A STUDY ON INVENTORY MANAGEMENT

OF SIPRADI TRADING PRIVATE LIMITED

A Thesis

Submitted By:
ANUP MANI DHAKAL
Nepal Commerce Campus
Roll No. 106/60
Symbol No. 1137
T.U Reg. No. 7-1-013-326-97

Submitted to:
Office of the Dean
Faculty of Management
Tribhuvan University

In partial fulfillment of the requirements for the

degree of Masters of Business Studies (M.B.S.)

New Baneshwor, Kathmandu

November, 2009
 RECOMMENDATION

This is to certify that the thesis:

Submitted by
Anup Mani Dhakal

Entitled:

A STUDY ON INVENTORY MANAGEMENT OF SIPRADI TRADING

PRIVATE LIMITED has been prepared as approved by this Campus in the
prescribed format of faculty of Management. This thesis is forwarded for
examination.

---------------------------- ----------------------------
(Prof. Dr. B.B. Pokharel) (Mr. Diwakar Pokhrel)
Head of Research Department Campus Chief
And Thesis Supervisor
 VIVA-VOCE SHEET

We have conducted the viva-voice examination of the thesis

Presented by:
Anup Mani Dhakal

Entitled

A STUDY ON INVENTORY MANAGEMENT OF SIPRADI TRADING PRIVATE

LIMITED and found that the thesis to be original work of the student and written
according to the prescribed format. We recommend the thesis to be accepted as
partial fulfillment of the requirement for Master's Degree in Business Studies
(M.B.S)

Viva-voce Committee

Chair Person, Research Committee ----------

Member (Thesis Supervisor) ----------

Member (External Expert) ----------

Date:
 ABBREVIATIONS
STPL : Sipradi Trading P. Ltd.

LCV : Light Commercial Vehicles

MUV : Medium Utility Vehicles

MCV : Medium Commercial Vehicles

LMV : Light Medium Vehicle

NADA : Nepal Automobile Dealers Association

PC : Private Car

TOC : Total Ordering Cost

TCC : Total Carrying Cost

TC : Total Cost

FIFO : First in First Out

LIFO : Last in First Out

NLOL : Nepal Lube Oil Limited

JCF : Janakpur Cigarette Factory

HCIL : Hetauda Cement Industry Limited

DNPL : Dabur Nepal P Ltd

EOQ : Economic Order Quantity

ROP : Re-order Point

ABC : Always Better Country

JIT : Just In Time

ITR : Inventory Turnover Ratio

IHD : Inventory Holding Days

 TABLE OF CONTENTS

Page No.
Viva-voce Sheet
Recommendation
Declaration
Acknowledgements
Table of Contents
List of Tables
List of Charts
List of Abbreviations

Chapter-I Introduction 1-11

1.1 General Background of the Study 1
1.2 Inventory Management 5
1.3 A Brief Profile of Sipradi Trading Private Limited 5
1.4 Major Objective of Sipradi Trading Private Limited 7
1.5 Statement of the Problems 8
1.6 Objective of the study 9
1.7 Significance of the Study 10
1.8 Limitation of the Study 10
1.9 Organization of the Study 11

Chapter-II Review of Literature 12-31

2.1 Conceptual Framework 12
2.2 Nature of Inventory 13
2.3 Importance of Holding Inventory 14
2.4 Concept of Inventory Management 15
2.5 Objective of Inventory Management 16
2.6 Importance of Inventory Management 18
2.7 Factor Affecting Inventory Management 20
2.8 Structure of Inventory Management Organization 22
2.9 Cost Concept of Inventory 22
2.9.1 Ordering Cost 23
2.9.2 Carrying Cost 24
2.9.3 Total Cost 25
2.10 Purchasing Management 25
2.11 Inventory Valuation 26
2.12 Methods of Inventory Management 27
2.12.1 First in First Out (FIFO) Method 27
2.12.2 Last in First Out (LIFO) Method 28
2.13 Review of Previous Research 28
2.14 Research Gap 31
Chapter-III Research Methodology 32-35
3.1 Research Design
32
3.2 Population and Sampling 32
3.3 Nature and Sources of Data 32
3.4 Data Collection Procedure 33
3.5 Data Analysis Tools 33
3.5.1 Financial Tools 33
3.5.2 Statistical Tools 34

Chapter-IV Presentation and Analysis of Data 36-52

4.1 Analysis of Inventory Management in STPL 36
4.1.1 Purchasing 36
4.1.2 Receiving and Store Keeping 37
4.1.3 Issuing and Pricing 38
4.2 Total Purchase of Product in Term of Value 38
4.3 Total Purchase and Sales in Term of Value 38
4.4 Inventory Position of the Organization in Term of Value 40
4.5 ABC Analysis 40
4.6 Economic Order Quantity 41
4.7 Just In Time (JIT) 41
4.8 Turnover Ratio 42
4.8.1 Inventory Turnover Ratio 42
4.8.2 Inventory Holding Days 43
4.8.3 Inventory to Current Assets Ratio 44
4.8.4 Inventory to Total Assets Ratio 46
4.8.5 Inventory to Working Capital Ratio 47
4.8.6 Purchase to Gross Profit Ratio 49
4.9 Regression Analysis 50
4.9.1 Regression Result 50
4.9.2 Regression of Closing Stock and Sales 50
4.9.3 Regression of Closing Stock and Gross Profit 51
4.9.4 Regression of Closing Stock and Working Capital 51

4.10 Major Finding of the Study 51

Chapter-V Summary, Conclusion and Recommendations 53-56

5.1 Introduction 53
5.2 Summary 53
5.3 Conclusion 54
5.4 Recommendations 55

Bibliography
Annexes
 LIST OF TABLES
TABLE NO. TITLE OF TABLE PAGE NO.

1.1 Major Auto Mobile Distributors in Nepal 4

1.2 Range of Product Offered by STPL 7

2.1 Channel of Distribution of Trading Company 16

4.1 Total Purchase of Product in Term of Value 38

4.2 Total Purchase of Sales in term of Value 39

4.3 Inventory Position of the Organization in Term of Value 40

4.4 Inventory Turnover Ratio in Term of Value 42

4.5 Inventory Holding Days in Term of Value 43

4.6 Inventory to Current Assets Ratio in Term Value 45

4.7 Inventory to Total Assets Ratio in Term of Value 46

4.8 Inventory to Working Capital Ratio in Term of Value 48

4.9 Inventory to Gross Profit Ratio 49

LIST OF CHARTS
CHART NO. TITLE OF CHARTS PAGE NO.

4.1 Inventory Holding Days of STPL 44

4.2 Inventory to Current Assets Ratio 45

4.3 Inventory to Total Assets Ratio 47

4.4 Inventory to Working Capital Ratio 48

4.5 Inventory to Gross Profit Ratio 49

 DECLARATION

I hereby declare that the research work entitled, A STUDY ON

INVENTORY MANAGEMENT OF SIPRADI TRADING PRIVATE
LIMITED. Submitted to Nepal Commerce Campus, Faculty of
Management, Tribhuvan University is my original work done in the form of
partial fulfillment of the requirements of the Masters of Business Studies
(MBS) under supervision of Prof. Dr. B.B. Pokharel, Head Of Research
Department and Thesis Supervisor of Nepal Commerce Campus.

Date: November, 2009

Anup Mani Dhakal

(Researcher)
Roll No: - 106/060
 ACKNOWLEDGEMENTS

I wish to express deep gratitude to Teachers Prof. Dr. B.B. Pokharel, Head of
Research Department and Thesis Supervisor of Nepal Commerce Campus
for his cordial co-operation and valuable supervisions, without which this
thesis would not have come into existence. His intellectual guidance was of
immense inspiration for me.

I would like to thank all the staffs of Accounts and Sales of Sipradi Trading
Private Limited for providing necessary data to conduct this thesis and
would like to thanks to all the respondents, who restored questionnaire
timely.

I also owe deep gratitude to all of my friends who continuously supported

and encouraged me. Finally, I would like to express debt to all my families
and other relatives who inspired me to complete this dissertation.

Date: __________
____________________
Anup Mani Dhakal
Nepal Commerce
Campus