DISSERTATION REPORT

On

The Impact Of Inventory Management On Customer Satisfaction.

UNDER THE GUIDANCE OF

Mrs. SHASHWATI BHOWMICK Ma’am

FDDI CHHINDWARA

SUBMITTED BY:

BHARTI MORE

ROLL No: 177101

B.sc (Retail and fashion merchandising)

Class of 2017

Date

Place

CHHINDWARA
 In partial Fulfillment of Award of Bachelor’s Degree

In Retail Management

To

Footwear Design & Development Institute

Chhindwara(M.P)

DECLARATION

I, BHARTI MORE student of B.sc (Retail and fashion merchandising)

from Footwear Design & Development Institute Chhindwara, hearby
declare that I have completed Dissertation on “ The Impact of Inventory
Management on customer satisfaction” as part of the course
requirement.

I further declare that the information presented in this project is true

and original to the best of my knowledge.
 CERTIFICATE

It is certified that Bharti more student of B.sc – Retail And Fashion

Merchandising at footwear design and development institute
chhindwara(M.P) having title - The impact of inventory management
on customer satisfaction has successfully completed the dissertation
Report under the guidance of Mrs. Shashwati Bhowmick Ma’am.

Submitted By

Bharti More

Submitted To

Mrs. Shashwati Bhowmick

HOD of RFM
 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to Mrs. Shashwati

Bhowmick Ma’am, who gave me the golden opportunity to do this
wonderful project of “Inventory management on customer satisfaction”
who also helped me in completing my project. I came to know about so
many new things I m really thankful to them. Her cooperation and
guidance helped me to progress on a daily basis, without which I would
not have been able to accomplish dissertation smoothly.

Submitted By Submitted To

Bharti more Mrs. Shashwati

Bhowmick
 TABLE OF CONTENT
S.No Content Page
no.

1. Introduction 6-16

2. Literature review 17-21

3. Scope of the study 22

4. Research Objectives 23

5. Hypothesis 24

6. Research Methodology 25-

7. Data Analysis

8. Findings

9 Conclusion

10. Recommendation

11. Bibliography

Introduction To The study

The inventory management in recent times has become a relevant
and topical issue in the strategically dynamic business environment
for growth and sustainability. Inventory management is one of the
most critical areas in retail, planning and strategy, since in the
constantly changing market economy, it may constitute a significant
activity determining the success of a business organization, if it is
handled, keeping in mind the evaluation of all aspects linked with
customer satisfaction. Customer satisfaction as a major determinant
of business performance is highly relevant to the long term success
of an efficient inventory management system. Customer satisfaction
is therefore, very significant to marketing concept with strong
reasons of strategic linkages between overall quality and customer
satisfaction. Customer satisfaction has shifted the centre stage that
generates the important value to other distant areas that are
important when compared with other issues. In the past, inventory
management was not seen as being significant because excess
inventory was conceptualized as an indication of being wealthy and
therefore over stocking was encouraged. But in recent time
companies accepts effective inventory control management
currently control inventory and reduce costs yet remaining
competitive. Inventory has been estimated to take care of about
30% of business investment in capital. Inventory control greatly
increases profitability by minimizing costs related to storage
handling of materials. The reasons for keeping inventory according
to researchers are that too much stock could lead to tying down of
funds, Increment in holding cost, deterioration of materials,
obsolescence and theft. Managing assets of various kinds connotes
inventory problems, since it is the same principle for cash and fixed
assets. The relationship between ordering costs and holding cost is a
feature of the transaction approach to inventory management that is
seen in the inventory model that has been in place many decades
ago. Inventory threatens a firm existence so its control and
management must be critical to a firm. Much inventory takes up a
great space, creates financial burdens and increase damages,
spoilage and loss. Major objective of inventory management is to
improve services to the customer. This is executed through guard
against stock out as a result of changes in demand in the market.
Inventory management therefore, attempts to increase the
efficiency in production. Thus inventory management is important
to a firm success in logistics. Inventory management aims at
achieving the needed customer service given the minimum
inventory commitment. This kind of research need to be done in this
era as the inventory is becoming more sophisticated part of business
as it involves major costs in the form of raw materials, work in
progress and caring costs. The collaboration on which helps in the
sense of feedback is very much necessary for higher inventory turns,
repeat purchases, customer loyalty and delivery of quality products
on time with minimum lead times after maintaining the inventory
levels for higher levels of customer satisfaction. Inventory
management measures consisted of inventory levels, order lead
time and inventory turns. Customer satisfaction measures consisted
of repeat purchases, customer loyalty, on time delivery, flexibility
and quality. Customer collaboration measures consisted of trust.
Inventory management is more than simply moving and organizing
inventory efficiently. It is also about keeping your customers happy.
It includes all of the big and small pieces involved in the logistics of
keeping inventory moving into the warehouse and out of the
warehouse at an ideal pace. It means always having enough parts
and products on hand at all times to meet and even exceed your
customers’ expectations while avoiding having too many items on
hand because that can lead to increased carrying costs, inefficient
use of warehouse space, and even product spoilage and
obsolescence if you are not careful.
Customer service is the way you treat your customers, and
inventory management is how you maintain the right items in your
stores and warehouses in order to treat your customer’s right. You
can’t keep a promise if you do not have the promised products in
your possession. So it is extremely important that you manage your
inventory wisely and avoid letting your customers down.
Improved customer satisfaction can be achieved by better inventory
management. On time orders fulfillment by suppliers satisfies
customers. This crafts chain members to keep safety stocks for
execution of purchaser’s order or go into long term relations who
need loyalty and trust. Loyalty is a wish to maintain a relationship
and can be distinct in three dimensions; inputs to it, its robustness
and its constant uniformity. Just in time, vendor management
inventory and consignment inventory allow members of the chain to
please customer’s needs by providing on time deliverance which
insist the customer for repetition of purchases. It points out with the
intention of purchaser fulfillment is achieved by decreasing cycle
time of order and it guides that through decreasing production lead
time of the manufacturer the deliveries to the purchaser should be
on time. Buyers get pleased while merchandisers are quick to
respond as well as they have flexibility in responses. Customers
want to get defect free products.

Relationship between inventory management and

customer satisfaction.
The correlation values expressed a positive significant association
among inventories management and customer satisfaction. Our
results were supported by Eckert which states active
considerations of inventory management by fulfilling customer’s
needs lead to better satisfaction of customers. Satisfaction of
customers was achieved when orders were fulfilled on time by their
suppliers. This is the reason due to which chain partners were
compelled to maintain safety stocks for considerations of inventory
management by fulfilling customer’s needs lead to better
satisfaction of customers. Satisfaction of customers was achieved
when orders were fulfilled on considerations of inventory
management by fulfilling customer’s needs lead to better
satisfaction of customers. Satisfaction of customers was achieved
when orders were fulfilled on time by their suppliers.

This is the reason due to which chain partners were compelled to

maintain safety stocks for fulfilling the orders of customers or go
into extensive strong relations which involve trust as well as
commitment. This is the reason due to which chain partners were
compelled to maintain safety stocks for fulfilling the orders of
customers or go into extensive strong relations which involve trust
as well as commitment. A good managed inventory improved
inventory turns, repeat purchasing, minimized returns of inventory,
increased flexibility and customer loyalty due to superior quality.
Without active considerations of improved inventory
management customer needs cannot be fulfilled on time.

INVENTORY MANAGEMENT
Inventory refers to the goods stocked for future use. Every retail
chain has its own warehouse to stock the merchandise to be used
when the existing stock replenishes. Inventory management refers
to the storage of products to be used at the time of crisis.
The retailer keeps a track of the stocked goods and makes sure there
is surplus inventory to avoid being “out of stock”. Such a process is
called as inventory management. Inventory management is now
recognized as a discipline under supply chain management together
with manufacturing operations, purchasing, transportation and
physical distribution. Lambert(2001) defines supply chain
management as an all encompassing discipline that involves all
integrated activities that bring the product to the market and
satisfies the customer’s need and aims at linking all the partners
from the manufacturers, distributors, to the retailer until the
product reaches the customer. These activities are cost drivers in an
organization and would affect it’s profitability and competitive
advantage. It is therefore the aim of any firm to minimize the cost to
efficiently and sustainably meet demand. The main objective of
inventory management is to inform managers how much to re-
order, when to re-order, how frequently products should be
reordered and the minimum safety stock required. Effective
inventory management system enables firm to minimize any
complexities encountered and anticipated in planning or execution
and controlling of resources. By improving inventory management
system, a firm can greatly improve the top and bottom line of
business. In most cases, inventory is the largest contributor to the
working capital and operational cost of a company and hence should
be given great emphasis by firm management.
out of stock levels in retail stores are quite frequent. This not only
affects the sales and conversion of inventory to cash, but also affects
the service levels of the store. In the modern retail industry,
unavailability of product does not only result to immediate sales
misses, but is also a major reflection of poor quality. Firm therefore
tend to hold excess inventories while avoiding the poor service
levels and lost sales.
The excess inventories on the other hand can cause unnecessary
costs to the firm. Noel & Jeff(2001) notes that in today’s competitive
retail environment, delivering high quality service can be treated as
the basic retailing strategy. The retail service quality is
characterized by the quality of interaction, the physical environment
quality and the outcome quality. The physical environment quality
includes the presence and quality of goods being consumed. This
indicates that lack of product on shelf affects the service quality of a
retailer and eventually affects ability to attract retail customers.

Inventory management and control

An inventory management policy is required for a retail business to
thrive. A successful inventory policy is one that guides the store on
how much to order, the reorder points, and the optimum
replenishment cycles. For this to work, demand planning and
forecasting is needed and required safety stocks should be defined.
To maintain competitive edge in a world that has higher variability
in demand, retailers would need to have an appropriate inventory
policy to ensure that they do not run out of stock and hence loss of
sales. Variability in demand also leads to overstock which leads to
higher costs and lower inventory turnover. Inventory management
is one of the key enables in executing inventory management. It
increases operational efficiency while ensuring cost reduction.

Some important terms on inventory

management
 3PL
Third party logistics is any provider of outsourced logistics.
This could include warehousing, fulfillment services,
shipping, or any other inventory-related logistics.

 Buffer stock
Buffer stock is known as safety stock held in a reserve to
guard against shortages: maybe customers suddenly can’t
get enough and haven’t factored that into the demand, or
maybe there’s a delay with the supplier. In any case, buffer
stock keeps covered.
  Cost of goods sold
COGS are the direct costs associated with the production of
goods, and carrying costs associated with those goods.

 CSV File
Comma separated value file. This is a file, usually in excel,
which allows value to be saved in a table format, keeping
separate columns for different information.

 ECONOMIC ORDER QUANTITY

EOQ is a complicated-looking equation used to measure
something pretty simple: how much should re-order, taking
into account demand and inventory holding costs.

 INVENTORY HOLDING COSTS

The cost business incurs in storing and holding inventory In
warehouse until sale to the customer.
Cost of shipping, storing, import fees, duties, taxes and other costs
associated with transporting and buying the inventory.

 RE-ORDER POINT
The point at which we decide it’s time to re-order –taking
into account current and future demand, along with how
long it will take supplier to send the new order.

 SKU
Stock keeping units or SKUs are unique tracking
numbers that assign to each of products, indicating
style, size, color and other attributes.
 STOCK OUT
Stock out refers to a situation when the retailer fails to fulfill
the consumer’s requirement due to lack of merchandise. The
merchandise is not available in the current inventory and
thus the customer has to return home empty handed.

STORE INVENTORY MANAGEMENT IN

PANTALOONS
To manage physical inventories, pantaloons adopted
platinum standard process as per following terms.
 Warehouse inward/outward done on daily basis.
 Register hygiene checked on daily basis by
warehouse manager.
 Walk way bay is clean and tidy.
 Display of tagging standards done and new
arrivals simple displayed on the rack.
 Stocks are segregated as per
season/brand/MC/DM’s wise.
 LITERATURE REVIEW
Inventory management is considered as major concerns of
every organization. It requires operational processes to be
followed and maintained on the floor and in inventory
management systems. Coupled with operations, it entails
continuous study, analysis and decision making to control
and manage inventory levels. The aim of inventory
management is to hold inventories at the lowest possible
cost, given the objective to ensure uninterrupted suppliers
for ongoing operations. When making decisions on inventory
management has to find a compromise between the different
cost components, such as the cost of supplying inventory,
inventory-holding costs and costs resulting from insufficient
inventories.
Improved customer satisfaction can be achieved by better
inventory management. On time orders fulfillment by
suppliers satisfies customer(will ding,2003) The members of
the chain to keep safety stocks for execution of purchaser
orders or go into long term relations which need loyalty and
trust. Loyalty is a wish for to maintain a relationship and can
be distinct in three dimensions; inputs to it, its robustness
and its constant uniformity.
Just in time, vendor management inventory and
consignment inventory allow members of the chain to please
customer’s needs by providing on time deliverance which
insist the customer for repetition of purchases (Wang, 2000
,Elliot and Arnold,2008). It points out with the intention of
purchaser fulfillment is achieved by decreasing cycle time of
order and it guides that through decreasing production lead
time of the manufacturer the deliveries to the purchaser
should be on time. Buyers get pleased while merchandisers
are quick to respond as well as they have flexibility in
responses. Customers want to get defect free products.
In the theoretical literature, a vast array of inventory
management best practices just in time, vendor managed
inventory, collaborative planning, forecasting and
replenishment, automatic replenishment, agile system, and
material requirement planning abound.

Inventory management is a management cum operations

function. It requires operational processes to be followed
and maintained on the floor and in inventory management
systems. Coupled with operations, it entails continuous
study, analysis management systems. Coupled with
operations, it entails continuous study, analysis and decision
making to control and manage inventory levels. The aim of
inventory management is to hold inventories at the lowest
possible cost, given the objectives to ensure uninterrupted
supplies for ongoing operations. When making decisions on
inventory, management has to find a compromise between
the different cost components, such as the cost of supplying
inventory, inventory-holding costs and Costs resulting from
insufficient inventories
According to Wild (2002), inventory controls is the activity
which organizes the availability of items to the customers. It
coordinates the purchasing, manufacturing and distribution
function to meet the marketing needs. This role includes the
supply of current sale items, new products, consumables,
spare parts, obsolescent items and all other supplies.
Inventory enables a company to support the customer
service, logistic or manufacturing activities in situations
where purchasing or manufacturing of the items is not able
to satisfy the demand. Lack of satisfaction could arise either
because of the speed of purchasing or manufacturing is too
protracted, or because quantities cannot be provided
without stocks. Clodfelter (2003) added that a good
inventory management system offers a wide range of
benefits as the proper relationship between sales and
inventory can better be well maintained. First, without
inventory control procedures in place, the stores
department can become overstocked or under stocked. Next,
inventory control systems provide a business with
information needed to take markdowns by identifying slow-
selling merchandise. Discovering such items early in the
season will allow a business to reduce prices or make a
change in marketing strategy before consumer demand
completely disappear.
Marfo-Yiadom et al. (2008) also added that holding large
quantity of inventory offers wide range of benefits to an
organization and can as well be associated with certain
costs. They noted among other things that, holding large
inventory helps to ensure that: possibility of disruption to
production from a stock out is remote, large stocks mean
that large orders can be placed so that buyers can negotiate
favorable prices and thus get trade discounts, material
drawn from a large stock will maintain a constant quality
whereas if stocks are replenished frequently, separate
batches may have slight differences, large stock protects the
firm against price increases for a few months, large stocks
mean fewer and less frequent orders, which will cut the cost
of buying inventory. They further asserted that the
associated cost of holding excessive inventory includes
obsolescence, deterioration, increased cost of storage and
store operation and Interest charges. They concluded that if
proper stock control is not put in place to balance the
benefits and the cost associated with holding large stock,
then this can have devastating consequences to an
organization. Emphasizing the pertinence of the study,
Gourdin (2001) noted that inventory is one
area of logistics that has received a great deal of
management attention over the decade. Executives now
realize that holding excessive stocks is simply too expensive.
Therefore, a great deal of effort has been expended to
eliminate unnecessary inventory without compromising
customer service. However there are numerous situations
where inventory simply must be held, particularly when
meeting the needs of global customers. Management’s goal
should be to hold only what is necessary to situations
where inventory simply must be held, particularly when
meeting the needs of global customers.
According to Joshi (2000), the objectives of inventory
management are as follows: to reduce cost of holding stock,
to avoid investment in stock outs (running out of stock) so as
to ensure that production cycle operates smoothly. The first
aim persuades the business to reduce the levels of inventory
whereas second one prompts it to increase the same. Marfo-
Yiadom et al (2008) also noted that the main objectives of
stock control are two: first, to maintain adequate sock to
avoid production stoppages and consequent customer
dissatisfaction, loss of revenue and increase cost of
emergency action and second to avoid excessive stock levels
and consequent tying up of capital. Deloof, (2003),
concluded that the inventory conversion period has a
negative effect on a business’s performance. He posited that,
shortening the inventory conversion period could increase
stock out costs of inventory which results in losing sales
opportunities and leads to poor performance. Managers of
firms should therefore keep their inventory to an optimum
level since mismanagement of inventory will lead to their
inventory to an optimum level.
 Scope of the Study
 Store inventory Management and control are the
most important part of retail sectors.
 which leads to customer service, lead time, cost,
stock counting and warehouse operational
performance.
 In today scenario, inventory management plays an
important role in proper controlling of stock, high
efficiency and rapid service to customer.
 This study would determine effective inventory
management and propose the operational activity
at retail sector. In any retail sector, warehouse
operational policies are the main part to cost
controlling.

Research Objective
The main objective of this study is to have a deeper
understanding on impact of inventory management
on customer satisfaction.
 To study the concept of inventory management.
 To study the importance of Inventory management in
a retail store.
 To study the role of inventory management in
effective customer service.
 To study the Impact of inventory management on
customer satisfaction.

Hypothesis

 H1:Inventory Management contribute significantly to

profit.
 H0: Inventory management does not contribute to
profit.
 H1: Inventory management reduces the risk of
inventory shortage.
 H0: Inventory management does not affect much the
risk of inventory shortage.
  H1: Inventory management impacts customer
retention.
 HO: Inventory management cannot affect customer
retention.

 H1: Inventory management plays a significant role in

ensuring Customer Satisfaction.
 H0: inventory management plays an insignificant role
in ensuring customer satisfaction.

RESEARCH METHODOLOGY

Inventory uses well-recognized TOC (“theory of

constraints”) dynamic buffer technology together with the
LEAN pull replenishment approach in order to manage
your inventory levels efficiently to satisfy customers.
TOC dynamic buffer helps to set and adjust appropriate
stock levels for each item in each location using inventory
state levels rather than forecasting. This simple approach
helps to overcome the majority of forecasting issues, such
as unpredictable forecasting errors and insufficient
planning data for new items with no history. It also helps
to manage stock levels with greater efficiency during and
after sales campaigns.
 Dynamic buffer technology means stock self-adjustment,
when inventory levels are used as a signal rather than an
analysis and forecast of sales and/or consumption.
The buffer is divided into 3 zones.
 Green is used for high inventory level
 Yellow for optimal inventory level
 Red for low inventory level
The first illustration shows a periodically replenished
inventory, where re-order quantities are calculated
from the buffer size.

The inventory level should be changed, when:

 Demand changes
 Lead time changes
 Unreliable supply occurs
 A permanent customer is lost

 An item’s end of life changes

 A promotion campaign is on

 Competitors start acting more aggressively

There are other factors

The next illustration shows how stock level is changed
when demand increases.

The next illustration shows how stock level decreases when re-order period
becomes shorter.
 Decreases re-order period

DATA ANALYSIS

This is a measurement of the number of line items on

sales orders shipped complete in one shipment on or
before the date the material was promised to the
customer. The customer service level is a great tool for
determining how well you are servicing your customers.
But some companies make it even better! They know that
just having a product in stock doesn’t ensure a satisfied
customer. They want to be sure that each order
completely meets the customer’s expectations. They
utilize a tool that is often called customer satisfaction
analysis. This analysis reflects the percentage of
customer orders that are filled correctly and completely,
on or before the promise date. In addition to inadequate
stock, the customer satisfaction analysis reflects situations
where:

THE ANALYSIS OF INVENTORY MANAGEMENT ON

CUSTOMER SATISFACTION

The financial management of firms pursues broad

coverage regarding inventory, but in terms of financial
analysis, we consider relevant the inventory structure
and its rotation. The inventory structure allows the
financial analyst to highlight the following aspects: - the
oversize or sub dimensioning of inventory elements; -
highlighting inactive inventory or slow-moving inventory,
which generates expenditures; - the evolution over time
of inventory structure. The relevant inventory for an
enterprise is: raw materials, work-in-process and finished
goods. The increase of the share of raw materials within
total inventory reflects the following aspects: - the
oversize of stock supply; - the existence of inactive or
slowly moving raw materials; - reducing other categories
of inventory due to the shortening of the production
cycle and the speeding of distribution.
A significant deviation from the planned inventory of raw
materials or from their share in enterprises with similar
activity indicates deficiencies on the line of management
for these inventory categories. The increase of the share
of the work-in-process takes place when the production
cycle increases, which can have objective causes if the
assortment structure of the production has changed, or
subjective causes if there are difficulties in supplying,
accidental interruptions or other causes. Increasing the
share of stocks of finished goods is recorded when the
enterprise faces difficulties with the distribution of the
production. In this case, the production on stock causes a
financial blockage, the enterprise turns to additional
credits and faces financial difficulties. Conducting an
analysis of inventory rotation provides information about
the duration during which inventory moves successively
through the economic cycle of supplying, production and
distribution. Increasing the rotation speed of inventory
means increasing the efficiency of its use and, implicitly,
additional profit simultaneously with the release of
financial resources. The specific analysis indicator is
Inventory Turnover Ratio expressed by a Number of
rotations (NoAI) or the Days’ sales in inventory (DdAI).

where: TO is the turnover; AI - average inventory,

calculated as arithmetic mean between the value at the
beginning and the value at the end of the management
period; T - analyzed period in days.
The number of rotation for inventory shows how many
times the inventory of a company goes successively
through the stages of supply, production and distribution
during a management period and is recovered through
sales. Another signification of this indicator suggests the
ability of the company to transform current assets in
money or trade receivables. A slow rotation speed may
be a negative signal for managers, as well as for investors
and shareholders regarding the real capacity of the
company to sell its production. The particularities of the
production are an important factor is assessing the
inventory size . In the production stage, the inventory
level must be adapted to the variations of quantity,
quality, price and time so that it’s necessary to have a
control and adjusting system for inventory according to
mathematic patterns in order to reduce as much as
possible the risks induced by the unexpected changes of
the market factors. Companies coordinate the
requirements of the processing, distribution, financing
and management functions with the exigencies of the
demand with the help of inventory management and
control. Sale success depends on the ability to provide
the products and services requested by the consumers in
conditions of profitability. In the activity of organizations,
the development of control practices for inventory is
largely due to the direction of management systems
towards implementing the concept of Total Quality
Management .
Conducting in dynamic an analysis of the inventory
rotation highlights the influences of the determining
elements that impact the change in the efficiency of
inventory management according to the following
relations: - The influence exercised by the change of the
turnover: The increase of the number of rotations during
a time period is equivalent with their participation on
several times to creating the turnover, which is the main
source of recovery of the costs and for obtaining a profit.
At the same time, by reducing the period when the
inventory is stationed in the economic cycle, the
expenses with depositing the raw materials, work-in-
process and finished goods are reduced so that the costs
are lower, another favorable effect being the shortening
of the capital expenditure period for inventory The
evolution of sales clearly influences the inventory size
and efficiency. To study the correlation between
inventory size and sales as expression of the demand on
the market we can use an analysis model in which
inventory is expressed depending on two influence
factors, namely average daily sales (Ds) and rotation
speed, expressed as stationing period in the economic
cycle, according to the next relation:
Material resources are immobilized or released by
changing the inventory rotation speed. The relation that
expresses the size of the released or immobilized
inventory, needed to achieve daily sales in the current
period. The expression actually signifies additional or
less number of days for which the inventory size is
changed depending on the average daily sales. If the
calculated value of the expression is negative, the
situation must be interpreted as being favorable to the
company because material resources are released and
the financing need of the current activity is smaller.

The expression actually signifies additional or less

number of days for which the inventory size is changed
depending on the average daily sales. If the calculated
value of the expression is negative, the situation must be
interpreted as being favourable to the company because
Inventory is the largest and probably the most important
asset of many distributors. More money is likely tied up
in inventory than in buildings or equipment. And
inventory is usually less “liquid” than accounts
receivable. That is, it’s harder to turn inventory back into
cash to pay employees and expenses. If distributors do
not have this money invested in the right amount of the
right products, they cannot provide the service to
customers necessary to be successful. It is crucial that
every distributor develops and uses a comprehensive set
of tools that allows them to closely monitor the
performance of their investment in inventory. In this
document we will discuss several simple measurements
that will help ensure that you are maximizing the
profitability and productivity of your investment in
inventory.
Customer Satisfaction Level The first measurement is
“customer service level,” or how often you have the
items you’ve committed to stock when your customers
want them. It is the most important measurement
because if you don’t have what your customers want,
when they want it, they will probably look for it
elsewhere. The customer service level is calculated with
the following formula:
Number of line items for stocked products shipped
complete in one shipment by the promise date Total
number of line items for stocked products ordered
Notice that we measure line items shipped complete.
That is, when the entire quantity ordered is delivered by
the date promised to the customer. If the customer
orders ten pieces, and you ship ten pieces, you get credit
toward the customer service level. But if a customer
orders 25 pieces, and you ship only 24 pieces before the
promise date, you get no credit. Why no “partial credit”
for shipping 24 out of 25 pieces?

• If the customer wanted 24 pieces, he or she would

have ordered 24 pieces. They want 25! The customer has
to find that last one somewhere else. Probably at your
competitor’s warehouse down the street.

• Even if your customer doesn’t immediately need all 25

pieces and can wait for you to receive more in a
replenishment shipment, your failure to have all 25
pieces in stock causes them to experience the cost of
processing two stock receipts (and your warehouse to
absorb the cost of filling two orders for the single
transaction).
 When calculating your customer satisfaction level, we
only include sales of stocked items that are filled using
warehouse inventory. We don’t include sales of other
kinds of products such as: Special order items—Items
that you do stock, but are specially ordered to fill specific
customer requirements. Direct or “drop” shipments—
Material sent directly from a vendor to your customer.
Shipments of these types of items do not reflect how
well you stock material to meet your customers’
immediate needs. Distributors who include special order
items and direct shipments when calculating a customer
service level tend to overstate how well they are serving
their customers from warehouse inventory.

Sure, you would probably like to be able to fill 100

percent of customer requests for stock items out of your
warehouse inventory. But this is often not practical. To
understand why, let’s look at a graph that compares the
number of customer orders for a popular stock item
against the quantity ordered on each order:
 Quantity order graph

Inventory turnover measures the number of times we

sell or “turn” our average inventory investment. In other
words it determines the number of “opportunities to
earn a profit” you experience each year from your
investment in stock inventory. Inventory turnover is
calculated by dividing annual cost of goods sold from
stock sales during the past 12 months by the average
inventory value during the same 12 months: Cost of
goods sold from stock sales during the past 12 months
Average inventory value during the past 12 months As
with the customer service level, non-stock sales and
direct shipments are excluded from the “cost of goods
sold” figure in the numerator of the equation. These
special sales are not filled from inventory and including
them in the calculation would exaggerate turnover. We
use the cost of goods sold during the past 12 months to
avoid distortions in turnover throughout the year. If we
used “annualized” year-to-date figures (that is, year-to-
date figures projected for the entire year) and the first
several months were the “slow” period of the year, we
would underestimate inventory turnover. On the other
hand if the first several months comprised the popular
season, turnover would be overestimated during these
months. Using the cost of goods sold during a “rolling” 12
months eliminates this effect of seasonality in our
calculation. The average inventory value in the
denominator of the turnover equation is calculated by
taking the average of the ending inventory value during
each of the past 12 months. The “cost basis” used to
calculate the cost of goods sold and inventory value is
usually average cost, but replacement or standard cost
can also be applied. By using the same 12-month history
and cost basis in the numerator and denominator of the
turnover equation, we obtain an accurate measurement
that can be used to track improvement in inventory
performance over time. Customer service level and
stockout analysis reveal how well you are meeting your
customers’ expectations. That is, how often you have
what they need or want available for immediate delivery.
Turnover is different. It is a gauge of profitability.

FINDINGS
 The inventory management had significant
relationship on customer satisfaction.
 More emphasis should be put on inventory
management to satisfy customers.
 Customer satisfaction level depends on your
inventory management.
 Meet your customer’s immediate needs.

CONCLUSION AND RECOMMENDATION

overall the study found that inventory management in
pantaloons on impact of inventory management on
customer satisfaction is improving as the management
is struggling to make sure that qualified and
competent professionals are employed and highly paid
and who are knowledgeable with the computerized
inventory system with the goal of insuring high
performance as far as inventory management is
concerned, unlike delay on stock replenishment tends
to loss of customers as well as revenues. Some of staffs
are not aware of all categories of stock. Lack of
availability of infrastructure creates an unhygienic
atmosphere. Warehouse operation is situated in
second floor instead of ground floor.
Maximize job work done through computerized process
data which tends to accuracy and time saving.
Sometimes operations staffs are facing slowdown of
server while doing work. Sometimes customers are not
getting proper readymade garments due to deficiency of
stock.

RECOMMENDATION
 Pantaloons employees should be aware of platinum
standard process of warehouse operations.
 Stock should be maintained less no. of days by using
method of evaluating inventory.

 Staff should be well aware about warehouse stock

so that they ease to found while doing stock
replenishment.
 The consignee and supplier might have more
responsibility and awareness about the shortage
of stock.
 Every employee should be aware of all stock
categories so those customers are getting proper
service without any problem.

BIBILIOGRAPHY
  BOOKS Retail management by Levy Weltz
 Research methodology by William G zikmund,bary
j babin, jon c carr.
 Institute of logistics and transport, how to
manage inventory effectively,added value
publication Ltd.2003,p94
 Supply chain management by sunil chopra, peter
meindl, D.v. kalra
 World class warehousing and material handling
Mcgraw hill Frazelle, E H(2002)
WEBSITE
 www.pantaloons.com
 www.sciencedaily.com
 www.asapsystems.com
 www.researchgate.net
 www.netstock.com
.

DATA ANALYSIS
This is a measurement of the number of line items on sales orders shipped complete in
one shipment on or before the date the material was promised to the customer. The
customer service level is a great tool for determining how well you are servicing your
customers. But some companies make it even better! They know that just having a
product in stock doesn’t ensure a satisfied customer. They want to be sure that each
order completely meets the customer’s expectations. They utilize a tool that is often
called customer satisfaction analysis. This analysis reflects the percentage of
customer orders that are filled correctly and completely, on or before the promise
date. In addition to inadequate stock, the customer satisfaction analysis reflects
situations where:

THE ANALYSIS OF INVENTORY MANAGEMENT ON CUSTOMER

SATISFACTION

The financial management of firms pursues broad coverage regarding

inventory, but in terms of financial analysis, we consider relevant the
inventory structure and its rotation. The inventory structure allows the
financial analyst to highlight the following aspects: - the oversize or
sub dimensioning of inventory elements; - highlighting inactive
inventory or slow-moving inventory, which generates expenditures; -
the evolution over time of inventory structure. The relevant inventory
for an enterprise is: raw materials, work-in-process and finished goods.
The increase of the share of raw materials within total inventory
reflects the following aspects: - the oversize of stock supply; - the
existence of inactive or slowly moving raw materials; - reducing other
categories of inventory due to the shortening of the production cycle
and the speeding of distribution.

A significant deviation from the planned inventory of raw materials or

from their share in enterprises with similar activity indicates
deficiencies on the line of management for these inventory categories.
The increase of the share of the work-in-process takes place when the
production cycle increases, which can have objective causes if the
assortment structure of the production has changed, or subjective
causes if there are difficulties in supplying, accidental interruptions or
other causes. Increasing the share of stocks of finished goods is
recorded when the enterprise faces difficulties with the distribution of
the production. In this case, the production on stock causes a financial
blockage, the enterprise turns to additional credits and faces financial
difficulties. Conducting an analysis of inventory rotation provides
information about the duration during which inventory moves
successively through the economic cycle of supplying, production and
distribution. Increasing the rotation speed of inventory means
increasing the efficiency of its use and, implicitly, additional profit
simultaneously with the release of financial resources. The specific
analysis indicator is Inventory Turnover Ratio expressed by a Number of
rotations (NoAI) or the Days’ sales in inventory (DdAI).

where: TO is the turnover; AI - average inventory, calculated as

arithmetic mean between the value at the beginning and the value at
the end of the management period; T - analyzed period in days.
The number of rotation for inventory shows how many times the
inventory of a company goes successively through the stages of supply,
production and distribution during a management period and is
recovered through sales. Another signification of this indicator suggests
the ability of the company to transform current assets in money or
trade receivables. A slow rotation speed may be a negative signal for
managers, as well as for investors and shareholders regarding the real
capacity of the company to sell its production. The particularities of
the production are an important factor is assessing the inventory size .
In the production stage, the inventory level must be adapted to the
variations of quantity, quality, price and time so that it’s necessary to
have a control and adjusting system for inventory according to
mathematic patterns in order to reduce as much as possible the risks
induced by the unexpected changes of the market factors. Companies
coordinate the requirements of the processing, distribution, financing
and management functions with the exigencies of the demand with the
help of inventory management and control. Sale success depends on
the ability to provide the products and services requested by the
consumers in conditions of profitability. In the activity of organizations,
the development of control practices for inventory is largely due to the
direction of management systems towards implementing the concept
of Total Quality Management .

Conducting in dynamic an analysis of the inventory rotation highlights

the influences of the determining elements that impact the change in
the efficiency of inventory management according to the following
relations: - The influence exercised by the change of the turnover:

- The influence of the inventory size:

The increase of the number of rotations during a time period is

equivalent with their participation on several times to creating the
turnover, which is the main source of recovery of the costs and for
obtaining a profit. At the same time, by reducing the period when the
inventory is stationed in the economic cycle, the expenses with
depositing the raw materials, work-in-process and finished goods are
reduced so that the costs are lower, another favorable effect being the
shortening of the capital expenditure period for inventory. The
evolution of sales clearly influences the inventory size and efficiency.
To study the correlation between inventory size and sales as expression
of the demand on the market we can use an analysis model in which
inventory is expressed depending on two influence factors, namely
average daily sales (Ds) and rotation speed, expressed as stationing
period in the economic cycle, according to the next relation:

The action of the influence factors on the change of inventory size is

determined as follows: - The influence of the inventory’s stationing
period within the economic cycle:
 Material resources are immobilized or released by changing the
inventory rotation speed. The relation that expresses the size of the
released or immobilized inventory, needed to achieve daily sales in the
current period, is the following:

The expression actually signifies additional or less number of days for

which the inventory size is changed depending on the average daily
sales. If the calculated value of the expression is negative, the situation
must be interpreted as being favourable to the company because
material resources are released and the financing need of the current
activity is smaller. In case of a positive result, an increase of the
expenditure capital for inventory is recorded and the increase of the
financing-need requires finding additional financing resources for the
activity. The situation must be analyzed in correlation with the changes
of the production and of the sales, which, if exceed the inventory
dynamic, justify their increasing and the increase of the necessary
financial resources.

Inventory is the largest and probably the most important asset of many
distributors. More money is likely tied up in inventory than in buildings
or equipment. And inventory is usually less “liquid” than accounts
receivable. That is, it’s harder to turn inventory back into cash to pay
employees and expenses. If distributors do not have this money
invested in the right amount of the right products, they cannot provide
the service to customers necessary to be successful. It is crucial that
every distributor develops and uses a comprehensive set of tools that
allows them to closely monitor the performance of their investment in
inventory. In this document we will discuss several simple
measurements that will help ensure that you are maximizing the
profitability and productivity of your investment in inventory.
Customer Satisfaction Level The first measurement is “customer service
level,” or how often you have the items you’ve committed to stock
when your customers want them. It is the most important
measurement because if you don’t have what your customers want,
when they want it, they will probably look for it elsewhere. The
customer service level is calculated with the following formula:
Number of line items for stocked products shipped complete in one
shipment by the promise date Total number of line items for stocked
products ordered Notice that we measure line items shipped complete.
That is, when the entire quantity ordered is delivered by the date
promised to the customer. If the customer orders ten pieces, and you
ship ten pieces, you get credit toward the customer service level. But if
a customer orders 25 pieces, and you ship only 24 pieces before the
promise date, you get no credit. Why no “partial credit” for shipping 24
out of 25 pieces?

• If the customer wanted 24 pieces, he or she would have ordered 24

pieces. They want 25! The customer has to find that last one
somewhere else. Probably at your competitor’s warehouse down the
street.
• Even if your customer doesn’t immediately need all 25 pieces and
can wait for you to receive more in a replenishment shipment, your
failure to have all 25 pieces in stock causes them to experience the cost
of processing two stock receipts (and your warehouse to absorb the
cost of filling two orders for the single transaction).

When calculating your customers satisfaction level, we only include

sales of stocked items that are filled using warehouse inventory. We
don’t include sales of other kinds of products such as: Special order
items—Items that you do stock, but are specially ordered to fill specific
customer requirements. Direct or “drop” shipments—Material sent
directly from a vendor to your customer. Shipments of these types of
items do not reflect how well you stock material to meet your
customers’ immediate needs. Distributors who include special order
items and direct shipments when calculating a customer service level
tend to overstate how well they are serving their customers from
warehouse inventory.

Sure, you would probably like to be able to fill 100 percent of customer
requests for stock items out of your warehouse inventory. But this is
often not practical. To understand why, let’s look at a graph that
compares the number of customer orders for a popular stock item
against the quantity ordered on each order:

Quantity order graph

Inventory turnover measures the number of times we sell or “turn” our

average inventory investment. In other words it determines the
number of “opportunities to earn a profit” you experience each year
from your investment in stock inventory. Inventory turnover is
calculated by dividing annual cost of goods sold from stock sales during
the past 12 months by the average inventory value during the same 12
months: Cost of goods sold from stock sales during the past 12 months
Average inventory value during the past 12 months As with the
customer service level, non-stock sales and direct shipments are
excluded from the “cost of goods sold” figure in the numerator of the
equation. These special sales are not filled from inventory and including
them in the calculation would exaggerate turnover. We use the cost of
goods sold during the past 12 months to avoid distortions in turnover
throughout the year. If we used “annualized” year-to-date figures (that
is, year-to-date figures projected for the entire year) and the first
several months were the “slow” period of the year, we would
underestimate inventory turnover. On the other hand if the first several
months comprised the popular season, turnover would be
overestimated during these months. Using the cost of goods sold
during a “rolling” 12 months eliminates this effect of seasonality in our
calculation. The average inventory value in the denominator of the
turnover equation is calculated by taking the average of the ending
inventory value during each of the past 12 months. The “cost basis”
used to calculate the cost of goods sold and inventory value is usually
average cost, but replacement or standard cost can also be applied. By
using the same 12-month history and cost basis in the numerator and
denominator of the turnover equation, we obtain an accurate
measurement that can be used to track improvement in inventory
performance over time. Customer service level and stockout analysis
reveal how well you are meeting your customers’ expectations. That is,
how often you have what they need or want available for immediate
delivery. Turnover is different. It is a gauge of profitability.

Research Findings
The research findings of the study are:
Pantaloons is a point of attraction to customers because it always
provide proper inventory management to its customer.
CONCLUSION & RECOMMENDATION

Conclusion:

Overall the study found that inventory management in pantaloons is improving as the

management is struggling to make sure that qualified and competent professionals are

employed and highly paid and who are knowledgeable with the computerized

inventory system with the goal of ensuring high performance as far as materials

management is concerned, unlike delay on stock replenishment tends to loss of

customers as well as revenues. Some of staffs are not aware of all categories of stock.

Lack of availability of infrastructure creates an unhygienic atmosphere. Warehouse

operation is situated in second floor instead of ground floor.

Maximum job work done through computerized process data which tends to accuracy

and time saving. Sometimes operations staffs are facing slowdown of server while

doing work. Sometimes Customers are not getting proper readymade garments due to

deficiency of stock.

Recommendation

(i) The employee should be received well proper trained regarding operational activities
off stock inventory management and control.

(ii)Pantaloons employees should be aware of platinum standard process of warehouse

operations.

(iii) Stock should be maintained less no of days by using method of evaluating inventory.

(iv)All employees should have noticed out of stock problem so that customers can get
proper stock with in right time.

(v) Need of more space for the warehouse transaction which will create a hygienic and
pleasant environment.

(vi) Staff should be well aware about warehouse stock so that they ease to found while
doing stock replenishment.
(Vi) The consignee and supplier might have more responsibility and awareness about the
shortage of stock.

(vii) Every employee should be aware of all stock categories so those customers are getting
proper service without any problem.

BIBILIOGRAPHY

BOOKS Retail management by Levy Weltz

Research methodology by William G zikmund,bary j babin, jon c carr

Retail management by Bajaj, tuli

Supply chain management by sunil chopra, peter meindl, D.v. kalra

World class warehousing and material handling Mcgraw hill Frazelle, E H(2002)

WEBSITE

www.pantaloons.com

www.sciencedaily.com

www.asapsystems.com

www.researchgate.net