Table of Contents

1. Introduction..................................................................................................................................2
1.1

Origin of the Report..........................................................................................................2

1.2 Scope of the Study.................................................................................................................2

1.3 Objective of the Study...........................................................................................................2
1.4 Methodology..........................................................................................................................2
1.5 Limitations.............................................................................................................................2
2. Manufacturing Practices of Beximco Pharma:............................................................................3
2.1 Key Functions of BPLs Inventory Management...................................................................3
2.2 Objective of Inventory Management.....................................................................................3
2.3 Types of Inventory in BPL:...................................................................................................4
2.4 Sources of Raw Material & Packing materials......................................................................4
3. Inventory Valuation......................................................................................................................7
3.1 Valuation of Raw Materials in the Store................................................................................7
4. Recommendations:......................................................................................................................7
5. Concluding Remarks:..................................................................................................................8
Reference.........................................................................................................................................9

1. Introduction
Studying international business is undoubtedly largely beneficial for doing business worldwide.
Operation Management is a core course in this department where pros and cons of operational
activities are discussed and also develop a students mind setting about the mechanism of
coordinating the scarce resources towards attaining competitive advantage of the organization.
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Inventory Management Practice is a basic mechanism of any organization. This report analyze
some points of inventory management practices of Beximco Pharmaceuticals Limited.

1.1 Origin of the Report

This report is prepared as a requirement for completing the course of MBA. The report is designed to
provide the MBA students some opportunities of obtaining knowledge of the inventory management
system and aims at bringing together the two facts of learning: theoretical and practical. Our course
instructor Mr. Abul Khayer has authorized and provided support to prepare the report.

1.2 Scope of the Study

This report deals with inventory management and their implication on organizational practices.
This study will allow us to learn about types of inventory, their sources, purchase system,
required documents and valuation system. Moreover this study give us a guidance about practical
and theoretical knowledge of operational activities of manufacturing firm.

1.3 Objective of the Study

Objective of the study is to analyze the procedures of inventory management system, determining
the drawbacks of the existing system and provide some recommendations on the basis of our
findings. Another object is to the completion of the course Operation Management in MBA
program.

1.4 Methodology
This study is exploratory in nature. We have tried our best to make the report informative and
handy. The report has been written on the basis of information collected from primary as well as
secondary sources.

Primary Sources: Oral interview of the responsible officers.

Secondary Sources: Course Text book, Internet.

1.5 Limitations
It was a great experience and opportunity for us to know something about inventory management
system. But there was some limitations. It is difficult for us to collect the necessary information
and documents within this short time. Adequate and in-depth well organized information is not
available to access. Also we have not enough time to cooperate in the information gathering
process.
2. Manufacturing Practices of Beximco Pharma:
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Beximco Pharma is the largest exporter of pharmaceuticals from Bangladesh, spreading its presence
in many developing and developed countries across the globe. Beximco Pharma is the only company
in Bangladesh to receive this highest national accolade for export, for record three times.
Beximco Pharma markets its brands through professional sales and marketing teams in African,
Asian and European markets. It also supplies its products to renowned hospitals and institutions in
many countries, including Raffles Hospital and K K Women & Children Hospital in Singapore,
MEDS and Kenyatta National Hospital (KNH) in Kenya, Jinnah Hospital, Agha Khan Hospital and
Shaukat Khanum Memorial Hospital in Pakistan. Beximco Pharma is also an enlisted supplier of
WHO and UNICEF.
Another important business activity of Beximco Pharma is the contract manufacturing for major
international brands of leading multinational companies. Beximco Pharma is acclaimed domestically
and internationally for its outstanding product quality, world class manufacturing facilities, product
development capabilities and outstanding service. Beximco Pharma has a strong market focus and is
anticipating continued future growth by leveraging business capabilities and developing superior
product brands and markets. In particular the company is very interested in developing a strong
export market in USA and Europe. To meet the future demand Beximco Pharma has invested US$ 50
million to build a new state-of-the-art manufacturing plant, confirming to USFDA and UK MHRA
standards. This new plant will also offer contract-manufacturing facility to leading pharmaceutical
companies, especially from Europe and US.

2.1 Key Functions of BPLs Inventory Management

To ensure material is available i.e. maintain appropriate level of inventory in the warehouse;
Receipts, custody, and issue of materials;
To recording the recording of all the stock movements;
To minimize investment in inventory;
Co-ordinate with management, maintenance, production, marketing and finance departments
and other departments in the company for meeting their requirements for materials and
spares;
Assist in devising Management Report.

2.2 Objective of Inventory Management

The objective of inventory management is to achieve required levels of production while keeping
inventory costs within reasonable bounds. The basic objectives are as follows:

To utilize the full capacity of the factory, production is running for twenty-four hours a day
and 350 days a year that minimizes overhead. So stock should be such that the factory will
never close down due to lack of raw materials. On the other hand, over stock is not expected,
as it will affect the working capital.

A series of processes are required to produce Medicine. It is not possible to start the next
phase before completing the previous one. In case of mechanical disturbance of one machine,
the next one will stop if sufficient WIP materials are not in the stock.

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The company is hundred percent export-oriented. So, in time delivery is very important.
Otherwise, the buyers will cancel export contract. So, Medicine should be stored to meet the
customers requirement.

The company used to go to production under particular order. Usually buyers require
different types of quality medicine. So in case of stocking raw materials, it must be
considered that no particular material will be in the store for a long time.

2.3 Types of Inventory in BPL:

Finished goods
Work in Process
Packing Materials
Laboratory Chemical
Literature & Promotional Materials
Physician Sample
Raw &Packing Materials In Transit
Stock of Stationery
Spares & accessories.

Raw Material: The raw-materials inventory contains items that are purchased by the firm from
others and are converted into finished goods through the manufacturing (production) process. They
are important input of the final product.
Work-in-Process: The Work in Process inventory consists of items currently being used in the
production process. They are normally partially or semi-finished goods that are at various stages of
production of multi-stage production process.
Finished Goods: Finished goods represent final or completed products, which are available for sale.
The inventory of such goods consists of items that have been produced but are yet to be sold.

2.4 Sources of Raw Material & Packing materials

Sources of Raw Material are classified into two Groups:

Local Purchase
Import

2.4.1 Local Purchase

When any specific material need for production then purchase department purchase the material from
locally. For local purchase, department seek for appropriate seller. In local purchase few condition

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are considered such as quality of the material, rate of the material, lead time, previous record of the
supplier.

2.4.2 The Process of Local Purchase

The processes or procedures of the local purchase are described below, like-

Processing Purchase Order: The procedure begins with need recognition. The respective
department identifies its need, gets approval of the departmental head and with the approval an
authorized person sends purchase requisition to purchase department to initiate purchase. In case
of property, plant and equipment acquisition, before sending purchase requisition, a budget has
to be prepared by the user department. If the departmental head or higher authorities, whichever
is required, approve the proposed budget a purchase requisition is sent to purchase department.
And in case of raw or packing materials, the planning department determines the quantity and
timing of raw materials. This department informs the purchase department when to buy
materials.
When the purchase department got the requisition, it calls for quotation or tender. After
receiving the quotation or tender, supplier has been selected. The supplier may be local or
international. If the terms and conditions are in favor of both BPL and the selected supplier, an
order for the purchase is than issued by the purchase department. In case of raw or packing
material, the purchase order is issued by the factory. A purchase register is maintained by the
purchase department in which they maintain all the required information relating to a
consignment.

Receiving Material, Goods and Services: Generally the goods and services are received by
the user department who issue the purchase requisition or in some cases by the authorized
department. Materials are received by Quality Assurance Department (QAD) in the factory.
After receiving materials, goods and services an MRR is issued for material and other than
material a GRR is issued by receiving department to purchase department. In the meantime
the invoice or bill is received by the purchase department.
Before using the product by user department that is at the time of delivery, it has been inspected
by the inspection or QAD, by user department or by authorized department. QAD examined the
materials on a sample testing basis and provide a certificate. Normally,
i.
QAD inspects standardized items like raw material, packing material etc.
ii.
User department inspects non standardized items like services, stationeries etc.
iii.
Inspection department inspects machineries, plants etc.
Again at BPL there are some authorized departments for inspection. For example, computer or
IT related products are inspected by IT department, furniture are by HR department. If the
received goods, material and services are not according to purchase requisition BPL may
i.
Refuse the order
ii.
Reorder the item
iii.
Received on condition
Before taking any action, there is a discussion between BPL and the supplier. After recommunication it has been decided whether the payment to the supplier will be made or not.

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Factory Sends MRR (Material Receiving Report): After receiving material factory send
MRR to accounts department for reconciliation. In this MRR amount of quantity, receiving date,
amount to use quality testing are mention. Respective department entry this MRR in excel sheet
for reconciliation.

Supplier Bill Submit: In this mean time of sending MRR supplier submit their bill in to
purchase department. They approve the figure and send this bill to accounts department.
Then accounts department check the approve amount, rate from purchase order, amount
from MRR. If any discrepancy identify at this stage then its reported to purchase
department.

Voucher Entry: After checking purchase order and MRR, respective person entry this
information in to journal vouchers. Where supplier name, description of product, approve
amount are mentioned. Every journal voucher stapling with photocopy of bill and original
bill. Then these journal vouchers approve with proper authority and main bill send for
payment.

2.4.3 Import of Raw & Packing Materials:

Another source of raw and packing material is importing. For import any raw and packing
material respective department must open a letter of credit at bank. It is ensure the liquidity of
foreign supplier. Purchase department maintain a PC file against a Letter of Credit. It contains all
necessary documents among the raw/packing material and shipment. Contains of PC file
described as follows:

Shed Bill: In every pc file shed bill is included. Shed bill authority may be changed depend
on the way of route for materials (Land, Air, Sea) so shed bill will charge the respective
authority. In shed bill there have three types of charged may be imposed - VAT, Damages
and Entry fee.

Invoice of Supplier: In every pc file there have few number of invoice is included. In this
invoice, the respective company mentions there product details, quantity, rate. This
information is very important for every step of production. Because when we measure a
specific product then we easily find the rate, quantity, and product specification.

Packing List: In every pc file packing list is included. In the packing list respective
company mention there forwarded packing list for materials receiving company. Then
company can sure about the delivery packing list.

Country of Origin: Supplier ensures the country of origin to the respective buyer issuing
certificate for origin. Supplier send to buyer and its also enclosed with PC file.

Promotional Material: The Promotion material inventory contains items that are purchased
by the firm from others and support for finished goods through the manufacturing
(production) process. They are important input of the final product.

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Source Document: Purchase Order, GRR, Bill, Mushak, Challan.

Purchase Order of Promotional Material: The procedure begins with need recognition.
The respective department identifies its need, gets approval of the departmental head and
with the approval an authorized person sends purchase requisition to purchase department to
initiate purchase. If the departmental head or higher authorities, whichever is required,
approve the proposed budget a purchase requisition is sent to purchase department. And in
case of Promotional material, the planning department determines the quantity and timing of
Promotional materials. This department informs the purchase department when to buy
materials.

Processing: Verification of quantity order (taken from purchase order) with GRR to make
sure that goods received thats not exceed. The quantity ordered and also with invoices
received from vendor to be sure that supplier/vendor delivers right quantity of goods at
specified price.

3. Inventory Valuation
Inventories are valued at lower of cost and net realizable value in accordance with IAS 2
Inventories. The net realizable value of inventories is based on the estimated selling price less any
further costs expected to be incurred to make the sale.

3.1 Valuation of Raw Materials in the Store

Cost included for the raw materials Purchased locally are:

Procurement cost
Transportation cost
Bank charge

Cost included for the imported raw materials are:

Procurement cost
Bank charge for opening L/C
Insurance
Clearing from the port and
Transportation cost

4. Recommendations:
The inventory management system of BPL is the most modern and exclusive one in Bangladesh. Its
process of recording of each level of inventory and the flow of documents is impressive. But in some
cases problems arise due to mismanagement. So in that circumstances management may concentrate
on the following area.

To reduce the holding period of each level of inventory BPL should emphasis to increase the
sales in each year.

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Now a days various emergent strategies are emerging for demand management, order
management, supplier management, excess stock management, slow moving stock
management, stockholding policy etc. are arises due to the necessity of time. BPL may use
those policies to support healthy inventory management.

BPL may re-engineer the inventory investment to reduce its inventory by using any Decision
Support Software currently available in the market.

BPL should form an inventory team who will be responsible for continuous checking of
inventory.

BPL should emphasis their importance on global demand of product before producing it.

The inventory software should be redesigned in such a way that it should be more users
friendly.

To reduce the unsold stock. BPL should reschedule their production plan.

Responsible persons should more careful about data input.

5. Concluding Remarks:
Beximco Pharma has successfully made its footmark in the global market when it made its debut
on the London Stock Exchange as the first Bangladeshi company to be listed in the worlds most
prestigious bourse. This milestone event has widened the responsibility, accountability and
transparency of the company beyond geographical border. The listing adds new challenges to the
staffs of Accounts & Finance department who are directly responsible for Inventory Management
and Financial Reporting to a diverse group of stakeholders both in national and international
arena. For addressing the challenges, Beximco Pharma needs to prepare its Inventory and its cost
statements often viewed as major components of annual report and most significant tools for
providing information about the firms performance to the investors to stay up to date on a
companys yearly outlook, The staffs who are directly associated with the excellence of
Inventory Management deserve to be acclaimed for their endeavor to this end. Beximco believes
in creating the difference in the market place by offering impeccable quality. Now time has come
to shift its quality from production process and drag on this quality to Inventory Management
also. We believe that the Accounts & Finance department equipped with knowledgeable,
professional, skilled, experienced and dedicated staffs possesses the power necessary to reach the
landmark of quality Inventory Management.

Reference
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Jon Schreibfeder Achieving Effective Inventory Management, 2 nd Edition.

Russel & Taylor, Operations Management, 7th Edition.
http://www.beximcopharma.com/

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