A SUMMER INTERNSHIP

& MINI PROJECT REPORT

ON “COMPREHENSIVE STUDY OF INVENTORY MANAGEMENT”

AT

PEPSICO INDIA HOLDINGS PRIVATE LIMITED

SUBMITTED BY: PURVESH J KANSARA GTU ENROLLEMENT NO.: 097710592005

SUBMITTED TO: SHRI M.H. KADAKIA INSTITUTE OF MANAGEMENT AND COMPUTER STUDIES (MBA PROGRAMME), ANKLESHWAR.

AFFILIATED TO: GUJARAT TECHNOLOGICAL UNIVERSITY, A’BAD

GUIDED BY: MS. RASHMI GHAMAWALA, ASSISSTANT PROFESSOR, KIMCOS.

FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

BATCH: 2009-2011

EXECUTIVE SUMMARY

In 1983, Caleb Bradham, a young pharmacist from New Bern, North Carolina begins

experimenting with many different soft drink concoctions. Like many pharmacists at the turn

of century he had a soda fountain in his drugstore where he served his customers refreshing

drinks, which he created himself his most popular beverage was something he called

“Brad’s Drink” made of carbonated water, sugar, vanilla, rare oils, pepsin and cola nuts.

PepsiCo India is striding ahead rapidly towards enabling the global vision to be the world’s

premier consumer products company focused on convenience foods and beverages.

PepsiCo India seeks to produce healthy financial rewards for investors as it provide

opportunities of growth and enrichment to its employees, business partners and the

communities in which it operates.

PepsiCo is one of the multinational company having more than 500 brands in 200 countries.

In India PepsiCo having 43 bottling Plants.

At Jhagadia Pepsi has started its GRB plant in 1997, PET line in 2001, Aquafina in 2003,

and PepsiCo has recently started its Slice line in 2010. In PepsiCo I have visited Human

Resource Department, Finance Department, Production Department, Quality Control, and

Dispatch and Logistic Departments. The company’s Marketing Office is at Ahmedabad.

I have selected the topic “Comprehensive Study of Inventory Management” as my special topic of Finance Department on which I have prepared a mini project including raw material inventories, work-in-process inventories, and finished goods inventories. This project gives the knowledge about inventory management and for that I have use different method like analysis of different techniques of inventory, analysis of inventories management system and control practice, practices of significant material usage, security system.

This project gives the idea or knowledge about inventory management system of the organisation how they are keeping inventory, how they are dealing with the system. Ratio analysis of the company shows the financial position of the company of particular years.

This way the project gives the theoretical knowledge about the inventory position of the organisation and overall condition of company in the history. Interpretation of various ratios related to inventory and operating cycle of the company are described hereunder in the report.

After going in the depth of the study I found that company’s Inventory Management system

is good and it enhance the company’s overall wealth which fulfil Organization objective.

This way the project gives the theoretical knowledge about the inventory position of the

organisation and overall condition of company in the history.

TABLE OF CONTENT

PARTICULARS NO A. ABOUT THE COMPANY 01

1) MISSION & VISSION 02

2) ORGANIZATIONAL VALUE 03

3) COMPANY HISTORY 05

4) COMPANY PROFILE IN INDIA 07

5) COMPANY BRANDS IN INDIA 08

6) MILESTONES 10

B. DEPARTMENTAL STUDY 13

C. ABOUT THE TOPIC 36

D. MINI PROJECT TOPIC 38

1) SUBJCET OF THE STUDY 38

2) OBJECTIVE OF THE STUDY 38

3) TOOLS OF ANALYSIS 39

4) SCOPE OF THE STUDY 84

5) RESEARH METHOD 85

E. FINDINGS & CONCLUSION 86

F. LIMITATIONS 88

G. SUGGESTIONS 89

H. BIBLIOGRAPHY 90

1

A. ABOUT THE COMPANY The Indian FMCG sector is the fourth largest sector in the economy with a total

market size in the excess of $15 billion. It has strong translational presence and

is characterized by a well established distribution network, intense competition

between the organized and unorganized segments and with its low operation

costs and presence across the entire value chain gives India a competitive

advantage. The FMCG market set to shoot up to $35 billion in 2015. Penetration

level as well as per capita consumption in most product categories like jams,

toothpaste, skin care, hair wash etc. In India is low indicating the unexploited

market potential. Burgeoning Indian population, particularly the middle class

brand frenzy class and the rural segments, presents an opportunity to makers of

branded products to convert consumers to branded products. Growth is also

likely to come from consumer “upgrading” in the matured product categories.

With 200 million people expected to shift to processed and packaged food by

2010, India needs around $28 billion of investment in the food-processing

industry.

Food and Beverages

The size of the Indian food processing industry is around $65.6 billion; including $

20.6 billion of the value added products. Of this the health beverage industry is

valued at $230 million; bread and biscuits at $1.7 billion; chocolates at $73 million

and ice cream at $188 million. The three largest consumed categories of the

packaged food are packed tea, biscuits and soft drinks.

Strong Growth forecast in Soft Drinks

The total trade volume of the soft drinks is forecast to grow by compounded

average of 11%. Total value growth is expected to track total volume growth

closely because intensifying competition in carbonates, which dominates in total

volume and value sales, is expected to keep prices per litter under check.

However, 100% juice is forecast to experience price per litter.

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With increase expected in tourism, distribution and a changing lifestyle, bottled

water is the one to watch in near future, with expected CAGR of 15% in trade

volume sales growth.

1) MISSION & VISION:

Mission:

“To be the world’s premier consumer Products Company focused on

convenience foods and beverages. We seek to produce healthy financial rewards

to investors as we provide opportunities for growth and enrichment to our

employees, our business partners and the communities in which we operate. And

in everything we do, we strive for honesty, fairness and integrity.”

Vision:

“To build India’s leading total beverages company, delighting consumer by best

meeting their everyday beverage needs, and stakeholders, by delivering

performance with purpose, through our talented people”

“PepsiCo vision is to be best Consumer Product Company in the world & wants

to become the market leader in the market. Its main vision is satisfaction of

supplier, customers, consumers, employees.”

Policy of the Company:

Quality Policy:

We shall deliver the best product in the:-

• Market place.

• Highest quality.

• Biggest testing. Safety Policy:

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We shall design, construct, maintain & safe operate our plant so that they are

safe for:-

• The people working in the company.

• The assets of the company.

• The environment in & around.

2) ORGANIZATIONAL VALUES:

Our commitment is to deliver sustained growth, through empowered people,

acting with responsibility and building trust.

Guiding Principles:

This is how we carry out our commitment. We must always strive to:

Care for customers, consumers and the world we live in.: We are

driven by an intense, competitive spirit in the marketplace, but we direct

this spirit towards the solution that achieves a win for each of our

constituents as well as a win for the corporation. Our success depends on

a thorough understanding of our customers, consumers and communities.

4

Caring means going the extra mile. Essentially, this is a spirit of growing

rather than taking.

Sell only products we can be proud of. : The test of our standards is

that we must be able to personally endorse our products without

reservation and consume them ourselves. This principle extends to every

part of the business, from the purchasing of ingredients to the point where

our products reach the consumer’s hands.

Speck with truth and candor. : We speak up, telling the whole picture,

not just what is convenient to achieving individual goals. In addition to

being clear, honest and accurate, we take responsibility to ensure our

communications are understood.

Balance short term and long term.: We make decisions that hold both

short-term and long-term risks and benefits in balance over time. Without

this balance, we cannot achieve the goal of sustainable growth.

Win with diversity and inclusion. : We leverage a work environment that

embraces people with diverse backgrounds, traits and different ways of

thinking. This leads to innovation, the ability to identify new market

opportunities, all of which helps develop new products and drives our

ability to sustain our commitments to growth through empowered people.

Respect others and succeed together. : This company is built on

individual excellence and personal accountability but no one can achieve

our goals by acting alone. We need great people who also have the

capability of working together, whether in structured teams or informal

collaboration. Mutual success is absolutely dependent on treating

everyone who touches the business with respect, inside and outside the

company. A spirit of fun, our respect for others and the value we put on

teamwork make us a company people enjoy being part of, and this

enables us to deliver world-class performance.

5

3) COMPANY HISTORY: PepsiCo India is striding ahead rapidly towards enabling the global vision to be

the world’s premier consumer products company focused on convenience foods

and beverages. PepsiCo India seeks to produce healthy financial rewards for

investors as it provide opportunities of growth and enrichment to its employees,

business partners and the communities in which it operates.

• Founder – Mr. Caleb Bradham

• Year of foundation – 1890

• It was originally founded as a cure for Dyspepsia & now, its name PepsiCo

soft drink.

• 1st plant setup in the year 1905 at America.

• In 1936 company earn $2 billion profit.

• Today its business is spread in more than 190 countries with 500 brands.

• In Gujarat PepsiCo has 1 plant.

Pepsico India Holdings Pvt. Ltd.

Plot No. 27, Gidc Estate

Jhagadia, Dist. Bharuch-399110

Phone: (02645) 226139, 226140

Fax: (02645) 226138

• 1st company of PepsiCo in India was started at Jaipur (Raj.).

• In Jhagadia PepsiCo started first plant in 1997 with GRB (Glass Refilling

Bottle).

• In 2001 PET (Poly Ethylene Tetracycline) was started.

• In 2003 AQUAFINA plant was started in Jhagadia.

• In 2010 SLICE separate plant was started in Jhagadia.

Establishment and Amendment: In 1983, Caleb

Bradham, a young pharmacist from New Bern, North

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Carolina begins experimenting with many different soft drink concoctions. Like

many pharmacists at the turn of century he had a soda fountain in his drugstore

where he served his customers refreshing drinks, which he created himself his

most popular beverage was something he called “Brad’s Drink” made of

carbonated water, sugar, vanilla, rare oils, pepsin and cola nuts.

One of Caleb’s formulations, known as “Brad’s Drink”, created in summer of

1893, was later renamed Pepsi Cola after the pepsin and cola nuts used in

recipe. In 1898 Caleb Bradham wisely bought the trade name “Pep Cola” for

$100 from a competitor from Newark, New Jersey that had gone broken. The

new name was trademarked on June 16th 1903. Bradham’s neighbour, an artist

designed Pepsi logo and ninety-seven Shares of stock for Bradham’s new

company were issued.

Investment: PepsiCo India and its partners have

invested more than USD1 billion since the company

was established in the country.

Employment: PepsiCo India provides direct and

indirect employment to 150,000 people including

suppliers and distributors.

7

4) COMPANY PROFILE IN INDIA:

PepsiCo entered India in 1989 and has grown to become one of the country’s

leading food and beverage companies. One of the largest multinational investors

in the country, PepsiCo has established a business which aims to serve the long

term dynamic needs of consumers in India.

PepsiCo India and its partners have invested more than U.S. $700 million since

the company was established in the country. PepsiCo provides direct

employment to 4,000 people and indirect employment to 60,000 people including

suppliers and distributors.

PepsiCo nourishes consumers with a range of products from treats to healthy

eats that deliver joy as well as nutrition and always, good taste. PepsiCo India’s

expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda

and Mountain Dew, in addition to low calorie options such as Diet Pepsi,

hydrating and nutritional beverages such as AquaFina drinking water, isotonic

sports drinks – Gatorade, Tropicana100% fruit juices, and juice based drinks –

Tropicana Nectars, Tropicana Twister and Slice. Local brands – Lehar Evervess

Soda, Dukes Lemonade and Mangola add to the diverse range of brands.

8

PepsiCo’s foods company, Frito-Lay, is the leader in the branded salty snack

market and all Frito Lay products are free of trans-fat. It manufactures Lay’s

Potato Chips; Cheetos extruded snacks, Uncle Chipps and traditional snacks

under the Kurkure and Lehar brands. The company’s high fiber breakfast cereal,

Quaker Oats, and low fat and roasted snack options enhance the healthful

choices available to consumers. Frito Lay’s core products, Lay’s, Kurkure, Uncle

Chipps and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated

fats and all of its products contain voluntary nutritional labeling on their packets.

The group has built an expansive beverage and foods business. To support its

operations, PepsiCo has 43 bottling plants in India, of which 15 are company

owned and 28 are franchisee owned. In addition to this, PepsiCo’s Frito Lay

foods division has 3 state-of-the-art plants. PepsiCo’s business is based on its

sustainability vision of making tomorrow better than today. PepsiCo’s

commitment to living by this vision every day is visible in its contribution to the

country, consumers and farmers.

5) COMPANY BRANDS IN INDIA:

PepsiCo nourishes consumers with a range of products from tasty treats to

healthy eats that deliver enjoyment, nutrition, convenience as well as affordability

The group has built an expansive beverage and foods business. To support its

operations, PepsiCo has 42 bottling plants in India, of which 13 are company

owned and 29 are franchisee owned. In addition to this, PepsiCo’s Frito Lay

division has 3 state-of-the-art plants. PepsiCo’s business is based on its

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sustainability vision of making tomorrow better than today. PepsiCo’s

commitment to living by this vision every day is visible in its contribution to the

country, consumers and farmers.

Beverages

PepsiCo India’s expansive portfolio includes

iconic refreshment beverages Pepsi, 7 UP,

Nimbooz, Mirinda and Mountain Dew, in

addition to low calorie options such as Diet

Pepsi, hydrating and nutritional beverages

such as Aquafina drinking water, isotonic sports drinks – Gatorade,

Tropicana100% fruit juices, and juice based drinks – Tropicana Nectars,

Tropicana Twister and Slice. Local brands – Lehar Evervess Soda, Dukes

Lemonade and Mangola add to the diverse range of brands.

Foods

PepsiCo’s food division, Frito-Lay, is the

leader in the branded salty snack market

and all Frito Lay products are free of trans-

fat and MSG. It manufactures Lay’s Potato

Chips, Cheetos extruded snacks, Uncle Chipps and traditional snacks under the

Kurkure and Lehar brands. The company’s high fibre breakfast cereal, Quaker

Oats, and low fat and roasted snack options enhance the healthful choices

available to consumers. Frito Lay’s core products, Lay’s, Kurkure, Uncle Chipps

and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats

and all of its products contain voluntary nutritional labeling on their packets.

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6) MILESTONES:

• In the year 1999 it wins Quality Assurance IQ award.

• In the year 2000 it wins award for 1 million hours without loss time

accident.

• In the year 2000 it wins award for zero loss time accident.

• In the year 2000 it wins Pepsi Cola International Bronze Quality award.

• In the year 2001 it wins Pepsi Cola Beverages International Bronze Quality

award.

• In the year 2001 it wins award for zero loss time accident.

Plant Detail:

Location : 90 Kms from Baroda

Plant Site : GIDC Mega Estate

Nearest City : Ankleswar -12km from Plant

Year of Start up and Expansion : GRE 1997 – PET 2000 –AF – 2003

Total Area of Plot : 75766Sq Mtrs (18.7 Acres)

Total Built up Area : 9570 Sq Mtrs

Max Coverage Allowed : 35336 Sq Mtrs

Green Blet Area : 24529 Sq Mtrs

11

Organizational structure:

12

Company Head Detail:

Mr. Chetan Thakkar (Plant Manager)

Mr. Yashpal Jajodia (Finance Manager)

Mr. Nilesh Borisa (Purchase Executive)

Ms. Yamini Sinha (HR Manager)

Mr. Zubair Shaikh (HR Executive)

Mr. Chetan Panchal (Quality Head)

Mr. Prashant Mujbaile (Manufacturing Manager)

Mr. Amit Raina, Manish Fosi (Manufacturing executive)

Mr. Anil Satpute (Shipping Head)

Mr. Gaurav Rathod (Shipping Executive)

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B. DEPARTMENTAL STUDY

(1) PRODUCTION DEPARTMENT:

Structure of the department:

• Production department has to plan the production schedule as per the

sales.

• Implementation of the item.

• Achieve the production target.

• Maintain quality with goodwill.

• Safety of machine.

• Organize the training programme.

Raw Material Used

The used raw-materials are water, Sugar, Preform, Concentrate, CO2,

Crown/closures, and Label.

Manufacture

Manager

Maintenance

Executive

Production

Executive

Utility

Associate

Production

Associate

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Product Specification

• Pepsi

Colour – Black

• Mirinda

Colour – Orange

• Mountain Dew

Colour – Off Green

• 7up

Colour – Like Water (No Colour)

• Aquafina

Colour – Water

• Slice

Colour – Mango

• Lehar

Colour – Like Water (No Colour)

Types of Material Handling Equipments Used

• Fork lift truck

o 2 for shipping

o 2 for production

o 2 for sugar godown

• Chain conveyer (GRB LINE)

• Belt conveyer (PET LINE)

• Plastic chain conveyer (PET LINE)

• Air conveyer (PET LINE)

• Pumps (WATER TREATMENT)

• Roller conveyer (GRB & PET LINE)

15

BRIEF EXPLANATION OF PRODUCTION PROCESS

1) GRB LINE (GLASS REFILLING BOTTLE)

• GRB LINE: Uncaser & Caser Machine:

Function: picking the empty bottles & placing to some other place.

Made By: kettner (Germany)

Capacity: 39000 bph.

Bottle Washer:

Function: bottle washing through 7 stages.

Made By: kettner (Germany)

Capacity: 39000 bph.

Filler (GRB):

Function: picking bottles from conveyer & filling beverages into the bottles

& also fitting crowns on bottles.

Made By: kettner (Germany)

Capacity: 36000 bph.

PROCESS

Production process starts from unloading of the empty bottles from the trucks.

These bottles are taken by fork lift trucks which send in the plant line. Carats from

fork lift are put down on the surface area & than workers put on the roller

conveyer.

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• Uncaser Machine Uncaser Machine keeps the bottle on the automatic conveyer belt from the

carats.

At once it pick up the 48 bottles from the 4 carats, on this belt 2 chips neck

inspection points are set in order to remove any damage bottle after inspection

are do going the further bottle process.

• Bottle washer: (max-43000 bph)

Tank Pre-

Jetting

Det.-1 Det.-2 WW-1 WW-2 CW Fresh

Caustic (%) 0.2 1.5-2 3-3.5 1 0.5 0.1 -

Pressure (Kg) 1.3 1.5 1.8 1.6 1.6 1.6 1.7

Temperature © 40 60-65 70-80 60-63 45-50 45-50 AMB

Internal Jets

(No's) 3 3 5 1 4 4 3

External Jets

(No,s) 1 - 1 2 1 1 1

Capacity (liters) 300 14600 21800 700 700 700 -

After bottle inspected bottles are goes to bottle washer.

Prejeking:

At this point the bottle is entering into the washer machine. At this time bottle is

inwarded into bottles by the jobs. The dust washed in the prejecting 400 C

temperature is maintaining the capacity.

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Detergent 1:

In this stage the tank is filled with washer & this water contains detergent. At this

stage minor dust or oiliness remove. Detergent 2:

Bottles are passed through detergent-1 to detergent-2 tank. The capacity of

detergent-2 tank is 21800 liters.

Warm Water:

The bottles are washed by the warm water at the temperature of 600-630. Here,

bottles are sterilized & almost all microbes & bacteria’s are killed by warm water.

Cold water:

At this stage bottles are washed with cold water of 300-350 C. At this stage the

temperature of the bottles is bought down to normal temperature.

• Refilling Bottles:

Empty bottles are refilled, which are passed through bottles. Bottles come from 4

inspection stages, the GRB capacity is 36000 bph.

80 valves in the filling bowl. The capacity of the machine is 36000 bottles per

hour. The empty bottles are picked up by the filling bowl & filling automatically.

Then bottles forwarded for sealing machine, the bottles are sealed with the

crown. After the bottles are sealed & crowned they pass through printing

machine. Printing machine print the manufacturing date, time, price after this

steps the bottles are ready to final inspection.

In inspection identified:

o Half fill

o Full fill

o Dirty bottles

o Different crown

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o Different bottles

The bottles are forwarded by the conveyer.

• Caser Machine: Caser machine picked up 96 bottles & put into the carats then through conveyer

belt; the carats are arranged into the pallets & then are arranged for fork lift truck

into the finished goods godown.

2) PET LINE (POLY ETHYLENE THYLATE):

• PET LINE: Blow Moludar:

Function: converting plastic performs into bottles of different size & shape.

Made By: Sidel (France)

Capacity: 10400 bph.

Unscrambler:

Function: picking bottles & placing it on air conveyer in upright position.

Made By: Ianfranchi (Italy)

Capacity: 500ml. (24000 bph)

1.5ml. (14000 bph)

Filler (PET): 52 valves machine.

Function: picking bottles from conveyer & filling beverage into it & also fitting

crown on bottles.

Made By: Krones (Germany)

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Capacity: 500 ml. (18000 bph)

1.5 liters (12000 bph)

Labeler:

Function: fixing labels bottles according to their size & type of beverage.

Made By: Trine (New York)

Capacity: 500 ml. (300 bph)

1.5 liters (250 bph)

Carton Erector:

Function: making cartoon boxes from sheets.

Made By: Sermax (France)

Capacity: 20 bph.

PROCESS

PET line is a line of plastic bottle & its maximum capacity for 500ml. bottle is

18000 bph, for 1.5 litters its capacity is 12000 bph, and for 2 litters it is 9000 bph.

The entire machine on PET line is imported & is purchased from the reputed

foreign companies like:

Sidel (FRANCE)

Linker (POLAND)

Para mix (GERMANY)

Krones (GERMANY)

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• Blow Moludar: In blow moludar machine preforms are converted into PET bottles, capacity of

this machine is 10400 bph. This machine is made by the Sidel (France Company)

& price of this machine is 7 to 8 crore.

Preforms are brought in ‘HOPPER’ from to Blow Moludar machine through

conveyer. The computer controlling the machine automatically and decides the

temperature of oven. For controlling the temperature, sensor cameras are

installed which measures the temperature. Camera checking is done after every

50 preforms.

8 models are set in blow moludar & converted into expected shape. Bottles are

send to unscramble by air conveyer.

• Unscrambler: Main function is to store the bottle from ‘BLOW MOLUDAR’. Bottles are stored

because it has two reasons:

It needs large amount of PET bottles continually; PET bottles are stored in

unscrambler machine.

Blow moludar is a very high energy consumption machine, so electricity, cooling

energy & continually air is required the unscrambler machine arranges the bottle

on conveyer. Air conveyer takes the bottles into filling hall. The bottles are

washed for one time because some dust is their.

• Filler Bowl: There are 54 valves in Pet filler bowl. Valves pick the bottle automatically. Syrup

and CO2 are filled up automatically, stop automatically and after. This crown

sealed done on the bottles.

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• Warmer: The bottle comes out from the filling halls which are very cold if these cold bottles

are forwarded to the “labeler” then the label can not be fixed properly. The

temperature of bottles is brought up to 200 to 250 C from 40 to 50 C.

• Printing Machine & Labeller: This label is fixed in particular machine label. Machine has automatic capacity

of 250 bph for 500 ml. & 200 bph for 1.5 litres & 150 bph for 2.0 litres.

• Case Packer Machine: Different sized pet bottles are packed into different size boxes.

96 valves-500ml

48 valves-1.5litres

27 valves-2litres

• Packaging Boxes: The boxes are forward through conveyer & boxes are going towards boxes

sealing station. Here boxes are sealing automatically & arranged into godown by

the fork lift truck operator.

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Present Product Mix:

Brand Name 200ml. 300ml. 600ml. 1liter 1.5liter 2liter

Pepsi • • • • •

Mirinda(orange) • • • •

Mirinda(lemon) • • •

Slice •

7up • • • •

Lehar • •

Aquafina •

Mountain dew • • • •

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(2) SHIPPING DEPARTMENT:

Departmental Structure

Functions Performed by the Department:

To regular track on order which had been placed by the BU (Ahmedabad)

of company To take daily physical stocks and verified with SAP To make an arrangement of all finished goods when production job would

be completed To make arrangement of FG as per SKU (Stock Keeping Units) To Dispatched Finished Goods as per Order

Anil Satpute

(Head of Department)

Guarang Rathod

(Executive)

Tusar Thakor

(Executive)

Dipak Trivedi

(Co-ordinator)

Associates

(3)

Associates

(3)

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SALES TARGET PLANNING Sales Chain Of the Company

PepsiCo India Holdings Ltd has divided the Gujarat unit into four territories as:

North Gujarat

Central Gujarat

South Gujarat

Saurastra

AOP

(Annual Operational Planning)

Unit

Manager

Territory

Manager

Customer

Executive

Distributors

Sales

Forecasting

Sales Target

Given to

Sales Target

Given to Each Plant

Sales Target

Given to Distributors

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PRODUCTION PL7ANNING SHIPPING PROCESS

AOP

(Annual Operational Planning)

Sales

Plan

Production

Planning

Place Order

By Customer Executives

Given Dispatched Details to Transporter

Dispatched of

Goods

Loading of

FG In the truck

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(3) STORE DEPARTMENT:

Functions Performed by the Department:

Physical stock varification of all Packing and Raw material to be check.

To compared physical stock with actual data feed in SAP.

To check following things in all invoice of materials (involves gate stamps)

which comes from pre-defined vendors

Date of invoice

PO (Purchase order) No

Material qty and price as per PO

GRN (General Registered No)

Gate stamps

Vendors details

Favoured party name

To place Material in proper location

To giving permission to issue material when its approved through

respective departmental Head (through physical invoice) and at a time

feed information related that in computer

To prepared Gate-pass

INVENTORY CONTROL SYSTEM:

For Raw Material & Packing Material:

Separate Ware-House for different Material

Sugar

Concentrate kept in cold storage

Sleeve material kept under 28 degree Celsius

Separate room for closures, crowns and labels

Separate packing material like cartoons and performs kept in RMPM

department

Dispatched of Material would be done as per FIFO method, especially

concentrate and pulp

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For that expired date would be written on each of material

Daily physical verification would be done and can be crossed check with

SAP

For Engineering Material:

If Material which value is more than Rs. 750 than it would be considered to

valuated material otherwise non-valuated material

Valuated material would be kept in Cup-Board

Non-valuated Material would be kept in Rack, different rack no are given to

separate Rack, so its easily when it would be issued

Inventory Valuation:

There are mainly three methods of valuation of inventory

FIFO (First In First Out) Method

LIFO (Last In First Out) Method

WAV (Weighted Avg. Valuation Method)

For valuation of Inventory, WAV method would be used,

Proportion of Materials in Warehouse:

Material Proportion (in %)

RMPM 10

Engineering 90

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(4) HUMAN RESOURCE DEPARTMENT:

Activities of HR Department:

• Dealing with employee.

• Dealing with contractors.

• Canteen management.

• Security activities.

• Welfare.

• Recruitment.

• Wages & Salary.

• Training & development.

• Statutory compliance.

• Administration.

• Transport management.

• Maintain employee relation.

• Housekeeping activities.

• Performance appraisal system.

Time Management:

In PepsiCo, Jhagadia, employees are working in 3 shifts, and 1 general shift.

Shift timings are given below:

1st shift : 07:00 to 15:00

General shift : 09:30 to 18:00

2nd shift : 15:00 to 23:00

3rd shift : 23:00 to 07:00

The bus arrives at the company gate, than after security officer note down the

attendance of each & every arriving employees. The attendance records are

sends to the HR department through computer.

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And the same process is repeated & security officer note down their out time of

each and every employee.

If any employee comes late more than half hour the security officer makes the

pass so that the head can know about that employee.

For the visitors security officer makes the visitors pass and are given an I-card.

On that I-card the company’s rules and regulations are written which are to be

followed.

Details in Employee Personnel File:

• Bio-data / C.V.

• Photograph

• Document of qualification:-

o School living certificate

o 10th mark sheet

o 12th mark sheet

o Graduate (B.SC / B.COM / B.A)

o Post Graduate (M.SC / M.COM / M.A.)

o If any additional qualification

• Experience & their relevant document

• Reference letter (should not be blood relative)

• Medical certificate (recommended doctor of last company)

• Letter of Intent & Annexure

• Joining forms

• P.F. and gratitudy forms

• Appointment letter

30

Human Resource Planning:

There are three major methods of HRP

1) Trend Analysis

2) Ratio Analysis

3) Through Software Packages

PepsiCo does the HR planning according to the session wise, if demand is at the

boom than company recruits some additional employee on the temporary basis.

Generally, company recruits the additional employee at the period of summer

vacation.

The decision takes by the ER/HR manager as per the situation.

Recruitment:

There are two types of Recruitment process are their:

1) Internal Recruitment

2) External Recruitment

1) Internal Recruitment: Internal recruitment is done through Rehiring,

Succession Planning, and Job Positioning.

2) External Recruitment: It is done through Internet, Advertising, Employment

Agency, Campus Recruitment, Referral etc.

Selection:

Company has two types of selection procedure

• Executive or manager

• For associate & workers

31

For executive level:-

Agency send the person as per requirement and plant manager takes the

interview of that person, if the person is selected by the plant manager than

company’s committee (department heads) takes the interview of that person,

once he/she selected then they are send to Ahemdabad & Mumbai for final

interview. If the selected person is agree with the company’s terms & conditions

then he/she can join the company.

For associate level:-

Companies directly recruit them by the help of private agency. ER/HR manager

takes the interview of that person and recruit them.

Performance Appraisal System:

• Performance appraisal is divided into two parts. Part A focuses on

the actual performance of the candidate, while part B focuses on

the person.

• It is important to complete both sections of the forms for objective

evaluation of candidate.

• In part B there is two sections, one focuses on the operative skills

and the second section focuses on the maintenance part.

Part A Part B

Work performance/output Care of machine

Concern safety Maintenance of the machine

Responsibility & discipline Know operating very well

Team work Keep clean machine & near

House keeping Environment

32

And according this performance appraisal he/she promoted by given rank from

his observation and give comment.

Remarks: (of performance appraisal programme)

• Outstanding

• OT (On Target)

• AT (Above Target)

Training & Development:

Company gives the training to new employee as well as old employee. In training

company know the capabilities of the person and now what kind of training he

needed in future.

Types Of Training Days

Personality development 02

First aid 01

GMP (good mfg. productivity training) --

Printing training 0.5

Basic fire training 01

FM (foreign matter training) 0.5

General safety 01

Promotion & Transfer Policy

PepsiCo Company gives the promotion on the basis of performance of the

employee. Promotion is given in the company’s same plant.

If the company needs the person in other plant and it will fill through transfer, by

the order of plant manager.

33

(5) QUALITY CONTROL DEPARTMENT:

Functions of QC Department:

• Checking of all in-put Raw-material and Packing Material

• Making syrup of various product

• Checking of Finished goods product

• Process control

• Overall plant food safety

Function Details:

Checking of all in-put Raw-material and Packing Material

1) Sugar: There are following things are to be checked in Sugar,

Things to be checked are weight of bags, Colour, International Colour Unit

Measurement of Sugar Analysis, Foreign material, Flock test.

2) Co2: Also known as A.O.T model.

• A – Appearance

• O – Odour

• T - Test

• Purity

3) Concentrate: It’s checked following things

• Manufacturing and expiry date

• Labels

4) Water: standards are set by PepsiCo

• Purification of water

- Coagulation process

- Filtration

• Proper chlorination

Process of checking Water:

• Hardness of soft water

34

• Alcholity

5) Micro-Biological Testing

• Moulds

• Colyforms

For Packaging of Raw Material:

1) Carton

• Gramage square mater (10*10)

• Busting Strength Bear

• Compressor strength bear

• Dimension of Box

• Printing

2) Label: In Lable the Length, Height and Design is checked.

3) Preform

• Weight

• Material Distribution

4) Crown

• Grammage

• Graphics

• Linear condition

Checking of Finished Product

• Brix (% of sugar)

• CO2 volume (Gas Volume)

• Foreign Material (F.M)

• Fill Height

• Net Content

• Micro Biological Parameters

35

(6) FINANCE DEPARTMENT

Finance department is the most important department of any organization or

company. Because it managed all finance resources of the company. It has been

done financial activities which are concerned with the planning & controlling of

the firm’s financial resources.

Financial management involves selling financial assets or securities such as

shares & bonds/ debentures to the financial investors in the capital markets to

raise necessary funds.

Finance management also raises funds by borrowing from banks, financial

institution & other resources. Almost all kinds of business activities, directly or

indirectly, involve the acquisition & usage of money.

Money occupies a key position in the capitalistic economies of the modern age.

One of the most important functions of the top management is to raise finance at

a right time and in a right quality also to use it most effectively.

Financial management is concerned with the managerial decisions that result in

the acquisition and financing of long term and short term credits for the firm as

such deals with the situations that require selection of specific assets, the

selection of specific liability as well as problem of these decisions are based on

the expected inflows and outflows of funds and their effects upon managerial

objectives.

Financial management does not stop at procuring the required finances. It has

also to see that it is effectively utilized in business. It is concerned with

maintaining adequate funds on hand to meet the expenses of both revenue and

capital nature.

36

C. ABOUT THE TOPIC

The term ‘Inventory’ refers to the stockpile of products. Inventory comprises those

assets which will be sold off in the near future and money recovered. Inventory

can be in the form of Raw-Material (RM), semi-finished goods (Work-In-Process)

or as Finished-goods (FG).

To understand the management of inventory at work and to examine how

Inventories are managed, I. M. Pandey and Khan & Jain has done their study on

the topic “Comprehensive study of Inventory Management”. Inventory can be

managed by using three methods FIFO, LIFO, WAM. Inventory management is

done in each aspects of the organization. There should be balance between

inventory and other assets in the organization. If balance is not maintain then

whole financial system will get disturb in the organization.

Inventories are stock of the product a company is manufacturing for sale and

components that make up the product.

IMPORTANCE:

Inventory is useful for the following purposes:

Predictability: In order to engage in capacity planning and scheduling,

you need to control how much raw-material, parts, and subassemblies you

process at a given time. Inventory buffers what you process. Fluctuations in demand: Inventory is assist in estimation of demand. You

don’t always know that how much stock you required at any given time,

but you still need to satisfy your customer’s demand on time. Unreliability of supply: Inventory kept when there is scarce of resources

or very few suppliers are available, Price protection: Buying quantities of inventory at appropriate times helps

avoid the impact of cost inflation. When there is chances of price rising in

future , better to purchase at presently at reasonable price and avoid price

fluctuation cost

37

Quantity discount: often bulk discounts are available if you buy in large

rather than small quantities Lower ordering cost: if you buy a larger quantity of an item less

frequently, the ordering costs are less than buying smaller quantities over

and over again.(The costs of holding the item for a longer period of time,

however, will be greater)

NATURE:

Inventory basically falls into overall categories of raw materials, finished goods

and work-in-process.

Raw Materials: Used to produce partial products or completed goods. for

e.g. sugar, concentrate, performs, labels, closures etc.

Finished Product : This is product ready for current customer sales,

Work-in-process (WIP): Items are considered to be WIP during the time

raw material is being converted into partial product.

Other types of inventory:

Consumables: Light bulbs, Hand towels, computer and photocopying

paper, tape, envelops, cleaning materials, lubricants, and so on. Engineering (Service, repair, replacement and spare) items: These are

after-market items used to “keep things going”. As long as a machine or

device of some type is being used and will need service in the future. Buffer/Safety inventory: This type of inventory can serve various

purpose, such as:

• Compensating for demand and supply uncertainties.

• Holding it to “Decouple” and separate different parts of your operation

so that they can function independently from one another.

Transit Inventory: It could be argued that product moving within a facility

is transit inventory. It may also define as the goods moving within

distribution channel between you and outside to the facility user or

provider.

38

D. MINI PROJECT TOPIC

(1) SUBJECT OF THE STUDY:

I have selected the topic “Comprehensive Study of Inventory Management”

as my special topic of Finance Department on which I have prepared a mini

project including raw material inventories, work-in-process inventories, and

finished goods inventories.

The subject is related with the analysis of the Inventory Management for the

investment of inventories in the PepsiCo India Holdings Pvt. Ltd.

(2) OBJECTIVE OF THE STUDY:

The report includes following main objectives, are as under:

To study and analyze the inventory management system and control

practices at PepsiCo India Holdings Pvt. Ltd.

To find out which types of Materials are available in the company.

To find out by which method company verify and classify the materials and

codification system of the company.

To find out management of projected sale and actual sale of each product.

To find out how company apply tight controls to the significant few items.

To find out how company sell of outdated or slow moving merchandise.

To find out which material company outsourced and rather why not it

produces on its not.

To find out security system to ensure that “No stock is going out the back

door”.

To find out how long it will take for delivery by supplier.

To find out operating cycle.

To find out inventory related ratios.

39

The objectives of the report are concerned with an Ideal Inventory Management.

An ideal inventory management give the minimum storage of the different types

of the inventories and maximum sales of the product of the company that’s why it

increases in the wealth of the company.

(3) RESEARCH APPROACH & TOOLS:

To find out by which method company verify and classify the material and

codification system.(Obj.)

Inventory Valuation System: The objective of the study is to analyse the valuation system undertaken by the

PepsiCo India Holdings Pvt. Ltd. to give the value of inventory. In order to assign

a cost value to inventory, company must make some assumptions about the

inventory on hand. Under the federal income tax law, a company can only make

this assumption once per fiscal year. There are some of the valuation methods

used by the company described below.

(A) INVENTORY VALUATION SYSTEM

There are mainly three methods of valuation of inventory

1. FIFO (First In First Out) Method

2. LIFO (Last In First Out) Method

3. WAV (Weighted Avg. Valuation Method)

PepsiCo India Holdings Pvt. Ltd. use following valuation methods for valuation of

Inventory.

40

(1) First in First out:

At PepsiCo for inventory valuation FIFO method is used. Inventory valuation

assume that the first goods purchased are first to be used or sold regardless of

the actual timing of their use of sale. This method is mostly use to tied to actual

physical flow of goods in inventory at PepsiCo India Holdings Pvt. Ltd.

(2) Weighted Average Method:

At PepsiCo this method is use to calculate the value of inventory that identifies

the value of the inventory and cost of goods sold by calculating an average unit

cost for all goods available for sale during a given period of time. This method

assumes that ending in inventory consists of all goods available for sale.

(B) CLASSIFICATION OF INVENTORY:

The inventories having huge amount of use in the organization has to be

controlled very strictly and low amount of use should be kept low control. There

are so many classification systems available amongst which some of

classification systems are uses at PepsiCo India Holdings Pvt. Ltd.

1. ABC system.

2. EOQ system.

3. JIT system.

4. Outsourcing.

(1) ABC classification: ABC classification is a basic analytical Management tools which enables top

Management to direct their effort where the result will be maximum. Inventory is

managed in store department at PepsiCo India Holdings Pvt. Ltd.

41

This technique properly knows as “ALWAYS BETTER CONTROL” has universal

application in many areas of human endeavour.

ABC Inventory control system:

Large no of firms have to maintain several types of inventories. It is not desirable

to keep the same degree of control on all the items. The firm should pay

maximum attention to those items whose value is the highest. The firm should,

therefore, classify inventories to identify which items should receive the most

efforts in controlling. The firm should be selective in its approach to control

investment in various types of inventories. This analytical approach is called the

ABC analysis and tends to measure the significance of each item of inventories

in terms of its value.

‘A items’ represents the high-value items and would be under the tightest

control.

‘B items’ falls in between above these two categories and require

reasonable attention of management.

‘C items’ represents relatively least value and would be under simple control.

The following steps are involved in implementing the ABC analysis:

• Classify the items of inventories, determining the expected use in units

and the price per unit for each item.

• Determining the total value of each item by multiplying expected units by

its unit price.

• Rank the items in accordance with the total value, giving first rank to the

item with highest total value and so on.

• Compute the ratios (percentage) of number of units of each items to total

units of all items and the ratio of total value of each item to total value of all

items.

42

Item Units

%

Of

Total

Cumula

tive

%

Unit

Price

(Rs)

Total

Cost

(Rs)

%

of

Total

Cumula

tive

%

1

2

3

4

5

6

7

10,000

5,000

16,000

14,000

30,000

15,000

10,000

10

5

16

14

30

15

10

15

30

55

30.40

51.20

5.50

5.14

1.70

1.50

0.65

3,04,000

2,56,000

88,000

72,000

51,000

22,500

6,500

38.00

32.00

11.00

9.00

6.38

2.81

0.81

70

20

10

Total 1,00,000 100 100 8,00,000 100

The tabular and graphs presentation indicate that

‘Item A’ forms a minimum proportion, 15 percentages of total units of all

items, but represent the highest value, 70 percentages.

‘Item B’ occupies middle place and contains 30 percent of total units and

represents 20 percent value of total value.

‘Item C’ represents 55 percentage of total units and only 10 percent of total

value.

Items A and B jointly represents 45 percent of total units and 90 percent of the

investment. More than half of the total units are item C, represents merely 10

percent of total investment.

At PepsiCo also this classification method is use to manage inventory. If the

material valued more than Rs. 750 is high value material and stored in racks in

this company. These materials called value-added material. And if the value of

43

the material is less than Rs. 750 then it stored at the open place in isolation and

classified by nonvalue-added material. If the value of the material is more than

Rs.1000 it is stored in lock and key.

Mostly engineering materials are high value and ordered in law quantity which

requires more attention, so these materials come under “A Item”. Mostly raw

materials are classified under law value and high stock material, so it comes

under “B Item”. And other operating materials which are use to keep things going

on is lowest value and not required high attention comes under “C Item”.

(2) Economic Order Quantity: Order Quantity is defined as the quality or its rupee equivalent for which fresh

order of an Inventory items is placed.

The decision regarding order quality of various Inventory items is of vital

importance in the Management of the Inventory items for which total of two types

of cost opposing.

Each order will be the minimum at this level, the sum of all cost of one type is

exactly equal to the sum of all cost of the other type.

Thus quantity is often referred to as economic order quality, for the purchase.

Determination of Economic Order Quantity:

The Economic Order Quantity can be determined with help of the following

formula.

.2...CIABQOE =

Where,

A = Annual usage in units.

B = Order (buying) cost per order.

C = Unit cost of material.

I = Inventory carrying cost.

44

(3) Just In Time System:

Japanese firms popularized the just-in-time (JIT) system in the world. In a JIT

system material or the manufactured components and parts arrives to the

manufacturing sited or stores just few hours before they are put to use. The

delivery of material is synchronized with the manufacturing cycle and speed. JIT

system eliminates the necessity of carrying large inventories, and thus, saves

carrying and other related costs to the manufacturer. The system requires perfect

understanding and coordination between the manufacturer and suppliers in the

timing of delivery and quantity of the material. Poor quality material or

components could halt the production. The JIT inventory system complements

the total quality management (TQM). The success of the system depends on

how well a company manages its suppliers. The system puts tremendous

pressure on suppliers. They will have to develop adequate system and

procedures to satisfactory meet the needs of manufactures.

(4) Out Sourcing:

A few years ago there was a tendency on the parts of many companies to

manufacture all components in-house. Now more and more companies are

adopting the practice out-sourcing. Out-sourcing is a system of buying parts and

components from outside rather than manufacturing them internally. Many

companies develop a single source of supply. PepsiCo India Holdings Pvt. Ltd.

outsource their raw material if it can’t be able to produce it of its own, e.g.,

PepsiCo give order to manufacture its “Empty glass bottle” product from outside,

PepsiCo also outsourced “Briquete”, bio-coal for the production of steam, etc.

(C) TECHNIQUES OF INCENTORY MANAGEMENT:

The financial Manager should aim at the optimum level of inventory on the basis

of trade off between cost and benefit.

45

To know the practical use of various Inventory Management Techniques in the

PepsiCo India Holdings Pvt. Ltd. Following Inventory Management Techniques

were studied and evaluated are:

Codification System:

Principal of Material Code:

• There should be no duplication.

• One particular type and size should be at one place only.

• Description should be brief, very accurate, specifications, part numbers,

drawing numbers should be quoted, wherever required.

• Units of Issues and Receipts should be given and followed strictly.

• Code should be easily understandable by those who have to use it.

• It should be properly classified for sections, classes and groups.

• One unique code for each item and each represented by single code.

Codification means assigning a unique code or name, to each item, based on its

use, characteristics, importance and other features. It may be of any digits say 1,

2 or up to 9. It may be Numerical, Alphabetical or Alphanumerical.

In PepsiCo India Holdings Pvt. Ltd. code of each material is of 11 digits. First digit

of each code start with ‘P’ which indicates the material code is of PepsiCo,

because there is other supplier code also written, so for identification company

have its own codes for each material.

Company gives code to each material machine wise and section wise so that the

sparse of different machine will not mix at the time of issue. For different items

there different starting codes some of which are described below.

• Forklift – 47

• Bearings – 41

• Filler machine – 11

46

• Censer – 30

• Electricals – 42

• General items – 99

The code of each material is given randomly for specific material and then after

that material is following in that series.

(D) DETERMINATION OF INVENTORY LEVEL: The Inventory level concept considers store keeping as profit intensive service to

production. Store keeping should contribute directly to profitability and be

concerned with such matter as flow, lead time storage cost, acquisition cost,

material handling, preservation, packing and dispatches.

In the same way that specification is related to technical needs, so, general level

of stock should be related to the sales and production policies of the company.

There are various levels of stock, which are established by the PepsiCo India

Holdings Pvt. Ltd., is as follows:

1. Minimum Stock Level. 2. Maximum Stock Level. 3. Re-order Stock Level.

(1) Minimum Stock Level: This is the level at which any future demands upon the bill will necessary

withdrawals from the reserve stock.

47

The minimum stock level is converted to meet exceptional conditions of demand.

The minimum stock of raw material is described as follow:

• Cartons-10000 in each size.

• Crowns for all glass bottles are approximately 200 boxes.

• Closures are also approximately 200 boxes.

One month’s usage of material is taken into consideration by the PepsiCo India

Holdings Pvt. Ltd. as a minimum level.

(2) Maximum Stock Level:

This is the level above which the stock should not be permitted to rise. Three

months consumption of stocks is taken into consideration by the PepsiCo India

Holdings Pvt. Ltd. as a maximum stock level.

• Cartons-30000 in each size.

• Crowns for all glass bottles are approximately 600 boxes.

• Closures are also approximately 600 boxes.

(3) Re-Order Level: It is the point at which the order has to be placed. The order level may not always

be numerically equal to the economic order quantity. It should be regularly

reviewed for paid moving items. For fast factors as change in demand, delivery

times or variation in trend.

48

To find out which types of Materials are available in the company.(Obj.)

Inventory as Money: Why should you care about the financial aspects of inventory? Because inventory

is money.

Even if you do not have a financial background, it is important to understand and

appreciate that inventory information in financial statements can be useful in the

operation of your business. A basic understanding of how inventory appears on

the balance sheet and its impact on the income statement and cash flow

statement will improve your ability to have the right item in the right quantity in the

right place at the right time.

Most of the inventory fits into one of these general buckets, yet the amount of

each category varies greatly depending on the specifics of your industry and

business.

STORES INVENTORY

Proportion of Material at the warehouse.

Inventories of the store department:

RAW MATERIAL:

Raw material inventory consists of those items which are purchased by the firm

to be converted into finished goods. Items are disclosed below.

Material Proportion (in %)

RMPM 90

Engineering 10

49

• SUGAR

• PREFORM

• DIESEL

• FO

• CO2

• CROWN

• CAP

• CLOSURE

• CONCENTRATE

• PUPL

• CARTON

• LABLE

• C&C

• VALUATED SPARES MAINTENCE

• SERVICE ORDER

• RETWNABLE GAT PASS

• OUTSIDE STORAGE

STORES BOOKS

• ENG ISSUE SLIP

• RGP

• STORE CHECK IN SLIP

• NRGP

• OT

• PEQUREMENT FOR CASUAL

• PRODUATION ISSUE SLIP

• LAB ISSUE SLIP

50

STOCK INVENTORY: Material Specification,

SUGAR:

Sugar is the material that is required to make syrup sweet. It is stored in sugar

godown. It is ordered to make syrup as per the batch size and batch size is

depends on Annual operating Planning (AOP).

BOTTEL CALCULATION

PARTICULER ML BOX STACKS

CRD 300ML 40 BOX -

CRD 200ML 48 BOX -

PET 2LT 27 BOX 3 STACKS

PET 1.5LT 36 BOX 4 STACKS

PET 600ML 48 BOX 6 STACKS

AQUAFINA 1LT 40 BOX 4 STACKS

CARTON LODING STACKS

Cartons are empty boxes which are used to pack crowns, closures, and labels.

The pack size is predefined and size will not change. The pack size for different

products is different which is described below.

PET 2 LT 8 STACKS

PET 600 ML 15 STACKS

AQUAFINA 1 LT 10 STACKS

51

CROWN

Crown is bottle cap which is used to seal glass bottles. Pack size for all type of

bottles are same. There are 300 cash in one box, each cash consists of 24

bottles, it means 7200 pieces in one box. Crowns and closures are managed in

the same room in isolation. Crowns are ordered for following brands.

Pepsi

Mirinda Orange

Mirinda Lemon

7-up

Mountain Dew

Slice

1 BOX =50 GROSS

2 50 GROSS=7200 CROWN

3 1 GROSS=7200/50=144 CROWN

LABLE

To manage label is most important thing for the company. Label role is depends

on the width of the bottles. It is also stored with crown and closures in isolation.

PARTICULER KG BOTTEL CS

PET 1 145*24 CS

PET 1 120*24 CS

AQUAFINA 1 120 CS

TAPE BOPP

1. ROLE= 650 METER

• EX.= 61750/650=95 ROLE

• VALUE= 15762.08/95= 165 PER ROLE

52

CORRUGATED BOX

• IN NUMBERS CALCULATED

CLOSURE

Closure is the bottle cap which is used to seal plastic bottles. There are different

closures for particular bottles. The closures are stored in particular room and

stored in isolation in different racks. Closures are available for the products listed

below.

Pepsi

7-up

Mirinda Orange

Mirinda Lemon

Mountain Dew

Common

Aquafina

1. BOX= 3500 CLOSSURE

PREFORM

Preform is the plastic test tube, which is used to made plastic bottles to fill up the

final syrup to make available it to the final consumer in attractive form in the

market.

PARTICULER ML BOX PCS

CLEAR/GREEN 600 ML 1 BOX 700,1056,1300,1344 PCS (25.5 GM

CLEAR 1 LT 1 BOX 550 PCS (42 GM)

CLEAR/GREEN 1.5 LT 1BOX 550, 700 PCS (48 GM)

CLEAR/GREEN 2 LT 1 BOX 550,700 {48 GM)

53

CONCENTRATE

Concentrate is that material, which used in making syrup to make cold drink. It is

stored in concentrate room and in cold storage to keep it safe. Concentrate is

liquid material, which required storing in approximately 150 to 200 Celsius

temperatures. Concentrate is required in different flavours to make different

products as under.

PRODUCT FLAVOURE UNIT

7 UP • SALT SODIUM CITRATE

• POTASSIAM SORBATE

• MALIC ACID

• CITRICT ACID ANHYRAS

• FLAVOURE

1 UNIT 567.8

PEPSI FLAVOURE

1 UNIT 1703.4

MIRINDA

ORANGE

FLAVOURE 1 UNIT 681.3

MOUNTAIN

DUE

FLAVOURE 1 UNIT 567.8

MIRINDA

LENMON

FLAVOURE 1 UNIT 567.8

(A) RAW MATERIAL PACKING MATERIAL

FOR RMPM

Raw- materials and packing material inventory is made up of goods that will

be used in the production of finished products at PepsiCo India Holdings Pvt.

Ltd., which is described below.

At PepsiCo India Holdings Pvt. Ltd. following raw material and packing

materials are used. In PepsiCo India Holdings Pvt. Ltd. all types of raw

materials are managed by First in First out (FIFO) method. There is some

54

limited time period for the expiry of that material, which is approximately 4 to 6

months.

Separate Ware-House for different Material

Water is kept in two different tanks.

CO2 stored at CO2 plant.

Sugar stored at sugar godown.

Concentrate kept in cold storage under 150 to 200 Celsius.

Sleeve material kept under 280 Celsius.

Separate room for closures, crowns and labels.

Closures are stored near production plant.

Cartons are stored near production plant.

Empty bottles are stored at open warehouse.

FOR ENGINEERING MATERIAL

If Material which value is more than Rs. 700 than it would be considered to

valuated material otherwise non-valuated material

Valuated material would be kept in Cup-Board.

Non-valuated Material would be kept in Rack, separate numbers are

given to each Rack, so it will be easy for storekeeper to note when

material would issued.

Products Litter per unit

Pepsi 1703.4

7 Up 567.8

Mountain Dew 567.8

Mirinda Orange 567.8

Mirinda Lemon 681.3

55

The above table indicates that one unit Pepsi is equal to 1703.4 litters. One unit

of 7 Up, Mountain Dew, and Mirinda is equal to 567.8 litters. And one unit Mirinda

Lemon is equal to 681.3 litters. And following table indicates the Litters for

different pack size.

Pack Pepsi, 7 Up,

Mountain Dew,

Mirinda Lemon

Mirinda Orange

200 ml 0.8 0.96

300 ml 1.2 1.44

600 ml 2.4 2.88

1000 ml 3 3.6

1500 ml 3 3.6

2000 ml 2 2.4

(B) WORK IN PROCESS:

Work in progress inventory consists of partially complete goods, that is, items

currently being used in production process.

At PepsiCo India Holdings Pvt. Ltd. more importance is given to raw-materials

and finished goods rather work in process, because work in process materials is

the material which is required at the time of production. At PepsiCo the process

of goods to be converting from raw material to finish goods is short period so it is

easy to manage work in process easily.

56

(C) FINISHED GOODS:

Finished goods stock represent completed products ready to be sold. Finished

goods inventory includes completed products waiting to be sold in the market.

To maintain finish goods is the major function of any company and it is the major

challenge because to manage finish goods is cost in money, because if finish

goods is not available at time in the market then it creates wrong image in the

mind of the consumer. To manage finished goods is also count in storage cost.

Finish goods is managed in following form at PepsiCo India Holdings Pvt. Ltd.

PALLETISE:

The finish goods which are made through line is stored in godown to

dispatches to the dealers and distributers as per their requirement at

PepsiCo India Holdings Pvt. Ltd. One pallet carries 24 boxes. If the pallet

is fully loaded then and then only counted under palletise form.

NON-PALLETISE:

The finished goods which come through production line is stored at

godown. If any of the box is carried one less bottle or any pallet carried

one less box then its come under non-palletise form.

At PepsiCo India Holdings Pvt. Ltd. Finished goods are managed by First in First

out (FIFO) method. Company also keeps four to five days stock to fulfil future

demand at its godawn at Bharuch.

The stock of finished goods is managed by SKU method which is well known

method and used in most companies. Daily, weekly, and yearly reporting is done

through shipping department at PepsiCo India Holdings Pvt. Ltd. First of all

Annual Operation Planning is done at country level. Then it is distributed to the

zone wise and then plant wise marketing researcher to find out the demands in

the market. Market researcher gives this detail to the distributers and they

57

ordered the finish good from the plant through shipping department at the plant.

After the order shipping department give detail of order to production department.

The stock which is stored at warehouse at the company godown is also managed

by SKU method and daily do the daily checking of the stock to keep it maintain

for future requirement. The stock of finished goods are stored in isolation at

warehouse of the company.

(D) Inventory Management of Chemicals and Consumables:

There are various types of chemicals starting from bottle washing till the direct

use in machinery. These different kinds of the chemicals are to be maintained at

good levels so that the functioning of machine can be at place and in some

circumstances it can be repaired easily.

Some chemicals are not required at all during the run of production but when

entire machines stop after the 22 hours production then chemicals may be used

to clean the production place.

In order to make the surface of the conveyers wet and not too much slippery a

type of chemical is used.

(E) Inventory Management of Repairs and maintenance :

Repairs may not seem actual part of the organisation but no such department

can make the organisation to a standstill, when damage occurs to the machinery

or the equipment gets distorted.

Repairs could be for both material that is the machinery side or it can be of the

service related material that has to be stocked.

Repairs can be of the service area as the need may arise for any computer

accessory it needs to answered on that only day as any file which has to be

mailed may not be able to access from other computer and so it has to be

maintained.

58

For the Engineering spares, there are more than two-thousand items that are

stored at this plant which are too difficult to account for.

Since each part has its unique SAP code which makes it identified even when a

single unit has been taken.

There is equally check of the SAP stored data and the actual one which is

physically taken by Stores department on day-on-day basis. Any discrepancy

may be immediately investigated.

59

To study and analyze the inventory management system and control

practices at PepsiCo.(Obj.)

Inventory Control System: Inward Registered

Company contains Inward register to control incoming and outgoing materials.

The register is described below.

Physical verification of material would be done on daily basis of RMPM stock with

SAP, following details required:

If not matched with SAP

Physically Re-calculation of material stock would be done.

Check whether issue entry would be done as per material issue slip.

Check whether receipt entry of material would be done as per store

inward register.

SE N0.

GATE INWARD

NO. DATE CHALLEN

NO. DESCRIP

TION

QTY AS PER

CHALLEN

QTY REC.

BILL NO. AND

DATE

SAP PO NO. &

GRN NO.

DATE RS. SAP CODE REMARK

PO

Material Description

Stock-

value

Curr.

INR UOM

Valuated

Stock

Physical

Stock

Qty

Differences

Location

60

To find out management of projected sales and actual sales of each

product.(Obj.)

Management of difference between Projected sales and Actual sales:

Each company has its own projected sales and actual sales. To manage the

difference between the projected and actual sales is the vital task for each

company. Total production mix and production consumption analysis is indicated

below.

(1) Production Mix Table for last three year

AQUAFINA PET GRB

2007 577,211 2,234,199 941,947

2008 571,412 1,925,830 1,017,769

2009 744,531 2,706,738 2,524,867

0

500000

1000000

1500000

2000000

2500000

3000000

2007 2008 2009

AQUAFINA

PETGRB

Above graph indicates total production for last three years. In year 2007 total

production is Rs.3753357, in 2008 total production is Rs.3515011, and in 2009

total production is Rs.5976136. In 2008 production was decrease approximately

6.35 percentages. And in 2009 it increase by approximately 70 percentages.

61

(2) Production Consumption Analysis for the year of 2008-2009

The above table make us aware of the difference comes in two respective years.

Now the major problem in this case is that how company manage this difference

to reduce wastage. For this problem company stored excess material at their

godown as safety stock to overcome their future demand at the ware house.

MONTH Total Prod.

% ↑↓

Raw Material

Pack Material

Chemical & Consumabl

es R&M

Service R&M

Material

Total Consumpti

on % ↑↓

Diff. in

Conc. Over prd.

8-Apr 3,17,065 NA 1,54,33,158 1,02,09,746 537109 105762 545629 2,68,31,404 NA

8-May 4,56,058 44 2,05,19,510

1,68,68,519 668673 1,26,941

5,83,337

3,87,66,980 45 -1

8-Jun 2,66,066 -42 1,28,49,543

96,94,943 520712 53,570

2,69,691

2,33,88,459 40 -2

8-Jul 1,08,198 -59 41,73,365 31,70,190 231450 2,75,072

2,02,888 80,52,965 -66 6

8-Aug 1,60,502 48 51,22,328

49,94,707 274983 70,435

2,31,314

1,06,93,767 33 16

8-Sep 1,75,401 9 63,99,168

66,60,239 317854 2,74,943

3,16,593

1,39,68,797 31 -21

8-Oct 2,44,054 39 1,11,22,767

81,91,877 490802 53,361

4,33,519

2,02,92,326 45 -6

8-Nov 2,31,824 -5 90,57,692

83,97,791 437216 1,37,264 99,856

1,81,29,819 -11 6

8-Dec 1,90,090 -18 70,53,404 61,19,502 807556 2,46,334 5,64,449 1,47,91,245 -18 0

9-Jan 1,37,627 -28 54,42,695 47,14,285 341296 52,512

20,57,995 1,26,08,783 -15 -13

9-Feb 2,22,200 61 98,56,686 99,39,268 319506 39,014

5,49,695 2,07,04,169 64 3

9-Mar 3,40,445 52 1,68,88,976 ,41,96,153 548479 1,39,256

7,73,732

3,25,46,596 -57 -5

62

To find out how company apply tight controls to the significant few

materials.(Obj.)

Vital Material Management:

Some materials are so costly and sometimes it may hazardous also. So to apply

tight control on such materials is very vital task for any company. So that overall

wealth can be increased and healthy environment can be maintain. There are so

many costly and important materials in PepsiCo India Holdings Pvt. Ltd. such as

CO2, Oil.

(1) CO2:

CO2 is the gas that consists of one Atom of Carbon Dioxide and two Atom of

Oxygen, which is used to mix it in the cold drink. CO2 is use to mix up in syrup of

different products of the company like Pepsi, Mirinda Orange, Mirinda Lemon,

Mountain Dew, and 7 up. The capacity of the CO2 plant is 20 kl (kilo litter), which

is ordered from Inox Baroda and Bombay.

Automatic cooling plant is use to keep CO2 in liquid form. CO2 is purchased in air

form. At present Natural E-Operator is installed which need not to absorb

temperature by fans, if CO2 interact with natural temperature it get air form.

Before auto cooling plant is use there is plant in which two absorb fans are there

to absorb the temperature of the air form CO2 and it is entered in filter machine.

This plant is changed because it was very costly.

CO2 usage (READING) is checked on daily bases. CO2 sometimes be hazardous

so company manage safety precaution to prevent accidents which are mentioned

below.

• Avoid contact with liquid and solid.

• Provide self-contained breathing in exclusive high CO2 area.

63

• Wear face cover to protect from liquid and solid.

• Operate machine at certain degree of compressor.

Usage of CO2 in each packing is described below.

Pack Pepsi Mountain

Dew

Mirinda

Lime

Mirinda

Orange

7 Up ES(Soda) Duck

Lemon

200 ml 0.03726 0.03017 0.0373 0.02277 0.03892 0.08253 0.0713

300 ml 0.0540 0.04525 0.05402 0.03301 0.05552 - -

600 ml 0.1237 0.1075 0.07430 0.0825 0.1266 0.1325 -

1000 ml 0.05078 0.05190 - - 0.05190 - -

1500 ml 0.0768 0.06949 - - - 0.0823 -

2000 ml 0.10167 0.05611 - - 0.10370 - -

The CO2 is managed by considering above table by the store personnel. Store

personnel count CO2 by getting aware of which product will produce by

production department.

(2) Oil:

Company also maintain oil plant to fulfil the requirement of the various activities.

Company has a separate oil plant in isolation. Company ordered oil from IOC as

per the requirement of the plant. These oil is use to operate various machines at

production line, to operate forklift to manage loading and unloading activities.

64

To find out how company sale of outdated or slow moving

merchandise.(Obj.)

Slow Moving Material Management:

Any manufacturing company has specific period of time for the expiry of the

material for using purpose. Each and every company try to sale all the finished

goods in the market. PepsiCo also tries to produce required material, but in some

cases some finished goods remains not sold then company stored these finished

goods as safety stock. If the material still not sold for long time then after expiry

company sold these materials to those parties who has authority to sold wine,

because they provide wine with soda so there is no need to check out the date of

expiry. And company’s inventory not disturb.

65

To find out which material company outsourced and why not it produces

on its not.(Obj.)

INVENTORY MANAGED AT UTILITY:

It is not possible for any company to produce all the products because it is costly

which increase finished goods cost. There are some products which are

outsourced at PepsiCo India Holdings Pvt. Ltd. also, e.g., Briquette, empty

bottles, water etc.

BOILER PLANT:

This plant is most important for this company, because at this plant steam is

produced which has multi task. The steam is used to wash empty bottles, to

dilute syrup, and for sanitation (to use for any cleaning process).

The capacity of this boiler machine is 20 kl at its full capacity. But company

produce only 16 kl as per the requirement of the plant. Inventory use at this

machine is described below.

(1) BRIQUETE:

Briquette is the solid form inventory which is use as bio-coal to gate hit in the

machine. This material consists of wastage of wood, Rice, Wheat, Jute, Grass

and so on. This material is ordered from outside of the company. It costs Rs. 4

per kg. And 12 kg steam is produced by 4 kg briquette.

Before using briquette material company use oil to get hit which is very costly. By

using briquette Inventory Company earns approximately 75 lakhs. Oil is very

costly for the company so it replaced by briquette.

(2) WATER:

Water is managed by the company from it own soft water plant for making syrup.

To make steam only soft water is use. This water is comes from G.N.F.C.

bharuch. To make water soft company has isolate plant, water passes through 3

66

processes. Company has one treated water plant also which is use to make

steam for the multipurpose.

Compressor:

This is pressure machine which compress the temperature in the boiler

machine. This compressed air is use for pick up and put the bottles on the

production line.

REFRIGERATION PLANT:

Ammonia and glycol:

At refrigeration plant Ammonia gas is used to cool glycol and this glycol

cools water and syrup to add CO2 in the syrup. CO2 can be add only in 00

temperature.

Air Compressor:

This compressor is managed in two form one is High pressure and second

is for law pressure. High pressure air compressor is use to operate forklift

and to convert perform into plastic bottles at 1200. And law pressure air

compressor is use to operate line’s requirements of air. Law pressure

compressor is known as Numetic system.

(3) EMPTY BOTTLES:

To manage empty bottles is very important task for the company, because it is

not possible for the company to manufacture new bottles each time due to heavy

cost of making glass bottles. There is no need to collect back the plastic bottles

from the distributers.

To fulfil the requirement of glass bottles company collect the empty bottles from

its dealer and manage these empty bottles in company’s godown at plant. The

production department demand the requirement of empty bottles to the shipping

department and shipping department provide the details of the availability of the

67

empty bottles. Shipping department manage all these empty bottles by Stock

keeping Unit method. If company not found enough stock from the market of the

empty bottles and are destroyed then to fulfil the requirement of the production

department shipping department ordered and manufacture from the outside.

Company stored the old bottles and new bottles in isolation at the plant location.

In SKU all the availability and absence detail of the empty bottles is mentioned

which document is manage daily, weekly and yearly form at PepsiCo India

Holdings Pvt. Ltd.

68

To find out security system to ensure that “No stock is going out the back

door”.(Obj.)

Security System:

It is very essential thing for any company to check that materials are not stolen by

internal as well as external persons. To prevent this activity company should take

some security steps. There is also security steps are taken by PepsiCo India

Holdings Pvt. Ltd. No one can gate access in the store department where the

materials are stored without the permission of store person, so that all the

responsibility is of the store person. The material whatever issued immediately

noted in store records.

There is separate issue books are available for each department so that the

issued material can be stored under particular department. These records will

help the entire department to know the availability of the material in the store

department. Various books are as follows,

• ENG Issue slip (Engineering Material)

• PRD Issue slip (Production Material)

• LAB Issue slip LAB Material)

• Store Check in slip

• RGP (Return Gate Pass)

• NRGP (Non Return Gate Pass)

Thus by checking these slips anyone can be able to verify the stock. On the basis

of these slips store person do the entry in SAP system by which any one can

verify material without checking these slips.

69

To find out how long it will take for delivery by the supplier.(Obj.)

Delivery Management:

Having right material at the right time at the right place is the core function if

inventory management. If material is not available at the time of requirement then

we can say that inventory control is poor. As inventory Affects Company’s

balance sheet and cash flow statement to manage it properly is vital thing.

PepsiCo ordered their required material to the vendor and vendor sent it within a

day if vendor is localised, it will take three to four days if vendor is out of state.

After giving order Finance department continuously follow-up of the order. If

vendor is continuously fail to provide material on time then Company cancelled

supplier’s vendor code number and not give them order further.

The total inventory of the company is the 38,650 lacks in 2008-09.

Total Inventory

Rs in Lakh.

Particulars Amount Amount Amount 2006-07 2007-08 2008-09

Inventory

- Stores & Spares 14,700.00 19,350.00 20,000.00

- Raw Material 5,300.00 5,300.00 5,800.00

- Work-In-Process 3,000.00 600 3,450.00

- Finished Goods 3,900.00 13,650.00 9,400.00

Total 26,900.00 38,900.00 38,650.00

0

5000

10000

15000

20000

2007 2008 2009

Stores & SparesRMWIPFG

70

The report includes different parts of analysis of the inventory

management it also includes as follows. (Obj.)

1. Analysis of the operating cycle of the company.

2. Effect of the various inventories ratios of the company.

(1) ANALYSIS OF OPERATING CYCLE OF PEPSICO INDIA HOLDINGS PVT. LTD.

Following terms are found to calculate Operating Cycle.

A. Raw Material Conversion Period.

B. Work In Process Conversion Period.

C. Finished Goods Conversion Period.

D. Debtors Collection Period.

E. Creditors Collection Period.

Accounts

Cash Finished Goods

Raw-Material

Work-in-Process

71

We can found Operating cycle by using following formula,

O = R + W + F + D + C

Where, O = Operating Cycle

R = Raw Material storage period.

W = Work-in-process period

F = Finished stock storage period.

D = Debtors’ collection period

C = Creditors’ payment period

The basic tools are required for the Net Operating Cycle is as under:

Rs in Lakh

Particulars 2006-07 2007-08 2008-09

Opening stock of R.M. 2800 5300 5300

Closing stock of R.M. 5300 5300 5800

R.M. consumption 77300 105000 123000

Opening stock of W.I.P. 1800 3000 600

Closing stock of W.I.P. 3000 600 3450

Manufacturing expenses 116000 149000 178000

Opening stock of F.G. 4800 3900 13650

Closing stock of F.G. 3900 13650 9400

Purchase of F.G. 24700 40200 63700

Dist. & Other Exps. 12900 15300 17750

72

(A) Raw Material Conversion Period:

360dayper n Consumptio Material Raw

Inventory Material Raw Average Period Conversion Material Raw ×=

Rs in Lakh

Particulars 2006-07 2007-`08 2008-`09

R.M.C.P.

Avg. R.M. Inventory 4050 5300 5550

R.M. Consumption per day 214.72 291.67 341.67

R.M. Conversion Period 18.86 18.17 16.23

14.515

15.516

16.517

17.518

18.519

2007 2008 2009

RM Conversion Period

Interpretation: From the above chart we can see that the year 2008-09 raw material

conversion is 16 time.

Low raw material conversion period indicates the required of this material is

very high. So during the year 2008-09 conversion period is low. These types

of material requirements are high and investment of this material is low.

73

(B) Work-In-Process Conversion Period:

360perday Production ofCost

Inventory W.I.PAvg. Period Conversion ProcessInWork ×=−−

Rs in Lakh

Particulars 2006-07 2007-08 2008-09

W.I.P.C.P.

Avg. W.I.P. Inventory 2400 1800 4050

Cost of Production per day 300 400 460

W.I.P. Conversion Period 8 4.5 8.80

0

2

4

6

810

2007 2008 2009

WIP Consumption period

Interpretation: Here, in 2008-09 work in process conversion period is 8 times.

During the year 2008-09 work-in-process conversion period is high as

compared previous years. It is not good because these types of material

consumption are very high for the other product’s production.

74

(C) Finished Goods Conversion Period:

360dayper Sold Goods ofCost

Inventory F.G. Avg.Period Conversion Goods Finished ×=

Cost of goods sold = Manufacturing exp. + Marketing Administration & other exp.

+ Personnel exp. + Purchase of finished good.

Rs in Lakh

Particulars 2006-07 2007-`08 2008-`09

F.G.C.P

Avg. F.G. Inventory 4350 8775 11525

Cost of goods sold per day 100 80 240

F.G. Conversion Period 43.5 109.69 48.02

020

406080

100120

2007 2008 2009

FG Conversion period

Interpretation:

Here in 2008-09 the finished goods conversion period is 48 times.

During the year 2008-09 finished good conversion period is drastically low

from the previous year as compared to the year 2007-08.

Finished goods conversion period is directly affects the sales of that product.

During the year 2008-09 conversion period is low so that time sales of the

product is high and storage of that material is low.

75

(D) Debtors Collection Period:

360dayper salesCredit Avg.

DebtorsPeriod Collection Debtors ×=

Rs in Lakh

Particulars 2006-07 2007-`08 2008-`09

D.C.P

Avg. Debtors 43,000 60,500 39,000

Avg. Credit Sales per day 2,15,000 2,74,000 3,43,000

Debtors Collection Period 72 79.49 40.93

01020304050607080

2007 2008 2009

Debtors Collection Period

Interpretation:

Here see in year 2008-09 debtor’s collection period is 40.93 days.

The company collect the money for minimum days is very good and here in

2008-09 compare with previous years the collection period is minimum.

76

(E) Creditors Collection Period:

360dayper purchaseCredit Avg.

CreditorsPeriod Collection Creditors ×=

Rs in Lakh

Particulars 2006-07 2007-`08 2008-`09

C.C.P

Avg. Creditors 5,000 4,500 5,000

Avg. Credit purchase per day 2,00,000 1,70,000 1,50,000

Creditors Collection Period 9 9.52 12

0

2

4

6

8

10

12

2007 2008 2009

Credit Collection Period

Interpretation:

Here in 2008-09 the creditor’s collection period in 12 days.

So, it ascertains that the liquidity of cash will remain in term for long period

which gain with higher rate of return on investment.

77

Operating Cycle:

=

=

=

=

=

PeriodPaymentCreditors

PeriodCollectionDebtors

Period StorageStock Finished

PeriodW.I.P

StorageR.M.

Cycle Operating

Creditors Collection Period

Rs in Lakh

Particulars 2006-07 2007-`08 2008-`09

R.M 18.86 18.17 16.23

W.I.P 8 4.5 8.80

F.G. 43.5 109.69 48.02

Debtors 72 79.49 40.93

Gross O.C. 142.36 211.85 113.98

Creditors 9 9.52 12

Net Operating Cycle 133.36 202.33 101.98

0

50

100

150

200

250

2007 2008 2009

Operating Cycle

78

Interpretation: In 2008-09 the operating cycle is 101.98 days. So it shows that the operating

cycle between the time lag of conversion of Raw material to finished goods is

comparatively less than other years.

Here we can conclude that the liquidity of the firm is more which assist the

firm to pay their creditors within the time limit and receive the debts in proper

time.

Effect of the various inventories ratio:

The relationship of one item to another expressed in a single mathematical form

is known as the ratio. A ratio is a mathematical relationship between two

quantities. It engages qualitative measurement and shows precisely how

adequate is one key item in relation to another.

The various inventories ratios are as follows:

A. Inventory to Working Capital Ratio

B. Stock (Inventory) Turnover Ratio

C. Inventory to Sales Ratio

D. Inventory to Current Assets Ratio

I have discussed all the ratios which are as follows:

79

(A) Inventory to Working Capital ratio: Working Capital = Current Assets – Current Liabilities

Capital WorkingInventory

Calculate the inventory to working capital ratio, the basic tools are as below:

Inventory to Working capital ratio:

Rs in Lakh

Particulars 2006-07 2007-08 2008-09

Inventory 26,900 38,900 38,650

Current Assets 88,000 1,40,000 1,20,000

Current Liabilities 22,500 54,000 50,000

Inventory to working capital ratio:

Particulars 2006-07 2007-08 2008-09

Inventory 26,900 38,900 38,650

Working Capital 65,500 86,000 70,000

Ratio 0.41 0.45 0.55

80

0

0.1

0.2

0.3

0.4

0.5

0.6

2007 2008 2009

Inventory to working capital ratio

Interpretation:

In 2008-09 the ratio is 0.55.

This ratio indicates that how many inventories include in the working capital.

The ratio indicates the requirement of the inventories, and in 2008-09 the ratio

is 0.55, in that time the inventory requirement is high.

(B) Stock (Inventory) Turnover Ratio:

This ratio shows the relationship between inventory at close of the business and

the overall turnover. It indicates the number of times the inventory of a firm

rotates within an accounting cycle.

Total inventory turnover ratio is concerned with the cost of goods sold and

average inventory.

Stock (Inventory) Turnover Ratio =Inventory

Sold Goods ofCost

Cost of goods sold = Sales – Gross profit

Calculate the Inventory Turnover Ratio; the basic tools are as follows:

81

Particulars 2006-07 2007-08 2008-09

Sales 2,30000 3,00,000 3,70,000

Gross Profit 45,000 50,000 57,500

Total Inventory Turnover Ratio:

Particulars 2006-07 2007-08 2008-09

Cost of goods sold 1,85,000 2,50,000 3,12,500

Inventory 26,900 38,900 38,650

Ratio 6.87 6.43 8.08

0

2

4

6

8

10

2007 2008 2009

Stock Turnover Ratio

Interpretation:

It saws that the stock turnover ratio in 2008-09 is 8.08.

This ratio indicates how many inventory stocks in the store departments.

82

(C) Inventory to Sales Ratio:

Inventory to sales ratio established relationship between the sales with average

stock. This ratio measures the velocity of conversion stock into sales.

We can find this ratio by using below formula,

Inventory to sales Ratio =Sales

Inventory

Particulars 2006-07 2007-08 2008-09

Inventory 26,900 38,900 38,650

Sales 2,30,000 3,00,000 3,70,000

Ratio 0.12 0.13 0.10

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

2007 2008 2009

Inventory to Sales Ratio

Interpretation:

The above table saws that the stock Sales Ratio in the year of 2008-09 is

11%. This ratio indicates how much inventory stock in the store departments.

83

(D) Inventory to Current Assets Ratio:

Inventory to Current Assets Ratio is concerned with the Inventory and Current

Assets.

Inventory to Current Assets Ratio is defined the how many inventory available in

the Current Asset.

Inventory to Current Asset Ratio = AssetsCurrent

Inventory

Particulars 2006-07 2007-08 2008-09

Inventory 26,900 38,900 38,650

Current Assets 88,000 1,40,000 1,20,000

Ratio 0.31 0.28 0.32

0.26

0.27

0.28

0.29

0.3

0.31

0.32

2007 2008 2009

Inventory to Current Assets Ratio

Interpretation:

Here in 2008-09 includes 32% inventories in the Current Assets, which

indicates highest ratio amongst last three years data.

And in last 3 years data in 2007-08 has lowest inventories are includes in

Current Assets.

84

(4) SCOPE OF THE STUDY:

To prepare a project report I had taken the help of PepsiCo India Holdings Pvt.

Ltd. as a base. I had taken the data of last 3 years.

Analysis of Inventory Management includes the study of the operating cycle,

inventory ratios, and different techniques. It will be helpful to understand the

theoretical aspects of the topic.

The report is also showing company’s requirement of the different inventory in the

last 3 years, are also closely related to the sales of the company. It will be helpful

in analysing past performance of the company’s inventory management.

The total inventory management of the company is includes the Raw Material

Inventory, Work-In-Process Inventory, Finished Goods Inventory.

85

(5) RESEARCH METHOD:

There are three types of research Designs

Exploratory Research

Descriptive Research

Causal Research

For Research topic, I have selected exploratory research method which is more

suitable for me to find out Inventory Management system at PepsiCo India

Holdings Pvt. Ltd., since I have no clear ideas about the study, for this method to

apply in the study I adopt personal interview approach, for that I asked following

Questions:

Which types of Material are available in the Company?

How Inventory is managed?

How they stored the material?

By which method they verify the material?

What is the consumption of the company?

Production Process.

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E. FINDINGS

• The less you rely on human intervention to identify items, input

information, and track data, the more timely and accurate your records will

be.

• Company having nice security system as it keep records of all issued

materials. And apply ABC classification system.

• Company manage its difference of projected sales and actual sales as

safety stock for future demand at warehouse.

• Company have separate plant for vital materials like Oil and CO2 and

maintain safe and healthy organizational environment.

• Some times company sell of out dated finished goods to the wine

merchants, and sometimes it destroyed the material.

• Company outsourced Empty bottles and Briquette materials rather to

produce it internally to save time and investment.

• For the verification company use First in First out method for long term and

Weighted Average method for short term verification.

• The management of finished goods material is done tremendously by

storing it next to the loading area, which materials are loaded for the sale.

• From the calculation of the Operating Cycle it is found that company’s

operating cycle is reduce which is good for the company.

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CONCLUSION

I hereby conclude that my overall experience at PepsiCo India Holdings Pvt. Ltd.

was nice during one and half months study. In the academic period we study the

theoretical aspects of the inventory management, but here we got practical

aspect of the inventory management. We also got general information of various

other departments of the organization.

From the above information the conclusion is that, the company manage its

inventory in proper manner and practice its inventory management successfully.

It is necessary to do tight control on ‘A’ class Inventory. From the above

information the conclusion is that, the company’s financial position is good.

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F. LIMITATIONS

• Since the PepsiCo India Holdings Pvt. Ltd is the multinational company it

does not have public shares and it is also not listed in Indian stock market,

so it has not provided any financial data.

• The data required to calculate Operating Cycle are collected from the

colloquial conversation while I was undertaking training. The data are

collected from various concerned departments. All the data and its

interpretations are based on approx figures.

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G. SUGGESTIONS

• Company should invest some amount for Research and Development to

find out the cheapest techniques to manufacture outsourced materials.

• Company should also try to calculate the requirement of material by

Economic Order Quantity.

• Company should try to store their raw material at the same place rather

different place to save the time and for the optimum use of the space.

• Operating Cycle of the company is improve as compare to previous year

but it is not consistent so company should maintain consistency.

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H. BIBLIOGRAPHY

• Financial Management I. M. Pandey

Vikas Publishing House Pvt. Ltd.

Eighth Edition

• Financial Management

P. K. Jain & M.Y. Khan

McGraw-Hill Publishing company limited

Fifth Edition

• Essentials of Inventory Management Max Muller

Jaico Publishing house

I have also visited the following sights for the study of the Company and to get

necessary data related to the company.

• www.pepsico.com