INVENTRY MANAGEMENT GTM Final
INVENTRY MANAGEMENT GTM Final
INVENTRY MANAGEMENT GTM Final
First of all, we are grateful to ALLAH, who gave us the strength to strive for our goal and
This report provides us “over view of the Inventory Management system of Gulahmed
We render us due respect and appreciation to our course teacher Mr. Shaham Ahmed,
who provided us all the guidance and required information about the report.
We would also like to acknowledge our parents for their utmost co-operation and their love
and affection which have become my strength.
We are a team from the Management Science, and a project assigned to our
In this regard we selected the Gulahmed textile mills, which is one of the
Leading textile mills of Pakistan in bed linen, curtain and apparel as well
And our scope of this project is to analyze the inventory of spare parts
of Processing unit.
With an installed capacity of more than 130,000 spindles, 300 state-of-the-art weaving machines
and most modern yarn dyeing, processing & stitching units, Gul Ahmed is a composite unit –
making everything from cotton yarn to finished products.
Gul Ahmed has its own captive power plant comprising of gas engines, gas & steam turbines,
and backup diesel engines. Believing in playing its role in protecting the environment, Gul
Ahmed has also set up a waste water treatment plant to treat 100% of its effluent, bringing it to
NEQS levels.
Gul Ahmed is playing a vital role not only as a textile giant, but has its strong presence in the
retail business as well. The opening of its flagship store – Ideas by Gul Ahmed– marked the
group's entry into the retail business. Starting from Karachi, Gul Ahmed now has an extensive
chain of more than 40 retail stores across the country, offering a diverse range of products from
home accessories to fashion clothing.
More than 50 years since its inception, the name Gul Ahmed is still globally synonymous with
quality, innovation & reliability.
BUSINESS ACTIVITIES
Excellence in quality and service is the hallmark of all operations performed at Gul Ahmed.
Firmly standing by its business values, Gul Ahmed is active in manufacture and sale of textile
products.
On the retail front, Ideas by Gul Ahmed offers fabrics and made-ups, ranging from home
accessories to clothing. It not only provides fashion at great value, but also caters to various
customer needs by offering a diverse product mix. This leads to a complete and enjoyable retail
experience. As a result of this, the chain has expanded to 40 stores across Pakistan since its
inception in 2003.
is a physical resource that a firm holds in stock with the intent of selling it or transforming it into
a more valuable state
Inventory is the most expensive asset of the most of the companies and can be as much as the
50% of total capital investment. Hence good management is crucial and firms can reduce cost by
reducing the inventory and if not managed properly then production may be stopped and
customer may become dissatisfied.
Spare Parts
Fuel
Packing Item Others
Non Production Chemicals
Construction and Fabrication Items
Health & Safety for Workers
Stationary & Accessories
Admin Items
Tools & Measuring Equipments
General & Miscellaneous Items
Repair, Maintenance, Services & Contract
Lubricants
Computer and Accessories Consumable
Machinery Consumables
Health and Safety Environmental
Furniture and Fixture Consumables
Appliances and Accessories Consumables
Assets
Machinery Assets
Furniture & Fixture Assets
Appliances & Accessories Assets
Computer & Accessories Assets
Capital Spares
Dyes and Chemicals
Chemicals
We will focus only the spare parts of machines as this is the scope of our work.
Indent
Approved by
HOD
If accepted then
processed for
Approved by DO
payment to
account
If rejected then
Sent to store for Grn is accepted/ sent back to
EBS # rejected by user suppliers
GRN(goods
Checking of
received note) is
stock in store
generated
Checked by store
Coding of items
personal and
in EBS
user
Arrangement of
quotation by Selection of
atleast 03 vendor
vendor/suppliers
Issuance request
is generated
from dept.
Approved by
HOD
Sent to central
store
Approved by the
store Manager
Stock is checked
Item is issued
Requistion is
received and
entered in
system
Several techniques of inventory control are in use and it depends on the convenience of
the firm to adopt any of the techniques. The techniques more commonly used are the following:
ABC ANALYSIS –
One of the widely used techniques for control of inventories is the ABC (Always better
control) analysis. The objective of ABC control is to vary the expenses associated with
maintaining appropriate control according to the potential savings associated with proper level of
such control. For example, an item having an inventory cost of Rs. 1000000 such as sheet steel,
has a much greater potential for savings expenses related to maintaining inventories than an item
with a cost of Rs.100 the ABC approach is a means of categorizing inventory items into three
classes ‘A’, ‘B’ and ‘C’ according to the potential amount to be controlled.
Once inventory is classified, we have a firm base for deciding where we will put our effort.
Logically, we expect to maintain strong controls over the ‘A’ items talking whatever special
actions needed to maintain availability of these items and hold stocks at the lowest possible level
consistent with meeting demands. At the other end of the scale, we cannot afford the expense of
rigid controls, frequent ordering, expediting, etc. because of the low amounts in this area. Thus,
with the ‘C’ group we may maintain somewhat higher safety stocks, order more months of
supply; expect lower levels of customer service, or all the three. It is for this selective approach,
ABC analysis is often called the selective Inventory Control Method (SIM).
Extending pareto’s principle to inventory, it is always possible and necessary to separate “vital
few” from “trivial many” of the stock items for their effective control. Separating vital few from
trivial many is what is precisely done in ABC analysis.
This approach helps the materials manager to exercise selective control and focus
attention on ‘A’ category items. By controlling the inventory of ‘A’ category items, the total
inventory costs can be considerably reduced. Usually, fixed order quantity system or ‘Q’ system
of inventory control is used for ‘A’ category items advising the supplier to follow staggered
supplies (i.e. EOQ is ordered and the supplier is asked to supply fraction of EOQ on weekly
basis to match the consumption rate). For ‘B’ category items the fixed order cycle system on ‘P’
system is used without appreciably increasing the average inventory value. For ‘C’ category
items “two-bin system” is used wherein the annual requirement of the item is ordered in one or
two lots and the quantity received is distributed into two bins-bin number one keeping the re-
order level inventory and bin number two keeping he balance quantity. The item is consumed
from bin number two and once it becomes empty, the repeat order is placed for the annual or six
month’s requirement. Item is issued from the first bin till the supply is received.
MINIMUM-MAXIMUM TECHNIQUE
TWO-BIN TECHNIQUE
Once of the oldest system of inventory control is the two-bin system which is mainly
adopted to control ‘C’ group inventories. In the two-bin system, stock of each item is separated
into two-bins. One bin contains stock, just enough to last from the date a new order is placed
until it is received in inventory. The other bin contains a quantity of stock enough to satisfy
probable demand during the period of replenishment is placed, and the stock in the second bin is
utilized until the ordered material is received.
Such a method is appropriate to ideal conditions in which rate of consumption is fairly constant
and for items lead time of which is fairly established and regular.
Although the system itself possesses a high degree of automacy, in practice, we need to allow for
variations in the rate of consumption as well as lead time. A possible disadvantage of the system
in some case is the requirement of additional storage facilities and perhaps some practical
difficulty in keeping the two stocks properly separated.
V-E-D ANALYSIS
‘V’ stands for vital, ‘E’ for essential and ‘D’ for desirable. This classification is usually
applied for spare parts to be stocked for maintenance of machines and equipments based on the
criticality of the spare parts. The vital spare parts are those which can cause stoppage of the plant
if not available. Usually such spare parts are known as capital or insurance spares. The inventory
policy is to keep at least one number of the vital spare irrespective of its value. Also, spare parts
to be supplied by foreign manufactures are treated as vital spares because of the long lead time
required for procurement. Essential spare parts are those whose non-availability may not
adversely affect production. Such spare parts may be available from many sources within the
country and the procurement lead time may not be long. The desirable spare parts are those
which if not available can be manufactured by the maintenance department or may be procured
from local suppliers and hence no stock is held usually.
H-M-L ANALYSIS
This stands for High value, medium value and low value items on unit price of the item.
For instance, a firm may decide to categories items having unit price of the item. For instance,
firm may decide to categories items having unit price more than Rs. 5000 as ‘H’ items. From Rs.
1000 to 5000 as ‘M’ items and below Rs. 1000 as ‘L’ items. On the basis, materials management
may delegate authority to various levels of purchase officers/mangers to authorize and sign
purchase orders. Also, for high value items, alternative source of supplier are developed
The ordering of the items can be done using the following two procedures.
• Periodic review
• Fix order quantity
• Lead time is the lapsed time between the placement of an order and its
actual delivery.
• Safety stock level is also known as buffer stock. It is the extra quantity of
merchandise that is stocked to take care of delay in delivery and higher
demand during the lead time.
• Lead time is the lapsed time between the placement of an order and its
actual delivery.
3. Obsolete parts are not removed from inventory which are causing unnecessary carrying cost
Stock movement
The analysis and reviews are not as per standards and issuance techniques are very poor.
Many of the parts are lying in the stores for more than 02 years and not being utilized and there
is no analysis and plan of these parts for their future utilization.
Recommendations:
1. There should be V.E.D. Analysis of this inventory to separate the vital, essential and desireable
spare parts of the machine.
2. There should be pre defined periodic review of the inventory to analyze the movement of stock
and its position.
References:
Mr. Shabbir Ahmed (Deputy Manager Costing)