A STUDY ON INVENTORY

MANAGEMENT AND CONTROL

Nkosinathi Mancoba Nkosi

ABSTRACT
This research propose to get exposure in inventory and it is very important to the company. It is to
ensure quality in business that control the transaction between the consumer goods. It is important
to do proper inventory management and control in the production company. This project is to analyse the
inventory control in the leading brake manufacturing company (WABCO Eswatini). This study shows the
analysis of ABC items in the inventory, SAP, stock policy followed. It deals with entire process carried in
inventory department. Also it was found that there no proper demand forecasting by the company it
is done only by suppliers and supply materials to the company along with the demand forecasted in SAP.
This affecting the production process in the company. It is suggested that to develop communication
between the suppliers and properly forecast the demand. This will result in managing inventory and
use man-power according to the demand in order to produce more and control the inventory
space.
Key words: - SAP, ABC analysis, Total quality

INTRODUCTION
The term stock alludes to the merchandise or materials utilized by a firm with the end goal
of generation and deal. It additionally incorporates the things, which are utilized as strong
materials to encourage generation
There are three fundamental sorts of stock: crude materials, work-in-advance and
completed merchandise.
Crude materials are the things bought by firms for use underway of completed item.
Work-in-advance comprises of all things as of now during the time spent creation.
Stock constitutes one of the vital things of current resources, which licenses smooth
operation of creation and
deal procedure of a firm. Stock administration is that part of current resources administration,
which is worried about keeping up ideal interest in stock and applying successful control
Stock enhancement in production network, ABC investigation is a stock order technique
which comprises in partitioning things into three classes, A, B and C: A being the most
profitable things, C being the minimum significant ones. This strategy plans to draw
directors' consideration on the basic few (A-Things) and not on the paltry numerous(C-
Things)
NEED FOR THE STUDY
Stock is basic for everything to get their assets proficiently and
Requirement for consider is to execute appropriate determining by the organization and
enhance correspondence process between the staffs with offices. To direct ABC examination
on the organization stock to decrease the Dead stock and utilization of materials keeping in
mind the end goal to deliver an item by appropriate determining of interest.

OBJECTIVES OF THE STUDY

To analyze the inventory management of this company.

To analyze the control measures taken by Brake Manufacturing Company on their
own terms using on inventory management.
To analyze the techniques used by the company in inventory management.
To suggest the suitable technique to the company to have improved control over the
inventory

SCOPE OF THE STUDY

This study is to find the facts and opinions of inventory management and control at the
brake manufacturing plant.
In accordance with the present trends it aims mainly at finding out the inventory control
procedures.
This study gives the brief information about the inventory management of the leading
break manufacturing company

LITERATURE REVIEW

Success of any industrial undertaking depends upon

1) Money 2) Manpower 3) Machine 4) Market 5) Material 6) Management
Materials are pivotal importance not less than any other M’s. Problems have their in
material
root affects the efficiency of all men, machine, money & marketing decisions of the firms
and thus become the grave concern of management at all levels. If there were too much of
material problems like ideal funds lied up in excessive inventory storage and obsolesces
difficulties market pressure would arise. Thus the importance of inventory management is
realized. A number of studies have been done in the field of inventory management by various
researchers. Some of them are given below;

1. Bern at de William year 2008

This study tells that the main focus of inventory management is on transportation and
warehousing. The decision taken by management depend s on the traditional method of
inventory control models. The traditional method of inventory management is how much useful in
these days the author tell about it. He is also saying that the traditional method is not a cost
reducing, it is so much expensive. But the managing the inventory is most important work for any
manufacturing unit.
2. Jon Schreibfeder 1992

He said that it is easy to turn cash into inventory, the challenge is to turn inventory back into cash.
In early1990’s many distributors recognize that they needed help controlling and managing their
largest asset inventory. In response to this need several companies developed
comprehensive inventory management modules and systems. These new package include
many new features designed to help distributors effectively managed
warehouse stock. But after implementing this many distributors do not feel that they have gained
control of their inventory
3. Wolf Bagby, Managing inventory

In this study Mr. W.Bagby explains that by managing the inventory it becomes easier for the organization
to meet the profit goals, shorter the cash cycle, avoid inventory shortage, avoid excessive carrying costs for
unused inventory, and improve profitability by decreasing cash conversion and adopt JIT system.
According to this study companies need to get smart about inventory.
Boosting financial performance is another benefit that comes from better inventory management.
Infect large number of manufacturers enjoy savings and better performance by choosing the approach of
inventory reduction. For this company needs to maximize the cash flow and profitability and this
includes keeping a watchful discerning eye on charge in supply and demand?
4. Asfaque Ahmed October 12, 2004
He said that most of the manufacturing company vendors have planning and scheduling product
which assume requirements or infinite quantities of raw material and WIP materials for calculating
production capacity
There are many problems with this approach and how to avoid these by making sure that the product
you are buying indeed takes into account finite quantities of required materials as well as finite
capacities of work centers in your manufacturing facilities.
4. D.Hoopman April 7, 2003
(Article from inventory planning and optimization)
In this article he said that inventory optimization recognize that different industry have different
inventory
profiles and requirements. Research has indicated that solutions are priced in a large range from
tens of thousands of dollars to millions of dollars. In this niche market sector price is definitely not an
indicator of the quality of solution, ROI and usability are paramount
5. Silver, Edward A Dec22, 2002

This article considers the context of a population of items for which the assumption
underlying the EOQ derivation holds reasonably well. However as is frequently the cash in practices
there is an aggregate constraints that applies to the population as a whole.
The existence of budget to be allocated among the stocks of the items and a
purchasing production facility having the capability to process at most a certain number of
replenishment per year. Because of the constraint the individual replenishment quantities cannot
be selected independently.
6. Charles Atkinson
(A study on inventory management)
In the study by Mr. Charles Atkinson, he explained the inventory management and
assessment of inventory levels. As per this study inventory management need to address two issue
Part I. How to optimize average inventory levels.
Part II. How to assess (evaluate) inventory levels.
This study tells about what the manager should do and not to do, and how much amount should be order in
one placed orders. Average inventory can be calculated by simplistic method.
Average inventory = beginning inventory +end inv./2
7. Delaunay C, Sahin E, 2007.
A lots of work has been done but now if we want to go ahead we must have good visibility upon this
field of research. That is why we are focused on frame work for an exhaustive review on the problem
of supply chain management with inventory inaccuracies. The author said that their aim in this work is
also to
present the most important criterion that allow a distinction between the different types of
managing the inventory

RESEARCH METHODOLOGY
METHODOLOGY OF THE STUDY

Research is an organized, systematic, data based, critical, objective scientific inquiry into a
specific problem, undertaken with the purpose of finding solutions to it. The research provides
the needed information that guides managers to make informed decisions to successfully deal
with the problem.

Here I am adapting different kinds of methods depending on the natures of the study and
information

OBJECTIVES OF THE RESEARCH

To analyze the inventory management of this company.

To analyze the entire activities of purchase and stores department.
To suggest the suitable technique to the company to have improved control

TYPE OF DATA

Primary data- The primary data is collected by personal interviews with officials.
Secondary data- Articles, annual reports, PDF. Which have already been passed
through the analyzing process are the secondary data used.
Field work- This was under taken individually to collect information regarding the

RESEARCH VARIABLES

To find out the cost involved in the entire inventory management process.
To ensure that the supply of raw material & finished goods will remain continuous so
that production process is not halted and demands of customers are duly met.
To minimize carrying cost of inventory.
To keep investment in inventory at optimum level.
To reduce the losses of theft, obsolescence & wastage etc.
To make arrangement for sale of slow moving items.

LIMITATIONS OF THE RESEARCH

Time restriction was only 2 months for research in the company.

The study is related to the only one leading Brake manufacturing
company only. The finding and suggestion cannot be generalized.
The study covered a wide concept hence wide collection and coverage of
DATA INTERPRETATION AND ANALYSIS

Data Analysis

ABC analysis for the year of 2017

Material Description Val stock Stock Rate classification
code volume
100138310 crankcase 977,008.52 1061 92.08 A

100312250 Valve (Ref part 109,524.19 4907 22.31 B

no:8995000462)
100335540 Spring 28,734.72 3250 8.841 C

100338250 Vent Filter 21,549.85 27628 0.78 C

100340490 Piston 6,425.46 657 9.78 C

100344411 Stem (Ref Part 107,312.16 11144 9.62 B

No:4613327704)

100939370 Closure plug 111,910.02 94839 1.18 B

4127046926 Crankshaft- 570,969.00 1431 39.9 A

Forging-Volvo
704

Chart no: 4.6

ON THE BASIS OF RATE

1%
20%

A
B
79%
C
INFERENCE
From the above observation, it is evident that 80% of profits come from 20% of the
materials. I.e. crank case and crank shaft provides a value of 50%, which is the highest
compared to other parts.
Chart no: 4.7
ON THE BASIS OF VOLUME

6%

24%

A
B
70%
C

INFERENCE
From the above observation it is visible that 25% of profits comes from 75%
I.e. from the above observation it seems that piston which occupies the space of 75%
provides only a profit of 25%which is the highest in volume compared to other parts.

ABC analysis for the year of 2016

Material code Description Val stock Stock volume Rate classification

100138310 crankcase 955,008.52 1040 90.08 A

100312250 Valve (Ref part 119,524.19 4920 24.30 B

no:8995000462)
100335540 Spring 29,764.72 3350 9.141 C

100338250 Vent Filter 22,579.85 29658 1.55 C

100340490 Piston 6,555.46 6697 9.99 C

100344411 Stem (Ref Part 187,312.16 17744 12.24 B

No:4613327704)
100939370 Closure plug 160,910.02 99649 3.124 B

4127046926 Crankshaft- 590,642.00 1311 40.21 A

Forging-Volvo
704
 Chart no: 4.8

ON THE BASIS OF RATE

11%

21%
A

68% B
C

INFERENCE
From the above observation, it is evident that 80% of profits come from 20% of the
materials. I.e. crank case provides a value of 47%, which is the highest compared to other
parts
Chart no: 4.9
ON THE BASIS OF VOLUME

A
4%

B
C 39% A
57% B
C

INFERENCE
From the above observation, it is visible that 57% of volume consumed from the 43%
I.e. from the above observation it seems that C which occupies the space of 57% provides
only a profit of 40% which is the highest in volume compared to other parts
 POSITION OF SALES AND INVENTORY

AVERAGE
YEAR MARCH 16 MARCH 15 INVENTORY

SALES (IN CRS) 1838.27 1347.96 1593.115

INVENTORIES (IN
CRS) 175.64 117.97 146.805

Chart no: 4.10

POSITION OF SALES AND INVENTORY

2000 1838.27
1800
1600
1347.96
1400
1200
1000
800
600
400
117.97 175.64
200
0
Jan-15 Jan-16

sales inventories

INFERENCE
From the above observation, it is evident that there is been an increase of 26% of sales in the
year 2016. Which is a found be caused as a result of proper forecasting.

FINDINGS
During the last two years’ position of sales and inventory 2015 to 2016. The inventory
level increased from
117.97 crores to 175.64 crores. It indicates a growth rate of 26% of sales. But the inventory
ABC Analysis: This firm has to buy more of C Category items rather than AB but at the same
time it has to keep a close watch on Focused goods that is high valued goods as it is kept in low
volume but a close assistance is given since value of these goods is high.
No proper communication between the staffs.
There is no demand forecasting within the company that makes the inventory to make
decision delayed in inventory

SUGGESTION
Under the ABC analysis, the management must have more control on C items than that on A &
B items, because C class constitutes more of higher values. There should not be tight control
exercised on stock levels, to avoid deterioration. This is done through maintaining low
safety stock levels, This is done through maintaining low safety stock levels, continuous
check on schedules & ordered frequently in inventories, to avoid over investment of working
capital
Communication between the staff’s needed to improve more in order to act as soon as possible
during orders
Company has to update the data in SAP timely
Necessity in improving communication between staffs with departments
Not only by suppliers in forecasting demand has company also needed to maintain
communication with suppliers in order to know the demand so company can manage
inventory
CONCLUSION

This study contains proper observation of inventory management in the company. A

better inventory
management can solve all the problems occur in inventory and helping the company to face the
problems by following proper techniques and controlling. This will reduce the huge
money
Inventory is timely changing physical asset which is sold or being a dead stock have by the
company. It creates
way for the production process if shortage occurs in the production and also it gets
An efficient inventory management can control and make the company to grow more and if in
inefficient way it
will ruin the company business. Companies are always concentrates on domestic as well as

This study is on leading brake manufacturing company conducting ABC analysis for items
predicting the future
From the study it is shown that buying of materials and shortage occurs due to improper way
of forecasting the
ABC analysis is carried to find out the materials which are moves fast and important to the
company and which