Business & Economics

A Research Project on the Economic Order Quantity of Retail Outlets

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A Research Project on the Economic Order Quantity of Retail Outlets
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  A RESEARCH PROJECT ON THE ECONOMIC ORDERQUANTITY OF RETAIL OUTLETS GITAM INSTITUTE OF INTERNATIONAL BUSINESS, VISAKHAPATNAMGITAM INSTITUTE OF INTERNATIONAL BUSINESS, VISAKHAPATNAM   Section – “A”; Trimester - IIIMBA (IB) 2008-2010 Submitted to : Dr. R.Venkateswarlu&Dr.B.Padma Narayan(Professor: Research Methods and Techniques) Submitted By: Group-IX 1 NamesRoll No: ã Mr. Abhishek kumar1224108101 ã Mr. Avinash Chauhan1224108113 ã Mr.B.Jayaram Pavan1224108119 ã Mr.Rajyavardhan1224108146  Contents 1. Acknowledgement -01 2. Executive Summary -01 3. Introduction -02 4. Objective of study -03 5. Research Methodology -03 6. Analysis and interpretation of data -04-15 7. Conclusion -16 8. References -17 2  ACKNOWLEDGEMENT We are extremely thankful to Prof. R.VENKATESWARLUand Dr. B.PADMA NARAYAN who gave us an opportunityto do a project on ECONOMIC ORDER QUANTITY Modeland guided us through out in making this project asuccessful one. We are also thankful to Mr.B.ChandraShekar (Regional Manager Spencer hyper market), whohelped us with various information in completion of thisproject.We have also received assistance in preparing this projectby going through the articles of various writers and internetsources. We would like to express our gratitude to all thosewho have assisted in completing this project. We thank allthe respondents who have co-operated with us for giving their valuable time to give their most valuableopinions while collection of our data. EXECUTIVE SUMMARY 3  Inventory management is big issue today, it gives one company competitive edgeover other companies. The word inventory refers to any kind of resource havingeconomic value and is maintained to fulfill the present and future needs of anorganization. Fred hansman defined inventory as an idle resource of any kindprovided such a resource has economic value. Inventory of resources is held toprovide desirable service to customers and to achieve sales turnover target.Investment in large inventories adversely affects firms cash flow and workingcapital as investment in inventory represents substantial portion of total capitalinvestment in any business. It is in therefore essential to balance the advantageof having inventory of resources and the cost of maintain it so as to determine anoptimal level of inventory of each resource so that total inventory cost isminimum. Holding of stock is expensive so controls are needed to ensure thatstock level remains as low as possible. Stocks should be controlled using rationalpolicies to balance between holding cost and demand. One such policy isordering ECONOMIC ORDER QUQNTITY for stock replenishment at this pointholding cost reduces significantly and total annual inventory cost is lowest.Though maintaining exact EOQ is sometime not possible working in the vicinityof it results in lower total annual inventory cost. Holding cost is straight line that isit directly varies with ordering quantity (according to classic EOQ model) is fairlytrue if product is non perishable, but in real life situation and specially in the caseof perishable item it is a curve, we will see it through data provided by Spenser’small through examples and regression analysis. This happens because in caseof perishable items holding cost is not constant again threat of spoilage forcescompanies to adopt mark down policy. We will check through linear regressionthe relation of holding cost with time and quantity that it is a curve in case of perishable items. 4
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