GEDRAG & ORGANISATIE REVIEW - ISSN:0921-5077 http://lemma-tijdschriften.

nl/

ANALYSIS ON INVENTORY CONTROL AND MANAGEMENT STRATEGIES IN

KNITWEAR COMPANIES

S.C.Vetrivel
Associate Professor, School of Management Studies,
Kongu Engineering College, Perundurai, Erode.
scvetrivel@gmail.com

ABSTRACT:
Inventory management is one of the most important and least aroused aspects of
running an apparel business. Inventory control means the accurate calculation and data of every
type of raw materials, spares and finished goods in time to time store. Inventory control in textile
mill are necessary because this paper focuses on the use of material planning methods to control
material flow to inventories of purchased items. Five material planning methods are studied the
EOQ method, the re-order point method, the ABC Analysis and VED analysis. In this Research
the Inventory analysis are used to analyse all the inventories like raw materials, spare parts and
finished products in the garment sector to control in the inventory techniques. Descriptive type
of research has been adopted for this research and description of a phenomenon or characteristics
associated with the population are also dealt with. The Judgmental sampling method is used in
this research various statistical tools used Chi Square, Correlation and One way ANOVA.

Key Words: Inventory management, Materials requirements planning, Re-order point,

Performance

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INTRODUCTION

Effective inventory management is all about knowing what is on hand, where it is

in use, and how much finished product results. Inventory management is the process of
efficiently overseeing the constant flow of units into and out of an existing inventory. This
process usually involves controlling the transfer in of units in order to prevent the inventory
from becoming too high, or dwindling to levels that could put the operation of the company into
jeopardy. Competent inventory management also seeks to control the costs associated with the
inventory, both from the perspective of the total value of the goods included and the tax burden
generated by the cumulative value of the inventory.

Balancing the various tasks of inventory management means paying attention to three key
aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for
inclusion in the total inventory, this means understanding how long it takes for a supplier to
process an order and execute a delivery. Inventory management also demands that a solid
understanding of how long it will take for those materials to transfer out of the inventory be
established. Knowing these two important lead times makes it possible to know when to place
an order and how many units must be ordered to keep production running smoothly.

In addition to maintaining control of the volume and movement of various inventories, inventory
management also makes it possible to prepare accurate records that are used for accessing any
taxes due on each inventory type. Without precise data regarding unit volumes within each phase
of the overall operation, the company cannot accurately calculate the tax amounts. This could
lead to underpaying the taxes due and possibly incurring stiff penalties in the event of an
independent audit.

Inventories occupy the most strategic position in the structure of working capital of most
business enterprises. It constitutes the largest component of current asset in most business
enterprises. In the sphere of working capital, the efficient control of inventory has passed the
most serious problem to the cement mills because about two-third of the current assets of mills
blocked in inventories. The turnover of working capital is largely governed by the turnover of
inventory. It is therefore quite natural that inventory which helps in maximize profit occupies
the most significant place among current assets.

Management of Inventories

Inventories consist of raw materials, stores, spares, packing materials, coal,

petroleum products, works-in-progress and finished products in stock either at the factory or
deposits. It is most important component of current assets in the cement industry and was 42 per
cent of total current assets for sample companies as on March 31, 2004. In other industries too

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it is very important component of total investment. The maintenance of inventory means

blocking of funds and so it involves the interest and opportunity cost to the firm.

In many countries specially in Japan great emphasis is placed on inventory management.

Efforts are made to minimize the stock of inputs and outputs by proper planning and forecasting
of demand of various inputs and producing only that much quantity which can be sold in the
market. The inventory cost is not only interest on stocks but also cost of store building for
storage, insurance and obsolesce and movement of inputs from place of storage to the factory
where the materials have to be finally used to convert them into finished goods. In japan
industries have adopted concept of JIT (Just in Time) and components, materials are received
when required for which detailed instructions are given to suppliers.

As against this by and large in India the inventory of coal, raw materials and packing materials
is very high and many items become junk or obsolete causing heavy loss to the enterprise. Lack
of inventory planning in India has been pointed out by various committees but due to
uncertainties in supplies, problem of timely receipt of railway wagons, lack of planning and
unreliable suppliers the investment in inventories is quit high. The fluctuation in demand affects
inventory of finished product of which cement industry has been a victim many times.

REVIEW OF LITERATURE

Wolf Bagby, Managing inventory,(2001) In this study Mr. W.Bagby explains that by
managing the inventory it becomes easier for the organization to meet the profit goals, shorter
the cash cycle, avoid inventory shortage, avoid excessive carrying costs for unused inventory,
and improve profitability by decreasing cash conversion and adopt JIT system. According to
this study companies need to get smart about inventory. Boosting financial performance is
another benefit that comes from better inventory management. Infect large number of
manufacturers enjoy savings and better performance by choosing the approach of inventory
reduction. For this company needs to maximize the cash flow and profitability and this includes
keeping a watchful discerning eye on charge in supply and demand

Silver, Edward A (2002) This article considers the context of a population of items for which
the assumption underlying the EOQ derivation holds reasonably well. However as is frequently
the cash in practices there is an aggregate constraint that applies to the population as a whole.
Two common forms of constraints are:

1) The existence of budget to be allocated among the stocks of the items and
2) A purchasing production facility having the capability to process at most a certain number
of replenishment per year. Because of the constraint the individual replenishment quantities
cannot be selected independently.

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D.Hoopman,(2003) In this article he said that inventory optimization recognize that different
industry have different inventory profiles and requirements. Research has indicated that
solutions are priced in a large range from tens of thousands of dollars to millions of dollars. In
this niche market sector price is definitely not an indicator of the quality of solution, ROI and
usability are paramount.

Asfaque Ahmed ,(2004) (Article from master requirement planning and master production
scheduling) He said that most of the manufacturing company vendors have planning and
scheduling product which assume either infinite production capacity for calculating quantities
of row material and work in progress (WIP) requirements or infinite quantities of raw material
and WIP materials for calculating production capacity. There are many problems with this
approach and how to avoid these by making sure that the product you are buying indeed takes
into account finite quantities of required materials as well as finite capacities of work centers
in your manufacturing facilities.

Delaunay C ,Sahin E, (2007). A lots of work has been done but now if we want to go ahead
we must have good visibility upon this field of research. That is why we are focused on frame
work for an exhaustive review on the problem of supply chain management with inventory in
accuracies. The author said that their aim in this work is also to present the most important
criterion that allows a distinction between the different type of managing the inventory.

OlowolajuMonisola,(2013) reviewed about the Inventory is a vital asset, necessary for effective
operation of any business organisation. The absence of good inventory management practices
in the Small and Medium Scale Industrial Enterprises (SMEs) necessitates a study to determine
the actual reasons for non application of scientific inventory management techniques in the
SMEs. Three hundred and twenty SMEs in Food, Textiles, Wood and Metal Products sectors in
South Western Nigeria were selected for the study. Two hundred and twelve organizations
returned the questionnaire. It is established that non usage of scientific inventory techniques for
better inventory decision was due to lack of skilled personnel and inadequate data to use
inventory models; and low level of ICT in the SMEs. It is recommended that the SMEs should
institute structure to improve the knowledge of their personnel about using quantitative
inventory decision models and the SMEs should make the application of Information
Communication Technology (ICT) for data management a priority.

Mohammad Shafi (2014) has discussed about the Inventory constitutes a major component of
working capital. To a large extent, the success and failure of a business depends upon its
inventory management performance. The basic objective of inventory management is to
optimize the size of inventory in a firm so that smooth performance of production and sales
function may be possible at minimum cost. D.Babin Dhas, S.C Vetrivel (2019) Galloping
inventories in recent years, the credit squeeze and the resultant general paucity of funds have
attracted the attention of planning elite on this crucial problem of inventories. Mismanagement
of inventories and absence of control systems have resulted in deplorable performance for some
of the industries in developing economies. Though, an abundance of literature, methods, models
and computer analysis have evolved from time to time and are highly availed of in the realms

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of industrial settings with greater pay-off of quality, precision and non-blockade of working
capital.

LilianTundura, Daniel Wanyoike.(2016) The purpose of this study was to determine the effect
of inventory control strategies on inventory record accuracy in Kenya Power Nakuru. The study
looked at three inventory control strategies; cycle counting, inventory coding and computerized
inventory accuracy. The three variables were individually and collectively related with
inventory records accuracy. The study adopted a descriptive survey. The target populations for
the study were the employees in Kenya Power Nakuru working in procurement, stores and
finance departments. Since there are only 42 employees in the departments, all the employees
were involved in the study as respondents. The researcher conducted a pilot study to test for
validity and reliability of the research instruments before the actual study.

Biri Anthony, DegbeSewodoAugustin(2017) discussed about the the implementation of

transshipments among two independent locations which belong to one parent firm and the
impact of transshipments, when implemented between these two locations. We examine how
the possibility of such transshipments affects the optimal inventory orders at each location and
find that, if each location aims to maximize its own profit, their inventory choices will not in
general maximize joint profits. However, we find transshipment prices which if implemented
by the parent firm as incentive design will make each location behave in order to optimize
aggregate profit.

Andre P. Calmon and Stephen C. Graves (2017)The goal of this paper is to describe, model,
and optimize inventory in a reverse logistics system that supports the warranty returns and
replacements for a consumer electronic device. The context and motivation for this work stem
from a collaboration with an industrial partner, a Fortune 100 company that sells consumer
electronics. The reverse logistics system is a closed-loop supply chain: failed devices are
returned for repair and refurbishing; this inventory is then used to serve warranty claims or sold
through a side sales channel. SC Vetrivel , J. Rajini , V. Krishnamoorthy (2020) Managing
inventory in this system is challenging because of the short life cycle of these devices and the
rapidly declining value for the inventory.

Objectives
1. To understand the perception of employees towards the inventory management and to
understand the factors causing the excess inventory within the organization.
2. To find the factors for the low inventory turnover ratio and to assess the mostly used
inventory management method

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ANALYSIS AND INTERPRETATION

TABLE 1 Rank The Factor By Which The Company Should Take Necessary Steps To
Safeguard The Good From Loss

SL.No Factors 5 % 4 % 3 % 2 % 1 % TOTAL

1 Adequate written instructions 30 30 40 40 10 10 20 20 0 0 100
2 Adequate supervision 20 20 20 20 50 50 10 10 10 10 100
3 Use of pre-numbered tags which 10 10 6 6 44 44 40 40 0 0 100
are accounted for
4 Careful investigation of
significant overages and shortages 4 4 50 50 26 26 20 20 0 0 100
5 The signing and dating of
inventory count sheets by the
person supervising the count 12 12 28 28 10 10 40 40 10 10 100
6 Clearly marking damaged and
obsolete inventory 30 30 40 40 10 10 20 20 0 0 100
7 Prompt adjustment of records for
inventory discrepancies
after approval by a responsible 40 40 60 60 0 0 0 0 0 0 100
official other than stores
personnel

INFERENCE
From the above table we find that, 40% of the respondents are given the 4th the
most preference for the adequate written instructions, 25% of the respondents are given the 3rd
preference for the adequate supervision,40% of the respondents given the 4th preference for the
clearly marking the damaged and obsolete inventory.

ANALYSIS USING KARL PEARSON’S CORRELATION

Correlation analysis is the statistical tool used to measure the degree to which two variables are
linearly related to each other. Correlation measures the degree of association between two
variables.
Null hypothesis (Ho): There is positive relationship between the management review and
follow up reports of inventory turnover, ageing and inventory adjustments and important is
managing inventory levels in your organization.
Alternate hypothesis (H1): There is negative relationship between the management review
and follow up reports of inventory turnover, ageing and inventory adjustments and important is
managing inventory levels in your organization

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Correlations
management review and follow
up reports of inventory Important is managing
turnover, ageing and inventory inventory levels in
adjustments your organization
management review and Pearson 1 .871**
follow up reports of inventory Correlation
turnover, ageing and inventory Sig. (2- .000
adjustments tailed)
N 100 100
important is managing Pearson .871** 1
inventory levels in your Correlation
organization Sig. (2- .000
tailed)
N 100 100
**. Correlation is significant at the 0.01 level (2-tailed).

𝑁∑𝑋𝑌 − ∑𝑋∑𝑌
𝑟=
√𝑁∑𝑋 2 − (∑𝑋)²√𝑁∑𝑌 2 − (∑𝑌)²

𝑟 = 0.871

Since r is positive, there is positive relationship between the management review and follow up
reports of inventory turnover, ageing and inventory adjustments and important is managing
inventory levels in your organization.

CHI- SQUARE TEST I – (ψ2)

Chi-square is the sum of the squared difference between observed (o) and the
expected (e) data (or the deviation, d), divided by the expected data in all possible categories.

Null hypothesis (Ho):

There is no significant difference between the inventory items maintained in a
secured manner and satisfaction level of the company’s inventory management.

Alternate hypothesis (H1):

There is a significant difference between the inventory items maintained in a
secured manner and satisfaction level of the company’s inventory management.

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Case Processing Summary

Cases
Valid Missing Total
N Percent N Percent N Percent
Inventory items maintained 100 100.0% 0 .0% 100 100.0%
in a secured manner *
satisfaction level of the
company’s inventory
management.

Inventory items maintained in a secured manner * satisfaction level of the company’s inventory management.
Cross tabulation
Satisfaction level of the company’s inventory
management.
highly
satisfied satisfied Neutral Dissatisfied Total
inventory items yes Count 20 56 0 0 76
maintained in a
secured manner Expected Count 7.6 22.8 3.8 3.8 38.0
% within inventory items 26.3% 73.7% .0% .0% 100.0%
maintained in a secured manner
% within satisfaction level of 100.0% 93.3% .0% .0% 76.0%
the company’s inventory
management.
% of Total 20.0% 56.0% .0% .0% 76.0%
No Count 0 4 10 10 24
Expected Count 2.4 7.2 1.2 1.2 12.0
% within inventory items .0% 16.7% 41.7% 41.7% 100.0%
maintained in a secured manner
% within satisfaction level of .0% 6.7% 100.0% 100.0% 24.0%
the company’s inventory
management.
% of Total .0% 4.0% 10.0% 10.0% 24.0%
Total Count 20 60 10 10 100

Expected Count 10.0 30.0 5.0 5.0 50.0

% within inventory items 20.0% 60.0% 10.0% 10.0% 100.0%
maintained in a secured manner
% within satisfaction level of 100.0% 100.0% 100.0% 100.0% 100.0%
the company’s inventory
management.
% of Total 20.0% 60.0% 10.0% 10.0% 100.0%

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Chi-Square Test

* Asymp. Sig. (2-

Value df sided)
a
Pearson Chi-Square 39.766 3 .000
Likelihood Ratio 40.412 3 .000
Linear-by-Linear Association 29.658 1 .000
N of Valid Cases 100
a. 5 cells (62.5%) have expected count less than 5. The minimum expected count is 1.20.

Calculated value = 39.766

Z = Z cal>Z tab
Hence, the alternate hypothesis [H1] is accepted
Since the calculated value is greater than the tabulated value, we reject the null
hypothesis and hence there is a significant difference between the inventory items maintained
in a secured manner and satisfaction level of the company’s inventory management.

ONE-WAY ANOVA CLASSIFICATION

Null hypothesis (Ho):
There is no significance difference between the management monitor and
approve the write-offs of obsolete and inactive inventories and often do departments compare
quantities received against receiving reports.

Alternate hypothesis (H1):

There is a significance difference between the management monitor and approve
the write-offs of obsolete and inactive inventories and often do departments compare quantities
received against receiving reports.

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Descriptive
often do departments compare quantities received against receiving reports, etc
95% Confidence Interval for Between-
Mean Component
Std. Deviation Std. Error Lower Bound Upper Bound Variance
Model Fixed Effects .433 .061 2.52 2.76
Random Effects .739 -6.75 12.03 1.069

ANOVA

often do departments compare quantities received against receiving reports, etc

Sum of Squares df Mean Square F Sig.

Between Groups 52.533 2 26.533 141.714 .000
Within Groups 16.987 96 .187
Total 70.520 98

The calculated value of F is greater than the tabulated value. Hence, we reject the
null hypothesis and conclude that there is significance difference between the management
monitor and approve the write-offs of obsolete and inactive inventories and often do
departments compare quantities received against receiving reports.
Findings:
Among the total 44% of the respondents are degree holder so, the majority of the respondents
are degree holders.30% of the respondents are between 1-2years so, the majority of respondents
are between 1-2years of experience. 24% of the respondents are in the Packaging department
so, the majority respondents belongs to packaging.36% of the respondents are using EOQ
methods, so,the majority of them uses EOQ method.70% of the accepting that inventories are
customizable .48% of the respondents are accepting they are following FIFO method so the
majority follows FIFO.32% of the respondents are agreeing with management reviews so, the
majority of them agrees. Majority 80% of the respondents are accepting that proper layout
having for inventory storage facilities.Majority 90% of the respondents are accepting that
document procedure for stock taking.Majority 70% of the respondents are accepting that they
receiving the information correctly, Majority 40% of the respondents are accepting that quality
check has been done monthly ,56% of the respondents are accepting it’s very important .

Conclusion :
Inventory management is a science primarily about specifying the shape and
percentage of stocked goods. It is required at different locations within a facility or within many

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locations of a supply network to precede the regular and planned course of production and stock
of materials. With this study, the researcher has been able to find out the efficiency of the
inventory management in Knit Wear companies. It can be inferred from that study that inventory
management at Knit Wear companies were very satisfactory. Company can continue the good
work and implement the suggestions derived from this study to optimize their inventory
management.

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