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A LIVE PROJECT

ON
INVENTORY MANAGEMENT
In

Submitted By: Kaneria Pankaj


Enrolment No.:7NBAMo57
Subject: Operations Management
Section: ‘C’

Submitted To:Samir Sir

AHMEDABAD (2007-09)
CONTENT
Sr.No. Topics Page
No.
1 Acknowledgement 3
2 Objectives 4
3 Introduction 5
4 Definition 6
5 Types of Inventory 7
6 Inventory management 8
7 Inventory Systems 9
8 Inventory Cost 10
9 Inventory management in Reliance Fresh 11
10 Outcome 12
11 Conclusion 13
Acknowledgement:

Through this live project report we would like to express our


sincere gratitude towards all those members who helped us
in the preparation of this project report on ‘Inventory
Management In Reliance Fresh’ which has been a learning
experience in MBA program.

Practical training is an important part besides theoretical


studies. As a student of MBA programmed of ICFAI, we have
carried out our live project, with the use of this project we
learn how we implement the theoretical knowledge in
practical life.
Objectives:
Effective inventory management and control help in
reducing inventory cost without compromising on the
firm’s ability to meet customer demand on time.

Firms maintain an inventory to ensure smooth


production, to provide better services to customer, to
take advantage of quantity discounts, and to operate
during times of business uncertainty.

To know the effectiveness of the inventory management


in FMCG sectors and technique it is implemented in the
FMCG sectors

Important of inventory control and technique of


maintaining the inventory in an organization.

How they manage the inventory level so that demand of


the goods can be satisfy in Reliance Fresh.
Introduction:
Inventory is a stock of goods held by a firm at a particular time for
future use in the production process or for meeting future demands.

In corporate world all the organization run with their long term goal
or objectives. To meet the goal or to become success the
organizations have their own policy and strategies which are going
to help them to reach the destination. There are main objectives of
the firm is to earn the profit and customer satisfaction.

But now a day competition is going on it becomes very difficult


to achieve the final goal. Because of that the firms have to
concentrate in the cost factors. It is only factors which help the
organization to achieve the dreams. In business there are many
types of costs are occurring. Each cost added some value in the
product it may either directly or indirectly. There are many cost like
cost of purchasing row material, cost of borrowing money for
business, purchasing the equipment, maintaining the machinery,
inventory costs, transportation costs, etc.

This report gives the specification of the inventory cost


because it becomes play major role in an organization. Inventories
play such a role which can help the organization to achieve the
major objectives. If we think about customer satisfaction point of
view, than it is very essential to provide the goods or satisfy the
demand of customers. Because if finished goods of inventory is not
store, the company have suffer from losses and customers also
dissatisfied with the products. And second important criteria is that
at the time of placing the orders it would be require for the company
to maintain the inventory levels in such a way so that they can place
the orders which actually the required.
Definition:
The terms ‘inventory’ refers to the material that possess economic
value, and are stored by firm for future use. Inadequate inventory
hampers the production process, and also affect the sales.
Inventory management assists organization in minimizing their
inventory cost without compromising on their ability to respond
quickly to goods that play an important role in manufacturing of a
product and become a part of the finished product.
Inventory can be divided in two parts:
Direct Inventory-
Direct inventory include goods that play an important role in
manufacturing of a product and become a part of the finished
product. Direct inventories include raw materials, work-in-progress
goods.
Indirect inventory-
Indirect inventories include goods that are necessary to run the
production process but do not become part of the end product.
Example – lubricants, grease, oils, stationery etc.
Types of Inventory:
Raw Materials:
-Obtaining raw material from suppliers exactly when needed
for production schedules is not always possible.
-Quantity discount can result from larger purchase quantities.
-Lager shipments can result in reduced incoming freight costs
and material handling cost.

Semi-finished Goods:
-Processing steps can be temporarily delinked, which allows
flexibility in planning each step.
-Unequal production rates of processing stations may result in
process slow-down, in the absence of inventories.
-Production and transporting in larger batches reduces
material handling and production costs.

Finished Goods:
-Production of products as and when the customers demand
them can be uneconomical.
-Backlogs in customer order may not always be allowed.
-Maintaining stocks result in higher levels of production and
lower production costs.
-Production can be shown to customer.
Inventory Management:
Management of the inventory would be helping the
organization to achieve the long term profitability of the business
and the customer satisfaction. There are five possible course of
action that will help firms manage inventory better.

1) Computerization of Records

It allows easy entry and retrieval of information, and few


systems with advanced processing capabilities can help the in the
decision making process.

2) Maintain Records of Inventory Turnover

By maintaining proper records of inventory, an organization


can keep track of the amount of inventory being utilized in its
operation. By comparing this amount with the industry standards,
organization can decide whether they need to change their
inventory policy.

3) Balance Date and Educated Guesswork

Determination of the exact inventory requirement is not


possible in many situations. Organization may end up with too much
or too little inventory. So the inventory requirement should be
planned after taking into consideration both available statistical and
data and guesswork based on the prevalent market situations.

4) Should Have an Ordering System in Place

Proper inventory ordering system should be in place rather


than just putting requisition when the inventory is finished. Proper
system would allow firms in their purchasing so that they can take
advantage of benefits offered by the vendors like discounts on bulk
purchase.
5) Employees Should Be Held Accountable for Mnventory
Management

Employees should be made accountable for tracking the


inventory levels, accepting defective and substandard items, delays
in receiving or ordering needed materials. This accountability on the
employees will make them alert while handling inventory matters.

Inventory Systems:
The series of activities involved in maintaining adequate levels of
inventory is referred to as inventory cycle. The activities include
ordering of inventory, receiving, storing, and using them in the
process of production. While ordering inventory, firms place the
orders on the basis of any of the following inventory systems.

Fixed Order Quantity System (Q-System)

In this system, the order quantity (Q) is always constant and the
order is placed when the level of inventory reaches the reorder
point. This system assumes that demand of the inventories over a
period of time is constant and lead time also zero.

Fixed Order Period System (P-System)

In this system the order period is fixed, but the order quantity varies
with the requirement. Here the quantity might be varies with the
orders it depends upon the current level of inventories and future
requirement.

Both the system has their own have their strengths and weaknesses.
In general, operations managers adopt a combination of this system
in maintaining their inventory.
Inventory costs:

One of the major decision that manager has to take is the


quantity of the goods to be ordered. The ordering decision directly
depends upon the costs which are being incurred at the time of
giving the order.

The following cost which are taken into consideration

Purchase Costs: - The cost of purchasing a unit of item is


called its purchase cost. It is directly related to the no. of
quantity which is being order by the firm.
Carrying Costs: - The cost which are incurred while
inventories are stored in the warehouse or stores. It includes
the insurance cost, interest charges, staffing and equipment
cost, maintenance cost etc.
Ordering cost: - This cost s is associated with the process of
purchasing inventory. The costs include cost of preparing
purchasing orders, postage, telephone, fax setup cost if
produce in house, recoding cost, cost of accounting and cost of
material receiving. This cost varies with the no. of orders
means for any quantity the cost remains same.
Stock-out Costs: - Stock-out costs are the penalty cost
associated with delays in meeting the demand or shortage of
stock means when firms are not able to produce. This cost also
includes the loss of future sales, urgent costs and loss of
customer goodwill.
Inventory management in Reliance
Fresh:
The Reliance Fresh stores would offer the widest range of fruits,
vegetables and dairy products.

The extended version of Reliance ‘Fresh’ to be called Reliance


‘Fresh Plus’ will sell apparel, as well.

Reliance Fresh will source fruits, vegetables and other farm offerings
from farmers through the agriculture hubs being set up by the company

This will while eliminating middlemen from the trade ensure higher
remuneration for farmers, lower prices for consumers and lesser wastage
of farm produce for the country.

RIL officials claimed that the company’s retail format for selling
vegetables, fruits and groceries, ‘Reliance Fresh,’ in fact, offers an
opportunity to push cart vendors and small traders (like kirana
merchants) to meet their requirements at competitive rates.

Reliance Retail has planned to capture the food retail market of Gujarat
by unveiling more than 180 ‘Reliance Fresh’ stores in the next six
months, 45 of which are expected to be launched within a month. These
180 Reliance ‘Fresh’ outlets to be set up in the next six months will
come up in 16 cities and towns of the State including Surat, Vadodara,
Rajkot, Jamnagar, Bhavnagar, Palanpur, Anand, Nadiad and Mehsana.

Reliance ‘Fresh’ stores, the new stores in Ahmedabad spread over an


area of 25,000 square feet, will stock fruits, vegetables, grocery, cereals,
bakery and dairy products. Each of them is expected to service the needs
of 3,000 families living within the two km radius of a store. Each ‘Fresh’
store is expected to stock around 180 types of fruits and vegetables.
Outcome:
-In Reliance Fresh they use SAP software for inventory management.

-They get delivery every three days.

-Their employees do work in two shifts (6:30 to 2:30 & 2:30 to 10:30)

-They get vegetables & fruits everyday in the morning.

-They get vegetables & fruits from the farmers.

- They know the stock help of the SAP software and according to the
information they place the order.
Conclusion:
In FMCG sectors to manage the inventory level is the difficult task
and that time technology and network connection or internet
system playing the important role because they have small branches
in different area at that time without software and computerize
system it would be difficult to manage the inventory level.
So that’s why inventory management is a very important task
in an organization.