Inventory management

Executive Summary Introduction Company profile Major Milestones Notables Literature Review Formula & Solution Conclusion Respondents Bibliography Questionnaire

Our live project is based on the inventory of Big Bazaar, Sector 18, Noida. We, a team of 8 dedicated individual, made the project a worthwhile experience for all of us as a part of partial fulfilment of our PGDM degree. 3 of our team mates went to “The Great Indian Place” on the 8 th March, 2010 to collect the necessary information regarding the inventory of the retail giant. We collected some necessary information from 3 Big Bazaar officials. They were highly co-operative and friendly. By gathering the information we made some calculations regarding the project to find out the maximum inventory, cycle time etc. Hopefully our study will make this observation worthwhile and with the continuous effort we can make our team cohesiveness greater than it was ever before.

You are in trouble if you have to keep telling customers, "I'm sorry we're out of that size. May we order it for you?" Even though the shirts are selling briskly, you will lose customers if you don't have an item in stock. When the customer spends, you have got to be ready with the goods. This is what inventory management is all about. In many retail and wholesale operations, the single largest asset is inventory. Control of this investment is vital. It will eliminate a number of the problems associated with capital shortages and will also provide capital to permit expansion of operations for increased sales and profit.

Pantaloons Retail (India) Limited, is India’s leading retailer that operates multiple retail formats in both the value and lifestyle segment of the Indian consumer market. Headquartered in Mumbai (Bombay), the company operates over 10 million square feet of retail space, has over1000 stores across 61 cities in India and employs over 30,000 people The company’s leading formats include Pantaloons, a chain of fashion outlets, Big Bazaar, a uniquely Indian hypermarket chain, Food Bazaar, a supermarket chain, blends the look, touch hand feel of Indian bazaars with aspects of modern retail like choice, convenience and quality and Central, a chain of seamless destination malls. Some of its other formats include, Depot, Shoe Factory, Brand Factory, Blue Sky, Fashion Station, ALL, Top 10, mBazaar and Star and Sitara. The company also operates an online portal, futurebazaar.com. A subsidiary company ,Home Solutions Retail (India) Limited, operates Home Town, a large-format home solutions store, Collection , selling home furniture products and E-Zone focused on catering to the consumer electronics segment

Pantaloons Retail was recently awarded the International Retailer of the Year 2007 by the US based National Retail Federation(NRF) and the Emerging Market Retailer of the Year 2007 at the World Retail Congress held in Barcelona Pantaloons Retail is the flagship company of Future Group, a business group catering to the entire Indian consumption space.

Future Group is one of the country’s leading business groups present in retail, asset management, consumer finance, insurance, retail media, retail spaces and logistics. The group’s flagship company, Pantaloons Retail (India) Limited operates over 10 million square feet of retail space, has over 1,000 stores and employs over 30,000 people. Future Group is present in 61 cities and 65 rural locations in India. Some of its leading retail formats include, Pantaloons, Big Bazaar, Central, Food Bazaar, Home Town, eZone, Depot, Future Money and online retail format, futurebazaar.com. Future Group companies includes, Future Capital Holdings, Future Generali India Indus League Clothing and Galaxy Entertainment that manages Sports Bar, Brew Bar and Bowling Co. Future Capital Holdings, the group’s financial arm, focuses on asset management and consumer credit.

Type: Subsidiary of Pantaloon Group Founded: 2001 Headquarters: Jogeshwari, Mumbai, India Industry: Retail Products Department store Parent: Future Group Website http://www.bigbazaar.com/ Big Bazaar is a chain of hypermarkets in India, with more than 100 stores in operation. It is a subsidiary of Pantaloon Retail India Ltd's, Future Group, and follows the business model of United States-based Wal-Mart. hypermarket is a superstore which combines a supermarket and a department store. The result is a very large retail facility which carries an enormous range of products under one roof, including full lines of groceries and general merchandise. In theory, hypermarkets allow customers to satisfy all their routine weekly shopping needs in one trip.

1987 - Company incorporated as Manz Wear Private Limited. Launch of Pantaloons trouser, India’s first formal trouser brand. 1991 - Launch of BARE, the Indian jeans brand. 1992 - Initial public offer (IPO) was made in the month of May. 1994 - The Pantaloons Shoppe – exclusive menswear store in franchisee format launched across the nation. The company starts the distribution of branded garments through multi-brand retail outlets across the nation. 1995 - John Miller – Formal shirt brand launched. 1997 - Pantaloons – India’s family store launched in Kolkata.

2001 Big Bazaar, ‘Is se sasta aur accha kahi nahin’ - India’s first Hypermarket chain launched. 2002 Food Bazaar, the supermarket chain is launched. 2004 Central – ‘Shop, Eat, Celebrate in the Heart of Our City’ – India’s first seamless mall is launched in Bangalore. 2005 Fashion Station - the popular fashion chain is launched aLL – ‘a little larger’ - exclusive stores for plus-size individuals is launched 2006 Future Capital Holdings, the company’s financial arm launches real estate funds Kshitij and Horizon and private equity fund Indivision. Plans foraysinto insurance and consumer credit. Multiple retail formats including Collection i, Furniture Bazaar, Shoe factory, E Zone, Depot and futurebazaar.com are launched across the nation. Group enters into joint venture agreements with ETAM Group and Generali.

Product categories in Big Bazaar Location of Big Bazaar Types of inventories maintained. Decision of how inventories are maintained Reorder points of inventories Uncertain demands of customers Supply chain of perishable and imperishable goods Area of Maintenance Quality of Food-items

Introduction to inventory: An inventory can be defined as a stock of goods which is held for the purpose of future production or sales. The stock of goods may be kept in the following forms: Raw Materials Partly finished goods Finished goods Spare parts etc. The objective of an inventory problem is to minimize the total (actual or expected) cost or to maximize (actual or expected) profit. Variables in an inventory problem : The variables associated with the inventory problems are classified into two categories. The Controlled variables The uncontrolled variables

Cost Variables (or the costs) involved in Inventory Problems: Holding or storage cost Set up (or replacement or ordering) cost Besides these cost variables there are other variables that may not be controlled in an inventory problem: Demand Lead Time Amount Delivered Need of Inventory : To decrease the setup and shortage costs. To meet demand on time to earn goodwill. For smooth running of the business.

The economics of production with the large run sizes. The smooth and efficient running of the business. The economics in transportation. The advantage of price discounts by bulk purchasing. Faster and adequate service to the customers and, Profit from speculation in the market where price are expected to rise.

Ware house rent. Interest on invested capital. Physical handling. Accounting. Depreciation and determination. Classification and Categories of Inventory Models:

Some general notations used in inventory models : r = Demand rate. K = Production rate. C = Average total cost per unit time. t = Time interval between two consecutive replenishments of inventory. z = Order level or stock level use the following general notations in inventory models: I = the cost of carrying one rupee in inventory for a unit time. C 1 = Holding cost per unit time. C 2 = Storage cost per unit time. C 3 = Set up cost per production run. q = Lot size per production run. (I.e. The quantity produced per pro L = lead time. q*, t*, z* = Optimal values of q, t, z respectively for which the cost C is minimum.

After communicating with the respondents we found the following average results: Q1) What is the store capacity of your warehouse? => 45000 units Q2) What is the annual demand? => 400000 units Q3) What is the average carrying cost to carry the inventory? => >10% Q4) What is the setup cost of the inventory? => Rs.4000 Q5) What is the average lead time? => 3days Q6) What is the ordering cost to place an order of 1 unit? => Rs.4

Some important formulas to solve

It has been a great experience focussing on the live project of Management Science Decision Making (MSDM). Our place of interest was the retail giant Big Bazaar. We found great support in the shop in Noida. We have found that Big Bazaar’s inventory is well equipped and their cost is under their control due to the short cycle time of ordering and buffering. Their inventory cost is very high because of their stocking of various products. Their product range varying from mere Rs.5 to Rs.50,000. Hence their range satisfies one and all. In future their inventory is well equipped if it sees any fundamental changes on the demand of the products, be it desired or undesired. Their inventory is quickly refilled which is one of their strengths and also they take less than a day to fully make their inventory a wide spectrum.

Books consulted with: Introduction to operation Research By Hamdy A.Taha Introduction of operation Research By J.K.Sharma Learning operation Research By S.K Jaiswal Website visited : www.futurebazaar.futuregroup.com www.wikipedia.org/inventory www.pdfsearchengine.com/inventory www.scribd.com

Mr.Hiten Bansal (Store manager, Big Bazaar) Mr.Sudhir Ganguly (Asst. merchandising officer, Big Bazaar) Mr.P Prasad (Floor Manager, Big Bazaar)

Q1) What is the store capacity of your warehouse? i) >15000 units ii) >25000 units iii) >35000 units iv) >45000 units Q2) What is the annual demand? i) >100000 units ii) >200000 units iii) >300000 units iv) >400000 units Q3) What is the average carrying cost to carry the inventory? i) >10% ii) >20% iii) >30% iv) >40% Q4) What is the setup cost of the inventory? i) > Rs1000 ii) > Rs2000 iii) > Rs3000 iv) > Rs4000 Q5) What is the average lead time? i) >3 days ii) >5days iii) >7days iv) >9days Q6) What is the ordering cost to place an order of 1 unit? i) > Rs2 ii) > Rs3 iii) > Rs4 iii) > Rs5 Questionnaire

Inventory management

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Inventory management