A CASE STUDY IN RAW-MATERIAL INVENTORY CONTROL AT M/S SYLVANIA & LAXMAN LTD., NEW DELHI

Abstract

Business managemont I s question in dealing with inventory policy can be expressed in simple terms: How bid; should inventories be `f The question is easy to state but difficult to answers Ii 'hc._ppens to be a question th t has received oonbir~uing attention since 1912. when first full recognition of this problem appeared. • Such problems in industries arise because of the need to purrckase o-^ produce in quantities greater than at t T.r~11. be used or sold at the moment. Purchase of raw that r .. _ material in sizable quantities reduces the cost associated. with purchasing and minimizing the handling and transportati-on costs. However, one can carry this principle only so far, for if the zepld shment orders become too large, the resulting inventories get out of line and the capital and handling costs of carrying these inventories more than offset the possible savings in roduction transportation and clerical costs. The work embodied in this, dissertation pertains to a study of inventory problems being faced by P4/s Sylvania & i,ax:1^n LtC., of New Delhi. Their keen desire to set up a scientific inventory control system nromp cecl the author to choose this problem. The application of scientific inventory control techniques in the present case has yielded spectacular results. It has been revealed that the firm was buying far in excess of what would be permissible economically. illy. This meant heavy investments and hence higher inventory costs. A system; for inventory classification bas been suggested so as to oxcorci.se an easy control over the Certain r_ecoi~o.:E_Zond Lions rog_,rd— items O " s1{;'n1.~1C~:,~'1CG . ~,, ing the reorder quantity, safety stock, otc,, have also boon given. It has boon found that in the present case it would be ;possible tor educe the i i rcntory cost thoo o tically by -bout 90% if scientific control over the i nsrnntory is oxcorcisedl Even if the practical constraints are taken into account, it should still be possible -co effect a considerable saving in inventory investments.