WHAT IS INVENTORY: Definition of term inventory:

Inventory- A physical resource that a firm holds in stock with the intent of selling it or transforming it into a more valuable state.

Inventory System- A set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be all organizations hold stocks. These are the stores of materials they keep until needed. A shop, for example, buys goods from a wholesaler and keeps them in stock until it sells them to customers; a factory keeps a stock of raw materials for its products; a television company has a stock of recorded programmes; a farmer stores hay to feed his animals over the winter; a research company has a stock of information; a bank holds cash for its day-to-day transactions. Whenever an organization has materials that it does not use immediately, it puts them into stock .

Stock consists of all the goods and materials that are stored by an organization. It is a store of items that is kept for use.

An immediate problem is that people use these terms in different ways. In recent years it has become more common to use inventory for both the list of items and the stock itself, and the two terms then become interchangeable. At the same time, organizations refer to their stock as stores, provisions, stockpiles, holdings, reserves, accumulated materials, banks, or a host of other names. To add to the confusion some groups put slightly different interpretations on the terms. Accountants, for example, view inventory as the amount of money tied up in stocks, rather than the stocks themselves, or it might be the total value of

an organizations assets. To finance people, stocks are a way of raising capital in the sense of stocks and shares and have nothing to do with stores of materials. Usually, these differences are fairly obvious and cause few problems, but sometimes you have to be a bit more careful. In this book we will stick to the standard definitions, where an inventory is a list of the items held in stock An inventory is a list of the items held in stock

Types of stocks:

To achieve these purposes, organizations hold different types of stock. A useful classification has: 1. Raw Materials, which have arrived from suppliers and are kept until needed for operations

2. Work in progress, which are units currently being worked on

3. Finished goods, which are waiting to be shipped to customers This is a fairly arbitrary classification, as one organizations finished goods are another organizations raw materials. Some organizations (notably retailers and wholesalers) have stocks of finished goods only, while others (manufacturers, say)have all three types. Some stock items do not fall easily into these categories, so we can define two additional types as:

4. Spare parts, for machinery, equipment, etc.,

5. Consumables, such as oil, paper, cleaners, etc

INVENTORY CONTROL:

Inventory Control and Management: long and broad removes most control from the organization and raises costs, but gives good customer service. As you can see, organizations often have to find the best balance between costs and customer service. This is a common theme in inventory management, and we will return to it several times in the book. Unfortunately, there is never a single best shape for a supply chain, and managers have to look for designs that come closest to achieving their aims. One approach to doing this takes the following steps:

1. The logistics strategy sets the overall direction of logistics (as we shall see in the next chapter) so analyse this and find the aims of the supply chain.

2. Examine current operations, identify their failings and look for ways of overcoming these.

3. Design an outline structure for logistics, finding the number of facilities, best locations, modes of transport, investment in stocks, etc.

4. Make detailed plans, setting the size of each facility, stock holdings, Material handling equipment, systems to develop, people to employ, transport needs, etc.

5. Get final approval from senior managers and agree the funding.

6. Finalize building designs, purchase land, choose contractors and build.

7. Finalize equipment design, choose equipment, suppliers and purchase.

8. Finalize systems design, for ordering, inventory control, billing, goods location, monitoring and all other systems

9. Fit out facilities, install all equipment, systems, staff and test operations.

10. Open and receive stock, run final tests of all systems, finish training and begin operations.

11. Sort out teething problems and get things running smoothly.

12. Monitor and control, ensuring that everything works as planned, measure performance, revise targets, etc

This is, of course, only a guideline to suggest the decisions in designing a supply chain. You can clearly see how decisions about the broader supply chain affect the stocks by, for example, setting the location, space available, handling facilities, systems and investment. You can also see how, conversely, attitudes towards stocks affect the design of the supply chain. If, for example, organizations accept that large stocks of finished goods must be kept near to customers, they will design supply chains to feed into these stocks.

PURPOSE OF INVENTORY MANAGEMENT AND CONTROL:

INVENTORY MANAGEMENT must tie together the following objectives ,to ensure that there is continuity between functions : Companys Strategic Goals Sales Forecasting Sales & Operations Planning Production & Materials Requirement Planning.

Inventory Management must be designed to meet the dictates of market place and support the companys Strategic Plan . The many changes in the market demand , new opportunities due to worldwide marketing , global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control .

Inventory Management system provides information to efficiently manage the flow of materials , effectively utilize people and equipment , coordinate internal activities and communicate with customers . Inventory Management does not make decisions or manage operations, they provide the information to managers who make more accurate and timely decisions to manage their operations.

INVENTORY is defined as the blocked Working Capital of an organization in the form of materials . As this is the blocked Working Capital of organization, ideally it should be zero. But we are maintaining Inventory . This Inventory is maintained to take care of fluctuations in demand and lead time. In some cases

it is maintained to take care of increasing price tendency of commodities or rebate in bulk buying.

Traditional Supply Chain solutions such as Materials Requirement Planning , Inventory Control , typically focuses on implementing more rapid and efficient systems to reduce the cost of communicating information between and across the Inventory links in the SCM.COM focuses in optimizing the total investment of materials cost and workload for every Inventory item throughout the chain from procurement of raw materials to finished goods Inventory . Optimization means providing a balance of supply to meet the demand at a minimum total cost , Inventory level and workload to meet customers service goal for each items in the link of Inventory Chain .

It is strategic in the sense that top management sets goals . These include deployment strategies ( Push versus Pull ) , control policies , the determination of the optimal levels of order quantities and reorder points and setting safety stock levels . These levels are critical , since they are primary determinants of customer service levels.

Keeping in view all concerns , the latest concept of Vendor Managed Inventory is used to optimize the Inventory . We are entering into Vendor Managed Inventory , Annual Rate Contracts with manufacturers or their authorized dealers , who maintain Inventory on our behalf and supply the items as and when required .

VMI reduces stock-outs and optimize inventory in supply chain . Some features of VMI include : Shortening of Supply Chain Centralized Forecasting

 Frequent communication of inventory, stock-outs and planned promotions

Trucks are filled in a prioritized order , e.g. items that are expected to stock out have top priority then items that are furthest below targeted stock levels then advance shipments of promotional items

Despite the many changes that companies go through, the basic principles of Inventory Management and Inventory Control remain the same. Some of the new approaches and techniques are wrapped in new terminology, but the underlying principles for accomplishing good Inventory Management and Inventory activities have not changed.

The Inventory Management system and the Inventory Control Process provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities, and communicate with customers. Inventory Management and the activities of Inventory Control do not make decisions or manage operations; they provide the information to Managers who make more accurate and timely decisions to manage their operations.

The basic building blocks for the Inventory Management system and Inventory Control activities are:

Sales Forecasting or Demand Management Sales and Operations Planning Production Planning Material Requirements Planning Inventory Reduction

The emphases on each area will vary depending on the company and how it operates, and what requirements are placed on it due to market demands. Each of the areas above will need to be addressed in some form or another to have a successful program of Inventory Management and Inventory Control. Inventory is usually a distributors largest asset. But many distributors arent satisfied with the contribution inventory makes towards the overall success of their business: The wrong quantities of the wrong items are often found on warehouse shelves. Even though there maybe a lot of surplus inventory and dead stock in their warehouse(s), backorders and customer lost sales are common. The material a distributor has committed to stock isnt available when customers request it. Computer inventory records are not accurate. Inventory balance information in the distributors expensive computer system does not accurately reflect what is available for sale in the warehouse. The return on investment is not satisfactory. The companys profits, considering its substantial investment in inventory, is far less than what could be earned if the money were invested elsewhere.

INVENTORY MANAGEMENT AT A BIG BAZAAR

Product categories in Big Bazaar Big Bazaar generally deals in national level brands like Lee, Levis etc, Other than this it also deals in some Private label brands DJ&C in apparel, KORIA in electronics etc. Then we asked about the product categories , that are :FMCG, FOOD & NON- FOOD junction , Staple items , fruits & vegetables , fashion & apparels ,chill section , home decorator , footwear , book zone, CDs etc

Location of Big Bazaar Considering all the facts which we have studied, and seeing the strategic location of Big Bazaar, we can say, that the location is the best, it could have in ............ Firstly it is in the heart of the city. Secondly it is in a shopping mall, which has all types of customers coming in and their, footfalls, being easily converted into sale, by the efficient employees of big bazaar. Moreover it is at the place where traffic inception is always high. It is near station, which gives it another competitive advantage over its competitors. Transportation is also good, as one can easily reach big bazaar through auto, private vehicles etc.

Types of inventories maintained. The inventories maintained in the outlet, are of different product category. Mainly Cycle inventory is maintained for FMCG product category & Food Category, Safety level of inventory for FMCG Products, and for Apparel, Seasonal inventory is maintained, because of fluctuation in demand.

Decision of how inventories are maintained Then coming to how the store manager decides the level of inventory, the store manager inspects the stocks time to time and also the demands of customers. Manager maintains the Stock in & Stock out, so that he can decide the level of inventory. He, also has seen the trends in the requirement of inventories, as for eg. he told that apparels are ordered approximately after 45 days. For every sample of clothes they have a back up of 10 pieces. However in case, if more number of pieces are required, they first ask other big bazaar location such as that of Patia etc. but if, even then they fail to meet the demands of customers, they go for Transfer of Interest. In this they prefer sending the customers to pantaloons, as it is also of Future Group, instead of losing them. He also told that recently big bazaar has undergone tremendous technological advancement, as its supply chain has become completely computerized. Once the product is sold, automatically, the computer sends the request for back up.

Reorder points of inventories The manager in charge told us that there is no such reorder points. Orders are placed as and when required. However he told that there are no such measures, except in a few items. Previously apparels were ordered once there stock fell below 4 per item piece. For general merchandise, which includes, food and non-food items, it was 7 days. However they always keep in mind the transit time of 2 days. Vegetables are taken on a daily basis, form local vendors.

Uncertain demands of customers As discussed earlier, the uncertain demands are met by either by getting it through other outlets of big bazaar or through transfer of interest, to other

outlets of future group, like Pantaloons.

Supply chain of perishable and imperishable goods Perishable goods like vegetables are maintained with great care. Vegetables are bought on daily basis on the basis of demand, and seasonal item. It is also ascertained that damaged vegetables are sold at a low cost to some other channels. Whereas imperishable goods like utensils and staple goods and electronic items are brought from ............. The distribution channel used in supply chain process is operated by Central Distribution Channel, which is located in ... From there goods are supplied to every Big Bazaar Store. The modes of transportation which are used in supply chain process are Truck & Rails, but in case of emergency, flights are also being used. The transportation is outsourced. Mainly the carriers for Big Bazaar are Quick & Safe, Gati, Deluxe Roadways, and TNT.

Operational strategies followed by retail outlet to attract more customers When we raised the question of strategy for attracting customers, the manager was not willing to answer us. However after convincing him a lot, he gave us some generalized strategies. He told us that mostly they give discount offers. Discount offers are basically given by manufacturers to them, and after keeping a safe margin of profit, they release the items on discounts. They also give ads in television, go for promotional activities and put banners on road sides. However once the customers is inside the store, then also strategies keep changing. They keep thing in places where they see for longer duration, for eg. near corners of turning, on cash counters etc.

Area of Maintenance Since the store is fully computerized, in the sense, like billing, inventory management, electronic equipments near the gates, to check thieves, it has to take proper care of machines. Food items are to be regularly checked. Inventory room has to be checked regularly for any sort of leakages. Air conditioners have to be regularly checked. Electrical wirings have to be closely monitored. Short circuit cameras have to be checked regularly as it is a major factor in security arrangement.

Quality of Food-items Food items are kept in a separate place, both in inventory and at store. Food items which are required to be kept at cold places, like cold-drinks, cheese, milk products, milk, fruits, etc. are kept in refrigerators, whereas those which can be kept anyway, are kept on proper shelves.