Project On Inventory Management

Case Study on Inventory Management: A Case Study in Jap
Enterprises
Submitted in partial fulfillment of the requirements for the
award of the Degree of
MASTER OF BUSINESS ADMINISTRATION

of
BANGALORE UNIVERSITY
By
Sarvajith M.S
Register Number: 151GCMD120
Under the guidance of
N. Suresh
Sr. Assistant Professor
RashtreeyaSikshanaSamithi Trust
R V INSTITUTE OF MANAGEMENT
CA-17, 36th Cross, 26th Main, 4th T Block, Jayanagar,
Bangalore 560 041
20162017
DECLARATION BY THE STUDENT
I hereby declare that INVENTORY MANAGEMENT : A CASE STUDY IN JAP

ENTERPRISES is the result of the project work carried out by me under the guidance
of N. SURESH Sr Assistant Professor in partial fulfillment for the award of Masters
Degree in Business Administration by Bangalore University.
I also declare that this project is the outcome of my own efforts and that it has not been
submitted to any other University or Institute for the award of any other Degree or
Diploma or Certificate.
Place: RVIM (Bangalore) Name : Sarvajith M.S

Date: 17/10/2016 Register Number: 151GCMD120
ACKNOWLEDGEMENT
The successful completion of any task would be incomplete without mentioning the
people who made it possible and whose constant guidance secured as success.
I express my deep gratitude to our Director Dr. T V Raju, RVIM Bangalore and for his
support in the successful completion of the case study and for giving me an opportunity
to complete this study successfully.
It is with humble sense and gratitude with heartfelt appreciation to my guide N Suresh,
Sr Assistant Professor, RVIM, whose estimable aid, keen surveillance, support,
continued inspiration, valuable guidance and meticulous supervision throughout the case
study and to bring this case study to a successful completion.
I would like to express my heartfelt gratitude and sincere thanks to Mr. Dayanand
Shetty, Owner Jap Enterprises for carrying out this case study project and providing all
the facilities.
I would also like to thank all the faculties and staff members for providing every form of
assistance and guidance whenever required. I am grateful to my parents, friends and well-
wishers who have encouraged and supported me in the completion of the case study.
Date: 17/10/2016 Sarvajith M.S
Place: Bangalore 151GCMD120

CONTENTS
TITLES PAGE NO.
1.3
ABSTRACT 1
2
1.4 INTRODUCTION
2
1.4.1 INDUSTRY INTRODUCTION
BACKGROUND 4
1.5 1.5.1 COMPANY INTRODUCTION 4
1.5.2 SWOT ANALYSIS 6
1.5.4 PRODUCT PROFILE 8
1.6 CASE CONTEXT 13
CASE STUDY 14
1.7.1 STOCK SUMMARY DETAILS 18
1.7 1.7.5 CRITICAL INCIDENT 21
1.7.8 STOCK AGEING ANALYSIS 25
1.7.9 INVENTORY TURN OVER RATIO 25
1.8 THEROITICAL CONCEPT 27
1.9 DISCUSSIONS 32
1.10 REFLECTIONS 34
1.11 REFERNCES 35
LIST OF TABLES
TABLE NO. NAME OF THE TABLE PAGE NO.
1.5.2 SALES DETAILS FOR THE YEAR 15-16 4
1.5.3 NET PROFIT DETAILS FOR THE YEAR 15-16 5
1.7.2 STOCK DETIALS OF BOTTLES 18
1.7.3 STOCK DETAILS OF CHEMICALS 19
1.7.4 STOCK DETAILS OF BEVERAGE FLAVOR 20
1.7.7 STOCK DETAILS OF LUGGAGE 24
1.7.9 INVENTORIES TURNOVER RATIO 25

INVENTORY MANAGEMENT: A CASE STUDY IN JAP ENTERPRISES
1.3 ABSTRACT:
The JAP (JYOTHI AERATED PRODUCTS) ENTERPRISES is a business organization

which does mainly distribution business. It includes distribution for one of the leading
brands in the field of Luggage owned by Samsonite in Bangalore and Mangalore city.
The Jap enterprise is also involved in the other type of distribution in the field of
Beverages, outdoor advertising and soft drinks bottle distribution.
It is a company with multifarious activities in the distribution business and hence it is

important for them to effectively manage the inventory levels so that they can maintain
the less stock level in the stores and can effectively manage the working capital in the
business. The main objective is to study the present techniques, which have been
employed in managing the inventory. The study involves the data collection of stocks in
the logistics line for all the types of products and also the system which has been
employed in maintaining the different stock levels of products.
The study involves how the Just in Time technique has been applied and how much of it
has been helping them in reducing the inventory levels. The study also involves analysis
of FIFO (First in First Out) techniques used in maintaining the stock levels for soft Drink
flavors.
The present case study attempts in analyze the present practices that has been followed by
JAP ENTERPRIESES for managing the Inventory. Based on the detailed study it also
attempts to give suggestions for improving Inventory Management.
KEY WORDS: JIT (JUST IN TIME), FIFO, LEAN MANAGEMENT
R V Institute of Management Page1

1.4INTRODUCTION
1.4.1 INDUSTRY INTRODUCTION:
The Indian Luggage Market:
The Indian Luggage industry is mainly involved in the making of luggage bags, bag
packs, duffle bags, laptop bags and other business travelling bags. The Luggage market
of India is undergoing a lot of innovation and development in the context of snow balling
the convenience of people.
Innovation has led to the upcoming up of water proof luggage and the smart luggage
called plug gage. The Luggage market can be divided on the base of organized and
unorganized segment. The majority of share is still occupied by the unorganized segment.
The unorganized markets are the one which uses recycled grade of polymers of 1st and
2ndtype of quality. Due to the above low quality they are able to produce the bags with
much cheaper rate compared to the high quality materials that has been used by
companies like American Tourister, VIP etc. The Luggage market is mainly concentrated
by the development in the Indian travel and tourism industry as with more people
travelling, the luggage they carry will increase equivalently. It is forecasted that the
Indian Luggage market will grow at a CAGR of 20 % over the period of 2015-2020.
Market size
6000
5000
Market value In crores
4000
3000
2000
1000
0
2011 2012 2013 2014 2015
Year

Beverages Industry:
In India, coke and Pepsi have a combined market share of around 95% directly or over
Franchise and the rest is shared among Local Players. According to the report by the
Indian Council for research on International Economic Research and the Indian Beverage
association the consumption of Non Alcoholic beverages are expected to increase by 16.5
19 % over the next five years. As per the IBA report with the rise in incomes, Indias
nonalcoholic sector has evolved both in terms of product selection and the number of
companies in the market.
Outdoor Advertising:
Indian Billboard Industry to touch 1110 crores by 2016. The biggest benefits of
billboards are their visibility. An advertisement in other mediums like newspaper or
magazines can get missed out by an individual but billboards are much more likely to
catch attention due to their larger sizes and strategic location. Research firm IMARC
group expects this to grow at a CAGR of around 5 % in the next three years. A bill board
placed near a busy traffic area generally catches attentions of thousands of travelers each
day, many of whom can turn into customers. This being key reason for billboards being
the most chosen among outdoor advertising options.

1.5 BACK GROUND
1.5.1 COMPANY INTRODCTION:
The JAP ENTERPRISES is a business organization which does mainly distribution

business. The company was set up in 1999 in Mangalore by Dayanand Shetty and Sujatha
Shetty. The company presently has 35 employees in both Mangalore and Bangalore
division. The company started their business with the distribution of Beverage Flavor,
chemicals and Co2 gas cylinders for the soft drink manufactures in the Mangalore
District.
In the year 2000 they have entered into Outdoor advertising business concentrating
mainly on Hoardings. Presently they have around 50 hoardings in Mangalore, Hassan and
Bangalore.
In the year 2001, The Company entered in to soft drink bottle distribution for the soft
drinks manufacturers. They also involved in the supply of crown caps for the soft drink
bottles.
In the year 2010, they have entered in to distribution of one of the leading brands in the
Luggage industry called American Tourister owned by Samsonite for Mangalore and
Bangalore division. Now they are in the 2nd position in overall turnover in the distribution
of the American Tourister in Karnataka.
In the year ending March 2016 the company has made a turnover of 9.18 Cr for the year
2015-2016 with the YOY growth of 15% combining all the business.
The sales details for the year ending March 2016 have been given below:
Table 1.5.2 Sales Details for the year 2015-2016
Sl.No Details Sales in Rs

1 Soft Drinks 1,88,50000
2 Hoardings 45,80000
3 Luggage ( Mangalore 14860000
4 Luggage ( Bangalore ) 42860000

Sales Details for the year 15-16

2,500,000.00
2,000,000.00
1,500,000.00
Sales in Rs
1,000,000.00
500,000.00
-500,000.00
Luggage ( Luggage ( Banglore
Soft Drinks Hoardings
Mangalore ) )
Series1 618,238.00 -220,324.00 196,847.00 1,947,037.00
Details
The company has made Net Profit of Rs 25, 41,799 for the year ending March 2016 with
YoY growth of 15 %.
The Net profit details of the individual business are shown below:
Table 1.5.3 Net Profit details for the year 2015-2016
Sl.No Details Net Profit in Rs

1 Soft Drinks 6,18,238
2 Hoardings -2,20,324
3 Luggage ( Mangalore 1,96,847
4 Luggage ( Bangalore ) 19,47,037
Net Profit Details for the year 15-16

2,500,000.00
2,000,000.00
Profit in Rs
1,500,000.00
1,000,000.00
500,000.00
-
-500,000.00
Luggage ( Luggage ( Banglore
Soft Drinks Hoardings
Mangalore ) )
Series1 618,238.00 -220,324.00 196,847.00 1,947,037.00
Details

The Hoarding business had a negative profit, the key reason is the company has made an
investment of Rs 22 Lakhs in installing of new hoardings. As per discussion with the
company owner they have informed that from the next year the hoarding division will
contribute to the profits for the company.
The Luggage division in Bangalore had improved in both the sales as well as added
around 25 % growth when compared with the previous year. The Beverage sales and
profit grew 13 % YOY. The industry has sluggish growth due to consumers preferring
less on local brand soft drinks compared with previous years. Along with that two more
new competitors entered in to the market in selling of beverage flavors in Mangalore. The
customers prefer are substitute products like Tetra tender coconut, natural tetra fruit juice
packs instead of soft drinks. These things have been lead to slow down in the demand for
soft drinks which in turn is affecting the beverage flavor supply.
These slow also effects on the bottle distribution, chemicals and Co2 gas distribution
which has been directly linked to the demand for soft drinks.
1.5.2 SWOT ANALYSIS OF JAP ENTERPRISES
STRENGTH:
1) Company is located in the center of the city with their distribution warehouse.
2) The company has experience in multifarious activities in the distribution business.
3) The company year on year growth of around 14 % - 15 %.
4) Good customer relationship.
5) Good relation with suppliers.

WEAKNESS:
1) Company should concentrate on timely customer service and delivery.

2) The payments to labor should improve and timely salary should be credited.
3) Attrition rate is higher in the company.
4) No proper organization structure.
5) No discounts offers are given.
OPPORTUNITIES:
1) The company can expand its luggage business to enter South India.
2) Scope for expanding the Hoarding business in Bangalore and other parts of
Karnataka.
3) Scope for setting up of bottle screen printing machine.
THREATS:
1) High competition from VIP, GUCCI and local manufacturers.

2) Due to wide spread of E- commerce and high discounts offered in the online,
there will be less customers visiting retail outlets.
3) Local soft drink companies may face the stiff competition from the branded
companies like Pepsi, coke etc.
4) Substitute for soft drink has been emerging in bigger way day to day.

1.5.4PRODUCT PROFILE:
Products and services offered by the company.
AMERICAN TOURISTER
LUGGAGE BAGS
BEVERAGE FLAVORS
BOTTLES
PRODUCTS
CO2 GAS & CYLINDERS
CHEMICALS
CROWN CAPS
BILL BOARDS

AMERICAN TOURISTER : List of products
- ACCESSORIES
- BACKPACK
- BUSINESS COLLECTION
- CASUAL COLLECTIONS
- DIGITAL ACCESSORIES
- DUFFLE
- HARD LUGGAGE
- HIGH SIERRA
- SOFY LUGGAGE

BEVERAGE FLAVORS:
These are the flavors which are used for in production process of carbonated drinks.
There are different suppliers which supplies different types of flavors for the soft drinks.
Below are the list of suppliers and their flavor details.
Beverage
flavor
suppliers
DOHLER GIVUADAN IFF KERRY KEVA
American
Clear lemon Apple Icecream soda Jaljeera Ginger
Cardamam
NImbu Pani Apple Flavor Lemon Zaffrani Pista
Narda
Mango Zaffrani pista

Orange Cola Butter Scotch
Alphanso Almond
Preservative Coconut
Ginger Flavor Orange
liquid
Strawberry
Juicy Orange Lemon Lime
Emulsion
Mango Orange Rose
Pine Apple Pineapple
Rose
Strawberry

BOTTLES:
They distribute the bottles of various sizes for the soft drink manufacturers.
The different sizes of the bottles are as follows:
Bottles
200ml Green 200ml White 250 ml Green 250ml White 300ml white
CO2 GAS & CYLINDERS:
The Co2 gas has been widely used in the soft drink production process. Co2 is carbonic
acid which will add enjoyably acidic flavor and an exciting mouth feel. When it is not
present in the soft drinks it tastes flat.
Co2 Gas &

Cylinders
Co2 gas 9 kg Co2 gas 22kg Co2 gas 27 kg Co2 gas 31kg Co2 gas 42 kg

CHEMICALS:
These are the preservatives which are widely in the soft drink production process which
will add an acidic taste to foods.
- Citric Acid
- Malic Acid
- Soap Water
- Soda Salt
- Sodium Benzoate
CROWN CAPS:
These are the caps which we found on the top of the soft drink bottles.
- Crown Cap Oriental

- Crown Caps 2.2 Gauge
BILL BOARDS:
Billboard advertisements are intended to catch a person's responsiveness and create an

unforgettable impression very quickly, leaving the reader thinking about the
advertisement after they have driven past it. They have to be understandable in a very
short time because they are usually read while being passed at high speeds.
The Jap Enterprises has 40 bill boards in and around the Mangalore District. They also
have the billboards located in between Hassan to Bangalore highway. They also organize
the mass campaigning advertisement promotional activities for the company. The various
sizes of bill boards which they cater offer for the clients has been listed below.
- 20 x 20 feet ( With and without lighting)

- 30 x 30 feet (With and without lighting)

1.6 CASE CONTEXT:
The Jap enterprises have many issues facing in their inventory control. The company is
having main business on distribution of various products. Therefore the company has
been maintaining the huge amount of inventory of finished goods. Being a distributor, so
there will be no inventory related to raw material and work in progress.
PRESENT SITUATION OF INVENTERY MANAGEMENT IN JAP

ENTERPRIESE:
1) No proper designated rack system to keep the various products.

2) High Inventory to current asset ratio.
3) Company is not having the computerized bar coding system to track the inward
and outgoing list of products.
4) Absence of quality control system adopted in checking of products delivered from
the suppliers.
5) Companys employees do not have the basic knowledge on inventory
management practices.
6) The company has been facing the problem in stock audits.
7) Lack of communication between the sales department and warehouse store
keepers.
8) Systematic ordering for the products are not in placed.
With the above mentioned related to some of the difficulties they faced in the inventory
management, they also have some of the finest and simple practices they have adopted in
managing the inventory for their Beverage flavor supply.
The company was faced one of the major problem during the year 2014 in storage of
Beverage flavor due to which they have incurred loss of around 5 lakhs. In the main case
the study has been done on how the company overcomes that problem with adopting a
simple and effective solution.

1.7 CASE STUDY
The most important part of any companies current assets constitute by the inventories.
When we consider, the public limited companies of India going on an average
approximately 60% of the Current Assets are constituted by Inventories. As a result of
large size inventories kept by firms, a substantial amount of funds has to reserve for the
inventory. Therefore it is very important to achieve inventories efficiently in order to
evade stagnant investment in inventory.
It is likely for the company to lessen its levels of inventories to a degree e.g.: 10 to 20 %.
, if they provide accommodations for simple inventory planning and control techniques
without affecting o the sales and production of the products. If they are able to reduce in
some margins also, it will have favorable impact on a companys profitability.
JAP ENTERPRIESES INVENTORY to CURRENT ASSET RATIO:
As per the Balance sheet of Jap enterprise the total current assets and the proportion of
inventory are discussed below:
The companys Total Currents assets = 2, 85, 07408
The companys inventory = 1, 72, 20000
When we calculate the inventory to current asset ratio
= 17220000/ 28507408
= 60 %
(Balance sheet has been attached in the annexure)
From the above findings, it shows that 60% of the current assets is constituted by
inventory which directly upsets the working capital of the company. The Jap enterprises
which is having an annual turnover of Rs 9 crore must adopt some of the inventory
management practices to improve their inventory to current asset ratio.

NATURE OF INVENTORIES:
Inventories are classified based on the stock of product a company is manufacturing for
sale and components that will make up the product. The kind of inventory which exist in
a manufacturing company are Raw materials, Work in progress and Finished Goods.
Raw Materials:
In manufacturing process the Raw materials are those inputs that are transformed into
finished goods through the production or manufacturing process. Inventories of raw
materials are those units which have been purchased and stored for future production.
Work In Progress:
The parts which are semi-finished are known as work in progress. This parts still requires
work to be done to consider as finished goods.
Finished Goods:
Finished goods inventories are those kinds of products which do not require any further
processing and these products are ready for the sale. The stock of finished goods
constitutes a major portion of inventories in cost. Therefore, the proper strategy should be
used to keep the FG as minimum as possible.
These are the major three kinds of inventories for a company which depends mainly on
the nature of its business. Generally manufacturing firm will have high levels of all the
three kinds of inventories, but on the other hand, inventories related to the FMCG
companies will not be big, the main reason being is of small product cycle and quick
turnover.
Firms also maintains inventory in the form of supplies or stores and spares.
Supplies:
These are the materials which supports the functioning of production. These supplies
constitute very small percentage of inventory and do not involve major investment. So, a
sophisticated inventory control may not be required for them.

NATURE OF INVENTORIES IN JAP ENTERPRISES:
The company is being associated with mainly on distribution business, so 98 % of the

inventory is linked to finished goods. The rest being the supplies which will supports for
the distribution of the products such as vehicles, equipments computers etc.
OBJECTIVES OF INVENTORY MANAGEMENT:
In any company the basic objective of any manager of inventory controller consists of
two important areas.
a) The avoidance on over investment or under investment.

b) Providing the raw material with right quality of standards to the production
department at the right time.
Operating Objective:
1) Guaranteeing availability of material.

2) Avoidance of unusual wastage.
3) Advancement of manufacturing productivity.
4) Avoidance of out of stock danger.
5) Better service to customers.
6) Highlight sluggish moving and outdated items of materials.
THE JAP ENTERPRISES USES THE FOLLOWING TECHNIQUES FOR

INVENTORY MANAGEMENT.
1) Just in Time in case of Bottles and Chemical Distribution.

2) FIFO technique for the Beverages Flavor distribution.
3) FSN technique for American tourister luggage distribution.

Following observations are made during the visit to Jap Enterprises w.r.t inventory
management.
PROS:
1) Purchasing power of the company is high.

2) Inventory turnover ratio is high.
3) The company has carried good Payment History for vendors.
4) The company is having high skill on Negotiation with vendors.
5) The company has established multiple vendors for their beverage and bottle
distribution.
CONS:
1) Company is not using their purchasing power always.

2) Nonmoving items in warehouse consists of huge quantity.
3) Communication with vendor is poor.
4) Less number of labor are skilled with inventory management practices.
5) No defined set pattern for purchases.
OPPORTUNITIES FOR IMPROVEMENT
1) Scope for expansion of warehouse space with planned rack system.

2) Scope for implementation of new inventory control software.
3) Handling practices and storage can be improved.
4) Cost reduction in distribution of products for retailers can be worked out.
5) Scope for reducing the manpower inside the warehouse with the effective
implementation of inventory management methods.

1.7.1 STOCK SUMMARY DETAILS FROM 1-APR-2015 TO 31-MARCH 2016
BOTTLES: CLOSING BALANCE
Table 1.7.2 Closing balance details of stocks for Bottles
QUANTITY RATE TOTAL VALUE

200ml Green 8992 13.49 121335.98
200ml White 1840 10.34 19018.77
250ml Green 13414 14.27 191387.87
250ml White 22013 11.16 245555.68
300ml White 10191 11.49 117117.01
BOTTLES 56450 12.30 694415.31
Stcok Details of Bottles as on

31/03/2016
300000
250000
200000
Qty in No's
150000
100000
50000
0
200ml Green 200ml White 250ml Green 250ml White 300ml White
Series1 121335.98 19018.77 191387.87 245555.68 117117.01
Types of bottles
Interpretation:
The reason for High Inventory:
The key reason for the high inventory of bottles are due to at the end of March it will be
the summer and the main business for bottles will happen from the period of March to
May. So during every year JAP enterprises will maintain a high inventory during these
months.

The inventory they maintained on bottles is purely established on the previous experience
on sales. In the course of the off season they follow Just in Time system for the delivery
of bottles. Whenever the customer orders then only they will place order with their
supplier and deliver the bottles.
Issues faced in Bottles:
The core problem faced by the Jap Enterprises in bottle distribution is breakage of bottles
during transportation as well as in their warehouse. As per the records yearly on average
they have a loss of 500 bottles due to breakages.
CHEMICALS:
Table 1.7.3 Closing balance details of stocks for Chemicals
QUANTITY (kg ) RATE TOTAL VALUE

Citric acid 169 66.84 11296.73
Citric-acid large 300 66.00 19800.00
Malic acid 56 206.75 11577.90
Sodium Benzoate 110 124.98 13746.19
TOTAL 635 88.85 56422.82
Stcok Details of Chemicals as on

31/03/2016
25000
20000
cost in Rs
15000
10000
5000
0
Citric acid Citric-acid large Malic acid Sodium Benzoate
Series1 11296.73 19800 11577.9 13746.19
Types of chemicals

Interpretation:
The over-all cost in the inventory on chemicals is less. The reason is the lead time for the
products is very less so they maintain Just in Time method in case of chemicals.
BEVERAGE FLAVOR:
Table 1.7.4 Closing balance details of stocks for Bottles
Suppliers QUANTITY RATE TOTAL VALUE

Dohler 121 340 41140
Givuadan India 2231 575 1282825
IFF 190 248 47120
Kerry 192 305 58560
Others 419 151 63330
TOTAL 3153 473 1492975
Stcok Details of Beverage flavor as on

31/03/2016
1400000
1200000
1000000
Value in Rs
800000
600000
400000
200000
0
Dohler Givuadan India IFF Kerry Keva
Series1 41140 1282825 47120 58560 63330
Types of flavor suppliers
Interpretation:
The Flavor Givuadan is the high selling product for Jap Enterprises in the Beverages. The
customers prefer Givuadan for the manufacturing of different flavor of soft drinks for the
reason that of the quality as well as the brand it follows in the beverage industry.

Here the inventory management technique they follow is FIFO in their warehouse. The
products that they receives 1st will be sold 1st due to the short period of expiry. The flavor
should be sold six months from the manufacturing date.
1.7.5CRITICAL INCIDENT:
In the year 2014, they occurred the loss of around 5 lakhs rupees. The key reason was due
to the mismatch in the warehouse. This is due to the product delivered in the month of
November has not been sold till the April instead of that they have delivered the product
which they have received in the month of March. Due to the short expiry date they could
not able to sell those products and incurred a loss.
After this incident they have adopted in house FIFO technique. The technique is very
simple and effective to follow so that whichever the product they receive will be
delivered to the customer as per the flow in the warehouse racks. So, that the product
which receives first will be first out.
The picture below explains on the process flow of FIFO technique been followed in the
warehouse.
Fig 1.7.6 Column system located in the front of the Rack.
C4 C3 D4 A4
B3 A3 D3 A3
A2 B2 C2 D2
A1 B1 C1 D1
Givuadan IFF Kerry

Dohler
India

Fig 1.7.6: Codification of Pellet Racks
A4 A3 A2 A1
B4 B3 B2 B1
C4 C3 C2 C1
D4 D3 D2 D1

How it Works:
1) As shown in the figure 1.7.6, the column system is located in the front portion of
the rack.
2) Each Portion in the column has been dedicated for one particular flavor.
3) When a company receives the item from the supplier, he will check the rack with
empty space and will pick one particular code (i.e. A1. B2 etc.)And place it in the
column system where you can place it in the slot as shown in the figure.
4) The process will continue as per the order and placing of codes will be done as
per the first received material will occupy the bottom of the column system and
latest received material will be positioned in the top portion.
5) When the company receives an order for the particular flavor from particular
company the store keeper will come and check in the column system and will take
the particular code.
6) With the particular he will go near rack and will identify the location and take the
products out from that particular rack and will deliver the product to the customer.
7) He will then place that particular code in the rack from where he took the product,
8) In the column system the next positioned code related to the product will slide to
the bottom portion.
9) This process will repeat as explained in the above steps.
10) When the store keeper follows these above steps correctly then they can achieve
100% FIFO technique in their distribution of flavor.
11) After establishing this system the company made an improvement in delivering
the products as per the FIFO and they looking to implement the similar system for
other products.

American Tourister Luggage: Mangalore and Bangalore Division
Table 1.7.7 Closing balance details of stocks for Luggage
TYPES QUANTITY RATE TOTAL VALUE

ACCESSORIES 158 368 58144
BACKPACK 2015 438 1077 472133
BUSINESS COLLECTION 34 1142 38851
CASUAL COLLECTION 42 1500 63018
DUFFLE 160 1340 214470
HARD LUGGAGE 212 1963 416274
SOFT LUGGAGE 578 3358 1941080
WALLETS 56 536 30032
WHEEL DUFFLE 1052 1924 2024605
TOTAL 2730 1926 5258609
Stcok Details of Luggage as on

31/03/2016
2500000
2000000
Value in Rs
1500000
1000000
500000
0
BUSINES
CASUAL HARD SOFT
ACCESSO BACKPAC S WHEEL
COLLECTI DUFFLE LUGGAG LUGGAG WALLETS
RIES K 2015 COLLECTI DUFFLE
ON E E
ON
Series1 58144 472133.3 38851.12 63018.48 214470.4 416274.7 1941080 30032.24 2024606
Types of Luggage category

Interpretation:
When compared with the all the products that are being distributed by JAP enterprises,
the Luggage division comprise of huge value of inventory costing around 52 lakhs. The
reason being the new items which are launched by the parent company will push the
product to distributor. If the demand for that particular product is not there, then for those
items remain in the warehouse as non-moving items. The 90% of the stock are due to the
company policy to have some fast moving items that should be always maintained in the
warehouse. There is no scope in reducing stock of these items. If the distributor follows
the Just in time technique then they can reduce the stock but it should be supported by the
main company.
1.7.8STOCK AGEING ANALYSIS BASED ON FSN TECHNIQUE:
The Jap Enterprises follows Fast Moving, Slow moving and Nonmoving (F, S and N)
technique for stock ageing analysis for tracking of its demand of products in American
Tourister. Based on the movement of bags they categories these into
a) Purchases less than 45 days ( Fast Moving items )

b) Purchases between 45 to 90 days ( Medium Moving items )
c) Purchases between 90 to 180 days ( Slow Moving items )
d) Purchases between greater than 180 days ( Non Moving items )
1.7.9INVENTORY TURN OVER RATIO
Inventory turnover Ratio = Total sales / Average Inventory
Table 1.7.9 Inventory turnover ratio
Sl.No Year Sales Investment on Inventory

Inventory turnover ratio
1 2012-2013 57033963 11662624 4.89
2 2013-2014 68715618 13328280 5.16
3 2014-2015 80841904 15498000 5.22
4 2015-2016 91865800 17220000 5.33

From the above table, inventory turnover ratio is increased when compared to 2014-2015.
This tells us that company is distributing the products with holding fewer inventories.
This will in turn help the company to achieve its working capital in an effective way. The
reasons for improved inventory turnover ratio are as follows:
a) Just in Time in case of Bottles and Chemical Distribution.

b) FIFO technique for the Beverages Flavor distribution.
c) Categorizations as per fast moving, slowing moving and non-moving items (F, S
and N) technique facilitated the company to prioritizing in placement of orders for
American tourister luggage.

1.8 THEROITICAL CONCEPT:
The Effective inventory management will require an effective control over inventories.
Usually controlling the inventory discusses to the system which ensures supply of
essential quantity in adding to quality of products in the required time and at the same
time prevents the unnecessary investment in inventories. The best practices in the field of
inventory controlling consist of different techniques. Some of the important techniques
which usually has been followed in many of the companies are studied below:
1) JIT IN TIME
2) ABC ANALYSIS
3) FIRST IN FIRST OUT
4) FSN ANALYSIS
5) EOQ
6) VED ANALYSIS
7) DETERMINATION OF REORDER LEVEL
JUST IN TIME:
JUST IN TIME is a procedure which is normally used by manufacturing companies.

Every manufacturing company has to maintain three types of inventories in their
production process that involves Raw materials, work in progress and finished goods.
The inventories are usually designed to act as buffers so that in case of any shipment late
by the suppliers can be managed with the help of inventory with that the process of
manufacturing or distribution should not be stopped. But if we have more inventory then
it leads to cost in terms of storage, blocking of capital investments. So the Just in time
system will help in maintaining the inventory at the lowest possible level, with this the
cost of storage will be minimized.
The three basic principles of Just in time are:
a) Pull System
b) Production of the exact needed amount at Takt time.

c) Continues Flow processing
The KANBAN system will helps in maintaining the Just in time in the process. The
Kanban is basically, a visual information management tool. It helps in
a) It helps in preventing over production

b) To detect delays or too rapid advancement of process.
ABC ANALYSIS:
ABC analysis is the technique of exercising careful mechanism over inventory items. In
this analysis usually the inventory items are distributed into 3 categories A, B, C. This
technique is built on the assumption that company should not look for the same degree of
control on those items which are more costly as related to those items which are less
costly. The reason is keeping the more value stock in more quantity will lead to number
of worries which will incur due to the price fluctuations in the present economy. So it is
necessary to categories the items based on the value.
Category A includes more costly items or raw materials, while category B consists of less
costly items and category C is the least of above two items.
Inventory surveys in general have shown the following trends regarding the components
of inventories.
Category Value Stock Volume Re order frequency
A High Low Regularly

B Moderate Moderate Monthly/Quarterly
C Low High Semi-
Annually/Annually
FIRST IN FIRST OUT:
FIFO is one of the best practices which has been used in which the product produces first
are sold first or the products received first should be used first for the production. This

technique will be highly useful in case of perishable goods. When first-hand products are
received place the previous ones in the front of the queue so that they will be picked first.
FSN ANALYSIS:
F, S and N analysis is established on the classification on frequency of issues of

products/use. F, S and N stand for
F: Fast Moving Items based on number of days usually less than 45 days.
S: Slow Moving Items based on number of days usually between 45-90 days
N: Non Moving items greater than 180 days.
The companies which involves in the distribution business like FMCG, it consists of
large number of products. So this type of sorting will help them in identifying the items
which are frequently issued, less frequently issued for the use. This type of grouping will
also help in creating most suitable stores design by locating all the fast moving items near
to the issue point so that it will reduces the handling effect.
This will also help in attention of management to emphasis on Nonmoving items to take
the decision as to check whether they are required in the feature.
EOQ (ECONOMIC ORDER QUANTITY):
In Inventory management the quantity for which the order to be place is one of the
important problems concerned with active inventory management. Economic order
quantity mentions to the size of order which gives maximum economy in purchasing any
item of Raw materials and finished product. It will be fixed after taking in to accounts of
following costs.
Ordering Cost: It is defined as cost of placing an order and obtaining the supplies. The
more frequently the orders are placed and less the quantities purchase from each other,
the greater will be ordering cost and vice versa.
Carrying cost: It is the cost of keeping pieces in stock.

VED ANALYSIS:
VED analysis is classified based on criticality. While deciding the criticality for a spare
part several factors will influence. For a machine if other process depend on particular
spare then it could be vital importance. Also, a spare is an important component when the
lead time for procurement is very high then it should be consider as vital. VED stands for,
Vital ( V) : Part will be considered as vital, if its non-availability will lead to the loss of
production down time and also it will cost more when procured in an emergency basis
Essential (E): Part will be considered as essential, if its non-availability will lead to
moderate loss.
Desirable (D): Part will be considered as desirable, if its non-availability wont affect
much on production.
DETERMINATION OF RE ORDER LEVEL:
The inventory level at which the firm should place the order to refill the inventory. In
case, if the order is placed at this point of level, the new ordered goods will arrive before
the firm runs out of goods to sell. In order to determine reorder level, information is
required about two things.
a) Lead time &

b) Usage rate
Jap Enterprises mainly uses the techniques of
1) Just In Time
2) FSN analysis
3) FIFO

1.9 DISCUSSIONS
FINDINGS AND SUGGESTIONS:
1) Quality control:
Certain inventory practices that best follows the link to quality control. This can be done
by providing the employees with check list and computing systems that can assist them in
following the procedures to check the quality of the products when they receive. All
goods must be inspected for signs of damage, including leaks, discrepancies in
descriptions. This quality a measure taken not only avoids faulty parts in the inventory
also improves the customer satisfaction to have a built in quality in the inventory system.
2) Rack system :
As per the store keeper there is no appropriate rack system to place the products. As an
outcome of this, there is possibility of damages being happened in the bottles. Also the
luggage has kept in the floor itself due to this there will be high possibility bags being
torn out from rats.
3) Computerization :
The store department has to be computerized which helps in easy recording of large
number of products can be traced quickly.
4) Wastage Control :
The non-moving items should be analyzed properly and ordering should be made in such
a way that the fast moving items should be given preference.
5) Effective Inventory Management method :
There is a need of active inventory management to be adopted in the warehouse. The

present inventory management practices are not properly followed and the workers inside
the warehouse did not have the knowledge on best practices.

6) Skill development
The workers skill should be developed in all the products. So it will be easy to handle any
kind of situation in case of absentees.
7) Packaging Standard :
The packaging material and finished goods are kept in different warehouses and
the material for packaging are not arranged in a good manner.
8) Communication :
The lack of communication is between the sales team and the dispatch section in
the store department. Daily morning meeting should be conducted with the key
aim that sales team should clearly mentioned their requirement and delivery
schedule to the dispatch team.
9) Inventory Turn Over Ratio :

In order to increase the inventory turn ratio the company should concentrate on
improve in sales and should give the target to the sales team maintaining the
required inventory level
10) Periodical Review :

The company should have a system to have a periodical review on inventory may
be twice a month so that the inventory can be kept under control.
11) Safety Stock level :

The company is not maintaining zero safety stock level for relating to fast moving
items. If they have maintained the safety stock level for some important fast
moving items, they can avoid the delay in distribution of products.

1.10 REFLECTIONS:
1) Gained the knowledge on the relationship between the inventory control and
purchasing function.
2) Got to know about the main reason for holding the inventory.
3) Experienced on how the theoretical concepts has been followed and adopted in
the company.
4) Practical application of FIFO technique has been understood.
5) The learning on how to face the problem and generate the solution when company
undergoes such a situation.
6) The overall case study helped me how to identify the present situation and how to
apply the theoretical concepts in solving the problem and how to benchmark the
solution to other different products.

REFERENCES

1.11 REFERENCES:
http://knowscm.blogspot.in/2008/04/how-to-do-fsn-analysis.html.
http://www.slideshare.net/Harmandeep0053/project-on-inventory-management. (n.d.).
http://www.sparepartsmanagement.co.in/Inventory%20analyses.html.
M Y Khan, P. K. Management Accounting. Tata Mac Grawhill Publishing company ltd.
Pandey, M. Financial Management. Vikas Publisher.
S.N Maheshwari, S. K. Advanced Accountancy. Vikas Publishing House Pvt Ltd.
https://issuu.com/sanjaykumarguptaa/docs/a-project-report-on-inventory-management-
system-a-.

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Case Study on Inventory Management: A Case Study in Jap

MASTER OF BUSINESS ADMINISTRATION

Under the guidance of

I hereby declare that INVENTORY MANAGEMENT : A CASE STUDY IN JAP

Place: RVIM (Bangalore) Name : Sarvajith M.S

Date: 17/10/2016 Sarvajith M.S

Place: Bangalore 151GCMD120

TITLES PAGE NO.

1.6 CASE CONTEXT 13

1.8 THEROITICAL CONCEPT 27

TABLE NO. NAME OF THE TABLE PAGE NO.

1.5.2 SALES DETAILS FOR THE YEAR 15-16 4

1.5.3 NET PROFIT DETAILS FOR THE YEAR 15-16 5

1.7.2 STOCK DETIALS OF BOTTLES 18

1.7.3 STOCK DETAILS OF CHEMICALS 19

1.7.4 STOCK DETAILS OF BEVERAGE FLAVOR 20

1.7.7 STOCK DETAILS OF LUGGAGE 24

1.7.9 INVENTORIES TURNOVER RATIO 25

The JAP (JYOTHI AERATED PRODUCTS) ENTERPRISES is a business organization

It is a company with multifarious activities in the distribution business and hence it is

KEY WORDS: JIT (JUST IN TIME), FIFO, LEAN MANAGEMENT

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The Indian Luggage Market:

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1.5 BACK GROUND

1.5.1 COMPANY INTRODCTION:

The JAP ENTERPRISES is a business organization which does mainly distribution

Table 1.5.2 Sales Details for the year 2015-2016

Sl.No Details Sales in Rs

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Sales Details for the year 15-16

Table 1.5.3 Net Profit details for the year 2015-2016

Sl.No Details Net Profit in Rs

Net Profit Details for the year 15-16

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1.5.2 SWOT ANALYSIS OF JAP ENTERPRISES

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1) Company should concentrate on timely customer service and delivery.

1) High competition from VIP, GUCCI and local manufacturers.

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Products and services offered by the company.

CO2 GAS & CYLINDERS

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AMERICAN TOURISTER : List of products

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DOHLER GIVUADAN IFF KERRY KEVA

Mango Zaffrani pista

Mango Orange Rose

Pine Apple Pineapple

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The different sizes of the bottles are as follows:

CO2 GAS & CYLINDERS:

Co2 Gas &

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- Crown Cap Oriental

Billboard advertisements are intended to catch a person's responsiveness and create an

- 20 x 20 feet ( With and without lighting)

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1.6 CASE CONTEXT:

PRESENT SITUATION OF INVENTERY MANAGEMENT IN JAP

1) No proper designated rack system to keep the various products.