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CHAPTER 1

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INTRODUCTION

The term inventory refers to the raw materials used in production as well as the goods produced
that are available for sale. A company's inventory represents one of the most important assets it
has because the turnover of inventory represents one of the primary sources of revenue
generation and subsequent earnings for the company's shareholders. There are three types of
inventory, including raw materials, work-in-progress, and finished goods. It is categorized as a
current asset on a company's balance sheet.

Inventory is a very important asset for any company. It is defined as the array of goods used in
production or finished goods held by a company during its normal course of business. inventory
is classified as a current asset on a company's balance sheet, and it serves as a buffer
between manufacturing and order fulfillment. When an inventory item is sold, its carrying cost
transfers to the cost of goods sold (COGS) category on the income statement.

Inventory management refers to the process of ordering, storing, using, and selling a company's
inventory. This includes the management of raw materials, components, and finished products,
as well as warehousing and processing of such items.

Inventory management helps companies identify which and how much stock to order at what
time. It tracks inventory from purchase to the sale of goods. The practice identifies and responds
to trends to ensure there’s always enough stock to fulfill customer orders and proper warning of a
shortage.

Once sold, inventory becomes revenue. Before it sells, inventory (although reported as an asset
on the balance sheet) ties up cash. Therefore, too much stock costs money and reduces cash flow.

One measurement of good inventory management is inventory turnover. An accounting


measurement, inventory turnover reflects how often stock is sold in a period. A business does not
want more stock than sales. Poor inventory turnover can lead to deadstock, or unsold stock.

Inventory management at Hindustan Pencils Private Limited or any company, generally, it


involves tracking, ordering, and storing materials needed for production. This can include

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software systems, barcode scanners, and strategic planning to optimize stock levels and minimize
costs.

Hindustan Pencils Private Limited, a renowned company in the stationery industry, likely
employs robust inventory management practices to ensure efficient operations. In the context of
Hindustan Pencils, inventory management involves overseeing the supply of raw materials such
as wood, graphite, and packaging materials, as well as managing finished goods like pencils and
related stationery.

To streamline these processes, the company may leverage modern inventory management
systems that incorporate technologies such as barcode scanning, RFID, or even advanced
analytics to optimize stock levels. These systems help in real-time tracking of inventory,
reducing the risk of stockouts or overstock situations. Efficient inventory control is crucial for
meeting production demands, preventing disruptions, and minimizing carrying costs.

Given the dynamic nature of the stationery market, Hindustan Pencils may implement just-in-
time inventory practices, ensuring that materials are ordered and received precisely when needed.
This approach minimizes storage costs and enhances overall operational efficiency.

Additionally, strategic vendor partnerships and negotiation skills are likely employed to secure
favorable terms and pricing for raw materials, contributing to cost-effectiveness in inventory
management. Continuous monitoring and periodic audits are essential to identify trends, mitigate
risks, and optimize the supply chain, aligning with best practices in inventory management for
sustained success in the competitive stationery market.

Hindustan Pencils Private Limited's inventory management strategies may extend beyond the
production line to encompass distribution channels and retail networks. Collaborative forecasting
with distributors and retailers helps align inventory levels with market demand, reducing the
chances of overstocking or stockouts at various points in the supply chain.

The company might also employ ABC analysis, categorizing items based on their importance
and value. This allows them to focus resources on managing high-value items more closely while
adopting more streamlined approaches for lower-value items.

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Furthermore, the implementation of just-in-time manufacturing practices not only applies to raw
materials but may also extend to the production of finished goods. This agile approach ensures
that the company can quickly adapt to changes in customer preferences or market trends,
minimizing the risk of obsolete inventory.

In the context of environmental sustainability, Hindustan Pencils might explore eco-friendly


materials and packaging, aligning with the growing demand for sustainable practices. This could
involve careful inventory tracking of environmentally friendly materials and optimizing their
usage in the production process.

Overall, the success of inventory management at Hindustan Pencils likely relies on a


combination of advanced technology, strategic partnerships, market insights, and a commitment
to operational efficiency, allowing the company to navigate the dynamic stationery industry
while maintaining high product quality and customer satisfaction.

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CHAPTER 2

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COMPANY PROFILE

Hindustan Pencils Pvt. Ltd. is an Indian manufacturer of pencils, writing materials and other
stationery items, established in 1958[1] in Bombay (present-day Mumbai). The company makes
writing implements under the brands Nataraj and Apsara, and claims to be the largest pencil
manufacturer in India.

Hindustan Pencils Pvt. Ltd is one of the largest Pencil manufacturers of the nation catering to the
needs of stationeries of about 50 countries across the world. The two brands under the umbrella
of Hindustan Pencils Pvt. Ltd namely, Apsara and Nataraj are exported to many countries across
the globe and has been the household brand of our nation, India. The non-toxic nature of the
ingredients with wood being the main ingredient has made the product reliable and safe.

Every child who has grown in India have used these pencils as a kid and definitely has fond
memories attached to it. That is the essence on which Hindustan Pencils Pvt. Ltd works in India.
It is a brand loved by generations of people.Sharpeners, pencils, erasers, pens and scales are
produced in-house to ensure quality standards of each and every product so that exporting them
internationally becomes an easy process without any complications.

HISTORY

The company was established in the year 1958 by friends B. J. Sanghvi (fondly called as
Babubhai), Ramnath Mehra and Mansookani. and has its headquarters in Mumbai. Since then it
has been manufacturing writing implements and making student life a more enjoyable one. The
company was incorporated as a Private Limited Company on March 15, 1955. It is a non-

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government company with authorized capital amounting to Rs 440,000,000 and with a paid-up
capital of Rs. 349,027,008.

Nataraj was the first brand under Hindustan Pencils Pvt. Ltd and was launched keeping in mind
the needs of all and sundries. Thus, it soon captured the value for money image. Apsara was
launched in the year 1970 with prime focus on drawing pencils. From 1990 onwards however it
also started manufacturing writing pencils and other writing implements under its brand name
and became the most sought-after scholastic brand.

From 2007, Hindustan Pencils Pvt. Ltd added another feather to its wing and started
manufacturing ball pens and the black and red designed ball pens became one the favorites
among students.

The company have mastered theart of marking high quality stationary product. With the latest
machinery set up.Today our state of the art manufacturing units daily produce 5.6 Million
pencils,1.2 million sharpeners, 2.3 million erasers, 0.16 million scales, 0.30 million pens.Its
entire product conforms to European CE EN-71 safety standards.
To be able to control quality better, we arc backward integrated, every littlecomponent like
pencil lacquer, sharpener blades, screws etc., that goes into making to our products, is produced
in-house.In India, Apsara and Nataraj have emerged as household names. In other words,
Hindustan pencils ltd. has come to personify quality at a competitive price. They are exporting
our products to over 30 countries.
Constantlywill be made by the company in improving process and maximizing utilization of
inputs to prevent degradation of environment. All ingredients used by the company are non-toxic
in nature efforts are being made develop plantations to ensure renewal of this precious
natural resource. Research & Development efforts are also being made to switch over to eco-
friendly water based lacquers and PVC-free formulation
.
Commitment to quality, competitive pricing and our enormous manufacturing capacities have
carried the product well beyond Indian shore.This company exports to over 32 countries which
includes UAE, Turkey, Sri Lanka, Brazil, Argentina, Kenya, Syria, Bahrain, Mauritius and many
more. This concern for the environment has led us to grow our own to satisfy our requirement

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for wood, an essential ingredient in pencil manufacture.
This practice in turn ensures an uninterrupted supply of wood of consistent qualityfrom our own
plantations. All said and done, the outcomes of our manufacturing process are products that offer
your customers excellent “value of money”.

Apasara‟s depots are spared the length and breadth of the country and are located at Ahmadabad,
Ambala, Bangalore, Bhivandi, Chandigarh, Chennai,Cuttack, Delhi, Goa. Apsara Colorama
Excellence Awards: Hindustan Pencils Pvt. Ltd, has contributed in its own to cultivate thehabit
of good handwriting and to generate interest in art among thousands ofchildren across the
country. One of the popular event organized by HPPL is Apsara Colorama Excellence Awards”.
An Inter-School Art contest in Mumbai, it has been organized at Sir J.J.School of Arts, Mumbai
since 1969.
“Apsara Excellence Awards” Has been a Platform for bringing together budding artists form
thousands of schools and surrounding areas since inception.

FINANCIAL REPORT OF HINDUSTAN PENCILS PRIVATE LIMITED for the financial year
ending on 31 March, 2020 and 2022.

 Revenue / turnover of HINDUSTAN PENCILS PRIVATE LIMITED is Over INR 500 cr


 Net worth of the company has decreased by -1.65 %
 EBITDA of the company has increased by 129.33 %
 Total assets of the company has increased by 0.05 %
 Liabilities of the company has decreased by -7.01 %
 As for the financial overview of the company, in the previous financial year 2020, its Net
Sales was 9,593.43 and Total Revenue was 9,812.09. After factoring in the Total
Expenditure of 9,243.41, Hindustan Pencils Pvt. Ltd. Company’s EBITDA was 568.68
with an EBITDA margin of 5.80. The company’s EBIT and PAT stood at 315.61 and
83.83 respectively. The resulting PAT was 83.83 with a PAT Margin of 0.85%. The
Company had a Debt-to-Equity ratio of 0.92 and Current Ratio of 1.31. Return on Capital
Employed was 12.99.

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Hindustan Pencils Pvt. Ltd’s Marketing Strategy and Reasons behind Its Success

Hindustan Pencils Pvt. Ltd focuses on quality products and environment friendly ingredients for
manufacturing the stationeries. The company makes consistent efforts in meeting all the norms
and specifications of international safety so that exporting the materials across the world goes on
smoothly.

The company makes use of natural and non-toxic ingredients with Wood being the main
component. To prevent degradation of the environment the company develops wood plantations
so that this valuable natural resource is continuously renewed. No forest wood is used for
manufacturing the products; instead the urge to use only natural ingredients has compelled the
company to develop its own wood plantations.

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The Company also procures the wood from those farmers who grow trees independently in their
own farm or courtyard. This ensures uninterrupted wood supply of superior quality. It also helps
in the maintaining of the ecological balance and protection of bio-diversity.

The main reason behind the Company’s success is that it uses natural raw materials that are
environment friendly and its serious endeavors to switch over formulations that are PVC free.
The Company’s commitment towards quality products and its constant efforts to improve the R
& D have taken the Company’s success beyond the national boundaries.

The Company also fulfills corporate responsibility towards the society. They have established
various institutions for imparting professional training for the betterment and improvement of
life. Teacher training is imparted for the sectors like rehabilitation and para medicines for areas
like mental retardation and cerebral palsy, hearing impairments etc. It educates more than 200
children in their institution in Gujarat.

It also conducts various rural programmes to eradicate diseases like Polio and Rubella to ensure
that the future generations are not any more effected by these viruses. Giving back to the society
as a brand is very essential and Hindustan Pencils Pvt Ltd have successfully worked towards the
progress of the society.

Campaign

For promoting its products, Hindustan Pencils Pvt Ltd uses various marketing Campaigns like
TV advertisements and posters. There are various advertisements that go on air in between daily
soaps and movies. Advertisement is the primary source to get close with the customers and to let
them know about the various launches of products. It also uses social media platforms; the
Company advertises its various products worldwide.

Various posters of the products also impart knowledge about the products. Like the poster for
Apsara pencils with an extra strong lead showcases an elephant with its head highlighted with a
conical cap that resembles the strong lead of the pencils. The campaign for Nataraj with the
tagline “Nataraj Phir Champion” is still remembered and did work wonders for the brand.

The Company has its own official website where every single information about the Company
and its products are updated systematically so that the customers get every news updates about

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the Company. The Company also has its Facebook page, Instagram and Twitter handle to get to
know the customers more closely and to cater to their changing needs and preferences.

Sustainable Business We do not use any forest wood for manufacturing pencils. Our concern for
the environment has led us to develop our own plantations. Moreover, we procure wood from the
farmers who either grow trees on their farm, land or in the court yard of their residential
premises. This practice ensures an uninterrupted supply of wood of consistent quality. It also
helps protect bio-diversity and maintain ecological balance. Constant efforts are made by the
company in improving processes and maximizing utilization of inputs to prevent degradation of
the environment. All ingredients used by the company are non-toxic in nature. Research &
Development efforts are also being made to switch over to eco-friendly water based lacquers and
PVC-free formulations.

The non-toxic ingredients and environment friendly products manufactured by the Company
have taken the Company to great heights with its various products being exported to various
countries across the world. The adherence to the International safety norms has made the export
hassle free and added to the growing sales volumes of the Company.

The Company uses latest machinery and technology to increase the sales volume and eventually
the profits of the company increases by leaps. It has become the nation’s biggest pencil
manufacturing company and also the favorite one among students. The price of the products is
also kept within the reach of people.

PRODUCT PROFILE
A Hindustan pencil is committed to manufacture and marker quality products of international
standards at competitive prices, in the stationery field. Constant effort will be made by the
company to meet international safety standards and to prevent degradation of the environment.
The „Pencil‟, derived from the lotion word penicillin, Seems humble enough to be hurriedly put
together in one‟s backyard. In this aspects, the simplicity of the pencil is truly misleading. The
common pencils uses about 40 different raw materials, the basic ones being wood, graphics and
clay. The indigenously frown wood brought specifically from the state of Jammu and Kashmir, is
slates. Next, the lead, which is a mixture of micronized and ball clay, is dried and inserted into
these groove. The leads are bounded, shaped and compressed to ensure that they are breakage

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resistant and long lasting. Each of these slates with another slat without lead to complete the
pencil. Once the pencil is created through this “sandwich” method, they are then meticulously
shaped, lacquered and printed as per requirement.

The process results in bounded lead pencils of high caliber, about 18cm long that can draw 3 line
55 km long and on a average write about 45,000 word. The pencils that write smooth and dark
are tripped at one end to indicate the end that has to be sharpened, ensuring maximum utilization,
Every stage of the process is executed with maximum control and quality checks to ensure that
the products is truly world class. Given that enduring reliability is the hallmark of the products,
understandably, they are manufactured using the most stringent quality controls backed
years of research and development. Our factories at 5 locations in India employ the latest in
technology and the best of raw materials at location in India product the quality, so ingrained in
product development philosophy. Besides developing the machines for manufacture
indigenously, every component that goes into the making of our products. The contest is divided
in 4 categories. One student per category is allowed to represent the school.

APSARA

Apsara is part of the Hindustan Pencils Group and is one of the most well-known brands. These
pencils have a 0.5 mm lead size and are made of very high-grade wood. They have a strong
graphite basis and come in a wide range of colours. For a long time, the pencils had a simple and
sleek finish, but with changing trends, they are now available in a more glossy finish. Some of
these are available with a Disney character finish. This brand also has the greatest dark pencil
with a matt texture on the outside. Apsara offers a diverse selection of pencils and the company
has carved out a space for itself in the pencil market.

In addition to pencils, Apsara has diversified its product line to include a variety of pens. From
ballpoint pens to gel pens, the brand offers a spectrum of writing instruments catering to different
preferences. The focus on innovation is evident in their pen designs, which often feature
ergonomic shapes and advanced ink technologies, ensuring a seamless writing experience.

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Beyond the conventional writing instruments, Apsara has embraced modernity with digital-
friendly tools. The integration of stylus pens and touch screen-compatible writing tools reflects
the brand's adaptability to changing technological landscapes. This strategic evolution positions
Apsara as a brand that not only honors its traditional roots but also embraces contemporary
trends.

Mission:

It may extend to fostering a culture of innovation in the stationery industry, ensuring


accessibility of their products to a wide range of consumers, and promoting environmental
responsibility through eco-friendly practices. Additionally, their mission might involve
supporting educational initiatives and striving for customer satisfaction by consistently
delivering reliable and innovative writing solutions.

.Under the brand Apsara the Company manufactures the following products.

Writing pencils for general writing purposes.

Professional pencils for the artists.

Erasers

Sharpeners

Scales

Instrument boxes more commonly knows as Geometry boxes that includes scales, Protractors,
compasses, and dividers.

Chalks

Kits that includes all the above in a compact set so that there is no need to buy them separately.

Color pencils that includes oil pastel colors, poster colors and water colors

Art materials that include different colors and brushes

Pens of both variety gels and ball pens.

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Every year, student from 400- 500 schools from Mumbai and thesurrounding sub-urban areas
participate in this prestigious event.Black lead pencils are available in a number of type under
Apsara brand name.

Writing pencils

Platinum extra dark pencils

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Beauty pencils

Gold pencils

Triangle extra dark pencils

Wood world extra dark pencils

Designer extra dark pencils

Matt magic extra pencils

Platinum extra dark pencils

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Product features:


Extra dark lead needs less pressure when writing

Writing stays dark longer

Superior quality wood makes sharpening easy

Meets international quality standards

This is an attempt to organize and summarize data in order to increase results. Usefulness in such
a manner that enables the researcher to relate critical points with the study objectives. Sometimes
these organizing and summarizingof data requires the use of summary statistical measures.Such
as percentage averages and dispersions since most marketing dataare collected through the use of
samples, the reliability of the summaryestimates is required to be determined.

NATARAJ

Nataraj, a venerable name in the realm of stationery and office supplies, has etched its presence
as a reliable and ubiquitous brand, particularly in India. The company's journey is a testament to
its commitment to quality, innovation, and a tradition of meeting the diverse needs of
consumers.Founded with a vision to provide high-quality writing instruments, Nataraj has
become synonymous with pencils, pens, and other stationery essentials. Over the years, the
company has crafted a legacy of craftsmanship and durability, earning the trust of millions of
users.

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One of Natraj's flagship products is its range of pencils. The classic Natraj pencil, with its
distinctive yellow body and green tip, has become an icon in schoolrooms and offices alike.
Known for its smooth writing experience and sturdy build, the Natraj pencil has been a
companion to countless students and professionals in their creative and academic endeavors.

In addition to pencils, Natraj has diversified its product line to include a variety of pens. From
ballpoint pens to gel pens, the brand offers a spectrum of writing instruments catering to different
preferences. The focus on innovation is evident in their pen designs, which often feature
ergonomic shapes and advanced ink technologies, ensuring a seamless writing experience.

Beyond the conventional writing instruments, Nataraj has embraced modernity with digital-
friendly tools. The integration of stylus pens and touchscreen-compatible writing tools reflects
the brand's adaptability to changing technological landscapes. This strategic evolution positions
Natraj as a brand that not only honors its traditional roots but also embraces contemporary
trends.

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Quality control is at the heart of Nataraj’s manufacturing process. The company employs
stringent measures to ensure that each product meets the highest standards. From the selection of
raw materials to the final packaging, Nataraj maintains a meticulous approach, guaranteeing that
customers receive products that are reliable and durable.

Nataraj commitment to sustainability is noteworthy. In an era where environmental


consciousness is paramount, the company has taken steps to minimize its ecological footprint.
The use of eco-friendly materials and packaging reflects Nataraj's awareness of its responsibility
towards the environment. This eco-conscious approach not only aligns with contemporary values
but also positions Nataraj as a socially responsible brand.

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The brand's reach extends far beyond the manufacturing floor. Natraj actively engages with its
customer base through marketing campaigns, social media presence, and educational initiatives.
The Natraj logo has become a symbol of trust, evoking a sense of nostalgia for those who have
grown up using Natraj products.

Natraj's success is not merely a result of its products; it is also a testament to its ability to adapt
and innovate. The company has weathered economic fluctuations and market dynamics by
staying attuned to consumer needs. Continuous research and development have allowed Natraj to
introduce new products that resonate with the evolving preferences of its diverse customer base.

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As Natraj continues to leave its mark on the stationery landscape, it remains a brand that
embodies the fusion of tradition and innovation. Through pencils that carry the weight of
countless stories and pens that script the future, Natraj stands as a stalwart in the world of writing
instruments, leaving an indelible mark on generations past and those yet to come.

Vision

Natraj Pencil Company's vision may focus on producing high-quality writing instruments,
fostering creativity, and meeting the diverse needs of consumers. It likely emphasizes
innovation in pencil design, sustainable manufacturing practices, and a commitment to education
by providing reliable and affordable writing tools. They may also aim to maintain a strong
market presence and contribute to the community through corporate social responsibility
initiatives.

Mission

Natraj Pencil Company's mission likely involves delivering high-quality writing instruments that
inspire creativity, promote learning, and meet the diverse needs of consumers. Their mission may
also include a commitment to sustainability in manufacturing and a dedication to contributing
positively to the communities they operate in.

It may extend to fostering a culture of innovation in the stationery industry, ensuring


accessibility of their products to a wide range of consumers, and promoting environmental
responsibility through eco-friendly practices. Additionally, their mission might involve
supporting educational initiatives and striving for customer satisfaction by consistently
delivering reliable and innovative writing solutions.

Under the brand Nataraj, the Company manufactures the following products.

Writing pencils for general scholastic purposes.

Mechanical pencils for engineering students and engineering purposes.

Erasers to meticulously erase mistakes are Plasto erasers, Petals, Stripes eraser, Wild erasers
etc.are the types of erasers.

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Sharpeners

Scales

Mathematical instruments that include protractors, compasses, dividers etc needed for various
scholastic and engineering purposes.

Color pencils for the little laureates of all sets

Cutters

Kits that includes pencils, scales, sharpeners and erasers so that there is no need to buy them
individually. Kits are: Writing kit,Best of luck kit, Pokeit etc.

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COMPETITORS OF HINDUSTAN PENCILS PRIVATE LIMITED

The top competitors ofHindustan Pencils Pvt. Ltd in India are Camlin, Kokuyo, Doms, Faber
Castell etc have been more of family-run companies. The majority of pencils marketed in India
are made by these family enterprises. With their better quality, Indian pencil brands have made
inroads in the worldwide market.

Faber Castell

Faber Castell is the world's leading manufacturer of writing implements. Faber Castell uses
secure bonding technology and marks its products with the initials "SV" (secure bonding). Faber
Castell's headquarters are located in Germany. Faber Castell makes pencils of Dark lead, wooden
pencils, and colour pencils. They are the world's leading manufacturer of writing instruments.
Because they are visually beautiful, we deemed Faber Castell pencils to be world-class. For each
request, you will receive ten pieces in each pack. Each kit from Faber Castell also contains a
metal sharpener and eraser.

Camlin Pencils

Camlin Pencils are one of India's best and most durable pencil brands. This brand is known for
its high-quality lead, appealing diversity, and long-lasting durability. This is a dependable brand
ensuring original writing leads in a single piece every time. Writing with these pencils is a one-
of-a-kind and exceptional experience. They come in a range of colours and have a very eye-
catching glossy finish. Their high-quality lead makes the writing process go smoothly.

Doms

Doms Pencils are the brand to choose if one is looking for quality, durability, variety and decent
pricing in pencils. These pencils are sold in 50 countries around the world, with a pan-India
presence. DOMS stands for Dynamic Organisation Manufacturing Stationery, and these pencils

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are noted for their soft and silky lead as well as their long-lasting wood. This 21-year-old
company has quickly established a reputation for producing high-quality stationery. It is one of
India's leading pencil manufacturers. Some of their types are packaged in attractive plastic jars
that make excellent gifts.

Dharam Pal Jain & Sons

Dharam Pal Jain & Sons, is a well-known name in the market for producing, wholesaling, and
trading a wide range of School Pencils, Slate Pencils, Pencil Cases, Student Rulers, Stapler Pins,
and Student Erasers, was founded in 1995. Customers love the flawless quality, smooth finish,
beautiful look, easy maintenance, and longer life of the items, which are designed utilizing
superior grade basic materials and the latest machines. Their customers can order these items in a
variety of sizes, patterns, and styles to suit their tastes. They have built a well-equipped
infrastructure facility that is run by a staff of highly qualified individuals.

Market share of Hindustan Pencils Pvt. Ltd

Hindustan Pencils is a market leader with a 45% market share and is the largest manufacturer
in India, making over 8.5 million pencils a day. It currently has a presence in over 50 countries.

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CHAPTER -3

OBJECTIVE OF THE STUDY

The objective of the study at Hindustan pencils states that what would be the problems arises in
the company

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 To know about the fast moving products in the company like Nataraj 621pencils, wild
erasers, petals erasers, long point sharpners, Gelix pens, superx pens, Apsara Platinum
pencils, Gold pencils, non dust erasers, HB pencils etc.
 To know about the slow moving products in the company like Natraj Mist and snappy
pens, plasto erasers, Glue, fluro pencils, checking green, purple, jumbo pencils etc.
 To study about the time period in which order placed by the company to manage stock
 To study about the reorder point for effective inventory management which saves holding
costs and prevent stockouts , overstocking. So it is important to setting a reorder point to
optimize the inventory.
 To evaluate that in how many days the order fulfilled by the company to its customers

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CHAPTER- 4

RESEARCH METHODOLOGY

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Research methodology simply refers to the practical “how” of any given piece of research. More
specifically, it’s about how a researcher systematically designs a study to ensure valid and
reliable results that address the research aims and objectives.

For example, how did the researcher go about deciding:

 What data to collect (and what data to ignore)


 Who to collect it from (in research, this is called “sampling design”)
 How to collect it (this is called “data collection methods”)
 How to analyse it (this is called “data analysis methods”)

“Research is an Organized and Systematic way of Finding answers to Questions.”

I. Systematic because there is a definite set of procedures and steps which you will follow.
There are certain things in the research process that are always done in order to get the
most accurate results.
II. Organized in that there is a structure or method in going about doing research. It is a
planned procedure, not a spontaneous one. It is focused and limited to a specific scope.
III. Finding answers is the end of all research. Whether it is the answer to a hypothesis or
even a simple question, research is successful when we find answers. Sometimes the
answer is no, but it is still an answer.
IV. Questions are central to research. If there is no question, then the answer is of no use.
Research is focused on relevant, useful, and important questions. Without a question,
research has no focus, drive, or purpose.

The word research is derived from the Latin word meaning to know. It is a systematic and a
replicable process, which identifies and defines problems, within specified boundaries. It
employs well-designed method to collect the data and analyses the results. It disseminates the
findings to contribute to generalizeable knowledge.

CHARACTERISTICS OF RESEARCH

A well-organized research must possess certain characteristics features, which are as follows:

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i. Solution Oriented: The problem of research must be clearly defined and stated. The
motive of research must be mentioned in the beginning of research work. The research
should provide a solution of a business problem.
ii. Logical: In a research we find out facts about a phenomenon and draw conclusions about
it. The inferences and generalizations thus made must be logical. For example, all
illiterate people in the village live longer than the educated people in the cities leads to
the conclusions that illiteracy is the cause of longevity. This is an example of illogical
research conclusion.
iii. Objective: Observing true picture of a phenomenon without being affected by observers
own opinion is termed as ‘objective’. Objectivity means knowing reality. The criterion of
objectivity is that all researchers should arrive at the same conclusion about the
phenomenon on which they are pursuing research.
iv. Impartiality: A dishonest research may select data items of individuals to draw
conclusions to his favour. This brings bias into research, which affects the objective of
the study. Therefore a true research must be impartial and unbiased.
v. Accuracy: A research worker needs to gain some expertise in the study he is
undertaking. This expertise results in achieving the accuracy in the solution drawn. The
accuracy of conclusions is a sensitive issue as it may affect the whole decision-making.
vi. Systematic: In a research there should be well-defined steps. Each step should be
sequentially linked with another, so that, the whole research work is an organized
structure.
vii. Verifiability: the results of a research are subjective to verifications. For building a
sound basis for decision making one verifies the research results by replicating the study.
viii. Empirical: A research is an empirical process and involves data collection. The results
are based on observed experience or empirical evidence. Research rejects assumptions
and dogma as methods of established knowledge. It accepts only what is verified by
empirical observations.

ROLE AND SIGNIFICANCE OF RESEARCH

A research study plays a very vital role in studying, understanding and solving a business
problem. Research is a process of obtaining dependable solutions through systematic and

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scientific investigations. In the modern business environment where operational problems are of
complex nature, research provides a solution oriented carefully designed procedures.

Research helps us to discover the functional relationships among various phenomena that exist
in a business or a government organization. Decision-making under uncertainty is a fact in every
sphere of a business. Research provides us inferences and generalizations that help in forecasting
the future happenings in the organization. All private or government organizations form their
policies on the basis of researches conducted.

OBJECTIVES OF RESEARCH

The main goal of research is to improve the quality and level of living in the society. The
purpose of a research study is to find out the hidden facts about a business phenomenon. The
obvious function of research is to add new knowledge to the existing store. It serves the
government and the business organizations in forming their future policies. The objectives of a
research study are listed below:

Understanding a business problem: The first and foremost objective of any study is to
understand, analyze and explore a business problem. Once complete familiarity with the
phenomenon is achieved, it is easier to decompose the complex problem into smaller once.

Identifying the cause and effect relationship: Individuals form groups, and groups form
organizations. They are interdependent. It is very important for a researcher to identify the
functional relationships among various components of an organization. A scientific investigation
is necessary in studying the cause and effect relationship of variables involved in a business
phenomenon.

To innovate new ideas: One of the objectives of a researcher is to bring constant improvement
in the techniques of his trade. Apart from verifying and testifying the existing assumptions, one
of the functions of a research is to add new knowledge to the state of the art. Research invokes
the innovation of new concepts, theories and idea in a business study. Apart from this, research
also removes and discards worthless theories that are prevalent in the society.

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To improve the quality: The whole exercise of any activity is done for the improvement of
quality of a product, machinery, or life of human beings. For a business organization it is atmost
important to improve the quality of its products. This can be achieved by a systematic and
critical investigation i.e. research.

TYPES OF RESEARCH METHODS

An area is selected, a specific hypothesis is determined and a defined conclusion is required to


be achieved. But how is this conclusion reached? What is the approach that can be taken up? The
basic types of Research Methods are the following :

Descriptive Research

Descriptive Research is a form of research that incorporates surveys as well as different varieties
of fact-finding investigations. This form of research is focused on describing the prevailing state
of affairs as they are. Descriptive Research is also termed as Ex post facto research. This
research form emphasises on factual reporting, the researcher cannot control the involved
variables and can only report the details as they took place or as they are taking place.
Researchers mainly make use of a descriptive research approach for purposes such as when the
research is aimed at deciphering characteristics, frequencies or trends.

Analytical Research

Analytical Research is a form of research where the researcher has to make do with the data and
factual information available at their behest and interpret this information to undertake an acute
evaluation of the data. This form of research is often undertaken by researchers to uncover some
evidence that supports their present research and which makes it more authentic. It is also
undertaken for concocting fresh ideas relating to the topic on which the research is based.

Applied Research

Applied research is a type of scientific inquiry that focuses on developing practical solutions to
real-world problems. It involves the use of existing knowledge, theories, and techniques to
address specific problems or challenges in a particular field or industry.It is often conducted in
collaboration with industry or government partners, who provide funding and expertise to

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support the research. The results of applied research are typically intended to be directly
applicable to the real world, and may involve the development of new products, technologies, or
processes.

Fundamental Research

This is a Research type that is primarily concerned with formulating a theory or understanding a
particular natural phenomenon. Fundamental Research aims to discover information with an
extensive application base, supplementing the existing concepts in a certain field or industry.
Research on pure mathematics or research regarding generalisation of the behavior of humans
are also examples of Fundamental Research. This form of research is mainly carried out in
sectors like Education, Psychology and Science. For instance, in Psychology fundamental
research assists the individual or the company in gaining better insights regarding certain
behaviors such as deciphering how consumption of caffeine can possibly impact the attention
span of a student or how culture stereotypes can possibly trigger depression.

Quantitative Research

Quantitative Research, as the name suggests, is based on the measurement of a particular


amount or quantity of a particular phenomenon. It focuses on gathering and interpreting
numerical data and can be adopted for discovering any averages or patterns or for making
predictions. This form of Research is number based and it lies under the two main Research
Types. It makes use of tables, data and graphs to reach a conclusion. The outcomes generated
from this research 76 are measurable and can be repeated unlike the outcomes of qualitative
research. This research type is mainly adopted for scientific and field based research.

Qualitative Research

Qualitative research is a type of research that explores and provides deeper insights into real-
world problems. Instead of collecting numerical data points or intervene or introduce treatments
just like in quantitative research, qualitative research helps generate hypotheses as well as further
investigate and understand quantitative data. Qualitative research gathers participants'

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experiences, perceptions, and behavior. It answers the how and whys instead of how many or
how much. Qualitative research is commonly used in the humanities and social sciences, in
subjects such as anthropology, sociology, education, health sciences, history, etc.

Conceptual Research

Conceptual research is a type of research that does not involve conducting any practical
experiments. It is based on observing and analyzing already existing concepts and theories. The
researcher can observe their surroundings and develop brand-new theories, or they can build on
existing ones.It is widely used in the study of philosophy to develop new ideas. And this type of
research is also used to answer business questions and organize ideas, or interpret existing
theories differently.Conceptual research is widely used in the study of philosophy to develop
new ideas. And this type of research is also used to answer business questions and organize
ideas, or interpret existing theories differently.

Emperical Research

Empirical research is research that is based on observation and measurement of phenomena, as


directly experienced by the researcher. The data thus gathered may be compared against a theory
or hypothesis, but the results are still based on real life experience. The data gathered is
all primary data, although secondary data from a literature review may form the theoretical
background.Empirical research is basically a research that uses empirical evidence. Empirical
evidence refers to evidence verifiable by observation or experience rather than theory or pure
logic. Thus, empirical research is research studies with conclusions based on empirical evidence.
Moreover, empirical research studies are observable and measurable.Empirical evidence can be
gathered through qualitative research studies or quantitative research studies. Qualitative
research methods gather non-numerical or non-statistical data. Thus, this type of studies helps to
understand the underlying reasons, opinions, and motivations behind something as well as to
uncover trends in thought and opinions.

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RESEARCH DESIGN

Research Design Research design is the plan, structure and the strategy of the investigation
conceived so as to obtain answer to research questions and to control variance. The research
design of this study is descriptive as well as analytical. The study is primarily based on
secondary data. However, primary data can also be used. Primary data are mainly collected
through questionnaires, direct interview from officers and non-officers of the companies.

Meaning of Research Problem

Research is a scientific, systematic and purposeful search, for new knowledge or for re-
interpretation of existing knowledge. It is a journey, which starts with a problem and ends with a
solution. Identifying a research problem is the first and foremost step in a research process. The
statement of research problem is the axis around which the whole research revolves, because it
explains in brief the aims and objectives of the research.
A research problem is a specific statement in the general area of investigation. It is a precise
identification of a problem situation in a certain context involving what, why, who, where and
when of the problem area.

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Who– means the person or business organization that is facing a problem.

Why– means that there is a purpose, goal aim or objective to solve this problem.

How– means the options of actions one can take to solve the problem.

When– means the time frame in which the problem is to be solved.

Where–means the environment in which the problem exists.

What– means the optimum action that is to be taken in solving the problem to attain the best
results.

Selecting a Research Problem


The old saying goes, “Necessity is the mother of invention”. A research study is another form of
invention. Thus, if there is some necessity or a difficulty a business organization is facing, it
forms a research problem that is to be investigated in order to fulfill that necessity or remove that
difficulty. However, simple it may look, but selecting a research problem is a big problem in
itself. Specially, when there is no apparent problem in an organization or when a students wants
to select a research problem for the purpose of a dissertation or thesis for a degree or a diploma it
becomes utmost important that the research problem must be very carefully chosen. Some of the
guidelines that researcher must follow in selecting a research problem are listed below.

Sources of problems: First of all one should look at the sources from which one can select a
research problem. Those may be readily available problem that has been identified by a person or
an organization. If that is not the case, one can make use of the experience of experts of that
field. The survey of related literature may also help in selection of a research problem.
Potential to be a research problem: One must ensure that the problem one has undertaken has
potential to be called as a research problem. One should avoid trivial or meaningless problem. A
research problem must provide solution to an existing problem or contribute to the body of
knowledge.

Select non-controversial issues: Unless the problem is specifically related to issues such as
religion, dogmas, beliefs, sexual preferences etc; one should try to avoid taking up controversial
subjects.

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Researcher’s interest and competency: In selection of research problem a researcher should
choose a topic of his own field of study in which he has independent mastery in both the subject
and method. The problem should sustain his interest, stimulate his imagination and should be
within the range of his competencies.
Resources available: To conduct a research study various resources are needed. A researcher
must ensure the following points about the inputs of the problem:

Time: The study must be completed in the allotted time frame.


Funds: The amount of funds available from the sponsoring agencies must be known in advance
and the study must be completed within given budget.
Size of research: The size of the investigation must be manageable and should not be too large to
handle. It should also not be too small to appear as a trivial problem.
Co-operation of others: A researcher must ensure the necessary cooperation of colleagues and
operational help of administrative authorities is available to the problem he is selecting.
Literature and Material: Related literature is readily available to compare and support the
research findings.
Obtainable data: The selection of a problem should be such that the information or data needed
for it is either readily available or obtainable.
In short a researcher must select a research problem of his area of interest and should ensure the
availability of all the comments needed to conduct the study. The consultation and guidance of
experts, who have experience in that area, is a must. A researcher must seek help of such
supervisors and guides in selecting a research problem.

Defining a Research Problem

Research is a disciplined approach to inquiry. It is a tool for testing as well as generating


theories. Every research plan is unique in itself and has its unique research problems. An old
saying is, “ a problem well defined is a problem half solved”.

By defining a research problem we mean a systematic way of asking and answering research
questions. Meaningful, productive and useful research depends on the development of

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appropriate research questions, the identification of appropriate constructs and confidence we
can have in our findings. There are two main steps in defining a research problem:

i. Formulation of the problem


ii. Establishment of research objectives

Formulation of a problem is the most important step in a research process. A clear statement of
the problem is a key to good research. A firm may spend hundreds or thousands of rupees
cunducting research, but if it has not correctly identified the problem, this money is wasted. A
clearly formulated research problem must answer all questions of the type Who, Why, How,
When, Where, and What, regarding a research study. With the problem or opportunity defined,
the next step is to set objectives for research operations. Clear objectives can lead to clear results.
Research objectives, related to and determined by the problem formulation, are set so that when
achieved they provide the necessary information to solve the problem. A good way of setting
research objectives is to ask, “What information is needed in order to solve the problem?" Your
objective might be to explore the nature of a problem so you may further define it, or perhaps it
is to determine how many people will buy your product packaged in a certain way and offered at
a certain price. Your objective might even be to test possible cause and effect relationships

Nature and Source of Data :

The nature of data of this study has been primary as well as secondary.

a) Primary Data: - primary data are original data gathered by the researcher for the research
work at hand. Thus, these data are collected for meeting the specify objectives of the study.
Primary data has been collected through questionnaire, interviews and observation.

b) Secondary Data: - secondary data are often in the form of published data. Secondary source
refers to those for already gathered by others. The sources of secondary data can be divided into
two groups: internal and external. The internal secondary data are found within the company
where as external secondary data are collected fromsources outsides the company.

Need for Research Design

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Research is a scientific investigation of a problem for which we need a systematic planning of
research. For a successful research we need a research design because it includes (i) the
formulation of a strategy to resolve a particular question (ii) the collection and recording of
information and evidence (iii) the processing and analysis of these data and their interpretation
and (iv) the publication of results.

A research design states structure and process of conducting a research process. Thus, it shows a
path to researcher without which he may be lost or confused as to what next step he has to take.
More so, it also takes care of budget and time frame of the research study. All this planning can
only make a research study a success story.

Features of a Good Research Design


It is a challenge to translate general scientific model into a practical research operation.
Therefore, designing a research study is not a simple task. There is nothing like completely
correct design or completely incorrect design. A design may work very well for one research
problem and may not work at all for the other. There are some features, however, a good
research design should posses. They are:

1. Freedom from bias: A good research design should ensure that the method of data
collection and analysis would not cause the data to vary in a systematic way. That is to say
that the data should be free from systematic errors.
2. Freedom from confounding: In a good research design the variables involved in the study
are separated from each other so that they do not influence each other.
3. Control of extraneous variables: In a well-designed research study the variables that are not
under scrutiny do not influence the experimental variables in a systematic way for example
things like temperature, time of day etc.
4. Statistical precision for testing hypothesis: A research design should ensure that the data
are recorded at a level of precision that will yield statistically meaningful results.
5. Within resources: A design should draw limits of a research study so that it could be
completed within available resources like time, money and staff.
6. Optimality: The best research design is one, which yields maximum precision in terms of
bias and variance using minimum resources in terms sample size, time and money.

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7. Objectivity: If operated by more than one researcher a good research design obtains same
results. Thus, a good research design should be free from the subjectivity of its performer.
8. Flexibility: It is often observed that one has to deviate from the basic research design
during the operation of the research study due to real world problems. A good research
design is one, which not only has the potential to predict such practical problems, but also
is flexible enough to incorporate changes in it whenever needed.

Process of Research Design

The research design process is a systematic and structured approach to conducting research. The
process is essential to ensure that the study is valid, reliable, and produces meaningful results.

1. Consider your aims and approaches: Determine the research questions and objectives,
and identify the theoretical framework and methodology for the study.
2. Choose a type of Research Design: Select the appropriate research design, such as
experimental, correlational, survey, case study, or ethnographic, based on the research
questions and objectives.
3. Identify your population and sampling method: Determine the target population and
sample size, and choose the sampling method, such as random, stratified random
sampling, or convenience sampling.
4. Choose your data collection methods: Decide on the methods, such as surveys,
interviews, observations, or experiments, and select the appropriate instruments or tools
for collecting data.
5. Plan your data collection procedures: Develop a plan for data collection, including the
timeframe, location, and personnel involved, and ensure ethical considerations.

CHARACTERISTICS OF RESEARCH DESIGN

A proper design sets your study up for success. Successful research studies provide insights that
are accurate and unbiased. You’ll need to create a survey that meets all of the main
characteristics of a design. There are four key characteristics:

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 Neutrality: When you set up your study, you may have to make assumptions about the
data you expect to collect. The results projected in the research should be free
from research bias and neutral. Understand opinions about the final evaluated scores and
conclusions from multiple individuals and consider those who agree with the results.
 Reliability: With regularly conducted research, the researcher expects similar results
every time. You’ll only be able to reach the desired results if your design is reliable. Your
plan should indicate how to form research questions to ensure the standard of results.
 Validity: There are multiple measuring tools available. However, the only correct
measuring tools are those which help a researcher in gauging results according to the
objective of the research. The questionnaire developed from this design will then be
valid.
 Generalization: The outcome of your design should apply to a population and not just a
restricted sample. A generalized method implies that your survey can be conducted on
any part of a population with similar accuracy.

TYPES OF RESEARCH DESIGN

Descriptive Research Design

In Descriptive Research Design, the scholar explains/describes the situation or case in depth in
their research materials. This type of research design is purely on a theoretical basis where the
individual collects data, analyses, prepares and then presents it in an understandable manner. It is
the most generalised form of research design. To explore one or more variables, a descriptive
design might employ a wide range of research approaches. Unlike in experimental research, the
researcher does not control or change any of the variables in a descriptive research design;
instead, he or she just observes and measures them. In other words, while qualitative research
may also be utilised for descriptive reasons, a descriptive method of research design is typically
regarded as a sort of quantitative research. To guarantee that the results are legitimate and
dependable, the study design should be properly constructed.

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Types of Descriptive Research Design

1. Survey Research

Surveys are a type of descriptive research that involves collecting data through self-administered
or interviewer-administered questionnaires. Additionally, they can be administered in-person, by
mail, or online, and can collect both qualitative and quantitative data.

2. Observational Research

Observational research involves observing and collecting data on a particular population or


phenomenon without manipulating variables or controlling conditions. It can be conducted in
naturalistic settings or controlled laboratory settings.

3. Case Study Research

Case study research is a type of descriptive research that focuses on a single individual, group, or
event. It involves collecting detailed information on the subject through a variety of methods,
including interviews, observations, and examination of documents.

4. Focus Group Research

Focus group research involves bringing together a small group of people to discuss a particular
topic or product. Furthermore, the group is usually moderated by a researcher and the discussion
is recorded for later analysis.

5. Ethnographic Research

Ethnographic research involves conducting detailed observations of a particular culture or


community. It is often used to gain a deep understanding of the beliefs, behaviors, and practices
of a particular group.

Experimental Research Design

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Experimental research is a type of research design in which the study is carried out utilising a
scientific approach and two sets of variables. The first set serves as a constant against which the
variations in the second set are measured. Experimentation is used in quantitative research
methodologies, for example. If you lack sufficient evidence to back your conclusions, you must
first establish the facts. Experimental research collects data to assist you in making better
judgments. Experimentation is used in any research undertaken in scientifically appropriate
settings. The effectiveness of experimental investigations is dependent on researchers verifying
that a variable change is due only to modification of the constant variable. The study should
identify a noticeable cause and effect. The traditional definition of experimental design is “the
strategies employed to collect data in experimental investigations.” There are three types of
experimental designs:

 Pre-experimental research design


 True experimental research design
 Quasi-experimental research design

Correlational Research Design

A correlational research design looks into correlations between variables without allowing the
researcher to control or manipulate any of them. Correlational studies reveal the magnitude
and/or direction of a link between two (or more) variables. Correlational studies or correlational
study designs might have either a positive, negative or zero.

Correlational research design is great for swiftly collecting data from natural settings. This
allows you to apply your results to real-world circumstances in an externally legitimate manner.
Correlational studies research is a viable choice in a few scenarios like:

 To investigate non-causal relationships


 To explore causal relationships between variables
 To test new measurement tools

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Exploratory Research Design

Exploratory research is defined as a research used to investigate a problem which is not clearly
defined. It is conducted to have a better understanding of the existing research problem, but will
not provide conclusive results. For such a research, a researcher starts with a general idea and
uses this research as a medium to identify issues, that can be the focus for future research. An
important aspect here is that the researcher should be willing to change his/her direction subject
to the revelation of new data or insight. Such a research is usually carried out when the problem
is at a preliminary stage. It is often referred to as grounded theory approach or interpretive
research as it used to answer questions like what, why and how.

Primary research methods

Primary research is information gathered directly from the subject. It can be through a group of
people or even an individual. Such a research can be carried out directly by the researcher
himself or can employ a third party to conduct it on their behalf. Primary research is specifically
carried out to explore a certain problem which requires an in-depth study.

 Surveys/polls: Surveys/polls are used to gather information from a predefined group of


respondents. It is one of the most important quantitative method. Various types of
surveys or polls can be used to explore opinions, trends, etc. With the advancement in
technology, surveys can now be sent online and can be very easy to access. For instance,
use of a survey app through tablets, laptops or even mobile phones. This information is
also available to the researcher in real time as well. Nowadays, most organizations offer
short length surveys and rewards to respondents, in order to achieve higher response
rates.

For example: A survey is sent to a given set of audience to understand their opinions about the
size of mobile phones when they purchase one. Based on such information organization can dig
deeper into the topic and make business related decision.

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 Interviews: While you may get a lot of information from public sources, but sometimes
an in person interview can give in-depth information on the subject being studied. Such a
research is a qualitative research method. An interview with a subject matter expert can
give you meaningful insights that a generalized public source won’t be able to provide.
Interviews are carried out in person or on telephone which have open-ended questions to
get meaningful information about the topic.

For example: An interview with an employee can give you more insights to find out the degree
of job satisfaction, or an interview with a subject matter expert of quantum theory can give you
in-depth information on that topic.

Focus groups: Focus group is yet another widely used method in exploratory research. In such a
method a group of people is chosen and are allowed to express their insights on the topic that is
being studied. Although, it is important to make sure that while choosing the individuals in a
focus group they should have a common background and have comparable experiences.

For example: A focus group helps a research identify the opinions of consumers if they were to
buy a phone. Such a research can help the researcher understand what the consumer value while
buying a phone. It may be screen size, brand value or even the dimensions. Based on which the
organization can understand what are consumer buying attitudes, consumer opinions, etc.

Observations: Observational research can be qualitative observation or quantitative observation.


Such a research is done to observe a person and draw the finding from their reaction to certain
parameters. In such a research, there is no direct interaction with the subject.

For example: An FMCG company wants to know how it’s consumer react to the new shape of
their product. The researcher observes the customers first reaction and collects the data, which is
then used to draw inferences from the collective information.

Secondary research methods

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Secondary research is gathering information from previously published primary research. In such
a research you gather information from sources likes case studies, magazines, newspapers,
books, etc.

 Online research: In today’s world, this is one of the fastest way to gather information on
any topic. A lot of data is readily available on the internet and the researcher can
download it whenever he needs it. An important aspect to be noted for such a research is
the genuineness and authenticity of the source websites that the researcher is gathering
the information from.

For example: A researcher needs to find out what is the percentage of people that prefer a
specific brand phone. The researcher just enters the information he needs in a search engine and
gets multiple links with related information and statistics.

 Literature research: Literature research is one of the most inexpensive method used for
discovering a hypothesis. There is tremendous amount of information available in
libraries, online sources, or even commercial databases. Sources can include newspapers,
magazines, books from library, documents from government agencies, specific topic
related articles, literature, Annual reports, published statistics from research organizations
and so on.

However, a few things have to be kept in mind while researching from these sources.
Government agencies have authentic information but sometimes may come with a nominal cost.
Also, research from educational institutions is generally overlooked, but in fact educational
institutions carry out more number of research than any other entities.

Furthermore, commercial sources provide information on major topics like political agendas,
demographics, financial information, market trends and information, etc.

For example: A company has low sales. It can be easily explored from available statistics and
market literature if the problem is market related or organization related or if the topic being

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studied is regarding financial situation of the country, then research data can be accessed through
government documents or commercial sources.

 Case study research: Case study research can help a researcher with finding more
information through carefully analyzing existing cases which have gone through a similar
problem. Such exploratory data analysis are very important and critical especially in
today’s business world. The researcher just needs to make sure he analyses the case
carefully in regards to all the variables present in the previous case against his own case.
It is very commonly used by business organizations or social sciences sector or even in
the health sector.

For example: A particular orthopedic surgeon has the highest success rate for performing knee
surgeries. A lot of other hospitals or doctors have taken up this case to understand and
benchmark the method in which this surgeon does the procedure to increase their success rate.

Quantitative Research Design

In Quantitative Research Design, a researcher examines the various variables while including
numbers as well as statistics in a project to analyze its findings. The use of graphics, figures, and
pie charts is the main form of data collection measurement and meta-analysis (it is information
about the data by the data).Quantitative research involves analyzing and gathering numerical
data to uncover trends, calculate averages, evaluate relationships, and derive overarching
insights. It’s used in various fields, including the natural and social sciences. Quantitative data
analysis employs statistical techniques for processing and interpreting numeric data.

Quantitative Research Characteristics

Quantitative research has several unique characteristics that make it well-suited for specific
projects. Let’s explore the most crucial of these characteristics so that you can consider them
when planning your next research project:

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 Structured tools: Quantitative research relies on structured tools such as surveys, polls,
or questionnaires to gather quantitative data. Using such structured methods helps collect
in-depth and actionable numerical data from the survey respondents, making it easier to
perform data analysis.
 Sample size: Quantitative research is conducted on a significant sample size representing
the target market. Appropriate Survey Sampling methods, a fundamental aspect of
quantitative research methods, must be employed when deriving the sample to fortify the
research objective and ensure the reliability of the results.
 Close-ended questions: Closed-ended questions, specifically designed to align with the
research objectives, are a cornerstone of quantitative research. These questions facilitate
the collection of quantitative data and are extensively used in data collection processes.
 Prior studies: Before collecting feedback from respondents, researchers often delve into
previous studies related to the research topic. This preliminary research helps frame the
study effectively and ensures the data collection process is well-informed.
 Quantitative data: Typically, quantitative data is represented using tables, charts,
graphs, or other numerical forms. This visual representation aids in understanding the
collected data and is essential for rigorous data analysis, a key component of quantitative
research methods.
 Generalization of results: One of the strengths of quantitative research is its ability to
generalize results to the entire population. It means that the findings derived from a
sample can be extrapolated to make informed decisions and take appropriate actions for
improvement based on numerical data analysis.

Qualitative Research Design

This type of research is quite contrary to the quantitative research design. It is explanatory in
nature and always seeks answers to “What’s” and “How’s”. It mainly focuses on why a specific
theory exists and what would be the respondent’s answer to it. This allows a researcher to draw a
conclusion with proper findings. Case studies are mainly used in Qualitative Research Design in
order to understand various social complexities.

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This method is about “what” people think and “why” they think so. For example, consider a
convenience store looking to improve its patronage. A systematic observation concludes that
more men are visiting this store. One good method to determine why women were not visiting
the store is conducting an in-depth interview method with potential customers.

For example, after successfully interviewing female customers and visiting nearby stores and
malls, the researchers selected participants through random sampling. As a result, it was
discovered that the store didn’t have enough items for women.

1.One-on-one interview

Conducting in-depth interviews is one of the most common qualitative research methods. It is a
personal interview that is carried out with one respondent at a time. This is purely a
conversational method and invites opportunities to get details in depth from the respondent.

One of the advantages of this method is that it provides a great opportunity to gather precise data
about what people believe and their motivations. If the researcher is well experienced, asking the
right questions can help him/her collect meaningful data. If they should need more
information, the researchers should ask such follow-up questions that will help them collect more
information.

These interviews can be performed face-to-face or on the phone and usually can last between
half an hour to two hours or even more. When the in-depth interview is conducted face to face, it
gives a better opportunity to read the respondents’ body language and match the responses.

2. Focus groups

A focus group is also a commonly used qualitative research method used in data collection. A
focus group usually includes a limited number of respondents (6-10) from within your target
market.

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The main aim of the focus group is to find answers to the “why,” “what,” and “how” questions.
One advantage of focus groups is you don’t necessarily need to interact with the group in person.
Nowadays, focus groups can be sent an online survey on various devices, and responses can be
collected at the click of a button.

Focus groups are an expensive method as compared to other online qualitative research methods.
Typically, they are used to explain complex processes. This method is very useful for market
research on new products and testing new concepts.

3. Case study research

The case study method has evolved over the past few years and developed into a valuable
quality research method. As the name suggests, it is used for explaining an organization or an
entity.

This type of research method is used within a number of areas like education, social
sciences, and similar. This method may look difficult to operate; however, it is one of the
simplest ways of conducting research as it involves a deep dive and thorough understanding of
the data collection methods and inferring the data.

4. Record keeping

This method makes use of the already existing reliable documents and similar sources of
information as the data source. This data can be used in new research. This is similar to going to
a library. There, one can go over books and other reference material to collect relevant data that
can likely be used in the research.

5. Process of observation

Qualitative Observation is a process of research that uses subjective methodologies to gather


systematic information or data. Since the focus on qualitative observation is the research process

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of using subjective methodologies to gather information or data. Qualitative observation is
primarily used to equate quality differences.

Qualitative observation deals with the 5 major sensory organs and their functioning – sight,
smell, touch, taste, and hearing. This doesn’t involve measurements or numbers but instead
characteristics.

DESIGN OF SAMPLING

In a research study once the problem is define and a research design is prepared, the next step is
to collect data on items or individuals related to the study. Collecting information on all the
items, objects, individuals or organizations is a huge task involving a lot of money, time and
staff. It is a therefore, sounds reasonable to study a portion of these items and try to draw
conclusions on all of them. This is called Sampling.

A population is defined as the totality of all possible values (measurements or counts) of a


particular characteristic of interest for a specified group of objects or persons. This specified
group of objects is also called a ‘universe’.
A population is called finite if it consists of a finite and fixed number of individuals or
elementary units. A population will be called infinite if this number is infinite or statistically very
large. For example, students in your university in a particular year constitute a finite population,
whereas the number of leaves on a big tree will constitute an infinite population.

Census v/s Sample Enumeration

Census survey
If we study each and every unit of a population, it is known as a population survey or census
survey. In a census investigation, intensive information is obtained from each and every item;
thus, many facets of the problem are brought to light. This type of inquiry is suitable where
scope of enquiry is limited, the population contains units having different characteristics,

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intensive study of each unit is required, the greatest accuracy is expected and the resources of the
investigator are sufficient.

Though, the data collected through census method are more true and reliable, it is appropriate
only when units of the population are of diverse characteristics or when population is not too
large. Census method of investigation is costly and much time consuming. It needs a big
organization to handle the investigation. Moreover, it is sometimes impossible to make the
census survey when the investigation involves destruction of items, like testing of blood in
human body. It is therefore, statisticians suggest, studying only a part of the population and
calling it sample survey.

Sample survey

In our daily life we adopt the sampling techniques almost every moment of our existence. We go
to the market and examine a sample of wheat to form an idea about the quality and then decide
whether the quality of the whole lot is acceptable or not. We examine a few beads of rice from
the bowl on the stove, to check if the rice is cooked or not. We meet a person for a short while,
and form opinion about his character and personality. The sampling procedure is based on the
assumption that a part of the aggregate represents well the whole population. Sampling is the
selection of a part of the population for the purpose of drawing conclusions about the entire
universe.

In a sample survey only a selected group of individuals from a population is surveyed and
studied. A sample consists of a small collection from larger aggregates about which we seek
information. The results obtained from the study of the sample are applicable to the whole
universe from which the sample is taken. For example, in order to know the per capita income of
a city we study a few households of different income groups of the city. To know the quality of
crackers, we burn a few of them out of the lot.

Types of sampling in research methodology

When creating a sample design, a researcher decides from who or what they'll collect
data. They also choose the techniques and procedures they'll use to select items or

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individuals for the sample. There are several types of sample design that fall into two
main categories:

Probability sampling

This sampling method uses a random sample from the pool of people or items you're
interested in, called the population, and is random or chance sampling. Every person or
item in the population has an equal chance of being selected. Using this method is the
best way to get a truly representative sample, and researchers can generalize the study's
results to the entire population.

Non probability sampling

Non probability sampling is not random, as the researcher deliberately selects people or
items for the sample. Researchers also refer to this method as deliberate sampling,
judgment sampling or purposive sampling. Every person or item in the population
doesn't have an equal chance of being selected, and the results are typically not
generalizable to the entire population.

Purposive Sampling
This type of Sampling is used with a definite purpose in view. In this sampling method the
investigator uses his discretion in the matter of selecting the items that are to be included in the
sample. In this kind of selection, the sample entirely depends upon the judgment of the
investigator and no formula or principle is followed. For example, to calculate the per capita
income of a city a wise investigator will choose only a few rich families, more of middle class
people and mostly poor people by his own judgment, to make the sample true representative of
the population of the city. This can also be misused if he selects a sample consisting of only rich
people in order to show a high per capita income. This is the biggest limitation of this sampling
method.

This sampling technique is also known as Subjective sampling or Judgment sampling or Non-
probability sampling. In general, this method is not recommended due to element of

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subjectiveness on the part of investigator. However, if the researcher is an expert and
experienced in the art of sampling, he can carefully aply this technique and then, purposive
sampling would provide reliable results.

Random Sampling
In order to eliminate the possibility of human prejudice interfering in the selection of a
representative sample, the method of random selection has been devised. A random sampling is
that in which every item of the population has an equal chance of being selected in the sample.
The selection is entirely objective. There are various ways in which a random sample may be
drawn. The following are commonly used:

Simple random sampling

Simple random sampling is a method of sample selection in which every item of the population
has an equal and independent opportunity of being selected in the sample. The selection does not
have any personal bias of the investigator. Random selection should not be confused with
haphazard selection. There is nothing haphazard about such selection. When we speak of a
simple random sample, we use the word random interchangeably with probability not with
haphazardness. Random sampling has sometimes been referred to as representative or
proportional sampling. If the sample is chosen at random and if the number of cases in it is
sufficiently large, it will represent all the groups in the population in approximately correct
proportion. Simple random sampling may be with or without replacement, according as a unit
selected is replaced or not replaced back into the population before next draw.

There are two methods of selecting a simple random sample:

i. Lottery method: Under this method all the items of the universe are represented on cards
and a blindfold selection is made of these cards. The selection of n (sample size) cards
may be made in n draws, one by one. The one by one selection may be with or without
replacement. In order to get accurate results, it is necessary that the cards should be
similar in size, shape, and thickness, and in all other respects. It is one of the most
reliable methods of drawing a random sample. This will, however, not be practicable if
the parent population is large.

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ii. Tables of random numbers: In the recent past, use of random number tables has been
frequent for drawing of a simple random sample. A table of random digits is simply a
table of digits, which have been generated by a random process. These numbers have
been put to all possible tests and have been found to be truly random. With the help of
these numbers, the work of selecting random samples has become very simple. What one
has to do is to take any table of random numbers and start using the table from any
position either horizontally or vertically. But once having started, not a single number
should be left out and the order should also not be disturbed.

Stratified random sampling


If the population is heterogeneous in nature, that is widely apart in terms of characteristics under
study, a simple random sample will not be a true representative of the population. In such cases,
the entire heterogeneous population is divided into a number of homogeneous groups called
strata or sub-populations. Each such stratum or sub-population is homogeneous with in itself.
These sub-populations are non-overlapping and together they comprise the whole of the
population. Then units are sampled at random from each of these strata. Generally, the number of
units selected from each stratum is proportional to the number of units in that stratum in the
population. The sample, which is the set of all the sampling units drawn from each stratum, is
called a stratified random sample and the technique of drawing this sample is termed as stratified
random sampling.

Systematic sampling
Systematic sampling is sometimes known as mixed sampling. It has the feature of randomness in
it along with a fixed procedure of selection of units. This is a convenient method when complete
list of sampling units is assumed to be readily available or can be prepared. Such a list is known
as a sampling frame. This sampling scheme consists of selecting only the first unit at random and
the rest are then automatically selected according to some predetermined pattern.

Cluster sampling

In a random sampling scheme, the population consists of distinct and identifiable units called
sampling units. The smallest unit into which the population can be divided is called an element

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of the population. A group of such elements is known as a cluster. When the sampling unit is a
cluster the procedure is called cluster sampling.

It is frequently used in large scale studies, as it is comparatively a less expensive and convenient
sample design. In this sample design a large population is divided into smaller groups called
clusters. These clusters are non-overlapping and exhaustive. Then out of all clusters a few are
chosen by simple random sampling and all the units (elements) in a chosen cluster are observed.

Clusters are usually formed of neighbouring elements and therefore tend to have similar
characteristics. As a simple rule, the number of elements in a cluster should be small and the
number of clusters should be large. The number of clusters and their formation depends on the
research objectives and the resources available for research.

Area sampling
If the population or universe is represented by a geographical area and its segments are made to
form clusters, the cluster sampling is called Area sampling. For example, to study some
characteristics nationwide, India can be divided into small geographical regions, called clusters.
These sub areas may be states, cities, districts, blocks or villages depending on the research
objective.

Sub- sampling or Multistage sampling


In cluster sampling, the whole population is divided into N clusters and then n clusters are
chosen randomly. Then, all the elements in the selected cluster are enumerated. Instead of
enumerating all the element in a cluster if we survey only a sample of units in each selected
cluster it is known as sub-sampling or two stage sampling. In such sample design, since clusters
are formed at first stage, they are known as first stage units or primary sampling units and the
elements within a cluster are called second stage units.

This procedure can be generalized to three or more stages and will be known as multistage
sampling. For example, in a marketing survey districts can be used as first stage units, colonies
can be called second stage units, and then household can be termed as the third stage units.

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Double sampling &Multi-phase sampling
There are situations in which it is useful to collect information on some auxiliary variable apart
from observing the study variable. For example, if we are interested to know the performance of
MBA students in research methodology course, the marks obtained in that paper will be the
study variable. A related variable will be the background of the student in graduation classes like
arts, science, and commerce. Therefore proportion of students belonging to arts, science,
commerce and others will be observed in the first phase and depending on these proportions the
second and main phase of the survey will be conducted i.e. obtaining their marks in research
methodology paper. It is relatively cheaper and faster to collect data on the auxiliary variable.
Therefore if such data are not readily available one conducts a large-scale fast survey to obtain
information on auxiliary variable in the first phase of the sample design. Then, after this the data
on study variable are collected by doing the main survey in the second phase. In the first phase of
the survey only a part of the resources are used and most of the part of resources are spent on the
main survey. This kind of sample design is known as double sampling or two-phase sampling.
When the survey is conducted in three or more phases, it is known as multi-phase sampling.

Types of Research Methods

Factors to consider when choosing a research methodology

Here are some factors to consider when choosing a research methodology:

The research objective: Consider the research project objective. When researchers
know what information they require at the end of the project to meet their objectives, it
helps them select the correct methodology and research method.

Significance of statistics: Another factor to consider is whether you require concise,


datadriven research results and statistical answers. Or whether the research questions
require an understanding of reasons, perceptions, opinions and motivations.

Nature of the research: If the aims and objectives are exploratory, the research will
probably require qualitative data collection methods. However, if the aims and objectives

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are to measure or test something, the research will require quantitative data collection
methods.

Sample size: The sample size can determine your data-gathering methods, such as
whether to use in-person interviews or smaller samples or online surveys for larger ones.

Time available: If there are time constraints, consider techniques like random or
convenience sampling and tools that allow for data collection in a few days. If there's
more time available for data collection, in-person interviews and observations are
possible.

RESEARCH PROCESS.

Inferential statistics is a branch of statistics that makes the use of various analytical tools
to draw inferences about the population data from sample data. Apart from inferential
statistics, descriptive statistics forms another branch of statistics. Inferential statistics
help to draw conclusions about the population while descriptive statistics summarizes the
features of the data set.

There are two main types of inferential statistics - hypothesis testing and regression
analysis. The samples chosen in inferential statistics need to be representative of the
entire population. In this article, we will learn more about inferential statistics, its types,
examples, and see the important formulas.

Identify the research problem

A well-identified problem will lead the researcher to accomplish all-important phases of


the research process, from setting objectives to selecting the research methodology.

But the core question is: whether all problems require research.

We have countless problems around us, but all we encounter do not qualify as research
problems; thus, these do not need to be researched.

Keeping this point in mind, we must draw a line between research and non-research
problems.

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Intuitively, researchable problems are those that have a possibility of thorough
verification investigation, which can be effected through the analysis and collection of
data. In contrast, the non-research problems do not need to go through these processes.

Research design

A research design is a well-defined plan of action. It is a planned sequence of the entire research
process. It is a blue print of research activity. In a big business scenario designing a research
study is very complex. Therefore, a research design may change during the operation of a
project. A good research design must use minimum of resources like time, money and
manpower. A research design must be able to translate the general scientific model into a
practical research operation. A scientifically developed research design possess the
characteristics like (i) objectivity (ii) Reliability ( iii) Validity (iv) Generalization .

Choice of sample design

In any investigation the group of all items, objects or individuals under study is called
‘population’ or ‘universe’. For all purpose of determining population characteristics, instead of
enumerating entire population, some items of the population, called a sample, are observed. Then
the sample characteristics are utilized to approximately determine or estimate the population. For
example, on examining the sample of particular product, we arrive at a decision of purchasing or
rejecting that product. There will be surely some error in such an approximation and is inherent
and unavoidable in any and every sampling scheme. But samples results in considerable gains in
terms of time, money, accuracy and efforts.

Drawing a sample of some predetermined size from an entire population is not a child’s play.
These have to be a systematic plan to choose the sample items. This plan or a technique of
drawing a sample is known as sample design or sample plan or sampling technique. Researchers
have suggested various sample designs. One research situation may be different from another,
therefore, simple random sample, though most popular, may not be suitable in each case.
Depending on the requirement of a situation one can choose one of the following sample
designs:

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I. Purposive or Judgment Sampling
II. Simple Random Sampling
III. Stratified Random Sampling
IV. Systematic Sampling
V. Cluster Sampling
VI. Area Sampling
VII. Multi-stage Sampling
VIII. Multi-phase Sampling

Data collection:
Once a sample design is formulated, the next step in a research process is the collection of
relevant data. There can be two sources of data (i) Internal data, that refers to the happenings
and functions of a business organization. For example, the sale- purchases details of a company.
(ii) External data, which is related to outside sources and external agencies. There are two types
of data (a) Primary data (b) Secondary data. Primary data are those observations, which are
collected by an investigator for the first time, Secondary data are already available in the records
and have been collected by some other researcher for the purpose of studying a similar problem.

Methods of collecting primary data are:

I. by direct observation and experimentations


II. by direct personal interview
III. by direct interviews through phone, sms and email.
IV. by indirect personal interview
V. by mailed / emailed Questionnaire
VI. by schedules through enumerators

Methods of collecting secondary data:

I. International organizations like WHO, UNO etc.


II. Government publications like economic survey, CSO, NSSO.
III. Journal and Newspapers

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IV. Research articles
V. Reports of business organization and financial institutions.

A method and source of data collection is chosen by an investigator taking into account the
objectives and requirements of the inquiry. The adopted method should incur minimum cost and
time should have a reasonable level of accuracy and unbiasedness.

Analysis and interpretation of data


After the collection of data, what we have is a huge chunk of observations and numerical values.
The data at the beginning are in raw form. For the purpose of applying further statistical
techniques, one has to put the raw data in a useful form by classification, tabulation and
categorization of data. If one has to feed the data in a computer, the data should bear the same
form as required by the software used. This kind of processing of data involves one or more of
the following activities: (i) coding (ii) labeling (iii)editing (iv) tabulation (v) classification.

Interpretations of results
After the data collection and testing of hypothesis one has to reach to the conclusions of the
research study. These conclusions are the most vital outcomes of the study and have to be dealt
with very carefully. On the basis of findings of the research work done we draw inferences about
the phenomenon under study. This is a useful activity as without any outcome a research study is
fruitless. The results obtained from the analysis of data are to be interpreted skillfully. A wrong
interpretation my lead to wrong decisions. Interpretation may also lead to generalizations of the
phenomena understudy. It may also help in developing new theories and can suggest new
research problems to be explored in future.

Report writing
Last but not the least is the step of reporting the facts and findings of the research study. A report
is a summary of the whole research process. The layout of a report must be attractive. The words
used in the text must be easily comprehensive to a reader. Even a non- technical person
understands a good report. In the beginning of the report one should give the title, time period of
work, acknowledgement and preface. In the main text an introduction to the problem, summary

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of findings, results and inferences, and then the recommendations of the researcher are given.
The report should conclude with appendices, bibliography and a subject or / and author indexes.

RESEARCH METHODOLOGY

A systematic study needs to follow a proper methodology to achieve the predetermined


objectives. “Research methodology is a way to systematically solve the research problem”. It is
the process of aiming at the solution of problem through the planned and systematic dealing with
collection and analysis of data. This research paper is based on descriptive method of the study

Research Design

Descriptive research design is used in this report for analysis of Hindustan Pencils Private Ltd.

Sources and Method of collection of data

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The study is primarily based on secondary data which will be collected through published and
unpublished research papers, magazines, published books, newspapers, website of company,
other websites, periodic reports, thesis of various professors, research reports and articles.

Research Gap

This study focused on the need for analyzing the methods and techniques which are used in the
report of the company to help in managing the inventory .

And we can summaries the importance of this study in the following points:

To determine various methods of analysis like ABC analysis, EOQ analysis, FSN analysis which
helps in evaluation of inventories available in the company.

To know about the tools and techniques which is helpful for the management of inventory in the
company.

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CHAPTER 5

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ABOUT THE TOPIC
The term inventory refers to the raw materials used in production as well as the goods produced
that are available for sale. A company's inventory represents one of the most important assets it
has because the turnover of inventory represents one of the primary sources of revenue
generation and subsequent earnings for the company's shareholders. There are three types of
inventory, including raw materials, work-in-progress, and finished goods. It is categorized as a
current asset on a company's balance sheet.Inventory is a very important asset for any company.
It is defined as the array of goods used in production or finished goods held by a company during
its normal course of business. inventory is classified as a current asset on a company's balance
sheet, and it serves as a buffer between manufacturing and order fulfillment. When an inventory
item is sold, its carrying cost transfers to the cost of goods sold (COGS) category on the income
statement.

Example: Consider a fashion retailer such as Zara, which operates on a seasonal


schedule. Because of the fast fashion nature of turnover, Zara, like other fashion retailers is
under pressure to sell inventory rapidly. Zara's merchandise is an example of inventory in the
finished product stage. On the other hand, the fabric and other production materials are
considered a raw material form of inventory.

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TYPES OF INVENTORY

Raw materials

Raw materials consist of all the items that are processed to make the final product. In a cookie
manufacturing company, the raw materials are items like milk, sugar, and flour that are used in
the different stages of production.

When we talk about raw materials, it is essential to understand that raw materials used by a
manufacturing company can either be sourced from a supplier or be a by-product of a
process. In our cookie manufacturing company, the raw materials will be mostly sourced
from various suppliers. However, in a sugar manufacturing company, only the sugarcane is
brought in from different farmers. When it is processed in the factory to extract the juice, the
residual substance is known as bagasse. The juice is sent for boiling and the bagasse is used as a
fuel. Here, the sugarcane, juice , and bagasse will all be treated as raw materials.

The concept of raw materials as inventory items exists only in the manufacturing industry. In a
trading industry, there is no processing or manufacturing involved, so there are no raw materials.

Work in progress

When raw materials have been sent for processing but have not yet been approved as finished
goods, this stage is known as work in progress. In a cookie manufacturing company, after the
raw materials have been processed and the cookies have been molded, they go for a quality
check before they are passed for final packaging. All the cookies which are waiting for their
quality check are considered work in progress. To put it in simple words, the work in progress
category consists of all the items that have been processed but not sent for sale.

Finished goods

Finished goods are the final items that are ready for sale in the market. These goods have passed
through all stages of production and quality checking. So for the cookie manufacturer, the final
packets of cookies that are sent to the market for selling after undergoing quality checks will be
the finished goods.

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Raw materials, semi-finished goods, and finished goods are the three main categories of
inventory that are accounted for in a company’s financial accounts. There are other types as well
which are maintained as a precautionary measure or for some other specific purpose.

MRO inventory

MRO stands for Maintenance Repairing and Operating supplies, this type of inventory is mostly
relevant for manufacturing industries. MRO items are not accounted as inventory items in books
of accounts, however, they play a crucial role in the day-to-day working of an organization.
MRO supplies are used for maintenance, repair, and upkeep of the machines, tools, and other
equipment used in the production process. Some examples of MRO items are lubricants,
coolants, uniforms and gloves, nuts, bolts, and screws.

Buffer inventory

The market movements cannot always be predicted. Such changes can have a negative impact on
the sales or production process, which can lead to out-of-stock situations. Buffer
inventory attempts to compensate for this by following the adage that prevention is better than
cure. Buffer inventory (also known as safety stock), consists of the items stored in the warehouse
of a store or a factory to cushion the impact of unexpected shocks. A sudden spike in demand,
delay in transport, or labor strike can be managed if sufficient buffer inventory is maintained.

Cycle inventory

Cycle inventory is a term used to describe the items that are ordered in lot sizes and on a regular
basis. Cycle inventories are usually materials which are directly used in the production or they
are part of some regular process. This includes the management of all the raw materials starting
from manufacturing and ending with the finished goods waiting to be shipped. The process is
usually carried out by resellers, manufacturers, and wholesalers to meet the regular order of the
day-to-day business.

Decoupling inventory

Most manufacturing is carried on by multiple machines. The output of one machine is fed into
the next machine for further processing. However, the process only works smoothly if all the

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machines work in tandem. A breakdown in any of the machines can derail the entire
process, which is when decoupling inventory comes into the picture. Decoupling
inventory consists of items which are kept in reserve to be processed by another machine if the
previous machine fails to produce its usual output. In our example of cookie manufacturing, after
the dough has been molded, it goes to the oven for baking. To prevent a breakdown in one of the
molding machines can delaying the baking process, the manufacturer might keep some extra
pieces of molded dough which can be sent to the oven for baking while the machine is being
repaired.

Transit inventory

Transit inventory refers to items that are being moved from one location to another, such as raw
materials being transported to the factory by railway or finished goods being transported to the
store by truck.Transit inventory can also be important for reasons related to financing. In some
cases, a buyer may attempt to use the goods he has purchased as collateral to gain financing for
additional business operations. Lenders who issue loans based on the assumption that such
goods will arrive within a specified time frame and in the amount listed must be careful to do
their due diligence to ensure that the borrower has all of his ducks in a row; otherwise the
lender runs the risk of buyer insolvency and the potential for a loan default.

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INVENTORY MANAGEMENT

Inventory management refers to the process of ordering, storing, using, and selling a company's
inventory. This includes the management of raw materials, components, and finished products,
as well as warehousing and processing of such items. It is the entire process of managing
inventories from raw materials to finished products.

Inventory management helps companies identify which and how much stock to order at what
time. It tracks inventory from purchase to the sale of goods. The practice identifies and responds
to trends to ensure there’s always enough stock to fulfill customer orders and proper warning of a
shortage.

Once sold, inventory becomes revenue. Before it sells, inventory (although reported as an asset
on the balance sheet) ties up cash. Therefore, too much stock costs money and reduces cash flow.

One measurement of good inventory management is inventory turnover. An accounting


measurement, inventory turnover reflects how often stock is sold in a period. A business does not
want more stock than sales. Poor inventory turnover can lead to deadstock, or unsold stock.

Inventory management is vital to a company’s health because it helps make sure there is rarely
too much or too little stock on hand, limiting the risk of stockouts and inaccurate records.

Public companies must track inventory as a requirement for compliance with Securities and
Exchange Commission (SEC) rules. Companies must document their management processes to
prove compliance.

The inventory management definition in the retail industry:

Retail inventory management refers to strategies, techniques, tools, technologies, and processes
to ensure you are carrying the right amount of merchandise that shoppers want to avoid
overstocking or shortages.

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In practice, effective retail inventory management results in lower costs and a better
understanding of sales patterns. Retail inventory management tools and methods give retailers
more information on which to run their businesses.

For retail, the main challenge is to balance the right amount of stock across all the different
warehousing and retail location and of course manage online and offline orders and they need to
be able to provide multiple ways to sell their products whether it is from their website, social
media, brick and mortar locations, and other places.

Manufacturing

The inventory management definition in the manufacturing industry:

Manufacturing inventory management refers to strategies, techniques, tools, technologies, and


processes to ensure keeping the right amount of stock to keep production up and running as well
as having enough common selling products to sell to customers to reduce order fulfillment time.

This process helps managers see stock levels at a glance and tracks raw materials, parts, work-in-
progress and finished goods.

One of the main issues that manufacturers often have is dealing with the constantly moving
pieces of raw materials as well as the finished products themselves. Manufacturing inventory is
constantly moving and tracking it can be very challenging.

This is why understanding that inventory is dynamic and fluid is the first step to attaining good
inventory management. Because then it becomes clear that keeping track of your stock is not
something you can force. You need to look for the right tools that can help you tame it.

Distribution

The inventory management definition in the logistics industry:

Logistics inventory management mainly refers to the process of maintaining the right amount of
inventory and being in sync with your supply chain strategy and your overall business strategy so
you can maintain a consistent flow of inventories in and out.

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Logistics inventory management is one of the majorly required solutions so that it can provide
more efficient streaming of insights in the supply chain and could easily integrate with the
already existing systems in the organization.

Both inventory management and inventory control are essential to running a successful direct
sales and channel operation. Inventory management is the overall strategy to ensure adequate
inventory, and inventory control encompasses the processes and tools used to track existing
inventory. Businesses may choose to use an inventory control system on its own but will benefit
from using both together. Here are the essential differences:

Inventory management

Inventory management is a strategy that ensures businesses always have the right amount of
inventory at the right time and in the right place. Inventory management tools enable businesses
to:

 calculate safety stock;

 calculate reorder points;

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 accomplish demand planning and forecasting;

 identify obsolete items;

 optimize warehouse layout; and

 identify fill rate percentage.

Inventory control

Inventory control addresses inventory already in a business's possession. It works at the


transactional layer of an ERP system and enables businesses to:

 receive inventory;

 process inter branch transfers;

 process receipts;

 pack and ship stock;

 process customer invoices; and

 process supplier purchase orders

Lead time is the duration between the placement of an order and the receipt of the products. It is
a crucial aspect of inventory management because it directly influences the planning and
execution of replenishment. Lead time includes order processing, production or procurement,
transportation, and any potential supply chain delays.

Understanding lead time is essential because it allows businesses to anticipate the amount of time
required to replenish inventory and plan accordingly to avoid stockouts.

BENEFITS OF INVENTORY MANAGEMENT

A company's inventory is one of its most valuable assets. In retail, manufacturing, food services,
and other inventory-intensive sectors, a company's inputs and finished products are the core of its
business. A shortage of inventory when and where it's needed can be extremely detrimental.

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At the same time, inventory can be thought of as a liability (if not in an accounting sense). A
large inventory carries the risk of spoilage, theft, damage, or shifts in demand. Inventory must be
insured, and if it is not sold in time it may have to be disposed of at clearance prices—or simply
destroyed.

For these reasons, inventory management is important for businesses of any size. Knowing when
to restock inventory, what amounts to purchase or produce, what price to pay—as well as when
to sell and at what price—can easily become complex decisions. Small businesses will often
keep track of stock manually and determine the reorder points and quantities using spreadsheet
(Excel) formulas. Larger businesses will use specialized enterprise resource planning
(ERP) software. The largest corporations use highly customized software as a service
(SaaS) applications.

1. Increased customer satisfaction

How you manage inventory on a day-to-day basis can grow or diminish your customer satisfaction
levels. For a consumer, a late delivery can be an inconvenience.

For a business, it can mean lost sales and profits.

Nobody wants to receive incorrect orders or late deliveries. But most consumers are grateful for fast,
accurate order management.

Inventory management dictates:

How quickly you get your products to your customers

How reliably you can fulfill orders

How much visibility you can give your customers

Your customers will be much more likely to come back for more if they know your organisation can
consistently deliver orders on time and let them know what’s available. This is especially true for
business-to-business transactions.

2. Faster business growth

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As businesses scale in complexity, their inventory management requirements get more complex as
well. New product lines, new staff, new production facilities, and new customers mean new challenges
to managing inventory.

The solution is to be proactive.

Putting an effective stock system in place early is key. The later you leave it, the longer it will take and
the more it will cost — and the less time you’ll have to do it.

3. Increased profit margins

Inventory management can also bring several direct benefits to your business’s bottom line.

For starters, you can analyse performance and empower salespeople with up-to-date product
information. It also eliminates the inefficiencies that lead to lost stock, overstocking, and stockouts —
reducing inventory costs and growing margins.

Inventory management works alongside purchasing and supply chain management to lower the cost
and effort required to prepare goods for sale. It minimises the time and labour ordinarily spent on
inventory admin.

Effective inventory management will mean you’re paying less for goods and making more profit
selling them.

Accounting for Inventory

Inventory represents a current asset since a company typically intends to sell its finished goods
within a short amount of time, typically a year. Inventory has to be physically counted or
measured before it can be put on a balance sheet. Companies typically maintain
sophisticated inventory management systems capable of tracking real-time inventory levels.

Several software solutions offer distinct features and cater to businesses of varying sizes and
industries. The choice of software largely depends on the specific needs and scale of the
company. Some of the highly recommended inventory management software includes:

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Inventory Management Modules In ERP Systems: Enterprise Resource Planning (ERP)
systems, such as SAP, Oracle ERP, and Microsoft Dynamics 365, often come with integrated
inventory management modules. These solutions offer comprehensive features and seamless
integration with other business processes.

Independent Inventory Management Software: Dedicated inventory management software


like Fishbowl, Trade Gecko, and Zoho Inventory are designed specifically to handle inventory-
related tasks efficiently. These solutions are often user-friendly and cost-effective for smaller
businesses.

Cloud-Based Inventory Management Systems: Cloud-based solutions, including inFlow and


DEAR Inventory, provide the advantage of real-time accessibility, allowing businesses to
manage inventory data from anywhere with an internet connection.

Point Of Sale (POS) Systems With Inventory Management Features: Some POS systems,
such as Square and Vend, offer integrated inventory management features, which can be
beneficial for businesses operating both online and offline.

PROCESS OF INVENTORY MANAGEMNET

The inventory management process involves tracking and controlling stock as it moves from your
suppliers to your warehouse to your customers.

The inventory management process can be divided into five stages:

 Purchasing
 Production
 Stock control
 Order management
 Reporting

Stage 1: Purchasing

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Purchasing is the process of sourcing and buying the goods, materials, equipment, and services required
to produce and sell products.

The purchasing manager or purchasing team raises a purchase order – a legally binding document
outlining what the purchasing business needs – which is sent to a supplier. The supplier fulfils the order
and delivers the goods or service on the agreed due date.

Inventory management informs how much inventory should be ordered, when to order it, and where
costs can be saved.

Stage 2 (optional): Production

Production or manufacturing is the process in which your finished product is created from its constituent
parts. Not every company will get involved in manufacturing — wholesalers, for instance, might skip
this step entirely.

All of the parts, materials, sub-assemblies, and components used to produce a product must be tracked,
typically via a document called a bill of materials, so that a business has an accurate understanding of
production capacity and costs.

Stage 3: Stock control

Stock control is the step in inventory management that deals with goods and raw materials once they’ve
been purchased or made by a business before they’re sold. It involves organising where and how
inventory is stored and keeping each product line within its minimum and maximum levels.

This part of the inventory management process requires effective auditing of stock levels and warehouse
optimisation. The goal of stock control is to ensure the right quantities of goods are stored in the right
location to facilitate efficient order fulfilment.

Stage 4: Order management

Inventory management also crosses wires with sales in a process called order management. Order
management refers to the processing and fulfilment of customer orders.

There are several steps in the order management process, including:

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 Order picking
 Packing
 Shipping
 Returns management
 Customer service

Because customer satisfaction is a major factor in the success of any business, order management plays
a critical role in inventory management and should be frequently optimised for efficiency.

Stage 5: Inventory reporting

Inventory reporting is the recording and analysis of key sales and inventory data to make the best
decisions at any given time. It involves tracking multiple inventory metrics to accurately understand the
costs that go in and out of a business.

Reporting feeds directly into important inventory optimisation processes, such as demand
forecasting and inventory planning, to enable a business to ensure the right budget allocation and
systems are in place for maximum success.

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BEST WAYS TO MANAGE INVENTORY.

When it comes to your inventory, you should always be trying to find the best ways to manage
your inventory in order to reduce costs, increase profit, improve customer service, have the right
amount of stock, reduce human errors, et cetera.

And while there is no one-fit blueprint that fixes all inventory challenges and transforms your
organization into a perfect inventory management operation, but, there are certain ways to
improve how you handle and manage your inventory, and here are the four best ways to manage
your inventory:

 Implement Inventory Management System: Digitalization is an important part of


improving business processes and that same applies to inventory management. The
inventory management system can help you better manage your inventories, improve,
and standardize processes, increase productivity, reduce errors, and there are many more
benefits of having an inventory management system. That’s why it is one of the best
ways to take to improve how you manage your inventory.
 Use Inventory Management Techniques: Inventory management techniques have been
developed specifically to improve the management of inventory. That’s why using such
techniques can improve the way how you operate within your warehouse, order
inventories, manage inventory, and more. That’s why applying relevant techniques to
your business can improve the way how you manage inventory.
 Follow Inventory Best Practices: Inventory Management best practices are another
great way to improve how you manage your inventories. These best practices come from
experience from other companies and professionals that faced problems like you and
came up with a solution or ways to improve inventory management. That’s why you
should constantly check for the latest inventory management best practices to implement
for your company.
 Prioritize Your Customers: In the end, your inventory is meant to be sold to customers.
That’s why one of the best ways to improve your inventory management is to listen to

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feedback from your customers. Often your customers can be the best source of
information to even improve your internal processes, whether it is order fulfillment,
quality of your products, or something else, your customers will let you know what you
should improve, so listen to them.

NEED OF INVENTORY MANAGEMENT

1. Meet variation in Production Demand

Production plan changes in response to the sales, estimates, orders and stocking patterns.
Accordingly the demand for raw material supply for production varies with the product
plan in terms of specific SKU as well as batch quantities.

Holding inventories at a nearby warehouse helps issue the required quantity and item to
production just in time.

2. Cater to Cyclical and Seasonal Demand

Market demand and supplies are seasonal depending upon various factors like seasons;
festivals etc and past sales data help companies to anticipate a huge surge of demand in
the market well in advance. Accordingly they stock up raw materials and hold inventories
to be able to increase production and rush supplies to the market to meet the increased
demand.

3. Economies of Scale in Procurement

Buying raw materials in larger lot and holding inventory is found to be cheaper for the
company than buying frequent small lots. In such cases one buys in bulk and holds
inventories at the plant warehouse.

4. Take advantage of Price Increase and Quantity Discounts

If there is a price increase expected few months down the line due to changes in demand
and supply in the national or international market, impact of taxes and budgets etc, the

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company’s tend to buy raw materials in advance and hold stocks as a hedge against
increased costs.

Companies resort to buying in bulk and holding raw material inventories to take
advantage of the quantity discounts offered by the supplier. In such cases the savings on
account of the discount enjoyed would be substantially higher that of inventory carrying
cost.

5. Reduce Transit Cost and Transit Times

In case of raw materials being imported from a foreign country or from a far away vendor
within the country, one can save a lot in terms of transportation cost buy buying in bulk
and transporting as a container load or a full truck load. Part shipments can be costlier.

In terms of transit time too, transit time for full container shipment or a full truck load is
direct and faster unlike part shipment load where the freight forwarder waits for other
loads to fill the container which can take several weeks.

There could be a lot of factors resulting in shipping delays and transportation too, which
can hamper the supply chain forcing companies to hold safety stock of raw material
inventories.

6. Long Lead and High demand items need to be held in Inventory

Often raw material supplies from vendors have long lead running into several months.
Coupled with this if the particular item is in high demand and short supply one can expect
disruption of supplies. In such cases it is safer to hold inventories and have control.

Inventory management facilitates the smooth functioning of your business and enhances
sales, promotes cost-effectiveness, and improves customer experience. Listed below are
some of the reasons why businesses need inventory management:

7. Managing Finances

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Inventory management helps businesses understand which products are more valuable in
sales and earning profits. This allows businesses to eliminate unnecessary capital
blockage by strategically planning their future inventory orders.

8. Tracking Inventory

Inventory management provides a complete detailing of the inventory and its location. It
is especially useful in assigning distribution channels to the inventory. Inventory
management eases the process of managing more than one shop/store or warehouse.

9. Avoiding Late Deliveries

Businesses are likely to face stock-outs if they do not have proper inventory management
that’s where they can use the inventory management software. Stockouts can result in late
deliveries and unhappy customers. Inventory management considers all plausible factors
and fluctuations and provides stockout warnings from beforehand. This helps in
improving customer experiences, thus increasing sales.

10. Managing Time and Effort

Proper inventory management leads to a well-arranged warehouse or store. This makes


tracking products in hand and products on order easy and less time-consuming. It helps in
increasing productivity and efficiency.

11. Predicting Future Sales

Inventory management helps in predicting future sales based on past transaction data.
This helps businesses to prepare well for the future and meet customer expectations.

12. Enhancing Customer Loyalty

Effective inventory management warns businesses about deteriorating inventory from


beforehand. This ensures that customers are only provided with top-notch quality
products. Enhanced customer experience leads to repeat customers.

OBJECTIVE OF INVENTORY MANAGEMENT

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1. Having Material Available

One of the main objectives of inventory management is to ensure you are always having
material available whenever the production department needs them ensuring that production
is not stopped or slowed down due to a lack of resources.

That’s why it is important to keep a buffer stock of all important materials in order to keep
production on track.

2. Improve Order Fulfillment

Improved order fulfillment is another important objective of inventory management to ensure


you avoid situations when you don’t have stock to fulfill all your orders and you’ll have to
keep your customer waiting or provide them with a refund.

Situations such as sales making a sale just to later find out your company won’t have enough
inventory to complete the order, or a customer bought your product from your eCommerce
store that is actually out of stock are one of the many order fulfillment problems that can cost
you customers, money, and business reputation.

To not experience this, an inventory management system should be used, and team members
should be knowing the inventory situation.

3. Having the Right Amount of Stock

Another major objective of inventory management is to ensure you are having the right
amount of stock to ensure stockouts or overstocking does not happen.

For manufacturing, you always need to ensure supplies should be easily available for all
stages of production, from raw materials to completed goods. You need to make sure you
have enough of the necessary material on hand to meet client demand without having to cut
corners and being concerned about running out of materials, and components and stopping
production.

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For retail, this helps you to track the best-selling and low-selling items, so you don’t end up
with too much stock with items that are hard to sell and too little stock for those items that
are selling by themselves.

Inventory management helps companies that handle inventory to optimize their inventory
stock levels so they don’t spend too much capital on inventory, but also are not out of stock
which could mean losing customers to competitors.

4. Keeping Wastage and Losses to a Minimum

The fourth objective of inventory management is to keep wastage and losses to a minimum.
When businesses don’t have a complete view of their inventory it is easy for a stock to be
misplaced, stolen, disappeared, or become obsolete because the business did not sell it on
time.

Inventory management helps you to ensure that these occurrences are being limited or
completely reduced by giving you a full view of your inventory, where it is stored, and its
movement of it.

Having processes and documents in place helps avoid waste and protects your business from
theft or losses. This is especially important when you are handling large quantities of goods.

Inventory management attempts to minimize inventory waste at all stages, such as during
storage in godowns or during production in the plant.

Normal or uncontrolled waste should not be allowed to exceed a permissible level, whereas
abnormal and unmanageable wastage should be carefully regulated.

5. Increase Profit

And the last main objective of inventory management I would like to mention here is to help
you increase profit.

An inventory management system can help you analyze your historical data and product
sales patterns and make a suggestion for you to have enough stock to avoid being out of
stock and losing profit.

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Inventory management gives you essential insights on your sales to keep profit high and cost
low, keeping your goods going in and out and helping you identify any important trends that
you should react to.

Inventory Management System


There are several types of inventory management systems that businesses use depending on how
they operate. Three examples are manual inventory, periodic inventory and perpetual inventory.
Manual methods are the least sophisticated and least accurate, and perpetual systems are the
most sophisticated and most accurate.

 Manual Inventory System: This involves physically counting items and recording them on
paper or in a spreadsheet. Small businesses may use manual systems.
 Periodic Inventory System: Periodic inventory systems include manual and periodic counts.
Periodic counts record item details as items move in and out of stock. Barcodes simplify
stocktaking. A database contains the records of stock levels and locations.
 Perpetual Inventory System: Perpetual inventory systems provide real-time stock data, as they
rely on active radio frequency identification (RFID) tags that are always on and sending updates
on item movements. Passive RFID tags, meanwhile, use a scanner to send stock information to
the database.

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 Improving inventory management is a continuous process that involves implementing best
practices and utilising modern techniques to enhance overall efficiency. Here are some
strategies:
 ABC Analysis: Implement ABC analysis to classify inventory items based on their value and
prioritise management efforts. Focus on high-value items (A items) to optimise stock levels
and improve customer satisfaction.
 Just-In-Time (JIT) Inventory Management: Adopt a JIT approach to reduce holding costs
by ordering inventory only when it is needed. JIT helps minimise excess stock and the
associated carrying costs.
 Demand Forecasting And Planning: Utilise historical sales data, market trends, and
customer feedback to forecast future demand accurately. This proactive approach ensures
that inventory levels align with actual customer requirements.
 Automate Inventory Management: Leverage inventory management software to automate
tasks such as stock tracking, order processing, and reporting. Automation improves accuracy,
saves time and reduces the chances of human error.
 Optimise Reorder Points And Safety Stock: Set appropriate reorder points and safety stock
levels based on lead time and demand variability. This ensures that inventory is replenished
before running out while avoiding excessive stockpiling.
 Implement Inventory Techniques: Utilise inventory techniques such as First-In-First-Out
(FIFO) or Last-In-First-Out (LIFO) to manage inventory based on product characteristics and
industry standards.
 Collaborate With Suppliers: Establish strong and transparent relationships with suppliers to
negotiate favourable terms, faster lead times, and reliable supply, leading to smoother
management.

Importance of inventory management

For several reasons, inventory management is crucial, especially in medium- and large-sized
organizations. Firstly, it gives you a thorough understanding of the stocks or items you currently
have, what needs to be ordered or refilled, what products are in high demand, what products are
merely taking up shelf space, and so forth.

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In general, successful inventory management assists companies in efficiently controlling supply
and demand.
1. It ensures you never run out of stock
Part of inventory management is figuring out how much inventory you should have on hand at
all times. Too much inventory, and you risk ‘dead stock’: inventory that can no longer be sold
due to being outdated. Too little, and you’ll run out of stock, fail to meet customer demands, and
miss out on potential sales.

By using a reorder point formula, you can ensure that you keep an eye on your inventory so that
it doesn’t dip below a critical level.

2. It helps you save money on storage

Too much inventory can result in too much money spent on storage space. Storing inventory is a
variable cost — it’s based on how much space your beginning inventory takes up at any given
time. When you have more product on hand than you need, you end up paying more
for inventory storage. Being smart about inventory levels can help you reallocate those funds.

3. It prepares you for the unexpected

It pays to be prepared. Do you know what you’d do if any of the following supply chain mishaps
took place tomorrow?

 You unexpectedly sell out of a product


 You miscalculate your storage needs and run out of space
 Incoming inventory from the manufacturer is delayed
 You run into a cash flow issue and can’t purchase more inventory

Strategic inventory solutions can help you get out of these sticky situations. Tracking
inventory over time and having contingency plans in place for potential inventory problems will
prepare you for situations that would otherwise seriously impact your business.

4. It shows trends in customer behavior

Keeping track of what inventory sells like hotcakes versus what ends up covered in metaphorical
cobwebs can share some important insight about what your customers are — and aren’t — into.

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You can also gauge the success of prior promotions or product launches by assessing inventory
levels before and after those events.

5. It predicts the future

Well, kind of. Good inventory management lends itself to good inventory forecasting, which can
help you predict and plan for demand. You can leverage past inventory trends on a monthly,
seasonal, or SKU-by-SKU level to better prepare for future levels of sales and demand. Make
sure to keep any planned marketing promotions or new product launches in mind, too.

6. It helps you track costs of goods sold

Inventory accounting is when you track and account for changes in the value of inventory over
time as it relates to manufacturing and costs of goods sold. If you don’t have an accurate method
for keeping track of the value of your inventory, you can’t properly value your assets or goods
sold and budget for the inventory you need to buy for your business.

ADVANTAGES

1. Centralized stock movement control


When you run a large-scale business with an extensive product line consisting of hundreds of
products, keeping track of each of them and their raw materials is a complex task. Handling all
of these items manually is not only error-prone but also time-consuming and labor-intensive.
However, with the help of an effective inventory management system for business, you can gain
centralized control over all items, regardless of whether you manage one warehouse or multiple.
2. Help navigate demand fluctuations
Another advantage of a good inventory management system is that it allows you to easily
navigate demand fluctuations. When you have real-time stock updates and other information
about market trends and future demand, you can better plan your strategy, procure the necessary
raw materials, and successfully manage seasonal or fluctuating demands.
By maintaining consistent market supply, you can not only strengthen your brand’s
reputation but also enhance the customer experience.

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3. Advanced sales analytics and demand forecasting
The next advantage of using an effective inventory management system is that it allows you to
forecast inventory requirements for a specific period or event. Inventory forecasting is a practice
that involves forecasting necessary inventory levels for a future period using historical data,
market trends, and known upcoming events.
When you have an accurate demand forecast for a specific product during a specific period, you
can plan its manufacturing and material procurement. Demand forecasting eventually assists you
in fulfilling customer orders while avoiding tying up cash flow in unnecessary inventory.
4. Improved customer satisfaction
The fourth reason you need a good inventory management system, or the benefit of inventory
management, is that it allows you to better serve your customers’ needs and increase their
satisfaction.When you have accurate demand projections and never fail to supply the necessary
products in the market or to the customers, you will develop a strong brand reputation for your
business among the customers. These customers will eventually become cult customers who will
always prefer you over your competitors.
5. Overall cost reduction
The next significant advantage of a good inventory management system is cost reduction. With
real-time updates on stock movements across all sales channels, you can avoid overstocking, get
rid of deadstock, and manufacture the necessary products.
Besides that, the system allows you to generate granular reports on sales performance and
determine the next best step to generate more revenue. All of these factors will assist businesses
in being cost-effective.
6. Organized storage facility
Another critical reason for inventory management is to keep your warehouse in an excellent
state. It is understandable that managing a warehouse manually is a difficult task, especially
when there are multiple warehouses located in different locations.
The implementation of transport management software can help you streamline warehouse
operations by optimizing transportation routes for inbound and outbound goods, reducing
congestion, and enhancing overall warehouse efficiency.
However, advanced stock inventory management software can help you manage the flow and
movement of raw materials and finished products more efficiently. A well-organized warehouse

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eventually eliminates waste, prevents health and safety issues, reduces maintenance costs, and
represents the professionalism of the company.
7.Satisfied suppliers and vendors
Inventory management not only helps you keep customers happy, but it also helps you keep
vendors and suppliers happy. Leveraging the insights provided by inventory management
software about which products sell and in what volume, you can negotiate better prices and terms
with suppliers.
You can also keep suppliers and vendors informed about stock status, which allows them to pass
the same information to their customers as soon as possible. This gives customers enough time to
find an alternative solution for the time being. If there is no such communication between you
and your suppliers, end users are likely to suffer and lose trust in your brand.

DISADVANTAGES

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1. Bureaucracy
Even though inventory management allows employees at every level of the company to read and
manipulate company stock and product inventory, the infrastructure required to build such a
system adds a layer of bureaucracy to the whole process and the business in general.

In instances where inventory control is in-house, this includes the number of new hires that are
not present to regulate the warehouse and facilitate transactions. In instances where the inventory
management is in the hands of a third party, the cost is a subscription price and a dependence on
another separate company to manage its infrastructure.

No matter the choice you go for, it translates to a higher overhead cost and more layers of
management between the owner and the customer. From the viewpoint of the customer, a
problem that requires senior management to handle will take a longer period of time before it
will be trashed out.

2. Impersonal touch
Another disadvantage of inventory management is a lack of personal touch. Large supply chain
management systems make products more accessible across the globe and most provide
customer service support in case of difficulty, but the increase in infrastructure can often mean a
decrease in the personal touch that helps a company to stand out above the rest.

For instance, the sales manager of a small manufacturing company that sells plumbing supplies
to local plumbers can throw in an extra box of washers or elbows at no charge to the customer
without raising any alarms. This is done for the sake of customer relations and often makes the
customer feel like he is special.

While free materials can also be provided under inventory management, processing time and
paper work make obtaining the material feel more like a chore for the customer or even an
entitlement.

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3. Production problem
Even though inventory management can reveal to you the amount of stock you have at hand and
the amount that you have sold off, it can also hide production problems that could lead to
customer service disasters. Since the management places almost all of its focus on inventory
management to the detriment of quality control, broken or incorrect items that would normally
be discarded are shipped along with wholesome items.

4. Increased space is need to hold the inventory


In order to hold inventory, you will need to have space so unless the goods you deal in are really
small in size, then you will need a warehouse to store it. In addition, you will also need to buy
shelves and racks to store your goods, forklifts to move around the stock and of course staff.

The optimum level of inventory for a business could still be a lot of goods and they will need
space to be stored in and in some cases additional operational costs to manage the inventory.
This will in turn increase cost and impact negatively on the amount of profit the business makes.

5. Complexity
Some methods and strategies of inventory management can be relatively complex and difficult to
understand on the part of the staff. This may result in the need for employees to undergo training
in order to grasp how the system works.

6.High implementation costs


Some inventory management systems can come at a high price because the business needs to
install specialized systems and software in order to use them. This can be problematic for large
businesses which operate in difficult locations. Even after installing the costly system, it still
needs to be maintained and upgraded on a regular basis, thus incurring more costs.

7.Initial higher cost


The first disadvantage of inventory management is that you will need to purchase a battery of
resources in order to upgrade your entire inventory infrastructure. Additionally, you may need to

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rent or purchase new space to store the inventory in an organized fashion. This initial or setup
cost may be a challenging factor for small businesses or startups operating on a tight budget.
8. Require skilled human resources
Another disadvantage of inventory management is that it necessitates skilled labor to operate
tools and technologies, monitor performance, and perform other necessary operations. All your
investment in infrastructure and technology stack will be wasted if you don’t have the right
people to manage the inventory.
9. Recurring administrative costs
The third significant disadvantage of inventory management is that it comes with recurring costs.
For example, when erecting a modern inventory infrastructure, you will certainly require to
purchase an inventory management software subscription. Also, you will need to hire a dedicated
team of employees to manage the inventory department. These recurring expenses can eat up a
sizable portion of your budget.
INVENTORY MANAGEMENT TECHNIQUES

Depending on the type of business or product being analyzed, a company will use various
inventory management methods. Some of these management methods include just-in-time (JIT)
manufacturing, materials requirement planning (MRP), economic order quantity (EOQ), ABC
Analysis, and FSN Analysis.

1. Just-in-Time Management (JIT)

This manufacturing model originated in Japan in the 1960s and 1970s. Toyota Motor (TM)
contributed the most to its development. The method allows companies to save significant
amounts of money and reduce waste by keeping only the inventory they need to produce and sell
products. This approach reduces storage and insurance costs, as well as the cost of liquidating or
discarding excess inventory.

JIT inventory management can be risky. If demand unexpectedly spikes, the manufacturer may
not be able to source the inventory it needs to meet that demand, damaging its reputation with
customers and driving business toward competitors. Even the smallest delays can be
problematic; if a key input does not arrive "just in time," a bottleneck can result.

2. Materials Requirement Planning (MRP)

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This inventory management method is sales-forecast dependent, meaning that manufacturers
must have accurate sales records to enable accurate planning of inventory needs and to
communicate those needs with materials suppliers in a timely manner.3 For example, a ski
manufacturer using an MRP inventory system might ensure that materials such as plastic,
fiberglass, wood, and aluminum are in stock based on forecasted orders. Inability to accurately
forecast sales and plan inventory acquisitions results in a manufacturer's inability to fulfill
orders.

3.Minimum Order Quantity (MOQ) methodology

It is the method in which the smallest amount of product a supplier is willing to sell is
determined. If a business can't purchase the minimum, the supplier won't sell it to them. This
method benefits suppliers, enabling them to quickly get rid of inventory while weeding out
bargain shoppers.

4. First in, first out (FIFO) methodology

It is the method in which the oldest inventory is sold first to help keep inventory fresh. This is an
especially important method for businesses dealing with perishable products that will spoil if
they aren't sold within a specific time period. It also prevents items from becoming obsolete
before a business has the chance to sell them. This typically means keeping older merchandise at
the front of shelves and moving new items to the back.

5. Last in, first out (LIFO) methodology

It is the method in which the newest inventory is typically recorded as sold first. This is a good
practice when inflation is an issue and prices are rising. Because the newest inventory has the
highest cost of production, selling it before older inventory means lower profits and less taxable
income. LIFO also means the lower cost of older products left on the shelves is what's reported
as inventory. However, this is a difficult technique to put into practice, as older items that sit
around have a chance of becoming obsolete or perishing.

6. ABC analysis

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It is the method in which classifies inventory of HINDUSTAN PENCILS into three categories
that represent the inventory values and cost significance of the goods. Category A represents
high-value and low-quantity goods, category B represents moderate-value and moderate-quantity
goods, and category C represents low-value and high-quantity goods. Each category can be
managed separately by an inventory management system. It's important to know which items are
the best sellers to keep enough buffer stock on hand. For example, more expensive category A
items may take longer to sell, but they may not need to be kept in large quantities. One of the
advantages of ABC analysis is that it provides better control over high-value goods.

Category Items

A Writing, Bird, and Colouring kits, 621 pencils, Matelo star pens, 621 pencils,
platinum, Beauty & gold pencils, non dust erasers, Superex and Gelix pens

B Snappy pens, Checking red, Glass marking, Sketch pens,

C Nataraj Mist pens, Plasto erasers, jumbo pencils,

7. Economic Order Quantity (EOQ)

This model is used in inventory management by calculating the number of units a company
should add to its inventory with each batch order to reduce the total costs of its inventory while
assuming constant consumer demand. The costs of inventory in the model include holding and
setup costs.

The EOQ model seeks to ensure that the right amount of inventory is ordered per batch so a
company does not have to make orders too frequently and there is not an excess of inventory
sitting on hand. It assumes that there is a trade-off between inventory holding costs and inventory
setup costs, and total inventory costs are minimized when both setup costs and holding costs are
minimized.

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8.FSN Analysis

FSN stands for Fast moving, Slow moving, and Non moving. FSN Analysis is an inventory
management technique which is based on the rate of consumption of spares and goods in an
organization.

This analysis divides the inventory of Hindustan pencils into three categories based on their rate
of utilization, their consumption and average stay.

Fast moving Inventory: It comprises of inventory which moves in and out of stock fastest and
most often. Therefore thes goods have the highest replenishment rate.

Slow moving Inventory: Items in this category move slower, hence their replenishment is also
slower.

Non- moving Inventory: The last category of this analysis is the least moving portion of the
inventory and also includes dead stock. Replenishment of these inventory may or may not take
place.

Category Items
Best of Luck kits,Writing, Bird, and Colouring kits, 621 pencils,
Fast- moving Matelo star pens, 621 pencils, platinum, Beauty & gold pencils, non
dust erasers, Superex and Gelix pens, Checking blue pencils, HB
pencils, Pencil colours Half size, Scales 15 CM

Wonder kits, Snappy pens, Checking red, Glass marking, Sketch


Slow- moving pens, Characol pencils, Triga pencils, Absolute pencils, Poke It ,
Vivid scales

Non- moving Nataraj Mist pens, Jumbo Picture pencils, Dual erasers, Pop erasers,
Absolute Sharpners, Ace kits, Jumbo Wax Crayons

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CHAPTER 6

94
FINDINGS

The comprehensive study about every aspect of this topic shows that inventory management in a
company plays a very efficient role. It involves systematic analysis and proper management of
inventory in the company.

During the period of analysis at Hindustan pencils it is found that the proportion of the products
which is sale out or demanded most in the market i.e. Natraj 621 pencils, Apsara platinum
pencils, gold pencils checking blue pencils, non dust erasers, writing kits, petals erasers, long
point sharpners, Gelix pens, superx pens etc.

The study found that the products which are demanded most in the market, at least how much
stock should company have depends upon the demand of the customers.

The study tells about the products which are sold less in the market or not much demaded in the
market i.e. Natraj Mist and snappy pens, plasto erasers, Glue, fluro pencils, checking green,
purple, jumbo pencils etc.

The study also find that sometimes the stocks which are available in large quantity in the
company did not match with the data which were available in the tally. Sometimes the product
shown to be understock or overstock.

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CHAPTER 7

96
CONCLUSION
At last researcher has conducted the summer training at Hindustan pencils private limited and
prepare a report where he study about the objectives that the products which are available are fast
moving products or slow moving products, the time period in which orders are to be placed.

And researcher also study about the reorder point for effective management of inventory which
saves holding costs, overstocking to optimize the inventory in the company.

The researcher has used secondary data for the research report where he used the qualitative
method and various techniques to prepare the report, for collection of data and records for the
report they used secondary sources of data.

To meet the consumer demand production on time efficiently and effectively, the study focus the
need for a good inventory system to maintain a suitable level of inventory and also control the
cost for the Hindustan Pencils Private Limited. The values maintaining proper stock of inputs as
well as discussed previously are necessary to know the answer about when and how much to
buy.

For managing inventory are available they could not be used fully for finding out the necessary
operation of the company because of the lack of adequate data. No techniques for inventory
management are possible to apply to calculate one of the major decisions when to buy because of
the lack of planning and unsystematic methods of recording cost.

The findings of the report is that the demand of the products in the market and its availability in
the company how much stock should company have depend on the demand of the customers.
The researcher also found that that availability of stock in the company sometimes not tally with
the records which is maintained in software.

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CHAPTER 8

98
RECOMMENDATIONS
To manage inventory, ledger cards are used by the company. In this card the name of items, item
numbers, unit price, usage rate, suppliers name, the percentage of carrying cost and the ordering
cost, data of order and its receipts with date, quantity used and issues of raw materials are
maintained.

Expert technicians are needed for the production of qualitative products and effective sales plan.
So the process of selection and recruitment techniques should be unbiased.

The vision of the top level management should be clear for solving the problems appeared in
course of inventory management system.

The company should follow scientific tools and technique i.e. economic order quantity and
economic lot size formula which help to reduce the relevant total cost for manufacturing product.
The output obtained from quantitative analyzed results the lowest cost and consumer can use
with low cost than company can increase their selling.

Record keeping system should be scientific and computerized. So that the corporation can locate
the past records which are helpful for the researcher as well as concern parties of this company.
The company should define its goals and objectives clearly with regards to its inputs and outputs
separately i.e. the quantities, time period should be specified.

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CHAPTER 9

100
BIBLIOGRAPHY
References:

Kothari C.R., “Research Methodology, Methods and Techniques, Second edition, (2008), New
Age International Publication.
Ranjit Kumar : Research Methodology, A step by step guide for beginners, Pearson Education,
Sixth Edition 2009.
Mark Saunders, Philip Lewis, Adrain Thornhiu:Research Methods for Business Students,
Pearson Education.
Killeen, Lousis M. (1969), "Techniques of Inventory Management", USA : American Managem

Star, Martin K. and Devid, W. Miller (1962), "Inventory Control: Theory and Practices", New
Delhi : Prentice Hall of India, Pvt. Ltd.

Baral, Puspa Raj (1996), "Inventory Management", A Case Study of Gandaki Noodles Pvt. Ltd.,
Dissertation, Faculty of Management, T.U.

Websites:

http://www.hindustanpencils.com

https://economictimes.indiatimes.com/company/hindustan-pencils-private-limited

https://en.wikipedia.org/wiki/Hindustan_Pencils

https://www.scribd.com/doc/79739231/Hindustan-Pencils-Details

https://www.investopedia.com/terms/i/inventory-management

https://www.netsuite.com/portal/resource/articles/inventory-management/inventory-
management.shtml

https://www.businessnewsdaily.com/15855-what-is-inventory-management.html

https://www.coursera.org/articles/inventory-management

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