Institute of Management Development & Research 2018 WINTER RESEARCH PROJECT REPORT On
“ A
st study on effe ff ecti ve I nve nvento ntor y manage nagem ment and .” C ontr ntr ol in i n D-m D -ma ar t & B i g B azar .”
Submitted by:
Submitted to:
Sanniya Aswal
Prof. Abhijit Shivne
Roll no.- 82
DECLARATION
I hereby declare that t he project work entitled “INVENTORY MANAGEMENT AND CONTROL IN RETAIL ORGANISATION” submitted to the Institute of Management Development and Research, Pune, is a record of an original work done by me under the guidance of Dr. Abhijit Shivne, Faculty at IMDR. This project work is submitted in the fulfilment of the requirement for the Post Graduation Degree of Diploma in Management. This report is my own work and has not duplicated from any source. The conclusions and suggestions drawn are based on my observation and collected materials by myself.
Name: Sanniya Aswal
Place: Pune
ACKNOWLDGEMENT
A successful project is the result of team work and coordination that includes the guidance provided by each team members and the mentors. I am also thankful to all my professor and special gratitude towards Dr. Abhijit Shivne for giving invaluable knowledge throughout the year which has helped me to complete my project report. Finally, my gratitude towards my family and friends for having believed on me and supporting me constantly.
SANNIYA ASWAL
TABLE OF CONTENT
S. No. I
II
Topic Introduction - Introduction of Inventory Management What is Inventory Types of Inventory Inventory Management Concept - Inventory Control Risk and cost associated with Inventory control Essentials of Inventory Control system Inventory Control Process
Literature Review - Introduction to Retail Sector Indian Retail Industry - Company Profile of D-mart - Vision & Mission - Organisation Layout - Inventory Management in D-mart (functional flow diagram, record for physical inventory)
III
Research Methodology - Objective of Research - Need of the Project - Research Design and Process - Problem Statement - Data Collection - Scope & Limitations of Research
IV
Data Presentation & Analysis (Desk Research)
V
Findings & Conclusion
VI
Bibliography
VII
Appendices
Questionnaire
Page No.
CHAPTER I INTRODUCTION OF INVENTORY MANAGEMENT
1.1 Introduction The Project is carried out for understanding the inventory management and control of the products at D-mart branch in Pune. D-mart launched its first store in the year 2002 and they are the old player in RETAIL sector. They follow the values such as Indian-ness, Leadership, Respect and Humility, Valuing and Nurturing Relationships, Simplicity and Positivity, Adaptability. This research will help us to understand the aspects of inventory management and control in retail sector which is booming and well used by the Indian families.
1.2 What is Inventory? Inventory is an important asset for many companies as it is often a large asset on the company’s financial statement and represent 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 the items such as whether the control exists; whether it was designed properly; related test procedure; 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, expenses tools and finish products recorded on the books by organisation. It is the essential part of every organisation whether big or small has to maintain inventory in the system. Inventory serves as a link between production and distribution processes.
1.2 (a) Definition 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”.
1.2 (b) Characteristics of Inventory: 1. Inventories Serve as a Cushion to Absorb Shocks: These is alwa ys fluctuation in demand and supply of the item which disturbs the schedule inventory absorbs these fluctuations. 2. Inventories Provide Production Economies: Stocks bring economy in purchase of various inputs due to discounts on bulk purchase.
3. Inventory in a Necessary Evil: Inventory require valuable space and consumes taxation and insurance charges. This leads to considerable inves tment and causes opportunity loss.
1.2 (c) Need of 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 purpose or motives of holding inventories: a) The Transaction Motive which facilitates continuous production and timely execution of sales order. b) The Precautionary Motives which necessitates the holding of inventories for meeti ng the unpredictable change in demand and supplies of materials. c) The Speculative Motives which includes to keep inventories for taking advantage of price fluctuations, saving in re-ordering costs and quality discounts etc. Other more important reasons to maintain inventory in the organisations 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 fluctuation in demand so if the inventory is kept then these fluctuations can be met easily and demand of the customer can be fulfilled easily. c) Unreliability of supply: Inventory protect us from unreliability 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 impact of cost inflation.
1.3 Types of Inventory a) Movement Inventories: They are also called transit or pipeline inventories. Their existence owes to the fact that transportation time is involved in transferring substantial amount of resources. b) Buffer Inventories: They are held to protect against t he uncertainties of demand and supply. An organisation generally knows the average demand for various items that it needs c) Anticipated Inventories: They are held for the reason that the future demand for the product is anticipated. Production of specialized time like crackers well before dewily, umbrellas and raincoats before taints set in, fans while summers are approaching, or the piling up of inventory stocks when a strike is on anvil, are some of the examples.
1.4 Inventory Management Inventory Management is very important area of production management and plays a vital role in the economic operations of a concern. It has been defined a variety of ways and most of the definition stress the importance of control element in achieving cost effectiveness. Irrespective of the range of particular discipline which may have to be applied within the functional fields in meeting the need of individual situation. According to Prichard and Eagle, inventory management can be defined as “ the sum total of those activities necessary for their aquition storage, sales, disposal or use of inventory”. Inventory management, impact is an integral part of production, planning and control which, according to Charles A. Kepke, may be defined as the co-ordination of series of function according to a plan which will economically utilize plant, facilities and regulate the orderly movement of goods through their entire manufacturing cycle, from procurement of all materials to the shipping of finished goods at pre- determined rate. The scope of inventory management is not restricted to techniques of regulating the movement of inventories and it rather converts the entire range of functions, which affects the flow, conversions, quality and cost of inventories. It can be inferred from the above definitions that there are two guiding principle in inventory management.
Adequate inventory has to be maintained to avoid the stock out and causing consequent production held up and the customer’s dissatisfaction Excessive investment in inventory items must be avoided as it increases the carrying and results in loss of profit
In view of these principles it may be inferred that for manufacturing concern, inventory management is the significant aspect of production and financial planning and control. 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.
1.4 (a) Importance of Inventory Management It is now great significance in a view of imperative need for productivity growth. Optimal utilization of all available resources and avoidance of all types of waste especially in case of raw materials is required for an ambitious programme of economic growth.
The importance of inventory management lies in the fact that many significant efforts for the reducing the materials cost will go along way in improving the profitability and rate on investment. Following are the benefits of optimum inventory management:
It provides a check against the loss of materials through carelessness or pilferage. Inventory management ensure an adequate supply of materials, stores, spares etc. Minimizes the stock out and shortages an avoids a costly interruption in operations. It reduces length of manufacturing cycle to the minimum. It enables the management make cost and consumption between operations and periods.
1.4 (b) Objectives of Inventory Management The main objectives of inventory management are operational and financial. The operational objectives mean that materials and spare should be available in sufficient quality so that work is not disrupted for want of inventory. The following are the objectives of inventory management: a. To ensure the continuous supply of materials, spares and finished goods so that production should not suffer at any time and customer demand should also be met. b. To keep material cost under control so that they contribute in reducing cost of production and overall costs. c. To minimize losses through deterioration, pilferage, wastage and damages. d. To eliminate duplication in ordering or replenishing stocks. This is possible with help of centralizing purchases. e. To design proper organisation for inventory management. f. To ensure perceptual inventory control so that materials shown in stock ledgers should be actually lying in the stores.
1.4 (c) Benefits of Inventory Management a. Centralized inventory management consolidates inventory information by tracking lot numbers, on-hand levels and expiration dates, making the re-ordering process more efficient. b. Enables simultaneous tracking and documenting supplies during studies to reduce redundant data entry and increase workflow efficiency.
c. When multiple officials are involved in a case, the statistical report accurately correlate the supplies used with the correct user, eliminating mis-charges and appropriately tracking resources. d. 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. e. Optional interface to company’s material management system significantly reduces ongoing inventory maintenance and ensure accurate pricing data for case cost reports and auto-decrements supply levels. f. 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.
1.5 Inventory Control It is an attempt to balance inventory needs and requirements with the need to minimize costs resulting from obtaining and holding inventory. It can also refer as Internal Control- A system design 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 stock
The cost of placing an order or set-up cost of production
The cost of storage, 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.
1.5 (a) Definition of Inventory Control It is a system of ordering based on the maintenanc e of the stock in the store using a re-order rule based in the stock level. It is a technique of maintaining the size of the inventory at some desired level keeping in view the best economic interest of an organisation. It means keeping a track of inventories, so that the items are available when they are needed. This is achieved by:
Purchasing items at economic price at a proper time an in sufficient quantity.
Provision of suitable and secured storage location with sufficient space.
Inventory identification system
Upto date and accurate record keeping by a responsible sta ff
Appropriate requisition procedure
1.5 (b) Importance of Inventory Control The aim of holding inventories is to allow the firm to separate the process of purchasing, manufacturing, and marketing of its primary products. Inventories are a component of the firm’s working capital and as such represent a current account. Inventories are also viewed as a source of near all cash. The purpose is to achieve efficiencies in areas where costs are involved. The scientific inventory control results in the reduction of stocks on the one hand and substantial decline in critical shortages on the other. (i) Reducing Risk of Production Shortages (ii) Reducing Order Cost (iii) Minimise the Blockage of Financial Resources (iv) Avoiding Lost Sales (v) Achieving Efficient Production Scheduling (vi) Gaining Quantity Discounts (vii) Taking the Advantage of Price Fluctuations (viii) Tiding over Demand Fluctuations (ix) Deciding timely Replenishment of Stocks
1.5 (c) Objectives of Inventory Control The main objective of an inventory control system is to make inventory decision that minimize the total cost of inventory, which is distinctl y 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.
Protection against fluctuation of Demands
Better use of men, machines and materials
Protection against fluctuation in outputs
For production economies
Control of stock volume
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 carr ying cost of inventory with the cost of running out of an item.
1.6 Risk and cost associated with Inventory control Holding of Inventories expose the firm to a number of risks and costs. Major risks are:
a) Price decline: They may be due to increase in market supply of the product, introduction of a new competitive product, price-cut by the competitors etc. b) Product deterioration: This may be due to holding a product for too long a period or improper storage conditions. c) Obsolesce: This may be due to change in customer’s taste, new production technique, improvements in product design, specifications etc. The cost of holding inventories are as follow:
a) Material Cost: This include the cost of purchasing the goods, transportation and handling charges less any discount allowed by the supplier of goods. b) Ordering Cost: This includes the variables cost ass ociated with placing an order for the goods. The fewer the orders, the lower will be the ordering costs for the firm. c) Carrying Cost: This includes the expenses for storing and handling the goods. It comprises storage costs, insurance costs, spoilage costs, cost of funds tied up in inventories etc.
1.7 Essentials of Inventory control system For an efficient and successful inventory control there are certain important conditions that are as follow: 1. Classification and Identification of Inventories 2. Standardization and simplification of Inventories 3. Setting the maximum and minimum limits for each part of Inventory 4. Economic Order Quantity 5. Adequate Storage facilities 6. Adequate Reports and Records 7. Intelligent and experienced personnel
8. Coordinating 9. Budgeting 10. Internal Check
1.8 Inventory Control Process To control inventory effectively, you need item-level visibilit y. The easiest way to do this is to conduct periodic inventories or cycle counts of all inventory by location. These physical inventories provide an accurate count of inventory levels by part number or SKU and location. But because items are constantly added and removed from stock, the accuracy of this information is limited by the frequency with which you conduct your inventories. To address this, you can also track all transactions as they occur. The most common transacti ons are: receipts and issues and moving inventory from one location to another. Typically, a receipt or issue transaction includes the part number, quantity, date/time and location the transaction took place. For example: you receive 10 units of part 1234 to shelf 12 at 10:00 AM on January 16th. That’s a lot of information to manually record each and every time a transaction occurs. And it doesn’t include additional information commonly captured, such as the purchase order number of the item being received, or the person, customer or job the items you’re issuing them to. This is why, when organizations monitor inventory at the transaction level, they use a barcode-based system to help streamline the process.
CHAPTER II INTRODUCTION RETAIL SECTOR
2.1 Meaning of Retail Retail means selling directly to the customers in small quantities. Retail sector is the most booming sector in Indian economy. Some of the biggest player of the world are going to enter into the industry soon. It is on t he threshold of a big revolution after the IT sector. Although organised retail market is not so strong as of now, but it is expected to grow manifold s by the year 2010. The sector contributes 10% of the GDP and is esti mated to show 20% annual growth rate by the end of the decade. The current growth rate is esti mated 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 organised sector. These 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 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, Supermarket and Department stores like Shubiksha, Marks & Spencer, 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 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 organised and unorganised retail sector with the latter holding the larger share of the retail market. At present the organised retail sector is catching up very fast. the impact of alterations in the format of the retail sector changed the lifestyle of the Indian consumers drastically. The growth factors of the retail sector of Indian economy:
Increase in per capita income which in turn increase the household consumption
Demographical changes and improvement in the standard of living
Change in pattern of consumption and availability of low-cost consumer credit
Improvement in infrastructure and enhanced availability of retail s pace entry to various sources of financing
The future trend of the retail sector of Indian economy:
It will grow upto 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 hypermart
The hypermart format would be further encouraged with the entry of the TNC’s
2.1 (a) 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. 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 fort has 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 wa y 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 median age of 24 years, nuclear families in urban areas, alongwith increasing workingwomen 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 inorganized 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.
2.2 Company Profile DMart is a one-stop supermarket chain that aims to offer customers a wide range of basic home and personal products under one roof. Each DMart store stocks home utility products including food, toiletries, beauty products, garments, kitchenware, bed and bath linen, home appliances and more - available at competitive prices that our customers appreciate. Our core objective is to offer customers good products at great value. DMart was started by Mr. Radhakishan Damani and his family to address the growing needs of the Indian family. From the launch of its first store in Powai in 2002, DMart today has a well-established presence in 149 locations across Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu, Punjab and Rajasthan. With our mission to be the lowest priced retailer in the regions we operate, our business continues to grow with new locations planned in more cities. Avenue Super Marts Pvt Ltd (ASPL) owns and operates hypermarkets and supermarkets by the store name D-Mart.
D-Mart seeks to provide a one-stop shopping experience for the entire family, meeting all their daily household needs. A wide selection of home utility products is offered, including foods, toiletries, beauty products, garments, kitchenware, bed and bath linen, home appliances and much more.
Since D-Mart first opened its doors in the Mumbai region in 2000, it has grown into a trusted and well-established shopping destination in the Mumbai Metropolitan Region (Mumbai, Navi Mumbai and Thane). D-Mart is now looking forward to growing its stores across India. The company founder Mr. Radhakishan Damani is respected in the business world as an astute investor in the Indian equity market, he has built a company that constantly strives towards developing a deep understanding of customer needs and satisfying them with the right products. A firm believer in core business fundamentals and strong ethical values, Mr. Damani has built DMart into an efficient, large and profitable retail chain that is highly respected by customers, partners and employees alike.
2.2 (a) The Customer Service Pledge At DMart, the strong emphasis is on excellence in customer service. The employees rely on the ACT formula to get the job done, with Dedication and Determination. Action-
Focus: To be focused about what I do. Motivated: To be clear of achieving my goal. Enthusiastic: To love what I do. Care-
Respect: To respect every individual in the organisation and provide her/him with the dignity and attention to make her/him believe that she/he makes a difference to the organisation. Listen: To listen and resolve any employee / customer grievance quickly and fairly. Truth
Integrity: By being open, honest and fair in all our relationships and being respectful and trustful to others.
2.2 (b) Product offerings D-Mart offers a wide selection of products in the following categories:
Foods
Toiletries and Beauty products
Garments
Kitchenware
Bed and Bath linen
Toys & Games
Stationery
Home Appliances
Footwear
2.2 (c) Merchandise
The product mix is good & lot of variety is available.
The assortments for apparels are done as per the price and size.
The D-Mart offer price and the Max. Retail Price both were visible on the price card
During the festival season, the festival items are kept in the main area.
A wide variety of festival and decorative items for DIWALI and NAVRATRI festival are kept along the main passage.
The whole area was divided as per the products that they offered like apparels, stationeries, crockery’s, sanitary items, gift articles, steel items, detergents, vegetables, fruits, etc.
2.2 (d) Slogan/Tag Line of DMart “MEHANAT HAMARI BACHAAT AAP KI”
2.3 Vision & Mission
MISSION “TO BE THE LOWEST PRICED RETAILER IN THE AREA OF OPERATION / CITY / REGION.”
VISION IT IS OUR CONTINOUS ENDAVOUR TO INVESTIGATE, IDENTIFY & MAKE AVAILABLE NEW PRODUCT CATEGORIES FOR CUSTOMER’S EVERYDAY USE & AT
THE BEST VALUES THAN ANYBODY ELSE
2.4 Organisation Layout
2.5 Inventory Management in DMart A) Categorization of Inventory: For the purpose of stock take the inventory will be categorise as follow
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 follow
Category A – Once a month Category B – Once in two month Category C – Once in three month
B) Stock Take Schedule: The schedule for the year is determine 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.
C) 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. Base on the Stock Take schedule, the stock take team leader generates the SKU list for each 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 manager, home delivery manager, store accountant and unit coordinator. 2. The Stock Service Supervisor is to have the damaged stock list updated. 3. The Stock 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 priorit y. The invoices pending for buyer ’s decision will be expedited and RC’s done before stock take.
D) Day prior to Stock Take: 1. Stock take team is to identify and list all the location where the merchandise to be counted is kept. This include back store, display locations, receiving bay and VM (Visual Merchandise) Displays. 2. A global count must be done 3. Ensure sufficient scanners are available and kept for changing 4. The count sheets are serially numbered and kept with the Stock Take team leader. 5. Stock Take Supervisor to ensure no SAV (Stock at Value) is pending with Store Accountant 6. Stock Service Supervisor to ensure the damaged stock list is updated. Whenever and 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 the 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/Transfer (In & Out) in respect of sub classes scheduled for stock take.
E) The day 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.
CHAPTER III RESEARCH METHODOLOGY
3.1 Objective of the study As the retrial sector is the booming sector in India it is very important to understand the Inventory management aspect of retail industry, because most of the spending and issues occurs from inventory level only. As a student of operations management I need to know about all these aspect in order to have a better understanding.
