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Inventory ManagementIndustry practices in various businesses
Group 2, Section A
Akash Sahu
Amit Singhania
Megha Agarwal
Naveen Agarwal
Preetisudha Pandab
Pulkit Agrawal
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StationeryStore
Grocery store
PharmaceuticalStore
Retail Chain
Industry practice
Recommendations
Industry practice
Recommendations
Industry practice
Recommendations
Industry practice
Recommendatio
ns
Outline:
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Stationery store: Geeta
Stores Wholesale Business
Located at Mal Godown, Cuttack
Items : Paper, Pen, Pencil, erasers etc
Around 100 SKUs
Procurement: -Distributors and Local
Wholesale merchants
Manpower: 3 staff members
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Inventory Management
Around 3 months of inventory(excepting for paper reams) To avail discounts on bulk purchase
Leverage upon stock outs of thecompetitors
Use of economies of scale intransportation and storage
Rent is of fixed floor space (Rs 1500) Godown is at a distance from the shop
Re-order point -10 days of inventory
Sale of Paper is by FIFO
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Issues in current
management Over stock costs
Irregular Stock tally
Time loss in getting goods fromwarehouse
Losing out potential customers due tounavailability of specific products.
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Recommendations
Proper monthly demand estimation
Bulk purchase should be avoided
Historical data should be maintained
to aid demand estimation
Periodical stock tally
Opting for a nearer warehouse
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Grocery Store: SMKP Store
Thirty years old business enterprise.
Located at Buxi bazaar, Cuttack.
SKUs range 900-1000
Staff members 10.Monthly TurnoverRs 15 to 17 Lakhs
Total Area3200 sq. ft. (1000 sq. ft. for shop
and 2200 sq. ft. for
storage)Category of itemsGrocery items & FMCG
items
Fastest Moving ItemsGrocery items like
rice, pulses etc
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Business process involved in
inventory procurement
Grocery Items:Procured on daily basis from Malgodown,
Cuttack from around 10-15 fixed no of shopsbased on the quality and price.
FMCG Items:
Agents of the distributor come and take theorders weekly and deliver the items in house
accordingly.
Maintain 10-12 days of inventory
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Key issues
Damage of Oil pouches, detergents packetsduring procurement
Breakage of Ketchup bottles due toimproper handling and bad packaging
Unsold seasonal items can be returned tothe vendor only in the next cycle, this leadsto undesirable loss of shelf and inventoryspace and also immobility of funds.
Stock check is done on an yearly basis (Every Diwali )
All accounting and ledger work is donemanually
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Recommendations
Maintain historical data to predictdemand for seasonal products.
Use of accounting software to track
sale and purchase of goods moreefficiently
Low level inventory for products like
oil, detergent and ketchup bottles toreduce the risk of breakage.
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Medical Store:
Medicine House,
Bhubaneswar
Medicine house is a standalone medicine shop in IDmarket, Bhubaneswar.Owner: Mr. Pramod Patra
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Overview of industry
Large number of drugs and their varietiesSeveral alternatives for the same salt.
License needed to manufacture and store
drugs
Manufacturer provides after supply servicesunconditional exchange of expired drugs
Doctors prescription alters the demand of the
drug. The consumer is usually indifferent to
the brand.
In some generic drugs the brand (eg.
Himalaya, Dr. Reddy) may be of importance
Several complementary items (eg. diapers)
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Inventory decides your
BusinessHuge variety
Countless number of Retailers (counters)
The sale of an individual medicine per shop is not great.
The over all sale of medicine at each shop is high
Small inventory of all things vs Large inventory of some things
Largeinventory ofcertain drugs
Smallinventories ofa many drugs
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As Variety increases volumes
decrease
Carry and Forward :One per company
Stockist : More innumber
Retailer: hugenumber of counters
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Medicine House: An Insight
Stand alone shop in ID market, Bhubaneswar
Monthly Sales average to approximately between 4
and 5 lakh
Number of employees is 4
About 65000 SKUs listed in the catalogueAt the time of visit about 20000 SKUs were present
in the inventory.
The owner has plans of expansion to 4 or 5 shops
within the city in the near future. Plan of starting achain of retail pharma shops if the plan works out.
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Inventory at Medicine House
Inventory is important:The customer is not ready to wait
Other medical stores offer the medicine at all times
A customer unsatisfied is a customer lost in this
businessMethod of Procurement:Daily procurement
Supplier is locally available
A safety stock per drug is maintained
Limited area in shop for storage of medicines. Storing
elsewhere is illegalInventory is usually only enough to satisfy the demand for 2 to
7 days, depending on the drug
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Computerized system
Medicine House uses a computer software to tracksupplies and sales
The batch number is entered along with the expiry
date for each purchase
The sales also follow a data entry in the system,
except in case of many customers waiting
The system provides reports of each item. Also alertsabout the approaching expiry dates
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Arrangement of Inventory
All inventory on shelf. Is available for sale
Use of refrigerators for certain items
Medicine house specifics:
All medicine arranged in Alphabetical
order
Bottles and strips arranged in one placeSeparate rack for expired and near expiry
drugs
Some items also placed on the counter.
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Mr. Patra says
A medicine like Cinarest is so popular that 50 strips may be soldin a day or two. A thermometer may, on the other hand, take
months before running out of stock.
0%
20%
40%
60%
80%
100%
drugs ininconsistent
demanddrugs incontinousdemand
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How much inventory to keep?
Suppliers are locally availableSuppliers maintain a huge inventory
Medicine House buys from 4 or 5 different suppliers
The supply is usually stable. Medicine are exempted
from any strike or closedown
Small level of inventory maintained. Safety stock
determines the order for next day
Extra order may be placed for fast moving drugs.
Staff keeps an eye on the doctors prescriptions andestimated the demand of a drug. Orders are altered
based on this observation.
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Recommendations
Use FIFO system effectivelyKeep the alphabetical system of placing items
intact. This will make it easier for the new staff to
locate the medicines
Manage the drugs in separate plastic boxes toseparate strips from mixing up.
Use a queue system in each box for
implementing the FIFO system.
The queue system if implemented will alsomake the inventory verification easier.
Keep faster moving goods in easily accessible
locations.
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Retail Chain: Big
Bazaar, Patia.
Bhubaneswar
Maruti Mall, Big Bazaar is located at KIIT square.36000 sq. feet in area80 employees
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BIG BAZAAR
Organization Structure
Front end divided into several divisions Food Bazaar,
Mobile,
Mens Wear,
Ladies Wear,
Kids Section,
Electronics.
Back end divided into 3 teams Inventory Management/Warehouse team
The Category Team,
The Commercial team
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Inventory Management at Big
Bazaar
The operational strategies for Food Bazaar and the
rest (which they refer as Big Bazaar) are highly
segregated
BigBazaar
FoodBazaar
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The main difference
FoodBazaar
Localvendors &distributers
Dailyinventorycounting
BigBazaar
CentralizedDC
Quarterlyinventorycounting
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Big Bazaar
The inventory procurement is done on a dailybasis
No individual warehouses for the individual stores
A central warehouse at Kolkata, which distributesto the eastern zone
Lead time of about 60 hours
In case of stock out they check for availability in
other branches
Upon arrival of inventory entries are made in the
system, a software called Auto Replenish System
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Inventory Management at Big
Bazaar
Inventory directly moved to the shelves on the display
floor
Layout decided by a Planogram
They try to maintain a FIFO method of inventory
consumption, but considering that its a self service
store that is not much under their control
Average sales per day calculated based on the sales
last 3 months
Minimum Base Quantity is used
Big Bazaar: Inventory
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Big Bazaar: Inventory
management during peak
season
Located onKolkata
Distributioncentre
Bhubaneswar
Supplies to 3outlets in Orissa
Temporarywarehouse Heavy rush during
peak season
Prevents stockouts
Big Bazaaroutlets
During super sales (like during 26thJan), a
temporary warehouse is maintained for all the 3
stores in Orissa combined
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Inventory Management at Food
Bazaar
Daily procurement from local vendors
Vegetables and fruits are fastest moving items
whereas imported chocolates are the slowest
movingOther items like Maggi, Biscuits are procured from
local distributors
Inventory level of 7 days plus safety stock of 2 days
Average sales per day is calculated based on the
sales last 3 months
Minimum Base Quantity = Avg. Sales per Day * 9
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Inventory Management
Stock verification is done manuallySales person checks for the expiry dates of individual
items manually
No special process for peak season demand
Estimates done according to last season and extra
inventories are orderedInventory counting is also a manual process, done
quarterly
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Recommendations
Expiry date verification can be easily automated by
the software they are already using i.e. Auto
Replenish System
Formalization of supply chain process in case ofFood Bazaar
Use of Cycle counting in place of quarterly counting
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THANK YOU