DR.

BABASAHEB AMBEDKAR MARTHWADA

UNIVERSITY, AURANGABAD.

Dr. Rafiq Zakaria Campus

Maulana Azad College of Arts, Science & Commerce
Rauza Bagh, Aurangabad.

A Study of Ethical Issues of Inventory Management and its implication

on Revenue

In the Partial Fulfillment of Bachelor of Business Administration (VI th Semester)

Academic Year – 2007 – 2008

Submitted by
Aditi Anand Deo (156061)
Parikshith Sambasivan (156214)
Sanaya Dhamodiwala (156069)

Guided by
Prof. I. M. Farooqui

Principal
Mr. Maqdoom Farooqui
 CERTIFICATE

This is to certify that the project report entitled “A Study of Ethical Issues of

Inventory Management and its implication on Revenue” is submitted by

Aditi Anand Deo, Parikshith Sambasivan and Sanaya Dhamodiwala, as per the
requirement of Dr. Baba Saheb Ambedkar Marathwada University in the partial
fulfillment of Bachelor of Business Administration (Final Year) for the academic year
2008 – 2009.

Mr. I.M. Farooqui Dr. Maqdoom Farooqui

Guide Principal
 ACKNOWLEDGEMENTS

Firstly, we would like to thank the Principal of Maulana Azad College, Dr. Maqdoom
Farooqui, for giving me the opportunity of working this project.

Special thanks to our BBA Co-ordinator and Project Guide, Mr. I.M. Farooqui for all his
advice and assistance throughout the course of the project.

I would also like to thank the Head of Department of Commerce and Management
Science, Dr. S.A. Mannan for his valuable inputs.
 DECLARATION

We hereby declare that the project is the result of our own collective efforts that it
confirms to the university, department and course regulations regarding cheating and
plagiarism. No material within this project has been used in any other submission, by the
researchers, for an academic award.

Aditi Anand Deo(156061)

Parikshith Sambasivan (156214)

Sanaya Dhamodiwala (156069)

 TABLE OF CONTENTS
1. Introduction
Revenue Management
Inventory Management
1.1 NIC
1.2 Organization
1.3 Introduction To Inventory Management
1.3.1 Project Description

1.4 Component Assigned

1.4.1 Goal Of The Proposed System
1.4.2 Limitation of the Existing System
2. System Analysis
2.1 Requirement Analysis/ SRS of the Component
2.1.1 Problem Definition
2.1.2 Performance Requirements
2.1.3 System Requirements
2.1.4 Acceptance Criteria
2.2 Feasibility Study
2.2.1 Economic Feasibility
2.2.2 Technical Feasibility
2.2.3 Behavioural Feasibility
2.3 Proposed System Functionality

3. System Design

3.1 Design Goals

3.2 Functional Flow/Flow Chart
3.3 ER Diagram
3.4 Data Flow Diagram
3.5 Database Design
3.6 Data Dictionary

4. Technologies Used

5. Testing and Debugging

5.1 Goals and Objectives

5.2 Statement of scope
5.3 Test Case
5.4 Testing Process
5.5 Debugging

6. Implementation
6.1 Conversion
6.2 Direct Implementation
 6.3 Module Diagram

7. Scope and Limitation

8. Conclusion

9 User Manual and Screen Shots

9.1 User Manual
9.2 Input/Output Interfaces (Screen Shots)
10. Annexure
 1. Introduction

Revenue management has become a buzz word in current market scenario. Existence of
revenue management can be traced back to 6000 B.C, where barter system of exchange
was prevalent. The person who wanted to exchange the goods negotiated an optimal price
suitable to his customers. The barter indirectly forecasted the demand for his product and
used the principles of revenue management nonetheless. Revenue Management as a
marketing strategy came into being during 1970s. The deregulations of U.S. Airlines lead
them to discover this ancient technique and survive the competition. The application of
revenue management as a strategy aimed at providing an identical flying experience to
different customers for different prices, based solely on the time element that is when
they booked their ticket and the flexibility they wanted.
Accommodation is the major part of the tourism industry and accounts for a large chunk
of revenue. A chief feature of the accommodations is the fact that it is highly labour and
capital intensive industry.

To envision the future is a difficult task which requires knowledge, creativity, and
imagination and borders the domain of science fiction. The world is entering the third
millennium in which great changes are expected in all the areas of human lifestyle.
They came up with this concept in order to survive the competition. Revenue
management is applicable to certain service industries. Services operate along a range of
spectrums, from low to high perishability, intangibility and customer intimacy.
The value of the product is not same as the price. The value of a product is determined
subjectively, in other words it is determined by the customer’s perception of the product.
This distinction between value and price is the backbone of business and the very reason
why everyone benefits from a transaction. It also explains the fact that companies
preaching revenue management try to establish different product values suitable to
different people.
Allocation of inventory and pricing are crucial aspects of revenue management and to be
successful at forecasting demand and pricing correctly, one must analyze data that helps
establish the characteristics of each micro market segment correctly.
Price and availability are two important aspects of hotel inventory that remain unstable
over a time period. These two elements shape a traveler’s perception about the product
and the willingness to pay for it.

Concept
Revenue management has altered the financial performance of this service sector since its
conception in the 1980’s. The firms practicing revenue management have accepted that
the revenue has increased by 3-7%.
Revenue management implements the basics of demand and supplying a tactical manner
in order to generate maximum revenue from the constrained or the fixed capacity. The
challenge lies in selling the right product, to the right customer at the right time and at
right price. The basic objectives of revenue management include determination of rates,
controlling availability of products for sale, optimizing the timing of availability for a
product and capturing spill over potential to maximize revenue.

Kimes (1997) describes revenue management as a price discrimination practice. At the

heart of revenue management decision making process is the trade – off of marginal
revenue from the segments that are competing for the same inventory.
Revenue management is a scientific technique which is an assimilation of operations
research, customer relationship management and statistical analysis of data. These
techniques enable a hotel to categorize the customers into price bands, depending upon
the propensity to spend.

Revenue management according to Ideas is defined as : ““It is an economic discipline

appropriate to many service industries in which “market segment pricing” is combined
with statistical analysis to expand the market for the service and increase the revenue
“revenue” per unit of capacity.”
Some industry practioners define revenue management as the art of selling the right
product to the right customer at the right time for the right price. The concept of right in
this definition refers to the practice of achieving the maximum revenue for the sellers and
gaining the maximum value from the buyers. The basic principle of revenue management
is to match the room rate and timing of sale to buyers needs.

Revenue management suites the industries which have perishable inventory, uncertain
demand, segmented markets. These are blended with other aspects selling the product in
advance and combining the essence of low marginal servicing costs. In other words
revenue management is a technique which assures financial prosperity to a firm by
making maximum use of its available capacity.

Today’s hotel executives confront intensively competitive markets which show excessive
capacity and serve short term liquidity prospects. Therefore it is necessary to use capacity
tactfully and strategically. In today’s volatile market condition the goal of hotel
management is to enhance revenue with hotel’s available resources.

Characteristics Of Revenue Management

Fixed capacity: One of the prime reasons for revenue management being in use is the fact
that inventory is constrained and cannot be altered over a short time period. Owing to the
high fixed costs the firm is unable to balance the demand and supply in the short run
while varying output.

Segmented markets: Industries implementing revenue management categorize their

customer base into various markets depending upon the eligibility of the customer to
spend. By identifying their customer, capacity constrained organisations are able to sell
their unit of inventory to the most appropriate customer.

Uncertain demand: The nature of demand is characterized by crests and troughs for the
industries seeking to use revenue management. It is difficult to predict demand for the
product and may change over a period of time.
Advance sales: This is yet another feature of the industry wishing to implement revenue
management. The industry has the legitimate right to sell the product before hand.
Perishable inventory: The inventory is highly perishable in nature; therefore it is
necessary for the managers to sell the product at a lower price than losing the entire
revenue. In other words this situation can be termed as a bird in hand is better than a bird
in the bush.

Low marginal servicing costs: According to Kimes (1997) the capacity constrained
organization the organization should be willing to sell their unused capacity for a value
above their variable cost. The perish ability of a room night represents high fixed cost and
low variable cost.

The techniques of revenue management are applied in various service industries such as
airlines, cargo, cruise, railways and many more. To sum up revenue management is
concerned with maximizing profits by fine tuning the capacity and juggling with the price
and the demand.

Need For Revenue Management

The key need for revenue management requirement is to achieve the following:
Break the traditional first come first served idea.
Minimize the spoilage or eliminate the denied sales.
Manage the assets and make optimum utilization.
Compete more effectively in the changing market.

Benefits Of Revenue Management

Better decision making due to sound and accurate data analysis.
Enables the hotel to cater to the micro segments and result in guest delight.

Hotels form a part of hospitality industry and are also a part of service industry. Hotels
are known to provide home away from home experience to the guests. Hotels sell rooms,
which is a perishable product. In hotels revenue management has become of key
importance as the competition has increased and each hotel company wants to achieve
the epitome of financial success. Revenue management in hotels is concerned with the
market sensitive pricing of a fixed room capacity relative to a hotel’s specific market
segment. Revenue management aims at formulating profitable alignment of a customer,
product and price. Besides revenue management helps hotels in decision making of the
most desirable market mix that generates maximum profit.

The real world of revenue management does not seem to have clear and defined
boundaries when it comes to decision making process. There do exist certain concepts
that create a dilemma while making decisions. Some of these include multiple units of
inventory: The hotel offers multiple units of inventory for sale. In other words, there are
different categories of rooms sold by the hotel for different rates. There is an element of
product differentiation and price discrimination practiced.

Rate structure: The essence of revenue management comes from pricing the rooms at
different levels depending on the demand and supply. A multiple set of pricing structure
can create confusion in customers mind and alienate him from the reality. (Edgar)
Overbooking: Overbooking is defined as accepting more number of reservations than the
inventory possessed by a hotel.

Overbooking is an essential tactic practiced in revenue management. Overbooking is

done by analyzing reports of the past, present and determining strategies for future
generation of revenue. The no-show and cancellation frequencies of customers have led
the hotels to overbook their properties. By overbooking the hotel can make efficient use
of capacity and generate more revenue. However overbooking must be handled with care
since if the hotel is unable to honor the reservation, they may have to compensate the
client and this may lead to loss of goodwill.

Market mix analysis: The best way to generate revenue is by understanding the customers
to whom we are going to cater. This will not only enable a hotel to deliver the best
service but also create guest delight. Understanding of market allows the hoteliers to cater
exclusively to each unique demand of the guest.
Discount allocation: Hotels started discounting rooms when the hoteliers wanted to
stimulate demand in the period of slack season. When a guest receives discount there are
certain restrictions with regards to cancellation or on the arrival and departure dates. This
tactic enables a hotel to build market share, identify new segments and indirectly promote
demand and influence the bottom line. While exercising discount allocation a hotel only
has information about sales, capacity and price at which the room is discounted. The
unknown elements for the same include demand for the discounted category and
competitor’s plan of action. This lack of information may lead to crisis in the near future.
Duration control: This aspect of revenue management looks at restricting the time period
when a guest can access the inventory. For example the guest may be curtailed from
giving an accommodation or making a reservation even when the product is available.
This comes handy to managers while predicting the length of stay, in order to maximize
revenue not only during the peak season but also for all round the year. In other words it
enables redirecting the demand for the product as per time constrains.

Peak off peak analysis: The demand and supply are the two forces that operate this key
feature of revenue management. The hotels undergo a phase when there are no takers for
the product, but to stay in the market the firm knees to achieve the normal profit
irrespective of the season. Thus, the hotel needs to cut down the rates to such an extent
that it is able to meet the variable costs. The vice- versa happens if there exists more
demand. The hotel may charge more in order to cater to the needs as capacity is
constrained and cannot be varied in the short run. This enables the hotel to maintain
equilibrium and prepare for rainy days.

Lead time analysis: We are more familiar with another side of this concept which is also
known as booking lead time. This involves placing time constraints on the customer in
order to avail certain benefits. This will enable the hotel to reposition the product such
that it is able to cater accurately to the customer.
Forecasting
“Luck is what happens when preparation meets opportunity”. Seneca (Roman
Philosopher). The ability to forecast is the enshrined ability of revenue management. This
means knowing the customer, their needs, likes, dislikes which guides in predicting
consumer behavior. Accurate forecasts provide a rational view of the prevailing market
situation. The data that is used to predict forecasts for the hotel has two faces to it which
include the booking information and the number of rooms sold daily.

Pricing:
Price of a product or service can be set by using three techniques. Price can be set by
cost, usually the bottoms –up approach. This is also known as bid price approach. Prices
can also be set by taking the competition into concern, generally termed as market
approach. Variable pricing, is a first degree of price -discrimination practiced. Price
shading is a chief feature that is implemented by the revenue managers in which sales
people are permitted to vary the prices.
Recently the bid price approach has become very popular as it is easy to implement. It
also acts as method of controlling the sale of inventory. In this type of pricing bid prices
are pre- determined for the room nights and are sold only if theater offered for the desired
time period exceeds the bid prices for each day that room is occupied. (Talluri and
Ryzin) (1989).

The bid prices obtained enable in stimulating the comparison between the first come first
serve approach and the latter one.

Ethics is derived from the Latin word “ethical” meaning moral philosophy. In very
general terms ethics refer to the act of taking a right action and greater good, while
morals indicate their practices. According to Henderson “ethics is commonly defined as
a set of principles prescribing behavior that can explain what is good and right or bad and
wrong; it may even outline moral duty and obligation”. This definition of retention is old
and the workable definition of ethics is concerned with clarifying what constitutes human
welfare and the kind of conduct necessary to promote it. Ethical issues emerge when our
perception of what constitutes human welfare receives or enquires clarifications of moral
dilemma.

Business ethics emerged in the corporate world in the response to the fast changing
conditions under which the enterprises must function in modern times. A business ethics
compliance system ensures the following:

1. Workers and management in an organization understand the mission and the

vision of the company.
2. Communication between the three levels of management is smooth.
3. Company gets appropriate feedback.

In an increasingly competitive globalised and most importantly consumer driven business

environment, an ethical approach to business is increasingly important. This is necessary
in order to maintain the reputation and goodwill of the company and also ensure its long
term success. Hotels sales managers and their counter parts regularly face decisions that
include some ethical dimension. From an ethical perspective, the dilemma faced by
people in hotels involves meeting the bottom line targets and also satisfying the needs of
customers. The focus of critiques is mainly on the problematic fields such as price
discrimination, price differentiation and unfair means of selling.

According to Longneck (1985) management affects an organization’s ethical

performance by the establishment of priorities that direct the ethical conduct of the
organization.

Longnecker’s points are of great importance to an organization given that management is

empowered to maintain:
The highest level of services as possible;
The highest guest satisfaction ratings; and
It enables the organization to achieve goodwill and also initiates the recovery of
costs.
In general, hospitality researchers have determined areas of key concern where ethical
issues are invoked. These include yield management, issues surrounding guests’ rights,
departmental relations and many more. During the provision of services the management
is concerned with ethical situations that can leave either a lasting positive or a negative
impression on a guest.

The practice of selling the same room in different market segments at different rates may
lead to loss of revenue. This happens due to the displacement of customers from a high
yield market segment by customers from low yield market segment. Usually customers
booking earlier pay a lower price as they receive discounts and other benefits, whereas
the customers who book closer to the date of arrival end up paying a higher price. Many
hotels earn large amount of revenue from other points of sale. The amount of revenue a
hotel obtains depends on the mix of market segments to which rooms are sold.
The basis ethical behavior is determined by justice, integrity, utility and competence.
Justice: The basic elements of justice include conscientiousness, impartiality and good
faith in dealing with others. The author has emphasized on procedural justice, which
examines the fairness to achieve some end. In the limelight of hotel sales managers and
their counterparts the value of justice may be most relevant in contract negotiation, where
bargaining is required. More broadly this element lays stress on the fact that individual
must refrain from engaging in price discrimination practices.

Competence: With the boom in the industry, there exists cut throat competition amongst
the hoteliers. The study of ethics reveals that the competition should be healthy and no
unfair practices should be followed to meet the desired end. The issue of competence
seems to be the area of prime concern as sales people in the hospitality sector strive to
enhance their credibility and professionalism.

Utility: Raiborne and Payne define utility as “encompassing efficiency and providing the
greatest good for the greatest number”. This calls for persuasion of alternatives that
improve the welfare of others and self. In other words it tries to establish a win-win
situation.
As stated earlier revenue management is a concept that is heavily based on theory of
economics, price discrimination is a policy followed by sellers when they sell identical
kind of goods and services. Price discrimination requires market segmentation. Price
discrimination occurs when the products or services are exclusively reserved. These are
referred to as “premium products”.

The first degree of price discrimination is a situation wherein the price varies by
customer. This rises due to the fact that the value of goods is subjective. The customer is
happy when the price elasticity is less than one.

The second degree of price discrimination occurs when the price varies with the quantity
of product purchased. For instance in hotels, the corporate discounts are offered for
frequent guests.

The third degree of price discrimination is the situation where price varies with the kind
of customer. This refers to market segmentation.

Critique
Managers of corporations frequently find themselves in quandaries over ethics.
(Beauchamp, Bowie, Mac lagan 1990, 1993). On one level they feel to maximize the
profits for the stake holders and at the other end enact to be transparent with customers
about their policies. Many revenue management practitioners break down the actual
scenario into four sub components which include:
1. Market segmentation
2. Overbooking
3. Inventory allocation
4. Forecasting and pricing
Of the points mentioned above overbooking and pricing are the two main categories
under which the concepts of market segmentation and inventory allocation will be
examined.
Market segmentation as stated before refers to the practice of segregating customers into
different categories depending upon the ability to pay. The catch here lies in the
following situation: For instance a guest comes through a corporate booking the rate
applicable to him would be different from the rate quoted when he comes for leisure. This
may create a doubt and lead to long term loss of the customer.

Overbooking: This refers to the practice of booking more number of rooms than the hotel
has. This protects the hotel from revenue loss in case the reservations get cancelled or
there are no –shows. In the short run overbooking practices protect the hotel from bearing
losses. But in the long run in appropriate practices may lead to loss of customers and
goodwill of the property may be at stake. The key to accurate overbooking policy lies in
obtaining accurate data with regards to occupancy and cancellations and no shows.
(Kimes, 1998)

Bundling
Product bundling refers to a market strategy where several products are offered for sale
under one product or an umbrella. This comes handy when there are economies of scale
in production, marginal costs of bundling are low, product set up costs are high. Pure
bundling occurs when a consumer can only purchase the entire bundle or nothing. Mixed
bundling happens when guests are confronted with choice between purchasing an entire
bundle or separate parts of the bundle. Pure bundling can be further categorized into
leader bundling and joint bundling. Joint bundling two products are offered at one price
and in leader bundling a leader product is offered for discount with the non leader
product.

Case Study—Things Go Bump In The Night

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The next morning Esther and her husband felt like they spent more of their time packing
and unpacking than they did visiting and celebrating with their relatives. During their
trip home, Esther told her husband that their experience reminded her of getting bumped
off a flight by an airline—but, in this case, they were not compensated for their
inconvenience. She also questioned the legality of overbooking. She quipped, “What good
is a confirmation number, when there is no guarantee of a room?” Esther decided to
write a letter to the corporate headquarters of the Panda Bear Inn hotel chain.

What good is a confirmation number when there is no guarantee of rooms?

Do no- shows and cancellations justify overbooking? Do operational advantages of
overbooking supersede the inconvenience caused to guests?
The above case study has emerged as a debatable issue amongst the hoteliers today. This
is a situation which involves ethics. The ethical aspect here can be viewed from two
perspectives, namely the Kantian Ethics and Virtue ethics.
According to the Kantian perspective the situation of overbooking may seem ethical only
when the guest is informed about the hotel policies. Had the person in charge of
reservation informed the guest that the probability of confirming and guaranteeing the
reservation is low, and may lead to dishonoring the reservation, then the guests are at
fault. If the similar case was to be viewed from the aspect of virtue ethics, this form of
ethics subscribes and views hotel as a human community.

The features of such a concept include honesty, integrity, tolerance and fairness. The case
study raises an issue on all the above traits as:
The guest’s reservation was confirmed and guaranteed as well. Secondly the hotel should
have reserved a room for the guest and then overbooked. Last but not the least the hotel
should have informed the guests about their arrangements in a referral group in advance.
Such situations are of critical importance as it may result in the loss of customer loyalty
and good will in the long run. In the short run the profit was made at the cost of causing
inconvenience to a guest. From the utilitarian perspective the management of the hotel
was ethical in maximizing the utility for the unsold rooms but while doing the same
should have been more careful. Thus we learn a lesson that while overbooking a hotel
needs to make sure that the practice is open and transparent with the guests in order to
avoid confusion and ceases to promote unethical or unfair deeds.

The pricing strategies used by the hotels form another debatable issue while discussing
ethics. Pricing is a very broad arena to be debated upon. The pricing culture followed by
a hotel depends upon numerous factors such as competition and demand for the product.
Demand is driven by the utility, which lies in the hands of the consumer and the supply is
governed by costs which lies in the supplier’s or management’s hand. As the law of
demand states that price and demand are inversely proportional to each other, the rate
structure is bound to be influenced by the demand for the product. When the demand is
high the rates quoted will be high and when demand is low the rates will be slashed so as
to generate demand.

Pricing is a key strategic lever in revenue management deploys. For revenue management
pricing to be effective customers who are willing to pay more must be prevented from
taking advantage of a lower price targeted at a more price sensitive segment. Because
services are often place, time and customer special and capacity constrained, substantial
opportunity exists for service providers to use price discrimination and to build effective
rate fences between the segments. Well designed rate fences allow customers to self
segment on the basis of their willingness to pay, service transaction and consumption
pattern. Fencing refers to putting certain restrictions in order to capture different
segments of consumers by offering different products which only higher end of the
society would desire.

Pricing and related rate fences can be viewed as unfair or even as price gouging and
fairness perceptions have been shown to be related to firm profitability. (Kahayan, Ketch,
Thales, 1985). Perceived fairness has been showed to be affected by the forming of
revenue practice where by customers perceive economically equivalent pricing schedules
as fair when expressed as discounts rather than premiums and
surcharges.(Kanheman,1979). In addition to price framing, the fairness is also affected by
the fencing condition of the customer. Perceived fairness is defined as whether an
outcome or a transaction process are seen by consumers as responsible, acceptable and
just. (Bolton, Alba, 2003). The dual entitlement and reference price and reference
transaction are used to examine fairness. The principle of dual entitlement refers to the
fact that the most customers believe that they are entitled to a reasonable price and a firm
is entitled to a reasonable profit. It further states that increase in price is accepted when it
occurs due to cost and unfair when the increase in price does not attribute to increase in
costs. A reference price is defined as how much a customer thinks a service should cost.
To assess the fairness of price, customers generally refer to the price paid in the recent
past and the frequency of the generally acceptable price.

Prospect theory suggests that consumers perceive prices framed as gains e.g. discounts,
than those framed as loses e.g. surcharge, even if situations are economically equivalent.
Customers who receive an advantage from a revenue management pricing tactic consider
the price they pay as fairer than the customers who are fence disadvantaged. If customers
view a firm’s practice as negative, consumers’ behavioral and affective responses change
instantly. These include agitation, disappointment and negative word of mouth publicity.
From the above discussion it is clear that the application of ethics varies from customer to
customer.

Conclusion
Today’s world is more competitive than ever. Revenue management is evolving at a
faster speed and is more than a mere strategy to optimize revenue.
“Revenue management has proven to be a devastatingly effective competitive device” .Dr
Alfred Khan

Revenue Management is a technique being utilized by an increasing number of service

industries in order to maximize the effective use of their available capacity and ensure
financial success. In hotels revenue management is concerned with market sensitive
pricing of fixed room capacity relative to a hotel’s specific market segment.
The means employed to achieve an end are equally important. Similarly in order to
maximize profits, the pathway chosen by the hotel’s management is important. When a
hotel fails to be transparent and firm with their operational policies, it tends to gain
negative publicity. Therefore it is necessary for the hotel to ensure that their customers
get the best value for money and at the same time protect the reputation of the hotel.
The ethical concern arises when the management discloses the ambiguous policies in
which reading between the lines becomes highly evident. In the revenue management
arena, the question of ethics arises when it comes to price discrimination and inventory
control. Price discrimination is considered ethical when the customer is aware and is not
affected by price elasticity. The art lies in creating a win – win situation, where in the
customer is happy and is satisfied with the value for money spent and the hotel is able to
meet its targets for the financial year. As hotels form a part of human community, the
management should have convincing power and make the guest realize that the
management is trying their best in providing the value for money.
Inventory management

Inventory is a list for goods and materials, or those goods and materials themselves, held
available in stock by a business. It is also used for a list of the contents of a household
and for a list for testamentary purposes of the possessions of someone who has died.

Origins of the word inventory

The word inventory was first recorded in 1601. The French term inventaire, or "detailed
list of goods," dates back to 1415. The reasons for keeping stock. There are three basic
reasons for keeping an inventory:

1. Time – the time lags present in the supply chain, from supplier to user at every
stage, requires that you maintain certain amount of inventory to use in this "lead
time"

2. Uncertainty - inventories are maintained as buffers to meet uncertainties in

demand, supply and movements of goods.

3. Economies of scale - ideal condition of "one unit at a time at a place where user
needs it, when he needs it" principle tends to incur lots of costs in terms of logistics.
So bulk buying, movement and storing brings in economies of scale, thus inventory.

All these stock reasons can apply to any owner or product stage. Buffer stock is held in
individual workstations against the possibility that the upstream workstation may be a
little delayed in long setup or change-over time. This stock is then used while that
change-over is happening. This stock can be eliminated by tools like SMED.

These classifications apply along the whole supply chain not just within a facility or
plant. Where these stocks contain the same or similar items it is often the work practice to
hold all these stocks mixed together before or after the sub-process to which they relate.
This 'reduces' costs. Because they are mixed-up together there is no visual reminder to
operators of the adjacent sub-processes or line management of the stock which is due to a
particular cause and should be a particular individual's responsibility with inevitable
consequences. Some plants have centralized stock holding across sub-processes which
makes the situation even more acute.

Special terms used in dealing with inventory

• stock keeping unit (SKU) is a unique combination of all the components that are
assembled into the purchasable item. Therefore any change in the packaging or product is
a new SKU. This level of detailed specification assists in managing inventory.
• Stock out means running out of the inventory of an SKU.
• "new old stock" (sometimes abbreviated nos) is a term used in business to refer to
merchandise being offered for sale which was manufactured long ago but that has never
been used. Such merchandise may not be produced any more, and the new old stock may
represent the only market source of a particular item at the present time.

Typology

1. Buffer/safety stock
2. Cycle stock (used in batch processes, it is the available inventory excluding buffer
stock)
3. De-coupling (buffer stock that is held by both the supplier and the user)
4. Anticipation stock (building up extra stock for periods of increased demand - e.g. Ice
cream for summer)
5. Pipeline stock (goods still in transit or in the process of distribution - have left the
factory but not arrived at the customer yet)
Inventory examples

While accountants often discuss inventory in terms of goods for sale, organizations -
manufacturers, service-providers and not-for-profits - also have inventories (fixtures,
furniture, supplies) that they do not intend to sell. Manufacturers', distributors', and
wholesalers' inventory tends to cluster in warehouses. Retailers' inventory may exist in a
warehouse or in a shop or store accessible to customers. Inventories not intended for sale
to customers or to clients may be held in any premises an organization uses. Stock ties up
cash and if uncontrolled it will be impossible to know the actual level of stocks and
therefore impossible to control them. Whilst the reasons for holding stock are covered
earlier, most manufacturing organizations usually divide their "goods for sale" inventory
into:
• Raw materials - materials and components scheduled for use in making a product.
• Work in process, WIP - materials and components that have begun their transformation
to finished goods.
• Finished goods - goods ready for sale to customers.
• Goods for resale - returned goods that are sellable.
• Spare parts

Manufacturing

A canned food manufacturer's materials inventory includes the ingredients to form the
foods to be canned, empty cans and their lids (or coils of steel or aluminium for
constructing those components), labels, and anything else (solder, glue,) that will form
part of a finished can. The firm's work in process includes those materials from the time
of release to the work floor until they become complete and ready for sale to wholesale or
retail customers. This may be vats of prepared food, filled cans not yet labelled or sub-
assemblies of food components. It may also include finished cans that are not yet
packaged into cartons or pallets. Its finished good inventory consists of all the filled and
labelled cans of food in its warehouse that it has manufactured and wishes to sell to food
distributors (wholesalers), to grocery stores (retailers), and even perhaps to consumers
through arrangements like factory stores and outlet centres.

Logistics or distribution
the logistics chain includes the owners (wholesalers and retailers), manufacturers' agents,
and transportation channels that an item passes through between initial manufacture and
final purchase by a consumer. At each stage, goods belong (as assets) to the seller until
the buyer accepts them. Distribution includes four components:

1. Manufacturers' agents: distributors who hold and transport a consignment of finished

goods for manufacturers without ever owning it. Accountants refer to manufacturers'
agents' inventory as "materiel" in order to differentiate it from goods for sale.

2. Transportation: the movement of goods between owners, or between locations of a

given owner. The seller owns goods in transit until the buyer accepts them. Sellers or
buyers may transport goods but most transportation providers act as the agent of the
owner of the goods.

3. Wholesaling: distributors who buy goods from manufacturers and other suppliers
(farmers, fishermen, etc.) For re-sale work in the wholesale industry. A wholesaler's
inventory consists of all the products in its warehouse that it has purchased from
manufacturers or other suppliers. A produce-wholesaler (or distributor) may buy from
distributors in other parts of the world or from local farmers. Food distributors wish to
sell their inventory to grocery stores, other distributors, or possibly to consumers.
4. Retailing: a retailer's inventory of goods for sale consists of all the products on its
shelves that it has purchased from manufacturers or wholesalers. The store attempts to
sell its inventory (soup, bolts, sweaters, or other goods) to consumers.

It is a key observation in "lean manufacturing" that it is often the case that more than 90%
of a product's life prior to end user sale is spent in distribution of one form or another. On
the assumption that the time is not itself valuable to the customer this adds enormously to
the working capital tied up in the business as well as the complexity of the supply chain.
Reduction and elimination of these inventory 'wait' states is a key concept in lean.

High level inventory management

It seems that around about 1880 there was a change in manufacturing practice from
companies with relatively homogeneous lines of products to vertically integrated
companies with unprecedented diversity in processes and products. Those companies
(especially in metalworking) attempted to achieve success through economies of scale -
the gains of jointly producing two or more products in one facility. The managers now
needed information on the effect of product mix decisions on overall profits and therefore
needed accurate product cost information. A variety of attempts to achieve this were
unsuccessful due to the huge overhead of the information processing of the time.
However, the burgeoning need for financial reporting after 1900 created unavoidable
pressure for financial accounting of stock and the management need to cost manage
products became overshadowed. In particular it was the need for audited accounts that
sealed the fate of managerial cost accounting. The dominance of financial reporting
accounting over management accounting remains to this day with few exceptions and the
financial reporting definitions of 'cost' have distorted effective management 'cost'
accounting since that time. This is particularly true of inventory. Hence high level
financial inventory has these two basic formulas which relate to the accounting period:

1. Cost of beginning inventory at the start of the period + inventory purchases within the
period + cost of production within the period = cost of goods

2. Cost of goods - cost of ending inventory at the end of the period = cost of goods sold

The benefit of these formulae is that the first absorbs all overheads of production and raw
material costs in to a value of inventory for reporting. The second formula then creates
the new start point for the next period and gives a figure to be subtracted from sales price
to determine some form of sales margin figure.
Manufacturing management is more interested in inventory turnover ratio or average
days to sell inventory since it tells them something about relative inventory levels.

Inventory turn over ratio (also known as inventory turns) = cost of goods sold/average

Inventory=cost of goods sold / ((beginning inventory + ending inventory) and its inverse

Average days to sell inventory=number of days a year/inventory turn over ratio=365

days a year/inventory turn over ratio

This ratio estimates how many times the inventory turns over a year. This number tells us
how much cash/goods are tied up waiting for the process and is a critical measure of
process reliability and effectiveness. So a factory with two inventory turns has six months
stock on hand which generally not a good figure (depending upon industry) whereas a
factory that moves from six turns to twelve turns has probably improved effectiveness by
100%. This improvement will have some negative results in the financial reporting since
the 'value' now stored in the factory as inventory is reduced.

Whilst the simplicity of these accounting measures of inventory is very useful they are in
the end fraught with the danger of their own assumptions. There are in fact so many
things which can vary hidden under this appearance of simplicity that a variety of
'adjusting' assumptions may be used. These include:
• Specific identification
• Weighted average cost
• Moving-average cost
• FIFO, and LIFO.

Inventory turn is a financial accounting tools for evaluating inventory and it is not
necessary a management tool. Inventory management should be forward looking. The
methodology applied is based on historical cost of goods sold. The ratio may not be able
to reflect the usability of future production demand as well as customer demand.

Business models including just in time (JIT) inventory, vendor managed inventory (VMI)
and customer managed inventory (CMI) attempt to minimize on-hand inventory and
increase inventory turns. VMI and CMI have gained considerable attention due to the
success of third party vendors who offer added expertise and knowledge that
organizations may not possess.

Accounting perspectives: the basis of inventory accounting

Inventory needs to be accounted where it is held across accounting period boundaries

since generally expenses should be matched against the results of that expense within the
same period. When processes were simple and short then inventories were small but with
more complex processes then inventories became larger and significant valued items on
the balance sheet. This need to value unsold and incomplete goods has driven much new
behaviour into management practice. Perhaps most significant of these are the
complexities of fixed cost recovery, transfer pricing, and the separation of direct from
indirect costs. This, supposedly, precluded "anticipating income" or "declaring dividends
out of capital". It is one of the intangible benefits of lean and the TPS that process times
shorten and stock levels decline to the point where the importance of this activity is
hugely reduced and therefore effort, especially managerial, to achieve it can be
minimized.

Accounting for inventory

Each country has its own rules about accounting for inventory that fit with their financial
reporting rules. So for example, organizations in the U.S.A define inventory to suit their
needs within us generally accepted accounting practices (GAAP), the rules defined by the
financial accounting standards board (FASB) (and others) and enforced by the U.S.A
securities and exchange commission (sec) and other federal and state agencies. Other
countries often have similar arrangements but with their own GAAP and national
agencies instead.

It is intentional that financial accounting uses standards that allow the public to compare
firms' performance, cost accounting functions internally to an organization and
potentially with much greater flexibility. A discussion of inventory from standard and
theory of constraints-based (throughput) cost accounting perspective follows some
examples and a discussion of inventory from a financial accounting perspective.
The internal costing/valuation of inventory can be complex. Whereas in the past most
enterprises ran simple one process factories, this is quite probably in the minority in the
21st century. Where 'one process' factories exist then there is a market for the goods
created which establishes an independent market value for the good. Today with multi-
stage process companies there is much inventory that would once have been finished
goods which is now held as 'work-in-process' (WIP). This needs to be valued in the
accounts but the valuation is a management decision since there is no market for the
partially finished product. This somewhat arbitrary 'valuation' of WIP combined with the
allocation of overheads to it has led to some unintended and undesirable results.

Financial accounting

An organization's inventory can appear a mixed blessing, since it counts as an asset on

the balance sheet, but it also ties up money that could serve for other purposes and
requires additional expense for its protection. Inventory may also cause significant tax
expenses, depending on particular countries' laws regarding depreciation of inventory, as
in Thor power Tool Company v. Commissioner.

Inventory appears as a [[current asset]] on an organization's balance sheet because the

organization can, in principle, turn it into cash by selling it. Some organizations hold
larger inventories than their operations require in order inflating their apparent asset value
and their perceived profitability.
in addition to the money tied up by acquiring inventory, inventory also brings associated
costs for warehouse space, for utilities, and for insurance to cover staff to handle and
protect it, fire and other disasters, obsolescence, shrinkage (theft and errors), and others.
Such holding costs can mount up: between a third and a half of its acquisition value per
year.

Businesses that stock too little inventory cannot take advantage of large orders from
customers if they cannot deliver. The conflicting objectives of cost control and customer
service often pit an organization's financial and operating managers against its sales and
marketing departments. Sales people, in particular, often receive sales commission
payments, so unavailable goods may reduce their potential personal income. This conflict
can be minimized by reducing production time to being near or less than customer
expected delivery time. This effort, known as "lean production" will significantly reduce
working capital tied up in inventory and reduce manufacturing costs (see the Toyota
production system).

the role of a cost accountant on the 21st-century in a manufacturing organization

by helping the organization to make better decisions, the accountants can help the public
sector to change in a very positive way that delivers increased value for the taxpayer’s
investment. It can also help to incentives progress and to ensure that reforms are
sustainable and effective in the long term, by ensuring that success is appropriately
recognized in both the formal and informal reward systems of the organization.

To say that they have a key role to play is an understatement. Finance is connected to
most, if not all, of the key business processes within the organization. It should be
steering the stewardship and accountability systems that ensure that the organization is
conducting its business in an appropriate, ethical manner. It is critical that these
foundations are firmly laid. So often they are the litmus test by which public confidence
in the institution is either won or lost.
Finance should also be providing the information, analysis and advice to enable the
organizations’ service managers to operate effectively. This goes beyond the traditional
preoccupation with budgets – how much have we spent so far, how much have we left to
spend? It is about helping the organization to better understand its own performance. That
means making the connections and understanding the relationships between given inputs
– the resources brought to bear – and the outputs and outcomes that they achieve. It is
also about understanding and actively managing risks within the organization and its
activities.

FIFO vs. LIFO accounting

When a dealer sells goods from inventory, the value of the inventory is reduced by the
cost of goods sold (cog sold). This is simple where the cog has not varied across those
held in stock; but where it has, then an agreed method must be derived to evaluate it. For
commodity items that one cannot track individually, accountants must choose a method
that fits the nature of the sale. Two popular methods which normally exist are: FIFO and
LIFO accounting (first in - first out, last in - first out). FIFO regards the first unit that
arrived in inventory as the first one sold. LIFO considers the last unit arriving in
inventory as the first one sold. Which method an accountant selects can have a significant
effect on net income and book value and, in turn, on taxation. Using LIFO accounting for
inventory, a company generally reports lower net income and lower book value, due to
the effects of inflation. This generally results in lower taxation. Due to LIFO's potential
to skew inventory value, UK, GAAP and IAS have effectively banned LIFO inventory
accounting.

Standard cost accounting

Standard cost accounting uses ratios called efficiencies that compare the labour and
materials actually used to produce a good with those that the same goods would have
required under "standard" conditions. As long as similar actual and standard conditions
obtain, few problems arise. Unfortunately, standard cost accounting methods developed
about 100 years ago, when labour comprised the most important cost in manufactured
goods. Standard methods continue to emphasize labour efficiency even though that
resource now constitutes a (very) small part of cost in most cases.

Standard cost accounting can hurt managers, workers, and firms in several ways. For
example, a policy decision to increase inventory can harm a manufacturing managers'
performance evaluation. Increasing inventory requires increased production, which
means that processes must operate at higher rates. When (not if) something goes wrong,
the process takes longer and uses more than the standard labour time. The manager
appears responsible for the excess, even though s/he has no control over the production
requirement or the problem.

In adverse economic times, firms use the same efficiencies to downsize, right size, or
otherwise reduce their labour force. Workers laid off under those circumstances have
even less control over excess inventory and cost efficiencies than their managers. Many
financial and cost accountants have agreed for many years on the desirability of replacing
standard cost accounting. They have not, however, found a successor.

Theory of constraints cost accounting

Elijah m. Godard developed the theory of constraints in part to address the cost-
accounting problems in what he calls the "cost world". He offers a substitute, called
throughput accounting, that uses throughput (money for goods sold to customers) in place
of output (goods produced that may sell or may boost inventory) and considers labour as
a fixed rather than as a variable cost. He defines inventory simply as everything the
organization owns that it plans to sell, including buildings, machinery, and many other
things in addition to the categories listed here. Throughput accounting recognizes only
one class of variable costs: the truly variable costs like materials and components that
vary directly with the quantity produced.
Finished goods inventories remain balance-sheet assets, but labour efficiency ratios no
longer evaluate managers and workers. Instead of an incentive to reduce labour cost,
throughput accounting focuses attention on the relationships between throughput
(revenue or income) on one hand and controllable operating expenses and changes in
inventory on the other. Those relationships direct attention to the constraints or
bottlenecks that prevent the system from producing more throughput, rather than to
people - who have little or no control over their situations.

National accounts

Inventories also play an important role in national accounts and the analysis of the
business cycle. Some short-term macroeconomic fluctuations are attributed to the
inventory cycle.

Distressed inventory
also known as distressed or expired stock, distressed inventory is inventory whose
potential to be sold at a normal cost has or will soon pass. In certain industries it could
also mean that the stock is or will soon be impossible to sell. Examples of distressed
inventory include products that have reached its expiry date, or has reached a date in
advance of expiry at which the planned market will no longer purchase it (e.g. 3 months
left to expiry), clothing that is defective or out of fashion, and old newspapers or
magazines. It also includes computer or consumer-electronic equipment that is
obsolescent or discontinued and whose manufacturer is unable to support it.
Economic order quantity
economic order quantity is the level of inventory that minimizes the total inventory
holding costs and ordering costs. The framework used to determine this order quantity is
also known as Wilson EOQ model. The model was developed by f. W. Harris in 1913.
But still r. H. Wilson is given credit for his early in-depth analysis of the model.
Underlying assumptions
1. The ordering cost is constant.
2. The rate of demand is constant
variables
• q = order quantity
• q * = optimal order quantity
• d = annual demand quantity of the product
• p = purchase cost per unit
• c = fixed cost per order (not per unit, in addition to unit cost)
• h = annual holding cost per unit (also known as carrying cost) (warehouse space,
refrigeration, insurance, etc. Usually not related to the unit cost)
the total cost function
the single-item EOQ formula finds the minimum point of the following cost function:
total cost = purchase cost + ordering cost + holding cost
extensions
several extensions can be made to the EOQ model, including backordering costs and
multiple items. Additionally, the economic order interval can be determined from the
EOQ and the economic production quantity model (which determines the optimal
production quantity) can be determined in a similar fashion.

The Importance Of Inventory Management In Hospitality.

Introduction

Inventory to many business owners is one of the more visible and tangible aspects of
business. Raw materials, goods in process and finished goods all represent various forms
of inventory. Each type represents money tied up until the inventory leaves the company
as purchased products. Likewise merchandise stocks in a retail store contribute to profits
only when their sale puts money into the cash register. In a literal sense, inventory refers
to stocks of anything necessary to do business. These stocks represent a large portion of
the business investment and must be well managed n order to maximize profits. Infact
many small businesses cannot absorb the types of losses that arise from poor inventory
management unless inventories are controlled they are unreliable, inefficient and costly.
This is because inventory forms a link between production and sales.

The objectives of inventory management are:

To ensure that inventories needed to sustain operations are sustainable
Costs are kept under control

Inventory can be classified into three broad categories:

1. Raw material inventory – they are materials and components that are inputs in
making the final product
2. Work-in-progress – also called as stock-in-progress/ process refers to goods in the
intermediate stage of production
3. Finished goods – consists of final products ready for sale

Inventory in transit i.e. inventory between various stages of production or storage that
permits efficient production scheduling and utilization of resources. The possibility of
resultant delays and idle times gives the firm an incentive to maintain in-transit inventory.
Raw material inventory gives the firm flexibility in purchasing without which the firm
exists on a hand-to-mouth existence of buying raw materials to strictly keep in sync with
production. Finished goods inventory allows the firm flexibility in its production
scheduling and marketing.

Large inventories allow efficient service of customer demand. The unavailability or

temporary stock-out of a product results in the loss of present as well as future sales.
Thus it is learning to maintain all types of inventory stocks. A disadvantage of holding
large inventories is the total cost of holding the inventory inclusive of storage and
handling costs and the required return on capital which get tied up in the inventory. An
additional disadvantage is the danger of obsolescence.

The costs associated with inventory are: ordering costs, carrying costs and stock-out
costs. Ordering costs include the cost of placing an order, receiving the material and
inspecting the quality. It does not change with the increase or decrease in the no. Of units
that have been ordered. Examples are shipping, storage, handling, insurance, property
tax, wastage costs, etc. Ordering costs would be increasing with the frequency of increase
in orders. Ordering a larger quantity of material would reduce costs per order. The second
broad category of costs is the carrying costs. The main component of carrying costs is
storage. Storage costs would include cold storage, warehouse charges, fire or theft
insurance charges, loss due to wastage, pilferage, etc. Carrying costs also include the cost
of funds that are locked inventory. This is called opportunity cost of funds. Carrying costs
increase or decrease with the rise and fall in inventory levels. Stock-out costs is basically
the cost of running short or running out of inventory. Stock-outs result in the loss of sales,
guest goodwill and disturbed production schedules. It is not possible to measure the
impact of stock-out costs as they are short-term and long-term in nature and are
intangible to an extent.

Importance of inventory management

Successful inventory management involves the balancing the costs of inventory with
benefits of inventory. Many business owners fail to appreciate the true costs of carrying
inventory which includes not only the direct costs but also the indirect costs. This fine
line b/w keeping too much inventory or not enough inventories is not the only concern of
a manager.

Maintaining an assortment of stocks but not spreading the rapidly moving ones
too thin
 Increasing inventory turnover but not sacrificing the service levels
Keeping stock low but not sacrificing performance
Obtaining lower prices for volume purchases and not ending up with slow moving
inventory
Having an adequate inventory on hand but not getting caught with obsolete or
near to obsolete items

One of the most important aspects of inventory is control. Inventory control is to have the
items in stock at the moment they are required. This includes procuring items from the
market early enough to ensure delivery at the proper time. Thus, a sound purchase plan
made in advance determines the inventory requirement for each time period leading to an
execution without delay. Inventory management and control must be designed to meet
the dictum of market and support the company’s strategy plans. Companies will need to
manage their inventory for greater profitability owing to market demand, new
opportunities worldwide marketing, global material sourcing and new technology.

Tools of inventory management: EOQ model

Horne and Wachowicz (2005) fundamentals of financial management, 11th edition,

defines EOQ or economic order quality as “the quantity of an inventory item to order so
that the total inventory costs are minimized over the firm’s planning period.” This model
defines the optimal quantity that minimizes total variable costs required to order and hold
inventory. This model was developed by F.W. Harris in 1913, though R.H.Wilson is
credited for his early in depth analysis of the model. EOQ is an important concept in
purchase of raw materials and the storage of finished goods and of in-transit inventories.
In the analysis the optimal order quantity for a particular item of inventory given its
forecasted use and costs is determined. Ordering can mean either the purchase of the item
or the production of the item. This model helps managers ensure an equilibrium b/w
ordering and carrying costs.
The graph illustrated the behaviour of total carrying costs and the total ordering costs and
the sum of these two. Total carrying costs varies directly with the size of the order and
total ordering costs vary inversely with size. The EOQ occurs when total carrying costs
equals total ordering costs assuming that there is no safety stock. Therefore, EOQ is
given as:

Example:
100 days requirement = 5000 units
Cc = re. 1/unit/100 days
OC = Rs. 100/order
No. Of orders OC Cc TCU
1 100 2500 2600
2 200 1250 1450
5 500 500 1000
10 1000 250 1250
20 2000 125 2125

Thus, by substituting the values in the formula we get the value of 1000. Therefore, the
optimal order quantity that the restaurant must order is 1000 units and this order must be
done five times. We can thus conclude that the restaurant would order five times during
the 100 day cycle.

Assumptions for the EOQ graph:

The forecast usage is for a given period
The demand is throughout the period
Inventory order can be replenished immediately
The two distinguished costs are carrying and ordering costs
The cost/order is constant regardless of order size
The carrying cost is fixed percentage of the avg. Inventory value

Order point: when to order?

The EOQ calculated ignores lead time. Lead time is the length of time b/w order
placement and order receipt. Suppose the demand for the inventory is known but it takes
five days b/w the placement and receipt of orders, the EOQ in the previous example was
1000 units with an order being placed every twentieth day. The firm has a daily usage of
50 units. The units remaining constant the firm needs to order five days in advance. Order
point can be expressed as:

Op= lead time * daily usage

Inference: thus, when the new order is received five days later the firm will have
exhausted its existing stock.

Safety stock

Inventory stock held in reserve as a cushion against the uncertain demand for usage and
replenished lead time. Order point here would become:
Op= (avg. Lead time * avg. Daily usage) +safety stock

Just – in – time: JIT

It refers to the idea that inventories are acquired and put in production at the exact time
they are needed. It is also described as an approach with the objective of producing the
right parts in the right place at the right time. This method reduces costs of moving of the
material, accumulation of materials, or the use of faulty production methods that would
create subsequent product rework. Example: McDonalds
JIT is also called as lean production or stockless production that improves profits and
ROI by reducing inventory levels variability, production and delivery lead times, other
costs like machine setup and breakdown, and increasing inventory turnover rate along
with improvement of product quality. In JIT under utilized excess capacity is used instead
of buffer inventories to hedge against problems that may arise. This process requires a
very accurate production and inventory information system, a highly efficient purchase
system with reliable suppliers and above all an efficient inventory handling system.
JIT may portray the fact that inventories are reduced to bare minimum and that EOQ for
an item might approach one unit. It is not so.

JIT rejects the notion that ordering costs are fixed. JIT drives down cost as:
1. Reduction of setup times
2. Reduction of lot sizes
3. Reduced lead times
4. Preventive maintenance
5. Flexible workforce
6. Requires a supplier quality assurance and implement a zero-defect quality
program
7. Small lot conveyance

By successfully reducing ordering costs firms can flatten the OC curve and can reduce
the EOQ to one. JIT emphasizes inventory as one of the seven wastes and as such its
practice involves the aim of reducing buffer inventory to zero. Zero buffer inventories
means that production is not protected from exogenous i.e. External shocks which will
result in the reduction of the supply of inputs which slow or stop production with
significant negative consequences. As noted by liker (2003) Toyota suffered a major
supplier failure as a result of the 1997 Aisin fire which resulted in one of its suppliers
incapable to fulfill Toyota’s orders. In the United States the 1992 railway strikes resulted
in GM (general motors) having to shut down a 75000 worker plant temporarily as they
had no inputs flowing to the factory.
Food and beverage inventory control is all about decision making. Food & beverage in
hospitality provides highest risk, lowest profit margins and has a success rate that is less
than one in five after five years of operations. This is the main reason for good food &
beverage control. Food & beverage outlets in large hotels and resorts may not provide a
big contribution to the bottom line but they still require strong control because these
places are large in nature, they do not have those many people involved in long-term
potentials and there is even a greater need for strict review and analysis.

In such a situation the entire hierarchy from the top manager to the front line executives
must be responsible for the follow –up of the controls namely viz.
A. Storage and requisitioning of supplies
B. Maintenance of equipment
C. Preparation and service of food & beverage
D. Revenue compilation from cash registers
E. Food inventory
F. Menu and portioning
G. All other kitchen preparations

Food & beverage industry portrays high customer expectation, stiff competition, complex
planning and perishable products. Knowing your customers buying patterns is critical to
maintain adequate levels of the product and sustain profitability from low margin items.
Replenishment of inventory is subjected to seasonal availability, promotions and special
events. Accounting includes regular inventory counts, contracting, purchase procedures,
pricing and reporting on a weekly, fortnightly and monthly basis to make the people
aware of what is in stock, allows problems to be recognized and responded to quickly.
The bottom-line “the better the inventory control, more is our command over prime
costs”.
1.1- NIC

National Informatics Centre (NIC) of the Department of Information Technology is providing

network backbone and e-Governance support to Central Government, State Governments, UT
Administrations, Districts and other Government bodies. It offers a
wide range of ICT services including Nationwide Communication
Network for decentralized planning, improvement in Government
services and wider transparency of national and local Governments.
NIC assists in implementing Information Technology Projects, in
close collaboration with Central and State Governments, in the areas
of (a) Centrally sponsored schemes and Central sector schemes, (b)
State sector and State sponsored projects, and (c) District
Administration sponsored projects. NIC endeavors to ensure that the
latest technology in all areas of IT is available to its users.

NIC Headquarters is based in New Delhi. At NIC

Headquarters, a large number of Application Divisions exist which
provide total Informatics Support to the Ministries and Departments of the Central Government.
NIC computer cells are located in almost all the Ministry Bhawans of the Central Government
and Apex Offices including the Prime Minister’s Office, the Rashtrapati Bhawan and the
Parliament House. Apart from this, NIC has various Resource Divisions at the Headquarters
which specialize into different areas of IT and facilitate the Application Divisions as well as other
NIC Centres in providing state-of-the-art services to the Govt.

At the State level, NICs State/UTs Units provide informatics support to their respective
State Government and at the District level lie the NIC District Infomatics Offices.

NIC has conceptualised, developed and implemented a very large number of projects for
various Central and State Government Ministries, Departments and Organisations. Many of these
projects are continuing projects being carried out by various divisions of NIC at New Delhi
Headquarters and State/District centres throughout the country. Some of the most important note
worthy projects, which offer a glimpse of the multifaceted, diverse activities of NIC, touching
upon all spheres of e-governance and thereby influencing the lives of millions of citizens of India
are given below :

• Agrictural Marketing Information Network (AGMARKNET).

• Central Passport System.

• Community Information Centres (CICs).

• Computerised Rural Information Systems Project (CRISP).

• Court Information System (COURTIS).

• Department of Agriculture Network (DACNET).

• Examination Results Portal.

• India Image.

• Land Records Information System (LRIS).

• National Hazardous Waste Information System (NHWIS).

Public Grievance Redress and Monitoring System (PGRAMS).

Spatial Data Infrastructure (SDI).

• Video Conferencing.

Web Site of NIC http://indiaimage.nic.in/

 1.2-Organisation

Border Road Organisation (BRO)

The early years post Independence saw India with a 15000 kilometers long border to be secured
and a vast, remote and economically backward North and North Eastern Region, with an
inadequate road communication network, to support its future development.

The 1950’s was one of consolidation and learning, politically and militarily. With the advent of
the Five Year Plans from 1951, the Central and State Government stepped in. With the
Constitution having declared road development as a State subject , the responsibility of road
development continued in the North and North Eastern States to be entrusted to the PWD, even
where defence strategy was involved.

However, what become apparently clear was that, the roads for the Border States were forbidding
challenges, needing dedicated commitment, time and money, to open up the hinterland to the out
side.

Vision

Nation’s most reputed, multifaceted, transnational, modern construction Organisation committed

to meeting the strategic needs of the armed forces with enlightened leadership, a strong, skilled
and committed work force, a well ingrained value system and a strong environment conscience.
Playing a national role in socio economic development through its large-scale contribution to
infrastructure development.

Mission

To support the armed forces meet their strategic needs by committed, dedicated and cost
effective development and sustenance of the infrastructure.

To achieve international levels of quality excellence and time consciousness in a

diversified sphere of construction activity in a cost effective manner.

Optimise potential and expertise through increased involvement in agency, transnational

and national development projects.

To attain leadership in development, adoption, assimilation and use of state of the art
technology.
 To create the environment for accurate, real time and effective decision making through
optimising use of information technology.

Through a focus on core competencies; ensure highest level of skill and proficiency in
construction activity.

To sustain a sense of values in the Organisation that will ensure a high level of self
esteem in each individual and immeasurable synergy in the Organisation.

To help enrich the quality of life of the community and ensure all rough growth.

Role of the BRO

In Peace

(a)Develop & Maintain The Operational Road Infrastructure Of General Staff In The Border
Areas.

(b) Contribute To The Socio-Economic Development Of The Border States.

In War

(a) To Develop & Maintain Roads To Keep L Of C Through In Original Sectors And Re-
Deployed Sectors .

(b) To Execute Addl Tasks As Laid Down By The Govt Contributing To The War Effort.

Web Site of BRO http://bro.gov.in/

1.3 Introduction To Inventory Management
Inventory Management System deals with the maintainance of equipments. BRO works for many
projects on building roads and bridges for which they have to purchase equipments.

1.3.1 Project Description

The primary role of Border Road Organisaton is to undertake road development departmently in
remote border areas of the Northern & North Eastern reagons of the country.the role envisages
implementation of time bound works plan base on Defence priorities and regional
development.this aim is achieved by co-ordinating the activities of a dedicated General Reserve
Engineers Force comprising of both the GREF and service personnel.the road construction
activites are backed by a mechanized fleet of about 130 different type of vehicles,equipments and
plants.
BRO procure the equipments.The purchase decision of equipments from different firms on the
basis of the Tender Price coated bt resp firms.Then these equipments are used in different projects
of BRO.
For the maintainance of these equipment’s spare parts Inventory Management System is
developed.
Basic Operation performed:
PRE-SO (Supply Order)
POST-SO details.

Pre-So is maintained from the starting of the financial year. It is concern to keep the records of
each Supply Order that is received from firm, supplying equipments. These equipments are then
assigned a unique ISG Number given by BRO, further they are supplied to different project
departments of BRO.

After the completion of PRE SO BRO maintains the POST SO worksheet. The supply and
liability to the current year is being prepared in this worksheet. First the details of the supply
order for the current year is prepared at the end of the current year followed by the liability
worksheet that is being carry forward.

At last Guide Sheet is formed that include budget allotted; liabilities of last three year cleared in
current year, liabilities to be carry forward to next year.

1.4 Component Assigned

1.4.1 Goal Of The Proposed System

The goal of the proposed system is to prepare PRE-SO on the basis of order made.
This module contain two stages:
• SO Sheet
• Pre_SO Worksheet
The preliminary stage of this project is to create the SO (Supply Order) sheet for each equipment
order.In this sheet each equipment spare part is assign a unique identifier i.e ISG Num.
SO sheet contains the Rate of each spare part. When the worksheet is being prepare then this rate
acts as the LPP. The reference of Last Purchase Price (LPP) of the equipments corresponding to
the ISG (Initial Stocking Guide) is maintain to form the transaction sheet of the particular
financial year. Each firm specifies their Tender Price (TP) respective to the spare parts. Each
equipment can have multiple spare parts, uniquely identified by their Part No.

Pre-SO worksheet is being prepared approx at the end of each financial year on the basis of SO
transaction sheet and Tender Price coated. In this worksheet basic operation is to get the last
purchase price, and its reference.

1.4.2 Limitation of the Existing System

• Existing system was manual.

• Time consuming as data entry which include calculations took lot of time.
• Searching was very complex as there could be 100’s of entry every year.
• The proposed system is expected to be faster than the existing system.
 2. System Analysis
System Analysis refers into the process of examining a situation with the intent of improving it
through better procedures and methods. System Analysis is the process of planning a new System
to either replace or complement an existing system. But before any planning is done the old
system must be thoroughly understood and the requirements determined. System Analysis is
therefore, the process of gathering and interpreting facts, diagnosing problems and using the
information to re-comment improvements in the System. Or in other words, System Analysis
means a detailed explanation or description. Before computerized a system under consideration, it
has to be analyzed. We need to study how it functions currently, what are the problems, and what
are the requirements that the proposed system should meet.

System Analysis is conducted with the following objectives in mind:

1. Identify the customer’s need.

2. Evaluate the system concept for feasibility.

3. Perform economic and technical analysis.

4. Allocate functions to hardware, software people, database and other system elements.

5. Establish cost and schedule constraints.

6. Create a system definition that forms the foundation for all the subsequent engineering
work.

2.1 Requirement Analysis/ SRS of the Component

2.1.1 Problem Definition

To provide the basic services related to the Supply of the equipments spare part, to maintain their
PRE-SO (Supply Order) and POST-SO details. The product will take care of all the supply
orders. Pre-So is maintained from the starting of the financial year. It is concern to keep the
records of each Supply Order, which is received, from firm, supplying equipments. These
equipments are then assigned a unique ISG Number given by BRO, further they are supplied to
different project departments of BRO. The reference of Last Purchase Price (LPP) of the
equipments corresponding to the ISG (Initial Stocking Guide) is maintain to form the transaction
sheet of the particular financial year.

2.1.2 Performance Requirements

The following performance characteristics should be taken care of while developing the
system:
 User friendliness: The system should be easy to learn and understand so that new user can
also use the system effectively, without any difficulty.
User satisfaction: The system should meet user expectations.
Response time: The response time of all the operations should be low. This can be made
possible by careful programming.
Error handling: Response to user errors and the undesired situations should be taken care of
to ensure that the system operates without halting.
Safety: The system should be able to avoid or tackle catastrophic behavior.
Robustness: The system should recover from undesired events without human
intervention.

2.1.3 System Requirements

SOFTWARE REQUIREMENT

• Visual Studio .Net 2003

• SQL Server 2000
• Windows 2000 Server edition

HARDWARE REQUIREMENT

• Pentium III processor

• 256 MB RAM
• 20GB HARD DISK

2.1.4 Acceptance Criteria:-

The following acceptance criteria were established for the evaluation of the new system:

User friendliness:- The system should meet user needs and should be easy to learn and
use.
Modularity:- The system should have relatively independent and single function parts .
Maintainability:- The system should be such that future maintenance and enhancements
times and efforts are reduced.
Timeliness:- The system should operate well under normal, peak and recovery
conditions.
The system developed should be accurate and hence reliable i.e. The error rate should be
minimized and the outputs should be consistent and correct.
Both the execution time and response time should be negligibly low.
The system should be efficient i.e. the resources utilization should be optimal.
The system should have scope to foresee modifications and enhancements i.e. it should
be able to cope with the changes in future technology.

2.2 FEASIBILITY STUDY :

All projects are feasible given unlimited resources and infinite time. Unfortunately the
development of computer-based system in many cases is more likely to be plagued by scarcity of
resources and delivery date. Hence, we have made use the concept of reusability that is what
Object Oriented Programming (OOPS) is all about.
The feasibility report of the project holds the advantages and flexibility of the project. This is
divided into three sections:
Economical Feasibility
Technical Feasibility
Behavioural Feasibility

2.2.1 Economic Feasibility:

Economic analysis is the most frequently used method for evaluating the effectiveness of the
candidate system. More commonly known as cost/benefit analysis, the procedure is to be
determining the benefits and savings that are expected from a candidate and compare them with
costs. If benefits outweigh costs, then the decision is made to design and implement the system.

A systems financial benefit must exceed the cost of developing that system. i.e. a new system
being developed should be a good investment for the organization. Economic feasibility considers
the following
i. The cost to conduct a full system investigation.
ii. The cost of hardware and software for the class of application.
iii. The benefits in the form of reduced cost or fewer costly errors.
iv. The cost if nothing changes (i.e. the proposed system is not developed).

The proposed “INVENTORY MANAGMENT” is economically feasible because

i. The system requires very less time factors.
ii. The system will provide fast and efficient automated environment instead
of slow and error prone manual system, thus reducing both time and man
power spent in running the system.
iii. The system will have GUI interface and very less user-training is required
to learn it.
iv. The system will provide service to view various information for proper
managerial decision making.

2.2.2 Technical Feasibility:

Technical feasibility centres around the existing computer system (Hardware and
Software etc) and to what extend it support the proposed addition. For example, if the
current computer is operating at 80 percent capacity - an arbitrary ceiling - then running
another application could overload the system or require additional Hardware. This
involves financial considerations to accommodate technical enhancements. If the budgets
are a serious constraint, then the project is judged not feasible. In this project, all the
necessary cautions have been taken care to make it technically feasible. Using a key the
display of text/object is very fast. Also, the tools, operating system and programming
language used in this localization process is compatible with the existing one.

2.2.3 Behavioural Feasibility:

 People are inherently resistant to change, and computers have been known to
facilitate change. An estimate should be made of how strong a reaction the user
staff is likely to have toward the development of a computerized system. Therefore
it is understandable that the introduction of a candidate system requires special
efforts to educate and train the staff. The software that is being developed is user
friendly and easy to learn. In this way, the developed software is truly efficient and
can work on any circumstances, tradition, locales. Behavioural study strives on
ensuring that the equilibrium of the organization and status quo in the organization
neither are nor disturbed and changes are readily accepted by the users.

2.3 Proposed System Functionality

The proposed system will be designed to support the following features:-

• The proposed system has a user friendly Interface for porting of data to server.

• The proposed system provides the facility to pull the data from the server of the specified
Supply order number and get the respective report.

• The proposed system provides the no replication of data.

• User can get the desired output according to their queries .This is an added advantage.
 3. System Design
Designing is the most important phase of software development. It requires a careful
planning and thinking on the part of the system designer. Designing software means to plan how
the various parts of the software are going to achieve the desired goal. It should be done with
utmost care because if the phase contains any error then that will affect the performance of the
system, as a result it may take more processing time, more response time, extra coding workload
etc.

Software design sits at the technical kernel of the software engineering process and is
applied regardless of the software process model that is used. After the software requirements
have been analyzed and specified, software design is the first of the three technical activities
Designing, Coding and Testing that are required to build and verify the software. Each activity
transforms information in such a manner that ultimately results in validated computer software.

3.1 DESIGN GOALS

The following goals were kept in mind while designing the system:

Make system user-friendly. This was necessary so that system could be used
efficiently and system could act as catalyst in achieving objectives.

Make system compatible i.e. It should fit in the total integrated system. Future
maintenance and enhancement must be less.

Make the system compatible so that it could integrate other modules of system into
itself.

Make the system reliable, understandable and cost-effective.

3.2 FUNCTIONAL FLOW OF THE SYSTEM

!"
3.3- ENTITY RELATIONSHIP DIAGRAM

Projects
BRO

1
Address

Part Num

SO Num Nomenclature

Rate ISG Num

M
V/E/P Type
Stores (Equipment) Type

M
ESD,WSD
TP

Price
List
Supply

Firm Name
3.4-DATA FLOW DIAGRAM

The Data Flow Diagram shows the flow of data or information. It can be partitioned into
single processes or functions. Data Flow Diagrams can be grouped together or decomposed into
multiple processes.

The DFD is an excellent communication tool for analysts to model processes and
functional requirements. Used effectively, it is a useful and easy to understand modeling tool. It
has broad application and usability across most software development projects. It is easily
integrated with data modeling, workflow modeling tools, and textual specs. Together with these,
it provides analysts and developers with solid models and specs. Alone, however, it has limited
usability. It is simple and easy to understand by users and can be easily extended and refined with
further specification into a physical version for the design and development teams.

The different versions are Context Diagrams (Level 0), Partitioned Diagrams (single process only
-- one level), functionally decomposed, and leveled sets of Data Flow Diagrams.

Data Store
A repository of information. In the physical model, this represents a file, table, etc. In the
logical model, a data store is an object or entity.

Data Flows
DFDs show the flow of data from external entities into the system, showed how the data
moved from one process to another, as well as its logical storage. There are only four symbols:

1. Squares representing external entities, which are sources or destinations of data.

2. Rounded rectangles representing processes, which take data as input, do something to it,
and output it.
3. Arrows representing the data flows, which can either, be electronic data or physical
items.
4. Open-ended rectangles representing data stores

There are several common modeling rules for creating DFDs:

1. All processes must have at least one data flow in and one data flow out.
2. All processes should modify the incoming data, producing new forms of outgoing data.
3. Each data store must be involved with at least one data flow.
4. Each external entity must be involved with at least one data flow.
5. A data flow must be attached to at least one process.
 CONTEXT- FREE DIAGRAM ( 0-Level DFD)

Data Flow Diagram

Supply Order

Nomenclature
ISG
SO Num
Firm Name 2
Rate
SO Sheet
Part Num
ESD, WSD
Date
V/E/P Type

1 UserID
LOGIN Administrator
Password

Tender Price (TP)

Price List
User Account

Num of Months
3
LPP Ref
Amount on TP Work-Sheet
ESC
Amount on LPP

RSG WORK-SHEET
3.5-TABLE DESIGN

i. SO_RECORD

This table contains the information about the various details and rate for each supply
order of the each equipments ad their spare parts.

FIELD NAME FIELD TYPE SIZE REMARKS

SO Num numeric 9 NOT NULL

Date date time 8 NOT NULL
ISG Num nvarchar 50 NOT NULL
Part Num varchar 50 NOT NULL
Alternate Part Num1 varchar 50
Alternate Part Num2 varchar 50
Offered Part Num varchar 50 NOT NULL
Nomenclature varchar 50 NOT NULL
Nomenclature1 varchar 50
Nomenclature2 varchar 50
A/U varchar 50 NOT NULL
ESD qty numeric 9 NOT NULL
WSD qty numeric 9 NOT NULL
Total qty numeric 9 NOT NULL
Rate float 8 NOT NULL
Amount float 8 NOT NULL
V/E/P Type varchar 50 NOT NULL
Firm Name varchar 50 NOT NULL

ii. Worksheet

This table contains the information about the various supply order made in the current
year including their LPP reference, Tender Price, Price List of respective equipments.

FIELD NAME FIELD TYPE SIZE REMARKS

Date date time 8 NOT NULL

RSG Num nvarchar 50 NOT NULL
Part Num varchar 50 NOT NULL
Alternate Part Num1 varchar 50
Alternate Part Num2 varchar 50
Offered Part Num varchar 50 NOT NULL
Nomenclature varchar 50 NOT NULL
Nomenclature1 varchar 50
Nomenclature2 varchar 50
A/U varchar 50 NOT NULL
ESD numeric 9 NOT NULL
WSD numeric 9 NOT NULL
Total numeric 9 NOT NULL
Tender Price float 8 NOT NULL
LPP nvarchar 50 NOT NULL
Amount on TP float 8 NOT NULL
Amount on LPP nvarchar 50 NOT NULL
LPP Refuse Num numeric 9
LPP Refuse Date date time 8
Num of Months numeric 9 NOT NULL
Overall ESC nvarchar 50 NOT NULL
Annual ESC nvarchar 50 NOT NULL
Price List nvarchar 50 NOT NULL
Remarks varchar 50
V/E/P Type varchar 50 NOT NULL

3.6 Data Dictionary

Data Dictionary is a simply repositories to store information about all data items. A data
dictionary contains a list of all files in the database, the number of records in each file, and the
names and types of each field. Most database management systems keep the data dictionary
hidden from users to prevent them from accidentally destroying its contents.

User: Administrator
Rite Of Security: Administrator
Data Bases: bro
Tables:
inv
rsg
login
Files:
front.aspx: Front page of the project
log.aspx : Loging page
main.aspx : Menu based form to enter into the different operations.
Inv.aspx : To insert,update and delete the entries into the SO Sheet.
Rsg.aspx : To insert,update and delete the entries into the Work-Sheet.
Invspe.aspx : To query for the SO Num to get its report.
Rsgspe.aspx : To query for the specific V/E/P Type to get its report.
Data Items:

SO Num
Date
ISG Num
Part Num
Alternate Part Num1
Alternate Part Num2
Offered Part Num
Nomenclature
Nomenclature1
Nomenclature2
A/U
ESD qty
WSD qty
Total qty
Rate
Amount
V/E/P Type
Firm Name
Tender Price
LPP
Amount on TP
Amount on LPP
LPP Ref_SO Num
LPP Ref_SO Date
Num of Months
Overall ESC
Annual ESC
Price List
 4.Technologies Used
4.1 Hardware

Processor : Pentium III Processor

RAM : 256 MB
Hard Disk : 20 GB

4.2 Software
• Visual Studio .Net 2003
• Microsoft SQL Server 2000

A Microsoft SQL Server 2000

Features of SQL Server 2000

• Internet Integration.

The SQL Server 2000 database engine includes integrated XML support. It also has the
scalability, availability, and security features required to operate as the data storage
component of the largest Web sites. The SQL Server 2000 programming model is
integrated with the Windows DNA architecture for developing Web applications, and
SQL Server 2000 supports features such as English Query and the Microsoft Search
Service to incorporate user-friendly queries and powerful search capabilities in Web
applications.

• Scalability and Availability.

The same database engine can be used across platforms ranging from laptop computers
running Microsoft Windows® 98 through large, multiprocessor servers running
Microsoft Windows 2000 Data Center Edition. SQL Server 2000 Enterprise Edition
supports features such as federated servers, indexed views, and large memory support
that allow it to scale to the performance levels required by the largest Web sites.

• Enterprise-Level Database Features.

The SQL Server 2000 relational database engine supports the features required to support
demanding data processing environments. The database engine protects data integrity
while minimizing the overhead of managing thousands of users concurrently modifying
the database. SQL Server 2000 distributed queries allow you to reference data from
multiple sources as if it were a part of a SQL Server 2000 database, while at the same
time, the distributed transaction support protects the integrity of any updates of the
distributed data. Replication allows you to also maintain multiple copies of data, while
ensuring that the separate copies remain synchronized. You can replicate a set of data to
multiple, mobile, disconnected users, have them work autonomously, and then merge
their modifications back to the publisher.

• Ease of installation, deployment, and use.

SQL Server 2000 includes a set of administrative and development tools that improve
upon the process of installing, deploying, managing, and using SQL Server across several
sites. SQL Server 2000 also supports a standards-based programming model integrated
with the Windows DNA, making the use of SQL Server databases and data warehouses a
seamless part of building powerful and scalable systems. These features allow you to
rapidly deliver SQL Server applications that customers can implement with a minimum
of installation and administrative overhead.

• Data warehousing.

SQL Server 2000 includes tools for extracting and analyzing summary data for online
analytical processing. SQL Server also includes tools for visually designing databases
and analyzing data using English-based questions.

SQL Server Enterprise Manager

Microsoft Management Console (MMC) is a tool that presents a common interface for
managing different server applications in a Microsoft Windows network. Server
applications provide a component called an MMC snap-in that presents MMC users with
a user interface for managing the server application. SQL Server Enterprise Manager is
the Microsoft SQL Server™ MMC snap-in.
SQL Server Enterprise Manager is the primary administrative tool for SQL Server and
provides an MMC-compliant user interface that allows users to:

• Define groups of SQL Server instances.

• Register individual servers in a group.

• Configure all SQL Server options for each registered server.

• Create and administer all SQL Server databases, objects, logins, users, and
permissions in each registered server.

• Define and execute all SQL Server administrative tasks on each registered server.

• Design and test SQL statements, batches, and scripts interactively by invoking
SQL Query Analyzer.

• Invoke the various wizards defined for SQL Server.

Overview of the SQL Server Tools

Microsoft SQL Server 2000 includes many graphical and command prompt utilities that
allow users, programmers, and administrators to:

• Administer and configure SQL Server.

• Determine the catalog information in a copy of SQL Server.

• Design and test queries for retrieving data.

• Copy, import, export, and transform data.

• Provide diagnostic information.

• Start and stop SQL Server.

In addition to these utilities, SQL Server contains several wizards to walk administrators
and programmers through the steps needed to perform more complex administrative
tasks.
b.Vb.Net

Introduction on .NET Framework

.NET is the framework for which we develop applications. It sits in between our
application programs and operating system. Applications developed for .NET run inside
.NET and are controlled by .NET. It supports both Windows and web applications.

.NET provides an object oriented environment. It ensures safe execution of the code by
performing required runtime validations. For example, it is never possible to access an
element of an array outside the boundary. Similarly, it is not possible to a program to
write into another programs area, etc. The runtime validations performed by .NET makes
the entire environment robust.

Components of .NET

.NET framework has two main components. They are:

1. Common Language Runtime

2. .NET class library

Common Language Runtime

The Common Language Runtime (CLR) is the environment where all programs in .NET
are run. It provides various services, like memory management and thread management.
Programs that run in the CLR need not manage memory, as it is completely taken care of
by the CLR. For example, when a program needs a block of memory, CLR provides the
block and releases the block when program is done with the block.

All programs targeted to .NET are converted to MSIL (Microsoft Intermediate

Language). MSIL is the output of language compilers in .NET . MSIL is then converted
to native code by JIT (Just-in Time Compiler) of the CLR and then native code is run by
CLR.

As every program is ultimately converted to MSIL in .NET, the choice of language is

pure personal. A program written in VB.NET and a program written in C# are both
converted to MSIL. Then MSIL is converted to native code and run. So, whether you
write program in C# or VB.NET at the end it is MSIL all that you get.

MSIL in .NET is same as Bytecode in concept. CLR is same as JVM (Java virtual
machine that .

.NET Class Library

.NET comes with thousands of classes to perform all important and not-so-important
operations. Its library is completely object oriented, providing around 5000 classes to
perform just about everything.

Visual Basic .NET (VB.NET) is an object-oriented computer language that can be

viewed as an evolution of Microsoft's Visual Basic (VB) implemented on the Microsoft
.NET framework. The great majority of VB.NET developers use Visual Studio .NET as
their integrated development environment (IDE).

Visual Basic .NET provides the easiest, most productive language and tool for rapidly
building Windows and Web applications. Visual Basic .NET comes with enhanced visual
designers, increased application performance, and a powerful integrated development
environment (IDE). It also supports creation of applications for wireless, Internet-enabled
hand-held devices. The following are the features of Visual Basic .NET with .NET
Framework 1.0 and Visual Basic .NET 2003 with .NET Framework 1.1.

Some Features of Vb.net:

Powerful Windows-based Applications

Visual Basic .NET comes with features such as a powerful new forms designer, an in-
place menu editor, and automatic control anchoring and docking. Visual Basic .NET
delivers new productivity features for building more robust applications easily and
quickly. With an improved integrated development environment (IDE) and a significantly
reduced start up time, Visual Basic .NET offers fast, automatic formatting of code as you
type, improved IntelliSense, an enhanced object browser and XML designer, and much
more.

Building Web-based Applications

With Visual Basic .NET we can create Web applications using the shared Web Forms
Designer and the familiar "drag and drop" feature. You can double-click and write code
to respond to events. Visual Basic .NET 2003 comes with an enhanced HTML Editor for
working with complex Web pages. We can also use IntelliSense technology and tag
completion, or choose the WYSIWYG editor for visual authoring of interactive Web
applications.

Simplified Deployment

With Visual Basic .NET we can build applications more rapidly and deploy and maintain
them with efficiency.

Powerful, Flexible, Simplified Data Access

You can tackle any data access scenario easily with ADO.NET and ADO data access.
The flexibility of ADO.NET enables data binding to any database, as well as classes,
collections, and arrays, and provides true XML representation of data. Seamless access to
ADO enables simple data access for connected data binding scenarios. Using ADO.NET,
Visual Basic .NET can gain high-speed access to MS SQL Server, Oracle, DB2,
Microsoft Access, and more.

Improved Coding

You can code faster and more effectively. A multitude of enhancements to the code
editor, including enhanced IntelliSense, smart listing of code for greater readability and a
background compiler for real-time notification of syntax errors transforms into a rapid
application development (RAD) coding machine.

Direct Access to the Platform

Visual Basic developers can have full access to the capabilities available in .NET
Framework 1.1. Developers can easily program system services including the event log,
performance counters and file system. The new Windows Service project template
enables to build real Microsoft Windows NT Services. Programming against Windows
Services and creating new Windows Services is not available in Visual Basic .NET
Standard, it requires Visual Studio 2003 Professional, or higher.
Full Object-Oriented Constructs

You can create reusable, enterprise-class code using full object-oriented constructs.
Language features include full implementation inheritance, encapsulation, and
polymorphism. Structured exception handling provides a global error handler and
eliminates spaghetti code.
 5. Testing and Debugging
Software testing is a critical element of the ultimate review of specification design and coding.
Testing of software leads to the uncovering of errors in the software functional and performance
requirements are met .Testing also provides a good indication of software reliability and software
quality as a whole. The result of different phases of testing are evaluated and then compared with
the expected results. If the errors are uncovered they are debugged and corrected. A strategy
approach to software testing has the generic characteristics:
Testing begins at the module level and works “outwards” towards the integration of the
entire computer based system.
Different testing techniques are appropriate at different points of time.
Testing and debugging are different activities, but debugging must be accommodated in
the testing strategy

5.1 Goals and Objectives

“Testing is a process of executing a program with the intent of finding an error”. A good test
case is one that has a probability of finding an as yet undiscovered error. A successful test is one
that uncovers an as yet undiscovered error. Our Objective is to design test processes that
systematically uncover different classes of errors and do so with minimum amount of time and
effort.

5.2 Statement of scope

A description of the scope of the software testing is developed. All the features to be tested are
noted as follows. The basic principles that guides software testing are,

All test cases should be traceable top customer requirements. The most severe defects
from the customer’s point of view are those that cause the program to fail to meet its
requirements.

Test case should be planned long before testing begins. Testing plan can begin as soon as
the requirement model is complete. Detailed definition of the test cases can begin as soon
as the design is solidified. Therefore, the entire test can be planned before any code has
been generated.

Testing should begin “in the small” and progress towards “in the large”. The first
test planned and executed generally focus on the individual modules. As testing
progresses testing shifts focus in an attempt to find errors in integrating clusters of
modules and ultimately in the entire system

5.3. Test Case

Before the project is released, it has to have passed through a test cases suit, so that the
required functionality is met and previous functionality of the system is also not broken
to do this, there is an existing test cases which checks for the previous functionality. New
test cases are prepared and added to this existing test suit to check for the added
functionality.
A test case describes an input description and compares the observed output with
expected output to know the outcome of the test case. If it is different, then, there is a
failure and it must be identified.

A pictorial representation of this can be shown as follows.

New Test Case Output

Software

Existing Test Case Under Testing

Comparator

Result Of Testing

5.4Testing Process
The testing process can be shown as:

Levels of testing Test Plan Test Procedures

Test Case
Specification

Yes
Test Case Execution

Is Error
Uncovered? Test Case Analysis

No

Test Report
Following types of testing are done on the System.

a) Unit Testing

The module interface is tested to ensure that information properly flows into and out of the
program unit under test. The unit testing is normally considered as an adjunct step to coding step.
Because modules are not a standalone program, drivers and/or stubs software must be developed
for each unit. A driver is nothing more than a “main program” that accepts test cases data and
passes it to the module. A stub serves to replace the modules that are subordinate to the modules
to be tested. A stub may do minimal data manipulation, prints verification of entry and returns.
Approaches used for Unit Testing were:

Functional Test: Each part of the code was tested individually and the panels were tested
individually on all platforms to see if they are working properly.
Performance Test: These determined the amount of execution time spent on various parts of units
and the resulting throughput, response time given by the module.

Stress Test: A lot of test files were made to work at the same time in order to check how much
workloads can the unit bear.

Structure Test: These tests were made to check the internal logic of the program and traversing
particular execution paths.

b) Integration Testing
“If they all work individually, they should work when we put them together.” The problem of
course is “putting them together “. This can be done in two ways:
Top down integration: Modules are integrated by moving downwards through the control
hierarchy, beginning with main control module are incorporated into the structure in either a
depth first or breadth first manner.

Bottom up integration: It begins with construction and testing with atomic modules i.e. modules
at the lowest level of the program structure. Because modules are integrated from the bottom up,
processing required for the modules subordinate to a given level is always available and the need
of stubs is eliminated.

• Testing includes

Verification and Validation

Verification:-is a process of confirming that software meets its
specification.
Validation:- is the process of confirming that software meets the
customer’s requirements.

c) Validation Testing

Validation succeeds when software functions in a manner that can be reasonably expected by the
customer. It covers the following :-

Validation test criteria: Performance, functional characteristics and uncovered deviation from
specification
Configuration review: Ensures that all the elements of software configuration have been
properly developed catalogued and have support for the maintenance phase of software life cycle

Alpha Beta testing: Alpha test is conducted by developer’s site by customer. Beta test is
conducted at one or more customer site by software end user

Modular integration testing:

Modular integration testing is done to ensure that the module is working independently. The
inputs as required by the module are given as required and the output is tested as per the
specifications

5.5 Debugging
Debugging occurs as a consequence of successful testing i.e. when a test case uncovers an error,
debugging is the process that results in identifying the location of error ad the removal of error.
The poorly understood mental process that connects a symptom to cause is debugging. This
process will always have one of the two outcomes:
The cause will be found, corrected and then removed or
The cause will not be found. In the latter case the person performing debugging may suspect a
cause, design a test case to help validate his suspicion, and then work towards the correction
of errors in the interactive fashion.
Following three approaches of debugging were used:
Debugging by Induction
Debugging by Deduction
Backtracking
 6. Implementation

Once the system was tested, the implementation phase started. A crucial phase in the
system development life cycle is successful implementation of new system design.
Implementations simply mean converting new system design into operation. This is the
moment of truth the first question that strikes in every one’s mind that whether the
system will be able to give all the desires results as expected from system. The
implementation phase is concerned with user training and file conversion.

The term implementation has different meanings, ranging from the conversion of a basic
application to a complete replacement of computer system Implementation is used here to mean
the process of converting a new or revised system design into an operational one. Conversion is
one aspect of implementation. The other aspects are the post implementation review and software
maintenance. There are three types of implementation:
Implementation of a computer system to replace a manual system
Implementation of a new computer system to replace an existing one.
Implementation of a modified application to replace an existing one.

6.1 Conversion

Conversion means changing from one system to another. The objective is to put the tested
system into operation while holding costs, risks and personnel irritation to a minimum. It
involves creating computer compatible files; training the operational staff; installing
terminals and hardware. A critical aspect of conversion is not disrupting the functioning of
organization.

6.2 Direct Implementation

In direct implementation; the previous system is stopped and new system is started
up coincidentally. Here there is a direct change over from manual system to computer-based
system. In direct change over implementation; employees can face the problems. Suppose our
software is not working much efficiently as manual one then we can’t find the defects in our
software. It will not be beneficial in finding errors.

• The proposed system “Inventory Management” is fully implemented using

Direct Implementation.
 6.3. Module Diagram

Enter
Inventory Management System

Deliver
Repots
Administrator
Pre-SO

Rate List

Supply Order Sheet

Send ISG Num LPP Reference

Generate Report
Work Sheet

BRO Database
 7. Scope and Limitation
Scope of the proposed System:

The proposed system provides the automated generation of LPP reference that includes
the LPP Rate and the reference date. LPP is used at the time of Worksheet preparation
along with the tender price, which helps to obtain the overall and annual escalation.
Escalation is related to the number of months, calculated by the LPP reference date and
the worksheet preparation date of the particular financial year.

The “Inventory Management System” software is being developed as an accurate

and efficient system for the user. In this system the record of the each request details are
preserved along with their transaction related to them. The system is also made secured
as all the updating and transaction can be done by the authorized person.

Limitation of the Proposed System:

• Database used is SQL Server and every database have a stack limit.
• Manual Errors at the time of entering the data can’t be check, only the validation required
w.r.t proposed system is checked.

8. Conclusion
The objective of this project was to build a program for maintaining the details of all
Supply Order .The system developed is able to meet all the basic requirements. It will provide the
facility to the user so that they can keep tracks of all the equipments being supplied. The
management of the Inventory will be also benefited by the proposed system, as it will automate
the whole supply procedure, which will reduce the workload. The security of the system is also
one of the prime concerns.

There is always a room for improvement in any software, however efficient the system may be.
The important thing is that the system should be flexible enough for future modifications. The
system has been factored into different modules to make system adapt to the further changes.
Every effort has been made to cover all user requirements and make it user friendly.

Goal achieved: The System is able provide the interface to the user so that he can
replicate his desired data. .

User friendliness: Though the most part of the system is supposed to act in the
background, efforts have been made to make the foreground interaction with user as
smooth as possible. Also the integration of the system with Inventory Management
project has been kept in mind throughout the development phase.
 9. User Manual & Screen Shots

9.1. User Manual

In the system there are mainly one user interface using which a user is able to
Store
Update/Delete
Search
View

System contains various forms for different Interfaces:

LOGIN:

This allows the user to enter into the system. User has to enter User ID and Password. If
invalid then User ID or Password is entered then alert message of invalid data is flashed.

MENU INTERFACE:

If User ID and Password both are correct then user enters into Menu Interface.
This Interface contains Menus for various operations to be performed on Basic Processes
of Pre-SO.
These processes are:
• Supply Order:- for preparing SO-Sheet.
• RSG: - For preparing Worksheet.
• Report:- To view the Output.
These menus have submenus to perform operations like: Insert, Update, Delete.

SubMenu of Supply Order:

Insert
• Insert Interface: Enter Data to prepare SO-Sheet.
Steps:
1) Enter V/E/P Type (vehicle/equipment/part type)
2) Enter firm Name from where V/E/P Type is procured.
3) Enter SO-Num i.e. The Supply Order Number of V/E/P type of the
current Financial Year.
4) Select Date of the Supply Order of the current Financial Year.
5) Enter ISG Num i.e. a unique identification number of spare parts given
by BRO.
6) Enter Part Numbers of the equipments assigned by firm.
7) Enter Nomenclature i.e. name of the equipments.
8) Enter the quantity for ESD and WSD.
9) Enter the Rate of the parts.
 10) Click on Submit to save these data or Reset to clear entries.

Update:
This has some Submenus that are:
Update Data – To alter the data entered in the Specified SO-Num and ISG
Num.
Data Interface: To alter records
Steps:
Select SO-Num.
Select required ISG Num.
Alter the entries.
Click Update Button to reflect these changes.

Date- To change the Supply Order Date.

Date Interface:
Steps:
1) Enter the SO Number whose Date is to be change.
2) Select the new Date.
3) Click on Ok button to reflect these changes.

SO-Num - To change the Supply Order number.

SO Interface:
Steps:
1) Enter the SO Number to be change.
2) Enter the new SO Num.
3) Click on Ok button to reflect these changes.

Delete
To delete the Specific record.
Steps:
Select SO-Num.
Select required ISG Num.
Click Delete Button to delete the record.

SubMenu of RSG:

Insert
• Insert Interface: Enter Data to prepare Work-Sheet.
Steps:
1) Select V/E/P Type (vehicle/equipment/part type).
2) Enter RSG-Num/Part Num to retrieve the respective LPP Reference.
 3) Select Date of the Work-Sheet of the current Financial Year.
4) Enter the quantity for ESD and WSD.
5) Enter the Tender Price of the parts.
6) Enter the Price List.
7) Click on Submit to save these data or Reset to clear entries.

Update:
Update Data – To alter the data entered in the Specified RSG-Num.
Update Interface: To alter records
Steps:
Select V/E/P Type.
Select required RSG Num.
Alter the entries.
Click Update Button to reflect these changes.

Delete
To delete the Specific record.
Steps:
Select V/E/P Type.
Select required RSG Num.
Click Delete Button to delete the record.

SubMenu of Report:

I. Supply Order:

Steps:
1) Select SO-Num.
2) Click OK Button to view the Supply Order Report.
3) To print this report click on the printer button on bar of the report.

II. RSG:

Steps:
1) Select V/E/P Type.
2) Select Date.
3) Click OK Button to view Report.
4) To print this report click on the printer button on bar of the report.

Terminology Used:
This section enlists the terminology and conventions adopted throughout the document.
ESD East Stock Division.
ISG Initial Stock Guide.
LPP Last Purchase Price.
Nomenclature Name/Description of the V/E/P Type.
RSG Revised Stock Guide.
SO-Num Supply Order Number.
TP Tender Price.
V/E/P Type Vehicle/Equipment/Plant Type.
WSD West Stock Division.
 10 . Annexure

10.2 Bibliography

Books Referred

“Microsoft Learning Vb.Net ”

“Teach Yourself VB.NET in 21 Days”- Sams Pearson Education [Lowell Mauer]
“Professional ASP.NET 2.0” –Wrox [Evajen,Hanselma,Muhammad,Sivakumar,Rader]
“ASP.NET 2.0 Uleashed”-Sams Pearson Education [Stephen Walther]
“Software Engineering” [Pankaj Jalote]
“Software Engineering” [K.K. Aggarwal & Yogesh Sighn]

Sites Referred

www.w3schools.com
http://bro.gov.in
www.aspalliace.com
www.vbforums.com/showthread.php?p=2686697