Inventory Control System-A comparative study of Dawar & Tej footwear

Data Collection & Analysis

( Submitted for the partial fulfillment of Degree of Bachelor of Commerce in Industrial Project) (2011-2012)

Under the Supervision of Dr Pramod Kumar (Department of Acco. Law)

Submitted by Nagma Khan B.com VIth Sem

Roll No. 092037

(Faculty of Commerce ) Dayalbagh Educational Institute (Deemed University) Dayalbagh Agra

Inventory Control System-A comparative study of Dawar&Tej footwear

Introduction
Inventory consist of raw materials, work in process and finished goods.Raw material used for manufacturing a product. Usally raw materials are purchased for production from different sources to get a maximum benefit of price and quality. Firms usually find the sources where such material actually exist and purchase from there after calculating there own recruitment of inventory. Such items put into production and when they are manufactured, they are sold as finished goods. The financial manager has to assess the right quantity of inventory required by a firm. Inventory must be control because loses arise if it is not safely and properly stored. Loses also arise if too much inventory has been purchased. Inventory can be stolen or it can be wasted. The techniques inventory control system maybe applied to reduce such kind of loses. Inventory should be purchase in the right time and the right quantity and it should be control to have efficient inventory control system.

Objectives
1. To study the inventory control system in selected units. 2. To analyze the valuation or techniques of inventory of

selected units.
3. To Make a comparative study in selected units. 4. To corrective measures of inventory control.

Research Methodology
The present study aims to study the Inventory control system-A Comparative study of Dawar & Tej Footwear. The sample of the study consists of 50 management executives of the organisation in Agra.The period of the study is one financial year ie- 2010-2011. Schedule Questionnaire & Interview was used to collect the data in the selected units. The data after being collected and coded systematically tabulated, percentage ,simple average & weighted average calculated. sample area -Agra Sample size- 50 Sample Units -2 Units Dawar Footwear and Tej

Period of the study 1 Financial year ie- 20102011

Collection of data & Analysis

Primary Data: The source of primary data questionnaire, interview and observation in selected units. secondary data: The source of secondary data is websites, literature, newspapers, books etc.

To achive the first objective: (To study the inventory control system in selected units).
Inventory required by a manufacturing firm will be different to that trading organization. A manufacturing firm will be require inventory from the stage of acquiring row material for manufacturing goods. A trading firm will acquire material only after they are manufacturer to sale or distribute them.

Raw Material
Inventory relating to raw material is very sensitive because not only should it be bought by the right supplier and the right quantity it should also be stored with care. Raw material should be priced correctly when sending them in the manufacturing process. It is useful to make an aging schedule to see that raw material are not left unused for a long time. In the stores, they should be managed carefully through the system of dins to make it easy for the manager to assess the minimum and the maximum quantity lying with it in the store. The raw material should be looked after by the manager through storage system of ABC analysis. Raw material should also be protected by having a stores ledger and daybook to record all the transactions of raw materials which leave the stores and new purchases which are bought into the stores. Raw material relating to goods return because they are defective should also be entered in the store journals.

Work In process
Such Materials are those which are in a semifinished state every manifecturing firm has its own cycle of production maybe very according to length of time takking for completion of a product. The Work in process can also if timely material is not received.

Finished Goods
These goods are ready for sale to the customers. optimum inventory management recuires that firm have the opprtuities as soon as there is demand for them. A large stock of finished good mean that stores should be efficiently controlled it also mean that there is high investment in goods. Inventory control system involves the balance between the benefits and the costs of maintaining inventory. The financial manager achieves this task by following certain important techniques like the ABC-Analyse Economic order quantity and the correct reorderlevel of materials.

Tools for analysis

ABC Analysis:
This technique classifies into different type and then controls them. The objective of ABC analysis is to find out those items which are most expensive but are used in small quantity such items would be called-A class of inventory. Those items which are less expensive and also their requirement is higher would be given less securities than A class inventory and C.The C groups are relatively low in investment although in number and volume it may be quit high. This can be summarized in the following way.

Classification of ABC analysis

A-Control most expensive items--Tight securities B-Control less expensive items--Medium securities C- control least expensive items--Low securities

Economic order quantity:

After making an analysis on the basis of ABC categories, the financial manager should focus his attention to the quantity of inventory which is to be purchased. In particular it is important to asses the annual requirement and then to find out the economic order quantity or the number of times materials should be bought in one year and the which should be purchased in each lot.The economic order quantity would help to provide a trade off between costs and benefits.it identifies the level of inventory which minimizes the total cost of inventory. Economic order quantity considers both ordering costs an carrying costs The minimum level of total cost is considerd to be the EOQ.

 Reorder level and Minimum level stock:

Since EOQ has many limitations the firm should maintain a safety stock so that if supplies are not received in time, such stock can be used as a buffer.A firm should also maintain its inventory in such a way that the reorder point is defined and stock is immediately replenished.At least the order should be sent for replacement of inventory.Reorder level is calculated on the basis of the daily use of the inventory and the lead time which is nessessary between placing of order and receiving of delivery of materials therefore reorder level can be calculated by the following formula. Reorder level=Average daily usage if inventory x lead time.

To achieve the second objective (To analyze the valuation or techniques of inventory of selected units.)
Schedule Questionnaire :
1. Are you aware about Inventory Control System?
Company Names Response Yes No Do not know/Cannot say Dawar Footwear (%) 80 16 0 Tej Footwear(%) 88 12 4

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

Axis Title

Company Names

Axis Title

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Tej is better than Dawar because the employees of Dawar doesnt know about the system.

2. Do you know that your company has an Inventory Control System?

Company Names Response Yes No Do not know/Cannot say Dawar Footwear (%) 64 24 12 Tej Footwear(%) 88 12 -

100 90 80 70 60 50 40 30 20 10 0

Company Names Tej

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Tej is better than Dawar because the employees of Dawar comparatable less follow the system.

3.

Do you agree that there should be an Inventory Control System in an organization/company?

Company Names Response Agree Disagree Do not know/Cannot say Dawar Footwear (%) 72 20 8 Tej Footwear(%) 96 4 -

100 90 80 70 60 50 40 30 20 10 0

Company Names

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Tej is better than Dawar because the employees of Tej are agree that the system should be exist as compare with Dawar.

4. For what reasons do you feel that there should be an Inventory Control System?(please give rank for highest.)

Response

To smoothen operational requirement To Save Time To maintain accountability and transparency

Company Names Dawar Footwear (%) Tej Footwear (%) Rank Rank I II III I II III 64 12 24 44 28 28 52 48 32 36 16 16 28 12 56 8 16 80

80 70 60 50 40 30 20 10 0 Company Names To smoothen operational requirement Response

Interpretation- I used table for analysis the question in which first column shows response second column shows executive response inform of rank & % of their company. Here Tej is better than Dawar because the employees of Tej are agree that the system must have the priority as given in the statement.

5. Do you agree that the Inventory Control System in your company has fulfilled the need for which it was evolved?

Company Names Response Strongly Agree Agree Disagree Strongly Disagree Do not know/Cannot say Dawar Footwear (%) 24 76 Tej Footwear(%) 48 16 28 8 -

80 70 60 50 40 30 20 10 0

Company Names

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Tej is better than Dawar because the employees of Tej are agree that the system fulfils their requirements.

6. What according to you is the major benefit of going for an inventory control system by your organisation/ company?(Please give rank for highest.)
Company Names Dawar Footwear (%) Tej Footwear (%) Rank Rank I II III I II III 12 4 9 16 7 2 8 9 9 8 8 8 5 1 19 25

Response

It has made storage retrieval of material easier Improvement effectiveness Reduced operational cost

25 20 15 10 5 0 Company Names

Response

It has made storage retrieval of material easier Improvement effectiveness

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here both (Tej & Dawar) gives almost equal preference to statements altranatives.

7. Do you know skilled professionals are employed in your organisation/company for Inventory control?
Company Names Response Yes No Do not know/Cannot say Dawar Footwear (%) 80 16 4 Tej Footwear(%) 64 24 12

160 140 120 100 80 60 40 20 0 Response Yes No Do not know/Cannot say Company Names

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Dawar is better than Tej because the employees of Dawar are highly agree that there must be skilled professionals are
employed in the organisation.

8. What category of professional is managing inventory in your organisation/ company ?

Company Names Response Skilled trained Only skilled but not trained Non skilled but trained professional Non skilled and non trained professional others Dawar Footwear (%) 60 28 8 4 Tej Footwear(%) 52 16 32 -

60 40 20 0 0 0

60

52 28 16 8 32 0 0 0

Company Names

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Tej is better than Dawar because the employees of Tej are agree that the system fulfils their requirements.

9. Do you agree that your company gives more emphasis on software than skilled manpower with regard to inventory control ?
Company Names Response Strongly Agree Agree Disagree Strongly Disagree Do not know/Cannot say Dawar Footwear (%) 28 60 12 Tej Footwear(%) 36 24 24 16 -

90 80 70 60 50 40 30 20 10 0

Company Names

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Tej is better than Dawar because the employees of Tej are stongly agree that org. more emphasis on software
than skilled manpower with regard to inventory control .

10. Do you think that the software used by your company is according to the design and needs of the system ?

Company Names Response Yes No Do not know/Cannot say Dawar Footwear (%) 78 12 10 Tej Footwear(%) 80 12 8

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Company Names

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Tej is better than Dawar because the employees of Tej are highly agree than dawar.

11. What is the prime challenge before your company regarding inventory control? (Please give rank for highest.)
Company Names Dawar Footwear (%) Tej Footwear (%) Rank Rank I II III I II III 19 3 3 17 6 2 18 2 5 5 16 4 15 5 5 5 20 3

Response

Lack of trained professional Maintenance cost Changing requirement of customers

60 50 40 30 20 10 Response 0 Company Names Lack of trained professional Changing requirement of customers Maintenance cost

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company.

12.

What is the future of inventory control system in your company?

Company Names Response Will continue as a successful mechanism May continue as successful mechanism may chance according to time shall collapse Dawar Footwear (%) 44 40 16 Tej Footwear(%) 40 24 36

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Company Names

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Tej is better than Dawar because the employees of Tej are agree that the system fulfils their requirements.

12.What is the future of Inventory Control System in your company?

Company Names Response Will continue as a successful mechanism May continue as successful mechanism May change according to time shall collapse Dawar Footwear (%) 44 40 16 Tej Footwear(%) 48 24 28

60 50 40 30 20 10 0 Response Will continue May continue May change as a as successful according to successful mechanism time shall mechanism collapse Company Names

Interpretation- I used table for analysis the question in which first column shows response second & third column shows executive response of their company. Here Tej is better than Dawar because the employees of Tej are agree that the system fulfils their requirements.

To achieve the third objective(To Make a comparative study in selected units.)

Schedule Interview
Q:-Do you maintain the inventory in your company? An:-Dawar footwear- yes, we maintain all types of inventory , Tejfootwear- Same as above. Interpretation - Here both (Tej & Dawar) maintain the inventory in thier company.

Q:-Do you purchase the raw material either through Centralised purchase or Decentralised purchase method? An:-Dawar footwear- Centralised purchase. Tejfootwear- Centralised purchase. Interpretation - Here both (Tej & Dawar) maintain the inventory in thier company. Q:-Which method do you applied for searching the supplier? An:- Dawar footwear- we search the supplier through websites. Tej footwear- we search the supplier by adopting the just in time technique

Interpretation- Here Tej is better than Dawar because Tej follows JIT.
Q:--which method do you follow for material issued? An:-Dawar footwear-We follow first in first out and average method. Tej footwear-We follow last in first out method. Interpretation- Here both (Tej & Dawar) are use the material issued method as per their priority. Que- From which year, you are following these method? Ans- Dawar footwear- From 1992 till now. Tej footwear- From 1989 till now.

Interpretation- Here Tej is more oldest company than Dawar.

Que- What is your minimum and maximum level of stock? Ans- Dawar footwearMinimum level- 50,000 units. Maximum level-1 lac units. Tej footwearMinimum level- 10-15% of order comes. Maximum level- 20-25% of order comes. Interpretation-Tej has the higher minimum and maximum level of stock than Dawar.

Que- What is your Economic Order Quantity? Ans- Dawar Footwear- 1 lac units. Tej footwear-1.5 lac units. Interpretation-Tej has the higher Economic Order Quantity than Dawar.

Que- What is your carrying cost & ordering cost incurred? Ans- Dawar footwearcarrying cost- 10% of material used. Ordering cost-2% of material used. Tej footwearcarrying cost- 9.5% of material used. Ordering cost- 1% of material used. Interpretation-The carrying cost & ordering cost of tej is lesser than Dawar Which is good for Tej.

Que- What is your lead time for placing order? Ans- Dawar footwear- 45 days. Tej footwear- 32-45 days.

Interpretation - Here both (Tej & Dawar)has almost same lead time.

Que- which method do you follow for keeping the goods? Ans- Dawar footwear- We do not follow any method. Tej footwear- We follow always better control (ABC) method. Interpretation-The Tej keeps the goods by using the is always better control (ABC) lesser than Dawar Which is good for Tej.

Que- what is your input-output ratio? Ans- Dawar footwear-40-60% of order comes. Tej footwear-60-80% of order comes. Interpretation-The Tej has the better input-output ratio than Dawar Which is good for Tej.

Que- What is your Inventory turnover? Ans- Dawar footwear-10 crore. Tej footwear-75 crore. Interpretation-The Tej has the better Inventory turnover than Dawar Which is good for Tej.

Findings
The Tej Footwear is better than Dawar Footwear Because T

ej has a good Inventory Control System. Tej is more oldest company than Dawar.

Tej follows just in time technique for search the supplier. Tej has the higher minimum and maximum level of stock . Tej has the higher Economic Order Quantity . Tej keeps the goods by using the is always better control (ABC) Tej has the better input-output ratio. Tej has the better Inventory turnover.

Reference www.dawar.com www.tej.com