Submitted by: Junaid khurram

ASSIGNMENT NO: 02

NAME: JUNAID KHURRAM

ROLL NO: 0000382470

COURSE CODE: 8401

SEMESTER: Autumn 2022

ALLAMA
1 IQBAL OPEN UNIVERSITY, ISLAMABAD
Submitted by: Junaid khurram

This assignment is a research-oriented activity. You are required to obtain

information from a business/commercial organization and prepare a report
of about 1000 words on the issue allotted to you to be submitted to your
teacher for evaluation.
You are required to select one of the following issues according to the last
digit of your roll number. For example, if your roll number is P-3427180
then you will select issue # 0 (the last digit): -

ISSUES:
0- Inventory Management
1- Accounting Receivable
2- Accounting Information System
3- Accounting for Plant Assets (Acquisition & Disposal)
4- Accounting for Merchandizing Business
5- Partnership Accounting
6- Accounting for Non-profit Organization
7- Accounting for Bank Reconciliation
8- Accounting for Cash & Short-term Investment
9- Application of International Accounting Standard
The report should follow the following format:
1. Title page
2. Acknowledgements
3. An abstract (one-page summary of the paper)
4. Table of contents
5. Introduction to the issue (brief history & significance of issue
assigned)

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6. Practical study of the organization (with respect to the issue)

7. Data collection methods
8. SWOT analysis (strengths, weaknesses, opportunities & threats)
relevant to the issue assigned
9. Conclusion (one-page brief covering important aspects of your report)
10. Recommendations (specific recommendations relevant to issue
assigned)
11. References (as per APA format)
12. Annexes (if any)

Topic:

Inventory Management
Inventory management refers to the process of ordering, storing, using, and selling
a company's inventory. This includes the management of raw materials,
components, and finished products, as well as warehousing and processing of such
items. There are different types of inventory management, each with its pros and
cons, depending on a company’s needs.

Acknowledgement

In the name of Almighty ALLAH, the most Gracious and Merciful. To Almighty
Allah we pray that he may guide us the right path, crown our endeavors with
success, and bless our lives with abundant prosperity. Countless Darood-o-Salam
upon the Lovingly Holy Prophet Muhammad (Peace Be upon Him), the fountains
of knowledge, who has guided his “Ummah” to seek knowledge from cradle to
grave this was presented I would like to thank the participants for guidance and
helpful suggestions during the research work. Acknowledgment is the most
beautiful page in any project’s pages. More than a formality, this appears to me the
best opportunity to express my gratitude. My list can never begin without you,
ALLAH Next thanks to all my teachers, friends without their conviction I would not
have been done my research. I also say special thanks to my H.O.D And thanks to

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all the faculty. Special thanks to my critics who help me to do best. Now I would
like to say thanks my Parents without them I would not be able to go outer. Thank
you for your faith and above all your unending support in little-little

An abstract (one-page summary of the paper)

Inventory management is a challenging problem area in supply chain management.

Companies need to have inventories in warehouses in order to fulfil customer
demand, meanwhile these inventories have holding costs and this is frozen fund
that can be lost. Therefore, the task of inventory management is to find the quantity
of inventories that will fulfil the demand, avoiding overstocks. This paper presents
a case study for the steel manufacturing industry (Small Scale Industry) on
inventory management. The relationship between the inventory management and
company performance was determined based on inventory days and return on asset
(ROA) analysis. The research found that company X had a few inventory problems
such as unorganized inventory arrangement, large amount of inventory days / no
cycle counting and no accurate records balance due to unskilled workers. The
study also proved that there was a significant relationship between return on asset
(ROA) and inventory days. This paper also provides recommendation to the
company and for further research.

Table of contents

SR NO. TITLE PAGE NO.

1 Topic 3
2 Acknowledgement 3

3 An abstract 4
4 Introduction 5
5 Statement of the Problem 7

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6 Sources of Data 8

7 Data Analysis 8
ABC Analysis

8 Practical study of the 8

organization (with respect
to the issue)

9 Data collection methods 12

10 SWOT analysis (strengths, 13

weaknesses, opportunities
& threats) relevant to the
issue assigned
11 Conclusion (one-page brief 14
covering important aspects
of your report)
12 Recommendations 14
(specific recommendations
relevant to issue assigned)
13 References (as per APA 14
format)

Introduction to the issue (brief history & significance of issue assigned)

Inventory is the supply of raw materials, partially finished goods called work-
in-progress and finished goods, an organization maintains to meet its
operational needs. It represents a sizeable investment and a potential source
of waste that needs to be carefully controlled. Inventory is defined as a stock
of goods that is maintained by a business in anticipation of some future

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demand. The quantity to which inventory must fall in order to signal that an
order must be placed to replenish an item.
Using an extension of a standard inventory-dependent demand model provide
a convenient characterization of products that require early replenishment.
The optimal cycle time is largely governed by the conventional trade-off
between ordering and holding costs, whereas the reorder point relates to a
promotions-oriented cost-benefit perspective. The optimal policy yields
significantly higher profits than cost-based inventory policies, underscoring
the importance of profit-driven inventory management. To work towards
perfect order metrics, there has to be aggressive inventory management,
restructuring supply chain operations, and updating standards to the perfect
standard. When updating the metrics, this would include the cases shipped vs.
the orders on-time delivery, data synchronization, damages and unusable
products, days in supply, the ordering time cycle, and shelf level of service.
Inventory problems of too great or too small quantities on hand can cause
business failures. If an organization experiences stock-out of a critical
inventory item, production halts could result. Inventory management
indicates the broad frame work of managing inventory. The inventory
management technique is more useful in determine the optimum level of
inventory and finding answers to problem of safety stock and lead time.
Inventory management has become highly developed to meet the rising
challenges in most Corporate entities and this is in response to the fact that
inventory is an asset of distinct feature.

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Figure 1. Showing production of raw material into finished goods

Statement of the Problem

Inventory costs have lot of impact on the profitability of the firm and its
success. Inventory management and its optimized decisions are depending on
the identification of key success factors and right decisions at right moment.
In a dynamic market environment, it is necessary to focus on the decision
making and the factors influencing decision making in order to optimize the
results of inventory function. The survey approach can bring a light on the
variables and these have lot of biased information. Testing of the factors
influence on inventory decisions by using scientific methods can help to
improve the reliability of the factors taken as key variables in decision
making. Hence, the present research is focused on the dimensions namely
identification of Factors influencing inventory optimization among SMEs in
steel sector through a structured and unstructured questionnaire and grouping
them into two sets as internal variables and external variables and
optimization by grouping the information for appropriate decision.

Sources of Data
The present study uses both primary and secondary data. Primary data is
collected from the steel industry (Small scale industry) units in the sample
area through a structured and unstructured questionnaire. In few cases to
understand the depth of the issue and the sensitivity of the variables in the
study, the scholar personally met experts in the industry having professional
experience and had a personal interview using both structured and
unstructured interview schedule. This helps in understanding the issue at
broad prospective and to analyse the same in the research point of view. The
secondary data is collected from both print and electronic media. The print
media includes reports, magazines, journals, published research papers, thesis
works, unpublished industry reports, newspaper reports and the other text

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books. The electronic media sources includes digital data bases, web portals,
indexed journals in open access portals, industry association reports etc.

Data Analysis
ABC Analysis
ABC analysis classifies various inventory into three sets or groups of priority
the allocates managerial efforts in proportion of
The priority the most important item are classified into “class – A”, those of
intermediate importance are classified as “class – B”
And remaining items are classified into “class – C”.
The financial manager has to monitor the items belonging to monitor the
items belonging to different groups in that order of priority and depending
upon the consumptions.
The items with the highest values is given priority and soon and are more
controlled then low value item. The re- rational limits are as follows.
Category % of items % of total cost of
materials
A 5-15 60-75
B 15-25 15-25
C 60-75 5-15

Procedure
Items with the highest value is given top priority and soon.
There after cumulative totals of annual value consumption are Expressed as
percentage of total value of consumption.
Then these percentage values are divided into three categories.

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ABC analysis helps in allocating managerial efforts in proportion to

importance of various items of inventory.
Practical study of the organization (with respect to the issue)
A practical inventory management system

Effective inventory management eludes many small business owners who often
assume only large competitors can create a well-oiled inventory machine. But with
some organization, assessments and periodic adjustments to inventory practices,
entrepreneurs can improve cash flow and gain valuable insight into their business.
To keep their eyes on the prize as they build their businesses, entrepreneurs often
forego a multitude of "niceties" like slick marketing materials or formalized
procedures for everyday tasks. But classifying "developing an inventory
management system" as something to accomplish once your business has grown
can stymie your company from increasing positive cash flow and predicting
inventory needs. Establishing and optimizing an inventory management system
will demand some time up-front as well as periodic upkeep. But the investment
reaps good returns. To help you streamline the inventory management process and
save money without sacrificing your customer experience, try following these
guidelines for optimizing inventory management.

Tracking inventory and sales data

The old saying "you can't improve what you can't measure" exemplifies the
backbone of a sound inventory management system. If you haven’t yet started
keeping thorough records, there's no time like the present. As you create this
records system, consider how it will accommodate the most vital inventory
components:

o sales orders — documents comprising your customers' purchase orders

(requests for your product or service) in a format tailored for your business
o bills of materials — documents stating the inventory components (and
hopefully labor) required to complete products or services

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o work orders — if you're involved in manufacturing, you're probably

familiar with these documents that include products' details and their
respective bills of materials

You likely already have a system for recording transactions that include sales
orders (we hope). But most entrepreneurs haven't taken the time to complete bills
of materials, and for good reason: They are time-consuming. But, in the end, the
benefits far outweigh the costs. Bills of materials are considerably easier to create
for a retail storefront than for, say, a restaurant. In the foodservice industry, one
sales order can relate to multiple bills of materials which, in turn, can require a few
primary components and many others in small amounts. If you fall into the latter
camp, determine the quantities of various invoice items needed for the appropriate
bills of materials.

If the hotcakes at your diner are selling like hotcakes, including the exact quantities
for all ingredients on the bill of materials allows you to determine how much
inventory you'll need for a day, a week, etc. once you analyze your sales orders
during a set time period. The system you use to record all of this data should allow
you to enter information easily and generate reports without extensive
programming knowledge. You can solve this through:

o building your own inventory-tracking spreadsheet

o checking to see what inventory capabilities your bookkeeping software
includes, or what add-ons are available
o exploring online inventory management tools

If your business requires little inventory, a homemade spreadsheet solution will

suffice. If, however, your business requires an extensive inventory and you're not
an Excel expert, the latter two options are a better bet.

Analyzing the data and improving inventory management

Once you have detailed sales and inventory records available, you can run a variety
of ratios to spot waste and improve your cash flow. In many cases, a cursory

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glance at your inventory records compared to your sales numbers will indicate if
your inventory is properly accommodating sales. But to properly evaluate your
inventory practices, complete these inventory management analyses and ratios.

Average inventory investment period. To determine the length of time needed to

convert money used to purchase inventory into sales, divide your current inventory
balance by the average daily cost of goods sold. If you don't know the average
daily cost of goods sold, divide your annual cost of goods sold amount by the
number of days you were open for business during the appropriate year.
Example: If your average inventory investment period is 100 days, it will take
100 days for something in your inventory to convert to sales. Any steps you
can take to reduce the number of days (like ordering less inventory or
offering trade discounts for prompt payment) means more money in your
cash flow.

Inventory-to-sales ratio. Understanding how your investment in inventory

corresponds to your monthly sales amounts will reveal recent spikes in inventory.
Divide your inventory balance by sales for the month to find your inventory-to-
sales ratio. Perform this ratio every month to see if the ratio is increasing or
decreasing.
Tip: An increasing inventory-to-sales ratio means you're investing too much
in inventory and/or your sales have dropped. A decreasing inventory-to-sales
ratio means your investment in inventory is decreasing in relation to sales
and/or your sales are increasing.

Turnover Analysis. Perhaps the most useful inventory management exercise, this
analysis can help you discover if your investment in a particular inventory item or
group of items requires modifications. And here is where your inventory
recordkeeping will really pay off. In order to perform turnover analysis, you'll need
to know:

o the number of inventory items currently in stock

o the number of inventory items used or sold during a set period (usually 30 or
60 days)

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o the number of inventory items that remained in stock during the set period

Example: Your turnover analysis reveals you have 200 pounds of flour in
stock, you used 185 pounds in the last 30 days and 90 pounds remained in
stock during that 30-day period. In this case, your flour inventory requires no
adjustment because you're using a majority while keeping enough in reserves.

The analysis also reveals you have 432 cans of tomato sauce, used 157 cans in the
last 30 days and 313 cans remained in stock during that 30-day period. When it
comes to tomato sauce, you're ordering roughly three times more than your
business uses in a 30-day period.

Remember the golden rule of inventory management: The more inventory you
have on hand, the less cash you have on hand. And while, in theory, you can
always liquidate excess inventory in order to boost your cash reserves, there's not
always a market to purchase your inventory.

Taking the time to maintain and evaluate your inventory frequently will allow you
to adjust inventory investment as your business evolves while helping your cash
flow remain positive

Data collection methods

Research Methodology

 R1.The data has been collected through interface and discussions with the
directors working with the division.
 R2.Some important information taken through unstructured and structures
interviews of the executive.
 R3.Magazines and annual reports also used for the collection of necessary
information.
 R4. Research Papers used for the source of secondary data.
 Experiment
 Survey
 Observation

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 Ethnography
 Secondary data collection
 Archival research
 Interview/focus group

SWOT analysis (strengths, weaknesses, opportunities & threats) relevant to

the issue assigned
Inventory Management
The four key elements of SWOT analysis are - Strengths, Weaknesses, and
Opportunities & Threats. Inventory Glassware can use strengths to create niche
positioning in the market, can strive to reduce & remove weaknesses so that it can
better compete with competitors, look out to leverage opportunities provided by
industry structure, regulations and other development in external environment, and
finally make provisions and develop strategies to mitigate threats that can
undermine the business model of Inventory Glassware.

Opportunities Threats

Strengths Strength Opportunities (SO) Strength Threats (ST) Strategies

Strategies
Inventory Glassware can use two approaches
Using Inventory Glassware - building on present strengths, or analyze the
strengths to consolidate and trend and build processes to two pronged
expand the market position. market penetration approach.
Weaknesses Weakness Opportunities (WO) Weaknesses Threats (WT) Strategies
Strategies
Inventory Glassware should just get out of
Building strategies based on these business areas and focus on strength
consumer oriented product and threats box , or on weakness and
development and marketing opportunities box.
approach.

Conclusion (one-page brief covering important aspects of your report)

Inventory management has to do with keeping precise records of finished goods
that are ready for shipment. This often means posting the production of newly
completed goods to the inventory totals as well as subtracting the most recent

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shipments of finished goods to buyers. When the company has a return policy in
place, there is usually a subcategory contained in the finished goods inventory to
account for any returned goods that are reclassified or second grade quality.
Accurately maintaining figures on the finished goods inventory makes it possible
to quickly convey information to sales personnel as to what is available and ready
for shipment at any given time. The ROI of Inventory management will be seen in
the forms of increased revenue and profits, positive employee atmosphere, and on
overall increase of customer satisfaction. The next step of the present research will
be the application of achieved results of demand forecasts, safety stock and reorder
points into simulation software in order to achieve more accurate results.
Recommendations (specific recommendations relevant to issue assigned)

Tips for managing your inventory

 Prioritize your inventory.

 Track all product information.
 Audit your inventory.
 Analyze supplier performance.
 Practice the 80/20 inventory rule.
 Be consistent in how you receive stock.
 Track sales.
 Order restocks yourself.
 The inability to capture critical visual evidence of supplies or deliveries can lead to
dissatisfied customers who make claim of poor quality or damaged products.
 Manual processes are time-consuming, costly, and prone to error.
 Paper forms containing vital information are vulnerable to loss and theft and often
suffer from illegible handwriting.

Annexes (if any)

Nothing found

References (as per APA format)

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https://www.wolterskluwer.com/en/expert-insights/how-to-establish-a-practical-
inventory-management-system

Steven C. Wheelwright, William Schmidt (2018), "Scientific Glass Incorporated:

Inventory Management (Brief Case) Harvard Business Review Case Study.
Published by HBR Publications.

L. Ling, Supply chain management: concepts, techniques and practices enhancing

the value through collaboration. NJ: World Scientific, 2007. 372 p.

M. Leseure, Key Concepts in Operations Management, 2010

D. Plinere, L. Aleksejeva, “Agent system application as a tool for inventory

management improvement,” in 8th Int. Conf. on Soft Computing, Computing with
Words and Perceptions in System Analysis, Decision and Control, 3–4 Sep., 2015.
Antalya, Turkey, pp. 157–166.

D.S. Plinere, A.N. Borisov, L. Ya. Aleksejeva, “Interaction of Software Agents in

the Problem of Coordinating Orders,” Automatic Control and Computer Sciences,
2015, vol. 49, no. 5, pp. 268–276. http://dx.doi.org/10.3103/S0146411615050089

Demand Forecasting Methods. [Online] Available:

http://www.forecastingmethods.net/DemandForecasting-Methods.html [Accessed:
Sept. 25, 2015]

R.B. Chase, F.R. Jacobs, N.J. Aquilano, Operations Management for Competitive
Advantage. [Online] Available:
http://highered.mheducation.com/sites/dl/free/0073525235/940447/jacob
s3e_sample_ch11.pdf [Accessed: Sept. 25, 2015

Chapter 15: Inventory Models [Online] Available:

http://web4.uwindsor.ca/users/b/baki%20fazle/70-
604.nsf/b6176c6e57429a9f8525692100621c8f/0c409154799651278525
694c005e3040/$FILE/Lecture4_Inv_f06_604.ppt [Accessed: Sept. 25, 2015]

www.capital line .com

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www.economictimes.com

www.blonnet.com

www.moneycontrol.com

www.reportgallery.com

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