CHAPTER I

INTRODUCTION

1
PRESENT SCENARIO OF INVENTORY MANAGEMENT IN
INDIA:

The success of a venture depends on its ability to provide services to customers

or users and remain financially viable. For an organization which is supplying goods to
its customers, the major activity is to have suitable products available at an acceptable
price within a reasonable timescale. Many parts of a business are involved in setting up
this situation. Initially these are the marketing and design departments. Then purchasing,
and in some cases, manufacture is involved. For an item which is already in the
marketplace, the main activity is providing a continuity of supply for the customers.

Inventory enables a company to support the customer service, logistic or

manufacturing activities in situations where purchase or manufacture of the items is not
able to satisfy the demand. Lack of satisfaction could arise either because of the speed
of purchasing or manufacturing is too protracted, or because quantities cannot be
provided without stocks.

Stock control exists at a crossroads in the activities of a company. Many of the

activities depend on the correct level of stock being held, but the definition of the term
'correct level' varies depending upon which activity is defining the stock. Stock control
is definitely a balancing act between the conflicting requirements of the company, and
the prime reason for the development of inventory management is to resolve this
conflict in the best interest of the business. A conventional supply organization will have
many departments including sales, purchasing, finance, quality assurance, contracts and
general administration. In some cases there will also be manufacturing, distribution or
support services or a variety of industry.

2
NEED FOR THE STUDY:

Materials are equivalent to cash and they make up an important part of the total
cost. it is essential that materials should be properly safeguarded and correctly
accounted. proper control of material can make a substantial contribution to the
efficiency of a business. the success of a business concern largely depends upon
efficient purchasing, storage, consumption and accounting.

Bulk drugs is the backbone of pharmaceutical industry and inventory plays a

vital role in bulk drug industry hence the study of inventory management in bulk drugs
of hetero drugs ltd has been selected for the project.

OBJECTIVES OF THE STUDY :

To know the Vision, Mission and the strength of Hetero Group towards
Inventory Management

To evaluate the various techniques of Inventory being adopted by Hetero

Groups.

To understand inventory management procedures followed at Hetero

3
HETERO DRUGS LTD.

To know the efficiency of the firm in utilizing its Current Assets in general and
in particular Inventory.

SCOPE OF THE STUDY

The study is done on inventories held by HETERO DRUGS LTD. The scope of
the study includes the LIFO- FIFO Statements, Techniques of Inventory Management &
Just in Time System.

Inventory control is the activity which organizes the availability of items to the
customers. It co-ordinates the purchasing, manufacturing and distribution functions to
meet the marketing needs. This role includes the supply of current sales items, new
products, consumables, spare parts, obsolescent items and all other supplies.

METHODOLOGY :

Information is collected through the Primary and Secondary data.

Primary data is collected through the personnel interactions with the employees
in the organization.

Secondary data is collected from Referred text books, Annual Reports &
Websites

4
LIMITATIONS:

Due to the limited time available the authenticity of conclusions drawn based on
the observations made cannot be ensured.
The analysis of Inventory Management is based on information available and if
any mistake would be reflected in the study.
The figures and facts claimed in the annual reports and other forms are assumed
true.
It is based on the data supplied by the factory personnel.

5
 CHAPTER II

INDUSTRY PROFILE

6
PHARMACEUTICAL INDUSTRY

From ancient times, two systems of medicine will in vague in India firstly, there was
Ayurvedic medicine, which dates back to the Vedic period. Ayurvedic medicine depends
largely on the combination of various herbs, minerals and metals like gold, copper etc.
Secondly, there was the Arabian system of medicine. An innumerable invasion has brought the
Arabian system into India. In contrast to, two others systems of medicine, namely Allopathic
and Homeopathy, were in vague in the western part of the world. Despite of being very
advanced indigenous systems of medicine, Ayurvedic medicine has not really become popular
enough, probably because of very long British Rule and the consequent development of an
educational system including medical educational based some efforts to promote ayurvedic
medicine, its development seems to be a long way off.

It is still popular in rural areas, may be because modern medicine cannot reach there.
In urban areas it has yet to gain importance in so far as the prescription drug market is
concerned.

The indication of allopathic doctors towards prescribing an ayurvedic medicine is very

low indeed. Of late, however, the attitude of customers towards ayurvedic medicine seems to
be increasingly favorable. Some of the pharmaceutical companies are planning to diversify
into ayurvedic drugs mainly to improve their profitability ayurvedic drugs re exempted from
price control.

7
ORIGIN OF THE INDIAN PHARMACEUTICAL INDUSTRY

The exact date on which the allopathic systems of medicine make its entry into the
country is not available but it is generally estimated that it happened some time during the
early part of the 19th century. The British for there personal use imported the medicines when
they come to do business. This was the beginning of the pharmaceutical industry in India.
Later, when they ultimately took over the country, the imports became a regular feature. These
pharmaceutical products, which were introduced in India to provide relief to Britishers, soon
gained popularity among the people in urban areas. For the first few decades after their
introduction, pharmaceutical products were being imported into the country, mostly from
Germany and the United Kingdom.

The Bengal chemical and pharmaceutical works started production of tetanus

antitoxin, a basic drug in 1930. Indigenous production in 1939 was sufficient to meet only
about 13 percent of medical requirements. Thus a large part of domestic demand for drugs was
still met by imports. The second world was another landmark in the history of the Indian
pharmaceutical industry it provided a propitious atmosphere for further expansion of
production.

Post-war developments in the west resulted in a high degree of product

obsolescence, replacing many older drugs with antibiotics and new chemotherapeutic agents.
This put the fledging Indian pharmaceutical industry at a great disadvantage. As a result,
Indian companies had to stop production of many items that were manufactured during the
war years. Instead, they started manufacture of formulations based on imported bulk drugs and
extraction of therapeutic agents from plant sources. Medicines, the industry could not make
much headway, in the absence of consistent govern-medal support to a nascent industry. The
estimated value of production of pharmaceuticals in 1947 and Rs.10 crores.

8
DRUG INDUSTRY: GROWTH INDICATORS

Particulars 1947-48 1991-92

(Rupees in crores) (Rupees in crores)
Capital Investment 24(1952-53) 950

Production 10 4200

Formulations 18(1956-66) 790

Bulk Drugs
Imports 100 1000
Exports 1.27(1963-64) 1281

R & D Expenditure 6(1972-73) 70

INDUSTRY STRUCTURE

The pharmaceutical industry is very aptly described as a life-line industry. It

plays a vital role in alleviating the suffering of millions of people and controlling various
ailments that afflict human beings. Recognizing this, the planners of Indian economic
development after independence have rightly included this industry in the core sector.

The present day Indian pharmaceutical industry has three main sectors:
The public sector
The Indian private sector (including the organized sector) and
The foreign sector:
It is estimated that there are presently 16000 firms engaged in the production of drugs
and pharmaceuticals. About 300 units out of these are on the list of the Directorate
General of Technical Development.

9
PHARMACEUTICAL PRODUCTION IN INDIA:

1986-87 458 2140

1987-88 480 2350
1988-89 550 3150
1989-90 640 3420
1990-91 730 3840
1991-92 720 4200

EXPORTS:

At the time of independence there were no exports of pharmaceuticals from India.

The total value of exports of pharmaceuticals was a mere by Rs.3 crores in 1965-66. During
the last seven years, the Indian pharmaceutical industry has achieved commendable progress
on the export front. The industry total exports were valued at Rs.1281 crores in 1991-92. The
progress of the industry in terms of exports can be seen in the tab.

Research & Development:

Pharmaceuticals industry is driven by a global need to conquer disease. Medicines

are developed to treat new diseases or improve upon the existing treatment. An in-depth
understanding of human physiology and disease mechanism is a pre-requisite to pharmacy R
& D to facilitate research.

10
 COMPANY PROFILE

HETERO DRUGS LTD

Established in the year 1993, with the motto to be the best in the API
manufacture, Hetero today embodies the vision of a top-notch player in developing and

11
commercializing products catering to a variety of therapeutic categories, integrating into
a leading finished dosage manufacturer.

True to the statement, WHERE THE FUTURE STARTED

YESTERDAY, with a foresight on the current trends in the pharmaceutical market,
HETERO has grown from strength to strength, combining its research strengths,
manufacturing capabilities, Human Resources and well established quality management
system. With full-fledged marketing capabilities the company has been able to market
its products in over 80 countries in Asia, Middle east, Eastern, Europe and Latin
America.

With its compliance to the most stringent regulatory requirements, Hetero has
today gained foothold to market. Several of its APIs in the United States, Canada and
Europe. With all six manufacturing facilities being supported by excellent infrastructure
and compliance to the GMP requirements, Hetero has crossed numerous milestones in a
comparatively small period since its inception

12
HETERO GROUPS

HETERO DRUGS LTD

HETERO LABS
HETERO RESEARCH FOUNDATION
CIREX PHARMACEUTICALS
SYMED LABS
GENX PHARMA
LYKA HETERO
EXPICOR

FOUNDER & MILESTONES

The spirit and brain behind the success story of HETERO is its founder
Dr.B.Parthasarathi Reddy, a scientist who started the company drawing
immense strength from the vast and rich experience he gained during his earlier.
Stint at the laboratory where he was instrumental in developing and
commercializing processes for several APIs.
The company was started by him with a vision to be recognized as an aggressive
company that combines its strength of R&D and manufacturing with definite
advantages in terms of cost and chemistry with a strong emphasis on quality of
the products.
The untiring efforts of the Chairman saw HETERO develop processes for
several products at relatively low cost, thus making it possible for several life
saving drugs to be available tat affordable prices, meeting all the regulatory and
quality norms.
With the organization having reached a point where it is identified among the
widely recognized companies, the Chairman is now

13
VISION AND VALUES

Hetero visualizes itself as an aggressive player in the global pharmaceutical

scenario, supplying generics developed, combining intellectual property,
research strengths and strong human resource inputs.
The company values the concepts of having social responsibilities ion the course
of its assent to greater heights. It strongly believes in focusing on customer
requirements and delivering the products at the right pace.
Hetero considers its human resources as the core of all its capabilities and
believes in tapping and honing the talents of its members to reach the zenith of
success.
It believes in continuous evaluation and improvement in all the factors that
contribute in transforming the organization into a global force to reckon with.
Hetero takes due cognizance to the fact that the processes that it develops should
be all Eco- friendly and should not result in any consequence that harms the
ecological harmony.

14
MISSION

HETEROs mission is to be a globally acclaimed pharmaceutical company, meeting the

requirements of healthcare imbibing the philosophy of both commercial and social
concerns, driven by research and manufacturing capabilities.

HETERO STRENGTH

Strong emphasis on Research and Development.

Ability to develop processes for a large range of therapeutic categories.
Ability to orient and adapt to the changing facets of industry, particularly in
terms of regulations, intellectual property and manufacturing capabilities.
Cohesive team of skilled professionals in all wings related to research,
manufacture and marketing.
Strong customer base and market presence.
A strong commitment towards the society to provide timely support by providing
life saving drugs at relatively low costs, short span of time

15
CAPABILITIES:

Type of Reactors Glass, Glass-Lined and Stainless Steel

Reactors Sizes 250-10,000 LTR Commercial Plant
5-250 LTR Pilot Plant
Total Reactor Volume -- 1000 Kilo Ltr
Temperature Range -- 80degrees C to 300degrees C
Pressure Range -- Unto 50 KG/cm square

ANALYTICAL STRENGTH OF HETERO GROUP

HPLCs (with PDA facility)

GCs (with Head space facility)
Infra Red Spectrophotometers
Ultra violet Spectrophotometers
Practical size analyzer
Digital polar meters
Differential Scanning Calorimeters
P-XRD
NMR
GCMS
LCMSM

16
QUALITY SYSTEMS

All the activities at HETERO right from receipt of raw materials to dispatch of
the finished product are carried out in accordance to a well-oiled quality management
system. The importance of having a strong quality based system has been recognized by
organization due to which every individual in each department understands his/her
responsibilities and carries out them with utmost care avoiding any confusion, thus
delivering the best results.

In addition, talking about quality of the product itself, the company has evolved
the systems to implement GMPs in the manufacture of the product to protect the safety,
quality and integrity. The approval of Heteros API Facility by USFDA and Finished
Dosage Facility by WHO bear a testimony to this fact.

R & D OVERVIEW

HETEROs emphasis has always been on Research and Development. The

emphasis was to ensure that the processes being adopted for the products are
cost effective, safe to handle and with optimum advantage in terms of yield and
quality.
Having laid solid foundation towards the end HETEROs R&D approach has
also taken cognizance of the present scenario where stringent patent regime is
under implementation. HETEROs teams of scientists have been and are
involved in developing non-infringing processes for its products. With its ability
to explore high and achieve the best, HETERO has been able to file patents for
several of its processes.

From an organization, which was concentrating on developing processes for

APIs HETERO, has now a full-fledged R&D facility for formulation
department.
HETERO research capabilities have been proven with its ability to carry out a
wide range of reactions, which are difficult to carry
Given its research capabilities HETERO has today has initiated contract
research. Towards the end, the company has already evolved its strategies and is

17
 into discussions with renowned companies for carrying out the contract research.
Custom synthesis is one area where the company has been concentrating on and
has initiating work on several projects.
In addition to the above, the company is now on the threshold of commencing
basic research activities to develop and screening new chemical entities for
different therapeutic categories.

STANDARD OPERATING PROCEDURES

LIST OF STANDARD OPERATING PROCEDURES:

Receipt, Storage, Handling&Distribution of Raw Material.

Handling &Disposal of Raw Material.
Writing Pharma Distribution.
Cleaning of Dispensing equipment.
Sanitation.
Raw Material distribution from Warehouse to Production
Handling of Hosepipes& their periodical change
Handling of Desiccant bags

PROCEDURE:
Receipt, Storage, Handling and Distribution of Raw Material
Receipt of Raw Material:

Upon receipt of rawmaterial the following checks can be taken up:

Whether the rawmaterial is recorded as per the purchase order.
Whether the consignment is supplied along with the certificate of analysis by the
vendor.
Whether the vehicle carrying the consignment is clean
In case of tankers carrying liquid rawmaterial, check whether the valves and
manholes are free from dust, grease or any other lubricant
Above the all conditions are not fulfill the consignment is rejected.

18
Storage of Raw Material:

After de-dusting bring the decoding list and deface the original name of the
material on each container or bags and write in-house code of the material.
Before defacing check the label on each container for vendor batch number and
weight.
Transfer the material to quarantine area. Enter the details into the inward registar.
Allot the in-house batch numbers to the consignment.
If the number of containers shall be less than 25 then the under test label shall be
pasted on all containers. If it is more than 25 then the under test labels shall be
pasted along four corners of the consignment.

19
Sampling and Testing:

The warehouse personnel shall then raise a raw material alert to Quality
Control for sampling and analysis of the consignment
The Quality Control personnel shall paste the sampled labels on the containers
from which the samples were taken.
The Quality Control personnel shall paste Approved/Rejected labels on the
yellow of the under test labels of the consignment.

Storage and Handling:

Raw Material shall be stored in such a manner that proper spacing between
different lots of the same material and also different material to avoid cross-
contamination between the materials.
Inventory cards along with the raw material alert and pre-inspection report shall
also be placed along with the status boards.
Special storage conditions are essential for the raw material say low temperature
and low humidity

Distribution of Raw Materials:

On receipt of the raw material request from the production department the
warehouse personnel shall issue the requisite quantity of raw material to the
concerned production department.
The warehouse personnel shall then enter the details of issue of the material in
the inventory card.
While issuing the material to the production department, the warehouse
personnel shall follow the First In First Out system.

20
Re-testing of Raw Material:

Raw materials being stored for longer periods of time shall be re-tested from
time to time i.e., within 5 days of re-test date.

Handling and Disposal of Rejected Raw Materials

In case of rejection of any consignment subsequent to the analysis, the quality

control personnel shall paste Rejected labels on the containers/packages.
The warehouse personnel should inform to the materials department regarding
the rejection of consignment and ask the material department to dispose the
material within 30 days in case domestic vendor, while incase of overseas
vendor material shall be disposed within 90 days.

Writing Pharma Distributioin

After receiving the goods transfer note from the production department it is the
responsibility of the warehouse personnel

Check the batch number, quantity

Ensure all the details mentioned in Goods Transfer Note are correct and check
all the required labels are pasted on the drums.
After confirming all the above details enter the details in the Pharma Distribution

21
Cleaning of Dispensing Equipment

All the dispensing equipment like scoop, measuring jars, funnels and buckets
barrels pumps etc should be cleaned after their use.
After completion of dispensing operations transfer the dispensing equipments to
wash area and rinse the dispensing equipment with water after wearing goggles,
nose masks and hand gloves.
Cover the hosepipe ends, scoops, funnels, buckets etc and pump end with clean
polythene bag/rexine cover and keep the dispensing equipment in their dedicated
area.

Sanitation

De-dust the entire area using nylon soft broom.

Mop the floor with clean cloth if not satisfied repeat it again.
Frequency-Everyday in the first shift

Sampling Room:

Clean the room before arranging for sampling to Quality Control.

Follow the cleaning activity in between two different materials sampling.
Clean the walls, doors and floor with dry cloth, collect the dust and dispose it
into a dustbin, if not satisfied repeat it again.
Details shall be entered in the sampling and sanitation record.
Frequency-Every after sampling operation

22
Dispensing Room:

Clean the room before starting dispensing activity and after completion of every
dispensing operation.
Use vacuum cleaner to suck all dust.
Mop the floor with water and allow to dry if not satisfied repeat it again.
Details shall be entered in the sampling and sanitation record.
Frequency-Every after dispensing operation

Raw Material Distribution from Warehouse to Production

Solids:

After receiving raw material requesting check whether all details are entered or
not.
Raw Material shall be taken into the dispensing room. Material shall be taken
using a clean scoop and tie the bags tightly after dispensing.
A tag shall be assigned there remaining quantity of the material and the details
shall be entered in the inventory card.
Liquids from Drums:

Drums shall be cleaned with a clean cloth and open the lid with drum opener.
Transfer the required quantity of solvent by using PVC siphon pipe/barrel pump
and drums shall be closed tightly.

23
Liquids from Tanks:

Check the day tanks/measuring tanks for the volume.

Ensure that the solvent valves in the alter production blocks are closed.
Measure the required volume of liquid raw material in measuring tank then open
the valves from measuring tank.
Close all the valves of measuring tank and enter the details in the inventory card.

Handling of Hose pipes and their Periodical Change

All the hosepipes shall be colored as mentioned in the Annexure.

Before starting of operation the hosepipe shall be cleared with 5 to 10 liters of
the same solvent and discard it.
Upon completion of operation, when not in use, the ends of the pipe shall be
covered with rexine covers/polythene bags and store at the designated place
keeping both the ends of the pipe facing down.
Hosepipe shall be checked monthly once and if any damages the pipe shall be
discarded and new pipe shall be used.
Enter the details of checking and replacement of pipe in the record.

24
Handling of desiccant bags:

Place the Desiccant bags in secador desiccators cabinet.

If the humidity is>40% activate the desiccant bags by drying in a oven for 1- 2
hrs at90degrees to 105degrees centigrade
Always maintain humidity below 40%
At the time of issuing desiccant bags check the humidity if it is >40% activate
the bags as mentioned above& then use only
Record the receipt& issuing details in the inventory card.

CAREERS

HETERO considers its Human Resources as its core strength. The company
believes in the fact that its present position as an aggressive player can be
attributed to the efforts on part of all its employees working in different
departments in realizing its goal of being a Top Notch Company.
The Company offers the best of the opportunities to work, where the potential
and capabilities of personnel are tapped to the maximum advantage of both the
organization and the personnel. The latent talents are honed to meet the
challenges faced by the organization and achieve the best.
HETERO believes in recognizing and rewarding contributions of its employees
to meet its staff requirements, HETERO has several openings in different
departments for those who are ready to take up the challenge and deliver the
goods.

25
 OFFICES

Corporate Office
HETERO DRUGS LIMITED
Hetero House
H.no.8-3-166/7/1,Erragadda,
Hyderabad-500018,
(A.P)INDIA
Tel: +91-40-23704923/24/25
Fax: +91 40 23704926, 23714250
E- mail:
[email protected]

BRANCH OFFICES

HETERO SINGAPORE PTE LTD. HETERO DRUGS LIMITED

19 Loyang way 607/608,6th floor, Matharu Arcade
#02 03, C.I.L.C Building Subash road, vile parle (E)
Singapore 508724 Mumbai - 400057
Tel: (65)65458442/65467901 India
Fax: (65)65458443 Tel: +91 22 56910809/10/11/12/13
E Mail: [email protected]

26
 CHAPTER III

REVIEW OF LITERATURE

27
INTRODUCTION OF INVENTORY MANAGEMENT:

Inventory management is the active control program, which allows the

management, sales, purchases and payments.

Inventory management software helps create invoices, purchase orders, receiving

lists, payment receipts and can print bar coded labels. An inventory management
software system configured to your warehouse, retail or product line will help to create
revenue for your company. The Inventory Management will control operating costs and
provide better understanding.

OBJECTIVES OF INVENTORY CONTROL

Scientific control of inventories should serve the following purpose:

To provide continuous flow of required materials, parts and components for

efficient and uninterrupted flow of production.
To minimize investment in inventories keeping in view operating requirements.
To provide for efficient store of materials so that inventories are protected from
loss by fire and theft and handling time and cost are kept at a minimum.
To keep surplus and obsolete items to minimum.

28
PURPOSE OF INVENTORY

The only inventory that is required is that which is actually being processed in a
manufacturing environment or being delivered to a customer in a distribution
environment. Leading companies in all industries recognize that inventory usually
indicates a potential area of improvement; it is a symptom rather than an asset.

Process buffer: Inventory should be used to buffer processes only at strategic

points. As viewed by a supply chain, a warehouse or distribution center is really
just a process buffer goods arrive in batches (pallets, truckloads, cartons, and so
on) and are processed (distributed to the customer) in smaller lots. In a
manufacturing company, processes frequently operate at different rates, thereby
requiring inventory buffers.

Fluctuations in demand: This inventory allows a supplier to satisfy customer

demand that is higher than expected. However, inventory is an expensive
substitute for information. When you can see actual usage of your product by the
end customer as well as inventory levels in the supply chain, you can satisfy
your customers while carrying minimal inventories. This approach requires you
to reduce your lead times and those of your suppliers. You can use this same
approach to help your suppliers reduce their inventories, and therefore their
costs. As you will see in another way to reduce the need for this type of
inventory is to reduce the re supply time. If the supply lead time can be reduced
to one day or less, much less inventory is required.

Unreliability of supply: In the short run, inventory can be used as a buffer

against unreliable suppliers (both internal and external). In the long run, you can
work with suppliers to insure their reliability, or you can replace them. The total
cost of supplier unreliability is usually far greater than any savings in purchase
price. The best suppliers deliver perfect materials directly to the desired
location inside your company on schedule. This is equally true for internal
suppliers in a manufacturing company. If varying quality is a root cause of
unpredictability, it should be addressed by an appropriate quality initiative (for
example, Six Sigma or Total Quality Management).

29
 Price protection: Buying large quantities at one time has been a traditional
hedge against price increases. You can negotiate pricing and long-term contracts
with key suppliers, but you should request multiple deliveries. As your suppliers
implement lean practices, they will strongly prefer to ship smaller quantities at
frequent intervals, rather than asking you to take delivery of the entire purchased
amount at once. Pricing agreements should also include the possibility of cost
reductions, automatically passing on the suppliers cost reductions.

Quantity discounts: Some suppliers offer discounts for buying large quantities.
Quantity discounts work just like price protection. Quantity discounts are being
replaced today by key supplier agreements, in which you agree to purchase your
entire years usage of various product families from one supplier in exchange for
highly favorable pricing, superb service, impeccable quality..

Lower ordering costs: Traditionally companies looked at ordering costs as a

necessary cost that should be traded off against carrying costs. However, todays
preferred way to lower ordering costs is to eliminate all non-value-added steps in
the ordering cycle. Value stream mapping is a technique of flow-charting all
steps in a process (such as placing an order), calculating the total cost and total
elapsed time, then identifying all those steps that dont really add value in the
customers eyes and deciding how to eliminate them.

30
 Types of Inventory

TYPES OF INVENTORY

RAW MATERIAL WORK-IN-PROGRESS FINISHED GOODS

IN-PROCESS
- REJECTED -REJECTED - REJECTED
- APPROVED -APPROVED - APPROVED
INTERMEDIARIES
-REJECTED
-APPROVED
SEMI-FINISHED GOODS
-REJECTED
-APPROVED

Inventory can be falls under three basic categories:

Raw materials
Work in- progress.
Finished Goods

Raw Materials:

These are the Inputs to produce the products. It includes direct material used in
the manufacture of a product and it also includes the components, fuel etc. used in the
manufacture.

These raw materials can be again divided in to two categories. They are:

31
 Approved raw material: Raw materials can be checked by the Quality
Control people by using certain Quality Control Methods. If they are approved after
applying those methods label can be pasted by the quality control people called
Approved Label. It is in green colour.

Ex: (Robin Singh) 4-AMINO-4-METGYL-3-N PROPLY PYRAZOLE-

CARBOXAMIDE SILDEN-AFILICATRATE AMINE, (Richa)
PTHALIMIDOAMLODIPINE

Rejected raw material: Raw materials can be checked by the Quality

Control people by using certain Quality Control Methods. If they are rejected after
applying those methods label can be pasted by the quality control people called
Rejected Label. It is in red colour.

32
Work in progress (WIP):
It includes partly finished goods and materials, sub-assemblies etc.held between
manufacturing stages. WIP should be kept to a minimum.Work-in-progess again can be
divided in to three categories. They are:
Intermediaries: The material which is in middle of the production process for
final product is called Intermediaries.
Semi-finished goods: The material which is in the last stage of production
process is called Semi-finished goods. In this stage also the products can be
approved or rejected by the quality control people.
In process: Every stage in the production process contains again certain
process. If the materials are in this stage then we may call it as under process.
In these stages also the products may be approved or rejected.

Finished product:
The goods ready for sale or distribution will come under this category. In this
stage also the products may be rejected due to certain reasons.
Ex: Sertraline HCL, Lisino Pril USP, Omeprazole etc.
The classification of inventory of a particular firm depends upon the nature of the
business it carries. For a spinning mill, cotton is the raw material and yarn is the
finished product. But in case of textile mill yarn is the raw material and fabric is the
finished product. A manufacturing concerns inventory consists of all the above three
types of inventory but in case of trading concern, the first two categories will not appear
in their stocks. The efficiency shown in inventory will have direct impact on
profitability of a business enterprise.

33
PURCHASING PLAN

The purchasing plan details:

When commitments should be placed;

When the first delivery should be received;

When the inventory should be peaked;

When reorders should no longer be placed; an

When the item should no longer be in stock.

Well planned purchases affect the price, delivery and availability of products for sale.

34
CONTROLLING YOUR INVENTORY

To maintain an in-stock position of wanted items and to dispose of unwanted

items, it is necessary to establish adequate controls over inventory on order and
inventory in stock. There are several proven methods for inventory control. They are
listed below, from simplest to most complex.

Visual control enables the manager to examine the inventory visually to

determine if additional inventory is required. In very small businesses
where this method is used, records may not be needed at all or only for
slow moving or expensive items.

Tickler control enables the manager to physically count a small portion of the
inventory each day so that each segment of the inventory is counted
every so many days on a regular basis.

Click sheet control enables the manager to record the item as it is used on a
sheet of paper. Such information is then used for reorder purposes.

Stub Control (used by retailers) enables the manager to retain a portion of the
price ticket when the item is sold. The manager can then use the stub to
record the item that was sold.

35
DEVELOPMENTS IN INVENTORY MANAGEMENT

In recent years, two approaches have had a major impact on inventory management:
Material Requirements Planning (MRP) and
Just-In-Time (JIT and Kanban).

Their application is primarily within manufacturing but suppliers might find

new requirements placed on them and sometimes buyers of manufactured items will
experience a difference in delivery.

Material Requirements Planning is basically an information system in

which sales are converted directly into loads on the facility by sub-unit and time period.
Materials are scheduled more closely, thereby reducing inventories, and delivery times
become shorter and more predictable. Its primary use is with products composed of
many components. MRP systems are practical for smaller firms. The computer system is
only one part of the total project which is usually long-term, taking one to three years to
develop.

Just-In-Time inventory management is an approach which works to

eliminate inventories rather than optimize them. The inventory of raw materials and
work-in-process falls to that needed in a single day. This is accomplished by reducing
set-up times and lead times so that small lots may be ordered. Suppliers may have to
make several deliveries a day or move close to the user plants to support this plan.

36
 CHAPTER IV

DATA ANALYSIS
&
INTERPRETATION

37
VALUATION & INTERPRETATION OF THE DATA

TECHNIQUES OF INVENTORY MANAGEMENT

1. Min-Max levels and Ordering levels

Minimum stock Level: It is the lower limit below, which the stock of any stock
item should not normally be allowed to fall. Their level is also called safety
stock or buffer stock level .The main object of establishing this level is to
protect against stock-out of a particular stock item and in fixation of which
average rate o f consumption and the item required for replacement, i.e., lead
time are given prime consideration.

Minimum stock Level = Re-order Level-(average or Normal Usage x Average Lead

Time)

Maximum Stock Level: It represents the upper limit beyond which the quality
of any item is not normally allowed to rise to ensure that unnecessary working
capital is not blocked in stock items. Maximum stock level represents the total of
safety stock level and economic order quantity. Maximum stock level can be
expressed in the formula given below:

Maximum Stock Level= Re-order Level + Economic Order Quantity (Minimum

Usage x Minimum Lead time)

38
ORDERING LEVEL

The annual consumption of an item and the time lag between ordering and
receiving can be collected from past records. Based on these facts and policies, the
ordering level and ordering quantity of Hetero Drugs Ltd. can be calculated, as
follows:

Ordering level= Minimum level + Consumption during time lag period

(OR)
Maximum consumption x Maximum re-order period

The ordering level should be fixed so that when an indent is placed at the
ordering level, the stock reaches the minimum level when the replenishment is received.
The ordering level is calculated from the following factors:

1. The expected usage

2. The minimum level
3. The lead time

39
 Q. Calculate Maximum level, Minimum level, Ordering level & Average level
Example of Material: D (-) Mandalic acid

Minimum Usage 120 Kgs per week

Maximum Usage 420 Kgs per week

Normal Usage 230 Kgs per week
Ordering quantity 6000 Kgs per week
Delivery period 6 to 8 weeks

Solution:
ORDERING LEVEL = Maximum usage x Maximum delivery period
= 420 x 8 = 3360 Kgs

MINIMUM USAGE LEVEL = Ordering level - (Normal usage x

Normal delivery period)
= 3360 - (230 x 7)
=1750 Kgs

MAXIMUM USAGE LEVEL = (Ordering level + Ordering quantity) (Minimum

usage x Minimum delivery period)
= (3360 + 6000) (120 x 6)
= 9360-720
= 8640 Kgs

AVERAGE LEVEL = (Minimum level + Maximum level)/2

= (1750 + 8640)/2
= 5195 Kgs
Q. Calculate Maximum level, Minimum level, Ordering level & Average level
Example of Material: Di isopropyl ether

Minimum Usage 350 Kgs per week

Maximum Usage 700 Kgs per week
Normal Usage 450 Kgs per week
Ordering quantity 12000 Kgs per week

40
 Delivery period 6 to 8 weeks
Solution:

ORDERING LEVEL = Maximum usage x Maximum delivery period

=700 x 8 = 5600 Kgs

MINIMUM USAGE LEVEL = Ordering level - (Normal usage x

Normal delivery period)
= 5600 - (450 x 7)
= 2450 Kgs

MAXIMUM USAGE LEVEL = (Ordering level + Ordering quantity)

(Minimum usage x Minimum delivery period)
= (5600 + 12000) (350 x 6)
= 15500 Kgs

AVERAGE LEVEL = (Minimum level + Maximum level)/2

= (2450 + 15500)/2
= 8975 Kgs

2. TWO BIN SYSTEM:

41
 Under two bin systems, each item of material is stored in two bins and
material is continuously issued from one bin until the stock material is emptied in
that bin. Then material from the second bin is started using and action will be
taken to replenish the material in the first bin. The material in the second bin will
be sufficient enough until the fresh delivery is received. The maintenance of two-
bin system is a continuous process.
This system is maintained in another form by maintenance of a single bin
marking it inside with a red line. It indicates the re-order stock position for
replenishment. The operative convenience and the cost analysis is to be made
before adopting two bin system. The major advantage under this system is that
stock can be kept at a lower level because of the ability to re-order whenever stock
fall to a low level, rather than having wait for the next re-order date.

3. THE ABC ANALYSIS

In this technique, the items of inventory are classified according to value of
usage. The higher value items have lower safety stocks, because the costs of
production are very high in respect of higher value items. The lower value items
carry higher safety stocks. ABC analysis divides the total inventory list into three
classes A, B and C using the rupee volume, as follows:
Items in class A constitute the most important class of inventories so for as
the proportion in the total value of inventory. The A items consists of
approximately 15% of the total items, accounts for 80% of the total material
usage.
Items in class B constitute an intermediate position, which constitute
approximately 35% of the total items, accounts for approximately 15% of the
total material consumption.
Items in class C are quite negligible. It consists remaining 50% items,
accounting only 5% of the monetary value of total material usage.

How an organization treats the various class of items according to their

consumption value. For A class items, the inventory policy, i.e., order quantity and re-
order point should be carefully determined and the close control over the usage of
materials is desirable. For B class items, the economic order quantities and re-order
level calculations can be done and larger stocks can be maintained. The review of these
42
items may be done quarterly or half-yearly. In case of C class items, generally one year
supply can be maintained. Periodic review once a year may be sufficient.

43
 A Class Items B Class Items C Class Items
(High consumption value) (Moderate (Low consumption
S.No
consumption value) value)

1 Very strict control. Moderate control Loose control.

2 No safety stocks or very Low safety stocks. High safety stocks.

Low safety stocks

3 Maximum follow-up and Periodic follow-up Follow-up & expediting

expediting

4 Rigorous value analysis Moderate value Minimum value

analysis. analysis.

5 Must be handled by senior Can be handled by Can be fully delegated

officers. middle Management.

The technique tries to analyze the distribution of any characteristics by stock values of
importance in order to determine its priority. This technique can be applied in all facets
of organization. Many organizations are applying this technique in materials
management and spare parts management to identify the contribution made by the
materials/spares in the total inventory value. On the basis of stock value, materials
procurement strategy and consumption strategy is decided.

44
 In HETERO DRUGS LTD there are certain reasons for slow or non-moving items.
They are as follows:

Order cancel
Products Ban by the Government.
Rejected imported material.
Damage in transit.
Sudden decrease of cost for the products in the market.
Expiry of items.
When process changed.

1. Order cancel: Customers may cancel the orders at any time for different
reasons. In HETERO DRUGS LTD some of the items became non-moving because of
order cancel.
For Example: Premipexale, Di HCL

2. Products Ban by the Government: Some products are ban by the

government due to different causes. In HETERO DRUGS LTD some products became
non-moving because of products ban by the government. For Example: Valdicoxib &
Gati Floxacan.

3. Rejected Imported material: In some manufacturing companies once

the materials are imported from other countries they may not be returned if they are
damaged. In HETERO DRUGS LTD some materials are imported from China, US, UK
etc.Once the materials are imported they may not be returned. If they are damaged or
rejected by the Quality control people they may become non-moving items.
Example: Ikon

4. Damage in Transit: Some materials may become non-moving because

of damage in Transit. In HETERO DRUGS LTD some materials became non-moving
because of damage in transit. Example: krack jack (BENZYL BROMO
ACETATE/BENZYL-2-BROMO ACETATE)

45
5. Sudden decrease of cost for the products in the market: Some times
the products may get very cheaper in the market than we produced. Then we may incur
losses when we produce those products. So we may stop the production to avoid losses.
In HETERO DRUGS LTD some items became non-moving because of this reason only.
Example: Cetrlin Hydro Chloride.

6. Expiry of items: Some items may became non-moving because they

may reach the expiry date due to certain reasons. If some items are not used they may
expire and will become non-moving items. In HETERO DRUGS LTD some materials
expired due to process changed. When process changed some items will not be used.
For Example: Ranenikel and London

7. When process changed: Some items may became non-moving because

of process changed. In HETERO DRUGS LTD some items became non-moving when
the company changes its process due to reduce the cost of production.
For Example: Lisno pril and Fosino pril
All the above are certain reasons for slow or non-moving of items in the stores

ECONOMIC ORDER QUANTITY (EOQ):

The prime objective of inventory management is to find out and maintain

optimum level of investment in inventory to minimize the total costs associated with it.
The EOQ is the optimum size of the order for a particular item of inventory calculated at
a point where the total inventory costs are at a minimum for a particular stock item .It is
an optimum size of either a normal out side purchase order or an internal production
order that minimizes total annual holding and ordering costs of inventory. Stock-out
costs are difficult to incorporate into this model. Since they are based on qualitative and
subjective judgment.
The ordering costs are the costs of placing a separate order multiplied by the
number of separate orders placed in the period. The carrying costs can be calculated
based on the assumption that annual cost of carrying a particular stock item on average,
half the stock is on hand all the time in addition to the safety or buffer stock. The fewer
the orders, the lower costs of ordering, but the greater the size of the order the

46
Ordering Costs: The costs of ordering inventory include the following:

Preparation of purchase order.

Costs of receiving goods.
Documentation processing costs.
Transport costs.
Intermittent costs of chasing orders, rejecting faulty goods.
Additional costs of frequent or small quantity orders.
Where goods are manufactured internally, the set-up and tooling costs associated
with each production run.

Carrying Costs: The carrying costs of inventory include the following:

Storage costs (rent, lighting, heating, refrigeration, air-conditioning etc.)

Stores staffing, equipment maintenance and running costs.
Handling costs.
Audit, stock taking or perpetual inventory costs.
Required rate of return on investment in current assets.
Obsolescence and security costs.
Costs of money tied up in inventory.
Pilferage and damage costs.

47
Stock-out Costs: The stock-out costs are associated with running out of stock, which
include the following:
Lost contribution through the lost sales caused by the stock-out.
Loss of furniture sales because customers go elsewhere.
Loss of customer goodwill.
Cost of production stoppages caused by stock-outs of WIP or raw material.
Labour frustration.
Over stoppages.
Extra costs associated with urgent replenishment purchases of small quantities.

Q. Calculate Re-order Quantity; Re-order level, Minimum level, Maximum level,

Average stock level
Hetero Drugs Ltd. Manufactures D (-) Mandalicacid material and the
following particulars are collected for the year ended March 2013:
Monthly demand 3000
Cost of placing an order 300
Annual carrying cost 15
Normal usage 230
Minimum usage 120
Maximum usage 420
Re-order period 4 to 6 weeks

48
Solution:
REORDER QUANTITY
2U x P
S
Where, U = Annual consumption (units) during the year
P = Cost of placing an order
S = Annual carrying cost per unit

2 x 33878 x 300
15
=1164 Kgs

RE-ORDER LEVEL = Maximum usage x Maximum delivery period

= 420 x 8 = 3360 Kgs
MINIMUM LEVEL = Re-Order level - (Normal usage x Normal
delivery period)
= 3360 - (230 x 7)
= 1750 Kgs

MAXIMUM LEVEL = (Re-Order level + Re-Order quantity)

(Minimum usage x Minimum delivery period)
= (3360 + 1164) (120 x 6)
= 3804 Kgs

AVERAGE LEVEL = (Minimum level + Maximum level)/2

= (1750 +3804)/2
= 3652 Kgs

6. VED ANALYSIS

VED analysis divides items in to three categories in the descending order of their
critically as follows:

49
 V stands for vital items and their stock analysis requires more attention,
because out-of-stock situation will result in stoppage of production. Thus, V
items must be stored adequately to ensure smooth operation of the plant.
E means essential items. Such items are considered essential for efficient
running but without these items the system would not fail. Care must be taken to
see that they are always in stock.
D stands for desirable item which do not affect the production immediately but
availability of such items will lead to more efficiency and less fatigue.

VED analysis can be very useful to capital intensive process industries. As it analysis
items based on their importance and it can be used for those special raw materials which
are difficult to procure.

7. JUST-IN-TIME MANAGEMENT

Japanese firms popularized the Just-in Time (JIT) system in the world. In
a JIT system material or the manufacturing components and parts arrive to the
manufacturing sites or stores just few hours before they are put to use. The
delivery of material is synchronized with the manufacturing cycle and speed. JIT
system eliminates the necessity of carrying large inventories, and thus, saves
carrying and other related costs to the manufacturer.

The system requires perfect understanding and coordination between the

manufacturer and suppliers in terms of the timing of delivery and quality of the
material. Poor quality material or components could halt the production. The JIT
inventory system complements the Total Quality Management. The success of
the system depends on how well a company manages its suppliers. They will
have to develop adequate systems and procedures to satisfactory meet the needs
of manufacturers

Who can use JIT?

Quality process improvement is usually thought of as a continuous journey

of improvement, with no definite ending, since there is always more potential. From the
point of view of material flow the principle of JIT is obviously ideal but it is often

50
difficult to implement in practical situations unless the conditions are right. Of course,
the right conditions do not happen by accident and anyone looking for the benefits has
to work hard to create the appropriate situation.

Just-in-time supply should be considered as a quality process,

although most of the objections to JIT are based on lack of quality in some aspect of
supply or demand. If stock levels are incorrect, this is often the result of complacency or
lack of understanding. There is no perfect solution to stockholding but, like any other
quality improvement process, JIT operations gradually develop an existing
unsatisfactory situation into an improved one. A decrease in lead times and
simplification of processes should be the aim of all inventory managers.

From the viewpoint of JIT, time is a value-added commodity and

wasting it is unprofitable. The more time saved the better, and continuous improvement
means reducing the timescales.

The definition of just in time presented so far can apply to any

material management process, which actively minimizes timescales. The purist would
think that there is more to JIT than this simple concept and there are some specific
concepts for achieving this reduction in timescales, particularly:
Desire to improve
Simplification
Demand-led supply (pull)
Quality conformance
Devolution of responsibility.

If these concepts are put into practice, then an operation has a JIT
philosophy supported by improvements in communications and driven by the need for
better service and lower costs, the influence of JIT has been felt in all types of business
and has fuelled change

51
Advantages of JIT:

Operational benefits:

How can it be more efficient to deliver in small quantities, manufacture in small

batches and increase the amount of administration? Equally, someone who only knows
JIT would ask:
Why do you buy things when you don't need them?
How do you know what the demand is so far ahead?
What use is a warehouse?

The operational benefits arising from JIT are

Inventory investment
'Supply to order' instead of 'provision for stock' easier forecasting so less slow
moving stock
Better flexibility
Simplified administration
Waste elimination
Less scrap should there be a problem.

For each of these operational benefits there is a corresponding cost benefit,

which can be offset against any additional costs, which arise. These additional costs
usually occur because methods have not been changed to suit JIT.
For instance: if an item is delivered in a batch once per month, it can be invoiced,
delivery documentation produced and payment made. If through a change to JIT the
item is delivered every day, then it would not be sensible to place a purchase order for
each load, to raise delivery paperwork and to arrange separate payments for each load.
Information is

52
Inventory Turn Over Ratio: -
Inventory turn ratio helps management to avoid capital being locked up
unnecessarily. The ratio reveals the efficiency of stock keeping.
Inventory turnover ratio is given by the formula:
Cost of material consumed
Cost of average stock held during the period
Cost of average stock
Cost of opening stock + Cost of closing stock
2
The Inventory turnover ratio can be calculated (in days) as follows:
Days during the period
Inventory turnover ratio

This will reveal the number of days for which the stocks are held.
Inventory turnover ratio:
Cost of material consumed
Cost of average stock held during the period
= 185445
286943
= 0.6
Cost of average stock
Cost of Opening Stock + Cost of Closing Stock
2
= 537030 +36855
2
= 286943
Inventory turnover ratio calculated in days:
Days during the period
Inventory turnover ratio
= 365 days
0.6
= 608 days

53
Example for Inventory turnover ratio for the year ended 2003-04
Material: B Soda

Material consumed during the year = 301770

Cost of Material per Kg = 30
Cost Material consumed = 301770 x 30 = 9053100
Opening Stock Stock = 12300 x 30 = 369000
Closing Stock = 5700
Cost of Closing Stock = 5700 x 30 = 171000

Inventory turnover ratio:

Cost of material consumed
Cost of average stock held during the period
= 9053100
270000
= 33.53
Cost of average stock:
Cost of Opening Stock + Cost of Closing Stock
2
= 369000 + 171000
2
= 270000
Inventory turnover ratio calculated in days:
= Days during the period
Inventory turnover ratio
= 365 x 100
33.53
= 1088 days

54
Inventory turnover ratio:
Cost of material consumed
Cost of average stock held during the period
= 941625
345650
= 2.7
Cost of average stock:
Cost of Opening Stock + Cost of Closing Stock

= 15500 + 675800
2

= 345650

Inventory turnover ratio calculated in days:

Days during the period

Inventory turnover ratio

= 365
2.7

= 135

55
 HOW RAW MATERIAL IS INWARDED DURING THE YEAR IN HETERO
DRUGS
RAW MATERIAL INWARD FOR THE YEAR APR 2016-MAR 2017 (In Units)
ITEMS APR MAY JUN JUL AUG SEP OCT NOSV DEC JAN FEB MAR
DHARNI 0 700 0 0 0 0 0 0 0 2500 0 0

V SALT 0 4000 0 0 0 3000 0 3000 3000 3000 0 3000

KAKI-320 1000 2000 490 2000 3040 0 2520 1050 5800 0 0 1520

HYFLOW 1498 2020 2020 2020 2020 4040 2043 3995 2497 2542 2497 4540

Note: ORGINAL NAMES USED FOR ABOVE DECODED MATERAILS

DHARANI : Sodium Bi Carbonate
V SALT : Vaccum Salt
HYFLOW : Hyflow Super Cell
KAKI 320 : Acetavated Carbon 320

From the above graph we can understood that how different raw materials are
Inwarded throughout the year.Hyflow,Kaki-320 & V salt raw materials are Inwarded
more & Dharani material is inwarded less in the year 2016-2017.

RAW MATERIAL INWARD FOR THE YEAR APR 2015-MAR 2016 (In Units)

56
ITEMS APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
DHARANI 0 3000 2000 0 4000 0 2000 0 0 0 0 1000
V SALT 2000 13000 7000 1000 2000 1000 2000 2000 2000 0 1000 2000
KAKI-320 3000 2000 1000 1000 0 0 1000 1000 0 0 2000 1575
HYFLOW 4994 1997 2996 4994 0 0 998 2247 2270 499 998 2270

Note: ORGINAL NAMES USED FOR ABOVE DECODED MATERAILS

DHARANI : Sodium Bi Carbonate
V SALT : Vaccum Salt
HYFLOW : Hyflow Super Cell
KAKI 320 : Acetavated Carbon 320

From the above graph we can understood how different raw materials are
Inwarded throughout the year. Hyflow & V salt raw materials are Inwarded throughout
the year.Dharani & Kaki-320 raw materials are inwarded less in the year 2015-2016.

RAW MATERIAL INWARD FOR THE YEAR APR 2014-MAR 2015 (In Units)

ITEMS APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR

57
DHARANI 2000 1000 3000 0 2000 3000 6000 2000 2000 15000 2000 7000
V SALT 4000 17000 4000 5000 11000 12000 7500 10500 14000 5000 5000 9950
KAKI-320 0 1000 1000 1000 1000 0 1000 2000 1000 0 1000 2120
HYFLOW 2996 4994 2996 0 1997 5992 5992 3995 0 1997 1997 3995

Note: ORGINAL NAMES USED FOR ABOVE DECODED MATERAILS

DHARANI : Sodium Bi Carbonate
V SALT : Vaccum Salt
HYFLOW : Hyflow Super Cell
KAKI 320 : Acetavated Carbon 320

From the above graph we can understood how different raw materials are Inwarded
throughout the year.V salt & Dharani raw materials are Inwarded more through out the
year.Hyflow & Kaki-320 raw materials are inwarded less in the year 2014-2015

58
 RAW MATERIAL INWARD FOR THE YEAR APR 2013-MAR 2014(In Units)

ITEMS APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
DHARANI 2000 2000 6000 0 4000 6000 2000 0 20000 0 0 0
V SALT 1450 5000 2500 3050 3000 12000 0 0 5000 5000 0 8000
KAKI-320 1000 0 1000 1000 1000 1000 1000 1000 0 1000 1000 1000
HYFLOW 1997 2996 2996 3495 3495 0 1997 3995 1997 1997 1362 3632

Note: ORGINAL NAMES USED FOR ABOVE DECODED MATERAILS

DHARANI : Sodium Bi Carbonate
V SALT : Vaccum Salt
HYFLOW : Hyflow S
HYFLOW : Hyflow Super Cell
KAKI 320 : Acetavated Carbon 320

From the above graph we can understood how different raw materials are
Inwarded throughout the year.Dharani, Hyflow & Kaki-320 raw materials are inwarded
continuously through out the year but V salt was Inwarded less in the year 2013-2014.

59
 ABC ANALYSIS OF 30 STOCK MATERIAL FOR THE PERIOD 2016-15
CLASS A MATERIAL CLASS B MATERIAL CLASS C MATERIAL
Material code Annual usage Material code Annual usage Material code Annual usage
Chanti 1004614 Aarthi 612500 AC-501 6136
Colin 861220 Ankita 572707 Bony mix 72406
7 Up 1939860 BPL 160500 Brisk 45056
DSP 671550 C.P.Flakes 248527 Buffer 120890
Honey 676522 C.S.Flakes 232339 Canon 28090
Cat-HH 141525 Cat-C 14994
Dharani 206895 Cat-H 116901
Maaza 383350 Champion 56848
Complan 62130
Dandi 6600
DCM 52080
Dimple 12500
Dranex 3400
Captain Cook 156000
Tata tea 2060
Kores 46400
Limca 10500

5 5153766 8 2558343 17 812991

16.60% 60.40% 26.70% 30% 56.70% 9.60%

60
NOTE: ORIGINAL NAMES USED FOR ABOVE DECODED MATERIALS

CHANTI: FORMALDEHYDE
COLIN: 1 4 DIOXANE
7UP: 2-METHYL PIPERZINE
DSP: PYRIDINE
HONEY: BENZENE SULFONIC ACID
AARTHI: 3,3A,4,5,6,7,-2H-HEXA HYDRO INDOLE-2-CARBOXTLIC ACID
HYDROCHLORIDE
ANKITA:PHENYL ISOCYANATE
BPL: TITANIUM TETRA ISOPROPO
C.P.FLAKES: CAUSTIC POTASH FLAKES
C.S.FLAKES: CAUSTIC SODA FLAKES
CAT HH: HYDROZEN HYDRIDE 100%
DHARANI:SODIUM BI CARBONATE
MAAZA: L-PROLINE
AC 501: E.D.T.A
BONY MIX: TRIETHYL AMINE
BRISK: FORMIC ACID
BUFFER: DI SODIUM PHOSPHATE
CANON: CALCIUM CARBONATE
CAT C: TETRA BUTYL AMMONIUM BROMIDE

61
 DANDI:SODIUM ACETATE (ANHYDROUS)
DCM: DI METHYL CARBONATE
DIMPLE: 2 MARCAPTO BENZIMIDAZOLE
DRANEX: TRITYL CHLORIDE
CAPTIAN COOK:P.T.S CHLORIDE
TATA TEA: MONO METHYL AMINE 40%
KORES: CUMENE HYDRO - PEROXIDE.
LIMCA: DIMETHYL FORMAMIDE

Percentage of A Class item is 60.04%

B Class item is 30%
C Class item is 9.60%

62
 ABC ANALYSIS OF 30 STOCK MATERIALS FOR THE PERIOD 2015-14
CLASS A MATERIALS CLASS B MATERIALS CLASS C MATERIALS
Material Annual Material Annual Material Annual
code usage code usage code usage
Pepsi 92568000 Limca 142876 Henko 85500
Chacobars 1711400 Castrol 289142 Hema 38135
Seeta 217674 Nutrine 8736
Jasmine 211250 Tata tea 39312
Durban 327540 Dimple 24500
Reeta 179790 Maaza 27060
Hazard 146400 Brisk 21428
Dabour 577500 Chanti 56980
Dhanraj 467116 SBH 54300
Ankita 6540
BPL 40446
Thinner 71853
Sunil 66780
Sagar 5500
Kaki-320 7040
Dharani 96750
Eno carbon 32200
Champion 81600
Kasthuri 56472

2 94279400 9 2559288 19 821132

6.60% 96.50% 30.00% 2.60% 63.40% 0.80%

63
NOTE: ORIGINAL NAMES USED FOR ABOVE DECODED MATERIALS
PEPSI: N-(1-(S)-ETHOXY CARBONYL -3- PHENYL) ALANINE
CHACOBAR: TRANS -4- HYDROXY -L- PROLINE(DEEC)
LIMCA: DIMETHYL FORMAMIDE
CASTROL: ETHYLENE DICHLORIDE
SEETA: CITRIC ACID MONO HYDRATE
JASMINE: TRIBUTYL TIN CHLORIDE
DURBAN: L-VALINE
REETA: BENZYOL CHLORIDE
HAZARD:
DABUR: ACETONITRILE
DHANRAJ: 1,2,BENZISOTHIAZOLINE-3ONE
HENKO: 1 HYDROXY BENZO TRIAZOLE
HEMA: SODIUM-2-ETHYLHEXANOATE
NUTRINE: SODIUM METHOXIDE
TATA TEA: MONO METHYL AMINE 40%
DIMPLE: 2 MARCAPTO BENZIMIDAZOLE
MAAZA: L-PROLINE
THINNER: P.T.S ACID
SUNIL: PHOSPHORIC ACID 85%
SAGAR: SULFOMIC ACID
KAKI-320: ACETAVATED CARBON 320
DHARANI: SODIUM BI CARBONATE
ENO CARBON: ENO CARBON
CHAMPION: L-ALANINE
KASTHURI: VANADYL ACETYL ACETONA

64
 Percentage of A Class item is 96.50%
B Class item is 2.60%
C Class item is 0.80%

ABC ANALYSIS OF 30 STOCK MATERIALS FOR THE PERIOD 2013-2014

CLASS A MATERIALS CLASS B MATERIALS CLASS C MATERIALS

Material Annual Material Annual Annual
code usage code usage Material code usage

Cycle 11778400 C.P.Flakes 191611 7 Up 2925

Bony mix 1395558 Bacardi 269640 AC-501 5664

65
C.S.Flakes 2378040 Captian cook 126750 Amisha 10050
Ammonium
Ankitha 1049670 Castrol 724572 formate 15000

Arundhathi 838559 Cat-HH 267399 Anamika 15000

Colin 123420 BPL 5778

Dharani 402930 Bogi 900

Duran 201450 Brisk 28644

DCM 101122 Amruthanjan 93000

Cat-C 49504

Cat-H 66030

Chakobar 9025

Chanti LR 15015

Dabour 28500

Dandi 17292

Dimple 1250

5 17440227 9 2408294 16 363577

16.67% 86.28% 30% 11.92% 53.33% 1.80%

66
NOTE: ORIGINAL NAMES USED FOR ABOVE DECODED MATERIALS
CYCLE: SODIUM CYANO BORO HYDRIDE
BONYMIX: TRIETHYL AMINE
C.S.FLAKES: CAUSTIC SODA FLAKES
ANKITHA: PHENYL ISOCYANATE
ARUNDHATHI: TRI METHYL SILYL CHLORIDE
C.P.FLAKES: CAUSTIC POTASH FLAKES
BACARDI: FORMAMIDE 99%
CAPTIAN COOK: P.T.S CHLORIDE
CASTROL: ETHYLENE DICHLORIDE
CAT-HH: HYDROZEN HYDRIDE 100%
COLIN: 1 4 DIOXANE
DHARANI: SODIUM BI CARBONATE
DURAN: L-VALINE
DCM: DI METHYL CARBONATE
7 UP: 2-METHYL PIPERZINE
AC-501: E.D.T.A
AMISHA: AMMONIUM CHLORIDE
AMMONIUM FORMATE: AMMONIUM FORMATE
ANAMIKA: ORTHO FLURO NITRO BENZENE
BPL: TRANS-4PHENYL-PROLINE
AMRUTHANJAN: DI METHYL SULPHATE
CAT-C: TETRA BUTYL AMMONIUM BROMIDE
CAT-H: HYDROZEN HYDRIDE
CHAKOBAR: TRANS -4- HYDROXY -L- PROLINE(DEEC)
CHANTI LR: FORMALDEHYDE

67
Percentage of A Class item is 86.28%
B Class item is 11.92%
C Class item is 1.80%

68
69
 ABC ANALYSIS OF 30 STOCK MATERIAL FOR THE PERIOD 2014-14

CLASS A MATERIAL CLASS B MATERIAL CLASS C MATERIAL

Material Annual Material Annual Material Annual
code usage code Usage code usage

Chakobar 8600000 Champion 580448 Konica 581685

Frooty 3228165 Reeta 454974 Maaza 90200

Picnic 7656120 Arundati 228980 Saffola 61740

Bonymix 1102050 Kaki-320 288000 Brisk 32912

Hazard 1281000 Henna 485300 Mypol 57600

Chanti 453145 Lalu 13250

Manasa 255117 Sunil 16200

Sesikala 608985 Thinner 8600

RM 162 210270 Tamrind 122500

Bogi 2500

Patna 17800

Amisha 7000

Juhichawala 51220

Menthal 47505

Cat-H 18786

Henko 8100

5 21867335 9 3565219 16 1137598

17.00% 82.30% 30.00% 13.42% 53% 4.28%

NOTE: ORIGINAL NAMES USED FOR ABOVE DECODED MATERIALS

CHAKOBAR: TRANS -4- HYDROXY -L- PROLINE(DEEC)
FROOTY: TETRA HYDROFURAN
PICNIC: 4-PHENYL BUTANE -1
70
 BONYMIX: TRIETHYL AMINE
HAZARD: ACETONITRILE
CHAMPION: L-ALANINE
REETA: BENZYOL CHLORIDE
ARUNDATI: TRI METHYL SILYL CHLORIDE
KAKI-320: ACETAVATED CARBON 320
HENNA: CYCLO HEXANE
CHANTI: FORMALDEHYDE
MANASA: D (-) MANDALIC ACID
SESIKALA: HYDRO BROMIC ACID
RM 162: METHANE SULPHONYL CHLORIDE
KONICA: DIMETHYL SULPHOXIDE
MAAZA: L-PROLINE
SAFFOLA: N,N DICYCLO HEXYL CORBIDIMIDE
BRISK: FORMIC ACID
MYPOL: N-METHYL PIPERZINE
LALU: LIQUID BROMINE
SUNIL: PHOSPHORIC ACID 85%
THINNER: P.T.S ACID
TAMRIND: L+ TARTARIC ACID
BOGI: OXALIC ACID
PATNA: SODIUM PERSULPHATE
AMISHA: AMMONIUM CHLORIDE
JUHICHAWALA: PHENYL CHLORO FORMATE
MENTHAL: SODIUM TUNGASTANATE
CAT-H: HYDROZEN HYDRIDE

71
Percentage of A Class item is 82.30%

B Class item is 13.42%

C Class item is 4.28%

72
 ABC ANALYSIS OF 30 STOCK MATERIALS FOR THE PERIOD 2015-15

Class A Materials Class B Materials Class C Materials

Material Material Annual Material Annual
Code Annual Usage Code Usage Code Usage

Sridevi 14,74,20,000 Dabaur 48,51,000 Honey 486472

Manasa 11050638 Richa 43,96,500 Kaki-320 454720

ZEC 6053400 Maaza 31,95,335 Cat-S 414400

Picnic 5354280 Orpat 2680935 Thiophene 251920

Chachobar 2184400 Zing thing 214682

Aarthi 2003750 Eno Carbon 164680

Frooty 1656000 Anaconda 123980

Hazard 1369950 Seeta 101268

Saffola 706986 Champion 91,936

Sunrise 572500 Dharani 68,550

Sunil 559776 7 Up 64,935

Anamika 43,950

Anchor 4,600

Dhanraj 2,764

Limca 8,600

4 169878318 11 11734297 15 2,497,457

13.36% 85% 36.64% 10% 50% 5%

73
NOTE: ORIGINALS NAMES FOR ABOVE DECOEDED MATERIALS
SREDEVI: N2-(1-(S)-ETHOXYCABONY-3-PHENYPROPYL)-N6-
RIFLUOROACETYL -L-LYSINE BENZL ESTER
MANASA: D (-) MANDALIC ACID
ZDC: N,N CORBONYL DI IMDAZOLE(DEEC)
PICNIC: 4-PHENYL BUTANE -1
DABUR: METHYL(R)-(-)-3-HYDROXY BUTYRATE
RICHA: PTHALIMIDO AMLODIPINE
MAAZA: L-PROLINE
ORPAT: INDOLE-2-CARBOXYLIC ACID
CHACHOBAR: YDROXY -L- PROLINE(DEEC)
AARTHI: 3,3A,4,5,6,7,-2H-HEXA HYDRO INDOLE-2-CARBOXTLIC ACID
HYDROCHLORIDE
FROOTY: TETRA HYDROFURAN
HAZARD: ACETONITRILE
SAFFOLA: CYCLO HEXYL CORBIDIMIDE
SUNRISE: CINCHONIDINE BASE HYDROUS
SUNIL: PHOSPHORIC ACID 85%
HONEY: BENZENE SULFONIC ACID
KAKI-320: ACETAVATED CARBON 320
CAT-S: 1,4 DIMETHYL AMINO PYRIDINE
THIOPHENE: THIOPHENE
ZING THING: HYDROZEN PEROXIDE
ENO CARBON: ENO CARBON
ANACONDA: VITRIDE(SODIUM DIHYDROBIS (2-
METHOXYETHOXY)ALUMINTE TOLUNE
SEETA: TRIC ACID MONO HYDRATE
CHAMPION: L-ALANINE

74
Percentage of A Class item is 85%

B Class item is 10%

C Class item is 5%

75
 4. i) FIRST-IN FIRST-OUT METHOD (FIFO):

CIMA defines FIFO as a material of pricing the issue of material using the purchase
price of the oldest unit in the stock. Under this method materials are issued out of stock
in the order in which they were first received into stock. It is assumed that the first
material to come into stores will be the first material to be used.

Stores Ledger Account of Zing Thing for the period 2016-16 (FIFO)
Receipts Issues Balance
Date Particulars Qty Price Value Qty Price Value Qty Price Value
06.05.09 Purchases 1000 22 22000 1000 22 22000

21.06.09 Purchases 1700 22 37400 1000 22 22000

1700 22 37400

21.07.09 Issues 1000 22 22000 1200 22 26400

500 22 11000

28.08.09 Purchases 500 22 11000 1200 22 26400

500 22 11000

15.09.09 Purchases 2500 22 55000 1200 22 26400

500 22 11000
2500 22 55000

22.09.09 Issues 1200 22 26400 300 22 6600

200 22 4400 2500 22 55000

19.10.09 Issues 300 22 6600 900 22 19800

1600 22 35200

21.11.09 Purchases 4000 22 88000 900 22 19800

4000 22 88000

19.12.09 Issues 900 22 19800 2450 22 53900

1550 22 34100

13.01.10 Purchases 1050 22 23100 2450 22 53900

1050 22 23100

27.02.10 Issues 2450 22 53900 1050 22 23100

76
02.03.10 Purchases 2500 22 55000 1050 22 23100
2500 22 55000

09.03.10 Issues 1050 22 23100 1400 22 30800

1100 22 24200

77
 CHAPTER V

FINDINGS & SUGGESTIONS

78
FINDINGS

There was good coordination between the Marketing, planning procurement,

production and distribution.
Hetero exports stock to my countries in world like china, USA,
They do not to satisfy the employees needs.

SUGGESTIONS

Inventory in Hetero Drugs was more. They have to minimize the inventory.
They have to satisfy the employees needs.
JIT system has to be implemented in the hetero Drugs.This system eliminates the
necessity of carrying large inventories, and thus, saves carrying and other related
costs to the manufacturer

Verify count--Make sure you are receiving materials as are listed on the delivery
receipt.
Carefully examine each material for visible damage--If damage is visible, note it on
the delivery receipt and have the driver sign your copy.
After delivery, immediately open all materials and inspect for merchandise damage.

Steps to take when damage is discovered:

Retain damaged items--All damaged materials must be held at the Point

received.
Call carrier to report damage and request inspection.
Confirm call in writing--This is not mandatory but it is one way to protect
yourself.

79
Steps to take when carrier makes inspection of damaged items:

Have all damaged items in the receiving area--Make certain the damaged items
have not moved from the receiving area prior to Inspection by carrier.
After carrier/inspector prepares damage report, carefully read before signing.

Steps to be taken after inspection has been made:

Retain damaged materials--Damaged materials should not be used or disposed

of without permission by the carrier.
Do not return damaged items to shipper without written authorization from
shipper / supplier

SPECIAL TIPS FOR MANUFACTURERS.

If you are in the business of bidding, specifications play a very important role.
In writing specifications, the following elements should be considered.
Do not request features or quality that is not necessary for the items' intended
use.
Include full descriptions of any testing to be performed.
Include procedures for adding optional items.
Describe the quality of the items in clear terms.

80
The following actions can help save money when you are stocking inventory:

Substitution of less costly materials without impairing required quality;

Improvement in quality or changes in specifications that would lead to savings

in process time or other operating savings;

Developing new sources of supply;

Greater use of bulk shipments;

Quantity savings due to large volume, through consideration of economic

order quantity;

A reduction in unit prices due to negotiations;

Initiating make-or-buy studies;

Application of new purchasing techniques;

Using competition along with price, service and delivery when making the
purchase selection decision.

81
CONCLUSIONS

There should be proper accounting and physical controls.

The inventory should be stored properly to avoid the losses like breakage,
spoilage, wastage, damage, deterioration, pilferage etc.

Fixation of inventory levels like, minimum, maximum and reorder levels

and economic order quantity to ensure the optimum level of stocks.

Proper care should be taken to avoid stock-out situation.

Continuous supply of material should be ensured at the right time and right
cost.

The investment in the inventory should be optimized by avoiding over-

stocking.

Regular monitoring of stock movements and reduce the investments in

dormant and slow moving stocks

82
 CHAPTER VI
BIBLIOGRAPHY

83
 BIBLIOGRAPHY

Referred from the following standard texts and websites:

Financial Management I.M.Pandey

Cost & Management Accounting M.Ravi Kishore

HETERO DRUGS LTD Websites:

www.Hetero.com
http://www.Google.com

84