effectiveness of inventory control measures

Effectiveness of the inventory control measures

Dept. of BBM JAN 2013-APR 2013

1.1 INTRODUCTION

Every enterprise needs inventory for smooth running of its activities. It serves as a link

between the production and distribution process. The greater a time lag, the higher the

requirement of inventory the unforeseen fluctuation of inventory demand and supply of

goods, fluctuating inventory prices, necessitate the need for inventory management.

The investment inventory constitutes the most significant part of the current assets inventory

of the under taking. Thus it is very essential to have a proper control and management of

inventory.

In any business or organization, all functions are interlinked and connected to each other and

are often overlapping. Some key aspects like supply chain management, logistics and

inventory form the backbone of the business delivery function. Therefore these functions are

extremely important to marketing managers as well as finance controllers.

Inventory management is a very important function that determines the health of the

supply chain as well as the impacts the financial health of the balance sheet. Every

organization constantly strives to maintain optimum inventory to be able to meet its

requirements and avoid over or under inventory that can impact the financial figures.

Inventory is always dynamic. Inventory management requires constant and careful evaluation

of external and internal factors and control through planning and review. Most of the

organizations have a separate department or job function called inventory planners who

continuously monitor, control and review inventory and interface with production,

procurement and finance departments.

1.2 MEANING OF INVENTORY

Inventory is an idle stock of physical goods that contain economic value, and are held in

various forms by an organization in its custody awaiting packing, processing, transformation,

use or sale in a future point of time.

Any organization which is into production, trading, sale and service of a product will

necessarily hold stock of various physical resources to aid in future consumption and sale.

While inventory is a necessary evil of any such business, it may be noted that the

organizations hold inventories for various reasons, which include speculative purposes,

functional purposes, physical necessities etc.



From the above definition the following points stand out with reference to inventory:

Inventory can be in complete state or incomplete state.

Inventory is held to facilitate future consumption, sale or further processing/value

addition.

All inventoried resources have economic value and can be considered as assets of the

organization

1.3 TYPES OF INVENTORY

INPUT

PROCESS

OUTPUT

Raw Materials Work in Process Finished Goods

Consumables required

for processing. E.g. :

Fuel, Stationary, Bolts

& Nuts etc. required in

manufacturing

Semi-Finished

Production in various

stages, lying with

various departments like

Production, WIP Stores,

QC, Final Assembly,

Paint Shop, Packing,

Outbound Store etc.

Finished Goods at

Distribution centres

throughout Supply

Chain

Maintenance

Items/Consumables

Production Waste and

Scrap

Finished Goods in

transit

Packing Materials Rejections and

Defectives

Finished Goods with

Stockiest and Dealers

Local purchased Items

required for production

Spare Parts Stocks &

Bought Out items

Defectives, Rejects and

Sales Returns

Repaired Stock and

Parts



1.4 INVENTORY CONTROL

Any inventory of Raw materials, finished goods as well as Intermediate in process inventory

has an economic value and is considered an asset in the books of the company. Accordingly

any asset needs to be managed to ensure it is maintained properly and is stored in secure

environment to avoid pilferage, loss or thefts etc.

Inventory control assumes significance on account of many factors.

First of all inventory of raw materials as well as finished goods can run in thousands of SKU

(Stock Keeping Unit) varieties. Secondly inventory can be in one location or spread over

many locations. Thirdly inventory may be with the company or may be under the custody of

a third party logistics provider. These factors necessitate inventory maintenance mechanisms

to be devised to ensure inventory control.

Inventory control is also required as an operational process requirement. Inventory is has two

different dimensions to it. On one level it is physical and involves physical transactions and

movement of inventory. While on the other hand, inventory is recognizable by the book stock

and the system stocks maintained. This necessitates inventory control mechanism to be

implemented to ensure the book stocks and the physical stocks match at all times.

Thirdly the inventory always moves through supply chain and goes through various

transactions at various places. The number of transactions and handling that it goes through

from the point of origin to the point of destination is numerous. Therefore it becomes

essential to control inventory and have visibility through the pipeline including transit

inventory.

Inventory control is exercised through inventory audits and cycle counts. An inventory audit

essentially comprises of auditing the books stocks and transactions and matching physical

stocks with the book stock.

Cycle counts: Cycle count refers to the process of counting inventory items available in

physical locations. Depending upon the nature of inventory, number of transactions and the

value of items, cycle count can be carried on periodically or perpetually.

1. Daily Cycle Count: Normally where the number of SKUs is very high coupled with

high number of transactions and through put, daily cycle count is initiated, where in a certain

percentage of locations or SKUs are counted on daily basis and physical stock is compared



with system stock. By the end of the month all of the stocks would have been covered once

in cycle count.

Inventory system throws up a count list based on an analysis of the movements of fast

moving SKUs along with other attributes like value etc. In some of the system, inventory

controllers can set up the attributes for each cycle count.

2. Quarterly & Half Yearly Cycle Counts: End of the sales quarter or end of half yearly

sales, finished goods and spare parts are normally covered under inventory audit and a 100%

cycle count is carried out.

3. Wall to Wall Cycle Count: End of financial year and closing of books entails doing wall

to wall cycle count of all stocks lying in all locations and tallying with books of account. This

is a mandatory audit requirement and until stock figures are reconciled, certified by auditors

and published, New Year books of accounts cannot be started a fresh.

1.5 Objective of inventory management

The main objectives of inventory management are operational and financial. The operational

object means availability of materials and spares in sufficient quantities for undisturbed flow

of production. The financial objective means investments in inventories should not remain

idle and minimum working capital should be locked in it.

The other objectives are:

1) To ensure continues supply of inventories to the production.

2) To avoid over stocking and under stocking.

3) To maintain optimum level of investment in inventories.

4) To keep material cost under control, to keep low cost of production.

5) To eliminate duplication in ordering or replacing stocks.

6) To minimize losses through, deterioration, pilferage, wastage and damages.

7) Designing structures for good inventory management.

8) Perpetual inventory control of materials.

9) To ensure right quality of goods at reasonable prices.

10) To facilitate data for shorthand long term planning and control of inventory.



1.6 NEED FOR INVENTORY CONTROL:

If a cost accounting system is to be effective there must be a proper control of inventory and

supplies form the time orders are placed with suppliers until they have been effectively

utilized in production.

Materials are equivalent to cash and they make up an important part of the total cost. It is

essential that materials should be properly safeguarded and correctly accounted. Proper

control of material can make a substantial contribution to the efficiency of a business. The

success of a business concern largely depends upon efficient purchasing, storage,

consumption and accounting.

In a large firm the planning and routing department is responsible for arranging how and

where the work is to be done and issue instructions. It sets definite time schedules so that

necessary materials are delivered to the proper department in proper time not too long before

hand neither lest it should interfere with other work nor after they are required as this result

in idle time.

Business firm keep inventories for different purposes. Every firm big or small trading or

manufacturing has to maintain some minimum level of inventories. Based on some motives

the inventories are maintained.

a. Transaction motives:

Every firm has to maintain some level of inventory to meet the day-to-day requirements of

sales, production process, customer demand etc. In this finished goods as well as raw

material are kept as inventories for smooth production process of the firm.

b. Precautionary motive:

A firm should keep some inventory for unforeseen circumstances also like loss due to natural

calamities in a particular area, strikes, lay outs etc so the firm must have some finished goods

as well as raw-materials to meet circumstances.

c. Speculative motive:

The firm may be made to keep some inventory in order to capitalize an opportunity to make

profit due to price fluctuations.



1.7 REASONS AND BENEFITS OF INVENTORY:

The optimal level of maintaining inventory is a subjective matter and depends upon

the features of a particular firm. Such as

(i) Trading firm:

In case of a trading firm there may be several reasons for holding inventories because of sales

activities that should not be interrupted. Moreover it is not always possible to procure the

goods whenever there is a sales opportunity as there is always a time gap required between

purchase and sale of goods. Thus trading concern should have some stock of finished goods

in order to undertake sales activities independent of the procurement schedule.

Similarly, a firm may have several incentives being offered in terms of quantity discounts or

lower price etc by the supplier of goods. There is trading concern inventory helps in a de-

inking between sales activity and also to capitalize a profit of opportunity due to purchase

made at a discount will result in lowering the total cost resulting in higher profits for the firm.

(ii) Manufacturing firm:

A manufacturing firm should have inventory of not only the finished goods, but also of raw

materials and work-in-progress for following reasons.

(a) Uninterrupted production schedule:

Every manufacturing firm must have sufficient stock of raw materials in order to have the

regular and uninterrupted production schedule. If there is stock out of raw materials in order

to have the regular and uninterrupted production schedule. If there is stock out of raw

material at any stage of production process then the whole production may come to a half.

This may result in custom dissatisfaction as the goods cannot be delivered in time more over

the fixed cost will continue to be incurred even if there is no production.

Further work-in-progress would let the production process run smooth. In most of

manufacturing concerns the work in progress is a natural outcome of the production schedule

and it also helps in fulfilling when some sales orders, even if the supply of raw-materials

have stopped.

(b) Independent sales activity:

Inventory of finished goods is required not only in trading concern but manufacturing firms

should also have sufficient stock of finished goods. The production schedule is a time



consuming process and in most of the cases goods cannot be produced just after receiving

orders. Therefore, every firm has to maintain minimum level of finished goods in order to

deliver the goods as soon as the order is received.

1.8 COSTS INVOLVED IN INVENTORY:

Every firms maintains inventory depending upon requirement and other features of firm for

holding such inventory some cost will be incurred there are as follows:

(a) Carrying Cost:

This is the cost incurred in Keeping or maintaining an inventory of one unit of raw

materials, work-in -process or finished goods. Here there are two basic cost involved.

(i) Cost of storage:

It includes cost of storing one unit of raw materials by the firm. This cost may be for the

storage of materials. Like rent of spaces occupied by stock, stock for security, cost of

infrastructure, cost of insurance, and cost of pilferage, warehousing costs, handling cost etc.

(ii) Cost of financing:

This cost includes the cost of funds invested in the inventories .It includes the required rate

of return on the investments in inventory in addition to storage cost etc. The Carrying cost

include therefore both real cost and opportunity cost associated with the funds invested in the

inventories. The total carrying cost is entirely variable and rise in directly proportion to the

level of inventories carried.

Total carrying cost = (carrying Cost per unit) x (Average inventory)



(b) Cost of ordering:

The cost of ordering includes the cost of acquisitions of inventories.

It is the cost of preparation and execution of an order including cost of paper work and

Communicating with the supplier.

The total ordering cost is inversely proportion to annual inventory of firm. The ordering cost

may have a fixed component, which is not affected by the order size: and a variable

component, which changes with the order size.

(c) Cost of stock out:

It is also called as Hidden cost. The stock out is the situation when the firm is not having

units of an item in stores but there is a demand for that Item either for the customers or the

production department .The stock out refers to zero level inventory .So there is a cost of

stock out in the sense that the firm face a situation of lost sales or back orders .The stock outs

are quite often expensive. Even the good will of firm also be effected due to customers

dissatisfaction and may lose business in case of finished goods, whereas in raw materials or

work in process can cause the production process to stop and it is expensive because

employees will be paid for the time not spend in producing goods.

The carrying cost and the ordering cost are opposite forces and collectively. They determine

the level of inventors in a firm.

Total cost =(cost of items purchased) +(Total Carrying and ordering

cost)

Total Ordering Cost = (No. of orders) x (cost per order).



1.9VALUATION OF INVENTORY:

The methods of valuing inventory are combination of the actual cost and replacement cost

plans. The chief advantage of the cost or net realizable value rule is that it is conservative.

Hence the methods of Valuation of inventory are quite independent of system of mincing.

In balance sheet closing stock is shown under current assets and is also credited to

manufacturing or trading accounts. The inventories are valued on the basis as follows.

Cost of raw materials in stock may include freight charges and carrying cost. But

such cost should not exceed market price,

Work -in -process is generally valued at cost, which includes cost of materials,

labour. And the proportionate factory overhead, as it is reasonable according to degree of

completion,

Cost of finished goods wound normally to be total or full cost it includes prime cost

plus appropriate amount of the overhead. Selling and distribution cost is deducted on the

other hand work in progress may be valued at work in progress may be Valued at work cost,

marginal cost, prime cost or, even at direct materials.

1.10 INVENTORY ISSUE PRICING METHODS

There are two methods of Inventory Pricing Method. They are:

a) Cost Prices : Under this method there are following methods:

1. FIFO( First In First Out)

2. LIFO( Last In First Out)

3. Specified Price

4. Base Stock Price

5. HIFO( Highest In First Out)

b) Derived From Cost Prices: Under this method there are following methods

involved:

1. Simple average price

2. Weighted average price

3. Periodic simple average price

4. Periodic weighted average price



5. Moving simple average price

6. Moving weighted average price

c) Notional Prices : Under this method there are following methods involved:

1. Standard price

2. Inflated price

3. Re-use price

4. Replacement price

Explanation of some of the important methods is as follows:

1. FIFO:

This method is based on the assumption that materials which are purchased first are issued

first. It uses the price of the first batch of materials purchased for all issues until all units

from this batch have been issued. After the first batch is fully issued, the price of the next

batch received becomes the issue price. Upon this batch also fully used, the price of the still

next batch is used for pricing and so on. In other words, the materials are issued at the oldest

cost price listed in the stores ledger account. Two points should be noted:

i. Materials are charged at the actual cost price and at the oldest price of materials in

stock.

ii. Stock of materials in hand is valued at the latest purchase prices.

Advantages: The following advantages are claimed for FIFO methods:

This method is based on a realistic assumption that materials which are received first are

issued first.

i. Materials are issued at actual cost. Thus, no unrealistic profit/ loss results from this

method.

ii. Closing Stock valuation is at cost as well as at the latest market prices.

iii. This method is quite simple to operate and easy to understand.

Disadvantages: This method suffers from the following disadvantages:

i. Materials are not changed at the current market prices. Therefore, in times of rising

prices charge to a production is unduly low.



ii. This method sometimes produces unfair results as between one job and another. For

example materials purchased @Rs. 10 may be issued to job A, but materials

issued to similar job may be from a later supply which is @ Rs. 12. This makes

comparison difficult because two similar jobs started at the same time may show

different costs.

iii. When transactions are large in number and the price fluctuates very frequently, the

method involves more calculations and increases the possibility of errors.

2. LIFO:

The method is just reverse of FIFO. It is based on the assumption that last purchases of

materials are issued first and earlier receipts are issued in the last. LIFO method uses the

price of the last batch received for all issues until all units from this batch have been issued.

After that, price of the previous batch received is used.

The students should note that in actual practice materials issued to production may not be

from the latest lot purchased. This is only a book-keeping method and must not be confused

with physical method of issue used by the storekeeper who always tries to issue the oldest

stock first.

Two important points of this method are:

i. Issues are priced at actual cost and at the latest prices paid.

ii. Closing stock is valued at the old prices and is completely out of line with

current prices.



Advantages: This method has the following advantages:

i. The value of materials issued is closely related to current market prices

ii. As materials are issued at actual cost, it does not result in any unrealised profit

or loss.

iii. When prices are rising, the higher prices of the most recent purchases are

changed to production. This reduces profit figure and results in income-tax

saving.

Disadvantages: Its main disadvantages are:

i. Although stock is valued at cost, the price is that of the earliest materials

purchased, so that stock value does not represent its current value.

ii. This method is not realistic as it does not confirm to the physical flow of

materials.

iii. Like FIFO, in this method also, the materials cost of similar jobs may differ

simply because the prior job exhausted the supply of lower priced stock.

This renders comparisons between jobs difficult.

iv. When prices fluctuate very often, the calculations complicate the stores

account and increase the possibility of clerical errors.

3. Simple Average Methods:

Simple average price is calculated by adding all the different prices and dividing by the

number of such prices. It does not take into account quantities of materials while computing

average price. For instance, when 100 units are purchased @ Rs. 9 per unit and 900 units are

purchased @ Rs. 7 per unit, the simple average price will be= (9+7)/2= Rs. 8.

Advantages:

The only advantage of this method is that it is simple to understand and easy to

operate.

Disadvantages:

i. Materials are not charged out at actual cost. Thus, unrealised profit or losses

will usually arise out of pricing.



ii. This method is scientific and usually produces unsatisfactory results. The

value of closing stock may be a negative figure which is quite absurd.

4. Weighted average price:

This is the price which is calculated by dividing the total cost of material in the stock from

which the material to be priced have been drawn, by the total quantity of material in the

stock. This method differs from all other methods because here issue prices are calculated on

receipts of materials and not on issue of materials. Thus as soon as new lot is received a new

price is calculated and issues are then taken.

Advantages:

i. This method is advantageous where the price varies widely as its use even out

the effect of these wide variations.

ii. The basis of price calculations is a simple one involving only the division of

total amount of material in stock by quantity in stock.

iii. Calculation of new prices arises only when receipt of stocks are received.

iv. Stock records under this method give a fair indication of the stock values,

which can be used in financial analysis.

Disadvantages:

i. This method is completed than simple average because it takes into

consideration the total quantities and total costs in stock.

ii. Profit or loss may be incurred as in simple average price,

iii. As LIFO or FIFO this method calls for many calculations,

iv. In order to calculate the accurate value of issues the average price must

normally be calculated to four to five decimal places.

5. Standard price:

It is the predetermination of fixed price on basis of a specification of all factors affecting

price like the quantity of materials in hand and to be normally purchased and rate of discount

compared with existing price including or excluding freight and ware housing expense.

A standard price for each material is set and the actual price paid is compared with standard.

It is paid exceeds the standard a loss will be realized if not profit will be obtained.



Advantages:

i. This method is easy to operate.

ii. Comparing the actual prices with the standard price will determine the

efficiency of purchase department.

iii. The effect of price variations is eliminated from job costs.

iv. It reduces classical costs by eliminating detailed cost records.

v. In times of inflation or price fluctuations is very difficult to fix a standard

price.

vi. This method also incurs a profit or loss on issues and closing stock.

1.11FACTORS LEADING TO INVENTORY INEFFICIENCIES

In any company inventory management is one area that the managements always focus on

when it comes to improving business efficiencies and cutting costs. An inventory reduction

drive always yields results, which are visible and releases cash back into business. Does this

mean that inventory management is inefficient? The answer can be a yes and a no. Inventory

management function is dependent upon physical operations involving multiple locations and

agencies and processes. The inter dependence upon transactions which are sequential and

parallel, renders inventory susceptible to inefficiencies occurring in operations, transactions,

and documentation over a period of time. Another possible factor that can hamper the

inventory efficiencies is the system setup that is used to manage the inventory. Quite often

one can find that the system setup and process defined in the system is not user friendly and

cumbersome.

An efficient system should define and guide the physical process as well as documentation

process. The system process should in turn be developed based on the business process

requirements. In many cases the operations are made to suit the system setup, which already

exists in some basic form and not suited to the particular business process on hand. Poor

system setup that does not match with the shop floor warehouse set up renders operations in

efficient. It is very common to come across complaints from users with regard to non-

availability of features to work around the processes; at times processes are lengthy and

cumbersome leading to operational delays. Non availability of different reports and loops and



bugs in the system can often push the operations teams to find shortcut methods to bypass the

system processes and carry on with the work, resulting in inventory inefficiencies as well as

inefficient operations.

In cases where a company has outsourced the inventory management to a third party service

provider, the inventory management complications increase manifold. You have the

company’s ERP or inventory system on one hand and the third part service provider’s

inventory management system or warehouse system on the other hand. At any given point of

time both have to be reflecting the same inventory accuracy and also match with physical

stock available on shop floor, but this is not the case always. In cases where the systems are

interfaced too inventory in one system cannot mirror the other and reconciling transactions

between the two systems can be cumbersome and time consuming. Health of the inventory

accuracy as well as inventory management can also depend upon the inventory strategy of

the company and its outlook.

A few companies treat inventory to be a necessary evil and just about ensure processes are

compliant and inventory audits are regularly held. They do not deal with and treat inventory

as an important asset that needs to be managed and reviewed to keep it accurate. Those

companies, which are aware of the implications and benefits that a lean inventory

management practice can have on their business, strive to build good management practices

and keep finding ways to optimize the processes. Any efficiency brought about with change

in processes adds to the company’s profits.

Hence they give attention to and invest in driving inventory management strategy and

practices, which are benchmarked against the best in the industry. Decisions with regard to

level of inventory to be carried, who owns and carries the inventory in the supply chain are

some of the key decisions that drive efficiencies in inventory management. Besides this

technology can also bring about process improvements speeding up the sales and delivery

processes and to a certain extent reduces manpower resources and associated costs too.

Inventory management is an on-going and dynamic process. To keep out the inefficiencies in

systems, processes and physical operations, calls for active management participation and

continuous improvement in all processes and systems that are involved in inventory

management.



1.12 INVENTORY DECISION

Executive decide two basic issues while dealing with inventories;

(a) How much of an item to order when the inventory of that item is to be replenished.

(b) When to replenish the inventory of that item.

By definition, inventory facilitates production or satisfies customer demands.

Inventory system is a set of policies and controls which monitors and determines the levels of

inventory. Inventory conventionally includes raw materials, work-in-progress, components

parts, supplies and finished goods. Operations are a transformation process in which the

inputs are raw materials.

1.13 WHEN TO AVOID HANDLING INVENTORIES?

Every business organization that is engaged in manufacturing, trading or dealing with

saleable products holds inventories in one form another. Inventory is held in the form of raw

materials or in the form of saleable goods. Since every unit of inventoried item has an

economic value and is itemized in the books of account of the company, inventory can be

considered to be an asset of the company. Inventory Management is a critical function

performed by planners to balance the inventory holding so as to ensure that optimum

inventory levels are maintained. Any excess inventory will result in incremental costs of



maintaining inventory and affects the financials of the company as it blocks working capital.

Under inventory on the other hand can seriously hamper the market share. Any customer

order that is not fulfilled due to a stock out is not at all a good sign.

Therefore the responsibility of striking a fine balance in holding lean inventory calls for

smart planning and continuous monitoring of the inventory levels coupled with quick

decision-making. Due to the above factors all organizations generally tend to avoid holding

inventories except at certain times. Inventory Build-up can be a Sign of Hidden Problems. It

has been noticed that inventory build-up in process and manufacturing industries is often a

sign of hidden problems, which lie underneath and are not visible at the surface level. In

other words one can say that to cover up inefficiencies in the internal systems, people build

up inventories as safety stocks.

Stock build up can occur as a solution to cover up supplier inefficiencies. If the vendors are

not reliable and the flow of raw materials cannot be ensured, there results a trend to hold

buffer inventories in the form of raw materials or semi manufactured Work in Process

inventories. In other cases inventory build-up can happen due to bad quality. The inventory

cost increase and resultant inventory storage cost can be attributed to cost of quality. If the

production is not consistent with quality, the goods produced will get rejected leading to an

increase in rejected inventory. Secondly, to make up for the loss due to quality rejection, one

would have to increase production and hold finished goods inventory. In other cases

production delays can lead to build-up of inventories too.

Production delays can be attributed to varied reasons such as bad design of the product,

production layout inefficiencies, production stoppage due to breakdowns, Lengthy process

times etc. Besides these causes, there could be many other problems related to people and

management resulting in slackness on the shop floor, which can add to inventory holding at

various stages. Such inventory build-ups not only block the working capital and increase

unnecessary cost of maintaining and storing the inventories, but also hide the problems which

can cause serious threat to the business. Management should be watchful to identify any such

inventory build-ups and investigate into the root cause and solve such problems.

An inventory build-up at the raw material side as well as the finished goods side gives cause

for worry to the finance controllers. Any non-moving inventory is a cause for concern



because it not only blocks up the funds of the organization but the incremental cost of

holding the inventory keeps increasing over a period of time and affect the bottom line

figures. More importantly inventory over a period of time is susceptible to loss, theft,

pilferage and shrinkage. It can also become obsolete and deteriorate over a period of time if

not used within the shelf life. Hence inventory levels are always on the radar of not only

finance controllers, but of the top management as well.

1.14 WHY YOUNG MANAGERS SHOULD KNOW ABOUT

INVENTORY OPERATIONS?

When a management student passes out from college and is absorbed into any business

organization, if he is lucky he will get to spend a few months in getting orientation in all

departments before being assigned to a particular department or function at the end of the

induction program. Those who get to be assigned to working in Supply chain or inventory

operations of the company are likely to learn very important lessons that is likely to give

them an edge later on when they grow in ranks and take up higher and different

responsibilities.

Inventory management and supply chain operations both on the Raw material as well as

Finished Goods side are very critical to the success of sales and marketing besides being

major contributors to the profitability of the company. Sales and Marketing can be said to be

efficient not when they build sales leads and convert them. But the efficiency of being able to

reach the right Finished Product to the Right Customer or Market and the Right Time is what

determines the Success of S & M. Inventory is the other function that is critical to the Sales.

An efficient inventory management will mean carrying balanced inventory and functioning at

optimum efficiency as well as ensuring control over inventory carrying costs. Any increase in

efficiency of inventory holding or operations impacts bottom line directly.

Supply chain, having to do with movement of inventory to and from plant to the markets,

holding inventory en route at various points and managing overall inventory logistics is also

very critical both to inventory management as well as the Sales Function. Once the trainee

has understood the operations models and seen how the entire chain of functions involving

multiple internal departments, systems, documentation as well as external vendors, third

party service providers and the governmental organization all work in tandem to make the



business a success, he would have pretty much understood the secret to building successful

business. Time and again we have seen that the General Managers as well as the Marketing

Managers who have been heading their departments in the companies have made headway

and achieved breakthroughs in terms of marketing their products using innovative supply

chain distribution strategies and thereby have been able to impact the bottom lines

substantially. Direct marketing, E marketing, Network marketing are all new sales concepts

but if you have to incorporate these into your marketing plan, then it becomes necessary first

for you to be able to understand and define the supply chain and inventory strategy to service

these delivery channels.

An inventory strategy can be designed on paper but then to be able make it operational, one

need to have a realistic exposure and experience to the field operations and have a hang of

how things work on the ground. Inventory management and operations involve multiple

agencies and service providers combined with multiple systems that need to be interfaced.

Sales process has to be married to Supply Chain and logistics process, which in turn needs to

drive the inventory operations process in the back end. All these different modules need to be

working in tandem and seamlessly to deliver products across markets in time. Any aspiring

manager who wants to head an organization as General Management or Marketing Manger

would have to first get first-hand experience of these brass tacks that will help him later to be

able to devise practical and achievable strategies to take his business ahead.

1.15 TIPS FOR BETTER INVENTORY MANAGEMENT

At time of delivery, verify count- making sure of the receiving of as many cartons as are

listed on the delivery receipt. Then carefully examine each carton for visible damage. If

damage is visible, note it on the delivery receipt and have the driver sign the copy. After

delivery, immediately open all cartons and inspect for merchandise damage. When damaged

item is discovered, retain damage items. All damaged materials must be held at the point

received. Then call carrier to report damage and request inspection. Confirm call in writing,

this is not mandatory but it is one way to protect it.



RESEARCH DESIGN OF THE STUDY

2.1 INTRODUCTION TO SUBJECT BACKGROUND

Inventory is a list for goods and materials, or those goods and materials themselves, held

available in stock by a business. Inventory are held in order to manage and hide from the

customer the fact that manufacture/supply delay is longer than delivery delay, and also to

ease the effect of imperfections in the manufacturing process that lower production

efficiencies if production capacity stands idle for lack of materials.

The most important objective or inventory control is to determine and maintain an optimum

level of investment in the inventory. Most companies have now successfully installed one or

the other system of inventory planning and control.

Inventory Management and Inventory Control must be designed to meet the dictates of the

marketplace and support the company's strategic plan. The many changes in market demand,

new opportunities due to worldwide marketing, global sourcing of materials, and new

manufacturing technology, means many companies need to change their Inventory

Management approach and change the process for Inventory Control.

Despite the many changes that companies go through, the basic principles of Inventory

Management and Inventory Control remain the same. Some of the new approaches and

techniques are wrapped in new terminology, but the underlying principles for accomplishing

good Inventory Management and Inventory activities have not changed.

The Inventory Management system and the Inventory Control Process provides information

to efficiently manage the flow of materials, effectively utilize people and equipment,

coordinate internal activities, and communicate with customers. Inventory Management and

the activities of Inventory Control do not make decisions or manage operations; they provide

the information to Managers who make more accurate and timely decisions to manage their

operations.

The basic building blocks for the Inventory Management system and Inventory Control

activities are:

1. Sales forecasting or demand management



2. Sales and operations planning

3. Production planning

4. Materials requirement planning

5. Inventory reduction

The emphases on each area will vary depending on the company and how it operates, and

what requirements are placed on it due to market demands. Each of the areas above will need

to be addressed in some form or another to have a successful program of Inventory

Management and Inventory Control.

2.2 STATEMENT OF THE PROBLEM

Every business firm however big and small has to maintain inventory and it constitutes an

integral part of the organisation. Hence proper techniques to control the inventory must be

taken in order to work efficiently. In an organisation there are various problem faced for

inventory control. The problems faced during the study at Edusys are:

a. Receiving stock at the right time.

b. Estimation of shipment to reach the destination at right time.

c. Cost Reduction for Operations & Printing.



2.3 TECHNIQUES USED TO OVERCOME THE PROBLEM

2.4 SCOPE OF THE STUDY

a) This study on inventory management of a particular department at Edusys will give us an

insight into the methods of inventory management, and inventory management affects the

pricing of the goods. We shall restrict the Scope of our Project to Study Materials and Gift

Items specifically.

b) This study is to find the facts and opinions of inventory management and control at

Edusys.

c) In accordance with present trends it aims mainly at finding out the inventory control

procedures at Edusys.

d) While making the analysis on inventory control, the concerned department people are

being questioned to get an idea on the performance of the company.

e) This study gives the brief information about the inventory management of Edusys.



2.5OBJECTIVES OF THE STUDY

a) To learn methods used in Inventory Control.

b) To know the various costs involved in Inventory.

c) To understand how unforeseen future demand due to variation in forecast figures and

actual figures is met.

d) To understand how to meet the customer requirement timely, effectively, efficiently,

smoothly and satisfactorily.

e) To reduce loss due to changes in cost of Inventory items.

2.6OPERATIONAL DEFINITION OF CONCEPTS

a) Inventory: “Is sum of finished goods, raw materials, packing materials, work in progress

and spares”

b) Finished Goods: “These are processed goods which are ready for consumption”.

c) Raw Materials: “Are the non-processed goods which are used in the production of

finished goods”.

d) Work in process: “These are semi-finished goods, which are yet to be finished. These are

materials which are components of machinery’s and tools of manufacturing”.

e) Packing Materials: “These are materials which are used in packaging the finished goods

for the protection”.

f) SKU: A stock-keeping unit or SKU is a term used (generally) by businesses as part of the

process of keeping track of what they have available to sell. SKU can also refer to a unique

identifier or code that refers to the items or products they have available for sale. Each SKU

is attached to an item, variant, product line, bundle, service, fee, or attachment. SKUs are

often used to refer to different versions of the same product.



2.7METHODOLOGY

In this research following methodology are used:

a) Study of inventory reports for collecting data of last 4 years

b) Direct interview with the head of the Inventory Department.

c) Comparison of various interconnected figures with each other to make the analysis.

d) Study the operation of Edusys to analyse the inventory.

e) Both the primary as well as secondary data has been used.

2.8 TYPE OF RESEARCH

This project is an analytical research where in the researcher has to use the available facts as

information and analyse this to make a critical evaluation of materials. This is also an applied

research with an aim to find a solution for immediate problem faced by the company.

2.9 SAMPLING PLAN

No specified sampling technique is used but for the purpose of research a questionnaire has

been prepared & filled out by the head of the inventory department.

2.10 TOOLS & TECHNIQUES USED

To make the analysis and interpretation of this project following tools and techniques are

used:

a. Trend Analysis

b. Face to face interview with inventory department head.

2.11 COLLECTION OF DATA

The collection of primary and secondary data is done by following sources.

Data are collected from existing records of the company. Both present and past

records were used. This includes:

o Shipping Invoices

o Printing Quotes and Invoices



Secondary data is the information that already exists somewhere, which has collected

to serve another purpose. In this study, secondary data has been collected from the

following sources:

1. Company Records and Reports.

2. Newspapers/Magazines.

3. Various Websites.

2.12 PLAN OF ANALYSIS

Relevant data was taken into consideration and different statistical tools and graphs were

used for analysing and interpretation. Dishonest and incomplete data was eliminated to

obtain pure data analysis.

2.13 LIMITATION OF THE STUDY

The following limitations were found:

This being an academic study it suffers from time and cost constraints.

To study a subject like Inventory Control Measures in detail the time was too short.

The study is limited to Edusys Services Pvt. Ltd.

Based on the limited information it is not possible to arrive at proper conclusion.

2.14 AN OVERVIEW OF CHAPTER SCHEME

i. Introduction: This chapter explains about the overall project. It includes the

method to control inventory of an organisation, tips for controlling inventory,

why inventory control is important and etc.

ii. Design of the study: This chapter includes the methodology used in the project,

objective of the project, limitation of the project, scope of the project and etc.

iii. Company profile: This chapter views the history of the company Edusys

Services Pvt. Ltd.

iv. Data Analysis an Interpretation: This chapter mainly views about the relevant

data analysis and interpretation.

v. Findings, Suggestions and Conclusion: This chapter contains the summary of

findings, suggestions and conclusion of whole project work.



3.1 Introduction of the company

Edusys Services Pvt. Limited (www.edusysglobal.com) is a Global Certification and

Training company providing courses on Project Management, Human Resource, Six Sigma,

IT related courses, CAT, GMAT and various professional courses. We are the leading

provider of PMP certification preparatory course in US and Canada. We conduct classroom

programs in 150+ cities in North America and other countries like UK, Australia, Germany,

UAE, Saudi Arabia, New Zealand and Singapore. We have online customers from more than

100 countries.

Edusys have been growing at >100% for past 3 years. Edusys is ranked as the 5th Fastest

Growing Company by Deloitte.

Edusys Global plays a key role in creating industry hallmarks like knowledge enrichment,

skill sharpening, and competitive edge through online courses and tests that spans a vast

spectrum of conventional and emerging domains of learning and work. Our robust learning

management and back office systems have given us tremendous scalability in terms of our

ability to offer better courses and cater to various domains of professional education where

there is a lack of good quality content and study methodology.

More than 100,000 individuals and 5000+ companies across the world have benefitted from

our time-tested and consistently proven education delivery models. Certification for

qualification is the basis for a good job and speaks for itself, demonstrating the mastery in

specific knowledge area. It holds you at a comparative advantage and helps you stand out in

the competition. We sharpen your skills so that you Target success in a guaranteed way.

Specialties

Edusys Global is a leading Education Training Provider in the Global Market (US, UK,

Australia, Canada, India and other countries). Knowledge enrichment, skill sharpening, and

being up to speed are the hallmarks that the profession looks at these days.



3.2 Brands of the company

PM Study: PMstudy is a brand of VMEdu, Inc., a Project Management Institute (PMI) ®

Approved Global Registered Education Provider, specializing in quality education courses to

prepare students for the Project Management Professional (PMP) ® Certification Exam.

VMEdu also provides a Certified Associate in Project Management (CAPM) ® exam

preparation course.

Classroom Project Management Education

• A Leading PMP Exam Prep Training Provider in US/Canada: We teach more than 60

Project Management classes each month across US/Canada.

• Experienced Faculty: PMstudy hires experienced faculty for our classes. All our faculty

have more than 15 years of experience, are from different industries, and are excellent

teachers.

• 100% Money back Guarantee: With a great course methodology and excellent faculty,

PMstudy offers 100% Money back Guarantee to its classroom students.



• 98.7% Success Rates: PMstudy has a success rate of 98.7% with great feedback from our

successful students

• Classes in other countries: PMstudy also teaches classes in UK, Germany, Australia New

Zealand, Singapore, Hong Kong, Middle East and India. We will very soon be teaching

classes in Netherlands and other countries in Europe.

6sigmastudy: 6sigmastudy is a preferred provider for Lean Six Sigma Black Belt, Black

Belt and Green Belt Certification courses. The high quality course materials, training

methodology and engaging course delivery model sets it apart from other training providers.

We also provide PMI® Approved PDUs (55 PDUs for Six Sigma Lean Black Belt, 55 PDUs

for Black Belt and 25 PDUs for Green Belt Certification) on successful completion of

6sigmastudy courses. These are valid PDUs for Continuing Education requirements of PMP

certificates to maintain their PMP Certification credential.

6sigmastudy.com program (ORG-PROGRAM-50015) has also been approved for 25

(Specified-Strategic) recertification credit hours towards PHR, SPHR and GPHR

recertification of the HR Certification Institute. Employees of more than 1100+ Companies

and 60+ Countries have enrolled with6sigmastudy.com and have successfully completed

their courses.

RMstudy: RMstudy offers a leading training course for Risk Management certification.

RMstudy offers both online and classroom courses. The quality course materials, training

methodology and the flexible course delivery model have made RMstudy very effective.

We also provide 20 PMI Approved PDUs on successful completion of Risk Management

course which are valid for Continuing Education requirements of PMP® certificates to

maintain their PMP credential.

The courses are designed by Risk Management experts from various domains and are based

on concepts defined by PMI. Aspirants who want to become PMI-Risk Management

Professional (RMP) ® can also use this as an exam prep course.

NGstudy: NGstudy is a premier training organization for Negotiation Skills Training and

specializes in creating skilled negotiators with variety of tactics. The high quality training



notes, presentations, time-tested training methodology and expert pedagogy have made the

course very competitive and effectual.

We also provide 8 PMI® Approved PDUs on successful completion of the Negotiation

course which are valid for Continuing Education requirements of PMI certified PMPs to

maintain their credential.

The Negotiation course is designed by expert negotiators with diverse expertise and based on

best practices to include real life role plays and case studies to enhance learning.

The course is also priced very economically making it one of the most cost-effective

Negotiation courses available.

PROJstudy: PROJstudy is among the select group of Accredited Training Organisations

(ATO) accredited by APM Group, UK specializing in providing quality education to prepare

students for PRINCE2® and ITIL® certification.

PROJstudy CLASSROOM BENEFITS

• High Success Rate: With a high overall success rate of 94% in PRINCE2® exams and

98% in ITIL® exams, PROJstudy is the preferred high quality partner for delegates for

PRINCE2®/ITIL® certification.

• Unique Exam Retake Guarantee policy: After attending our classroom course, the

delegate is guaranteed to pass the PRINCE2®/ITIL® certification exams. But in a rare case

of the delegate not passing, the delegate will be allowed to re-take the exam at no extra cost.

PROJstudy guarantees peace of mind.

• Best Price Guarantee: We at PROJstudy, believe in providing the best value to our

customers at affordable price for all our courses. We guarantee that you will find us more

economical than any other provider.

• Experienced Faculty: PROJstudy PRINCE2®/ITIL® trainers are APMG accredited. Each

has extensive industry/project management experience in diverse fields such as IT, finance,

consultancy services, etc. Through a comprehensive and extensive "Train-the-trainer"

programme, all our faculty members are trained in PROJstudy classroom training techniques

and adult learning processes aimed at delivering an exceptional training experience.



• Complimentary Six Sigma Green Belt Course: Completely free and complimentary

access to Six Sigma Green Belt online certificate course for three months, offered by

www.6sigmastudy.com (priced at £175).

• Excellent training environment: PROJstudy classroom trainings are normally conducted

at premium meeting centres / hotels at convenient locations with all the required study aids.

Snacks and coffee / tea are provided during the classroom programme.

• Small class size for focused individual attention: PROJstudy classroom courses are

meticulously designed and delivered by experienced faculty in business. The class strength is

kept limited to ensure effective delivery to maintain quality and to provide focused individual

attention.

• Excellent Feedback from Delegates: PROJstudy delegates speak volumes about our

distinguished quality and service.

• PMI Approved PDUs: PROJstudy provides relevant hours of PDUs (Professional

Development Units) with all its certification training courses. These are valid PDUs for

continuing education requirements in maintaining PMP (Project Management Professional)

certification status.

PROJstudy METHODOLOGY

• PRINCE2®/ITIL® classroom course has been developed, assessed, and evaluated by

several certified experts, and approved by APMG.

• To improve the learning experience and to enhance retention, our course draws

instructional elements from the three primary learning styles, that is, visual (presentations,

aids, etc.), auditory (verbal instructions, interactions, etc.) and kinaesthetic (do-it-yourself).

• Several interactive methods such as experiential learning, small groups, hands-on practice,

repetition, trainee panels, periodic evaluation and case studies are extensively used.

• Explore the classroom training methodologies for PRINCE2® or ITIL® classes.



HRDstudy : HRDstudy offers online courses on Human Resource Development, and is

recommended for practicing project managers. It provides 20 (General) recertification credit

hours toward PHR, SPHR and GPHR recertification through the HR Certification Institute

(HRCI) ®.

At the end of the course, candidates will be awarded with 20 recertification credits (from

PMI/HRCI) and Human Resource Development Certificate.

After the course completion, you will be provided three certificates:

• A Human Resource Development Certificate, which will certify your successful completion

of this course.

• A certificate of 20 PMI PDUs which can be used for Continuing Education Requirements

of certified PMP®s.

• 20 (General) recertification credit hours toward PHR, SPHR and GPHR recertification

through the HR Certification Institute (HRCI) ®.

PROGstudy: PROGstudy offers online program management courses. It is prepared by

Certified PMPs and Program Management Experts that provides the preparation required for

successfully becoming a certified Program Management Professional.

We provide 25 PDUs valid for Continuing Education Requirements of PMPs, to maintain the

PMP® Certification Status. We also provide Program Management Certification after

completion of the course.

Our course methodology includes Guides, Comprehensive Tests and Case Study, which

covers all concepts required for Program Management Certification and helps in preparation

for Program Management Certification Exam offered by Program Management Institute

(PMI) ®.

PROGstudy provides comprehensive study materials to help you become an expert at

Program Management.



ITILstudy: ITILstudy like PROJstudy, is another brand dealing with courses accredited to

APMG. Edusys being one of the best Accredited Training Organizations (ATO), has an

excellent reputation for prompt and efficient service.

ITILstudy ITIL® Foundation classroom training program offers:

• Study guides covering goals, objectives, and basic concepts of core ITIL processes &

functions and other syllabus areas of ITIL Foundation.

• Real life and industry-specific examples to help the student apply ITIL concepts to real-life

scenarios.

• Chapter tests that deepen and expand the student's understanding of the concepts.

• Intensive 2 days training program to ensure a thorough understanding of all the concepts

thereby helping the student to come out successful in the certification exams.

Comprehensive course structure:

• ITILstudy’s course is comprehensive and covers goals, objectives, and basic concepts of

core ITIL processes & functions and other syllabus areas of ITIL Foundation.

• The course content is explained in simple language and is delivered using an approved and

time-tested training methodology. ITILstudy makes it easy for the students to understand

even the most complex topics. No study material other than the material provided by

ITILstudy will be required for the preparation of ITIL Foundation.

• Methodology for ITIL Foundation Certification (Classroom) Training.

Scientifically designed effective and result-oriented instruction method:

• ITILstudy classroom course has been developed, assessed, and evaluated by several ITIL

Foundation certified experts, and approved by APMG. To improve the learning experience

and to enhance retention, our course draws instructional elements from the three primary

learning styles, that is, visual (presentations), auditory (verbal instructions, interactions, etc.)

and kinaesthetic (do-it-yourself). Several interactive methods such as experiential learning,

small groups, hands-on practice, repetition, trainee panels, periodic evaluation and case

studies are extensively used.



Globally Proven Instruction Methodology:

• With our proven instruction methodology and excellent track record we have cemented our

position as global leaders in ITIL and project management training. Our pedagogy ensures

that you get adequate exposure to our comprehensive study material, real life examples and

important strategies and tips to successfully clear the ITIL Certification.

3.3 Competitors

• Global knowledge:

Global Knowledge is the worldwide leader in IT and business skills

training. We deliver via training centres, private facilities, and the Internet, enabling our

customers to choose when, where, and how they want to receive training programs and

learning services.

Founded in 1995, Global Knowledge employs more than 1,300 people worldwide. The

company is owned by New York-based investment firm MidOcean Partners.

• QAI Global:

QAI is a global workforce development and consulting organization addressing

the education and 'Operational Excellence' needs of information technology, information

technology enabled and knowledge intensive organizations.

QAI was established in 1980 in Orlando, Florida - USA.

QAI Global Institute, the workforce development division of QAI, focuses on creating

education and training products and services to address competence development,

assessments and professional IT certifications. The Institute conducts industry research,

houses the software QA, Testing, Business Analyst and PM Bodies of Knowledge and

administers the professional certifications in these domains.

• Simply learn:

Simply learn is an online Learning Content Management System (LCMS),

developed around the specific needs of today's learners, organisations and training providers.



The simply learn Learning Platform means that there are no specialised software or technical

requirements, no need for in-house support and no geographical restrictions. Above all, there

are none of the associated costs.

• Knowledge Academy:

Knowledge Academy has been established to offer a range of courses

aimed at providing market-oriented vocational certifications. To start off with we are offering

courses for those who want to build their careers in the fast-growing and highly lucrative

Banking, Financial Services and Insurance sector. Unlike many such courses designed with

the sole aim of gaining a paper qualification or certification, our courses have a strong

emphasis on practical application and know-how. Each course also includes modules

covering IT and soft skills.

3.4 Investor:

Edusys is funded by Sequoia Capital, a Californian venture capital firm located on Sand Hill

Road in Menlo Park, California. The Wall Street Journal has called Sequoia Capital "one of

the highest-calibre venture firms", and noted that it is "one of Silicon Valley's most

influential venture-capital firms". The New York Times has called Sequoia "one of the top

venture firms in the Valley" and has said that it is "among the most successful venture firms

in Silicon Valley." The Washington Post has called Sequoia Capital "one of the pre-eminent

venture capital firms in Silicon Valley." The firm is known for the companies it has funded,

and it estimates that 19% of the NASDAQ’s value is made up of firms Sequoia has funded.

Sequoia has funded companies including Apple, Aruba Networks, Google, YouTube, PayPal,

Cisco Systems, Oracle, Electronic Arts, Yahoo!, NVIDIA, Navigenics, Cotendo, Atari,

Ameritox, Kayak, Meebo, Admob, Zappos, Green Dot and LinkedIn. The firm has offices in

the U.S., China, India and Israel. Sequoia invests in companies all over the world.

Sequoia was founded by Don Valentine in 1972 in Menlo Park, CA and today has offices

worldwide to support its international portfolio of companies.



Sequoia Capital is a venture capital firm specializing in incubation, seed stage, start-up stage,

early stage, and growth stage investments in private companies. It also invests in public

companies. The firm seeks to invest in all sectors with a focus on services including financial

services, healthcare, Internet, outsourcing, retail, and wireless; mobile; technology; software

including application, infrastructure, data management, and wireless; systems including

networking, infrastructure, security, and wireless; components including semiconductors

with a focus on analog and mixed signal, networking, multimedia, and programmable and

wireless components; and energy including alternative energy, conventional energy, energy

efficiency, energy storage, and energy services.

The firm seeks to invest in companies based in the United States for early and seed stage

investments. However, for growth stage investments, it does not limit its investments to any

country and recent funds have been internationally focused. It invests between $100,000 and

$1 million in seed stage, between $1 million and $10 million in early stage, and between $10

million and $100 million in growth stage. The firm prefers to invest in companies with an

established revenue stream of $100,000 per month or greater. Sequoia Capital was founded

in 1972 and is based in Menlo Park, California.

Sequoia invests in these sectors:

• Financial services

Within financial services, it invests in banking, brokerage, payments, and enabling

technology.

• Healthcare

Within healthcare, the firm invests across diagnostic services, genetics services, lab services,

patient services, product development services, and enabling technology companies.

• Internet

Within Internet, it invests in advertising, communications, ecommerce, games, media, search,

social networking, and enabling technology companies.

• Mobile sector

Within the mobile sector, the firm invests in advertising, applications, devices and enabling

technology companies.



• Outsourcing

Within outsourcing, it invests across business process outsourcing, hosting services, managed

services, professional services and software development services.

• Technology

Within technology, the firm invests in semiconductor, sub-systems, systems, software, and

services companies.

• Other

It also invests in optical components; computer, subsystems, and communication systems;

and consumer and professional services.

3.5 Recent Achievements:



3.6 Acquiring Datrix

Datrix Vision

Datrix aims to continue to grow a sustainable IT business which delights customers

throughout the UK. We recognise that to achieve this, we must have a solid foundation. By

investing in our staff, training and expanding our mindset we believe we are positioned to

deliver real customer value to an expanding client base through cutting edge and cost

effective solutions.

Mission Statement

Datrix believes satisfied customers fuel growth, so our company’s philosophy is simple: We

will strive to ensure that every one of our clients will be a reference client that will stay with

us year after year, decade after decade. To do this, we will offer real value and competence

every day, and we will always be honest and straightforward.

Datrix will continue to re-invest our profits and to achieve outstanding growth year after

year. We have become a significant player in the IT market based on our industry experience

and expertise, successful track record, the quality of our people and our technology partners.

Accreditations



3.7 SWOT ANALYSIS

STRENGTH

Marketing capability.

Develop content in international

languages.

Qualified and experienced

management.

Able to quickly adapt to changes in

technical environment.

Young employee base fuels appetite

for change.

WEAKNESS

Younger workforce is more prone to

attrition.

Low advertisement.

OPPURTUNITIES

Growing demand in international

markets.

Larger demand of professional

certifications in the international job

market.

Can enter into various services due to

its in depth understanding of

customers taste and preference.

THREATS

Being an emerging and growing

business it invites competition.

Foreign exchange fluctuation.

Validations of certification with

respect to geography.

Outdated certification.



3.8 ORGANISATIONAL STRUCTURE

CEO

VP HR VP Finance VP Marketing VP IT

Senior Manager Senior Manager Senior Manager Senior Manager

Assist. Manager Assist. Manager Assist. Manager Assist. Manager

Executives Executives Executives Executives



Table 1: Table showing, growth of inventory for period of 4 years

ANALYSIS

The above table shows the inventory capacity of different years starting from financial year

2009 to 2012. In 2009-10 inventory capacity was 1910 units, in 2010-11 it was 3241 units, in

2011-12 it was 4824 units, and in 2012-13 it was 7128units.

Year Inventory

2009-2010 1910

2010-2011 3241

2011-2012 4824

2012-2013 7128



Graph 1: Graph showing, growth of inventory for a period of 4 years

INTERPRETATION

The inventory capacity of the company is growing approximately 1.5 times each year. The

reason of such increase in the inventory capacity is introduction of several courses which

thereby increases the study materials and hence there is a growth in inventory. By this graph

I can say that the company has expanded its operation which in turn increases the profit.



Table 2: Table showing comparison of quantity ordered & remaining stock for a period

of 4 years

ANALYSIS

The above table shows the comparison of ordered quantity to remaining stock. In the year

2009-10 ordered quantity was 1910 units and remaining stock was 510 units, in 2010-11

ordered quantity was 3241 units and remaining stock was 735 units, in 2011-112 ordered

quantity was 4824 units and remaining stock was 764 units, and finally in 2012-13 ordered

quantity was 7128 units and remaining stock was 488 units.

Year Quantity ordered Remaining Stock

2009-2010 1910 510

2010-2011 3241 735

2011-2012 4824 764

2012-2013 7128 488



Graph 2: Graph showing comparison of quantity ordered & remaining stock for a

period of 4 years.

INTERPRETATION

There is a fluctuation seen while comparing ordered quantity and remaining stock. In the

year 2010-11 & 2011-12, the percentage of remaining stock was high compared to other two

years. Measures must be taken in order to overcome the high percentage of stock left over.

Measures may include proper marketing of the courses, forecast the demand and accordingly

order the study materials because the structure of courses will change every year and the left

stock will be unused because of the changes in courses.



Table 3: Table showing Comparison of quantity ordered & quantity sent for last 4

years.

ANALYSIS

The above table shows the comparison of quantity ordered and quantity sent. In the year

2009-10 ordered quantity was 1910 units and the quantity sent was 1400 units, in 2010-11

ordered quantity was 3241 units and the quantity sent was 2706 units, in 2011-12 ordered

quantity was 4824 units and the quantity sent was 4060 units, and finally in 2012-13 ordered

quantity was 7128 units and the quantity sent was 6640 units.

Year Quantity ordered Quantity Sent

2009-2010 1910 1400

2010-2011 3241 2706

2011-2012 4824 4060

2012-2013 7128 6640



Graph 3: Graph showing comparison of quantity ordered and quantity sent for last 4

years.

INTERPRETATION

The quantity sent and quantity ordered is showing a good growth. But in some years like

2010-11 & 2011-12 the quantity sent was less compared to other year, this may be because of

low demand in the market or quality of the study materials. Company must overcome such

problems in order to increase their profit and long survival in the market.



Table 4: Table showing growth of sales for a period of 4 years

Year Sales

2009-10 1400

2010-11 2706

2011-12 4060

2012-13 6640

ANALYSIS

The above table shows the sales of study materials for a period of 4 years. In 2009-10 sales

were 1400 units, in 2010-11 sales were 2706 units, in 2011-12 sales were 4060 units and in

2012-13 sales were 6640 units.



Graph 4: Graph showing growth of sales for a period of 4 years

INTERPRETATION

From the above trend it can be interpreted that the company has shown a growth in the

financial year 2012-13 compared to all other years because the company has introduced two

additional courses i.e. 6 Sigma and RM study which led to increase in the sales. A consistent

proper strategy must be formulated, so that the sales value must increase year by year.



Table 5: Table showing trend analysis of holding the stock

Year Remaining Stock

2009-10 510

2010-11 535

2011-12 764

2012-13 488

ANALYSIS

The table shows the remaining stock of study materials over a period of 4 years. In 2009-10

stock left were 510 units, in 2010-11 stock left over were 535 units, in 2011-12 stock left

over were 764 units, in 2012-13 stock left over were 488 units.



Graph 5: Graph showing trend analysis of holding the stock

INTERPRETATION

From the above trend of stock left over of 4 years in financial year 2012-13 less stock was

left compared to all other years. In education industry all most every year, syllabus of courses

is changing depending on the market demand. So if there is less stock of study materials left

over then there will be less amount of scrap noticed.



(All other analysis and interpretation are done through face to face interview between

the researcher and the Head of Inventory Department)

1. How do you keep track of your inventory?

Ans. We maintain the stock in excel sheet, where it includes materials received on date &

materials sent, rejected materials from the stock, replacement of materials & to whom

materials been sent & from whom materials received.

ANALYSIS

The above print screen shows that the materials are tracked and recorded in Excel sheet on

daily basis whenever a transaction takes place.

INTERPRETATION

The technique used in Edusys for recording and for keeping track record of inventory is not

efficient. There are many chances of recording wrong data. Hence, proper software must be

used in order to do the recording efficiently and with less time. Example Bar Coder can be

used in order to manage inventory efficiently.



2. What percentage of suppliers transmits invoices electronically?

Ans.100%

ANALYSIS

From the screen shot it can be analysed that 100% suppliers are transmitting the invoices

electronically.

INTERPRETATION

All the suppliers of Edusys who are supplying materials are transmitting the invoices

electronically which is very efficient for both of them. There is very low chance of

committing mistakes while ordering the materials. It saves lot of time for both of them.



3. How many purchasing orders are issued each month (approx.)?

Ans. On an average 6 purchasing orders are done every month.

ANALYSIS

On an average in Edusys 6 purchasing orders are made every month.

INTERPRETATION

There are various costs such as packing charge, transportation cost, labour charges and etc

are involved in making any purchase order. So, less the number of order done less would be

the expenses. Proper forecast of materials demand should be done in order to decrease the

ordering expenses.

4. How is the item coding done in your company?

Ans. We code the item on particular brand, country wise materials are coded.

ANALYSIS

The items are coded according to the brand such as PM Study, My CAT Study, NG Study,

ITIL Study, SCRUM Study, PROG Study, HRCL Study, VMEDU Stud, 6 Sigma Study,

HRD Study, RL Study.

INTERPRETATION

The technique used in Edusys for coding the materials is appropriate because they code the

materials according to the courses they provide. They segregate the materials on the basis of

the courses they provide and the study materials they are despatching abroad. So, there is no

confusion for sending the materials.



5. What is the method of accounting techniques used in managing inventory?

Ans. FIFO method is adopted.

ANALYSIS

In Edusys FIFO accounting technique are used in order to manage inventory.

INTERPRETATION

FIFO (First In First Out), it means the materials which are purchased first are sent first and so

on. It depends on the company that what method they are following for accounting the

inventory. It has many pros and cons, company will see all the pros and cons of each method

and go for the method which is beneficial for them. The major advantage of using this

technique is, it provides managers with information about changes in the costs per unit from

one period to the next.



6. What is the technique used in Inventory Control?

Ans. EOQ (Economic Order Quantity) are adopted

ANALYSIS

Economic Order Quantity techniques are used to control the inventory. Economic order

quantity is the order quantity that minimizes total inventory holding costs and ordering costs.

INTERPRETATION

EOQ applies only when demand for a product is constant over the year and each new order is

delivered in full when inventory reaches zero. It helps in determining the optimal number of

units to order so that the total cost associated with the purchase, delivery and storage of the

product be minimised.



7. What types of stock are purchased?

Ans. Here, stocks of finished goods are purchased.

EDUSYS

ANALYSIS

In Edusys finished goods are purchased directly from the Suppliers. They do not do the

printing of study materials.

INTERPRETATION

Directly finished goods are purchased from the suppliers. Edusys orders the study materials

to their supplier according to the content of the study materials they want for their different

courses. But the company should start manufacturing their study materials according to their

needs, this will decrease the expenses for ordering materials and all other expenses like

transport cost, labour cost and etc. They can decrease the chances of mistake in the study

materials.



8. At what stage of goods arrival, inspection is done?

Ans. The received goods are checked after storage.

ANALYSIS

In Edusys the inspection of study materials are done after storing the goods in warehouse.

INTERPRETATION

Inspection of goods at this stage i.e. after storing them in warehouse is not an efficient way

to do the inspection because it’s very late to do the inspection. Inspection must be done

immediately after receiving the goods and inform the supplier if any changes required in the

goods.

9. How often do you do physical inventory checks?

Ans. Physical Inventory checks are done once in a month.

ANALYSIS

In Edusys the physical inventory checks are done once in a month for the study materials.

INTERPRETATION

From the above answer given by the inventory management head, it can be interpreted that

they are doing the physical check-up of study material once in a month. It is done mainly to

see whether the study materials are not destroyed or any pilferage happened and etc.



10. How is the Sampling for inspection done?

Ans. We do 100% Quality check of all materials. Quarterly quantity inspection will be

done to make sure of materials are handled properly.

ANALYSIS

In Edusys they do 100% Quality check for the study materials at the time of receiving from

suppliers.

INTERPRETATION

They do 100% checks up for all the materials they receive from suppliers. So, there is no

chance of any quality defect of study materials.



11. Do you perform 100% item checks or random?

Ans. We do 100% item check for all item.

ANALYSIS

In Edusys they do 100% item check for all the Study materials.

INTERPRETATION

They are not following the random technique for checking the study materials, they perform

100% check for all the study materials of different courses.

12. How many active suppliers are there in the supplier master file?

Ans. We have 4 suppliers in our master file.

ANALYSIS

There are 4 suppliers for study materials at Edusys namely Jwalamuki Mudranalaya Pvt Ltd,

Printo, Sri Ganesh offset printers, Pace services.

INTERPRETATION

The number of suppliers in Edusys is less, they must increase their supplier master file in

order to get the materials in time and at reasonable rate.



13. What happens to quality control failed inventory?

Ans. Quality failed inventory will be rejected and will get it replaced with good ones.

ANALYSIS

The quality failed inventories are rejected and are replaced with the new ones from the

suppliers.

INTERPRETATION

In Edusys, if the study materials are failed to their quality level then such materials are

rejected and replaced with the good materials.

14. What kind of security is maintained for the stores?

Ans. Security guards, cupboards with the lock and CCTV surveillance cameras are installed

in the warehouse for security.

ANALYSIS

They have installed cameras, 24x7 security guards, and lockers for security of the inventory.

INTERPRETATION

In Edusys they take efficient measures for security of warehouse. They have installed various

cameras, 24x7 security guards and etc. but they have not taken any measures for fire. They

should take measures to fight with fire.



15. Do you receive materials more than what is ordered in the purchasing order? If

yes, what do you in such cases?

Ans. No we do not receive any extra material more than ordered.

ANALYSIS

In Edusys, they do not receive any extra material from the supplier more than what they

ordered.

INTERPRETATION

The supplier are delivering study materials as mentioned in the order, they do not receive any

extra than ordered. If in case they receive any extra than they ordered, they return it to the

supplier.

16. How would you evaluate the effectiveness of the current process in achieving the

following control objectives? Use a scale of 1 to 5 with 1= Not effective & 5= highly

effective.

Control Objective Evaluation

Purchase orders are properly authorized 1 2 3 4 5

Ans. 5

All purchase order transactions are completely 1 2 3 4 5

prepared & recorded on a timely basis.

Ans. 5

Receipts of materials & supplies are properly 1 2 3 4 5

authorized.

Ans. 5

Receipts of materials & supplies are recorded 1 2 3 4 5

accurately & completely on a timely basis.

Ans. 5

All materials & supply receipts transactions are 1 2 3 4 5

reliably processed & reported.

Ans. 5

Employees & management are provided the 1 2 3 4 5

information they need to control the process

of obtaining materials & suppliers.

Ans. 5



Orders are placed on timely basis. 1 2 3 4 5

Ans. 4

ANALYSIS

From the above evaluation it can be analysed that their purchasing orders are very effective,

they prepare and record purchasing order timely, they record the receipts of materials timely,

employees and management are provided the information that they want to control the

process of ordering and receiving but sometimes the orders are not placed timely.

INTERPRETATION

From the above evaluation it can be interpreted that they are very efficient in all things for

example, their purchasing orders are authorized very effectively, they record each and every

transaction very effectively but sometimes they lack in placing the order. So they must take

appropriate decision on placing the order.

17. How would you rate the overall quality of this process? Use a scale of 1 to 5, 1=Poor

& 5=Best Practice.

1 2 3 4 5

Ans. 4

ANALYSIS

The overall quality process at Edusys is 4.

INTERPRETATION

The head of the inventory department has given 4 out of 5 for the quality process in Edusys.

Good managerial decision as well as good decision must be taken in order to increase the

rating of overall process of inventory control.



18. Is scrap adequately controlled? (example collection, segregation, disposition and

etc)

Ans. Yes

ANALYSIS

In Edusys, the scrap items are properly controlled. They segregate and dispose off the scrap

materials.

INTERPRETATION

The unused and old study materials are segregated according to the courses and are disposed

of properly.

19. Are quantities of material received verified by actual count, weight, or

measurement by the receiving department? If yes, When?

Ans. Yes, at the time of delivery by vendor.

ANALYSIS

At the time of receiving the materials, all the materials are verified and checked from various

aspects such as actual count, weight, quantity and etc.

INTERPRETATION

In Edusys, when the materials are ordered they are recorded in Excel sheet and at the time of

receiving the materials they are verified from the actual that they have recorded.



20. Are receiving reports prepared for all purchased goods?

Ans. Yes

ANALYSIS

Materials receiving reports are prepared for all the goods.

INTERPRETATION

In Edusys, the study materials purchased are prepared for all goods. Ordered goods, received

goods, rejected goods, despatched goods are immediately recorded in Excel as and when the

transaction takes place.



21. Are inventory stored in a secure location while awaiting shipment? If yes, where?

Ans. Yes, inventories are stored in secure location. They are stored in cupboards.

ANALYSIS

All the study materials and other goods are kept in the basement of the office. They are

stored in cupboards at controlled temperature and hygienic environment.

.

INTERPRETATION

In Edusys, all the inventories are stored in the cupboards which are kept in the basement of

the office. All possible security measures are taken for the safety of the inventory.

22. Where is the printing of study materials done?

Ans. India

ANALYSIS

All the study materials of different courses are printed in India.

INTERPRETATION

In Edusys, earlier all the study materials are printed based on their delivery location. For

example, Suppose a study materials to be sent to London then they are printed in London and

are despatched but this lead to high cost. Hence, all the materials are printed in India and are

despatched to different location.



5.1 FINDINGS

There is a steady increase in the inventory since 2009-2012.

Fluctuations are observed while comparing ordered quantity and remaining stock.

In 2010-11 & 2011-12 the quantity sent was less compared to other year.

There has been increase in sales from 2009-2013

The left over stock was less in the year 2012-2013 as compared to last 4 years.

The materials are recorded and tracked in Excel sheet.

All the invoices are transmitted electronically.

The technique used in managing inventory is FIFO.

The technique used in inventory control is Economic Order Quantity.

Finished goods are purchased directly from the suppliers.

The items are coded according to the brand such as PM Study, My CAT Study, NG

Study, ITIL Study, SCRUM Study, PROG Study, HRCL Study, VMEDU Stud, 6

Sigma Study, HRD Study, RL Study.

The inspection of study materials are done after storing the goods in warehouse.

Quarterly quantity inspection are done to make sure of materials are handled

properly.

Physical Inventory checks are done once in a month.

100% item checks are done for all the Study materials.

There are 4 suppliers in the master file.

The quality failed inventories are rejected and are replaced with the new ones from

the suppliers.

Security guards, cupboards with the lock and CCTV surveillance cameras are

installed in the warehouse for security.

The purchasing orders are authorized very effectively, each and every transaction is

recorded effectively.

The scrap items are properly controlled. They segregate and dispose of the scrap

materials.



All the materials are verified and checked from various aspects such as actual count,

weight, quantity and etc.

All the study materials and other goods are kept in the basement of the office. They

are stored in cupboards.

All the study materials of different courses are printed in India.

5.2 CONCLUSION

Inventory control is a constant requirement of doing business successfully. Procedures

for pulling, receiving, and replenishing stock should be established, with considerations

made for your particular environment. These procedures should be enforced as law at

your company: inventory accuracy is developed only through adherence to consistent

practices and procedures.

Inventory management involves more than immediate and reactionary decisions that

affect your business. Inventory management requires that you establish and enforce

procedures that will serve as tools in utilizing your system on a daily basis in the most

efficient manner to produce the most profits for your company.

5.3 SUGGESTIONS

Appropriate measures must be taken in order to overcome the high percentage of

stock left over like JIT (Just In Time).

A consistent proper strategy must be formulated, so that the sales value must increase

year by year.

Measures must be taken to check that there is less stock of study materials left over.

Proper software must be used in order to do the recording efficiently and with less

time. For example: Bar coder.

Proper forecast of materials demand should be done in order to decrease the ordering

expenses.

The company should start manufacturing their study materials according to their

needs, this will decrease the expenses for ordering materials and all other expenses

like transport cost, labour cost and etc



Inspection must be done immediately after receiving the goods and inform the

supplier if any changes required in the goods.

They must increase their supplier master file in order to get the materials in time and

at reasonable rate.

Fire extinguisher must be installed.

Appropriate decisions must be taken in order to place the order timely.

effectiveness of inventory control measures

Documents

meaning of inventory

inventory management

management of inventory

review inventory

requirement of inventory

inventory planners

optimum inventory

investment inventory