Inventory Management

Operations Research and Management

A report on

Submitted By:- Dhruva Jyoti (08DM011)

Inventory Management Introduction You are in trouble if you have to keep telling customers, "I'm sorry we're out of that size. May we order it for you?" Even though the shirts are selling briskly, you will lose customers if you don't have an item in stock. When the customer spends, you have got to be ready with the goods. This is what inventory management is all about. In many retail and wholesale operations, the single largest asset is inventory. Control of this investment is vital. It will eliminate a number of the problems associated with capital shortages and will also provide capital to permit expansion of operations for increased sales and profit.

L ite ra ture R e v ie w Inventory Management Inventory management can be briefly described as: · Acquiring an adequate supply and assortment of merchandise from which customers can buy. · Providing safety stocks to meet unexpected demand or delays in inventory replenishment. · Maintaining clear, correct, and current records. · Purchasing the proper assortment of goods in quantities that will maintain inventory levels consistent with business requirements, while providing adequate safety stocks. · Reducing excessive inventories promptly, so that the dollars realized from clearing overstocks can be invested in merchandise with a greater market potential. Inventory Investment Control Inventory investment control is accomplished in two ways: · Prompt elimination of overstocked items. · Inventory replenishment in anticipation of customer demand. Whenever a particular item is overstocked, the overstock should be reduced as promptly as possible. Naturally, the most effective and profitable way is to sell it to

Inventory Management customers, even at a discount. However, there are other possibilities. There may be a wholesale market available for certain kinds of inventory. Excessive consumer goods inventories are often sold to "bargain basements" or warehouse outlets. Perhaps you can even arrange wholesale sales to a competitor. Frequently, it is wiser to scrap inventory that shows no sales activity for an extended period of time. In this way, you reduce a misleading overstatement of inventory on your company's books. At the same time, you make space available for inventory that can be sold at a profit. Inventory R ep l eni s h ment The key to successful inventory management is adherence to procedures for inventory replenishment. Your ability to anticipate customer demand for certain items will help you plan your inventory purchases so that sufficient stocks are on hand to accommodate sales volume without excesses that cause other problems. Planning your purchases will also help you avoid shortages that can only be filled through forfeiture of discounts or absorption of premium shipping charges. Determining purchasing requirements involves answering two questions: · What to buy? · How much to buy? Both questions can be answered by establishing an inventory target for any item you carry expressed as so many days', weeks', or months' sales.

Inventory Management Answers to questions given, on the basis of our visit to B ig- B az aar. In order to complete the project, we went on a survey to Big Bazaar. Product categories in Big Bazaar Big Bazaar generally deals in national level brands like Lee, Levis etc, Other than this it also deals in some Private label brands DJ&C in apparel, KORIA in electronics etc. Then we asked about the product categories , that are :FMCG, FOOD & NON- FOOD junction , Staple items , fruits & vegetables , fashion & apparels ,chill section , home decorator , footwear , book zone, CDs etc Location of Big Bazaar Considering all the facts which we have studied, and seeing the strategic location of Big Bazaar, we can say, that the location is the best, it could have in ............ Firstly it is in the heart of the city. Secondly it is in a shopping mall, which has all types of customers coming in and their, footfalls, being easily converted into sale, by the efficient employees of big bazaar. Moreover it is at the place where traffic inception is always high. It is near station, which gives it another competitive advantage over its competitors. Transportation is also good, as one can easily reach big bazaar through auto, private vehicles etc. Types of inventories maintained. The inventories maintained in the outlet, are of different product category. Mainly Cycle inventory is maintained for FMCG product category & Food Category, Safety level of inventory for FMCG Products, and for Apparel, Seasonal inventory is maintained, because of fluctuation in demand.

Inventory Management Decision of how inventories are maintained Then coming to how the store manager decides the level of inventory, the store manager inspects the stocks time to time and also the demands of customers. Manager maintains the Stock – in & Stock – out, so that he can decide the level of inventory. He, also has seen the trends in the requirement of inventories, as for eg. he told that apparels are ordered approximately after 45 days. For every sample of clothes they have a back up of 10 pieces. However in case, if more number of pieces are required, they first ask other big bazaar location such as that of Patia etc. but if, even then they fail to meet the demands of customers, they go for “Transfer of Interest”. In this they prefer sending the customers to pantaloons, as it is also of Future Group, instead of losing them. He also told that recently big bazaar has undergone tremendous technological advancement, as its supply chain has become completely computerized. Once the product is sold, automatically, the computer sends the request for back up. Reorder points of inventories The manager in charge told us that there is no such reorder points. Orders are placed as and when required. However he told that there are no such measures, except in a few items. Previously apparels were ordered once there stock fell below 4 per item piece. For general merchandise, which includes, food and non-food items, it was 7 days. However they always keep in mind the transit time of 2 days. Vegetables are taken on a daily basis, form local vendors. Uncertain demands of customers As discussed earlier, the uncertain demands are met by either by getting it through other outlets of big bazaar or through transfer of interest, to other outlets of future group, like Pantaloons. Supply chain of perishable and imperishable goods

Inventory Management Perishable goods like vegetables are maintained with great care. Vegetables are bought on daily basis on the basis of demand, and seasonal item. It is also ascertained that damaged vegetables are sold at a low cost to some other channels. Whereas imperishable goods like utensils and staple goods and electronic items are brought from ............. The distribution channel used in supply chain process is operated by Central Distribution Channel, which is located in ……... From there goods are supplied to every Big Bazaar Store. The modes of transportation which are used in supply chain process are Truck & Rails, but in case of emergency, flights are also being used. The transportation is outsourced. Mainly the carriers for Big Bazaar are Quick & Safe, Gati, Deluxe Roadways, and TNT. Operational strategies followed by retail outlet to attract more customers When we raised the question of strategy for attracting customers, the manager was not willing to answer us. However after convincing him a lot, he gave us some generalized strategies. He told us that mostly they give discount offers. Discount offers are basically given by manufacturers to them, and after keeping a safe margin of profit, they release the items on discounts. They also give ads in television, go for promotional activities and put banners on road sides. However once the customers is inside the store, then also strategies keep changing. They keep thing in places where they see for longer duration, for eg. near corners of turning, on cash counters etc. Area of Maintenance Since the store is fully computerized, in the sense, like billing, inventory management, electronic equipments near the gates, to check thieves, it has to take proper care of machines. Food items are to be regularly checked. Inventory room has to be checked regularly for any sort of leakages. Air-conditioners have to be regularly checked. Electrical wirings have to be closely monitored. Short circuit cameras have to be checked regularly as it is a major factor in security arrangement.

Inventory Management Quality of Food-items Food items are kept in a separate place, both in inventory and at store. Food items which are required to be kept at cold places, like cold-drinks, cheese, milk products, milk, fruits, etc. are kept in refrigerators, whereas those which can be kept anyway, are kept on proper shelves. The Questionnaire that we have prepared is as follows:- P.T.O.

Inventory Management

Q u e s t i o n n a i r e Please put (tick) on a scale of 1-5, where 1 = "Never", 2 = “Seldom”,

3 = “Can’t say”, 4 = “Often”, 5 = "Always"

1. How satisfied are you overall with the service you received? 1 2 3 4 5

2. How satisfied are you with the speed in which the service/product was delivered? 1 2 3 4 5

3. How satisfied are you with the ease of contacting the person you needed?

1 2 3 4 5

4. How satisfied are you with the clarity of information or advice provided?

1 2 3 4 5

5. How satisfied are you with the time taken to respond to your queries?

1 2 3 4 5

6. Are you satisfied with the quality of products you buy from Big- Bazaar?

1 2 3 4 5

7. Are you satisfied with the cleanliness of the store?

1 2 3 4 5

8. How satisfied are you with the total management of the store?

1 2 3 4 5

Inventory Management The responses were collected from 10 people, who have been to Big Bazaar. Meth od ol ogy: - Sampling technique used- Convenient Sampling Sample size- 10 Statistical method used- Mean, Standard Deviation, Bar-graph, Line-graph Software- SPSS

Inventory Management F i nd i ngs : - Descriptive Statistics

N Range Minimum Maximum Sum Mean Std. Deviation VAR00001 10 2.00 3.00 5.00 41.00 4.1000 .73786 VAR00002 10 2.00 3.00 5.00 41.00 4.1000 .73786 VAR00003 10 2.00 3.00 5.00 40.00 4.0000 .81650 VAR00004 10 2.00 3.00 5.00 42.00 4.2000 .63246 VAR00005 10 3.00 2.00 5.00 41.00 4.1000 1.10050 VAR00006 10 3.00 2.00 5.00 38.00 3.8000 1.03280 VAR00007 10 2.00 3.00 5.00 41.00 4.1000 .87560 VAR00008 10 1.00 4.00 5.00 47.00 4.7000 .48305 Valid N (list wise) 10

Bar-Graph

VAR00008

VAR00007

VAR00006

VAR00005

VAR00004

VAR00003

VAR00002

VAR00001

Mea

n

4.8

4.6

4.4

4.2

4.0

3.8

3.6

Inventory Management Line-Graph

VAR00008

VAR00007

VAR00006

VAR00005

VAR00004

VAR00003

VAR00002

VAR00001

Sta

ndar

d D

evia

tion

1.2

1.1

1.0

.9

.8

.7

.6

.5

.4

Inventory Management A nal ys i s Here the 8 variables stand for the 8 questions asked to the respondents. After calculating the mean, we can see that overall the mean is above 4, which means that the customers are “Often” satisfied with the services they receive at the store. As the mean of question number 8 is highest we can infer that the customers are happy with the way the store is managed. However since the mean of question number 6 is lowest, we can infer that the customers are not happy with the quality of the products the buy from the store. They think that it is due to the low price of the products available there. The same is shown in the bar graph. But when we look at the standard deviation of the data, we see that the standard deviation of the responses is highest for question number 5, where as it is the lowest for question number 8. It signifies that, the response of question number 5 differs in opinion among customers. Some are satisfied with the time taken to respond to there queries, whereas some are not. However, question number 8 has a unanimous response, and so it has the lowest deviation from the standards. It is everyone’s opinion that the management of Big-Bazaar has to be given all kudos for efficient functioning and customer satisfaction.