Synopsis

On
Parle Biscuits Pvt. Ltd. Bahadurgarh (Haryana)

ON
PRODUCTION MANAGEMENT ANALYSIS

Under the supervision of Submitted by

Mr. Rajinder Nishant Hooda
Lect. Roll No. : 15061119115
ZAD Computer
Rohtak
Remarks of Evaluator
Approved/Disapproved Approved/Disapproved
(I Evolution) (II Evolution)

DIRECTORATE OF DISTANCE EDUCATION

GURU JHAMBHESHWAR UNIVERSITY OF SCIENCE &
TECHNOLOGY
HISSAR-125001 (HARYANA)
 DIRECTORATE OF DISTANCE EDUCATION
GURU JHAMBHESHWAR UNIVERSITY OF SCIENCE &
TECHNOLOGY
HISSAR-125001 (HARYANA)

Name : Mr. Rajinder

Designation : Lecturer
Qualification : MBA
Experience : 5 years
Official Address : ZAD Computers, Rohtak
Mobile : 9729077884
E-Mail : infozadglobal@gmail.com

I am willing to supervise Himanshu Attri

Enrolment No. : 15061119114
On the topic : “Production Management Analysis”

Signature

Countersigned by the employer with seal

Countersigned by Director of Study Centre with Seal

 CERTIFICATE

This is to certify that Nishant Hooda Enrolment No. 15061119114 has proceed
under by supervision her Research Project Report on “Financial Management” in
the specialization areas Finance.
The work embodied in this report is original and is of the standard expected of an
MBA student has not been submitted in part or full to this or any other university
for the award of any degree of diploma. He has completed all requirements of
guidelines for Research Report and work is fit for evaluation.

Signature of Supervision/ guide

Name : Mr. Rajender

Designation : Lecturer

Official Address : ZAD Computers, Rohtak

Forward by Head/Director/Study Center

(With Signature Name & Seal
 DECLARATION

I NISHANT HOODA ROLL 15061119114 NO. MBA of the GJU, ROHTAK

hereby declares that the project entitled Inventory Management Analysis is an original

work and the same has not been submitted to any other institute for the award of any

other degree. The interim report was present to the Supervisor on the feasible suggestions

have been duly incorporated in consultation with the Supervisor.

Signature of the Candidate

 ACKNOWLEDGEMENT

No task is single man’s effort. Any job in this world however trivial or tough cannot be
accomplished without the assistance of others.
I wish to record my gratitude to all the persons with whom I interacted and have
contributed significantly for the completion of the project. It is very difficult to put their
names individually but their contribution cannot be underestimated without their help and
co-ordination, this project would not have been possible.

I take this opportunity to extend my heartiest thanks to Mr. ARJUN GUPTA for
providing me an opportunity to undergo training in their esteemed organization.

Besides, all the official and staff deserve my heartiest thanks for providing co-cordial
atmosphere and made me feel like home.
 PREFACE

The concept of writing the project is one of the essential features for Master of Business
Administration (“M.B.A."), at Institute of Management Studies and Research (M.D
University),Rohtak. It enables a student to apply his mind, time and labour for going deep
into the understanding and applications of the Finance function in an organization.

Contemporary business world is becoming increasingly complex and unpredictable,

thanks to the dramatic shift brought in by the leaps made in information technology and
telecommunications. Today continuously excel or perish seems to be the message
emerging from the Darwinian dance in the corporate world. To compete in such a
turbulent business environment, organizations need to relentlessly adopt strategies
towards Value Creation. It is these strategies, which enables organizations to build
sustainable competitive edge.

The project titled “Inventory Management Analysis” of Parle Biscuits Pvt. Ltd.
involves an attempt to identify the benefits that would accrue to Parle Biscuits Pvt. Ltd
 TABLE OF CONTENTS

 Introduction

 Research Methodology & Objective of Study

 Data Collection & Interpretation

 Findings

 Recommendations

 Conclusion

 Limitation

 Annexure
1.1 OBJECTIVES:

 To minimize the investment in inventory

 To meet the demand by efficiently organizing the production.
 To find out the reorder level, EOQ, minimum and maximum level of raw
material of the company in order to facilitate better inventory control.

1.2 COMPANY PROFILE

1.2.1 HISTORY OF COMPANY

“QUALITY, HEALTH & GREAT TASTE….

The Parle story unfolded in the year 1929, with the establishment of its first
confectionery factory in the western suburbs of Mumbai, presently known as the
landmark region of “Ville Parle”. Thereafter in 1939 Parle started the manufacture of
biscuits which henceforth became its core activity. PARLE BISCUITS LIMITED is a
subsidiary to PARLE PRODUCTS LIMITED, MUMBAI, which is a closely held
company run by the Chauhans. The company commands a 40 percent market share in
the Rs.35 billion biscuit markets in India.
Parle-G; its first venture became an instant favorite amongst the masses, leading the
glucose category with a huge market share of 65%. It topped charts worldwide by
becoming the world’s largest biscuit selling brand as revealed by the US-based Bakery
Manufacturers' Association in 2002. The product portfolio also comprises of Krackjack,
Monaco, Hide ‘n’ Seek and its variants.
The success and survival of Parle is its adherence to quality and diversification in its
core area. The strong and extensive distribution network assures the availability of
Parle biscuits even in remote regions. Most of its offerings are in the low and mid price
range making it affordable to the masses. Parle understands the psyche of the Indian
consumer and provides them value–for-money.
There are four factories of its own at Mumbai (head office), Bahadurgarh (Haryana),
Neemrana (Rajasthan), and in Bangalore. The production, marketing and distribution of
the biscuits are controlled by the “Business Development Department”, Mumbai office
with assistance from the regional sales offices at New Delhi, Calcutta, Bangalore and
Mumbai. To reduce freight rates and increase productions, Parle has tie-ups with contract
manufacturing units supervised by a “Parle officer”. These units are provided with the
processing charges for manufacturing biscuits which are transferred to depots established
at strategic locations.
A long time ago, when the British ruled India, a small factory was set up in suburbs of
Mumbai city, to manufacture sweets and toffees. The year was 1929 and the market was
dominated by famous international brands that were imported freely. Despite the odds
and unequal competition, this company called Parle Products, survived and succeeded, by
adhering to high quality and improving from time to time.
A decade later, in 1939, Parle Products began manufacturing biscuits, in addition to
sweets and toffees. Having already established a reputation for quality, the parle brand
name grew in strength with this diversification. Parle glucose and parle Monaco was the
first brands of biscuits to be introduced, which later went on to become leading names for
great taste and quality.
IMPORT AND EXPORT
The immense popularity of Parle products in India was always a challenge to our
production capacity. Now using more modern techniques for capacity expansion, we have
begun spreading our wings and are going global.
Parle biscuits and confectionaries are fast gaining acceptance in international markets,
such as, Abu Dhabi, Africa, Dubai, South America and Sri Lanka.
Even the more sophisticated markets like USA and Austrslia, now relish Parle products.
As a part of the efforts towards a larger share of the global market, Parle has initiated the
process of getting ISO 9000 certification. Many parle products have also won gold, silver
and bronze medals at he monde selection.

THE MARKETING STRENGTH

The extensive distribution network, built over the years, is a major strength for Parle
Products. Parle biscuits & sweets are available to consumers, even in the most remote
places and in the smallest of villages with a population of just 500. Parle has nearly 1,500
wholesalers, catering to 4,25,000 retail outlets directly or indirectly. A two hundred strong
dedicated field force services these wholesalers & retailers. Additionally, there are 31
depots and C&F agents supplying goods to the wide distribution network. The Parle
marketing philosophy

emphasizes catering to the masses. We constantly endeavor at designing products that

provide nutrition & fun to the common man. Most Parle offerings are in the low & mid-
range price segments. This is based on our cultivated understanding of the Indian
consumer psyche. The value-for-money positioning helps generate large sales volumes
for the products. However, Parle Products also manufactures a variety of premium
products for the up-market, urban consumers. And in this way, caters a range of products
to a variety of consumers.
The Parle name conjures up fond memories across the length and breadth of the country.
After all, since 1929, the people of India have been growing up on Parle biscuits &
sweets.
Today, the Parle brands have found their way into the hearts and homes of people all over
India & abroad. Parle Biscuits and confectioneries, continue to spread happiness & joy
among people of all ages. The consumer is the focus of all activities at Parle. Maximizing
value to consumers and forging enduring customer relationships are the core endeavors at
Parle Our efforts are driven towards maximizing customer satisfaction and this is in
synergy with our quality pledge. "Parle Products Limited will strive to provide
consistently nutritious & quality food products to meet consumers' satisfaction by using
quality materials and by adopting appropriate processes. To facilitate the above we will
strive to continuously train our employees and to provide them an open and participative
environment."

1.2.2 OVERVIEW OF COMPANY

The more than 50-year-old brand, Parle G, has been rated as the largest selling glucose
biscuit brand in the whole world in terms of Parle-G is a bit of a legend. Originally called
the Parle Gluco, it started life back in 1939 in Mumbai India as one of the first brands
from Parle Products. The glucose biscuits success led to many me too competitors and so
the brand changed its name to Parle-G. Today it enjoys enormous success and has its own
superhero called G-Man who defeats evil on a regular basis

If you thought that a typical family run Indian company cannot top the worldwide charts,
think again. The homegrown biscuit brand, Parle G, has proved the belief wrong by
becoming the largest selling biscuit brand in the world.
MARKET SHARE

According to ORG-MARG reports, Parle G commands a good 65 per cent market share
in the domestic biscuit market. The glucose biscuits category in India is estimated at Rs
15 billion. The Parle G brand faces competition from Britannia's Tiger brand of biscuits.

The company's flagship brand, Parle G, contributes more than 50 per cent to the
company's total turnover. The other biscuits in the Parle Products’ basket include
Monaco, Krack Jack, Marie, Hide n Seek, Chiseling’s, Jeff’s, Sixer and Fun Centre.
Today, Parle enjoys a 40% share of the total biscuit market and a 15% share of the total
confectionary market, in India. The Parle Biscuit brands, such as, Parle-G, Monaco and
Krackjack and confectionery brands, such as, Melody, Poppins, Mangobite and Kismi,
enjoy a strong imagery and appeal amongst consumers. Be it a big city or a remote
village of India, the Parle name symbolizes quality, health and great taste! And yet, we
know that this reputation has been built, by constantly innovating and catering to new
tastes. This can be seen by the success of new brands, such as, Hide & Seek, or the single
twist wrapping of Mango bite.In this way, by concentrating on consumer tastes and
preferences and emphasizing Research & Development, the Parle brand grows from
strength to strength .
THE BISCUIT BASKET
Biscuit Basket Sweets n Treats

Monaco Bites Kismi Bar

Fun Centre Mango Bite

Melody
Hide & Seek

Jeffs Magix

Krackjack Orange Candy

Marie Choice Poppins

Rol-a-Cola
PARLE-G

Monaco

Toffees
 Sixer Milk Shakti

Nimkin Parle Cream

1. Parle-G: The taste, energy and nourishment Parle - G offers, along with its quality
and value-for-money, contribute to making it an unchallenged success. Apart from
being India's largest selling biscuit, Parle - G is the winner of 8 Gold and 11 Silver
awards at the Monde Selection.

2. Krackjack: A little sweet - A little salty… That's what makes Krackjack very,
very delicious! This delightful biscuit is acclaimed in India and across the world
for its controversial sweet and salty taste.Krackjack has won 11 Gold, 3 Silver and
1 Bronze award at the 'Monde Selection'.

3. Monaco: This original 'O' shaped salted biscuit makes people exclaim 'Oh,
Monaco'. Whether plain or with toppings, Monaco is simply delicious. An ideal
party time delicacy one can create more scrumptious snacks by combining
Monaco with a choice of toppings. Light, crisp and fresh, it's no wonder that
Monaco is India's largest selling salted biscuit. Variants include onion, methi,
zeera and nimkin.

4. Marie Choice: “Solid Milk, Solid Taste" - this summarizes the qualities of this
delicious biscuit.

5. Hide & Seek: This cookie biscuit is made up of large quantity of chocolate chips.
Crunch into it or let it melt in the mouth to seek out the real taste of chocolate.
6. Fun Centre: Parle's Fun Centre range has the highest cream content amongst
biscuits in the category. Best of all, one gets a choice of delicious, creamy flavors,
such as, orange, elaichi (cardamom), and chocolate cream.

7. Cheeslings: The scrumptious, cheese-filled taste makes it difficult to stop with

just a few. The little fluffy biscuits, called Cheeslings is a unique, high-count
cheese biscuit. Cheeslings has won 1 'Trophy of the International High Quality', 2
'Gold with Palm Leaves', 1'Grand Gold', 14 Gold and 2 Silver at the Monde
Selection' awards.

8. Jeffs: rectangular shaped, salted biscuit, flavored with cumin seed (Zeera) for that
delicious, crunchy taste. The high-count of cumin seed makes Jeffs a more
scrumptious savory - an absolute must, for munching just about anytime.

9. Sixer: This six-sided, salted delight is one hard-to-resist savory. Whatever the
occasion, Sixer makes for a great salty snack. Be it a picnic, a party, or just any
snack time, Sixer gives that crunchy, munchy, delicious, salty taste that leaves one
wanting for more.
THE FOLLOWING PROCEDURE IS ADOPTED FOR
PURCHASING THE MATERIALS

Purchase order given to the supplier based on the price and quality offered by them.
Gate entry to stores
Sample testing (by quality assurance dept.)
Approval and unloading of stock to stores
M-I-N (Material Inward Note) prepared by stores
Crosschecking the bills (the order rate and quantity) with that of the purchase order and
rectification if necessary
Payment of bills by the accounts dept.

FINANCE AND ACCOUNTS DEPARTMENT

Financial activities mainly include the following:
1. PAYMENTS & COLLECTIONS
2. BANKING TRANSACTIONS
3. CASH TRANSACTIONS
4. SALES
5. INVESTMENTS

PAYMENTS:
Payment aspects include payments of bills of the Bahadurgarh factory as well of the six
contract-manufacturing units (CMU) under it. The payment of raw materials is within a
week except for sugar, which is an advance payment. For engineering items it is done
within a month. Payments include the following:

 Payment to suppliers (of raw materials, packing, stores and spares)

 Payment of excise advance

  Payment of interim advance
 Processing charges
 Payment of depot and freight expenses

A) PAYMENTS TO SUPPLIERS OF FACTORY (FUNCTION-WISE)

Receive the M-I-N from stores.

Verification of the MIN from stores with the purchase order so as to cross check
actual rate with the supplier’s bill. MIN consists of quantity of raw material accepted
and shortage amounts.

Passing of bills through the purchase voucher and updating of the following ledgers:

 Purchase book
 Supplier ledger
 General ledger
 Stock ledger

Accounting entry: Purchases a/c Dr.

Cenvat a/c Dr.
To supplier a/c

(Procedure ):
The Bill No., Bill Date, Supplier Code, MIN No., and MIN Date are entered into the
system and the details of the particular MIN are displayed – the item code, item name,
rate, qty, and Cenvat. There is a provision for deducting and adding the quantity of raw
materials in case of
a shortage or increase in supply. If the item is excisable then the system extracts the
Cenvat amount proportionately. A payment advice no. is generated by the system for a
specific bill. Saving of this transaction updates the stock ledger with the net value of this
item. The computerized system uses the finance entry and updates the General ledger
accounts of CENVAT, PURCHASE OF RAW MATERIALS, and Sub ledger accounts of
the SUPPLIER with the gross value, and the purchase book. The same MIN cannot be
passed twice. Also using the same advice no. one can pass multiple bills.)

Bank payment to suppliers

Accounting entry: Supplier a/c Dr.
To Bank a/c

The Bank Payment module releases the payment to the suppliers. The bank balance is
displayed when the specified bank code (of the bank from which payment is to be done)
is selected from the master. This ensures balance in the account. The advice no. is then
entered as mentioned in the purchase voucher that selects all the bills for that advice. The
cost center (0) displays any advance or debit balance of the supplier, which is adjusted in
the final payment. The cheque no. is generated by the system and print outs of cheques
are taken.

B) PAYMENT to suppliers of cmu’s:

The payment to the suppliers at the cmu’s is done via Bombay, which verifies the MIN,
Bill rates according to the purchase order. The original copy is sent by courier and
also sent by email. The systems dept. downloads the data and transfers it to the
finance dept. for payment. Thereafter the supplier is firstly credited by passing the
PJV (purchase journal voucher) and then debited by making the bank payment.
2. Payment of excise advance:
Excise advance payment to CMU’S is done twice; on 12th and 24th of the month for the
first and second fortnights respectively.

3. PAYMENT OF INTERIM ADVANCE:

An interim advance is paid to CMU’s as prescribed by the Business Development Dept.
(BDD) of Mumbai. It includes 90% of the processing charges and calculated based on the
production schedule.

THE INTERIM ADVANCE IS ADJUSTED AGAINST THE FINAL BILL PAYMENTS.

PRODUCTION SCHEDULE (A) 1000 TONS

BASIC RATE (B) 2.20
TOTAL AMOUNT (A*B) 2200
90% OF THE TOTALAMOUNT 1980
ROUNDED OFF 2000
LESS TDS (2.10) IF APPLICABLE 42
NET PAYABLE 1958

4. PAYMENT OF PROCESSING CHARGES FOR CMU’S: The bills of CMU’S are sent
to Mumbai for verification and a final statement is prepared .it consists of the following
structure.
LUCKY BISCUITS CO., PATNA
ADD:

DESCRIPTION PRODUCTION @RATE AMOUNT

(Rs.)
LDO ESCALATION CHARGES 1117443.60 0.47205 527489.25
LDO ON MARIE 135951.20 0.681 92582.77
ELECTRICITY ESCL CHARGES 1117443.60 0.25714 287339.45
ELEC. ESCL ON MARIE 135951.20 0.51429 69918.34
ARREAR ON ELEC ESCL APR TO
- - 15389
OCT 02
PRODN. INCENTIVE FOR OCT 02 - - 223571
MODVAT ON LDO PURCHASE - - -
TOTAL AMOUNT PAYABLE 4519505.59

LESS:

Ex gratia on prod. For above 750

tons on PG 75g (21%of 1.887 i.e. @. 199480.26
39627
Advance for processing (interim) 2155000
T.d.s. if applicable @ -
EMI of loan (56414+56523) 112937 2467417.26
NET PAYABLE FOR THE MONTH
2052088.33
OF NOV-02
NET PAID 2052088
5. PAYMENT OF DEPOT AND FREIGHT EXPENSES:
The depot expenses from the Bahadurgarh factory are paid at the end of the month.
Schedules are compared with the actual payments and adjusted if there are changes in
rent etc ... to be paid to the depot.

1. DEPOT EXPENSES include the following:

 Godown rent
 Miscellaneous expenses
 Service charges
 Establishment expenses
2. COMPUTER STATIONERY
3. SECONDARY FREIGHT
4. INCENTIVES
5. SERVICE TAX (8%)

Banking transactions (FOR COLLECTIONS AND PAYMENTS) are a routine at Parle

Biscuits Pvt. Ltd.
BANKS
 Uti
 Canara bank
 Bank of Punjab
 Allahabad bank
 Corporation bank
 State bank of India
 Standard chartered
The daily balance and recent transactions at these banks are received through fax, phone,
and through the telebanking system. Corporation bank and UTI send their bank balances
through telebanking system, whereas the balances at Bank of punjab, SBI, Canara
bank,and Allahabad bank are received by phone and that of standard chartered by fax.
Daily balances are necessary to prepare the
DAILY LIQUIDITY REPORT.
This report is essential for:
FUND MONITORING
TO AVOID OVERDRAFT PROBLEMS.
For investment purposes it is essential to know the bank balances so as to tranfer the
excess funds to relevant accounts. Excess funds are mainly transferred to Bank of
Punjab.
FACILITIES PROVIDED BY THE VARIOUS BANKS
Bank of punjab
 At par facility
 ATM facility provided at factory–salary & Wage Disbursement to Staff & workers
account; no charges even at zero balance.
 Overdraft facility for staff (rs.25000) and workers (rs.500O)
UTI:
 At par facility
Corporation bank
 For collections only
Allahabad bank
 Payments to bahadurgarh public carrier union(transporter of biscuits from factory
to all over india)
Standard chartered
 At par facility for some branches.
Government dues (PROVIDENT FUNDS, EMPLOYEES STATE INSURANCE) are
transacted through the SBI account.The banks also provides overdraft limits, Canara bank

of 9 lakhs, Bank of Punjab of 5 crores & Standard chartered of 1 crore. At the end of the
month a reconciliation statement is sent by banks and the details of collections are sent
by the depots which needs to be matched, and in case any discrepancy occurs the banks
are notified. The transaction summary has the following structure:
1. COLLECTION xxx
2. RETURN xxx
3. ADJUSTMENT xxx
net effect xxx
(1-2+/-3)

Current account facilities all over India are provided by UTI, Bank of Punjab,
Corporation bank, and standard chartered. Collections from all the other banks get
transferred to Bank of Punjab, which is the main bank of Parle.
Cash transactions are also essential for the following purposes:
 Medical and conveyance reimbursement to staff and workers.
 Small purchases of stores
 For travel which includes hotel payment,tel,and D.A.-the sum varies with the
category of Staff.
 Day to day expenses for stationary and Freight charges in few cases.
There is a Mediclaim scheme provided for senior management staff which can be availed
by them during the year. Daily cash transactions are about Rs.20000 or so. Monthly
wages and salaries,leave travel concessions are given through the Bank of Punjab using
respective accounts.
Schedules of wages,salary,unpaid wages,price stock register,purchases ,leave encashment
etc..at the year end for audit purposes.The unpaid wages (unclaimed for more than 2 yrs )
is finally transfered to the Welfare Commissioner of Haryana at Chandigarh. Bonus is
paid to workers in form of Exgratia with no limits applicable. Bonus is also paid to Staff

getting Rs.3500 or below of basic salary according to the payment of bonus act.Ex-gratia
payment,and retainership fees(consultancy fees) are also paid by the company.

SALES:
Sales of Parle Biscuits is through strategically located “depots”, presently 39. Few cmu’s
have direct sales. A sales day book is maintained which has both detailed and summary
recordings of sales. General ledgers are also maintained and sales to the various
customers are updated regularly. Parle Biscuits keeps track of the product sale to the
wholesalers only,thereafter it becomes the responsibility of wholesalers to distribute it to
the retailers.
From the Depots data is sent daily via email;in the month end the floppys from various
depots are used for updating the missing data. The DATA MANAGEMENT SYSTEM
updates the data regularly. The sales.dbf helps in updating the sales day book of
ALNISHA SOFTWARE through a loader.
BIP – FOR PRODUCT.
BIR – FOR COLLECTION DATA.
BIS – FOR INVOICE DETAIL.
Summaries of sale (Depot-wise,Party-wise and product-wise)details,taxes paid,can also
be generated through the computerised system.
A monthly sales report of each depot is prepared every month. The depot sends its sales
report detailing the party name, the invoice no. and the invoice amounts, Freight charges,
sales tax, and the net amount to the factory at Bahadurgarh.
 MAINTAINENCE OF STOCK STATEMENTS AT DEPOTS
The stock ledger of depots is also updated regularly. The product wise report is
compared with the sales report generated by the software to avoid errors. The stock
statement is prepared from the stock ledger, which can either be a summary or a detailed
statement.

Stock Statement (Summary)

PRODUC PROD.NAME OPENIN RECEIPTS ISSUE STOCK ADJUST CLOSING

T G TRANS MENT STOCK
STOCK .

Stock Statement (Detail-wise)

TYPE UNIT OPENING RECEIPT ISSUE STOCK ADJUST CLOSING

(INVOICE/ STOCK TRANSFER MENT
STOCK
STN/GAN)

This gives details of the sale of each product and the balance or closing stock at the end
of each day. A monthly summary of closing stock is also prepared.
SCRAP SALES:
Sales also include sale of scrap material which incurs an income of about 1 Crore every
year. The scrap is sold to contractors, invited through tenders, a contract for a year and
involves a security deposit of Rs.20000.

The waste materials include:

 Residues and waste (of biscuits)
 Waste wheat flour
 Ink drums
 Canvas belts
 Waste and sewage ghee
 Empty gunny bags
 Empty plastic bags etc…

ISSUING CREDIT AND DEBIT NOTES:

The regional sales office generates credit notes for the following reasons:
 When damaged and unsold goods are destroyed and wholesalers are credited with the
amount.
 For providing trade discounts.
 Incentives for sales above target-“Dream plan”
 For sales promotions.
 For Service charges
 Toll tax purposes
 Depot also generates these notes in case of a revision of sales tax, return of goods
etc…Credit notes are adjusted in the invoices of next month.
Collections through the Concentration banking system:
Strategically located collection centers are selected for receiving payment from
customers. Instead of all the payments being collected at the head office, the cheques for
a certain geographical area are collected at specified local collection centers. Under this
arrangement the customers are required to send their payments to the collection centre
covering the area in which they live and these are deposited in the local account of the
concerned collection center, after meeting local expenses if any. Funds beyond a
predetermined minimum are transferred daily to a central or concentration bank (the
major bank) or account.
 Decentralized billing and multiple collection points.
 Reduces mailing and clearance time (sending bill and receipt of payment)

PREPARATION OF “PENDING DD LIST”

One of the main activities is to keep track of collections from the WHOLESALERS and
to know if any of the collection is pending or not. A pending DD LIST is prepared for
each zone at the end of the month to classify the doubtful debts.

DATE: NORTH ZONE

Depot code name of town inv. Date amt due days amt. recd. Balance remarks
the party no. (in Rs.)

OUTSTANDING AGAINST CHEQUES BOUNCE

TOTAL OUTSTANDING AS ON 31.03.03

OUTSTANDING AGAINST DD LOST IN TRANSIT

TOTAL OUTSTANDING AS ON 31.03.03

 OUTSTANDING AGAINST DD SEND BACK FOR CORRECTION

TOTAL OUTSTANDING AS ON 31.03.03

OUTSTANDING AGAINST DEMAND DRAFTS

TOTAL OUTSTANDING AS ON 31.03.03

XXXXXX

OUTSTANDING AGAINST LEGAL CASES

TOTAL OUTSTANDING AS ON 31.03.03

XXXXXX

INVESTMENTS:

LIMITS
TAX FREE BONDS (A SAFE INVESTMENT).
 HUDCO
 KRCL
 IRFC (Indian Railway finance Corporation)
 NHB (National Housing Board)
 IREDA (Indian Renewable Energy Development
 KRC (Konkani Railway Corporation)
 NABARD
 NCRPB (National Capital Regional Planning Board)
 NPC (Nuclear Power Corp.)
MUTUAL FUNDS

 Birla Mutual Funds

 ICICI Prudential
 HDFC
 LIC Bond Funds
EQUITY SHARES

 Reliance
 Hero Honda
 Gujarat gas
 Kothari products
 Britannia
PREFERENCE SHARES

(Done through private placement)

INSURANCE:
The company has taken insurance policies from NEW INDIA ASSURANCE and
UNITED INDIA INSURANCE.

INSURANCE POLICIES FOR THE YEAR 2003-04

PARTICULARS OF THE POLICY

PERIOD

FIRE POLICY AT BAHADURGARH 01.04.2008 to 31.03.09

Stock of store and spare at store
Stock of raw packing materials/finished goods/hsd/ldo/lpg
(declaration basis)
Plant machinery at b.garh factory
Buildings at bgarh factory

Electrical installations & electrical equipment at bgarh

Furnitures and fixtures at b.garh factory
Material handling equipment
Capital work in progress(plant & machinery & building)
Office equipments

FIRE POLICY OUTSIDE BAHADURGARH 01.04.2008 to 31.03.09

Stock of raw/packing materials/finished goods(declaration basis)
kanpur,gorakhpur,patna
Silo tanks at kanpur cmu’s annakut,rishi,swati,grk,lucky
Stock at various depots (declaration basis) flotter policy
Building at rohad factory
MARIN POLICY 01.04.2008 to 31.03.09
Incoming goods HSD/LDO and LPG declaration basis
Marine policy from anywhere in india to bihar and (patna) to anywhere in bihar anywhere
in India to Calcutta and Gauhati.

MISC. POLICIES
Stock at various depots and burglary
Cash/cheque in transit including fidility of person carrying cash
Personal accident insurance for 5 unnamed employees during cash carrying
P.A. cover restricted to working hour it covers all benefits upto table IV with medical
benefits
Cash in safe one time
Fedility guarantee insurance for 5 employees
Cash at shop counter
Personal baggage during tour and travelling
Flight coupons for 120 flights

Public liabilty insurance

Data processing machinery/electronic equipment including all risk cover
TOTAL

MOTOR VEHICLES 01.04.2008 to 31.03.09

Maruti car
Maruti cars with stereo-2
Massay fergusson tractor withtrolley and other accessories
Mahindra single cab(pick up) chassis
Mini bus
Toyota qualis
Omni ambulance
Tata sumo
TOTAL

HR & PERSONNEL DEPARTMENT

HUMAN RESOURCE AT THE FACTORY: 1177 WORKERS: 1085

The HR and Personnel department caters to the well being of the staff and workers.
HR ACTIVITIES:
1. APPRAISAL OF STAFF
2. TRAINING AND DEVELOPMENT
3. QUALITY CIRCLES
4. COLLECTIVE BARGAINING
6. DISCIPLINARY PROCEDURES
7. PAYMENTS AND welfare to staff and workers and fulfillment of govt. norms.

WORKER WELFARE:
1. Provision of uniform: 2 sets and 1 pair of shoes; 1 sweater every year and 1 woolen
uniform set every 3 yrs.
2. Subsidized Biscuits Coupons
3. Free medical Aid and Doctor’s Visit everyday

Quality assurance / control department

In concurrence with the trademark of quality that Parle stands for the Quality Assurance
department seeks to control and maintain quality in three stages:
1. Quality checking
2. Process checking
3. Quality packing

1. Quality checking of incoming raw material:

It is necessary to use standard inputs for a quality consumable product such as Biscuits.
All the raw materials used, need to be quality tested and approved before consumption.
Therefore sample testing is done and the test report is sent to the store mentioning the
date after issuing a batch no.

THE FOLLOWING TESTS ARE DONE FOR SOME OF THE RAW MATERIALS:
Wheat flour:
 Spreading factor test
 Moisture%
  WAP (water absorbency power)
 Gluten %
 Sedimentation value

2. PROCESS CHECKING:
 Issue of raw material from “stores” to the mixing section involves:
1. Checking the request of the mixing section
2. Issuing raw materials as per FIFO SYSTEM (First in First Out).
3. Maintenance of good storage conditions for all raw materials.
4. Checking the stock of raw materials (daily/shift basis).
 Weighing of the raw materials:
1. Calibration of the weighing scales on a weekly or daily basis (by QC).
2. Weighing of raw materials as per batch requirement (by the mixing section)
 Mixing of the raw materials & checking the quality of batch prepared:
1. Checking the mixing period.
2. Checking the presence of all raw materials as per formula.
3. Maintenance of fermentation time and room temp.
 Weighing of raw biscuits after moulding /cutting:
This is necessary for controlling the final weight of biscuits as per requirement.
 Testing of biscuits after Baking for:
1. Weight, Taste & Colour.
2. Stack height/length and width.

3. QUALITY PACKING:
This section is automated and the following quality measures are undertaken during
packaging:
1. Aesthetic value of the packet (checking the printing shades of wrapper).
2. Positioning of the packet on the machine and proper sealing of packets
(lengthwise and crosswise).
3. Mentioning the source of manufacture, Pkd, MRP, bar code, ingredients,
weight and slug length.
4. Checking the no. of biscuits and Moisture% of biscuits (when packed).
5. Checking presence of broken biscuits during packing.
6. Proper polypack sealing & Coupons in polybags with proper batch and Pkd no.
7. Proper taping of corrugated boxes (mentioning the batch and Pkd no.).
8. Proper palletizing and loading of the boxes.

PRODUCTION DEPARTMENT
The sales team in the market estimates the requirements at the wholesalers end and
reports to the head office at Mumbai. The allotted product requirements are dispatched to
all the production units, where the monthly production schedule is prepared by the
production team.
The factory has three plants producing Parle g, Monaco and krackjack. The total
capacities of the plants (tones/month.) are:
Parle g 3500
Krackjack 1500
Monaco 800

The plant prides itself of the 300ft long ovens, partly-automated mixing section,
automated packing machines (100 packets of Parle g/min), state of the art printing and
lamination machines (100-120 tons/month).

BISCUIT PRODUCTION “2014-15

5708
5551
6000 5086 5196 5295
4755
PRODN (METRIC TONNES)

4420 4429
5000
3781 3575
3456
4000 3217

3000

2000

1000

0
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

MONTH
DEPARTMENTAL ACTIVITIES:
 Preparation of the monthly production schedule so as to fulfill specified
requirements.
 Supervision by shift and mixing officers during production.
 Minimizing wastes during production.
 Transferring the daily production to the dispatch department.

FLOW CHART OF PARLE G PRODUCTION

Parle g is the soft dough variety of biscuit. Around 75 batches of Parle g are produced
per shift.
Standard Requirements Packaging standards
Moisture% 2-2.5 Net wt 100 g
Protein% 6.5 no. of biscuits 16
Energy 450kcal no. of packets in a polybag 24
Ca 50 mg no. of polybags in a c-box 6
Fe 2 mg
High speed dry mixing of flour, sugar, fat, and flavor (2 min.).

Wet mixing for 2 min (add water, sugar syrup & ammonia) till dough formation.

Feeding into the moulder hopper using a dough conveyor.

Baking

Cooling

Stacking

Packing
LIST OF MATERIALS USED FOR THE PRODUCTION

COCONUT OIL
MAIDA
SUGAR
PALM KERNAL OIL
VANASPATI
DRY YEAST
AMONIA
BUTTER FLAVOUR
CITRIC ACID
S.M.P
SODA
SALT
STARCH
METHI(DRY)
VANILLA BUSH
VANILLA POWDER
S.M.B.S
LACTIC ACID
PROPLINE GLICOL
ETHYLE VANILLIN
YEAST
PAPAIN
M.C.A.P
SODIUM STEAROYL LACTYLATE
ONION FLAKES
FINMUL 87
TATA SALT
STARZYMES
ZEERA
VITAMIN PREMIX
MOLIC ACID
JAGGERY
SOYA LACITHIN
STANDARD REQUIREMENTS FOR KRACKJACK AND MONACO

Krackjack Monaco

Moisture% 2-2.5 2-2.5

Protein% 7 7
Energy cal. Value 573 560
Ca 58 mg 50 mg
Fe 9 mg 3 mg
Stack height 20 26

FLOW CHART OF KRACKJACK AND MONACO PRODUCTION

Weighing flour in a barrel, addition of water and chemicals

Vertical mixing (for 2 min)

Fermentation of slurry (2.5 hrs)

Add and mix flour, sugar, fat, salt, soda and other chemicals (10 min)

Laminator (gauge rolls to alter thickness)

Cutting

Baking (salt spraying in case of Monaco)

Oil spraying

Cooling

Stacking

Packing
1.2.4 SWOT ANALYSIS
The SWOT analysis summarizes the internal factors of the firm as a list of its strengths
and weaknesses and the opportunities and threats it faces from its external environment.

Internal Analysis:
The internal analysis is a comprehensive evaluation of the internal environment's
potential strengths and weaknesses.
1. Company culture: a closely held company of Parle products limited,
headquartered at Mumbai; “Parle parivar”- a family oriented work culture
which provides flexibility and discretion in ones key resource area; lack of written
down policies.
2. Company image – A biscuit and confectionery major in the Indian market, Parle
has seeped into the hearts of the masses be it the rural folk or the urban class. Has
not mainly forayed into the premium biscuit sector.
3. Organizational structure – a flat organization with minimum overheads, mainly
dependent on direct communication with colleagues and superiors. No succession
policy.
4. Key staff – the general manager.
5. Access to natural resources- Good accessibility.

6. Position on the experience curve –more than 60 yrs of experience in the biscuit
manufacturing industry, it has not bothered to raise the price of its flagship brand
for the past six years and has always tried to provide its offerings at nearly 33 per
cent discount to competitive brands.
7. Operational efficiency-highly efficient production units, 4 factories of its own
and 18 contract manufacturing units for biscuits, 6 under PBPL. The
Bahaduragarh factory prides itself of having the longest oven in Asia; automated
printing and packing section.
 8. Operational capacity – 200-250 tons per day at pbpl, Bgarh; Bahadurgarh and
Neemrana factories have the largest manufacturing facilities for biscuits.

9. Brand awareness – highly aware product and brand profile (esp. Parle g,
krackjack and Monaco) due to a strong and efficient marketing team. The other
biscuits in the Parle Products’ basket include Monaco, KrackJack, and Marie;
Hide n Seek, Cheeslings, Jeffs, Sixer and Fun Centre. But consumers need to be
made aware that are from the house of Parle.

10. The marketing strength Parle has nearly 1,500 wholesalers, catering to 425,000
retail outlets directly or indirectly. A two hundred strong dedicated field force
services these wholesalers & retailers. Additionally, there are 39 depots and C&F
agents supplying goods to the wide distribution networks.

11. Market share-The Company commands a 40 per cent market share in the Rs 35
billion biscuits market in India. Has established a dominant position in the
glucose biscuit market share (around 65%); Marie segment (12-13%); sweet and
salt category at9%.

12. Financial resources – a cash rich company having major investments. Needs to
emphasize on budgeting and cost minimization.

External Analysis

An opportunity is the chance to introduce a new product or service that can generate
superior returns. Opportunities can arise when changes occur in the external environment.
Many of these changes can be perceived as threats to the market position of existing
products and may necessitate a change in product specifications or the development of
new products in order for the firm to remain competitive. Changes in the external
environment may be related to:
Customers-Customer expectation has increased over the years, Parle needs to evolve
with the changing envt. and focus upon R&D and advertising.
Competitors-The competitive scenario at the national level is more of a disguised
duopoly than a real one. A closer look at the State-level markets show the presence of
strong regional players such as Bakeman's, PriyaGold, Shalimar, Windsor and
Champion other than the national players ,Parle and Britannia This has held the prices
in check for a long time.
Market trends-Growth in the over 40-year-old Indian biscuit industry has remained
slow. Back-of-the-envelope calculations will show that per capita consumption is less
than Rs 3 per month on biscuits or less than Rs 15 per household per month. Hence
there is immense opportunity for Parle to move up the value chain in the Indian and
export market.
Social changes-More and more marketing budgets are being spent on below-the-line
promotions and less on brand building. The freebie driven purchase behavior may
lead to long-term damage of the brand.
New technology-Both Parle and Britannia are now trying to differentiate their brands
to reflect their superior quality through superior packaging. Being a national player,
Parle can afford to concentrate on continuous technological updating.
Economic environment –a reduction in the 16% excise tax to 8 % has proved to be a
boon to the biscuit industry.
 CHAPTER - 2
REVIEW OF LITERATURE
INVENTORY MANAGEMENT

OBJECTIVE: ESTIMATION OF THE INVENTORY LEVELS & EOQ OF

MAJOR RAW MATERIALS

CONCEPT OF INVENTORY MANAGEMENT:

Inventory is defined as a usable resource, which is physical and tangible such as

materials. In this sense, our inventory, but even then the term inventory is more
comprehensive. Though inventory, is a usable resource, it is also an idle resource, unless
it is managed effectively and efficiently.
Inventory management boils down to maintaining an adequate supply of something to
meet the expected demand pattern subject to budgeting considerations. Inventory could
be raw materials, work-in-progress, finished products or the spare parts and other indirect
materials. Effectiveness of the material and production function depends to a large extent
upon inventory management.
Inventory turnover ratio Annual Demand is an index of business performance. Sound
Average Inventory
Management gives a higher inventory turnover ratio.

Inventories have to be procured, stored and carried for a production system, since a
situation when they can be instantaneously available is difficult to assume in Indian
setting. Inventories are therefore, a necessary evil to stay.
IMPORTANCE OF INVENTORY

Inventories constitute the largest component of current asset in many organizations. Poor
management of inventories therefore may result in business failures. A stock-out creates
an unpleasant situation for the organization for the organization.
In case of a manufacturing organization, the inability to supply an item for inventory
could bring production process to halt. Conversely, if a firm carries excessive inventories,

The added carrying cost may represent the difference between profit and loss. Efficient
inventory control, therefore, can significantly contribute to the overall profit-position of
the organization.

FUNCTIONS OF INVENTORY MANAGEMENT

In any organization, inventories add an operating flexibility that would otherwise is lost.
In production, work-in progress inventories are an absolute necessity unless each
individual part is to be carried from machine to machine and those machines set up to
produce that single part.

Main functions of inventories are:

1. Regularizing demand and supply

2. Economizing purchases or productions by lost buying or batch production
3. Allowing organizations to cope with perishable materials
4. Inventory can store labour
Motives for holding inventories:
1. The transactions motive, which emphasizes the need to maintain inventories to
facilitate smooth production and sales operations.
2. The precautionary motive, which necessitates holding of inventories to guard against
the risk of unpredictable changes in demand and supply forces and other factors.
3. The speculative motive which influences the decision to increase or reduce inventory
levels to take advantage of price fluctuations.

There are two conflicting needs the firm faces in context of inventory management:
1. To maintain a large size of inventory for efficient and smooth production and sales
operations.
2. To maintain a minimum investment in inventories to maximize profitability.
It is hence necessary to determine the optimum levels of inventory. For efficient
management of inventory the following techniques are used:

CLASSIFICATION OF INVENTORY SYSTEM

1. Lot size re-order point policy

As soon as inventory level falls to a predetermined value , a replenishment order

is placed as per EOQ. The order size is constant ; and its economically
determined. It is a classical type of inventory policy. While adopting this system,
lead time which the gap between the placing of the replenishment order and its
subsequent receipt is taken into account.

2. Fixed order internal scheduling policy

Under this policy, the time between two immediate orders is kept constant. Here ,
maximum stock level is predetermined. At fixed time intervals, inventory levels
are determined. At each determination of inventory level, an order of size is
 placed which allows the current inventory level to go up to the maximum stock
level. The order size may vary from time to time.

3. Optional replenishment policy

Popularly it is branded as (s, S) policy. The inventory level is periodically

reviewed and maximum (S) minimum (s) stock levels are prescribed. While
reviewing, its stock on hand (inventory level) is < s, an order of size Q is placed
so that the stock on hand (inventory level) becomes equal to maximum stock level
(=S). if the inventory level > s, no order is placed. The situation is reviewed later.
The three decision variables in this policy are s, S and T (review period)
.
SELECTIVE INVENTORY MANAGEMENT

Selective inventory control is a formidable task when we consider an enormous number

of items a large organization is expected to stock. Even if the organization thinks of the
uniform inventory control over all these large of items, it will become counter-productive
since the cost will far exceed the benefits. This is the logic behind selective inventory
control. Selective inventory control considers the factors like the value of the inventory
item, its critically and its usage frequency. Control which is selective is more effective,
and is directed to more significant groups of items. In this system, the are categorized in
few discrete groups depending upon value, critically and usage frequency. Three such
methods of selective control are popular: ABC Analysis, VED analysis and FSN analysis.
Such grouping paves the way for scientific inventory control in organization.
ABC ANALYSIS

ABC analysis is a basic analytical management tool which enables top management to
place the efforts where the results will be greatest. This technique popularly known as “
ALWAYS BETTER CONTROL” , has universal application in many areas of human
endeavor. The technique tries to analyses the distribution of any characteristic by money
value of importance in order to determine priority. In materials management , this
tecnique has been applied in areas such as inventory, criticality of items , obsolete stocks,
purchasing order, inspection etc.

APPLICATION OF ABC ANALYSIS

1. Degree of control
2. Ordering procedure
3. Stock records
4. Priority treatment
5. Safety stock
6. Stores layout
7. Value analysis

VED ANALYSIS

The possible consequences of material stock outs when demand arises from the basis
of VED analysis. The cost of shortage depends upon the seriousness of the situation.
Items are grouped as V (Vital), E (Essential), D (desirable).

Items Remarks Strategy

V Most critical high opportunity cost percentage of risk should be

quite
of shortage. Must be available in stock small. High level of service is
whenever demanded. Called for.
 E quite critical. Substantial opportunity can take higher risk of shortage
Cost of shortage should be available in
Stock by and large

D no serious consequences of non-availa risk that can be taken is even

bility. Can be stocked. Higher.

FSN ANALYSIS

All items are not required with the same frequency – some are required regularly, some
occasionally and some once in awhile. FSN analysis places the items in three categories :
fast moving (F), slow moving (S), non-moving (N). inventories policies and models for
these three groups are different.

INVENTORY CONTROL

Inventory control refers to the process whereby the investment in materials and parts
carried in stock is regulated within predetermined limits set in accordance with the
inventory policy.
Inventory control focuses on the following aspects of inventory control:
1. Inventory control is concerned with the raw materials and purchased parts.
2. Regulates the investment in inventories.
3. The investments are decided on the basis of predetermined limits.
4. These limits are prescribed by the inventory policy followed by the management.

MAJOR ACTIVITIES OF INVENTORY CONTROL

1. Planning the inventories
2. Procurement of inventories
3. Receiving and inspection of inventories
4. Storing and issuing the inventories
5. Recording the receipts and issues of inventories
 6. Physical verification of inventories
7. Follow up functions
8. Material and standardization and substitution

INVENTORY CONTROL TECHNIQUES

1. RE-ORDER LEVEL (ROL):

Receiving and issuing of inventories are the common and reoccurring phenomena in a
manufacturing organization. When the inventories fall below a particular level, they are
replenished by the fresh purchases. The prescription of re-order level is an important
technique of inventory control. It fundamentally deals with ‘WHEN TO ORDER’ to
replenish the inventories. Re-order level is predetermined point, and when the existing
stock of inventories reaches this point or falls below it, the purchase action is initiated to
replenish them. Generally size of order is determined on the basis of the economic
ordering quantity (EOQ), which is also an important technique of inventory control.

The re-order level is decided for each important item of inventory on the basis of
following considerations:

1. lead time
2. average periodic consumption
3. safety stock

re-order level is decided as under:

ROL = (lead time x average daily consumption) + safety stock

ECONOMIC ORDER QUANTITY (EOQ):

EOQ is an important technique of inventory control. EOQ prescribed the size of the order
at which the ordering cost and the inventory carrying cost will be minimum. The ordering
cost consist of the cost of the paper work for placing the order like use of paper, typing,
posting, filling, etc. ordering cost is more or less fixed and it is ascertained on per order
basis. If the annual requirements are met by placing more orders of small quantity instead
of single large order, the number of order placed during the year will increase resulting
into higher total ordering cost.
Economic order quantity (EOQ) is the optimum quantity of materials that need to be
ordered, considering the costs involved in ORDERING AND CARRYING inventories.
EOQ is the optimum order size for a particular item of inventory calculated at a point
where the total inventory costs are at a minimum for that particular stock item.

ORDERING COSTS - The costs of ordering inventory mainly includes:

 Preparation of purchase order
 Costs of receiving goods
 Documentation processing costs
 Transport costs

CARRYING COSTS - carrying costs of inventory includes:

 Storage costs (rent, lighting, heating etc…)
 Reqd. rate of return on investment of current assets.
 Handling costs
 Insurance costs
 Stores staffing, equipment maintenance costs.

EOQ=SQRT (2 * ANNUAL DEMAND * ORDERING COST/CARRYING COST

PER UNIT)

INVENTORY LEVELS: To avoid carrying excess inventory and to prevent stock outs it
is necessary to determine the following inventory levels:
REORDER LEVEL: Reorder point is that inventory level at which an order should be
placed to replenish the inventory level. The stores department should initiate the purchase
of material when the stock of materials reaches that point. To determine the reorder point
one should know:
a) lead time b)average usage c)safety stock
REORDER POINT= (LEAD TIME * AVERAGE USAGE) + SAFETY STOCK

MINIMUM STOCK LEVEL: this stock level is the lower limit below which the stock
of any stock item should not be normally allowed to fall. This level is also called the
safety or buffer stock level.

MAXIMUM STOCK LEVEL: This level represents the upper limit beyond which the
quantity of any item is not normally allowed to rise to ensure that unnecessary working
capital is not blocked in stock items.
MAXIMUM STOCK LEVEL=REORDER LEVEL+ EOQ
CHAPTER- 3
RESEARCH AND METHODOLOGY

3.1 SIGNIFICANCE
3.2 MANAGERIAL USEFULNESS
3.3 SCOPE
3.4 LIMITATIONS
3.5 METHODOLOGY
3.1 SIGNIFICANCE:

Inventories constitute the most significant part of current assets of a large majority of
companies in India. Because of a large size of inventories maintained by firms, a
considerable amount of funds is required to be committed to them. It is therefore ,
absolutely imperative to manage inventories efficiently and effectively in order to avoid
unnecessary investment. a firm neglecting the management of inventories will be
jeopardizing its long run profitability and may fail ultimately. The reduction in excessive
inventories carries a favorable impact on companies profitability.

3.2 MANAGERIAL USEFULNESS OF STUDY

The basic responsibility of the financial manager is to make sure the firms cash flows are
managed efficiently. Efficient management of inventories should ultimately result in
maximization of the owners wealth. Inventories should be turned over as quickly as
possible, avoiding stock-outs that might result in closing down the production line or lead
to a loss of sales.
The basic objectives of inventory management is to pursue the financial objective of
turning inventory as quickly as possible therefore it should at the same time ensure
efficient inventories to satisfy production and demand. In other words financial manager
has to reconcile these two conflicting requirements.
The objective of inventory management consists of two counter balancing parts.

1. To balance the production flow

2. To meet the demand by efficiently organizing the production.

The firm should minimize investment in inventory implies that maintaining inventory
involves cost, so if smaller the inventory lower is the cost of the form. But inventory also
ensure the smooth functioning of firm, that is larger the inventory, better the production.
Obviously manager should aim at a level of inventory, which will reconcile these
conflicting elements.

3.3 SCOPE OF STUDY:

1. Ensure to continuous supply of maintenance spares to facilitate uninterrupted

production.
2. Maintain sufficient stock of maintenance spares in periods of short supply and
anticipate price change.
3. Minimize the carrying cost and time.
4. Control investment in inventories and keep it at an optimum level.
 5. It reduces possibility of excess item being locked up in storage large inventories
means locked up capital there is also a danger of obsolescence
6. It produces savings in purchases through evaluation of requirements of scientific
basis.
7. It provides a check against a loss of materials through carelessness or
misapprociation.
8. It facilitates accounting of cost.

3.4 LIMITATION

1. It is assumed that no back orders are allowed and demand is variable and
unknown.
2. Inventories should not be so high because it will lock up the working capital.
3. Less inventories may create the chances of stock outs. It will also lead production
stoppage
4. High inventories leads to high insurance charges and deteriorating the quality of
material

3.5 RESEARCH AND METHODOLOGY

RESEARCH
Research is an active, diligent and systematic process of inquiry in order to discover,
interpret or revise facts, events, behaviours, or theories, or to make practical applications
with the help of such facts, laws or theories. The term "research" is also used to describe
the collection of information about particular subject.
The procedure to conduct the study required a lot attention for securing reliable and
meaningful information. Research methodology adopted act as the radiology and
pathology , helps the researcher to give a true picture of the business and furnishes
reports that can guide the business executive . in fact, it acts as a tool in the hand of
management for taking the right decision in business and thus avoid chances of failure ; it
also reduces the element of risk in business keeping this concept in mind.
The research procedure chosen to achieve the objective is outlined as under;
1. Ensure to continuous supply of maintenance spares to facilitate uninterrupted
production.
2 .Maintain sufficient stock of maintenance spares in periods of short supply and
anticipate price Change.
3. Minimize the carrying cost and time.
4. Control investment in inventories and keep it at an optimum level.

DATA COLLECTION METHOD

1. To collect the data from annual reports of the concern
2. To collect primary data through consultation with various executives and
concerned staff.
3. Analyse and interpretation of data
4. Collected the various information from the various books
5. Tabulate the collected data in a concerned form to draw meaningful results.
6. Inventory management techniques have been used for the purpose of analyzing
the data.
 CHAPTER -4

DATA ANALYSIS
 DATA COLLECTED FROM THE PURCHASE DEPARTMENT:
MAJOR RAW MATERIALS:
 Coconut oil
 Wheat flour
 Sugar
 Vanaspati
 Skimmed Milk Powder

PRODUCTION SUMMARY
Products PRODN. (MT) PRODN. RATIO PROD/DAY
Parle g 27464 0.57 91
Krackjack 12806 0.27 42
Monaco 7293 0.15 24
Nimkin 554 0.01 2

No. of working days = 303 days

SUMMARY OF RAW MATERIAL CONSUMPTION(PER MT) FOR THE YEAR

usage
RAW MO consumption usage per day
S. no PG KJ NIM
MAT. N (IN MT) rate (IN
MT)
1 Coconut oil 0.00 0.11 0.10 0.10 2156.05 0.04 7.12
Wheat
2 flour 0.01 0.01 0.01 0.01 381.02 0.01 1.26
3 Sugar 0.00 0.00 0.00 0.00 107.36 0.00 0.35
4 Vanaspati 0.15 0.12 0.12 0.13 6714.23 0.14 22.16
5 Smp 0.01 0.00 0.00 0.00 333.30 0.01 1.10
CARRYING COST INCLUDES:

INSURANCE COST- Premium cost for raw mat.

DEPRECIATION COST-Depreciation value of storage area
MANPOWER COST-Salary of store people(clerical and those involved in loading
and unloading)
POWER COSTS- no. of units consumed in the store *rate
OPPORTUNITY COSTS-the inventory (SAFETY STOCK) when invested (6%)

COMPUTATION:
COSTS AMT.(Rs)
INSURANCE 226,475.00
DEPRECIATION 1,077,907.00
MANPOWER 81,430.00
POWER 392,688.00
OPPORTUNITY 468,381.76
TOTAL AMT. 2,246,881.76

ORDERING COSTS:

ITEM Freight Purchase Ordering

S.no Rate ordering Cost
Cost
1
coconut oil 2000 20.00 2,020.00
2
wheat flour 40000 20.00 40,020.00
3
Sugar 40000 20.00 40,020.00
4
Vanaspati 2000 20.00 2,020.00
5
Smp 1000 20.00 1,020.00
 PROPORTIONATELY (QUANTITY AND VALUE WISE)

safety stock safety stock proportion

item
( 2 days) (rs) qty wise
coconut oil
21.35 1,006,512.45 0.202
wheat flour
3.77 2,379,287.65 0.036
Sugar
1.06 1,470,121.43 0.010
Vanaspati
66.48 1,903,916.31 0.629
Smp
3.30 920,700.00 0.031

ALLOCATION OF THE CARRYING COSTS:

ITEMS INSUR OPPOR. DEPRE. LABO POWER CARRYI PER

. Val. wise Qty. UR Qty. NG COST UNIT
Val. wise wise Qty. wise
wise
coconut 29,200.5 217,726. 16,448. 79,318.9 403,084.5 18,882.4
oil 60,390.75
3 24 03 8 2 6
Wheat 69,026.9 142,757.2 38,476.6 2,906.7 14,017.2 267,184.8 70,825.1
Flour 2 6 7 0 8 3 8
Sugar 42,650.5 10,842.0 146,468.7 137,786.
88,207.29 819.06 3,949.82
6 3 5 8
Vanaspa 55,235.6 678,028. 51,221. 247,009. 1,145,730. 17,234.8
ti 114,234.98
4 82 38 9 7 6
Smp 26,710.9 33,657.9 2,542.6 12,261.7 130,415.3 39,519.8
55,242.00
7 2 7 8 4 0
REORDER LEVEL= (LEAD TIME X ANNUAL DAILY CONSUMPTION) +
SAFTEY STOCK

REORDER LEVEL FOR WHEAT = (2 X 193291.78/365) + 3.77

= 1062

REORDER LEVEL FOR VANASPATI = (2 X 43813.48/365) + 66.48

= 306.55

REORDER LEVEL FOR SUGAR = (2 X 82330.79/365) +1.06

= 452.18

REORDER LEVEL FOR COCONUT OIL = (2 X 2534.54/365) + 21.35

=35.23

REORDER LEVEL FOR SMP = (2 X 40000/365) + 3.30

=222.47

EOQ = SQRT ( 2 X ANNUAL DEMAND X ORDERING COST/ CARRYING

COST PER UNIT)

EOQ OF WHEAT = SQRT ( 2 X 193291.78 X40020 / 70825.18)

= 467

EOQOF VANASPATI = SQRT ( 2 X 43813.482 X 2020 / 17234.86)

= 1013

EOQ OF COCONUT OIL = SQRT ( 2 X 2534.54 X 2020 / 18882.46)

= 23

EOQ OF SUGAR = SQRT (2 X 82.330 X 40020 / 137786.8)

= 7
Raw mat. ord.cost Carr. cost EOQ no. of lead min. ROL max
(Rs.) (Rs.) orders days level level

Coconut
2,020 18,882.46 23 100 3 21 35.23 58.23
oil

wheat
40,020 70,825.18 467 18 4 4 1062 1529
flour

Sugar 40,020 137,786.82 7 14 5 1 452.18 459.18

vanaspati 2,020 17,234.86 1013 169 3 66 306.55 1319.5

Smp 1,020 39,519.80 460 80 4 3 222.47 682.47

DETERMINATION OF EOQ AND VARIOUS INVENTORY LEVELS (IN MT)

INVENTORY MANMAGEMENT IN PARLE BISCUITS PVT. LTD.

For inventory management in Bahadurgarh plant of PBPL certain things are considered
which are completely practical-

 As market generally fluctuates so if there is any perception of the increment in

the price level of any commodity in future then that particular commodity is stored.

 All the materials of the mixture, which is used in making biscuits, can be stored
maximum only for 3 days. Because store of plant is designed like this that more
than 3 days storage can’t be maintained in it.

 Minimum levels of inventories are maintained in plant in wake of lead-time,

govt. policies, and one-day safety stock for transportation problem.

 Re-order levels of inventories are maintained in the plant in wake of per day
consumption level of inventories and lead-time in days.
INVENTORIES

YEAR VALUE

2009-2010 2869.33

2011-2012 2524.98

2013-2014 6083.93

INVENTORY

8000

6000
VALUE

4000 INVENTORY

2000
0
2006-2007 2007-2008 2008-2009
YEAR

As the inventories in the year 2006-2007 were 2859.33 and in the year 2007-2008 were
2524.98, so the inventories are decreasing. It means that the demand of the product the
year 2007-2008 was more than the year 2006-2007 and the length of cash commercial
cycle is reduced. In the year 2008-2009 the inventories increased. Increase in inventories
is not good for the company as it leads to the locking up of the working capital for a long
time to become a finished product. If there is excess inventory then it phonies unbalanced
work load and more market forecasts. It generates excess labor cost, fuel cost, space cost
and the most important is the material obsolesce.
 CHAPTER - 5

5.1 FINDINGS

5.2 RECOMANDATION

5.3 CONCLUSION

1.1 FINDINGS
Some of the findings during project are:
 1. As parle biscuits is the cash surplus company and it follows the advanced dd
system so there is no shortage of money and day-to-day operations work
efficiently. As it also follows the FIFO system so there is no wastage of material,
and efficient utilization of raw material takes place.
2. As the inventory turnover is less so working capital required is less and it
would lead to the increase in the profitability of the company.
3. In the year 2008-2009 the inventories increased. Increase in inventories is not
good for the company as it leads to the locking up of the working capital for a
long time to become a finished product. If there is excess inventory then it
phony’s unbalanced workload and more market forecasts. It generates excess
labor cost, fuel cost, space cost and the most

5.2 RECOMMENNDATIONS

As inventories constitute the largest components of the current assets in many

organization. Poor management of inventories therefore may result in business
failure. As the management is doing good to improve the financial position in view of
certain thumb rule cannons. But according to my perceptions certain measures should
be taken so that the company’s day to day operations work efficiently and effectively.
Recommendations from my side are:
1. As the demand of Parle biscuits are increasing because of good
advertisement they should increase their storage space.
2. Proper chekup of raw materials should be done during the storage of raw
materials.
3. While dispatching proper checkup of raw materials should be done so that
the breaking of material should not take place.

4. Order and level of inventory should be maintained according to the

seasonal changes.
5. Inventories should be minimized by using various factors of production
 Efficiently.

5.3 CONCLUSION

Like a traveler, who, after completing his long journey, reaches his destination
and looks back upon the area covered by him for recalling the important
landmarks and experiences he come across. Similarly, it would be desirable to
review the various aspects of the present study and attempt is made hereunder to
summaries its major findings and suggestions on the basis of forgoing chapter
which deals with the interpretation and analysis of the inventory management
with the help of inventory management techniques.
As Parle biscuits is a cash surplus company it also follow the advanced DD
system due to this the cash is always available in surplus and day to day
operations work efficiently. On the whole the inventory management has its own
unique features particularly for the manufacturing units, which require high usage
of consumable items.

As the company uses the FIFO system which is governed by the principle that the
material which are received first are issued firstwhich helps in the reduction of
wastage, increases the profit, and helps in the efficient utilization of resources,
men material and raw material.

Below level inventories takes place wastage of production, which leads to the
delay in the delivery of goods and will spoil the image among the customers. so it
is important always to keep the inventories balanced.

So in the end we can conclude that the inventories act as the backbone of the
organization. Inventory is the life and blood of the production process and hence
should be maintain so that the targets are achieved efficiently and effectively
 which will further leads to the increase in the profits and good image of the
company.

BIBLIOGRAPHY

 www.answers.com
 www.parle products.com

 www.britania.com

 www.itc.com

 S.A.Chunawala And D.R.Patel,

 Production operations and management,

 Himalaya publishing house