Inventory Management Grp 2 Sec A

8/13/2019 Inventory Management Grp 2 Sec A

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Inventory ManagementIndustry practices in various businesses

Group 2, Section A

Akash Sahu

Amit Singhania

Megha Agarwal

Naveen Agarwal

Preetisudha Pandab

Pulkit Agrawal


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StationeryStore

Grocery store

PharmaceuticalStore

Retail Chain

Industry practice

Recommendations

Industry practice

Recommendations

Industry practice

Recommendations

Industry practice

Recommendatio

ns

Outline:


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Stationery store: Geeta

Stores Wholesale Business

Located at Mal Godown, Cuttack

Items : Paper, Pen, Pencil, erasers etc

Around 100 SKUs

Procurement: -Distributors and Local

Wholesale merchants

Manpower: 3 staff members


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Inventory Management

Around 3 months of inventory(excepting for paper reams) To avail discounts on bulk purchase

Leverage upon stock outs of thecompetitors

Use of economies of scale intransportation and storage

Rent is of fixed floor space (Rs 1500) Godown is at a distance from the shop

Re-order point -10 days of inventory

Sale of Paper is by FIFO


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Issues in current

management Over stock costs

Irregular Stock tally

Time loss in getting goods fromwarehouse

Losing out potential customers due tounavailability of specific products.


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Recommendations

Proper monthly demand estimation

Bulk purchase should be avoided

Historical data should be maintained

to aid demand estimation

Periodical stock tally

Opting for a nearer warehouse


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Grocery Store: SMKP Store

Thirty years old business enterprise.

Located at Buxi bazaar, Cuttack.

SKUs range 900-1000

Staff members 10.Monthly TurnoverRs 15 to 17 Lakhs

Total Area3200 sq. ft. (1000 sq. ft. for shop

and 2200 sq. ft. for

storage)Category of itemsGrocery items & FMCG

items

Fastest Moving ItemsGrocery items like

rice, pulses etc


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Business process involved in

inventory procurement

Grocery Items:Procured on daily basis from Malgodown,

Cuttack from around 10-15 fixed no of shopsbased on the quality and price.

FMCG Items:

Agents of the distributor come and take theorders weekly and deliver the items in house

accordingly.

Maintain 10-12 days of inventory


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Key issues

Damage of Oil pouches, detergents packetsduring procurement

Breakage of Ketchup bottles due toimproper handling and bad packaging

Unsold seasonal items can be returned tothe vendor only in the next cycle, this leadsto undesirable loss of shelf and inventoryspace and also immobility of funds.

Stock check is done on an yearly basis (Every Diwali )

All accounting and ledger work is donemanually


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Recommendations

Maintain historical data to predictdemand for seasonal products.

Use of accounting software to track

sale and purchase of goods moreefficiently

Low level inventory for products like

oil, detergent and ketchup bottles toreduce the risk of breakage.


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Medical Store:

Medicine House,

Bhubaneswar

Medicine house is a standalone medicine shop in IDmarket, Bhubaneswar.Owner: Mr. Pramod Patra


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Overview of industry

Large number of drugs and their varietiesSeveral alternatives for the same salt.

License needed to manufacture and store

drugs

Manufacturer provides after supply servicesunconditional exchange of expired drugs

Doctors prescription alters the demand of the

drug. The consumer is usually indifferent to

the brand.

In some generic drugs the brand (eg.

Himalaya, Dr. Reddy) may be of importance

Several complementary items (eg. diapers)


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Inventory decides your

BusinessHuge variety

Countless number of Retailers (counters)

The sale of an individual medicine per shop is not great.

The over all sale of medicine at each shop is high

Small inventory of all things vs Large inventory of some things

Largeinventory ofcertain drugs

Smallinventories ofa many drugs


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As Variety increases volumes

decrease

Carry and Forward :One per company

Stockist : More innumber

Retailer: hugenumber of counters


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Medicine House: An Insight

Stand alone shop in ID market, Bhubaneswar

Monthly Sales average to approximately between 4

and 5 lakh

Number of employees is 4

About 65000 SKUs listed in the catalogueAt the time of visit about 20000 SKUs were present

in the inventory.

The owner has plans of expansion to 4 or 5 shops

within the city in the near future. Plan of starting achain of retail pharma shops if the plan works out.


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Inventory at Medicine House

Inventory is important:The customer is not ready to wait

Other medical stores offer the medicine at all times

A customer unsatisfied is a customer lost in this

businessMethod of Procurement:Daily procurement

Supplier is locally available

A safety stock per drug is maintained

Limited area in shop for storage of medicines. Storing

elsewhere is illegalInventory is usually only enough to satisfy the demand for 2 to

7 days, depending on the drug


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Computerized system

Medicine House uses a computer software to tracksupplies and sales

The batch number is entered along with the expiry

date for each purchase

The sales also follow a data entry in the system,

except in case of many customers waiting

The system provides reports of each item. Also alertsabout the approaching expiry dates


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Arrangement of Inventory

All inventory on shelf. Is available for sale

Use of refrigerators for certain items

Medicine house specifics:

All medicine arranged in Alphabetical

order

Bottles and strips arranged in one placeSeparate rack for expired and near expiry

drugs

Some items also placed on the counter.


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Mr. Patra says

A medicine like Cinarest is so popular that 50 strips may be soldin a day or two. A thermometer may, on the other hand, take

months before running out of stock.

0%

20%

40%

60%

80%

100%

drugs ininconsistent

demanddrugs incontinousdemand


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How much inventory to keep?

Suppliers are locally availableSuppliers maintain a huge inventory

Medicine House buys from 4 or 5 different suppliers

The supply is usually stable. Medicine are exempted

from any strike or closedown

Small level of inventory maintained. Safety stock

determines the order for next day

Extra order may be placed for fast moving drugs.

Staff keeps an eye on the doctors prescriptions andestimated the demand of a drug. Orders are altered

based on this observation.


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Recommendations

Use FIFO system effectivelyKeep the alphabetical system of placing items

intact. This will make it easier for the new staff to

locate the medicines

Manage the drugs in separate plastic boxes toseparate strips from mixing up.

Use a queue system in each box for

implementing the FIFO system.

The queue system if implemented will alsomake the inventory verification easier.

Keep faster moving goods in easily accessible

locations.


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Retail Chain: Big

Bazaar, Patia.

Bhubaneswar

Maruti Mall, Big Bazaar is located at KIIT square.36000 sq. feet in area80 employees


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BIG BAZAAR

Organization Structure

Front end divided into several divisions Food Bazaar,

Mobile,

Mens Wear,

Ladies Wear,

Kids Section,

Electronics.

Back end divided into 3 teams Inventory Management/Warehouse team

The Category Team,

The Commercial team


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Inventory Management at Big

Bazaar

The operational strategies for Food Bazaar and the

rest (which they refer as Big Bazaar) are highly

segregated

BigBazaar

FoodBazaar


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The main difference

FoodBazaar

Localvendors &distributers

Dailyinventorycounting

BigBazaar

CentralizedDC

Quarterlyinventorycounting


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Big Bazaar

The inventory procurement is done on a dailybasis

No individual warehouses for the individual stores

A central warehouse at Kolkata, which distributesto the eastern zone

Lead time of about 60 hours

In case of stock out they check for availability in

other branches

Upon arrival of inventory entries are made in the

system, a software called Auto Replenish System


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Inventory Management at Big

Bazaar

Inventory directly moved to the shelves on the display

floor

Layout decided by a Planogram

They try to maintain a FIFO method of inventory

consumption, but considering that its a self service

store that is not much under their control

Average sales per day calculated based on the sales

last 3 months

Minimum Base Quantity is used

Big Bazaar: Inventory


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Big Bazaar: Inventory

management during peak

season

Located onKolkata

Distributioncentre

Bhubaneswar

Supplies to 3outlets in Orissa

Temporarywarehouse Heavy rush during

peak season

Prevents stockouts

Big Bazaaroutlets

During super sales (like during 26thJan), a

temporary warehouse is maintained for all the 3

stores in Orissa combined


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Inventory Management at Food

Bazaar

Daily procurement from local vendors

Vegetables and fruits are fastest moving items

whereas imported chocolates are the slowest

movingOther items like Maggi, Biscuits are procured from

local distributors

Inventory level of 7 days plus safety stock of 2 days

Average sales per day is calculated based on the

sales last 3 months

Minimum Base Quantity = Avg. Sales per Day * 9


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Inventory Management

Stock verification is done manuallySales person checks for the expiry dates of individual

items manually

No special process for peak season demand

Estimates done according to last season and extra

inventories are orderedInventory counting is also a manual process, done

quarterly


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Recommendations

Expiry date verification can be easily automated by

the software they are already using i.e. Auto

Replenish System

Formalization of supply chain process in case ofFood Bazaar

Use of Cycle counting in place of quarterly counting


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THANK YOU

Inventory Management Grp 2 Sec A

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