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The management of assets in any organization is an essential part of overall

management. The enterprises, at the time of formation attach great importance to
fixed assets management, as a part of investment decision-making. Stocks form the
Importance Of Keeping Stocks
• The time lag present in the supply chain , from supplier to production
department, requires maintenance of certain level of inventory
• Inventories are maintained as buffer stocks to meet uncertainties in demand,
supply and movements of goods.
• Inventories help in smooth functioning of production of goods and thus
enhances working of the organisation.
Sometimes, due to some reasons the stocks reach zero level. This situation is
referred to as stock out condition.
A stockout, or out-of-stock (OOS) event is an event which causes inventory to be exhausted. It is
a situation where the demand or requirement for an item cannot be fulfilled from the current
inventory. It is an informal situation in which a company sells its entire inventory. The term
usually refers to situations where demand exceeds supply, causing the company to run out of
inventory earlier than expected.

Consequences Of Stock Out Condition

• Loss of sales
• Decrease in efficiency of work
• Production gets hampered
• Delay in future projects
• Customers do not get timely delivery of goods, thus this condition damages the company
and customer relationship

“Store is an area set aside into which all the items and materials required for
production and/or for sale/ distribution are received, where they are housed for
safekeeping, and from which they will be issued as required.”
Functions Of Store
1. Receiving of materials from the suppliers.
2. Inspecting the materials.
3. Stacking the materials to their designated godowns/ racks / bins.
4. Issue of materials.
Apart from these four functions there are two other functions of store
department of Usha Martin Ltd :-
i. Maintaining Calibration Certificate of weighing machines falling
under four quarters of a year ( viz January- March, April-June, July-
September, October- December)
ii. Maintaining all the explosive licenses such as
• License to import and store Petroleum Products
• License to store compressed gases in cylinder
• License to store butane gas.

Besides the above functions, the store department has the responsibility of
providing service to the other departments, which can be explained through the
following :-
i. The Production Department –
The store department makes raw materials and tools available for continuous
production. But it requires adequate information about the future expected
needs of the quality and quantity of items, so that it can fulfil those
ii. The Sales Department –
The store department should contain all the items needed for sale in a
company and, similarly, it is the responsibility of the sales department to sell
all the items kept in the store. The sales department must give adequate
information to the store about future sales and trends, and help in planning
orders, setting safety stock level, allocating storage place.
iii. The Purchasing Department –
The store department must keep the purchase department up to date with the
information about the level of inventories. The purchase department ensure
timely delivery of materials required by the company.
iv. The Maintenance or Engineering Department –
The store department ensures that all the spares, tools, equipment and
materials are available which are required for maintenance. In return, the
store gets information about the maintenance plans and requirements.
v. The Accounts Department –
It requires information from stores about the value of stock, about any
losses, about receipt of items for which payment is made, about the stock
issued, etc.
Objectives Of Store
The objectives of the store department are :-
1. To protect the items from loss occurring due to damage, theft, pilfering or
poor storage.
2. To control the movements of the items coming in and going out of the store
by maintaining their records
3. To minimize the inventory carrying cost.
4. To avoid over-stocking and under- stocking of materials.

Store Department of Usha Martin Ltd

It is responsible for taking care of all the raw materials coming to the company and used in the
production. There are more than 350,000 items kept in the stores of Usha Martin Ltd.

Operation Flow Chart For Stores Department

Requirement from
in the form of indent

Indent is ok
(with material code)

Raised Indent
Information To Purchase And
Concerned Department
Function In Purchase

Receive Materials From


Verification Of Paper
And Materials

Manual GR Booking

Entry In BANN

Print Tag And Inspection


Inspection Of Materials By User


Material Is OK Material Is Not OK

Stacking In Print Rejection

Bin Advice

Requisition Slip From Sent Back Material

Department (with To Supplier
Material Code and
Bin No)

Check In Bin And

Issue To Department

File Issue Slip

There are two types of items kept in the stores of Usha Martin Ltd :-
Record In File

1. Indented/ Departmental Items

2. SIC Items

SIC Items or Statistical Inventory Control Items have basically two features :-

• They are fast moving items

• They are consumed interparallely in the departments.
There are nine types of Ledgers starting from Ledger 1 to Ledger 9

1 – Raw Material

2 – Packing

3 – Stores and Sphere

4 – Drawing

5 – Fuel

6 – Imported Raw Material

7 – Project

8 – Imported Stores and Spheres

9 – Imported Drawing

Apart from the above ledger, there is another type of ledger known as B- ledger or miscellaneous ledger
which contains stationery and medicines.

Inventory Management

According to American Production And Inventory Society " Inventory Management is the branch of
business management concerned with planning and controlling."

Inventory management emphasises the need to maintain inventory of raw material to facilitate smooth
and efficient production and sales operation. It helps in maintaining minimum investment in inventories
to maximise profitability.

Inventory Control Techniques

The inventory control techniques are needed in a company to manage its inventory in an effective way.
There are several inventory control systems ranging from simple to very complicated system. The nature
and size of business dictate the choice of the inventory control technique.

ABC analysis, also referred to as Pareto analysis, is a method of classifying items, events, or
activities according to their relative importance. It is frequently used in inventory management
where it is used to classify stock items into groups based on the total annual expenditure for, or
total stockholding cost of, each item. As Usha Martin Ltd is a very large firm, it has to maintain
many types of inventories. It is not desirable to keep the same degree of control on all the items.
The firm should pay maximum attention to those items whose value is the highest. The firm
should , therefore, classify inventories to identify which items should receive the most effort in
controlling. It is a value based analysis. The high value items are classified as "A items" and
would be under the tightest control. "C itmes" represent relatively least value and would be under
simple control. "B items" fall in between these two categories and require reasonable attention of

Class Consumptionper annum Time periodfor storing

A Above 1.5Lac 1month
B 25000to 1lac 4months
C below 25000 12months

Inventories are stock of the product which a company is manufacturing for sale and components that
make up the product. Inventory is a stock of goods and resources that is stored for future production or
for meeting future demand.

Lead Time – It is the time period from the date of requisition to delivery of goods. It is the latency
(delay) between the initiation and execution of a process.

Re- order Point- The stock level at which new orders must be placed. To determine the re-order point
under certainity , we should know the lead time, average consumption and safety stock of a particular

Re –order point = (Average Consumption multiplied by Lead Time + Safety stock)

Safety Stock-

Safety stock is a term used by inventory specialists to describe a level of extra stock that is maintained
below the cycle stock to buffer against stockouts. Safety Stock (also called Buffer Stock) exists to counter
uncertainties in supply and demand. Safety stock (also called buffer stock) is a term used by logisticians
to describe a level of extra stock that is maintained to mitigate risk of stockouts (shortfall in raw material
or packaging) due to uncertainties in supply and demand. Adequate safety stock levels permit business
operations to proceed according to their plans.

Research Methodology

Type of research
This project “A Case Study of Reasons For Stock Out Condition Of SIC Items In
Usha Martin Ltd” as an analytical research.
Analytical Research is defined as the research in which, researcher has to use facts or
information already available, and analyze these to make a critical evaluation of the facts,
figures, data or material.
The project includes finding of primary data and secondary data. It includes surveys and fact-
finding enquiries. So, the project basically covers description of state of affairs, as it exists at
present. Here in this case, the researcher does not have control over the variables. Here, the
job done as a researcher is to use the facts and information already available. The same set of
information is analyzed to make the critical evaluation of the material.
Data collection methods
Sources of data can be classified into two types they are:-
• Primary data
• Secondary data
Primary data:Primary data may be described as those data that has been
observed by the researchers for the first time. The primary data was obtained
through personal interaction with company officials during the internship period.
Secondary data: Secondary data are those data that have been complied already
before conducting the research. Secondary data may be internal data as well as
external data. Internal data are collected from the company’s records. External data
are collected from outside the company.
The various sources of secondary data are,
• Company websites
• Record of the SIC items received from BANN