THE IMPACT OF INVENTORY CONTROL TECHNIQUES ON

PRODUCTION LOSS REDUCTION AND FINANCIAL

PERFORMANCE OF A FIRM.
(A Case Study in H. Nizamdin & Sons Pvt. Ltd, Karachi)

Submitted by:
Name Roll Number
Zahid Bhutto(GL) 17IN36
Muhammad Yasir (AGL) 17IN48
Rasool Bux Soomro 17IN39
Muhmammad Saleh F16-17IN74

Supervised by:
SIR ALI ARSALAN

Department of Industrial Engineering and

Management Mehran University of
Engineering and Technology
Jamshoro, Pakistan.

Submitted in Partial Fulfillment of the Requirements for

the Degree
of Bachelor of Industrial Engineering and Management

1
 DEDICATION

I dedicate this thesis to my beloved parents and all the teachers , especially
our Respected Chairman SIR ABDUL SALAM SOOMRO and our Thesis
Supervisor Respected SIR ALI ARSALAN.

2
Mehran University of Engineering & Technology, Jamshoro
Certificate

This is to certify that the work presented in this project report/Thesis on “The Impact of
Inventory Control Techniques on Product Loss Reduction and Financial
Performance of a Firm(A Case Study in H. Nizamdin & Sons Pvt. Ltd)”, is written
and completed by the following students themselves, under the supervision of Engr. Ali
Arsalan

Name Roll Number

Zahid Bhutto (GL) 17in36
Muhammad Yasir (AGL) 17in46
Rasool Bux Soomro 17IN39
Muhammad Saleh F16-17IN74

Engr. Miskeen Ali Gopang External Examiner

Project/Thesis Supervisor

Chairman,
Department of industrial Engineering and management

Date:

3
 Acknowledgement

All praise is belonged to ALMIGHTY ALLAH, who has blessed us with

wisdom, strength, willpower, and good health for us to complete this
research. We would like to thank Sir Ali Arsalan, Supervisor, for his
constant supervision, guidance, and support throughout this study. For his
time, patience, motivation, and enthusiasm in this research, as well as for
sharing his vast knowledge and providing a welcoming research
environment and services whenever needed.
We would also like to thank Prof. Dr. Abdul Salam Soomro, Chairman,
MUET's Department of Industrial Engineering and Management, for
his administrative support. We are also grateful for their in-kind support.
We are also very thankful to H. Nizamdin & Sons Pvt Ltd,Karachi for
their in-kind support. The staff of the Inventory Department , for their
helpful co-operation.

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 ABSTACT

Inventory refers to the value or quantity of raw materials, supplies, work in progress and
finished stock that are kept or stored for use as need arises, and inventory management means
to maintain the stock level of raw materials , finished goods, work in progress inventories so as
to make the production process smoother and reducing the wastages like wastage of resources,
time warehouse space . A sound inventory control systems helps firm to in focusing on the
major products and the firm has the idea of what should be ordered in what quantity according
to the demand . There are many inventory techniques that firms, industries and organizations
use in order to maintain there inventory level. The focus of this research is on ABC Analysis.
ABC Analysis is a inventory technique that creates anm order of the products according to there
demand and usage and then categorized them into A,B and C. This technique is based on the
20-80 Rule which states that 20% of a firms product contribute to 80% of the firms
profitability. We used ABC Analysis technique in H. Nizamdin & Sons Pvt. Ltd on there Tents
inventory. There were 17 different types of tents that were categorized into 10 groups according
to the similarities . After that there annual % cum was found out and then the products were
categorized into A, B and C category. ABC Analysis techniques states that A category items
contribute the most to the firm so they should be controlled more frequently, B category items
contribute moderately to the firm so they should be given moderate importance and C category
items contribute lowest to the firms so they should be given the lowest attention.

.
Key Words: Inventory, inventory management, demand, inventory control system, inventory
level, ABC Analysis

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 Table of Contents

Description Page
Title Page
Dedication Page
Certificate
Acknowledgment
Abstract
Table of Content
List of Abbreviations
List of Tables
List of Figures

CHAPTER 1 INTRODUCTION
1.1 Inventory

1.2 Other definitions of Inventory

1.3 Inventory Control

1.4 Inventory Management

1.5 Inventory Management in increasing profitability

1.6 Types of Inventory

1.7 Inventory Management Techniques

1.8 Advantages of Inventory

1.9 Disadvantages of Inventory

1.10. Aims and Objectives

1.10.1 Aims
1.10.2 Objectives

1.11 Scope

1.12 Limitations

CHAPTER 2 LITERATURE REVIEW

2.1 Content

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CHAPTER 3 INTRODUCTION TO THE COMPANY
3.1 History
3.1.1 (1857-1932)
3.1.2 (1932-1947)
3.1.3 (1947-1965)
3.1.4 (1965-present)

3.2 Types of Tents produced in H. Nizamdin & Sons

3.3 Departments in H.Nizamdin

3.3.1 Cutting
3.3.2 Processing
3.3.3 Stitching and Finishing
3.3.4 Packing

CHAPTER 4 RESEARCH METHODOLGY

4.1 Collection of data

4.2 Techniques used in this study

4.3 Pareto Analysis

4.4 ABC Analysis

4.4.1 Steps involved in ABC Analysis

CHAPTER 5
5.1 Introduction to the Chapter

5.2 Data Collection

CHAPTER 6 CONCLUSION AND RECOMMENDATIONS

6.1 Introduction to the chapter

6.2 Conclusion

REFERENCES

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 LIST OF ABBREVIATIONS

ABC ANAYSIS
MRO (Maintainance, Repair, Operations) Inventory
WIP Work in Progress Inventory
JIT Just in Time

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 List of Tables

Table 1: Detail of Cutting Department

Table 2: Detail of Processing Department

Table 3: Detail of Stitching & Finishing Department

Table 4: Detail of Packing Department

Table 5: General ABC Table

Table 6: Inventory Data of Tents

Table 7: Annual Earning Table

Table 8: Table of Categorization

Table 9: Table of % Contribution to Revenue

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 List of Figures

Figure 1 Methodology Flow Diagram

Figure 2 Pie Chart of %age of ABC items earning

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 CHAPTER NO. 1

INTRODUCTION
.
1.1 INVENTORY:
Inventory is the stock purchased with the purpose of resale in order to gain a profit and
represents the largest cost to firms especially manufacturing firms. Inventory should then be
managed well in order to facilitate operations. The success of inventory management is highly
dependent on technological and managerial resources

Inventory refers to the value or quantity of raw materials, supplies, work in progress and
finished stock that are kept or stored for use as need arises
.
RAW MATERIAL:
Raw materials are commodities such as steel and lumber that go into the final
product. Supplies include items such as Maintenance, Repair and Operating (MRO) inventory
that do not go into the final product.

WORK IN PROGRESS:
Work in progress is materials that have been partly fabricated but are not yet
completed.

FINISHED GOODS:
Finished goods are completed items ready for shipment.

1.2 Other definitions of Inventory:

1. Inventory is the accounting of items, component parts and raw materials a company uses
in production, or sells..

2. The verb “inventory” refers to the act of counting or listing items. As an accounting term,
inventory refers to all stock in the various production stages and is a current asset. By
keeping stock, both retailers and manufacturers can continue to sell or build items.
Inventory is a major asset for most companies. However, while inventory is an asset on
the balance sheet, too much inventory can become a practical liability.

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1.3 INVENTORY CONTROL:
Inventory control is an activity of checking a shop’s stock and to maintain the inventory at
desired levels, keeping in view the best economic interest of an organization. In simple words,
inventory control is a process of ensuring that a business maintains the adequate quantity of
stock to meet the forecasted demand with minimum holding cost.

Inventory control implies the coordination of materials controlling, utilization and purchasing. It
has also the purpose of getting the right inventory at the right place in the right time with right
quantity because it is directly connected with the production. The objective of any organization
is to get a good return out of every cedi invested in the company. According to Pandey (2005)
management through their policies, coordination, decision and control mechanisms must
maximize the return on investment (ROI).

1.4 INVENTORY MANAGEMENT:

Inventory management is the art and science of maintaining stock levels of a given group of
items incurring the least cost consistent with other relevant targets and objectives set by
management It is important that managers organizations that deals with inventory, to have in
mind, the objective of satisfying customer needs and keeping inventory costs at a minimum
level.

Inventory management is an ongoing and dynamic process. To keep out the inefficiencies in
system, process and physical operations, calls for active management participation and
continuous improvement in all processed and systems that are involved in inventory
management.
It is all about knowing what is on hand, where it is in use, and how much finished product
results.
, inventory management involves a process of efficiency overseeing the constant flow of units
into and out of an existing inventory. This process usually involves controlling the transfer in of
units in order to prevent the inventory from becoming too high, or dwindling to levels that could
put operation of the company into jeopardy.

Competent inventory management also seeks to control the costs associated with the inventory,
both from the perspective of the total value of the goods included and the tax burden generated
by the cumulative value of the inventory.

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1.5 Inventory Management in increasing profitability:
The inventory management can make a direct contribution in increasing
profitability in the following ways:

(a) By deciding inventory norms nationally and through control systems. Inventory turnover can
be maximized which in turn will maximize current assets turnover and ROI.

(b) By proper planning and control of spare parts, capacity utilization can be increased which
will increase the turnover of fixed assets and consequently increase ROI.

(c) By developing dependable sources and purchasing quantity materials at competitive prices.
Materials cost per naira of sales can be brought down which will increase the profit margin.

(d) By developing proper systems and control on issue of materials, the consumption can be
minimized, reduction in wastes and rejects, resulting in reducing the materials cost, which
will increase the profit margin.

(e) Establishment of farms to grow the major raw materials and less dependent on importation.

1.6 TYPES OF INVENTORY:

There are four main types of inventory:

 Raw materials Inventory

 Work In Process Inventory(WIP)
 Finished goods Inventory
 MRO( Maintainance, Repair and Operations) Inventory

Apart from that there are 13 types of inventories that are classified as follow:

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1. Raw Materials:
Raw materials are the materials a company uses to create and finish products. When the
product is completed, the raw materials are typically unrecognizable from their original
form, such as oil used to create shampoo.
2. Components:
Components are similar to raw materials in that they are the materials a company uses to
create and finish products, except that they remain recognizable when the product is
completed, such as a screw.
3. Work In Progress (WIP):
WIP inventory refers to items in production and includes raw materials or components,
labor, overhead and even packing materials.
4. Finished Goods:
Finished goods are items that are ready to sell.
5. Maintenance, Repair and Operations (MRO) Goods:
MRO is inventory—often in the form of supplies—that supports making a product or the
maintenance of a business.
6. Packing and Packaging Materials:
There are three types of packing materials. Primary packing protects the product and
makes it usable. Secondary packing is the packaging of the finished good and can include
labels or SKU information. The tertiary type of packing is bulk packaging for transport.
7. Safety Stock and Anticipation Stock:
Safety stock is the extra inventory a company buys and stores to cover unexpected
events. Safety stock has carrying costs, but it supports customer satisfaction. Similarly,
anticipation stock comprises raw materials or finished items a business purchases based
on sales and production trends. If a raw material’s price is rising or peak sales time is
approaching, a business may purchase safety stock.
8. Decoupling Inventory:
Decoupling inventory is the term used for extra items or WIP kept at each production line
station to prevent work stoppages. Decoupling inventory is useful if parts of the line work
at different speeds and only applies to companies that manufacture goods. Whereas all
companies may have safety stock.
9. Cycle Inventory:
Companies order cycle inventory in lots to get the right amount of stock for the lowest
storage cost. Learn more about cycle inventory formulas in the “Essential Guide to
Inventory Planning.”
10. Service Inventory:
A management accounting concept, service inventory refers to how much service a
business can provide in a given period. A hotel with 10 rooms, for example, has a service
inventory of 70 one-night stays in a given week.

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 11. Transit Inventory:
Also known as pipeline inventory, transit inventory is stock that’s moving between the
manufacturer, warehouses and distribution centers. Transit inventory may take weeks to
move between facilities.
12. Theoretical Inventory:
Also called book inventory, theoretical inventory is the least amount of stock a company
needs to complete a process without waiting. Theoretical inventory is used mostly in
production and the food industry. It’s measured using the actual versus theoretical
formula.
13. Excess Inventory:
Also known as obsolete inventory, excess inventory is unsold or unused goods or raw
materials. A company doesn’t expect to use or sell this stock but must pay to store it.

1.7 INVENTORY MAMANGEMENT TECHNIQUES:

1. Bulk Shipments:
This method banks on the notion that it is almost always cheaper to purchase and
ship goods in bulk. Bulk shipping is one of the predominant techniques in the industry, which
can be applied for goods with high customer demand.The downside to bulk shipping is that
you will need to lay out extra money on warehousing the inventory, which will most likely be
offset by the amount of money saved from purchasing products in huge volumes and selling
them off fast.

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2.ABC Inventory Management:
ABC Inventory is a technique that’s based on putting products into categories in
order of importance, with A being the most valuable and C being the least. Not all products are
of equal value and more attention should be paid to more popular products.

3.Backordering: refers to a company’s decision to take orders and receive payments for out-of-
stock products. It’s a dream for most businesses but it can also be a logistical nightmare … if
you’re not prepared.When there’s just one out-of-stock item, it’s simply a case of creating a new
purchase order for that one item and informing the customer when the backordered item will
arrive. When it’s tens or even hundreds of different sales a day, problems begin to
mount.Nonetheless, enabling backorders means increased sales, so it’s a juggling act that many
businesses are willing to take on.

4. Just in Time (JIT) lowers the volume of inventory that a business keeps on hand. It is
considered a risky technique because you only purchase inventory a few days before it is needed
for distribution or sale.JIT helps organizations save on inventory holding costs by keeping stock
levels low and eliminates situations where deadstock - essentially frozen capital - sits on shelves
for months on end.However, it also requires businesses to be highly agile with the capability to
handle a much shorter production cycle

5.Consignment: involves a wholesaler placing stock in the hands of a retailer, but retaining
ownership until the product is sold, at which point the retailer purchases the consumed stock.
Typically, selling on consignment involves a high degree of demand uncertainty from the
retailer’s point of view and a high degree of confidence from the wholesaler’s point of view.

6.Dropshipping and Cross-docking: This inventory management technique eliminates the cost
of holding inventory altogether. When you have a dropshipping agreement, you can directly
transfer customer orders and shipment details to your manufacturer or wholesaler, who then
ships the goods.Similar to dropshipping, cross-docking is a practice where incoming semi-trailer
trucks or railroad cars unload materials directly onto outbound trucks, trailers, or rail
cars.Essentially, it means you move goods from one transport vehicle directly onto another with
minimal or no warehousing. You might need staging areas where inbound items are sorted and
stored until the outbound shipment is complete. Also, you will require an extensive fleet and
network of transport vehicles for cross-docking to work

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 7.Cycle Counting:  or involves counting a small amount of inventory on a specific day without
having to do an entire manual stocktake. It’s a type of sampling that allows you to see how
accurately your inventory records match up with what you actually have in stock.This method is
a common part of many businesses’ inventory management practices, as it ultimately helps
ensure that customers can get what they want, when they want it, while keeping inventory
holding costs as low as possible.

8.EOQ AND ROP:

ECONOMIC ORDER QUANTITY:

Economic order quantity (EOQ) is the ideal order quantity a company should purchase to
minimize inventory costs such as holding costs, shortage costs, and order costs. This production-
scheduling model was developed in 1913 by Ford W. Harris and has been refined over
time.1  The formula assumes that demand, ordering, and holding costs all remain constant.

ROP:
The reorder point (ROP) is the minimum inventory or stock level for a specific product that
triggers the reordering of more inventory when reached. When calculating the reorder points for
different SKUs, the lead time it will take to replenish inventory is factored in to ensure inventory
levels don’t reach zero. Setting accurate reorder points allows businesses to avoid having
products out of stock while waiting for new inventory.

1.8 ADVANTAGES OF INVENTORY:

Accurate inventory management is key to running a successful product business.
Tracking stock regularly can help avoid stock errors and other problems. The following are the
benefits of strong inventory management:

 Better Inventory Accuracy: With solid inventory management, you know what’s in

stock and order only the amount of inventory you need to meet demand.
 Reduced Risk of Overselling: Inventory management helps track what’s in stock and
what’s on backorder, so you don’t oversell products.

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 Cost Savings: Stock costs money until it sells. Carrying costs include storage handling
and transportation fees, insurance and employee salaries. Inventory is also at risk of theft, loss
from natural disasters or obsolescence.
 Avoiding Stockouts and Excess Stock: Better planning and management helps a
business minimize the number of days, if any, that an item is out of stock and avoid carrying too
much inventory. Learn more about solving for stockouts in our “Essential Guide to Inventory
Control.”
 Greater Insights: With inventory tracking and stock control, you can also easily spot
sales trends or track recalled products or expiry dates.
 Better Terms With Vendors and Suppliers: Inventory management also provides
insights about which products sell and in what volume. Use that knowledge as leverage to
negotiate better prices and terms with suppliers.
 More Productivity: Good inventory management solutions save time that could be spent
on other activities.
 Increased Profits: A better understanding of both availability and demand leads to
higher inventory turnover, which leads to greater profits.
 A More Organized Warehouse: An efficient warehouse with items organized based on
demand, which items are often sold together and other factors reduces labor costs and speeds
order fulfillment.
 Better Customer Experience: Customers that receive what they order on time are more
loyal.

1.9 Disadvantage OF Inventory Management:

1. Bureaucracy: even though inventory management allows employees at every level of
the company to read and manipulate company stock and product inventory, the
infrastructure required to build such a system adds a layer of bureaucracy to the whole
process and the business in general.

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 2. Impersonal touch: another disadvantage of inventory management is a lack of personal
touch. Large supply chain management systems make products more accessible across
the globe and most provide customer service support in case of difficulty, but the increase
in infrastructure can often mean a decrease in the personal touch that helps a company to
stand out above the rest.

3. Production problem: even though inventory management can reveal to you the amount
of stock you have at hand and the amount that you have sold off, it can also hide
production problems that could lead to customer service disasters. Since the management
places almost all of its focus on inventory management to the detriment of quality
control, broken or incorrect items that would normally be discarded are shipped along
with wholesome items.

4. Increased space is need to hold the inventory: in order to hold inventory, you will need
to have space so unless the goods you deal in are really small in size, then you will need a
warehouse to store it. In addition, you will also need to buy shelves and racks to store
your goods, forklifts to move around the stock and of course staff.

5. High implementation costs: some inventory management systems can come at a high

price because the business needs to install specialized systems and software in order to
use them. This can be problematic for large businesses which operate in difficult
locations. Even after installing the costly system, it still needs to be maintained and
upgraded on a regular basis, thus incurring more costs.

1.10 AIM & OBJECTIVES:

 1.10.1 AIM:
The Aim of this study to help the company in prioritizing the products and focusing on
the main products so to avoid wastage of resources and money in inventory

 1.10.2 OBJECTIVES:

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 The objectives of this study are:
1. Applying ABC analysis and prioritizing the products according to their demand and
earning
2. Avoid overstocking of products in less demand
3. Avoid understocking of products in high demand
4. Analyse what % of revenue is generated through leading products

1.11 SCOPE:
This research helps researchers to understand how ABC Analysis can be used in industries so
that the products can be categorized according to their demand and earning and so focusing on
products that are more beneficial to the company. It also helps company in giving it a overview
of products i.e how much do a product contribute to the earning of the firm. It helps the industry
on how frequently the inventory should be kept of a product and what product should be kept in
a larger quantity depending on the need and demand.

1.12 LIMITATIONS:
The first limitation was COVID 19 as it was pretty difficult to collect the data due to SOP
policies of H. Nizamdin & Sons Ltd. The second limitation is that the ABC Analysis was
applied to tents of H.Nizamdin & Sons , and H. Nizamdin & Sons also produces Denim Jeans,
Protective Clothing for Work Wear, Home Textile, Made ups and Polyester Fleece Blankets and
the ABC Analysis can be applied in these products also.

CHAPTER 2
LITERATURE REVIEW:

1.[Torky Althaqafi et al.,2019]The process of managing inventory is a delicate matter, and a

difficult task in any business. Displaying misleading or distorted information within financial
statements, which are considered to be the most reliable sources of information relied upon to

20
make sound decisions, leads to their inability to reflect in an honest and fair manner the result of
the activity and the financial position of the company or economic unit for those periods of time.
The interest in developing accounting practices has increased to include sufficient disclosures in
order to provide an honest and fair picture of the outcome of the activity, as well asthe financial
position of the economic unit.
This study’s primary purpose has been to examine the effectiveness of the cycle count activities
and to identify problems in the practice and procedures in the inventory management of a
particular company.

2.[ Daniel & Assefa,2019] This study aimed to empirically examine the impact of inventory
management practice on firms’ competitiveness and organizational performance. Data for the
study were collected from 188 micro and small enterprises (MSEs) operating in the
manufacturing sub-sector and the relationships and hypothesis proposed in the conceptual
framework were tested using structural equation modeling (SEM). The results indicate that
higher levels of inventory management practice can lead to an enhanced competitive advantage
and improved organizational performance. 
This paper provides empirical justification for a framework that identifies five key dimensions of
inventory management practices and describes the relationship among inventory management
practices, competitive advantage, and organizational performance.

4.[Mohamed & Khaled,2016]ABC analysis is one of the most widely used techniques in
inventory management to classify items into three predefined and ordered categories: A (very
important items), B (moderately important items) and C (relatively unimportant items). In the
literature, most of existing classification models tackled the ABC inventory classification
problem as a ranking problem, i.e. a set of inventory items are ranked in a deceasing order based
on their performance expressed by an overall weighted score. In this paper, the ABC inventory
classification problem will be tackled as an assignment problem, i.e. an inventory item will be
classified to the category with which it has the most similar characteristics.

4.[Asita et al.,2020] Inventory analysis and control has become inevitable for a manufacturing
industry. In order to refrain from having an inventory go dead it is of utmost importance to stay
abreast with the number and condition of items in that particular inventory.

5.[Prempeh & Kwadwo,2015 ]This paper measured the effects of raw materials inventory
management on the profitability of companies in the Ghanaian manufacturing sector. A cross
sectional data of manufacturing companies in Ghana during the period of 2004 to 2014 provided
the basis for the data analysis. Findings from this study reveal that the pivotal variable raw

21
material inventory management designed to capture the effectiveness of a company's
management of part of working capital on profitability is significantly positive and impacts on
profitability of the manufacturing firms in Ghana. My findings confirms the findings of Eneje,
Nweze and Udeh (2012) whose results of their research showed that there is a significant effect
of efficient inventory management on profitability. From the results of the study, it can be
deduced that raw materials inventory management is a major variable that has significant
positive relationship on the profitability of the manufacturing firms in Ghana. Management of
raw materials is therefore an important factor to be considered in enhancing or boosting the
performance of manufacturers in Ghana. It is therefore necessary that adequate management of
raw materials inventory should be pursued by manufacturing firms in Ghana. This can be
achieved by encouraging large scale mechanized production of the major raw materials in Ghana
and training and re-training of staff from time to time to update their knowledge and skills in
modern manufacturing techniques.
Inventory control implies the coordination of materials controlling, utilization and purchasing. It
has also the purpose of getting the right inventory at the right place in the right time with right
quantity because it is directly connected with the production. The objective of any organization
is to get a good return out of every cedi invested in the company.

6.[Jayakumaran et al., 2020] The study found Giant had used POM.net in their inventory
management since this software from ABC tool. HR manager has to recruit quality skilled
workers that have proper qualifications and acceptable for particular job duties
This study aimed to understand the inventory management of Giant Superstore Taman
Connaught. The study was qualitative study that explored the ABC analysis efficiency of
inventory management in Giant Superstore, Taman Connaught an outlet of GCH Retail
(Malaysia) SDN. BHD. ABC analysis was one method to manage the inventory management
who good position was arranged according to the category such as A category product was high
in value but low in quantity and C category product was low in value and high in quantity. The
elements that were selected as significance included the product consumption rate, carrying cost
and replenishment product lead time which contributed toward ABC analysis of inventory
management efficiency in Giant Superstore. The study indicated dissimilarities in controlling the
inventory in Giant superstore. The study found Giant had used POM.net in their
inventorymanagement since this software from ABC tool. HR manager needs to recruit quality
skilled workers that have proper qualifications and acceptable for particular job duties.

7.[Edewor & Adeniji.,2021] The study examined ABC analysis inventory management practice
and product quality of manufacturing firms, a study of De United Foods Industries Limited. The
objective of the study was to investigate the effect of ABC analysis on product quality of De
United Foods Industries Limited. The population of the study is 385 which consist of all the staff
of inventory related departments and a sample size of 196 was selected. The study used
quantitative method utilizing questionnaire to gather data from the respondents. Research data
were analyzed using regression analysis. The findings indicate that there is a strong positive and

22
significant relationship between ABC analysis on product quality of De United Foods Industries
Limited (r=0.568; β=0.447; p=0.000).The study concludes that ABC analysis has a positive,
strong and significant effect on product quality of De United Foods Industries Limited. From the
test of hypothesis, a unit increase in ABC analysis will lead to 44.7% increase in product quality.
Arising from the findings of the study on inventory management practices and competitive
advantage of manufacturing firms (study of De United Foods Industries Limited), some pertinent
recommendations can be made. Owing to the huge sum of money firms spend on inventory, a lot
of emphasis or attention needs to be given to inventory management to enable manufacturing
firms achieve competitive advantage. The study recommends that De United Foods Industries
Limited should maintain ABC analysis in inventory management as this has a great impact on
product quality.

8.[.Balajia & Senthil.,2015] The automobile industry frequently uses rubber in the body
structure of its components. The rubber parts contribute around 20 % of the entire body structure
.Storing the inventory of the rubber components is the main problem in the automobile industry.
A Multi Criteria Inventory Classification (MCIC) is one of the effective inventory classification
techniques. In MCIC, various criteria and sub criteria are also considered for classification of the
inventory. In this paper, the MCIC method has been proposed for the classification of the
inventory of an automobile rubber components manufacturing industry. An Analytic Hierarchy
Process (AHP) has been utilized for estimating the value of the inventory system. In the AHP,
complex problems are categorized into various sub problems, which have been identified by
using the hierarchical structure based on the criteria and attributes. Using the AHP, better
inventory classification was identified for the automobile rubber components manufacturing
industry. Further, this paper discusses the effective inventory control system of the automobile
rubber components manufacturing industry.
In this study, the mulicriteria inventory ABC classification is proposed, for an automobile rubber
components manufacturing industry. Due to improper material allocation and inefficient
inventory handling process, storing the inventory of the rubber components in a proper location
and in the proper bin is the main problem in the automobile rubber components industry. The
criteria, unit weight of the component, and shape of the product, are used along with the other
traditional criteria for the inventory classification. The Analytic Hierarchy Process (AHP) has
been utilized, for estimating the judgment of the inventory system. By analyzing the various
criteria, sub criteria and alternatives, the weights are obtained for the different types of bins.
Based on the usage of the bin, the inventory items are classified as A, B, C items. The resulting
bin classification has easy accessibility in the warehouse.The bin traceability and utilization has
also improved.

9.[Mpafe et al., 2016]The purpose of this study was to investigate the effect of inventory
management on the financial performance as well as to explore the moderating effect of political
environment on the financial performance of firms funded by Government Venture capital in
Kenya. The target population comprised all firms funded by government venture capital in

23
Kenya. Twenty four firms had been funded by government venture capital through ICDC as at
31stDecember, 2013. The study adopted a census approach because of the small number of
firms. The study reviewed both theoretical and empirical literature on inventory management.
From the review of related literature, a comprehensive conceptual framework of argument of the
relationship between inventory management and firm financial performance was formulated.
Based on the conceptual framework, a questionnaire was formulated and with the use of
Cronbach’s Co-efficient Alpha the instrument’s validity and reliability was tested through a pilot
study. The pretested questionnaire was used to collect primary data for the independent variables
while a record survey sheet was used to collect secondary data for the dependent variable. Out of
72 respondents, 51 responded, being 71%. Statistical package for social sciences (SPSS) version
20.0 was used as the statistical tool for analysis of the data. Normality tests were carried on the
dependent variable. Multi collinearity and homoscedasticity tests were carried out on the
independent and dependent variables respectively. Quantitative data was analyzed and described
using descriptive and inferential statistics. Scatter plots were used to test if linear relationships
existed after which inferential statistics analysis for every variable was made. There are few
studies in Kenya on Cash flow management and financial performance and therefore this study
was an attempt to fill this gap and provide empirical evidence on the effect of cash flow
management on the financial performance of firms funded by government venture capital in
Kenya.

10.[Kakamega et al.,2013]Manufacturing firms apply various techniques in the management of

their inventories. The practices adopted have a significant impact on returns, profitability and
volume of sales. Manufacturing firms that efficiently apply these practices have an excellent
financial performance. This paper examines the impact of inventory management practices on
the financial performance of sugar manufacturing firms in Kenya, by analyzing the extent to
which lean inventory system, strategic supplier partnership and technology are being applied in
these firms. The research survey was conducted in all the eight operating sugar manufacturing
firms from the period 2002- 2007. The primary data was collected using structured and semi-
structured questionnaires administered to key informants in the organizations. Secondary data
was obtained from annual financial performance statements available in the year Book sugar
statistics. Descriptive statistics was used to test the impact of inventory management practices
and Correlation analysis was used to determine the nature and magnitude of the relationship
among inventory management variables. The results indicate that there exists a positive
correlation between inventory management and Return on Sales (r=0.740) and also with Return
on Equity (r=0.653) which were found to be statistically significant at 5% level.

11.[M.Taylor et al.,2014]ABC analysis is a well-established categorization technique based on

the Pareto Principle for determining which items should get priority in the management of a
company’s inventory. In discussing this topic, today’s operations management and supply chain
textbooks focus on dollar volume as the sole criterion for performing the categorization. The
authors argue that today’s businesses and supply chains operate in a world where the ability to

24
deliver the right products rapidly to very specific markets is key to survival. With suppliers,
intermediaries, and customers all over the globe, and product lives decreasing rapidly, this focus
on a single criterion is misplaced. The large body of research was summarized based on multiple
criteria ABC analysis that has accumulated since the 1980s and recommend that textbooks
incorporate their key findings and methods into their discussions of this topic. Suggestions are
offered on how this discussion might be structured.
Traditionally, ABC analysis has been used to classify various inventory items into three
categories - A, B, and C. This has been done based on the criterion of dollar volume. In the
current globalized hyper-responsive business environment, a single criterion is no longer an
adequate guide to the management of inventories and multiple criteria have to be considered.
Researchers in operations and inventory management recognized this fact in the early 1980s and
since then have proposed numerous approaches to multi-criteria ABC classification. However,
textbooks of operations management and supply chain management have not followed their lead
but continue to discuss ABC analysis based on the idea of annual dollar volume. In this paper,
the authors review the literature todate and argue that multi-criteria ABC analysis is a mature
concept that needs to make its way into textbooks. Authors should revise their coverage to
include a detailed coverage of the concept and methodology of multi-criteria ABC analysis.
Such a revision will make their textbooks more relevant to the current business environment and
provide students with the skills they need to function and contribute in the workplace. As a
result, companies will be able to manage their inventories better and be more competitive in the
marketplace.

12.[Sinara et al.,2017]This research aimed to introduce new inventory management methods in

a refrigeration company. The results point to a better inventory management which makes an
association between: a) ABC curve; b) classification and codification of the stock by groups and
sub-groups of products; c) development of a new plant for inventory.
Currently some companies do not draw strategies to meet the needs of the consumer market,
which is increasingly demanding in seeking agility in customer service, product and service
quality. Thus, in a fully globalized and competitive scenario requires that organizations seek
methodologies directed to assist in the planning of operations and the use of available
technology to better manage the activities (Oliveira and Melo, 2015, Sousa et al. 2014). In stock
storage industry, for example, the handling of items is very labor intensive, requires the use of
software to manage and control all existing goods, thereby achieving a higher inventory
turnover, parallel to this, there is the minimization of losses . This is very important for the
organization to be able to balance the investment value of the inventory in a satisfactory manner
to the needs of its members actually meeting your expectations. Therefore, the inventory 2
management is an alternative applied to companies with regard to proper allocation of available
resources, it favors several benefits such as reduced costs, occupancy of idle locations in the
company, minimizes delivery time, among others.

25
13.[Karthick & Karthikeyan.,2014]The effective inventory management plays an important
role in the success of the organizations in the new business environment. It is not clearly
possible for the organizations that store hundreds of inventory items to economically design an
inventory management policy for each inventory item separately. To have an efficient control of
a huge amount of inventory items, traditional approach is to classify the inventory into different
groups. Different inventory control policies can then applied to different groups. The well-
known ABC classification is simple to understand and easy to use. Moreover, various inventory
items may play quite different roles in the business of the organization. Hence, the managers
need to classify these items in order to control each inventory category properly based on its
importance rating. In this thesis we consider a model of college hostel mess stores items
(grocery and vegetables) for inventory management through ABC analysis. This research is
composed of the following sections: In the first section, the criteria affecting the evaluation of
the inventory control system of the studied mess stores and the priority of each one of them will
be identified, in the second section, the priority of each criterion such as cost of item, annual
demand for an each item hence find annual consumption cost in each inventory category (A, B,
C) is Calculated based on conventional model, in the third section, presents an alternative way of
classifying the different productive items of accompanies and this ABC model compares with
the classic Pareto classification, which ranks productive items according to their importance in
terms of frequency and costs whereas rankings obtained using the classical method are based on
information about costs and demand over a period in the past "A-items" that result from this new
classification.

14.[Gulsen & Coskun., 2012]Inventory control is a well-known problem in operations research.

Several models have been developed to solve inventory problems. In business, companies have
hundreds of different types of materials. Therefore, it is easy to lose control of managing the
materials. Inventory classification using ABC analysis is one of the most widely used techniques
in organizations. ABC classification allows an organization to separate stock keeping units
(SKUs) into three groups: A, the most important; B, important; and C, the least important. The
purpose of classifying items into groups is to establish appropriate levels of control over each
item. The major advantage of ABC analysis is the easiness of use and simplicity to understand.
The items are classified according to the annual use value, which is the product of annual
demand and the average unit price. The classification of items into A, B, and C groups has

26
generally been implemented according to one criterion. For inventory items, the criterion is
frequently the annual dollar usage of the item. However, it has been generally recognized that
the traditional ABC analysis has a serious drawback that may inhibit the effectiveness of the
procedure in some situations. Using one criterion only may create problems of significant
financial loss. For example, class C items with long lead time or class A items prone to
obsolescence may incur financial losses due to a possible interruption of production and/or huge
inventory levels. Therefore, it has been proposed that multicriteria ABC classification, such as
lead time, criticality of a stockout of the item, the rate of obsolescence, the scarcity,
substitutability, and order size requirement of the item, can provide a more comprehensive
managerial control and to take other important criteria into consideration

15.[Anshur, & Hasan.,2018]In this study, the research team studied the role of inventory
management on the financial performance in some selected manufacturing companies in
Mogadishu with the major objective of the study is to determine the inventory management
practices used in manufacturing firms and to investigate the relationship between inventory
management and financial performance in manufacturing firms. The research team selected 72
respondents with the use of questionnaire as instrument and data was analyzed using both
descriptive and correlation statistics of mean and frequency (percentage) for SPSS. After
gathering and analyzing data, the study found that there is significant positive relationship
between the inventory management and financial performance where r=0.683
Нis study investigated the role of inventory management in financial performance in some
selected manufacturing companies in Mogadishu. As the findings showed, the companies used
lead time for purchasing system of inventory and also the respondents believe that the
companies have computerized all inventory management systems. Also, it shows that the sta ‫ ٴو‬of
the company is highly skilled for managing the inventory by using information technology. Нe
study shows that there is relationship between the inventory management and financial
performance. Нe result was r=0.683 that provide strong positive relationship between the
variables. Means, the two variables moves at same direction.

16.[Jesujoba & Anthonia.,2019]The purpose of the study was to analyze the effect of inventory
management on supply chain performance in terms of profitability, reliability, cost,
responsiveness, flexibility and asset management efficiency of textile manufacturing firms in
Kenya. The study was guided by the inventory management theory. The study adopted the
convergent parallel mixed methods design. The study targeted a total of 196 respondents drawn
from employees of procurement departments and departmental heads of respective 15 textile
manufacturing industries operating in Nairobi County. The sample size was therefore 139
respondents. Stratified and simple random sampling methods were used to select employees of
procurement departments from their respective textile firms. Questionnaires and interview
schedules were used to gather the data from primary sources. The study applied the use of both
qualitative and quantitative data which was analyzed using statistical package for social sciences
(SPSS Version 22). Inferential statistics using hierarchical multiple regression and Correlation

27
analysis was applied to test the relationship between the variable and formulated hypothesis. The
final analyzed results were presented using tables, graphs and charts. The study established that
textile manufacturing firms in Kenya have adoption of inventory management as a factor of
supply chain influencing performance. The study concludes that inventory management possess
the potential of positively influencing performance of Textile firms in and therefore recognizes
the importance of inventory management in the supply chain and have put clear mechanisms in
place and invested in current material flow systems to oversee smooth and transparent material
flow that can be tracked along a supply chain.

17.[Chituru& Ikegwuru ]The study sought to find out the effect of inventory management on
customer satisfaction in supermarkets in Rivers State. The findings of this study provide key
insights to supermarkets mangers that seeks to design excellent inventory management practices
and programs to achieve customer satisfaction. The study identified three attributes that impacts
on customer satisfaction: Information technology, lean inventory management system and
strategic supplier partnership. The results provides empirical evidence that the three inventory
management dimensions are distinct constructs in Nigeria in the context of supermarkets. Lean
Inventory Management System with a correlation coefficient of 0.795 was found to have the
most significant impact on customer satisfaction, whereas, information technology with a
correlation coefficient of 0.725 was found to have a strong positive impact on customer
satisfaction, while strategic supplier partnership with a correlation coefficient of 0.352 was
found to have a positive weak association with customer. Following these interrelationships, it
can therefore be argued that inventory management implementation within the context of
supermarket will be more successful if based on excellent customer orientated marketing. This is
because efficiency in service delivery reinforces trusts which, positively impacts customer
satisfaction. Customer satisfaction subsequently enhances customer satisfaction.

18.[Emmanuel et al.,2021] The study concluded that effective Inventory management practice
(EIMP) is essential in the operation of any business effective Inventory as an asset on the
balance sheet of companies has taken on increased importance because many firms are applying
the strategy of reducing their investment in fixed assets, like plants, warehouses, equipment and
machinery, and so on, which even highlights the significance of reducing inventory. From the
financial performance tables, there are varied growth pattern for every firm. Specific
performance indicators have been proved to depend on the level of inventory management
practices. The study of inventory management in brewery industry for the respective period
(2009-2019) leads to the conclusion that effective inventory management performance was
satisfactory. Return on Capital Employed toward theFirm’s Growth and Return on Investment

28
are positively correlated with the . This means that by shortening ICP, firms‟ profitability
improves. The study also concludes that increase in financial performance indicators which
denote the financial performance measurements enrich the firm’seffective Inventory
management practice (EIMP) levels, which pushes profits upwards due to optimal inventory
levels. It is also noted that firms effective inventory management practice systems must maintain
an appropriate inventory levels to enhance turnover and minimize the inventory costs associated
with value of stock carried cost, inventory usage waste, inventory procurement cost and holding
excessive stock in the warehouses.

19.[Muchaendepi,& Mbohwa., 2019] The study assessed the inventory management (IM)
strategies that are used by SME’s in the manufacturing sector of Harare, Zimbabwe. The study
comprised of the population from Gleview complex, Siya So Mbare, Kuwadzana, Gazaland and
Magaba industrial sites. Respondents were selected from the each of the companies which the
researchers selected purposively. The study used qualitative research design which was
descriptive in nature. The study also used purposive sampling technique. A sample used a
sample size of 244 respondents. Data was collected from the questionnaires which were
completed and received back. The research established that most SME’s use the Just-In-Time
method of inventory management and do not have knowledge on the other computerized
systems and methods. Since companies use JIT method, SME’s face challenges in the supply
chain as they always have to make sure they have constant communication with their suppliers
and also to reduce the time in which they receive materials. However, due to lack of
computerized communication, they have to make orders when they are needed which would
make delays to the customer. Due to the finding, the researchers concluded and also made
request for further studies on specific areas which needed more time and clarity

CHAPTER 3
INTODUCTION TO COMPANY:
H. NIZAM and SONS PVT. LTD:

3.1 HISTORY
For over a hundred years, Nizam has been building quality tents for survival, pleasure, disaster
and wars.

29
3.1.1 1857 to 1932

The year was 1857, the town of Merut lay asleep, as the silent orb rule the night. Suddenly shots
crackled in the darkness; cries of agony invaded the gloom; as the deserted of the British army
defied the might of an empire. Elsewhere in Delhi an old man got blown to pieces as he hurled
stones and sticks towards an obstinate unit of the British army-it had begun-the mutiny of 1857;
and with it came an idea, a dream, it brought a family together. They had a purpose in mind; a
vision to supply man with on of his most basic needs-shelter. The need was there, all that was a
needed was same insight, diligence, perseverance, and application to materialize the thought –
that of making tents or the army and the units of the civil government.The war was a brief
glimpse; a stark realization of things to come. It was the potential portrayed by the needs of the
army during the war which lead Mr. Haji Nizam Din to start manufacturing tents in the year
1869. The industry had been born, given proper care and nourishment, it could bloom. Flourish it
did; with the growth of the British hold on the subcontinent, and the development of subsequent
civil departments; the need far a variety of tents arose. The dream by Mr. Haji Nizam Din
became a reality.It was a humble beginning in the heart of the city, within the historic confines of
Lohari gate, Lahore. Gradual development took place, and the firm’s fine workmanship earn it
an impeccable reputation which resulted in the government placing the company on the approved
list of contractors for the government, railway, and ruling chief of India.

Due to the increase in demand and lack of working space, management decided to move their
premises to a more accessible and accommodating venue. At this stage the two sons of H.Nizam
Din started taking an active part in the business. They managed to widen the sphere of business
through frequent visits to several states, In the year 1932, the company shifted to Ravi Road;
establishing a new production unit to cope with the increase in demand.

3.1.2 1932 to 1947

On the outbreak of the second world war in the year 1939, the founder of the firm, H. Nizam Din
died, but the tradition lived on. Throughout this trying and hazardous period of the war, the firm
spared on pains or trouble in straining themselves to the utmost in providing support for the war
effort. The efforts were not in vain; the military authorities expressed their appreciation by
relying on the Nizam name for the manufacture of numerous tents. These tents were sent to
various parts of the subcontinent in conjunction with needs of the British forces; enabling them
to act as the vanguards of the Nizam label.Heavier military demand compelled management to
open another factory in 1942, at 9 Tapp road. Through all these expansionary times, the firm

30
never swayed from the principles adopted by the founder, which were, to always maintain the
highest standards in its workmanship, but not at the expense of dependability and reliance, for
those were the hallmarks that the founder had always strived for.Since the inception of the firm,
the Rental of tentage had been carried on from time to time. Management carried a large stock of
tents of all sorts, Durbar Shaminas, furniture etc. They supplied all these goods to marriages,
garden tea parties and other social functions at a moderate rental prices. During the war however,
the company kept the Rental business at a minimum to divert all their resources to the war
effort.After the end of the war, a recessionary period started, and correspondingly the demand
slackened for our industry because of its sensitivity to the environment. The reduced government
spending following a exhausting and depleting war effort and direct consequences on the firm
and left the company in a dire financial state, under excruciating circumstances.The ‘Mullah’
climbed into the pulpit o the mosque to deliver the ‘Azam’, calling forth all the Muslims to a
rendezvous with ‘Allah’. It wasn’t an ordinary occasion; the people had gathered to offer their
gratitude to the creator for grating them “the land of the pure” Pakistan. The formation of
Pakistan marked a new era; business was in the doldrums from the ravages of the war. The time
was ripe for experimentation with existing resources, and the development of new avenues; it
required a more aggressive approach, risks had to be taken, and the law of the wild reigned
supreme in the minds of all businessman. The survival of the fittest would ensure a process of
natural selection. The winner would take it all. It required a different breed of men; those with
tenacity, ambition, and a sense of purpose to navigate their ships across the troubled waters.

 3.1.3 1947 to 1965

In 1947, to search out new propositions Mr. Faiz Ahmad, grandson of H.Nizam Din arrived in
the seaport of Karachi, which was destined to become the capitol off the infantile country. He
started with a small retail outlet on Burns Road, selling cloth by the yard. These were had times
demanding the utmost endurance and resilience. If not for the inspiration, initiative, and
understanding provided by his wife; the times may well have proved too trying for one man. The
support was always there which ultimately lead to reminiscence; during times when the newly
formulated Rental business in Karachi might well have died in its cradle.

The Rental business started from scratch was to one-day envelope contracts with the army, civil
department, hiring of shamianas for wedding, and semi-government organization. The mode of
transportation for the supplies were sub-contracted carts pulled manually. From 1947-1960 the
army was involved with 80% of our business deals.In 1954 Mr. Faiz Ahmad’s elder brother died;
the heavy administrative load on his shoulders over the year had finally taken its toll with the
demise of his father in 1958; this was followed by the death of second brother, two-year latter.
The final affliction of Mother Nature came in 1962 when with the passing of his s uncle elapsed
another chapter in the saga of H. Nizam Din & Sons. With the non-existence of additional
elderly members in the family the full brunt of the responsibility landed on his shouldersBy

31
1957, management was convinced that the real future of the tent industry in Karachi, resided in
the manufacturing of tents. Keeping the vision in mind the firm acquired a 4.15 acres, piece of
land in the Sind industries Trade Estates (S.I.T.E) district of Karachi. The tremendous potential
foreseen by management was an inference from the persistence of the heavy military demand,
and the development of a young export market in Pakistan. This was augmented by the
encouraging government policy toward investment in the industrial sector.With the advent of
60’s, first export order of tents was generated from the Iranian embassy; and in the process of
manufacturing them; H. Nizam Din & Sons entered another realm. They became the first tent
manufacturers in Pakistan to export tents to a foreign country. To facilitate the manufacture of
tents for export, and catering to demand in the local market primarily consisting of defence
supplies, a small shed measuring 100’by 30’ was constructed at the new site.Tent stitching at this
stage was crafted by hand. There was no place for amateurs in the stitching of tents, the labour
was highly specialized and resourceful; each stitch seemed like a small pearl etched on the sturdy
canvas background. Management trained new employees from thier very inception into the form
and gradually groomed him into a skilled craftsman with an impeccable desire for perfection. 

3.1.4 1965 to 1985

In the early sixties a Saudi army delegation visited Pakistan and placed on order through the
defence purchase department for export of military tents to Saudi Arabia; which was followed in
1965 by another order through the Saudi Embassy for Hajj Tents. When the tents were delivered
the purchasers were astonished at the quality of the tents, at prices, which were very competitive
with European manufactures.

Saudi market was further developed in this era however,owing to the 1965 Indo-Pakistan war
which necessitated the supply of tents for the army and production resource had to be diverted
from export oriented work, to the supply of tents for the army, in 1966 the focus shifted back on
Saudi Arabian market. Our company submitted quotations to their ministry of defence, and
succeeded in getting a large order from the defence department for military use.

The beginning of the export trade lead to the mechanization of production, which had previously
been done manually. For that very purpose; weaving looms ,automatic power driven jiggers
waterproofing plant industrial sewing machines .These expansionary moves had been carried out
which the utmost vigour, and their immensity hallmarked management’s commitment to the
specialized cause of manufacturing tents.

During the decade 1960-1970, strenuous effort were made to increase exports; which were
followed by repeated visits in the accompaniment of different delegations to middle eastern &
North African countries.

32
The efforts were converted to export merits recognized by the international Export association
with recipient Gold Medallion Award for our services rendered in the exports arena.

In 1975, the partnership was converted into a private Limited to limit the liability of the directors
to numbers of shares they held in the company, and to facilitate change in the management
structure. The prestige of the company was a natural beneficiary of this paper shifting and of the
company was a natural of this paper shifting and reorganization of essentially the same, existing
century old enterprise.

Mr. Naveed Ahmad the eldest son of Mr. Faiz Ahmad joined the business operations in June
1977, after completting his M.S Industrial Engineering from University of Michigan Ann Arbor.

Keeping the vision of the family for expanding export markets and continous improvement and
mordenization; Mr. Naveed Ahmad after visiting and exploring new markets in U.S & Europe
concluded that buyers demand and had expressed interest in canvas cloth of wider width. A
major BMR was made in 1978 based on the market assesment; a continous dyeing range from
M/S Goller Germany & Automatic Shuttle Weaving Looms from M/S Picanol Belgium were
aquired with a vision to service U.S & European Canvas Fabric and Camping Tent markets.
Pakistan Tentage Industries was set up as the weaving unit for H.Nizam Din & Sons Pvt Ltd.

3.1.5 1985 to Present

The Early 80’s were spent consolidating the Middle Eastern markets, succeding in the camping
tent programs in Europe; Germany, England, Netrherland & U.S Markets. Hundred of thousands
of camping tents were being produced annually at heist ! How ever this business was short lived
as Polyester/Nylon tents came out and finished the cotton market tents. Hence causing the
management to re invent the business.

The late 80’s presented an opportunity of supplying Tents to UNHCR a leading Aid
Organization. Nizam was selected to supply 50,000 Tents to Afghanistan Refugees, this contract
was the single largest contract of tents ever signed between an Aid Organization and private
company. The contract was executed succesfully. The 90’s were focused on this new business
division servicing Relieft Tent needs of leading Aid Organizations. How ever in early 1999 Mr.
Faiz Ahmad passed away. He had been leading the Nizam brand for 5 decades succefully and
evolving the company in to a symbol of trust worldwide for Canvas Tents, Fabric & Allied
products. Mr. Naveed Ahmad took over as Managing Director after his sad demise.

33
Mr. Ali Ahmad eldest son of Mr. Naveed Ahmad joined H.Nizam Din & Sons Pvt Ltd in August,
2000 after completing B.S Finance & Economics from Indiana University. The commencment
coincided with one of the single largest contracts executed by Nizam as a joint venture with M/S
Alpinter Relief for the supply of 10,000 Flame Retardent Tent worth US $ 5 Million to Turkish
Red Crescent through American Red Cross. The succesful execution of this contract led both
Alpinter & Nizam closer and formation of a partnership in the Humanatarian Relief Business.
Major man made & natural disasters were witnessed in this last decade. Hence this scenario
allowed Mr. Ali Ahmad to establish a comprehensive Humanatarian Relief Supplies division
based on sourcing and providing timely solutions to leading Aid Organizations in a one stop
window operation for all their Emergency Humanatarian needs. The devstating 2005 Earthquake
in Kashmir resulted in a major catastrophe. The demand for rehabilitation after the emrgency
phase was paramount. In order to service our customers needs the management undertook
engineering reconstruction projects in Kashmir & NWFP effected Aread. The engineering
division had reconstructed over 800,000 Square Feet of Prefabricated Hospitals, Dispensary &
Self sufficient houses for earthquake victims with in one year on behalf of leading Aid
organizations.

In the last decade Nizam has reinvested almost all of its earnings in the modernization of allied
machinery; Weaving, Knitting, Dyeing/Finishing & Stitching. Infrastructure upgradation at
Karachi factory and building state of the art Tent Stitching factory in Lahore on 34 Km Main
Ferozpur Road to meet the growing tent business needs.

Mr Usman Ahmad second son of Mr. Naveed Ahmad joined H.Nizam Din & Sons Pvt Ltd in
August 2003. He was given the responsibility of taking over the Rental & Catering business
which was a neglected business division after the sad demise of Mr. Faiz Ahmad. In the last
decade this business has had a rebirth and has been revolutionized under the leadership of Mr.
Usman. It has evolved in to a leading brand in The Rental, Catering, Event Management solution
provider. More over it is also operating its exclusive banquet halls in Karachi.

3.2 TYPES OF TENTS PRODUCED IN H. NIZAMDIN AND

SONS :
There are 2 types of tents produced in H. Nizamdin and sons:
1. Sahara Tents
2. Camping Tents.

3.2.1 Sahara Tents:

 Sahara Majlis Tent

34
  Sahara Small Majlis Tent
 Sahara Medium Majlis Tent
 Sahara Large Majlis Tent
 Sahara Deluxe Tent
 Sahara Centre Pole Tent

3.2.2 Camping Tents:

 Hub Tent 24 M2
 Hub Tent 42 M2
 Artic X Tent
 Mobiflex Bow Tent
 Tesla Patrol Tent
 Icelander Swag Bag
 Traditional Swag Bag
 Beach Shade
 Swag Tent
 Base Tent 27.5 M2
 Base Tent 33.6 M2

3.3 Departments in H. Nizamdin and Sons

1 Cutting
2 Processing
1. Stitching and Finishing
2. Packing

3.3.1 Cutting:
35
 Department Cutting
Function Tent and Garment Cutting
Processes Pattern Designing + Fabric
Spreading + Cutting
Monthly Production 3900000 meters
Product Tents, Garments and Tarpal
No. of Machines 16
Total Strength 44
Efficeincy 65%
Table 1: Detail of Cutting Department

 The first department the material has to go through is the Cutting Department .

 The main function of the cutting department is Tent and Garment Cutting .

 The processes involved are:

i. Pattern Designing
ii. Fabric Spreading
iii. Cutting

 Monthly Production of Cutting department is 3900000 meters .

 The product of this department are :

i. Tents
ii. Garments
iii. Tarpal

 The number of machines in cutting department are 16.

 The total strength in this department is 44

 Total efficiency of cutting department is 65%

3.3.2 Processing Department:

36
 Department Processing
Function Process the fabric to produce required quality
fabric
Processes Fabric Processing, washing & Drying
Product Tent and Tarpal
Monthly Production 2600000 meters
No. of Machines 10
Total Strength 20
Efficiency 72%
Table 2: Detail of Processing Department

The second department the material has to pass through is the Processing Department.

The main function of the processing department is to process the fabric to produce required
quality fabric

The main processes involved are :

i. Fabric Processing
ii. Washing
iii. Drying

The products of Processing Department are:

i. Tent
ii. Tarpal

The monthly production of Processing Department is 2600000 meters.

The number of machines in Processing Department are 10.

The total strength of Processing Department is 20.

The efficiency of Processing Department is 72%

3.3.3 Stitching and Finishing Department:

Department Stitching and Finishing

Function Convert Fabric into actual form of
product and provide finishing
Processes Stitching, Reshaping, Cropping,
37
 Trims attachment, Checking
Product Tents, Garments, Tarpal
Monthly Production 65000 units
No. of Machines 670
Total Strength 870
Efficeincy 55%
Table 3: Detail of Stitching and Finishing Department
 The third department through which the product has to go through is the Stitching and
Finishing Department.

 The main function of Stitching and Finishing Department is to convert fabric into actual
form of product and provide finishing .

 The processes in Stitching And Finishing Department are:

1 Stitching
2 Reshaping
3 Cropping
4 Trims attachment
5 Checking

 The main products are:

i. Tents
ii. Garments
iii. Tarpal
 The monthly production of this department is 65000 units.

 The number of machines in Stitching and finishing department are 670.

 The total strength of this department is 870.

 The efficiency of Stitching And Finishing Department is 55%.

3.3.4 Packing Department:

Department Packing
Function Packing

38
 Processes Carton Making , Labels inserting and
Box Closing
Product Tents, Garments and Tarpal
Monthly Production 65000 units
No. of Machines 12
Total Strength 200
Efficiency 58%
Table 3: Detail of Packing Department

 The final department that the ,material has to go through is the Packing Department

 The main function of this department is packing

 The processes are:

2.3.1 Carton Making
2.3.2 Labels Inserting
2.3.3 Box Closing

 The main products are:

i. Tents
ii. Garments
iii. Tarpal

 The monthly production is 65000 units

 The number of machines in Packing Department are 12

 The total strength of packing department is 200.

 The efficiency of Packing department is 58%.

39
 Chapter 4:
RESEARCH METHODOLOGY

40
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.H
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a,B
A
th
g
resu
C
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z
Figure 1: Methodology Flow Diagram

4.1 Collection of Data:

The data of 17 different types of tents were collected and there demand and unit prices were
collected so they can be classified using ABC analysis.

4.2 Technique used in this study:

41
  Observation of the data
 ABC analysis
 FIFO

Research tools are used to analyse data and implement the data to reach the desired goals either
numerically or theoretically .
ABC analysis is based on Pareto Analysis.

4.3 Pareto Analysis:

Pareto analysis is a technique used for decision-making, and also has applications in
several different fields like quality control. It is based on the "80-20 rule." As a decision-
making technique, Pareto analysis statistically separates a limited number of input
factors—either desirable or undesirable—which have the greatest impact on an
outcome
Pareto analysis is based on the idea that 80% of a project's benefit can be achieved by
doing 20% of the work or 80% of problems can be traced to 20% of the causes. Pareto
analysis is powerful quality and decision-making tool.  It is a technique to get the
necessary facts needed for setting the priorities..

4.4 ABC Analysis:

ABC analysis is an inventory management technique that determines the value of inventory
items based on their importance to the business. ABC ranks items on demand, cost and risk data,
and inventory mangers group items into classes based on those criteria. 

In this analysis we classify products according to their importance and are classified as A,B,C as
given shown in the table.

Category % of item Annual Usage

A Category Items 20% 80%(important) More closer

control

42
 B Category Items 30% 25%( Moderate View time by time
important)
5%( less Not that important
C Category Items 50% important)

Table 5: General ABC Table

Annual usage value can be calculated from the general ABC formula:

Annual Usage Value: Annual Demand * Cost of Unit.

4.4.1Steps involved in ABC Analysis:

The steps involved in ABC Analysis are:

Step #1:
Calculate the annual usage price and then list the items descending . It is obtained by multiplying
price of single unit with the number of units consumed annually.

Annual Usage Price: Price of Single Unit*Number of units consumed annually.

Step #2:
Now the items are arranged in descending order by their annual usage price and so organizing
the products in the sequence .

Step#3:
Items of total annual usage with 70% are categorized as A items, items with total annual usage
of 20-25% are categorized as B items and items with total annual usage between 5-10% are
categorized as C items.

4.5 Safety Stock:

Safety stock is an extra quantity of a product which is stored in the warehouse to prevent an out-
of-stock situation. It serves as insurance against fluctuations in demand.
Safety stock helps eliminate the hassle of running out of stock. If you hold sufficient safety
stock, you needn’t rely on your suppliers to deliver quickly or turn away customers because of
depleted inventory levels. Safety stock covers you until your next batch of ordered stock arrives.

43
4.6 FIFO (First In First Out):
The first in, first out (FIFO) method of inventory valuation is a cost flow assumption that
the first goods purchased are also the first goods sold. In most companies, this assumption
closely matches the actual flow of goods, and so is considered the most theoretically correct
inventory valuation method. The FIFO flow concept is a logical one for a business to
follow, since selling off the oldest goods first reduces the risk of inventory obsolescence .
Under the FIFO method, the earliest goods purchased are the first ones removed from the
inventory account. This results in the remaining items in inventory being accounted for at
the most recently incurred costs, so that the inventory asset recorded on the balance sheet
contains costs quite close to the most recent costs that could be obtained in the marketplace.
Conversely, this method also results in older historical costs being matched against current
revenues and recorded in the cost of goods sold ; this means that the gross margin does not
necessarily reflect a proper matching of revenues and costs. For example, in an inflationary
environment, current-cost revenue dollars will be matched against older and lower-cost
inventory items, which yields the highest possible gross margin.

Chapter 5
Data Collection and Analysis

5.1 Introduction to Chapter:

By using inventory management and ABC Analysis it is easy to classify item according to their
importance and eliminating risk out of and under stock . We collected the data of demand and

44
price of different types of tents from H. Nizamdin and Sons Pvt Ltd. and applying ABC
Analysis. After that the second step is the identification of those products that are in high
demand and annual usage is high and of those also that are in low demand and there annual
usage is low. The third step is the classification of the products into A,B and C according to their
importance . Then the removal of the products that are non-valued and are consuming extra
space is easier, it also helps in keeping safety stocks of those products that are of high value by
using FIFO technique.

Inventory Data of tents:

S Product Annual Demand Unit Price(Rs.)
NO.
Sahara Majlis Tent 8760 60000
1.

Sahara Small Majlis Tent 5430 24000

2.

Sahara Medium Majlis Tent 4450 32000

3.

Sahara Large Majlis Tent 5136 55000

4.

Sahara Deluxe Tent 5300 24500

5.

Sahara Centre Pole Tent 3455 45000

6.

Hub Tent 24 M2 3780 30000

7.

Hub Tent 42 M2 2300 41000

8.

Artic X Tent 2215 15000

9.

Mobiflex Bow Tent 2235 24000

45
 10.
Tesla Patrol Tent 2870 32000
11.

Icelander Swag Bag 720 17000

12
.
Traditional Swag Bag 2120 12000
13.

Beach Shade 1620 7000

14.

Swag Tent 2726 8200

15.

Base Tent 27.5 M2 6760 18500

16.

Base Tent 33.6 M2 5123 32000

17.

Table 6: Inventory Data of Tents

5.2 DATA CALCULATION

Step 1:
Similar items are classified into groups in the above table and are given the named as
T1,T2,T3… till T10. , and their annual demand is represented in combined form according to
their groups

T1:
 Sahara Majlis Tents

46
  Sahara Majlis Tents
 Sahara Majlis Tents
 Sahara Majlis Tents
 Sahara Majlis Tents
 Sahara Majlis Tents

T2:
 Hub Tent 24 M2
 Hub Tent 42 M2

T3:
 Artic X Tent

T4:
 Mobiflex Bow Tent

T5:
 Tesla Patrol Tent

T6:
 Icelander Swag Bag

T7:
 Traditional Swag Bag

T8:
 Beach Shade

T9:
 Swag Tent

T10:
 Base Tent 27.5 M2
 Base Tent 33.6 M2

47
Step 2:
Now the Annual Earning is calculated by multiplying the price of a single unit to the number
monthly demand

Item Annual Demand(x) Unit Price(y) Annual Earning(x*y)

T1 32,531 240000 7,807,440,000

T2 6080 71000 431,680,000
T3 2215 15000 33,225,000
T4 2235 24000 53,640,000
T5 2870 32000 91,840,000
T6 720 17000 12,240,000
T7 2120 12000 25,440,000
T8 1620 7000 11,430,000
T9 2726 8200 22,353,200
T10 11883 50500 600,915,000
Table 7: Annual Earning Table

Now the products are arranged according to their annual usage.

Step No.3:
Now the items are arranged in descending order according to their annual earning and them the
cum annual usage and % cum is found out and the items are categorized as A,B,C respectively.

Rankin Item Annual Earning Cum annual % of Cum Category

g (Rs) earning(Rs)

01 T1 7,807,440,000 7,807,440,000 85.89 A

02 T10 600,915,000 8,408,355,000 92.50 A
03 T2 431,680,000 8,840,035,000 97.25 B
04 T5 91,840,000 8,931,875,000 98.25 B
05 T4 53,640,000 8,985,515,000 98.84 B
06 T3 33,225,000 9,018,740,000 99.21 C

48
 07 T7 25,440,000 9,044,180,000 99.49 C
08 T9 22,353,200 9,066,533,200 99.73 C
09 T6 12,240,000 9,078,773,200 99.87 C
10 T8 11,430,000 9,090,203,200 100.00 C
Total: 9,090,203,200
Table 8: Table of categorization

Step No.4:
The next step is the construction of showing how much %age of Earning is gained by A category
products , B category products and C Category products respectively.

Category Items % of items Earning per %

Category

A T1,T10 20% 8,408,355,000 92.50

B T2,T5,T4 30% 577,160,000 6.35

C T3,T7,T9 50% 104.688.200 1.15

,T6,T8
Table 9: Table of % contribution to Revenue

A Category
B Category
C Category

Figure 2: Pie chart of %age of A,B,C items earning.

49
 Chapter no.6
Conclusion & Recommendation

6.1 Introduction To Chapter

ABC technique of inventory management helps in analyzing proper optimized inventory at
warehouse to reduce out of cost inventory. There are 17 different tent items in the warehouse
and are classified according to previous annual demand of particular item. The products with the
highest demand and revenue are classified as A category and are given the most attention,
product with moderate demand and revenue are classified as B category and are given moderate
attention and products with least demand and revenue are categorized as C items and are given
the least attention.

6.2 Conclusion:
This research helps in reducing the wastage of time, resources and space of inventory as it helps
in prioritizing the products according to their demand and revenue which helps in improving the

50
inventory management and helps increase the firms financial position as it focuses on products
with greater demand.

As A category items contribute the most 92.50 % to the firm so most focus should be given to
these products. Products in A category include.
As B category items contribute 6.35% to the firm so it is given moderate importance.
As Category items contribuite 1.15% to the firm these are given the least importance.

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Tonny Kerley de Alencar Rodrigues Federal University of Rio de Janeiro / Rio de
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Websites:
www.google.com
www.googlescholar.com
www.wikipedia.com
https://www.zoho.com/inventory
https://www.netsuite.com

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https://www.brightpearl.com 

https://searcherp.techtarget.com

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