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A STUDY OF INVENTORY MANAGEMENT

A PROJECT REPORTINVENTORY MANAGEMENT

AT

HERO MOTOCORP LTD.MASTER OF BUSINESS ADMINISTRATION

Submitted by:

ACKNOWLEDGEMENT

Accomplishment of a task with desired success calls for dedication towards work and prompting guidance, co-operation and deliberation from seniors.

This report is the outcome of the project that I did in Hero Motocorp Ltd. It gives me immense pleasure to acknowledge my deep sense of gratitude and sincere thanks to Mr. M. S. Arora (Manager, Store) and to Mr. Rajender Pal (Executive Store) for agreeing for the project and providing me necessary information for completion of project.

I am extremely grateful to Mr. _____________________ for his valuable guidance and glorious teaching.

In last, I express my profound gratefulness and indebtedness to the esteemed organization for granting me the grand privilege of working on a project under team of experts and professionals in the field of inventory.

PREFACE

MBA program is one of the most reputed professional courses in the field of management. This course includes both theory and its applications as its content of curriculum. The project is an integral part of the curriculum and its purpose is to provide the practical exposure of business world in the changing scenario. In this way it helps the student in development of practical skills and analytical thinking process. It helps in moldings the students according to the requirement of the market. Each student is required to complete the project in his or her field of interest

The purpose of the project is to expose the students on practical and research front of his or her area of interest. The project gives a unique experience to aspirants who can visualize things what they have been taught in classroom. I was fortunate enough to have the opportunity to do a project on inventory management at Hero Motocorp Ltd. I have tried my best and have applied all my efforts, knowledge and sources available, in this project. Throughout the project the focus has been on presenting information and comments in easy and intelligible manner.

TABLE OF CONTENT

Chapter No.ContentPage No.

Executive Summary

1Theoretical Framework of Inventory Management

Introduction

Meaning and Nature of Inventory

Purpose/Benefits of holding inventory

Risk and Cost of holding inventory

Inventory Control

Importance of inventory Control

Essential of good Inventory Control

Techniques of Inventory Control

2Objective and Research Methodology

Objective of the Study

Research Methodology

Sources of Data Collection

Limitations

3Company Profile

Introduction

Vision

Mission

Strategy

Manufacturing

Distribution

Product portfolio

Process Flow chart

4Inventory Management at Hero Motocorp Ltd.

Material Management Cycle

Functional Strategies/ Objectives of inventory management at Hero Motocorp

Purchase Control

Purchase Procedure

Process of Receipt of Material

Storage control

Objective of stores

Divisions of Store

Accounting Control

Valuation of material issue

Classification of inventory

Tools and Techniques of Inventory Management

Estimation of different cost of holding inventory

Estimation of Stock Levels of super splendor

Inventory ratios

5Findings

6Suggestions

7Bibliography

EXECUTIVE SUMMARYTo be successful in today's fast-paced, highly-competitive environment, organizations need to have the necessary parts in stock or have reliable suppliers to meet customer demands at a moment's notice. Either way, organizations must have a practical, efficient method for managing inventory in order to stay in business and satisfy their customers.Effective Inventory Management enables an organization to meet or exceed customers' expectations of product availability while maximizing net profits or minimizing costs.

The three primary functions that characterize the occupation are management, coordination, and control of inventory and systems of inventory management. Management of inventory records and relevant details is an important area of concern for every organization, whether it is large or small. And also calls for efficient planning and maintenance. No matter the viewpoint, effective inventory management is essential to supply chain competitiveness.

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.

Inventory management, or inventory control, is an attempt to balance inventory needs and requirements with the need to minimize costs resulting from obtaining and holding inventory. It deals with the maintenance of equipments. It is a discipline that encompasses the principles, concepts and techniques for determining what to order, when to order and how much to order. The right amount of inventory involves the balance between what is required to service customers and what is financially practical.

Precise control and safeguarding of inventory is an essential task for a successful, well-organized company. Businesses require timely and accurate information on inventory location, movement, and valuation. Inaccurate inventory counts can cost you sales and delay shipments past the promise date. Out-of stock items as well as overstocked items in inventory can be devastating to business. Additionally, an overstated or understated inventory valuation can result in incorrectly reported assets within financial statements. Properly used, the Inventory Management module can help bring about the formulation of new or improved purchasing policies, sales policies, pricing methods, and even enhanced customer service.

This project is about inventory management system of Hero Motocorp Ltd. Project starts with theoretical framework of inventory management, its benefits, inventory management techniques and valuation of inventory. Second chapter deals with objective and research methodology. Third chapter is about company profile, its products, mission, vision etc. Forth chapter is about the inventory management at Hero Motocorp. How company manages its inventory and what are the inventory control techniques used by the company were studies in this chapter. Suggestions were made to improve efficiency of the inventory management. I have used both primary as well as secondary data.

CHAPTER -1

THEORETICAL FRAMEWORK OF INVENTORY MANAGEMENT

INTRODUCTIONEvery enterprise needs inventory for smooth running of activities. It serves, as a link between production and distribution. For every process there is, generally, a time lag between the recognition of a need and its fulfillment. The greater the time lag, the higher the requirement for inventory. The unforeseen fluctuations in demand and supply of goods also necessitate the need for inventory. It provides a cushion for future price fluctuations.

The investment in inventories constitutes the most significant part of current assets/working capital in most of the undertakings. Thus, it is very essential to have proper control and management of inventories. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment in inventories.

The investment in inventory is very high in most of the undertakings engaged in manufacturing, wholesale and retail trade. In India, a study of 29 major industries has revealed that the average cost of materials is 65paise and the cost of labor is 10paise and overheads is 15paise of a rupee, 10%is profit. It is necessary for every management to give proper attention to inventory management. A proper planning of purchasing, handling, storing and accounting should form a part of inventory management.

An efficient system of inventory will determine,

What to purchase

How to purchase

From where to purchase

Where to store etc.,

There are conflicting interests of different departmental heads over the issue of inventory. The finance manager will try to invest less in inventory because to him it is an idle investment, where as production manager will emphasis to acquire more inventory as he does not want any interruption in production due to shortage of inventory. The purpose of inventory management is to keep the stocks in such a neither way that there is over-stocking nor under-stocking. The over-stocking will mean a reduction of liquidity and starving of other production processes whereas under-stocking, on other hand, will result in stoppage of work. The investments in inventory should be kept in reasonable limits.

MEANING AND NATURE OF INVENTORY

There are different meanings of inventory in different languages. In accounting language it may mean stocks of finished goods only. In a manufacturing concern, it may include raw materials; work in process and stores, etc., to understand the exact meaning of the work inventory

Inventory may include the following things:

1. RAW MATERIALS:

Raw materials form a major input into the organization. They are required to carry out production activities uninterruptedly. The quantity of raw materials