Inventory Management System

Submitted to : Prof. Kapil Garg

Submitted by :

ADITYA VARDHAN (16DM010)

ALLAM DIVYA SANJANA (16DM018)

ANSHUL MASIH (16DM032)

ARVIND SHARMA (16DM045)

ASHISH PANDEY (16DM046)

CHEENU KANSAL (16DM061)

INDEX

ContentsPage No.

Acknowledgement 3

1.Inventory Management 4-6

1.1-Objective of Inventory Management

1.2-Information System in Retail Chain

1.3-What is Inventory Management System

1.4-Types of IMS

1.5-Need and Importance of IMS

1.6-Inventory Costs

2.Introduction to Big Bazaar 6-9

2.1-Competitors of Big Bazaar

2.2-Inventories in Big Bazaar

2.3-Supply Chain for goods

3.MIS (Management Information System) 10-12

3.1-MIS in Big Bazaar

3.2-Enterprise Resource Planning

3.3-Functions of ERP in Big Bazaar

3.4-IM using other software

4.Bibliography 13

Acknowledgement

Inventory Management

We would like to gratefully acknowledge the contribution of all the people who took active

part and provided support to us during the course of this project. To begin with, we would

like to offer our sincere thanks to Prof. Kapil Garg, for giving us the opportunity to study

the inventory management system of BIG BAZAAR. Without his guidance, support, and

valuable suggestions during the research, the project would not have been accomplished.

Our heartfelt gratitude goes to him for his co-operation and willingness to answer all our

queries, and provide valuable assistance that shared his rich corporate experience, and

helped us script the exact requisites.

Last, but not the least, I would like to thank Birla Institute of Management

Technology for giving us this wonderful opportunity to learn about the need for

information systems in today’s business models.

Imagine a condition that you visit a supermarket and ask for a product and reply you get are as follows “I am sorry we are out of stock, May we order it for you?” then what will be your reaction. Will you be visiting that store again or recommend to someone else? Most probably your answer must be a “NO”. This creates the need for inventory management.

If any store irrespective of their size does not manage their inventory, it will definitely lose its customer.

Inventory management is the practice of monitoring, controlling and coordination of the ordering, storage and use of components that a company uses in the production of the goods it sells. Inventory management is also the process of monitoring and controlling of quantities of finished goods for sale. A firm’s inventory is one of its major assets and represents an investment that is wound up until the item sells.

Objective of inventory management

Objective of the inventory management is to maintain an optimum size of inventory for efficient and smooth production and sales operations. Its objective depends on 5 R’s: Effort should be made to place an order at the right time with right source to acquire the right quantity at the right price and right quality.

Information System in Retail ChainAn IS is a system that takes different resources as input and processes them efficiently into an information product as output. It is a coordinated and organized blend of people, hardware, software, network both intranets and extranets and internet and data resources.

In the present scenario, if the retailer is on highest rung of the information system, then he would be able to coordinate and manage his business efficiently and easily. For large retailers, it becomes very necessary to centrally coordinate and manage all the shops. Retail management IS exactly does this very simply and efficiently with help of different specialized hardware, software and networks, database management systems and various useful modules.

The primary role of Retail IS is to facilitate basic retail functions like raw material procurement, storage and warehousing, dispatch and efficient delivery, etc. It should allow the manager to oversee sales of differentiated product mix and daily sales volume. An information system can help to a very large extent in inventory management.

The objectives of the retail management information systems are as follows:

An information system should provide necessary and concise data to retail manager in regular intervals.

An IS must foresee needs and requirement of the retail manager.

An IS should be flexible enough to encompass constant increasing and evolving needs of the consumer market.

An information system should be able to captivate, store and organize all the necessary data on a regular and continuous basis.

What is Inventory?

Inventory refers to the stock of work-in-process goods, raw material and finished goods that are the assets of a business which are ready or will be ready for sale.

The different types of inventory are as follows:

Raw materials Supplies and purchased parts Tools and Equipment Finished Goods Work-in-process or partially completed products

What is Inventory Management System?

When the customer is ready to spend, then you have got to be ready with required goods at any condition. This is what the inventory management system is all about. It is a system which tracks inventory levels, sales, orders and deliveries to keep a sufficient supply of goods while minimizing the cost of.

Companies generally use inventory management to avoid product shortage or overstock. Inventory Management System helps in managing all your sales, accounting, stock, and customer data.

Inventory management is becoming one of the most crucial elements in the organisation as inventory constitutes the one of the biggest part of Investment of any organisation in its current assets. So funds blocked in inventory should neither be too high nor too low. It should just be optimum. So one of the biggest aims of this inventory management system is to maintain the optimum level of investment in inventory and stocks. As we know too high investment of funds in inventory results into the high blockage of funds in the stocks which bears many kind of costs say the cost of interest on amount of money blocked, cost of risk to bear, cost of storage in warehouses etc. So we can say that it reduces the overall profitability of the firm which is one of the main aims of any organisation. On the other hand, insufficient investment in inventory is also not desirable as it may lead to frequent stock outs which is the biggest problem as it breakdown the production and selling processes.

Therefore, the firm may lose their current market share as consumers once shifted can never be regained.

Inventory Management can be easily understand by the following diagram in which a tap which is filling the tank can be considered as the supply of inventory and one tap which is emptying the tank can be considered as selling of inventory. The flow of both the taps can be considered as the frequency of inflow and outflow of the inventory. The capacity of tank can be considered as the adequate amount of inventory which is required to maintain to avoid shortage or surplus of inventory. We should maintain the inventory level to avoid any uncertainty in demand or supply of inventory.

Types of Inventory Management System

Inventory Management Systems are of two types:

a.) Periodic Inventory System:The periodic inventory system measures the level of inventory using an occasional physical and the cost of goods that are sold. Commodity purchases are recorded in the purchase account. The cost of goods sold and the inventory account are always updated at the end of a specific period.

b.) Perpetual Inventory System:The perpetual system keeps continuous track of the inventory balances, by making updates automatically whenever a product is sold or received. Returns and purchases are recorded immediately in inventory account.

Need of Inventory Management System

SMOOTHENING DEMAND: This is one of the most important purposes of inventory management system to smooth the seasonal and cyclical demand.

ACT AS PRICE CUSHION: Good inventory management system also acts as cushion against the sudden rise or fall in price. Also it enables the firm to gain the benefit of various kinds of reductions in price.

SAFETY PURPOSE: 1. In internal process of the organisation due to any breakdown or

shortage2. For acting as cushion for any kind of delay in receiving goods in our

supply chain.

Importance of Inventory Management System

Provides adequate inventory:The firm has to maintain sufficient inventory for smooth selling and production activities so that surplus or shortage of inventory would not become the reason for the downfall of the firm.

Increase efficiency and effectiveness:If you want to enhance a profitable firm then it has to minimize the investment in inventory so that we can use such limited resources in any other way which will enhance the efficiency and effectivity.

Increase productivity:The main objective of inventory management is to minimize the total cost of carrying and ordering the inventory and the shortage costs. So as to enhance the productivity of the organization they are maintaining the optimum balance between these costs

Avoid stock outs: As we know that no organisation wants the loss of their prospective customers due to the lack of their supply when the customers demanded as customers once gone are very difficult to regain.

Matching the requirements:

Proper inventory management systems should be there in an organisation so as to match the requirement of the organization in terms of the information system required to control.

Inventory Costs

Basically there are three types of costs involved in inventory handling. These are

CARRYING COST: It means the total cost of holding the inventory in their store. It includes the cost of capital blocked in the stock.

ORDERING COST: It includes the cost of replenishing the stock from the sources.

SHORTAGE COST: It arises from the difference between the actual demand and the forecasted demand. It is equal to the value of sales lost due to shortage of inventory.

Introduction to Big BazaarBig Bazaar is an Indian chain of retail hypermarkets which have greater than 120 stores which are currently in working. From the success of the US based super retail store Wal-Mart the Future Group Venture Ltd.’s took an initiative to explore the similar market in India by opening the subsidiary named Big Bazaar.

A very unique campaign “Hafte ka sabse sasta din” was introduced by the Big Bazaar after being influenced from a very successful campaign of Wal-Mart, in which special and extra reductions in prices were given on Wednesday every week, to attract the would be consumers into their market. They have a tight security check like at every exit point of Big Bazaar, they use various kinds of alarm systems or Electronic Article Surveillance system, which can detect the goods that have attached tags or not.

1. Big Bazaar is a large chain of retail hypermarket in India, which satisfies the number of the wants and requirement of every family.

2. Big Bazaar has emerged into the fashion market, ordinal merchandise like cutlery, sports products, utensils, crockery and home furnishings materials etc. at the reasonable prices.

3. Big Bazaar chain has more than 120 working stores across the country.

4. Big Bazaar is the biggest country chain promoted by CEO of the Future Group, Mr. Kishor Biyani. Their Unique Selling Price is the basic attraction associated with the reasonable prices.

Competitors of Big Bazaar

Wal-Mart Easy Day Reliance Store Vishal mega mart Shoppers stop Spencer

Types of inventories in Big Bazaar

The inventory management for all the branches is that they adopt different methodology for different categories of products.

1) Cycle inventory is carried for the FMCG product category and Food Category as the turnover of these products is high and after a period they get expired.

2) Safety level of inventory is adopted for Apparel as the cost of these products is high and they can be retained for longer span.

3) Seasonal inventory is adopted for the products which are in demand for only peak season

Big Bazaar generally deals in international level brands like Lee, Levis etc., and Wrangler along with this it also deals with Private label brands KORIA in electronics, DJ&C in apparel, etc. The inventories can be further classified into FMCG, fashion & apparels, FOOD & NON- FOOD junction, fruits &vegetables, chill section, home decorator, book zone, footwear, etc.

Apparels: Formal & casual wears, fabrics, jeans & shirts, etc.

Home Care: soap, detergents, cleaning agents

Chill station: beverages products, drinks

Farm Products: fruits, vegetables, dairy products

Electronics: TV, Mobile, Accessories

Supply chain for perishable and imperishable goods

Perishable products like fruits and vegetables are handled with care and accuracy. They are purchased on regular basis as per demand. Care is also taken that damaged and rotten vegetables are either rejected or sold at a lower cost to the local market.

On the other hand for imperishable products which are utensils, electronic items and staple goods are generally purchased from local manufacturing units from different parts of countries.

Big Bazaar is operated by Central Distribution Channel and by this mechanism commodities are transported to every Big Bazaar Store. The modes of transportation are Truck & Rails, but in emergency cases, flights are also used. The transportation is mostly outsourced which are primarily Quick & Safe, Gati, Deluxe Roadways, and TNT.

Management Information System (MIS) in Big Bazaar

Big Bazaar has strong MIS capability that helps them to improve their operations, as well as enhancing their speed of execution in response to what the customer want. They are thus able to monitor their speed of response on daily basis across stores, departments and also for category of products. This really helps them to take correct action on a timely basis and optimize their stock accordingly.

Big Bazaar uses JDA ERP and SAP ERP software. JDA ERP is an enterprise resource planning software developed by an American software and consultancy company while SAP ERP is an enterprise resource planning software developed by a German company SAP (System, Application and products) SE to manage the inventory system of different business and improve customer relationship management.

What is ERP?

ERP is an acronym for Enterprise Resource Planning which is software used for business process management that allows any organization to use an information system of integrated applications to do many back office functions related to information technology and manages the business.

Function of Enterprise Resource Planning in Big Bazaar

Product ordering Merchandising buying Inventory Management Stock Transfer

Process of MIS in Big Bazaar

a.) SOD (Start of the Day)Procedure:

Start the web Portal Enter provided login ID and password Open webapp basics Click SOD status Click Start SOD

b.) EOD (End of the Day)Procedure:

Start the web Portal Enter provided login ID and password Open webapp basics Click EOD status Enter Login ID and Password again Press Enter

Functioning of Management Information System (MIS) in Big Bazaar

There are 2 servers used by the MIS: Main Server and Backup Survey Each of the servers has its own storage system (15 hard disks to store the

same information) The information is backed up daily at the EOD (End of Day). There are generally 15 counters for transaction in Big Bazaar. The recording

at the transaction at each of these counters is done. The average no. of transactions made per day varies from 3500-4500 and all

transaction data is recorded at each terminal and stored at the database.

Inventory Management using different software

Information System is very instrumental to reduce costs, improve optimization and efficiency, providing a value proposition to the consumers and increasing the valued customer experience in every area. Achieving cognizance in activities across various procurement processes of inventory is easily done by using specialized software. Now Information System is playing an indispensable role in most of the critical functions of Supply Chain, Operational, Financial & Accounting activities and HR. IS has helped them to reduce processing time and enable them to respond efficiently to the changing customer requirements. This has also helped them a lot to reduce the cost and expenses of operations through reduction in unnecessary wastage.

Main Server

Backup Server

Transaction Counter

---at least 15Transaction

CounterTransaction

CounterTransaction

Counter

SOD/EOD SOD/EOD SOD/EOD SOD/EOD

Other than from ERP’s, Big Bazaar uses some other methods like Bar Code Technology, CCTV and RFID. Bar Code is a popular device which is used to identify and point the items in the supply chain of the business while RFID (Radio Frequency Identification) removes the limitations of Bar Code. Big Bazaar also uses CCTV’s installed in different locations around the store such that entire functioning and live activities taking place in a store can be monitored closely by a human operator.

Bibliography

Essentials of Inventory Management by Max Muller

Inventory Accuracy by David J. Piasacki

https://www.academia.edu/7108307/RETAIL_MANAGEMENT_BIG_BAZAAR_Introduction_to_Retail_Industry

http://www.inc.com/encyclopedia/inventory-control-systems.html

http://www.capterra.com/inventory-management-software/

https://www.tradegecko.com/product-tour/inventory-management-system

https://www.asapsystems.com/inventory-management-system.php

http://searchmanufacturingerp.techtarget.com/definition/Inventory-management

http://www.cmu.edu/information-systems/

https://www.microsoft.com/en-us/dynamics/what-is-erp.aspx

http://www.netsuite.com/portal/products/netsuite/erp.shtml