are useful for inventory management not only for large concerns but also for small concerns. The invemntories should be classified either acc. to their use and their nature. Special terms used in dealing with inventory Stock Keeping Unit (SKU) is a unique combination of all the components that are assembled into the purchasable item. Therefore, any change in the packaging or product is a new SKU. This level of detailed specification assists in managing inventory. Stockout means running out of the inventory of an SKU. "New old stock" (sometimes abbreviated NOS) is a term used in business to refer to merchandise being offered for sale that was manufactured long ago but that has never been used. Such merchandise may not be produced anymore, and the new old stock may represent the only market source of a particular item at the present time.

SKUâ&#x20AC;&#x2122;s Used at Hypercity or Codification : SKU is the unique combination of digits Exp: 10003256 its of 9 digits which uniquely identifies the specific items. Whenever the items comes in the store the unique SKU is given by which the item is being identified. Different codes are given or SKUâ&#x20AC;&#x2122;s are given to different items acc. to their nature , type and characteristics. All the entries are made in the system when it comes in the store and all the items along with their SKU numbers are stored in the system so that there should not be any confusion while evaluating or managing the inventory.

Chapter 3 Inventory Management at Hypercity :

Purpose To enable accurate reflection of inventory in the system for better decision making Scope 1. To rectify the book figures of inventory on a continuous basis and update it on the basis of actual physical stock 2. To identify the extent of shrinkage and provide for it on a regular basis so that it is reflected in our income statement 3. Stock Take is a year round, cyclical count of merchandise whereby the entire inventory is covered according to certain pre-determined criteria

Categorization of Inventory For the purpose of stock take the inventory will be categorized as follows:Category A – Items of high value, low volume and possibility of pilferage is high. Category B – Items of low value, high/low volume and possibility of pilferage is low to moderate Category C – All other items not covered above The periodicity of stock take will be as follows Category A – Once a month Category B – Once in two months Category C – Once in three months Stock Take Schedule The schedule for the year is determined in advance and is common across the chain. The stock take schedule will be made at sub class level. The schedule for a month will include the entire Cat A items, half of Cat B items and one third of Cat C items. The stock take schedule for the quarter is sent to all stores before the start of the quarter. A copy of the schedule is also sent to the B&M dept. The objective of having a common schedule is to facilitate comparison of stock take variance of a department across the chain on a month-to-month basis. Process Every Month On the first of every month, the Stock Take schedule is made available to the respective managers and also has to be put up on the back store notice board by the Stock Control Manager so that all concerned are aware of the sub classes to be covered. Every Week 1. Based on the Stock Take schedule, the stock take team leader generates the SKU list for each sub class for the coming week by friday evening. A copy of

the list is to be made available in the common drive of the intranet for the information of Receiving supervisor , admin supervisor, service managers, home delivery manager, store accountant and unit coordinator. 2. The Stock Service Supervisor is to have the damaged stock list updated 3. The Store Accountant is to pass all the pending SAVs 4. The Receiving Supervisor will ensure that all the pending RC’s/RTV/Transfers(In & Out) are completed on priority. The invoices pending for buyer’s decision will be expedited and RC’s done before stock take. Day prior to Stock Take 1. Stock Take team is to identify and list all the locations where the merchandise to be counted is kept. This includes back store, display locations, receiving bay and VM Displays 2. A global count must be done 3. Ensure sufficient scanners are available and kept for charging 4. The count sheets are serially numbered and kept with the Stock Take team leader 5. Stock take supervisor to ensure no SAV is pending with Store Accountant 6. Stock Service Supervisor to ensure the damaged stock list is updated. When ever an RTV/SAV is initiated in the system; such products are to be deleted from the list. 7. The admin supervisor is to provide the count of merchandise taken out of the store on a returnable gate pass to stock take supervisor. 8. The receiving supervisor to ensure that there are no pending RC’s/RTV/Transfers (In & Out) in respect of sub classes scheduled for stock take The day of Stock Take 1. Stock Take team will start the count as soon as the trading for the day is over. 2. The quantity reflected in the damaged list is to be added to the stock count. 3. The quantity reflected in the returnable gate pass also to be included in the count

4. Care should be taken not to include the items kept aside for home delivery.

Software Used for Inventory Management at Hypercity MMS Inventory Count System Once the physical count of the stock is completed the team is to carry out inventory count in the system. Prior to this the stock take team is to ensure from the IT rep that the end of day activities has been completed in the system. Steps involved in Inventory Count System in MMS is as follows •

Enter Inventory Count Name

•

Select Dept Hierarchy for that Inventory Count

•

Create a Batch for Inventory count

•

Freeze the Batch

•

Capture data of physical inventory in the scanner/PDCU

•

Transfer the Data from Scanner to MMS

•

Validate the Data Scanned

•

Push the Scanned Data to Interface

•

Merge the Stock Data in MMS

•

Check Pre-Posting Variance Report

•

Post Inventory Adjustment - This would be done by the store accountant. To Reach Inventory Count System Menu Screen

Login to MMS with the username password provided to you. Menu Path for entering Inventory Count System 06 - Inventory Control and Reporting 02 - Physical Inventory

Once you input the above menu option you will reach Inventory Count System Main Menu. Following is the Screen of the same.

Step 1 & 2 – Enter Inventory Count Name & Select Dept Hierarchy for that Inventory Count Menu Option: 04 – Enter Inventory Count Selection. This function will be used to enter an Inventory Count name for the store and also to select Department Hierarchy for that Inventory Count Name. Once you enter the option you will see the below screen.

Once you are into Inventory Count Selection Screen, It will ask you for an Inventory Count Name. Inventory Count Name can be of 6 alphanumeric characters. If

you have already created an Inventory count name then you can input the same or you can use “F3” to search Count Names.

If you are creating for the First time then Input the Count Name. Once you input it, it will ask you for the store that needs to be attached to the count name. Input the number assigned to the store where the count will be taken. Press “F7” to accept the store no., once you do it you will get the below screen

Over here you can define the selection criteria that determine which SKUs are included in the count. Items may be selected for a Product Hierarchy range or by SKU range A range of values must be included for each selection criteria chosen. For example, •

“From” Value - Department 101

“To” Value – Department 101

Includes all items assigned to Department 101 •

“From” Value – Department 101

“To” Value – Department 501

Includes all items assigned to any department that begins with a number between 101 and 501. •

Also if the selection criteria is for Dept 101 and Dept 501, then the value entered will be “From” Value – Department 101

“To” Value – Department 101

Press F7, Now make a second selection

“From” Value – Department 501

“To” Value – Department 501

Press F7 to confirm the second selection. This will include the entire items for Dept 101 & Dept 501 •

Note you need to press “F7” as many time as you do the selection. Otherwise the selection for the Inventory Name will not get saved. So once you are done with Hierarchy selection Press “F7” Step 3 & 4 – Enter and Freeze the Batch for Inventory Count Name

Menu Option - 05 – Create Inventory Count Batch This will freeze the inventory for a selected count. Before this menu option is submitted, all sales, returns, etc. should be processed. The frozen inventory count will then be compared with the actual inventory counts when computing item variances. The inventory freeze provides the system with a point of comparison for calculating the difference (variance) between the system count and the actual physical count.

On entering the menu option you will get the below screen

Over here the batch is created and freezed based on input of these 3 fields; •

Inventory Count Name: Input the inventory count name that you have created and attached product hierarchy to. Press Help function “F3” if you need to search

the Count Name. Printing of Count Sheet: Input “0” here as the products will be scanned through Handheld Scanners. To print the Count Sheets user will input “1” (not needed as we are scanning the products). •

Freeze the Batch: Input “1” to freeze the selection. Press “F7” to Create and Freeze the Batch. Step 5 A– Transfer Scanned Data from All Scanner to PC

All the data for that Inventory count assigned needs to be transferred from Scanners to the PC. The Data from Scanner can be copied to PC in the following manner. •

Transfer the scanned data from Scanner to PC through Cradle

•

Copy that Data into FTP in respective store folder “STOCKTAKE” which is available in Directory Path /QDLS/mm510flr/<StoreCode>/STOKTAKE For e.g. Hypercity Malad Path will be /QDLS/mm510flr/1001/STOKTAKE

•

The Stocktake file name can for 8 character alphanumerical names with 3 digit of extension. EG “R1S1101.TXT” or “1001107.TXT”

•

Always preserve a copy of the file on the local PC.

•

Once you have copied all the files into the system you can continue with next step.

Step 5 B– Enter physical stock Data manually from sheet ( in case scanners not available) Go to option 06 – 02 – 10 Enter Inventory Count Data

Put the count name and the store number and press F7 to enter. As shown in the above screen shot the count name was put as BAGS and store selected was 1001. the screen will give you list of all SKU’s with count as 0. We need to manually add the quantity from the count sheet in front of respective SKUs. After adding the quantity we have to press F7 to accept the quantity. Than directly go to Step 9 - Check Pre-Posting Variance Report Step – 6 - Validate the Data Scanned Menu option – 15 – Interface to Upload Scanner Data 01 – Scan Scanner Data for Errors – OPS This option will help you to validate the Scan Data. It will check for each scanned UPC with the Master present in MMS for the selection criteria that you have entered while creating the Inventory Count Name.

If any product is found out of scope of stock take, it means though the UPC was valid but belonged to an item which did not fall under the product selection criteria. For example if the product selection criteria was specified from Dept 101 to Dept 101, than the Scanned data needs to have all SKU pertaining to that Dept only. If any SKU other than Dept 101 is found, it will give an error against that SKU. Input the value for the following fields; •

Store Name – Enter the Store Number for which the stock take is being done. You can use F3 as a search function for searching the Store Number

•

Inventory Count Name – Enter the Inventory Count Name that you have set for the Store and the Dept hierarchy.

•

File Name – Enter the file name that you have downloaded from scanner and copied on to FTP Folder. (Note : file name can for 8 character alphanumerical

•

In the above screen you can see that once you have pressed “F7”, it has validated the file and then has showed one Comment “Data Has NO Error”. This mean the

file that we are checking had no errors and the same can be pushed to MMS for Stock Updating. •

In the below screen it shows you Comments in Red that “Data Contains Errors… Check LOG”. This means the file which we are trying to validate contains some error. So for this you need to check the Log / Spool file that is created.

•

To Check the Error Log follow the steps mention below o Come to the Main Screen of Inventory Count System o Press “Alt+F1” o It will ask you to “Enter Your Choice”, Input “05” as your choice. o Once you input your choice you will List of File Names. Use PageDown to go to the Last job OR you can Press “Shift+F6” to go to the Last job o Once you are at the Last Job (Bottom) you will be able to see 2 files with name “QPQUPRFIL”. Against each file in option field you need to input ‘5’ and press “Enter” to view the LOG.

Step 7 - Push the Scanned Data to Interface Menu option – 15 – Interface to Upload Scanner Data 02 – Push Scanner Data to Interface This menu will help you to push the scanned data to the interface created between Scanner and MMS. Once you enter the above Menu option you will get the below screen.

Step 8 - Merge the Stock Data in MMS Menu option – 15 – Interface to Upload Scanner Data 04 – Merge StockTake Data Batch in MMS

This option will merge the data in MMS for the controls created by you. All the control for that inventory count needs to be input one by one and merged into MMS through this menu option. The merge process allows these items to be included in the count file so that they can be compared to the freeze counts to calculate the count variance. Once all the control numbers assigned to a batch have been merged, the user is able to print the variance reports. Please note that after merging you won’t be able to change the scanned data. Following is the screen that you will get once you enter the above menu option

Here you have to input the Control Number and Press “F7”. You can press “F3” as search option for Control Number. You have to enter all the Control No’s’ for the Inventory count Name for which you want to generate the Variance report and want to post the Variance. Failing which, the stock scanned in the Control Files which did not get included will remain unaccounted for.

Step 9 - Check Pre-Posting Variance Report Menu Option: 28 – Pre-Post Variance Report This function is used to print a variance report listing all unit, cost, and retail variances between System stock and actual stock, which will then get posted in the system during the posting process. Two reports are generated, one displaying variance at the department level, and the other displaying variances at the SKU level. Following are the fields that will be there in the Report output. •

SKU No

•

Description

•

On Hand Qty

•

Physical Count Qty

•

Qty Variance

•

On Hand Retail

•

On Hand Cost

•

Physical Count Retail

•

Physical Count Cost

•

Retail Variance

•

Cost Variance Through this report you will be able to make out what is the variance with

regards to QTY, Retail and Cost for the Inventory Count that you have scanned for The Item balance is calculated as ACTUAL COUNT - FROZEN COUNT = INVENTORY ADJUSTMENT INVENTORY ADJUSTMENT + CURRENT STOCK ON HAND = NEW ITEM BALANCE

Input the value for the following fields; •

Inventory Count Name

•

Store Number

Once you input the above two parameters press “F7” and accept and generate the Report / Spool file (File Name: CY0065). This will generate the Final Variance report as per the Stock Frozen and the Physical Stock Merged into MMS. Hypercity Retail India Pvt. Ltd. RAJUD

Inventory Final Variance Report

Page: 1 Count: 010101

Time: 15:57:28 Date:

15/06/06 Store: 1001 HYPERCITY , MALAD STORE-1 On

Qty

On Hand On Hand

Count

Retail

Cost Sku No. Description

Hand

Count

Var

Retail

Cost

Retail

Cost

Variance Variance 100019944 HYPERCITY S 00

35.00

.00

3291.75 2518.49

.00

35.00-

.00

100020069 HYPERCITY A 00

.00

100020062 HYPERCITY S 00

.00

100020060 HYPERCITY S 00

5365.80 3900.06

3291.75- 2518.49-

100020055 HYPERCITY S 00

.00 271.00-

5365.80- 3900.06-

100020054 HYPERCITY S 00

271.00

1612.00- 1294.37-

52.00

.00

52.00-

1612.00 1294.37

.00

100020071 HYPERCITY A 00

1121.00-

1148.00-

.00

59.00

.00

5320.00

1121.00

944.00

.00

41.00

.00

41.00-

1148.00

943.00

.00

38.00-

.00

38.00

5320.00- 4370.00-

.00

4370.00

100020080 SUPREMIASU 2148.30-

59.00-

943.00-

100020079 SUPREMIASU

70.00

.00

70.00-

2148.30 1610.00

.00

1610.00-

100020081 HYPERCITY S 00

7950.00 6169.65

944.00-

100020078 HYPERCITY D

53.00-

.00

100020075 HYPERCITY I

.00

7950.00- 6169.65-

100020073 HYPERCITY A 00

53.00

5078.70-

190.00

.00 190.00-

5078.70 3990.00

.00

3990.00-

Once this is done the stocks will get updated in the system. You can refer to Stock Status, SKU Performance, Stock Ledger etc to check the impact.

Functional Flow Diagram

For managing the Inventory

Record For physical inventory

Management

Warehouse Id + count

Warehouses

Order items

Record Physical Inventory & on hand Books Id

Books

Warehou se Id + Physical count Orders

Inventory Items

Chapter 3 Research Methodology Research methodology defines what the activity of research is , how to proceed , how to measure progress and what constitute success.It is a science that studies how research is done scientifically. Acc. to Sandra Harding Research methodology is technique a way of preceding & gathering the evidence . Acc. to Albert Einstens It is a theory that decides what can be observed . Scientific research methodology was very successful at explaining natural phenomena. It provided a systematic way of knowing. Western philosophers embraced this new structure of inquiry. Eastern philosophy continued to stress the importance of the one seeking knowledge

Objectives Of Research: 6. To gain new insights into phenomenon. 7. To describe the characteristics of particular individual , situationor a group. 8. To determine the association & relationship between the variables . 9. To test the hypothesis between different variable.

Research Process. Research Process consist of series of steps which is necessary to effectively carry out research. The following chart indicates that the research process consists of no. of closely related activities.

Define Research Problem Review Of Literature Formulated Hypothesis Research Design Data Collection Analysis Of data Interpretation Of report

Define Research Problem: The process of formulating research topic is most important part of the research .The major content which we should cover objective , need and methodology.and this project our objective is to manage the inventory in the efficient manner . Need of managing the inventory is to make proper decision and methodology is techniques by which it can be achieved .

Research Types Research types are used to identify and classify the elements or characteristics of the subject. Quantitative techniques are used to collect , analyze and summarize the data .In hyper city , data and information are collected to analyze the inventory control techniques .Here analytical research is also used as descriptive approach is extended to suggest and explain the causes of changes in inventory and factors effecting inventory and inventory control techniques. Applied research is followed i.e. problem solving research is applied in this project. The already known theories and knowledge of inventory control techniques are studied and applied to the practical situations like of

Hypercity inventory and understand the variation in level of inventory and find out alternative and methods for better inventory control .

Objective of the Topic The main objective of the topic is to study the inventory system of Hypercity . •

How the material is handled or stored in the store.

•

How the perishable goods are stored.

•

How the inventory is managed in the stored.

•

What techniques are used in the Hypercity to manage the stock

•

Which s/w is used for managing the stock .

The three primary functions that characterize the occupation are management , coordination and control of inventory and systems of inventory management . Management of inventory records and relevant details is an important area of concern for every organization whether it is large or small. Think of the situation when you have to look in to various registers to find each ad every item . and situation even go worse when we need to manage so many registers .every register needs to be updated to make records up to date . Obviously managing such records and registers manually sounds to be truly a laborious job and calls for effective planning and implementation of effective skills to get job done.

Review Of Literature : â&#x20AC;˘

Acc. to Vishal Gaur and John c fransoo Retail store managers may not follow order advices generated by an automated inventory replenishment system if their incentives differ from the cost-minimization objective of the system or if they perceive the system to be suboptimal. We study the ordering behavior of retail store managers in a supermarket chain to characterize such deviations in ordering behavior, investigate their potential drivers, and thereby devise a method to improve automated replenishment systems. Using orders, shipments, and point-of-sale data for 19,417 item-store combinations over five stores, we show that (i) store managers consistently modify automated order advices by advancing orders from peak to nonpeak days, and (ii) this behavior is explained significantly by product characteristics such as case pack size relative to average demand per item, net shelf space, product variety, demand uncertainty, and seasonality error. Our regression results suggest that store managers improve upon the automated replenishment system by incorporating two ignored factors: in-store handling costs and sales improvement potential through better in-stock. Based on these results, we construct a method to modify automated order advices by learning from the behavior of store managers. Motivated by the management coefficients theory, our method is efficient to implement and outperforms store managers by achieving a more balanced handling workload with similar average days of inventory.

â&#x20AC;˘

Acc. To Lining Bai and Ying Zhong The growth of small business is fast and their impact on the economy is becoming bigger. How to manage the inventory effectively and efficiently often is a challenge for these small businesses. The study took place at HEM-SOL FORSALJNINGS AB, a company involved in gym sports equipment wholesale. For HEM-SOL two inventory problems, stock-out and overstock occur frequently. The company wants to improve its efficiency and is con-sidering a change in the inventory management.

â&#x20AC;˘

Dan Brown or Jessica Gomez Mulberry creator of the revolutionary retail inventory management system, Q, with software for allocation and replenishment, forecasting and order planning, as well as the recently released module for assortment and range planning, has made several free resources available discussing retailers' need to improve their inventory planning activities.

â&#x20AC;˘

MCLEAN, Va., Sept. 10 a leading worldwide provider of business intelligence (BI) software, today announced that 99 Cents Only Stores(R) has selected MicroStrategy for enterprise-wide reporting and analytics. Operating more than 270 retail stores, 99 Cents Only Stores emphasizes quality name-brand consumables, priced at an excellent value. Founded over 25 years ago, 99 Cents Only Stores((R)) operates 271 extreme value retail stores with 202 in California, 32 in Texas, 25 in Arizona and 12 in Nevada. 99 Cents Only Stores((R)) emphasizes quality name-brand consumables, priced at an excellent value, in convenient, attractively merchandised stores. Over 50% of the company's product mix consists of food and beverage including produce, dairy, deli and frozen foods, along with fresh baked goods and gourmet foods.

â&#x20AC;˘

Ed Mckinley says O'Reilly Automotive juggles 25,000 SKUs in smaller stores and as many as 65,000 in larger locations, says VP of purchasing Gregory Beck. To reduce inventory and streamline the flow of goods, O'Reilly draws on its 14year relationship with Manhattan Associates. Based in Atlanta, Manhattan Associates continually refines the underlying science of inventory control, staying in touch with customers' changing needs. It recently began aggregating sales of items at regional stores to interpret seasonal trends. O'Reilly shares its wealth of inventory information with suppliers in regularly scheduled meetings and through a vendor portal. Before signing on with Manhattan Associates, O'Reilly relied on a paper-based system of purchase orders with eight buyers and four DCs. Now, 19 replenishment analysts handle the 22 DCs. Each analyst tracks from 90,000-120,000 SKUs, depending upon volatility and seasonality, Beck says.

Data Collection : There are several methods of collecting the data which differ considerably in the content of time , money , place and other resources. The data can be collected by 2 methods Primary Data Collection Secondary collection In this Project Primary and secondary both data are used . Primary data is the data which is collected for the first time.Itm include Survey Method Observation Method Questionaire Schedules In this Project Questionaire and Obeservation method is used by following these two methods of primary data the project information s made . Secondary Data means the data which have alredy been collected, analysed by some one else Seondary data may be classified as Internal secondary data External Secondary data Internal Data are those generated within the organization which includes Sales invoices , Company accounting , Company reports , Data marts. In this project we have proceeded by collecting internal data from the organization as daily reports are generated and mailed to the respective managers . External Secondary Data may exist in form of published material and electronic or non electronic form .It includes Government sources , non government sources , computerized databases and other sources of collecting the data . In this project we have made use of external data also.

Chapter 4

Data Analysis & Interpretation 1. Are you aware about Inventory Management system? Yes

Canâ&#x20AC;&#x2122;t say/do not know

Yes No Cant say -

Interpretation: Awareness among the company official regarding the inventory management system is high i.e 25% as per the result of study. 2. Do you know that your company has inventory management system ? Yes

Canâ&#x20AC;&#x2122;t say/do not know

Yes No Can't say Slice 4

Interpretation:

Officials are aware about the company having the inventory management system. And as against 16% and 6% are either not aware or not able to provise the information. 3. Do you agree that there should be inventory management system in company or Organization? Agree

Disagree

Canâ&#x20AC;&#x2122;t say

Agree Disagree Can't Say Slice 4

Interpretation : As per the study 35% company officials agree that there should be the inventory management system. 4. For what reason do you feel that there should be an inventory management system. To smoothen operational requirement

To save time

To maintain accountability

Other reasons

Do not know/canâ&#x20AC;&#x2122;t say

06 To smoothen operation requirem ent To save tim e

To m aintain accountability Other reasons

Can't say

Interpretation: As per the study 17%believes that inventory management system saves time nd 12% think that it maintains accountability.

5. What acc. to you is major benefit of going for an inventory management system by your company . It has made storage and retrieval of material easier

Improves sales effectiveness

Reduced operational cost

Other benefit

Do not know/canâ&#x20AC;&#x2122;t say

04 Im proves sale effectiveness Easy storage Reduced operational cost Other benefit Can't say

Interpretation: Major benefit lies in relaxation in terms of shortage and return of information .This is followed by sales effectiveness & reduction in cost . 6. Do you have skilled professionals in your company for inventory management ? Yes

Canâ&#x20AC;&#x2122;t say/do not know

Yes No Can't say Slice 4

Interpretation: Recruitment of skilled professionals well vested with the latest inventory management technology. 7. What category of professional are managing your company inventory? Skilled & Trained

Only skilled but not trained

Non skilled but trained professional

Non skilled and non professional

Others

02 Skilled & Trained Only skilled not trained Non skilled but trained non skilled non professional Others

Interpretation: Acc. to the study 22% believes that Hypercity has skilled & trained people for managing the inventory and 10% says they have non skilled staff for managing it . 8. Do you agree that your company give more emphasis on s/w than skilled manpower with regard to inventory management ? Strongly Agree

Agree

Disagree

Strongly disagree

Canâ&#x20AC;&#x2122;t say

Strongly Agree Agree Disagree Strongly Disagree Can't say

Interpretation: Above response dive emphasis that company puts emphasis on s/w rate\her than skilled manpower. 9. Do you know that s/w used by your company is acc. to design needs of the System? Yes

Canâ&#x20AC;&#x2122;t say/do not know

Yes No Can't say Slice 4

Interpretation: Above study shows athat 28% believes that s/w used by the company is acc. to needs of the system.

10. What is the prime challenge by your company regard to inventory management ? Lack of trained professional

Maintenance cost

Changing requirements of customers