0601075 inventory management

APROJECT REPORT

ON

A STUDY OF INVENTORY CONTROL AND MANAGEMENT SYSTEMS AND ITS IMPACT ON

COST.

For

T.CHOITHRAM & SONS. (L.L.C) U.A.E

Submitted in the Partial Fulfillment of the Requirementof Course

Master of Business Administration.(Session 2006-2008)

Submitted byYASH.S.GANDHI

Project GuideProf. Yuvraj Lahoti

Viahwakarma Institute Of Management, Pune

1

ACKNOWLEDGEMENT

I want to extend my gratitude to all those who have helped me in the

completion of this project. First and foremost I want to thank the

Chairman of T. Choithram & Sons for his generosity, faith and superb

guidance.

I take immense pleasure in thanking Mr.Mohommad Kiyas and

Mr.Pravesh Sawlani for always being so friendly and co-operative in all

the work assigned to us. I want to thank all the staffs of T. Choithram &

Sons, especially all the shelf incharge for helping us in long hours of

work.

I also extend my gratitude to all the Store Managers, especially to

Mr. Manoj for providing us with the data required for the compilation of

our project.

My sincere thanks to Mr. Subash for helping us in the Advertisements

and Promotions related activities. Last but not the least I want to thank

Mr. Prakash, Mr. Manoj, Mr. Ghanshyam, Mr. Ashok for their

co-operation and for making these two months an unforgettable

experience.

In addition, my internal guide Prof. Yuvraj Lahoti has critically

evaluated my each step in developing this project report. I would like to

extend my gratitude toward Dr. Sharad L. Joshi, Director, Vishwakarma

Institute of Management, for his technical and moral support required for

the realization of this project report.

Thanks to all.Yash.Subhash.Gandhi.

2

TABLE OF CONTENTS

Chapter no. Title Page no.

Executive Summary

4

Introduction 10

1 Retail Industry 13

2 Company Profile 21

3 Objective 24

4 Research Methodology

26

5 Analysis 31

6 Findings 64

7 Recommendations 67

8 Bibliography 72

9 Annexure74

3

Executive Summary

4

EXECUTIVE SUMMARY

This study has been done with an objective of understanding the

entire procedure of Inventory Management and Control System followed at

T.Choithram and Sons (L.L.C) UAE. The study focuses on specific areas of

Inventory Management Systems, such as Impact of Inventory on the store

and the cost that the store has to bare for storing and maintaining that

inventory, the study also throws light on the quantity of product to be

reordered & the safety stock that should be maintained.

The study involves a detailed analysis of the various procedures of

Inventory Management used at TCS, procedures such as visual checks of the

goods received, elementary documentation, to fully Computerized and

Software Based Techniques for merchandise, re-order, documentation for

preparation of Purchase Orders, for Inventory check, for maintenance of

shelf stock and overall inventory control.

Proposed Title for Research:

A Research on Inventory Management & Control System used at

T. Choithram & Sons (LLC) U.A.E and their impact on cost.

Introduction:

The Study comprises of a detailed study on the Inventory Management &

control systems that are currently being used at T. Choithram & Sons (LLC).

5

The data for this study has been collected by means of store visits (more

than 20), questionnaire, interaction with the staff of TCS, & personal

observations.

The study throws light on areas such as Inventory Management,

Product Placement, Product Reordering, Stocking- Safety stock & Necessary

Stock, & Pricing Strategies.

Objectives:

The objectives of this study are in multiple folds, the core objectives being:

1. To study the current inventory management and control techniques

used at TCS.

2. To study the maintenance and control of the in-store inventory.

3. The impact of various inventory levels on space and cost in the

store.

4. To identify the approximate difference between Ideal Inventory

and the Actual Inventory.

5. To define a exact reorder period and quantity for products taken as

population for the study.

6. To identify the problems faced while using current Inventory

Management & Control System.

7. To search for solutions and alternatives for those problems faced at

TCS.

6

Research Methodology:

To attain the above mentioned objectives the methodology would be as

follows:

1. Collection of primary data, by taking interviews of at least 20 store

managers and stock takers.

2. Collection of secondary data, with the help of different search

engines, articles, websites, books and documents provided by the store

in-charge at TCS.

3. Interpretation and analysis of the collected data

4. Representation of the data in graphical, tabular, and theoretical

manner respectively.

For the collection of primary data simple technique of Questionnaire is used

and a population of size not more than 20 is considered. This data will be

further interpreted into 100%. The sample area considered is Sharjah and

Dubai.

Data Analysis:

The primary & secondary data collected by various means of data collection

is further analyzed in various forms. Initially data has been sorted in

accordance with store visit and on the basis of these store visits a

questionnaire has been designed & on the basis of questionnaire feedback

which includes various aspects of Inventory Management the data is further

analyzed. The analysis throws light on areas such as Product Placement,

Pricing Strategy, Inventory Records, Product Reorder & Managing a huge

product portfolio.

7

S.W.O.T Analysis:

The S.W.O.T analysis shows that the good reputation of TCS as a brand.

It highlights the strengths of TCS and the opportunities it has in the U.A.E

market. It also focuses on the threats that the market holds for the company.

The main competitors of the company being Spinneys, LuLu Supermarket,

& Al Madina Supermarket, S.W.O.T Analysis tries to lay a path for the

company to capitalize on their strengths and tap the opportunities to

minimize the weaknesses & threats.

Findings:

Awareness among the Staff of TCS regarding modern Techniques of

Inventory Management & Control System needs to be updated.

Even after not having any Scientific or Technical Base the staff at

TCS perform a fabulous job in maintaining considerable standards for

inventory management.

In the present system there are areas where the company needs to pay

more attention.

Every often it so happens that the products reach the store a bit too

late, i.e the supply chain management of the company needs to be

upgraded.

The percentage of stock shrinkage due to employee theft is

considerable.

8

Recommendations:

The staff should be trained to use new system of Inventory Control

system.

Even after not using any scientific or technical base the staff is so

efficient in giving exact figure of reorder, then if given a good

technical & scientific support the store could reach great heights.

The receiving section at some stores needs to be upgraded.

The manual inspection system that is followed could be replaced with

electronic scanner system.

For the reorder system instead of depending on staffs experience the

company should go for technical (automatic) reorder.

More distribution of flyers in Newspapers should be there with which

the customers will be able to know the offers.

9

INTRODUCTION

10

INTRODUCTION

The retail food industry has been undergoing major changes as a

result adoption of proper stores management is launched by supermarkets

industry in 1993. The total stores management involves all factors which

responsible for build a stores image like inventory management, space

management, category management, customer service and all other like this.

The Stores industry is changing, as like new information

technologies, new business practices and new retail strategies are

developed. The result from this the research can serve as a baseline for

future research monitoring for adoption of innovations and assessing

there impact on productivity and profitability. Choithrams Stores

appear to be a smaller but more productive than other competitors.

Retailers encounter many problems Retailers encounter many

problems as they attempt to upgrade their systems. A major obstacle is the

effort required, particularly for staff training and in developing new

procedures, as the organization prepares to switch over to the new system.

Another is the lack of awareness of the various options available to retail

organizations as they seek to improve the efficiency and effectiveness of

their inventory management and control procedures. There is a lack of

understanding of the costs and benefits of these options, and of what needs

to be done to move to the next level of sophistication.

11

The study strongly suggests that there is a need for training retailers

on inventory management issues. Further research needs to be conducted to

understand and document the practices, problems, and needs of different

segments of the retail and wholesale sector.

Training material needs to be developed which, through case histories of

successful (and failed) implementations of inventory management and

control systems, illustrates the options available to retailers for improving

their operations. Given the size of the retail sector in the economy (third

largest sector contributing Rs. 196 billion to the national GDP and

employing 3.7 million), and the predominantly small size of retail

establishments (less than 2% of the 347,000 retail establishments in urban

Pakistan employed over 4 individuals), the impact of improved inventory

management systems can be wide-ranging and significant.

The main motive of doing this research was to get the feedback from the

Stores Manager, analyzing it and finding the weak areas in which Choithram

is and overcome the weaknesses to give a better Inventory Management

practices to maintain the existing customers & future prospects. This

company aims to target these customer groups & offer innovative &

convenient service that will fulfill their needs fast and efficiently.

The survey has been done of 7 Choithram Stores on various factors

such as variety, quality, service, promotions, offers and many more. The

sample size was 1 questionnaire (per store).

This study aims at analyzing Inventory Management & Control

System used among the all supermarkets located through out UAE. and

service offered to customers by Choithram and Sons L.L.C. Dubai

12

RETAILINDUSTRY

(INDIA)

13

The Changing Face Of Retail in India:

Liberalization of the economy in the nineties and the entry of large

players in the retail business have brought the retail industry into spotlight.

Big players and national retail chains are changing the rules of the game, in

spite of their meager share in the overall retail trade. Organized retailing

though still in an embryonic stage has huge growth potential.

In organized retailing, the retailer is no longer just a last mile

distributor. He is an important source of information related to customer

behavior and also gives the customer a memorable shopping experience.

Experiential marketing is becoming the paradigm of organized retailing and

this has further raised the significance of the retailer in the business value

chain.

India has seen a rise in the number of malls in the last few years.

Today India has 37 malls in Mumbai, 10 in Hyderabad, 15 in Bangalore.

Approximately 220 malls in the whole of India by end 2005 is what is the

estimate of various agencies involved in assessing the future of commercial

property development in India. The real estate sector is booming thanks to

the low interest regime for home loans. The other factor that is providing a

fillip to the development of real estate is the boom in commercial property

development, especially the retail property sector.

14

Moreover, with the convergence of the retailing, entertainment and

the tourism industries, retail property in India has taken to mega mall

development to suit the needs of all the three sectors in a single location.

Throughout the past decade, malls appeared on the retailing scene as the

locus of retailing activity in major Indian cities in the central business

district, which was populated by well-known department stores. But as the

suburban population grew, many local shopping areas in suburbs

transformed into regional shopping destinations.

In a few cities, specialized developers purchased large blocks of the

central city land and then offered it on a lease basis to department stores and

other stores at differential rents. The displacement of the central business

districts in major Indian cities by the suburban mall phenomenon was clearly

hastened by the increase in automobile ownership, an enhanced urban road

network, and growing suburban markets. Malls represent a set of co-located

retail outlets in a large area with lots of amenities. In the retail sector, mall

development must be a planned, as this would help in attracting the right

tenant mix. A typical mall has one or more anchor store and a diversity of

smaller stores.

The development of a mall should also be planned in anticipation of

the increased footfalls. Understanding of the retail environment becomes

crucial for mall developers as well as for the potential tenants while

investing in malls.

Retail is India's largest industry, accounting for over 10 per cent of the

country's GDP and around eight per cent of the employment. Retail industry

in India is at the crossroads. It has emerged as one of the most dynamic and 15

fast paced industries with several players entering the market. But because

of the heavy initial investments required, break even is difficult to achieve

and many of these players have not tasted success so far. However, the

future is promising; the market is growing, government policies are

becoming more favorable and emerging technologies are facilitating

operations.

Retailing in India is gradually inching its way toward becoming the

next boom industry. The whole concept of shopping has altered in terms of

format and consumer buying behavior, ushering in a revolution in shopping

in India. Modern retail has entered India as seen in sprawling shopping

centres, multi-storeyed malls and huge complexes offer shopping,

entertainment and food all under one roof. The Indian retailing sector is at an

inflexion point where the growth of organized retailing and growth in the

consumption by the Indian population is going to take a higher growth

trajectory. The Indian population is witnessing a significant change in its

demographics. A large young working population with median 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 growth drivers of the organized retail sector in India.

16

RETAIL INDUSTRY (U.A.E)

17

Retail Industry in U.A.E:

‘Dubai is already known as the shopping center of the Middle East,

and in years to come it will be known as the shopping mall of the world,'

With retail space in the city set to rise to 20 million square feet in six years

time, related industries - ranging from software management organizations

to cleaning firms - are tipped to experience a significant boost in activity.

'The expansion of retail space in Dubai is going to have a positive

impact on the emirate's overall economy. In the short-term, construction and

design companies will benefit from the boost in building activity. 'In the

future, companies specializing in everything from retail software and

mannequins to cleaning firms and interior decorators will also benefit from

the trickle-down affect.'

Additionally, new retail developments will contribute to rising

tourism numbers to the emirate. Coinciding with the 400 percent increase in

retail space in 2010, the emirate is preparing to welcome around 15 million

tourists by the end of that year. If Dubai does manage to boast more than 20

million square feet of shopping space by 2010 then there is no doubt that it 18

will be an even bigger tourist attraction than it already is.

As a relatively new organization in the region, I believe that the next

five years are going to be an exciting, buoyant and challenging as the

country tries to meet the demands of a constantly expanding market.

Conceptualization of Retail Middle East is a direct result to meet the

needs of the market for the entire region. It will be the sourcing forum for

retailers and franchise chains looking acquire cutting-edge concepts and

store design for both new and old stores. This event will encompass

everything from lighting, hanging rails, POS, mannequins to shop fitting

equipment and services, visual merchandising, signage, P-O-P as well as

retail information technology – all in one convenient location to serve as a

fertile sourcing ground for retailers, while serving as a platform for group

showcases from the USA and other international companies. Exhibitors

would also include woodworking machinery manufacturers and franchisors

interested in international expansion.

To cater to the fast changing needs of the retailers, Retail Middle

East is planned to become an annual event. There is no doubt that the local

retail industry needs a platform that occurs on a frequent enough basis to

keep up with the momentum of evolving trends as well as remain connected

with developments in the industry in international markets..

Retailers and shoppers alike are yearning for new concepts in the

retail scene. To become successful in this region watchwords to a new

market entrant would be time, effort and resources starting with a personal

relationship. 19

Retail Middle East (RME) has the support of US associations – Point

of Purchase Advertising International (POPAI), and the National

Association of Store Fixture Manufacturers (NASFM) as well as by EHI-

EuroHandelsinstitut (The International Retail Network) from Germany.

Companies from Italy, UK, Australia, Malaysia, Jordan, Lebanon etc., have

already signed on to participate at RME.

DUBAI is the business hub of Middle East, is throbbing with

multidimensional activities and is undergoing thanks to the vision and

foresightedness of the country´s leadership, tremendous growth, which is

evidenced by the fact that a country until 3 years ago with a population of

2,5 – 3 million in now accommodating and catering for 5 million people.

CHOITHRAM take the pride of being among such Supermarkets with

highest degree of popularity with the local Arabs,Asians and the Western

Expats offering it’s long range of quality products at very competitive

prices. Fruit sourced from any where in the world by important importers

such as Fresh Fruits, Abbar O Zainy, Sharbatly, Iffco are always available

with us. In fact, we are in process of commencing our own import program

and in doing so we will be more than happy to source Argentinian Oranges,

Lemons, Pears, Apples and Stone fruit.

20

COMPANY PROFILE

21

COMPANY PROFILE

The Company was founded in 1944 in Sierra Leone and arrived

in the United Arab Emirates in 1974. Since then thecompany

T. Choithram and Sons is deep-rooted & focused on one remarkable

vision, the aggressive diversification and geographical expansion,

which led the company to UAE.

Within a short period, the company is acknowledge today as the

largest chain of the Supermarket group in the Emirates. With twenty

four Supermarkets and five Department Stores at prime locations

spread over the seven Emirates of the UAE.

The company has grown to become one of the most popular

chain in the UAE and today represents over sixty multinational

companies in the Emirates, which are handled by several specialized

divisions.

With the experience of over 60 years of marketing branded

consumer products, the Company´s infraestructure, extensive

knowledge of the market and the support of dedicated employees

22

numbering over 1500, all come together in a very effective

marketing-mix to offer their principals the best distribution network

and support in the UAE.

The Company´s popular chain of Supermarkets & Department

Stores, conveniently located, leend important and significant support

for brands and agancy lines, through prime products displayss,

facilities for below-the-line marketing activities, test launching of

promotional offers and even to conduct valuable consumer surveys

to help formulating sound and effective brand development

strategies.

The Company´s well established Catering Division, services,

apart from the regularly awarded government tenders, over two

hundred major institutional clients:

\

– AIRLINES

– RESTAURANTS

– CLUBS

– SCHOOLS

– PETROL STATIONS

– KIOSKS AND SO ON ….

The novelty division handles agency lines from over twenty-one

countries, supplying to the wholesale and retail outlets in the UAE,

23

with new products innovations in novelties, fashionwear, children

´sgarments,toys, household appliances, domestic products, etc.

OBJECTIVES

24

Objectives:

The objectives of this study are in multiple folds, the core objectives being:

1. To study the current inventory management and control techniques

used at TCS.

2. To study the maintenance and control of the in-store inventory.

3. The impact of various inventory levels on space and cost in the store.

4. To identify the approximate difference between Ideal Inventory and

the actual inventory.

5. To define a exact reorder period and quantity for products taken as

population for the study.

6. To identify the problems faced while using current Inventory

Management & Control System.

7. To search for solutions and alternatives for those problems faced at

TCS.

25

RESEARCH

METHODOLOGY

26

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve a research

problem. It may be understood as a science of studying how research is done

scientifically. In it we study various steps that are generally adopted by a

researcher in studying his research problem along with logic behind them.

Before we understand the research methodology used for this rearch

let us first understand what a research means:

Research in common parlance refers to a search for knowledge. One can also

define research as a scientific and systematic search for pertinent

information on a specific topic. In fact, research is an art of scientific

investigation. The advanced learner’s dictionary of current English lays

down the meaning of research as “a careful investigation or inquiry specially

through search for new facts in any branch of knowledge”.

For every research there is a certain objective, towards which the

research is directed, following are the objectives towards which the research

methodology has been designed. The purpose of research is to discover

answers to questions through the application of scientific procedures.

Though each research study has its own scientific purpose, we may think of

research objectives as falling into a number of following groups:

1. To gain familiarity with a phenomenon or to achieve new insights.

27

2. To portray accurately the characteristics of a particular individual,

situation or a group.

3. To determine the frequency with which something occurs or with

which it is associated with something else.

4. To test a hypothesis of a casual relationship between variables.

Research process

Research process consists of series of actions or steps necessary to

effectively carry out research and the desired sequencing of these steps.

Formulating the research problem

Extensive literature survey

Development of working hypothesis

Preparing the research design

Determining the research design

Deliberate sampling

Simple random sampling

Systematic sampling

Stratified sampling

Collecting the data

By observation

Through personal interview

Through telephone interviews

By questionnaires

Execution of the project

Analysis of data28

Hypothesis-testing

Generalization and interpretation

Preparation of the report

Research Methodology:

A)Primary Data Source:-Questionnaire, Interviews

B)Secondary Data Source:-Books, Journals etc.

Collected data will be analyzed with simple statistical tools and will

be interpreted with graphical explorations.

The project was to check feasibility of the methodologies used at

T. Choithram & Sons using primary data. For the collection of the primary

data a regular format of store visit has been followed. The primary data was

also obtained through observation, direct communication with the staff and

filling up of questionnaires, also enormous help was obtained from

T. Choithram & Sons branch members, crew, staff and colleagues working

there.

FIELD WORK PLAN

The field work was carried according to the sampling plan formed, by

visiting various branches of T. Choithram & Sons under some limitations

and time constraints. The main motive for these visits was to identify the

system that is being followed in the company & to find out solutions to the

29

problems that the company faces at this moment in handling the present

Inventory Control & Management System. A two-way discussion was done

with the staff at the stores and s questionnaire was filled by the respective

personals. The questionnaires are either directly filled up or indirectly filed

up by the people and through the prospect of the respective people.

DATA ANALYSIS:

The data has been analyzed under certain conditions, which have been

mentioned in the later part of this research. The data analysis part constitutes

of analyzing the collected data and interpreting it for the convenience of the

researcher and for better understanding of the data analyzed.

The data analysis comprises of 4 parts:

1. Data analysis for the Product Reorder Section.

2. Explanation of the concept of Safety Stock, & its Implementations.

3. Analysis of the Inventory Management & Control System used at

TCS.

4. Data analysis for the Customer Service Section.

30

ANALYSIS

31

ANALYSIS FOR REORDER SECTION

CANNED FRUITESPINEAPPLE:

Total Stock: 50 pieces Weekly Sales: 84 piecesWeekly Reorder: 24 pieces Ideal Reorder: 72 pieces Ideal Reorder Day: Wednesday

Pineapple

50

84

24

72

0102030405060708090

Total Stock WeeklySales

WeeklyReorder

Ideal Reorder

Pineapple

RAMBUTAN:Total Stock: 46 pieces Weekly Sales: 42 piecesWeekly Reorder: 24 pieces Ideal Reorder: 24 pieces Ideal Reorder Day: Every Alternate Saturday.

32

Rambutan

4642

24 24

05

101520253035404550


WeeklyReorder

Ideal Reorder

Rambutan

PEAR:Total Stock: 24 pieces Weekly Sales: 28 piecesWeekly Reorder: 24 pieces Ideal Reorder: 24 piecesIdeal Reorder Day: Friday

Pear

24

28

24 24

22

23

24

25

26

27

28

29


WeeklyReorder

Ideal Reorder

Pear

CHERRY:Total Stock: 30 pieces Weekly Sales: 56 piecesWeekly Reorder: 48 pieces Ideal Reorder: 72 piecesIdeal Reorder Day: Wednesday

33

Cherry

30

5648

72

010203040

50607080


WeeklyReorder

Ideal Reorder

Cherry

FRUITE COCTAIL:Total Stock: 36 pieces Weekly Sales: 84 piecesWeekly Reorder: 24 pieces Ideal Reorder: 72 piecesIdeal Reorder Day: Monday

Fruite Coctail

36

84

24

72

0102030405060708090


WeeklyReorder

Ideal Reorder

Fruite Coctail

34

CANNED VEGETABLES

TOMOTA:Total Stock: 288pieces Weekly Sales: 336 piecesWeekly Reorder: 144 pieces Ideal Reorder: 336 piecesIdeal Reorder Day: Thursday

Tomato

288336

144

336

050

100150200

250300350400


WeeklyReorder

Ideal Reorder

Tomato

SWEETCORN:Total Stock: 48pieces Weekly Sales: 84 piecesWeekly Reorder: 72 pieces Ideal Reorder: 72 pieces

35

Ideal Reorder Day: Wednesday

Sweetcorn

48

24

72 72

0

10

20

30

40

50

60

70

80

Total Stock Weekly Sales Weekly Reorder Ideal Reorder

Sweetcorn

MUSHROOM:Total Stock: 24 pieces Weekly Sales: 42 piecesWeekly Reorder: 96 pieces Ideal Reorder: 48 piecesIdeal Reorder Day: Wednesday

Mushroom

24

42

96

48

0

20

40

60

80

100

120


Mushroom

KIDNEY BEANS:Total Stock: 60 pieces Weekly Sales: 84 piecesWeekly Reorder: 72 pieces Ideal Reorder: 72 piecesIdeal Reorder Day: Thursday

36

Kidney Beans

60

84

72 72

0102030405060708090


Kidney Beans

BACKED BANES:Total Stock: 160 pieces Weekly Sales: 224 piecesWeekly Reorder: 48 pieces Ideal Reorder: 192 piecesIdeal Reorder Day: Thursday

Backed Beans

160

224

48

192

0

50

100

150

200

250


Backed Beans

37

SAUSE

RICOTTA:Total Stock: 14 pieces Weekly Sales: 14 piecesWeekly Reorder: 12 pieces Ideal Reorder: 12 piecesIdeal Reorder Day: Friday

Ricotta

14 14

12 12

11

11.5

12

12.5

13

13.5

14

14.5


Ricotta

ARABBIATA:Total Stock: 10 pieces Weekly Sales: 21 piecesWeekly Reorder: 12 pieces Ideal Reorder: 24 pieces

38

Ideal Reorder Day: Tuesday

Arabbiata

10

21

12

24

0

5

10

15

20

25

30


Arabbiata

SPAGNETTI:Total Stock: 22 pieces Weekly Sales: 28 piecesWeekly Reorder: 24 pieces Ideal Reorder: 24 piecesIdeal Reorder Day: Friday

Spagnetti

22

28

24 24

0

5

10

15

20

25

30


Spagnetti

PIZZA SAUSE:Total Stock: 56 pieces Weekly Sales: 49 piecesWeekly Reorder: 36 pieces Ideal Reorder: 36 piecesIdeal Reorder Day: Saturday

39

Pizza Sause

56

49

36 36

0

10

20

30

40

50

60


Pizza Sause

TOMATO:Total Stock: 18 pieces Weekly Sales: 42 piecesWeekly Reorder: 36 pieces Ideal Reorder: 36 piecesIdeal Reorder Day: Monday

Tomato

18

42

36 36

05

1015202530354045


Tomato

40

PASTA

PENNE RIGATE:Total Stock: 20 pieces Weekly Sales: 42 piecesWeekly Reorder: 36 pieces Ideal Reorder: 36 piecesIdeal Reorder Day: Tuesday

Penne Rigate

20

42

36 36

05

1015202530354045


Penne Rigate

LACOLLEZIONE : Total Stock: 17 pieces Weekly Sales: 21 piecesWeekly Reorder: 12 pieces Ideal Reorder: 24 piecesIdeal Reorder Day: Thursday

41

Lacollezione

17

21

12

24

0

5

10

15

20

25

30


Lacollezione

LASAGNE:Total Stock: 29pieces Weekly Sales: 42 piecesWeekly Reorder: 12 pieces Ideal Reorder: 24 piecesIdeal Reorder Day: Wednesday

Lasagne

29

42

12

24

05

1015202530354045


Lasagne

SEDANINI:Total Stock: 18 pieces Weekly Sales: 42 piecesWeekly Reorder: 12 pieces Ideal Reorder: 36 piecesIdeal Reorder Day: Tuesday

42

Sedanini

18

42

12

36

05

1015202530354045


Sedanini

FUSILLI:Total Stock: 19 pieces Weekly Sales: 42 piecesWeekly Reorder: 48 pieces Ideal Reorder: 36 piecesIdeal Reorder Day: Tuesday

Fusilli

19

4248

36

0

10

20

30

40

50

60


Fusilli

43

STORE REORDER STRUCTURE

Excess Reorder

10%

Short Reorder45%

Perfect Reorder45%

Excess Reorder Short Reorder Perfect Reorder

44

CAPITAL UTILIZATION FOR REORDER

1984.8

195

1480.8

0

500

1000

1500

2000

2500

Shortage of reorderworth

Excess of Reorderworth

Reorder Perfect Worth

Captal Utilization

Cap

ital

(in

Dh

iram

s)

Capital Utilization

45

ANALYSIS FOR SAFETY STOCK

The analysis that has been done in the earlier part is based on the

concept of “Safety Stock”. The concept emerges from the fact that from the

time of reorder there is a time gap between ‘Product Order & Product

Delivery’, during this time period there is a requirement for the product at

the sales counter, to manage the sales effectively between this time gap a

certain amount of products need to be there in the store which is called as

“Safety Stock”

There is a specific way, a specific manner which is used to calculate

this Safety Stock. In the above data analysis for Reorder section the fact of

Safety Stock has been considered and accordingly the Reorder for each

product has been scheduled.

Example:

Canned Fruits: Pineapple:

Total Stock: 50 pieces. Daily Sales: 12 pieces.

Time lag: 1 day Reorder Quantity: 36 pieces.46

Thus the safety stock for Pineapple would be 12 pieces.

Theoretically, it should be easy to determine when to reorder a

stocked item from a supplier. If we know that customers will order ten

pieces of the product each day, and you know that it will take seven days to

get the shipment from the vendor, you should reorder the product when there

are seventy pieces on the shelf:

Demand per Day Lead Time Usage During Lead Time

10 pieces 7 days 70 pieces

This quantity is appropriately called the "order point." But the order point

formula contains one more element: safety stock. Safety stock provides

protection against running out of stock during the time it takes to replenish

inventory. Why is this protection necessary?

Demand is a prediction based on past history, trend factor(s), and/or

known future usage of a product. The item's actual usage will

probably be more or less than this quantity. Safety stock is needed for

those occasions when actual usage exceeds forecasted demand. It is

"insurance" to help ensure that you can fulfill customer requests for a

product during the time necessary to replenish inventory.

The anticipated lead time is also a prediction, usually based on the

lead times from the last several stock receipts. Sometimes the actual

lead time will be greater than what was projected. Safety stock

provides protection from stock outs when the time it takes to receive a

replenishment shipment exceeds the projected lead time.47

The following diagrams illustrate how safety stock is used:

Projected Lead Time = 8 Days

Demand = 1 piece/day

On Order with Vendor = 0

The dotted line in the graph represents the available quantity (On-Hand –

Committed) of the item. A replenishment order is placed on the first of the

month as the available quantity available reaches the order point ("A" in the

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graph). In this example, there is none of the product currently on incoming

replenishment orders. Therefore, at point "A," the item's available quantity

equals its replenishment position.

The actual usage of eight pieces during the lead time is consistent with

projected demand. The shipment arrives on the 9th of the month. As the

stock receipt is processed, the available quantity on the shelf is equal to the

safety stock quantity. The protection provided by the safety stock was not

needed.

The product again reaches the order point on the 11th of the following

month ("B" in the following graph):

Projected Lead Time = 8 Days

Demand = 1 piece/day

On Order with Vendor = 0

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Another order is placed with the supplier. But the vendor is temporarily

experiencing manufacturing problems and the shipment arrives two days late

("C" in the graph). If it weren't for the safety stock, we would have run out

of the product.

Shortly after the shipment arrives, a customer orders 10 pieces of the

product. You experience more than a week's usage in just one day. The

available quantity falls to "D" in the following graph. A replenishment order

is issued that day, but the available quantity is already below the order point.

The safety stock quantity allows you to satisfy customer demand for the

product until the replenishment shipment arrives from the supplier on the

29th of the month ("E" in the graph). Again, safety stock prevented a stock

out.

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Thus after understanding what Safety Stock is, and how do we

calculate Safety Stock, the next question arises that “How much safety stock

do we need?” The answer to this question could be better understood by the

following Diagram & the corresponding explanation overleaf.

When a replenishment shipment arrives, the available quantity is usually

somewhere in the shaded area of the graph. Notice that the safety stock

quantity is in the middle of the shaded area. Half the time you will use some

or all of the safety stock before the replenishment shipment arrives. The

other 50% of stock receipts will arrive before you use any of the safety

stock. On average, the full safety stock quantity is always on the shelf when

the replenishment shipment arrives. It is, on average, "non-moving"

inventory.

A distributor puts inventory in her warehouse to sell it to customers. Profits

from these sales are necessary to pay the distributor's expenses and provide a

return on her investment. With this thought in mind, it seems as though it

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would not be a good idea for a distributor to intentionally have non-moving

inventory in stock.

On the other hand, keep in mind the goal of effective inventory

management:

"Effective inventory management allows a distributor to meet or

exceed his (or her) customers' expectations of product availability

with the amount of each item that will maximize the distributor's net

profits."

Safety stock is, in reality, an expense of doing business. But it is necessary

to ensure good customer service. To maximize profits, we must carefully

control all expenses, including safety stock. Therefore, we want to achieve

our customer service goals with the least possible amount of safety stock.

Thus the analysis shows that at TCS to prevent a product from being

out of stock or being in excess inventory Safety Stock system is needed at a

really high alert rate.

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ANALYSIS FOR THE INVENTORY MANAGEMENT &

CONTROL SYSTEM

“Inventory Management & Control System”, for this part of analysis a

simple procedure of Questionnaire for the staff at TCS was formulated and

on that basis the analysis has been done.

During the analysis there was an observation as to the procedure that

is followed in the company for Inventory Control. The observation was that

there is no scientific or technically formulated system that is followed for

inventory management & control, rather a simple technique is followed in

which the Shelf Incharge makes a LPO (Local Purchase Order), or a Invoice

for the warehouse totally based on his experience and his calculation.

There are 5 steps in Inventory Management & Control:

1. Identification of need to make a Purchase Order.

2. Issuing of a Purchase Order.

3. Delivery of the Purchase Order.

4. Stocking of the product in shelf & in the back office.

5. And making the product available for sale.

STEP 1:

Identification of need to make a Purchase Order (PO):

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This is the most basic and the most crucial part of Inventory Control,

because if we are not able to identify the basic need to make a Purchase

Order then it would be really very difficult rather impossible to manage

Inventory and run a store in a appropriate manner.

At TCS the need to make a Purchase Order is identified by a shelf in-

charge (a person who looks after the products in a certain number of shelves)

totally based on his experience. i.e he calculates in his mind the average

number of products that are sold in a week and checks the number of

products available in the store and if he find a need to make PO then

accordingly he would make a PO.

STEP 2:

Issuing of a Purchase Order:

Once the need to make a PO is identified then comes the procedure to

make a PO. Now in this case there are two conditions:

1. That the product is to be ordered from the Local Supplier.

2. The product is to be ordered from the Companies Warehouse.

In both the cases the procedure for making a PO would differ. Let us

consider both the cases one by one.

1. PO for Local Supplier:

In this case the representative from the Local Supplier comes into the

store on a certain day, and he asks the shelf in-charge the products that are

required for that particular week. The shelf in-charge according to his

calculation and experience gives the representative a list of products to be

delivered. Then the representative shows the list to the IT section and there a

LPO (Local Purchase Order) in the name of the respective vendor is

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produced. From here the LPO is taken to the Store Manager for

confirmation, and once the Store manager confirms the LPO then the LPO is

dispatched to the respective vendor for delivery.

2. PO for Warehouse:

In this case the product to be ordered is not available in the local

market the product needs to be Imported or it is purchased by the company

and then distributed into the stores, for this type of products there is a

separate method of making PO.

Here the shelf in-charge identifies the need to issue a PO and then

makes an invoice and sends it to the Central Warehouse of the company.

Before sending the invoice it has to be verified by the Store Manger, and

once the verification & confirmation is done then the invoice is delivered to

the warehouse, and after a specific period the goods are dispatched.

In this case there is no representative of the supplier, the shelf in-charge

himself has to issue a PO.

At the end of every week the store receives a invoice from the

company containing all the details of the LPO’s made & another list

containing products ordered from the warehouse, thus at end of every week

there is a check on the LPO’s & Invoices.

STEP 3:

Delivery of the Purchase Order:

On receiving the LPO or Invoice from the store, the supplier or the

warehouse dispatches the list of products to the store. On the arrival of these

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products at the store the person at the receiving area checks the products,

this checking is done by simple technique of Visual Examination or by the

method of Random Sampling. The in-charge person signs on the invoice and

only then the products can enter the store. In case during examination

products are found missing or damaged those respective products are

rejected and sent back to the supplier or ware house and this is marked on

the invoice that the representative of the supplier brings.

STEP 4:

Stocking of the product in shelf & in the back office:

After entering the store the products are brought into the storing

section where in the products are stored in the respective conditions in which

they are to be stored;

example: Fish would go into the Cold Storage Section, Toiletries would go

into the Dry section, Vegetables & fruits would go into the Fresh Section,

etc. Once the products are placed at their respective places then the products

can be brought to the shelf as and when required.

STEP 5:

Making the Product Available for Sale:

After the product has reached the back office of the store then the

shelf in-charge with co-ordination with the store manager decides a place for

displaying the product for better sales. Here many times the product needs to

be placed at a particular shelf only because that space has been rented to that

company for that product. Many times there are certain “offers” that are

given by the company to attract customers the store manager has to see to it

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that the “offer” has been displayed properly and the price tags have been put

up in order.

Even in this step there is no scientific method to support the actions

all the actions are performed totally on “experience”. Thus this analysis

shows that there has to be a scientific method to support the actions of the

staff. The staff needs to be made aware about various Inventory

Management & Control Systems that are available in the market or the

methods that they can use to make the Inventory Storage more effective.

From the above analysis (reorder analysis) it can be seen that even after not

having any scientific base line, the staff of TCS is doing a considerable job

in making exact reorders, but still the proportion of making shorter reorder

i.e running the product into a out of stock situation is very high.

Thus by using a scientific & technical base for Inventory Management &

Control System TCS could do wonders to its turnover.

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ANALYSIS FOR CUSTOMER SREVICE

EXCELLENT

21%AVERAGE

11%

GOOD 68%

EXCELLENT GOOD AVERAGE

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The quality of the products available at TCS is really good as 70% of the customers said

GOOD 63%

AVERAGE 16%

POOR3%

EXCELLENT

18%

EXCELLENT GOOD AVERAGE POOR

YES 96%

NO4%

YES NO

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The variety of the product at TCS is very good as 63% of the customers said

96% of the customers said that the store was clean

YES92%

NO8%

YES NO

GOOD61%

AVERAGE11%

POOR1%

EXCELLENT

27%

EXCELLENT GOOD AVERAGE POOR

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92% of the customers said that the parking provided for us was sufficient & appropriate.

61% of the customers said that the overall appearance of the staff members of TCS is good.

NO20%

YES 80%

YES NO

GOOD58%

AVERAGE24%

EXCELLENT

18%

EXCELLENT GOOD AVERAGE

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80% of the customers said that the signages in the store were informative.

58% of the customers said that the visibility and shelf space arrangement was good.

MOUTH PUBLICITY

25%

NEWS PAPER47%

TELE-CALLING

2%FLYERS

26%

FLYERS MOUTH PUBLICITY

NEWS PAPER TELE-CALLING

FEMALE44%

MALE56%

MALE FEMALE

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47% of the customers said that they have come to know about the offers at TCS through newspaper, 26% by flyers & 25% by mouth publicity.

56% of the customers were female and 44% were male.

ANALYSIS HAS BEEN DONE ON THE BASES OF:

The Sample Size considered for this analysis is 5 sub categories of

each main category.

Thus the Population for the analysis becomes 20 different products

with 20 different weekly sales figures, & thus requiring 20

different reorder schedules.

The information give by the staff at TCS is correct and accurate.

The values i.e in case of capital are in terms of Dirham.

The Stock was measured on Monday 30th July 2007.

A week is considered from Sunday to Saturday.

The analysis has been done under certain time constraint.

For analysis of customer service at the store random sample of 100

customers per store has been done and the analysis has been don

on the basis of the answers that the customers has submitted,

corresponding to the given questionnaire.

The stock taking has been at “Safa Park” branch of T. Choithram

& Sons. And the same data has been generalized.

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Questionnaire for customer service has been filled up at various

branches of TCS, and the same have been used as a base for

analysis of customer service.

FINDINGS

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FINDINGS

From the research that I have conducted I have come across the following

findings:

Awareness among the Staff of TCS regarding modern Techniques of

Inventory Management & Control System needs to be updated.

Even after not having any Scientific or Technical Base the staff at

TCS perform a fabulous job in maintaining considerable standards for

inventory management.

In the present system there are areas where the company needs to pay

more attention.

Every often it so happens that the products reach the store a bit too

late, i.e the supply chain management of the company needs to be

upgraded.

The percentage of shrinkage due to employee theft is considerable.

The receiving area at many stores is not up to the mark.

The supply chain management is very weak, which results in products

getting out of stock.

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Every store of TCS is designed on the basis of demand patter of the

customers arriving at that store.

The product availability at TCS is commendable.

Some stores of TCS face a parking problem.

The offers given to the customers are repeated every time.

Most of the customers have come to know about the offers through

News papers and Flyers but less amount of customers have came to

know through Tele-calling.

Satisfaction level of existing customers is satisfactory, however for

the future prospects more changes and efforts have to be taken.

There is a huge potential of TCS as they have the maximum branches

in Gulf as compared with others.

Most of the customers found the store hygiene up to the mark.

In almost all stores a grid layout of store layout has been used which

helps the product to be displayed very effectively.

The availability of products is satisfactory.

The people do not find any problem in finding the products they want,

& the prices of the products are very clearly and effectively visible.

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RECOMMENDATIONS

67

RECOMMENDATIONS

From the analysis conducted so far I suggest the following

Recommendations:

The staff should be trained to use new system of Inventory Control

system.

Even after not using any scientific or technical base the staff is so

efficient in giving exact figure of reorder, then if given a good

technical & scientific support the store could reach great heights.

The receiving section at some stores needs to be upgraded.

The manual inspection system that is followed could be replaced with

electronic scanner system.

For the reorder system instead of depending on staffs experience the

company should go for technical (automatic) reorder.

More distribution of flyers in Newspapers should be there with which

the customers will be able to know the offers.

There should be new offers everytime.

Tele-calling should be done to the customers to inform them about the

new offers.

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More focus should be given on the advertisements of TCS.

Hoardings should be put up in the key areas of the city.

SMS should be given to the customers about the new offers.

In-store buzz should also be conducted at each store of TCS

The most important recommendation is the number of TCS members

should be increased, and more number of trained staff should be

recruited.

More customers should be converted into TCS members

S.W.O.T ANALYSIS

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S.W.O.T ANALYSIS

STRENGTH

Limited competition.

Good reputation of the company (T. Choithram & Sons.)

Quality of service.

Highly cooperative, experienced and efficient staff & crew members.

Exclusive Products.

Use of modern technology like credit card billing & loyalty

progrramme.

Wide range of products to suit all customer segments.

Maximum number of branches (Approx.27)

WEAKNESS

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Target customer base very small.

No presence in semi urban sector.

Promotional campaigns are nearly absent.

Less advertising efforts.

At Some times products are out of stock.

Weak supply chain management.

Offers are repeated commonly.

OPPORTUNITIES

Can build a strong distribution network to trap the untouched market.

Customer education will improve the customer base.

Increasing awareness will result in increase in customer base.

None of the supermarkets have 27 branches in U.A.E..

No of competitor’s is increasing very fast, especially In Dubai.

By making some good promotional efforts TCS can gain more

number of customers who will be loyal.

THREATS

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Competition with big giants like LuLu, Spinys, Al Madina Super

market Etc.

Challenges posed by other retailers in the market.

Customer may shift to other supermarket.

Lower customer base may hinder prompt service.

BIBLOGRAPHY

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Bibliography

Research Methodology, methods and techniques by C.R.Kothari-2nd

edition.

TCS Brochures & Flyers.

Web Search Engine

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ANNEXURE

74

COMPREHENSIVE STUDY OF THE INVENTORY MANAGEMENT SYSTEM AND ITS IMPACT ON COST AT

‘TCS’

QUESTIONNAIRE

1. What is the stores average stock in hand?

2. What is the time period after which a regular inventory check is done in the store and in the warehouse?Daily Weekly Monthly

3. How much time is given to stock taking and how many people are employed for it?

4. Do we follow the procedure for annual stock taking?Yes No

5. Who makes the following decisions:

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-What to store?-How much to store?-When to store?-Where to store?

6. What is the procedure that is followed stock taking and reordering?

7. What is the procedure to calculate reorder point?

8. In the process of stock taking, inventory control, and reordering when does the store manager come into action?

9. Who issues the Purchase Order (PO)?

10.What are the documentations required for making a PO?

11.What is the procedure followed to make a purchase order, for local supplier and for imported goods?

12.What is the procedure followed after the PO has been received?

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13.What system do we follow for Sales Documentation?

14.Do we observe seasonal sales?Yes No For Some Products

15.Is the supply and availability of products affected by seasonal variation? If yes how do we keep a check on it?

16.What is the % share of fresh and perishable goods in the entire inventory?

17.What is the % amount of perishable goods that are produced by us and that is purchased from others?

18.How is the inventory check for perishable goods done?

19.On what basis is a vendor selected for a certain commodity?

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20.Do we have a rating system for our vendors? If yes on what scales are the rated?

21.Do we observe inventory shrinkage? If Yes, how much of it is due to -Shoplifting. -Employee Theft. -Inventory record errors.

22. How are returns and damages handled?

23. At the end of each accounting year approximately how much inventory is found unaccountable? (in %).

24. Do we have a duplicate receipt of the goods that we sale at the cash Counter?

25. Do we follow a regular check between the cash counter sales and the Inventory records?

26. Do we follow any special techniques to increase the durability/expiry of certain commodities?

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27. What suggestions do you have to improve the inventory management of the store?

QUESTIONNAIRE FOR CUSTOMER SERVICE

Dear Customer, In an effort to serve you better, we request you to fill in the

following questionnaire.

1. How often do you shop at Trumart?

(Weekly / fortnightly / monthly / quarterly / half yearly)

2. Are you a Trusmart member? (yes/no)

3. How do you find the quality of the products?

(Excellent / good / average / poor)

4. How did you find the variety of products?


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5. Did you come across any difficulty while purchasing or billing?

(yes/no)

Reason: _________________________________________

_________________________________________.

6. Do you wish any products to be added in our store?

(yes/no)

Which: __________________________________________

7. Was the store clean? (yes/no)

8. Was the parking space provided to you appropriate?

(yes/no)

9. How was the overall appearance of the crew members?

(Hair, dressing, body language, communication skill)


10. Were the signage’s informative? (yes/no)

11. How was the visibility and shelf space arrangement of the store?


12. How did you come to know about the offers?

(Flyers / mouth publicity / news paper / Tele-calling)

Other: _____________________________________________.

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13. Any other observations :

________________________________________________________

________________________________________________________

___________________________________.

14. Any other suggestions :

________________________________________________________

________________________________________________________

___________________________________.

Personal information:

Name: __________________________________________.

Age: ________. Sex: (Male / Female)

Address: ___________________________________________

___________________________________________.

Contact no. : ________________. Mobile: _______________.

“THANK YOU”

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PHOTOGRAPHS OF T. CHOITHRAM AND SONS

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0601075 inventory management

Business

store inventory

study of inventory control

impact of inventory

inventory check

ideal inventory

actual inventory

overall inventory control

data analysis