A SUMMER TRAINING PROJECT

ON

IMPACT OF ITC ON

FMCG SECTOR

SUBMITTED IN FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF

MASTER OF BUSINESS ADMINISTRATION (MBA)

SUBMITTED TO MR. TARIQUE SIDDHIQUIH.O.D.GIMT, Gr. Noida

SUBMITTED BYVIRENDRA PANWARMBA (3RD SEM)ROLL NO. 0709470116

GALGOTIAS INSTITUTE OF MANAGEMENT & TECHNOLOGY 1, KNOWLEDGE PARK, PHASE-II, GREATER NOIDA

TABLE OF CONTENTS

• Acknowledgement

• Preface

• Executive Summary of the project

• Introduction

• Company Profile

• Research Methodology

• Objective• Scope• Sample size• Data Sources

• Finding and Analysis

• Conclusion

• Recommendations

ANNEXURE

Bibliography

Acknowledgement

I would like to express my sincere gratitude towards Galgotias

Institute of Management & Technology, Greater Noida for

providing me the opportunity to work and learn through this end-term

project.

I am extremely grateful to my esteemed project guide, Mr.

Tarique Siddhiqui, H.O.D., GIMT, Greater Noida, for giving me an

opportunity to work with him and his indispensable help and guidance

throughout this project and for inspiring me to strive to achieve the

best in difficult situations.

While doing the project I visited many companies in Delhi region

and met many senior personnel. I would like to extend my special

thanks to all of them for sparing their time to patiently answer the

questions and giving their views.

VIRENDRA PANWAR

MBA (3RD SEM)

Preface

This project had been undertaken for “Impact of ITC on FMCG

Sector”.

In order to gather the most appropriate and accurate data survey was

conducted in various location and markets in Saharanpur. The data

was assimilated with the help of a questionnaire aimed and designed

to extract the most correct and conclusive information.

The consumers were requested to fill the questionnaire and were also

asked various other relevant questions revealing detailed information

apart from that in the questionnaire.

The survey was conducted successfully and its findings have been

studied, analyzed and have led to a conclusion, included in the report,

which could prove to be fruitful for the project.

OBJECTIVES

The highly significant function not only because inventories constitute

substantial portion of total current assets of a firm but also because it has to

satisfy the following objectives:

(i) To minimize the financial investment in inventories. The main

objective of a system of inventory control in manufacturing organization is

to minimize the capital blocked in the inventories. Because the capital

required carrying inventories costs money and holding assets in the form of

inventories results in decreased liquidity.

(ii) To ensure that the value of materials consumed is minimum. For

ensuring this objective, there should be proper control over materials from

the time orders are placed with suppliers till the materials have been

effectively utilized in production. Thus, materials must be properly

safeguarded and correctly accounted for. Efficient purchasing, storage,

consumption and accounting for materials are an important objective of

inventory control.

(iii) To maintain timely records of inventories of all items and to

maintain the stock within the desired limits.

(iv) To provide scientific base for short-term and long-range planning

of inventory requirements.

(v) To ensure timely action for replenishment.

(vi) To protect the bank of inventories from pilferage, theft, waste,

loss, damage and unauthorized use.

VISION & MISSION

Innovating Enjoyment With That Extra Flavour.

Enduring value. Enhancing appeal. Enriching life. By adding that extra

flavour. We are constantly innovating to offer products & services, which

are distinctive, differentiating and not the ordinary.

• To sustain global leadership in the Chewing Tobacco Business.

• To become a household name for quality products in Foods &

Beverages.

• To set new benchmarks in the sectors we operate.

INTRODUCTION

"ITC" to many small business owners is one of the more visible and tangible

aspects of doing business. Raw materials, goods in process and finished

goods all represent various forms of inventory. Each type represents money

tied up until the inventory leaves the company as purchased products.

Likewise, merchandise stocks in a retail store contribute to profits only when

their sale puts money into the cash register.

In a literal sense, inventory refers to stocks of anything necessary to do

business. These stocks represent a large portion of the business investment

and must be well managed in order to maximize profits. In fact, many small

businesses cannot absorb the types of losses arising from poor inventory

management. Unless inventories are controlled, they are unreliable,

inefficient and costly.

EXECUTIVE SUMMARY

The title of the project is “Study Of Systems Practices & Structure Of Companies

For Snack Food with Relevance to Convenience Channel & compare it with ITC.

This project seeks to understand the systems practices & structures of

companies for snack food with relevance to convenience channel & compare it

with ITC. . The focus of this research is to find out how other companies like lays

and haldiram its major competitors what practices are they following, what is their

distribution network like how many variants do they have in the snack food

segment etc. I gathered information in areas like how many number of

distributors are there in specific regions for a particular company, their delivery

process, size of go down, number of mechanized and Non-mechanized units,

their norms, schemes billing methods, order structure, cash and credit facility etc.

The research adopts a qualitative and quantitative methodology by conducting

surveys with distributors and salesman of snack food. The main focus of the

research was on Bingo, as, it has been launched recently. Another factor was to

analyze how ITC would regain its bench mark impression and since ITC has

diversified itself in various sectors, how to overcome the problem that salesman

and the distributors are facing. By conducting this survey it helped me to

understand how ITC differs from its competitors in its sales practices.

The location of research is Noida, Faridabad and Ghaziabad. And in these

locations I covered the distributors of Lays, Haldiram and ITC. I also had a

meeting with the sales officer of Lays at Noida and found out about its working,

schemes and other practices that it follows.

During the research I discovered that the total wafer market of India comprises of

20,000 crores. There is a huge market potential in this sector.

The findings state that how each distributor differs from each other in terms of

number of salesman that they have, total number of outlets that they cover, size

of go down, number of SKU’s that each company has in the snack food segment,

the margin that the companies are giving to their distributors and retailers, the

average number of outlets covered by each salesman in a day, and also how do

they differentiate between town and village working.

Finally, this report concludes by making a summary of the findings. Some

recommendations have also been made for better promotions and effective sales

of the product.

INTRODUCTION

The idea behind this project was to do a extensive study of systems, practices,

and structures of select companies for snack food, with relevance to convenience

channel and compare it with ITC. The scope of the project involved the following

areas to be covered extensively-

Ordering, delivering and cash collection models- people& processes. – under this

I had to cover the distributors profile, that is their location and number. What are

the loctions where the distributors are located and hoe many of them are there in

number for each region and each company.secondly I had to understand the

infrastructure that the distributors are using like mechanized and non mechanized

units which includes three wheelers, rickshaw, mopeds, cycles etc.Then I had to

know about the margins that the various companies are giving to their distributor

and retailers.Then I had to study about the coverage plan, which involves the

total number of outlets that the distributors cover in their regions for respective

companies, and what is their mode of transportation, through which they cover

these outlets. Then I ha d to find out the frequency of service that the salesmen

of respective compnies are undergoing in respective to the outlets that they

cover, that is how many times in a week is one salesman covering a particular

outlet.I had to also find out about the no of sku;s and varients that each of these

companies have.Then I had to know about the norms and delivary process of

various companies, what norms do the distributors have to follow set by the

company, and what is their delivary process. Then I had to find out about the

cash and credit collection method that the distributors are giving to the retailers.I

had to also find out about the billing methods and the various sehemes that the

companies are giving to the consumers.Apart from this I had to also find out

about the stock rotation , and damage stock replacement policies of the

companies, and also about maintaining bingo rack hygine.

THE ITC PROFILE

ITC is one of India's foremost private sector companies with a

marketCapitalisation of nearly US$ 15 billion and a turnover of over US $ 4.75

billion.

Rated among the World's Best Big Companies, Asia's 'Fab 50' and the World's

Most Reputable Companies by Forbes magazine,among India's Most Respected

Companies by BusinessWorld and among India's Most Valuable Companies by

Business Today, ITC ranks third in pre-tax profit among India's private sector

corporations.

ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty

Papers, Packaging, Agri-Business, Packaged Foods & Confectionery,

Information Technology, Branded Apparel, Greeting Cards, Safety Matches and

other FMCG products. While ITC is an outstanding market leader in its traditional

businesses of Cigarettes, Hotels, Paperboards, Packaging andAgri-Exports, it is

rapidly gaining market share even in its nascent businesses of Packaged Foods

& Confectionery, Branded Apparel and Greeting Cards.

As one of India's most valuable and respected corporations, ITC is widely

perceived to bededicatedly nation-oriented. Chairman Y C Deveshwar calls this

source of inspiration "a commitment beyond the market". In his own words: "ITC

believes that its aspiration to create enduring value for the nation provides the

motive force to sustain growing shareholder value. ITCpractises this philosophy

by not only driving each of its businesses towards international competitiveness

but by also consciously contributing to enhancing the competitiveness of the

larger value chain of which it is a part”

ITC's diversified status originates from its corporate strategy aimed at creating

multiple drivers of growth anchored on its time-tested core competencies:

unmatched distribution reach, superior brand-building capabilities, effective

supply chain management and acknowledged service skills in hoteliering. Over

time, the strategic forays into new businesses are expected to garner a

significant share of these emerging high-growth markets in India.

ITC's Agri-Business is one of India's largest exporters of agricultural products.

ITC is one of the country's biggest foreign exchange earners (US $ 2.8 billion in

the last decade). The Company's 'e-Choupal' initiative is enabling Indian

agriculture significantly enhance its competitiveness by empowering Indian

farmers through the power of the Internet. This transformational strategy, which

has already become the subject matter of a case study at Harvard Business

School, is expected to progressively create for ITC a huge rural distribution

infrastructure, significantly enhancing the Company's marketing reach.

ITC's wholly owned Information Technology subsidiary, ITC Infotech India

Limited, is aggressively pursuing emerging opportunities in providing end-to-end

IT solutions, including e-enabled services and business process outsourcing.

ITC's production facilities and hotels have won numerous national and

international awards for quality, productivity, safety and environment

management systems. ITC was the first company in India to voluntarily seek a

corporate governance rating.

ITC employs over 21,000 people at more than 60 locations across India. The

Company continuously endeavors to enhance its wealth generating capabilities

in a globalizing environment to consistently reward more than

4,88,000 shareholders, fulfill the aspirations of its stakeholders and meet societal

expectations. This over-arching vision of the company is expressively captured in

its corporate positioning statement: "Enduring Value. For the nation and for the

shareholder.

HISTORY AND EVOLUTION

ITC was incorporated on August 24, 1910 under the name of 'Imperial Tobacco

Company of India Limited'. Its beginnings were humble. A leased office on Radha

Bazar Lane, Kolkata, was the centre of the Company's existence. The Company

celebrated its 16th birthday on August 24, 1926, by purchasing the plot of land

situated at 37, Chowringhee, (now renamed J.L. Nehru Road) Kolkata, for the

sum of Rs 310,000. This decision of the Company was historic in more ways than

one. It was to mark the beginning of a long and eventful journey into India's

future. The Company's headquarter building, 'Virginia House', which came up on

that plot of land two years later, would go on to become one of Kolkata's most

venerated landmarks. The Company's ownership progressively Indianised, and

the name of the Company was changed to I.T.C. Limited in 1974.

In recognition of the Company's multi-business portfolio encompassing a wide

range of businesses - Cigarettes & Tobacco, Hotels, Information Technology,

Packaging, Paperboards & Specialty Papers, Agri-Exports, Foods, Lifestyle

Retailing and Greeting Gifting & Stationery - the full stops in the Company's

name were removed effective September 18, 2001. The Company now stands

rechristened 'ITC Limited'.

• Though the first six decades of the Company's existence were primarily

devoted to the growth and consolidation of the Cigarettes and Leaf

Tobacco businesses, the Seventies witnessed the beginnings of a

corporate transformation that would usher in momentous changes in the

life of the Company.

• ITC's Packaging & Printing Business Division, was set up in 1925 as a

strategic backward integration for ITC's Cigarettes business. It is today

India's most sophisticated packaging house.

• In 1975 the Company launched its Hotels business with the acquisition of

a hotel in Chennai which was rechristened 'ITC-Welcomgroup Hotel

Chola'.

• The objective of ITC's entry into the hotels business was rooted in the

concept of creating value for the nation. ITC chose the hotels business for

its potential to earn high levels of foreign exchange, create tourism

infrastructure and generate large scale direct and indirect employment.

Since then ITC's Hotels business has grown to occupy a position of

leadership, with over 70 owned and managed properties spread across

India.

• In 1979, ITC entered the Paperboards business by promoting ITC

Bhadrachalam Paperboards Limited, which today has become the market

leader in India. Bhadrachalam Paperboards amalgamated with the

Company effective March 13, 2002 and became a Division of the

Company, Bhadrachalam Paperboards Division. In November 2002, this

division merged with the Company's Tribeni Tissues Division to form the

Paperboards & Specialty Papers Division. ITC's paperboards' technology,

productivity, quality and manufacturing processes are comparable to the

best in the world. It has also made an immense contribution to the

development of Sarapaka, an economically backward area in the state of

Andhra Pradesh. It is directly involved in education, environmental

protection and community development. In 2004, ITC acquired the

paperboard manufacturing facility of BILT Industrial Packaging Co. Ltd

(BIPCO), near Coimbatore, Tamil Nadu. The Kovai Unit allows ITC to

improve customer service with reduced lead time and a wider product

range.

• In 1985, ITC set up Surya Tobacco Co. in Nepal as an Indo-Nepal and

British joint venture. Since inception, its shares have been held by ITC,

British American Tobacco and various independent shareholders in Nepal.

In August 2002, Surya Tobacco became a subsidiary of ITC Limited and

its name was changed to Surya Nepal Private Limited (Surya Nepal).

• In 1990, ITC acquired Tribeni Tissues Limited, a Specialty paper

manufacturing company and a major supplier of tissue paper to the

cigarette industry. The merged entity was named the Tribeni Tissues

Division (TTD). To harness strategic and operational synergies, TTD was

merged with the Bhadrachalam Paperboards Division to form the

Paperboards & Specialty Papers Division in November 2002.

• Also in 1990, leveraging its agri-sourcing competency, ITC set up the

International Business Division (IBD) for export of agri-commodities.

The Division is today one of India's largest exporters. ITC's unique and

now widely acknowledged e-Choupal initiative began in 2000 with soya

farmers in Madhya Pradesh. Now it extends to 9 states covering over 3.5

million farmers. ITC's first rural mall, christened 'Choupal Saagar' was

inaugurated in August 2004 at Sehore. The year 2006 witnessed the

ramping up of the Company's rural retailing network with 17 'Choupal

Saagars' being operational in three states of Madhya Pradesh,

Maharashtra and Uttar Pradesh.

• In 2000, ITC's Packaging & Printing business launched a line of high

quality greeting cards under the brand name 'Expressions'. In 2002, the

productrange was enlarged with the introduction of Gift wrappers,

Autograph books and Slam books. In the same year, ITC also launched

'Expressions Matrubhasha', a vernacular range of greeting cards in eight

languages and 'Expressions Paperkraft', a range of premium stationery

products.

• In 2003, the company rolled out 'Classmate', a range of notebooks in the

school stationery segment.ITC also entered the Lifestyle Retailing

business with the Wills Sport range of international quality relaxed wear

for men and women in 2000. The Wills Lifestyle chain of exclusive stores

later expanded its range to include Wills Classic formal wear (2002) and

Wills Clublife evening wear (2003). ITC also initiated a foray into the

popular segment with its men's wear brand, John Players, in 2002. In

December 2005, ITC introduced Essenza Di Wills, an exclusive line of

prestige fragrance products, to select 'Wills Lifestyle' stores.

• In 2006, Wills Lifestyle became title partner of the country's most premier

fashion event - Wills Lifestyle India Fashion Week - that has gained

recognition from buyers and retailers as the single largest B-2-B platform

for the Fashion Design industry. To mark the occasion, ITC launched a

special 'Celebration Series', taking the event forward to consumers.

• In 2000, ITC spun off its information technology business into a wholly

owned subsidiary, ITC Infotech India Limited, to more aggressively

pursue emerging opportunities in this area. In a short span of 5 years, ITC

Infotech has already crossed over US$ 60 million in revenues. It also has

a joint venture with ClientLogic, a top five global Business Process

Outsourcing (BPO) provider.

• ITC's foray into the Foods business is an outstanding example of

successfullyblending multiple internal competencies to create a new driver

of business growth. It began in August 2001 with the introduction of

'Kitchens of India' ready-to-eat Indian gourmet dishes. In 2002, ITC

entered the confectionery and staples segments with the launch of the

brands Mint-O and Candyman confectionery and Aashirvaad atta (wheat

flour). 2003 witnessed the introduction of Sunfeast as the Company

entered the biscuits segment. ITC's entered the fast growing branded

snacks category with Bingo! in 2007.

• In just six years, the Foods business has grown to a significant size with

over 150 differentiated products under six distinctive brands, with an

enviable distribution reach, a rapidly growing market share and a solid

market standing.

• In 2002, ITC's philosophy of contributing to enhancing the competitiveness

of the entire value chain found yet another expression in the Safety

Matches initiative. ITC now markets popular safety matches brands like

iKno, Mangaldeep, VaxLit, Delite and Aim.

• ITC's foray into the marketing of Agarbattis (incense sticks) in 2003

marked the manifestation of its partnership with the cottage sector. ITC's

popular agarbattis brands include Spriha and Mangaldeep across a

range of fragrances like Rose, Jasmine, Bouquet, Sandalwood, Madhur,

Sambrani and Nagchampa.

THE ITC WAY

ITC is a board-managed professional company, committed to creating enduring

value for the shareholder and for the nation. It has a rich organisational culture

rooted in its core values of respect for people and belief in empowerment. Its

philosophy of all-round value creation is backed by strong corporate governance

policies and systems.

ITC’s corporate strategies are:

Create multiple drivers of growth by developing a portfolio of world class

businesses that best matches organisational capability with opportunities

indomestic and export markets.

Continue to focus on the chosen portfolio of FMCG, Hotels, Paper,

Paperboards & Packaging, Agri Business and Information Technology.

Benchmark the health of each business comprehensively across the

criteria of Market Standing, Profitability and Internal Vitality.

Ensure that each of its businesses is world class and internationally

competitive.

Enhance the competitive power of the portfolio through synergies derived

by blending the diverse skills and capabilities residing in ITC are various

businesses.

Create distributed leadership within the organisation by nurturing talented

and focused top management teams for each of the businesses.

Continuously strengthen and refine Corporate Governance processes.

ITC VISION

“Sustain itc’s position as one of India’s most valuable corporation through world

class performance, creating growing values for the Indian economy and the

companies Stake holders.”

ITC MISSION

To enhance the wealth generating capabilities of the enterprise in a globalizing

environment, delivering superior and sustainable stake holder value.

BRANDS OF ITC

BABA Flavoured Chewing Tobacco

Chewing tobacco is an age old heritage. The ritual of relishing the taste of tobacco has been a practice in Asian and the Far-Eastern civilizations. The traditional way of preparing the chew is very cumbersome and unhygienic.

The DS Group has been a pioneer in introducing hygienically processed and packed chewing tobacco. Assured for international quality, refreshing taste and fragrance.

BABA, the nation’s first saffron flavoured chewing tobacco is the flagship brand of the group that has set global benchmarks for quality, since 1929. Popular internationally for its refined taste, spiced with aroma, saffron and silver flakes, BABA boasts of unwavering customer loyalty across the world.

Unique flavours of BABA have been a closely guarded secret for generations. The choicest and the finest natural ingredients and global packaging standards, make BABA the international favourite. These standards have been the corner-stone of all our offerings. Be it flavoured betelnuts or natural mouth-freshener like silver coated cardamoms, all products that come from BABA are truly world-class.

CANPAC

The collaboration between DS and the Switzerland based packaging technology major, CANPAC International AG, is an endeavour to bring a never-before packaging revolution in Asia.

Our packaging division is an ideal example of vertical integration. This international packaging solution is a unique value addition that we offer to our consumer across categories. A testimony to our idea of providing that extra flavour, that's unmatched and unparalleled. Our packaging division is an ideal example of vertical integration.

Eco-Friendly

Consumer Convenience

Corrosion Free Packaging

User Friendly, No Cut, No Nick

Counterfeit Proof Membrane Seal

Paper Bottom

Ready to Serve Packs

Catch Clear Flavoured Drink

Another innovation, which shook the market and gave a refreshing, fruity break!

Yet another nation’s first, Catch Clear Flavoured Spring Water ! Made from finest blend of flavours of natural fruits and sparkling spring water. Tantalizing with six delightful flavours – Lime n Lemon, Black Currant, Peach, Mango, Green Apple and Strawberry, with more exciting flavours in the pipeline – it also appeals to the health-conscious by being a totally caffeine-free, calorie-free & sugar-free drink!

Catch Club Soda

A perfect blend of nature's pristine purity and bubbling effervescence, Catch Club Soda in its attractive packaging, promises to fizz up your mood in an instant.

Made from hygienically processed Catch Natural Spring Water and bottled at the in-house state-of-the-art plant, that ensures retention of its discerning taste and fizz, Catch Club Soda tastes best till the very last drop.

Si lver & Gold Foi l

The DS Group has been a pioneer in bringing the best of technologies and world-class solutions to India. Silver Foil division of DS joined hands with Wallner, Germany to abolish the primitive and cruel method of manually beating silver pieces between intestines of animals. The collaboration introduced the process of electronically beating silver between a special paper, in a hygienically controlled dust free atmosphere.

Apart from Silver Foils, DS has started manufacturing Gold Foils. The beauty of these foils lie in their purity. The Gold foils are made from 24 Carat Gold. The process of making Gold Foils is almost similar to Silver Foils. DS is the only producer of 100% pure and vegetarian Silver & Gold Foils for the first time in India and our plant is the largest in the world.

CATCH JALJEERA

Plugging the need gap with a natural refreshing drink, Catch Jaljeera offers a drink which is natural with no artificial flavours and gives a freshness with a hint of salt and spice which tantalizes the taste buds and cools you from within. The product is being offered in one time use sachets that require to be emptied into a glass of water, with a stir ………and the drink is ready.

Catch Natural Spring Water

Nearly twenty-six kilometers from the town of Manali, cocooned in the Himalayan valley of the Gods, at a height of around 5000 feet, lies an ebullient spring bubbling with pristine pure water. This purity is popular as Catch Natural Spring Water, bottled at source, using the state-of-the-art packaging technology.

Catch Natural Spring Water is the only Indian bottled water brand, which has been tested and certified to comply with Food & Drug Administration (US) Code of Federal Regulations by NSF International, the world's leading independent organization dedicated to public health, safety and protection of the environment.

Bringing this pristine purity of nature to your homes is a path-breaking bottling technology, set up in association with world leaders – Sidel, France. Even though the state-of-the-art plant has a packaging capacity of around 100 bottles per minute – the demand still far exceeds the supply. Just yet another instance of how DS fulfils the latent market needs through bringing in path-breaking product technology & quality – and in the process, creates an entirely new segment.

Catch Salt & Spices

Unparalleled product quality. Host of never-before innovations. DS Group made its foray into food & beverages segment with Catch Salt & Pepper – packed in pioneering table-top rotatory dispensers – which created a unique niche of its own.

Following this spectacular success in 1987, the Group further expanded the Catch range to include the choicest spices. Handpicked from the length and breadth of the sub-continent, Catch spices are made available in fully food grade metal-lined cartons, flexible laminates and convenient composite cans.

Low-temperature Grinding Technology : What makes Catch spices, spicier than

anything else ? It is the state-of-the-art Low Temperature Grinding Technology (LTG). Choicest ingredients are grounded at a very low temperature, thus preventing evaporation of volatile & delicate oils from spices. Thereby, bringing to you the original aroma of the finest Indian exotica and its wholesome flavour.

Catch Snacks

Further extending the promise of world-class quality & packaging revolution, Catch added a range of sumptuous & farm-fresh snacks to its range in the year 2001. This includes premium quality Pistachios, Cashews, Green Grams, Green peas and especially imported Jumbo Corn – which is retailed in two exciting spicy blends.

Catch Snacks are packed in special composite cans. Besides being exported to leading stores internationally, they are also available at select outlets in India.

Catch Spring - Cola, Lemon & Orange

Bringing excellence to innovation, Catch Spring Cola, Lemon & Orange gives the refreshing himalayan freshness in exciting flavours. The new range promises to quench the long standing desire for a nupitial of pristine purity of Catch Spring Water with popular flavours.

Catch Tonic Water

Catch Indian Tonic Water, Once again, a first of its kind product – India’s first zero calorie tonic water in PET bottle. The market literally lapped up this innovative beverage and the response from the discerning individuals is highly encouraging.

CONTACT US

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Core Management Group

BOARD OF DIRECTORS

Mr. Ravinder Kumar (Chairman)Mr. Rajiv Kumar (Managing Director) Mr. Satya Narain GuptaMr. Rajendra Narain GoelaMr. Puesh KumarMr. Raj Kumar Kakrania

COMPANY SECRETARY

Mr. Sanjay Goyal

AUDITORS

M/S Jain Singhal & AssociatesM/S H.R. Surendra & Co

BANKERS

State Bank of IndiaBank of BarodaPunjab National BankJammu & Kashmir BankAndhra BankCorporation BankCitibankICICI BankStandard Chartered Bank

REGISTERED OFFICE:

1711, S.P. Mukherjee MargDelhi-110006

CORPORATE OFFICE:

A-85 & 86, Sector 2,(Gautam Buddha Nagar) Noida – 201301, U.P, INDIA

"DS Group is a real story of a glorious present enroute to an inspiring future"

Ravinder Kumar

Chairman

"Our brands add credence to our axiom of unmatched quality."

Rajiv Kumar

Managing Director

"Our philosophy is of moving up the value chain by integrating supplier competencies to help increase efficiency and productivity"

Puesh Kumar

Director

DOUBLE MAZAA

DOUBLE MAZAA is a convenient single pack, combining together the lingering taste and freshness of RAJNIGANDHA Pan Masala and the purity of TULSI Royal Flavoured Chewing Tobacco. This is specially packed for our consumers to enjoy the taste of two premium products in a single purchase.

It gives yet another reflection of the fact that we at DS, consistently seek to enhance your enjoyable experiences through our unique product offerings.

DOUBLE MAZAA is a reinforcement of our belief that everything we do, has the consumer at the center.

DS Charitable Trust

The DS Group is a vibrant entity, alive to the social responsibility it shoulders as a committed corporate citizen. While it pursues leadership in its business sphere, simultaneously it endeavours to spread hope, well-being and enjoyment for all by thereby patronising various social activities.

Set up in 1983, the trust makes a humble contribution to social action by improving the quality of life of the needy and the deprived.

Two such institutions which have benefited from this endeavour are the Anglo Sanskrit Victoria Jubliee Senior Secondary School and the Commercial School, located at Daryaganj in Delhi.

The schools have been maintaining a place of pride in the academic circles of Delhi, since 1869. These temples of learning have produced a galaxy of scholars, doctors, engineers, administrators, politicians and business tycoons.

DS Punjabi Kala Sangam

An endeavour to enrich and promote Indian art and culture.

The DS Group fosters a deep-rooted commitment to promote the entire Indian culture gamut. This ethos is embedded in the vision of Punjabi Kala Sangam, and is mirrored in the unsparing patronage the Group accords to outstanding talent and performance.

Punjabi Kala Sangam has instituted Kala Shree awards to give a fillip to remarkable talents in spheres of cinema, television, radio and fine arts.So far, over 700 renowned artists from diverse backgrounds have been felicitated with this award, giving DS an opportunity to acknowledge and honour their rich contributions in the field of Indian art and culture.

KNOW US

• DS - At a Glance • Our Founders • Vision & Mission • Core Management Group • Over The Years • Key Facts and Figures

OUR BUSINESS

• Tobacco o BABA Flavoured Chewing Tobacco o TULSI ROYAL Flavoured Chewing Tobacco

• Pan Masala o RAJNIGANDHA Flavoured Pan Masala o TULSI ROYAL GOLD Saffron blended Pan Masala o Toofani

• Pan Masala having Tobacco o TULSI MY MIX o TULSI MIX ’0’

TULSI ROYAL MIX ’00’ & NES

o TULSI ROYAL GOLD blended with BABA 600 o DOUBLE MAZAA o NAZAKAT

• Food & Beverages o CATCH Salt & Spices o CATCH Snacks o CATCH Jaljeera o PASS PASS o CATCH Beverages

CATCH Natural Spring Water CATCH CLEAR Flavoured Drink CATCH Club Soda CATCH Tonic Water CATCH Spring - Cola, Lemon & Orange

• International Alliances o CATCH Silver & Gold Foil o CANPAC

• Other Businesses o Hospitality

MANU MAHARANI, Nainital o New Projects

BEYOND BUSINESS

• DS Charitable Trust • DS Punjabi Kala Sangam Awards • Improving Life in the North East • Swasthyagram

CAREERS

• Our Leadership Model • Join Us

REACH US

• Corporate Office • Manufacturing Plants • Key Regional Offices • Contact Us

Improving Life in North East

DS always pioneers new benchmarks. It was in this spirit that we boldly ventured into setting manufacturing units in the North East region thereby setting pace for industrialization & societal development. Today, we actively employ more than 1500 locals across different levels and aim to generate employment for over 5000 people in a span of next five years through various operations and diversifications.

Besides providing basic amenities, we are also actively considering setting up wide range of public service institutions like dispensaries, schools & orphan homes. We have also initiated opportunities of earning from home: for housewives.

We wish to make this unexplored part of India into a future industrial hub for India, catering to the entire South East Asian economy.

Because, like business, care & development too does not have any boundaries.

SOCIAL & CHARITABLE ACTIVITIES

• Actively participated and contributed towards the flood relief activities in Nagaon, Morigaon & Nalbari districts of Assam by providing relief material to the affected families• Contributed Rs. 11 lacs to the Chief Minister’s Relief Fund for flood relief in Assam.• Contributed Rs. 1 crore in Chief Minister’s Relief Fund for Tsunami relief• Financial assistance to Army Wives Welfare Association (AWWA) for the welfare of war widows of Assam• Construction of the Science Laboratory and teacher’s common room and toilets at Margherita College, Tinsukia - Assam• Donated computer and furniture to schools in rural areas of Upper Assam• Donated computer furniture to Department of Zoology, Guwahati College• Constructed city bus passenger waiting shed near Guwahati College• Donated CGI sheets to Sonapur College, Guwahati for construction of a college building

• Main contributor for construction of under ground water storage tank for fire fighting at Bamunimaidan Industrial Estate

• Erection of steel made plaques of the Battle of Saraighat and development of the North Brook Gate at Sukreswar Park, Guwahati

• Reconstruction of wall around the pond & brass fencing around the steps, construction of a gate at the Ganesh Temple and construction of Sitlamai Mandir, Installation of Air circulation system and Water filtration unit at the Maa Kamakhya Temple

• Aiding for construction of Kirtan Ghar at Sarthebari in lower Assam• Contributing in construction and marble work at Ganesh Temple near

Guwahati High Court• Aiding in reconstruction of boundary wall of the Jyotinagar Mosque• Financial contributions for organizing Elephant festival at Kaziranga

Wild life Sanctuary in Assam to promote Wild Life Preservation• Contribution for renovation of the Kaziranga Heritage IB at Baguri

prior to the celebration of the centenary of the Kaziranga National Park

• Felicitating Outstanding Foresters on the eve of Kaziranga Centenary Celebration with cash awards

• Co-sponsor for Indo- Asean car rally• Sponsored R.G. Baruah Memorial 15th All India Open Body Building

Competition Mr. Saraighat 2004”• Aiding Jyotinagar Sangha to construct their office building and

gymnasium• Sponsorship of Prag Cine Awards 2003 & 2004, constituted to

promote Assamese films and artists

• Sponsorship of Jyotirupa Drama Competition & Media Awards” for excellence in Film, Television & Music

Key Facts & Figures

The fundamental purpose of business is to add value. All endeavours at DS are aimed at enduring value and achieving growth. Consistent rise in sales, a sound net worth and the highest contribution to the state exchequer, in our business, is a matter of pride for us.

With transparent dealings, we endure value, that in turn delivers that 'extra' to all our stake holders.

The Net Worth of DS Group has grown phenomenally over the last few years.

DS is also highest contributor to the central excise, in our business segment.

Key Regional Office

The core strength of the group lies in it's expansive reach covering even the remotest part of the country.

We have 15 regional offices spread across the country.

DS Group today is a diversified conglomerate with diverse business interests.

The manufacturing locations of the group is spread across the country with major concentration in the North Eastern part of India.

Manufacturing Plants

NAZAKAT

The Persian influence followed by the Mughal reign in India brought style, luxury and a new appetite of culinary exotic’s, with dinners usually ending with a pair of paan .

With time dynamics, plausible alternatives developed but failed to deliver the style, elegance, and taste which had reminiscence of that atypical ethnicity preferred by the legion.

Nazakat aims to fill the gap offering a nostalgic taste, elegant and tasteful mix of pan masala and tobacco with an exquisite perfume blend for those preferring a discerning royal taste.

NEW PROJECTS

Continuing the saga of expansion and diversification, the company has ventured into diverse business areas, with one vision, to become one of the largest business conglomerate in the North Eastern part of the country. The projects thus envisaged would catapult DS Group to a new high and carve out a special position for the group in the Corporate world. The present backward integration and diversification foray is focused on Flexible packaging, Latex rubber related products, Hospitality, Real Estate etc.

FLEXIBLE PACKAGING

Flexible packaging and printing is the fastest growing segment of the packaging Industry worldwide. The efficient use of raw materials and high-tech product protection that can be achieved using flexible packaging has made it the most popular form of packaging both in India and the world. The converted flexible packaging market is estimated to be at 6 lac MT valued at approximately Rs.12000 crores and is growing at a rate of 15% annually. The high growth rate can be attributed to the rise in demand of branded food and other products thereby leading to increased demand by the FMCG companies who are trying to increase penetration in the rural market with cost efficient, small size packs.

The good quality laminate printers and packagers are mostly located in the Northern and Western part of the country and it is difficult for them to cater the requirements of Eastern and North Eastern markets at competitive rates. The manufacturers in Eastern and North Eastern region do not have the state-of –the-art machines as well as technology, which thereby gets reflected in the product quality. One the other hand, the presence of FMCG companies in the North East has increased with excise exemption in place.

The company identified the opportunity to cater to the emerging demand of high quality packaging, in the region, supported by competitive pricing. The company is also focusing on emerging demands from the markets of Bangladesh, Nepal and Central India apart from internal consumption.

The printing, packaging and lamination plant would be equipped with state-of-the-art technology of printing, lamination, slitting and pouching providing a complete packaging solution. The company has taken keen interest to equip the plant with latest R&D facilities so as to meet the changing requirements of the industry and to be the pioneer in introducing innovative packaging solutions.

The civil work at the site has already started. The plant is expected to be functional in the last quarter of financial year 2005-06 and will provide employment to over 200 persons.

HEAT RESISTANT LATEX RUBBER THREAD (HRLRT)

Heat Resistant Latex Rubber Thread ( HRLRT) is a 12000 MT industry valued at Rs. 150 crores annually. HRLRT is the most critical product in elastic manufacturing, used in garments, hosiery, socks, sports wear, luggage

etc. The sector is experiencing a spurt in demand after the lifting of garment quota restriction by USA and European Union, effective from January 2005.

The international market is dominated by large players with multiple lines, whereas the Indian industry has small manufacturers with capacities below 3000 MT per annum. The inconsistency in the product quality of domestic manufacturers led big consumers of rubber thread to import their requirements from Thailand and Malaysia. The estimated rubber thread imports in India is 2500 MT annually.

Citing the potential, the company decided to set-up a state-of-the-art Rubber Thread Manufacturing facility at Agartala, Tripura. The state of Tripura is the second largest natural rubber producer in India and is showing a consistent growth in production. The World bank and Rubber Board has identified the region as high growth area which can lead to increased economic activity and all round development of the state.

The proposed rubber thread unit is being set-up using the latest European technology, which is recognized as one of the best sources for HRLRT technology in the world. The unit will be a model unit in the region and will generate direct employment for over 200 people. The company aspires to become the largest player in the country in this segment with a total installed capacity of 20,000 MT annually.

The plant will be operational in the last quarter of 2005-06.

CONFECTIONARY

The potential within Indian markets has propelled foreign brands to enter India. DS Group realizing the potential is aggressively planning to diversify in the field of confectionary because of it's natural and coherent strength in distribution. In search of a formidable international brand a joint venture has been formalized with the world's leading confectionary giant "LOTTE" group of Japan.

HOSPITALITY

The demand in the hospitality industry in on a rise. The industry is witnessing a rise in occupancy level, thereby reinforcing the claim of rising demand. The growth is contributed to rise in business travel, corporate leisure travel, rise in domestic and international tourism, relaxation of visa

rules etc. The growing image of the country as an attractive tourist destination is likely to result in the domestic tourism sector growing exponentially in the coming years. In one of the recent surveys conducted by Kellogg’s school of Management, US and Sasin School of Business Administration, Thailand and India is ranked as the second best exotic tourist destination with real growth rate of 8.8 percent. As per the recent reports India is ranked as the 6th most favoured destination of the world.

The industry consists of around 1,800 properties comprising of 84,000 rooms currently, which is likely to increase to at least 1,30,000 rooms by 2008. Presently this sector contributes around $25 billion worth of economic activity - around 4.8% of the GDP whereas the global average is 10%. Hence, international benchmark offers a lot of headroom for the domestic industry to catch up. This sector is expected to grow by around 6% CAGR

In line with our long-term business plan and keeping in view the opportunities available in the hospitality sector, DS has decided to foray into the Hotel Business. We propose to have a large chain of business hotels across India for which we plan to have strategic business alliance and management tie-ups with hotel chain of international repute. The company already has its presence in the sector with “Manu Maharani”, which is a premium hotel in Nainital.

Based on the detailed study on business potential and opportunities available, company has decided to go for six destinations in the first stage.

Our target segment for positioning is 5 Star Standard Business Hotels .

REAL ESTATE

India has a vast untapped potential in the sector of real estate development and is on its way to become a desired location for international real estate investors and developers. The sector reflects its impact on the GDP whereby every rupee spent adds Re. 0.78 in the GDP. The sector also affects 250 related ancillary industries and is the second highest employment generator in the country. The Real Estate Sector in India has seen a wide spectrum of changes : for starters, developers have realized the merits of transforming into corporate functioning and enhancing transparency in terms of their financials. The Real Estate market is growing at an annual rate of 30 per cent with steady growth in residential properties, shopping malls, multiplexes, food outlets, office spaces, convention and business centers across India.

Diversification and consolidation in the Real Estate Sector has been a part of DS long-term strategic imperative. Keeping in view the present potential in the sector of land banking, the company has embarked upon a plan to acquire strategic sites in Delhi NCR region and land adjacent to Gurgaon-Jaipur highway. The company intends to foray in the field of colonising and developing the acquired land in the near future and as a first step intends to develop a residential and commercial property on 600 acres land near Gurgaon.

THE ROAD AHEAD

. . . and miles to go before I sleep. Continuing with the journey, there are many more milestones to be covered including power generation, education and other infrastructural projects. In-depth feasibility analysis is going on for venturing into the power sector, considering the options of generation and distribution and transmission to power dry states. It is just a matter of time that DSL will be recognized not only in the field of FMCG but as a model of well-diversified conglomerate

NAZAKAT

The Persian influence followed by the Mughal reign in India brought style, luxury and a new appetite of culinary exotic’s, with dinners usually ending with a pair of paan .

With time dynamics, plausible alternatives developed but failed to deliver the style, elegance, and taste which had reminiscence of that atypical ethnicity preferred by the legion.

Nazakat aims to fill the gap offering a nostalgic taste, elegant and tasteful mix of pan masala and tobacco with an exquisite perfume blend for those preferring a discerning royal taste.

Born on 01-01-1901, Call it coincidence. Or call it destiny. Birth of a legend Shri Dharampal Ji, remains the dawn of a new era.

An era when the nation was to experience the taste of independence. Beginning with a modest perfume shop in Chandni Chowk, in the heart of Delhi, Shri Dharampal Ji, was adding his personal touch in spreading fragrance to the nation. A self-starter and a visionary, he was farsighted to conceive the impossible.

Shri Satyapal Ji was a visionary who made everything possible. He inherited high virtues and aspiration for being the best in one's own business. His in-depth knowledge of perfumes honoured him with the title of "Sugandhi" (Perfumer). Shri Satyapal Ji was skilled at blending tradition with modernity. He is credited with blending chewing tobacco with exquisite perfumes. He is also known for bringing the element of quality and research, hitherto unknown in this category. Today, all our endeavours are guided by his mission of offering the unmatched.

1929 : A modest perfume shop set up in Chandni Chowk, Delhi.

Tobacco & Related Products

1948 : Quality chewing tobacco launched.

1964 : BABA - the flagship brand launched.

1979 : Tulsi touches millions.

1983 : Rajnigandha redefines pan masala category.

1990 : Tulsi Mix matches expectations.

2001 : My Mix & Double Mazaa capture the market.

2002 : Rajni & Toofani storm the market.

2004 : Nazakat spells its charm

Foods & Beverages

1987 : Foray into F&B, Catch Salt & Pepper sprinklers launched.

1999 : Catch Natural Spring Water launched.

2000 : Catch Kitchen Range Spices launched.

2001 : Foray into Snacks.

2002 : Catch adds fizz with the launch of Catch Club Soda.

2003 : Catch Clear Flavoured Drink launched.

2004 : Catch Tonic water added

Over The Years . . . . . .

2004 : Catch Jaljeera becomes instant favourite

2005 : Catch Spring Cola, Lime & Orange give a refreshing change

2005 : Catch Spice 6, stirs up the spice market

Mouth Freshener

1999 : PASS PASS - Saunf-date fruit assorted fun mix refreshes the nation.

2005 : Paas Paas Meetha Magic launched

Hospitality

2000 : Manu Maharani, Nainital, sets new benchmarks

2005 : DS plans major diversification and expansion in the hospitality sector

Retail

2003 : DS draws up plan for a mega retail project

Rubber

2004 : Plans to set up Rubber complex at Agartala

Lamination Printing & Packaging

2004 : Plans to set up Printing, Packaging and Lamination unit at Guwahati

2004 : DS & Lotte, Japan formed a joint venture to produce and market confectionaries

Real Estate

2004 : Entry into Real Estate bussiness

International Alliance

1991 : DS & SRW Maschinen (I) Ltd, Germany, come together to electronically produce finest malleable silver foils in India.

2001 : DS & Canpac, Switzerland join hands to bring world-class eco-friendly packaging solutions to India.

2004 : DS & Process Engineering, Italy for providing technology for Heat Resistant Rubber Thread project.

PASSPASS

The saunf-datefruit fun mix.

PASSPASS is the story of a brand that has created a new product category altogether.

The nation's first ever, branded healthy assorted mix, PASSPASS offers the freshness of hand-picked quality dry dates, saunf(fennel), coconut, saffron, silver coated cardamom seeds, coriander seeds, melon seeds, natural sweetener and herbs. With its fresh and crunchy feel it is the right mix for guilt free indulgence.

Available in delightful flavours, packed in trendy flip-top packs, sachets and dinning table packs PASSPASS has today become a benchmark in the industry for new product creation. Paas Paas Meetha Magic Launched in 2005 offers a sweeter version of Paas Paas with coloured fennel, dates, coated sugar balls, silver coated cardamom, rose petals and pan leaves. Taste so tempting that you will never get it off your mind.

RAJNIGANDHA Pan Masala

Art and acumen. Emotion and enthusiasm. Passion and perfection. Packed together since 1983 ... Nothing compares to RAJNIGANDHA.

RAJNIGANDHA is the world's largest selling premium flavoured Pan Masala. Made up of hand-picked cardamom, lingering lime, pure menthol, clear catechu, best betel nuts and the finest flavours. RAJNIGANDHA has been offering quality taste, time after time.

It is available in vacuum packed cans, that ensure longer shelf life, and longer retention of its exquisite aromatic fragrance.

Rajnigandha is available in 1.6 gm, 4 gm, 8.5 gm, 18 gm, 50 gm, 100 gm, 250 gm and 1000 gm pack sizes.

Need creates demand, a long felt need and aspiration of millions got fulfilled in Toofani.

Making a spectacular foray into the popular category, Toofani caught the imagination of the market in no time. A unique blend of choicest ingredients at ‘easy-to-afford’ prices gave Toofani Flavoured Pan Masala its distinct place in the crowd.

Toofani with its unique taste and flavour entices the gutsy. With a aroma which gives to drool and a pleasure which lasts long, Toofani is the favorite with all.

SWASTHYAGRAM

Modern Medicine have made an exceptional progress in the last two centuries but even today physicians world over believe in treatment of some chronic and acute diseases by natural resources.

'The Health Villa' - SWASTHYAGRAM - a yoga and nature cure centre established at Manesar, India, provides expert treatment based on the principles of Naturopathy, for all chronic and acute diseases.

The peaceful environs, amongst which the center is developed, augment the therapeutic effects of the treatment offered. Thus, preserving the tradition for the next generations.

SWASTHYAGRAM - The Health Villa, a way of life in the lap of the nature.

SWASTHYAGRAM

Modern Medicine have made an exceptional progress in the last two centuries but even today physicians world over believe in treatment of some chronic and acute diseases by natural resources.

'The Health Villa' - SWASTHYAGRAM - a yoga and nature cure centre established at Manesar, India, provides expert treatment based on the principles of Naturopathy, for all chronic and acute diseases.

The peaceful environs, amongst which the center is developed, augment the therapeutic effects of the treatment offered. Thus, preserving the tradition for the next generations.

SWASTHYAGRAM - The Health Villa, a way of life in the lap of the nature.

Tulsi Mix '0'

Tulsi Mix ‘0’ is a blend of tobacco and Pan Masala that offers complete and long lasting satisfaction. Spiced with specially prepared natural perfumed compound, made with extracts of fresh flowers, tobacco, betelnut, catechu and lime.

Tulsi Mix combines the right blend with quality customized to suit diverse regional palates.

TULSI MY MIX

My Mix, is a mix of pan masala and tobacco to give you a perfect blend, ensuring a lasting satisfaction.

Made with natural ingredients like, raw tobacco, betel nut, catechu and lime powder blended with specially prepared natural perfumed compounds.

Tuls i Royal Flavoured Chewing Tobacco

The DS Group has been a pioneer in introducing hygienically processed and packed chewing tobacco. Assured for international quality, refreshing taste and fragrance.

TULSI has been created after years of research for that perfect flavour and enticing aroma. Made from fresh and natural ingredients like tobacco flakes, vegetarian silver foil, permitted spices, saffron and added flavours, Tulsi gives an excellent taste for instant satisfaction,long-lasting flavour and fragrance.

Tulsi Royal Chewing Tobacco is available in five varieties;’0’, ’00’, ‘000’, ‘0000’, ‘00000’, offering varying degrees of refinement. With a touch of silver and saffron, Tulsi caters to discerning taste buds.Tulsi is available with silver and without saffron variety as well as with saffron without silver varieties. The products are available in pack sizes of 0.5gm, 10gm, 50gm & 200gm.

Tulsi Royal Flavoured Chewing Tobacco

The DS Group has been a pioneer in introducing hygienically processed and packed chewing tobacco. Assured for international quality, refreshing taste and fragrance.

TULSI has been created after years of research for that perfect flavour and enticing aroma. Made from fresh and natural ingredients like tobacco flakes, vegetarian silver foil, permitted spices, saffron and added flavours, Tulsi gives an excellent taste for instant satisfaction,long-lasting flavour and fragrance.

Tulsi Royal Chewing Tobacco is available in five varieties;’0’, ’00’, ‘000’, ‘0000’, ‘00000’, offering varying degrees of refinement. With a touch of silver and saffron, Tulsi caters to discerning taste buds.Tulsi is available with silver and without saffron variety as well as with saffron without silver varieties. The products are available in pack sizes of 0.5gm, 10gm, 50gm & 200gm.

TULSI has been created after years of research for that perfect flavour and enticing aroma. Made from fresh and natural ingredients like tobacco flakes, vegetarian silver foil, permitted spices, saffron and added flavours, Tulsi gives an excellent taste for instant satisfaction,long-lasting flavour and fragrance.

Tulsi Royal Chewing Tobacco is available in five varieties;’0’, ’00’, ‘000’, ‘0000’, ‘00000’, offering varying degrees of refinement. With a touch of silver and saffron, Tulsi caters to discerning taste buds.Tulsi is available with silver and without saffron variety as well as with saffron without silver varieties. The products are available in pack sizes of 0.5gm, 10gm, 50gm & 200gm.

Tulsi Royal Flavoured Chewing Tobacco

The DS Group has been a pioneer in introducing hygienically processed and packed chewing tobacco. Assured for international quality, refreshing taste and fragrance.

TULSI has been created after years of research for that perfect flavour and enticing aroma. Made from fresh and natural ingredients like tobacco flakes, vegetarian silver foil, permitted spices, saffron and added flavours, Tulsi gives an excellent taste for instant satisfaction,long-lasting flavour and fragrance.

Tulsi Royal Chewing Tobacco is available in five varieties;’0’, ’00’, ‘000’, ‘0000’, ‘00000’, offering varying degrees of refinement. With a touch of silver and saffron, Tulsi caters to discerning taste buds.Tulsi is available with silver and without saffron variety as well as with saffron without silver varieties. The products are available in pack sizes of 0.5gm, 10gm, 50gm & 200gm.

A tryst with a taste which befits monarchs ! Blended with BABA 600 the best chew-tobacco man has ever produced, endowed with refined blend, spiced with secretive aroma , the richness of silver flakes with an exquisite blend of pan masala ; TULSI ROYAL GOLD with BABA 600 offers the SUPREME taste which only the monarchs dare to savor.

Made with natural and herbal ingredients like choicest tobacco & betel-nuts, catechu, lime powder, cardamom, menthol, delectable flavors, specialty herbs and permitted spices, TULSI ROYAL GOLD with BABA 600 reigns supreme.

TULSI ROYAL GOLD with BABA 600 is available in pouch packing.

TULSI ROYAL GOLDblended with BABA 600

TULSI ROYAL GOLDSaff ron b lended Pan Masala

Tulsi Royal Gold pan Masala offers a succulent taste of richness and royalty reflected in its unsullied blend of choicest tobacco and pan masala embroiled in flavoring saffron which augments the taste to make it fit for the majestic desires. Made with natural and herbal ingredients like betel-nuts, catechu, lime powder, cardamom, menthol, delectable flavors, specialty herbs and permitted spices, Tulsi Royal Gold pan Masala offers a real royal taste, fit for a king! “ Jiyo Maharaja style”

REACH US . . . . .

We thank you for your interest in DS Group.

In case you have any further queries, please feel free to mail us at:

ds@dsgroupindia.com or shweta.sarkar@dsgroupindia.com

Shweta Sarkar Executive Corporate CommunicationsDS GroupA - 85/86, Sector 2Noida - 201301India

Tel: 91 (120) 2522140, 2530554Fax: 91 (120) 2522592

TULSI ROYAL MIX ’00’ & NES

Tulsi Royal Mix Pan Masala with Tulsi ’00’ is a perfect mix of power and pompous taste blended to pamper your taste buds. Pledging to deliver the strength and punch of tobacco alongwith a perfect mélange of pan masala which spells the grandeur of eloquent vigor, lingering freshness and mellowed smoothness.

Offering a perfect blend to the coterie of connoisseurs, The New Extra Strong Tulsi Royal Mix Pan Masala with Tulsi '00' promises to deliver the power and punch of tobacco alongwith a perfect blend of pan masala which spells the clout of power , extra strength, a verve taste and lingering freshness.

Vision & Miss ion

Innovating Enjoyment With That Extra Flavour.

Enduring value. Enhancing appeal. Enriching life. By adding that extra flavour. We are constantly innovating to offer products & services, which are distinctive, differentiating and not the ordinary.

• To sustain global leadership in the Chewing Tobacco Business.• To become a household name for quality products in Foods & Beverages.• To set new benchmarks in the sectors we operate.

OUR LOGO – OUR SPIRIT

Our logo is a visual manifestation of our spirit to continuously innovate and rediscover ourselves to accomplish newer frontiers.

It projects our firm determination to become a world leader and conveys a distinctive image of innovation and change.

DS Group is today a well - diversified conglomerate with business leadership across wide spectrum of industries - right from chewing tobacco, food & beverages, real estate, hospitality and packaging.

.We are proud to have build strong Indian brands and sustained their leadership over the years - and are proud to share with you some of our competencies, which constitute the backbone of our success across diversified sectors.

Continuous investment into research & development forms the very elixir of the DS Group. Be it developing indigenous technologies or embracing international technological solutions -we ensure that any product from our stable sets global benchmarks in innovation & quality.

A well-documented process is adopted for product development & quality assurance. Apart from a centralized R&D laboratory housed at the corporate office, all our manufacturing units are also equipped with state-of-the-art technology and specialized microbiology labs.

.While dedicated teams of research specialists continuously work towards bringing enhancements in existing products, the quest for innovation leads us to interact & learn from global leaders in various segments. This has been the guiding philosophy in associating with some of the best-known corporates to bring never-before innovations in the country. These innovations are result of our meticulous research into ever-changing customer needs and creating new segments to pro-actively fulfill the requirements. Our associations include tying-up with Canpac of Switzerland to bring biodegradable, composite can packaging; Wallner from Germany to bring nation's first 100% vegetarian silver foils; Sidel France for spring water bottling operations and now Process Engineering, Italy for providing technology for manufacturing Heat Resistant Rubber thread and lot more!

To effectively back our quest for innovation as well as passion to expand into newer frontiers, we have build considerably strong project implementation skills over past few years. Right from site selection, facility planning, construction & placement to project commissioning-we have a specialized team to deliver timely turnkey projects.

.We are just providing instances of some of our recent projects, set up by us :

PROJECTS PROJECT COST (Investment)

TECHNICAL COLLABORATION

SET UP DURATION

Manufacturing facilities for chewing tobacco brands at Guwahati and Agartala

Rs.18crores (Indigenous) 11 months

DS Canpac Division

Rs.17crores Canpac, Switzerland

6 months

Natural Spring Water Bottling Plant at Kullu

Rs.14crores Sidel, France 6 months

• Present in all 28 states

• Manufacturing sites at HP, UP & North East• 16 DEPOTS across India• 17 C&S Agents across India• 1800 authorized dealers• Product availability at 1.6 million outlets

Besides a widespread national reach, we are proud to have established an enviable market for our brands at leading International markets - with dedicated agents to serve markets at Canada, North America, South America Africa, Europe, Middle East and Far East.

Effectively backing this wide reach is an efficient logistics and supply chain management-which continuously strives to establish a productive synergy amongst various suppliers all over the world as well as timely delivery of raw materials and finished products across various outlets. The initiative is further supported by an extensive ERP implementation across all our manufacturing bases as well as key depots-thus helping us to constantly monitor & adapt to changing market parameters almost with real-time effectiveness.

These systems are continuously updated-so that we can give enjoyment to the customer, the way he wants it!

The facilities at Guwahati are ISO 9001 certified

DS Group is today a well - diversified conglomerate with business leadership across wide spectrum of industries - right from chewing tobacco, food & beverages, real estate, hospitality and packaging.

.We are proud to have build strong Indian brands and sustained their leadership over the years - and are proud to share with you some of our competencies, which constitute the backbone of our success across diversified sectors.

Continuous investment into research & development forms the very elixir of the DS Group. Be it developing indigenous technologies or embracing international technological solutions -we ensure that any product from our stable sets global benchmarks in innovation & quality.

A well-documented process is adopted for product development & quality assurance. Apart from a centralized R&D laboratory housed at the corporate office, all our manufacturing units are also equipped with state-of-the-art technology and specialized microbiology labs.

.While dedicated teams of research specialists continuously work towards bringing enhancements in existing products, the quest for innovation leads us to interact & learn from global leaders in various segments. This has been the guiding philosophy in associating with some of the best-known corporates to bring never-before innovations in the country. These innovations are result of our meticulous research into ever-changing customer needs and creating new segments to pro-actively fulfill the requirements. Our associations include tying-up with Canpac of Switzerland to bring biodegradable, composite can packaging; Wallner from Germany to bring nation's first 100% vegetarian silver foils; Sidel France for spring water bottling operations and now Process Engineering, Italy for providing technology for manufacturing Heat Resistant Rubber thread and lot more!

For us, innovation & enjoyment begins at our work place! We believe in grooming each of our team member to be the Messenger of Joy. And to help him spread enjoyment all across, DS has implemented a well-thought Leadership Model-which brings transparency, collective wisdom, performance orientation & minimum response time.

DS group is a function-driven lean organization. Not only are the team members given exposure to intra-functional & inter-functional tasks, they are equipped with world-class training & continuous development programs-

which all go a long way in laying strong foundation of a dynamic & vibrant organization.

Today, DS is a family of around 2000 innovators-eachcontributing in their own significant way to make the world a happier place to live in & enjoy living! Through DS's unique products and offerings.

RESEARCH OBJECTIVE

The main objective of the research was to do a extensive study of

systems,practices and structures of selective companies for snack food with

relevance to convenience channel and compare the same with those of itc. in this

project i had to visit various distributorsof various companies in various regions

and find out about the practices and systems that they are following.I had to also

study the various schemes that itc’s competitors are giving and compare it with

the schemes of ITC and find out which one is better.I had to also study the

margin structures that the various companies were giving to their retailers and

distributors and compare it with ITC’S that with one is better.

The focus of this research is to find out how other companies like lays and

haldiram its major competitors what practices are they following, what is their

distribution network like how many variants do they have in the snack food. The

scope of the project involved the following areas to be covered extensively-

Ordering, delivering and cash collection models- people& processes. – under

this I had to cover the distributors profile, that is their location and number. What

are the loctions where the distributors are located and hoe many of them are

there in number for each region and each company.secondly I had to understand

the infrastructure that the distributors are using like mechanized and non

mechanized units which includes three wheelers, rickshaw, mopeds, cycles

etc.Then I had to know about the margins that the various companies are giving

to their distributor and retailers.Then I had to study about the coverage plan,

which involves the total number of outlets that the distributors cover in their

regions for respective companies, and what is their mode of transportation,

through which they cover these outlets. Then I ha d to find out the frequency of

service that the salesmen of respective compnies are undergoing in respective to

the outlets that they cover, that is how many times in a week is one salesman

covering a particular outlet.I had to also find out about the no of sku;s and

varients that each of these companies have.Then I had to know about the norms

and delivary process of various companies, what norms do the distributors have

to follow set by the company, and what is their delivary process. Then I had to

find out about the cash and credit collection method that the distributors are

giving to the retailers.I had to also find out about the billing methods and the

various sehemes that the companies are giving to the consumers.Apart from this

I had to also find out about the stock rotation , and damage stock replacement

policies of the companies, and also about maintaining bingo rack hygine.

THE RESEARCH

The Research Methodology

Research Objective -To suudy the systems, practices and structures of selective

companies for snack food in convenience channel and compare it with ITC.

Research Design: Descriptive research design has been used.

Research Plan

Data sources: Primary data has been used .

Research Approaches: Type of research approaches used is:

o Survey Research

Research Instruments: Questionnaires (closed end & open end questions have

been used)

Sampling Plan: Sampling Unit: Distributors of various companies in various

regions.

o Sampling Procedure : cluster Sample.

Contact Methods: Face to face interviews.

Survey Research has been used because of the following reasons:

• Can accommodate large sample sizes and generalize results

• Can distinguish small differences

• Ease of administering and recording questions and answers

• Ability to use statistical analysis

Factors and relationships not directly measurable can be studied

SUCCESSFUL INVENTORY MANAGEMENT

Successful inventory management involves balancing the costs of inventory

with the benefits of inventory. Many small business owners fail to appreciate

fully the true costs of carrying inventory, which include not only direct costs

of storage, insurance and taxes, but also the cost of money tied up in

inventory. This fine line between keeping too much

inventory and not enough is not the manager's only concern. Others include:

1. Maintaining a wide assortment of stock -- but not spreading the

rapidly moving ones too thin;

2. Increasing inventory turnover -- but not sacrificing the service level;

3. Keeping stock low -- but not sacrificing service or performance.

4. Obtaining lower prices by making volume purchases -- but not ending

up with slow-moving inventory; and

5. Having an adequate inventory on hand -- but not getting caught with

obsolete items.

The degree of success in addressing these concerns is easier to gauge for

some than for others. For example, computing the inventory turnover ratio is

a simple measure of managerial performance. This value gives a rough

guideline by which managers can set goals and evaluate performance, but it

must be realized that the turnover rate varies with the function of inventory,

the type of business and how the ratio is calculated (whether on sales or cost

of goods sold).

Average inventory turnover ratios for individual industries can be obtained

from trade associations.

THE PURCHASING PLAN

One of the most important aspects of inventory control is to have the items

in stock at the moment they are needed. This includes going into the market

to buy the goods early enough to ensure delivery at the proper time. Thus,

buying requires advance planning to determine inventory needs for each

time period and then making the commitments without procrastination. For

retailers, planning ahead is very crucial. Since they offer new items for sale

months before the actual calendar date for the beginning of the new season,

it is imperative that buying plans be formulated early enough to allow for

intelligent buying without any last minute panic purchases. The main reason

for this early offering for sale of new items is that the retailer regards the

calendar date for the beginning of the new season as the merchandise date

for the end of the old season. For example, many retailers view March 21 as

the end of the spring season, June 21 as the end of summer and December 21

as the end of winter.

Part of your purchasing plan must include accounting for the depletion of the

inventory. Before a decision can be made as to the level of inventory to

order, you must determine how long the inventory you have in stock will

last. For instance, a retail firm must formulate a plan to ensure the sale of the

greatest number of units. Likewise, a manufacturing business must formulate

a plan to ensure enough inventory is on hand for production of a finished

product.

In summary, the purchasing plan details:

1. When commitments should be placed;

2. When the first delivery should be received;

3. When the inventory should be peaked;

4. When reorders should no longer be placed; and

5. When the item should no longer be in stock.

Well planned purchases affect the price, delivery and availability of products

for sale.

_____________________________________________________________

CONTROLLING YOUR INVENTORY

To maintain an in-stock position of wanted items and to dispose of unwanted

items, it is necessary to establish adequate controls over inventory on order

and inventory in stock. There are several proven methods for inventory

control. They are listed below, from simplest to most complex.

1. Visual control enables the manager to examine the inventory visually

to determine if additional inventory is required. In very small

businesses where this method is used, records may not be needed at

all or only for slow moving or expensive items.

2. Tickler control enables the manager to physically count a small

portion of the inventory each day so that each segment of the

inventory is counted every so many days on a regular basis.

3. Click sheet control enables the manager to record the item as it is used

on a sheet of paper. Such information is then used for reorder

purposes.

4. Stub control (used by retailers) enables the manager to retain a portion

of the price ticket when the item is sold. The manager can then use the

stub to record the item that was sold.

As a business grows, it may find a need for a more sophisticated and

technical form of inventory control. Today, the use of computer systems to

control inventory is far more feasible for small business than ever before,

both through the widespread existence of computer service organizations and

the decreasing cost of small-sized computers. Often the justification for such

a computer-based system is enhanced by the fact that company accounting

and billing procedures can also be handled on the computer.

1. Point-of-sale terminals relay information on each item used or sold.

The manager receives information printouts at regular intervals for

review and action.

2. Off-line point-of-sale terminals relay information directly to the

supplier's computer who uses the information to ship additional items

automatically to the buyer/inventory manager.

The final method for inventory control is done by an outside agency. A

manufacturer's representative visits the large retailer on a scheduled basis,

takes the stock count and writes the reorder. Unwanted merchandise is

removed from stock and returned to the manufacturer through a

predetermined, authorized procedure.

A principal goal for many of the methods described above is to determine

the minimum possible annual cost of ordering and stocking each item. Two

major control values are used:

1) the order quantity, that is, the size and frequency of orders; and

2) the reorder point, that is, the minimum stock level at which additional

quantities are

ordered. The Economic Order Quantity (EOQ) formula is one widely used

method of computing the minimum annual cost for ordering and stocking

each item. The EOQ computation takes into account the cost of placing an

order, the annual sales rate, the unit cost, and the cost of carrying inventory.

Many books on management practices describe the EOQ model in detail.

DEVELOPMENTS IN INVENTORY MANAGEMENT

In recent years, two approaches have had a major impact on inventory

management: Material Requirements Planning (MRP) and Just-In-Time (JIT

and Kanban). Their application is primarily within manufacturing but

suppliers might find new requirements placed on them and sometimes

buyers of manufactured items will experience a difference in delivery.

Material requirements planning is basically an information system in which

sales are converted directly into loads on the facility by sub-unit and time

period. Materials are scheduled more closely, thereby reducing inventories,

and delivery times become shorter and more predictable. Its primary use is

with products composed of many components.

MRP systems are practical for smaller firms. The computer system is only

one part of the total project which is usually long-term, taking one to three

years to develop.

Just-in-time inventory management is an approach which works to eliminate

inventories rather than optimize them. The inventory of raw materials and

work-in-process falls to that needed in a single day. This is accomplished by

reducing set-up times and lead times so that small lots may be ordered.

Suppliers may have to make several deliveries a day or move close to the

user plants to support this plan.

TIPS FOR BETTER INVENTORY MANAGEMENT

At time of delivery

1. Verify count -- Make sure you are receiving as many cartons as are

listed on the delivery receipt.

2. Carefully examine each carton for visible damage -- If damage is

visible, note it on the delivery receipt and have the driver sign your

copy.

3. After delivery, immediately open all cartons and inspect for

merchandise damage.

When damage is discovered

1. Retain damaged items -- All damaged materials must be held at the

point received.

2. Call carrier to report damage and request inspection.

3. Confirm call in writing--This is not mandatory but it is one way to

protect yourself.

Carrier inspection of damaged items

1. Have all damaged items in the receiving area -- Make certain the

damaged items have not moved from the receiving area prior to

inspection by carrier.

2. After carrier/inspector prepares damage report, carefully read before

signing.

After inspection

1. Keep damaged materials -- Damaged materials should not be used or

disposed of without permission by the carrier.

2. Do not return damaged items without written authorization from

shipper/supplier.

SPECIAL TIPS FOR MANUFACTURERS

If you are in the business of bidding, specifications play a very important

role. In writing specifications, the following elements should be considered.

1. Do not request features or quality that are not necessary for the items'

intended use.

2. Include full descriptions of any testing to be performed.

3. Include procedures for adding optional items.

4. Describe the quality of the items in clear terms.

The following actions can help save money when you are stocking

inventory:

1. Substitution of less costly materials without impairing required

quality;

2. Improvement in quality or changes in specifications that would lead to

savings in process time or other operating savings;

3. Developing new sources of supply;

4. Greater use of bulk shipments;

5. Quantity savings due to large volume, through consideration of

economic order quantity;

6. A reduction in unit prices due to negotiations;

7. Initiating make-or-buy studies;

8. Application of new purchasing techniques;

9. Using competition along with price, service and delivery when

making the purchase selection decision.

22.1 INTRODUCTION

In majority of the organisations, the cost of material forms a substantial part

of the selling price of the selling price of the product. The interval between

the receiving the purchased parts and transforming them in to final products

varies from industries to industries depending upon the form of inventories.

It is therefore necessary to hold Materials are procured and held in the form

of inventories. It is therefore necessary to hold inventories of various kinds

to act as a buffer between supply and demand for efficient operatopm of the

system. Thus, an effective control on inventory becomes a must for smooth

and efficient running of the production cycle with least interruptions. The

stocking of anything that is tangible in order to meet the future demand is the

subject-matter of inventory theory.

22.2 MEANING OF INVENTORY

Inventory generally refers to the materials in stock. It is also called the idle

resource of and enterprise. Inventories represent those items which are in the

form of materials which are yet to be utilised .

22.3 TYPES OF INVENTORIES

A manufacturing firm generally carries the following types of inventories:

1. Raw materials: Raw materials are those basic unfabricated

materials which have not un-dergone andy operation since they

are reeceived from the suppliers, e.g. round bars, angles,

channels, pipes, etc,

2. Bought out parts: These parts refer to those finished parts,

subassemblies which are put-chased form outside as per the

company' specifications.

3. Work-in -process inventories (WIP) : These refer to the items or

materials in partially completed condition of manufacturing, e-

g- semi-finished products at the various stages of manufacture.

4. Finished goods inventories: These refer to the completed

products readu for dispatch.

5. Maintenance, repair and operating stores: Normally these

inventories refer to those. items which do not form the part of

the final product but are consumed in the production process, e-

g- machine spares, oil, grease.

6. Tools inventory: Includes both standard tools and special tools.

7. Miscellaneous inventories: Miscellaneous in ventories-office

stationaries and other con-sumable stores.

Inventories can also be classified as (i) Fluctuation inventories,

(ii) Anticipaion inventories, (iii) Lot size in ventories, and (iv)

Transportation in ventories.

Flutuation in ventories :have to be be carried for the reason that

sales and production times for the product cannot be always predicted

with accuracy. There are variations in demand and lead times required

to manufacture items. Thus, there is a need for reserve stock or safety

stock to account for the fluctuations in demand and lead time.

Anticipation inventories : are built up in advance for big selling

season, promotion programme or anticipation of likely change in

demand suddenly and in case of plant shutdown period It is the

inventory for the future need.

Lot size inventory : refers to producing and storing at the rate

higher than the current consumption rate. The production in lots is

going to help the advantage of price discounts for quantities

purchasesd in bulk and fewer set-ups and, hence, the lower set-up

cost.

The transportation inventories exist : because materials must be

moved from one place to another. When transportation requires a long

time, the items in transport represent the inventory.Thus,

transportation inventory is a result of extended or longer

transportation time.

REASONS FOR HAVING INVENTORY

1. To stabilise production: The demand for an item fluctuates because of

the number of factors, e-g- seasonality, production schedule etc. The

inventories (raw materials and components should be made available

to the production as per the demand failing which results in stock out

and the production stoppage takes place for want of materials. Hence,

the inventory is kept to take care of this fluctuation so that the

production is smooth .

2. To take advntage of price discounts: Usually the manufactures offer

discount for bulk buying and to gain this price advantage the materials

are bought in bulk even though it is not required immediately. Thus,

inventory is maintained to gain economy in purchasing.

3. To meet the demand during the replenishment period; The lead time

for procurement of materials depends upon many factors like location

of the source, demand supply condition etc. So inventory is

maintained to meet the demand during the procurement

(replenishment) period.

4. To prevent loss of orders (sales): In this competitive scenario, one has

to meet the delivery schedules at 100 per cent service level, means

they cannot afford to miss the delivery schedule which may result in

loss of sales. To avoid this the organisations have to maintain

inventory.

5. To keep pace with changing market conditions: The organisations

have to anticipate the changing market sentiments and they have to

stock materials in anticipation of non-availability of materials or

sudden increase in prices.

6. Sometimes the organisations have to stock materials due to other

reasons like suppliers minimum quantity condition, seasonal

availability of materials or sudden increase in prices.

22.4 INVENTORY CONTROL IN DS GROUP

Inventory control is a planned approach of determining what to order,

when to order and how much to order and how much to stock so that

costs associated with buying and storing are optimal without

interrupting production and sales. Inventory control basically deals

with two problems, (i) When should an order be placed? (Order level),

and (ii) How much should be ordered ? (Order quantity)

These questions are answered by the used of inventory models.

The scientific control system strikes the balance between the loss due

to non-availability of an item and cost of carrying the stock of an item.

Scientific inventory control aims at maintaining optimum level of

stock of goods required by the company at minimum cost to the

company.

22.6. OBJECTIVES OF INVENTORY CONTROL

1. To ensure adequate supply of products to customer and

avoid shortages as far as possible .

2. To make sure that the financial investment in inventories

is minimum (i.e.to see that the working capital is blocked

to the minimum possible extent).

3. Efficient purchasing, storing, consumption and

accounting for materials is an important objective.

4. To maintain record of inventories of all the items and to

maintain the stock within the desired limits.

5. To ensure timely action for replenishment.

6. To provide a reserve stock for variations in lead times of

delivery of materials.

7. To provide a scientific base for both schort-term and

long-term planning of materials.

22.7. BENEFITS OF INVENTORY CONTROL

It is an established fact that through the practice of scientific

inventory control the stocks can be reduced anywhere between

10 per cent to 40 per cent. The benefits of inventory control are;

1. improvement in customers relationship because of the

timely delivery of goods and services.

2. Smooth and uninterupted production and, hence, no stock

out.

3. Efficient utilisation of working capital.

4. Helps in minimising loss due to deterioration,

obsolescence damage.

5. Economy in purchasing.

6. Eliminates the possibility of duplicate ordering.

22.8. COSTS ASSOCIATED WITH INVENTORY

1. Purchase (or production) cost: The value of an item is its

unit purchasing (production) cost. This cost becomes

significant when availing the price discounts. These cost

is expressed as Rs/unit.

2. Capital cost: The amount invested in an item, (capital

cost) is an amount of capital not available for other

purchases. if the money were invested somewhere else, a

return on the investment is expected . A charge to

inventory expenses is made to account for this unreceived

return. The amount of the charge reflects the percentage

return expected from other investment.

3. Ordering cost: It is also known by the name procurement

cost or replenishment cost or acquisition cost. Cost of

ordering is the amount of money expended to get an item

into inventory. This takes into account all the costs

incurred from calling the quotations to the point at which

the items are taken to stock.

There are two types of costs-Fixed costs and variable

costs.

Fixed cost depend on the number of orders whereas

variable costs change with respect to the number of

orders placed. The salaries and wages of permanent

employees involved in purchase function and control of

inventory, purchasing, incoming inspection, accounting

for purchase orders constitute the major part of the fixed

costs. The cost of placing an order varies from one

organisation to another. to They are generally classified

under the following heads:

(i) Purchasing : The clerical and administrative cost associated

with the purchasing the cost of requisitioning material, placing

the order, follow-up, receiving and evaluating quotations.

(ii) Inspection : The cost of checking material after they are

received by the supplier for quantity and quality and

maintaining records of the receipts.

(iii) Accounting : the cost of checking supply against each order,

making payments and maintaining records of purchases.

(iv) Transportation costs.

4. Inventory carrying costs (holding costs) : These are the

costs associated with holding a given level of inventory on hand and

this cost vary in direct proportion to the amount of holding the stock

in stores . the holding costs include.

(i) Storage costs (rent, heating lighting etc. )

(ii) Handling costs: Costs associated with moving the items such as

cost of labour, equipment for handling.

(iii) Depreciation, taxes and insurance.

(iv) Costs on record keeping.

(v) Product deterioration and obsolescence.

(vi) Spoilage, breakage, pilferage and loss due to perishable nature.

5. Shortage cost : When there is a demand for the product

and the item needed is not in stock, then we incur a shortage cost or

cost associated with stock out. The shortage costs include:

(i) Backorder costs.

(ii) Loss of future sales.

(iii) Loss of customer goodwill.

(iv) Extra cost associated with urgent, small quantity ordering costs.

(v) Loss of profit contribution by lost sales revenue.

The unsatisfied demand can be satisfied at a later stage (by means of

back orders) or unfulfilled demand is lost completely (no back

ordering, the shortage costs become proportional to only the shortage

quantity)

22.9 INVENTORY CONTROL - TERMINOLOGY

(1) Demand : it is the number of items (products) required per unit

of time. The demand may be either deterministic or

probabilistic in nature.

(2) Order cycle: The time period between to successive orders is

called order cycle.

(3) Lead time.: The length of time between placing an order and

receipt of items is called lead time.

(4) Safety Stock : It is also called buffer stock or minimum stock .

It is the stock or inventory needed to account for delays in

materials supply and to account for sudden increase in demand

due to rush orders.

(5) Inventory turnover : If the company maintains inventories equal

to 3 months consumption. It means that inventory turnover is 4

times a year, i.e. the entire inventory is used up and replaced 4

times a year.

1.5 Re-order level (ROL): It is the point at which the replenishment

action is initiated. When the stock level reaches R.O.L., the

order is placed for the item.

1.6 Re-order quantity : This is the quantity of material (items) to be

ordered at the re-order level, Normally this quantity equals the

economic order quantity.

22.10 INVENTORY COST RELATIONSHIPS

There are tow major costs associated with inventory. Procurement cost

(ordering cost) and inventory carrying cost. Annual procurement cost

varies with the number of orders. This implies that the procurement

cost will be high, if the item is procured frequently in small lots. The

procurement cost is expressed as Rs./Order.

The annual inventory carrying cost (Product of average inventory X

Carrying cost) is directly proportional to the quantity in stock. The

inventory carrying cost decreases, if the quantity ordered per order is

small. The two costs are diametrically opposite to each other. The

right quantity to be ordered is one that strikes a balance between the

two opposing cost. This quantity is referred to as "Economic order

quantity" (EOQ). the cost relatioships are shown in the Fig.

22.11 INVENTORY MODELS

One of the basis problem of inventory management is to find our the

order quantity so that it is most economical from overall operational

point of view. Here the problem lies in minimising the two conflicting

costs. i.e. ordering cost and inventory carrying cost. Inventory models

helps to find our the order quantity which minimises the total costs

(sum of ordering costs and inventory carrying costs). Inventory

models are classified as shown

22.12 SAFETY STOCK

The economic order quantity formula is developed based on the asumption

that the demand is known and certain and that the lead time is constant and

does not vary. In actual practical situations, there is an uncertainty with

respect to both demand as well as lead time. The total forecasted demand

may be more or less than actual demand and the lead time may vary tom the

estimated time. In order to minimise the effect of the uncertainty due to

Inventory Models

Deterministic (Models assuming certainty)

Probabilistic

Fixed Qty. System

Fixed Period System

Fixed Qty. System

Fixed Period System

demand and lead time a firm maintains safety stock, reserve stock or buffer

stock.

The safety stock is defind as "The additional stock of material to be

maintaind in order to meet the unaticipated increass in demand arising out of

uncontrollabel factors. "

Because it is difficult to predict the exact amount of safety stock to be

maintained , by using statistical methods and simulation, it is possible to

determine the level of safety stock to be maintained

Determination of Safety Stock

If the level of safety stock maintained is high , it locks up the capital

and there is a ossiblity of risk of obsolescence. On the other hand, if it is low,

there is a risk of stock out because of which there may be stoppage of

production. When the variation in lead time is predomiant. The safety stock

can be computed as.:

Safety stock = (Maximum Lead time - Normal lead time) x

Consumption rate.

Lead time Time

Expected demand

Re-order point

Actual demand

Safety Stock

The service level of inventory thus depends upon the level of safety

stocks. Larger the safety stocks, there is lesser risk of stock out and hence,

higher service level. Sometimes higher service levels are not desirable as

they result in increase of costs, thus fixing up a safety stock level is critical.

Using the past date regarding the demand and lead time data, reliability of

suppliers and service level desired by the management, safety stock can be

determined with accuracy.

The inventory pattern with safety stock and variation in demand and

lead time is shown in Fig.

ALT - Actual lead times

ELT - Expected lead

times

Re-order point

Actual demand

Safety Stock

22.13 INVENTORY CONTROL SYSTEM

The inventory systems are developed to cope with the situations where

the demand or lead time or both with flucturate. the basic approach to

all stock control methods is to establish a re-order level which, when

reched would indicate the signal for the replenishment action. Thus

the replenishment of the inventory means determining the quanitity to

be ordered and the time of ordering.

basically, there are two types of replenishment systems.

(i) Fixed quantity system (Q-system )

(ii) Fixed period system (P-system)

Fixed Order Quantity System

This is also called perpetual inventory system or Q-system. In this

system , the order quantity is fixed and ordering time varies according to the

flucuation in demand.

The characterisitcs of this system are :

(1) Re-order quantity is fixed and normally it equals Economic

order quantity (EOQ).

(2) Depending upon the demand, the time interval of ordering

varies.

(3) Replenishment action is initiated when stock level falls to Re-

order level (ROL).

(4) Safety stock is maintained to account for increase in demand

during lead time.

Advantages

1- Simple and cheaper to operate.

2- Stock control with be accurate as the replenishment action is

initiated soon after the stock reachers R.O.L.

3- Suitable for low value items.

4- Appropriate for variety of inventory maintained within the

organisation.

Limitations

(i) In this inventory system, there will be a load on the re-ordering

system if may items reach R.O.L. at the same time.

(ii) The stock leves records and usage rate data are to be

maintained.

Periodic Review System

It is also called fixed period system or P-system .

This system has a fixed ordering interval but the size of the order

quantity may vary with changes in demand .

In this system .

The inventory position is verified at prefixed interval,

(weekly/monthly/quarterly), then depending upon the situation

replenishment action is intitiated.

The characteristics of the system are:

1. Order interval is fixed for individual item or group of items .

2. Stock is reviewed at periodic interval and the quantity (Q) which will

bring the iventory to maximum level is orderd.

Comparison between Fized Quantity (Q) and Fixed Peirod (P) System

Q-System P-System

1. The Quantity to be ordered

each time is fixed and

normally it is equal to EOQ .

2. It is suitable for low unit

cost, high volume ietms.

3. Normally preferred when

supplier puts minimum

quantity restriction.

The period of ordering the inventory is

fixed and the order quantity depends on the

stock on hand,

Suitable for high unit cost and less in

number items

Preferred when supplier delivers at fixed

period.

22.14 SELECTIVE CONTROL OF INVENTORY

Selective control refers to the variation in method of control from item

to item on some selective basis. There are many criteria used for this

purpose. They are:

• based on the cost of the product/item.

• Lead time.

• Usage rate.

• Procurement difficulties, criticality, frequency of usage.

The selective control is more effective and is directed to more

significant groups of items . In the system, the items are categorised in a few

groups depending upon the selected criteria such as value, usage and

frequency of consumption. Such grouping helps the organisation for

scientific inventory control. The various types of classifications are shown in

Table 22.1 .

Table . 22.1 : Types of classifications

Classification Criteria

1. A.B. C. Analysis Annual usage value of items

2. H.M.L. Analysis (High, Low,

Medium)

Unit price of the material (it does not

depend upon consumption)

3. V.E.D. Analysis (Vital, Essential,

Desirable)

Criticality of the item (Material

criticality)

4. S.D.E. Analysis (Scarce, Difficult, Procurement difficulties

Easy)

5. F.S.N. Analysis (Fast, Slow, Non-

moving)

Issues from stores

6. G.O.L.F. (Govt. Ordinary, Local,

Foreign)

Source of material

7. S.O.S. (sEASONAL, oFF

sEASONAL)

Seasonality of items

8. X.U.Z. Analysis Inventory value of items used

1. ABC analysis : The inventory of an industrial organisation generally

consists of thousands of items with varying prices, usage rate and lead

time. It is neither desirable nor possible to pay equal attention to all

the items. For example, a T.V. set has about 5 per ent of its parts

contribute to 80 per cent of the total costs. This is true for majority of

the items like car, refrigerator, etc.

ABC analysis is a basic analytical tool which enables management to

concentrate its efforts where results will be greater.

The pareto principle (20/800) of cause and effect is a useful concept in

business where it can be used to solve majority of production, quality

and inventory problems.

The concept applied to inventory control is called as ABC

analysis.

Statistica reveal that just a few items account for bulk of the annual

consumption of the materials. These few itemsare called A class items

which hold the key to business.

INVENTORY CONTROL

Kmpwm as B and C which are numerous in number but their

contribution is less significant. ABC analysis thus tends to segregate

the items into three categories A,B and C are the basis of their annual

usage. The categorisation is made to pay right attention and control

demanded by items.

A class items: These items hardly constitue5-10 per cent of the

total items and accoount for 70-75 per cent of the total money spent

on inventories. These items require rigid and strict contril and need to

be stocked in smaller quantities. These items are to procured

frequently and each time less quantity is procured. The inventory of A

class items is kept at minimum .

B class items: These items are generally 10-15 per cent of total items

and represent 10-15 per cent of the total expenditure on materials.

These are intermediate items. These are intermediate items. The

control on these items should be intermediate between A and C items .

C class items: These are about 70-80 per cent in number and constitute

only 5-10 per cent total expenditure on materials.

These items being less expensive does not require strict control.

These are ordered in bulk as against infrequent ordering of A class

items.

ADVANTAGES OF ABC Analysis

This approach helps the manager to exercise selective control and

focus his attention only on a few items.

By exercising strict control on A class items, the materials

manager is able to show the results within a short period of time. It

results in reduced clerical costs, saves time and effort and results in

better planning and control and increased in ventory turnover. ABC

analysis, thus, tries to focus and direct the effort based on the merit of

the items and, thus, becomes an effective management control tool.

Limitations of ABC Analysis

ABC analysis is a fundamental tool for exercising selective

control over numerous inventory items but in present form do not

permit precise consideration of all relevant problems of in ventory

management.

ABC analysis is not one time exercise and items are to be reviewesd

amd recategprosed periodically.

Features and policy Guidelines for ABC Analysis is shown in Table

22.2.

Table 22.2. Features and policy Guidelines for ABC Analysis

A Class (High Value) B Class (Moderate

Value)

C Class (Low Value)

1. Tight control on

stock levels

moderate control Less control

2. Low safety stock Medium safety stock Large safety stock

3. Ordered frequently Less frequently Bulk ordering

4. Individual posting in

stores

Individual posting Collective postings

5. Continuous check on

schedules and revision

when called for

Broad check on

schedule revisions

Quarterly control

reports

7. procured from

multiple sources

Two or more reliable

sources

Two reliable sources for

each item

8. Minimise waste,

obsolete snd surplus

Quarterly control over

waste

/annual review

regarding waste

9. Conitinuous effort to

reduce lead time

Moderate efforts Minimum efforts

Procedure for making ABC Analysis%

1. Calculate the total inventory value for each item held in inventory

by multiplying the num-ber of units used in a year by its unit price.

2. Tabulate these items in descending order of their values placing fist

the item having the highest total value and so on.

3. Prepare a table showing item No. unit cost, annual units consumed

and annual rupee value of units used.

4. Compute the running total item by item for the items and aldo for

rupee value of consump-tion.

5. Compute the cumulative percentae for the item count and

cumulative annual usage value.

6. Classify the items as per the norms for ABC items.

7. The cumulative percentages are represented graphically as in Fig.

22.11

2.V.E.D. analysis: This analysis represents classification of items based on

criticality. The analysis classifies the items into three groups called vital,

essential and desirable.

Vital items are those items the unavailability of which will stop the

production.

Essential items are those items whose stock out costs are very high.

Desirable items will not cause andy inmmediate production stoppages and

their stock out costs are nominal.

This analysis is mainly carried out to identify critical items. An item which

may belong to C-category may be critical from production point of view.

the service level for each item may be determind and the inventory

can be plannerd accordingly.

2. S.D.E. analysis : S.D.E. analysis classifies the items into three groups

namely - Scarce, Difficult and Easy. these are based on the problems

of procurement.

3. S.D.E. analysis : S.D.E. analysis classifies the items into three groups

namely - Scarce, Difficult and Easy. These are based on the problems

of procurement.

Scarece, classification includes items which are in short supply,

imported items. Such items are procured once in a year because of

effort and expenditure involved in its import.

difficult items are those items which are available indigenously but are

difficult to procure.

Easy classification covers those items which are readily available and

easy to procure. These are mostly commercially available standard

items .

This SDE analysis is applied by purchased department.

4. HML analysis : this analysis is similar to ABC analysis but here the

criteria is 'price' instead of usage value.

The items in this analysis are classified into three groups, i.e. high,

low and medium. The management decides the cut off lines or prices

for the three categories. this analysis helps to keep control over

consumption as per the price and helps to assess storage and security

requirements i.e. the high priced items are to be stored in the

cupborads. It helps to outline the buying policies and to delegate

authorities to buyers.

5. FSN analysis : All the items in the inventory are not required at the

same frequency. Some are required regularly, some occasionally and

some very rarely.

FSN analysis classifies items into fast moving, slow moving and non-

moving.

6. SOS analysis : This classification is based on the seasonality of the

items as seasonal and off seasonal. Seasonal items are available only

for a limited period and, hence, they are procured to meet the demand

till the next season.

7. XYZ analysis : This analysis is based on the value of the stocks on

hadn (i.e. capital employed to procure in ventory). Items whose

inventory values are high are called X category and whose values are

low are called Z items. Usually XYZ analysis is used in association

with A.B.C. analysis.

12.1 INTRODUCTION

Every producing department, be it a factory, a workshop or an engineering department, has to handle materials. The major objectives in handling these materials are threefold:

(a) maximum customer's service,

(b) minimum investments on materials, and

(c) Coefficient on low-cost plant operation.

The above three objectives are basically in conflict and require a scientific approach to get an optimal solution with a view to earn maximum profit for a given investment. Studies of the involved operations are now known by the term 'Material Management', or 'Inventory Control'.

Inventory control has emerged as one of the most important yet perplexing tasks faced by modern managers. The investments in inventories for most firms are substantial. Many companies have as much as 10 to 25 per cent or more of their assets committed to inventories. Further inventories are often the least stable and difficult to manage type of asset. Fads, styles, technological changes, and so on, all serve to make part or whole of an inventory obsolete. Rapid changes in levels of business activity often have catastrophic effects o n inventories. Also, in recent years, soaring interest rates have substantially increased the cost of maintaining inventories. Employee and customer theft has also led to increased cost of maintaining inventories. To complicate matters, there has been a tremendous proliferation of products over the past several decades which places substantial pressure on firms to maintain a large stock of items. To sum up, every firm whether large or small must control its inventories.

In nutshell, inventory control may be defined as "the function of directing the movement of goods through the entire manufacturing cycle from the requisitioning of raw materials to the inventory of finished goods in orderly manner to meet the objectives of maximum customer service with minimum investment and efficiency (low-cost) plant operation."Different authors used the term inventory management as 'Inventory Control', 'Inventory System', 'Inventory Theory', Inventory Process', etc. But the fundamental object however is the same.

REMARKS

1. INVENTORY is very broad term and includes the elements whose

values are always very high, in any industrial unit, whether small,

medium or big and constitutes major parts, approx., from 40% to 80%

of Gross. Working Capital, depending upon the nature and size of that

Unit. To illustrate, the Company engaged in manufacturing in

Consumer products, say Soaps and Perfumes, hold Inventory normally

805 of its Gross working Capital, particularly due to huge stocks of

Finished Goods to be carried, besides the Raw Materials and WIP. On

the other hand, another Company, manufacturing the Industrial

Products like heavy machinery and Switchgears hold Inventory on an

average only 40% of its Gross Working Capital since the F.G. is

normally not required to be carried in Inventory and are sold as soon

as produced. Therefore this 40% inventory includes only stock of

R.M. and Comp, along with WIP. Thus, the Inventory to be carried

depends upon the nature and size of Industry bet at no time it could be

less than approx. 40% of Gross Working Capital during the whole

year in any Industrial Unit. Hence it is beyond doubt that all the

Industrial Units have necessarily to keep Inventory, whose value is

very submittal, blocking the major portion of working capital. So it is

absolutely necessary, rather must, to control the Inventory for not only

effective management of Working Capital but also to cut the cost of

interest so as to sustain and survive in business, especially in today's

era of cut-throat competition.

2. The basic question which arises is: why a firm holds inventories?

There are two basic motives for holding inventories :

(i) for speculative purposes, and

(ii) To enable a constant rate of output flow.

It sometimes happens that the value of stock increases over time at a rate which is higher than the cost of holding stocks. This is mainly true in a situation of inflation. The decision to hold inventories for speculative purposes would depend on the expectations of price increase vis-à-vis the holding cost of inventory which includes the capital costs and the cost of storage. Only if the expectation of price increase is higher than the holding cost it is fruitful to hold stocks. The expected price increase and the opportunity cost of capital tie up as inventory; however introduce an element of uncertainty in the calculation of return from speculative inventories.

The common motive for holding inventories is to facilitate a constant and smooth rate of production for the firm. This may involve holding stocks of raw materials and semi-finished goods so that the production remains uninterrupted even if the sources of supply are not too reliable. For example, if the industrial units supplying the material are frequently troubled by power shortages, transport bottlenecks, labour unrest, etc., the firm whose production depends on the supply from these u nits has to keep some precautionary stock. On the other hand, a firm holds stocks of finished goods so that it can meet excess demand out of the inventories accumulated during periods of slack demand. This helps the firm to keep its output at a constant level. The decision to hold inventories of finished goods depends on the market structure within which the firm is operating and the shape of the average cost curve of the firm.

3.

Few Applicationsof

Inventory Control

1. Determine the number of color TVs, Refrigerators, Washing

machines, a store should order to minimize total inventory costs.

2. Determine when a new order for pharmaceutical supplies should be

placed.

3. Calculate how many orders should be placed every month for

admirals and sofa sets at a furniture store.

4. Determine which supplies of medicines and hospital stocks require

careful monitoring and tight inventory control.

5. Calculate the requirements for automotive batteries given the demand

for small cars.

6. Determine the number of days between orders for automatic washing

machines.

7. Determine how many air conditioners to keep on hand during summer

to avoid stock outs.

8. Determine distribution pattern of finished goods inventories to

various retails location.

9. Take capacity decisions for production facilities.

10. Discuss inventory control models relating to fluctuating prices and

shortages as are prevalent in the country.

12.2 FUNCTIONAL CLASSIFICATION ON INVENTORIES

Inventory can be broadly defined as the stock of goods, commodities or other economic resources that are stored or reserved at any given period for future production or for meeting future demand.

Inventory, for example, may include raw materials waiting to be used in producing goods (raw materials inventory), semi-finished goods or goods in process temporarily stored during the production process (work-in-process inventory), finished goods awaiting shipment from the factory, wholesaler or retailer (finished-good inventory). Inventory also includes machinery, furniture, fixtures, etc. The term inventory may be divided into two classes:

1. Direct inventories: - Direct inventories include those items which play a direct role in the manufacture and become an integral part of finished goods. Direct inventories may be classified into three groups: Type of Inventory ReasonsRaw materials 1. Physically impressible and economically infeasible

to instantaneously supply raw materials and supplies

when demanded by operations.

2. Variation in demand for raw materials by operations

from period to period and variation in delivery times

of materials rule out planning flows-in of materials

that exactly match flows out.

3. Allows favorable unit prices through volume

buying.

4. Allows reducing of incoming unit freight costs

through larger shipments.

5. Allows more efficient materials handing through

larger loads.

6. Allows stabilization of the level of production.work-in-process 1. Maintain uniform production even though sales may

vary.

2. Production rates of processing steps are unequal.

3. Allows the decoupling of operations. Each operation

is then somewhat independent of other operations.

This allows flexibility in planning each operation.

4. Allows large batches of materials to be moved at

one time between operations, particularly with

process layouts. This reduces materials handling

costs.

5. Cater to the variety of products and replacement for

wastages. Finished goods 1. Variation in customer demand from period to period

rules out planning flows of products in to exactly

match flows out.

2. It is more economical to hold inventory than

constantly placing emergency order to meet

customer’s demands.

3. It is physically impossible to instantaneously

produce or acquire products when demanded by

customers.

4. Backlogging of customer’s orders may be

unacceptable.

5. Enable production rate changes and provide

production buffer against delays in transportation.

6. Allows efficient scheduling of production. This

refers both to economic production runs and stable

production levels which may not match seasonal or

other erratic demand patterns.

7. Allows the display of products to customers.

2. Indirect inventories :- Indirect inventories include those items which are necessary for manufacturing but do not become component of the finished production, such as lubricants, grease, oil, petrol, office materials, maintenance materials, etc.

Inventories may be held for a variety of purposes, but in general, they exist for fulfilling the following basic functions.

i. Transit or pipeline inventories: - These are also called movement

inventories. The function of those inventories is to cover delays in

handling and transit. For example, when coal is transported from the

coal fields to an industrial town by trains, then the coal, while in

transit, cannot provide any service to the customers for burning in

furnaces or for power generation.

ii. Buffer inventories: - These inventories are held to prevent stock out

due to uncertain demand and supply fluctuations. An organization is

generally aware of the average demand for various items it needs.

However, the actual demand may exceed this average demand. Hence,

inventories may be held in excess of the expected demand. Similarly,

the average delivery time of an inventory is known to the

organization. However, unforeseen events may cause the actual

delivery time to be more than the expected time. Thus, excess stock

(also called safety stock) is held to meet fluctuations in demand and

lead time.

iii. Lot size or cycle inventories. These inventories are held due to the fact

that orders are placed in lots rather than purchasing the exact amount

of inventory which may be needed at a point of time. Of course, if all

purchases are made on an as-needed basis, there would be no cycle

inventories by ordering or producing in large lots to achieve reduced

ordering or set up costs or to obtain quantity discounts on the items

purchased.

iv. Decoupling inventories. These inventories serve the function of

decoupling operations in a production system. These permit the

various production activities to operate more independently; they do

not have to rely completely on the schedule of output of prior

activities in the production process. For example, in manufacturing,

work-in-process inventories are essential so that there is no need for

carrying each in-process inventory at each station effectively reduces

the dependence of each station on the speed and performance of the

line.

v. Seasonal inventories. The function of these inventories is to meet the

seasonal fluctuations in demand economically. Production of

specialized items like crackers well before Diwali, fans and coolers

while summers are approaching, or the piling up of inventory stock

when a strike is on the anvil, are all examples of seasonal inventories.

These inventories are used to smooth out the level of production so

that workers do not have to be frequently hired, or retained to vary

production levels in order to meet such demand fluctuations.

Inventories are used to serve many other functions also. For example, raw material and finished goods inventories are frequently accumulated to hedge against price rises, inflation and strikes. Inventories also serve to smooth out irregularities in supply. Fruits and vegetables, for example, are grown only a few months in each year, inventories of such items are necessary to meet demand for the entire year.

vi. Fluctuation inventories. Those have to be carried because sales and

production times for the product cannot always be predicted

accurately. There are fluctuations in demand and lead-times required

to manufacture items. These require reserve stocks or safety stocks

represent the fluctuation inventories.

vii. Anticipation inventories. These are built up in advance for a big

selling season, a promotion program or a plant shut-down period.

Basically, anticipation inventories store men and machine hours for

future need.

viii. Inventory Decisions. The corporate managers must take two basic

decisions in order to accomplish the functions of inventory. The

decisions made for every item in the inventory are :

(i)- How much amount of an item should be ordered when the inventory of that item is to be replenished?

(ii)- When to replenish the inventory of that item?

Inventory decisions may be classified as follows:

INVENTORY DECISIONS

When to order ? How much to order ?

Fixed order systemFixed period system Demand Supply

Deterministic Probabilistic

Rate of supply Lead time

Instantaneous Gradual Deterministic Probabilistic

12-3 PHASES OF INVENTORY MANAGEMENT

An inventory management system can be described as a coordinated set of rules and procedures which are helpful in taking decisions such as -when to order and how much to order each item of inventory required in the manufacturing or procurement process, to meet customers demand .It also provides managers with the necessary information to effectively make decisions relating to non-routing situations .The objective of a well designed inventory management system is to minimize the cost of maintaining the inventories and at the same time achieving customer service satisfaction. The area of inventory management thus covers the following five phases:

1. Assessment of inventory requirement. The prime responsibility of any

manufacturing organization is towards its products' customers. It owns

the social responsibility of producing economical and quality products

for its customers and also to ensure the supply of such products round

the year without any interruption. To achieve this social objective, the

production managers of such organizations must maintain continuous

supply of standardized raw materials and spares. If these managers are

provided with information regarding sales, break-up of sales with the

help of proper forecast and assessment of inventory, they can easily

determine their requirement schedules. They can also update their

requirements by periodic review and adjustments of inventory,

continuous development of sources of supply, market study and

market research.

2. Ensuring material quality. The inventory management system ensures

that materials of requisite specifications and quality are only

purchased. This object is achieved by selecting suitable vendors and

also by forcing the suppliers of such materials to apply quality control

and preventive inspection at their end before supplying the raw

mateial. It would help the production managers not only to reduce the

production of defective or spoiled output but also to enhance the

reputation of the company for producing quality products.

3. Timely inventory flow and inventory control. This phase of inventory

management is concerned with the task of ensuring timely and

adequate flow of inventories from various vendors for optimal

production and sales without unduly blocking high investments in

inventories. This objective is achieved by fixing various inventory

levels such as maximum, minimum, recorder, safety stock and

economic order quantity. Proper management of stores with the help

of these prefixed levels enables the manager not only to ascertain the

balance of any inventory but also to detect slow and non-moving

inventories which are likely to become obsolete. Such information

facilitates a manager to place fresh purchase requisitions of those

materials which have reached to their recorder level.

4. Investment in inventories. The fourth phase is concerned with

reducing the amount of working capital tied up in inventories, by

proper planning and resorting to the right policy for purchase such as

bulk purchase, seasonal purchase, hand-to-mouth purchase, annual

and long-term contracts, availing quantity discounts, etc. Investments

in inventory can also be reduced by making use of techniques like

value analysis, standardization and variety reduction. The

management may also conduct continuous market research for

determining the availability of materials at lesser costs and try to

reduce secondary costs including packing, transportation and handing

costs, etc.

5. Transactions maintenance. The last phase of inventory management

concerns the book-keeping for inventory control, i.e. formulating

procedures for inventory receipts, issues and storage. use of properly

laid down procedures in respect of all materials which are purchased,

stored and issued for the purpose of production not only increases the

efficiency of each related department but also maximizes the overall

gain of the organization.

OBJECTIVES OF INVENTORY MANAGEMENT

Inventory control is highly significant function not only because inventories constitute substantial portion of total current assets of a firm but also because it has to satisfy the following objectives:

(i) To minimize the financial investment in inventories. The main objective of a system of inventory control in manufacturing organization is to minimize the capital blocked in the inventories. Because the capital required carrying inventories costs money and holding assets in the form of inventories results in decreased liquidity.

(ii) To ensure that the value of materials consumed is minimum. For ensuring this objective, there should be proper control over materials from the time orders are placed with suppliers till the materials have been effectively utilized in production. Thus, materials must be properly safeguarded and correctly accounted for. Efficient purchasing, storage, consumption and accounting for materials are an important objective of inventory control.

(iii) To maintain timely records of inventories of all items and to maintain the stock within the desired limits.

(iv) To provide scientific base for short-term and long-range planning of inventory requirements.

(v) To ensure timely action for replenishment.

(vi) To protect the bank of inventories from pilferage, theft, waste, loss, damage and unauthorized use.

(vii) To standardize and centralize information on stock levels and progress of stock issues.

(viii) Inventory control also helps the firm in tiding over the demand fluctuations. Since demand fluctuations are taken care of by keeping a safety stock by the firm, inventory control aims at keeping the cost of maintaining safety stock minimum.

(ix) Inventory control also aims at overcoming the problem of variation in raw material delivery time.

(x) To provide a safeguard for variations in raw materials delivery time or lead-time. The safety stock would have to be maintained to account for the inherent variability of lead times of the raw material supply. This variability arises because of irregularity of production at vendor’s plants, transportation of goods, rejects, etc.

(xi) To allow flexibility in production scheduling. The maintenance of higher levels of finished goods inventory relieves the pressure on production system and gives them scheduling flexibility that can substantially reduce unit production costs. This further improves customer services.

(xii) to reduce surplus stock. Reduction of surplus stock is one of the essential requirements of effective inventory control. Inventory control offers an opportunity to critically examine the causes of excessive stocking and take appropriate measures to bring down stock to a reasonable level and thus reduce investment in inventory and at the same time avoid obsolescence losses.

The broad objectives of any inventory control system are to minimize inventories and provide reasonable service to the customers. These resolve into the following couple or trade-offs and parameters : Inventory level versus acquisition How much to order? Cost. i.e. cost of procurement/set i.e. up for brought-outs and made-ins Order size Respectively.

Inventory level versus service to When to order? the customer or conversely dis- i.e. service to the customer that Reorder level leads to loss of goodwill and' Therefore, monetary loss.

12.5 BENEFITS OF INVENTORY MANAGEMENT

Experience indicates that through a scientific system of inventory control, the stocks can be reduced by anywhere between 15% and 60% and critical shortages substantially reduced. An inventory reduction of Rs.10 lakhs may be equivalent to a recurring saving of Rs.2 lakhs per annum and a simultaneous reduction in critical shortages may greatly facilitate continuous production and emergent purchases. Few more benefits of the inventory control are:

1. Ensures an adequate supply of items to the customers and

avoids the shortages as far as possible at the minimum cost.

2. Makes use of available capital (and/or storage space) in a most

effective way and avoids and unnecessary expenditure on high

inventories, etc. also by reducing the unnecessary tying up of

captain excess inventories, it improves the liquidity position of

the firm.

3. Reduces the risk of loss due to the changes in prices of items

stocked at the time of making the stock.

4. Provides cushion between work centers thereby assures a

smooth and efficient running of the organization.

5. Takes advantages of quantity discounts on bulk purchases.

6. Serves as a buffer stock in case of delayed deliveries by the

suppliers. In other words it ensures against scarcity of materials

in the market.

7. Eliminates the possibility of duplicate ordering.

8. Helps in minimizing the loss due to deterioration, obsolescence,

damages or pilferage of goods etc.

9. Helps in maintaining economy by absorbing some of the

fluctuations when the demand for an item fluctuates or is

seasonal.

10. Controls and minimizes accumulation and build-up of surplus

stock, and eliminates the dead movable surplus stock as far as

practicable.

11. Utilizes the benefits of price fluctuations. Thus, in conclusion,

with a good inventory, a firm is able to make purchases in

economic lots, maintain continuity of operations, avoid small-

time consuming orders and guarantee prompt delivery of

finished goods.

12. The firm ensures smooth functioning of its various departments

by maintaining reasonable stocks with the help of inventory

control.

REMARKS: - CAUSES OF POOR INVENTORY CONTROL.

1. Overbuying without regard to the forecast or proper estimates of

demand when a shortage occurs or the market is temptingly favorable.

2. Over production or early production of goods even before the

customer requires them. Also in an endeavor to keep equipment

loaded stocks may accumulate. Unused portions of the materials

drawn from the stores may be held in the works with the result that

when a shortage occurs a batch is pushed through earlier than

otherwise would have been the case.

3. In an endeavor to keep the inventories low, the fast moving and the

slow-moving stock may be indiscriminately suppressed. This would

result in (lower inventory of slow-moving items than needed and)

higher stocks for the fast-moving items than needed.

4. To provide better service to the customers there is always the

tendency of the sales department to have inventories. Production

department may also be interested in longer runs to cut down

production costs.

Besides the above causes which are more or less controllable, stocks may also arise owing to cancellations of orders and minimum quantity stipulations by suppliers.

5. Sometimes when the market is temptingly favorable or there is a

temporary short age, then the organizations tend to overbuy stocks

without considering the forecast or proper estimate of demand.

6. At times, organization may purchase larger batches of items in order

to avail discounts offered by the seller. This will lead to overstocking

of inventory.

7. In a situation when there is low demand, the organization may

continue its production in an endeavor to keep its equipment loaded.

Overproduction or early production of goods even before the customer

requires them leads to poor inventory control.

SOME OTHER GENERAL OBSERVATIONS

Mass Mentality and Influence of Word of Mouth: In urban areas mass

mentality prevails a lot and things like beliefs, notions spread like wild fire through

word of mouth. The following example is typical of a rural area. Somebody buys a

Hero Honda Motorcycle and finds it satisfactory. When he had bought the bike,

even then there was curiosity among his friends and neighbours about its

performance. When he attests its good performance, there’s nothing like it to

endorse that brand. Then two or three of his friends may end up buying Hero

Honda bike and others looking at a few Hondas may decide that it is the vehicle

they would buy. In fact, people thereafter stop questioning the pros and cons of

the purchase and become impervious to other opinions. They unquestioningly

accept the popular notion that Hero Honda is the best bike and anybody with the

least knowledge about bikes and their mechanisms would strongly advocate

buying a Hero Honda bike. Similarly is the case for snack foods. They may not

have actually tried to check whether the product is good or not but by just talking

to people they create a liking for the product. .

So the best way to launch any new brand is to encourage usage by a few

(preferably influential) people in a village. These people should be given free

samples like we did for Aashirwaad Aata during its launch in urban areas. The

free samples should be directly given to the consumer and not through a retailer,

who may in fact sell it. If the initial users like the brand, they will turn into opinion

makers and testify the brands excellence, which is the best endorsement

possible.

Brand purchase peculiarities

A peculiar thing that I found in rural areas is that people hardly ever go to a shop

and ask for a brand by its brand name. Mostly they hold out the required price,

point to a particular shelf and name the product. The shopkeeper either by

previous experience or by the price deduces the required brand. A common

conversation is as follows:

The customer holds out the money and says, “Give a soap”, the shopkeeper

takes out the brand costing that much. If it is Rs 7.00 he knows that the customer

wants Nirma soap. If the customer doesn’t have change and only a ten-rupee

note, in the above case, he would ask “Give me a seven rupee soap”. This also

shows why the rural consumer would prefer to see the price prominently

displayed on any type of communication.

Another interesting thing is the use of a brand name for an entire product family.

For e.g., the use of Surf washing powder to describe the entire range of washing

powders. The use of Dalda for the entire vegetable oil family or the use of Tata

for Salt. This shows the strength of the communication even though the product

has now found disfavour among the target population.

Use of Novelty and Humour in Communication

As is human nature, anything new attracts human attention and curiosity. This

isvery much evident in urban areas. People pay attention towards anything

newthat goes around them. Hence there is nothing like a urban activity to

promote a brAnd in these areas, whether it is company personnel

conducting brand reinforcing games amongst the rural consumers along

with a van showing popular films and the brands advertisements or simply

one person passing through the town in an vehicle and announcing any

new consumer scheme or distributing free samples. The people flock to

any such activity if they are near at hand and not busy. Thus any activity is

like an occasion, which is remembered even a long time afterwards.

As with novelty in activities, the same learning goes with other forms of

communication such as advertisement through various media, packaging,

product etc. For example, an advertisement of Candyman was very widely

recalled. A few consumers when questioned about it recalled a display in

which a child on a swing was hanging nearly upside down. This very simple

ad aroused the curiosity of a lot of people due to the oddness of it. They

liked the picture with the child, but were curious about its upside down

alignment. Many questioned the supervisors, who were present while the

displays were being put up, as to why the display was being put upside

down. Along with Novelty, the urban consumer’s receptivity to Humour is

high. The Aamir Khan ad for Coca Cola is liked because of its very novel

and humorous approach in introducing the five rupees bottle. The urban

audience also likes Akshay Kumar’s latest Thums Up ad in which he’s

involved in displaying astounding feats while finding a treasure.

Though something new, odd or strange arouses the curiosity of the rural

audience, one should be careful, while designing the communication to ensure

that it is not misinterpreted by them. There is a thin line between something being

novel and pleasant to something that is alien to the rural consumer. We should

be careful to not to cross the line.

Prominent Display of Price

Whether or not to prominently display the price in a communication through retail

outlet displays, through TV commercials or through any other medium is an

issue of great significance. In rural areas it is very essential that price be

displayed on the communication. One of the elements of any

communication that a rural consumer pays attention to is price and it

definitely influences the way he perceives the communication. Price is a

way to generate curiosity about a brand. Once a rural person sees a price

mentioned, whether it’s a product he has thought of buying or not and

irrespective of the magnitude of price (if its wellabove what he can afford),

he will be curious to know why that particular brand costs that much. So

even if he sees a high priced motorbike’s ad, he’ll pay attention to the

communication wondering what makes the bike so expensive.And he’ll

remember the communication.

Secondly, in rural areas, there are greater chances of overcharging because of

lack of communication and low literacy, because of which some people may not

know where to read the price on a pack. Especially with snack foods, there is a

greater chance of overcharging, because consumers mostly buy loose and do

not buy packs, so they do not know the price. Indeed, in most of the places,

people simply prefer to hold out the required money as the price of the brand

they know of, instead of asking the shopkeeper the price. Hence price should be

prominently displayed in a communication, written in Hindi, so that the rural

consumer is not cheated.

1. Use of Celebrity Endorsement

The aim of a communication is to make the person try the product. A celebrity ad

definitely increases the desire to use the product. So using a Govinda or Sunny

Deol will definitely increase the awareness of Geep battery and Farmtrac

Tractors respectively but more and more people will only start buying it if the

experience of the initial users must be satisfactory. In short the product should be

good enough to attract more users.

What also matters is the way a celebrity is used. The Aamir Khan ad for Coke is

well liked because of the way Aamir Khan was utilized in the ad. Here was an ad

that was already on the successful path, because it was using a celebrity, so it

was bound to get attention. But the way Aamir Khan promoted the product is also

remarkable. He was used in the ad to do something that the rural audience would

sit up and notice. Following are the reasons why the ad was so successful apart

from the celebrity endorsement.

CONCLUSION.

After going through the findings and research that I have done in respective to

this project I would like to conclude by saying that the salesmen are facing a

problem , because according to them they are facing a problem when they have

to sell two items at a time, therefore I feel that itc should take care of this thing

and divert from their policy of one face to all the outlets, and make different

salesman for cigarettes and different salesman for snack food, by this way the

salesman will be able to concentrate on one product, and help to increase the

sales of that product.

After having a word with the salesman I also gathered that they are facing a

problem when ITC is launching two products close to each other. Like I was told

by one of the salesman the launch of bingo and silk cut was so close that they

had a problem in selling both the products to the retailers, because the retailers

said that the product is new and not known in the market, so therefore they did

not want to buy large quantity of the products.

I also feel that ITC should keep a brand ambassador of their products, because

this concept is selling a lot these days in the market, even lays has adopted to

this policy by keeping saif ali khan as its brand ambassador.Apart from this

another important area is the retailers, itc should give attractive schemes to their

retailers, because retailers are an important tool for the selling of the

product.They should also bring about a little flexibility in the credit policies, so

that the retailers can purchase more stock from the distributors and to sell the

product more.

I think that ITC should increase its number of retailers in the ncr region, so that

they can cover more areas, ITC as compared to its competitors has the lowest

number of distributors in all the regions.ITC should try and cover more outlets in

Ghaziabad, because lays in covering comparatively more outlets,and ITC main

aim is that wherever there is lays , bingo has to be there.

SUGGESTIONS & RECOMMENDATIONS

1. Try and not launch 2 Products simultaneously because DS facing problem,e.g.

silk cut & bingo launched closely.

2. Separate Ds for wafers and cigarettes.

3. Give free sampling during the time of launch.

4. Good brand ambassador.

5. Attractive schemes for retailers.

6. Flexibility in the credit period.

7. Bingo rack placement.

8. Increase the number of distributors so that more area can be covered and the

frequency of service can be increased.

9. Try and cover more outlets in ghazizbad, because lays covering more outlets

in this region.

ANNEXTURE

DISTRIBUTOR BASED OBSREVATION SHEET.

1. How many number of distributors are there in a particular region for particular

company

50 100 200 400

2. How many go down does the distribute have, and what is its size -.

3. How many mechanised and non mechanised units do they have.

MECHANISED –

NON-MECHANISED P –

4. What is the total number of outlets the distributor covers-

5. How many outlets does a salesman cover in a day. –

6.What is the margin of the retailers and distributor –

7.What is the delivery process –

8.What schemes are the company offering –

9.How do they differentiate between their town/village working –

10.What are the norms that they have to follow –

11.What is their cash and credit policy –

12.What is their expiry policy –

13.How do they do the billing –

14.What are the location of the distributors –

15.One shop is covered how many times in a week –

16.What is the total number of salesman a distributor has –

BIBLIOGRAPHY

1. Consumer Behavior, 9th Ed.: Blackwell, Roger D; Miniard, Paul W; Engel,

James F.

2. Understanding Consumer Decision Making- The Means-End Approach To

marketing And Advertising Strategy edited by: Reynolds, Thomas J;

Olson, Jerry C Consumer

3. Behavior Concepts And Application, 4th Ed.: Loudon, David L; Della Bitta,

Albert .

4. Business Research Methods, 6th Ed.: Cooper, Donald R; Schindler,

Pamela S.

5. www.up gov.nic.in

6. www.businessweek.com.

7. www.ITC.in.