e business and its role in inventory management1.doc

8/9/2019 e business and its role in inventory management1.doc

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A

RESEARCH PROJECT REPORTON

“E- BUSINESS AND ITS ROLE IN

INVENTORY

MANAGEMENT”

Project Submitted To:

SWAMI VIVEKANAND SUBHARTI UNIVERSITY

MASTER OF BUSINESS ADMINISTRATION

Session- 2013-15

Submitted To: Submitted By:

Ms. VISHAKA Anumat Kumar Sin!

"#a$u%t& '( Mana)m)nt* R'%% N'-+,/0,/

MBA IV SEM

SUBHARTI INSTITUTE OF MANAGEMENT

!OMMER!E

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2/94

SUBHARTI"URAM# MEERUT

DE1LARATION

I am Anumat Kumar Sin! student of SIM12 M))rut ere by so!emn!y dec!are tat te

"roject tit!ed “E- BUSINESS AND ITS ROLE IN INVENTORY MANAGEMENT” is

te outcome of my o#n efforts $ researc is conducted by me and fina!!y re"ort as

been Su3mitt)4 t'5- Ms. VISHAKA2 #a$u%t& '( Mana)m)nt SIME2 M))rut

dra#n by my o#n creati%ity and s&i!!s on!y and te same as submitted to Subarti

'ni%ersity( )eerut any oter or*ani+ation( institution or uni%ersity in order to *et

any oter de*ree,

DATE66.. Anumat Kumar Sin!

R'%% N'-+,/0,/

MBA IV SEM

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A1KNO7LEDGEMENT

Presentin* a "roject of tis ty"e is an arduous tas&( demandin* a !ot of time, I cannot

in fu!! measure a""reciate and ac&no#!ed*ement te &indness so#n and e!"

e-tended by %arious "ersons in tis endea%or, I #i!! remember a!! of tem #it

*ratitude,

)y sincere tan&s are a!so due to Ms. VISHAKA2 #a$u%t& '( Mana)m)nt SIME2

M))rut for teir si*nificant e!" e-tended for te successfu! com"!etion of te "roject, I i*!y te e!" I *ot from tem in "ro%idin* me and !ot of information

re*ardin* te functionin* of tis or*ani+ation,

I am a!#ays beo!den to my .od( for a!#ays bein* #it me and so#in* me te

ri*t #ays( my fami!y( for a!#ays doin* fa%ors to me and my friends and co!!ea*ues

consistent!y e!"ed #it encoura*ement and criticism trou*out te "roject #or&(

for a!#ays !iftin* my si*ts to i*er %ision( raisin* my "ersona!ity beyond norma!

!imitation and for rea!i+in* me my stren*ts and "otentia!( as I did not a!#ays

#e!come er e-ortation( /try a*ain0 you can do better,1 But tis "roject o#es a *reat

dea! to it 2 and so do I,

ANUMAT KUMAR SINGH

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8RE#A1E

No "rofessiona! curricu!um is considered com"!ete #itout #or& e-"erience, E%ery

indi%idua! #o is doin* mana*ement studies as to *o tis "ase of "ractica! study

before e3se considers imse!f3erse!f fu!!y 4ua!ified as "otentia! mana*ers,

I *ot an o""ortunity to do trainin* #it a 5inancia! com"any I underta&e te trainin*

to study “E- BUSINESS AND ITS ROLE IN INVENTORY MANAGEMENT 9

Tis study discusses on te %arious as"ects of Study uman re!ationsi"

mana*ement and its im"ortance in retai!in*, Te study is based on 4uestionnaire

sur%ey resu!ts of Com"any Te study concentrates on te conce"t of 5inance

mana*ement it is correct to my &no#!ed*e,

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CONTENTS

• E-ecuti%e summary• Objecti%e of te study• Com"any "rofi!e• In%entory mana*ement• Researc metodo!o*y• 5indin*s• 6ata ana!ysis• 7imitations• Conc!usions• Bib!io*ra"y

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E:E1UTIVE SUMMARY

8it te on*oin* re%o!ution in e!ectronic and communication #ere Inno%ations areta&in* at te b!in& of eye0 it is im"ossib!e to &ee" te "ace #it te emer*in* trends,

E-ce!!ence is an attitude tat tat #o!e of uman race is born #it, It is te

en%ironment tat ma&es sure tat #eter te resu!t of tis attitude is %isib!e or

oter#ise, A 8e!! "!anned( "ro"er!y e-ecuted and e%a!uated Industria! trainin* e!"s

a !ot in incu!catin* a "rofessiona! attitude, It "ro%ides a !in&a*e bet#een te

student and industry to de%e!o" an a#areness of industria! a""roac to "rob!emso!%in*( based on a broad understandin* of "rocess and mode of In%entory of

or*ani+ation,

6urin* tis "eriod( te student *ets te rea! e-"erience for #or&in* in te actua!

Industry en%ironment, )ost of te teoretica! &no#!ed*e tat as been *ained durin*

te course of teir studies is "ut to test ere, A"art from tis te student *ets an

o""ortunity to !earn te !atest tecno!o*y ( #ic is immense!y e!"s in tem in bui!din* teir career ,

I ad te o""ortunity to a%e a rea! e-"erience on many %entures( #ic increased

my s"ere of &no#!ed*e to *reat e-tent, I *ot a cance to !earn many ne#

tecno!o*ies and #as a!so interfaced to many instruments, And a!! tis credit

*oes to or*ani+ation,

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OB;E1TIVES O# THE STUDY

To assess te si*nificance of te in%entory mana*ement,

To &no# te !e%e! of in%entory to be &e"t,

To &no# te amount of in%estment in in%entory,

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E- 3usin)ss

Te emer*in* e9business mar&et affords com"anies of a!! si+es and ty"es teo""ortunity to !e%era*e teir e-istin* assets( em"!oyees( tecno!o*y infrastructure(

and information to *ain or maintain mar&etsare, 5or e-am"!e( in te

te!ecommunications industry( ser%ice( rater tan tecno!o*y( is no# te &ey

differentiator, 8it !o#er barriers to entry( ne# com"etitors are ra"id!y enterin* te

mar&et offerin* ne# ser%ices( suc as on!ine bi!! "resentment and "ayment( and

!e%era*in* teir uni4ue di*ita! assets,

Information tecno!o*y researc ana!ysts a*ree tat e9business is any net9enab!ed

business acti%ity tat transforms interna! and e-terna! re!ationsi"s to create %a!ue

and e-"!oit mar&et o""ortunities dri%en by ne# ru!es of te connected economy,

Ho#e%er( todays e9business re4uires more, Industry ana!ysts furter "oint out tat e9

business in%o!%es te continuous o"timi+ation of an or*ani+ations %a!ue "ro"osition

and %a!ue9cain "osition trou* te ado"tion of di*ita! tecno!o*y,

Te ca!!en*e for an or*ani+ation is to turn te %ision and te mar&et o""ortunityinto a %iab!e business, 6e%e!o"in* te mar&etin* strate*y and "!ans and desi*nin*

and de"!oyin* te business so!ution is &ey, Tose #o successfu!!y arcitect(

de%e!o"( and de"!oy e9business so!utions #i!! need to formu!ate and ado"t a

com"reensi%e business "!an, Because of te critica! ro!e of Internet tecno!o*ies

and inte*ration re4uirements( it is recommended tat or*ani+ations need a

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com"reensi%e "!annin* frame#or&;an actua! e9business mode!, Tis structured

"!annin* a""roac enab!es te or*ani+ation to assess( "!an for( and im"!ement te

mu!ti"!e as"ects of an e9business,

Bui!din* an e9business


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• no#!ed*e mana*ement tecni4ues a""!ied to a com"anys information and

inte!!ectua! assets

• Effecti%e e9business "rocesses ty"ica!!y *rou"ed in te customer re!ationsi"

mana*ement


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teir business and IT strate*ies ra"id!y( de"endin* on un"redictab!e com"etitors and

mar&et "ressures, Todays e9business c!imate re4uires te continuous o"timi+ation of

an or*ani+ations business and IT strate*ies, Because IT no# as suc a si*nificant

im"act on e%ery business "rocess


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mana*ement is te definiti%e #ay to !e%era*e an or*ani+ations information and

inte!!ectua! assets for business ad%anta*e, It is te forma!i+ed( inte*rated a""roac

tat e%ery or*ani+ation must ta&e to /&no#1 its business,

Kn'


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ad%anta*e and( tus( te return on in%estment for an e9business inte*ratin* its

business "rocess domains is tat it e-tends te or*ani+ations business direct!y to

customers and su""!iers,

8en business "rocess domains are inte*rated( tey can increase "roducti%ity and

im"ro%e customer and su""!ier satisfaction, 5or e-am"!e( #en a re"eat customer

%ie#s a successfu! e9businesss 8eb site( an inte*rated CR) system "resents tat

indi%idua! #it offers or items of interest based on "re%ious orders, After te

customer "!aces an order( tis same e9business a!!o#s tat indi%idua! to %ie# te

status of is order in rea! time as it mo%es trou* te su""!y cain,

Business "rocess domains are a**re*ations of core business "rocesses, A!tou*

tere is *ro#in* "o"u!arity of business "rocess domains as teir o#n entities


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1ust'm)r R)%ati'ns!i? Mana)m)nt

Customer re!ationsi"s are becomin* a more im"ortant factor in differentiatin* one

business from anoter, In order to stay com"etiti%e( e9businesses in e%ery industry

a%e be*un to ana!y+e tese re!ationsi"s #it customers usin* CR) so!utions,

In te "ast( customers #ou!d "!ace an order %ia te te!e"one and #ait unti! te

com"anys "urcasin* de"artment "rocessed and si""ed te order, Todays

customers "!ace an order e!ectronica!!y and ten demand to be ab!e to cec& te

status of teir order #itin minutes,

CR) enab!es an or*ani+ation to ado"t a com"reensi%e %ie# of te customer and

ma-imi+e tis re!ationsi", Tese CR) systems enab!e a business to identify( attract(

retain( and su""ort customs centers( direct mai!( and retai! faci!ities, In an efficient e9

business( tere are CR) "rocesses in "!ace to and!e:

Ana%&ti$a% 1RM5 Te ana!ysis of data created on te o"erationa! side of te CR)

e4uation for te "ur"ose of business "erformance mana*ement0 uti!i+in* data

#areousin* tecno!o*ies and !e%era*in* data marts

1ust'm)r int)ra$ti'ns5 Sa!es( mar&etin*( and customer ser%ice


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O?)rati'na% 1RM5 Te automation of ori+onta!!y inte*rated business "rocesses

in%o!%in* /front office1 customer touc "oints

8)rs'na%i@ati'n5 Te use of ne# and traditiona! *rou"#are38eb tecno!o*ies to

faci!itate customer and business "artner communications

Su??%& 1!ain Mana)m)nt

Inte*ration of te SC) functions is emer*in* as one of te *reatest ca!!en*es facin*

todays e9businesses, SC) is te inte*ration of business "rocesses from end user

trou* to ori*ina! su""!ier, Te *oa! of SC) is to create an end9to9end system tat

automates a!! te business "rocesses bet#een su""!iers( distribution "artners( and

tradin* "artners, Te ne# mantra for tis "rocess( accordin* to industry ana!ysts( is

/re"!acin* in%entory #it information,1 In an effecti%e e9business( te fo!!o#in*

SC) inde"endent "rocesses must be i*!y inte*rated

D)man4 mana)m)nt5 Tese are sared functions( inc!udin* demand "!annin*(

su""!y "!annin*( manufacturin* "!annin*( and sa!es and o"erations "!annin*,

In3'un4'ut3'un4 %'isti$s5 Tese inc!ude trans"ortation mana*ement( distribution

mana*ement( and #areouse mana*ement,

Su??%& mana)m)nt5 Tese inc!ude "roducts and ser%ices for customer order

fu!fi!!ment

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1'r) O?)rati'ns

E9businesses a!so need to de%e!o" and o"erate com"!e- transaction "rocessin*

systems tat su""ort teir core business o"erations, Tese core o"erations inc!ude te

o"erationa! systems tat su""ort teir "articu!ar business( suc as c!aims "rocessin*(

trade e-ecution( enter"rise resource "!annin*


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Com"onents: Parts or subassemb!ies used in bui!din* te fina! "roduct,

8or&9in9"rocess


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INDE8ENDENT VS. DE8ENDENT DEMAND INVENTORY

Some in%entory items can be c!assified as inde"endent demand items( and some can

be c!assified as de"endent demand items, 8i!e #e need to ma&e te timin* and

si+in* decisions for a!! in%entory items( #e must be carefu! in te manner in #ic

#e ma&e tose decisions for tese t#o ty"es of items,

Inde"endent demand in%entory item: In%entory item #ose demand is not re!ated to


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REASONS #OR MAINTAINING INVENTORY

Antici"ation In%entory or Seasona! In%entory: In%entory are often bui!t in

antici"ation of future demand( "!anned "romotiona! "ro*rams( seasona! demand

f!uctuations( "!ant sutdo#ns( %acations( etc,

5!uctuation In%entory or Safety Stoc&: In%entory is sometimes carried to "rotect

a*ainst un"redictab!e or une-"ected %ariations in demand,

7ot9Si+e In%entory or Cyc!e Stoc&: In%entory is fre4uent!y bou*t or "roduced in

e-cess of #at is immediate!y needed in order to ta&e ad%anta*e of !o#er unit costs

or 4uantity discounts,

Trans"ortation or Pi"e!ine In%entory: In%entory is used to fi!! te "i"e!ine as "roducts

are in transit in te distribution net#or&,

S"ecu!ati%e or Hed*e In%entory: In%entory can be carried to "rotect a*ainst some

future e%ent( suc as a scarcity in su""!y( "rice increase( disru"tion in su""!y( stri&e(

etc,

)aintenance( Re"air( and O"eratin*


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OB;E1TIVES O# INVENTORY MANAGEMENT

Tere are tree main objecti%es of in%entory mana*ement( as fo!!o#s:

Pro%ide te desired !e%e! of customer ser%ice, Customer ser%ice refers to acom"anys abi!ity to satisfy te needs of its customers, Tere are se%era! #ays to

measure te !e%e! of customer ser%ice( suc as:


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Tere are t#o basic decisions tat must be made for e%ery item tat is maintained in

in%entory, Tese decisions a%e to do #it te timin* of orders for te item and te

si+e of orders for te item,

Basic In%entory 6ecisions

Ho# mucG 8enG

7ot si+in* decision

6etermination of te

4uantity to be ordered,

7ot timin* decision

6etermination of te

timin* for te orders,

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RELEVANT INVENTORY 1OSTS

Re!e%ant In%entory Costs

Item Costs Ho!din* CostsOrderin*

CostsSorta*e Costs

6irect cost for *ettin* an

item, Purcase

cost for

Costsassociated

#it carryin*

items in

5i-ed costsassociated

#it "!acin*

an order

Costsassociated

#it not

a%in* enou*

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BEHAVIOR O# 1OSTS #OR DI##ERENT INVENTORY DE1ISIONS

8en assessin* te cost effecti%eness of an in%entory "o!icy( it is e!"fu! to measure

te tota! in%entory costs tat #i!! be incurred durin* some reference "eriod of time,

)ost fre4uent!y( tat time inter%a! used for com"arin* costs is one year, O%er tat

s"an of time( tere #i!! be a certain need( or demand( or re4uirement for eac

in%entory item, In tat conte-t( te fo!!o#in* describes o# te annua! costs in eac

of te four cate*ories #i!! %ary #it can*es in te in%entory !ot si+in* decision,

Item costs: Ho# te "er unit item cost is measured de"ends u"on #eter te item is

one tat is obtained from an e-terna! source of su""!y( or is one tat is manufacturedinterna!!y, 5or items tat are ordered from e-terna! sources( te "er unit item cost is

"redominant!y te "urcase "rice "aid for te item, On some occasions tis cost may

a!so inc!ude some additiona! car*es( !i&e inbound trans"ortation cost( duties( or

insurance, 5or items tat are obtained from interna! sources( te "er unit item cost is

com"osed of te !abor and materia! costs tat #ent into its "roduction( and any

factory o%eread tat mi*t be a!!ocated to te item, In many instances te item costis a constant( and is not affected by te !ot si+in* decision, In tose cases( te tota!

annua! item cost #i!! be unaffected by te order si+e, Re*ard!ess of te order si+e


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to te o!din* cost, Tese inc!ude suc tin*s as insurance on te e!d in%entory0

ta-es on te e!d in%entory0 dama*e to( teft of( In%entory of( or obso!escence of te

e!d items, Te order si+e decision im"acts te a%era*e !e%e! of in%entory tat must

be carried, If sma!!er 4uantities are ordered( on a%era*e tere #i!! be fe#er units

bein* e!d in in%entory( resu!tin* in !o#er annua! in%entory o!din* costs, If !ar*er

4uantities are ordered( on a%era*e tere #i!! be more units bein* e!d in in%entory(

resu!tin* in i*er annua! in%entory o!din* costs,

Orderin* costs: Any time in%entory items are ordered( tere is a fi-ed cost associated

#it "!acin* tat order, 8en items are ordered from an outside source of su""!y(

tat cost ref!ects te cost of te c!erica! #or& to "re"are( re!ease( monitor( and recei%e

te order, Tis cost is considered to be constant re*ard!ess of te si+e of te order,

8en items are to be manufactured interna!!y( te order cost ref!ects te setu" costs

necessary to "re"are te e4ui"ment for te manufacture of tat order, Once a*ain(

tis cost is constant re*ard!ess of o# many items are e%entua!!y manufactured in te

batc, If one increases te si+e of te orders for a "articu!ar in%entory item( fe#er of

tose orders #i!! a%e to be "!aced durin* te course of te year( ence te tota!

annua! cost of "!acin* orders #i!! dec!ine,

Sorta*e costs: Com"anies incur sorta*e costs #ene%er demand for an item

e-ceeds te a%ai!ab!e in%entory, Tese sorta*e costs can manifest temse!%es in te

form of !ost sa!es( !oss of *ood #i!!( customer irritation( bac&order and e-"editin*

car*es( etc, Com"anies are !ess !i&e!y to e-"erience sorta*es if tey a%e i*

!e%e!s of in%entory( and are more !i&e!y to e-"erience sorta*es if tey a%e !o#

!e%e!s of in%entory, Te order si+e decision direct!y im"acts te a%era*e !e%e! of

in%entory, 7ar*er orders mean more in%entory is bein* ac4uired tan is immediate!y

needed( so te e-cess #i!! *o into in%entory, Hence( sma!!er order 4uantities !ead to

!o#er !e%e!s of in%entory( and corres"ondin*!y a i*er !i&e!iood of sorta*es and

teir associated sorta*e costs, 7ar*er order 4uantities !ead to i*er !e%e!s of

in%entory( and corres"ondin*!y a !o#er !i&e!iood of sorta*es and teir associated

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costs, Te bottom !ine is tis: !ar*er order si+es #i!! !ead to !o#er annua! sorta*e

costs,

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1LASSI1 E1ONOMI1 ORDER UANTITY "EO* MODEL

Te EO mode! is a tecni4ue for determinin* te best ans#ers to te o# muc

and #en 4uestions, It is based on te "remise tat tere is an o"tima! order si+e tat

#i!! yie!d te !o#est "ossib!e %a!ue of te tota! in%entory cost, Tere are se%era!

assum"tions re*ardin* te bea%ior of te in%entory item tat are centra! to te

de%e!o"ment of te mode!

EO assum?ti'ns5

F, 6emand for te item is &no#n and constant,

>, 7ead time is &no#n and constant,


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EO s&m3'%s5

6 annua! demand


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8e sa# on te "re%ious "a*e tat te on!y costs tat need to be considered for te

EO mode! are te tota! annua! orderin* costs and te tota! annua! o!din* costs,

Tese can be 4uantified as fo!!o#s:

Annua% Or4)rin 1'st

Te annua! cost of orderin* is sim"!y te number of orders "!aced "er year times te

cost of "!acin* an order, Te number of orders "!aced "er year is a function of te

order si+e, Bi**er orders means fe#er orders "er year( #i!e sma!!er orders means

more orders "er year, In *enera!( te number of orders "!aced "er year #i!! be te

tota! annua! demand di%ided by te si+e of te orders, In sort(

Tota! Annua! Orderin* Cost


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te a%era*e in%entory !e%e! times te cost to carry a unit in in%entory for a year, In

sort(

Tota! Annua! Ho!din* Cost = H

T'ta% Annua% 1'st

Te tota! annua! re!e%ant in%entory cost #ou!d be te sum of te annua! orderin* cost

and annua! o!din* cost( or

TC


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At tis "oint #e are not interested in any o!d %a!ue, 8e #ant to find te o"tima!


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E.O. ILLUSTIRATION IVENTORY

Annua! demand ,D days

SOME OBSERVATIONS ABOUT OUR EO ILLUSTINVENTORYN

Gi>)n 4ata

Annua! demand


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7ead time D days

Te com"any o"erates >DL days "er year DL ?L

units "er day=

R)su%ts '( $'m?utati'ns

EO DLL units

Number of orders "!aced "er year >L

A%era*e in%entory !e%e! >DL units

Annua! orderin* cost MFDLL

Annua! o!din* cost MFDLL

Tota! annua! in%entory cost MLLL

Time bet#een te "!acement of orders F>,D days

O3s)r>ati'n C+

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Te tota! annua! in%entory cost of MLLL inc!udes on!y te annua! orderin* cost and

te annua! o!din* cost, 8e #ere ab!e to i*nore te sorta*e cost because a!! of te

certainty in our assum"tions !ed to a no sorta*e situation, 8e a!so i*nored te

tota! annua! item cost( since it #as a ori+onta! !ine tat ad no im"act on te o"tima!

si+e of our orders, Ho#e%er( #e #i!! sti!! a%e to "ay for tose FL(LLL items tat

#ere ordered o%er te course of te year( so tat annua! "urcase cost #i!! contribute

to te tota! of our in%entory re!ated costs ,D days, 8e "rojected tat #e #ou!d run out on days F>,D( >D( ,D( DL( >,D( D(

etc, 8it a D day !ead time( #e #ere smart enou* to order D days in ad%ance of

#en #e #ou!d run out( #ic ad us "!acin* orders on days ,D( >L( >,D( ?D( D,D(

L( etc, 8e on!y a%e to #atc te ca!endar to &ee" trac& of #en tose order

instants arise so tat #e can "!ace te orders,

An a!ternati%e to #atcin* te ca!endar #ou!d be to #atc te in%entory !e%e!s,Reca!! tat te a%era*e dai!y demand for tis item is ?L units "er day, Tis means tat

at te moment #e "!ace an order( #e a%e just enou* in%entory to co%er te demand

tat #i!! occur durin* te D day !ead time, Te demand durin* te D day !ead time is

D days - ?L units "er day >LL units, So( a!! #e a%e to do is &ee" our eyes on our

in%entory !e%e!( and #en it reaces >LL units( tat is te si*na! tat it is time to

reorder, Tis !e%e! of in%entory tat tri**ers a reorder is ca!!ed te reorder "oint


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34

200R

Inventory Level

Time


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INVENTORY MONITORING A88ROA1HES

Continuous re%ie# system: Tis a""roac maintains a constant order si+e( but a!!o#s

te time bet#een te "!acements of orders to %ary, Tis metod of monitorin*in%entory is sometimes referred to as a "er"etua! re%ie# metod( a fi-ed 4uantity

system( and a t#o9bin system, 8en te in%entory is de"!eted to te reorder "oint( a

re"!enisment order is "!aced, Te si+e of tat order is te economic order 4uantity

for tat item, Tis ty"e of system "ro%ides c!oser contro! o%er in%entory items since

te in%entory !e%e!s are under "er"etua! scrutiny,

Periodic re%ie# system: Tis a""roac maintains a constant time bet#een te "!acements of orders( but a!!o#s te order si+e to %ary, Tis metod of monitorin*

in%entory is sometimes referred to as a fi-ed inter%a! system or fi-ed "eriod system,

It on!y re4uires tat in%entory !e%e!s be cec&ed at fi-ed "eriods of time, Te amount

tat is ordered at a "articu!ar time "oint is te difference bet#een te current

in%entory !e%e! and a "redetermined tar*et in%entory !e%e!


36/94

continuous re%ie# system, At te re%ie# "eriod te in%entory !e%e! on and is

com"ared to a reorder "oint for te item, If in%entory as not fa!!en be!o# te reorder

"oint( no order is "!aced, Ho#e%er( if te in%entory !e%e! as dro""ed be!o# te

reorder "oint( an order is "!aced, Te si+e of te order is te difference bet#een te

in%entory on and and te tar*et in%entory !e%e!,

36


37/94

INVENTORY O# SA#ETY STO1K DETERMINATION

Data5

A%era*e dai!y demand DL units "er day

O"eratin* year contains LL days of o"eration In%entory L( L( ?L( or DLG Ho#e%er( if te demand durin* te F day

!ead time #as L( L( L( or QL you #ou!d a%e ad a sorta*e, Te si+e of te

sorta*e #ou!d de"end u"on o# many units #ere demanded durin* te !ead time(37


38/94

but te ma-imum "ossib!e sorta*e #ou!d a%e been ?L units


39/94

Ser%ice !e%e!: Te "robabi!ity tat demand durin* !ead time #i!! not e-ceed te

in%entory on and #en te order is "!aced,

In te "re%ious i!!ustration In%entory( it #as su**ested tat you mi*t "ro%ide ?L

units of safety stoc&, If you ad done so( you #ou!d ne%er e-"erience a sorta*e, ou

#ou!d a%e acie%ed a ser%ice !e%e! of FLL, Tis mi*t not be a desirab!e so!ution

for tis "rob!em, 8e are carryin* a re!ati%e!y i* amount of safety stoc&( and tere

is a %ery !o# "robabi!ity tat !ead time demand #i!! actua!!y *o as i* as QL units


40/94

Continuin* #it te "re%ious i!!ustration of In%entory( assume tat mana*ement as

made a "o!icy decision tat te com"any #i!! acie%e a QL ser%ice !e%e!


41/94

Tis means tat te a%era*e sorta*e "er order cyc!e #i!! be F, units, L units( or L units, Te F, ref!ects te !on* run a%era*e "er

cyc!e=,

.o bac& a fe# "a*es and refres yourse!%es on te ca!cu!ations for te data of tis

"rob!em, Order si+e


42/94

HO7 MU1H 1ONTROL AB1 ANALYSIS

In%entory

Item Number

Annua!

'sa*e

Ua!ue

Per 'nit

Annua!

6o!!ar 'sa*e

F >D(LLL M D(LLL

> D(LLL M? >L(LLL

F(LLL MFL FL(LLL

? FL(LLL M> >L(LLLD ?(LLL MD >L(LLL

L(LLL MFL LL(LLL

>D(LLL MD F>D(LLL

D(LLL MF D(LLL

Q (LLL MD FD(LLL

FL >(LLL MD FL(LLL

Item

Number

Annua!

M 'sa*e

of

Items

Cumu!ati%e

of Items

of

Ua!ue

Cumu!ati%e

of Ua!ue

ABC

C!assV

MLL(LLL FL FL L L A

MF>D(LLL FL >L F>,D >,D A

F MD(LLL FL L ,D QL B42


43/94

> M>L(LLL FL ?L > Q> C

? M>L(LLL FL DL > Q? C

D M>L(LLL FL L > Q C

Q MFD(LLL FL L F,D Q,D C

MFL(LLL FL L F Q,D C

FL MFL(LLL FL QL F QQ,D C

MD(LLL FL FLL ,D FLL C

Tota! MF(LLL(LLL

V8en c!assifyin* te items as A( B( or C items( it can be some#at subjecti%e as to

#ere te !ines are dra#n, 8it te unrea!istica!!y sma!! In%entory abo%e( te first

>L of te in%entory items constitute >,D of te in%entory %a!ue( so tese items


44/94

AB1 1LASSI#I1ATION O# ITEMS

INVENTORY MANAGEMENT

44

Cumulative % of Items

100%

Cumulative % of alue

100%


45/94

Intr'4u$ti'n

In%entories constitute most si*nificant "art of current assets( in most of te

com"anies in India, To maintain a !ar*e si+e of in%entory( a considerab!e amount of

fund is re4uired, It is( terefore( abso!ute!y im"erati%e to mana*e in%entories

efficient!y and effecti%e!y in order to a%oid unnecessary in%estment, A firm

ne*!ectin* te mana*ement of in%entories #i!! be jeo"ardi+in* its !on*9run

"rofitabi!ity and may fai! u!timate!y, It is "ossib!e for a com"any to reduce its !e%e!s

of in%entories to a considerab!e de*ree( e,*,FL to >L( #itout any ad%erse effect

on "roduction and sa!es( by usin* in%entory "!annin* and contro! tecni4ues, Tereduction in We-cessi%e in%entories carries a fa%orab!e im"act on a com"anys

"rofitabi!ity,

Tere are at !east tree moti%es for o!din* in%entories:

F9To faci!itates smoot "roduction and sa!es o"eration In%entory 9To *uards a*ainst te ris& of un"redictab!e can*es in usa*e rate and de!i%ery time


46/94

T!) )>'%>in 4is$i?%in) '( mar)tin5

T!) mar)tin 4is$i?%in) !a4 its 'riins in t!) )ar%& /t! $)ntur& as an '((s?rin '( )$'n'mi$s.

E$'n'mi$ s$i)n$) !a4 n)%)$t)4 t!) r'%) '( mi44%)m)n an4 t!) r'%) '( (un$ti'ns 't!)r t!an ?ri$) in t!)

4)t)rminati'n '( 4)man4 %)>)%s an4 $!ara$t)risti$s. Ear%& mar)tin )$'n'mists )Famin)4

ari$u%tura% an4 in4ustria% mar)ts an4 4)s$ri3)4 t!)m in r)at)r 4)tai% t!an t!) $%assi$a% )$'n'mists.

T!is )Faminati'n r)su%t)4 in t!) 4)>)%'?m)nt '( t!r)) a??r'a$!)s t' t!) ana%&sis '( mar)tin

a$ti>it&5 t!) $'mm'4it&2 t!) instituti'n2 an4 t!) (un$ti'n. 1'mm'4it& ana%&sis stu4i)s t!) tra$)s t!)

%'$a% 4air& $''?)rati>)s2 an4 s!i??)4 t' r'$)rs an4 su?)rmar)ts ('r $'nsum)r ?ur$!as).

5or e-am"!e( any mar&etin* effort must ensure tat te "roduct is trans"orted from te su""!ier to te

customer, In some industries( a truc&( #i!e in oters it may be done by mai!( facsimi!e( te!e%ision si*na!( or

air!ine may and!e tis trans"ortation function, A!! tese institutions "erform te same function,

As te study of mar&etin* became more "re%a!ent trou*out te >Lt century( !ar*e com"anies;

"articu!ar!y mass consumer manufacturers;be*an to reco*ni+e te im"ortance of mar&et researc( better

"roduct desi*n( effecti%e distribution( and sustained communication #it consumers in te success of teir

brands, )ar&etin* conce"ts and tecni4ues !ater mo%ed into te industria!9*oods sector and subse4uent!y

into te ser%ices sector, It soon became a""arent tat or*ani+ations and indi%idua!s mar&et not on!y *oods

and ser%ices but a!so ideas

mar&etin*=( e%ents


47/94

R'%) '( mar)tin5

As mar&etin* de%e!o"ed( it too& a %ariety of forms, It #as noted abo%e tat mar&etin* can be %ie#ed as a set

of functions in te sense tat certain acti%ities are traditiona!!y associated #it te e-can*e "rocess, A

common but incorrect %ie# is tat se!!in* and ad%ertisin* are te on!y mar&etin* acti%ities, et( in addition

to "romotion( mar&etin* inc!udes a muc broader set of functions( inc!udin* "roduct de%e!o"ment(

"ac&a*in*( "ricin*( distribution( and customer ser%ice,

)any or*ani+ations and businesses assi*n res"onsibi!ity for tese mar&etin* functions to a s"ecific *rou" of

indi%idua!s #itin te or*ani+ation, In tis res"ect( mar&etin* is a uni4ue and se"arate entity, Tose #o

ma&e u" te mar&etin* de"artment may inc!ude brand and "roduct mana*ers( mar&etin* researcers( sa!es

re"resentati%es( ad%ertisin* and "romotion mana*ers( "ricin* s"ecia!ists( and customer ser%ice "ersonne!, As

a mana*eria! "rocess( mar&etin* is te #ay in #ic an or*ani+ation determines its best o""ortunities in te

mar&et"!ace( *i%en its objecti%es and resources, Te mar&etin* "rocess is di%ided into a strate*ic and a

tactica! "ase, Te strate*ic "ase as tree com"onents;se*mentation( tar*etin*( and "ositionin*


48/94

T!) mar)tin ?r'$)ss5

Te mar&etin* "rocess consists of four e!ements: strate*ic mar&etin* ana!ysis( mar&etin*9mi- "!annin*(

mar&etin* im"!ementation( and mar&etin* contro!,

“Strat)i$ mar)tin ana%&sis”

Mar)t s)m)nts5

Te aim of mar&etin* in "rofit9oriented or*ani+ations is to meet needs "rofitab!y, Com"anies must terefore

first define #ic needs;and #ose needs;tey can satisfy, 5or e-am"!e( te "ersona! trans"ortation

mar&et consists of "eo"!e #o "ut different %a!ues on an automobi!es cost( s"eed( safety( status( and sty!in*,

No sin*!e automobi!e can satisfy a!! tese needs in a su"erior fasion0 com"romises a%e to be made,

5urtermore( some indi%idua!s may #is to meet teir "ersona! trans"ortation needs #it sometin* oter

tan an automobi!e( suc as a motorcyc!e( a bicyc!e( or a bus or oter form of "ub!ic trans"ortation, Because

of suc %ariab!es( an automobi!e com"any must identify te different "reference *rou"s( or se*ments( of

customers and decide #ic *rou"


49/94

A *ro#in* number of com"anies are no# tryin* to ser%e /se*ments of one,1 Tey attem"t to ada"t teir

offer and communication to eac indi%idua! customer, Tis is understandab!e( for instance( #it !ar*e

industria! com"anies tat a%e on!y a fe# major customers, 5or e-am"!e( Te Boein* Com"any )%'?m)nt5

49


50/94

Te first mar&etin*9mi- e!ement is te "roduct( #ic refers to te Offerin* or *rou" of offerin*s tat #i!!

be made a%ai!ab!e to customers, In te case of a "ysica! "roduct( suc as a car( a com"any #i!! *ater

information about te features and benefits desired by a tar*et mar&et, Before assemb!in* a "roduct( te

mar&eters ro!e is to communicate customer desires to te en*ineers #o desi*n te "roduct or ser%ice, Tis

is in contrast to "ast "ractice( #en en*ineers desi*ned a "roduct based on teir o#n "references( interests(

or e-"ertise and ten e-"ected mar&eters to find as many customers as "ossib!e to buy tis "roduct,

Contem"orary tin&in* ca!!s for "roducts to be desi*ned based on customer in"ut and not so!e!y on

en*ineers ideas, In traditiona! economies( te *oods "roduced and consumed often remain te same from

one *eneration to te ne-t;inc!udin* food( c!otin*( and ousin*, As economies de%e!o"( te ran*e of

"roducts a%ai!ab!e tends to e-"and( and te "roducts temse!%es can*e, In contem"orary industria!i+ed

societies( "roducts( !i&e "eo"!e( *o trou* !ife cyc!es: birt( *ro#t( maturity( and dec!ine, Tis constant

re"!acement of e-istin* "roducts #it ne# or a!tered "roducts as si*nificant conse4uences for "rofessiona!

mar&eters, Te de%e!o"ment of ne# "roducts in%o!%es a!! as"ects of a business;"roduction( finance(

researc and de%e!o"ment( and e%en "ersonne! administration and "ub!ic re!ations,

8a$ain an4 3ran4in5

8a$ain an4 3ran4in ar) a%s' su3stantia% $'m?'n)nts in t!) mar)tin '( a ?r'4u$t.

8a$ain in s'm) instan$)s ma& 3) as sim?%) as $ust'm)rs in #ran$) $arr&in %'n %'a>)s '(

uni$) ?r'4u$t5

Te same *enera! mar&etin* a""roac about te "roduct a""!ies to te de%e!o"ment of ser%ice offerin*s as#e!!, 5or e-am"!e( a ea!t maintenance or*ani+ation


51/94

describes #ic medica! "rocedures #i!! be co%ered( o# muc "ysician coice #i!! be a%ai!ab!e( o# out9

of9to#n medica! costs #i!! be and!ed( and so fort, In creatin* a successfu! ser%ice mi-( te H)O must

coose features tat are "referred and e-"ected by tar*et customers( or te ser%ice #i!! not be %a!ued in te

mar&et"!ace,

/. 8ri$)

Te second mar&etin*9mi- e!ement is "rice, Ordinari!y com"anies determine a "rice by *au*in* te 4ua!ity

or "erformance !e%e! of te offer and ten se!ectin* a "rice tat ref!ects o# te mar&et %a!ues its !e%e! of 4ua!ity, Ho#e%er( mar&eters a!so are a#are tat "rice can send a messa*e to a customer about te "roducts

"resumed 4ua!ity !e%e!, A )ercedes9Ben+ %eic!e is *enera!!y considered to be a i*94ua!ity automobi!e(

and it terefore can command a i* "rice in te mar&et"!ace, But( e%en if te manufacturer cou!d "rice its

cars com"etiti%e!y #it economy cars( it mi*t not do so( &no#in* tat te !o#er "rice mi*t communicate

!o#er 4ua!ity, On te oter and( in order to *ain mar&et sare( some com"anies a%e mo%ed to /more for

te same1 or /te same for !ess1 "ricin*( #ic means offerin* "rices tat are consistent!y !o#er tan tose

of teir com"etitors, Tis &ind of discount "ricin* as caused firms in suc industries as air!ines and

"armaceutica!s ai%a3%)2 is t!) t!ir4 )%)m)nt '( t!) mar)tin miF an4 is m'st

$'mm'n%& r)()rr)4 t' as 4istri3uti'n. 7!)n a ?r'4u$t m'>)s a%'n its ?at! (r'm ?r'4u$)r t'

$'nsum)r2 it is sai4 t' 3) ('%%'B& usin t!is $!ann)%2 a (''4 manu(a$tur)r ma)s its ?r'4u$ts )asi%& a$$)ssi3%) 3& )nsurin t!at t!)&

51


52/94

ar) in st'r)s t!at ar) (r)=u)nt)4 3& t!'s) in t!) tar)t mar)t. In an't!)r )Fam?%)2 a mutua% (un4s

'rani@ati'n ma)s its in>)stm)nt ?r'4u$ts a>ai%a3%) 3& )n%istin t!) assistan$) '( 3r')ra) !'us)s

an4 3ans2

. 8r'm'ti'n5 -

Promotion( te fourt mar&etin*9mi- e!ement( consists of se%era! metods of communicatin* #it and

inf!uencin* customers, Te major too!s are sa!es force( ad%ertisin*( sa!es "romotion( and "ub!ic re!ations,

Sa%)s ('r$)5

Sa!es re"resentati%es are te most e-"ensi%e means of "romotion( because tey re4uire income( e-"enses(

and su""!ementary benefits, Teir abi!ity to "ersona!i+e te "romotion "rocess ma&es sa!es"eo"!e most

effecti%e at se!!in* com"!e- *oods( bi*9tic&et items( and i*!y "ersona! *oods;for e-am"!e( tose re!ated

to re!i*ion or insurance, Sa!es"eo"!e are trained to ma&e "resentations( ans#er objections( *ain

commitments to "urcase( and mana*e account *ro#t, Some com"anies a%e successfu!!y reduced teir

sa!es9force costs by re"!acin* certain functions


53/94

"ermanent!y, Te use of "romotions as risen considerab!y durin* te !ate >Lt century, Tis is due to a

number of factors #itin com"anies( inc!udin* an increased so"istication in sa!es "romotion tecni4ues and

*reater "ressure to increase sa!es, Se%era! mar&et factors a!so a%e fostered tis increase( inc!udin* a rise in

te number of brands


54/94

mana)s 'n%& 'n). In a44iti'n2 ?r'm'ti'n )F?)n4itur)s ar) %i)%& t' 3) 3)tt)r a%%'$at)42

3)$aus) 4i(()r)n$)s am'n ?r'm'ti'n t''%s 3)$'m) m'r) )F?%i$it.

54


55/94

N))4 t' 8us! #u%% T!r'tt%) A!)a45

In$r)asin n'


56/94

TABLE +5 DIMESIONS O# 1HANGES

1!an)Im?a$t 'n Busin)ss

Mar)ts

7oca! to .!oba! - In%estments in

Identifyin*

$ Ser%icin* Ne#

mar&ets

1ust'm)rsAcce"tance to de!i*t - 7istenin* to

Consumers,

9 no#in*

$'nderstandin*

teir needs,

9 5u!fi!!in* Customers

Re4uirements,

1'm?)titi'n9 Increased Com"etition

9 Sorta*e to sur"!us

Economy

9 S4uee+e in mar*ins

!eadin*

to cost cuttin*s,

9 Conso!idatin* $

Con%er*ence,

T)$!n'%'&.radua! can*e to

4uantum Can*e

9 Inno%ationa!

Sareo!ders

Trans"arency,

S'$i)t& 6emandin* Ri*ts 9 Cor"orate .o%ernance

9 Concern for socia!

Ob!i*ations,

56


57/94

1!an)Im?a$t 'n Busin)ss

Mar)ts7oca! to .!oba! - In%estments in

Identifyin*

$ Ser%icin* Ne#

mar&ets

1ust'm)rs

Acce"tance to de!i*t - 7istenin* to

Consumers,

9 no#in*

$'nderstandin*

teir needs,

9 5u!fi!!in* Customers

Re4uirements,

1'm?)titi'n9 Increased Com"etition

9 Sorta*e to sur"!us

Economy

9 S4uee+e in mar*ins

!eadin*

to cost cuttin*s,

9 Conso!idatin* $

Con%er*ence,

T)$!n'%'&.radua! can*e to

4uantum Can*e

9 Inno%ationa!

Sareo!ders

Trans"arency,

S'$i)t& 6emandin* Ri*ts 9 Cor"orate .o%ernance

9 Concern for socia!

57


58/94

Ob!i*ations,

Historica!!y( Can*es in society a%e a!#ays been "receded by te f!o# of ideas( #ic "ro%ide te cuttin*

Ed*e of de%e!o"ment, In contem"!atin* te ca!!en*es( te a""roaces of tose enter"rise( #ic

successfu!!y #eatered te ca!!en*es of tis %o!ati!e era( so#s tat inno%ation is not on!y "o#er but a!so

te &ey to sustained economic success, 8i!e te debate o%er inno%ation in te #or!d of business as ra*ed

for !on*( inno%ation as no# ra"id!y emer*ed as a critica! !ament of te *ro#t strate*y,

6es"ite te mu!ti9!ayered any mu!ti9dimensiona! as"ect of ubi4uitous can*e( most or*ani+ation sti!!

disconcertin*!y confine temse!%es to incrementa! im"ro%ement $ inno%ation #itout tryin* to a!ter te

ru!es of te *ame( brin* about brea&trou* inno%ation, 8at is "ro*nostica!!y a!armin* is tat most

com"anies in te *i%en industry or mar&et tend to fo!!o# te same un#ritten ru!es for conductin* business

#it !imited de%iations from de facto strate*ies, Tis is ref!ected by te fact tat tou* a**!omeration $ te

!ocation of inno%ati%e acti%ities are c!ose!y re!ated( im"ortant sectora! c!usters !i&e te-ti!es


59/94

T!) Inn'>ati'n Im?)rati>) A$$)%)ratin Gr'


60/94

“ SURVIVAL IS THE MOTHER O# INNIVATION”

/Ban&s can "ro%ide inno%ation "roducts and ser%ices to teir cor"orate and retai! customers on!y #en

creati%e "eo"!e are in "!ace a!on* #it !atest tecno!o*y, Suc "eo"!e mi*t "ro%ide inno%ati%e ideas to

customers and ban&s, By con%ertin* tere acce"tab!e ideas into rea!ity( ban&s can *et an ed*e to com"ete

effecti%e!y in te *!oba! %i!!a*e, Indian ban&in* is a!so can*in* its sa"e ra"id!y by ado"tin* inno%ati%e

tecno!o*y( "roducts and ser%ices,1

Inn'>ati'n is t!) )& t' su$$)ss ('r an& a$ti>it&. Inn'>ati'n 3anin is t!)r)('r) n't an )F$)?ti'n.

Inn'>ati'n 3anin is ?'ssi3%) 'n%& ) inn'>ati>) ?)'?%) in 3anin. M'r)'>)r2 inn'>ati>)

i4)as '( su$! ?)'?%) !a>) t' 3) !)ar4 at t!) ri!t tim) 3& t!) ri!t ?)'?%). On%& t!)n t!) n))4)4

)n$'ura)m)nt an4 su??'rt is i>)n t' $'n>)rt su$! inn'>ati>) i4)as in r)a%it&.

In t!) ?ast2 a )n)rati'n a? is $'nsi4)r)4 t' 3) )m)nt in t!) t)$!n'%'& ('%%')r& s!'rt s?an '( 0 &)ars in )>)r& s?!)r) '( a$ti>it&

in(usin 4&namism an4 $r)ati>it& %)a4in t' s)>)ra% inn'>ati'ns.

G%'3a%%&2 usa) '( t)$!n'%'& is >)r& )Ft)nsi>) in t!) (inan$ia% s)$t'r '(

m'm)ntum )nt '( /+st $)ntur&. Li3)ra%i@ati'n '( t!) In4ian )$'n'm& !as ?r'>i4)4 s$'?)

t' t!) 3anin s)$t'r t' r)'ri)nt its ('$us 3& s!i(tin (r'm 4)>)%'?m)nta% r'%) '3%iat)4 m'st%& 3&

s'$i'-?'%iti$a% $'nsi4)rati'ns int' ?r'()ssi'na% (inan$ia% a)n$i)s ))n 'n ?r)s)r>in t!)ir 3'tt'm

%in)s. T!) 4ir)$ti'n in )r)n$). Sma%% ?%a&)rs ) t' ('r) am)r)r t' 3)$'m) 3i ?%a&)rs 'r )%s) t!)& )r 't!)rs. T!is )m)rin s$)nari'


61/94

?ri>at) s)$t'r 3ans ('r mar)tin a%% t!) 3anin ?r'4u$ts )%s in mar)tin2 $'r?'rat) an4 r)tai% 3anin s?)$ia%ists a%'n

II n'rms i4ua% 3ans 'r !an4)4 '>)r t' an

aut'n'm'us a)n$& 3& m'st '( t!) 3ans $'%%)$ti>)%&. Sma%% ?%a&)rs in ATMs ar) a%s' tr&in t' 3) a

?art '( t!is s!ar)4 n)t) Ban '( In4ia !as a%r)a4&

initiat)4 t!) r)=uir)4 st)?s t' ra4ua%%& 4is?)ns) isi'n '( t!) 3ans 3& R)s)r>) Ban '(

In4ia is ma4) ?'ssi3%) 3& t!) t)$!n'%'&2 %)a>in t!) r'utin) au4it i4ua% 3ans.

7it! t!) aut'mati'n '( t!) r'utin) )%'?m)nts2 a !'st '(

$ust'm)r (ri)n4%& 3anin ?r'4u$ts )

a%r)a4& initiat)4 t!) ?r'$)ss '( EDI "E%)$tr'ni$ Data Int)r(a$)* t!)r) 3& r)4u$in t!) manua% tass in

t!) ?r)?arati'n '( 4'$um)ntati'n an4 )n!an$in t!) %)>)%s '( aut'mati'n. T!is a%s' (a$i%itat)s

stan4ar4i@ati'n in 4'$um)ntati'n

)na3%)s )-$'mm)r$) t' ain m'm)ntum. T!)r)('r)2 3ans $an a%s' )=ua%%& %'' ('risit t!) 3an 3ran$!)s t' su3mit t!) 4'$um)nts ) r)4u$) t!) 4)?)n4s '( in4i>i4ua%s $ust'm)rs 'n t!) 3an3ran$!)s t' $'n4u$t t!)ir r'utin) 3anin '?)rati'ns2 t!) EDI

tain ?%a$) main%& 'n a$$'unt '( aut'mati'n a%u)s.

#)< 3ans !a>) a%r)a4& start)4 mar)tin ar)ssi>)%& ('r r)tai% 3usin)ss %'ans 3& t&in u?


62/94

?r'()ssi'na%s $an 3) (urt!)r )Ft)n4)4 t' $'>)r 't!)r ar)as as )r& sim?%). Bans ar)

r)=uir)4 t' !a>) a $'mm'n a)n$& T!is 4ata s!'u%4 3) ana%&@)4 an4 $%assi(i)4 int' >ari'us s)m)nts sa&- a$$'r4in t' a$ti>it&2 a)2

?%a$)2 in$'m)2 )4u$ati'n2 )t$.2 '( t!) 'rani@ati'ns an4 ?)'?%)

?r'$)ss is 4'n) 'n a%% In4ia 3as)s2 a

62


63/94

WINNOUATION IN C'STO)ER SERUICE IN BANS

Satisfied customers are te best *uarantee for te stabi!ity and *ro#t, Customers #i!! be satisfied on!y

#en te ban&s "ro%ide te customi+ed and inno%ati%e "roducts and ser%ices at res"onsib!e cost, Tis artic!e

focuses on te &ind of ser%ices "ro%ided by de%e!o"ed countries and !e%e! of inno%ati%e ser%ices "ro%ided by

Indian ban&s, )any inno%ati%e ser%ices are current!y a%ai!ab!e from Indian ban&s !i&e E9Ban&in*( AT)s(

Any#ere Ban&in* etc,( but tere is a #ast sco"e of im"ro%ement, G%'3a%i@ati'n2 t!) 3u@@

n't %)a>) t!) 3anin in4ustr& unt'u$!)4. T!) '?)nin '( t!) '%uti'n !a>) ?r'>)n 3)n)(i$ia% t' t!) )$'n'm&.

H')r2 inn'>ati'ns in (inan$ia% ?r'4u$ts a%s' !a>) i>)n ris) t' s'm) n)< $!a%%)n)s ('r mar)t

?arti$i?ants an4 t!)ir su?)r>is'rs in t!) ar)as '( $'r?'rat) '>)rnan$) an4 $'m?%ian$). T!) $!an)s

t!at ar) ta)n ?%a$) in t!) %ast 4)$a4) 4)m'nstrat) aain t!) t)$!ni$a% )%'?)4 $'untri)s ar) turnin in$r)asin%& t' )%)$tr'ni$ ?a&r'%% $ar4s

as a $'st-)(()$ti>) '%uti'n '( ?a&m)nt 3)!a>i'r2” t!) ABA n't)42 “4ri>)n 3& t!)

in$r)asin ?'?u%arit& '( 4)3it $ar4s.rs ?r)()rr)4 ?a&m)nt m)t!'4 ('r in st'r) ?ur$!as)s- an“)>'%uti'n '( ?a&m)nt 3)!a>i'r2” t!) ABA n't)42 “4ri>)n 3& t!) in$r)asin ?'?u%arit& '( 4)3it $ar4s.

1'min a$r'ss t!r'u! t!) ?)r('rman$) '( Banin Instituti'ns '( t!) ) n' 4'u3ts a3'ut t!)ir str'n 3anin mai%-'r4)r $'m?an& L.L. B)an2 n'< ('r its su?)r3 'r4)r-

tain an4 s)r>i$) 4)%i>)r& s&st)ms2 as its m'4)% ('r $!an). A ma'r r)su%t '( t!is (un$ti'na%

3)n$!marin i$)s. T!) $)nt)r )>)n

a%%'). T!) ma$!in)

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$an )>)n 3u& an4 s)%% mutua% (un4s. Ins?ir)4 3& LL B)an2 Bans ?u3%is!)4 a 0-?a) $ata%'u) t'

!)%? $ust'm)rs a??r)$iat) an4 s)%)$t (r'm its m'r) t!an +P (inan$ia% s)r>i$)s.

Ot!)r 3ans in t!) )2 s%)44)4 t!)ir $'n>)rsati'n “(inan$) an4 $'ntr'%” ima)s2 !a>) %i)ati>) s)r>i$) strat)i)s an4 ?ra$ti$)s. Man& Bans !a>) )sta3%is!)4 an in('rmati'n

$)nt)r 'r “)n$&$%'?)4ia” in t!) ari'us 3its an4

?i)$)s '( im?'rtant s)r>i$) in('rmati'n %i) t!) a>)ra) tim) t' (inis! a transa$ti'n an4 t!)

$'m?an&s ?r'4u$ts an4 s)r>i$)s. In('rmati'n a3'ut t!) 3usi)st 4a& 'r 4a&s in t!) 3ran$! is 4is?%a&)4

s' t!at t!) $ust'm)rs 'i4 t!)s) ?)ri'4s ma& 4' s'. 8!'n) %in)s 4)4i$at)4 t' $ust'm)r

s)r>i$) !a>) 3))n insta%%)4. Man& In4ian 3ans !a>) a%s' a4'?t)4 s'm) '( t!)s) s&st)ms. An&

$ust'm)r $an ?i$ u? t!is ?!'n) an4 r)%a& !is 'r !)r $'m?%ains2 =u)sti'ns2 'r 4i((i$u%ti)s.

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65/94

1'nstraints5

Te constraints tat need to be remo%ed to ma&e our ban&in* sector "ro*ressi%e are:

F, To remo%e inf!e-ibi!ity !i&e !ac& of users friend!y front and en%ironment for ban& officia!s0

>, 'se of a %ery tecnica! and "ro"rietary bac& and soft#are( #ic cannot be customi+ed easi!y,

, 'sers in ban&s as #e &no# are not IT "rofessiona!s and tou* tey are trained in %arious as"ects( it

rea!!y ma&es im"ractica! for tem to co%ers temse!%es sudden!y to ne# u"comin* systems,

1'n$%u4in R)mars5

7) ())% t!at (irst '( a%%2 inn'>ati'n is r)=uir)4 in 3ans t' r)n4)r 3)tt)r an4 )((i$i)nt

$ust'm)r s)r>i$)s. E%)$tr'ni$ 3anin )na3%)s n)< ?r'4u$ts an4 s)r>i$)s t' 3) )ar)4 ('r

s?)$i(i$ $ust'm)rs. 7) !a>) >ari)t& '( $ust'm)rs t'4a& an4 t!) n))4 '( )a$! $ust'm)r is

4i(()r)nt an4 >ari)4. L''in t' 't!)r )$'n'mi)s %i) #ran$) an4 Unit)4 Stat)s 'ur 3anin

s&st)m !as a%s' a4'?t)4 $r)4it $ar4s2 4)3it $ar4s2 )%)$tr'ni$ $!)$s2 smart $ar4s2 )-$as! 'r

$&3)r $as!2 aut'mat)4 t)%%)r ma$!in)s2 )%& ?ra$ti$)4 in t!)s)

$'untri)s.

Int)rn)t 3anin is in >'u) n'


66/94

“BANKING S1ENE5 INDIA”

Mi4 T)rm A??raisa% '( t!) +t! 8%an Tar)ts

Te )id Term A""raisa! of Te FLt P!an conducted by te Nationa! 6e%e!o"ment Counci!


67/94

/. Ari$u%tura% Gr' to F,Q bet#een FQL9F and FQQD9Q, Tere is a need to re%am" te entirestrate*y ad more action is ca!!ed for to im"ro%e te "erformance in a*ricu!ture sector,

,. In(rastru$tur) 8r'3%)ms5

Inade4uate infrastructures in bot rura! and urban areas are a major factor constrainin* on

Indias *ro#t, Te 4ua!ity of infrastructure im"acts on our abi!ity to com"ete *!oba!!y and a!so

to attract 5orei*n 6irect In%estment,

. Int)rnati'na% D)>)%'?m)nt5

O#in* to i* oi! "rices( our im"ort out*o is 4uite i*, Since #e a%e am"!e forei*n e-can*e

reser%es at te moment( te im"acts of te oi! "rices are not "assed on to te users, But if te oi!

"rices remain i*( its im"act need to be "assed on to te consumer( #ic #i!! !ead to inf!ation

or fisca! deficit in te country, Anoter cause of concern is tat te do#nturn in te #or!d

economy( #ic #i!! affect our e-"ort *ro#t considerab!y, It s estimated tat e%ery F

"ercenta*e "oint reduction in our e-"ort *ro#t rate #i!! reduce te *ro#t rate of .6P by

L,> "oints,

0. S'$ia% D)>)%'?m)nts5

Our socia! indicators are not on!y !o#er ten te !e%e!s in East Asian countries( but tey are

!o#er e%en in com"arison #it te !e%e!s acie%ed by tese countries t#enty9fi%e years a*o, Te

socia! indicators are a!so so# #ide dis"arity in te *ender *a"s( !ar*e rura! and urban

differences and #ide %ariation across states,

P. Em?%'&m)nt5

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68/94

Tis is anoter area of *ra%e concern, Studies based on data co!!ected from or*ani+ed and

unor*ani+ed sectors state tat #i!e em"!oyment may be increasin* in te unor*ani+ed sector in

res"onse to *ro#t( tere is actua!!y a contraction in em"!oyment in te or*ani+ed sector( #icis te "referred sector for em"!oyment by ne# entrants to te !abour force,

. In)=ua%it& an4 8'>)rt&5

Tou* te "o%erty as dec!ined te dec!ine #as !ess ten tar*eted, Te moderate im"ro%ement

in education ad ea!t indicators im"!ies tat access to more "roducti%e em"!oyment remains

!imited( es"ecia!!y in bacard re*ions and amon*st disad%anta*ed *rou"s,

. Ba%an$) R)i'na% D)>)%'?m)nt5

Re*iona! imba!ance in te de%e!o"ment of different states "resents a "icture( #ic re4uires a

focused attention, Some states #ere ab!e to rea" te benefits of te economic reforms( but some

oters #ere not ab!e to do so, E%en district bacardness in a #e!! "erformin* state a!so

"resents a *rim "icture,

. R)s'ur$)s in t!) 8u3%i$ S)$t'r5

Te a%ai!abi!ity of resources in te "ub!ic sector to meet tar*eted !e%e!s of "!an e-"enditure is an

area( #ic deser%es attention, Neiter te center nor te state a%e been ab!e to mobe!i+e teresources needed to &ee" out!ays in !ine #it FLt "!an "rojections and tis as !ed to si*nificant

under fundin* in many sectors, Te conso!idated "ub!ic debt of te Center and States ta&en

to*eter is about L of te .6P( #ic is amon* te i*est in emer*in* mar&et economies,

+. D)$%arati'n '( Di>i4)n45

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69/94

Te RBI as decided to *rant *enera! "ermission to ban&s to dec!are di%idends( "ro%ided tey

com"!y #it te fo!!o#in* conditions:

E%ii3i%it& 1rit)ria

+. On!y tose ban&s( #ic com"!y #it te fo!!o#in* minimum "rudentia! re4uirements( #ou!d be

e!i*ib!e to dec!are di%idends #itout te Reser%e Ban&s "rior a""ro%a!:

a= Ca"ita! to ris&9#ei*ted assets ratio


70/94

Ban&s( #ic fu!fi!! te e!i*ibi!ity criteria( may dec!are and "ay di%idends( "ro%ided9

a= Te di%ined "ayout ratio does not e-ceed ?L "er cent, ) 3an !as a4>is)4 a%% s$!)4u%)4 $'mm)r$ia% 3ans t' ('rmu%at) a s$!)m) ('r

?r'>i4in s)r>i$)s at t!) ?r)mis)s '( a $ust'm)r a% '( t!)ir r)s?)$ti>) 3an

3'ar4s an4 s)n4 t!) sam) ('r RBI a??r'>a%. In t!) instrum)nts2 )t$.2 (r'm t!) ?r)mis)s '(

$)ntra% an4 stat) '>)rnm)nts 4)?artm)nts.

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71/94

“ENTRY O# LI1 INTO BANKING5 A 7ISE DE1ISION”

7IC is a !on*9term "!ayer #it !on*9term resources *arnered at a !o# cost, It as cosen Cor"oration Ban& and Orienta! Ban& of Commerce( for

in%estments in teir e4uity sares, Tese t#o "ub!ic sector ban&s a%e te distinction of turnin* out su"er!ati%e "erformance, Te business "erem"!oyee and intermediation costs for tese t#o ban&s are te !o#est in te industry, So are tere Non Performin* Assets, Cor"oration ban&

incidenta!!y( is te on!y "ub!ic sector ban&( #ere te recent %o!untary retirement scemes as not been im"!emented( as it does not a%e any e-cess

staff to be sent out,

In te )an*a!ore based Cor"oration ban& are "era"s te bi**est *amb!es o%er underta&en by te t#o

*iants, Tat( des"ite te state ban&s status as one of te best9mana*ed ban& in te country, Com"etition is

intense in bot domence at !ast count tere #ere FQ "ub!ic sectors( ? "ri%ate sectors( and ?D forei*n ban&s

o"eratin* in te country( and at te time of *oin* to "ress( com"anies a%e secured !icense from te IR6Ato start o"erations


72/94

ban&s #it a source of !on*9term funds to mana*e teir sort9term !iabi!ities,1 Tat bot com"anies are

serious about teir uni%ersa!9ban&in* ambitions is e%ident, Says Baja"ai: /8e a%e "ut in a "!ace a %ery

#ide array of "roducts and today #e are tru!y financia! su"ermar&et1,

Today D "er cent of SBIs re%enues come from ban&in*( and a!most a!! of 7ICs re%enues come form insurance, Bot are see&in* to reduce tis

"ro"ortion o%er te ne-t fi%e years, On!y( SBI is see&in* to become a uni%ersa! ban& trou* or*anic means( #i!e 7IC as started its cam"ai*n #it

te ac4uisition of a si*nificant sta&e in cor"oration ban&,

T!) Sam) En4s5

Te 7ife Insurance Cor"orations ac4uisition of a > "ercent sta&e in cor"oration ban& for rs,?L,?L crore

does ma&e *reat business sense: Cor"oration Ban& is amon* te better ban&s in te country0 and a *reen9

fi!ed ban&in* entity #i!! find it difficu!t to estab!is itse!f in tese tryin* times, Baj"ai as a!ready articu!ated

is desire to u" 7ICs sta&e in te ban&s once te *o%ernment amends te ban&in* com"anies Act( a!!o#in*

"ri%ate o!din*s in nationa!i+ed ban&s to e-ceed ?Q "er cent,

Tan&s to te ac4uisition of tis sta&e( Indias !ar*est insurance com"any no# benefit from Cor"oration

Ban&s e-"ertise in money mana*ement, 7IC boasts an annua! cas f!o# of around rs,DLLL crore, Te ban&

can e!" it mana*e tis money, )ana*in* a sum of tis ma*nitude #i!! not on!y enab!e Cor"oration Ban&

earn a !ar*e mana*ement fee( it #i!! a!so e!" it ac4uire a si*nificant c!out in te money mar&et,

By ac4uirin* a sta&e in cor"ban& securities( 7IC ac4uires an a!most in ouse fund mana*er for a!! te

Rs,>D( LLL crore it needs to in%est in *o%ernment securities, And by *radua!!y increasin* its sta&e in te

"rofit ma&in* Orienta! Ban& of Commerce LLF de"osits( Rs, >?(L crore0 net "rofit( Rs,>L>, crore= to

FF( 7IC as made its intent c!ear0 to restructure itse!f into #at Baj"a terms /a transnationa! com"etiti%e

financia! con*!omerate of si*nificance to societies1,

7!'s B)tt)r

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73/94

6iscountin* te o%er!a" tat must e-ist bet#een te t#o( bot com"anies on teir e-istin* customer base to

e!" tem ma&e te transformation to uni%ersa! ban&, SBI( for instance( can se!! a c!utc of offerin* to its

account9o!ders0 7IC( to its "o!icyo!ders, Ten tere are o"erationa! efficiencies to be *ained,

6es"ite SBIs stron* brand( si+eab!e net#or&( and u*e customer base( it does !oo& second best


74/94

OB;E1TIVE5 9

In%entories re"resent in%estment of a firms funds, Te objecti%e of te in%entory

mana*ement sou!d be te ma-imi+ation of te %a!ue of te firm, Te firm sou!d

terefore consider:

8ere(

A Annua! re4uirement,

O Per order cost,

C Per unit carryin* cost,

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75/94

7HEN SHOULD THE #IRM 8LA1E AN ORDER TO RE8LENISH

INVENTORY

Te in%entory !e%e! at #ic te firm "!aces order to re"!enis in%entory is ca!!ed

reorder "oint, It de"ends on


76/94

#UN1TION O# INVENTORY 1ONTROL

5unctions to be "erformed in te fie!d of In%entory Contro! are:

F Settin* u" norms for carryin* In%entory,

> 6eterminin* #at items to be stoc&ed,

Settin* ru!es for In%entory re"!enisments,

? Recei%in*( storin* and issuin* in%entory items as needed,

D )aintainin* records of in%entory 4uantities and %a!ues,

Identifyin* and de"osin* of s!o# mo%in*( non9mo%in*( obso!ete or dama*e

in%entories,

5urnisin* summary information on in%entory "osition for contro! "ur"oses,

7ocations of "osition res"onsib!e for "erformin* eac of tese functions in

or*ani+ation structure *reat!y %ary from com"any to com"any,

In Ne# Ho!!and 5iat India determination of "roduct materia! or direct #or& order

materia!


77/94

6etermination of indirect materia!


78/94

T!) Int)rn)t in E-$'mm)r$)5 In>)nt'r& ?%annin an4 'r4)r mana)m)nt

)ost of te time te job of forecastin* demand and re"!enisin* in%entory to suit te

demand is not accom"!ised in a manner tat is usefu!, 8e!! te!! you o# to

co!!aborate o%er te Internet on order mana*ement( in%entory mana*ement( and

demand forecastin*( "roduction scedu!in* and trans"ortation, 8e!! describe o#

trou* co!!aborati%e "!annin* on te Internet( consumer bea%ior can be

communicated trou*out te or*ani+ation,

S$)nari's5 8at a""ens #en a customer contacts you and as&s for a "roduct tat

e #ants immediate!y and you disco%er tat your #areouse doesnt stoc& it at tat

momentG And if tis a""ens after te item as been !o**ed in as a confirmed orderG

Are you ab!e to res"ond in a timeframe tats suitab!e to your customerG

8at a""ens if te customer contacts you trou* te!esa!es( or trou* on!ine sa!es

on te #ebG Is your staff ab!e to res"ond accurate!y to te customers 4ueryG In te

"rocess are you rea!!y ma&in* money in tese dea!sG 8at do you need to ensure tat

you are not in a situation #ere you are in te dar& about orders and in%entories( and

maybe e%en customersG

8e &no# tat customer orders dri%e a su""!y cain, A "rimary re4uisite for any e9

commerce business is tat it em"!oys systems tat mana*e orders and in%entory

!e%e!s efficient!y,

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79/94

8en customers demand ser%ice trou* mu!ti"!e canne!s( order "romisin*(

trac&in* and fu!fi!!ment become more com"!e- and intensi%e, )u!ti"!e canne!s

cou!d mean customers ca!!in* in trou* te #eb0 "one( fa- or emai! and usua!!y

different "eo"!e attend to tese ca!!s in an or*ani+ation,

6is"arate order "rocessin* can !ead to serious *a"s in demand and fu!fi!!ment, If

order commitments are not onored trou*out te enter"rise a conso!idated order

status at any "oint of time can be difficu!t to %ie# and tis difficu!ty may in turn to

be communicated to te customer,

Conso!idatin* orders into a sin*!e interface for submission( trac&in*( routin*(

fu!fi!!ment( and order status 4ueries( can e!" a!! em"!oyees access %ita! information

from a common interface tus ensurin* %isibi!ity in te entire "rocess, And if tis

%isibi!ity is in turn communicated to te customer( it means tat te customer as a

com"!ete "icture of te status of is order unti! te fina! de!i%ery, Customer order

istory im"!ies %ie#in* and mana*in* "endin* orders by status( accessin* order

numbers by in%oice numbers( trac&in* number or customer,

Or4)r mana)m)nt s)r>i$)s5

Order mana*ement ser%ices are a critica! com"onent of customer ser%ice 9 enab!in*

interna! communications #itin an or*ani+ation and faci!itatin* co!!aboration amon*

tradin* "artners to ensure tat a!! customer orders are fu!fi!!ed and de!i%ered #en

"romised,

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Profitab!e order mana*ement features can afford te fo!!o#in*:

• Conso!idated order mana*ement tat !o#ers costs in turn,

• Ad%anced order commitment and trac&in* tat can in turn e!" im"ro%e

customer ser%ice,

• A!!ocation of in%entory and "roducts in a "rofitab!e manner,

• Automation of #or&f!o#s trou* order mana*ement "rocesses[ Order

%isibi!ity


81/94

In>)nt'r& mana)m)nt5

One of te !ar*est costs to any business is tat of in%entory or stoc& at and, 8eter

a manufacturer( retai!er or distributor( te amount of in%entory e!d direct!y im"acts

your bottom !ine in more number of #ays tan you can ima*ine, Ha%in* too muc

cas tied u" by not stoc&in* u" on items tat customers need( can a%e a major

im"act on your business,

A "roduct tat is in e-cessi%e demand is usua!!y e-treme!y difficu!t to mana*e,

Su""!yin* te ri*t amount of "roducts im"!ies tat an accurate demand forecast is

essentia!, Tis im"acts te entire su""!y cain, A simi!ar situation e-ists at te

#areouse !e%e! and e%en te manufacturer end,

Continuous re"!enisment in a #areouse can become a mammot tas& if consumer

res"onse is not studied accurate!y, To faci!itate efficient consumer res"onse based on

consumer demands( #areouse data( sa!es forecasts( and in%entory "!annin*( it

becomes im"erati%e tat suc com"anies consider in%entory mana*ement serious!y,

)a&in* accurate demand and su""!y "redictions is an idea! situation tat anyone inte su""!y cain mana*ement arena cou!d dream off,

In%entory mana*ement can remo%e barriers bet#een manufacturer and retai!ers and

estab!is a c!oser re!ationsi" bet#een tem, Idea!!y in%entory mana*ement sou!d

be easy as te main aim is to reduce in%entories, If items #anted are not at and or

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82/94

e%en if mercandi+e #anted is reordered often( sa!es #i!! be !ost to com"etitors,

Precise contro! of in%entory is an essentia! in*redient for a successfu! com"any,

Te main aims in in%entory mana*ement are:

F, Im"ro%ed customer ser%ice

>, Reduced in%entory in%estment

, Increased "roducti%ity

Benefits of in%entory mana*ement:

• Com"!ete contro! of in%entory,

• Com"!ete information about te %a!ue of te in%entory[

• Com"!ete %isibi!ity on uantities on and( uantities committed and

uantities so!d[

• Res"onse time to demand can*es reduced[

• Increased sa!es

• no#!ed*e of te e-act si+e of mercandi+in* in%entory[

• 5re4uent ana!ysis of "urcases( sa!es and in%entory records,

• Remo%a! of unnecessary use of #areouse s"ace used by unneeded "art of

in%entory,

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• Reduction in e-cess mercandi+e stoc&,

• Ta-es and insurance "remiums "aid on e-cess mercandi+e in%entory a%oided,

By "ro%idin* time!y accurate information "ertainin* to in%entory !ocation( mo%ement

and %a!uation( recei"t of *oods( sa!e and return of *oods and "rofits you can ma&e

sure tat your in%entory is %isib!e trou*out a net#or&,

8it in%entory mana*ement you can set your "roduct cata!o* to ide "roducts tat

are not in stoc&( or can*e "rices based on te amount of "roducts a%ai!ab!e in te

#areouse, Te 4uantity a%ai!ab!e can be dis"!ayed to te so""er and tis can

"re%ent unnecessary confusion #en te so""er adds items not a%ai!ab!e to a

so""in* cart, Te store buyer can be automatica!!y notified about !o# in%entory

!e%e!s,

IT is a &ey enab!er in te transformation of "urcasin* into a strate*ic business

function, Te ca!!en*e is to find a #ay to "ut tese tecno!o*ies to use and create

%a!ue and com"etiti%e ad%anta*e,

Contact us for inno%ati%e ideas and so!utions in creatin* and bui!din* on!ine stores

#it ad%anced features !i&e Order mana*ement and In%entory mana*ement, Cec&

out our e9store "ac&a*es,

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In>)nt'r& Mana)m)nt in )-3usin)ss "An EO A??r'a$!


85/94

o"tima! in%entory "o!icyG and if it can be an o"tima! in%entory "o!icy( #at are te

sufficient conditions for te o"tima!ityG

It is #e!! &no#n tat( under te EO mode! #it bac&orders( acce"tin* on!y

bac&orders cannot be an o"tima! so!ution un!ess bac&order cost is e4ua! to L \F( ?],

Tere are many "a"ers about !ost sa!es cases and "artia! !ost sa!es cases, Ho#e%er(

te stoc&!ess "o!icy as not been researced fu!!y yet, Tis "a"ers main "ur"ose is to

find te stoc&!ess "o!icys sufficient conditions for te o"tima!ity and to *enerate

some insi*ts from te sufficient conditions,

To ana!y+e and ans#er te abo%e basic 4uestions( #e introduce a ne# in%entory

"o!icy( Com"ensation "o!icy, In tis "o!icy( te on!y difference from te oter

in%entory "o!icy occurs #en #e do not a%e any stoc& on and, Tat means( if #e

do not a%e any stoc& on and( #e #i!! offer a com"ensation( R( to &ee" or increase

demand rate,

Terefore( #e com"ensate consumers #aitin* time #it com"ensation due to stoc&9

outs, 5rom customers "oint of %ie#( stoc&9outs #i!! *i%e a ne*ati%e effect, Terefore(

some customers may "ost"one te fina! "urcase or sto" by te oter stores #en

tey notice tat tey cannot buy #at tey #ant immediate!y, Ho#e%er( #it te

com"ensation "o!icy( te customers may sti!! #ant to buy te "roduct because of te

com"ensation, 5urtermore( it is "ossib!e tat te com"ensation "o!icy may a%e

i*er demand rate com"are to te demand rate #it stoc&, 5rom retai!ers "oint of

%ie#( as !on* as tey can ma&e "rofits( tey #ant to increase demand rate, Terefore(

tis in%entory "o!icy is beneficia! for bot customers and retai!ers as !on* as tey can85


86/94

*et benefits from te "o!icy,

To im"!ementin* tis "o!icy is not difficu!t, In traditiona! retai!in*( if a store #i!! "ost

its com"ensation rate #it #aitin* time( it may be attracti%e some customers #o are

not interested in "urcasin* te "roduct at tat time, In e9business retai!in*( te

"o!icy can be im"!emented more easy #ay, 6ue to te ad%anced #eb9tecno!o*y( #e

can can*e our "roducts "rice %ery easi!y, Terefore( a store #i!! announce te

com"ensation immediate!y #en its in%entory is out of stoc&,

'nder tis com"ensation "o!icy( tere is a!so trade9off, Because #e #i!! a%e an

additiona! com"ensation cost( our tota! cost #i!! be a!so increased, Ho#e%er( due to

te "o!icy( if te demand rate #it stoc&9outs #i!! be increased( our tota! "rofit #i!!

be increased a!so, 5urtermore( #e may a%e different o"tima! in%entory "o!icy


87/94

same, Ho#e%er( in our mode!( #e can a%e different demand rates bet#een #it

stoc& and #it stoc&9outs, Second( if te demand rates are not same( just minimi+in*

a%era*e in%entory cost #i!! not *i%e us te so!ution tat #i!! ma-imi+e "rofit,

Terefore( tere are t#o #ays to so!%e tis "rob!em, One is ma-imi+in* "rofit

function( and te oter is minimi+in* a%era*e in%entory cost inc!udin* te effect of

different demand rate, In tis "a"er( #e introduce ne# cost( o""ortunity cost, Tis

cost re"resents and ta&es into account can*es of "rofit due to te difference of

demand rate, Terefore( in our mode!( minimi+in* te a%era*e in%entory cost

*uarantee tat te so!ution from our mode! is a!so ma-imi+in* te "rofit function,

Our major findin*s from our in%entory "o!icy and mode!s are as fo!!o#in*s, 5irst( te

EO mode! #it bac&orders and its so!ution are s"ecia! case of our mode!, Tis

resu!t is ob%ious, 8en #e #i!! not offer any com"ensation and a%e same demand

rates bet#een #it stoc& and #it stoc&9outs( our mode! is e-act!y same as te EO

mode! #it bac&orders, Second( our mode! a!so *enera!i+es te EO mode! #it

bac&orders in case of "artia! !ost sa!es, Tis is a!so our mode!s s"ecia! case #en #e

#i!! not offer any com"ensation and a%e "artia! !ost sa!es, Tird( #e found tat(

#itout any com"ensation( te stoc&!ess "o!icy cannot be an o"tima! in%entory

"o!icy un!ess bac&order cost is +ero,

Terefore( #it no com"ensation( #e can a%e on!y "ositi%e stoc& on and or

mi-ture in%entory "o!icy accordin* to our cost structure and demand rates, 5ourt(

te stoc&!ess "o!icy can be an o"tima! so!ution on!y #it "ositi%e com"ensation87


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under certain conditions, 5ift( #e deri%e sufficient conditions for te tree o"tima!

in%entory "o!icies( #ic are "ositi%e stoc& on and( mi-ture in%entory( and stoc&!ess

in%entory "o!icy, Tese sufficient conditions are sim"!e and easy to understand,

5ina!!y( #e so# te o"tima! so!utions for eac case, Terefore( *i%en cost structure

and demand rates for a "roduct( #e can te!! #at is te o"tima! in%entory "o!icy and

#at is te e-act so!ution to minimi+e te a%era*e in%entory cost #ic is e4ui%a!ent

to ma-imi+in* "rofit function, Trou*out te rest of tis "a"er( #e #i!! re%ie# te

traditiona! EO mode! #it bac&orders( formu!ate Com"ensation mode!s( ana!y+e

tese Com"ensation mode!s( find insi*ts from our researc( and discuss furter

researc issues, To our &no#!ed*e( e-ce"t te traditiona! EO #it bac&orders( a!!

mode!s are ne# and a!so te o"tima! so!utions are ne#,

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RESERA1H METHODOLOGY

It is te arran*ement of te conditions for co!!ection and ana!ysis of data in a

manner tat aims to combine re!e%ance to te Ne# Ho!!and 5iat India "ur"ose #it

economy in "rocedure,

Te Ne# Ho!!and 5iat India is e-"!anatory in te be*innin* as te secondary data is

co!!ected most!y from te i*er mana*ement and some from midd!e mana*ement,

Tis information is ab!e to *i%e &no#!ed*e about te com"any and its sare in te

mar&et,

SOUR!ES OF DATA

Bot "rimary and secondary data #ere co!!ected to meet te objecti%e0 te data is

co!!ected for te !ast tree years from te annua! re"orts of te ne# o!!and fiat

india, 6ue to non9a%ai!abi!ity of te accounts of se"aIn%entoryn units, I measure te

"erformance on te base of a!! a**re*ate units,

6ata is ta&en as "er te re4uirements of te study of te in%entory mana*ement,

Secondary data is used for it, Primary data is co!!ected for te "ur"ose of te

teoretica! "art,

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1ON1LUSION

F, By studyin* !ast t#o years "erformance of te com"any( #e say tat te

#or&in* ca"ita! of te com"any is increasin*,

>, Te o"erationa! In%entory "erformances of te com"any are continuous!y

risin* because of te increase in te sa!es of te com"anies "roducts,

, Te 6ebt E4uity In%entory of te com"any is increasin* as com"any is no#

"ayin* its debt due to #ic te com"any 7i4uidity In%entory is fa!!in*,

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#INDINGS

5ormation of s"ecific *rou" in eac area to identify te #asta*e e!ements and

see& "artici"ation of a!!,

Identification of #asta*e,

5ormu!ation of action "!an to e!iminate3minimi+e #asta*e,

Re%ie# of status,

Identification of correcti%e actions and teir im"!ementation,

Hi*!i*tin* te *ains,

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LIMITATION

Te study is !imited to t#o mont on!y,

Price !e%e! can*es are not considered,

Time is sort for dee" researc,

Se"arate records of te a!! units are not a%ai!ab!e,

No com"arison made #it oter firms In%entory #i!e durin* te study

"eriod and ma&in* conc!usion time,

Te readjusted and re*rou" fi*ure s!i*t!y affects te In%entory fi*ures,

Study is !imited #it te one unit of Ne# Ho!!and 5iat India Industries!imited,

Te data is used in te "roject a%e been ta&en from annua! re"ort on!y,

Hence( *rou"in* and sub *rou"in* and annu!iasation of data may s!i*t!y

affect te resu!ts,

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SUGGESTIONSD

A!tou* ne# o!!and fiat india( as satisfied te In%entory, Te fo!!o#in* are te

su**estion bein* made out by me as obser%ed durin* study of te "erformance

trou* In%entory )ana*ement:

Com"any sou!d increase its sa!es of a!! te "roduction units #it increase

in te sa!es of te com"any tat can be ab!e to increase its financia!

"osition,

Com"any sou!d decrease te o"eratin* e-"enses to increase its o"eratin*

"rofit, )a-imi+e te "roduction ca"acity,

)aintain te amount of current sa!es !e%e! and try to increase it,

)a-imi+e te uti!i+ation of fi-ed assets and #or&in* ca"ita!,

A!! oter mana*ement( "ersona! and administrati%e su**estion to be

incor"orated,

To fo!!o# te strict credit co!!ection "o!icy,

Reduce te current assets and 4uic& assets In%entory to maintain te

standard In%entory,

Cas In%entory "erformance is "oor, So ma&e "o!icies to im"ro%e it,

Return on in%estment is in satisfactory "osition and tey try to maintain it

in future,

Try to start tose com"anies( #ic are c!osed due to non9a%ai!abi!ity of

funds,

Try to best uti!i+ation of te a%ai!ab!e resources,

Try to maintain te standard In%entory in te financia! In%entory,

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BIBLIOGRA8HY

B''s

)anua!s and 5i!es of Ne# Ho!!and 5iat India,

Deep & Deep Publication Pvt. Ltd. Year -2005.

Princi"!es and Tecni4ues of Personne! )ana*ement 2'dai Paree& Himalya

Publishing House Delhi

Year -!!"

7EB. Sit)s

###,*oo*!e,com 3

http://www.google.com/http://www.google.com/

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