SUMMER INTERNSHIP REPORT

ON

“ INVENTORY MANAGEMENT & CONTROL AT HERSHEY INDIA

PRIVATE LIMITED”FOR THE PERIOD

22nd June to 04th August 2015

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS OF M.B.A. FINANCE & CONTROL

PROGRAM OF PURVANCHAL UNIVERSITY

SUBMITTED BYDILIP KUMAR YADAV

M.B.A.(F&C) IIIrd SemesterRoll No. :-14409

VEER BAHADUR SINGH PURVANCHAL UNIVERSITY,JAUNPUR

(U.P.)

(2014 – 2016)SUMMER INTERNSHIP REPORT

ON

“ INVENTORY MANAGEMENT & CONTROL AT HERSHEY INDIA

PRIVATE LIMITED”FOR THE PERIOD

22nd June to 04th August 2015

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS OF M.B.A. FINANCE & CONTROL

PROGRAM OF PURVANCHAL UNIVERSITY

SUBMITTED BYDILIP KUMAR YADAV

M.B.A.(F&C) IIIrd SemesterRoll No. :-14409

VEER BAHADUR SINGH PURVANCHAL UNIVERSITY,JAUNPUR

(U.P.)(2014 – 2016)

CERTIFICATE

This is to certify that the Summer Training Report entitled

“Inventory Management & Control at Hershey India Pvt.

Ltd., Mandideep, Raisen (M.P.)”,in partial fulfilment of the

requirements for the award of the Degree of Master of Business

Administration (Finance & Control) is a record of original

training undergone byMr.DILIP KUMAR YADAV (Roll

No.14409),during the year 2014-16 of his study in the

Department of Financial Studies, Veer Bahadur Singh

Purvanchal University, Jaunpur (U.P.),under my supervision

and the report has not formed the basis for the award of any

Degree/Fellowship or other similar title to any candidate of any

University.

The original work was carried during 22 June to 04 August

2015in Hershey India Pvt. Ltd., Mandideep, Raisen (M.P.).

Date:- Ms.Rachana Chaudhary

Place:- (Deputy General Manager-Finance)

DECLARATION

I Dilip Kumar Yadav, Roll No.-14409 student of M.B.A (F&C) IIIrd

Semester of Veer Bahadur Singh Purvanchal University, Jaunpur (U.P.),

hereby declare that the Summer Internship Report, entitled “Inventory

Management & Control at Hershey India Pvt. Ltd., Mandideep,

Raisen (M.P.)” submitted to the V.B.S.P.U., Jaunpur (U.P.)in partial

fulfillment of the requirements for the award of the Degree of Master of

Business Administration (Finance & Control) is a record of original

training undergone by me during the period 22nd June to 04th August

2015 under the supervision of Ms.Rachana Chaudhary (DGM-

Finance), Hershey India Pvt. Ltd. ,Mandideep Raisen (M.P.)and

guidance of Dr.Ajay Dwivedi (H.O.D. of Financial Studies) and

Mr.Alok Gupta (Coordinator, Training & Placement of Financial

studies), Veer Bahadur Singh Purvanchal University, Jaunpur (U.P.).All

the data represented in this project is true & correct to the best of my

knowledge & belief.

I also declare that this project report is my own preparation and not

copied from anywhere else.

Date:

Place: (Signature of the Student)

ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of gratitude to all those who have helped me in completing this summer project to the best of my ability. Being a part of this project has certainly been a unique and a very productive experience on my part.

I present my sincere thanks to Mr. Asharfi Lal Gupta (DGM -HR)who allowed me to take training at “Hershey India Pvt. Ltd., Mandideep Raisen (M.P.)”.

I express my sincere thanks to my Project Guide Ms.Rachana Chaudhary (DGM-Finance) and Mr.N. Rajeevan (Sr. Executive Stores), Hershey India Pvt. Ltd. ,Mandideep Raisen (M.P.)for guiding me throughout the work.

I also thank Dr.Ajay Dwivedi (H.O.D. of Financial Studies), &Associate Prof. Sushil Kumar sir ,V.B.S.PU. Jaunpur (U.P.). who has sincerely supported me with the valuable insights into the completion of this project.

I am very grateful thank to Mr.Alok Gupta (Coordinator, Training & Placement of Financial studies) V.B.S.PU., Jaunpur (U.P.).Who has given me the opportunity to do this project in Hershey India Pvt. Ltd.,Mandideep Raisen (M.P.).

I would also like to thank the staff of Hershey India Pvt. Ltd., Mandideep Raisen (M.P.) for their wonderful support & inspirable guiding for the completion of my project.

Last but not least I convey my thanks to my beloved parents and my faculty who helped me directly or indirectly in bringing this project successfully.

Thank You!

DILIP KUMAR YADAV

M.B.A(F&C) IIIRDSemester

Roll.No.-14009

TABLE OF CONTENTSCONTENTS Page No.

Title page………………………………………………...ii

Certificate………………………………………………..iii

Declaration……………………………………………….iv

Acknowledgement………………………………………..v

Ch apter -1 Inventory Management 7-33

Chapter -2

Company Profile 34-51

Industry Profile 52-61

Chapter -3

Literature Review 62-81

Chapter -4

Inventory Control 82-91

Chapter -5

Summary 92-93

List Of Abbreviations 94

Bibliography 95

CHAPTER -1INVENTORY MANAGEMENT

STRUCTURE

1. Introduction

2. Meaning and Types of Inventory

3. Need to hold Inventories

4. Objectives of Inventory Management

5. Cost of Holding Inventory

6. Techniques of Inventory Management

7. Inventory and the Finance Manager

8. Common Inventory Valuation Methods

9. Effects Of Inventory(S) Valuation On Financial Statement

10. Relation Of Working Capital With Inventory

1-INTRODUCTION

Inventory constitutes a major component of working capital. To a large extent, the

success or failure of a business enterprise depends upon its inventory management

performances. The inventories need not be viewed as an idle assets rather these are an

integral part of firm's operations. But the question usually is as to how much

inventories be maintained by a firm? If the inventories are too big, they become a

strain on the resources, however, if they are too small, the firm may lose the sales.

Therefore, the firm must have an optimum level of

inventories. Managing the

level of inventories is like

maintaining the level of water

in a bath tub with an open

drain. The water is flowing

out continuously. If water is

let in too slowly, the tub is soon empty. If water is let in too fast, the tub over flows.

Like the water in the tub, the particular item in the inventory keeps changing, but the

level may remain the same. The basic financial problem is to determine the proper

level of investment in the inventories and to decide how much inventory must be

acquired during each period to maintain that level. The present lesson attempts to

discuss different aspects of inventory management.

2-MEANING AND TYPES OF INVENTORY

The term 'inventory' refers to the stockpile of the products a firm is offering for sale

and various components that make up these products. As per accounting terminology,

inventory means "the aggregate of these items of tangible property which (i) are held

for sale in the ordinary course of business, (ii) are in the process of production for

such sale, and (iii) are to be currently consumed in the production of goods or services

to be available for sale". Thus, inventory includes the stock of raw materials, goods-

in-process, finished goods and stores and spares. The various forms in which

inventories exist in a manufacturing company are : raw materials, work-in-process

and finished goods.

Raw Materials are those basic inputs that are converted into finished product through

the manufacturing process. Raw materials inventories are those units which have been

purchased and stored for future productions.

Work-in-process inventories are semi-manufactured products. They represent

products that need more work before they become finished products for sale.

Finished goods inventories are those completely manufactured products which are

ready for sale. Stocks of raw materials and work-in-process facilitate production,

while stock of finished goods is required for smooth marketing operations. Thus,

inventories serve as a link between the production and consumption of goods.

The level of three kinds of inventories for

a firm depend on the nature of its

business. A manufacturing firm will have

substantially high level of all three kinds of inventories, while a retail or wholesale

firm will have a very high level of finished goods inventories and no raw material and

work-in-process inventories. Within manufacturing firms, there will be differences.

Large heavy engineering companies produce long production cycle products,

therefore, they carry large inventories. On the other hand, inventories of a consumer

product company will not be large because of short production cycle and fast

turnover.

A fourth kind of inventory, supplies (or stores and spares), is also maintained by

firms. Supplies include office and plant cleaning materials like soap, brooms, oil, fuel,

light bulbs etc. These materials do not directly enter production, but are necessary for

production process. Usually, these supplies are small part of the total inventory and

do not involved significant investment. Therefore, a sophisticated system of inventory

control may not be maintained for them.

3-NEED TO HOLD INVENTORIES

The question of managing inventories arises only when the company holds

inventories. Maintaining inventories involves tying up of the company's funds and

incurrence of storage and handling costs. If it is expensive to maintain inventories,

why do companies hold inventories? There are three general motives for holding

inventories.

(i) The transactions motive : It expresses the need to maintain inventories to

facilitate production and sales operation smoothly.

(ii) The precautionary motive : It necessitates holding of inventories to guard

against the risk of unpredictable charges in demand and supply forces.

(iii) The speculative motive : It influences the decision to increase or reduce

inventory levels to take advantages of price fluctuations.

In order to maintain an uninterrupted production, it becomes necessary to hold

adequate stock of materials since there is a time lag between the demand for materials

and its supply due to some unavoidable

circumstances. Besides, there are two other

motives for holding of inventories viz., to receive

the benefit of quantity discount on account of

bulk purchases and to avoid the anticipated rise in

price of raw material.

The work-in-progress builds up since there is

production cycle. Actually, the stock of work-in-

progress is to be maintained till the production

cycle completes. Similarly, stock of finished goods has also to be held since there is a

time lag between the production and sales. When goods are demanded by the

customers, it cannot immediately be produced and as such, for a continuous and

regular supply of goods, minimum stock of finished goods is to be maintained.

Stock of finished goods should also be maintained for sudden demands from

customers and for seasonal sales.

Therefore, the primary objective of holding raw materials are :

(i) to separate purchase and production activities and for holding finished goods there

should be a separate production and sales activities;

(ii) to obtain quantity discount against bulk purchases, and

(iii) to avoid interruption in production.

At the sametime, work in progress inventory is necessary since production is not

instantaneous and finished goods should also be maintained for :

(i) serving customer on a continuous basis;

(ii) meeting the fluctuating demands.

4- OBJECTIVES OF INVENTORY MANAGEMENT

Efficient inventory management should result in the maximization of the owners's

wealth. For this purpose, a firm should neither hold excessive inventories nor hold

inadequate inventories, i.e., it should hold the optimum level of inventory. The

optimum level of inventory investment lies between the point of excessive and

inadequate levels. In other words, there must not be an over investment or under

investment in inventories. The danger of over investment in inventories are : (i) funds

of the firm are tied-up unnecessarily; (ii) it creates loss of profit; (iii) excessive

carrying cost and risk of liquidity increases.

As such, the opportunity cost and carrying costs (viz., cost of storage, handling,

insurance etc.) increase proportionately. No doubt, these costs will impair the

profitability of the firm. Excessive investment in raw materials, will prove the same

result except at the time of inflation and scarcity. Similar results may also be noticed

for the over investment in work-in-progress since it is very difficult to sell. Similarly,

many difficulties will appear to dispose of excessive finished goods since time

lengthens (viz., the goods may be sold at low price

etc.) Moreover, for carrying excessive Inventory physical deterioration of the same

may occur while in storage. From the above, it becomes clear that there must not be

an over investment in inventories. Similarly, inadequate level of inventories is not

also free from snags.

The consequences are :

(i) production may shut-down; (ii) commitment for the delivery may not be possible;

(iii) inadequate raw material and work-in-progress will create frequent production

interruption; (iv) customers may shift to the competitor if their demands are not met

up regularly, etc.,

Thus, the objective of inventory management is to maintain its optimum level in the

following manner :

a. To ensure a continuous supply of materials to facilitate uninterrupted

production;

b. To maintain sufficient stocks of raw materials during short-supply;

c. To maintain sufficient finished goods for efficient customer service;

d. To minimise the carrying cost; and

e. To maintain the optimum level of investment in inventories.

5- COST OF HOLDING INVENTORY

The effective management of inventory involves a trade-off between having too little

and too much inventory. In achieving this trade-off the Finance Manager should

realise that costs may be closely related. The cost of holding inventories may include

the following :

i. Ordering/Acquisition/Set-up Costs,

and

ii. Carrying Costs.

iii. Cost of Running out of goods/cost of

stock-outs

(i) Ordering/Acquisition/Set-up Costs :

These are the variable costs of placing an

order for the goods. Orders are placed by the

firm with suppliers to replenish inventory of raw materials. Ordering costs include the

costs of : requisiting, purchasing, ordering, transporting, receiving, inspecting and

storing. The ordinary costs vary in proportion to the number of orders placed. They

also include clerical costs and stationery costs. (That is why it is called a set-up cost).

Although, these costs are almost fixed in nature, the larger the order placed, or

the more frequent the acquisition of inventory made, the higher are such costs.

Similarly, the fewer the orders, the lower the order cost will be for the firm. Thus, the

ordering/acquisition costs are inversely related to the level of inventory.

(ii) Carrying Cost : These are the expenses of storing goods, i.e., they are involved in

carrying inventory. The cost of holding inventory may be divided into:-

(a) Cost of Storing the Inventory and (b) Opportunity Cost of Funds.

(a) Cost of Storing the Inventory

This include :

a. Storage Cost (i.e., tax, depreciation, insurance, maintenance of

building etc.)

b. Insurance (for fire and theft);

c. Obsolescence and Spoilage;

d. Damage or Theft;

e. Cost of running out of goods.

(b) Opportunity Cost of Funds

Whenever a firm commits its resources to inventory, it is using funds that otherwise

might be available for other purposes. The firm has lost the use of funds for other

profit making purposes. This is its opportunity cost. Whatever the source of funds

inventory has a cost in terms of financial resources. Excess inventory represents an

unnecessary cost.

(c) Cost of Running out of Goods/Cost of Stock-Outs

These are costs associated with the inability to provide materials to be production

department and/or inability to provide finished goods to the marketing department as

the requisite inventories are not available. In other words, the requisite items have run

out of stock for want of timely replenishments.

These costs have both quantitative dimensions. These are, in the case of raw

materials, the loss of production due to

stoppage or work, the uneconomical

prices associated with 'cash' purchases

and the set-up costs which can be

quantified in monetary terms with a

reasonable degree of precision. As a

consequence of this, the production department may not be able to reach its target in

providing finished goods for sale.

When marketing personnel are unable to honour their commitment to the customers in

making finished goods available for sale, the sale may be lost. This can be quantified

to a certain extent.

However, the erosion of the goods customer relations and the consequent damage

done to the image and good-will of the company fall into the qualitative dimension

and elude quantification. Even if the stock-out cost cannot be fully quantified a

reasonable measure based on the loss of sales for want of finished goods inventory

can be used with the understanding that the amount so measured cannot capture the

qualitative aspects. The level of inventory and the carrying costs are positively related

and move in the same direction, i.e., if inventory level decreases, the carrying costs

also decrease and vice-versa.

6- TECHNIQUES OF INVENTORY MANAGEMENT

As in the case of other current assets, the decision making in investment in inventory

involves a basic trade-off between risk and return. The risk is that if the level of

inventory is too low, the various functions of the business do not operate

independently. The return results because lower level of inventory saves money. As

the size of the inventory increases, the storage and other costs also rise.

Therefore, as the level of inventory increases, the risk of running out of inventory

decreases but the cost of carrying inventory increases. Out of different current assets

being maintained by the firm, inventory is one which requires to be monitored and

managed not only in terms of monetary value but also in terms of number of physical

units.

The financial manager must see that the inventory does not become unnecessarily

large when compared with the requirements; and for this, close control over the size

and composition of inventories must be maintained. Moreover, since the investment in

inventories is the least liquid of all the current assets, any error in its management

cannot be readily rectified and hence may be costly to the firm. The goal of inventory

management should therefore, be to established a level of each item of the inventory.

There should be a systematic approach to inventory management which must attempt

to balance out the expected costs and benefits of maintaining inventories. In order to

ensure efficient management of inventories, the finance manager may be required to

answer the following questions :

1. Are all items of inventories equally important, or some of the items are to

be given more attention?

2. What should be the size of each order or each replenishment?

3. At what level should the order for replenishment be placed?

Various techniques has been suggested to deal with these problems.

Some of these has been discussed as follows :

1. Determination of Stock Levels

Carrying of too much and too little of inventories is detrimental to the firm. If the

inventory level is too little, the firm will face frequent stock-outs involving heavy

ordering cost and if the inventory level is too high it will be unnecessary tie-up of

Capital. Therefore, an efficient inventory management requires that a firm should

maintain an optimum level of inventory where inventory costs are the minimum and

at the same time there is no stock-out which may result in loss of sale or stoppage of

production. Various stock levels are discussed as follows :

(a) Minimum Level : This represents the quantity which must be maintained in hand

at all times. If stocks are less than the minimum level then the work will stop due to

shortage of materials. Following factors are taken into account while fixing minimum

stock level :

i. Lead Time : A purchasing firm requires some time to process

the order and time is also required by the supplying firm to

execute the order. The time taken in processing the order and

then executing it is known as lead time. It is essential to

maintain some inventory during this period.

ii. Rate of Consumption : It is the average consumption of

materials in the factory. The rate of consumption will be

decided on the basis of past experience and production plans.

iii. Nature of Material : The nature of material also affects the

minimum level. If a material is required only against special

orders of the customer then minimum stock will not be required

for such materials. Minimum stock level can be calculated with

the help of following formula :

Minimum stock level = Re-ordering level – (Normal consumption × Normal

Re-order period).

(b) Re-ordering Level : When the quantity of materials reaches at a certain figure

then fresh order is sent to get materials again. The order is sent before the materials

each minimum stock level. Re-ordering level or ordering level is fixed between

minimum level and maximum level. The rate of consumption, number of days

required to replenish the stocks, and maximum quantity of materials required on any

day are taken into account while fixing re-ordering level. Re-ordering level is fixed

with the following formula :

Re-ordering Level = Maximum Consumption × Maximum Re-order period.

(c) Maximum Level : It is the quantity of materials beyond which a firm should not

exceed its stocks. If the quantity exceeds maximum level limit then it will be

overstocking. A firm should avoid overstocking because it will result in high material

costs. Overstocking will mean blocking of more working capital, more space for

storing the materials, more wastage of materials and more chances of losses from

obsolescence. Maximum stock level will depend upon the following factors :

i. The availability of capital for the purchase of materials.

ii. The maximum requirements of materials at any point of time.

iii. The availability of space for storing the materials.

iv. The rate of consumption of materials during lead time.

v. The cost of maintaining the stores.

vi. The possibility of fluctuations in prices.

vii. The nature of materials. If the materials are perishable in

nature, then they cannot be stored for long.

viii. Availability of materials. If the materials are available only

during seasons then they will have to be stored for the rest of

the period.

ix. Restrictions imposed by the Government. Sometimes,

government fixes the maximum quantity of materials which a

concern can store. The limit fixed by the government will

become the limiting factor and maximum level cannot be fixed

more than this limit.

x. The possibility of change in fashions will also affect the

maximum level.The following formula may be used for

calculating maximum stock level : Maximum Stock Level = Re-

ordering Level + Re-ordering Quantity – (Minimum

Consumption × Minimum Re-ordering period).

(d) Danger Level : It is the level beyond which materials should not fall in any case.

If danger level arises then immediate steps should be taken to replenish the stocks

even if more cost is incurred in arranging the materials. If materials are not arranged

immediately there is a possibility of stoppage of work. Danger level is determined

with the following formula :

Danger Level = Average Consumption × Maximum re-order period for emergency

purchases.

(e) Average Stock Level : The average stock level is calculated as

follows :

Average Stock Level = Minimum Stock Level + ½ of Re-order quantity.

2. Determination of Economic Order Quantity (EOQ)

Determination of the quantity for which the order should be placed is

one of the important problems concerned with efficient inventory

management. Economic Order Quantity (EOQ) refers to the size of the

order which gives maximum economy in purchasing any item of raw

materials or finished product. It is fixed mainly after taking into

account the following costs :

i. Ordering Cost : It is the cost of placing an order

and securing the supplies. It varies from time to

time depending upon the number of orders

placed and the number of items ordered. The more frequently

the orders are placed, and fewer the quantities purchased on

each order, the greater will be the ordering cost and vice versa.

ii. Inventory carrying cost : It is cost of keeping items in stock.

It includes interest on investment, obsolescence losses, store-

keeping cost, insurance premium, etc. The larger the value of

inventory, the higher will be the inventory carrying cost and

vice versa. The former cost may be referred as the "cost of

acquiring" while the latter as "cost of holding" inventory. The

cost of acquiring decreases while the cost of holding increases

with very increase in the quantity of purchase lot. A balance is

therefore struck between the two opposing factors and the

EOQ Total CostsTotal annual costs = annual

ordering costs + annual holding costs

economic ordering quantity is determined at a level for which

the aggregate of two costs is the minimum.

Q =SQRT 2U*P/S

where,

Q = Economic ordering quantity

U = Quantity (units) purchased in a year (month)

P = Cost of placing an order

S = Annual (Monthly) cost of storage of one unit

Illustration 1 : A, a T.V. manufacturer, purchases 1,600 units of a certain component

from B. His annual usage is 1,600 units. The order placing cost is Rs. 100 and the cost

of carrying one unit for a year is Rs. 8. Calculate the economic Ordering Quantity and

tabulate your results.

Solution :

Q = SQRT 2U*P/S

=SQRT 2×1,600×100/8

= SQRT 40,000

= 200 units

Table Showing The Economic Ordering Quantity

EPQ (Economic Production Quantity) Assumptions

Same as the EOQ except: inventory arrives in increments & is drawn down as it arrives

Annual

requirements

Orders

per year

Units

per

Order

order

placing

costs

Rs.

Average

inventory in

units (50% of

order placed)

Carrying

costs

Total

annual

costs

Rs.

1,600 1

2

3

4

5

6

7

8

9

10

1,600

800

533

400

320

267

229

200

178

160

100

200

300

400

500

600

700

800

900

1,000

800

400

267

200

160

134

115

100

89

80

6,400

3,200

2,136

1,600

1,280

1,072

920

800

712

640

6,500

3,400

2,436

2,000

1,780

1,672

1,620

1,600

1,612

1,640

The above table shows that total 533cost is the minimum when each order

is of 200 units. Therefore, economic ordering quantity is 200 units only.

Assumptions :EOQ model is based on the following assumptions :

i. The firm knows with certainty the annual usage or demand of

the particular items of inventories.

ii. The rate at which the firm uses the inventories or makes sales is

constant throughout the year.

iii. The orders for replenishment of inventory are placed exactly

when inventories reach the zero level. These assumptions have

pointed out to illustrate the limitations of the basic EOQ model.

3. A B C Analysis A B C analysis is the technique of exercising selective control over inventory items.

The technique is based on this assumption that a firm should not exercise the same

degree of control on items which are more costly as compared to those items which

are less costly. According to this approach, the inventory items are dividend into three

categories – A, B and C. Category A may include more costly items, while category B

may consist of less costly items and category C of the least costly items. Though, no

definite procedure can be laid down for classifying the inventories in A, B, C

ABC Analysi

s

102030405060708090100Percentage of items

Perc

enta

ge o

f dol

lar v

alue

100 —

90 —

80 —

70 —

60 —

50 —

40 —

30 —

20 —

10 —

0 —

Class C

Class A

Class B

categories as this will depend upon a large number of factors, such as nature and

varieties of items, specific requirements of the business, etc., yet the following

method is generally adopted.

i. The quantity of each material expected to be used in a period is

estimated.

ii. The value of each of the above items of materials is found out

by multiplying the quantity of each item with the price.

iii. The items are then rearranged in the descending order of their

value

irrespective of their quantities.

iv. A running total of all the values will then be taken.

v. It will be found that a small number of a first few items may

amount to a large percentage of the total value of the items.

ABC Classification System

Classifying inventory according to some measure of importance and allocating control efforts accordingly.A - very important

B - mod. important

C - least important

Annual $ value of items

AB

C

High

LowLow

HighPercentage of Items

The management then wil have to take a decision as to the percentages of total value

or the total number of items which have to be covered by A, B and C categories.

Inventory surveys in general have shown the following trends regarding the

components of inventories manufacturing organisations :

Category % of total value % of total quantity

A 70 10

B 25 35

C 5 55

While exercising control over stores, items of category A should be given the utmost

attention. Their levels of stock should be strictly controlled. In case of items category

B, ordinary stores routine should be observed but the rules regarding levels of stock

may not be so strictly adhered to as those in category A. Items of category C may be

considered as "free issue" items and even normal accounting procedure may be

dispersed with. The advantages of this system are as follows :

i. It ensures closer control on costly items in which a large

amount of capitalhas been invested.

ii. It helps in developing a scientific method of controlling

inventories. Clerical costs are reduced and stock is maintained

at optimum level.

iii. It helps in achieving the main objective of inventory control at

minimum cost.

The stock turnover rate can be maintained at comparatively higher level through

scientific control of inventories. The system of A B C analysis suffers from a serious

limitation. The

system analyses the items according to their value and not according to their

importance in the production process. It may, therefore, sometimes create difficult

problems. For example, an item of inventory may not be very costly and hence it may

have been put in category C. However, the item may be very important to the

production process because of its scarcity. Such an item as a matter of fact requires

the utmost attention of the management though it is no advisable to do so as per the

system of ABC analysis. Hence, the system of A B C analysis should not be followed

blindly.

Illustration 2 : The inventory of a company comprises of 7 different items. The

average number of each of these items along with their unit costs is given below.

The company wants to introduce ABC system of inventory management. You are

required to give a break-down of the items into the classification of ABC. The

details are :

Item Average No. of units in

Inventory

Average Cost Per Unit

(Rs.)

1 40,000 121.60

2 20,000 204.80

3 64,000 22.00

4 56,000 20.56

5 1,20,000 6.80

6 60,000 6.00

7 40,000 2.60

Solution :

ABC Analysis

Item Unit % of Total units Unit Cost (Rs.) Total Cost (Rs.) % of Total

cost

1 40,000 10 121.60 48,64,000.00

38.00

2 20,000 5 204.80 40,96,000.00

32.00

3 64,000 16 22.00 14,08,000.00

11.00

4. 56,000 14 20.56 11,52,000.00

9.00

5. 1,20,000 30 6.80 8,16,000.00

6.38

6. 60,000 15 6.00 3,60,000.00

2.80

7. 40,000 10 2.60 1,04,000.00

0.82

4,00,000 100 1,28,00,000.00

100.00

An analysis of the above table brings out that A items (1 and 2) are less important in

terms of number with only 15% of the total volume. But it accounts for 70% of the

total value of inventory. Therefore this group is very important. Contrary to this C

items (5,6 and 7) carry 55% of the total volume but have only 10% value of the total

inventory value. The categorisation has been made on the basis of cost involvement.

However, this analysis does not mean that B and C items, despite being less

expensive, are of less importance. Instead their importance may be tremendous in the

production process of the company.

4. VED Analysis

The VED analysis is used generally for spare parts. The requirements and urgency of

spare parts is different from that of materials. ABC analysis may not be properly used

for spare parts. The demand for spares depends upon the performance of the plant and

machinery. Spare parts are classified as Vital (V), Essential (E) and Desirable (D). The

vital spares are a must for running the concern smoothly and these must be stored

adequately. The non-availability of vital spares will cause havoc in the concern. The E

type of spares are also necessary but their stocks may be kept at low figures. The

stocking of D type of spares may be avoided at times. If the lead time of these spares

is less, then stocking of these spares can

be avoided.

The classification of spares under three categories is an important decision. A wrong

classification of any spare will create difficulties for production department. The

classification of spares should be left to the technical staff because they know the

need, urgency and use of these spares.

5.SDE Analysis

SDE Analysis evaluates the importance of the inventory item on the basis of its

availability. Accordingly SDE analysis groups inventory items into the following

categories :

i. S (Scarce items) : The items which are in short-supply and

mostly such items constitute imported items.

ii. D (Difficult Items) : This category refers to such items which

cannot be procured easily.

iii. E (Easy Items) : The items which are easily available in the

market.

6.Inventory Turnover Ratios

Inventory turnover ratios are also calculated to minimise the investment in

inventories. Turnover ratio can be calculated regarding each item of inventory on the

basis of the following formula :

Inventory Turnover Ratio =Cost of goods consumed / sold during the period Average inventory held during the period

For example, if the cost of raw material consumed during January, 2002 is Rs. 10,000

and the average inventory held during the month is Rs. 2,000, the inventory turnover

ratio comes to 5.

Inventory turnover ratios regarding different items of inventory may be compared

with the ratios of the earlier years as well as with each other item. Such a comparison

may reveal the following four types of inventories :

i. Slow moving inventories. These are inventories which have a

low turnover ratio. An attempt should be made to keep these

inventories at the lowest level.

ii. Dormant inventories : Inventories which have at present no

demand are classified as dormant inventories. A decision

should be taken by the financial manager in consultation with

the storekeeper, the production controller and the cost

accountant whether to retain these inventories because of good

chance of future demand or to cut losses by scraping them

while they have some market value.

iii. Obsolete inventories : These are inventories which are no

longer in demand because of their becoming out of date. They

should be immediately discarded or scrapped.

iv. Fast moving inventories : These are inventories which are very

much in demand. Special care should be taken in respect of

these items of inventories so that the production of the sales do

not suffer on account of their shortage.

7.Aging Schedule of Inventory

Classification of the inventories according to age also helps in identifying inventories

which are moving slowly into production or sales. This requires identifying the date

of purchase/manufacture of each item of the inventory and classifying them as shown

in the table below :

Aging Schedule of Inventory as on 31 Dec., 2001

Age classification

(days)

Date of purchase/

manufacture

Amount

(Rs.)

Percentage to

total

0-15 Dec. 16 8,000 20

16-30 Dec. 12 4,000 10

31-45 Nov. 26 2,000 5

46-60 Nov. 10 20,000 50

61 and above Oct. 25 6,000 15

Total 40,000 100

The above table shows that 50% of the inventory is of the age group of 46-60 days,

while 15% is older than 60 days. In case steps are not taken to clear the inventories, it

is possible that more than 50% inventories may suffer deterioration in its value or may

even become obsolete.

8. Just in time (JIT) Inventory System : As discussed, every manufacturing

company has to maintain three classes of inventories – raw materials, work-in process

and finished goods. These inventories are designed to act as buffers so that operations

can proceed smoothly even if the suppliers are late with deliveries or the department

is unable to operate for a short period because of breakdown or any other reason.

However, carrying of inventories results in costs in terms of storage, blocking of

capital investment, insurance, etc. Such costs can be reduced/ minimised by keeping

the inventories at the lowest possible level. JIT system

basically aims to achieve this objective.

JIT Inventory System, as its name suggests, means all inventories whether of raw

materials, work-in-process and finished goods are received in time. In other words,

raw material are received just in time to go into production, manufactured parts are

completed just in time to be assembled into products, and products are completed 'just

in time' to be shipped to customers.

In a JIT environment the flow of goods is controlled by what is described as "pull

approach" to the manufacture of products. The pull approach means at the final

assembly stage, a signal is sent to the preceding work-station as to the exact quantum

of parts and materials that will be needed over the next few hours' for the assembly of

products, and only that quantum of parts and materials is provided. The same signal is

sent back through each preceding work-station so that a smooth flow of parts and

materials is maintained with no inventory build-up at any point.

The "pull approach" described above is different from "push approach" as used in

case of conventional inventory system. In the latter case, inventories

of parts and materials are built up and 'pushed forward' to the next work-station. This

results in blocking of funds and stockpiling of parts which may not be used for days

or even weeks together.

Requirements of JIT System : The following are the key requirements for the

successful operation of JIT Inventory System :

i. The company must have only a few suppliers.

ii. Suppliers must be bound under long-term contracts and willing

to make frequent deliveries in small lots.

What if Demand is Uncertain?

iii. The company must develop a system of total quality control

(TQC). TQC means that no defects can be allowed over its

parts and materials.

iv. Poor quality of goods or parts cannot be accepted since JIT

inventory system operates with no work-in-process inventory.

v. Workers must be multi-skilled in JIT environment. This is

because in case of JIT system machine and equipments are

arranged in small cells where several tasks can be performed in

relation of a product. The workers assigned to these cells are

expected to operate all the equipments which are there in the

cells.

Benefits of JIT System : The following are the benefits of JIT System :

i. Inventories of all types can be reduced significantly. This

results in saving of costs.

ii. Storage space used for inventories can be made available for

other more productive uses.

iii. Total Quality Control results in production of quality products.

iv. Productivity of workers is increased and machine set-up time is

decreased.

7- INVENTORY AND THE FINANCE MANAGER

The inventory control methods described in this lesson give us a means for

determining an optimal level of inventory, as well as how much should be ordered and

when. These tools are necessary for managing inventory efficiently and balancing the

advantages of additional inventory against the cost of carrying it. Although inventory

management usually is not the direct operating responsibility of the finance manager,

the investment of funds in inventory is an important aspect of financial management.

Consequently, the finance manager must

be familiar with ways to control inventories effectively, so that capital may be

allocated efficiency. The greater the opportunity cost of funds invested in inventory,

the lower is the optimal level of average inventory and the lower the optimal order

quantity, all other things held constant. The EOQ model also can be useful to the

finance manger in planning for inventory financing. When demand or usage of

inventory is uncertain, the finance manager

may try to effect policies that will reduce the average lead time required to receive

inventory, once an order is placed. The lower the average lead time, the lower is the

safety stock needed and the lower the total investment in inventory, all other things

held constant. The greater the opportunity cost of funds invested in inventory, the

greater is the incentive to reduce this lead time. The purchasing department may try to

find new vendors that promise quicker delivery, or it may pressure existing vendors to

deliver faster. The production department may be

able to deliver finished goods faster by producing a smaller run. In either case, there is

trade off between the added cost involved in reducing the lead time and the

opportunity cost of funds tied up in inventory.

The finance manager is concerned also with the risks involved in carrying inventory.

The main risk in inventory investment is that market value of inventory may fall

below what the firm paid for it, thereby causing inventory losses. The sources of

market value risk depend on the type of inventory. Purchased inventory of

manufactured goods is subject to losses due to changes in technology. Such changes

may sharply reduce final prices of the goods when they are sold or may even make the

goods unsaleable. This risk is, of course, most acute in products embodying a high

degree of technological sophistication, for example, electronic

parts.

There are also substantial risks in inventories of goods dependent on current styles.

The readymade industry in particularly susceptible to the risk of changing consumer

tastes. Agricultural commodities are a type of inventory subject to risks due to

unpredictable changes in production and demand. A bumper crop of a commodity can

send prices plummeting. Of course, there is also the potential for shortage in these

commodities, which cause rapid price rises. Moreover, all inventories are exposed to

losses due to spoilage,

shrinkage, theft or other risks of this sort. Insurance is available to cover many of

these risks and, if purchased, is one of the costs of holding inventory. Also, poor

inventory control and storage systems can "lose" inventory. That is, inventory may

still exists in the store room, but if it cannot be found when desired by a customer, the

firm does not profit from its investment. The financial manager must be aware of the

degree of risk involved in the firm's investment in inventories. The manager must take

those risks into account in evaluating the appropriate level of inventory investment.

This can be done by including the relatively predictable losses as part of the holding

costs.

8- COMMON INVENTORY VALUATION METHODS

The methods a company uses to value the cost of inventory have a direct effect on the

business balance sheets, income statement and cash flows. Three methods are widely

used to value such costs. They are First-In, First-Out (FIFO), Last-In, First-Out

(LIFO) and Average Cost. Inventory can be calculated based on the lesser of

cost or market value. It can be applied to each item, each category or on total

basis.

FIFO: - FIFO operates under the assumption that the first product that is

put into inventory is also the first sold.That the first goods purchased are

the first to be used or sold regardless of the actual timing of their use or

sale. This method ismost closely tied to actual physical flow of goods in

inventory.

LIFO: - LIFO assumes instead that the last unit to reach inventory is the

first sold. That is inventory valuation assumes that the most recently

purchased/acquired goods are the first to be used or sold regardless of the

actual timing of their use or sale. Since items you have just bought often

cost more than those purchased in the past, this method best matches current

costs with current revenues.

WEIGHTED AVERAGE: - Average cost works out a weighted average for

the cost of goods sold. It takes an average cost for all units available for sale

during the accounting period and uses that as a basis for cost of goods sold.

That is Average cost method of inventory valuation identifies the value of

inventory and cost of goods sold by calculating an average unit cost for all

goods available for sale during a given period of time. This valuation method

assumes that ending inventory consists of all goods available for sale.

Average Cost = Total Cost of Goods ÷ Total Quantity of Goods

Available for Sale Available for Sale

SPECIFIC IDENTIFICATION: -A less commonly used, but important

method to valuation is called specific identification. This method is used for

Safety Stock

LT Time

Expected demandduring lead time

Maximum probable demandduring lead time

ROPQ

uant

itySafety stock

Figure 12.12

Safety stock reduces risk ofstockout during lead time

high-end items that are more easily tracked. In some cases, this method can be

used for common items, but less value realized from these accounting methods

is such cases. This is because powerful and detailed tracking software is

required to employ specific identification on large number of goods.

STANDARD COST METHOD: - Standard Cost Method of inventory

valuation is often used by manufacturing companies to give all of their

departments a uniform value for an item throughout a given year. This method

is a “best guess” approach based on known costs and expenses such as

historical costs and any anticipated changes coming up in the foreseeable

future. It is not used to calculate actual net profit or for income tax purposes.

Rather, it is a working tool more than a formal accounting approach.

FIFO vs. LIFO vs. Average Cost Method of Inventory Valuation Example

Assume the following inventory events:

• November 5 Purchased 800 units at Rs.10.00/unit—Total costRs.8, 000.00

• November 7 Purchased 300 units at Rs.11.00/unit—Total costRs.3, 300.00

• November 8 Purchased 320 units at Rs.12.25/unit—Total costRs.3, 920.00

• November 10 Sold 750 units of goods at Rs.15.00/unit

• November 14 Sold 460 units of goods at Rs.15.55/unit

• November 15 Purchased 200 units at Rs.14.70/unit—Total costRs.2, 940.00

• November 18 Sold 220 units of goods at Rs.14.45/unit

Basic Events:

UNITS PURCHASED

Date Units Cost/Unit Total Cost

05/12 800 10 8000

07/12 300 11 3300

08/12 320 12.25 3920

15/12 200 14.70 2940

TOTAL 1620 N/A 18160

UNITS SOLD

Date Units Cost/Units Total Cost

10/12 750 Varies by Valuation Method

14/12 460

18/12 220

TOTAL 1430 N/A N/A

FIFO Method of Inventory Valuation

Basic Events FIFO Method of Accounting

Units Purchased Units Sold Ending

Inventory

Date Units Cost/Unit Total

Cost

Units Cost/

Unit

Total

Cost

Units Total

Cost

05/12 800 10 8000 800 8000

07/12 300 11 3300 1100 11300

08/12 320 12.25 3920 1420 15220

10/12 750 10 7500 670 7720

14/12 50 10 500 620 7220

300 11 3300 320 3920

110 12.25 1348 210 2573

15/12 200 14.70 2940 410 5513

18/12 210 12.25 2573 200 2940

10 14.70 147 190 2793

LIFO Method of Inventory Valuation

Basic Events LIFO Method of Accounting

Units Purchased Units Sold Ending

Inventory

Date Units Cost/Unit Total

Cost

Units Cost/

Unit

Total

Cost

Units Total

Cost

05/12 800 10 8000 800 8000

07/12 300 11 3300 1100 11300

08/12 320 12.25 3920 1420 15220

10/12 320 12.25 3920 1100 11300

300 11 3300 800 8000

130 10 1300 670 6700

14/12 460 10 4600 210 2100

15/12 200 14.70 2940 410 4144

18/12 200 14.70 2940 210 2100

20 10 200 190 1900

Average Cost Method of Inventory Valuation

Average Cost = Total Cost of Goods Available for sale / Total Quantity of Goods

Available for Sale

= Rs. 18160 / 1620 Units

= Rs. 11.21/ Unit

Basic Events Average Cost Method of Accounting

Units Purchased Units Sold Ending

Inventory

Date Units Cost/Unit Total

Cost

Units Cost/

Unit

Total

Cost

Units Total

Cost

05/12 800 10 8000 800 8000

07/12 300 11 3300 1100 11300

08/12 320 12.25 3920 1420 15220

10/12 750 11.21 8407 670

14/12 460 11.21 5157 210 1656

15/12 200 14.70 2940 410 4596

18/12 220 11.21 2.466 190 2130

9- EFFECTS OF INVENTORY (S) VALUATION ON FINANCIAL

STATEMENT

Formula

This information is also useful because it can be used to show how a company “officially”

accounts for inventory. With it, you can back into the cost of purchases without knowing the

actual costs by turning around the equation as follows:

I. Closing Inventory = Opening Inventory + Net Purchase + Direct expences -

Cost of Goods Sold

II. Cost of Goods sold = Opening Inventory + Net Purchase + Direct expences –

Closing Inventory

Or, you can figure out the cost of goods sold if you know what your purchases are by making

the following calculation:

Net Purchase = Ending Inventory + Cost of Goods Sold– Beginning

Inventory – Direct expences

Finally, as you sell/use inventory and take in revenue for it, you subtract the cost of the

items from the income. The result is your gross profit.

Financial statement

a) Income Statement

b) Balance Sheet

c) Trend Analysis

d) Fund Flow Statement

e) Cash Flow Statement

10-RELATION OF WORKING CAPITAL WITH INVENTORY

Ending InventoryFIFO Rs. 2793LIFO Rs. 1900Average Cost Method Rs. 2130

Three things will come to your mind when you think of a manufacturing unit -

machines, men and materials. Men using machines and tools convert the materials

into finished goods. The success of any business unit depends on the extent to which

these are efficiently managed. Inventory is an asset to the organization like other

components of current assets.

Inventory constitutes a very significant part of working capital or current assets in

manufacturing organization. It is essential to control inventories (physical/quantity

control and value control) as these are significant elements in the costing process

constituting sometimes more than 60% of the current assets.

Inventory holding is desirable because it meets several objectives and needs but an

excessive inventory is undesirable because it costs a lot to firms.

On the other hand, excessive working capital may pose the following dangers:

1 Excess of working capital may result in unnecessary accumulation of inventories,

increasing the chances of inventory mishandling, waste, and theft.

2 It may encourage the tendency to accumulate inventories for making speculative

profits, causing a liberal dividend policy, which becomes difficult to maintain when

the firm is unable to make speculative profits.

CHAPTER -2COMPANY PROFILE

Broad makeover of the confectionery leader’s corporate branding

includes a new global visual identity that supports its global growth vision

HERSHEY, Pa., August 29, 2014 — One hundred twenty years ago, people across

America fell in love with the name “Hershey’s” stamped on a chocolate bar. Today,

The Hershey Company – known for its iconic Hershey’s Milk Chocolate bars and

more than 80 other confectionery brands around the world – is unveiling a refreshed

corporate brand that builds on the company’s powerful legacy and

creates a new, modern look and feel that positions the company for the

next 100 years.

A key element of the broad corporate brand makeover is a fresh, new

company logo. The logo redesign underscores the company’s evolution

from a predominately U.S. chocolate maker to a global confection and

snack company. The new branding will impact all visual aspects of how

The Hershey Company presents itself, from consumer communications

to websites to the interior design of its office spaces and the look of its

retail stores. While rooted in a rich heritage, the new corporate brand

reflects a modern, approachable look that reflects the company’s

openness and transparency as it has grown into a global company.

“Today we are much more than the ‘Great American Chocolate Bar,’”

said Mike Wege, Senior Vice President and Chief Growth and

Marketing Officer at Hershey. “We have an amazing portfolio of iconic brands in

confectionery and snacking, a great workplace filled with remarkable people and a

longstanding commitment to giving back to our communities. Our updated company

brand and refreshed visual identity is an expression of our

progression to a modern, innovative company that positively

impacts our local communities as we continue to grow

globally.” The new corporate brand supports and reaffirms the

purpose, values and culture that have been the foundation of

Hershey since 1894. The Hershey Company’s brand promise –

Bringing Goodness to the World – is a commitment that is

deeply rooted in the company’s heritage and fundamental to the

company’s current and future success. This promise is delivered

by Hershey’s iconic brand portfolio, its remarkable people and the longstanding

programs to help support children in need, a commitment that spans more than a

century tracing back to when company founder Milton Hershey founded the Milton

Hershey School for disadvantaged children in 1909. The company’s work helping

kids in need continues, including support of cocoa-growing communities worldwide

and innovative projects in Ghana that provide nutrition and education to malnourished

children.

The new corporate logo - built upon the globally recognized HERSHEY logotype

used on its famous Hershey’s chocolate bar - is a modern update that features a new

interpretation of the iconic shape of its Kisses brand chocolate. Along with the new

logo, Hershey is implementing a new, disciplined visual identity system that is

inspired by the famous colors of its most iconic brands, including Hershey’s, Reese’s

and Ice Breakers, to bring a more colorful and consistent look to all of the company’s

visual materials.

From the beginning, Milton Hershey was focused on bringing goodness to the world

through making chocolate affordable and accessible to everyone. He did this by

building a progressive company committed to innovation, constant improvement and

philanthropy. Now, more than a century later, the same values drive Hershey’s more

than 13,000 employees around the globe who are operating in a complex and

challenging market. The new corporate branding system and visual identity are

emblematic of their shared purpose of bringing goodness to the world, and bridge

time zones and cultures, honoring the company’s heritage while staying fresh and

current in the marketplace.

BUSINESS DESCRIPTIONThe Hershey Company (originally Hershey Chocolate Corporation) was organized

under the laws of the State of Delaware on October 24, 1927, as a successor to a

business founded in 1894 by Milton S. Hershey.

The Hershey Company and its subsidiaries are engaged in the manufacture,

distribution and sale of consumer food products. The Company produces and

distributes a broad line of chocolate, confectionery, and chocolate-related grocery

products.

ABOUT THE HERSHEY COMPANY

The Hershey Company is the largest producer of quality chocolate in North America

and a global leader in chocolate and sugar confectionery. Headquartered in Hershey,

Pennsylvania, The Hershey Company has operations throughout the world with more

than 12,000 employees. With revenues of more than $5 billion, Hershey offers many

iconic brands such as HERSHEY'S, REESE'S, HERSHEY'S KISSES, KIT KAT, TWIZZLERS

and ICE BREAKERS as well as the smooth, creamy indulgence of HERSHEY'S BLISS

chocolates.

The Hershey For more than 100 years, The Hershey Company has been a leader in

making a positive difference in the communities where people live, work and do

business. The Milton Hershey School, established by the company's founder in 1909,

provides a nurturing environment, quality education, housing, and medical care at

no cost to children in social and financial need. The School is administered by the

Hershey Trust Company, HERSHEY'S largest shareholder, making the students of

Milton Hershey School direct beneficiaries of HERSHEY'S success.

OUR   STORY

The story of Hershey spans nearly a century and a half of industrial and social change.

It tells of how one determined pioneer from rural Pennsylvania built an international

company, a town to go with it, and a chocolate and confectionery sensation.

HERSHEY'S   HISTORY

The Hershey Company has come a long way since 1894.

View the timeline of HERSHEY'S success here, divided into four main chapters.

CHAPTERS

1. MILESTONES ALONG OUR ROAD TO SUCCESS:

2. GETTING STARTED1894 - 1916

3. EXPANDING & INNOVATING1917 – 1938

4. GOING TO WAR1939 – 1948

5. GROWING GLOBALLY1949 – Present

1. MILESTONES ALONG OUR ROAD TO SUCCESS :-

I. It all started with a decision

Our company originated with candy-manufacturer Milton Hershey’s decision

in 1894 to produce sweet chocolate as a coating for his caramels. Located in

Lancaster, Pennsylvania, the new enterprise was named the Hershey

Chocolate Company. In 1900, the company began producing milk chocolate in

bars, wafers and other shapes. With mass production, Hershey was able to

lower the per-unit cost and make milk chocolate, once a luxury item for the

wealthy, affordable to all. One early advertising slogan described this new

product as “a palatable confection and a most nourishing food.”

II. A company on the move

The immediate success of Hershey’s low-cost, high-quality milk chocolate

soon caused the company’s owner to consider increasing his production

facilities. He decided to build a new chocolate factory amid the gently rolling

farmland of south-central Pennsylvania in Derry Township, where he had been

born. Close to the ports of New York and Philadelphia that supplied the

imported sugar and cocoa beans needed, surrounded by dairy farms that

provided the milk required, and with a local labor supply of honest,

hardworking people, the location was perfect. By the summer of 1905, the

new factory was turning out delicious milk chocolate.

III. A KISS for the whole world

Looking to expand its product line, the company in 1907 began producing a

flat-bottomed, conical milk chocolate candy that Mr. Hershey decided to name

HERSHEY’S KISSES Chocolates. At first, they were individually wrapped in

little squares of silver foil, but in 1921 machine wrapping was introduced.

That technology was also used to add the familiar “plume” at the top to signify

to consumers that this was a genuine HERSHEY’S KISSES Chocolate. In

1924, the company even had it trademarked.

IV. New products, hard times

Throughout the next two decades, even more products were added to the

company’s offerings. These included MR. GOODBAR Candy Bar (1925),

HERSHEY’S Syrup (1926), HERSHEY'S chocolate chips (1928) and the

KRACKEL bar (1938). Despite the Great Depression of the 1930s, these

products helped the newly incorporated Hershey Chocolate Corporation

maintain its profitability and avoid any worker layoffs. Nevertheless,

supported by the CIO labor union, a group of workers staged a six-day strike

that ended with the strikers being forcibly removed by loyal workers and local

farmers.

V. HERSHEY’S chocolate goes to war

With the outbreak of World War II, the Hershey Chocolate Corp. (which had

provided milk chocolate bars to American doughboys in the first war) was

already geared up to start producing a survival ration bar for military use. By

the end of the war, more than a billion Ration D bars had been produced and

the company had earned no less than five Army-Navy “E” Production Awards

for its exceptional contributions to the war effort. In fact, the company’s

machine shop even turned out parts for the Navy’s antiaircraft guns.

VI. A family friend becomes a family member

The postwar period saw the introduction of a host of new products and the

acquisition of an old one. Since 1928, H.B. “Harry” Reese’s Candy Company,

also located in Hershey, had been making chocolate-covered peanut butter

cups. Given that Hershey Chocolate Company supplied the coating for

REESE’S “penny cups," (the wrapper said, “Made in Chocolate Town, So

They Must Be Good”), it was not surprising that the two companies had a

good relationship. As a result, seven years after Reese’s death in 1956, the

H.B. Reese Candy Company was sold to Hershey Chocolate Corp.

VII. Growing up and branching out

The following decades would see the company - renamed Hershey Foods

Corporation in 1968 - expanding its confectionery product lines, acquiring

related companies and even diversifying into other food products. Among the

many acquisitions were San Giorgio Macaroni and Delmonico Foods (1966);

manufacturing and marketing rights to English candy company Rowntree

MacKintosh’s products (1970); Y&S Candies, makers of TWIZZLERS

licorice (1977); Dietrich Corp.’s confectionery operations (1986); Peter

Paul/Cadbury’s U.S. confectionery operations (1988); and Ronzoni Foods

(1990).

VIII. The Hershey Company enters a new century

Today, The Hershey Company is the leading North American manufacturer of

chocolate and non-chocolate confectionery and grocery products. As the new

millennium begins, The Hershey Company continues to introduce new

products frequently and take advantage of growth opportunities through

acquisitions. HERSHEY'S products are known and enjoyed the world over. In

fact, the company markets its products in approximately 70 countries

worldwide. With approximately 14,000 employees and net sales in excess of

$6.6 billion, The Hershey Company remains committed to the vision and

values of the man who started it all so many years ago.

2. GETTING STARTED 1894 – 1916

I. A New Company: 1894

In the beginning, the Hershey Chocolate Company was simply a wholly

owned subsidiary of Milton HERSHEY'S Lancaster Caramel Company. Using

chocolate-making equipment purchased at the 1893

Columbian Exposition in Chicago, the company

produced baking chocolate, cocoa and sweet

chocolate coatings for the parent company's

caramels.

But things changed with the hiring of William

Murrie to sell the excess product to other

confectioners. Murrie was so successful a salesman

that the Hershey Chocolate Company quickly turned into a viable concern on

its own. Milton Hershey became even more convinced that his future in the

candy business lay in chocolate, not caramels.

II. Sweet Chocolate Novelties: 1895 – 1909

By 1895, the Hershey Chocolate Company

was manufacturing 114 different items in all

sorts of sizes and shapes. Many were flavored

with vanilla and given luxurious-sounding names like LeRoi de Chocolate,

Petit Bouquets and Chocolate Croquettes. Chocolate "segars" and cigarettes

were also quite popular.

Some chocolate cigarettes and cigars, such as Vassar Gems and Smart Set

Cigarettes, were purposely marketed to women as an alternative to the tobacco

variety. Chocolate was also touted as a source of quick energy for athletes.

The packaging for National Chocolate Tablets, which showed a bicyclist and

baseball batsman, proclaimed that "wheelmen and ball-players will find them

very beneficial."

III. The Baby in the Bean: 1898

On August 1, 1898, the company adopted a very

distinctive symbol for its trademark. The small child

in a cocoa bean pod appeared on cans of

HERSHEY'S COCOA up until 1936, when it was

finally replaced by the block lettering familiar today.

The "Baby in the Bean" went through many

incarnations, sometimes holding a cup of cocoa,

sometimes a chocolate bar. Even the child's hair and

facial expression underwent changes over the years. The logo symbol was

finally retired in 1968, when the company was reorganized as Hershey Foods

Corporation.

IV. Finding the Formula: 1895 – 1904

While his company was successful enough selling sweet chocolate products,

Milton Hershey was certain the real market lay in milk chocolate. The

problem was in developing a formula

for manufacturing it cheaply and

efficiently, while still maintaining a

high level of quality.

Hershey built a milk-processing plant on the family farm in Derry Township

in 1896 and spent the next several years developing a viable formulation for

milk chocolate. Dressed in hip boots, Hershey worked day and night, going

back and forth between the condensing room and the creamery, rarely even

stopping for meals. Finally, in 1899, he cracked the recipe and became the first

American to manufacture milk chocolate.

V. Hershey’s Chocolate Factory: 1905

At the turn of the century, most industrial facilities were located in urban

population centers and transportation hubs

(such as Pittsburgh with its steel mills or

New York's garment factories). But when

it came to selecting a site for his chocolate

plant, Milton Hershey chose rural Derry

Township in south-central Pennsylvania.

For one thing, it was right in the heart of

Pennsylvania's dairy farming country and, therefore, close to the source of an

essential ingredient in the making of milk chocolate: milk. It was also near the

port cities of Philadelphia and New York from which imported cocoa beans

and sugar could be obtained. Finally, the region was populated by honest,

industrious folk. Exactly the kind of workforce every business owner dreams

of.

VI. Hershey Goes to Cuba: 1916

With the onset of World War I, the European beet sugar, which Hershey had

been using to make his milk chocolate, became increasingly scarce. So,

searching for a more dependable source,

Milton Hershey started acquiring cane sugar

plantations and constructing refineries in

Cuba. Typically, he also established a planned

community for the workers, called Central

Hershey, based on the Pennsylvania model.

HERSHEY'S Cuban holdings eventually included 60,000 acres of land, five

mills, a 251-mile railroad and, not surprisingly, a school for orphaned

children. By the end of World War II, the company found it no longer needed

its Cuban sources, and its sugar and railway interests were sold to the Cuban-

Atlantic Sugar Company.

3. EXPANDING & INNOVATING 1917 – 1938

I. Stepping Stones

Many Hershey products that are familiar today were originally produced for

the confectionary trade and were later reformulated for consumers.

HERSHEY’S powdered cocoa, for

example, has been manufactured

continuously since 1894. Also, Hershey

was the first to sell chocolate syrup for

home use beginning in 1926. While

Sprigs, the forerunner of HERSHEY’S

chocolate chips, was introduced in 1928.

Not all products under the HERSHEY brand were so successful in the

marketplace. HERSHEY’S mint-flavored chewing gum, introduced in 1915,

enjoyed only brief popularity. And a creation named the Not-So-Sweet bar

was introduced in 1934, only to be discontinued in 1937.

II. A Kiss and Tell Story

Of course, the very first addition to the HERSHEY’S product line of milk

chocolate confections was HERSHEY’S KISSES Chocolates way back in

1907. Originally, each one was hand-wrapped in a square of silver foil, but in

1921 machine wrapping was introduced,

along with the addition of the unique “plume”

which marked it as a genuine HERSHEY’S

KISSES Chocolate.

The chocolates were not produced at all from

19 42 through 1949 due to the rationing of silver foil during and immediately

after World War II. HERSHEY’S KISSES Chocolates were wrapped in colors

other than silver for the first time in 1962. HERSHEY’S KISSES with

almonds were introduced in 1990 and the first successful HERSHEY’S

product using white chocolate, HERSHEY’S HUGS, in 1993.

III. Sweet Inventions

Two of the most successful products launched during ‘20s were the MR.

GOODBAR and KRACKEL bars. MR. GOODBAR, combining milk

chocolate and peanuts, was introduced

in November of 1925. According to

popular legend, Milton Hershey

himself named the new product. Upon

tasting it, he is said to have

exclaimed, “Now, that’s a good bar!”

The KRACKEL bar was introduced on September 14, 1938. During its first

few years, the formula for the confection changed several times, with almonds,

and then peanuts, being included along with crisped rice in milk chocolate.

Finally, the nuts were eliminated altogether in 1943, leaving the crispy milk

chocolate recipe enjoyed by millions ever since.

IV. Mr. Reese and his Cups

In 1923, a former Hershey employee named H.B. Reese decided to start his

own candy company out of the basement of his home. He made several

different kinds of candy, but it wasn’t until five years later that he hit upon his

greatest idea: a confection of peanut butter covered by milk chocolate

(purchased, incidentally, from the Hershey Chocolate Company). During

World War II, he discontinued his other product lines and concentrated on

producing only REESE’S peanut butter

cups.

Despite its dependence on only a single

product, Reese’s company prospered, and

in 1963 the H.B. Reese Candy Company

was purchased by the Hershey Chocolate Corporation. Since then, the

REESE’S product line has grown to include REESE’S PIECES candies, the

NUTRAGEOUS candy bar and REESESTICKS.

V. Going Public

During the 1920s, the stock market became a powerful vehicle for raising

capital. So in 1927, Milton

Hershey decided to take

advantage of this fact by

reorganizing his company and

offering shares to the public.

His Hershey Chocolate

Company was incorporated as

the Hershey Chocolate

Corporation. At the same time, Hershey created another corporate entity

named Hershey Estates, which included his non-chocolate enterprises and

allowed him to continue providing funds for community projects. A third

corporation was established to handle the Cuban enterprises.

The initial stock offering in the new Hershey Chocolate Corporation consisted

of 350,000 shares of convertible preferred stock, and the opening price was

$61.50 a share. It turned out to be quite a bargain.

4. GOING TO WAR 1939 – 1948

II. The Ration D Bar

The U.S. Army's requirements were quite specific. For troops engaged in a

global war, they needed a ration bar that weighed about four ounces, would

not melt at high temperatures, was high in food energy value, and did not taste

so good that soldiers would be tempted to eat it except in an emergency. This

last objective in particular was certainly a new one for the Hershey Chocolate

Corporation. Nevertheless, its chocolate technologists came up with something

that passed all tests.

Named "Field Ration D," it was so successful

that by the end of 1945, approximately 24

million bars were being produced every

week. More successful still was HERSHEY'S Tropical Chocolate Bar, a heat

resistant bar with an improved flavor developed in 1943. In 1971, this bar

even went to the moon with Apollo 15.

III. The HERSHEY’S Bar in Stalag 3

No one was injured when T/Sgt Milton McCracken's bomber was shot down

over Italy and the crew had to bail out that

day in May of 1944. But no sooner had

they hit the ground than they were captured

by enemy soldiers and transported to the

first of a series of POW camps in

Germany.

Fortunately that winter, McCracken received a very special parcel from home,

one that contained a five-pound HERSHEY'S Bar. Hearing that they were

soon to be marched to another camp, the men in McCracken's hut decided to

share the chocolate evenly to give them the energy to survive the long, cold

march. Remembers McCracken, "We left the end of January and walked for

about six days." Thankfully, he and his buddies made it. And were liberated

four months later.

IV. The Hershey Hellion

It was only four days after D-Day in 1944 when the Hershey Hellion took

some flak and crashed into a field in the French countryside near Renes. That,

by the way, was what Flight Officer John

W. Ginder had christened his Thunderbolt

dive bomber. A native son of Hershey,

Pennsylvania, he even had a Hershey bar

painted on the side of it right below the

cockpit. And while Ginder only had a few

cuts and bruises, his faithful plane was now just burning wreckage.

Fortunately, like a lot of American flyboys, Ginder was hidden from German

patrols by friendly French farmers. Eventually, he joined up with members of

the Maquis, the French resistance movement, and even accompanied them on

night raids. After two months, an armored patrol from General Patton's Third

Army showed up, and Ginder was reunited with his unit. And his next plane?

Hershey Hellion #2, of course.

V. Der Schokoladen-flieger

Soviets halted all traffic into and out of Berlin, effectively cutting off the

entire city. Almost immediately, the

U.S. Air Force commenced an airlift

of food supplies to trapped

inhabitants. One of the pilots flying

the Berlin Airlift was 1st Lt. Gail

Halvorsen of Garland, Utah. Seeing a

crowd of children at the end of the

Templehof airport runway, Halvorsen

started dropping HERSHEY'S

chocolate bars for them whenever he made a run in his C-54 plane.The

delivery system was straightforward enough. He tied a handkerchief to each

candy bar, which acted as a tiny parachute, and dropped them out the plane's

flare chute. Flying into Templehof, he'd wiggle his wings, so the children

would know to expect their heaven-sent treats. Thanks to his candy drops,

Halvorsen soon became the most widely publicized symbol of the Berlin

Airlift. But the children simply called him The Chocolate Flier.

5. GROWING GLOBALLY 1949 – Present

I. Up, Up and Away

Despite Milton HERSHEY'S death in

1945, Hershey Chocolate Corporation

retained the entrepreneurial values of

innovation and risk-taking imprinted on

it by its founder. Throughout the post-

World War II period, a host of new products were introduced, many of which

were successful, some of which were discontinued after only a few years.

By the 1960s, the company was ready to enlarge the scope of its operations.

One example of this new approach was the purchase in 1963 of the H.B. Reese

Candy Co. Another was the company's diversification into pasta

manufacturing with the acquisition of San Giorgio Macaroni, Inc. and

Delmonico Foods, Inc. The company also expanded geographically, building

new chocolate plants in Ontario, Canada and

Oakdale, California.

II. Advertising to the Nation

Except for a TV and billboard campaign in

Canada in 1964, the company had never really

done advertising on a national scale. In 1968, the

newly renamed and reorganized Hershey Foods

Corporation announced plans for a nationwide consumer advertising campaign

spearheaded by the famous Ogilvy & Mather ad agency.

Starting with a Sunday newspaper supplement in July, 1970, followed two

months later by television and radio commercials, the campaign was an

immediate success. Sales of REESE'S peanut butter cups and HERSHEY'S

KISSES Chocolates, in particular, rose dramatically. But while the company

today continues to advertise in all media, the quality of our products is still our

best form of advertising. Milton Hershey would have liked that.

III. E.T. Makes a Good Choice

In the early 1980s, Hershey executive

Jack Dowd met with Hollywood

producer Steven Spielberg and struck a

deal to include REESES'S PIECES

candy in Spielberg's upcoming film,

E.T.: The Extraterrestrial. When Hershey

Chocolate Company President Earl Spangler first saw the movie's promotional

materials, he told Dowd, "That's the ugliest creature I've ever seen."

After its successful premiere, the movie was screened by the company's

managers and top brass. When the film ended, there was first silence, then

wild applause. Like many others, Spangler emerged from the theater with

moist eyes. "Is he still ugly, Earl?" Dowd asked. Replied the company

president, "He's beautiful!" Both the lovable alien and his candy of choice

became instant hits nationwide.

IV. Hershey Goes International

In addition to being the leading producer of chocolate and non-chocolate

confectionary and other grocery products in North America, The Hershey

Company also carries on a significant

international presence with operations

in more than 90 different countries.

HERSHEY'S International division

exports HERSHEY'S chocolate and

grocery products worldwide and

maintains licensing agreements with partners in nations such as South Korea,

Japan, the Philippines and Taiwan. We don't believe Milton Hershey would

have been at all surprised to learn that his HERSHEY'S KISSES Chocolates

are especially popular in Japan.

V. Top of the Charts

Through unceasing technological modernization, strategically astute

acquisitions and continued new product development, The Hershey Company

grew spectacularly in the last 30

years of the 20th century. From $334

million in 1969, the company's net

sales soared to $4.4 billion in 2004.

The Hershey Company is the leading

North American manufacturer of

quality chocolate and non-chocolate confectionery and chocolate-related

grocery products. The company also is a leader in the gum and mint category.

COMPANY VALUES

Hershey India has implemented an aggressive growth plan to evolve as the market

leader in the Food & Beverage space in India.

Strong product innovations, brand building, and investments in improving people and

process capabilities truly reflect the values of these two organizations.

Open To Possibilities

We are open to possibilities by embracing diversity, seeking new approaches and

striving continuous improvement. Think Globally, Embrace Change, Have the

Courage to Innovate.

Making A Difference

We are making a difference by leading with integrity and

determination to have positive impact on everything we do.

Act with integrity. Drive sustainability. Commit to

engagement.

Growing Together

We are growing together by sharing knowledge and

unwrapping human potential in an environment of mutual

respect. Build Trusting Relationships. Develop Self.

Develop Others.

One Hershey

We are One Hershey, winning together while accepting individual responsibility for

our results. Align goals. Promote Collaboration. Embrace Accountability.

MANAGEMENT TEAMChief Executive Officer

John P. Bilbrey Chairman of the Board, President and Chief Executive Officer

Global Leadership Team

Michele G. Buck President, North AmericaPatricia A. Little Senior Vice President, Chief Financial

OfficerTerence L. O'Day Senior Vice President, Chief Supply

Chain OfficerWilliam C. Papa Senior Vice President, Chief Research

and Development OfficerSteven C. Schiller President, China and AsiaLeslie M. Turner Senior Vice President, General Counsel

and SecretaryKevin R. Walling Senior Vice President, Chief Human

Resources OfficerD. Michael Wege Senior Vice President, Chief Marketing

OfficerWaheedZaman Senior Vice President, Chief Knowledge,

Strategy and Technology Officer

PRINCIPAL CUSTOMERS AND MARKETING STRATEGY

Our customers are mainly wholesale distributors, chain grocery stores, mass

merchandisers, chain drug stores, vending companies, wholesale clubs, convenience

stores, dollar stores, concessionaires and department stores. The majority of our

customers, with the exception of wholesale distributors, resell our products to end-

consumers in retail outlets in North America and other locations worldwide.

In 2014, approximately 25% of our consolidated net sales were made to McLane

Company, Inc., one of the largest wholesale distributors in the United States to

convenience stores, drug stores, wholesale clubs and mass merchandisers and the

primary distributor of our products to Wal-Mart Stores, Inc.

INDUSTRY PROFILE

HERSHEY INDIA PRIVATE LIMITED

LOCATED IN INDUSTRIAL AREA CALLED -MANDIDEEP

• Since 1987, Located at 25 KM from Bhopal (State Capital of Madhya Pradesh)

• Land – 18.0 Acres, Built-up Area – 23,570 Sq. Meters

HISTORYOn April 3, 2007, The Hershey Company, North America’s leading chocolate and

confectionery manufacturer, and Godrej Beverages and Foods Ltd announced a joint venture

to manufacture and distribute confectionery,

snacks and beverages across India. This new

born entity was named Hershey India Private

Limited.

The company has an aggressive growth agenda and plans to become a leading player in the

Food & Beverage space in India.

HIPL have a multi-category portfolio of brands spanning across Confectionery, Non

Carbonated beverages, Cooking Aids, Packet Tea and Edible Oil.

Later in Feb 2012, The Hershey Company which was holding 51% stake in the joint venture

acquired the remaining shares of the Godrej Group. The company was remained as Hershey

India Private Limited.

Hershey India Private Ltd. is a 100% Subsidiary of The Hershey Company. Hershey

India operates in multiple categories such as confectionery and beverages.

Hershey India has four Regional Sales Offices in Mumbai, Delhi, Chennai and

Kolkata. The organization has a strong sale force of 500 people reaching to more than

a million retail outlets through 1500 distributors spread across India.

Hershey India has an aggressive growth plan to evolve as the market leader in the

Food & Beverage space in India. Strong product innovations, brand building, and

investments in improving people and process capabilities form critical aspects of

future growth strategy for the organization.

Hershey India has also played an active role in the community, taking part in many

initiatives that have benefited the environment, healthcare and education.

PRESENT SETUP OF COMPANY

It has been producing JUMPIN brand ready to serve fruit drinks and TOMATO

PUREE since 1991. Now the company captured a considerable portion of the fruits

juices market. It has newly launched different range of flavor in Xs nectar, Natural

juices for ready to serve like Natural orange juice in tetra pak . Company has also

newly launched Jumpin in 1 lit, 1/2 lit PET bottles. Jumpin drinks, nectar, soymilk

and tomato puree are available in 200 ml tetra paks. Nectar and Soymilk are also

available in 1 lit tetra pak. It has its own pulping plant.

paks. Nectar and Soymilk are also available in 1 lit tetra pak. It has its own pulping

plant.

SALIENT FEATURES

Company is certified by ISO-9002 and HACCP standards for quality safety

and hygiene.

Company is certified by EMS 14001 for its environmental Policy.

The unit was awarded with national productivity award for the best

productivity performance during three consecutive years in 1995, 1996 &

1997.

The division has two state of the art manufacturing facilities.

It is having TETRAPAK Packing system, which gives the product shelf life of

6 months without preservative.

Company has also contract with PCI (Pest Control India) to control the flies

and rodent, and also maintain the hygiene condition of the plant.

Company has also total quality management system for ensuring good quality

product.

Fruit / Vegetable Based Products

Dry blended products

Jam, Ketchup & Squash

Hersheys

THE PROCESS TECHNOLOGIES @HIPL

The plant is equipped to handle a variety of products and processes with the latest

technologies and equipments. The major area of strength being aseptic packaging in

consumer packs of 200 ml and 1000 ml family pack and hot filling in pet and glass

bottles.

The plant is designed to exacting standards of engineering excellence and has a high

degree of process capability .

PRODUCT DEVELOPMENT AND CUSTOMER SERVICES

The company offers complete service to customers in food industry,

from initial development to the finished product, the company works

with its customers to actualize their product ideas within the

shortest possible time including post manufacturing services to

monitor product performance in the market place. The plant has a

comprehensive facility to carry out product development work and

to assess chemical, microbiological and organoleptic properties of

food products.

CATEGORIESHershey India has multi-category of brands spanning across confectionery and

beverages.

BEVERAGESThe beverage portfolio consists of JUMPIN, SOFIT and HERSHEY'S SYRUP. JUMPIN

JUMPIN is a sweet and scrumptious fruit drink that delights your mood. JUMPIN

range of fruit drinks is available in

2 delicious flavours of Mango and

Apple. JUMPIN is available in

trendy Tetrapak units of 200 ml,

and 1 litre, while the PET bottle is available in easy to carry sizes of 250ml, 500ml,

and 1 litre.

SOFIT

SOFIT is the market leader in the fast growing soyamilk market. It was first

introduced in the year 2004. Hershey India now presents SOFIT in a brand new look

and in a range of new mouth-watering flavours such as Natural, Chocolate, Kesar

Pista, Mango and Vanilla. The beverages factory is located in Mandideep (Madhya

Pradesh), and is one of the largest tetrapak units in India.

HERSHEY'S SYRUP

The world renowned HERSHEY’S SYRUP was launched in 2008. It is synonymous

to toppings and works like

magic when used with milk.

Currently, Hershey India is

offering two of HERSHEY’S

most popular flavors –

chocolate and strawberry to the Indian consumer.

CONFECTIONERYHershey India has multi-category of brands spanning across Confectionery and

Beverage. Hershey India acquired India’s leading confectionery player, NUTRINE,

and today it leads the market in a number of Confectionery and Beverage in India.

NUTRINE

Nutrine Confectionery Company Private Ltd., one of the leading players in the Indian

confectionery market, was

acquired by Hershey India in 2006,

and forms a key portfolio for

Hershey India today. The

NUTRINE portfolio has products

like Maha Lacto, Maha Choco, NUTRINE Eclairs, NUTRINE Lollipop, NUTRINE

Santra Goli, AASAY, KOKANAKA and HONEYFAB in the hard candy, éclairs,

toffee, lollipop and roll formats. The confectionery factory is located in Chittoor

(Andhra Pradesh).

CO-MANUFACTURING

Processed Food Division

The beverages factory is located at Mandideep (Madhya Pradesh) and is the largest

Tetra Pak packaging unit under single roof in India.

I. Six Tetra Pak 200 ML and one Tetra Pak 1 L machine

II. Capability to simultaneously produce four flavours

III. Product range (acidic and neutral):

a. Fruit Drinks

b. Pulps

c. Nectars

d. Purees

e. Juices

f. Soymilk

IV. PET line capable of packing from 250 ML to 1.5 L packs

V. Two cold storage warehouses with combined capacity of 2,500 tons.

VI. Extraction facility to produce Soymilk from soybeans

VII. Dedicated lines to pack culinary products and dry blended powders

ASEPTIC PACKAGING – TETRA PAK CAPACITY

1L machine:

5,400 trays

64,800 packs

68 tons per day

200ML machines

(slimline):

4 machines

16,000 trays

432,000 packs

90 tons per day

200ML machines

(baseline):

2 machines

8,000 trays

216,000 packs

45 tons per day

PET PACKING

i. 4 KL per hour

ii. 250 ML, 500 ML, 1 L and 1.5 L packing

COLD STORAGE FOR PULP AND PASTE

i. 2 cold storage warehouses

ii. Capacity 2000 T and 500 T

iii. Temperature: 5-10°C

HOT FILLING - CONCENTRATES AND SYRUPS

i. Range: 200 ML to 1 L

ii. Capacity: 20 bottles / minute

iii. Uses pre-moulded HDPE bottles

CULINARY PRODUCTS

Jams:

Pack size: 200 & 500 g

Flavour Range:

Mix Fruit

Pineapple

Mango

Orange

Pack size: 200 & 500 g

Capacity: 20 tons per day

Ketchup:

Pack size: 200, 500, 

and 1000 g, 90 g pouch

Capacity: 30 tons per day

Squash:

Pack size: 200 ml PET

bottles

Flavour Range:

Pineapple

Mango

Orange

Lemon

Lime

Capacity: 40 tons per day

DRY BLENDING

i. Instant tea and coffee mixes

ii. Health and dietetics products

iii. FFS machine

iv. Pack size: 500 to 1000 g

v. Capacity: 10 tons per day

THIRD PARTY PACKING CUSTOMERS

Some of our esteemed clients and their brands packed by us are:

Coca-Cola: 

Maaza, Minute Maid &

Georgia

Mother Dairy: 

Safal

Jagdale: 

ORS-L

Hindustan Unilever

Limited: 

Kissan

Pro Soya Inc: 

Staeta

Patanjali Ayurveda: 

Arogya

ZydusCadila: SeabuckthornIndage

Tealite Limited:

Tropical Fruit Pulp Division (Chittoor)

We process substantial quantities of tropical fruit pulps for captive consumption and

domestic/export buyers at Chittoor (Andhra Pradesh)

i. Extensive experience of manufacturing and packing fruit juices for own and

third party brands and manufacturing/sourcing fruit pulps/concentrates

required as main ingredient.

ii. Manufactured under stringent quality

norms like ISO 2000 and HACCP

iii. Process certifications like SGF–IRMA,

KOSHER OU, etc. available.

iv. Best fruits for the season are sourced by

experienced horticulturists at optimum

price levels.

v. Entire fruit pulp/concentrate manufacturing is as per Hershey India quality

systems and supervised by our personnel who are some of the most competent

fruit beverage technologists in the country.

MANGO PULP/CONCENTRATE

PRODUCT SPECIFICATION PACKING

Alphonso Mango Pulp 

(Natural)

Brix: Min 16

Acidity:0.5% -

0.9%

pH < 4.5

215 kg Aseptic

Bags in MS drums

3.1 kg Cans (A10

cans) X 6 cans per

carton

Totapuri Mango Pulp 

(Natural)

Brix: Min 14

Acidity:0.4% -

0.7%

pH < 4.5

215 kg Aseptic

Bags in MS drums

3.1 kg Cans (A10

cans) X 6 cans per

carton

Totapuri Mango 

Concentrate (Natural)

Brix: Min 28

Acidity:0.6% -

1.1%

pH < 4.5

TOMATO PASTE, GUAVA PULP/CONCENTRATE, PAPAYA

PULP/CONCENTRATE

PRODUCT SPECIFICATION PACKING

Tomato Paste 

(Natural, Hot Break)

Brix: 28 – 30

Acidity:1.8% - 2.8%

pH < 4.6

220 kg Aseptic Bags in

MS drums

White Guava Pulp 

(Natural)

Brix: Min 9

Acidity:0.4% - 0.7%

pH < 4.5

215 kg Aseptic Bags in

MS drums

3.1 kg Cans (A10 cans) X

6 cans per carton

White Guava

Concentrate 

(Natural)

Brix: Min 28

Acidity:0.9% - 1.1%

pH < 4.0

220 kg Aseptic Bags in

MS drums

Red Papaya Concentrate 

(Natural)

Brix: Min 24

Acidity:0.6% - 1.2%

pH < 5.5

220 kg Aseptic Bags in

MS drums

ASEPTIC PACKAGING – MANUFACTURING PROCESS

i. Fruit unloading & ripening in chambers

ii. Transfer to washing station

iii. Inspection

iv. Pulping

v. Decantation – removal of black particles

vi. Storage of Raw pulp in tanks

vii. Sterilization

viii. Bulk aseptic packaging

ix. Storage of finished pulp

DISTRIBUTIONHershey India Private Ltd. has a strong sales force of 500 people reaching to more

than a million retail outlets through 1500 distributors across India. They are managed

by four Regional Sales Offices, located in Mumbai, Delhi, Chennai and Kolkata.

NORTH

Hershey India Private Ltd.

Sun Business India, Bldg no. 99,

3rd Floor, Grand Plaza, Old Rajendra Nagar 

Market, Rajendra Nagar, Delhi – 110060

Phone: 011 -28741387

EAST

Hershey India Private Ltd.

AE 552, Sector 1, Salt Lake, Kolkata – 64

Phone: 033-64598812

WEST

Hershey India Private Ltd.

Veg Oils Division, L M Nadkarni Marg, Near MPT 

Hospital, Wadala East, Mumbai – 400037

MPhone: (022) 24188153 & 55

SOUTH

Hershey India Private Ltd.

Salma’s SVP Arcade, No. 333,

Arcot Road,

Chennai 600024

Phone: 044 42667474

CHAPTER -3LITERATURE REVIEW

STRUCTURE

1. Introduction

2. Challenges: Single Integrated System

3. Decision To Implement Sap Mm Module

4. System Analysis

5. Performance Requirements

6. Design Goals

7. Inventory Management System Of HIPL

8. Warehouse Arrangement

9. System Design

10. Data Flow at HIPL

11. Objectives & Scope Of Study

12. Process Of Material Receipts, Acceptance, Storage And Issue Procedure

13.Inetrnal Audit And Procedure

14. Methodology

15.Data Collection

1-Introduction

The company has complete and accurate knowledge of the stock across the units and

inventory management at all units greatly improved post implementation of

SAP.Matching aspiration with execution is an important ingredient for success,

especially for companies spread across expanse of India. And to execute well,

visibility into operations is a pre-requisite. As Hershey India Private Limited figured,

a robust system can provide this much needed visibility. So they chose SAP MM

Module application to automate operations across expanse of India and reaped the

benefits.

Hershey India Private Limited (HIPL) specializes in the areas of Beverages portfolio

consists of jumpin (Fruit Drinks), Xs (Juice and Nectars) and Sofit (Soya Milk). Sofit

is the market leader in the niche but fast growing soyamilk market. The Hershey

Chocolate syrup was added to the beverages portfolio in 2008. They have one of the

largest tetrapack units in India.

The company is also involved in production of goods for third party which includes

big market leaders in FMCG Sector. They produce Beverages such as Maaza, Minute

Maid (Fruit Drinks) in Tetra Pack & Pet Bottles for Coca Cola India and Georgia

Tea & Coffee Premixes for Coca Cola India Pvt. Ltd. Kissan (Jam, Ketchup, Squash

and Tomato Puree) for Hindustan Unilever Limited. Safal (Fruit Juice) for Mother

Dairy Food Processing Ltd.Staeta (Soya Milk) for Prosoya Ltd. Onjus( Fruit Drink)

for Tunip Agro Ltd. and ORS and Bejoice (Fruit Juice) for Jagdale Foods Limited.

The Company, fast becoming a market leader in Indian market.

2.Challenges: Single Integrated System

The Company earlier used software known as MFG/PRO, but latter after joint

venture between Godrej & Hershey. SAP was implemented to have better control

over Finance and production and material management and have integrated reporting

and control. Hershey India Private Limited aiming at market spread across India,

transparency of, and control over, business operations across the extended

organization was posing a big challenge for the top management. Hershey India

Private Limited needed a single integrated and, more importantly, universal solution

which would enable them to establish central transaction and management control.

This would, in turn, enable accurate and on time generation of consolidated MIS

reports, helping top management to monitor the health of Company.

Second the local management needed systemic support to run their day to day

operations. Generating timely and accurate MIS report, recording daily transactions

and reporting to central office on time was a great challenge. Another important area

which needed immediate attention was inventory management. “Thus, it was clear

that we needed a system that would be universal, as well as handle the problems faced

by inventory management.

3.Decision To Implement Sap Mm Module

Hershey India Private Limited looked for a solution that was universal yet locally

adaptable. They evaluated a few options before deciding an SAP MM Module.

Hershey India Private Limited felt that SAP provided them the much needed

adaptability and flexibility. SAP also inherently possessed control and check features

for management control which was important for Hershey, considering their

widespread expansion in Indian market. Also, SAP was web-enabled, had the

necessary reporting capabilities and had local product support at all the locations

considered for implementation. So, SAP was a clear winner.

4.System Analysis

System Analysis refers into the process of examining a situation with the intent of

improving it through better procedures and methods. System Analysis is the process

of planning a new system to either replace or complement an existing system. But

before any planning is done the old system must be thoroughly understood and the

requirement determined. System Analysis is therefore, the process of gathering and

interpreting facts, diagnosing problems and using the information to re-comment

improvements in the system. Or in other words, System Analysis means a detailed

explanation or description. Before computerized a system under consideration, it has

to be analyzed. We need to study how it functions currently, what are the problems,

and what are the requirements that the proposed system should meet.

System Analysis is conducted with the following objectives in mind:

Identify the customer’s need.

Evaluate the system concept for feasibility.

Perform economics and technical analysis.

Allocate function to hardware, software people, database and other system

elements.

Established cost and schedule constraints.

Create a system definition that forms the foundation for all the subsequent

engineering work.

Requirement Analysis/SRS of the Component.

5. Performance Requirements

The following performance characteristics should be taken care of while developing

the system:

User friendliness: The system should be easy to learn and understand so that

new user can also use the system effectively, without any difficulty.

User satisfaction: The system should meet user expectations.

Response time: The response time of all the operation should be low. This

can be made possible by careful programming.

Error Handling: Response to user errors and the undesired situations should

be taken care of to ensure that the system operates without halting.

Safety: The system should be able to avoid or tackle catastrophic behavior.

Robustness: The system should recover from undesired events without human

intervention.

6.Design Goals

The following goals were kept in mind while designing the system:

Make system user-friendly. This was necessary so that system could be used

efficiently and system could act as catalyst in achieving objectives.

Make system compatible i.e. It should fit in the total integrated system. Future

maintenance and enhancement must be less. Make the system compatible so that it

could integrate other modules of system into itself.

Make the system reliable, understandable and cost-effective.

7.Inventory Management System Of HIPL

The procurement of inventory is totally depends on order/demand. In first step they

get the order from customer then they write a form called indent form by hand

writing. Order schedule is made in hand for every month by the production

department. List of all the raw material needed for production is send to the stores

along with the order.

After getting the order they will send the order to purchase department for buying of

Raw Material and Packaging material. After receiving the raw material from supplier

they check the quality, because quality is more important for them. In whole

production process 4-5 times they will check the quality and after that quality seal on

product.

They are using FIFO method for delivery of good to the customers. First In First Out

(FIFO) or they call it as First Expire First Out means first order should deliver first

and after that continue process because every product has a fixed expire date for it. It

is good way of delivery that makes the customer satisfied. Every inspection about

available stock is on SAP every one can know how much stock is available, and how

much order should be placed. For every order they keep the numbers for

identification.

Every month they carry out the work of physical verification of all the goods

including raw material, finished goods, packaging material and stores & spares.

Difference is seen in the physical stock and the stock in system this is because of the

wastage of stock during production. Percentage of wastage is also pre-defined which

is 2% of the actual production. This difference is then adjusted in the system

according to the physical count.

8.Warehouse Arrangement

There is a separate warehouse for keeping the different type of inventory like Raw

material, packaging material, semi finished good and finished good. Raw materials

includes the fruit pulps, sugar, invert sugar, cocoa powder, flavours etc. arranging of

these things they have rack and rack number, and unique code number for each and

every pulp for identification. Fruit pulps and flavours are stored separately in cold

storage room.

Packaging material include corrugated box, glass bottles. Laminate etc. finished

goods and packaging material are kept separately in different stores. So that finished

goods could be delivered easily.

Each and every data is maintained in system so it is very easy to get the information.

Goods of third party such as raw material, finished goods, and packaging material are

kept Separately In Different Go-Downs Situated At The Factory Premises.

9.System Design

Software such as SAP MM MODULE is used for practice such as Inventory

Management, Logistics and the same software is used by Purchase department also.

SAP MM is the materials management module of the SAP ERP software package

from SAP AG that is used for Procurement Handling and Inventory Management.

Materials management is integrated with other modules such as SD, PP and QM.

Materials management is used for procurement and inventory management.

The module has two important master data - material and vendor. Broadly, the various

levels that can be defined for a SAP MM implementation are: Client, Company Code,

Plant, Storage Location and Purchase Organization.

SAP Materials management covers all tasks within the supply chain, including

consumption-based planning, planning, vendor evaluation and invoice verification. It

also includes inventory and warehouse management to manage stock until usage

dictates the cycle should begin again. Electronic Kanban/Just-in-Time delivery is

supported.

It can be divided into five major components. There are: materials management, plant

maintenance, quality management, production planning and control, and a project

management system. Each is divided into number of subcomponents.

SAP MM is all about managing the materials i.e. the resources of an organization.

These resources include man, manpower and materials. The main functionality within

MM includes purchasing, Inventory management, valuation and assignment, batch

management and classification.

SAP MM Module is a part of logistics and it helps in managing end to end

procurement and logistics business process. Main features of this module are

requisitions, purchase orders, goods receipt, accounts payable, inventory

management, BOM’s and master raw material, finished goods etc.

Requisitions in SAP MM module is a document created for purchase of goods or

service, it is sent to procurement office for the issuance of purchase orders.

Requisitions exceeding certain amount need vendor verification in SAP MM module.

There are two ways of placing requisitions either through SAPGUI or SAP web.

Purchase orders are legal document issued as commitment to the vendor to supply

mentioned material in the specific quantity along with shipping details and

specification. The authorized vendor list is displayed while creating purchase order as

per material and plant of the organization.

Goods receipt in SAP MM module is made against the purchase order issued to the

vendor. The goods receipt affects warehouse, inventory management, and FI and CO

modules of SAP.

Accounts payable component of SAP MM module handles accounting data of all

vendors by recording the transaction of goods. Deliveries and invoices are managed

according to vendors and this component is an integral part of sales management and

cash management, it keeps them updated by making automatic postings of all the

transactions. Inventory management helps the user in managing inventory as per items

purchased, manufactured, sold and kept in stock. It provides optimum support for

business processes and handles creation of orders, delivery notes and outgoing

invoices. It also automatically updates price, create sales units and calculating gross

profit.

Three types of bills of material is supported by SAP MM module, these are

production of bill of material which describes components used in making the

finished product or hours of labor required for making the product. Sales bill of

material describes finished product which is ready to be sold and third is assembled

bill of material which also describes finished product ready to be sold, the difference

between sales BOM and assembled BOM is that sales bill contains description of

finished product as well as its components while assembled BOM contains only one

single entry of finished products.

Material master or finished product master is integrated with all the sub modules of

SAP logistics including SAP MM. The single database of SAP supports easy data

access, storage and retrieval. The master is required for purposes like purchasing for

ordering, inventory management for goods movement postings and physical

inventory, invoice verification for postings, sales order processing and for material

requirement planning, work scheduling and scheduling.

SAP MM module is integrated with other SAP modules like FI, information related to

vendors and purchasing details are directly updated and retrieved, SD or sales and

distribution module also interacts with SAP MM via bill of material and invoices,

SAP plant maintenance controls the activities related to plant management,

maintenance and material required for running them smoothly, PPC or production

planning and control module of SAP and project management system also interact in

real time with MM module for updated information and proper functioning.

10.DATA FLOWAT HIPL

Step 1. Maximum and Minimum level are set for every inventory in SAP but

consumable items which are used on daily basis does not have this levels.

Step 2. As the stock of inventory goes below the maximum level an automatic PO

(Purchase Order) is generated, which can be accessed by both the purchase

department as well as the stores.

Step 3. On the basis of the PO goods are called for by the purchase department is also

done by the purchase department.

Step 4.When the goods are received gate entry is done and GRN (Goods Receipt

Note) is prepared.

Step 5. Then the goods reaches the stores, vehicle check and material check is

conducted by the stores department and IQC (Incoming Material Quality Check) is

prepared by the stores department.

Step 6. On the basis of IQC quality check & microbiological test if needed of the

product is conducted by the quality department.

Step 7. If everything is found as per the requirement receipt is given with the seal and

signature then the store department updates it into the system then GR (Goods

Receipt) is generated.

Step 8. When goods is needed by the production department MRS (material

requisition slip) is generated by production department.

Step 9. Which is handed over to stores and the goods are issued to the production

department as per the requisition slip.

Step 10. After the issue of material, system is updated accordingly to reconcile the

physical stock with the system.

Step 11. Inventory Report is automatically generated by SAP after every day end.

Product Information

Inventory report

SAP MM

Minimum & Maximum level defined

Stock goes below maximum level

Automatic PO is generated

Purchase department calls for the goods

Goods received on gate GRN is prepared

Goods reach the store

Requirement of goods for production

In engineering goods minimum and maximum level are not pre-defined. The

maintenance department calls for the goods as per their requirement. For that purpose

PR is generated manually by the purchase department on their request. This is done so

because engineering goods always have variable cost and variation in price is always

seen. Same thing is also done for consumable items maximum & minimum levels are

Vehicle checking & material check conducted

IQC is prepared

Quality & microbiological check

As per requirement Not as per requirement

Update the system Rejected

GR generated Returned back

MRS is prepared by production department

MRS received by stores

Issue of goods to production department

Update system as per the issue

not pre-defined in SAP because these items are consumed on daily basis and are to be

called for regularly.

Sales order Information

BENEFITS

Consu

mption Based Planning

CBP is based on the past consumption values and uses the forecast or other

statistical procedure to determine future requirements. It gets trigger when

stock level falls below pre-defined reorder points.

Procedure available for MRP: -

Reorder point procedure

Forecast based planning

Time-phased material planning

Purchasing-Purchasing is the main part of SAP MM module purchasing helps

the organization to acquire goods and services on time, and the module is fully

integrated to FI, PS, PP, SD, and CO.

Task of Purchasing as follows: -

External procurement of material & services

Determination of possible source of supply

Monitoring deliveries from and payment to vendors.

Determination of Requirements

Material is identified through the user department for material planning and

control sub modules.

Source Determination

The purchase component in SAP helps to get the potential source from where

the company will get the orders. The supply is mainly based on past orders

and long term purchase agreements and to quicken the process, an

electronically designed RFQ can be made.

Vendor Evaluation

It is one of the key SAP MM module features. A comparison of quotation of

various vendors can be made to find out the vendors with similar pricing

options and to select the best option. After making the vendor selection the

rejection of other letter can be made. The Vendor Evaluation component

supports you in optimizing your procurement processes in the case of both

materials and services.

Helps you to select source of supply & monitoring of existing supply

relationships.

Vendor reliability

Processing Purchase order

The purchase order can be processed after vendor selection and the

information related to the purchase order can be obtained from the system. An

automatic PO can be generated by the system. The PO is supported by the

vendor scheduling agreement and contract- including the long term

agreements.

PO follow-ups

The system keeps a record of the remainders and automatically prints the

remainders at defined time intervals. It also provides the latest status of the

requisitions, quotations and PO’s. it is one of the important SAP MM module

features.

Inventory Management

Management of material stocks on a quantity and value basis.

Planning, entry and documentation of all goods movement.

Carrying out the physical inventory

Logistic Invoice Verification

It is a component of MM. It is in the logistic invoice verification that incoming

invoice are verified in terms of content, price and arithmetic. The system takes

care of the invoices and checks the invoices. The accounts payable clerk is

informed about the amount and price variance. The accounts payable

employee can ensure the data by checking the purchase order and goods

receipt data. The process makes the data available to the user which can be

easily audited and invoices can be generated and cleared on the time for

payment.

It completes material procurement process, which start with purchase

requisition & result in goods receipts.

It allows invoices that do not generate in material procurement like

expenses to be processed.

It allows credit memo to be processed.

Benefits of MM

Material cost can be lowered down

Controlling of indirect cost

Risk of inventory loss minimized

Reduction in loss of time of direct labor

Control of manufacturing cycle

Material congestion in storage places avoided

Improvement in delivery of the product

11.Objectives & Scope Of Study

To study and understand as to what exactly is inventory management system.

To study the operational feasibility and utility of inventory management

system.

The scope is to drive meaningful application of theory for actual implementation. As

the study is focusing on identifying the present potential of the company’s inventory

methods and aims, we identify best set of inventory method to be carried to improve

the company’s policy to determine their inventory.

This study provides insight to the management of high value item and low value

items. This study also gives the idea about industrial focus and addressal towards

maintaining inventory.

12.Process Of Material Receipts, Acceptance, Storage And Issue Procedure

Purpose: To ensure that the incoming material is received in good condition and is as

per the specification.

Scope: All Raw Materials, Packing Materials, Cleaning aids, Chemicals, fuels.

Reference: GMP- storage and warehousing

PROCEDURE:

1. Security supervisor makes entry of material, vehicle no., quantity, invoice

no. in gate entry register.

2. QA officer visually inspects the incoming vehicle for any abnormalities e.g.

odor, color, damaged containers, any pest infestation etc.

3. Stores Officer checks whether supply of material is accompanied with

quality certificate. If quality certificate is not available logistic officer

informs this to QA officer and buyer also.

4. Stores Officer Stamps formats on the back of Delivery Challan. Fills the

entry no. & Date. Receives the DC and Material at the stores.

5. Stores Officercompares the material against Purchase Order. Check the

general condition of goods as per the document.

6. If Quality Certificate is not available, and material complies with

specifications and supplied by approved vendor, QA officer allows the

material unloading subjected to receive quality certificate through fax or

mail from supplier.

7. Stores Officer Segregates the defective stocks and keep aside. Informs QA

about the damaged stocks through the memo. QA reviews whether the

transit damaged material can be stored or rejected. If it is rejected stores

officer prepares a purchase order return in SAP for said material and returns

it back to supplier.

8. If material is Ok, warehouse team unloads and stores all the materials safely

at ear marked place.

9. QA officer/assistant withdraws sample from the consignment as per the

sampling plan.

10. QA officer analyzes the sampled material as per the work instruction or as

per procedure.

11. QA officer prepares a test report. Approves the test report against

specifications.

12. If the material complies to the specifications stickspassed a green colored

label on material.

13. If the consignment (analysis) shows defects which do not specify for outright

rejection, but the defect is partial and can be sorted out, QA officer informs

warehouse officer for the same by given ‘Partial rejection note’ for the

consignment.

14. If the consignment is partially rejected, warehouse officer arrange for

segregation of the materials and then send the material back to the supplier.

After segregation, rejected material will bear ‘Red label’ giving all the

relevant details.

15. In case the material is not outright or partially rejected but,

a. it is not meeting the parameters defined as ‘Major’ and ‘Minor’ to

AQL levels and if concession can be given,

b. In case the material which is received is not having the approved

sample,

The material will bear ‘HOLD’ label till decision on acceptance is taken.

16. If the material under Hold is accepted, QA person will stick ‘Passed’ green

color label on the Hold stickers. In case of rejection, DGM (Materials) will

generate return PO and send back material to vendor.

17. Store ‘PASSED’ material at its appropriate place – all raw materials at Food

items area, Chemicals are to be stored at separate Chemical godown and rest

of the material at Non-Food Items area.

18. Stores officer identifies the old stocks of RM/PM every month and prepare

materials review report and sends to QA.

19. QA officer withdraws sample, analyses and prepare report. If material

complies then, return the material review report to stores and continue usage

of the material.

20. If material not complies QA officer identifies the non-conforming material as

‘REJECTED’

21. In case of fruit pulps, concentrates, juices and pastes, inform Stores to drain in

the Effluent Treatment Plant. In case of all other items, inform Purchase

through system for necessary return to vendor.

13.Inetrnal Audit And Procedure

Purpose: To determine whether Quality & Food Safety Activities and related results

comply with planned arrangements and whether these arrangements are

suitable to achieve objectives in respect of Quality and Food Safety

Management System.

SCOPE: This procedure covers audits of Quality & Food Safety Management

System at HIPL processes, products and services.

RESPONSIBILITY: Management Representative

PROCEDURE:

1. Management Representative shall organise internal audit in every six

months interval.

He will prepare department wise “Internal QFSMS audit Schedule” based on

status and importance “Internal audit Schedule” is prepared for periodic

auditing of all activities and functional areas considering importance of

activity concerned and the results of the previous audit.

Auditor shall be chosen from the list of trained auditors. He will ensure that

the Auditor chosen is impartial and objective to the activity & also not from

the department to be audited. External agencies who are qualified lead

assessors can also be engaged to carry out the internal audit.

In case of any difficulty in adhering to the schedule, the audit and the auditor

shall mutually decide on the date within the same week and same should be

informed to MR for making changes in schedule

2. Management Representative shall communicate the schedule to all auditors

and audittees.

3. Management Representative shall provide internal audit checklist. Audit

shall be carried out. Techniques may include but not limited to:

o Observation and inquiries–Operation of

functions/activities/departments

o Analysis and Review- Data collection/activities into most refined

details

o Inspection – Documents/assets/other evidences

o Confirming- Validity of records

4. Auditors shall record observations in the Audit observation sheet. Auditor

shall prepare a Non-Conformity report / discrepancy report based on the

observations. All such observations classified as ‘NC’ in the audit observation

sheet shall be listed separately in the Non-Conformity report. It shall also be

explained as to why it is Non-Conformity.

All non-conformity reports shall be identified by serial numbers and clause

nos.

The audit checks list, audit observation sheet and the non-conformance report

shall be submitted to the MR as audit report within three days of completion of

audit.

5 . Management Representative shall organise a review meeting shall be

convened to scrutinise the audit report. The meeting shall be attended by the

MR, Auditor(s), Auditee(s) and his immediate superior.

If required it shall also be decided to include representative from other

department(s) who may have a role in removing the discrepancy.

6. The review meeting shall decide on:

- Find out the root cause

- The appropriate corrective action plan for root cause

- The responsibilities (Including responsibilities of other department if

required) for implementation.

- Time schedule.

These decisions shall be recorded in the Non-Conformity report, and a

photocopy of the same shall be given to the auditee and all persons who have a

defined responsibility.

7. If the corrective action is accepted to auditor, the auditee or department

responsible person shall take corrective action as planned in the Non-

Conformity Report. If not accepted root cause must be again determined and

corrective action shall be established accordingly.

8. Management Representative shall verify for the effective implementation of

the action taken and disposition of non-conformity of corrective actions

implemented within stipulated time by auditee. Such records shall be

maintained.

9. Management Representative shall made the final closure of the “Internal

QFS Management System Non conformance report/Audit Report”

14.METHODOLOGY

A research methodology defines the purpose of the research, how it proceeds, how to

measure progress and what constitute success with respect to the objectives

determined for carrying out the research study.

The appropriate research design formulated is detailed below.

Exploratory research: this kind of research has the primary objective of

development of insights into the problem. It studies the main area where the

problem lies and also tries to evaluate some appropriate courses of action.

The research methodology for the present study has been adopted to reflect

these realities and help reach the logical conclusion in an objective and

scientific manner.

The present study contemplated and exploratory research.

15.DATA COLLECTION

Source of data

Primary Data: - Primary data which included the input received from

directly the officials and employees through interview.

Secondary Data: - Secondary data is collected from books, journals, Annual

Accounts and internet etc.

Method of collecting data: Interview method, and Annual Reports.

CHAPTER -4INVENTORY CONTROL

STRUCTURE1. Why Inventory Control?

2. Inventory Control

3. The Eyeball System

4. Reserve Stock (or Brown Bag) System

5. Perpetual Inventory Systems

6. Stock Control

7. Inventory Control Records

8. Controlling Inventory

1.Why Inventory Control? Control of inventory, which typically represents 45% to 90% of all expenses

for business, is needed to ensure that the business has the right goods on hand to avoid

stock-outs, to prevent shrinkage (spoilage/theft), and to provide proper accounting.

Many businesses have too much of their limited resource, capital, tied up in their

major asset, inventory. Worse, they may have their capital tied up in the wrong kind

of inventory. Inventory may be old, worn out, shopworn, obsolete, or the wrong sizes

or colors, or there may be an imbalance among different product lines that reduces the

customer appeal of the total operation.

Inventory control systems range from eyeball systems to reserve stock systems

to perpetual computer-run systems. Valuation of inventory is normally stated at

original cost, market value, or current replacement costs, whichever is lowest. This

practice is used because it minimizes the possibility of overstating assets. Inventory

valuation and appropriate accounting practices are worth a book alone and so are not

dealt with here in depth.

The ideal inventory and proper merchandise turnover will vary from one

market to another. Average industry figures serve as a guide for comparison. Too

large an inventory may not be justified because the turnover does not warrant

investment. On the other hand, because products are not available to meet demand,

too small an inventory may minimize sales and profits as customers go somewhere

else to buy what they want where it is immediately available. Minimum inventories

based on reordering time need to become important aspects of buying activity.

Carrying costs, material purchases, and storage costs are all expensive. However,

stock-outs are expensive also. All of those costs can be minimized by efficient

inventory policies.

2.Inventory Control

Inventory control involves the procurement, care and disposition of materials.

There are three kinds of inventory that are of concern to managers:

• Raw materials,

• In-process or semi-finished goods,

• Finished goods.

If a manager effectively controls these three types of inventory, capital can be

released that may be tied up in unnecessary inventory, production control can be

improved and can protect against obsolescence, deterioration and/or theft,

The reasons for inventory control are:

• Helps balance the stock as to value, size, color, style, and price line in

proportion to demand or sales trends.

• Help plan the winners as well as move slow sellers

• Helps secure the best rate of stock turnover for each item.

• Helps reduce expenses and markdowns.

• Helps maintain a business reputation for always having new, fresh

merchandise in wanted sizes and colors.

Three major approaches can be used for inventory control in any type and size

of operation. The actual system selected will depend upon the type of operation, the

amount of goods.

3.The Eyeball System

This is the standard inventory control system for the vast majority of small

retail and many small manufacturing operations and is very simple in application. The

key manager stands in the middle of the store or manufacturing area and looks

around. If he or she happens to notice that some items are out of stock, they are

reordered. In retailing, the difficulty with the eyeball system is that a particularly good

item may be out of stock for sometime before anyone notices. Throughout the time it

is out of stock, sales are being lost on it. Similarly, in a small manufacturing

operation, low stocks of some particularly critical item may not be noticed until there

are none left. Then production suffers until the supply of that part can be replenished.

Such unsystematic but simple retailers and manufacturers to their inherent

disadvantage.

4.Reserve Stock (or Brown Bag) System

This approach is much more systematic than the eyeball system. It involves

keeping a reserve stock of items aside, often literally in a brown bag placed at the rear

of the stock bin or storage area. When the last unit of open inventory is used, the

brown bag of reserve stock is opened and the new supplies it contains are placed in

the bin as open stock. At this time, a reorder is immediately placed. If the reserve

stock quantity has been calculated properly, the new shipment should arrive just as the

last of the reserve stock is being used.

In order to calculate the proper reserve stock quantity, it is necessary to know

the rate of product usage and the order cycle delivery time. Thus, if the rate of product

units sold is 100 units per week and the order cycle delivery time is two weeks, the

appropriate reserve stock would consist of 200 units (I00u x 2w). This is fine as long

as the two-week cycle holds. If the order cycle is extended, the reserve stock

quantities must be increased. When the new order arrives, the reserve stock amount is

packaged again and placed at the rear of the storage area.

This is a very simple system to operate and one that is highly effective for

virtually any type of organization. The variations on the reserve stock system merely

involve the management of the reserve stock itself. Larger items may remain in

inventory but be cordoned off in some way to indicate that it is the reserve stock and

should trigger a reorder.

5.Perpetual Inventory Systems

Various types of perpetual inventory systems include manual, card-oriented, and

computer- operated systems. In computer-operated systems, a programmed instruction

referred to commonly as a trigger, automatically transmits an order to the appropriate

vendor once supplies fall below a prescribed level. The purpose of each of the three

types of perpetual inventory approaches is to tally either the unit use or the dollar use

(or both) of different items and product lines. This information will serve to help

avoid stock-outs and to maintain a constant evaluation of the sales of different product

lines to see where the emphasis should be placed for both selling and buying.

6.Stock Control

A stock control system should keep you aware of the quantity of each kind of

merchandise on hand. An effective system will provide you with a guide for what,

when, and how much to buy of each style, color, size, price and brand. It will reduce

the number of lost sales resulting from being out of stock of merchandise in popular

demand. The system will also locate slow selling articles and help indicate changes in

customer preferences. The size of your establishment and the number of people

employed are determining factors in devising an effective stock control plan. Can you

keep control by observation? Should you use on-hand/on-order/sold records?

Detachable ticket stubs? Checklists? And/or physical inventory? If so, how often?

With the observation method (the eyeball system), unless the people using it

have an unusually sharp sense of quantity and sales patterns, it is difficult to keep a

satisfactory check on merchandise depletion. It means that you record shortages of

goods or reorders as the need for them occurs to you. Without a better checking

system, orders may only be placed at the time of the salesman's regular visit,

regardless of when they are actually needed. Although it may be the simplest system,

it also can often result in lost sales or production delays. Detachable stubs or tickets

placed on merchandise provide a good means of control. The stubs, containing

information identifying the articles, are removed at the time the items are sold. The

accumulated stubs are then posted regularly to the perpetual inventory system by hand

or through the use of an optical scanner.

A checklist, often provided by wholesalers, is another counting tool. The

checklist provides space to record the items carried, the selling price, cost price, and

minimum quantities to be ordered of each. It also contains a column in which to note

whether the stock on hand is sufficient and when to reorder. This is another very

simple device that provides the level of information required to make knowledgeable

decisions about effective inventory management.

Most smaller operations today, except for the very smallest, are using some

form of a perpetual online system to record the movement of inventories into and out

of their facilities. In a retail operation, the clerk at the register merely scans the ticket

with a reader, and the system shows the current price and removes the item from the

inventory control system. A similar process occurs in a manufacturing operation,

except that the "sale" is actually a transfer of the inventory from control to production.

This is a particularly critical system in a large operation such as a grocery store where

they regularly maintain 12,000 plus items. Often a vendor will provide on-site or

computerized assistance needed to help their smaller customers maintain a good

understanding of their own inventory levels and so keep them in balance.

7.Inventory Control Records

Inventory control records are essential to making buy-and-sell decisions. Some

companies control their stock by taking physical inventories at regular intervals,

monthly or quarterly. Others use a dollar inventory record that gives a rough idea of

what the inventory may be from day to day in terms of dollars. If your stock is made

up of thousands of items, as it is for a convenience type store, dollar control may be

more practical than physical control. However, even with this method, an inventory

count must be taken periodically to verify the levels of inventory by item.

Perpetual inventory control records are most practical for big-ticket items.

With such items it is quite suitable to hand count the starting inventory, maintain a

card for each item or group of items, and reduce the item count each time a unit is

sold or transferred out of inventory.

Periodic physical counts are taken to verify the accuracy of the inventory card.

Out-of-stock sheets, sometimes called want sheets, notify the buyer that it is

time to reorder an item. Experience with the rate of turnover of an item will help

indicate the level of inventory at which the unit should be reordered to make sure that

the new merchandise arrives before the stock is totally exhausted.

Open-to-buy records help to prevent ordering more than is needed to meet

demand or to stay within a budget. These records adjust your order rate to the sales

rate. They provide a running account of the dollar amount that may be bought without

departing significantly from the pre- established inventory levels. An open-to-buy

record is related to the inventory budget. It is the difference between what has been

budgeted and what has been spent. Each time a sale is made, open-to-buy is increased

(inventory is reduced). Each time merchandise is purchased; open-to-buy is reduced

(inventory is increased). The net effect is to help maintain a balance among product

lies within the business, and to keep the business from getting overloaded in one

particular area.

Purchase order files keep track of what has been ordered and the status or

expected receipt date of materials. It is convenient to maintain these files by using a

copy of each purchase order that is written. Notations can be added or merchandise

needs updated directly on the copy of the purchase order with respect to changes in

price or delivery dates.

Supplier files are valuable references on suppliers and can be very helpful in

negotiating price, delivery and terms. Extra copies of purchase orders can be used to

create these files, organized alphabetically by supplier, and can provide a fast way to

determine how much business is done with each vendor. Purchase order copies also

serve to document ordering habits and procedures and so may be used to help reveal

and/or resolve future potential problems.

Returned goods files provide a continuous record of merchandise that has

been returned to suppliers. They should indicate amounts, dates and reasons for the

returns. This information is useful in controlling debits, credits and quality Issues.

Price books, maintained in alphabetical order according to supplier, provide a

record of purchase prices, selling prices, markdowns, and markups. It is important to

keep this record completely up to date in order to be able to access the latest price and

profit information on materials purchased for resale.

8.Controlling Inventory

Controlling inventory does not have to be an onerous or complex proposition. It is a

process and thoughtful inventory management. There are no hard and fast rules to

abide by, but some extremely useful guidelines to help your thinking about the

subject. A five step process has been designed that will help any business bring this

potential problem under control to think systematically thorough the process and

allow the business to make the most efficient use possible of the resources

represented. The final decisions, of course, must be the result of good judgment, and

not the product of a mechanical set of formulas.

STEP 1: Inventory Planning

Inventory control requires inventory planning. Inventory refers to more than

the goods on hand in the retail operation, service business, or manufacturing facility.

It also represents goods that must be in transit for arrival after the goods in the store or

plant are sold or used. An ideal inventory control system would arrange for the arrival

of new goods at the same moment the last item has been sold or used. The economic

order quantity, or base orders, depends upon the amount of cash (or credit) available

to invest in inventories, the number of units that qualify for a quantity discount from

the manufacturer, and the amount of time goods spend in shipment.

STEP 2: Establish order cycles

If demand can be predicted for the product or if demand can be measured on a

regular basis, regular ordering quantities can be setup that take into consideration the

most economic relationships among the costs of preparing an order, the aggregate

shipping costs, and the economic order cost. When demand is regular, it is possible to

program regular ordering levels so that stock-outs will be avoided and costs will be

minimized. If it is known that every so many weeks or months a certain quantity of

goods will be sold at a steady pace, then replacements should be scheduled to arrive

with equal regularity. Time should be spent developing a system tailored to the needs

of each business. It is useful to focus on items whose costs justify such control,

recognizing that in some cases control efforts may cost more the items worth. At the

same time, it is also necessary to include low return items that are critical to the

overall sales effort.

If the business experiences seasonal cycles, it is important to recognize the

demands that will be placed on suppliers as well as other sellers.

A given firm must recognize that if it begins to run out of product in the

middle of a busy season, other sellers are also beginning to run out and are looking for

more goods. The problem is compounded in that the producer may have already

switched over to next season’s production and so is not interested in (or probably even

capable of) filling any further orders for the current selling season. Production

resources are likely to already be allocated to filling orders for the next selling season.

Changes in this momentum would be extremely costly for both the supplier and the

customer.

On the other hand, because suppliers have problems with inventory control,

just as sellers do, they may be interested in making deals to induce customers to

purchase inventories off-season, usually at substantial savings. They want to shift the

carrying costs of purchase and storage from the seller to the buyer. Thus, there are

seasonal implications to inventory control as well, both positive and negative. The

point is that these seasonable implications must be built into the planning process in

order to support an effective inventory management system.

STEP 3: Balance Inventory Levels

Efficient or inefficient management of merchandise inventory by a firm is a major

factor between healthy profits and operating at a loss. There are both market-related

and budget-related issues that must be dealt with in terms of coming up with an ideal

inventory balance:

• Is the inventory correct for the market being served?

• Does the inventory have the proper turnover?

• What is the ideal inventory for a typical retailer or wholesaler in this business?

To answer the last question first, the ideal inventory is the inventory that does

not lose profitable sales and can still justify the investment in each part of its whole.

An inventory that is not compatible with the firm’s market will lose profitable

sales. Customers who cannot find the items they desire in one store or from one

supplier are forced to go to a competitor. Customer will be especially irritated if the

item out of stock is one they would normally expect to find from such a supplier.

Repeated experiences of this type will motivate customers to become regular

customers of competitors.

STEP 4: Review Stocks

Items sitting on the shelf as obsolete inventory are simply dead capital. Keeping

inventory up to date and devoid of obsolete merchandise is another critical aspect of

good inventory control. This is particularly important with style merchandise, but it is

important with any merchandise that is turning at a lower rate than the average stock

turns for that particular business. One of the important principles newer sellers

frequently find difficult is the need to mark down merchandise that is not moving

well.

Markups are usually highest when a new style first comes out. As the style

fades, efficient sellers gradually begin to mark it down to avoid being stuck with large

inventories, thus keeping inventory capital working. They will begin to mark down

their inventory, take less gross margin, and return the funds to working capital rather

than have their investment stand on the shelves as obsolete merchandise. Markdowns

are an important part of the working capital cycle. Even though the margins on

markdown sales are lower, turning these items into cash allows you to purchase other,

more current goods, where you can make the margin you desire.

Keeping an inventory fresh and up to date requires constant attention by any

organization, large or small. Style merchandise should be disposed of before the style

fades. Fad merchandise must have its inventory levels kept in line with the passing

fancy. Obsolete merchandise usually must be sold at less than normal markup or even

as loss leaders where it is priced more competitively. Loss leader pricing strategies

can also serve to attract more' consumer traffic for the business thus creating

opportunities to sell other merchandise as well as well as the obsolete items.

Technologically obsolete merchandise should normally be removed from inventory at

any cost. Stock turnover is really the way businesses make money. It is not so much

the profit per unit of sale that makes money for the business, but sales on a regular

basis over time that eventually results in profitability. The stock turnover rate is the

rate at which the average inventory is replaced or turned over, throughout a pre-

defined standard operating period, typically one year. It is generally seen as the

multiple that sales represent of the average inventory for a given period of time.

Turnover averages are available for virtually any industry or business

maintaining inventories and having sales. These figures act as an efficient and

effective benchmark with which to compare the business in question, in order to

determine its effectiveness relative to its capital investment. Too frequent inventory

turns can be as great a potential problem as too few. Too frequent inventory turns may

indicate the business is trying to overwork a limited capital base, and may carry with

it the attendant costs of stock-outs and unhappy and lost customers.

Stock turns or turnover, is the number of times the "average" inventory of a

given product is sold annually. It is an important concept because it helps to

determine what the inventory level should be to achieve or support the sales levels

predicted or desired. Inventory turnover is computed by dividing the volume of goods

sold by the average inventory. Stock turns or inventory turnover can be calculated by

the following equations:

If the inventory is recorded at cost, stock turn equals cost of goods sold

divided by the average inventory. If the inventory is recorded at sales value, stock turn

is equal to sales divided by average inventory. Stock turns four times a year on the

average for many businesses. Jewelry stores are slow, with two turns a year, and

grocery stores may go up to 45 turns a year.

If the dollar value of a particular inventory compares favorably with the

industry average, but the turnover of the inventory is less than the industry average, a

further analysis of that inventory is needed. Is it too heavy in some areas? Are there

reasons that suggest more inventories are needed in certain categories? Are there

conditions peculiar to that particular firm? The point is that all markets are not

uniform and circumstances may be found that will justify a variation from average

figures. In the accumulation of comparative data for any particular type of firm, a

wide variation will be found for most significant statistical comparisons. Averages are

just that, and often most firms in the group are somewhat different from that result.

Nevertheless, they serve as very useful guides for the adequacy of industry turnover,

and for other ratios as well. The important thing for each firm is to know how the firm

compares with the averages and to deter- mine whether deviations from the averages

are to its benefit or disadvantage.

STEP 5: Follow-up and Control

Periodic reviews of the inventory to detect slow-moving or obsolete stock and

to identify fast sellers are essential for proper inventory management. Taking regular

and periodic inventories must be more than just totaling the costs. Any clerk can do

the work of recording an inventory. However, it is the responsibility of key

management to study the figures and review the items themselves in order to make

correct decisions about the disposal, replacement, or discontinuance of different

segments of the inventory base.

Just as an airline cannot make money with its airplanes on the ground, a firm

cannot earn a profit in the absence of sales of goods. Keeping the inventory attractive

to customers is a prime prerequisite for healthy sales. Again, the seller's inventory is

usually his largest investment. It will earn profits in direct proportion to the effort and

skill applied in its management.

Inventory quantities must be organized and measured carefully. Minimum

stocks must be assured to prevent stock-outs or the lack of product. At the same time,

they must be balanced against excessive inventory because of carrying costs. In larger

retail organizations and in many manufacturing operations, purchasing has evolved as

a distinct new and separate phase of management to achieve the dual objective of

higher turnover and lower investment. If this type of strategy is to be utilized,

however, extremely careful attention and constant review must be built into the

management system in order to avoid getting caught short by unexpected changes in

the larger business environment.

Caution and periodic review of reorder points and quantities are a must.

Individual market size of some products can change suddenly and corrections should

be made.

CHAPTER -5

1.SUMMARYThe term inventory refers to assets which will be sold in future in the normal course

of business operations. The assets which the firm stores as inventory in anticipation of

need are raw materials, work-in-process/semi-finished goods and finished goods. The

objectives of inventory management consists of two counter-balancing parts, namely,

to minimise investments in inventory and to meet the demand for products by

efficient production and sales operations. In operational terms, the goal of inventory

management is to have a trade-off between costs and benefits at different levels of

inventory. The cost of holding inventory are ordering cost and carrying cost.

The major benefits of holding inventory are in the area of purchasing, production

and sales.The inventory management techniques illustrated here are (i) the

determination of stock levels which shows the minimum, re-order, maximum and

danger levels of inventory (ii) EOQ model which reveals the size of order for the

acquisition of inventory by the firm; (iii) ABC system which is useful in determining

the type and degree of control on inventory; (iv) inventory turnover ratios to minimise

the investment in inventories; (v) classification of inventory according to age and (vi)

Just in time, which aims to minimise/reduce the carrying

cost of inventories.

Conclusions

The aim of this research was to develop a performance measurement tool for

inventory management. As a result a unique framework is developed which enables

organisations to measure their inventory management’s performance. Contrary to

existing literature the designed model provides a business process overview of

inventory management and the relevant metrics. The structure provided by the

framework gives organisations something to hold on to and prescribes them what to

measure and how to measure it. Furthermore the framework is unique in its design,

because different process steps are represented due to its span. This is a good aspect,

as it makes sure that the accent is not on a single process or output only, but really

serves the two goals of good inventory management.

Overall the framework provided a structured way to measure the performances in two

cases and made an orderly comparison of the results possible. As a final conclusion it

can be put that the strength of the developed model lies within the structured, holistic

measurement approach which the framework represents. If the full framework is too

much to implement at once, it is strongly recommended to measure at least the TOP-

10 KPIs. Off course, if it is possible one should measure all the metrics present in the

framework to gain the best insight in inventory management processes.

Generalization Of The Results

In this research the framework was applied to hospitals, however the framework can

be applied to other industries as well, because at other organisations the same main

basic processes take place within inventory management. The framework represents

inventory management process steps which are quit generic and not very detailed,

which creates the possibility to apply the framework to various types of industries or

organisations.

A second interesting opportunity for the framework lies with its possibility to test

other technologies as well. In this research the framework is used to validate

hypotheses concerning the improvements caused by ERP. Yet it is considered

possible to use the framework for studying the effects on inventory management

caused by other technologies as well. Additionally in this research the framework is

used to compare two organisations, but an opportunity for applying the framework

would also be to analyse changes over time.

Further Research

The framework offers several opportunities, but unfortunately limitations should be

remarked as well. First of all, the framework is developed based on various kinds of

literature and expert interviews. The list of KPIs that was comprised is not exhaustive.

It is however very hard and probably even an impossible job, to create a framework

that is complete towards all situations and scenarios. More research in other industries

and with other technologies is therefore advised to validate the completeness and

applicability of the framework even further. Further research is also recommended to

test the hypotheses towards ERP even more. Finally further research on aggregating

the operational KPIs presented in the framework could be conducted. Such a research

could create a higher level ‘above’ the current KPIs, which is interesting for top

management for instance and provides an even quicker insight in the performances of

the inventory management process.

2.List of AbbreviationsBI Business Intelligence

BSC Balanced Scorecard

CFF Critical Failure Factor

CRM Customer Relationship

Management

CSF Critical Success Factor

EDI Electronic Data Interchange

ERP Enterprise Resource Planning

ERP II Successor to ERP

e-ERP Extended Enterprise Resource

Planning (successor to ERP)

ES Enterprise Systems

FIFO First in – First Out

fte Fulltime-equivalent

HR Human Resources

JIT Just In Time

KPI Key Performance Indicator

MRP Material Requirements Planning

NPV Net present value

ROI Return on Investment

SAP SAP AG is a German company;

SAP is the German abbreviation

for ‘Systeme, Anwendungen,

Produkte in der

Datenverarbeitung’

SCM Supply Chain Management

SRM Supplier Relationship

Management

3.BIBLOGRAPHYReferances of Books

1. Financial Management and Policy by James C. Van Horne

2. Financial Management by Prasana Chandra

3. Financial Management by Ravi M. Kishore

4. Financial Management by I.M. Pandey

5. Working Capital Management by V.K. Bhalla

Referances of e-BOOKSI. S.E. Bolter, Managerial Finance, (Boston: Hovyhlon Mifflin Co., 1976).

II. American Institute of Certified Public Accounts: According Research and

Terminology Bullet New York (1961).

III. Black Champion U. Miller, Accounting in Business Decisiions-Theory Method

and Use, Englewood Cliffs New Jersey, Prentice Hall, Inc., (1961).

IV. S. Venu, Lokudyog (1972).

V. Howard Leslie R., Working Capital: Its Management and Control, London

MacDonald and Evan Ltd., 1971.

VI. L.R. Howard, Working Capital – Its Management and Control, (London :

Macdonald & Evan Ltd., 1971).

VII. R.S. Chadda, Inventory Management in India, (Mumbai Allied Publishes,

1971).

VIII. Martin K. Star and David W. Miller, Inventory Control, (NJ, Jheary and

Phensice, Englewood cliffs, Prentice Hall, 1962).

IX. P.K. Ghosh and G.S. Gupta, Fundaments of Management Accounting, (New

Delhi: National Publishing House, 1979).

X. R.S. Chadda provides the following useful guidelines for selective control

(Chadda R.S.: Inventory Management in India).

XI. P. Hopal Prishan L.M. Sundersan, Material Management-An Integrated

Approach, (New Delhi): Prentice Hall and India 1984.

XII. Buchar, Joseph and Koenisbgerg, Ernest, Scientific, Inventory Management,

(New Delhi: Prentice Hall of India, 1966).

XIII. H.J. Wheldon, Cost Accounting and Costing Methods, (London : McDonald

and Evans Ltd., 1948)