HLL Company is a young growing organization with a turnover of over Rs 200 crores. The company has a central warehouse near the factory, 7 regional warehouses at important locations and 27 depots or storage points from where supply is made to stockiest who sell the company’s products. Its current stock holding is :

18 days All India Sales at Central Warehouse

37 days All India Sales at 7 Regional Warehouses

50 days All India Sales at its 27 depots

The company was making very good profit on its sales and the marketing manager who was incharge of the entire distribution system was least concerned about the huge inventory.

The top management was however, not very happy with the situation and hired a professional materials manager to conduct a diagnostic study. The study revealed that out of the total stock held, a considerable volume, representing about 25 days annual sales was slow moving and 72 non-moving items valuing more than Rs 4.1 crores had not moved for over two years. 354 items that were slow moving valued at Rs 6.1 crores could last for about 5 years based on the present rate of consumption.

The area salesman attached to the depots indented for the new stocks and not the depot incharge. As a professional material manager, you are asted to :

1) Comment on the shortcomings of the present state of affairs?

2) Comment on the current system of controlling finished goods inventories?

3) Suggest area of improvement in the present system.

4) Explain the advantages of your suggestion.