A STUDY ON INVENTORY MANAGEMENT IN WOORY AUTOMOTIVE INDIA

PRIVATE LIMITED
-R.KISHORE
(142221631047)
CHAPTER 1
INTRODUCTION

Financial Management is concerned with the duties of the finical manager in the business firm. Financial
managers actively manage the financial affairs of any type of business, namely financial and non-financial,
private and public, large and small, profit seeking and non-profit. They perform such varied task, as
budgeting, financial forecasting, cash management, credit administration, investment analysis, funds
management and inventory management.

A term inventory refers to the stock file of the products a firm is offering for sale and the components that
make up the product. In other words, inventory is composed of assets that will be showed in future in the
normal course of the business operations. The assets which firms store as inventory in anticipation of need
are:
 Raw materials

 Work in process (Semi Finished goods)

 Finished goods

The raw material inventory contains item that are purchased by the firm from other and are converted into
finished goods through the manufacturing (production) process. They are an important input of the final
product. The working process inventory consists of items currently being used in the production process.

They are normally semi finished goods that are at various stages of production in a multi stage production
process. A finished goods represented final or completed products which are available for sale .The
inventory of such goods consists of items that have been produced but are yet be sold.

Inventory, as a current asset, differs from other current assets because only financial managers are not
involved. Rather all the functional areas, finance, marketing, production, and purchasing are involved. The
views concerning the appropriate level of inventory would differ among the different functional areas.
The job of the financial manger is to reconcile the conflicting view points of the various functional areas
regarding the maximizing the owners wealth.
Thus, inventory management, like the management of other current assets , should be related to the overall
objective of the firm. It is in this context that the present chapter is devoted to the main elements of
inventory management from the view point of financial management.
The objective of inventory management is explained in some detail sections. Section two is concerned with
inventory management techniques. Attention is given here to basic concepts relevant to the management and
control of inventory.

The aspects covered are:

• Determination of the type of control required.
• The basic economic order quantity
• The reorder point, and Safety stocks.

As a matter of fact, the inventory management techniques are a part of production management. But a
familiarity with them is of great help to the financial managers in planning and budgeting inventory need of
working capital in the form of current assets to deal with the problem arising good sold.

Therefore, sufficient working capital requires sustaining sales activity. Technically this is refer to as the
operating the cash cycle. The continuous flow form cash to supplies to inventory to accounts receivable and
back into cash what is called operating cycle.

REASONS AND BENFITS OF INVENTORY:

The optimal level to maintaining inventory is subjective matter and depends upon the features of a particular
firm.

TRADING FIRM :
In case of a trading firm there may be several reasons for holding inventories because of sales activities that
should not be interrupted more over it not always possible to procure the good whenever there is a sales
opportunity there is always a time gap required between purchase and sale of goods. Thus trading concern
should have some stock of finished goods in order to under- take sales activities independent of the
procurement schedule.
• In may be a subdivision of the cost accounting department, although in many concerns, it is a
part of the stores keeping department.
• It keeps perpetual inventory records.
• Adjust the stock on receipt of the property authorized adjustment notes.
• Prepare weekly or monthly, statement of receipts, issue, balance and average consumption of
materials both in terms of quantity and value.
Similarly, a firm may have several incentives being offered in terms of quantity discounts or lower price etc
by the supplier of goods. There is trading concern inventory helps in a de-inking between sales activity and
also to capitalize a profit of opportunity due to purchase make at a discount will result in lowering the total
cast resulting in higher profits for the firm.

MANUFACTURING FIRM :
A manufacturing firm should have inventory or not only the finished goods, but also of raw materials and
work -in-progress for following reasons.

UNINTERRUTED PRODUCTION SCHEDULE :

Every manufacturing firm must have sufficient stock of raw materials in order to have the regular and
uninterrupted production schedule. If there is stock out of raw materials in order to have the regular and
uninterrupted production schedule. If there is stock out of raw material at any stage of production process
then the whole production may come to a half. This may result in custom dissatisfaction as the goods cannot
be delivered in time more over the fixed cost will continue to be incurred even if there is no production.
Further work-in-progress would let the production process run smooth. In most of manufacturing concerns
the work in progress is a natural outcome of the production schedule and it also helps in fulfilling when
some sales orders, even if the supply of raw-materials have stopped.

INVENTORY CONTROL DEPARTMENT :

• In may be a subdivision of the cost accounting department, although in many concerns, it is a part of
the stores keeping department.

• It keeps perpetual inventory records.

• Adjust the stock on receipt of the property authorized adjustment notes.

• Prepare weekly or monthly, statement of receipts, issue, balance and average consumption of
materials both in terms of quantity and value.

RECEIPT AND ISSUE OF INVENTORIES: BIN CARD

DESCRIPTION : Maximum level

MATERIAL CODE : Minimum level

LOCATION CODE : Ordering level

BIN NO:Ordering : Quantity

STORES LEDGER NO : Unit.

 OBJECTIVE OF THE STUDY

PRIMARY OBJECTIVE:
To study on inventory management in WOORY AUTOMOTIVE INDIA PRIVATE LIMITED.

SECONDARY OBJECTIVE:
 To study about the ordering levels for the important components of inventory.
 To understand and measure economic order quantity for the selected raw material items.
 To analyze its inventory management methods with the help of ABC analysis.
 To evaluate the inventory management practices of WOORY AUTOMOTIVE INDIA PRIVATE
LIMITED.
 To offer suitable suggestions for the improvement of inventory management practices.
 SCOPE OF THE STUDY

 Inventory management is a simple concept-don’t have too much stock and don’t have too little. Since
there can be a substantial costs involved in staying above and below the optimal range, careful
inventory management can make a huge difference in the right balance can be quite a complex and
time consuming task without the right technology.
 Inventory management is very important for “WOORY AUTOMOTIVE INDIA PRIVATE
LIMITED”. It enables the business to meet or exceed expectations of the customers by making the
products readily available.
 The scope of the study includes the ABC Analysis of Raw Materials, work in progress and finished
goods for four financial years.
 This study provides insight to the management of high value items and also brings attention of
management towards movement of ‘A’ class items over period of 5 years.
 NEED OF THE STUDY

Martin and miller identified three general motives for holding inventories

TRANSACTION MOTIVE:
This refers to the need of maintaining inventory to facilitate smooth production and sales operations.

PRECAUTIONARY MOTIVE:
Precautionary motive for holding inventory is to provide a safeguard when then actual level of activity is
differ than anticipated. This inventory serves when there is a unpredictable changes in the demand and
supply forces.

SPECULATIVE MOTIVE:
This motive influences the decision to increase or decrease the levels of inventory to take the advantage of
price fluctuations.
 LIMITATIONS OF THE STUDY

 It consumes more time and requires lots of expenditure. More time is needed to do this study.
 Study is based on secondary data only.
 The quality of inventory is not compared in analysis.
 The analysis is based on figures present in the internal records only.
 The study is based on two year reports given by marketing and finance department that has its own
limitation.
 Working environment didn't permit more involved way of collecting data .
 CHAPTER 2

REVIEW OF LITERATURE

S. SINGH (2016):
Analysed the inventory control practices of single fertilizer company named IFFCO. He statistically
examined the inventory system with consumption, sales and other variables along with growth of these
variables and inventory patterns. He concluded that an increase in components of inventory lead to an
increase in the proportion of inventory in current assets. A special focus was made on stores and spares in
order to calculate excess purchases resulting in loss of profit.

PRADEEP SINGH (2018) :

In his study made an attempt to examine the inventory and working capital management of Indian Farmers
Fertilizer Cooperative Limited (IFFCO) and National Fertilizer Limited (NFL). He concluded that the
overall position of the working capital of IFFCO and NFL is satisfactory. But there is a need for
improvement in inventory in case of IFFCO. However inventory was not properly utilized and maintained
bay IFFCO during study period. The management of NFL must try to properly utilize the inventory and try
to maintain the inventory as per the requirements. So that liquidity will not interrupt.

CAPHUN HAMERI and WEISS (2019):

Statistically analysed the relationship between inventory performance and financial performance in
manufacturing companies using the financial information of a large sample of US-based manufacturing
firms over a 26-year period, that is, 1980 to 2005. They inferred that a significant relationship existed
between inventory performance along with the performance of its components and profitability. Raw
material inventory performance was highly correlated to gross profit and operating profit. Work in progress
inventory was highly correlated to gross profit measures while finished goods inventory performance was
more correlated with operating profit measures.

GAUR AND BHATTACHARYA (2021):

Attempted to study the linkage between the performance of the components of inventory such as raw
material, work in progress and finished goods and financial performance of Indian manufacturing firms The
study revealed that finished goods inventory as inversely associated with business performance while raw
material inventory and work in progress did not have much effect on same. They emphasised that instead of
focusing on total inventory, an attempt should be made to concentrate on individual components of inventory
so as to adequately manage the same. They concluded that managers not paying heed to inventory
performance may become weak in combating competitors.
ENEJE ET AL (2020):
Investigated the effects of raw materials inventory management on the profitability of brewery firms in
Nigeria using a cross sectional data from 1989 to 2008 which was gathered for the analysis from the annual
reports of the sampled brewery firms. Measures of profitability were examined and related to proxies for raw
materials inventory management by brewers. The Ordinary Least Squares (OLS) stated in the form of a
multiple regression model was applied in the analysis. The study revealed that the local variable raw
materials inventory management designed to capture the effect of efficient management of raw material
inventory by a company on its profitability is significantly strong and positive and influences the
profitability of the brewery firms in Nigeria. They concluded that efficient management of raw material
inventory is a major factor to be contained with by Nigerian brewers in enhancing or boosting their
profitability.

PANIGRAHI (2019):
Undertook an in-depth study of inventory management practices followed by Indian cement companies and
its affect on working capital efficiency. The study also investigated the relationship between profitability and
inventory conversion days. The study, using a sample of the top five cement companies of India over a
period of 10 years from 2001 to 2010, concluded that a considerable inverse linear relationship existed
between inventory conversion period and profitability

SRINIVAS RAO KASISOMAYAJULA (2018):

An analytical study was conducted on” Inventory Management in Commercial Vehicle Industry In India”. A
sample of five companies’ was selected for study. The study concluded that all the units in the commercial
vehicle industry have significant relationship between Inventory and sales. Proper management of inventory
is important to maintain and improve the health of an organization. Efficient management of inventories will
improve the profitability of the organization.

EDWIN SITIENEI AND FLORENCE MEMBA (2017) :

Conducted a study on Effect of Inventory Management on profitability of Cement Manufacturing
Companies in Kenya. The study concluded that Gross profit margin is negatively correlated with the
inventory conversion period, Increase in sales, which denotes the firm size enriches the firm’s inventory
levels, which pushes profits upwards due to optimal inventory levels. It is also noted that firms inventory
systems must maintain an appropriate inventory levels to enhance profitability and reduce the inventory
costs associated with holding excessive stock in warehouses.
 CHAPTER 3

RESEARCH METHODOLOGY

RESEARCH DESIGN:
Research design is purely and simply the frame works are plan for a study that gives the collection and
analysis of data.

TITLE OF THE STUDY:

A Study on “INVENTORY MANAGEMENT” with special reference in WOORY AUTOMOTIVE
INDIA PRIVATE LIMITED.

 The data has been gathered through interaction and discussions with the executives
working in the division.
 Some important information has been gathered through couple of unstructured interviews
of executive.
 Annual reports and other magazines published by the company are used for collecting the
`required information.

METHODS OF DATA COLLECTION:

The research was descriptive in nature the secondary data was the only source for the study

SECONDARY DATA:
All the secondary data were collected from company’s annual reports. The figures for the financial year 2018
- 2022 the undertakings of the WOORY AUTOMOTIVE INDIA PRIVATE LIMITED.
and for the financial year.

The secondary data was collected mainly.

 Annual Reports
 Balance sheet