Summer training project report

Presented By : Parneet Kaur MBA 2A

COMPANY PROFILE
Company: Head office: Registered Office: Status: Turnover:

GlaxoSmithKline Consumer Health Limited. Gurgaon (Haryana) Nabha (Punjab)

Multinational Company (originally U.K. Firm) Rs. 20,251.2 (Millions), 11.5% as compare last year

to

Export to :

Bangladesh, Myanmar, Sri Lanka, Middle East Nepal, Hong Kong, Malaysia, & Fiji

INTRODUCTION TO GSKCH
GlaxoSmithkline Consumer Healthcare Limited is an

Indian associate of Glaxo Smithkline Plc, U.K.

Largest players in the health food drinks industry in India Manufacturing plants located in Nabha, Rajahmundry &

Sonepat has a total workforce of over 2700 people

Flagship product- Horlicks GSKCH has distribution network in India comprising over

1800 wholesalers & direct coverage of over 4,00,000 retail outlets.

MISSION To improve the quality of human life by enabling people to do more, feel better and live Longer.

Historical Background
In 1955 Horlicks manufactured by Horlicks Ltd. Slough,

England was being imported, bottled and sold in India

On May 31, 1958 Pratap Singh laid the foundation stone of

the Company at Nabha.

On 24th March 1960, the factory went into production. In 1969 Horlicks Group disposed off their holding in India

and U.K. to BEECHAM GROUP OF INDUSTRIES" which was a multinational

In 1979 Beecham India (Pvt.) Ltd. Mumbai merged with

Hindustan Milk food Manufacturers Ltd. and the name was changed to H.M.M. Beecham Group ltd.

Cont..
SmithKline U.S.A. merged on September 16, 1991 to form

Smith Kline Beecham Consumer Brands, Plc. with its registered office in the U.K. H.M.M. became a part of Smithkline Beecham Consumer Brands
In 1994 the name was changed to Smithkline Consumer

Healthcare Ltd.
A merger took place between Smithkline Beecham and

Glaxo Welcome and the new company Glaxo Smithkline (GSK) was formed on 27-12-2000 . In the Indian market GSKCHs journey began with Horlicks

Business stations of GSKCH ltd.

Head office: GURGAON Packing stations: MANGALDOI, GAUHATI (ASSAM) KOMPALLY BADDI (HIMACHAL PRADESH) Regional Sales Offices (RSO) : GHAZIBAD MUMBAI KOLKATA CHENNAI

Factories
RAJAMUNDREY SONIPAT NABHA

Main Product of GSKCH Ltd.

HORLICKS
MOTHER HORLICKS WITH DHA JUNIOR HORLICKS WITH DHA BOOST BISCUITS ENO GOPIKA GHEE (BY PRODUCT)

About GSKCH Nabha Plant

It is biggest unit of all the three manufacturing

units and it is also the registered office of GSK Consumer Health Care.
The plant at present employs a work force

varying from 1500 to 2000 out of which approximately 1100 are permanent. There is a staff and management of about 140 persons
There is a wage agreement for 3 years

Cont
The plant runs 24 x 6 and there are 3 shifts from

5.15 a.m. to 1.15 p.m., 1.15 p.m. to 9.15 p.m. & 9.15 p.m. to 5.15 a.m. The office opens for 6 days in a week.
Production Capacity of Nabha plant is about

99500 MT pa
There are 7 Milk Collection Centers (MCCs)

around Nabha, to meet the requirement of 70 tones of Milk per day.

5S AT NABHA
5S is a tool that aims to create and maintain an

organized, clean & high performance workplace. This tool has been efficiently utilized by Nabha Unit and it has lead to reduce the records retrieval time drastically. Sort Store Shine Standardize Sustain

Supply chain process

Drums (at factories)

Bottles & GPs (at packing stations)

Sale Depots

Wholesalers

Consumer

Retailers

Various departments at GSKCH Ltd

HUMAN RESOURCES AND ADMINISTRRATION DEPARTMENT. MANUFACTURING DEPARTMENT MILK PROCUREMENT DEPARTMENT QUALITY ASSURANCE DEPARTMENT ENGINEERING DEPARTMENT FINANCE DEPARTMENT

FINANCE DEPARTMENT
VENDOR PAYMENT

DISBURSEMENT OF SALARIES
PAYMENT TO GOVERNMENT BODIES

MILK ACCOUNTING
TREASURY & BANKING

PAYMENT OF SERVICES
CAPITAL BUDGETING

SWOT analysis of Nabha plant

Strengths: They have there own energy conversion projects. GSK has good brand image in the market. High production capacity.

Weaknesses GSK is not using its Working capital properly. GSK dont recruit the any female staff.

Cont.
Opportunities Rising household incomes, increasing urbanization, changing lifestyles, growth in working womens population should lead to greater demand for processed food products Threats Limited use of technology in food processing High taxes on branded agricultural products

INVENTORY
The dictionary meaning of Inventory is a list of

goods. In a wider sense, inventory can be defined as an idle resource, which has an economical value. KINDS OF INVENTORY Raw materials & parts Consumables & Spares Work-in-progress Finished goods-

INVENTORY CONTROL
Inventory Control is the art and science of maintaining the stock level of a given group of items. The activities of Inventory control include the following: Determination of limits of inventories to be held. Determination of inventory policies. Setting out of investment pattern and its regulation as per individual and collective requirements.

IMPORTANCE OF INVENTORY CONTROL

To minimize the idle time caused by shortage of

inventory and non- availability of inventories as per requirements, and

To keep down capital investment in inventories,

inventory carrying cost and obsolesces losses.

VARIOUS INVENTORY MANAGEMENT TECHNIQUES

Selective Management: In this technique, various

items of stores are classified in various classifications Management by Exception: In this technique, items with certain exceptions are tackled on different points of time. Rationalization: Techniques of standardization and variety reduction are used. Value Analysis : Functions performed by the materials are analyzed and alternative raw materials are suggested to achieve the same function at minimum cost. Computerization: Computer outputs can be used for scientific forecast of demand to solve many inventory models.

NATURE OF GENERAL INVENTORY

Inventories are stock of the product a company is

manufacturing for sale and components that make up the product. The various forms in which inventories exist in a manufacturing company are: raw materials, work in progress, finished goods & stores and spares.

GENERAL STORE INVENTORY IN GSK

General store is that which the part of the production becomes indirectly. Without such inventory no production will be there. This store inventory includes: Polythene bags Consumables like diesel etc. Cleaning material like nitric acid, caustic soda etc. Floor cleaning towels Spare parts of the machines

Cont.
Inventory required under GMP (Good

Manufacturing Practices) like uniform, hand gloves, mouth covers, safety shoes etc
Under the general store inventory total no. of items are 2254, which have the ABC classification. Their total consumption value is Rs. 1,99,02,268.13 .

TITLE
Inventory management and control at Glaxo Smithkline Consumer Healthcare Ltd.

OBJECTIVES OF STUDY
To determine overall inventory position of the

company. To study the existing inventory control practices and procedures in the company To know that how the recategorization of the inventory is done through the ABC analysis. To know that how other techniques can be better applied on the existing controlling technique.

Research Methodology
Sources of Data:
Primary data Secondary data

Size of Population:
Include all the employees presently working either in finance department or procurement department or store department of GlaxoSmithKline Consumer Healthcare Ltd. at Nabha plant.

Sample size :
Six employees working in Finance department or procurement department or store department of GlaxoSmithKline Consumer Healthcare Ltd. at Nabha plant.

Cont..
Sample unit:
Any one employee working in Finance department or procurement department or store deparrment of GlaxoSmithKline Consumer Healthcare Ltd. at Nabha plant.

Research design concepts:

For this research descriptive research design is used .

The period:
The study is supposed to be relating to current year consumption i.e. 2010

LIMITATIONS OF THE STUDY:

To maintain secrecy the resource person were

not providing information on the ground of maintenance of secrecy (Data being collected through MCA procedures). A company generally cannot disclose its internal policies to outsiders. In such case, it is very difficult to find out and gather complete and true information in the forms of figures regarding financial matters as an Intern/Trainee

ABC ANALYSIS
It is selective approach popularly known Always (A) Better (B) Control (C). The ABC goes by its name it always the best, then better and lastly the good.
Majority of the activity (70 to 80%) is governed by very few

(10 to 20) attributes. 15 to 20% of total consumption is represented by another 15 to 20% items that may be classified as B category Remaining 5 to 10% consumption is represented by a large no. of small consumption value items, which may be classified as C category.

Stock physical verification in GSK

For A category items is carried out every six

months; For B category items every year and Once in two years for C category items.

Different criterias for recategorisation for ABC analysis

Criteria-1

Category Average rate Annual consumption A Rs. 7000 and above 70000 and above B Rs,1250 and above Rs,15000 and above But less then 7000 less then70000 C less then Rs.1250 then Rs. 15000

Rs.

But

less

Cont..
Criteria-2 Category Average rate consumption A Rs. 10000 and above 100000 and above B Rs,2500 and above Rs,15000 and above But less then 10000 then 100000 C less then Rs.2500 then Rs. 25000 Annual Rs.

But less

less

Requirement for recategorization process

General inventory items.

Their unit value.

There annual consumption For calculating the unit value any of the following

is required Closing value/Opening value/Consumption value Closing Qty./ Opening Qty. /consumption Qty.

PREPARATION OF PROPOSALS
For preparing the proposals under the different conditions following steps have been taken: Firstly check that according to the unit value in which category the item is falling. See that according to the consumption value which category is best suited to the item. Then out of the two put the items in the upper category.

For example:
Item Code IS97004 Proposed Category Per unit value 147.2. C Consumption value 12355.20 B

According to Unit value it should fall in C category but according to Consumption value it should fall in B category. Therefore, it will fall in B category.
Item code S99471 Proposed Category Per unit value 46.2916 A Consumption value 147896.91 B

According to Unit value it should fall in A category but according to Consumption value it should fall in B category. Therefore, it will fall in A category.

Existing Criteria: per unit value 7000 and consumption value 70000
According to No. of items
Category
A B C TOTAL

Existing No. of items

295 573 1615 2483

%
11.88% 23.07% 65.01%

According to consumption value:

Consumption Value A 44147223
%

81.29%

B
C TOTAL

5818917.82
4373084.19 54339225.01

10.7%
8.05% 100

Proposed criteria: per unit value Rs.10000 and consumption value Rs.100000
According to No. of items
Category A B C TOTAL No. of Items 177 283 2023 2483 % 7.11% 11.39% 81.50% 100%

According to consumption value:

Category A B C TOTAL Consumption Value 42927988.50 6162067.21 5249169.30 54339225.01 % 79.02% 11.34% 10.51% 100 .00%

Comparison between existing and proposed criteria

Comparison of items
Category No. of items % of (E) items A 295 11.88%
B C TOTAL 575 1615 2483 23.073% 65.01%

existing No. of items % of items (P) 177 7.11%

283 2023 2483 11.39% 81.50%

Comparison of consumption value

Category Existing Consumption 44147223 % Proposed Consumption 42927988.50 %

A B C TOTAL

64.49% 23.5% 12.01% 100

79.02% 11.34% 10.51% 100 .00%

5818917.82 4373084.19 54339225.01

6162067.21 5249169.30 54339225.01

FSN Classification
This classification is done on the basis of consumption pattern of the items under analysis. Fast moving:-Items being issued more than 15 times a year may be placed in F category. Slow moving:-Items up to a certain limit say 1015 issues in a year may be classified as S items. Non-moving:-If there is no issues of a particular item during the past few years, naturally they will be classified as Zero issue items

In GSK, criteria for FSN

In GSK items, under FSN categorizing is done on the following criteria : Fast moving :-The items which are very frequently moved in one year are included in the fast moving category . Slow moving :-The items which are moved from stores for a period of one and a half year. Non-moving:-The items which are not issued from stores for more than three years

 General Stores Inventory Composition

Slow/non/fast moving items

91 lacs

fast moving slow moving non moving

15%
43 lacs

51%
64 lacs

34%

LEVEL SETTING

Re-order Level:

Maximum Consumption *Maximum re-order period Minimum Level: Re-ordering Level - (Normal Consumption * Normal Re-order Period) Maximum Level: Reordering level + Minimum Re-ordering Quantity - (Minimum Consumption * Minimum Re-ordering Level period)

Cont..
Danger Level:

(Average Consumption) * (Maximum re-order period for emergency purchases) Average Stock Level: Average stock Level = Minimum stock level + of re-order quantity

Requirements to set these levels at GSK

First of all consumption of the items by different

department or according to production pattern. On the basis of lead-time involved on purchase of items.
While fixing minimum stock level employees of purchase

department in GSK are consider following factors: Consumption pattern Seasonality of raw material Rejection rate in past Lead time / manufacturing time Source of material (import or Indian) Testing time, replenishment time, fumigation time Vendor response.

ECONOMIC ORDER QUANTITY

The quantity to be ordered should be such which

minimise the carrying and ordering cost. If the price to be paid is stable, the quantity to be ordered each time can be ascertained by the following formula:Economic Order Quantity (EOQ) = 2AO/C Where, A = Annual Consumption Quantity O = Cost of placing one order (ordering cost) C = Annual inventory carrying cost or holding cost

The total cost of material usually consist of:Total acquisition cost (Purchase Value) + Total carrying cost (Holding Cost) + Total ordering cost Acquisition Cost Holding cost IN GSK THE RESONABLE ASSESSMENT OF INVENTORY CARRYING COSTS IS ESTIMATED TO 15% PER YEAR OF THE AVERAGE INVENTORY HOLDING Ordering costsIN GSK ORDERING COST PER ORDER COMPUTED IS APPROXIMATELY Rs. 25 PER ORDER.

Proposal:
STUDY AND ANALYSIS OF THE INVENTORY

OF GSK AS PER THE EOQ MODEL TO KNOW THE DIFFERENCE BETWEEN THE TOTAL INVENTORY COST TO THE ORGANIZATION IN COMPARISON TO THEIR ACTUAL (ROQ METHOD) AND TOTAL SAVINGS, IF ANY, CAN BE MADE FROM THE THREE DIFFERENT.

FINDINGS OF THE PROPOSAL

Category A Existing Inventory cost 6136034 Proposed Inventory cost 6109275 SAVINGS 26759

B
C TOTAL

1510368
659387 83,05,789

1497927
647832 82,55,034

12441
11555 50,755

BENEFITS IF THE ORGANIZATION STARTS PLACING THEIR PURCHASE ORDERS AS PER THE EOQ METHOD THEY CAN SAVE SOME AMOUNT OF MONEY FROM THEIR ACTUAL TOTAL INVENTORY COSTS, AS THIS CAN HELP THEM IN SAVING THEIR WORKING CAPITAL ALSO

FINDINGS:
Many items are there in the stores, which although

lying in general stores but dont have any category in spite of having consumption value. Some items have no consumption value but their minimum quantity is more than twice. Some modern techniques of inventory management like VED can help in reducing investment in inventory, is absent. Items, which are written off in the books, are lying in the stores and in any year if again their need arises they are written back in the books. Capital related spares are placed under D99 category. These are those spares the asset value of which becomes zero but their spares have value.

SUGGESTIONS:
All the general store inventory items should be

recategorized especially those, which have the consumption value during the year. Company should have to go for some other controlling techniques like VED The items, which dont fall under any category, should be treated separately. The company must treat ROQ & EOQ separately on their individual effects on the inventory costs.

Thank you