A STUDY ON INVENTORY
MANAGEMENT AND CONTROL
Nkosinathi Mancoba Nkosi
ABSTRACT
This research propose to get exposure in inventory and it is very important to the company. It
is to ensure quality in business that control the transaction between the consumer goods. It is
important to do proper inventory management and control in the production company. This
project is to analyse the inventory control in the leading brake manufacturing company
(WABCO Eswatini). This study shows the analysis of ABC items in the inventory, SAP, stock
policy followed. It deals with entire process carried in inventory department. Also it was
found that there no proper demand forecasting by the company it is done only by suppliers and
supply materials to the company along with the demand forecasted in SAP. This affecting the
production process in the company. It is suggested that to develop communication between the
suppliers and properly forecast the demand. This will result in managing inventory and use
man-power according to the demand in order to produce more and control the inventory space.
Key words: - SAP, ABC analysis, Total quality
INTRODUCTION
The term stock alludes to the merchandise or materials utilized by a firm with the end goal of
generation and deal. It additionally incorporates the things, which are utilized as strong
materials to encourage generation
There are three fundamental sorts of stock: crude materials, work-in-advance and completed
merchandise.
Crude materials are the things bought by firms for use underway of completed item. Work-in-
advance comprises of all things as of now during the time spent creation.
Stock constitutes one of the vital things of current resources, which licenses smooth operation
of creation and deal procedure of a firm. Stock administration is that part of current resources
administration, which is worried about keeping up ideal interest in stock and applying
successful control.
Stock enhancement in production network, ABC investigation is a stock order technique
which comprises in partitioning things into three classes, A, B and C: A being the most
profitable things, C being the minimum significant ones. This strategy plans to draw directors'
consideration on the basic few (A-Things) and not on the paltry numerous(C-Things)
NEED FOR THE STUDY
Stock is basic for everything to get their assets proficiently and
Requirement for consider is to execute appropriate determining by the organization and
enhance correspondence process between the staffs with offices. To direct ABC examination
on the organization stock to decrease the Dead stock and utilization of materials keeping in
mind the end goal to deliver an item by appropriate determining of interest
OBJECTIVES OF THE STUDY
To analyze the control measures taken by Brake Manufacturing Company on their own terms
using on inventory management.
To analyze the techniques used by the company in inventory management.
To suggest the suitable technique to the company to have improved control over the inventory
To analyze the inventory management of this company.
LITERATURE REVIEW
Success of any industrial undertaking depends upon
1. Money 2. Manpower 3. Machine 4. Market 5. Material 6. Management
Materials are pivotal importance not less than any other M’s. Problems have their root
In material affects the efficiency of all men, machine, money & marketing decisions of the
firms and thus become the grave concern of management at all levels. If there were too much
of material problems like ideal funds lied up in excessive inventory storage and obsolesces
difficulties market pressure would arise. Thus the importance of inventory management is
realized. A number of studies have been done in the field of inventory management by various
researchers. Some of them are given below;
1. Bern at de William year 2008
This study tells that the main focus of inventory management is on transportation and
warehousing. The decision taken by management depend s on the traditional method of
inventory control models. The traditional method of inventory management is how much
useful in these days the author tell about it. He is also saying that the traditional method is not
a cost reducing, it is so much expensive. But the managing the inventory is most important
work for any manufacturing unit.
2. Jon Schreibfeder 1992
He said that it is easy to turn cash into inventory, the challenge is to turn inventory back into
cash. In early1990’s many distributors recognize that they needed help controlling and
managing their largest asset inventory. In response to this need several companies developed
comprehensive inventory management modules and systems. These new package include
many new features designed to help distributors effectively managed warehouse stock. But
after implementing this many distributors do not feel that they have gained control of their
inventory
3. Wolf Bagby, Managing inventory
In this study Mr. [Link] explains that by managing the inventory it becomes easier for the
organization to meet the profit goals, shorter the cash cycle, avoid inventory shortage, avoid
excessive carrying costs for unused inventory, and improve profitability by decreasing cash
conversion and adopt JIT system. According to this study companies need to get smart about
inventory.
Boosting financial performance is another benefit that comes from better inventory
management. Infect large number of manufacturers enjoy savings and better performance by
choosing the approach of inventory reduction. For this company needs to maximize the cash
flow and profitability and this includes keeping a watchful discerning eye on charge in supply
and demand?
4. Asfaque Ahmed October 12, 2004
He said that most of the manufacturing company vendors have planning and scheduling
product which assume requirements or infinite quantities of raw material and WIP materials
for calculating production capacity
There are many problems with this approach and how to avoid these by making sure that the
product you are buying indeed takes into account finite quantities of required materials as
well as finite capacities of work centers in your manufacturing facilities.
4. [Link] April 7, 2003
(Article from inventory planning and optimization)
In this article he said that inventory optimization recognize that different industry have
different inventory profiles and requirements. Research has indicated that solutions are priced
in a large range from tens of thousands of dollars to millions of dollars. In this niche market
sector price is definitely not an indicator of the quality of solution, ROI and usability are
paramount
5. Silver, Edward A Dec22, 2002
This article considers the context of a population of items for which the assumption
underlying the EOQ derivation holds reasonably well. However as is frequently the cash in
practices there is an aggregate constraints that applies to the population as a whole.
The existence of budget to be allocated among the stocks of the items and a purchasing
production facility having the capability to process at most a certain number of replenishment
per year. Because of the constraint the individual replenishment quantities cannot be selected
independently.
6. Charles Atkinson
(A study on inventory management)
In the study by Mr. Charles Atkinson, he explained the inventory management and
assessment of inventory levels. As per this study inventory management need to address two
issue
Part I. How to optimize average inventory levels.
Part II. How to assess (evaluate) inventory levels.
This study tells about what the manager should do and not to do, and how much amount
should be order in one placed orders. Average inventory can be calculated by simplistic
method.
Average inventory = beginning inventory +end inv./2
7. Delaunay C, Sahin E, 2007.
A lots of work has been done but now if we want to go ahead we must have good visibility
upon this field of research. That is why we are focused on frame work for an exhaustive
review on the problem of supply chain management with inventory inaccuracies. The author
said that their aim in this work is also to present the most important criterion that allow a
distinction between the different types of managing the inventory
RESEARCH METHODOLOGY
METHODOLOGY OF THE STUDY
Research is an organized, systematic, data based, critical, objective scientific inquiry into a
specific problem, undertaken with the purpose of finding solutions to it. The research
provides the needed information that guides managers to make informed decisions to
successfully deal with the problem.
Here I am adapting different kinds of methods depending on the natures of the study and
information
OBJECTIVES OF THE RESEARCH
To analyze the inventory management of this company.
To analyze the entire activities of purchase and stores department.
To suggest the suitable technique to the company to have improved control
TYPE OF DATA
Primary data- The primary data is collected by personal interviews with officials.
Secondary data- Articles, annual reports, PDF. Which have already been passed through the
analyzing process are the secondary data used.
Field work- This was under taken individually to collect information regarding the
RESEARCH VARIABLES
To find out the cost involved in the entire inventory management process.
To ensure that the supply of raw material & finished goods will remain continuous so that
production process is not halted and demands of customers are duly met.
To minimize carrying cost of inventory.
To keep investment in inventory at optimum level.
To reduce the losses of theft, obsolescence & wastage etc. To make arrangement for sale of
slow moving items.
LIMITATIONS OF THE RESEARCH
Time restriction was only 2 months for research in the company. The study is related to the
only one leading Brake manufacturing company only. The finding and suggestion cannot be
generalized.
The study covered a wide concept hence wide collection and coverage of
Data Analysis
ABC analysis for the year of 2017
Material Description Val stock Stock Rate Classification
Code volume
100138310 crankcase 977,008.52 1061 92.08 A
100312250 Valve (Ref part 109,524.19 4907 22.31 B
no:8995000462)
100335540 Spring 28,734.72 3250 8.841 C
100338250 Vent Filter 21,549.85 27628 0.78 C
100340490 Piston 6,425.46 657 9.78 C
100344411 Stem (Ref Part 107,312.16 11144 9.62 B
No:4613327704)
100939370 Closure plug 111,910.02 94839 1.18 B
4127046926 Crankshaft- 570,969.00 1431 39.90 A
Forging-Volvo 704
Chart no: 4.6
ON THE BASIS OF RATE
INFERENCE
From the above observation, it is evident that 80% of profits come from 20% of the materials.
I.e. crank case and crank shaft provides a value of 50%, which is the highest compared to
other parts
ON THE BASIS OF VOLUME
INFERENCE
From the above observation it is visible that 25% of profits comes from 75% of the material.
I.e. from the above observation it seems that piston which occupies the space of 75%
provides only a profit of 25% which is the highest in volume compared to other parts.
ABC analysis for the year of 2016
Material Description Val stock Stock Rate classification
code volume
100138310 crankcase 955,008.52 1040 90.08 A
100312250 Valve (Ref 119,524.19 4920 24.30 B
part
no:89950004
62)
100335540 Spring 29,764.72 3350 9.141 C
100338250 Vent Filter 22,579.85 29658 1.55 C
100340490 Piston 6,555.46 6697 9.99 C
100344411 Stem (Ref 187,312.16 17744 12.24 B
Part
No:46133277
04)
100939370 Closure plug 160,910.02 99649 3.124 B
412704692 Crankshaft- 590,642.00 1311 40.21 A
6 Forging-
Volvo 704
INFERENCE
From the above observation, it is evident that 80% of profits come from 20% of the materials.
I.e. crank case provides a value of 47%, which is the highest compared to other parts.
POSITION OF SALES AND INVENTORY
YEAR MARCH 16 MARCH 15 AVERAGE
INVENTORY
SALES (IN CRS) 1838.27 1347.96 1593.115
INVENTORIES 175.64 117.97 146.805
(IN CRS)
INFERENCE
From the above observation, it is evident that there is been an increase of 26% of sales in the
year 2016. Which is a found be caused as a result of proper forecasting.
FINDINGS
During the last two years’ position of sales and inventory 2015 to 2016. The inventory level
increased from 117.97 crores to 175.64 crores. It indicates a growth rate of 26% of sales. But
the inventory level has increased to 117.97 to 175.64 crores which was about 28% of the
inventory value as maintained in the year March 2016.
ABC Analysis: This firm has to buy more of C Category items rather than AB but at the
same time it has to keep a close watch on Focused goods that is high valued goods as it is
kept in low volume but a close assistance is given since value of these goods is high. No
proper communication between the staffs. There is no demand forecasting within the
company that makes the inventory to make decision delayed in inventory.
SUGGESTION
Under the ABC analysis, the management must have more control on C items than that on A
& B items, because C class constitutes more of higher values. There should not be tight
control exercised on stock levels, to avoid deterioration. This is done through maintaining
low safety stock levels, continuous check on schedules & ordered frequently in inventories,
to avoid over investment of working capital.
Communication between the staff’s needed to improve more in order to act as soon as
possible during orders.
Company has to update the data in SAP timely.
Necessity in improving communication between staffs with departments.
Not only by suppliers in forecasting demand has company also needed to maintain
communication with suppliers in order to know the demand so company can manage
inventory and helpful in man power sourcing.
CONCLUSIONS
This study contains proper observation of inventory management in the company. A better
inventory
management can solve all the problems occur in inventory and helping the company to face
the problems by following proper techniques and controlling. This will reduce the huge
money investment problems and it will lead the way for avoiding such circumstances.
Inventory is timely changing physical asset which is sold or being a dead stock have by the
company. It creates way for the production process if shortage occurs in the production and
also it gets more even after the production.
An efficient inventory management can control and make the company to grow more and if
in inefficient way it will ruin the company business. Companies are always concentrates on
domestic as well as international in order to increase the business globally based on trends.
This study is on leading brake manufacturing company conducting ABC analysis for items
predicting the future demands which should be forecasted by the company.
From the study it is shown that buying of materials and shortage occurs due to improper way
of forecasting the demand.
ABC analysis is carried to find out the materials which are moves fast and important to the
company and which is differs from sales and volume in the inventor