A STUDY ON INVENTORY MANAGEMENT & CONTROL

Nkosinathi Mancoba Nkosi

ABSTRACT

This research propose to get exposure in inventory & 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 & 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 & 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 & properly forecast the demand. This will result in managing inventory & use man-
power according to the demand in order to produce more & 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 & 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 & completed merchandise. Crude materials are the things bought by firms for use
underway of completed item. Work-inadvance 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 & deal procedure of a firm. Stock administration is that part of
current resources administration, which is worried about keeping up ideal interest in stock &
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 & 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) & not on the paltry numerous(C-
Things)

NEED FOR THE STUDY

Stock is basic for everything to get their assets proficiently & Requirement for consider is to
execute appropriate determining by the organization & enhance correspondence process between
the staffs with offices. To direct ABC examination on the organization stock to decrease the
Dead stock & 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 & 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 & 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 & 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 & managing their largest asset inventory. In response to this need several companies
developed comprehensive inventory management modules & systems. These new package
include many new features designed to help distributors effectively managed warehouse stock.
Butafter implementing this many distributors do not feel that they have gained control of their
inventory

3. Wolf Bagby, Managing inventory In this study Mr. W.Bagby 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, & improve
profitability by decreasing cash conversion & 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 & better performance by choosing the approach of inventory reduction. For this
company needs to maximize the cash flow & profitability & this includes keeping a watchful
discerning eye on charge in supply & demand?

4. Asfaque Ahmed October 12, 2004 He said that most of the manufacturing company vendors
have planning & scheduling product which assume requirements or infinite quantities of raw
material & WIP materials for calculating production capacity There are many problems with this
approach & 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.
5. D.Hoopman April 7, 2003 (Article from inventory planning & optimization) In this article he
said that inventory optimization recognize that different industry have different inventory
profiles & 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 & usability are paramount

6. 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 & 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.

7. Charles Atkinson (A study on inventory management) In the study by Mr. Charles Atkinson,
he explained the inventory management & 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 & not to do, & 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

8. 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 & information

OBJECTIVES OF THE RESEARCH

To analyze the inventory management of this company.

To analyze the entire activities of purchase & 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 & 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 & suggestion cannot be generalized.

The study covered a wide concept hence wide collection & coverage of
Data Analysis

ABC analysis for the year of 2017

Material Description Val stock Stock Rate Classification

Code volume
100138310, crankcase 977008.52 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 CrankshaftForging- 570,969.00 1431 39.90 A
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 & crank shaft provides a value of 50%, which is the highest compared to other
parts.

ABC analysis for the year of 2016

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 & INVENTORY

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 & 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 & 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 & helping the company to
face the problems by following proper techniques & controlling. This will reduce the huge
money investment problems & 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 & also it gets more
even after the production. An efficient inventory management can control & make the company
to grow more & 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 & shortage occurs due to improper way of forecasting the
demand. ABC analysis is carried to find out the materials which are moves fast & important to
the company & which is differs from sales & volume in the inventory.