Project ReportOn

INVENTORY MANAGEMENT AT HYPERCITY

SUBMITTED TO

PUNJAB TECHNICAL UNIVERSITY, JALANDHAR

For Partial Fulfillment Of The Requirements for The Award Of

Master of Business Administration MBA (Session: 2010-2011)MBA (Session: 2010-2011)

Supervised By Submitted ByMs. Kanika Sharma Ms.Deepika KapoorLecturer Roll No. 33630

Department Of Management

Swami Satyanand College of Management and

Technology

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. Rajneesh Jain, Assistant Manager and

Pradhuman singh Rathore 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

Deepika kapoor

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 store’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 company’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 country’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 , India’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, children’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

SOM(Food, Non food)

SOM (Checkout , CSD )

SOM(Staples, personal care )

SM(Receiving )

Service Manager

Service Manager

Service Manager

Assistant Manager

Branches Of Hypercity

Hypercity – Malad Hypercity – Vashi

Hypercity – Jaipur 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 world’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 month’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 & Cafés:

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, Café 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:

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

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

production.

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.…

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.

Relevant Inventory Costs

Ordering Costs Holding Costs Set up Costs

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 firm’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 fir’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 .

I NVENTORY 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 re-

ordering 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 hospital’s existing inventory system, significantly

reducing go-live times and improving departmental efficiency.

5. Optional interface to institution’s/company’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 TechniquesInventory 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-

Minimum lost of energy

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 No. of Items (%) Value Of items (%)

A 10 70

B 20 20

C 70 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 ‘X’

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 “ a system of records maintained by controlling department , which reflects the

physical movements of stocks and their current balance “ . 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.

SKU’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 SKU’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 Count Retail

Cost

Sku No. Description Hand Count Var Retail Cost Retail Cost

Variance Variance

100019944 HYPERCITY S 271.00 .00 271.00- 5365.80

3900.06 .00 .00 5365.80- 3900.06-

100020054 HYPERCITY S 35.00 .00 35.00- 3291.75

2518.49 .00 .00 3291.75- 2518.49-

100020055 HYPERCITY

S .00 .00 .00 .00 .00 .00 .00 .00 .00

100020060 HYPERCITY

S .00 .00 .00 .00 .00 .00 .00 .00 .00

100020062 HYPERCITY

S .00 .00 .00 .00 .00 .00 .00 .00 .00

100020069 HYPERCITY A 52.00 .00 52.00- 1612.00

1294.37 .00 .00 1612.00- 1294.37-

100020071 HYPERCITY A 53.00 .00 53.00- 7950.00

6169.65 .00 .00 7950.00- 6169.65-

100020073 HYPERCITY

A .00 .00 .00 .00 .00 .00 .00 .00 .00

100020075 HYPERCITY I 59.00 .00 59.00- 1121.00 944.00 .00 .00

1121.00- 944.00-

100020078 HYPERCITY D 41.00 .00 41.00- 1148.00

943.00 .00 .00 1148.00- 943.00-

100020079 SUPREMIASU 38.00- .00 38.00 5320.00-

4370.00- .00 .00 5320.00 4370.00

100020080 SUPREMIASU 70.00 .00 70.00- 2148.30 1610.00 .00 .00

2148.30- 1610.00-

100020081 HYPERCITY S 190.00 .00 190.00- 5078.70

3990.00 .00 .00 5078.70- 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 Warehouses

Record Physical Inventory

Books Orders Inventory Items

Order items

Warehouse Id + count

Warehouse Id + Physical count

Books Id & on hand

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 : 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.

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.

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.

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.

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 14-

year 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 25

No 17

Can’t say/do not know 08

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 28

No 16

Can’t say/do not know 06

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 35

Disagree 08

Can’t say 07

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 07

To save time 17

To maintain accountability 12

Other reasons 08

Do not know/can’t say 06

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 15

Improves sales effectiveness 20

Reduced operational cost 06

Other benefit 05

Do not know/can’t say 04

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 28

No 18

Can’t say/do not know 04

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 22

Only skilled but not trained 08

Non skilled but trained professional 10

Non skilled and non professional 08

Others 02

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 10

Agree 20

Disagree 05

Strongly disagree 08

Can’t say 07

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 28

No 12

Can’t say/do not know 08

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 22

Maintenance cost 08

Changing requirements of customers 08

Other problem 07

Can’t say 05

Interpretation:

Future seems to be pretty good as per the responses given by the people .

as 22% says that the trained professionals are prime challenge to inventory

management system

Annexure 1. Are you aware about Inventory Management system?

Yes

No

Can’t say/do not know

2. Do you know that your company has inventory management system ?

Yes

No

Can’t say/do not know

3. Do you agree that there should be inventory management system in company or

Organization?

Agree

Disagree

Can’t say

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/can’t say

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/can’t say

6. Do you have skilled professionals in your company for inventory management ?

Yes

No

Can’t say/do not know

7. 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

Can’t say

8. Do you know that s/w used by your company is acc. to design needs of the

System?

Yes

No

Can’t say/do not know

9. What is the prime challenge by your company regard to inventory management ?

Lack of trained professional

Maintenance cost

Changing requirements of customers

Other problem

10. 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

BibliographyTo bring the system to verge of completion the following sites have been referred:

www.answers.com

www.Hypercity india.com

Karel H van Donselaar, Vishal Gaur, Tom van Woensel, Rob A C M Broekmeulen,

Jan C Fransoo. Management Science. Linthicum: May 2010. Vol. 56

PR Newswire. New York: Sep 10, 2009..

Ed McKinley. Stores. New York: Jun 2010. Vol. 92, Iss. 6; p. 48

Martin C Daks. NJBIZ. New Brunswick: Jun 7, 2010. Vol. 23, Iss.

Felipe Caro, Jérémie Gallien. Operations Research. Linthicum: Mar/Apr 2010. Vol.

58, Iss.

ConclusionIt might seem axiomatic that inventory control is efficient as long as inventory level is

going down. But the fact is that, if inventories are minimized without adequate

operations, inventories have been mismanaged rather than controlled efficiently. Thus,

the basic objectives of inventory management appear to be conflicting in nature.

Inventories should increase or decrease in amount or time as related to sales requirements

and production schedules

Hypercity should efficiently use various Inventory management tools to control the stock

levels like ABC analysis, monitoring of stock levels i.e. ROL, EOQ, Min-Level, Max-

Level system of verification of inventory etc.

Steps to effective inventory management

There are two approches that the orgainizations can made with regard to inventory .

1) They can assume it is just a neceesary evil and start a special inventory reduction

program whenever cash gets tight .

2) They can make strategic decisions on the level to carry , put an inventory

management process in place to actively manage inventory and contimul improve

the business results.