INVENTORY

MANAGEMENT

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PREFACE

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Acknowledgement

I wish to express my sincere thanks to all those individuals who guided me in a proper direction and providing essential information regarding report at their part. Without support and co-operation of all, project would not have been completed

I would like to express my sincere thanks to Ms. Yamini sinha (HR manager, PepsiCo, Jhagadia) who give us opportunity in their company to get training over their

I would like to express my gratitude to all of HOD of the PepsiCo Holdings pvt Ltd who provides me their valuable information and data which helps me in prepared project Report; I would like to give special thanks to Chetan Thakar for providing me production planning and shipping information.

- Purvesh Kansara

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Executive Summary

PepsiCo is one of the multinational company having more than 400 brands in 190 countries. In India PepsiCo having 37 bottling Plants.

At Jhagadia Pepsi has started its GRB plant in 1997, PET line in 2001, Aquafina in 2003. In PepsiCo I have visited Human Resource Department, Finance Department, Production Department, Quality Control, Marketing and Dispatch and Logistic Departments. The company’s Marketing Office at Ahmedabad.

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Background Of The Company

PepsiCo Pvt.Ltd. is the world’s most powerful soft drink well reputed company in the FMCG market. It ranks in the most six companies in FMCG business, the history of are as under:

Founder – Mr. Caleb Bradham Year of foundation – 1890 It was originally founded as a cure for Dyspepsia & now,

its name Pepsi soft drink. 1st plant setup in the year 1905 at America. In 1936 company earn $2 billion profit. Today its business is spread in more then 190 countries

with 500 companies. In Gujarat Pepsi have 1 plant.

( JHAGADIA MEGA G.I.D.C. BHARUCH ). 1st company of Pepsi in India was started at Jaipur

(Raj.). In Jhagadia PepsiCo started first plant in 1997 with GRB

(glass refilling bottle). In 2001 PET (poly ethylene tetracycline) was started. In 2003 AQUAFINA plant was started in Jhagadia. In 2010 SLICE plant was started in Jhagadia.

VISION & MISSION STATEMENT

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VISION:-

PepsiCo vision is to be best Consumer Product Company in the world & wants to become the market leader in the market. Its main vision is satisfaction of supplier, customers, consumers, employees.

MISSION:-

PepsiCo’s mission is to deliver the best quality product in the market & try to achieve the maximum satisfaction.

MILESTONE SINCE INCEPTION

In the year 1999 it wins Quality Assurance IQ award. In the year 2000 it wins award for 1 million hours

without loss time accident. In the year 2000 it wins award for zero loss time

accident. In the year 2000 it wins Pepsi Cola International Bronze

Quality award. In the year 2001 it wins Pepsi Cola Beverages

International Bronze Quality award. In the year 2001 it wins award for zero loss time

accident.

TYPES OF COMMUNICATION CHANNELS

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In PepsiCo company two types of channels are there :-

CHAIN COMMUNICATION :- These communication exists between superior & sub-ordinate according to there in an organizations.

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

PRESENT PRODUCT MIX

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Brand200ml.

300ml.

600ml. 1liter

1.5liter 2liter

NamePepsi • • • • •Mirinda(orange) • • • •Slice •7up • • • •Lehar • •Aquafina •Mountain dew • • • •

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ORGANIZATION CULTURE

Organization culture consist of:-

Open & transparent. Free forum & chain communication. Performance linked assessment. Mutual trust & respect. Non interference in internal matters. Team work.

POLICIES OF THE COMPANY

Quality Policy

We shall deliver the best product in the:- Market place. Highest quality. Biggest testing.

Safety Policy

We shall design, construct, maintain & safe operate our plant so that they are safe for:- The people working in the company. The assets of the company. The environment in & around.

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COMPANY’S HEADS DETAILS

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

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ORGANIZATIONAL STRUCTURE

Mr.Chetan Thakar(Plant

Manager)

Mr.Yashpal Jajodia

(Finance Manager)

Ms.Yamini Sinha(HR

Manager)

(Quality Control)

(Production Manager)

Mr.Nilesh Borisa

(Account Executive)

Mr.Prakash Shah

(Account Executive)

Mr.Zubair Saikh(HR

Executive)

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ORGANIZATION LAYOUT

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PRODUCTION DEPARTMENT

Production department has to plan the production schedule as per the sales.

Implementation of the item. Achieve the production target. Maintain quality with goodwill. Safety of machine. Organize the training programme.

ManufactureManager

MaintainsExecutive

ProductionExecutive

UtilityAssociate

ProductionAssociate

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PRODUCT SPECIFICATION

PepsiColour – Black

MirindaColour – Orange

Mountain DewColour – Off Green

7upColour – Like Water (No Colour)

AquafinaColour – Water

SliceColour – Mango

LeharColour – Like Water (No Colour)

RAW MATERIAL USED

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

BOTTLE SPECIFICATION

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Particular For 200 ml. For 300 ml.Height (mm) 209.5+1.20 247.7+1.20Fill Height (mm) 57.2 57.2Weight (gms) 312 390Base Diameter (mm) 54.5 59.6

PREFORM SPECIFICATION

Types of Material Handling Equipment Used

Fork lift trucko 2 for shippingo 2 for productiono 2 for sugar godown

Chain conveyer (GRB LINE) Belt conveyer (PET LINE) Plastic chain conveyer (PET LINE)

Particular SpecificationWeight (gms) 25.5+0.3Wall Thickness (mm) 3.5+0.25Length (mm) 107.4+1

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

BRIEF EXPLAINATION OF PRODUCTION PROCESS (GRB)

GRB LINE (GLASS REFILLING BOTTLE)

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Production process starts from unloading of the empty bottles from the trucks. These bottles are taken by fork lift trucks which send in the plant line. Carats from fork lift & put on the roller conveyer.

Uncaser Machine

Uncaser Machine keeps the bottle on the automatic conveyer belt from the carats.

At once it pick up the 48 bottles from the 4 boxes on this belt 2 chips neck inspection points are set in order to remove any damage bottle after inspection are do going the further bottle.

Bottle washer: (max-43000 bph)

After bottle inspected bottles are goes to bottle washer.

PrejectingAt this point the bottle is entering into the washer machine. At this time bottle is inwarded into bottles by the jobs. The dust washed in the prejecting 400 C temperature is maintaining the capacity.

Detergent 1:In this stage the tank is filled with washer & this water contain detergent. At this stage miner dust or oiliness remove.

Detergent 2:Bottles are passed through detergent-1 to detergent-2 tank. The capacity of detergent-2 tank is 21800 liters.

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Warm Water:The bottles are washed by the warm water at the temperature of 600-630. Here, bottles are sterilized & almost all microbes & bacteria’s are killed by warm water.

Cold water:At this stage bottles are washed with cold water of 300-350 C. At this stage the temperature of the bottles is bought down to normal temperature.

Refilling Bottles:

Empty bottles are refilled, which are passed through bottles. Bottles come from 4 inspection stages, the GRB capacity is 36000 bph.

80 valves in the filling bowl. The capacity of the machine is 36000 bottles per hour. The empty bottles are picked up by the filling bowl & filling automatically.

Then bottles forwarded for sealing machine the bottles are sealed with the crown. After the bottles are sealed & crowned they pass through printing machine. Printing machine print the manufacturing date, time, price after this steps the bottles are ready to final inspection.

In inspection identified:o Half fillo Full fillo Dirty bottleso Different crown

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o Different bottlesThe bottles are forwarded by the conveyer.

Caser Machine:

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

GRB PLANT STRUCTURE

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PET LINE( POLY ETHYLENE THYLATE )

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PET line is a line of plastic bottle & its maximum capacity for 500ml. bottle is 18000 bph, for 1.5 liters its capacity is 12000 bph, and for 2 liters it is 9000 bph.

The entire machine on PET line is imported & is purchased from the reputed foreign companies like:

Sidel (FRANCE)Linker (POLAND)Paramix (GERMANY)Krones (GERMANY)

Blow Moludar:

In blow moludar machine performs are converted into PET bottles capacity of this machine is 10400 bph. This machine is made by the Sidel (France Company) & price of this machine is 7 to 8 crore.

Performs are brought in ‘HOPPER’ from to blow. Moludar machine through conveyer. The computer controlling the machine automatically and decides. The temperature of oven. For controlling the temperature, sensor cameras are installed which measure the temperature. Camera checking is done after every 50 performs.

8 models are set in blow in moludar & converted into expected shape. Bottles are send unscrambler by air conveyer.

Unscrambler:

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Main function is store the bottle from ‘BLOW MOLUDAR’. Bottles are stored because it has two reasons: It needs large amount of PET bottles continually; PET bottles are stored in unscrambler machine.

Blow moludar is a very high energy consumption machine, so electricity, cooling energy & continually and air is required the unscrambler machine arranges the bottle on conveyer. Air conveyer takes the bottles into filling hall. The bottles are washed for one time because some dust is their.

Filler Bowl:

There are 54 valves in Pet filler bowl. Valves pick the bottle automatically. Syrup and CO2 are filled up automatically, stop automatically and after. This crown sealed done on the bottles.

Warmer:

The bottle comes out from the filling halls which are very cold if these cold bottles are forwarded to the “labeler” then the label can not be fixed properly. The temperature of bottles is brought up to 200 to 250 C from 40 to 50 C.

Printing Machine & Labeler:

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

Case Packer Machine:

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Different sized pet bottles are packed into different size boxes.

96 valves-500ml48 valves-1.5litres27 valves-2litres

Packaging Boxes:

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

SHIPPPING PROCESS

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AOP (Annual Operational planning):

Order placed at plant

level by all Dealers

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AOP(Annual Operational

Planning)

Target given to each Dealer

Dispatched of Order

Transportation

Arrangement

Name suggest that operational planning would be done on annual based and split in to monthly based and based on that production planning would be done, and target are given to each of all Dealers/Distributors,

How it would be decided:

On the basis of last year sales/forecast data and plus predefined growth rate and it would be on all plant wise and it could be decided on its potentiality

Who could be done:

It could be decided at Head-office, Delhi

Why it could be done:

Meaning:

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Inventory can be in the form of Raw-Material (RM), work in process (WIP)

or as Finished-goods (FG)

Purpose of Inventory

Inventory is useful for the following purposes:

Predictability: In order to engage in capacity planning and scheduling,

you need to control how much raw-material, parts, and subassemblies

you process at a given time. Inventory buffers what you process.

Fluctuations in demand: Inventory is assist in estimation of demand.

You don’t always know that how much stock you required at any given

time, but you still need to satisfy your customer’s demand on time.

Unreliability of supply: Inventory kept when there is scarce of resources

or very few suppliers are available,

Price protection: Buying quantities of inventory at appropriate times

helps avoid the impact of cost inflation. When there is chances of price

rising in future , better to purchase at presently at reasonable price and

avoid price fluctuation cost

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

rather than small quantities

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

frequently, the ordering costs are less than buying smaller quantities over

and over again.(The costs of holding the item for a longer period of time,

however, will be greater)

Types of Inventory (stock):

Inventory basically falls into overall categories of raw materials, finished

goods and work-in-process.

Raw Materials: Used to produce partial products or completed goods.

for e.g. sugar, concentrate, performs, labels, closures etc

Finished Product : This is product ready for current customer sales,

Work-in-process (WIP): Items are considered to be WIP during the

time raw material is being converted into partial product.

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Other types of inventory:

Consumables: Light bulbs, Hand towels, computer and photocopying

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

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

after-market items used to “keep things going”. As long as a machine or

device of some type is being used and will need service in the future.

Buffer/Safety inventory: This type of inventory can serve various

purpose, such as:

Compensating for demand and supply uncertainties.

Holding it to “Decouple” and separate different parts of your

operation so that they can function independently from one another.

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

facility is transit inventory. It may also define as the goods moving

within distribution channel between you and outside to the facility user or

provider.

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INVENTORY COST

It has include following cost like ordering, holding cost and stock-out cost

Ordering cost: It includes all cost incurred from placing order to receive

order and include

Price of goods

Salaries of purchase executives

Transportation cost

Damage cost

Holding cost: It include all cost related from receive order to dispatching

products and has

Rent of factory

Security cost

Insurance cost

Obsolescence cost

Salaries of Store manager

Stock-out cost: It said to be cost when there is non availability of

material at a time of processing of finished goods which demanded by

consumer ( loss of consumer)

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TYPES OF INVENTORY SYSTEMS

1. Economic Order Quantity (EOQ) System:

It said to be place the order (in qty) at which ordering cost and carrying

cost would be minimum or said to be equal,

S P

Ordering Cost

C Holding CostO S U EOQT

R O T

No of orders

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Ordering cost (OC): It incurred during placing order to receive order

like salaries of procurement, transportation cost, damage cost etc. It said

to high when there are many orders placed and should be optimum so

that frequency of order reduced cost. From above graph OP line it can be

observed that as no of order increased leads to increased in OC

Holding cost: It incurred after receiving of materials to getting into

process like rent of factory, insurance, security cost and salary of store

manager, it said to be zero when there is no inventories in stores and

increased as store material quantity increased so quantity should be

optimum.

2. ABC Inventory control system:

Large no of firms have to maintain several types of inventories. It is not

desirable to keep the same degree of control on all the items. The firm

should pay maximum attention to those items whose value is the highest.

The firm should, therefore, classify inventories to identify which items

should receive the most efforts in controlling. The firm should be

selective in its approach to control investment in various types of

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inventories. This analytical approach is called the ABC analysis and

tends to measure the significance of each item of inventories in terms of

its value.

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

tightest control

‘C items’ represents relatively least value and would be under simple

control

‘B items’ falls in between above these two categories and require

reasonable attention of management

The following steps are involved in implementing the ABC analysis:

Classify the items of inventories, determining the expected use in units

and the price per unit for each item

Determining the total value of each item by multiplying expected units

by its unit price

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Rank the items in accordance with the total value, giving first rank to the

item with highest total value and so on

Compute the ratios (percentage) of number of units of each items to total

units of all items and the ratio of total value of each item to total value of

all items.

Combine items on the basis of their relative value to form these

categories-A,B and C

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Item Units

%

Of

Total

Cumul

ative

%

Unit

Price

(Rs)

Total

Cost

(Rs)

%

of

Total

Cumul

ative

%

1

2

3

4

5

6

7

10,000

5,000

16,000

14,000

30,000

15,000

10,000

10

5

16

14

30

15

10

15

45

100

30.40

51.20

5.50

5.14

1.70

1.50

0.65

3,04,000

2,56,000

88,000

72,000

51,000

22,500

6,500

38.00

32.00

11.00

9.00

6.38

2.81

0.81

70

90

100

Total 1,00,000 100 8,00,000

The tabular and graphs presentation indicate that

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

items, but represents the highest value, 70 percentage

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

total value

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

represents 20 percent value of total value

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Items A and B jointly represents 45 percent of total units and 90 percent of

the investment. More than half of the total units are item C, represents

merely 10 percent of total investment

100

80C 60O 40 Item S Item C Item BT 20 A

10 30 50 70 90 100 Percentage of units

(3) JUST IN TIME (JIT) SYSTEM:

Japanese firms popularized the just-in-time (JIT) system in the world.

In a JIT system material or the manufactured components and parts

arrives to the manufacturing sited or stores just few hours before they are

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put to use. The delivery of material is synchronized with the

manufacturing cycle and speed. JIT system eliminates the necessity of

carrying large inventories, and thus, saves carrying and other related

costs to the manufacturer. The system requires perfect understanding and

coordination between the manufacturer and suppliers in the timing of

delivery and quantity of the material. Poor quality material or

components could halt the production. The JIT inventory system

complements the total quality management (TQM). The success of the

system depends on how well a company manages its suppliers. The

system puts tremendous pressure on suppliers. They will have to develop

adequate system and procedures to satisfactory meet the needs of

manufactures.

(4) OUT-SOURCING:

A few years ago there was a tendency on the parts of many companies to

manufacture all components in-house. Now more and more companies

are adopting the practice out-sourcing. Out-sourcing is a system of

buying parts and components from outside rather than manufacturing

them internally. Many companies develop a single source of supply.

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Introduction to Inventory Management

Inventory constitutes the most significant part of current assets of a

large majority of companies in India.

The term inventory refers to the stockpile of the products of the firm

is offering for sale and the components that make up the product.

The various firms in which inventories exist in manufacturing

companies are :

Raw-materials inventories.

Work-in-process inventories.

Finish goods inventories.

Inventory control refers to the process whereby the investment in

materials and parts carried in stock is regulated within predetermined

limits, set in accordance with the inventory policy established by

management.

The production manager favors relatively higher levels of inventory

so that production process runs smoothly. The marketing manager

prefers to have reserves of finished goods so that availability of

product is ensured even if demand for the product keeps fluctuating.

The finance manager justify limited stock levels because of them,

inventory blocks money which doesn’t earn interest.

Raw materials are those basic input materials that are converted into

finished product through manufacturing process. Raw materials

inventories are those raw materials inventory units which have been

purchased and stored for future.

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Work-in-process represents products that need more work before they

become finished product products for sale.

Introduction to Inventory Management in PepsiCo India

Holdings (P) Ltd.

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A study at PepsiCo India Holdings (P) Ltd. was carried out taking into

consideration the concept f total material control, which significant that

efficiency of any organization is upon having the right quality, right place

in right quantity at right time and at right place in following broad areas:

1. Purchase control.

2. Storage control.

3. Warehouse Accounting.

Purchase Control:

Purchasing is one of the basic functions of inventory

management and forms a major part of it. It needs considerable

expertise not only negotiating but also in the techniques of

competition and studying in large economic trends in respect of

materials to be purchased in large quantity to increase the

profit.

Objective:

o To maintain continuity of production.

o To contribute toward higher productivity.

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

lowest initial price.

o To contribute towards standardization, variety reduction

and value analysis programs.

Functions:

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Purchase time:-The purchase time indicates the lead

time i.e. time taken to physically receive the material

from the date of its indent.

To find out the lead time five cases

different items have been studied randomly, and

analyzed its fact which indicates that by following the

existing procedure, the administrative lead is very long

i.e. 5 to 7 months, while suppliers lead time about 2 to 3

months.

Purchase quality & quantity:- It has been observed that

the quantity of material is being purchase considering 6

to 12 months consumption that means no economic

order quantity has been fixed for different types of

material.

Purchase Price:- The price of each item is being

compared with supplier’s quotations considering the

quality of material to be supplied. Also the price and

terms are considered.

Store Control:

The control of materials while in storage is affected

through what is known as the perpetual inventory.

Thus main functions of the perpetual inventory system

have been studied which are:

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Receipt and issue system

Maintenance of store records.

Warehouse Accounting:

The procedure comes in to operation immediately on receipt of

dispatched documents or dispatched intimation in the stores and

covers on the activities, i.e. clearness, delivery, inspection, stock

charging and preservation, issue and return of materials by the

consumer and ends after striking out of balance from the stock

card and delivery of documents to the account department.

Stores ledger

Physical stock verification.

An insight in the study

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I have selected the topic “INVENTORY MANAGEMENT” as my

special topic of finance department on which I have prepared a mini project

including raw inventories, work-in-process inventories, and finished goods

inventories.

The subject is related with the analysis of the inventory management

for the investment of inventories in the PepsiCo India holdings (P) Ltd.

Objective of the study:

The report includes following main objectives, are as under:

To find out the operation cycle.

To study of the various inventories ratio.

To analysis of inventory management techniques used in the

PepsiCo India Holdings (P) Ltd.

To study and analysis the inventory management system and

control practices at PepsiCo India Holdings (P) Ltd.

The objectives of the report are concerned with an Ideal Inventory

Management. An ideal inventory management give the minimum

storage of the different types of the inventories and maximum sales of

the product of the company that’s why it increase in the wealth of the

company.

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