CHAPTER – 01

INTRODUCTION AND RESEARCH METHODOLOGY

This chapter presents the pharmaceutical Industry, Operational concepts, Inventory

management pharmaceutical industry in India, Introduction of the study, covers
meaning and it concept of the related subject, Statement of the Problems,
Significance of the study, objective of the study, and Hypotheses of the study,
Methodology, Sampling methods and use of statistical tools and techniques and
scope and Limitation of the study i.e.

1.1 Introduction
Inventory is one of the most expensive assets of each company. This important asset
represents so far as 50% - 70% of total invested capital. Managers have long
recognized the importance of capital. They have recognized that good quality
inventory control is an essential thing. Managers know that a Firm is able to decrease
costs by reducing on-hand inventory levels. At the same time they are aware of that
customers are not happy if inventory outages i.e. stock outs occur frequently.
Therefore companies have to make the balance among high and low inventory levels.
Cost minimization is the main part in obtaining this subtle balance. Summation of
those activities, which are essential for the acquisition, sale of storage, and use of
inventories are defined as the Inventory management. Inventory can be described as a
usable resource. It has substantial and concrete materials. The term inventory is more
comprehensive. Inventory is our stock. It is usable resource, as well as idle resource.
Inventory has to manage efficiently. Inventory Management needs to maintain the
sufficient supply of something. This is done to meet the expected demand, which is an
issue to budgeting considerations. Inventory management is largely responsible for
production functions and efficiency of the materials. When it comes to finance, it
plays a very crucial role in inventory. With the help of finance every activity is done
successfully. Financial ratio analysis is done to assess the financial condition of an
organization. It is one of the mathematical techniques to measure the financial
condition. This technique makes use of figures that usually appear in the balance
sheet, financial statements, profit and loss account and computers ratios. This
technique of financial ratio analysis uses the same figures for entirely x-ray the

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financial stability liquidity, quality of the management of that business, profitability
and concerns related to manufacturing.
1.1.1 Classes of Inventory
„Industries find that it is far more convenient to establish classes of inventory rather
than to throw everything together into one class. They separates those goods which
have bad no work done on them from those which have had some work done and
both from those which are finished.
The common inventory classifications found in Industry are:-
 Raw material ;
 Material in process;
 Finished products;
 Components parts;
 Supplies.
1.1.2 Need For Inventory Control:
Today it has become crucial thing for organizations to keep inventories of goods.
Gradually the volume of manufacturing unit is growing. In the past it was possible
for manufacturing companies to keep a sound margin of profit. They could do it
without the use of a scientific method of inventory control. There is fundamental
reason for the necessity of maintaining inventory. It is financially not sound and
physically also not possible to have goods get there in a given system accurately. The
reason is when the demand for goods arises; clients have to keep waiting till their
orders are filled from a source. When demand for the goods increases, without
inventories customers have to wait until goods were manufactured. On the other hand
customers cannot be kept waiting beyond certain period of time. That is why
inventories are necessary for all those organizations who supply physical goods to
their customers. There is one more important reason for the need of inventories to
manufacturing organisations. That factor is the high idle time cost of men and
machines. It is economical unsound to keep machines and men waiting for spare
parts, raw material etc. It is necessary for such manufacturing organisations keep
inventories on hand. Today‟s economy is an economy of industry where there are
greater demands for maintaining liquidity. Earlier there was no such pressure on
trading companies compared to present time. The best solution to prevent this high

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idle time cost is to secure a rapid turnover of capital. The most effective means of
achieving this objective can be control stock.
1.1.3 Techniques of Inventory Control:
Selective Control Techniques manner versions in the method of manage from object
to object primarily based on selective foundation. The criterion used for the reason
can be price of item criticality. Lead time, consumption, procurement problems or
something else numerous classifications are hired to render selective remedy to
exceptional forms of substances, every category emphasizing on unique factor. ABC
analysis emphasizes usage fee (i.e. Consumption items in phrases of money) VED
analysis considers criticality HML employs rate criterion and SDE evaluation is
primarily based on procurement difficulties.

Sr. No Classification Criteria

1. ABC Analysis Usage value (i.e. consumption per
period price per unit)
2. HML Analysis Unit price of material (i.e. High
medium low it does not take
Consumption into account)
3. VED Analysis (Vital-Essential By Critical value of component or
Desirable) material with respect to production
(i.e. loss of production)
4. SDE (Scarce Difficult to obtain Purchasing problems in regard to
easy to obtain) availability.
5. GOLF (Government ordinary – Source of material
Local – foreign)
6. FSN (Fast moving slow moving Issue from Stores
and non-moving)
7. SOS (Season-off Seasonal) Seasonality. This applies especially to
Analysis commodities.
8 XYZ Analysis The inventory value of items stored.
1.2. Operational Concepts of the Study
1.2.1. ABC Analysis:
ABC is basic methods of stock manage and is regularly stated to be its place to begin.
The method can be applied to almost all factors of materials management. Such as
shopping, receiving and inspection, store preserving and difficulty of shops fee
analysis etc. .A-B-C evaluation underlines a totally critical precept “Vital Few, trivial
many.” Statistics monitor that just a handful of items account for bulk of the annual
expenditure on materials. These few gadgets known as “A” objects therefore maintain
the key to enterprise. The different items referred to as B and C gadgets are numerous
in range but their contribution is much less large. ABC analysis for this reason has a
tendency to segregate all instances into three classes: A, B and C on the premise in

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their annual usage. The categorization so made permits one to pay the proper amount
of attention as merited by the object.
1.2.2. HML Analysis:
HML analysis is just like ABC analysis besides for the difference that instead of
“usage fee” “Price” criterion is used. The gadgets eight below this evaluation are
categorised into three groups which are known as “excessive” medium and “low”. To
classify the gadgets are listed in the descending order in their unit charge. The cut off
line are then constant by using the management for figuring out three categories.
1.2.3.V-E-D Analysis:
V-E-D evaluation is representing category of items on significantly. The evaluation
classifies the gadgets into three groups called, Vital, Essential and Desirable. Vital‟
category encompasses the ones objects for want to which manufacturing might come
to halt. Essential group includes gadgets whilst inventory placed fee may be very
high and ideal institution compromises price may be very high and `Desirable‟
organization contains of gadgets which do not cause any on the spot lack of
production. V-E-D evaluation is fined acceptable for spare stock. In truth it's far fine
to apply a couple of method. e.g. A-B-C and VED evaluation together might be
useful for inventory manipulate of spares.
1.2.4. S-D-E Analysis:
S-D-E evaluation classifies the gadgets into three groups called “Scarce” tough to
obtain and easy to achieve. The statistics so advanced is then used to decide
purchasing techniques. `Difficult‟ class includes the ones objects which can be to be
had indigenously but clean you got. Also item which come from a ways off distance
and for which reliable sources do now not exist fall into this category. Even the
gadgets which are tough to manufacture are to be had, belong to this institution.
Suppliers of such item require several months of enhance observe.” Easy” class
covers those items which are quite simply available. Items produced to business
standards objects wherein deliver exceeds demand and others which can be locally
available fall into this group.
1.2.5. G-O-L-F Analysis:
The G-O-L-F evaluation like S-D-E suppliers which determine best, lead time,
terms of charge, continuity or in any other case of deliver and administrative were
concerned. The analysis classifies the objects into four agencies. `G‟ institution
covers `Government‟ providers together with the STC the MMTC and the public
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quarter undertaking. Transactions with this category of suppliers involve lengthy lead
time and payments in advance or against transport‟s‟ institution accommodates of
objects procured from ordinary supplier. Transactions with this category contain mild
shipping time and availability of credit score usually inside the variety of 30 to forty
five days‟‟ institution includes terms offered from local providers. The gadgets sold
from neighbourhood suppliers are those that are cash bought on blanket orders. `F‟
group incorporate the ones items which are purchased from foreign suppliers.
1.2.6. S-O-S Analysis :
S-O-S Analysis is based on an item's seasonality or lack thereof. In the study, the
items are divided into two groups: "S" [seasonal] and "OS" [off seasonal] the
analysis identifies the following things Seasonal and only available for a short time,
such as agricultural products such raw grain and raw materials for the cigarette and
paper industries, such commodities are manufactured to last the entire year.
Occasionally available but only during certain seasons. During the harvest season,
their prices do drop. The quantity of such things must be established after weighing
the cost savings from lower fees against the greater cost of sporting inventory on-
seasonal items whose quantity is determined on one basis.
1.2.7. F-S-N Analysis:
F-S-N analysis is primarily based at the intake figures of the objects. The gadgets
underneath this analysis are classified into three corporations. F [Fast Moving], S
[Slow Moving], and N [Non Moving] this classifications is available in very on hand
whilst we choice to manipulate obsolescence. Items categorized as S and N,
especially N objects require very splendid attention. There may be several seasons
why an object has got into N class. There might also have been a trade in generation
or trade within the specification of a particular spare element or the item might also
not be in use, while on F-S-N analysis is made, all such facts stand out prominently,
allowing managers to act on it in the first-class hobby of the business enterprise F-
S-N evaluation enables to discover Active items which require to be reviewed often,
Surplus objects whose shares are better than their price of consumption and Non-
moving objects which aren't being ate up.
1.2.8. X-Y-Z Analysis:
XYZ evaluation is one of the simple supply chain techniques, frequently used to
determine the inventory valuation inside a Store. It's additionally strategic because it
intends to allow the Inventory manager in exercising most manipulate over the very
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best stocked item, in terms of stock value. X-Y-Z analysis is primarily based on price
of the stocks handy nine i.e. Stock funding) gadgets whose inventory values are
excessive are called `X‟ gadgets at the same time as whose inventory values are low
are known as `Z‟ gadgets and `Y‟ objects are those that have mild stock share
1.3. Pharmaceutical Industry
1.3.1 History of Pharmaceutical Industry
The Indian Pharmaceutical industrial development is divided into four eras. First is
called pre 1970 era, second era is between 1970-1990, third era is 1990-2005, and
fourth era starts since 2005 till date.
Pre 1970: During this period of early stage Indian Pharmaceutical industry was
primarily cantered on Ayurveda therapies and medicines. The Industry of allopathic
medicines was introduced by British rulers in India. During this early phase of Indian
Pharmaceutical industry the size of the industry was very small. There were very less
number of Indian firms, which scaled down the size of the industry. The Multi-
National Companies (MNC‟s) has mainly conquered this era. This early time was
administered by the Patent Act 1911. This act prevented both product and process
patent for 16 years which more can be expanded for 10 years. As a result it was illegal
for the indigenous firms could not manufacture the patented drugs, as it was illegal
under the act to produce drugs for local firms.
1970-1990: in this era Indian Patent Act 1970 was dominant. This act supported
procedure patent and never supported product patent. The Indian Pharmaceutical
industry saw its golden days during this era. As the indigenous companies accepted
“reverse engineering process” method to manufacture drugs. They did not give any
royalty to the patentee. As well Drug Price Control Order had released an order to
give very small incentive to MNCs for introducing new drugs. Production
infrastructure has developed after numbers of Pharmaceutical companies started. The
government of India came forward and took various initiatives to promote exports.
1990-2005: India government adopted the policy of globalization, liberalization, and
privatization in 1991. It impacted almost all the sectors in the country. It encouraged
MNC‟s to enter the liberalised domestic market of country. Several Indian companies
also entered in the foreign countries to launch new operations in their markets. The
entire world started recognising India as the most important place to manufacture
generic drugs. India became one of the founder colleagues of World Trade
Organization (WTO) in 1995. World Trade Organisation (WTO) and Trade

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Intellectual Property Right (TRIPS) had some norms to follow. The government of
India had to amend the Patent Act accordingly from process patent to product patent.
The patent act 1970 was approved and amended in the year 2005. It was further
known as Patent Act 2005. According to this act product patents was implemented for
the period of 20 years in India. As a result the level of competition for the product
patent was raised. After this act the structure of drug production changed completely.
Those companies who were producing patented drug, needed to obtain license before
the expiry of patent. To procure license companies have to pay heavy fees.
Consequently, the pharmaceutical companies in India come across through many
changes. They changed drastically by conducting research and development in the
companies, instead of merely coping drugs with reprocessing pattern. In spite of these
shifts the pharmaceutical market grew phenomenally. In comparison with overseas
cost of labor was low in India. Being the hub of technical and management personnel
there was not need of management skills from overseas in India. In manufacturing of
drugs necessary domestic availability of equipment was fulfilling.
Post 2005: There were challenges in the early phase of Indian Pharmaceutical sector.
Regardless of these challenges Indian Pharmaceutical sector proved to be the Industry
of world class generics. In post 2005 till date era Indian Pharmaceutical industry is
encouraged to conduct more research and development for new molecules. Earlier it
was only focusing on re-processing of generic drugs. In the year 2005-6 the Indian
pharmaceutical sector observed major investments. In future it was gradually dropped
down. In this present era number of local producers faced competition among
themselves as a result of Many MNCs turned towards India as their possible market.
Overseas producers in India became confident after the New Patent Act 2005. Apart
from the patent act a series of new rules and regulations were developed in 2005.
These are such as the implementation of value added tax (VAT), MRP based levy
system, and shifting of excise duty based levy system to schedule M was introduced.
The Drug and Cosmetics Act educates about factory premises and materials, plants
and equipment‟s in general and specific needs for the setup. The Indian
Pharmaceutical industry witnessed major changes in the policies. The National
Pharmaceutical Pricing Policy 2012 (NPPP-2012) was introduced to control the
pricing of the essential drugs. Before this policy essential drugs were not covered
under Drug Price Control Order. According to this Policy medicines shall have an
MRP. It should be less than the price of selling as notified by the government. New
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Drug price control Order 2013, a new policy was framed an implemented by the
director of food and drug. It was aimed to decrease the price of the drugs. 100 percent
Foreign Direct Investments (FDI) was allowed by the government in the medical
industry. The pharmaceutical companies adopted aggressive marketing strategies in
order to face the increased competition during the growth phase. They adopted this
strategy for the sale of new molecules such as Key Account Management defines
relationship between business and the customers of the business and channel
management. To give personal touch to the sales these companies appointed sales
person to contract sale organization and develop everlasting business relationships.
1.3.2. Global Scenario
The global pharmaceutical market become estimated at US$ 962 billion in 2021
growing at a muted tempo of 2.4 per cent y-o-y (on a consistent currency basis) vis-a-
vis 5.3 in step with cent in 2011. Regulated markets, inclusive of the United States,
Europe, and Japan, continued to develop at a slower tempo (vis-a-vis the rising
markets) following the patent expiry of key pills, saturation of markets and declining
productivity of research and improvement sports. Additionally, the global financial
slowdown has additionally contributed to a weaker pricing environment for branded
drugs, which in flip caused higher substitution of frequent drugs. Growth momentum
in emerging markets persisted in 2012. The USA, Europe and Japan are the dominant
markets within the global pharmaceutical industry. Sales of pharmaceutical products
in the USA and Europe had gotten smaller by 1 in keeping with cent each, even as
income in Japan remained stagnant. Sales of pharmaceutical merchandise in Asia
(aside from Japan), Africa and Australia accounted for 17 according to cent of the full
international pharmaceutical income in 2012. With recognize to remedy training
oncology retained the pinnacle spot with an 8 per cent percentage inside the basic
international pharmaceutical income. Global exports of pharmaceutical merchandise
(HS Code 30) registered a modest boom at a CAGR of 3.7 in step with cent among
2013 to 2019, from US$ 420 billion to US$ 486 billion. With a percentage of 15.4
according to cent inside the international exports of pharmaceutical merchandise,
Germany changed into the main exporter of pharmaceutical merchandise during the yr
2013, followed by means of Switzerland (11.9 per cent), Belgium (10.4 according to
cent), and USA (8.2 consistent with cent). As a location, Europe debts for
approximately 80 in keeping with cent (US$ 389 billion) of the entire exports of
pharmaceutical products. With a share of 58 according to cent (US$ 289 billion) three
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within the general worldwide imports of pharmaceutical products, Europe become the
largest importer of pharmaceutical merchandise all through the year 2013. Among the
pharm emerging markets, India registered a giant increase in exports accounting for
two.4 consistent with cent percentage in the worldwide prescribed drugs exports in
2019. China has emerged as an enormous importer of pharmaceutical merchandise.
1.3.3. Key Trends in the Industry
Some of the important thing trends in the international pharmaceutical marketplace
that have been appreciably defining the way forward inside the region are: mergers
and acquisitions - with around 615 deals signed during 2013 worth US$ 100 billion,
translating into an boom by means of 34 in step with cent in fee over the previous yr.;
patent cliff – predicted at around US$ 38.7 billion in Pharmacy revenue at chance
because of patent expiration in 2014, and some other US$ 47.5 billion in 2015; boom
in time-honoured enterprise - at nine per cent CAGR from 2009 to 2014 and
presently, estimated at US$ 129 billion; rise inside the Rand D expenditure - via the
pharmaceutical enterprise from US$ 88 billion in 2004 to US$ 135 billion in 2013,
and forecast to reach US$ 149 billion through 2018; extended outsourcing of Rand D
to Contract Research Organisations - developing at an annual charge of about 10
consistent with cent among 2008 and 2013, and accounting for round 10 in keeping
with cent of overall global pharmaceutical Rand D spend currently. Drugs, across
various healing classes, are being produced in India. The domestic formulations
enterprise is particularly fragmented, in phrases of each the variety of manufacturers
and kind of products. There are 300-400 organised players and approximately 15,000
unorganised gamers. However, organised gamers dominate the formulations market,
in terms of sales.
1.3.4. Indian Pharmaceutical Industry
Indian pharmaceutical industry may be widely divided into two durations, the pre-
patent regime (earlier than 2005) and the publish-patent regime. While the pre-patent
or procedure patent regime helped the enterprise grow to be a world-magnificence
generics industry, the submit-patent or product patent regime is geared toward
encouraging new drug discoveries over the long-time period. However, the launch of
patented merchandise in India has been gradual. India received a foothold in the
global area, with reverse-engineered well-known drugs and energetic pharmaceutical
substances (API) and now seeks to emerge as a first-rate player in outsourced medical
studies and the agreement research and production services (CRAMS) segments.
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India has the highest number of manufacturing facilities (332 sites) approved by the
US FDA. Indian pharmaceutical companies have manufacturing opportunities in two
segments - formulations and bulk drugs. The industry is dominated by exports (in
both bulk drugs and formulations), which contributed about 60 per cent to the
industry‟s sales in 2013-14. Over 100,000.
1.3.5. Challenges and Prospects Global pharmaceutical industry,
In the current years, is faced with 4 key demanding situations. These are as follows:
Global Health Care Reforms – Countries everywhere in the international are gradually
bringing about health care reforms transforming the fitness care region from a
quantity-based to a price-based totally area, considerably impacting the worldwide
pharmaceutical industry. Among the important thing trends, lowering charges,
enhancing innovation and improving marketplace get right of entry to be the defining
dreams of the healthcare reform. Specific factors of reform range by means of United
States, requiring pharmaceutical agencies adopting national methods. While many
pharmaceutical corporations are addressing these demanding situations bobbing up
out of fitness care reforms with a reactive approach, many others are considering
fitness care reforms as prominent assignment in the following couple of years in terms
of developing products that meet the desires of reformed structures. Innovation and
Value Addition - Product innovation and fee addition has end up one of the
compelling challenges for the worldwide pharmaceutical industry in view of the
ensuing patent cliff and resultant revenue loss for the drugstore corporations. This has
caused them for expanded Rand D and new product development implying
accelerated price. Productivity in Rand D is a constant assignment. Main challenges to
productiveness are managing danger without limiting innovation. The resulting patent
cliff has also improved opportunity and opposition inside the standard enterprise; but,
multiplied regulatory stress on the widespread enterprise brought by means of the
groups also envisaged to sluggish down the growth of the industry in the medium to
long term. Regulatory Compliance - Regulatory compliance has emerged as a crucial
assignment for the pharmaceutical enterprise, particularly in emerging markets, along
with Southeast Asia, India, China and Latin America. Compliance troubles facing the
pharmaceutical industry include authorities‟ rules, drug protection, counterfeiting,
statistics security and privacy, intellectual property protection, corruption and
adulteration, and A joint assignment (JV) and other 0.33-celebration dangers.
Noncompliance is cost intensive, and may expose the groups to sales losses,
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reputational dangers, affected person protection issues, criminal sanctions, and can
jeopardize the destiny of the entire commercial enterprise unit.
1.3.6. Challenges of Indian Pharmaceutical Industry
Key Challenges Data Integrity – Data integrity practices accompanied in lots of
USFDA authorised gadgets of Indian pharmaceutical corporations have emerged as a
prime undertaking for the enterprise in the current instances. Multiple statistics
integrity problems pronounced through the investigators include failure to document
activities contemporaneously; record backdating; copying existing facts as new facts;
re-jogging samples to achieve better outcomes; and fabricating or discarding facts.
However, in step with the enterprise sources, high-quality of completed tablets has not
been below the USA-FDA scanner. Nonetheless, such facts integrity troubles have
resulted into import bans, which appreciably impacted the performance of the groups,
and also the pharmaceuticals in well known. Credibility of Clinical Trial Data - India
has emerged as the appropriate location to behaviour scientific trials given its
numerous pools of sufferers with numerous remedy wishes, and access to a massive,
scientifically professional team of workers. However, potential to adjust medical trials
has now not saved tempo with this growth main to a number of suggested unethical
practices which include: confined patient reimbursement for negative activities;
approval of medication without clinical trials; and lapses in informed consent
approaches. Government of India‟s current efforts to bring in extended manage on
regulatory measures in clinical trial have ended in delays in approvals and different
complex procedural delays ensuing in slowing down of the boom in scientific trial
area. IPR - A principal trade within the patent legal guidelines in India become the
enactment of the Patent Act, 2005, which made patent legal guidelines in India
compliant with the TRIPS Agreement. Though there has been an normal improvement
in patent safety in India, current problems including granting of obligatory licenses
(CLs) have been contentious. While CLs had been regarded as a essential evil, in a
growing united states, like India, they have got additionally caused grave concerns
inside the enterprise due to the revenue loss that CLs have a tendency to cause.
1.4. Statement of the Problem
Many of us deal with inventories daily, normally without taking any bigger notice of
them. However, we try to keep the inventories low since we otherwise would run out
of space or money. Food may also be out of date if stored too long time, which

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presumes some kind of strategy behind the purchase of perishable items. Therefore,
we are all familiar with the need to manage inventories. Inventories can be visible as
stockpiles of raw materials, components, work in manner, spare components, and
finished goods and play a vital function in lots of sports. For instance, hospitals
depend on components of drugs, blood for transfusions, surgical gadget, and different
matters. We might also be grounded or delayed without airways‟ inventories of jet
fuel. These are only a few examples were lack of inventories should have poor results.
Most of the gadgets that we use at home or at paintings had been gadgets for a long
chain of manufacturing and distribution sports which are fed with the aid of various
inventories. The control and of inventory is a not unusual trouble to all agencies in
any region of the financial system. The problems of stock do no longer confine
themselves of earnings making establishments. The same sort of issues is encountered
even through social and nonprofit institutions. Inventories are not unusual to
agriculture, producers, wholesalers, shops, hospitals, churches, prisons, zoos,
universities, and country wide, kingdom, and nearby Governments. Indeed,
inventories also are applicable to the circle of relatives unit on the subject of meals,
clothing, medicines, toiletries, and so forth. On a combination country wide
foundation, the overall investment in inventory represents a great part of the gross
country wide product. Inventory problems have been encountered via each society;
however it turned into not until the 20th century that analytical strategies had been
advanced to take a look at them. The preliminary impetus for evaluation came from
production industries. It was now not tilled after the World War II that a focused
effort on hazard and uncertainty components of inventory became made. In idea,
inventory is an area of organizational operation this is nicely evolved. In practice, it's
miles very backward. This gap will slender as academic institutions integrate
substances or inventory control into their path systems.
The present research topic is select for the purpose to know the various inventory
control techniques and the inverse relationship with the profitability of pharmaceutical
industrial units in the Raigad district. It is the planning, Directing, Controlling and co-
ordinating of all the activities concerned with the material. It starts with determination
of materials. Quantity and quality and ends with final products. Thus inventory
management is an important area of both production and financial management and
plays a crucial role in cost control and reduction in any manufacturing industries. The
studies of inventory costs are generally needed for maintenance and finance. The
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importance of inventory management is to profit maximization through proper
inventory control techniques. Inventories serve a few social cause in industries which
from a few financial motives. These motives are labelled as hypothesis, transaction
and precaution. The speculative purpose which gives sufficient scope for containing
large amount of inventories isn't always important for the purpose of commercial
interest. The transaction reason results from the choice to fit influx and outflow of
fabric underneath certain manage conditions. The precautionary motive arises out of
the inability to predict future demands precisely and getting the materials ready in
time, without incurring some extra costs. Inventory management is an extremely
important problem in the study area in the management of material. The focus of the
study is on “Inventory Management”. Therefore it is decided to study on the topic of
inventory management for the present research work entitled as “A Study on
Inventory Management of Pharmaceutical Industrial Units in Raigad District”
1.5. Objectives of the Study:
1. To study the various inventory control techniques adopted for pharmaceutical
industrial units in Raigad district.
2. To measure the effectiveness of the inventory control techniques.
3. To study the stock valuation methods adopted for inventory management by
pharmaceutical industries in Raigad district.
4. To study the plan performed by various departments with reference to inventory
control.
5. To give the appropriate suggestions for better inventory management in
pharmaceutical industries.
1.6. Hypotheses of the Study:
1. H0 –There is no standard inventory control techniques in pharmaceutical
industries in sample area.
H1 – There is standard inventory control techniques in pharmaceutical industries
in sample area.
2. H0 - There is no satisfactory functional performance of various departments in
relation with inventory control in the sample organizations.
H1 - There is satisfactory functional performance of various departments in
relation with inventory control in the sample organizations.

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3. H0 - There is no significant difference between stock valuation methods adopted
for inventory management by pharmaceutical industries.
H1 - There is significant difference between stock valuation methods adopted for
inventory management by pharmaceutical industries.
1.7. Research Methodology:
In this research, the researcher has extensively studied different Pharmaceuticals units
of Raigad district and understood their management practices by conducting a survey
that almost covered the Pharmaceuticals units of the selected geographical area. For
the detailed study, the researcher has met personally the authorities, decision-makers,
middle-level management, and functional level people to collect their views and to
make some rational suggestions. The strength of any research depends on the
systematic process of collecting the data, and analysing the same in a sequential order.
The primary as well as secondary data have been collect for the present research
study.
1.7.1 Primary Data
The primary data have been collect from the selected industrial units through structure
interview schedule. For the purpose of present research study the sample respondents
is stores superintendent, stores officials and Accounts Manager ; officials of accounts
department. The information has been collect which is related to an inventory
management. The areas focuses related to inventory cost, inventory control techniques
and basic inwards procedure of inventory etc. The data used in the study has been
collected primarily from primary sources by administering structured questionnaires
and getting responses complete in all respect from 60 executives, and top level
managers working with various Inventory across the Pharmaceuticals industry in the
Study area. Structured interviews were also conducted with selected managers, Store
Managers, Accounts mangers and of various operators so as to ascertain their specific
needs in the Inventory system proposed to be developed that would be useful for
inventory and maintenance management. In order to elicit relevant information, a
survey method is adopted at the outset a pilot survey was conducted to clarify and
finalize certain key issues. After the pilot survey, to collect the responses, a
comprehensive questionnaire was administered by personally visiting the selected
samples. After the pilot survey, the researcher has made some suggested changes as

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per the guide and industry experts and made the questionnaire more relevant and
feasible.
1.7.2 Secondary Data
The secondary data have been collect through research articles, books, published and
unpublished research papers, M. Phil. dissertations, Ph. D. thesis, records of store
department, records of inventory control department, published annual reports and
manuals of the selected industrial units in Raigad district. Lastly, the researcher has
also referred to many foreign authors and global studies to know and compare the
Indian and global Pharmacy industry, the scope for export, and the total global
demand for Pharmacy. The researcher has visited different libraries universities and
institutions, special to mention. Khardekar library, Shivaji University, Raigad district
reports, Indian Journals and International Journals and International research papers,
Pharmaceuticals Industry, Various website to Pharmacy industry and M.Phil and
Ph.D. thesis and dissertations
1.7.3. Sample Selection:
The researcher has selected the sample units from the population i,e Pharmaceuticals
units of Raigad district. The district has split into talukas based on Stratified sampling
method. This had helped the researcher to cover the geographical and tropical factors
of Raigad district. Every taluka has a different number of Pharmaceuticals Units
therefore the taluka is base for the cluster. Then the taluka wise sample
Pharmaceuticals Units are selected on the bases of size using stratified sampling
method. In the Raigad district 22 pharmaceutical industries working from Raigad
district. The turnovers of the industries and number of manufacturing products and
quantities have been considering the criteria for the selection of industries for the
present research study. The name of the selected industries is as follows;
Table 1.1
Table Showing Selected Sample Size
Sr. No. Area Population Sample Size
1 Mahad 9 9
2 Roha 3 3
3 Khopoli 3 3
4 Rasayani 3 2
5 Taloja 3 3
6 Total 22 20
Source: Primary data

15
The above table data indicates that sample size of the Pharmaceuticals industry in
Raigad district. A sample design is a specific plan for acquiring a pattern from a
given populace. It refers back to the approach or the technique that the researcher
might undertake in selecting items for the pattern. Sample layout can also as well lay
down the variety of objects to be protected inside the sample i.e. the size of the
sample. The sample should be determined before data are collected. For the present
study, researcher has selected 20 pharmaceuticals units from Raigad district. The list
of the selected pharmacy industries is given under table.
Table: 1.2
Table Showing List of Selected Companies
S. N Company Name Address
1. Piramal Enterprises Limited Mahad Mahad
2. Deva Drill Tech Ltd Mahad Mahad
3. IPCA Laboratories Ltd Mahad/ Kolad Mahad
4. Dharia Impex Private Limited Rasayani
5. M/S. Hikal Limited Mahad/Navi Mumbai Mahad
6. Sandoz Private Limited Mahad/Roha Roha
7. PLEX Laboratory Mahad Mahad
8. Perfect Protein Private Limited Roha
9. MAC Organic Pvt Ltd Mahad Mahad
10. Sequent Scientific Ltd Mahad/ Navi Mumbai Mahad
11. Aqua Pharma Chemical Pvt Ltd Mahad Mahad
12. Fredun Pharmaceuticals Mahad
13. Prachi Pharmaceuticals Private Limited Navi Mumbai Taloja
14. Piramal Pharma Limited Mahad / Navi Mumbai Mahad
15. Kopran Ltd Mahad Mahad
16. Titan Laboratories Private Limited Mahad
17. Aastrid Life Sciences Pvt. Ltd Mahad/ Navi Mumbai Taloja
18. Blue Jet Healthcare Private Limited Mahad Mahad
19. Unichem Laboratory Ltd Roha Midc Mumbai
20. Kemo Pharma Ltd , Khopoli MIDC Roha
21. Cipla Pharmaceuticals Industries Rasaiyani
22. ASTEC Limited Mahad / Navi, Mumbai Mahad
Source: District Industrial Report
The hundred percent samples have been considered for the present research study.
There are number pharmaceutical companies working the study area but for the
purpose of present research study the researcher have been taken only pure
pharmaceutical companies which worked as raw material, work in progress and
finished goods and other pharmaceutical companies in the study area are not taken

16
because of the working as speciality pharmaceutical companies. For the present
research work researcher has used censes method for collection of the data because
the samples of the pharmaceutical industries are small size so researcher has chosen
censes method for the present research work. The reason for use of Census sampling
method there is need a statistical investigation is which the data are collected for each
and every unit of the pharmaceutical industries population.
1.8. Validity and Reliability:
Validity is described as the truth or accuracy of the studies. It is also described
because the extent to which the facts series device measures as well as the
appropriateness of the measures coming to accurate conclusions (Saunders, et al,
2009). The researcher gave questionnaire to experienced folks who are informed and
expert inside the region of have a look at. They were asked to independently evaluate
and critique each item of the questionnaire in the terms of relevance to the objective
and hypothesis of the study. Further it was pre-tested with selected sample as above
discussed and after their valuable suggestions, questionnaire was modified.
Reliability is defined as the consistency of either measurement or design to give the
same conclusions if used different times by different scholars. The reliability of the
questionnaire was computed using SPSS to determine the Cronbach‟s Alpha
coefficient. If Alpha value is 0.7 and above, then the questionnaire is considered
satisfactory. After data collection, reliability analysis was done and the findings for
each of the variables are presented in the table below.
Table-: 1.3
Table showing Reliability of Scale
Sr. Scale for Question Cronbach‟s Result Valid
No. Alpha Cases
1 Questionnaire for Manager .812 Satisfactory 65
2 Questionnaire for Store .860 Satisfactory 55
3 Questionnaire for Accounts manger .803 Satisfactory 55

Source: Primary Data

It can be observed that, this is done on Cronbach”s alpha model of Questionnaire for
Manager, which is 0.812, this is reliable Questionnaire for Store of the study area
importance rating on Cronbach‟ s alpha is 0.86 and Questionnaire for Accounts
manager Cronbach‟ s alpha model is 0.803. It has been concluded that Cronbach‟ s
alpha of all variables is good it means that data is reliable for the present study.

17
1.9. Data Analysis and Presentation
The collected data was exposed and represent with the help of statistical tools and
techniques like classification, tabulation, percentage, diagrams, charts, and graphs,
and also collected data from respondents are analysed with help of SPSS and MS
Excel to get systematic and accurate results. The researcher has placed the collected
data in the tabulated format and used the statistical techniques for analysing the data.
The version of SPSS 22.0 is used for analysis. In SPSS the variables are created with
proper attributes and scales. The necessary scales are used based on the questionnaire.
The variable view has created a tabular format for feeding input from respective data
collected for that attribute and variable. The data view has included all the data in
numerical and tabular form. The same data is analysed accessed and stored as per the
researcher‟s discretion. SPSS has provided readymade drop-down menus for drawing
frequency tables. The researcher has used the tools and put the frequency table and
the necessary inference and interpretation are drawn out of it. The collected data have
been be analysed by using appropriate statistical tools and techniques. The researchers
have been also use the software like SPSS, MS-EXCEL. The data compiled through
primary and secondary source have been be tabulated in structured tables followed in
the text. The percentage, average, standard deviation, coefficients of variation and
correlation have been using for the purpose of analysis. On the basis of data analysis
the researcher have been make the various types of charts and diagrams such as
column charts, bar diagram, pie diagram and line diagram.
1.9.1. Statistical Tools:
After the gathering of information from the field it turned into coded and summarized
on the premise of the research questions for the purpose of evaluation. The statistics
were analysed with the help of statistical tools including frequencies, chances,
suggest, Standard Deviation, percentile, SPSS, Chi Square Test, t-Test, Paired Sample
t-check, Factor Analysis, and presented through tables and graphs.
Correlations: Correlation is a statistical measure that expresses the volume to which
two variables is linearly associated (that means they change together at a consistent
charge). It's a not unusual device for describing simple relationships without making a
declaration about purpose and impact.
One Sample T test: The one-sample t-test is used when we want to know whether
our sample comes from a particular population but we do not have full population

18
information available to us. For instance, we may want to know if a particular sample
of college students is similar to or different from college students in general.
ANOVA: ANOVA is helpful for testing three or more variables. It is similar to
multiple two-sample t-tests. However, it results in less type I errors and is appropriate
for a range of issues. ANOVA groups differences by comparing the means of each
group and includes spreading out the variance into diverse sources.
Descriptive Statistics: Descriptive data are brief descriptive coefficients that
summarize a given facts set, which can be either a representation of the complete
population or a sample of a population. Descriptive statistics is broken down into
measures of primary tendency and measures of variability.
1.9.2. Major Parameter of the Study
The below table explain the use of parameters for the present research work.
Table: 1.4
Parameter of the Study
Use of Parameters
S.N Manger perspective Account Manger
Store Manger
1.
Name of the Company: Age Age
2.
Age Experience Experience
3.
Experience Designation Designation
4.
Designation About Inventory system About Inventory system
5.
About Inventory system Standard of inventory Standard of inventory
management techniques management techniques
6.
Type of the Company Stock valuation methods
Policies And Procedures
To Control Inventory
7. Inventory Management Inventory Management
Stock valuation methods
Practices and Methods Practices and Methods
8. Inventory Management Stock Valuation Stock Valuation
Practices and Methods Methods Methods
9. Stock Valuation
Effects of Control Effects of Control
Methods
techniques techniques
10. Satisfaction about Satisfaction about
Effects of Control
Functional Performance Functional Performance
techniques
of the Inventory of the Inventory
11. Satisfaction about Problems of Inventory Problems of Inventory
Functional Performance Management Management
of the Inventory

19
The above table indicates that the selected parameters for the present study. This
study Inventory Management Practices are independent variables, whereas Firms
Operational Performance is the dependent variable and Knowledge of Inventory
managements and Impact of inventory control system as the mediating variable. The
scale to measure each constructs being adopted from past highly sighted and related
literature as per the study objectives. All of the constructs are evaluated using a 5-
point Likert scale and Categorical scale.
1.9.3. Test of Normality
For the continuous data, test of the normality is an important step for deciding the
measures of central tendency and statistical methods for data analysis. When our data
follow normal distribution, parametric tests otherwise nonparametric methods are
used to compare the groups. The following table researcher has applied test of
normality on the basis of hypothetical data collected from selected respondents from
pharmaceuticals industry in Raigad district.
Table: 1.5
Tests of Normality for system of standard inventory control techniques
Kolmogorov-Smirnova Shapiro-Wilk
Sr.No Statistic df Sig. Statistic df Sig.
V1 .272 20 .000 .859 20 .008
V2 .332 20 .000 .751 20 .000
V3 .388 20 .000 .741 20 .000
V4 .520 20 .000 .354 20 .000
V5 .400 20 .000 .739 20 .000
a. Lilliefors Significance Correction - - -
Source: Primary Data
The above table data shows the Tests of Normality for system of standard inventory
control techniques. The results of both the Kolmogorov-Smirnov and Shapiro-Wilk
tests, it appears that none of the variables (V1, V2, V3, V4, and V5) follow a normal
distribution. This is important to know when applying statistical techniques that
assume normality, as alternative methods or non-parametric tests may be more
appropriate for analysing these data. As per Kolmogorov and Sharpio Wilk test all
the variables data are significant. It is concluded that there is Shapiro-Wilk Sig. (.000)
value is less than Level of significance (0.05). On the other hand, Kolmogorov-

20
Simronov significance values of all parameters are less than level of significance
(0.05). It is implied that data of all parameters are data are significant.
Table: 1.6
Tests of Normality about Functional Performance of the Inventory

Kolmogorov-Smirnova Shapiro-Wilk
Variables Statistic df Sig. Statistic df Sig.
Manager opinion .150 20 .200* .930 20 .153
Store Manager opinion .159 20 .200* .966 20 .674
Accounts manager Opinion .127 20 .200* .952 20 .392
a. Lilliefors Significance Correction - - -
*. This is a lower bound of the true significance. -- -
Source: Primary data
The above table data shows the Tests of Normality for Satisfaction about Functional
Performance of the Inventory As per Kolmogorov and Sharpio Wilk test all the
variables data are significant. It is concluded that there is Shapiro-Wilk Sig. (.000)
value is less than Level of significance (0.05). On the other hand, Kolmogorov-
Smirnovv significance values of all parameters are less than level of significance
(0.05). It is implied that data of all parameters are data are significant.
Table: 1.7
Tests of Normality Stock valuation method and According to Pharmacy
Company
Kolmogorov-Smirnova Shapiro-Wilk
Variables Statistic df Sig. Statistic df Sig.

According Pharmacy Company .077 20 .200* .960 20 .551

Stock valuation method .355 20 .000 .715 20 .000

a. Lilliefors Significance Correction - - -

*. This is a lower bound of the true significance. - -

Source: Primary Data
The above table data shows the Tests of Normality Stock valuation method and
According to Pharmacy Company. As per Kolmogorov and Sharpio Wilk test all the
variables data are significant. It is concluded that there is Shapiro-Wilk Sig. (.000)
value is less than Level of significance (0.05). On the other hand, Kolmogorov-
Smirnovv significance values of all parameters are less than level of significance
(0.05). It is implied that data of all parameters are data are significant.

21
1.10. Significance of the Study:
Pharmacy inventory management is the science and art of managing the inventory of
pharmacy effectively whereby the process or system helps the manager/owner reduce
cost, improve operational efficiency, and minimize overstocking and opportunity loss.
Inventory is the accounting of items, component parts and raw materials that a
company either uses in production or sells. As a business leader, you practice
inventory management in order to ensure that you have enough stock on hand and to
identify when there's a shortage. Poor inventory management can also result in failing
to sell items before their expiry dates or not putting returned or uncollected repeat
prescriptions back into stock. In short, effective inventory management is necessary to
improve cash flow, increase margins by reducing waste and improve the service you
offer. There are some aspects which are influenced on the effective `Inventory
Management‟ in the industries hence that makes it an important topic for the present
research exercise. The inventory management is needed for proper inventory control
and it brings several advantages and economics in purchasing. Management makes
every attempt to purchase the inventories in bulk and to take the advantages of
favourable market conditions.
1) The importance of inventory is in connection with
 What is inventory
 Why inventory
 Need of inventory and it‟s production
2) The effective and proper inventory control techniques useful for the profit
maximization.
3) The inventory management and control as an integrated approach which is
useful for cost control and cost reduction.
4) The basic contribution of material and its cost in production – Proper
inventory control helps increasing and maintaining buffer stock of raw
materials to meet any inequality in difficult times. Production variations can
be avoided by receiving and recording of all goods rolled in the store and store
and keeping up to date trace of every outgoing items.
1.11. Scope of the Study:
1. Geographical Scope: A geographical scope of study is confined to the
Pharmaceuticals Industries management of selected sample industries in Raigad

22
district. The geographic al area of the present study is restricted to all the 6 talukas of
Raigad district especially the industrial areas in all the talukas of Raigad district. It
covers the Industrial and MIDC area in Raigad district.
2. Topical Scope: The topical scope focuses on the various inventory control
techniques adopted by the department, material cost as well as purchase and store
functioning of the companies. The managerial functions have been discussed such as
planning, organization, direction and controlling the inventory of the sample units.
The selected pharmaceutical industries have been working with raw material, work in
progress and finished goods, so the topical scope of the present study is raw material,
work in progress and finished goods.
3. Analytical Scope: The analytical scope covers the fulfilment of the objectives. The
study is confined with practical, applied, and meaningful suggestions for the
development of sample Pharmaceuticals units of Raigad district. The researcher has
covered all together 20 Pharmaceuticals units situated in 6 different talukas of Raigad
district. The researcher has considered the size of units, different technology
pharmaceuticals units are within the scope of the study.
4. Periodical Scope: The period selected for the study is five years, i.e. F.Y. 2016-17 to
F.Y. 2021-22. Primary and secondary data related to this period is collected and analyzed.
1.12. Limitations of the Study:
1. The study is limited to the Raigad district only, where there are 22
Pharmaceutical companies working in the district out of which only 20 have been
selected.
2. The researchers have been focus only on the inventory management practices of
the selected sample units.
3. The recent five years have been taken for the present research study.
4. The research is based on collected data from various available sources. The
confidentiality of the data may be the delimiting factor of this research.
1.13. Chapter Scheme
The research study is divided into 5 chapters are as follows –
Chapter I – Introduction and Research Methodology:
This chapter deals with Introduction of the topic, statement of the problem, objectives
of the study, hypotheses of the study, research methodology which includes data

23
collection methods, data analysis methods, significance of the study, scope and
limitation of the study, and chapter scheme of the study.
Chapter II – Review of Literature and Conceptual Framework:
This chapter includes overall review of literature related to selected topic as well as
the conceptual framework which helps to clear the various concepts related to selected
topic.
Chapter III –Profile of the Study area:
This chapter deals with the brief profile of the selected industrial units from Raigad
district and Overview of the Raigad district. The recent data have been taken into
consideration for the present research topic. This chapter creating a profile of a study
area involves providing detailed information about the geographic location, physical
characteristics, demographic data, and relevant features of the area under
investigation.
Chapter IV – Data Analysis and Interpretation:
This chapter includes the data analysis and its interpretation. Data collection and
analysis are considered to be the most important steps and a core of research work.
With the help of statistical tools and proper techniques, the next logical step is to
analyse and interpret the data in order to find empirical solutions to the problem. The
above chapter "Data Analysis and Interpretation" is divided into the following five
sections:
Section I - Analysis with Respect to Manager Perspectives
Section –II - Analysis with Respect to Store Manager Perspectives
Section –III - Analysis with Respect to Account Manager Perspectives
Section-IV: Analysis of Performance of Inventory
Section- V: Testing Of Hypothesis
For the data analysis of the research, the researcher used various tools and techniques,
such as the mean, standard deviation, and stepwise regression. In order to test the
hypothesis, the researcher applied a one-way Analysis of Variance Correlation, and T-
test was performed by using SPSS (demo version 20) and Microsoft Excel.
Chapter V – Findings, Suggestions and Conclusion:
This chapter involves the findings, suggestion and conclusion of the research study.
The present chapter aims to collect the various phases of the study and summary of
the research with the main findings has been presented. In this chapter, an attempt is
made to bring the key findings and to arrive at the conclusion. Based on these
24
findings, a few suggestions have also been made. The study also throws light on
future directions.
 Findings related to Manager Perspectives
 Findings related to Store Manager Perspectives
 Findings related to Account Manager Perspectives
 Findings related to Performance of Inventory
Bibliography
The books, Magazines, journal and website used during the collection of theory and
secondary have mentioned in the thesis.
1.14. Conclusions
This research proposes to get publicity in inventory and it's far very essential to the
organization. It is to make certain first-rate in enterprise that controls the transaction
among the consumer items. It is vital to do proper inventory control and manipulate
within the production business enterprise. The bankruptcy additionally throws mild on
the history of the research study, the declaration of hassle, the targets and the
hypotheses set for the research examine and importance and limitations of the studies
take a look at. A detailed view of the research methodology used for the study has
been presented. It includes the research plan and research design, sample size and
sampling technique, the sources of data collection, designing of questionnaire, data
analysis and statistical tests and tools used and the experiences of the researcher.
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