A

PROJECT REPORT
ON

“The Study of Inventory Management through ABC Analysis

And The Inventory Ratio Analysis for Various Companies. ”

FOR
The Gateway Hotel, Nasik

SUBMITTED TO

SAVITRIBAI PHULE PUNE UNIVERSITY

In Partial Fulfillment of the Requirement Of
MASTER OF BUSINESS ADMINISTRATION (MBA)

SUBMITTED BY
Mansheel Kaur Ranjeet Singh Anand

UNDER THE GUIDANCE OF

Prof. Prasad Joshi

METs
Institute of Management
Bhujbal Knowledge City
Adgaon, Nashik-422003
2017-2019
COMPANY CERTIFICATE
 STUDENT’S DECLARATION

I undersigned hereby declare that, the project entitled, “The Study Of

Various Inventory Management Techniques and The Inventory Ratio
Analysis” is executed as per the course requirement of two year full time
MBA program of Savitribai Phule Pune University. This report has not been
submitted by me or any other person to any other University or
Institution for a degree or diploma course. This is my own and original
work.

Place: Nasik

Date: Mansheel Kaur Anand

 ACKOWLEDGEMENT

It is always a difficult task to acknowledge those who have been

tremendously helpful in an academic project of this nature and magnitude
nevertheless. I have made a sincere attempt to express gratitude to all those who
have contributed to the successful completion of this project through this project
report.

I am extremely thankful to Respected Principal Dr. Nilesh Berad Sir of

MET’s Institute Of Management, Nasik-, for providing me an opportunity to
prepare this project on ‘The Study Of Various Inventory Management Techniques and
The Inventory Ratio Analysis’ under summer project.

I also take this opportunity to express my deepest gratitude to my Project

Guide Prof Prasad Joshi for the constructive support throughout the development
of the project.

I also express my gratitude to Mr. Harish Pant, The Gateway Hotel, Nasik
for his valuable guidance at various stages providing written material including
various books, pamphlets and handbills concerning to the subject.

Finally, I thank those who have helped me directly or indirectly in

completion of this project in due time.
 Executive Summary

The project is concern with The Taj Groups of Hotel - The Gateway Hotel to
“The Study of Inventory Management through ABC Analysis
And The Inventory Ratio Analysis for Various Companies. The project
included as part of MBA program and the project is done during the period 19th
June to 20th August 2018.

The project report involves managing the inventory at The Gateway Hotel,
Nashik. Management of inventory records and relevant details is an important area
of concern for every organization, whether it is large or small. And also calls for
efficient planning and maintenance.

Think of a situation when you have to look into various registers to find and enter
each and every minor mandatory detail. And the situation goes worse when you
need to manage a number of such registers. Every register needs to be updated to
make the records up to date. Obviously, managing number of such records and
registers manually sounds to be truly a laborious job and calls for efficient and
effective planning and implementation of effective skills to get the job done.

But what for, if not all but a maximum part of the job of management can be done
automatically with just the click of a button!!Sounds a bit relieving and
interesting, isn’t it!!
CHAPTER I:
Introduction
 1.1 INTRODUCTION

“Inventory” means physical stock of goods, which is kept in hands for smooth and
efficient running of future affairs of an organization at the minimum cost of funds
blocked in inventories. The fundamental reason for carrying inventory is that it is
physically impossible and economically impractical for each stock item to arrive exactly
where it is needed, exactly when it is needed.

Inventory management is the integrated functioning of an organization dealing

with supply of materials and allied activities in order to achieve the maximum co-
ordination and optimum expenditure on materials. Inventory control is the most
important function of inventory management and it forms the nerve center in any
inventory management organization.

Inventory control is vitally important to almost every type of business, whether

product or service oriented. Inventory control touches almost every facets if operations. A
proper balance must be struck to maintain proper inventory with the minimum financial
impact on the customer. Inventory control is the activities that maintain stock keeping
items at desired levels.

A ratio analysis is a quantitative analysis of information contained in a company’s

financial statements. Ratio analysis is used to evaluate various aspects of a company’s
operating and financial performance such as its efficiency, liquidity, profitability and
solvency.

Ratio analysis can provide an early warning of a potential improvement or

deterioration in a company’s financial situation or performance. Analysts engage in
extensive number-crunching of the financial data in a company’s quarterly financial
reports for any such hints. Successful companies generally have solid ratios in all areas,
and any hints of weakness in one area may spark a significant sell-off in the stock.
Certain ratios are closely scrutinized because of their relevance to a certain sector.
 1.2 Need and Significance of Study

An inventory management system can help you manage your business’s inventory
and stock items, keeping track of exactly where your assets are and what they’re worth.
The system also analyzes your business’s inventory needs and can even automate your
ordering. Inventory management systems are important for many industries including
retail, food and beverage, manufacturing, health care and more. A well-run system helps
you understand your assets and maximize their potential, thus improving your business
operations and increasing profits.

An inventory management system helps keep your business more organized. Without
tracking and managing your inventory, it’s difficult to know what you need, when you
need it and in what quantity. With a quality inventory management system, you have
detailed records of every asset in your business.

You can see all of the moving parts in one place. You are easily able to see the products
that are moving and those that are selling slowly. You can see if certain inventory sells at
certain times of the year, or even during certain times of the day. You can even set your
system to reorder a certain popular inventory item so it’s never out of stock for your
customers. Having all of this information and capability in one place allows you to make
informed decisions about the needs of your company.

 The importance of inventory management is to track accurate inventory that

allows brands to fulfil orders on time and accurately and as brands grow out of
small warehouse space and into larger facilities, so does the need to efficiently
manage inventory.
 Accurate Order Fulfillment
 Better Inventory Planning and Ordering
 Increased Consumer Satisfaction
 Reducing Risk of Production Shortages
 Minimise the Blockage of Financial Resources
 To get the smooth flow in manufacturing by fulfilling the requirement of raw
material
 To achieve best value, value for money and continuous improvement.
 Chapter 2:
Research Methodology
 2.1 Research Methodology

The research methodologies are used primary data and secondary data collection.
Research process is a series of systematic steps that are following to solve a business problem.
It is a framework of entire plan of action. It clearly describes the crucial issues like the studies
purpose and objectives, the type of data needed, the technique to be used for selecting samples,
data collecting method, analyzing it and other aspects that are essential for conducting business
research.

2.2 Objectives

 To study the inventory management procedure.

 To determine the stock level in inventory management at The Gateway Hotel,
Nashik.
 To achieve satisfactory levels of customer service while keeping inventory costs
within reasonable bounds.
 To maintain economy in purchasing.
 To ensure availability of material.
 Understand business requirements
 To develop Strong relationship with internal customer by understanding there
requirement.
 To meet the customer requirement timely, effectively, efficiently, smoothly and
satisfactorily.
 To smoothen the production process.
 To meet the time lag for transportation of goods.
 To avoid of abnormal wastage.
 To avoid of out of stock danger.
 To study the inventory control measures in inventory management.
  To ascertain whether the company has suffered from poor management and
control of inventories.
 To minimize risk of loss due to obsolescence, deterioration, etc.;
 To maintain necessary records for protecting against thefts, wastes leakages of
inventories and to decide timely replenishment of stocks.
 To compare the data for the past three years on the basis of ABC analysis.
 To make comparative analysis of financial variables for last 3 years of The
Gateway Hotel, Nasik.
 To analyze the current inventory position of the company and provide suggestions
for growth and improvement.
 To compare the financial statements of three years in order to analyze, compare
and evaluate the performance of the company in terms of stock turnover ratio.

PRIMARY OBJECTIVE

 To analyse the efficiency of Inventory Management of The Gateway Hotel, Nasik.

SECONDARY OBJECTIVE

 To identify optimum level of inventory which minimizes the cost.

 To identify the safety stock level for various components.
 To classify the various components based on its value and movements.
 To identify inventory requirement of the company for the next year.

2.3 Data Collection

When the survey method is utilized, some form of direct participation by the
respondent is necessary during the process. The respondent may participate by filling out
a questionnaire or by interacting with an interviewer. If an unobtrusive method of data
collection is utilized, the subjects do not actively participate. For instance, a simple count
of motorists driving past a proposed franchising location is one kind of data collection.
However, the data are collected, it is important to minimize errors in the data collection
process.
In this project, the research is to be carried out with help of officials and employees.

The data collection technique is different for different types of research design.
There are predominantly two types of data:
 The primary data and
 The secondary data.

2.3.1 Primary Data

By primary data, we mean the data that have been collected originally for the first
time. In other words, primary data may be the outcome of an original statistical enquiry,
measurement of facts or a count that is undertaken for the first time. For instance data of
population census is primary. Primary data being fresh from the fields of investigation is
very often referred to as raw data. In the collection of primary data, a good deal of time,
money and energy are required.
The advantage of this research is that it is timely, focused and no unnecessary data
collection.
Disadvantage is that it is Expensive.
The source of collecting the primary data was through interviews, observation and
questionnaire. It was collected from the discussion and interaction with the senior
employees and executives in the organization from the accounts and finance department.
2.3.2 Secondary data

Secondary data are the data that are in actual existence in accessible records,
having been already collected and treated statistically by the persons maintaining the
records. In other words, secondary data are the data that have been already collected,
presented tabulated, treated with necessary statistical techniques and conclusions have
been drawn. Therefore, collecting secondary data doesn't mean doing some original
enumeration but it merely means obtaining data that have already been collected by some
agencies, reliable persons, government departments, research workers, dependable
organizations etc. Secondary data are easily obtainable from reliable records, books,
government publications and journals.
This research is any information we may use , but which cannot been specifically
collected for current research. It includes published sources of data, periodicals,
newspaper, reports and internet.
The advantage of this research is that it is easy to collect, less expense.
Disadvantage is that not all data is useful.
The secondary data I collected was through the study of the financial statements already
existed in the company in form of printed files or digital files reserved in the company for
further references. I had chosen these files because of the reliability and suitability of this
information which I was also sure about the accuracy of them.
These files consist of:
1. Stock report of the company
2. Financial balance sheets
3. Income statements
4. Financial reports
5. Different reports prepared by Finance Department
6. Internet.

2.4 Hypothesis

 There is a significant relationship between low productivity and poor inventories

management in the gateway hotel nashik.
 There is not a significant relationship between low productivity and poor
inventories management in the gateway hotel nashik.
 2.5 SCOPE OF THE STUDY

Inventory systems provide a basis for recording sales, purchases. and the quantity for
each item at the end of the accounting period.

The scope of inventory management concerns the fine lines between replenishment lead
time, carrying costs of inventory, asset management, inventory forecasting, inventory
valuation, inventory visibility, future inventory price forecasting, physical inventory,
available physical space for inventory, quality management, replenishment, returns and
defective goods, and demand forecasting. Balancing these competing requirements leads
to optimal inventory levels, which is an on-going process as the business needs shift and
react to the wider environment.

Inventory management involves a retailer seeking to acquire and maintain a proper

merchandise assortment while ordering, shipping, handling, and related costs are kept in
check. It also involves systems and processes that identify inventory requirements, set
targets, provide replenishment techniques, report actual and projected inventory status
and handle all functions related to the tracking and management of material. This would
include the monitoring of material moved into and out of stockroom locations and the
reconciling of the inventory balances.

It also may include ABC analysis, lot tracking, cycle counting support, etc.
Management of the inventories, with the primary objective of determining/controlling
stock levels within the physical distribution system, functions to balance the need for
product availability against the need for minimizing stock holding and handling costs.

The two primary inventory systems are the periodic system and the perpetual system. The
periodic system records the inventory only at the end of each period, leaving the balance
unchanged throughout the period. Since counting inventory takes time, smaller
businesses are more likely to use the periodic system and find it easier. The perpetual
system, in contract, adjusts the inventory balance each time a transaction, such as an
inventory purchase or a sale, occurs, and it provides real-time information larger
businesses find helpful.

The scope of an inventory system defines which needs it addresses, including valuing the
inventory, measuring the change in inventory and planning for future inventory levels.
The value of the inventory at the end of each period provides a basis for financial
reporting on the balance sheet.

Measuring the change in inventory allows the company to determine the cost of
inventory sold during the period. Together, inventory values and level changes allow the
company to plan for future inventory needs.

2.6 Limitations of the study

 Time constraint in main limitation.

 They employees refuse to fill questionnaire.
 Guests may be bias to certain questions.
 Store department employees are not very well educated.
 The study was limited only for the period of 2 months.
 Information given by the company is limited.
 As per the company rules many information were not disclosed.
 Some data is confidential so it is not given to trainee.
 Chapter III:-
Review of Literature & Theoretical
Background of the Study
A STUDY ON INVENTORY MANAGEMENT BY RAMYA

In this review Miss. RAMYA, who has done the project about Inventories at WOIL,
it is constitute the most significant part of the current assets of a large majority of
companies in India. Raw materials, goods in process and finished goods all represent
various forms of inventory. Each type represents money tied up until the inventory leaves
the company as purchased products. Because of the large size of the inventories
maintained by firms, a considerable amount of funds is required to be committed to them.
It is therefore absolutely imperative to manage inventories efficiently and effectively in
order to avoid unnecessary investments

A REPORT ON INVENTORY MANAGEMENT BY VIJAYARAMAN

In this review Mr. VIJAYARAMAN .R, who as done the project about A report
Inventory at WOIL, an Inventory Management System is an essential element in an
organization. It is comprised of a series of processes which provide an assessment of the
organization’s inventory. The Inventory Management System also aids the organization
in achieving its goals and objectives with the primary focus on adding value for the
customers. The management of inventory adds value for customers (quality, speed,
flexibility, and cost), and this is the primary consideration of the Operations Management
System. Inventory management is possibly one of the richest areas of operations
management, with many tools and techniques available to help managers run their
processes as effectively as possible.

INVENTORY AS MANAGING INVENTORY BY WOLFE BAGBY

In this review Mr. WOLFE BAGBY explains inventory as Managing inventory to

Meet Profit Goals, Shortening the cash cycle, avoiding inventory shortage, Avoid
excessive carrying costs for unused inventory, Improving profitability by decreasing cash
conversion, JIT.
  Getting smart about inventory
 Shortening the cash conversion cycle
 Avoiding inventory shortage
 Avoid excessive carrying costs for unused inventoryImproving profitability
by decreasing cash conversion

 JIT

A STUDY ON INVENTORY MANAGEMENT BY CHARLES

ATKINSON

In this review Mr. CHARLES ATKINSON explains inventory as inventory

management topics, he explains average inventory levels, in this topic he explained about
two parts. The first half part of this article covers how to find what inventory levels
should be, and the second half covers how to evaluate it..

Average Inventory Levels

In this part, it provides a brief description for how optimal inventory levels for
materials are kept. Essentially, this section can serve as a starting point for inventory
managers. The First thing he determines the ideal inventory levels is a material's
Economic Order Quantity (EOQ). This is the amount one should be ordering when you
place orders.

Next he determines Safety Stock (SS). This is the amount that you should have
remaining when the EOQ arrives. This should be intuitive because safety is what you
have when your shipment arrives and when the order arrives (EOQ) it gets added to the
safety stock.

It is clear that average minimum and maximum level because you might not
receive the EOQ exactly when you planned to and therefore may have more or less. On
average you should have the SS amount when you receive shipments. Between these two
average minimum and maximum values lies your long-term average inventory. Average
Inventory can be calculated by Simplistic Method.

Most methods of accounting take the beginning inventory of a period, add it to the
ending inventory of a period, and divide by 2. This essentially provides the mathematical
average for a given month.

Avg. Inventory = (Beginning Inventory+ (Beginning Inventory + Units Produced-Units

Sold))/2

Or more simply:

Avg. Inventory = (Beginning Inventory + Ending Inventory)/2

THEOROTICAL BACKGROUND

Inventory

Despite its importance to the supply chain, inventory is not universally well understood.
It is variously characterized, both positively and negatively, as an economic asset to a
non-income-producing use of capital funds. Only when considered in light of all quality,
client service and economic factors—from the viewpoints of purchasing, manufacturing,
sales and finance—does the whole picture of inventory become clear. No matter the
viewpoint, effective inventory management is essential to supply chain competitiveness.

Inventory is a list for goods and materials, or those goods and materials themselves, held
available in stock by a business. Inventory are held in order to manage and hide from the
customer the fact that manufacture/supply delay is longer than delivery delay, and also to
ease the effect of imperfections in the manufacturing process that lower production
efficiencies if production capacity stands idle for lack of materials. In other words,
Inventory is a quantity or store of goods that is held for some purpose or use (the term
may also be used as a verb, meaning to take inventory or to count all goods held in
inventory). Inventory may be kept "in-house," meaning on the premises or nearby for
immediate use; or it may be held in a distant warehouse or distribution center for future
use. With the exception of firms utilizing just-in-time methods, more often than not, the
term "inventory" implies a stored quantity of goods that exceeds what is needed for the
firm to function at the current time (e.g., within the next few hours).

Raw Materials

This type of inventory includes any goods used in the manufacturing process, such as
components used to assemble a finished product. Raw materials may also include
partially finished goods or materials. For example, for an orange juice company, oranges,
sugar and preservatives are raw materials; while for a computer manufacturer, chips,
circuit boards and diodes are raw materials. Inventory items may be classified as raw
materials if the organization has purchased them from an outside company, or if they are
used to make components.

Work-in-Process

Work-in-process inventory items are those materials and parts that are waiting to be made
into something else. These may include partially assembled items that are waiting to be
completed. Work-in-process inventory items may include finished goods that have not
yet been packaged and inspected, as well as raw materials that have moved from storage
to a preassembly area. For example, in an orange juice company, the oranges may come
in to a storage area, where they are raw goods, but once they have been moved out of the
storage area and onto the assembly line for juicing, they become work-in-process
inventory. In a small company, work-in-process goods may be stored in the same area as
raw materials and finished goods.

Finished Goods
Finished goods are any products that are ready to be shipped out or sold directly to
customers, including to wholesalers and retailers. Finished goods may be waiting in a
storage area or on a shop floor. If the amount of inventory of finished goods increases
faster that the amount of raw goods and work-in-process goods, then production may
need to slow down until more finished goods are sold. In some businesses, goods are not
included in the finished goods inventory until they are sold. For example, in companies
where goods are made to order.

Other Types of Inventory

Maintenance, repair and operating inventory are all the items an organization needs in
order to operate, such as office equipment, packing boxes and tools to repair equipment.
There are also other types of inventory that are classified based on the purpose they serve.
These include transit inventory, which are products or components that are being moved
from one location to another, such as from a warehouse to a factory; buffer inventory,
which are excess inventory items that are kept on hand to protect against supply
problems, such as poor quality or slow delivery of raw materials; and anticipation
inventory, which are items that an organization stocks up on in case of excess demand --
such as in the build up to Christmas shopping.

Keeping Inventory

Why would a firm hold more inventory than is currently necessary to ensure the firm's
operation? The following is a list of reasons for maintaining what would appear to be
"excess" inventory.

Meet Demand

In order for a retailer to stay in business, it must have the products that the customer
wants on hand when the customer wants them. If not, the retailer will have to back-order
the product. If the customer can get the good from some other source, he or she may
choose to do so rather than electing to allow the original retailer to meet demand later
(through back-order). Hence, in many instances, if a good is not in inventory, a sale is
lost forever.

Keep Operations Running

A manufacturer must have certain purchased items (raw materials, components, or

subassemblies) in order to manufacture its product. Running out of only one item can
prevent a manufacturer from completing the production of its finished goods. Inventory
between successive dependent operations also serves to decouple the dependency of the
operations. A machine or work center is often dependent upon the previous operation to
provide it with parts to work on. If work ceases at a work center, then all subsequent
centers will shut down for lack of work. If a supply of work-in-process inventory is kept
between each workcenter, then each machine can maintain its operations for a limited
time, hopefully until operations resume the original center.

Lead Time

Lead time is the time that elapses between the placing of an order (either a purchase order
or a production order issued to the shop or the factory floor) and actually receiving the
goods ordered. If a supplier (an external firm or an internal department or plant) cannot
supply the required goods on demand, then the client firm must keep an inventory of the
needed goods. The longer the lead time, the larger the quantity of goods the firm must
carry in inventory.

A just-in-time (JIT) manufacturing firm, such as Nissan in Smyrna, Tennessee, can

maintain extremely low levels of inventory. Nissan takes delivery on truck seats as many
as 18 times per day. However, steel mills may have a lead time of up to three months.
That means that a firm that uses steel produced at the mill must place orders at least three
months in advance of their need. In order to keep their operations running in the
meantime, an on-hand inventory of three months' steel requirements would be necessary.

Hedge.
Inventory can also be used as a hedge against price increases and inflation. Salesmen
routinely call purchasing agents shortly before a price increase goes into effect. This
gives the buyer a chance to purchase material, in excess of current need, at a price that is
lower than it would be if the buyer waited until after the price increase occurs.

Quantity Discount.

Often firms are given a price discount when purchasing large quantities of a good. This
also frequently results in inventory in excess of what is currently needed to meet demand.
However, if the discount is sufficient to offset the extra holding cost incurred as a result
of the excess inventory, the decision to buy the large quantity is justified.

Smoothing Requirements

Sometimes inventory is used to smooth demand requirements in a market where demand

is somewhat erratic.

There are three basic reasons for keeping an inventory:

Time - The time lags present in the supply chain, from supplier to user at every
stage, requires that you maintain certain amount of inventory to use in this "lead time"

Uncertainty - Inventories are maintained as buffers to meet uncertainties in

demand, supply and movements of goods.

Economies of scale - Ideal condition of "one unit at a time at a place where user
needs it, when he needs it" principle tends to incur lots of costs in terms of logistics. So
Bulk buying, movement and storing brings in economies of scale, thus inventory.

Controlling Inventory
Inventory management, or inventory control, is an attempt to balance inventory needs and
requirements with the need to minimize costs resulting from obtaining and holding
inventory. There are several schools of thought that view inventory and its function
differently. These will be addressed later, but first we present a foundation to facilitate
the reader's understanding of inventory and its function. Firms that carry hundreds or
even thousands of different part numbers can be faced with the impossible task of
monitoring the inventory levels of each part number. In order to facilitate this, many
firm's use an ABC approach. ABC analysis is based on Pareto Analysis, also known as
the "80/20" rule. The 80/20 comes from Pareto's finding that 20 percent of the populace
possessed 80 percent of the wealth. From an inventory perspective it can restated thusly:
approximately 20 percent of all inventory items represent 80 percent of inventory costs.
Therefore, a firm can control 80 percent of its inventory costs by monitoring and
controlling 20 percent of its inventory. But, it has to be the correct 20 percent.

The top 20 percent of the firm's most costly items are termed "A" items (this should
approximately represent 80 percent of total inventory costs). Items that are extremely
inexpensive or have low demand are termed "C" items, with "B" items falling in between
A and C items. The percentages may vary with each firm, but B items usually represent
about 30 percent of the total inventory items and 15 percent of the costs. C items
generally constitute 50 percent of all inventory items but only around 5 percent of the
costs.

By classifying each inventory item as an A, B or C the firm can determine the resources
(time, effort and money) to dedicate to each item. Usually this means that the firm
monitors A items very closely but can check on B and C items on a periodic basis (for
example, monthly for B items and quarterly for C items).

Another control method related to the ABC concept is cycle counting. Cycle counting is
used instead of the traditional "once-a-year" inventory count where firms shut down for a
short period of time and physically count all inventory assets in an attempt to reconcile
any possible discrepancies in their inventory records. When cycle counting is used the
firm is continually taking a physical count but not of total inventory. A firm may
physically count a certain section of the plant or warehouse, moving on to other sections
upon completion, until the entire facility is counted. Then the process starts all over
again. The firm may also choose to count all the A items, then the B items, and finally the
C items. Certainly, the counting frequency will vary with the classification of each item.
In other words, A item may be counted monthly, B items quarterly, and C items yearly.
In addition the required accuracy of inventory records may vary according to
classification, with items requiring the most accurate record keeping.

There are three types of costs that together constitute total inventory costs:-

holding costs, set-up costs, and purchasing costs.

Holding Costs

Holding costs, also called carrying costs, are the costs that result from maintaining the
inventory. Inventory in excess of current demand frequently means that its holder must
provide a place for its storage when not in use. This could range from a small storage area
near the production line to a huge warehouse or distribution center. A storage facility
requires personnel to move the inventory when needed and to keep track of what is stored
and where it is stored. If the inventory is heavy or bulky, forklifts may be necessary to
move it around.

Storage facilities also require heating, cooling, lighting, and water. The firm must pay
taxes on the inventory, and opportunity costs occur from the lost use of the funds that
were spent on the inventory. Also, obsolescence, pilferage (theft), and shrinkage are
problems. All of these things add cost to holding or carrying inventory.

Set-up Costs
Set-up costs are the costs incurred from getting a machine ready to produce the desired
good. In a manufacturing setting this would require the use of a skilled technician (a cost)
who disassembles the tooling that is currently in use on the machine. The disassembled
tooling is then taken to a tool room or tool shop for maintenance or possible repair
(another cost). The technician then takes the currently needed tooling from the tool room
(where it has been maintained; another cost) and brings it to the machine in question.

There the technician has to assemble the tooling on the machine in the manner required
for the good to be produced (this is known as a "set-up"). Then the technician has to
calibrate the machine and probably will run a number of parts, that will have to be
scrapped (a cost), in order to get the machine correctly calibrated and running. All the
while the machine has been idle and not producing any parts (opportunity cost). As one
can see, there is considerable cost involved in set-up. If the firm purchases the part or raw
material, then an order cost, rather than a set-up cost, is incurred. Ordering costs include
the purchasing agent's salary and travel/entertainment budget, administrative and
secretarial support, office space, copiers and office supplies, forms and documents, long-
distance telephone bills, and computer systems and support. Also, some firms include the
cost of shipping the purchased goods in the order cost.

Purchasing Cost.

Purchasing cost is simply the cost of the purchased item itself. If the firm purchases a part
that goes into its finished product, the firm can determine its annual purchasing cost by
multiplying the cost of one purchased unit (P) by the number of finished products
demanded in a year (D). Hence, purchasing cost is expressed as PD.

Now total inventory cost can be expressed as:

Total = Holding cost + Set-up/Order cost + Purchasing cost or Total = H(Q/2) + S(D/Q)
+ PD
Inventory Management

Inventory Management System deals with the maintenance of equipments. Inventory

Management is a discipline that encompasses the principles, concepts and techniques for
determining what to order, when to order and how much to order. The right amount of
inventory involves the balance between what is required to service your customers and
what is financially practical.

Precise control and safeguarding of inventory is an essential task for a successful, well-
organized company; businesses require timely and accurate information on inventory
location, movement, and valuation. The Inventory Management module for Sage MAS
90 and Sage MAS 200 ERP systems provides data pertaining to the receipt of goods, the
movement of goods within or between locations, the sale, removal, or other disposition of
goods, kitting capabilities, lot and serial tracking, and the precise valuation and status of
goods remaining in inventory at any point in time. When used in conjunction with other
Sage MAS 90 and 200 modules, Inventory Management is the cornerstone of an effective
manufacturing or distribution solution. Inaccurate inventory counts can cost you sales and
delay shipments past the promise date. Out-of stock items as well as overstocked items in
inventory can be devastating to your business. Additionally, an overstated or understated
inventory valuation can result in incorrectly reported assets within your financial
statements.

Inventory Management offers comprehensive reporting capabilities to keep you on top of

inventory status. Generate reports on item pricing, stock status, detailed sales history,
backorder information, reorder points and recommendation, valuation, turnover, sales
analysis, and much more. And adding the Business Alerts module can keep your staff on
top of quantity changes to critical inventory items, to keep stocking levels precisely
where you want them. Properly used, the Inventory Management module can help bring
about the formulation of new or improved purchasing policies, sales policies, pricing
methods, and even enhanced customer service. Inventory Management could also provide
your company with an additional edge over competitors who are unable to access the
same strategic information.

Functions Inventory Control

 Initiating, developing, installing, or administering a control program.

 Providing guidance on or conducting surveys of supply and inventory
management functions.
 Analyzing, evaluating, revising, or developing new inventory management
systems.
 Developing long-range material support plans.
 Directing, guiding, or reviewing material support programs, functions, and actions
implemented by others; and/or
 Performing quality assurance and review functions.
 Inventory specialists satisfy these responsibilities by:
 Controlling and authorizing funding for material so that the proper kind, quality,
and quantity are available at the correct time and place.
 Maintaining records and controls over material in stock, due in, or planned for the
distribution system on a quantitative and monetary basis.

ABC ANALYSIS

MEANING

The inventory of an organization generally consists of thousands of items with

varying prices, usage rate and lead time. It is neither desirable nor possible to pay equal
attention of all items.
 ABC analysis is a basic analytical tool which enables management to concentrate
its efforts where results will be greater. The concept applied to inventory is called as
ABC analysis.

Statistics reveal that just a few items account for bulk of the annual consumption
of the materials. These few items are called A class items which hold the key to business.
The other items known as B & C which are numerous in number but their contribution is
less significant. ABC analysis thus tends to segregate the items into three categories A,B
& C on the basis of their values. The categorization is made to pay right attention and
control demanded by items.

FEATURES OF ABC ANALYSIS

A Class (High Value) B Class (Moderate Value) C Class (Low Value)

1. Tight control on Moderate control Less control
stock levels
2. Low safety stock Medium Large
3. Ordered frequently Less frequently Bulk ordering
4. Individual posting in Individual Collective posting
stores
5. Weekly control Monthly control Quarterly control
reports
6. Continuous effort to Moderate efforts Minimum efforts
reduce lead time

ADVANTAGES

 This approach helps the manager to exercise selective control & focus his
attention only on a few items.
  By exercising strict control on A class items, the materials manager is able to
show the results within a short period of time.
 It results in reducer clerical costs, saves time and effort and results in better
planning and control and increased inventory turnover.
 ABC analysis, thus, tries to focus and direct the effort based on the merit of the
items and thus, becomes an effective management control tool.

INVENTORY TURNOVER RATIO

Kohler defines inventory turnover as “a ratio which measures the number of times
a firm’s average inventory is sold during a year”.

A higher turnover rate indicates that the material in question is a fast moving one.
A low turnover rate, on the other hand, indicates over-investment and locking up of
working capital on undesirable items.

Inventory turnover ratio may be calculated in different ways by changing the

numerator, but keeping the same denominator. For instance, the numerator may be
materials consumed, cost of goods sold or net sales. Based on any one of these, the ratio
differs from industry to industry.

Stock turnover is measured in terms of the ratio of the value of materials

consumed to the average inventory during the period. the ratio indicates the number of
times the average inventory is consumed and replenished. By diving no. of days in a yeat
by turnover ratio, the number of days for which the average inventory is held, can be
ascertained.

Comparing the no. days in the case of two different materials, it is possible to
know which is fast moving & which is slow moving. On that basis, attempt may be made
to reduce the amount of capital locked up, and prevent over-stocking of slow moving
items.
 Net sales
Inventory turnover ratio =
Avg. inventory

No. of days in a year

Inventory velocity =
Inventory turnover ratio

Other Schools Of Thought In Inventory Management

There are a number of techniques and philosophies that view inventory management from
different perspectives.

Mrp and Mrp II.

Mrp and Mrp II are computer-based resource management systems designed for items
that have dependent demand. Mrp and Mrp II look at order quantities period by period
and, as such, allow discrete ordering (ordering only what is currently needed). In this way
inventory levels can be kept at a very low level; a necessity for a complex item with
dependent demand.

Just-in-time (JIT).

Just-in-time (JIT) is a philosophy that advocates the lowest possible levels of inventory.
JIT espouses that firms need only keep inventory in the right quantity at the right time
with the right quality. The ideal lot size for JIT is one, even though one hears the term
"zero inventory" used.
Supply Chain Meaning

A supply chain is a system of organizations, people, activities, information, and resources

involved in moving a product or service from supplier to customer. Supply chain
activities involve the transformation of natural resources, raw materials, and components
into a finished product that is delivered to the end customer. In sophisticated supply chain
systems, used products may re-enter the supply chain at any point where residual value is
recyclable.

Supply Chain Management

The basic idea behind SCM is that companies and corporations involve themselves in a
supply chain by exchanging information about market fluctuations and production
capabilities

If all relevant information is accessible to any relevant company, every company in the
supply chain has the ability to help optimize the entire supply chain rather than to sub-
optimize based on a local interest. This will lead to better-planned overall production and
distribution, which can cut costs and give a more attractive final product, leading to better
sales and better overall results for the companies involved.

The primary objective of SCM is to fulfill customer demands through the most efficient
use of resources, including distribution capacity, inventory, and labor. In theory, a supply
chain seeks to match demand with supply and do so with the minimal inventory.

Profit

A financial benefit that is realized when the amount of revenue gained from a business
activity exceeds the expenses, costs and taxes needed to sustain the activity. Any profit
that is gained goes to the business's owners, who may or may not decide to spend it on
the business.
The surplus remaining after total costs are deducted from total revenue and the basis on
which tax is computed and dividend is paid. It is the best known measure of success in an
enterprise.

Profit is reflected in reduction in liabilities, increase in assets, and/or increase in owners'

equity. It furnishes resources for investing in future operations, and its absence may result
in the extinction of a company. As an indicator of comparative performance, however, it
is less valuable than return on investment (ROI) also called earnings, gain, or income.
 CHAPTER IV:
ORGANIZATIONAL PROFILE
 4.1 INDUSTRY PROFILE

4.1.1 OVERVIEW OF HOSPITALITY INDUSTRY

Hospitality is about serving the guest to provide them with “feel-good-effect.” “Athithi
devo bhavha” (Guest is God) has been one of central tenets of Indian culture since times
immemorial.

In India, guest is treated with utmost warmth and respect and is provided the best
services.

Today hospitality sector is one of the fastest growing sectors in India. It is expected to
grow at the rate of 8% between 2007 and 2016. Many international hotels including
Sheraton, Hyatt, Radisson, Meridian, Four Seasons Regent and Marriott International are
already established in the Indian markets and are still expanding.

Service sector in India today accounts for more than half of India’s GDP. According to
data for the financial year 2006-2007, the share of services, industry and agriculture in
India’s GDP is 55.1 percent, 26.4 percent and 18.5 percent respectively. The fact that the
service sector now accounts for more than the half GDP marks a watershed in the
evolution of the Indian economy and takes it closer to the fundamentals of a developed
economy. Services or the tertiary sector of the economy covers a wide gamut of activities
like trading, banking and finance, infotainment, real estate, transportation, security,
management & technical consultancy among several others. The various sectors that
combine together to constitute service industry in India are:

 Trade
 Hotels & Restaurants
 Railways
 Other transport & storage
 Communication (Post, Telecom)
  Banking
 Insurance
 Dwellings, Real estate
 Business services
 Public administration
 Defense
 Personal services
 Community services
 Other services

There are marked acceleration in services sector growth in the eighties and nineties,
especially in the nineties. While he shares of services in India’s GDP increased by 21
percent points in the 50 years between 1950 and 2000, nearly 40 percent of that increase
was concentrated in the nineties. While almost all service sectors participated in this
boom, growth was fastest in communications, banking, hotels and restaurants,
community services, trade and business services. One of the reasons for sudden growth in
the service sector in India in the nineties was the liberalization in the regulatory
framework that gave rise to innovation and higher exports from the service sector.

Some of the main features of the Indian hotel industry include the following:

 The industry is more dependent on metropolitan cities as they account for 75% to
80% of the revenues, with Delhi and Mumbai being on top.
 The average room rate (ARR) and occupancy rate (OC) are the two most critical
factors that determine profitability. ARR depends on locations, brand image, star
rating, quality of facilities and services offered. The occupancy rate depends on
other seasonal factors.

India is an ideal destination for tourists. Approximately 4.4 million tourists visit India
every year. Thus the growth prospects are very high. In the hotel sector, a number of
multinationals have strengthened their presence. Players like Four seasons are also likely
to enter the Indian market in the near future. Moreover, Indian hotel chains are also
expanding internationally. A combination of this entire factor could result in a strong
emergence of budget hotels, which could potentially lower the cost of travel and related
costs.

4.1.2 TOP PLAYERS IN HOTEL INDUSTRY

 ITC Hotels
 Indian Hotels Company Ltd. (The Taj Hotels, Resorts and Palaces)
 Oberoi Hotels (East India Hotels)
 Hotel Leela Venture
 Asian Hotels Ltd
 Hotel Corporation of India
 ITDC Hotels

4.1.3 HOTEL INDUSTRY CLASSIFICSATION

The industry can be classified into four segments:

 5 Stars and 5 Star Deluxe: These are mainly situated in the business districts of
metro cities and cater to business travelers and foreign tourists. These are
considered to be very expensive. These account for about 30% of the industry.
 Heritage Hotels: These are characterized by less capital expenditure and greater
affordability and include running hotels in palaces, castles, forts, hunting, lodges
etc
 Budget Hotels: Budget hotels cater mainly to domestic travelers who favor
reasonably priced accommodations with limited luxury. These are characterized
by special seasonal offers and good services.
 Unclassified: These are low-priced hotels spread throughout the country. A low-
pricing policy is their only selling point. This segment accounts for about 19% of
the industry, service sector in India
 4.2 COMPANY PROFILE

The Indian Hotels Company Limited (IHCL) and its subsidiaries are collectively
known as Taj Hotels Resorts and Palaces and is recognized as one of Asia's largest and
finest hotel company. Incorporated by the founder of the Tata Group, Mr. Jamsetji N.
Tata, the company opened its first property, The Taj Mahal Palace Hotel, Bombay in
1903. The Taj, a symbol of Indian hospitality, completed its centenary year in 2003.
Taj Hotels Resorts and Palaces comprises 93 hotels in 55 locations across India
with an additional 16 international hotels in the Maldives, Malaysia, Australia, UK, USA,
Bhutan, Sri Lanka, Africa and the Middle East.
Spanning the length and breadth of the country, gracing important industrial
towns and cities, beaches, hill stations, historical and pilgrim centers and wildlife
destinations, each Taj hotel offers the luxury of service, the apogee of Indian hospitality,
vantage locations, modern amenities and business facilities.

IHCL operate in the luxury, premium, mid-market and value segments of the
market through the following:
Taj (luxury full-service hotels, resorts and palaces) is our flagship brand for the
world's most discerning travelers seeking authentic experiences given that luxury is a
way of life to which they are accustomed. Spanning world-renowned landmarks, modern
business hotels, idyllic beach resorts, authentic Rajput palaces and rustic safari lodges,
each Taj hotel reinterprets the tradition of hospitality in a refreshingly modern way to
create unique experiences and lifelong memories.
Taj also encompasses a unique set of iconic properties rooted in history and
tradition that deliver truly unforgettable experiences. A collection of outstanding
properties with strong heritage as hotels or palaces which offer something more than
great physical product and exceptional service. This group is defined by the emotional
and unique equity of its iconic properties that are authentic, non- replicable with great
potential to create memories and stories.
 Taj Exotica is our resort and spa brand found in the most exotic and relaxing
locales of the world. The properties are defined by the privacy and intimacy they provide.
The hotels are clearly differentiated by their product philosophy and service design.
Taj Safaris are wildlife lodges that allow travelers to experience the unparalleled
beauty of the Indian jungle amidst luxurious surroundings. They offer India's first and
only wildlife luxury lodge circuit. Taj Safaris provide guests with the ultimate,
interpretive, wild life experience based on a proven sustainable ecotourism model.
Vivanta by Taj Hotels & Resorts - Hailed by Wallpaper UK as a "stroke of
genius" and rated by Conde Nast Traveler US as the 3rd best global hotel brand Vivanta
by Taj offers an imaginative, vivacious and stylish take on 'cool luxury'
and relax, it appeals to the cosmopolitan world-traveler immersed in a sensory lifestyle.

4.2.1 Application Area

The Gateway Hotels & Resorts is a full service upscale hospitality brand in the
South Asia region. Designed for the modern nomad, Gateway provides consistent,
courteous and crisp service for business and leisure travelers seeking contemporary and
refreshing experiences. Keeping in mind those looking for comfort, familiarity and
flexibility, the hotels & resorts are divided into 8 zones – Enter, Stay, Hangout, Meet,
Work, Workout, Unwind and Explore. 24/7 services such as 24/7 breakfast, 24/7 'active
studio' and 24/7 laundry are all designed to cater to guests round-the-clock. Gateway
provides welcome perfection through an unrivalled network and innovative cuisine
offerings like 'active food' – super foods and low glycemic index foods for the health
conscious; regional home-style cuisine; 'eat-in' – refreshed in-room dining menus and
'wake up' - buffet breakfasts with a range of healthy and indulgent options. Flexible,
dynamic and warm service, 'in-room yoga' amenities and 'explore' packages all make The
Gateway Hotels & Resorts sanctuaries that refresh, refuel and renew. Stay connected to
The Gateway Hotels & Resorts
 Ginger (economy hotels) is IHCL's revolutionary concept in hospitality for the
value segment. Intelligently designed facilities, consistency and affordability are
hallmarks of this brand targeted at travelers who value simplicity and self-service.

Taj Hotels Resorts and Palaces is committed to replicate its domestic success onto
international shores with plans to build an international network of luxury hotels, which
will provide an exemplary product-service combination and in the process create a global
brand.
Taj Hotels further expanded its global footprint by securing management
contracts at Palm Island, Jumeirah in Dubai, Saraya Islands in Ras Al Khaimah, Aldar
Group in Abu Dhabi, UAE Langkawi in Malaysia and Thimpu in Bhutan. The most
significant additions to the portfolio have been The Pierre, the iconic landmark hotel on
New York's Fifth Avenue, Taj Boston and Blue, Sydney.
Taj Hotels also promise a whole new experience of tranquility and total 'wellness',
through Jiva Spas a unique concept, which brings together the wisdom and heritage of
the Asian and Indian Philosophy of Wellness and Well-being. Rooted in ancient Indian
healing knowledge, Jiva Spas derive inspiration and spirit from the holistic concept of
living.
IHCL operates Taj Air, a luxury private jet operation with state-of-the-art Falcon
2000 aircrafts designed by Dassault Aviation, France; and Taj Yachts, two 3-bedroom
luxury yachts which can be used by guests in Mumbai and Kochi, in Kerala. IHCL also
operates Taj SATS Air Catering Ltd., the largest airline catering service in South Asia,
as a joint venture with SATS (formerly known as Singapore Airport Terminal Services).
4.2.2 The Brand Gateway

The Gateway Hotels & Resorts is a full service upscale hospitality brand in the South
Asia region. Designed for the modern nomad, Gateway provides consistent, courteous
and crisp service for business and leisure travelers seeking contemporary and refreshing
experiences.
Keeping in mind those looking for comfort, familiarity and flexibility, the hotels &
resorts are divided in to 8 zones–Enter, Stay, Hangout, Meet, Work, Workout, Unwind
and Explore. 24/7 services such as 24/7 breakfast, 24/7'active studio' and 24/7 laundry are
all designed to cater to guests round-the-clock. Gateway provides welcome perfection
through a nun rivalled network and innovative cuisine of firings like' active food'–super
foods and low glycemic index foods for the health conscious; regional home-style
cuisine;' eat-in'–refreshed in-room dining menus and' wake up'-buffet breakfasts with
arrange of healthy and indulgent options.
Flexible, dynamic and warm service, 'in-room yoga 'amenities and 'explore' packages
all make The Gateway Hotels & Resorts sanctuaries that refresh, refuel and renew. Set a
midst acre so flush landscaped gardens ,The Gateway Hotel Ambad Nashik welcomes
guests with the kind of majestic gateway be fitting Maharashtrian royal residence .It is all
so stop over an route to the famous pilgrim a get town of Shirdi.
Situated in a place where timeless culture its modern industry, The Gateway Hotel
Ambad welcome guests with comfortable room sand photo-worthy views.
Surrounded by 20 acres of lush landscaped gardens, religious land marks and bust
ling city life, The Gateway Hotel is the perfect spot from which to explore Nashik.
 4.2.3 THE GATEWAY HOTEL’S PROFILE

The Gateway in Nasik is set amidst lush green gardens and is known for its great
hospitable services towards the guests. The hotel caters to the needs of the leisure as well
as the business travellers. The hotel is located at a distance of 180Kms from the Airport,
14Kms from the Railway Station and 7Kms from the Bus Station.
The Gateway Hotel provides

 Accommodation
 Dining
 Business
 Recreation
For the entertainment of the guests, the following recreation facilities are
provided by The Gateway in Nasik:
 Swimming Pool
 Bookshop
 Health Club
 Jogging Park
 Tennis Court
 Steam
 Jacuzzi
 Other Facilities
The various additional services provided at The Gateway in Nashik in
Maharashtra include:
 Travel Assistance
 Car Hire Service
 Currency Exchange
 Medical Services - Doctor On Call
 Drivers Dormitory
 Express laundry/Dry cleaning
 IHCL operates in the luxury, premium, mid-market and value
segments of the market through the following:
 4.2.4 Important Milestones In The History Of Taj

 1903: Created history with the opening of the Taj Mahal Palace Hotel,
Bombay (Mumbai) – India’s first luxury hotel.
 1971-72: Pioneered the concept of authentic Palace Hotels in the country
with the Rambagh Palace in Jaipur, the Palace of the Maharajah of the
erstwhile state of Jaipur.
 1974: conceptualized the unique beach resort at Fort Aguada, Goa built
within the walls of a Portuguese fort overlooking the Arabian Sea.
 1978-82: Taj launched in Delhi with its luxury hotel – Taj Mahal Hotel on
No.1 Man Singh road and then prepared India for the Asian Games by
setting up Taj Palace Delhi with largest convention centre in the country.
 1982: Taj established a presence in the western Hemisphere with the
historic St. James Court Hotel near Buckingham Palace, London.
 1984-92: Rolled out business Hotels in Key cities and towns across the
country, branded Taj residency Hotels.
 2000: consolidated its position as the largest chain in India with hotels in
Ahmadabad and Hyderabad, the latter city being a joint venture with GVK
Hotel rooms.
 2002: The new Taj Exotica Resort & Spa, Maldives, within six months of
its launch, was awarded the title of “The Best Resort in the World” in the
first ever harpers and Queen Travel Awards.
 4.2.5 TAJ PEOPLE PHILOSOPHY

You are important member of Taj family. We endeavour to select, retain and compensate
the best talent in the industry. We REWARD AND RECOGNISE quality customer care
based upon individual and team performance. We commit to provide you with
opportunities for CONTINOUS LEARNING AND DEVELOPMENT. We abide by fair
and just policies that ensure your well-being and that of your family, the community and
the environment. We commit to REGULAR AND FORMAL CHANNELS OF
COMMUNICATION, which nurtures openness and transparency.
We strongly believe that YOU ARE THE TAJ.
 VISION:
Embrace TALENT and harness EXPERTISE to leverage standards of EXCELLENCE in
the ART OF HOSPITALITY to GROW our INTERNATIONAL presence, INCREASE
domestic DOMIANCE and CREATE VALUE for all stakeholders. To embrace is to hold
closely with affection. To embrace is to accept and support.
 VALUES:
 People Diversity, Integrity & Respect
 Passion for excellence
 Exceed expectations
 Innovation
 Sense of urgency and accountability
 Social responsibility
 Joy at work
Values + Vision guide us towards an ethical acceptance direction for the
organization.
 4.3 ORGANISATIONAL CHART:

Chief Operating Officer

Brand Brand Brand HR Brand Brand Brand General

Financial House Manager Marketing Sales Business Managers
Controller Keeping Manager Manager Development of Units
Manager

Chief HR F&B Sales Front Training

Accountant Manager Manager Manager Office Manager
Manager

Executive Chief Material

Executive
Housekeeper Enginee Manage
Chef
r r
ORGANIZATION CHART

HR MANAGER
(Seema Lele)

SALES MANAGER
(Ajit Jha)

CHIEF ACCOUNTANT
(Harish Pant)

EXECUTIVE
HOUSEKEEPING
(Mandar More)

EXECUTIVE CHEF
(Abhijit Chakraborty)
GENERAL MANAGER
(Vinod Pandey)
F & B MANAGER
(Paul Dokka)

FRONT OFFICE
MANAGER
(Rajdeep Deora)

CHIEF ENGINEER
(Sahebrao Gawade)

PURCHASE MANAGER
(Dilip Panduranga)

SECURITY MANAGER
(Ajay Birhade)
 Chapter V:
Data Analysis
and Interpretation
MEANING

The ABC system is a widely used classification technique to identify various

items of inventory for purposes of inventory control. On the basis of unit cost involved,
the various items are classified into 3 categories:

(1) A, consisting of items with the large investment,

(2) C, with relatively small investments but fairly large number of items and
(3) B, which stands mid-way between category A & C.

Category A needs the most rigorous control, C requires minimum attention and B
deserves less attention than A but more than C.

ABC Analysis
ABC analysis classifies the materials based on their consumption during a particular time
period (usually one year). Depending upon the company to company A B & C items can
be as under
A – Approx. 5% to 10% of the Items accounting for 60% to 80% of the consumption
value.
B – Approx. 10 % to 30% of the Items accounting for 10% to 30% of the consumption
value.
C – Approx. 60% to 85% of the Items accounting for 5% to 15% of the consumption
value.

Usage of ABC Analysis

 In day to day operations, materials are some time under issued, over issued, issued
and not accounted into the system, misplaced, stolen etc. This results into inaccuracy
in the inventory. Cycle counting is the process to count and reconcile the materials.
Ideally, every material in the warehouse should be counted during a fixed interval
 (every year) for maintaining 100% accuracy, but counting & reconciling every
material is not cost effective and very expensive. To count the accuracy of the
inventory in a cost effective manner, it is recommended to count the materials based
on inventory classification.

 If A class materials are counted within a fixed interval (could be min two months or a
year) then you need to count only 5% to 10% of the total materials and it will cover
60% to 80% of the inventory value. That means that you only count 5 % to 10% of
the materials and remove the inaccuracy from the inventory value from 60% to 80%. \

 Similarly B class materials can also be counted on a less as the no’s of materials
become higher and C class materials at even lesser frequency as nos of material
becomes more (60% to 85% of the total materials).

 An inventory controller shall be concentrating more on the A class items for reducing
the inventory as he/she shall be concentrating only 5% to 10% of the total items and
shall be getting the opportunity to reduce inventory on 60% to 80% of the value.

 Any reduction in lead time of A class items shall result in reduction in inventory, so
procurement manager will work out with suppliers to reduce the lead time.

 On issue of materials, tight control on A class, Moderate control on B class, Loose

Control on C class. So A class items may be issued after getting the approvals from
Senior Executives of the company. B may be moderately controlled. Very little
control can be exercised while issuing C class item.

Comparison of quantities of all Categories for the year 2015-16, 2016-17, 2017-18

Category Quantity (15-16) Quantity (16-17) Quantity (17-18)

A 143,178.35 150,599.73 171,889.66
B 128,545.76 140,304.69 151,734.85
C 58,795.07 53,011.21 56,256.09

Comparison of 3 yrs Quantity Data

200,000.00

180,000.00

160,000.00

140,000.00

120,000.00
QUANTITY

100,000.00

80,000.00

60,000.00

40,000.00

20,000.00

-
Quantity (15-16) Quantity (16-17) Quantity (17-18)
A 143,178.35 150,599.73 171,889.66
B 128,545.76 140,304.69 151,734.85
C 58,795.07 53,011.21 56,256.09

ANALYSIS & INTERPRETATION :

 The above table shows the classification of various components as A, B & C
classes using ABC analysis techniques based on unit value. From the classification A
classes are those which constitute around 45% of total components. B classes are those
which constitute around 35% of total components and C classes are those which
constitutes about 20% of total components. It is good that the company maintains its
inventories based on its value using controlling techniques.

YEAR 15-16

Division of items on the basis of various categories for the year 15-16

Description Quantity Value Percentage Class of Items

Grains 71589.175 3676558.6 50 A
Fruits and
vegetables 35794.5875 1838279.3 25 A
Dairy Products 21476.7525 1102967.582 15 A
Herbs and Spices 14317.835 735311.721 10 A
Total (A) 143178.35 7353117.203 100

Meat and Sea Food 51418.304 828926.08 40 B

Bakery 64272.88 1036157.6 50 B
Frozen Food 12854.576 207231.52 10 B

Total (B) 128,545.76 2,072,315.20

Snacks and 11759.014 186832.39 20 C

Crackers
Juices 5879.507 93416.195 10 C
Culinary 8819.2605 140124.292 15 C
Essences and
Syrups 2939.7535 46708.0975 5 C
Aerated Drinks 11759.014 186832.39 20 C
Hard Drinks 11759.014 186832.39 20 C
Salad Dressing 5879.507 93416.195 10 C

Total (C) 58,795.07 934,161.95

Classification of the basis of Quantities

15-16
Category Quantity in Percentage
A 43.32
B 38.89
C 17.79
 Quantity in Percentage
50.00
43.32
45.00
38.89
40.00
35.00
Percentage

30.00
25.00
20.00 17.79
15.00
10.00
5.00
-
A B C
Category of Itmes

Quantity of Category A for the year 2015-16

14317.835

21476.7525
71589.175

35794.5875

Grains Fruits and vegetables Dairy Products Herbs and Spices

 Quantity of Category B for the year 2015-16

12854.576

51418.304

64272.88

Meat and Sea Food Bakery Frozens Food

Quantity of Category C for the year 2015-16

5879.507
11759.014

11759.014
5879.507

8819.2605
11759.014

2939.7535

Snacks and Crackers Juices Cullinary Essences and Syrups Airrerated Drinks Hard Drinks Salad Dressing
YEAR 16-17

Division of items on the basis of various categories for the year 16-17

Description Quantity Value Percentage Class of Items

Grains 75299.865 4127941.145 50 A
Fruits and
vegetables 37649.9325 2063970.573 25 A
Dairy Products 22589.9595 1238382.34 15 A
Herbs and Spices 15059.973 825588.229 10 A
Total (A) 150599.73 8255882.287 100

Meat and Sea Food 56121.876 930966.436 40 B

Bakery 70152.345 1163708.045 50 B
Frozen Food 14030.469 232741.609 10 B
Total (B) 140,304.69 2,327,416.09

Snacks and
Crackers 10602.242 210379.138 20 C
Juices 5301.121 105189.569 10 C
Culinary 7951.6815 157784.3535 15 C
Essences and
Syrups 2650.5605 52594.7845 5 C
Aerated Drinks 10602.242 210379.138 20 C
Hard Drinks 10602.242 210379.138 20 C
Salad Dressing 5301.121 105189.569 10 C

Total (C) 53,011.21 1,051,895.69

Classification of the basis of Quantities

16-17
Category Quantity in Percentage
A 43.79
B 40.80
C 15.41
 Quantity in Percentage
50.00
43.79
45.00 40.80
40.00
35.00
Percentage

30.00
25.00
20.00 15.41
15.00
10.00
5.00
-
A B C
Category of items

Quantity Category A for the year 2016-17

15059.973

22589.9595
75299.865

37649.9325

Grains Fruits and vegetables Dairy Products Herbs and Spices

 Quantity Category B for the year 2016-17

14030.469

56121.876

70152.345

Meat and Sea Food Bakery Frozens Food

Quantity Category C for the year 2016-17

5301.121

10602.242

10602.242
5301.121

7951.6815
10602.242

2650.5605

Snacks and Crackers Juices Cullinary Essences and Syrups Airrerated Drinks Hard Drinks Salad Dressing
YEAR 17-18

Division of items on the basis of various categories for the year 17-18

Description Quantity Value Percentage Class of Items

Grains 85944.83 4760492.385 50 A
Fruits and
vegetables 42972.415 2380246.193 25 A
Dairy Products 25783.449 1428147.716 15 A
Herbs and Spices 17188.966 952098.477 10 A

Total (A) 171,889.66 9520984.77 100

Meat and Sea Food 60693.94 1013707.772 40 B
Bakery 75867.425 1267134.715 50 B
Frozen Food 15173.485 253426.943 10 B

Total (B) 151,734.85 2534269.43 100

Snacks and
Crackers 11251.218 239389.63 20 C
Juices 5625.609 119694.815 10 C
Culinary 8438.4135 179542.2225 15 C
Essences and
Syrups 2812.8045 59847.4075 5 C
Airrerated Drinks 11251.218 239389.63 20 C
Hard Drinks 11251.218 239389.63 20 C
Salad Dressing 5625.609 119694.815 10 C

Total (C) 56,256.09 1196948.15 100

Classification of the basis of Quantities

17-18
Category Quantity in Percentage
A 45.25
B 39.94
C 14.81
 Quantity in Percentage for the year 2017-18
50.00 45.25
45.00 39.94
40.00
35.00
Percentage

30.00
25.00
20.00 14.81
15.00
10.00
5.00
0.00
A B C
Category of items

Quantity A Category for the year 2017-18

17188.966

Grains
25783.449
Fruits and vegetables
85944.83
Dairy Products
Herbs and Spices
42972.415
 Quantity B Category for the year 2017-18

15173.485

60693.94

75867.425

Meat and Sea Food Bakery Frozens Food

Quantity Category C for the year 2017-18

5625.609

11251.218

11251.218
5625.609

8438.4135
11251.218

2812.8045

Snacks and Crackers Juices Cullinary Essences and Syrups Airrerated Drinks Hard Drinks Salad Dressing
Inventory Turnover Ratio:

 This ratio is otherwise called as Stock Turnover Ratio.

 It indicates whether stock has been efficiently used or not. It establishes a
relationship between the cost of goods sold during a particular period and the
average amount of stock in the concern.
 It indicates number of times the replacement of inventory during the given period
usually a year.
 Higher the ratio more efficient is the management of inventory. But higher
inventory turnover ratio is not always good if it is lower level of inventory
because it invites problem of frequency stock outs and loss of sales and customer
or goodwill.

Inventory Turnover Ratio: Cost of Goods Sold

Average Stock in Hand

If information to calculate average stock is not given then closing

stock may be taken as average stock.

Cost of goods sold = Sales – Gross Profit

Average inventory = Opening stock + Closing Stock / 2
INVENTORY TURNOVER RATIO OF THE TAJ GROUP OF HOTELS AND ITS
COMPETITORS.

Analysis For Taj Hotels, Resorts, Palaces And Safaris.

(Amount in Crores)
Financial Years MARCH 15-16 MARCH 16-17 MARCH 17-18
Cost of goods sold 197.31 204.74 201.3
Average Inventory 8.05 7.71 9.03
Inventory Turnover 24.51 TIMES 26.56 TIMES 22.29 TIMES
Ratio
 STR 15-16 STR 16-17 STR 17-18

30

25
26.56
24.51
20 22.29

15

10

0
MARCH 15-16 MARCH 16-17 MARCH 17-18

INTERPRETATION:

In the above table shows inventory turnover ratio for The Taj Group of Hotels. The ratio
is first showing an increasing trend from 24.51 to 26.56 in the year 2015 - 2017. Later,
the ratio decreases from 26.56 to 22.29 in the year 2017 – 2018.
The above chart shows that the stock gets converted into cash was 24.51 times, 26.56
times and 22.29 times in the FY 2016 to 2018 respectively. If we compared the figures of
sales and inventory of the last three years, the level of inventory has a slight change and
there is hardly any difference in the amount. In the year 16-17, the cost of goods sold was
highest with least cost of inventory, which implies that the inventory easily gets
converted into sales. The ratio is highest in the same year.
Analysis For Eih Ltd – The Oberoi Group.

(Amount in Crores)
Financial Years MARCH 15-16 MARCH 16-17 MARCH 17-18
Cost of goods sold 1017.15 1098.25 984.67
Average Inventory 39.09 41.52 41.33
Inventory Turnover 26.02 TIMES 26.45 TIMES 23.82 TIMES
Ratio
 STR 15-16 STR 16-17 STR 17-18

30

25
26.02 26.45

23.82
20

15

10

0
MARCH 15-16 MARCH 16-17 MARCH 17-18

INTERPRETATION:

In the above table shows inventory turnover ratio for Eih Ltd – The Oberoi group.
The ratio first shows an increasing trend and later, the ratio it decreases in the three years.
The above chart shows that the stock gets converted into cash was 26.02 times, 26.45
times and 23.82 times in the FY 2016 to 2018 respectively. If we compare the figures of
sales and inventory of the last three years, the level of inventory has a slight change and
there is hardly any difference in the amount. In the year 16-17, the cost of goods sold was
highest with least cost of inventory, which implies that the inventory easily gets
converted into sales. The ratio is highest in the same year.

Analysis For Hotel Leela Venture

(Amount in Crores)
Financial Years MARCH 15-16 MARCH 16-17 MARCH 17-18
Cost of goods sold 604.17 498.35 481.89
Average Inventory 52.60 43.70 30.09
Inventory Turnover 11.49 TIMES 11.40 TIMES 16.02 TIMES
Ratio
 STR 15-16 STR 16-17 STR 17-18

18

16

14
16.02
12 11.49 11.4

10

0
MARCH 15-16 MARCH 16-17 MARCH 17-18

INTERPRETATION:

In the above table shows inventory turnover ratio for Hotel Leela Venture.
The ratio is decreasing in first decreasing and later increases in the last year.
The above chart shows that the stock gets converted into cash was 11.49 times, 11.40
times and 16.02 times in the FY 2016 to 2018 respectively. If we compare the figures of
sales and inventory of the last three years, the level of inventory has a slight change and
there is hardly any difference in the amount. In the year 17-18, the cost of goods sold was
lowest with least cost of inventory. The ratio is highest in the same year.

Analysis For Marriott International

(Amount in Crores)
Financial Years MARCH 15-16 MARCH 16-17 MARCH 17-18
Cost of goods sold 12959 15150 20086
Average Inventory 324.14 404.54 482.84
Inventory Turnover 39.98 TIMES 37.45 TIMES 41.60 TIMES
 Ratio

STR 15-16 STR 16-17 STR 17-18

45

40

35 39.98 37.45 41.6

30

25

20

15

10

0
MARCH 15-16 MARCH 16-17 MARCH 17-18

INTERPRETATION:

In the above table shows inventory turnover ratio for Marriott International.
The ratio is decreasing in the first and later increases in the last year.
The above chart shows that the stock gets converted into cash was 39.98 times, 37.45
times and 41.60 times in the FY 2016 to 2018 respectively. If we compare the figures of
sales and inventory of the last three years, the level of inventory has a drastic change. In
the year 17-18, the cost of goods sold was highest with highest cost of inventory and so,
the ratio is highest in the same year.

Analysis For Itc Hotels

(Amount in Crores)
Financial Years MARCH 15-16 MARCH 16-17 MARCH 17-18
Cost of goods sold 3499.72 3522.42 3842.73
Average Inventory 127.72 144.36 128.51
Inventory Turnover 27.40 TIMES 24.40 TIMES 29.90 TIMES
 Ratio

STR 15-16 STR 16-17 STR 17-18

35

30

25 27.4 29.9
24.4

20

15

10

0
MARCH 15-16 MARCH 16-17 MARCH 17-18

INTERPRETATION:

In the above table shows inventory turnover ratio for ITC Hotels.
The ratio is decreasing in the first and later increases in the last year.
The above chart shows that the stock gets converted into cash was 27.4 times, 24.4 times
and 29.9 times in the FY 2016 to 2018 respectively. If we compare the figures of sales
and inventory of the last three years, the level of inventory has a drastic change. In the
year 17-18, the cost of goods sold was highest with low cost of inventory and so, the ratio
is highest in the same year.

COMPARISION OF ITR OF THE TAJ GROUP WITH ITS PEERS

FOR THE PAST 3 YEARS
YEARS Taj Hotels, Eih Ltd – Hotel Marriott Itc
Resorts, The Leela International Hotels
Palaces Oberoi Venture
And Group
Safaris.

2015-2016 24.51 26.02 11.49 39.98 27.4

2016-2017 26.56 26.45 11.40 37.45 24.4
2017-2018 22.29 23.82 16.02 41.60 29.9

15-16
45

40
39.98
35

30

25 27.4
26.02
20 24.51

15

10
11.49
5

0
TAJ EIH LEELA MARRIOTT ITC

15-16
 16-17
40

35 37.45

30

25
26.56 26.45
24.4
20

15

10
11.4
5

0
TAJ EIH LEELA MARRIOTT ITC

16-17

17-18
45

40
41.6
35

30
29.9
25

20 23.82
22.29
15
16.02
10

0
TAJ EIH LEELA MARRIOTT ITC

17-18
INTERPRETATION :
The Taj group of hotels always has a better performance than The Leela
Venture.
Marriott International has the highest Inventory Turnover Ratio in all the
years and The Leela Venture has the least.
Chapter VI:
Findings
 The Operating cycle is very long i.e. Cash in and Cash Out is very long.
 The Quality Inspection is done by the Store Department on getting material.
 The Company maintains a stock of about 1.5 months of Inventory at any given
Point of time because of which large capital is locked in the same.
 The Company has not performed any analysis on the value front of material,
like ABC analysis. It treats some materials very essential and thus
concentrates mainly on keeping it.
 As from the above analysis it is clear that the A Type of material consume
more than 70 % of the total value of consumption so increases the total
inventory cost and results in locking of the money, so having very low safety
stock would be beneficial for the company.
 From the classification A classes are those which constitutes about 45% of
total components. B classes are those which constitutes 35% of total
components and C classes are those which constitutes approximately 20% of
total components. It is good that the company maintains its inventories based
on its value using controlling techniques.
 The inventory turnover ratio has increasing trend from the year 2015 to 2017
for the Taj Group and Eih Ltd. For the rest of the hotels, it has a decreasing
trend .
 The Taj group of hotels always has a better performance than The Leela
Venture.
 In the year 2017-18, The Taj Group and Eih Ltd ratios are decreasing and rest
all the hotels have an increase.
 Marriott International has the highest Inventory Turnover Ratio in all the
years and The Leela Venture has the least.
 Chapter VII:
Recommendations
And Suggestions
 Under ABC analysis, the management must have more control on A than
B&C, because A class constitutes more(45%) of higher values. There should
be tight control exercised on stock levels, to avoid deterioration. This is done
through maintaining low safety stock, continuous check on schedules &
ordered frequently in inventories, in order to avoid over investment of
working capital.
 The Company can also concentrate further on extending vendor development
which will help in reducing the Inventory in the company.
 The Quality Inspection is done by the Store Department on getting material
this can be done away with vendor development where the onus of providing
good material will be his.
 The follow up process can also be reduced drastically with vendor
development.
 Looking at the analysis of the Raw Materials, Packaging Materials the
company can decide to maintain inventory of items, which are in the A, type
category and reduce inventory of C type items which can reduce the carrying
cost.
 The Company can combine the ABC analysis with the VED analysis to come
to a conclusion as to which materials should be handled by the top
management.
 Accurate planning and forecasting is required to be done, as it was found in
the the staff has to go to the store frequently for getting the Materials which
also affects the productivity. A proper method would be to predict in advance
the days work and assemble the materials at the restaurant floor itself.
 The inventory turnover ratio indicates whether investment in inventory is
within proper limit or not. It also measures how quickly inventory is sold. It
 requires to maintain a high turnover ratio than lower ratio. A high ratio
implies that good inventory management and it also reflects efficient business
activities.
 Hotel Leela Venture should focus more on its sales.