INVENTORY MANAGEMENT

PREFACE

Acknowledgement
I wish to express my sincere thanks to all those individuals who guided me in a proper direction and providing essential information regarding report at their part. Without support and co-operation of all, project would not have been completed I would like to express my sincere thanks to Ms. Yamini sinha (HR manager, PepsiCo, Jhagadia) who give us opportunity in their company to get training over their I would like to express my gratitude to all of HOD of the PepsiCo Holdings pvt Ltd who provides me their valuable information and data which helps me in prepared project Report; I would like to give special thanks to Chetan Thakar for providing me production planning and shipping information.

- Purvesh Kansara

Executive Summary
PepsiCo is one of the multinational company having more than 400 brands in 190 countries. In India PepsiCo having 37 bottling Plants. At Jhagadia Pepsi has started its GRB plant in 1997, PET line in 2001, Aquafina in 2003. In PepsiCo I have visited Human Resource Department, Finance Department, Production Department, Quality Control, Marketing and Dispatch and Logistic Departments. The companys Marketing Office at Ahmedabad.

Background Of The Company

PepsiCo Pvt.Ltd. is the worlds most powerful soft drink well reputed company in the FMCG market. It ranks in the most six companies in FMCG business, the history of are as under: Founder Mr. Caleb Bradham Year of foundation 1890 It was originally founded as a cure for Dyspepsia & now, its name Pepsi soft drink. 1st plant setup in the year 1905 at America. In 1936 company earn $2 billion profit. Today its business is spread in more then 190 countries with 500 companies. In Gujarat Pepsi have 1 plant. ( JHAGADIA MEGA G.I.D.C. BHARUCH ). 1st company of Pepsi in India was started at Jaipur (Raj.). In Jhagadia PepsiCo started first plant in 1997 with GRB (glass refilling bottle). In 2001 PET (poly ethylene tetracycline) was started. In 2003 AQUAFINA plant was started in Jhagadia. In 2010 SLICE plant was started in Jhagadia.

VISION & MISSION STATEMENT

VISION: PepsiCo vision is to be best Consumer Product Company in the world & wants to become the market leader in the market. Its main vision is satisfaction of supplier, customers, consumers, employees. MISSION: PepsiCos mission is to deliver the best quality product in the market & try to achieve the maximum satisfaction.

MILESTONE SINCE INCEPTION

In the year 1999 it wins Quality Assurance IQ award. In the year 2000 it wins award for 1 million hours without loss time accident. In the year 2000 it wins award for zero loss time accident. In the year 2000 it wins Pepsi Cola International Bronze Quality award. In the year 2001 it wins Pepsi Cola Beverages International Bronze Quality award. In the year 2001 it wins award for zero loss time accident.

TYPES OF COMMUNICATION CHANNELS

In PepsiCo company two types of channels are there :CHAIN COMMUNICATION:These communication exists between superior & subordinate according to there in an organizations.

FREE FLOW:In this communication each person can communicate with others freely in this network communication fast.

PRESENT PRODUCT MIX Brand

Name Pepsi Mirinda(orange ) Slice 7up Lehar Aquafina Mountain dew

200ml. 300ml. 600ml. 1liter

1.5liter 2liter

ORGANIZATION CULTURE
Organization culture consist of: Open & transparent. Free forum & chain communication. Performance linked assessment. Mutual trust & respect. Non interference in internal matters. Team work.

POLICIES OF THE COMPANY

Quality Policy We shall deliver the best product in the:Market place. Highest quality. Biggest testing. Safety Policy We shall design, construct, maintain & safe operate our plant so that they are safe for: The people working in the company. The assets of the company. The environment in & around.

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COMPANYS HEADS DETAILS

Mr. Chetan Thakkar (Plant Manager) Mr. Yashpal Jajodia (Finance Manager) Mr. Nilesh Borisa (Account Executive) Ms. Yamini Sinha (HR Manager) Mr. Zubair Shaikh (HR Executive) (Quality Head) (Production Manager) (Production executive) (Shipping Head) (Shipping Executive)

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ORGANIZATIONAL STRUCTURE
Mr.Chetan Thakar (Plant Manager)

Mr.Yashpal Jajodia (Finance Manager)

Ms.Yamini Sinha (HR Manager)

(Production Manager)

(Quality Control)

Mr.Nilesh Borisa (Account Executive)

Mr.Prakash Shah (Account Executive)

Mr.Zubair Saikh (HR Executive)

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ORGANIZATION LAYOUT

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PRODUCTION DEPARTMENT

Manufacture Manager Maintains Executive Production Executive

Utility Associate

Production Associate

Production department has to plan the production schedule as per the sales. Implementation of the item. Achieve the production target. Maintain quality with goodwill. Safety of machine. Organize the training programme.

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PRODUCT SPECIFICATION
Pepsi Colour Black Mirinda Colour Orange Mountain Dew Colour Off Green 7up Colour Like Water (No Colour)

Aquafina Colour Water Slice Colour Mango Lehar Colour Like Water (No Colour)

RAW MATERIAL USED

Water, Sugar, Preform, CO2 , Crown, Label.

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BOTTLE SPECIFICATION Particular

Height (mm) Fill Height (mm) Weight (gms) Base Diameter (mm)

For 200 ml.

For 300 ml.

209.5+1.20 247.7+1.20 57.2 57.2 312 390 54.5 59.6

PREFORM SPECIFICATION Particular

Weight (gms) Wall Thickness (mm) Length (mm)

Specification
25.5+0.3 3.5+0.25 107.4+1

Types of Material Handling Equipment Used

Fork lift truck o 2 for shipping o 2 for production o 2 for sugar godown Chain conveyer (GRB LINE) Belt conveyer (PET LINE) Plastic chain conveyer (PET LINE) Air conveyer (PET LINE)

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 Pumps (WATER TREATMENT) Roller conveyer (GRB & PET LINE)

BRIEF EXPLAINATION OF PRODUCTION PROCESS (GRB)

GRB LINE (GLASS REFILLING BOTTLE)

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Production process starts from unloading of the empty bottles from the trucks. These bottles are taken by fork lift trucks which send in the plant line. Carats from fork lift & put on the roller conveyer. Uncaser Machine Uncaser Machine keeps the bottle on the automatic conveyer belt from the carats. At once it pick up the 48 bottles from the 4 boxes on this belt 2 chips neck inspection points are set in order to remove any damage bottle after inspection are do going the further bottle. Bottle washer: (max-43000 bph) After bottle inspected bottles are goes to bottle washer. Prejecting At this point the bottle is entering into the washer machine. At this time bottle is inwarded into bottles by the jobs. The dust washed in the prejecting 400 C temperature is maintaining the capacity. Detergent 1: In this stage the tank is filled with washer & this water contain detergent. At this stage miner dust or oiliness remove. Detergent 2: Bottles are passed through detergent-1 to detergent-2 tank. The capacity of detergent-2 tank is 21800 liters.

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Warm Water: The bottles are washed by the warm water at the temperature of 600-630. Here, bottles are sterilized & almost all microbes & bacterias are killed by warm water. Cold water: At this stage bottles are washed with cold water of 300-350 C. At this stage the temperature of the bottles is bought down to normal temperature.

Refilling Bottles:

Empty bottles are refilled, which are passed through bottles. Bottles come from 4 inspection stages, the GRB capacity is 36000 bph. 80 valves in the filling bowl. The capacity of the machine is 36000 bottles per hour. The empty bottles are picked up by the filling bowl & filling automatically. Then bottles forwarded for sealing machine the bottles are sealed with the crown. After the bottles are sealed & crowned they pass through printing machine. Printing machine print the manufacturing date, time, price after this steps the bottles are ready to final inspection.

In inspection identified: o Half fill o Full fill o Dirty bottles o Different crown
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o Different bottles The bottles are forwarded by the conveyer.

Caser Machine:

Caser machine picked up 96 bottles & put into the carats then through conveyer belt; the carats are arranged into the pallets & then are arranged for fork lift truck into the finished goods godown.

GRB PLANT STRUCTURE

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(POLY ETHYLENE THYLATE)

PET LINE

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PET line is a line of plastic bottle & its maximum capacity for 500ml. bottle is 18000 bph, for 1.5 liters its capacity is 12000 bph, and for 2 liters it is 9000 bph. The entire machine on PET line is imported & is purchased from the reputed foreign companies like: Sidel (FRANCE) Linker (POLAND) Paramix (GERMANY) Krones (GERMANY)

Blow Moludar:

In blow moludar machine performs are converted into PET bottles capacity of this machine is 10400 bph. This machine is made by the Sidel (France Company) & price of this machine is 7 to 8 crore. Performs are brought in HOPPER from to blow. Moludar machine through conveyer. The computer controlling the machine automatically and decides. The temperature of oven. For controlling the temperature, sensor cameras are installed which measure the temperature. Camera checking is done after every 50 performs. 8 models are set in blow in moludar & converted into expected shape. Bottles are send unscrambler by air conveyer.

Unscrambler:

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Main function is store the bottle from BLOW MOLUDAR. Bottles are stored because it has two reasons: It needs large amount of PET bottles continually; PET bottles are stored in unscrambler machine. Blow moludar is a very high energy consumption machine, so electricity, cooling energy & continually and air is required the unscrambler machine arranges the bottle on conveyer. Air conveyer takes the bottles into filling hall. The bottles are washed for one time because some dust is their.

Filler Bowl:

There are 54 valves in Pet filler bowl. Valves pick the bottle automatically. Syrup and CO2 are filled up automatically, stop automatically and after. This crown sealed done on the bottles. Warmer: The bottle comes out from the filling halls which are very cold if these cold bottles are forwarded to the labeler then the label can not be fixed properly. The temperature of bottles is brought up to 200 to 250 C from 40 to 50 C.

Printing Machine & Labeler:

This label is fixed in particular machine label. Machine has automatic capacity of 250 bph for 500 ml. & 200 bph for 1.5 liters & 150 bph for 2.0 liters. Case Packer Machine:

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Different size boxes. 96 48 27

sized pet bottles are packed into different valves-500ml valves-1.5litres valves-2litres

Packaging Boxes:

The boxes are send forward through conveyer & boxes are going toward boxes sealing station. Here boxes are sealing automatically & arranged into godown by the lift truck operator.

SHIPPPING PROCESS

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AOP (Annual Operational Planning)

Target given to each Dealer

Order placed at plant level by all Dealers

Transportatio n Arrangement

Dispatched of Order AOP (Annual Operational planning):

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Name suggest that operational planning would be done on annual based and split in to monthly based and based on that production planning would be done, and target are given to each of all Dealers/Distributors, How it would be decided: On the basis of last year sales/forecast data and plus predefined growth rate and it would be on all plant wise and it could be decided on its potentiality Who could be done: It could be decided at Head-office, Delhi Why it could be done:

Meaning:
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Inventory can be in the form of Raw-Material (RM), work in process (WIP) or as Finished-goods (FG) Purpose of Inventory Inventory is useful for the following purposes:
Predictability: In order to engage in capacity planning and

scheduling, you need to control how much raw-material, parts, and subassemblies you process at a given time. Inventory buffers what you process.
Fluctuations in demand: Inventory is assist in estimation of demand.

You dont always know that how much stock you required at any given time, but you still need to satisfy your customers demand on time.
Unreliability of supply: Inventory kept when there is scarce of

resources or very few suppliers are available,

Price protection: Buying quantities of inventory at appropriate times

helps avoid the impact of cost inflation. When there is chances of price rising in future , better to purchase at presently at reasonable price and avoid price fluctuation cost

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 Quantity discount: often bulk discounts are available if you buy in

large rather than small quantities

Lower ordering cost: if you buy a larger quantity of an item less

frequently, the ordering costs are less than buying smaller quantities over and over again.(The costs of holding the item for a longer period of time, however, will be greater)

Types of Inventory (stock): Inventory basically falls into overall categories of raw materials, finished goods and work-in-process. Raw Materials: Used to produce partial products or completed

goods. for e.g. sugar, concentrate, performs, labels, closures etc Finished Product : This is product ready for current customer

sales, Work-in-process (WIP): Items are considered to be WIP

during the time raw material is being converted into partial product.

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Other types of inventory:

Consumables: Light bulbs, Hand towels, computer and photocopying

paper, tape, envelops, cleaning materials, lubricants, and so on.

Engineering (Service, repair, replacement and spare) items: These

are after-market items used to keep things going. As long as a machine or device of some type is being used and will need service in the future.
Buffer/Safety inventory: This type of inventory can serve various

purpose, such as:

Compensating for demand and supply uncertainties. Holding it to Decouple and separate different parts of your

operation so that they can function independently from one another.

Transit Inventory: It could be argued that product moving within a

facility is transit inventory. It may also define as the goods moving within distribution channel between you and outside to the facility user or provider.

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INVENTORY COST It has include following cost like ordering, holding cost and stock-out cost
Ordering cost: It includes all cost incurred from placing order to receive

order and include Price of goods Salaries of purchase executives Transportation cost Damage cost
Holding cost: It include all cost related from receive order to

dispatching products and has Rent of factory Security cost Insurance cost Obsolescence cost Salaries of Store manager
Stock-out cost: It said to be cost when there is non availability of

material at a time of processing of finished goods which demanded by consumer ( loss of consumer)
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TYPES OF INVENTORY SYSTEMS

1.

Economic Order Quantity (EOQ) System: It said to be place the order (in qty) at which ordering cost and carrying cost would be minimum or said to be equal,

S C O S T

P Ordering Cost Holding Cost U R EOQ

T No of orders
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Ordering cost (OC): It incurred during placing order to

receive order like salaries of procurement, transportation cost, damage cost etc. It said to high when there are many orders placed and should be optimum so that frequency of order reduced cost. From above graph OP line it can be observed that as no of order increased leads to increased in OC Holding cost: It incurred after receiving of materials to

getting into process like rent of factory, insurance, security cost and salary of store manager, it said to be zero when there is no inventories in stores and increased as store material quantity increased so quantity should be optimum.

2. ABC Inventory control system: Large no of firms have to maintain several types of inventories. It is not desirable to keep the same degree of control on all the items. The firm should pay maximum attention to those items whose value is the highest.

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The firm should, therefore, classify inventories to identify which items should receive the most efforts in controlling. The firm should be selective in its approach to control investment in various types of inventories. This analytical approach is called the ABC analysis and tends to measure the significance of each item of inventories in terms of its value.

A items represents the high-value items and would be under the

tightest control

C items represents relatively least value and would be under

simple control

B items falls in between above these two categories and require

reasonable attention of management The following steps are involved in implementing the ABC analysis: Classify the items of inventories, determining the expected use in units and the price per unit for each item

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 Determining the total value of each item by multiplying expected units by its unit price Rank the items in accordance with the total value, giving first rank to the item with highest total value and so on Compute the ratios (percentage) of number of units of each items to total units of all items and the ratio of total value of each item to total value of all items. Combine items on the basis of their relative value to form these categories-A,B and C

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% Item 1 2 3 4 5 6 7 Units 10,000 5,000 16,000 14,000 30,000 15,000 10,000 Of Total 10 5 16 14 30 15 10

Cumul ative %

Unit Price (Rs) 30.40 51.20 5.50 5.14 1.70 1.50 0.65

Total Cost

% of

Cumul ative % 70 90 100

(Rs) Total 3,04,00 38.00 0 32.00 2,56,00 11.00 0 88,000 72,000 51,000 22,500 6,500 8,00,00 0 9.00 6.38 2.81 0.81

15 45 100

Total

1,00,000

100

The tabular and graphs presentation indicate that

Item A forms a minimum proportion, 15 percentage of total units of

all items, but represents the highest value, 70 percentage

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 Item C represents 55 percentage of total units and only 10 percent

of total value
Item B occupies middle place and contains 30 percent of total units

and represents 20 percent value of total value Items A and B jointly represents 45 percent of total units and 90 percent of the investment. More than half of the total units are item C, represents merely 10 percent of total investment

100 80 C 60 O 40 S T 20 Item A Item B Item C

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30 50 70 Percentage of units

90 100

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(3) JUST IN TIME (JIT) SYSTEM: Japanese firms popularized the just-in-time (JIT) system in the world. In a JIT system material or the manufactured components and parts arrives to the manufacturing sited or stores just few hours before they are put to use. The delivery of material is synchronized with the manufacturing cycle and speed. JIT system eliminates the necessity of carrying large inventories, and thus, saves carrying and other related costs to the manufacturer. The system requires perfect understanding and coordination between the manufacturer and suppliers in the timing of delivery and quantity of the material. Poor quality material or components could halt the production. The JIT inventory system complements the total quality management (TQM). The success of the system depends on how well a company manages its suppliers. The system puts tremendous pressure on suppliers. They will have to develop adequate system and procedures to satisfactory meet the needs of manufactures.

(4) OUT-SOURCING: A few years ago there was a tendency on the parts of many companies to manufacture all components in-house. Now more and more companies

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are adopting the practice out-sourcing. Out-sourcing is a system of buying parts and components from outside rather than manufacturing them internally. Many companies develop a single source of supply.

Introduction to Inventory Management

Inventory constitutes the most significant part of current assets of a large majority of companies in India.

The term inventory refers to the stockpile of the products of the firm is offering for sale and the components that make up the product.

The various firms in which inventories exist in manufacturing companies are : Raw-materials inventories. Work-in-process inventories. Finish goods inventories.

Inventory control refers to the process whereby the investment in materials and parts carried in stock is regulated within predetermined limits, set in accordance with the inventory policy established by management.

The production manager favors relatively higher levels of inventory so that production process runs smoothly. The marketing manager

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prefers to have reserves of finished goods so that availability of product is ensured even if demand for the product keeps fluctuating.

The finance manager justify limited stock levels because of them, inventory blocks money which doesnt earn interest.

Raw materials are those basic input materials that are converted into finished product through manufacturing process. Raw materials inventories are those raw materials inventory units which have been purchased and stored for future. Work-in-process represents products that need more work before they become finished product products for sale.

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Introduction to Inventory Management in PepsiCo India Holdings (P) Ltd.

A study at PepsiCo India Holdings (P) Ltd. was carried out taking into consideration the concept f total material control, which significant that efficiency of any organization is upon having the right quality, right place in right quantity at right time and at right place in following broad areas: 1. Purchase control. 2. Storage control. 3. Warehouse Accounting. Purchase Control:

Purchasing is one of the basic functions of inventory management and forms a major part of it. It needs considerable expertise not only negotiating but also in the techniques of competition and studying in large economic trends in respect of materials to be purchased in large quantity to increase the profit.

Objective: o To maintain continuity of production.

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o To contribute toward higher productivity.

o To buy for the best ultimate value not necessary at the

lowest initial price. o To contribute towards standardization, variety reduction and value analysis programs. Functions:

Purchase time:-The purchase time indicates the lead time i.e. time taken to physically receive the material from the date of its indent. To find out the lead time five cases different items have been studied randomly, and analyzed its fact which indicates that by following the existing procedure, the administrative lead is very long i.e. 5 to 7 months, while suppliers lead time about 2 to 3 months.

Purchase quality & quantity:- It has been observed that the quantity of material is being purchase considering 6 to 12 months consumption that means no economic order quantity has been fixed for different types of material. Purchase Price:- The price of each item is being compared with suppliers quotations considering the

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quality of material to be supplied. Also the price and terms are considered. Store Control: The control of materials while in storage is affected through what is known as the perpetual inventory. Thus main functions of the perpetual inventory system have been studied which are: Receipt and issue system Maintenance of store records.

Warehouse Accounting: The procedure comes in to operation immediately on receipt of dispatched documents or dispatched intimation in the stores and covers on the activities, i.e. clearness, delivery, inspection, stock charging and preservation, issue and return of materials by the consumer and ends after striking out of balance from the stock card and delivery of documents to the account department. Stores ledger Physical stock verification.

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An insight in the study I have selected the topic INVENTORY MANAGEMENT as my special topic of finance department on which I have prepared a mini project including raw inventories, work-in-process inventories, and finished goods inventories. The subject is related with the analysis of the inventory management for the investment of inventories in the PepsiCo India holdings (P) Ltd. Objective of the study: The report includes following main objectives, are as under: To find out the operation cycle. To study of the various inventories ratio. To analysis of inventory management techniques used in the PepsiCo India Holdings (P) Ltd.

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To study and analysis the inventory management system and control practices at PepsiCo India Holdings (P) Ltd.

The objectives of the report are concerned with an Ideal Inventory Management. An ideal inventory management give the minimum storage of the different types of the inventories and maximum sales of the product of the company thats why it increase in the wealth of the company.

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