A PROJECT REPORT ON

“TO DECREASE THE WORK LOAD WITHOUT HAMPERING THE NET PROFIT OF THE FIRM”

CARRIED OUT AT VAIBHAV AGENCIES

NAGPUR

IN PARTIAL FULFILLMENT OF THE COURSE OF

M.B.A.(SEM-I)

[WINTER PROJECT]

SUBMITTED TO:

THE UNIVERSITY OF PUNE

PREPARED BY:

AGRAWAL VAIBHAV GAJADHAR

DIV: A ROLL NO: 02

UNDER THE GUIDANCE OF

PROF. SANMATH SHETTY

THROUGH

S.K.N. SINHGAD SCHOOL OF BUSINESS MANAGEMENT.

PUNE-41.

(2010-2011)

ACKNOWLEDGMENT

I have pleasure in successful completion of this work titled

: TO DECREASE THE WORK LOAD WITHOUT HAMPERING THE NET PROFIT OF THE FIRM

The special environment at S.K.N.SSBM, Pune that always supports educational activities, facilitated my work on this project.I acknowledge the support and encouragement extended for this study by Principal Dr.Rajshree shinde

I greatly appreciate the motivation and understanding extended for the project work, by Mr.G.G. Agrawal And staff of the surveyed firm, who responded promptly and enthusiastically to my requested actions despite their congested schedules. I am indebted to all of the fellow suppliers to the firm, who helped to implement the project through their support and suggestions.

I am very much thankful to Prof.Sanmath shetty for his encouragement and guidance for this project work.

I acknowledge the authors, whose works gave me insight and information related to this subject.

I am thankful to my father and mother as well the friends who encouraged me to extend my reach; with their help and support, I have been able to complete this work.

Signature

Date: (name of the student)

DISCLOSURE- The abovesaid firm is of my father. I have been a part of it for many years. So I knew the problems and short-comings before hand. It also gave me liberty and freedom to exercise my decision fearlessly. Yet I have tried my best to do it absolutely professionally with full dedication.

INDEX

1. INTRODUCTION

2. RESEARCH METHODOLOGY

3. DATA ANALYSIS

4. FINDINGS

5. MEASURES TAKEN

6. CONCLUSION AND SUGGESTIONS

INTRODUCTION

“Vaibhav Agencies” is a Pharmaceutical Distributorship firm located in Nagpur.Started in year 2002 it has progressed consistently in terms of sales and distribution.

With the years passed by, the revenue of the firm increased consistently and so the work load. Currently there are around 9 people working in the firm. The total area of the working place is about 10x12 feet.

As far as selling is concerned the number of brands that are currently sold by the firm ranges about 2500. All the items are sold in cash only and delivered at the same time. The trade timing is such that almost 90% of the sales takes place in just 4 hours i.e; between 3pm to 7pm. Also all the bills has to be dispatched at the same time and payment has to be taken immediately.

Also as regards to purchasing, all items are purchased from the stockists situated in the same market as it being a centralized one i.e; all the stockists and sub-stockists are located in the same complex. So it becomes absolutely necessary to manage stock without hampering the selling process.

Thus its a firm where place is a constraint and where sales and purchase activities have to be balanced in such a way that customer doesn’t have to wait for long because they have got another supplier waiting for them very next door.

The firm gets margin ranging from 5 to 10 percent of which 3 to 4 percent gets exhausted in mere billing process. Also it has to pay interest of about 12% per annum on the bank credit facility used.

RESEARCH METHODOLOGY

As such the problems with the firm were very well explained by the owner and workers. Also as the student itself has worked there personally so even he was knowing the short-comings before-hand.

The firm is using a software provided by “MICROTEK SOFTWARES” which keeps record of all the transactions that has taken place since the firm started in a yearly pattern.

Inputs were taken from the customers, workers and some well known people of the market for their invaluable experience as they are the key role players.

The owner of the firm itself has a very vast knowledge of business of about 30 years.

Also having been closely associated with the firm for so many years even the student himself knows the basics of , if not the whole market, the firm atleast.

Also a detailed study of data was made using the information stored in the software used by firm.

DATA ANALYSIS

As already stated the problems of the firm were well known befor hand. So data analysis was done to take and implement the decisions and not for finding problems.

Data analysis was done with the help of software as it had all the information regarding the firm.

FINDINGS

The main problems that were either known before-hand or were found during the due course of project are as follows.

The financial statements of the firm were not tallied for almost last seven months.

The physical stock of medicines was not tallying with the stock that has to be there according to firm’s inventory software.

The firm was placing problem of space to keep the stock. The firm was placing problem of space for carrying out day to day

activities as it was overcrowded by workers itself. Invoice of many customers were not made because of over-crowding

of billing counter leading to sales loss. The replenishment of stock was not proper. Also many items could not be found in actual while the software was

showing them to be there in stock. There were many mistakes done by workers while dispatching items to

the customers in terms of quantity and brand. Example - if its written in invoice to give 1 strip of certain brand, they

supplied 2 strips as the pack itself is of 2 strips and it looks like that it should contain only one strip.

Many items were found to be non-moving and very slow moving leading to blockage of working capital.

Also customers were bit unhappy with the behaviour of the workers and the policies of the firm regarding expiry and breakage claim settlements.

MEASURES TAKEN (SOLUTIONS)

The financial statements of the bank were brought and tallied first. All the entries of cheques,cash deposit,purchases were made and the discrepancies found in them were settled.

Utilizing Sundays all the formalities for income tax filling were done and finalized by chartered accountant till year ending 31st march 2010.

All the expired items and the items which were about to expire in next 3 months were taken off from the shelf and were discontinued from selling.

It was found that there were lots of non moving items which were causing blockage of space and working capital.the suppliers were contacted and were told about the objectives. They understood the situation and got ready to lend their help.thus all the non moving items were returned back to them under no profit no loss tag. This helped in clearing working capital of almost 1.5 lakh rupees and most importantly the space.

In due course it was found that there were many items that were very cheap in rate and they required a lot of space to store them. Also the revenue generated by them was not significant either in terms of sales or profit margin.

Example- A combo pack of 2 strips of brand name DEXONA tablets costs around Rs 2.64 . The total sales generated by it was around Rs 8000 per annum. Also there always happened to be shortages of it because of over supply to customers owing to its packing.

All such items were shortlisted and were discontinued after they got sold out. It resulted into discontinuance of almost 50 items.

Items of companies like SUN PHARMA were discontinued owing to very less margin on sales. The net profit on the sales was around 1% only, while the range was very vast.

Many items were found to be very slow moving which in long term is actually a loss to firm. The explanation of which is as follows,

Suppose that 10 bottles of xyz syrup takes 3 months to get sold. The firm gets 6% of margin on its purchase. In making invoice atleast 3% of profit gets exhausted in terms of cash discount. Now the remaining 3% can be taken as a profit. But if we calculate then we will find that the firm has to pay interest to bank for using the credit limit. Thus in 3 months the firm end up paying 3% interest to bank thereby bringing profit on that particular brand to be theoretically zero.

All such items were either returned off or has been asked to be discontinued from selling after they get sold off. For avoiding reordering of such items a dollar sign ‘ $ ‘ has been put in front of their coding in software.

Example- xyz syrup $

Thus almost 450 items were discontinued combining expired, non-moving, having negligible margin, slow moving and having cheap value.

This helped in creating a lot of space for keeping items and the immediate effect that was seen was that the delivery speed of the floor staff got improved by almost 50%.

Now talking about the loss in net profit it can be seen that the firm will suffer no loss as far as non-moving and very slow moving items are concerned.

Now coming to loss in net profit because of discontinuance of items with very negligible profit margin, it was found that the total revenue generated out of such items was somewhere around close to RS 3.8 lakh per annum. Thus the firm was earning Rs.3500 per annum on selling such a vast range of brands approximately 60 in number. This loss can be taken as being nullified if we consider the working capital generated out of return of non-moving items which is approximately 1.5lakh rupees. The interest that will be saved on it is big enough to cover the abovesaid loss. Also if its utilized efficiently then it will give return upto 8% following principle of rolling of working capital.

Now considering the net loss in profit that the firm will incur due to discontinuance of cheap brands. If we take the total revenue generated out of these items to be Rs 8 lakhs per annum which is far more than actual revenue earned out of them, the net profit earned out of these would amount to Rs 16000 @ 2% profit on sales.

But it can be seen that due to discontinuance of these many items the work load has decreased drastically and it has actually created an opportunity for shortening the work force. Work force shortening was infact necessary as the workers were not having enough space to walk or work owing to small floor area and the condition gets worse during peak hours.

Thus even if one worker is discontinued, the firm will save Rs. 24000 per annum ( if we consider the very basic salary as Rs 2000 per month) which alone is capable of nullifying the net loss of abovesaid Rs 16000.

Thus it can be seen that owing to all such measures taken the work load has decreased drastically while the net profit has infact increased.

TO MINIMISE FAULTS IN DISTRIBUTION

As explained above to minimise the losses due to packaging problems following steps were taken. The products which are having quantity of 2 strips in a box has been started to be sold as a box and not in loose quantity.

Example- Tab Jalra which comes in a box of 2 strips is now sold as a box only.

Also brands like Tab DECDAN comes in a combo pack of 5 strips joined together which can be cut only by using scissors. Coding of such items were made in the form of similar to their combo pack. That is now DECDAN is sold only in the multiples of 5. This helped in reducing delivery time and also loss due to over supply.

During all these it was found that number of items were having almost similar brand names. Also the brands were having several sub-brands.

Example- TELVAS 40 & TELSAR 40,

DICLOCIN MR & DICLORIL MR,

TELMA 80 & TELMA 80-H etc.

The rates of these items were having huge difference. It was found that customer were reporting the discrepancy if they get under priced product but not if its vice versa. Also lot of time used to get waste in searching for that product and then tallying the stock. So study of such items were made and those which were either slow moving or cheaper as compared to other or were generating less revenue as compared to other were discontinued after they got sold.

To counter balance the loss of revenue due to above activity, new items were introduced.

Example- Savlon & many OTC products

These products are fast moving and in fact having margin greater than the discontinued products.

Thus all the above measures were taken to reduce to loss and workload related to distribution.

CHANGES IN ORDER CYCLE- Prior to project the firm used to give purchase order only once in a week. Because of these large stock of items used to come at once and hence it used to become very tacky to tally all these stock and arrange them in shelf. Also a worker used to go to every shop personally to give purchase order.

Hence it was decided to give purchase order on telephone (which is feasible because of group plans of telephone) and that too twice a week. Also it was decided that some major suppliers will be given purchase order daily. This helped in maintainance of stock and also smoothened the purchase process.

CHANGES IN INVOICING- The culture of market is such that one man comes to do purchasing for almost 5 to 10 customers. Also there are some major customers who purchases in bulk. Order from such customers and purchasers was then started to be taken on telephone that too in the lean hours of morning when the billing is almost nil. This helped a lot in reducing work load during peak hours and also the delivery got smoothened as by the time they come to the shop their order gets processed, checked and packed.

STAFF SATISAFACTION- Staff is the backbone of any organization. A happy employee is necessary for smooth working of an organization. Therefore considering current inflation the salaries of the staff were increased proportionately.

CUSTOMER SATISFACTION- The customers were not happy with the expiry & breakage policy of the firm. To resolve all these, firstly one time settlement of all their claims were done. Then a cart was installed in front of the shop for putting expiry & breakage and they were asked to drop the packets of their expiry and breakage items with the name of their firm inside it in between 1st to 18th of every month. Thus customer satisfaction was given priority and efforts were taken to achieve the same.

STOCK VERIFICATION- Stock verification was initiated by taking 3 to 4 companies daily in order to match the actual stock with that shown by software. As this helps in maintainance of proper inventory and also reduces the time loss.

CONCLUSION

All the above measures helped in reducing the work load drastically.

Also it was found that the daily turnover had not suffered any drastic decline owing to discontinuance of so many products. The main reason behind it being improved sales and purchasing pattern.

The firm has immense potential to improve and capture market if it can find some solution to the constraint of available space.

SUGGESTIONS

It has been suggested that the firm should go for bulk purchase and avail bulk discount which is very prominent.

It has been suggested that the firm should keep on searching for products having prominent margin.

It has been suggested that fast moving items should be purchased in bulk.

It has been suggested that slow moving items with schemes should be purchased only in one lot of scheme to avoid blockage of space and working capital.

It has been suggested that all the financial statements should be tallied in the same month.