A STUDY ON INVENTORY MANAGEMENT

(With reference to BRANDIX.)

A project report submitted to J.N.T. University (GV) in fulfillment of the
requirements for the award of the degree of
Master of Business
Administration
Submitted by
UPPALA RAMANA PRASAD
Regd.No: 226C1E0059
Under the guidance of

Dr.M. JAGADISH MBA, M.COM, Ph. D

MIRACLE SCHOOL OF MANAGEMENT

MIRACLE EDUCATIONAL SOCIETY GROUP OF INSTITUTIONS
(Approved by AICTE & Affiliated to JNTU, GUARAJADA
VIZAINAGARAM) BHOGAPURAM, VIZIANAGARAM
2022-24
 DECLARATION

I hereby declare that this project work entitled “A study on inventory

management in BRANDIX” submitted by me to the J.N.T. University, gurajada
Vizianagaram in partial fulfillment for the award of Degree of MBA is entirely based on my
own study is being submitted for the first time and it has not been submitted to any other
university or institution for any degree or diploma.

Place: Bhogapuram Signature of the candidate

Date: UPPALA RAMANA PRASAD
 MIRACLE EDUCATIONAL SOCIETY GROUP OF INSTITUTIONS
(Approved by AICTE & Affiliated to JNTU, GURAJADA
VIZAINAGARAM) BHOGAPURAM, VIZIANAGARAM

MIRACLE SCHOOL OF MANAGEMENT

Dr.M. JAGADISH

CERTIFICATE

This is to certify the project report titled “A study on INVENTORY

MANAGEMENT IN BRANDIX.” is being submitted UPPALA RAMANA PRASAD in
partial fulfillment for the award of the degree of M.B.A has been carried out by his under my
guidance and supervision.

Dr.B. Venkat Rao Dr.M. JAGADISH

Head of the department (Project guide)

External Examiner
 ACKNOWLEDGEMENTS

Apart from the efforts of me, the success of this project depends largely on the
encouragement and guidelines of many others. I take this opportunity to express my
gratitude to the concerned that have been instrumental in the successful completion of
this project.

I wish to convey my sincere regards to our beloved Principal Dr. A. Arjun Rao Garu
for his inspiration, timely help in the official clearances and valuable suggestions
throughout my course.

I wish to convey my sincere regards to our beloved DEAN Sir Dr. SreenivasBehehara
For his inspiration, timely help in the official clearances and valuable suggestions
throughout My course.

I am also thankful to our Head of the Department Dr. B. Venkat Rao and all other
faculty members who helped me directly and indirectly for the successful completion
of my project work.

I extended my heartfelt gratitude to my project guide Dr.M. JAGADISH, for her

consistent encouragement, benevolent criticism, inseparable suggestions which were
the main reasons to bring the work to present shape

I wish to express my deep gratitude to the management of BRANDIX. for giving me

the opportunity to do the project on “INVENTORY MANAGEMENT” for the
partial fulfillment of Master of Business Administration.

Finally, I would like to express my deep sense of gratitude to my beloved parents and
my family members for their love and blessings to complete the project successfully.

(UPPALA RAMANAPRASAD)

5
 CONTENTS

Pg.No
1. CHAPTER-I 1-10

INTRODUCTION
NEED FOR THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY
LIMITATIONS OF THE STUDY

2. CHAPTER-II 11-27

INDUSTRY PROFILE
COMPANY PROFILE
3. CHAPTER-III 28-52

THEORETICAL FRAMEWORK OF THE STUDY

4. CHAPTER-IV 53-68
DATA ANALYSIS & INTERPRETATION OF THE STUDY
4. CHAPTER-V 69-108

SUMMARY
FINDINGS
SUGGESTION
CONCLUSION
BIBLIOGRAPHY

6
 CHAPTER-1
 INTRODUCTION OF THE
STUDY
 NEED FOR STUDY
 OBJECTIVES OF STUDY
 METHODOLOGY
 LIMITATIONS OF THE STUDY

7
 1. INTRODUCTION

INTRODUCTION TO INVENTORY MANAGEMENT:

Inventory is a usable resource which is physical and tangible such as goods

and materials, or those goods and materials themselves, held available in stock by a
business-In this sense, our stock is our inventory. It is also used for a list of the
contents of a household and Industries etc., but even then the term inventory is more
comprehensive. Through inventor/ is a usable resource, it is also an idle resource,
unless it is managed efficiently and effectively. In accounting inventory is considered
an asset. Inventory management is primarily about specifying the size and placement
of stocked goods. Inventory management is required at different locations within a
facility or within multiple locations of a supply network to protect the regular and
planned course of production against the random disturbance of running out of
materials or goods.

The inventory management process begins as soon as one has started

production and ordered raw materials, semi-finished products or any other thing from
a supplier. If you are a retailer, then this process begins as soon you have placed your
first order with the wholesaler. Inventory constitutes the most significant part of
current assets to a large majority of companies in India. On an average inventories are
approximately 60% of current assets in public Limited companies in India It is
possible for a company to reduce its levels of inventories to a considerable degree
e.g., 10 to20 percent, with out any adverse effect on production and sales, by using
simple inventory planning control and techniques. The company may lose the
opportunity cost on the excess inventory and also the carrying cost will increase due
to large size of inventories. Therefore it is advisable for the company to maintain
inventory at an optimum level always. There are different techniques available for the
company to maintain optimum level of inventory. As the inventories forms a major
part in BIAC, a study is being carried over on how the inventories are controlled and
managed.

8
 Inventory plays a vital role in every manufacturing organization to have an
uninterrupted production process by maintaining an optimum level of raw materials
available at all time. Hence, this study about the inventory management at BRANDIX
INDIA APPERAL CITY PVT LTD is an idea about the study of utilization of the
inventory and little more about the storage procedure that are practically implemented
in organization.

The scope of my study is confined to one of the key areas of finance i.e.
inventory management. The study concentrates on the methods and techniques
followed by BRANDIX INDIA APPERAL CITY PVT LTD for its inventory
management and its relative merits and demerits. The study appraises the company's
success in meeting the requirements of the company and the country by helping the
farmers to raise agriculture output to meet the requirement of the country's growing
population for food grains.

The major current asset is inventory. The term ‘inventory’ refers to stocks of the
products of a company in manufacturing for sale and components that make up
the product. The store inventory is anticipation of raw materials, work in
progress and finished goods.Raw materials are those basic inputs that are
converted into finished products through the manufacturing process. Work in
process inventory consists of items currently being used in the production
process. Finished goods represent final or completed products, which are
available for sale.

Inventory as a current assert differs from other current asset the views of
concerning the appropriate level of inventory would differ among the different
functional areas. The job of finance manager is to reconcile the conflicting
viewpoints of the various functional areas regarding the appropriate inventory
levels in order to fulfill the overall objectives of maximizing the owner’s
wealth. Inventory management is related to overall objective of the firm.

9
 NEED FOR THE STUDY

Inventory in a wider sense is defined as any idle resource of an enterprise. The

benefits of the inventory can be best understood, if one imagines of an organization
working with no inventory at all. This organization on receiving a sales order out of
the quantity of materials required for completing this order, wait for those to arrive
and start production. So Inventory management is important from the view point that
it enables to address two important issues:

 (a) The firm has to maintain adequate inventory for smooth production and
selling activities.
 (b) It has to minimize the investment in inventory to enhance firm’s
profitability.

Investment in inventory should neither be excessive nor inadequate. It should just be

optimum. Maintaining optimum level of inventory is the main aim of inventory
management. Excessive investment in inventory results into more cost of fund being
tied up so that it reduces the profitability, inventories may be misused, lost, damaged
and hold costs in terms of large space and others. At the same time, insufficient
investment in inventory creates stock-out problems, interruption in production and
selling operation. Therefore, the firm may loose the customers as they shift to the
competitors. Financial manager, as he involves in inventory management, should
always try to put neither excessive nor inadequate investment in inventory. The
importance or significance of inventory management could be specified as below:

 Inventory management helps in maintaining a trade-off between carrying

costs and ordering costs which results into minimizing the total cost of
inventory.
 Inventory management facilitates maintaining adequate inventory for
smooth production and sales operations.
 Inventory management avoids the stock-out problem that a firm otherwise
would face in the lack of proper inventory management.
 It suggests the proper inventory control system to be applied by affirm to
avoid losses, damages and misuses.

10
OBJECTIVES OF THE STUDY

In order to fulfill the project study entitled “Inventory Management” with the
special reference to BIAC, the following objectives have been undertaken:

1. To find whether the BRANDIX ensures a continuous supply of materials to

facilitate uninterrupted production.
2. To study the inventory management policies, techniques and their
effectiveness in BRANDIX.
3. To make an appropriate investment in inventories and keep it at an optimum
level.
4. To give suggestions when inventory is replenished and to increase
inventory turnover.
5. To identify the major findings and give necessary suggestions measure to
improve the quality of the necessary levels in BRANDIX.

11
METHODOLOGY OF THE STUDY

The research study is generally based on the data collected from mainly two
important sources i.e.; primary data and secondary data, but the present study is
highly based on secondary data and a less information gathered through primary
sources. The theoretical part in this project was collected from various text books
which are written by famous authors.

(a) PRIMARY DATA

(b) SECONDARY DATA

PRIMARY DATA: This data is collected by personal discussions with various

officials in warehouse department and financial department of BIAC. So it is called as
first hand information.

SECONDARY DATA: Data collection from the in-house purchase order books and
ware house. Indent books and journals relating to fertilizers industry magazines and
annul report of BIAC. The secondary data is also obtained from the annual reports
and the documents maintained by the company.

12
LIMITATIONS OF THE STUDY

The below mentioned are the constraints under which my study has been carried out.
The study is conducted with the limited data available and analysis was done
accordingly.

 The study is confined to only 5 years only.

 Most of the information has been kept confidential and as such is not passed
on as a part of the policy of the company.
 Since the number and size of inventory is very large, all the raw materials
could not be included in the analysis.

The total study presented in five chapters. The significance of financial

management as well as the basic concepts of inventory management, the research
design of the study has been discussed in the first chapter. The second chapter gives
organizational profile it includes an overview of textile industry in India along with
the brief sketch of BRANDIX covering its origin, growth, production, commercial
and financial performance. The third chapter gives a theoretical framework and the
impact of financial performance on inventory management of BRANDIX. Data
analysis and interpretation are explained in the fourth chapter. The last chapter gives
an outline of summary, findings, suggestions and conclusion.

13
CHAPTER-II
INDUSTRY PROFILE
AND
COMPANY PROFILE

14
 INDUSTRY PROFILE

INTRODUCTION: The Indian textile industry has a significant presence in the

economy as well as in the international textile economy. It is contribution to the
Indian economy that manifested in terms of its contribution to the industrial
production, employment generation and foreign exchange earnings. It contributes 20
per cent of industrial production, 9 per cent of excise collections, and 18 per cent of
employment in the industrial sector, nearly 20 per cent to the country’s total export
earning and 4 per cent to the Gross Domestic Product.

Textile industry plays a significant role in the growth of Indian economy and it
is an important component of global trade. Textile industry accounts for about one
third of India's total export earnings. It is regarded as the second largest industry of
India and is the largest foreign export earner, accounting for 35 per cent of the gross
export earnings in trade. During 1992-93 and 2001-02, textile exports recorded an
increase at a compound annual growth rate of 14.01 per cent. Handloom and cotton
are the two most significant sectors in textile industry. These two sectors together
contribute the major portion of total textile export in India.

Textile industry generally includes manufacturers, wholesalers, suppliers, and

exporters of cotton textiles, handloom, woolen textiles etc. This industry has the
potentiality of generating a large number of employment opportunities. About thirty
five million people are already engaged with this sector. In human history, past and
present can never ignore the importance of textile in a civilization decisively affecting
its destinies, effectively changing its social scenario. A brief thoroughly researched
feature on Indian textile culture.

2.1.1 HISTORY OF TEXTILEINDUSTRY:

India has been well known for her textile goods since very ancient times. The
traditional textile industry of India was virtually decayed during the colonial regime.
However, the modern textile industry took birth in India in the early nineteenth
century when the first textile mill in the country was established at fort gloater near
Calcutta in 1818. The cotton textile industry, however, made its real beginning in

15
Bombay, in 1850s. The first cotton textile mill of Bombay was established in 1854 by
a Paris cotton merchant then engaged in overseas and internal trade. Indeed, the vast
majority of the early mills were the handiwork of Parsi merchants engaged in yarn
and cloth trade at home and Chinese and African markets.

The first cotton mill in Ahmadabad, which was eventually to emerge as a rival
centre to Bombay, was established in 1861. The spread of the textile industry to
Ahmadabad was largely due to the Gujarati trading class. The cotton textile industry
made rapid progress in the second half of the nineteenth century and by the end of the
century there were 178 cotton textile mills, but during the year 1900 the cotton textile
industry was in bad state due to the great famine and a number of mills of Bombay
and Ahmadabad were to be closed down for long periods.

The two world wars and the Swadeshi movement provided great stimulus to
the Indian cotton textile industry. However, during the period 1922 to 1937 the
industry was in doldrums and during this period a number of the Bombay mills
changed hands. The Second World War, during which textile import from Japan
completely stopped, however, brought about an unprecedented growth of this
industry. The number of mills increased from 178 with 4.05 lakh looms in 1901 to
249 mills with 13.35 lakh looms in 1921 and further to 396 mills with over 20 lakh
looms in 1941. By 1945 there were 417 mills employing 5.10 lakh workers.

The cotton textile industry is rightly described as a Swadeshi industry because

it was developed with indigenous entrepreneurship and capital and in the pre-
independence era the Swadeshi movement stimulated demand for Indian textile in the
country.

The partition of the country at the time of independence affected the cotton
textile industry also. The Indian union got 409 out of the 423 textiles mills of the
undivided India. 14 mills and 22 per cent of the land under cotton cultivation went to
Pakistan. Some mills were closed down for some time. For a number of years since
independence, Indian mills had to import cotton from Pakistan and other countries.
After independence, the cotton textile industry made rapid strides under the Plans.
Between 1951 and 1982 the total number of spindles doubled from 11 million to 22
million. It increased further to well over 26 million by 1989-90.

16
2.1.2 CURRENT POSITION OF TEXTILE INDUSTRY IN INDIA:

Textile constitutes the single largest industry in India. The segment of the
industry during the year 2000-01 has been positive. The production of cotton declined
from 156 lakh bales in 1999-2000 to 1.40 lakh bales during 2000-01. Production of
man-made fiber increased from 835 million kgs in 1999-2000 to 904 million kgs
during the year 2000-01 registering a growth of 8.26per cent. The production of spun
yarn increased to 3160 million kgs during 2000-01 from 3046 million kgs during
1999-2000 registering a growth of 3.7per cent. The production of man-made filament
yarn registered a growth of 2.91per cent during the year 1999-2000 increasing from
894 million kgs to 920 million kgs. The production of fabric registered a growth of
2.7 per cent during the year 1999-2000 increasing from 39,208 million sq mars to
40,256 million sq meters. The production of mill sector declined by 2.6 per cent while
production of handloom, power loom and hosiery sector increased by 2 per cent, 2.7
per cent and 5.1 per cent respectively. The exports of textiles and garments increased
from Rs. 455048 million to Rs. 552424 million, registering a growth of 21per cent.
Growth in the textile industry in the year 2003-2004 was Rs. 1609 billion. And during
2004-05 production of fabrics touched a peak of 45,378 million square meters. In the
year 2005-06 up to November, production of fabrics registered a further growth of 9
per cent over the corresponding period of the previous year.

2.1.3 STRUCTURE OF INDIA’S TEXTILE INDUSTRY:

The textile sector in India is one of the worlds largest. The textile industry today is
divided into five segments. The various categories in Indian textile industry are listed
as below:

 Cotton Textiles
 Silk Textiles
 Woolen Textiles
 Readymade Garments
 Hand-crafted Textiles

All segments have their own place but even today cotton textiles continue to
dominate with 73per cent share. The structure of cotton textile industry is very
complex with co-existence of oldest technologies of hand spinning and hand weaving
with the most sophisticated automatic spindles and loom. The structure of the textile

17
industry is extremely complex with the modern, sophisticated and highly mechanized
mill sector on the one hand and hand spinning and hand weaving on the other in
between falls the decentralized small scale power loom sector.

Unlike other major textile-producing countries, India’s textile industry is

comprised mostly of small-scale, non integrated spinning, weaving, finishing, and
apparel-making enterprises. This unique industry structure is primarily a legacy of
government policies that have promoted labor-intensive, small-scale operations and
discriminated against larger scale firms like:

2.1.3.1 Composite Mills:

Relatively large-scale mills that integrate spinning, weaving and, sometimes,

fabric finishing are common in other major textile-producing countries. In India,
however, these types of mills now account for about only 3 per cent of output in the
textile sector. About 276 composite mills are now operating in India, most owned by
the public sector and many deemed financially sick. In 2003-2004 composite mills
that produced 1434 msq mts of cloth. Most of these mills are located in Gujarat and
Maharashtra.

2.1.3.2 Spinning:

Spinning is the process of converting cotton or manmade fiber into yarn to be

used for weaving and knitting. This mills chiefly located in North India. Spinning
sector is technology intensive and productivity is affected by the quality of cotton and
the cleaning process used during ginning. Largely due to deregulation beginning in
the mid-1980s, spinning is the most consolidated and technically efficient sector in
India’s textile industry. Average plant size remains small, however, and technology
outdated, relative to other major producers. In 2002/03, India’s spinning sector
consisted of about 1,146 small-scale independent firms and 1,599 larger scale
independent units.

18
2.1.3.3 Weaving and Knitting

The weaving and knits sector lies at the heart of the industry. In 2004-05, of
the total production from the weaving sector, about 46 per cent was cotton cloth, 41
per cent was 100per cent non-cotton including khadi, wool and silk and 13 per cent
was blended cloth. Three distinctive technologies are used in the sector handlooms,
power looms and knitting machines. Weaving and knitting converts cotton, manmade,
or blended yarns into woven or knitted fabrics. India’s weaving and knitting sector
remains highly fragmented, small-scale, and labor-intensive. This sector consists of
about 3.9 million handlooms, 380,000 power loom enter-prizes that operate about 1.7
million looms, and just 137,000 looms in the various composite mills. Power looms
are small firms, with an average loom capacity of four to five owned by independent
entrepreneurs or weavers. Modern shuttle less looms account for less than one per
cent of loom capacity.

2.1.3.4 Fabric Finishing:

Fabric finishing (also referred to as processing), which includes dyeing, printing, and
other cloth preparation prior to the manufacture of clothing, is also dominated by a
large number of independent, small-scale enterprises. Overall, about 2,300 processors
are operating in India, including about 2,100 independent units and 200 units that are
integrated with spinning, weaving, or knitting units.

2.1.3.5 Clothing:

Apparel is produced by about 77,000 small-scale units classified as domestic

manufacturers, manufacturer exporters, and fabricators (subcontractors).

Current facts on India textile industry:

 India retained its position as world’s second highest cotton producer.

 Average under cotton reduced about 1per cent during 2008-09.
 The productivity of cotton which was growing up over the years has decreased in
2018-19.
 Substantial increase of Minimum Support Prices (MSPs).

19
 Cotton exports couldn't pick up owing to disparity in domestic and international
cotton prices.
 Imports of cotton were limited to shortage in supply of Extra Long staple cottons.

2.1.4 INDIA’S MAJOR COMPETITORS IN THE WORLD:

To understand India’s position among other textile producing the industry

contributes 9 per cent of GDP and 35 per cent of foreign exchange earnings, India’s
share in global exports is only 3 per cent compared to Chinas 13.75 per cent. In
addition to China, other developing countries are emerging as serious competitive
threats to India. Looking at export shares, Korea (6 per cent) and Taiwan (5.5 per
cent) are ahead of India, while Turkey (2.9 per cent) has already caught up and others
like Thailand (2.3 per cent) and Indonesia (2 per cent) are not much further behind.
The reason for this development is the fact that India lags behind these countries in
investment levels, technology, quality and logistics. If India were competitive in some
key segments it could serve as a basis for building a modern industry, but there is no
evidence of such signs, except to some extent in the spinning industry.

2.1.5 TEXTILE INDUSTRY TRENDS IN THE GLOBAL ECONOMY:

Textile production and consumption is an increasingly global affair as production

continues to shift to developing countries. Developing countries have seen an
explosion in the growth of their textile exports, and for many countries textiles are a
significant portion of their total exports. In response to increasing competition from
low-value imports from developing countries, industry leaders in developed countries
have made significant capital investments in order to increase productivity and move
into advanced market sectors.

There are several trade agreements in place that impact world textile trade.
The African Growth and Opportunities Act, Andean Trade Preference Act, and Trade
Promotion Act are each designed to liberalize textile trade and provide equal market
access to both developing and developed countries. Despite the potential economic
and social benefits, the effectiveness of these trade policies is limited by special
interest politics in the developed world. The presence of a political economy in
developed countries can affect both the formation of and the adherence to

20
international trade agreements; industry leaders can still appeal to the World Trade
Organization or their Trade Representative to protect domestic industry.

2.1.6 TEXTILE INDUSTRY DEVELOPMENT IN THE GLOBAL MARKET:

In order to achieve economic growth and development, policy makers first

encourage the formation and growth of domestic industry. Through labor force
mobilization and capital development, a country shifts its basic factors of production
from primary products, such as localized agricultural goods, to industry. In recent
years, the World Trade Organization and other multilateral institutions have
emphasized the importance of allowing developing nations to enter the world market
in order to achieve economic growth and development. Recognizing the power of
international markets, policy makers develop an export strategy based on their
comparative advantages in order to compete in an increasingly global economy.

Textile manufacturing is primarily a labor-intensive industry; because

emerging economies have a surplus of unskilled labor, the creation of a textile
industry in a developing country is both feasible and attractive from an economic
growth perspective. Many countries view the creation of a domestic textile industry as
“an initial rung on the ladder of industrialization.

2.1.7 TEXTILE INDUSTRY GROWTH IN DEVELOPING ECONOMIES:

The textile industry is now “clearly a global enterprise” production shifted

to countries with a comparative advantage in labor-intensive manufacturing, and
products are shipped all over the world for consumption. Across a variety of
countries, we see that developing nations are claiming an increasing share of the
global textile market. From the mid-1960s to 1998, “the developing countries’ share
of world textile exports grew from 15 per cent to 50 per cent and total exports of
textiles and clothing by developing countries as a group reached $213 billion in
1998”. Textiles compose a large portion of many developing countries’ total exports.

The textile and apparel industries also compose a substantial part of Latin
American manufacturing exports. Although the region only captures about 3 per cent
of the world textile trade market, exports have grown by an average of 24 per cent

21
over the last two decades. Latin American producers face stiff competition from the
East Asian countries: nearly half of the producers of synthetic and blended textiles
closed in São Paulo, Brazil because of the intense penetration of imports from South
Korea and China. China, South Korea, and Taiwan in particular saw their collective
export volume grow from US$42.4 million in 1963 to US$3315.2 million in 1984.

2.1.8 TEXTILE INDUSTRY TRENDS IN THE DEVELOPED WORLD:

The textile industry in developed countries has often found itself unable to
compete with low-value goods made with cheap labor in developing nations. As a
result, textile industry jobs continue to move out of industrial countries and into
developing countries. The textile and apparel industry has lost 700,000 jobs since
NAFTA’s implementation in January 1994; North Carolina alone lost 124,700 jobs.
Textile output has fallen 22.2 per cent since 1994, and apparel output has declined
more than 14 per cent.

However, the focus of production shifted into advanced market sectors and the
industry has maintained profitability by making sizeable capital investments in
computer and mechanization technology. Between 1975 and 1985, U.S. textile mills
reinvested 80 to 85 per cent of their retained earnings, spending $1.4 billion per year
on new plant facilities and equipment. Between 1984 and 1986 this figure rose to $1.6
billion per year. Firms invested in computer-controlled systems and robotics in order
to improve productivity while cutting labor costs employs a “five minute rule. If the
product requires more than five minutes of labor, production is shifted overseas. As a
result, domestic production concentrates on specialty fabrics, which continue to
succeed in the domestic and overseas markets. However, even in the specialty fabrics
divisions, the fabric is produced domestically and then shipped to China to cut and
sew the fabric into finished products.

2.1.9 TEXTILE TRADE POLICIES:

The nature of global textile production and consumption patterns threatens

domestic workers in industrial nations. As a result, developed nations have succeeded
in limiting market access to countries with a comparative advantage in production by
employing quotas, tariffs, and other barriers to trade. Developing countries have also

22
taken steps to protect their domestic market from other developing and developed
countries: “developing nations want the growing textile and apparel markets within
their countries for themselves”.

In 1984, tariffs in developing countries averaged from 25 to 75 per cent; Brazil

imposed tariffs of up to 205 per cent. Bolivia, Egypt, and Afghanistan outright ban
certain imports; furthermore, developing countries with the largest exports also tend
to have the highest tariffs to ensure their domestic industry will not be threatened.

Protectionist policies directly impact exporters in developing countries

because they are crowded out of the global market. “Each job saved in a developed
country by tariffs and quotas is estimated to cost about 35 jobs in developing
countries.” In addition, quotas and tariffs cause a direct welfare loss of around $24
billion per year and lost export revenues of $40 billion. These figures can only begin
to demonstrate the need to remove trade restrictions. Again, developing countries
stand to gain substantially from removal of their own barriers.

2.1.9.1 Multifibre Arrangement and the Agreement on Textiles and Clothing:

The Multifibre Arrangement (MFA) was instituted in the WTO in 1974 to

“achieve the expansion of trade, the reduction of barriers to such trade, and the
progressive liberalization of world trade in textile products. While the MFA appears
to be ideologically supportive of expanding free trade in the textile industry, it was
mostly used to protect developed countries from low-value imports from developing
nations. Therefore, the WTO adopted the Agreement on Textiles and Clothing in
1995. The ATC takes place in four stages designed to gradually integrate the textile
industry to GATT rules. 16 per cent of textile products will be traded according to
GATT rules by the end of 1997, 33 per cent by year-end of 2001, 51 per cent by year-
end of 2004, and 100 per cent starting in 2005. These figures are substantially higher
than what is set forth in the MFA. MFA contains a mandatory provision to increase
the number of imports not subject to quotas by 6 per cent a year.

The International Monetary Fund estimated in 1984 that removing MFA

quotas and tariffs from textile goods could substantially increase exports from
developing countries to developed nations: an 82per cent increase is possible from

23
developing nations to countries that participate in the Organization for Economic
Cooperation and Development (OECD) alone. The ATC is set to expire in 2005,
when 100% of textile trade will comply with GATT rules. However, most countries
back-loaded the products excluded from protectionist policies many of the products
excluded early in the process were not restricted in the first place nor are they most
sensitive to import competition.

2.1.9.2 Political Economy Considerations:

While economists and politicians generally agree that sustainable

development, economic growth, and the reduction of poverty are worthy goals for
developing nations, it is more difficult in practice to implement policies that achieve
these goals. Textile manufacturers in developed economies have traditionally
influenced the country. Powerful industries have proven their ability to influence
policy makers to implement protectionist policies, as demonstrated with the recent
steel tariff increases. As long as interest group politics dominate policy making, we
can expect that government policy will serve the needs of industry, not consumers.
The WTO regulations aspire to reduce the possibility that individual governments act
in a way that hurts free trade.

2.1.10 DEVELOPMENT OF TEXTILE INDUSTRY:

Textile structures derive from two sources, ancient handicrafts and modern
scientific invention. The earliest were nets, produced from one thread and employing
a single repeated movement to form loops, and basketry, the interlacing of flexible
reeds, cane, or other suitable materials. The production of net, also called limited
thread work, has been practiced by many peoples, particularly in Africa and Peru.
Examples of prehistoric textiles are extremely rare because of the perish ability of
fabrics. Weaving apparently preceded spinning of yarn; woven fabrics probably
originated from basket weaving. Cotton, silk, wool, and flax fibers were used as
textile materials in ancient Egypt; cotton was used in India by 3000 bc; and silk
production is mentioned in Chinese chronicles dating to about the same period. The
history of spinning technology will be touched on below in the section Production of
yarn: Spinning and that of weaving technology in the section Production of fabric.

24
2.1.10.2 Early Fabrics:

Many fabrics produced by the simple early weaving procedures are of striking
beauty and sophistication. Design and art forms are of great interest, and the range of
patterns and colors is wide, with patterns produced in different parts of the world
showing distinctive local features. Yarns and cloth were dyed and printed from very
early times. Specimens of dyed fabrics have been found in Roman ruins of the 2nd
century and there is evidence of production of printed textiles in India during the 4th
century. Textiles found in Egypt also indicate a highly developed weaving craft by the
4th century with many tapestries made from linen and wool. Persian textiles of very
ancient origin include materials ranging from simple fabrics to luxurious carpets and
tapestries.

2.1.10.3 Textiles in the middle Ages:

By the early Middle Ages certain Turkish tribes were skilled in the
manufacture of carpets, felted cloths, towels, and rugs. In Mughal India (16th–18th
century), and perhaps earlier, the fine muslins produced at Dhaka in Bengal were
sometimes printed or painted. Despite the Muslim prohibition against representation
of living things, richly patterned fabrics were made in Islamic lands. In Sicily after the
Arab conquest in 827, beautiful fabrics were produced in the palace workshops at
Palermo. About 1130, skilled weavers who came to Palermo from Greece and Turkey
produced elaborate fabrics of silk interlaced with gold.

Following the conquest of Sicily in 1266 by the French, the weavers fled to
Italy; many settled in Lucca, which soon became well known for silk fabrics with
patterns employing imaginative floral forms. In 1315 the Florentines captured Lucca,
taking the Sicilian weavers to Florence, a centre for fine woven woolens’ from about
1100 and also believed to be producing velvet at this time. A high degree of artistic
and technical skill was developed, with 16,000 workers employed in the silk industry
and 30,000 in the wool industry at the close of the 15th century. By the middle of the
16th century a prosperous industry in velvets and brocades was also established in
Genoa and Venice.

25
2.1.11 EFFECTS OF THE INDUSTRIAL REVOLUTION:

The textile industry, although highly developed as a craft, remained essentially

an industry until the 18th century. The advantages of cooperative operations were
realized much earlier, and numbers of workers occasionally operated together under
one roof, with one such group operating a mill in Zürich in 1568 and another in
Derby, Eng., in 1717. Factory organization became most advanced in the north of
England, and the Industrial Revolution, at its height between 1760 and 1815, greatly
accelerated the growth of the mill system.John Kay’s flying shuttle, invented in 1733,
increased the speed of the weaving operation, and its success created pressure for
more rapid spinning of yarn to feed the faster looms. Mechanical spinners produced in
1769 and 1779 by Sir Richard Arkwright and Samuel Crompton encouraged
development of mechanized processes of carding and combing wool for the spinning
machines. Soon after the turn of the century the first power loom was developed. The
replacement of water power by steam increased the speed of power-driven machinery,
and the factory system became firmly established, first in England, later in Europe
and the United States.From the 19th century to the present throughout the 19th
century a succession of improvements in textile machinery steadily increased the
volume of production, lowering prices of finished cloth and garments. The trend
continued in the 20th century Japanese textile manufacturing.

2.1.11.1 Textile Industries of France and Germany:

French manufacture of woven silks began in 1480. Others were brought to

weave silk in Lyon, eventually the centre of European silk manufacture. Until 1589
most of the elaborate fabrics in France were of Italian origin, but in that year Henry
IV founded the royal carpet and tapestry factory at Savonnières. By the time of Louis
XIII (1610–43), French patterned fabrics showed a distinctive style based on
symmetrical ornamental forms, lacelike in effect, perhaps derived from the highly
regarded early Italian laces. French textiles continued to advance in style and
technique, and under Louis XI (1774–93) design was refined, with Classical elements
intermingled with the earlier floral patterns. The outbreak of the French Revolution in
the 1790s interrupted the work of the weavers of Lyon, but the industry soon
recovered.

26
2.1.11.2 Textile Manufacture in England:

English textiles of the 13th and 14th centuries were mainly of linen and wool,
and the trade was influenced by Flemish fullers and dyers. Silk was being woven in
London and Norwich in 1455, and in 1564 Queen Elizabeth. The most important
group of refugees, some 3,500, lived in Spite, a London settlement that became the
chief centre for fine silk damasks and brocades. These weavers produced silk fabrics
of high quality and were known for their subtle use of fancy weaves and textures.
Norwich was also famous for figured shawls of silk or wool.

2.1.11.3 Textile industries in United States:

The United States followed the British lead, using stolen blueprints and
illegally immigrating engineers. Samuel Slater (1768-1835) of Rhode Island pulled
American cotton-spinning technology by constructing carding, drawing, and roving
machinery, and by determining the operating and gearing ratios necessary to use
water power. By 1850 the American had built their own industrial revolutions around
textiles, and use of abundant water power in New England.

2.1.11.4 Textile industries in Asia:

Textile industry in Asia argues that between 1400 and 1800, South Asian
textile production adapted to economic and cultural cycles and was never displaced by
cheaper or higher-quality foreign imports, coming mainly from India. The example of
Bandjarmasin, an important Borneo port, demonstrates the dynamic between
upstream and downstream communities in a changing economy, the role of the arrival
of Islam in the islands of Southeast Asia, and the interplay of international trade and
the local textile industry. The growing European presence in the region was only one
factor in the developments during this period.

2.1.11.5 Textile industries in China:

In 1890 the first cotton textile factory was established in China, marking the
beginning of textile modernization in China. For the period 1890-1937 China was
unable to maintain control over the industry, which for the most part was controlled
by foreign investors. This was due in part to China's lack of capital and managerial

27
knowledge and techniques, which were supplied by such countries as Japan and Great
Britain. However, the industry greatly expanded during this period and had vast
influence on the Chinese economy. The new factory system resulted in a move from
small-scale family production to mass production. Since the textile industry was the
largest in China and employed one-fourth of the labor force, it had repercussions on
the traditional society. The textile industry also formed the basis for labor movements
and collective bargaining and strikes.

2.1.12 EXPORTS AND IMPORTS OF TEXTILE INDUSTRY:

India textile industry is one of the leading in the world. Currently it is

estimated to be around US$ 52 billion and is also projected to be around US$ 115
billion by the year 2012. The current domestic market of textile in India is expected to
be increased to US$ 60 billion by 2012 from the current US$ 34.6 billion. The textile
export of the country was around US$ 19.14 billion in 2006-07, which saw a stiff rise
to reach US$ 22.13 in 2007-08. The share of exports is also expected to increase from
4per cent to 7per cent within 2012. Following are area, production and productivity of
cotton in India during the last six decades.

Strengths

 Vast textile production capacity

 Large pool of skilled and cheap work force
 Entrepreneurial skills
 Efficient multi-fiber raw material manufacturing capacity
 Large domestic market
 Enormous export potential
 Flexible textile manufacturing systems

Weaknesses

 Increased global competition in the post 2005 trade regime under WTO
 Imports of cheap textiles from other Asian neighbors
 Use of outdated manufacturing technology
 Poor supply chain management

28
  Huge unorganized and decentralized sector
 High production cost with respect to other Asian competitors
 Cotton Exports from India.

2.1.12.1 India's export to Malaysia:

Malaysia imports various types of textile products from India to meet the
requirements of raw materials for its emerging garment industry. Malaysia's total
textile imports are estimated to exceed US$ 1.5 billion annually. Malaysia's major
importing products include woven man-made fiber fabrics, apparel accessories, textile
yarn, knitted and crocheted fabrics, and women’s apparel.

Table : 2.1 Shows India’s Export To Malaysia

Area in lakh Production in lakh bales of 170 Yield kgs per

Year
hectares kgs hectare

2009-10 56.48 30.62 92

2010-11 76.78 56.41 124

2011-12 76.05 47.63 106

2012-13 78.24 78.60 170

2013-14 74.39 117.00 267

2014-15 85.76 140.00 278

2015-16 87.30 158.00 308

2016-17 76.67 136.00 302

2017-18 76.30 179.00 399

2018-19 87.86 243.00 470

2019-20 86.77 244.00 478

2020-21 91.44 280.00 521

2021-22 94.39 315.00 567

2022-23 93.73 290.00 526

29
Graph: 2.1 Shows India’s Export to Malaysia

2.1.12.2 India's export to Australia:

Australia is considered as one of the most open textile markets in the world.
Major textile imports include apparels and made-ups specifically polyester-cotton and
polyester-viscose types. Bulk of cotton and hand-made fibers are also imported from
countries like India.

30
Table: 2.2 Statement Showing India's Export to Australia

Quantity (in lakh bales of 170

Year Value (` /Crores)
kgs.)

2010-11 0.30 56.42

2011-12 4.13 497.93

2012-13 7.87 772.64

2013-14 22.01 1967.92

2014-15 22.13 2029.18

2015-16 25.26 2150.01

2016-17 17.67 1789.92

2017-18 7.21 880.10

2018-19 12.17 1338.04

2019-20 5.00 695.77

2020-21 5.53 752.29

2021-22 6.50 986.33

2022-23 7.00 910.27

31
 Graph: 2.2 showing India’s Export to Australia

2.1.12.3 Indian exports of textiles to EU (European Union):

EU overpowered USA as becoming the largest market for textiles and clothing in the
world. Asia pre dominates the EU market in both clothing and textiles, with 30per
cent (US $ 30 bn) and 17 per cent (US $ 8 bn) share, respectively. India is one of the
leading suppliers of textile products to the EU market and ranked fourth, ahead of
other textile exporters like Mexico, Bangladesh and Turkey, with a market share of
5.2per cent (US $ 0.45 bn).

32
Table: 2.3 Statement Showing Indian Exports Of Textile to European Union

Year Quantity (in lakh bales of 170 kgs) Value (in `/Crores)

2010-11 16.82 1655.00

2011-12 3.50 313.62

2012-13 1.01 86.72

2013-14 0.65 52.15

2014-15 0.60 51.43

2015-16 0.50 44.40

2016-17 0.83 66.31

2017-18 12.11 1089.15

2018-19 9.14 657.34

2019-20 47.00 3951.35

2020-21 58.00 5267.08

2021-22 85.00 8365.98

2022-23 50.00 9244.36

Graph : 2.3 Showing Indian Export Of Textile To EU

33
 Current trend in textile Industry sources reveal that India's textile
exports are likely to fall short by over 16per cent from the expected target. This is
happening because of an increase in value of money and slowing down of investment.
Witnessing a negative growth in exports, specifically in segments like garments.
Garments accounts for about half of the overall textile exports by India.

Implementing the projected investment of Rs. 1, 94,000 crore in the 11th Five Year
Plan (2007-12). Source from Business Standard reveals that the Indian government is
expected to export around 20 per cent more raw cotton than before. Indian textile
exports to USA and China are growing rapidly. China and India are speedily
becoming the two biggest textile players in the world.

2.2 A BRIEF PROFILE OF BRANDIX APPAREL INDIA CITY (BAIC)

34
Introduction: Brandix Apparel India City (BAIC) is conceptualized and managed by
Brandix, Sri Lanka’s largest apparel exporter. It offers a host of attractive financial
and operational incentives for investors and procedural ease for facilitating
investment. It’s offering a unique one-stop shop, with end-to-end apparel solutions;
BIAC is a first of its kind in the world. It is a veritable ‘Paradise’ for the global
apparel industry.

It’s based on a breakthrough ‘Fiber-to-Store’ concept; it will house world-

class apparel chain partners, from fashion design to manufacturing all under than one
roof, offering seamless integration and unmatched value.

BAIC is spanning across 1000-acres, it’s is located in the bustling city of

Visakhapatnam, in the State of Andhra Pradesh, India. It provides the platform to
unlock the massive synergies that India offer as a textile destination.

2.2.1 BRANDIX APPAREL INDIA:

Brandix Apparel India, the Indian manufacturing arm of Brandix Lanka Ltd,
commenced commercial production for export at BIAC in July 2008. It has
systematically increased its local workforce, and today has a combined strength of
3300 associates, majority women from neighboring villages, with world-class apparel
being exported to top customers in US and Europe.

The facility is located in Brandix Apparel India City (BAIC) SEZ being a
revolutionary development in the apparel industry; a unique, integrated apparel supply
chain city, managed by Brandix Lanka Ltd. BAIC spread over 1000 acres in the port
city of Visakhapatnam (or Vizag for short) in the eastern state of Andhra Pradesh, it
brings alive an avant-garde 'Fiber to Store' concept. BAIC will bring together world
class apparel chain partners from the design table to consumer brands in flawless
integration.

Conceived and nurtured by Brandix, Sri Lanka's largest apparel exporter,

BAIC highlights India's phenomenal synergies in the world of textiles. To leverage
India's immense potential for economies of scale and other robust business
fundamentals in its fast growing economy, Brandix brings 30 years of industry

35
expertise and invites other world class experts to join its value chain to enjoy assured
mutual benefits of investment. It is initially located in PENDURTHI -
VISAKHAPATNAM on August 2016. In January 2017 a production centre was
opened at DUVVADA, VISAKHAPATNAM.In July 2018 BRANDIX APPAREL
INDIA (PVT) LTD is opened in BRANDIX INDIA APPAREL CITY, as a
manufacturing unit (wholesale) located at APSEZ (ANDHRA PRADESH SPECIAL
ECONOMIC ZONE), Pudimadaka Road, Atchutapuram, and Visakhapatnam.

2.2.2 BRANDIX VISION:

The vision of the company is to be the inspired solution for branded clothing.
Brandix is supported by over 20 manufacturing facilities in Sri Lanka and
strategically located international sourcing offices.

2.2.3 BRANDIX MISSION STATEMENT:

Our mission is, to help people and organizations do meaningful business with one
another, efficiently and effectively, using the most appropriate (and suitable)
technologies.

“HELPING PEOPLE CONDUCT BUSINESS, IN AN ELECTRONIC WORLD”.

2.2.4 COMPETENCIES OF BRANDIX:

Brandix strong competencies in product development, manufacturing and

marketing, are complimented by their most significant advantage in textiles. They
make their own fabric, threads, buttons and hangers.

They also provide customers with R&D, washing, dyeing, finishing, and quality
control services. Their group-wide initiatives is to achieve manufacturing and supply
chain excellence, close collaboration with their suppliers, and sales offices at the
customer's doorstep all guarantee fast and flexible solutions from the source to stores.

36
2.2.5 MILESTONES OF BRANDIX:

2001 Joint venture with Colombia Clothing Co Ltd

2002 Formed Brandix Lanka Ltd; "Brandix" - a new name, a new identity
View Logo Formation Video

2003 Strategic acquisition of Mast Industries' equity interests in our joint -

ventures Merger with the Jewelex Group. Restructure of Brandix Group
into Apparel, Textile and Accessories sectors

2004 Hanger’s joint venture formed A&E Brandix Hangers

2005 Established the Brandix Centre of Inspiration,

Established the Automated Denim Plant

Established Brandix Active wear Ltd

MOU signed with Government of India for Brandix Apparel City, India.

2006 Brandix India Apparel City: launch of first manufacturing unit.

Garment Dyeing Joint-Venture: Stevenson’s Lanka.

Brandix Green Textile Processing Park, Horana signed MOU with

Government of Sri Lanka.

2007 Brandix was ranked as the country's largest apparel exporter for 2006-07
by the Export Development Board, Sri Lanka.

2008 Brandix was once again ranked as the country's largest apparel exporter
for 2007-08 by the Export Development Board, Sri Lanka.

The newly converted Brandix Eco Centre in Seeduwa was ceremonially

inaugurated in April.

37
 The Brandix Casual wear plant in Seeduwa achieved a global first in
August when it received the Platinum rating under the Leadership in
Energy and Environmental Design (LEED) Green Building Rating
System of the US Green Building Council (USGBC).

2009 Brandix Lanka was rated Platinum in the Corporate Accountability

Rating Survey.

The Brandix Green Project was judged as the National Winner for Sri
Lanka at the Energy Globe Awards 2008 presented by the Energy Globe
Foundation.

Brandix Lanka Limited won the Corporate Social Responsibility Award

presented by the YPO-WPO Social Enterprise Network, USA.

Textured Jersey launched the in-region fleece programme for Victoria's

Secret PINK.

Brandix was commended by the United Nations Global Compact as an

example of good CSR practice and compliance with the principles of the
UNGC.

The Ceylon Chamber of Commerce recognized Brandix to be among the

Top 10 Best Corporate Citizens for the year 2009

2010 The "Brandix Active wear" Company name was transformed to "Brandix
Essentials" in order to reflect the change in product focuses,
specialization and future business direction.

38
2.2.6 BOARD OF DIRECTORS:

Chairman- Desamanya Ken Balendra:

Ken Balendra joined the Board of Directors of Brandix Lanka Limited as its
Non-Executive Chairman in 2001, following one of Sri Lanka's most distinguished
and respected active business careers. During an illustrious professional life, he
served as chairman of several key institutions in Sri Lanka - John Keells Holdings
Limited, Bank of Ceylon, the Securities and Exchange Commission, the Insurance
Board of Sri Lanka and the Ceylon Chamber of Commerce.

Chief Executive Officer- Ashroff Omar:

Ashroff Omar, Chief Executive Officer of Brandix Lanka Ltd, is a leading

industrialist and a prominent figure in the apparel industry. The Brandix Group is the
single largest apparel exporter in Sri Lanka and is positioned as a leading apparel
solutions provider to many of the world's super brands.

Director-Aslam Omar:

Aslam Omar joined the business in 1984, and within a year began to
successfully manage and develop a growing number of subsidiaries under the
emerging Brandix Group. He was instrumental in forming alliances with Tyco A&E
(USA), American & Efird Inc. (USA) and T&S Buttons (Hong Kong) leading to
successful joint ventures, namely Brandix Hangers, American and Efird Lanka and

39
Bangladesh and T&S Buttons respectively. These companies have premium standings
as trim suppliers to the apparel industry.

Director -Feroz Omar:

Feroz Omar began his career as Managing Executive of MKC Industries,

which was the Group's maiden foray into the manufacture of knitted lingerie. As
Brandix grew, logical integration required a fabric processing mill, which he fulfilled
by converting a Greenfield site into Brandix Textiles - a leader in fabric
manufacturing today, with a customer base that spans the region. In addition, he is
currently responsible for Ocean Lanka and Quenby Lanka Prints, both of which he
helped form, along with Brandix Casual wear Denim. The Brandix India Apparel City
project also falls under his purview.

Director -Ajit Johnpillai:

Ajit Johnpillai is the Director in charge of Brandix Casual wear; Brandix

Finishing and Comfort wear Limited. He is a former Financial Controller/Director of
Smiths DIY Group Limited in New Zealand, a US$ 50 million group that traded in
hardware, builder's supplies, and sports goods. Prior to this, he served as an Audit
Manager with Ernst & Young, in Bermuda and New Zealand.

Director -Udena Wickremasooriya:

Udena Wickremasooriya is the Director in charge of Brandix Intimate Apparel

and Brandix Essentials. He brings to Brandix extensive experience in the apparel
industry with focus on strategy, business turnaround and building strong performance
cultures and teams, both locally and internationally. Prior to joining the apparel
industry, Mr. Wickremasooriya worked in the FMCG Industry with Unilever Ceylon
Ltd and the Banking industry with NDB and held managerial positions in Supply
Chain, Operations, Finance, IT and Human Resources. He holds an MBA from the
University of Sri Jayewardenepura, Sri Lanka and is a Fellow of the Chartered
Institute of Management Accountants, UK.

Director -Trevine Jayasekara:

40
 Trevine Jayasekara is the Group Finance Director of Brandix Lanka Limited
and is responsible for the overall finance function of the group, as well as related
support functions. As the former Group Finance Director of Aitkin Spence & Co., he
held similar responsibilities. Other positions Mr. Jayasekara held at Aitkin Spence
include Director Management Board, where he was responsible for finance, planning
and IT for their entire group, and Director Corporate Finance, where he spearheaded
project evaluation, long-term planning and treasury management.

2.2.7 ACHIEVEMENTS:

BAIC got many achievements from past few years. Some of them are:

LEED Certification:

Brandix is proud to receive the recent global recognition for its Eco Centre in
Seeduwa for Brandix Casualwear. The plant received Platinum rating in August 2008
under the Leadership in Energy and Environmental Design (LEED) Green Building
Rating System of the US Green Building Council (USGBC).

WRAP (Worldwide Responsible Apparel Production):

WRAP (Worldwide Responsible Apparel Production) is the most recognized

compliance standard in the United States for the apparel industry. It is an independent,
non-profit organization that endorses the certification of lawful, humane and ethical
manufacturing of apparel throughout the world.

SA8000 (social accountability):

Brandix has been accredited the SA 8000 Social Accountability standards

established by New York based Social Accountability International (SAI). The
organisation promotes the global improvement of human rights for workers by
collaborating with a range of organisations including companies, trade unions and
governments.

FAIR TRADE certificate:

41
 Brandix Textiles (BTL) accomplished another national first when its plant in
Makandura received its Fair Trade certification from the Institute for Market ecology
(IMO) of Switzerland. The company is Sri Lanka's largest woven fabric processor and
the award is an important development for it and the country. Another Brandix Group
company, Brandix Casual wear, Giritale, has also received this certification while
Quenby Lanka Prints is in the process of obtaining it.

OE100 (Organic Exchange):

The OE 100 certification from Organic Exchange (OE) is a set of industry

compliance standards for the global organic cotton textile industry. Within the
Brandix Group, seven companies have received this certificate and one, Quenby
Prints Lanka, is in the process of obtaining this important award. The Organic
Exchange is a non-profit organisation that promotes the global organic cotton industry
and its members include many top international retailers who have added organic
cotton products into their offerings.

ISO 9001:

The ISO 9001 certification is part of a suite of a system of quality

management standards stipulated by the international Organisation for
Standardization (ISO). Currently, Brandix Intimates, Katunayake, is ISO 9001
certified.

ISO 14001:

The ISO 9001 certification is part of a family that covers environmental

management standards developed by the International Organisation for
Standardization (ISO).

OHSAS 18001 (Occupational Health & Safety Assessment Series):

The OHSAS 18000 is an international occupational health and safety

management system specification which seeks to promote various improvements in
the working environment. Within the Brandix Group, Brandix Casual wear, Seeduwa,
has been accredited with this internationally renowned standard.

42
2.2.8 BRANDIX ORGANIZATION CULTURE:

The Brandix Way of Life is their culture and permeates there whole
organization. The Brandix corporate 'personality' is determined by three overlapping
areas: values, work culture and social responsibility. Their way of working is all about
accepting and embracing their values, and acting with social responsibility. It's also
about a young and dynamic entity which supports its personalities to blossom in a
vibrant environment.

“An organization is the sum of the people it employees”

The Brandix culture not only aligns associates with corporate goals, it moulds
their philosophy of work and therefore life. As well as encouraging associates to
becoming customer-focused, incorporating speed, flexibility, innovation and passion
into their work allows them to think more productively and perform for results.
Brandix culture of internal appreciation and recognition includes the Kaizen awards
for innovative thinking, merit awards for work and attendance, 'I value you' cards and
gifts. The 'Pat on the back' initiative promotes instant appreciation of behavior and
performance among colleagues. Their new programme GLOW (Great Lift off Work)
enables social interaction and the annual Brandix Niter celebrates outstanding
executive team and individual performance.

2.2.9 LOCATION:

The Brandix Apparel City is located near ATCHUTAPURAM Mandal which

is 45 kms from the Visakhapatnam Airport and from the city it is located at a distance
of 47 kms, which is 50 kms away from the Visakhapatnam Port. This apparel city is
very near to Bay of Bengal which makes the transportation process convenient
through sea.

43
 2.2.10 CORPORATE AND REGISTERED OFFICE:

Corporate office: The Corporate office means the Administrative office is located at
COLOMBO, SRI LANKA.

Registered office: It is located in India at ULSOOR ROAD, BANGALORE,

KARNATAKA. The BAI has the capacity of producing 1, 92, 00,000 garments per
annum.

44
 CHAPTER-III
THEORETICAL FRAMEWORK OF THE
STUDY

45
 THEORETICAL FRAMEWORK
___________________________________________________________

3.1 INTRODUCTION TO INVENTORY MANAGEMENT:

Inventory is a physical resource that a firm holds in stock with the intent of
selling it or transforming it into a more valuable state. Inventory management
occupies the most significant position of working capital. Management of inventory
may be defined as the sum of total of those activities necessary for the acquisition,
storage, disposal or use of materials. It is one of the important components of current
assets. Inventory management is an important area of working capital management,
which plays a crucial role in economic operations of the firm.

Maintenance of large size of inventories by a firm requires a considerable

amount of funds to be invested on them. Efficient and effective inventory
management is necessary in order to avoid unnecessary investment and inadequate
investment.

A considerable amount of funds is required to be committed in inventories.

Efficient management of inventory reduces the cost of production and consequent
increases the profitability of the enterprise by minimizing the different types of costs
associated with holding inventory.

MEANING AND DEFINITION:

The term “Inventory” is originated from the French word “Inventoried” and
the Latin “Inventoried” which implies a list of things found. Inventories are stock of
the product a company is manufacturing for sale and components that make up the
product. The various forms in which inventories exist in a manufacturing company
are:

46
  Raw materials
 Work-in-process
 Finished goods.

3.2 COMPONENTS OF INVENTORY:

From the above definitions, we can draw the components of inventory. The
various forms in which inventories exist in a manufacturing firm are raw materials,
work-in process, finished goods, and the firms also maintain a fourth kind of
inventory, i.e.; supplies or stores & spares. The following figure gives the components
of inventory:

a. Raw Materials: Raw materials are those inputs that are converted into
finished goods through a manufacturing or conversion process. These form a major
input for manufacturing a product. In other words, they are very much needed for
uninterrupted production.

b. Work-in-process: Work-in-process is a stage of stocks between raw

materials and finished goods. Work-in-process inventories are semi-finished products.
They represent products that need to undergo some other process to become finished
goods.

c. Finished Products: Finished products are those products, which are

completely manufactured and ready for sale. The stock of finished goods provides a
buffer between production and market.

d. Supplies or Stores and Spares: Supplies include office and plant

maintenance materials like, soap, brooms, oil, fuel, light, bulbs, etc. These materials do
not directly enter production, but are necessary for production process.

Components of
Inventory

47
Finished Stores and
Work-in-
Raw materials products spares
process
3.3 MOTIVES OF INVENTORY MANAGEMENT:

Managing inventories involves lack of funds and inventory holding costs.

Maintenance of inventory is expensive. There are three general motives for holding
inventories.

a. The Transaction Motive:

Transaction motive includes production of goods and sale of goods. Transaction

motive facilitates uninterrupted production and delivery of order at a given time (right
time).

b. The Precautionary Motive:

This motive necessitates the holding of inventories for unexpected changes in

demand and supply factors.

c. The Speculative Motive:

This complies to hold some inventories to take the advantage of changes in prices
and getting quantity discounts.

3.4 OBJECTIVES OF INVENTORY MANAGEMENT:

The objectives of inventory management may be viewed in two ways and they are:

Operational Objectives: It maintain sufficient inventory, to meet demand for product

by efficiently organizing the firm’s production and sales operations.

Financial Objectives: It minimizes inefficient inventory and reduce inventory costs.

An effective inventory management should consist:

48
  Ensure a continuous supply of raw materials and supplies to facilitate uninterrupted
production.
 Maintain sufficient stocks of raw materials in periods of short supply and
anticipate price changes.
 Maintain sufficient finished goods inventory for smooth sales operations and
efficient customer services.
 minimize the carrying costs and time, and
 Control investment in inventories and keep it at an optimum level.

3.5 NEED FOR BALANCED INVESTMENT IN INVENTORY:

Management of optimum level of inventory investment is the prime objective of

inventory management. Inadequate or excess investment in inventories is not healthy
by for any firm. The investment in inventories should be sufficient. The optimum
level of investment in inventories lies between excess investment and inadequate
investment.

A. Dangers of Excessive (Over) Investment In Inventory:

The following are the dangers of excessive investment in inventory:

 Carrying excessive inventory over a long-period leads to the loss of

quality. It may not be possible to sell the inventories in time without loss.
 Excess purchases or storage leads to theft, waste and mishandling of
inventories.
 The excessive level of inventories consumes funds of the company, they
cannot be used for any purpose since they have locked in inventory, and they
involve an opportunity costs.

B. Dangers of Inadequate Investment In Inventories:

Under investment in inventory is also not healthy one. It has some negative points,
they are:

 Inadequate raw materials and work-in-progress inventories will disturb

production.

49
  When the firm is not able to produce goods without interruption that leads the
inadequate storage of finished goods. If finished goods are not sufficient to
meet customer demand, the customers may shift to the competitors, which will
lead to loss of customers permanently.

3.6 COSTS OF HOLDING INVENTORIES:

Minimizing cost is one of the operating objectives of inventory management.

The costs (excluding merchandise cost), there are three costs involved in the
management of inventories.

A. Inventory Ordering Costs:

Ordering costs are those costs that are associated with the acquisition of raw
materials. In other words, the costs that are spend from placing an order to raw
materials to the receipt of raw materials. They include the following:

 cost of requisitioning the items(raw materials)

 cost of preparation of purchase order(i.e., drafting typing, dispatch, postage)
 cost of transportation of goods
 cost of receiving and verifying the goods
 cost of unloading of the of goods
 Storage and stocking charges.

B. Inventory Carrying Costs:

Inventory carrying costs are those costs, which are associated in carrying or
maintaining inventory. Usually constitute to around 25% of the value of inventories
held. The following are the carrying costs of inventory:

 capital cost(interest on capital locked in the inventories)

 storage cost( insurance, maintenance on building, utilities, serving costs)
 insurance and taxes(on inventory- against fire and theft insurance)
 obsolescence cost and deterioration
 Stores handling costs and
 Administration costs (clerical and staff service costs).

50
3.7 RISKS OF HOLDING INVENTORY:

Holding of inventories involves above said cost, they exposes the firm to take
to take some risks. Risk in inventory management refers to the change that inventories
cannot be turned over into cash through normal sales without loss. Risks associated
with inventory management are as follows.

a. Price Decline: Price decline is a result of more supply and less demand. In other
words, it may be the result due to introduction of competitive production.

b. Product Deterioration: Holding of finished goods for a longer period or storage

under improper conditions of light, heat, humidity and pressure leads to product
deterioration.

c. Product obsolescence: Product may become obsolete due to improved products,

changes in customer tastes, particularly in high style merchandise, changes in
requirements. Obsolescence costs risk is least controllable except by reduction in
inventory investment.

3.8 BENEFITS OF HOLDING INVENTORY:

Optimum level of inventory is that level where the total costs of inventory is
less. The major benefits of inventory are the basic function of inventory. Proper
management of inventory will result in the following benefits to a firm.

 Inventory management ensures an adequate supply of materials and stores,

minimize stock outs and shortages and avoids costly interruptions in
operations
 It keeps down investment in inventories; inventory carrying costs,
obsolescence losses to the minimum.
 It permits better utilization of available stocks by facilitating inter-department
transfers within a firm.
 It provides a check against the loss of materials through carelessness or
pilferage.

3.9 TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT:

51
 Effective inventory management requires an effective control system for
inventories. A proper inventory control not only helps in solving acute problems of
liquidity but also increases profits and causes substantial reduction in the working
capital of:

3.9.1 Determination of Stock Levels:

Carrying of too much and too little of inventories is detrimental to the firm. If
the inventory level is too little, the firm will face frequent stock-outs involving heavy
ordering cost and if the inventory level is too high it will be unnecessary of tie-up
capital. Therefore an efficient inventory management requires that a firm should
maintain an optimum level.

a. Minimum Stock Level:

This represents at the quantity which must be maintained in hand at all times.
If stocks are less than the minimum level then work will stop due to the shortage of
materials. Following factors are taken into account that while fixing minimum stock
levels;
Lead time: A purchasing firm requires some time to process the order and time is
also required by the firm to execute orders. The time taken in processing the order and
executing it is known as lead-time. It is essential to maintain some inventory during
this period.
Rate of consumption: It is the average consumption of materials I the factory. The
rate of consumption will be decided on the basis of past experience and production
plans.
Nature of materials: The nature of materials also affects the minimum level. If urea
material is required only against special order of the customer the minimum stock will
not be required for such materials.

Minimum Stock Level = Re-ordering level – (Normal consumption x

Normal Re- order point)

52
b. Re-order Level:
Re-order level is the level of stock available when a new order should be
raised.

Re-order Level (or reorder point) = lead time in days * daily average usage

Which the quantity of an item is not normally allowed to raise to ensure that
unnecessary working capital is not blocked in stock items. Maximum stock represents
the total of safety stock represents the total of safety stock level and economic order
quantity.
c. Danger Stock Level:
Danger level of stock is fixed below the minimum stock level and if stock
reaches below this level urgent action for the replenishment of stock should be taken
to prevent stock out position.

Danger Level = normal Consumption x Maximum re-order period for

emergency purchases

d. Average Stock Level:

The average stock level indicates the average stock held by the concern. It is
calculated by the following formula:

Average Stock Level = Minimum Stock Level + 1\2 of re-order quantity.

e. Maximum Level:
It is the quantity of materials beyond which a firm should not exceeds its
stocks. If the quantity exceeds maximum level limit then it will be over – stocking.
Overstocking will mean blocking of more working capital, more space for
storing the materials, more wastage of materials and more chances of losses from
obsolescence.

53
 Maximum stock level = Reordering Level + Reorder Quantity – (Maximum
Consumption x Minimum reorder period)

3.9.2 Determination of Safety Stocks:

Safety stock is a buffer to meet some unanticipated increase in usage. The
demand for materials may fluctuate and delivery of inventory may also be delayed in
such a situation the firm can be facing a problem of stock out. In order to protect
against the stock out arising out of usage fluctuations, firms usually maintain some
margin of safety stocks. Two costs are involved in the determination of this stock that
is opportunity cost of stock outs and the carrying costs.
If a firm maintains low level of safety frequent stock outs will occur resulting
into the larger opportunity costs. On the other hand, the larger quantity of safety
stocks involves carrying costs.

3.9.3 Economic Order Quantity (EOQ):

Economic order quantity (EOQ) refers to the quantity of material to be ordered
at one time. It is the order quantity that minimizes the total inventory holding costs
and ordering costs. It is one of the oldest classical production scheduling models. This
technique applies only when demand for a product is constant over the year and each
new order is delivered in full when inventory reaches zero. There is a fixed cost for
each order placed, regardless of the number of units ordered.

Total Cost Material = Acquisition Cost + Carrying Costs + Ordering Cost

Acquisition cost: it is the cost associated in convincing a customer to buy a product.

Carrying Cost: It is the cost of holding the materials in the store.
EOQ can be calculated with the help of the following formula:

Economic Order Quantity (EOQ) = 2CO / I

Where as,
C = Consumption of the material in units during the year
O = Ordering Cost

54
 I = Carrying Cost or Interest payment on the capital.

The costs of ordering the inventory include the following:

 Preparation of purchase order.
 Costs of receiving goods.
 Documentation processing costs and 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.

3.9.4 Stock out Costs:

The stock out costs is associated with running out of stock, which include the
following:
 Lost contribution through the lost sales caused by the stock out.
 Loss of future sales because customers go elsewhere.
 Loss of customer goodwill.
 Cost of production stoppages caused by stock outs of work in progress of raw
materials.
 Labor frustration over stoppages.
 That replacement is made instantaneously, i.e., the whole batch delivered at
once.

3.9.5 Carrying Costs:

Carrying cost refers to the total cost of holding inventory. This includes
warehousing costs such as rent, utilities and salaries, financial costs such as
opportunity cost, and inventory costs related to perish ability, pilferage, shrinkage and
insurance.

When there are no transaction costs for shipment, carrying costs are
minimized when no excess inventory is held at all, as in a JUST IN TIME production
system. The carrying cost of inventory includes the following:

55
  Storage costs (rent, lighting, heating, refrigeration, air-conditioning
etc.,)
 Staffing, equipment maintenance and running costs.
 Handling costs, Audit, stocktaking costs.
 Obsolesce and deterioration costs.
 Costs of money tied up in inventory.

3.10 TYPES OF INVENTORY CONTROLS SYSTEM:

The selective control means that there are variations in the method of
inventory control from item to item and this differentiation should be on selective
basis. Selective control can be divided into 8 Types

Classification Criteria
A-B-C (Always Better Control) Annual Value of Consumption
H-M-L (High, Medium, Low) Unit price of material

V-E-D (Vital, essential, Desirable) Critical Nature of Items

F-S-N (Fast moving, slow moving, non-
moving) Quantity Issue from Stores Non moving)
X-Y-Z (high, medium, low) Inventory value of items stored
G-O-L-F (Government, Ordinary, Local,
Foreign) Source of material
S-D-E (Scarce, Difficult to obtain, easy to Purchasing problems regarding
obtain) availability
Seasonality applies especially to
S-O-S (Seasonal, Off-Seasonal) Commodities

3.10.1 A B C ANALYSIS SYSTEM:

The ABC analysis system comes in handy & enables the management to
concentrate attention & keep a close watch on a relatively “less no. of items which
account for a high % of the value of annual usage of all items of inventory.”

56
System divides 3 groups i.e.; A, B, C:

 The A items are which it has large investment

 The B group consists of the items accounting for the next largest inventory.
 The C group consists of a large no. of items accounting for a small rupee
inventory.

SI.NO A ITEMS B ITEMS C ITEMS

1 Very strict control Moderate control Loose control

2 Very low safety stock Low safety stock High safety stock

3 Phased delivery (weekly) Once in 3 months Once in 6 months

4 Weekly control report Monthly C.R Quarterly C.R

5 Maximum follow-up Periodic Exceptional

Estimates on past
6 Accurate forecasts Rough Estimation
data

Central purchasing & Combination

7 Decentralized
storage. Purchasing

Table handled by senior Minimum clerical

8 Moderate
officers efforts

% of item % of Value
Category
A 15 70
B 30 20
C 55 10
TOTAL 100 100

57
3.10.2 VED ANALYSIS:

The VED analysis is used generally for spare parts. The requirements and
urgency of spare parts is different from that of materials. A-B-C analysis may not be
properly used for spare parts. The demand for spares depends upon the performance
of the plant and machinery. Spare parts are classified as Vital (V), Essential (E), and
Desirable (D).

The classification of spares under three categories is an important

decision. A wrong classification of spares will create difficulties for production
department. The classification of spares should be left to the technical staff because
they know the need, urgency and use of these spares.

3.10.3 FSN ANALYSIS:

When analysis is carried out on this basis of the movement of materials in the
store or on the basis of consumption pattern of components, it is known as FSN
analysis. The three letters stand for fast moving, slow moving and non-moving. The
classification comes in very handy when it necessary to control obsolescence. The
demand for fast-moving items is generally high. Thus special care should be taken in
respect of these items.

58
3.10.4 SDE ANALYSIS:

The SDE analysis is generally done on the basis of the problems faced in
procurement of an item. These letters stand for scare items, those which are Difficult
to obtain and those which are fairly easy to obtain.

3.10.5 XYZ ANALYSIS:

It is the procedure of classification by bill explosions or by the determination

of variation and\ or fluctuations co- efficient of goods and articles concerning its
turnover & regularly sometimes, the XYZ analysis is also called RSU analysis, with
“R” per Regular, “S” for seasonal, “U” for Irregular.

 “X” constant consumption, fluctuations are rather rare. “X” class items
represent 70% of the stock value these items are critically important and
require close monitoring and tight central.
 “Y” stronger fluctuations in consumption usually for tend moderate or
seasonal reasons. “Y” class items fall between 70% to 90% of the annual
stock value. These are lower critically requiring standard controls.
 “Z” completing irregular consumption. It requires the least controls, which
are sometimes issues as Free Sock or forward holdings.
The XYZ analysis is one of the base supply chain techniques, which are used to
determine the inventory valuation inside stores.

3.10.6 HML ANALYSIS:

While the ABC classification is based on the annual consumption value of an

item, the basic criterion for HML classification is the unit value of an item. In this
respect the HML classification is distinct from the ABC classification. On the basis of
the unit value of an item, the materials are further classified as high-value materials,
medium-value materials and low-value materials. In HML analysis, the item should
be listed out in descending order of unit value and the management may fix limits for
determining the three categories.

59
3.10.7 GOLF ANALYSIS:

The GOLF analysis is carried out mainly on the basis of the source of the
material. GOLF stands for Government, Ordinary, Local, and Foreign. There are
many important items, which are channelized through the State Trading Corporation,
etc.; certain special procedures are required to be followed for procuring such items.
As such, the ordinary procedures of inventory control may not work in respect of
those items. Similarly, the items, which are available indigenously, are treated
differently on the basis of their sources.

3.11 INVENTORY VALUATION METHODS:

An inventory valuation allows a company to provide a monetary value for

items that make up their inventory. Inventories are usually the largest current asset of
a business, and proper measurement of them is necessary to assure accurate financial
statements. If inventory is not properly measured, expenses and revenues cannot be
properly matched and a company could make poor business decisions.

3.11.1 First-in-First-out Method (FIFO):

This method is based on the assumptions that the materials, which

purchased first, are issued first. Issues if materials are priced in the sequence of
incoming order of purchases. The flow of cost of materials should also be in the same
order. Issues are priced on the same basis until the first lost received i.e., exhausted,
after which the price of next lot received becomes the basis of cost for issues. Thus
the materials issued are priced at the cost pertaining to the earliest lot, and as the
corollary the inventory in hand is valued at a price representing recent purchases. It
merely donates that the cost incurred for the “earliest purchases” is first used for
accounting purposes.

3.11.2 Last-In-First-Out Method (LIFO):

This method is based on the assumption that last item of materials or goods
purchased are the first to be issued or sold. Thus, according to this method, inventory
consists of items purchased at the earliest cost. This method has the following
advantages:

60
  It takes into account the current market conditions while valuing materials
issued to different jobs or calculating the cost of goods sold.
 The method is base on cost and, therefore, no unrealized profit or loss is
made on account of use of this method.
The method is most suitable for materials which are of bulky and non – Perishable
type.

3.11.3 Weighted Average Cost Method:

This calculated by dividing the total cost of material in stock by the total
quantity of materials in stock. Under this method, costs are average after weight by
their quantities this method evens out the effect of widely varying prices of different
lots of purchases, which makes up the stock. There will be no profit or no loss arising
out of pricing issues.

3.12 THE VARIOUS TYPES OF INVENTORY RATIOS:

 Inventory Turnover Ratio

 Raw Material Inventory Turnover Ratio
 Work In Progress Turnover Ratio
 Inventory To Net Working Capital Ratio
 Sundry Debtors Turnover Ratio

1. Inventory Turnover Ratio:

Inventory turnover ratios are calculated to indicate whether inventories have been
used efficiently or not. The purpose is to ensure the blocking of only required
minimum finds in minimum finds in inventory. The Inventory turnover ratio is also
known as stock velocity is normally calculated as sales\average inventory or cost of
goods sold\average inventory cost. Inventory conversion period may also be
calculated to find the time taken for clearing the stocks. Symbolically

61
 Cost of goods sold
1. Inventory Turnover Ratio = ------------------------------
Average stock cost

2. Raw Material Inventory Turnover Ratio:

The ratio indicates the efficiency of the firms raw material consumed. It is
calculated by material consumed. It is calculated by material consumed divided by
average material inventory.

Average inventory

2. RMITR = --------------------------------

Material consumed

3. Work In Progress Turnover Ratio:

This is unable for the company in establishing the time gap between different
stages in a production cycle and the efficiency with the production cycle gets
completed. It is calculated from cost of production divided by average work in
progress inventory

Cost of production
3. WIPTR = ---------------------------------
Average work-in-progress

4. Inventory to Net Working Capital:

The net working capital is the difference between the current assets and the
current liabilities. When it is negative current liabilities exceed current assets. Raw
material consists of inventory. The efficient management of inventory indicates firm’s
efficient performance. The ratio calculated from inventory divided by the net working
capital.

62
 Inventory

4. INWC = ---------------------------

Working Capital

5. Sundry Debtors Turnover Ratio:

Debtors turnover indicates the number of times debtors turnover each year.
Generally the higher the value of debtor turnover, the more efficient is the
management of credit.

Credit Sales

5. DTR = --------------------------

Average Debtors

63
 INVENTORY MANAGEMENT IN BRANDIX

LABEL RECEIVING PROCESS:

RESPONSIBILITY PROCESS DOCUMENTS

S2 Sourcing term SI Sourcing will generate for the purchase order
required label
Qty in to as per style.
S2 Sourcing term vendor Vendor will supply the Given to in Purchase order /invoice
single a consignment or more.

Bal sourcing / receiving Once we receiving the Purchase order /invoice

team consignment our receiving team
will check the material against the
packing list.
Receiving team GRM After verification received team Invoice packing team.
Team. will submit the documents to GRM
team.
GRN team GRN team will do the GRN and Invoice packing list
sent the document fiancé

Receiving team After GNR receiving team will Sticker report /Packing
generate stickers and paste list.
respective materials.
Receiving team After posting stickers label
receiving team will segregate the
labels as per to wise in bins and
kept in the label Receiving register.

64
 LABEL ISSUING PROCESS:

RESPONSIBILITY PROCESS DOCUMENTS

Team leader issuing When a new schedule released, team cut plan
record leader will check in which to we
received the labels in co RM report or
consumption.
Preparation team With the no preparation person will Receiving excel
check the receiving excel report and report
find the location of the labels and take
the required qty for that schedule.
Team leader
Preparation team check the label W.V.T Trim card
Supervision. TRIM CARD and signature from
Respective supervision.

Preparation team Preparation team will prepare the qty Cut plan
as per cut plan and kept the prepared
schedule Qty in the same location and
the detail will be Mentioned and the
cut plan

Issuing team When production request the cut no Cut plan / Job sheet
Leader/Recorder against the schedule issuing team will
request the pick list to the Recorder.

Issuing recording Issuing recorder will generate pick Picking list

list in m3 and hand over the some
to issuing team leader
Issuing team leader Issuing team leader will issue the Trim card/ picking
material to production as per pick list/ Cut plan/ Job
list and take the Signature sheet.

65
INVENTORY MANAGEMENT AND WAREHOUSE OPERATIONS WHITE
PAPERS

INVENTORY MANAGEMENT ARTICLES:

Guide to Inventory Accuracy Defines 11 steps to more accurate inventory

operations including emphasis on process evaluation, procedure documentation,
employee training, and accountability.

Cycle Counting and Physical Inventories Avoid the pitfalls of the annual physical
inventory by designing a more effective custom cycle counting system. Insights on
why you should cycle count, tracking inventory accuracy, blind counts, count timing,
and effects of adjustments.

Optimizing Economic Order Quantity (EOQ) Many organizations fail to take

advantage of one of the most fundamental inventory management tools available.
This article details data inputs, applications, and implementation of EOQ. Specific
detail on accurate order cost and Carrying cost calculations are key to calculating
EOQ.

Optimizing Safety Stock Determining optimum safety stock levels to provide high
levels of customer service while maintaining minimal inventory is possible through
the use of statistical based inventory models. This article focuses on the Standard
Deviations of a Normal Distribution Model. Details include calculating Safety Stock
using Service Factor calculation, Lead Time Factor, and Order Cycle Factor.

Depended Demand Safety Stock Covers some options for dealing with safety
stock at the component level.

Using Excel's Forecast Function While not a complete forecasting system, the
Forecast Function in Excel (and Open Office Calc) can prove to be useful in
forecasting trend or basing a forecast on a predictor variable.

Consignment Inventory The pros, cons, and implications of consignment inventory.

When does it provide a strategic advantage and when is it just moving costs.

66
Negative Inventory What you don't know about negative inventory balances may
result in your making things worse by incorrectly "fixing it". This article is an excerpt
from my book Inventory Accuracy: People, Processes, & Technology.

Software Selection and Implementation Tips Nuts and bolts tips on software
selection and implementation, including tips on defining functionality needs, software
testing, and employee training.

Enhance Inventory System Functionality Through Custom Reporting. Although

software packages continue to get better it is unlikely that software manufacturers in
the near future will be able to deliver adequate pre-defined reports to meet the diverse
needs of their customers. Discusses database terminology and various types of
reporting tools available.

Back flushing. Article defines back flushing as a means for issuing inventory in a
manufacturing environment, its application, and implementation tips.

WAREHOUSE OPERATIONS ARTICLES:

Lift Truck Basics Lists basic information about truck types and
functionality. Details functionality of most common types of vehicles such as
counterbalanced forklift, motorized pallet truck, order selector; reach truck, swing
reach and turret truck. Also discusses common lift truck attachments.

The Aisle Width Decision. Provides more detailed information on Narrow Aisle
(NA) and Very Narrow Aisle (VNA) storage configurations and the lift truck designs
available including comparisons of reach trucks and turret trucks.

Order Picking: Methods and Equipment for Piece Pick, Case Pick, and Pallet
Pick Operations. Batch Picking, Zone Picking, Wave Picking, Carousels, Flow
Rack, Static Shelving, and Pick-to-Light; Bar-coding . . . there are a lot of choices out
there in methods and equipment for order picking operations. Choosing the best
systems requires thorough analysis of the characteristics of your unique operation.

Warehouse Slotting. Understanding the factors to consider when determining where

to slot items in your warehouse.

67
Same-Day Shipping The pros and cons of same-day shipping and tips on how to
accomplish it.

Automated Data Collection (ADC) Basics Intro to ADC technologies including bar
codes, barcode scanners, portable terminals, voice systems, and pick-to-light.

Warehouse Optimization . . . The Little Things. Discusses the often neglected little
issues that affect warehouse operations.

Supervision in the Warehouse. The missing link between how you want your
warehouse to operate and how it actually operates.

Warehouse Management Systems (WMS). What are they? Do you need one?
Describes functionality of warehouse management systems WMS.

Trailer Loading Techniques. Methods for loading trailers.

Update. The latest on RFID, including the Wal-Mart mandate, EPC, privacy concerns,
and more.

RFID Technology Updates. This is from my other website (for my book on

Inventory Accuracy) and contains some different information from the above article
on RFID.

How Effective is your Lift Truck Safety Program? Tips on forklift safety and
reference to the OSHA 1999 ruling on Powered Industrial Truck Training.

Loading Dock Safety. Education and Equipment can increase safety in your
loading dock.

Warehouse Fire Safety. Tips on compliance and the need to go beyond compliance
to ensure adequate fire safety.

OSHA’s Ergonomics Program Standard Original article plus updated info on

recent repeal by Congress.

68
CHAPTER-IV
DATA ANALYSIS
AND
INTERPRETATION

69
 4. DATA ANALYSIS AND INTERPRETATION
Organizations are purposive creations. They are created in order to achieve
particular task, which individuals cannot accomplish on their own. When
organizations are created the huge task of the organization is also sub divided into
smaller tasks, which can be handled, effectively be an individual or a group of
individuals. This is called as activity analysis. Usually this leads to
departmentalization of organization. To carry out these activities, people are required
to to take timely decisions in light of present objectives.
Analysis and interpretation of financial statements are the most important step
in accounting to have a very clear understanding of the profitability and financial
position of a company, the financial statements have to be analyzed and interpreted
analysis refers to the methodical classification of the given in the financial statements.

4.1 INVENTORIE VALUES OF BRANDIX:

These are the values of inventory from 2016-17to 2020-21 in LAKHS. It
includes all types of inventories such as raw materials, work in progress, finished
goods etc...

Table 4.1: Inventory Statement of Brandix Apparel India Pvt Ltd

For the year 2018-19 to 2022-23 (in lakhs)
SI .No Year Inventory in lakhs

1 2018-19 499.28

2 2019-20 518.10

3 2020-21 545.66

4 2021-22 451.74

5 2022-23 523.16

70
 Graph 4.2: Showing Inventory Values of Brandix

Analysis:
From the above table it is clear that the Inventory levels in BRANDIX
APPAREL INDIA PVT LTD is increasing gradually. In 2017-18 the inventory was
499.28, in the year 2021-22 the inventory level was 545.66. But in 2022-23 inventory
level was decreased to 451.74 and later it is increased to 523.16.

Interpretation:
The purchase of raw material leads to the overall decrease of Inventories to
meet the production requirements.

71
4.2 THE VARIOUS TYPES OF INVENTORY RATIO’S:
Inventory ratios are calculated to minimize the investment in inventories. The
various types of inventory ratios are follows:
4.2.1 Inventory Turnover Ratio:
The ratio indicates the efficiency of the firm of selling its product. It is
calculated by dividing the cost of goods sold by the average inventory
The cost of goods sold is known then the inventory turnover ratio and can
be computed by dividing sales by average inventory of the year-end inventory. The
inventory turnover shows how rapidly the inventory is turning in to receivables
through sales. This ratio signifies the liquidity of inventory. It is used to measure and
discover the possible trouble in the form of over stocking or over valuation.

Cost of goods sold

 Inventory turnover ratio = ------------------------------
Average inventory

Table 4.2: Statement showing total Inventory Turnover Ratio:

Inventory
Year Sales ITOR (in %)
(in lakhs)

2018-19 9220.45 499.28 18.46

2019-20 8736.91 518.10 16.86

2020-21 6141.47 545.66 11.25

2021-22 8437.87 451.74 18.67

2022-23 9010.67 523.16 17.22

72
 Graph 4.2: Graphical Representation of total Inventory Turnover Ratio

Analysis:
A high inventory turnover ratio is desirable in every organization, as it is an
indicative of good management. A low inventory turnover ratio implies slow moving or
obsolete inventory. The above table indicated that the inventory turnover ratio of
BRANDIX APPAREL INDIA PVT LTD in all the 5 years of study is comparatively
fluctuating. The inventory turnover ratio of BRANDIX APPAREL INDIA PVT LTD
showed a somewhat irregular trend of increase and decrease in all the 5 years of study.
It is highest that 18.67 in the year 2022-23 and later it was decreased to 17.22.

Interpretation:
So compared to all other years of study it is clear that the stock has been utilized
more efficiently to produce goods only in the year 2022-23.

73
 4.2.2 Raw Material Inventory Turnover Ratio:

The ratio indicates the efficiency of the firms raw material consumed. It is
calculated by material consumed. It is calculated by material consumed divided by
average material inventory.

Average inventory
RMITR = --------------------------------
Material consumed

Table 4.3 Statement Showing Raw Material Inventory Turnover Ratio

Year Inventory Material Consumed RMITR

2018-19 499.28 5.86 85.20

2019-20 518.10 6.09 85.07

2020-21 545.66 40.39 13.50

2021-22 451.74 45.09 10.01

2022-23 523.16 50.42 10.37

74
Graph 4.3: Graphical Representation of RMITR

Analysis:
The ratio is calculated to know the level of raw materials inventory held by
the firm on an average. It was 85.20 in the year 2017-18 and 85.07 in the year of
2018-19; it is decreased to 13.5 in the year 2019-20 and gradually decreased to 10.37
in the year 2021-22.

Interpretation:
This ratio indicates the efficiency with which the firm converts raw materials
in to work in process. It is clear from the above table that the raw material inventory
turnover ratio of BRANDIX INDIA APPAREL CITY is very low, the ratio showed a
very erratic trend of decrease in all the 5 years of study.

75
4.2.3 Days Of Inventory Holding Period:
This ratio is calculated by following formula:

Inventory
 Days of inventory holding= ------------------------ * 360
Sales

Table 4.4: Statement Showing Days Of Inventory Holding Ratio

Year Days of inventory holding Inventory holding

period
2018-19 499.28/9220.45*360=19.49 19.49

2019-20 518.66/8736.91*360=21.31 21.31

2020-21 545.66/6141.47*360=31.98 31.98

2021-22 451.74/8437.87*360=19.27 19.27

2022-23 523.16/9010.67*360=20.90 20.90

76
 Graph 4.4: Graphical Representation Of Days Of Inventory Holding
Analysis:
The Inventory holding period is increased at a gradual rate from the year
2018-19 to 2020-21 according to the productivity levels in 2021-22 but the inventory
holding period is decreased to 19.27.

Interpretation:
High ratio indicates that the inventory is not transforming into the finished
product and caused for increase of scrape and obsolescence of inventory. In the year
2020-21 it was decreased, that indicates an increase of productivity.

77
 4.2.4 Work In Progress Turnover Ratio:
This is unable for the company in establishing the time gap between different
stages in a production cycle and the efficiency with the production cycle gets
completed. In case of BRANDIX INDIA APPAREL CITY work in progress
inventory turnover ratio has been gradually increasing over the years. It is calculated
from cost of production divided by average work in progress inventory.

Cost of production
WIPTR = ---------------------------------------
Average work-in-progress

Table 4.5: Statement Showing Work In Progress Turnover Ratio

Average work-In
Year Cost of production WIPTR
progress
2018-19 9220.45 47.70 193.3

2019-20 8736.91 43.80 199.47

2020-21 6141.47 23.70 259.13

2021-22 8437.87 11.18 754.72

2022-23 9010.67 9.37 961.65

78
 Graph 4.5 : graphical representation of WIP turnover ratio

Analysis:
This ratio is calculated to know the level of work in process inventory held by
the firm on an average. It indicates the efficiency with which the firm converts work
in process into finished goods. From 2022-23 the increasing rate started and now the
rate is 961.65.
Interpretation:
It indicates the efficiency of conversion of work in process into finished goods
of firm is increasing.

79
 4.2.5 Inventory to Net Working Capital:
The net working capital is the difference between the current assets and the
current liabilities. When it is negative current liabilities exceed current assets. Raw
material consists of inventory. The efficient management of inventory indicates
firm’s efficient performance. The ratio calculated from inventory divided by the net
working capital.
Inventory
INWC = ---------------------------
Working Capital

Table 4.6: Statement Showing Inventory To Net Working Capital

Current Current ITNWC

Year Inventory NWC
assets liabilities

2018-19 499.28 1480.95 826.76 654.19 0.76

2019-20 518.10 2711.63 898.44 1813.19 0.28

2020-21 545.66 3783.66 1000.95 2782.95 0.19

2021-22 451.74 1995.25 1325.8 669.45 0.67

2022-23 523.16 2896.37 1456.3 1440.07 0.36

80
 Graph 4.6: Graphical Representation Of Inventory To Net Working Capital

Analysis:
With reference to the above table the ratio in 2018-19 was 0.76, in 2019-20
the ratio was 0.28 and in the year 2022-23 ratio is 0.36.

Interpretation:
It indicates that a positive trend of performance with working capital.

81
4.2.6 SUNDRY DEBTORS TURNOVER RATIO:
The percentage of sundry debtors to sales at the end of the last five years is
summarized.

Credit Sales
DTR = -------------------------
Average Debtors

Table 4.7: Statement Showing Sundry Debtors Turnover Ratio

Year Sundry Debtors Sales SDTR

2018-19 556.62 9220.45 0.06

2019-20 443.66 8736.91 0.05

2020-21 164.94 6141.47 0.02

2021-22 151.83 8437.87 0.01

2022-23 100.96 9010.67 0.01

82
 Graph 4.7: Graphical Representation Of Sundry Debtors Turnover Ratio

Analysis:
From the above table it is clear that the organization maintaining the credit sales in a
better manner. The ratio in the year 2017-18 was 0.06, it is 0.02 in the year 2021-22
and now it is 0.01 in 2022-23.

Interpretation:
The low SDTR indicates the efficient management of Credit Sales with Debtors.

83
4.2.7 Inventory Holding Period:
The inventory-holding period indicates of inventory and finished goods into
sales in a year. In other words it holds average inventory for some months or days.

360 days
Inventory holding period = ------------------------------------
Inventory turnover ratio

Table 4.8: Statement Showing Inventory Holding Period

Inventory turn Inventory holding

Year
over ratio period in days

2018-19 18.46 19.50

2019-20 16.86 21.35

2020-21 11.25 32

2021-22 18.67 19.28

2022-23 17.22 20.90

84
 Graph 4.8: Graphical Representation Of Inventory Holding Period

Analysis:
The above table and graph shows comparative period of inventory holding of
the company. A fluctuating ratio can be observed as fluctuating. Trends are
comparing with the last 5 years. Now it is increased to 20.90.

Interpretation:
High ratio indicates that the inventory is not transforming into the finished
product and caused for increase of scrape and obsolescence of inventory. In the year
2020-21 it was decreased, that indicates an increase of productivity and later it was
slightly increased in 2022–23 are 20.90.

85
 ABC ANALYSIS of 2022-23
Table 4.10 ABC analysis for 2022-2023
ABC
Category Description 2022-23 Category Value in TOTAL
Stores - Stitching machines 118.43 A 51.15
Stores - Clutch Raw Material 19.58 A 8.46
74.64
Stores - Cutting Machines 12.03 A 5.20
Stores - Systems 11.41 A 4.93
Stores -Spreading Cutting Machines 11.35 A 4.90

Stores - Threads 10.18 B 4.40

Stores - P.O.L. 9.89 B 4.27 22.8
Stores - Stores – others 21.27 B 9.19
Stores - Plant Protection Chemicals 5.86 B 2.53
Stores - Other Plant Stores 5.59 B 2.41
Stores - Thread Cutting Machines 2.62 C 1.13
Stores - Misc. Stores 2.05 C 0.88
Stores - Electrical & Electronic 0.66 C 0.29 2.56
Stores - General Tools 0.28 C 0.12
Stores - Colors 0.18 C 0.08
Stores - Clutch shifting vehicles 0.13 C 0.05
Stores -Peking covers 0.01 C 0.00
Total 231.52 100.00

86
 Figure 4.10 ABC analyses for 2022-2023
INTERPRETATION:
BRANDIX following ABC Inventovery control technque for physcical
verification of stores & spraes for better control over stocks w.r.t their value.
Stores and spares are broadly classified into A,B,C categeies by group value
wise. A categeory needs to be verified 100% every year throgh perpectual inventory
verification system. B Categeory items verified once in 2 years as the value is
moderate and C categeory will be once in 3 yrs as value is low.
The type of verification for stores & spres is perpectual inventory verification
system by using ABC Technique and for Finished goods year/period end stock
verification system.

ABC ANALYSIS OF 2020-2021

87
 ABC Value in
Category Description 2020-21 Category % Total
Stores - Stitching machines 208.92 A 60.47
Stores - Clutch Raw Material 22.72 A 6.58
79.5
Stores - Cutting Machines 18.16 A 5.26
Stores - Systems 16.49 A 4.77
Stores -Spreading Cutting Machines 8.36 A 2.42
Stores - Threads 29.69 B 8.59
Stores - P.O.L. 17.51 B 5.07
18.45
Stores - Stores – others 1.33 B 0.38
Stores - Plant Protection Chemicals 8.52 B 2.46
Stores - Other Plant Stores 6.70 B 1.94
Stores - Thread Cutting Machines 2.88 C 0.83
Stores - Misc. Stores 2.91 C 0.84
Stores - Electrical & Electronic 0.71 C 0.21 2.05
Stores - General Tools 0.35 C 0.10
Stores - Colors 0.05 C 0.02
Stores - Clutch shifting vehicles 0.17 C 0.05
Stores -Peking covers 0.00 C 0.00

Total 345.47 100.00

Table 4.11 ABC analysis for 2020-21

88
 Figure 4.11 ABC analyses for 2020-21
INTERPRETATION:
BRANDIX following ABC Inventory control technique for physcical verification
stores & spraes for better control over stocks w.r.t their value.
Stores and spares are broadly classified into A, B, C categeies by group value wise.
A categeory needs to be verified 100% every year through perpectual inventory
verification system. B Categeory items verified once in 2 years as the value is
moderate and C categeory will be once in 3 yrs as value is low.
The type of verification for stores & spares is perpectual inventory verification
system by using ABC Technique and for Finished goods year/period end stock
verification system.

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st

MARCH 2019
SCH Year ended 31st
PARTICULARS march 2019
( Rs in lakhs)
INCOME
Work & Other Services 9 24357.73
Other Income 10 4700.99
Accretion/(Decrement) to work in progress 11 2829.08

TOTAL 31887.80
EXPENTITURE

89
 Material Consumed 14453.49
Subcontracts, Off Loaded Jobs 12 4360.30
Other Direct Expenses 8266.38
Pay and Benefits to Employees 13 859.23
Taxes (Other then Income Tax) and Duties 14
Other Expenses 15 1549.88
Interest 16 492.15
Depreciation 17 407.15
Provision and Losses
18 1403.06
31792.27
Less: Write Back of Future Losses 110.52
Transfer to Other Accounts 19 221.58

Profit/(Loss) before Extraordinary Items 31460.17

Extraordinary Items: 0 427.63

Expenditure under V.R. Scheme 0
Less: Grant from Govt. of India 20
Prior Period Adjustments 0.00
0.00

(191.86)
Profit/(Loss) for the year
Loss Brought Forward from Last Year 619.49
Loss Carried To Balance Sheet
Notes forming past of Accounts 21 116335.43
115715.94
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST
MARCH 2020

Year ended 31st March

PARTICULARS SCH 2020
Rs in lakhs
INCOME
From works& other services 8 32762.78
Less: Services Tax & VAT Collection 1348.94 31413.84
Other Income 9 2653.69
Accretion/(Decrement) in
Work in progress 10 4560.69

TOTAL 38627.70

EXPENDITURE 11
Materials Consumed 19019.22

90
 Subcontract & Off Loaded Jobs and
Other Direct Expenses 12 8016.49
Pay and Benefits to Employees 13 9264.29
Other Expenses 14 1911.96
Interest & Finance charges 15 3469.67
Depreciation 406.35
Provisions and Losses 16 4514.71

Less: Transfer to other Accounts 46602.69

384.53
Profit/(Loss) before Extraordinary & 46218.16
Prior Period Items (7590.46)
Extraordinary Items:
Expenditure under V.R. Scheme
(Net of Grant in aid from Govt.
of India 4130.9
Prior Period Adjustments 17 (38739.86)

27018.41
Profit before Taxation 18.03
Provision for fringe benefit Tax 3810.99
Income tax earlier year (MAT) 3997.61
Interest on MAT of earlier year (10901.31)
Deferred Tax (Assets)
Profit after Taxation 30093.09
Balance of Loss brought for ward from
Previous year 115715.9
Balance of Loss carried over to next year 85622.85

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2021
Year ended of 31st March
PARTICULARS SCH 2021
Rs in lakhs
INCOME
From works & other services 8 38452.02
Less: Services Tax & VAT Collection 2036.96 36415.06
Other Income 9 5663.57
Provisions with drawn 16 2761.93
Accretion/(Decrement) in work in 10 4136.07
progress
TOTAL 48976.63
EXPENDITURE 11
Materials Consumed 22255.48
Subcontract & Off Loaded Jobs and 12
Other Direct expenses 13 8988.34
Pay and Benefits to employees 14 8090.62
Other Expenses 15 2590.58
Interest & Finance charges 4450.96

91
 Depreciation 582.31
Provisions and Losses 16 873.48
47831.77
Less: transfer to Other Accounts 445.22
Profit/(Loss) Before Extraordinary & 47386.55
Prior Period Items
Extraordinary Items:
Expenditure under V.R. Scheme(net of
Grant-in-aid Govt. of India). 7.72
Profit Period Adjustments (765.83)
17
Profit before taxation 2348.19
Provision for:
Fringe Benefit tax 20.80
Current year MAT 28.00
Less MAT Credit years (MAT) (28.00)
Income tax earlier year (MAT) 0.00
Interest on MAT of earlier years 528.13
Deferred tax (liability) 665.72

Profit after taxation 1133.54

Balance of loss brought forward from previous 85622.85
year
Provision towards transitional liability in respect of 252.38
Sick leave (as per ASIS)
Balance of loss carried over to next year 84741.69
Nominal value of equity share in Rupees 1000.00
Earnings per share (Basic & Diluted) in Rupees 41.00

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2022
Year ended 31st March
PARTICULARS SCH 2022
Rs in lakhs
INCOME
From works & other services 8 39581.39
Less: Service Tax & VAT Collections 2867.68 36713.71
Other Income 9 3240.65
Provisions with drawn 16 574.03
Accretion/(Decrement) in work in progress 10 6432.08
TOTAL 46960.47

92
EXPENDITURE:
Materials consumed 11 26466.04
Subcontract & off Loaded Jobs and
Other Direct Expenses 12 6210.04
Pay and Benefits to Employees 13 12693.05
Other Expenses 14 3102.79
Interest & Finance changes 15 5049.13
Depreciation 692.67
Provisions and Losses 16 1407.36
55621.08
Less: Transfer to Other Accounts 17 431.73
Profit/(Loss) before Extraordinary & 55189.35
Prior period Items (8228.88)
Extraordinary Items:
Expenditure under V.R. Scheme (net of
grant- 0.00
In-aid from Govt. of India) 5443.79
Prior Period Adjustments
Profit before taxation 13672.67
Provision for:
Fringe benefit tax 28.00
Current year MAT 0.00
Less: MAT credit entitlement 0.00
Interest on MAT of earlier years 656.77
Deferred Tax (Assets)/ liability (356.49)
Profit/(Loss) after taxation (14000.95)
Balance of loss brought forward from previous year 84741.69
Provision to words transitional liability in respect
of 0.00
Sick leave (as per ASIS) 98742.64
Balance of loss carried over to next year
Nominal value of equity share in Rupees 1000.00
Earnings per share (basic & diluted) in Rupees (485)

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST

MARCH 2023
Year ended 31stMarch
PARTICULARS SCH 2023
Rs in lakhs
INCOME
From works & other services 8 61896.05
Less: Service Tax & VAT Collections 2325.50 59570.55
Other Income 9 3804.38

93
 Provision with drawn 16 1555.82
Accretion/(Decrement) in work in 10 (1052.80)
progress
TOTAL 63877.95
EXPINDITURE:
Material Consumed 11 34457.31
Subcontracts & off Loaded Jobs and 9438.82
Other Direst Expenses 12 12989.27
Pay and benefits to Employees 13 2784.95
Other Expenses 14 5241.55
Interest & Finance changes 15 645.75
Depreciation
Provisions and Losses 16 1866.70
67424.35
Less: Transfer to other Accounts 512.11
66912.24
Profit/(Loss) before Extraordinary &
Prior Period Items (3034.29)
Prior Period Adjustments 17 345.98
Profit before taxation (3380.29)
Provision for:
Fringe benefit tax 0.00
Current year MAT
MAT liability written back (3186.15)
Interest on MAT of earlier years 0.00
Deferred tax (Assets/liability (426.55)
Profit/loss) after taxation 232.43
Balance of loss brought forward from pervious 98742.64
year
Balance of loss carried over to nest year 98510.21
Nominal value of equity share in Rupees 1000.00
Earnings per share(basic & diluted) in Rupees 8

BALANCE SHEET OF BRANDIX FOR THE YEAR ENDED 31ST

MARCH 2019
Year ended at 31st March
PARTICULARS SCH 2019
Rs in lakhs
SOURCES OF FUNDS
94
 Share Holders Funds
a) Capital 1 14431.22
b) Reserves and surplus 2 9.50 14440.72
LOAN FUNDS
a) Secured loans 3 683.24
b) Unsecured loans 4 98776.84
TOTAL
APPLICATION OF FUNDS 113900.80
Fixed Assets
a) Gross Block 5 16928.96
b) Depreciation 5 12998.54
c) Net Block 3930.42
d) Capital work in progress 52.29
INVESTMENTS 3982.71
CURRENT ASSETS LOANS & 0.00
ADVANCES 6 15537.71
a) Inventories 6 13825.06
b) Sundry Debtors 6 18419.69
c) Cash and Bank Balance 6 304.07
d) Other Current Assets 7 13813.79
e) Loans and Advances 61900.32
Less: Current Liabilities & Provision:
a) Liabilities 8 60903.08
b) Provisions 8 6795.09
67698.17
Net current assets (5797.85)
Miscellaneous expenditure (to the extent no
Written offer adjusted) 0.00
Profit and Loss account 115715.94
TOTAL 113900.80

BALANCE SHEET AS OF BRANDIX FOR THE YEAR ENDED

31ST MARCH 2020
Year ended 31st March
PARTICULARS SCH 2020
Rs in lakhs
SOURCES OF FUNDS
Share Holders Funds:

95
 a) Capital 1 14931.22
b) Reserves and Surplus 2 9.50 14940.72
LOAN FUNDS:
a) Secured Loans 3 7046.84
b) Unsecured Loans 4 61069.02 68115.86
TOTAL 83056.53
APPLICATION OF FUNDS
Fixed Assets: 5
a) Gross Block 17754.92
b) Depreciation 13302.19
c) Net Block 4452.73
d) Capital work in progress 401.51 4854.24
Deferred Tax Assets 6 10901.31
(refer note no. 11 of schedule 18B)
CURRENT ASSETS, LOANS & ADVANCE
a) Inventories 13205.73
a) Sundry Debtors 14054.91
b) Cash & Bank Balance 28169.94
c) Other Current Assets 7 8191.36
d) Loans & Advances 17198.20
80820.14
CURRENT LIABILITIES & PROVISIONS
a) Current liabilities 82163.37
b) Provisions 16978.59
99141.96
Net current assets (18321.82)
Debit balance in profit and loss account 85622.85
TOTAL 83056.58

BALANCE SHEET OF BRANDIX FOR THE YEAR ENDED 31ST

MARCH 2021
Year ended at 31st March
PARTICULARS SCH 2021
Rs in lakhs
SOURCES OF FUNDS
Share Holders Funds
c) Capital 1 28101.22
d) Reserves and surplus 2 9.50 28110.72

96
LOAN FUNDS
c) Secured loans 3 8977.54
d) Unsecured loans 4 52472.47 61450.01
TOTAL
APPLICATION OF FUNDS 89560.73
Fixed Assets
e) Gross Block 5 19214.45
f) Depreciation 5 13786.80
g) Net Block 5427.65
h) Capital work in progress 13786.80
6250.22
Deferred Tax Assets 10235.59
(refer note no. 11 of schedule18B)
CURRENT ASSETS LOANS &
ADVANCES 6 25355.22
f) Inventories 14805.34
g) Sundry Debtors 21183.47
h) Cash and Bank Balance 7169.86
i) Other Current Assets 13357.83
j) Loans and Advances 81871.99
Less: Current Liabilities & Provision:
c) Liabilities 7 78160.39
d) Provisions 15178.37
93338.76
(11466.77)
Net current assets
84741.69
Debit Balance in Profit & Loss Account
TOTAL 89560.73

BALANCE SHEET OF BRANDIX FOR THE YEAR ENDED 31ST

MARCH 2022
Year ended at 31st March
PARTICULARS SCH 2022
Rs in lakhs
SOURCES OF FUNDS
Share Holders Funds
e) Capital 1 30199.22

97
 f) Reserves and surplus 2 9.50 30208.72
LOAN FUNDS
e) Secured loans 3 6824.13
f) Unsecured loans 4 5591.64 62738.77
TOTAL 92947.49
APPLICATION OF FUNDS
Fixed Assets
i) Gross Block 5 20860.88
j) Depreciation 5 14473.03
k) Net Block 6387.85
l) Capital work in progress 515.96 6903.81
Deferred Tax Assets 10592.08
(refer note no. 10 of schedule 18B)
CURRENT ASSETS LOANS & 6 37215.31
ADVANCES 11722.32
k) Inventories 11547.09
l) Sundry Debtors 3308.29
m) Cash and Bank Balance 12909.02
n) Other Current Assets 76702.03
o) Loans and Advances
Less: Current Liabilities & Provision: 7
e) Liabilities 83329.48
f) Provisions 16663.59
99993.07
Net current assets (23291.04)
Debit Balance in Profit & Loss Account 98742.64
TOTAL 92947.49

BALANCE SHEET OF BRANDIXFOR THE YEAR ENDED 31ST

MARCH 2023
Year ended at 31st March
PARTICULARS SCH 2023
Rs in lakhs
SOURCES OF FUNDS
Share Holders Funds
g) Capital 1 30199.22

98
 h) Reserves and surplus 2 9.50 30208.72
LOAN FUNDS
g) Secured loans 3 9639.67 683.24
h) Unsecured loans 4 59383.79 98776.84
TOTAL
APPLICATION OF FUNDS 113900.80
Fixed Assets
m) Gross Block 5 21270.60
n) Depreciation 5 14393.45
o) Net Block 6877.15
p) Capital work in progress 1247.05 8124.20
Deferred Tax Assets 11018.63
(refer note no. 10 of schedule 18B)
CURRENT ASSETS LOANS & 6
ADVANCES 47889.76
p) Inventories 6031.56
q) Sundry Debtors 11006.61
r) Cash and Bank Balance 6354.28
s) Other Current Assets 13474.49
t) Loans and Advances 84756.70
Less: Current Liabilities & Provision: 7
g) Liabilities 90317.83
h) Provisions 12859.73
103177.56
Net current assets (18420.86)
Debit Balance in Profit & Loss Account 98510.21
TOTAL 99232.18

FINANCIAL POSITION AND PERFORMANCE OF THE

COMPANY

(Rs in crores)
2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
PARTICULARS

99
BALANCE
SHEET:

Sources of funds 136.81 144.31 149.31 281.01 301.99 301.99

Paid up capital 0.10 0.10 0.10 0.10 0.10 0.10
Reserves & 6.44 6.83 70.47 89.78 68.24 96.40
Surplus
Secured loans

UNSECURED
LOANS&
INTERSET: 661.22 700.99 331.14 248.71 283.16 317.84
290.22 255.46 255.46 255.46 255.46 255.46
Govt. of India 36.08 31.32 24.09 20.55 20.53 20.53
State bank of India
Others

TOTAL 1130.87 1139.01 830.57 895.61 929.48 992.32

APPLICATIONOF
FUND

Gross block 167.90 169.39 177.55 192.14 208.61 212.71

less:
Cumulative
depreciation 125.96 129.98 133.2 137.87 144.73 143.93
Net Fixed Assets 41.94 39.31 44.53 54.27 63.88 68.78
Capital work in 0.20 0.52 4.02 6.23 5.16 12.47
progress 0.00 0.00 109.01 102.36 105.92 110.18
Deferred Tax 332.38 619.00 808.20 818.72 767.02 847.57
Assets
Current Assets 407.00 676.98 991.42 933.39 999.93 1031.78
Current liabilities (74.62) (57.98) (183.22) (114.9) (232.91) (184.21)
& 1163.35 1157.16 856.23 847.42 987.43 985.10
provision
Net Current Asset
Cumulative loss

TOTAL 1130.87 1139.01 830.57 895.61 929.48 992.32

Net worth* (1026.59) (1012.85) (766.92) (566.41) (685.44) (683.11)

*Net worth*= Paid up Capital + Free Reserves – Accumulated Losses.

2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
PARTICULARS

100
PROFIT AND
LOSS
ACCOUNT:

Income:
Turn over 225.30 243.58 327.63 384.52 395.81 618.96
Work in progress (10.070 28.29 45.60 41.36 64.32 (10.53)
Other income 21.75 47.01 26.54 84.36 38.15 53.60

TOTAL 236.98 318.88 399.77 510.14 498.28 662.03

EXPENDITURE:

Materials 103.08 144.54 190.19 222.55 264.66 344.57

Direct Expenses 39.65 43.60 80.16 89.88 62.10 94.39
Pay & benefits 77.78 82.67 92.64 80.91 126.93 129.89
Taxes & Duties 4.29 8.59 13.49 20.37 28.68 23.25
Other Expenses 14.23 15.50 19.12 25.91 31.03 27.85
Provision & 8.48 14.03 45.15 8.74 14.07 18.67
Losses (0.86) (1.92) (387.40) (7.66) 54.44 3.46
Prior period 0.00 0.00 41.31 0.08 0.00 0.00
adjustments (11.64) (3.32) (3.84) (4.45) (4.32) (5.12)
Extraordinary
Items
Transfers
TOTAL 235.11 303.69 90.82 436.33 577.59 636.96
PROFIT/LOSS
BEFORE
TAX
1.87 15.19 308.95 73.81 (79.31) 25.07
Interest & 4.15 4.07 4.06 5.82 6.93 6.46
Depreciation 5.61 4.93 34.70 44.51 50.49 52.41
Depreciation (7.89) 6.19 270.70 23.48 (136.73) (33.80)
Interest 0.00 0.00 78.27 5.49 6.85 (31.86)
Profit/(Loss) 0.00 0.00 (109.01) 6.66 (3.27) (4.26)
before Tax (7.89) 6.19 300.93 11.33 (140.01) 2.32
Income Tax
Deferred Tax 0.00 0.00 0.00 2.52 0.00 0.00
Assets
Net profit/(loss)
Profit & Loss
Appropriation
Cumulative (1163.35) (1157.16) 856.23 (847.42) (987.43) (985.10)
profit/(loss)

101
CHAPTER-V
SUMMARY
FINDINGS
SUGGESTIONS
CONCLUSION
BIBLIOGRAPHY

SUMMARY

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 Inventory in a wider sense is defined as any idle resource of an enterprise. It is
commonly used to indicate raw materials in process, and finished goods, packing;
spares and others stocked in order to meet and exported demand or distribution in the
future. Even though inventory of materials is an idle resource in the sense it is not
meant for the most immediate use, it is almost necessarily to maintain some inventory
for the smooth functioning of an organization.
The benefits of an inventory can be best understood, if one imagines of an
organization working with no inventory at all. This organization on receiving a sales
order out the quantity of materials required for completing this order, wait for these to
arrive and start production. One can think of the various disadvantages way of
functioning.
Inventory management covers a large number of issues including fixation of
minimum and maximum levels; determining the size of inventory to be carried;
deciding about the issue price policy; setting receipt and inspection procedure;
determining the economic order quantity; providing proper storage facilities, keeping
check on obsolescence and setting up effective information system with regard to the
inventories.
Manufacturing firm will have subsequently high level of all three kinds of
inventory while retail or wholesale firm will have a very high level of finished goods.
Inventories like raw materials, and work in progress inventory constitute that most
significant part of current assets of a large majority of the company in India , for
example on an average inventories are approximately 60% of current assets in public
limited companies in India.
The various ratios have been calculated in relation to the inventory
management in BRANDIX APPREAL CITY INDIA.

FINDINGS

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A high inventory turnover ratio is desirable in every organization, as it is an
indicative of good management. A low inventory turnover ratio implies slow moving
or obsolete inventory. The inventory turnover ratio of Brandix apparel India pvt
ltd. in all the 5 years of study is comparatively fluctuating. It shows a somewhat
irregular trend of increase and decrease over the period of the study. It is highest that
18.67 in the year 2018-19 and at presently it was 17.22. So compared to all years, it is
clear that the stock has been utilized more efficiently to produce goods only in the
year 2019-20. So that the company should held effective inventory management to
sustainable the growth.
The raw material turnover ratio is calculated to know the level of raw materials
inventory held by the firm on an average. It was 85.20 in the year 2018-19 and 85.07
in the year of 2021-22 it is decreased to 13.5 in the year 2022-23 and gradually
decreased to 10.37 in the year 2019-20. This ratio indicates the efficiency with which
the firm converts raw materials in to work in process. It is clear from that the RMIT
ratio of Brandix is very low, the ratio showed a very erratic trend of decrease in all
the 5 years of study. So they have to increase the level of raw materials inventory
held by the firm.
As such the companies haven’t provided the adequate data for work in progress. As
given information it indicates that the increasing rate and now the rate are 961.65. So
the efficiency of conversion of work in process into finished goods of firm is
increasing rate. It is good for company.
The Inventory to net working capital ratio of Brandix in the year 2018-19 was 0.76,
in 2018-19 the ratio was 0.28 and in the year 2022-23 ratio is 0.36. It indicates that a
positive trend of performance with working capital. So the company should continue
the present policy of inventory to sustain the firm’s current growth.
From the year 2018-19 inventory holding period was high but after the respective year
it started decreasing which is good sign, but in the year 2019-20 it again started
increasing. Therefore the company should concentrate to maintain constant policies to
reduce the holding period.

SUGGESTIONS

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The following suggestions may help reduce the inventories further improved rate of
service level.
 Periodical stock verification may help the removing and non-removing dead
inventory levels.
 It is also basic consideration in inventory control brandix in deciding of the
E.O.Q.
 Proper care is required to dispatch the finished goods to various stock points.
 To earn more profits it has to concentrate on both work in progress and goods
in transit also.
 To avoid risk and damages it has to maintain a level between WIP, Goods in
transit and raw material.

CONCLUSION
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 As the study completed with a feeling of satisfaction leaving behind. It can be
amicably concluded that the company’s performance Inventory Management during
the period of the study i.e. 2018-19 to 2022-23 is good and overall inventory position
is also at superior stage. Therefore, with due consideration to analysis summary and
suggestions of the inventory can achieve greater success in terms of increase in sales,
profitability and continuity of growth and build more stronger equity than ever. As
with the minute changes that has been occurred in the ratio there can be all over
increase in the company sales, current assets, fixed assets and contributions. The
overall financial performance of the company is quite appreciable.

BIBLIOGRAPHY

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Financial Management ------------- I.M. PANDEY

Financial management ------------- KHAN & JAIN

Production & Operations Management ------------- ASHWATAPPA

Financial accounting and analysis ------------- k k VARMA

Financial management and analysis ------------- PRASANNA CHANDRA

Other sources -------------- BRANDIX Annual Reports.

WEBSITE: WWW.BRANDIXINDIA.COM

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