BBA Project

DR. BABASAHEB AMBEDKAR MARTHWADA

UNIVERSITY, AURANGABAD.

Dr. Rafiq Zakaria Campus

Maulana Azad College of Arts, Science & Commerce

Rauza Bagh, Aurangabad.

A Study of Ethical Issues of Inventory Management and its implication

on Revenue

In the Partial Fulfillment of Bachelor of Business Administration (VI th Semester)

Academic Year – 2007 – 2008

Submitted by

Aditi Anand Deo (156061)

Parikshith Sambasivan (156214)

Sanaya Dhamodiwala (156069)

Guided by

Prof. I. M. Farooqui

Principal

Mr. Maqdoom Farooqui

CERTIFICATE

This is to certify that the project report entitled “A Study of Ethical Issues of

Inventory Management and its implication on Revenue” is submitted by

Aditi Anand Deo, Parikshith Sambasivan and Sanaya Dhamodiwala, as per the

requirement of Dr. Baba Saheb Ambedkar Marathwada University in the partial

fulfillment of Bachelor of Business Administration (Final Year) for the academic year

2008 – 2009.

Mr. I.M. Farooqui Dr. Maqdoom Farooqui

Guide Principal

ACKNOWLEDGEMENTS

Firstly, we would like to thank the Principal of Maulana Azad College, Dr. Maqdoom

Farooqui, for giving me the opportunity of working this project.

Special thanks to our BBA Co-ordinator and Project Guide, Mr. I.M. Farooqui for all his

advice and assistance throughout the course of the project.

I would also like to thank the Head of Department of Commerce and Management

Science, Dr. S.A. Mannan for his valuable inputs.

DECLARATION

We hereby declare that the project is the result of our own collective efforts that it

confirms to the university, department and course regulations regarding cheating and

plagiarism. No material within this project has been used in any other submission, by the

researchers, for an academic award.

Aditi Anand Deo(156061)

Parikshith Sambasivan (156214)

Sanaya Dhamodiwala (156069)

TABLE OF CONTENTS

1. Introduction

Revenue Management

Inventory Management

1.1 NIC

1.2 Organization

1.3 Introduction To Inventory Management

1.3.1 Project Description

1.4 Component Assigned

1.4.1 Goal Of The Proposed System

1.4.2 Limitation of the Existing System

2. System Analysis

2.1 Requirement Analysis/ SRS of the Component

2.1.1 Problem Definition

2.1.2 Performance Requirements

2.1.3 System Requirements

2.1.4 Acceptance Criteria

2.2 Feasibility Study

2.2.1 Economic Feasibility

2.2.2 Technical Feasibility

2.2.3 Behavioural Feasibility

2.3 Proposed System Functionality

3. System Design

3.1 Design Goals

3.2 Functional Flow/Flow Chart

3.3 ER Diagram

3.4 Data Flow Diagram

3.5 Database Design

3.6 Data Dictionary

4. Technologies Used

5. Testing and Debugging

5.1 Goals and Objectives

5.2 Statement of scope

5.3 Test Case

5.4 Testing Process

5.5 Debugging

6. Implementation

6.1 Conversion

6.2 Direct Implementation

6.3 Module Diagram

7. Scope and Limitation

8. Conclusion

9 User Manual and Screen Shots

9.1 User Manual

9.2 Input/Output Interfaces (Screen Shots)

10. Annexure

1. Introduction

Revenue management has become a buzz word in current market scenario. Existence of

revenue management can be traced back to 6000 B.C, where barter system of exchange

was prevalent. The person who wanted to exchange the goods negotiated an optimal price

suitable to his customers. The barter indirectly forecasted the demand for his product and

used the principles of revenue management nonetheless. Revenue Management as a

marketing strategy came into being during 1970s. The deregulations of U.S. Airlines lead

them to discover this ancient technique and survive the competition. The application of

revenue management as a strategy aimed at providing an identical flying experience to

different customers for different prices, based solely on the time element that is when

they booked their ticket and the flexibility they wanted.

Accommodation is the major part of the tourism industry and accounts for a large chunk

of revenue. A chief feature of the accommodations is the fact that it is highly labour and

capital intensive industry.

To envision the future is a difficult task which requires knowledge, creativity, and

imagination and borders the domain of science fiction. The world is entering the third

millennium in which great changes are expected in all the areas of human lifestyle.

They came up with this concept in order to survive the competition. Revenue

management is applicable to certain service industries. Services operate along a range of

spectrums, from low to high perishability, intangibility and customer intimacy.

The value of the product is not same as the price. The value of a product is determined

subjectively, in other words it is determined by the customer’s perception of the product.

This distinction between value and price is the backbone of business and the very reason

why everyone benefits from a transaction. It also explains the fact that companies

preaching revenue management try to establish different product values suitable to

different people.

Allocation of inventory and pricing are crucial aspects of revenue management and to be

successful at forecasting demand and pricing correctly, one must analyze data that helps

establish the characteristics of each micro market segment correctly.

Price and availability are two important aspects of hotel inventory that remain unstable

over a time period. These two elements shape a traveler’s perception about the product

and the willingness to pay for it.

Concept

Revenue management has altered the financial performance of this service sector since its

conception in the 1980’s. The firms practicing revenue management have accepted that

the revenue has increased by 3-7%.

Revenue management implements the basics of demand and supplying a tactical manner

in order to generate maximum revenue from the constrained or the fixed capacity. The

challenge lies in selling the right product, to the right customer at the right time and at

right price. The basic objectives of revenue management include determination of rates,

controlling availability of products for sale, optimizing the timing of availability for a

product and capturing spill over potential to maximize revenue.

Kimes (1997) describes revenue management as a price discrimination practice. At the

heart of revenue management decision making process is the trade – off of marginal

revenue from the segments that are competing for the same inventory.

Revenue management is a scientific technique which is an assimilation of operations

research, customer relationship management and statistical analysis of data. These

techniques enable a hotel to categorize the customers into price bands, depending upon

the propensity to spend.

Revenue management according to Ideas is defined as : ““It is an economic discipline

appropriate to many service industries in which “market segment pricing” is combined

with statistical analysis to expand the market for the service and increase the revenue

“revenue” per unit of capacity.”

Some industry practioners define revenue management as the art of selling the right

product to the right customer at the right time for the right price. The concept of right in

this definition refers to the practice of achieving the maximum revenue for the sellers and

gaining the maximum value from the buyers. The basic principle of revenue management

is to match the room rate and timing of sale to buyers needs.

Revenue management suites the industries which have perishable inventory, uncertain

demand, segmented markets. These are blended with other aspects selling the product in

advance and combining the essence of low marginal servicing costs. In other words

revenue management is a technique which assures financial prosperity to a firm by

making maximum use of its available capacity.

Today’s hotel executives confront intensively competitive markets which show excessive

capacity and serve short term liquidity prospects. Therefore it is necessary to use capacity

tactfully and strategically. In today’s volatile market condition the goal of hotel

management is to enhance revenue with hotel’s available resources.

Characteristics Of Revenue Management

Fixed capacity: One of the prime reasons for revenue management being in use is the fact

that inventory is constrained and cannot be altered over a short time period. Owing to the

high fixed costs the firm is unable to balance the demand and supply in the short run

while varying output.

Segmented markets: Industries implementing revenue management categorize their

customer base into various markets depending upon the eligibility of the customer to

spend. By identifying their customer, capacity constrained organisations are able to sell

their unit of inventory to the most appropriate customer.

Uncertain demand: The nature of demand is characterized by crests and troughs for the

industries seeking to use revenue management. It is difficult to predict demand for the

product and may change over a period of time.

Advance sales: This is yet another feature of the industry wishing to implement revenue

management. The industry has the legitimate right to sell the product before hand.

Perishable inventory: The inventory is highly perishable in nature; therefore it is

necessary for the managers to sell the product at a lower price than losing the entire

revenue. In other words this situation can be termed as a bird in hand is better than a bird

in the bush.

Low marginal servicing costs: According to Kimes (1997) the capacity constrained

organization the organization should be willing to sell their unused capacity for a value

above their variable cost. The perish ability of a room night represents high fixed cost and

low variable cost.

The techniques of revenue management are applied in various service industries such as

airlines, cargo, cruise, railways and many more. To sum up revenue management is

concerned with maximizing profits by fine tuning the capacity and juggling with the price

and the demand.

Need For Revenue Management

The key need for revenue management requirement is to achieve the following:

Break the traditional first come first served idea.

Minimize the spoilage or eliminate the denied sales.

Manage the assets and make optimum utilization.

Compete more effectively in the changing market.

Benefits Of Revenue Management

� Better decision making due to sound and accurate data analysis.

� Enables the hotel to cater to the micro segments and result in guest delight.

Hotels form a part of hospitality industry and are also a part of service industry. Hotels

are known to provide home away from home experience to the guests. Hotels sell rooms,

which is a perishable product. In hotels revenue management has become of key

importance as the competition has increased and each hotel company wants to achieve

the epitome of financial success. Revenue management in hotels is concerned with the

market sensitive pricing of a fixed room capacity relative to a hotel’s specific market

segment. Revenue management aims at formulating profitable alignment of a customer,

product and price. Besides revenue management helps hotels in decision making of the

most desirable market mix that generates maximum profit.

The real world of revenue management does not seem to have clear and defined

boundaries when it comes to decision making process. There do exist certain concepts

that create a dilemma while making decisions. Some of these include multiple units of

inventory: The hotel offers multiple units of inventory for sale. In other words, there are

different categories of rooms sold by the hotel for different rates. There is an element of

product differentiation and price discrimination practiced.

Rate structure: The essence of revenue management comes from pricing the rooms at

different levels depending on the demand and supply. A multiple set of pricing structure

can create confusion in customers mind and alienate him from the reality. (Edgar)

Overbooking: Overbooking is defined as accepting more number of reservations than the

inventory possessed by a hotel.

Overbooking is an essential tactic practiced in revenue management. Overbooking is

done by analyzing reports of the past, present and determining strategies for future

generation of revenue. The no-show and cancellation frequencies of customers have led

the hotels to overbook their properties. By overbooking the hotel can make efficient use

of capacity and generate more revenue. However overbooking must be handled with care

since if the hotel is unable to honor the reservation, they may have to compensate the

client and this may lead to loss of goodwill.

Market mix analysis: The best way to generate revenue is by understanding the customers

to whom we are going to cater. This will not only enable a hotel to deliver the best

service but also create guest delight. Understanding of market allows the hoteliers to cater

exclusively to each unique demand of the guest.

Discount allocation: Hotels started discounting rooms when the hoteliers wanted to

stimulate demand in the period of slack season. When a guest receives discount there are

certain restrictions with regards to cancellation or on the arrival and departure dates. This

tactic enables a hotel to build market share, identify new segments and indirectly promote

demand and influence the bottom line. While exercising discount allocation a hotel only

has information about sales, capacity and price at which the room is discounted. The

unknown elements for the same include demand for the discounted category and

competitor’s plan of action. This lack of information may lead to crisis in the near future.

Duration control: This aspect of revenue management looks at restricting the time period

when a guest can access the inventory. For example the guest may be curtailed from

giving an accommodation or making a reservation even when the product is available.

This comes handy to managers while predicting the length of stay, in order to maximize

revenue not only during the peak season but also for all round the year. In other words it

enables redirecting the demand for the product as per time constrains.

Peak off peak analysis: The demand and supply are the two forces that operate this key

feature of revenue management. The hotels undergo a phase when there are no takers for

the product, but to stay in the market the firm knees to achieve the normal profit

irrespective of the season. Thus, the hotel needs to cut down the rates to such an extent

that it is able to meet the variable costs. The vice- versa happens if there exists more

demand. The hotel may charge more in order to cater to the needs as capacity is

constrained and cannot be varied in the short run. This enables the hotel to maintain

equilibrium and prepare for rainy days.

Lead time analysis: We are more familiar with another side of this concept which is also

known as booking lead time. This involves placing time constraints on the customer in

order to avail certain benefits. This will enable the hotel to reposition the product such

that it is able to cater accurately to the customer.

Forecasting

“Luck is what happens when preparation meets opportunity”. Seneca (Roman

Philosopher). The ability to forecast is the enshrined ability of revenue management. This

means knowing the customer, their needs, likes, dislikes which guides in predicting

consumer behavior. Accurate forecasts provide a rational view of the prevailing market

situation. The data that is used to predict forecasts for the hotel has two faces to it which

include the booking information and the number of rooms sold daily.

Pricing:

Price of a product or service can be set by using three techniques. Price can be set by

cost, usually the bottoms –up approach. This is also known as bid price approach. Prices

can also be set by taking the competition into concern, generally termed as market

approach. Variable pricing, is a first degree of price -discrimination practiced. Price

shading is a chief feature that is implemented by the revenue managers in which sales

people are permitted to vary the prices.

Recently the bid price approach has become very popular as it is easy to implement. It

also acts as method of controlling the sale of inventory. In this type of pricing bid prices

are pre- determined for the room nights and are sold only if theater offered for the desired

time period exceeds the bid prices for each day that room is occupied. (Talluri and

Ryzin) (1989).

The bid prices obtained enable in stimulating the comparison between the first come first

serve approach and the latter one.

Ethics is derived from the Latin word “ethical” meaning moral philosophy. In very

general terms ethics refer to the act of taking a right action and greater good, while

morals indicate their practices. According to Henderson “ethics is commonly defined as

a set of principles prescribing behavior that can explain what is good and right or bad and

wrong; it may even outline moral duty and obligation”. This definition of retention is old

and the workable definition of ethics is concerned with clarifying what constitutes human

welfare and the kind of conduct necessary to promote it. Ethical issues emerge when our

perception of what constitutes human welfare receives or enquires clarifications of moral

dilemma.

Business ethics emerged in the corporate world in the response to the fast changing

conditions under which the enterprises must function in modern times. A business ethics

compliance system ensures the following:

1. Workers and management in an organization understand the mission and the

vision of the company.

2. Communication between the three levels of management is smooth.

3. Company gets appropriate feedback.

In an increasingly competitive globalised and most importantly consumer driven business

environment, an ethical approach to business is increasingly important. This is necessary

in order to maintain the reputation and goodwill of the company and also ensure its long

term success. Hotels sales managers and their counter parts regularly face decisions that

include some ethical dimension. From an ethical perspective, the dilemma faced by

people in hotels involves meeting the bottom line targets and also satisfying the needs of

customers. The focus of critiques is mainly on the problematic fields such as price

discrimination, price differentiation and unfair means of selling.

According to Longneck (1985) management affects an organization’s ethical

performance by the establishment of priorities that direct the ethical conduct of the

organization.

Longnecker’s points are of great importance to an organization given that management is

empowered to maintain:

� The highest level of services as possible;

� The highest guest satisfaction ratings; and

� It enables the organization to achieve goodwill and also initiates the recovery of

costs.

In general, hospitality researchers have determined areas of key concern where ethical

issues are invoked. These include yield management, issues surrounding guests’ rights,

departmental relations and many more. During the provision of services the management

is concerned with ethical situations that can leave either a lasting positive or a negative

impression on a guest.

The practice of selling the same room in different market segments at different rates may

lead to loss of revenue. This happens due to the displacement of customers from a high

yield market segment by customers from low yield market segment. Usually customers

booking earlier pay a lower price as they receive discounts and other benefits, whereas

the customers who book closer to the date of arrival end up paying a higher price. Many

hotels earn large amount of revenue from other points of sale. The amount of revenue a

hotel obtains depends on the mix of market segments to which rooms are sold.

The basis ethical behavior is determined by justice, integrity, utility and competence.

Justice: The basic elements of justice include conscientiousness, impartiality and good

faith in dealing with others. The author has emphasized on procedural justice, which

examines the fairness to achieve some end. In the limelight of hotel sales managers and

their counterparts the value of justice may be most relevant in contract negotiation, where

bargaining is required. More broadly this element lays stress on the fact that individual

must refrain from engaging in price discrimination practices.

Competence: With the boom in the industry, there exists cut throat competition amongst

the hoteliers. The study of ethics reveals that the competition should be healthy and no

unfair practices should be followed to meet the desired end. The issue of competence

seems to be the area of prime concern as sales people in the hospitality sector strive to

enhance their credibility and professionalism.

Utility: Raiborne and Payne define utility as “encompassing efficiency and providing the

greatest good for the greatest number”. This calls for persuasion of alternatives that

improve the welfare of others and self. In other words it tries to establish a win-win

situation.

As stated earlier revenue management is a concept that is heavily based on theory of

economics, price discrimination is a policy followed by sellers when they sell identical

kind of goods and services. Price discrimination requires market segmentation. Price

discrimination occurs when the products or services are exclusively reserved. These are

referred to as “premium products”.

The first degree of price discrimination is a situation wherein the price varies by

customer. This rises due to the fact that the value of goods is subjective. The customer is

happy when the price elasticity is less than one.

The second degree of price discrimination occurs when the price varies with the quantity

of product purchased. For instance in hotels, the corporate discounts are offered for

frequent guests.

The third degree of price discrimination is the situation where price varies with the kind

of customer. This refers to market segmentation.

Critique

Managers of corporations frequently find themselves in quandaries over ethics.

(Beauchamp, Bowie, Mac lagan 1990, 1993). On one level they feel to maximize the

profits for the stake holders and at the other end enact to be transparent with customers

about their policies. Many revenue management practitioners break down the actual

scenario into four sub components which include:

1. Market segmentation

2. Overbooking

3. Inventory allocation

4. Forecasting and pricing

Of the points mentioned above overbooking and pricing are the two main categories

under which the concepts of market segmentation and inventory allocation will be

examined.

Market segmentation as stated before refers to the practice of segregating customers into

different categories depending upon the ability to pay. The catch here lies in the

following situation: For instance a guest comes through a corporate booking the rate

applicable to him would be different from the rate quoted when he comes for leisure. This

may create a doubt and lead to long term loss of the customer.

Overbooking: This refers to the practice of booking more number of rooms than the hotel

has. This protects the hotel from revenue loss in case the reservations get cancelled or

there are no –shows. In the short run overbooking practices protect the hotel from bearing

losses. But in the long run in appropriate practices may lead to loss of customers and

goodwill of the property may be at stake. The key to accurate overbooking policy lies in

obtaining accurate data with regards to occupancy and cancellations and no shows.

(Kimes, 1998)

Bundling

Product bundling refers to a market strategy where several products are offered for sale

under one product or an umbrella. This comes handy when there are economies of scale

in production, marginal costs of bundling are low, product set up costs are high. Pure

bundling occurs when a consumer can only purchase the entire bundle or nothing. Mixed

bundling happens when guests are confronted with choice between purchasing an entire

bundle or separate parts of the bundle. Pure bundling can be further categorized into

leader bundling and joint bundling. Joint bundling two products are offered at one price

and in leader bundling a leader product is offered for discount with the non leader

product.

Case Study—Things Go Bump In The Night

������������������� ���������� ��������������������� ���������������� �������

���������������������� ������������ ������ ��� ��������������������������

������������������ ������ �������������������������� ��������������������������

����������� �� ���!�����!������������������ ���������������� ����������������������

���������������������!����������������� ����� ��������������!� ���� �������!���

���!��������������� ����������������!�����������!�� ����"���������������� �����

�������������������������������������������������������!������������������# �����

$���������% � ���������� ���� ����� ������������������������ ������� ������

&������������������������������������������������������������������������������

���������������������� ��������# �����$������������������� ����� ������������������

������'��� ������������������������������� ������������������ �������������������

�������������������������������������������� ������

� ����������������������� ��������������������������� ������������������������

�����������������!��������# �����$��������� � ���� ���� ��������(�������� ��� �����

����# �����$��������!�����������������!���������������!���� ������������������ ���

��������������� �������������������'����!�����!�������������������� �!����� �������

������������# �����$�������������� ������� ��������������������� ��������������������

�����)�������������!���� ���������� ���������������������������������!������������

��������������!������������� �������� �����

The next morning Esther and her husband felt like they spent more of their time packing

and unpacking than they did visiting and celebrating with their relatives. During their

trip home, Esther told her husband that their experience reminded her of getting bumped

off a flight by an airline—but, in this case, they were not compensated for their

inconvenience. She also questioned the legality of overbooking. She quipped, “What good

is a confirmation number, when there is no guarantee of a room?” Esther decided to

write a letter to the corporate headquarters of the Panda Bear Inn hotel chain.

What good is a confirmation number when there is no guarantee of rooms?

Do no- shows and cancellations justify overbooking? Do operational advantages of

overbooking supersede the inconvenience caused to guests?

The above case study has emerged as a debatable issue amongst the hoteliers today. This

is a situation which involves ethics. The ethical aspect here can be viewed from two

perspectives, namely the Kantian Ethics and Virtue ethics.

According to the Kantian perspective the situation of overbooking may seem ethical only

when the guest is informed about the hotel policies. Had the person in charge of

reservation informed the guest that the probability of confirming and guaranteeing the

reservation is low, and may lead to dishonoring the reservation, then the guests are at

fault. If the similar case was to be viewed from the aspect of virtue ethics, this form of

ethics subscribes and views hotel as a human community.

The features of such a concept include honesty, integrity, tolerance and fairness. The case

study raises an issue on all the above traits as:

The guest’s reservation was confirmed and guaranteed as well. Secondly the hotel should

have reserved a room for the guest and then overbooked. Last but not the least the hotel

should have informed the guests about their arrangements in a referral group in advance.

Such situations are of critical importance as it may result in the loss of customer loyalty

and good will in the long run. In the short run the profit was made at the cost of causing

inconvenience to a guest. From the utilitarian perspective the management of the hotel

was ethical in maximizing the utility for the unsold rooms but while doing the same

should have been more careful. Thus we learn a lesson that while overbooking a hotel

needs to make sure that the practice is open and transparent with the guests in order to

avoid confusion and ceases to promote unethical or unfair deeds.

The pricing strategies used by the hotels form another debatable issue while discussing

ethics. Pricing is a very broad arena to be debated upon. The pricing culture followed by

a hotel depends upon numerous factors such as competition and demand for the product.

Demand is driven by the utility, which lies in the hands of the consumer and the supply is

governed by costs which lies in the supplier’s or management’s hand. As the law of

demand states that price and demand are inversely proportional to each other, the rate

structure is bound to be influenced by the demand for the product. When the demand is

high the rates quoted will be high and when demand is low the rates will be slashed so as

to generate demand.

Pricing is a key strategic lever in revenue management deploys. For revenue management

pricing to be effective customers who are willing to pay more must be prevented from

taking advantage of a lower price targeted at a more price sensitive segment. Because

services are often place, time and customer special and capacity constrained, substantial

opportunity exists for service providers to use price discrimination and to build effective

rate fences between the segments. Well designed rate fences allow customers to self

segment on the basis of their willingness to pay, service transaction and consumption

pattern. Fencing refers to putting certain restrictions in order to capture different

segments of consumers by offering different products which only higher end of the

society would desire.

Pricing and related rate fences can be viewed as unfair or even as price gouging and

fairness perceptions have been shown to be related to firm profitability. (Kahayan, Ketch,

Thales, 1985). Perceived fairness has been showed to be affected by the forming of

revenue practice where by customers perceive economically equivalent pricing schedules

as fair when expressed as discounts rather than premiums and

surcharges.(Kanheman,1979). In addition to price framing, the fairness is also affected by

the fencing condition of the customer. Perceived fairness is defined as whether an

outcome or a transaction process are seen by consumers as responsible, acceptable and

just. (Bolton, Alba, 2003). The dual entitlement and reference price and reference

transaction are used to examine fairness. The principle of dual entitlement refers to the

fact that the most customers believe that they are entitled to a reasonable price and a firm

is entitled to a reasonable profit. It further states that increase in price is accepted when it

occurs due to cost and unfair when the increase in price does not attribute to increase in

costs. A reference price is defined as how much a customer thinks a service should cost.

To assess the fairness of price, customers generally refer to the price paid in the recent

past and the frequency of the generally acceptable price.

Prospect theory suggests that consumers perceive prices framed as gains e.g. discounts,

than those framed as loses e.g. surcharge, even if situations are economically equivalent.

Customers who receive an advantage from a revenue management pricing tactic consider

the price they pay as fairer than the customers who are fence disadvantaged. If customers

view a firm’s practice as negative, consumers’ behavioral and affective responses change

instantly. These include agitation, disappointment and negative word of mouth publicity.

From the above discussion it is clear that the application of ethics varies from customer to

customer.

Conclusion

Today’s world is more competitive than ever. Revenue management is evolving at a

faster speed and is more than a mere strategy to optimize revenue.

“Revenue management has proven to be a devastatingly effective competitive device” .Dr

Alfred Khan

Revenue Management is a technique being utilized by an increasing number of service

industries in order to maximize the effective use of their available capacity and ensure

financial success. In hotels revenue management is concerned with market sensitive

pricing of fixed room capacity relative to a hotel’s specific market segment.

The means employed to achieve an end are equally important. Similarly in order to

maximize profits, the pathway chosen by the hotel’s management is important. When a

hotel fails to be transparent and firm with their operational policies, it tends to gain

negative publicity. Therefore it is necessary for the hotel to ensure that their customers

get the best value for money and at the same time protect the reputation of the hotel.

The ethical concern arises when the management discloses the ambiguous policies in

which reading between the lines becomes highly evident. In the revenue management

arena, the question of ethics arises when it comes to price discrimination and inventory

control. Price discrimination is considered ethical when the customer is aware and is not

affected by price elasticity. The art lies in creating a win – win situation, where in the

customer is happy and is satisfied with the value for money spent and the hotel is able to

meet its targets for the financial year. As hotels form a part of human community, the

management should have convincing power and make the guest realize that the

management is trying their best in providing the value for money.

Inventory management

Inventory is a list for goods and materials, or those goods and materials themselves, held

available in stock by a business. It is also used for a list of the contents of a household

and for a list for testamentary purposes of the possessions of someone who has died.

Origins of the word inventory

The word inventory was first recorded in 1601. The French term inventaire, or "detailed

list of goods," dates back to 1415. The reasons for keeping stock. There are three basic

reasons for keeping an inventory:

1. Time – the time lags present in the supply chain, from supplier to user at every

stage, requires that you maintain certain amount of inventory to use in this "lead

time"

2. Uncertainty - inventories are maintained as buffers to meet uncertainties in

demand, supply and movements of goods.

3. Economies of scale - ideal condition of "one unit at a time at a place where user

needs it, when he needs it" principle tends to incur lots of costs in terms of logistics.

So bulk buying, movement and storing brings in economies of scale, thus inventory.

All these stock reasons can apply to any owner or product stage. Buffer stock is held in

individual workstations against the possibility that the upstream workstation may be a

little delayed in long setup or change-over time. This stock is then used while that

change-over is happening. This stock can be eliminated by tools like SMED.

These classifications apply along the whole supply chain not just within a facility or

plant. Where these stocks contain the same or similar items it is often the work practice to

hold all these stocks mixed together before or after the sub-process to which they relate.

This 'reduces' costs. Because they are mixed-up together there is no visual reminder to

operators of the adjacent sub-processes or line management of the stock which is due to a

particular cause and should be a particular individual's responsibility with inevitable

consequences. Some plants have centralized stock holding across sub-processes which

makes the situation even more acute.

Special terms used in dealing with inventory

• stock keeping unit (SKU) is a unique combination of all the components that are

assembled into the purchasable item. Therefore any change in the packaging or product is

a new SKU. This level of detailed specification assists in managing inventory.

• Stock out means running out of the inventory of an SKU.

• "new old stock" (sometimes abbreviated nos) is a term used in business to refer to

merchandise being offered for sale which was manufactured long ago but that has never

been used. Such merchandise may not be produced any more, and the new old stock may

represent the only market source of a particular item at the present time.

Typology

1. Buffer/safety stock

2. Cycle stock (used in batch processes, it is the available inventory excluding buffer

stock)

3. De-coupling (buffer stock that is held by both the supplier and the user)

4. Anticipation stock (building up extra stock for periods of increased demand - e.g. Ice

cream for summer)

5. Pipeline stock (goods still in transit or in the process of distribution - have left the

factory but not arrived at the customer yet)

Inventory examples

While accountants often discuss inventory in terms of goods for sale, organizations -

manufacturers, service-providers and not-for-profits - also have inventories (fixtures,

furniture, supplies) that they do not intend to sell. Manufacturers', distributors', and

wholesalers' inventory tends to cluster in warehouses. Retailers' inventory may exist in a

warehouse or in a shop or store accessible to customers. Inventories not intended for sale

to customers or to clients may be held in any premises an organization uses. Stock ties up

cash and if uncontrolled it will be impossible to know the actual level of stocks and

therefore impossible to control them. Whilst the reasons for holding stock are covered

earlier, most manufacturing organizations usually divide their "goods for sale" inventory

into:

• Raw materials - materials and components scheduled for use in making a product.

• Work in process, WIP - materials and components that have begun their transformation

to finished goods.

• Finished goods - goods ready for sale to customers.

• Goods for resale - returned goods that are sellable.

• Spare parts

Manufacturing

A canned food manufacturer's materials inventory includes the ingredients to form the

foods to be canned, empty cans and their lids (or coils of steel or aluminium for

constructing those components), labels, and anything else (solder, glue,) that will form

part of a finished can. The firm's work in process includes those materials from the time

of release to the work floor until they become complete and ready for sale to wholesale or

retail customers. This may be vats of prepared food, filled cans not yet labelled or sub-

assemblies of food components. It may also include finished cans that are not yet

packaged into cartons or pallets. Its finished good inventory consists of all the filled and

labelled cans of food in its warehouse that it has manufactured and wishes to sell to food

distributors (wholesalers), to grocery stores (retailers), and even perhaps to consumers

through arrangements like factory stores and outlet centres.

Logistics or distribution

the logistics chain includes the owners (wholesalers and retailers), manufacturers' agents,

and transportation channels that an item passes through between initial manufacture and

final purchase by a consumer. At each stage, goods belong (as assets) to the seller until

the buyer accepts them. Distribution includes four components:

1. Manufacturers' agents: distributors who hold and transport a consignment of finished

goods for manufacturers without ever owning it. Accountants refer to manufacturers'

agents' inventory as "materiel" in order to differentiate it from goods for sale.

2. Transportation: the movement of goods between owners, or between locations of a

given owner. The seller owns goods in transit until the buyer accepts them. Sellers or

buyers may transport goods but most transportation providers act as the agent of the

owner of the goods.

3. Wholesaling: distributors who buy goods from manufacturers and other suppliers

(farmers, fishermen, etc.) For re-sale work in the wholesale industry. A wholesaler's

inventory consists of all the products in its warehouse that it has purchased from

manufacturers or other suppliers. A produce-wholesaler (or distributor) may buy from

distributors in other parts of the world or from local farmers. Food distributors wish to

sell their inventory to grocery stores, other distributors, or possibly to consumers.

4. Retailing: a retailer's inventory of goods for sale consists of all the products on its

shelves that it has purchased from manufacturers or wholesalers. The store attempts to

sell its inventory (soup, bolts, sweaters, or other goods) to consumers.

It is a key observation in "lean manufacturing" that it is often the case that more than 90%

of a product's life prior to end user sale is spent in distribution of one form or another. On

the assumption that the time is not itself valuable to the customer this adds enormously to

the working capital tied up in the business as well as the complexity of the supply chain.

Reduction and elimination of these inventory 'wait' states is a key concept in lean.

High level inventory management

It seems that around about 1880 there was a change in manufacturing practice from

companies with relatively homogeneous lines of products to vertically integrated

companies with unprecedented diversity in processes and products. Those companies

(especially in metalworking) attempted to achieve success through economies of scale -

the gains of jointly producing two or more products in one facility. The managers now

needed information on the effect of product mix decisions on overall profits and therefore

needed accurate product cost information. A variety of attempts to achieve this were

unsuccessful due to the huge overhead of the information processing of the time.

However, the burgeoning need for financial reporting after 1900 created unavoidable

pressure for financial accounting of stock and the management need to cost manage

products became overshadowed. In particular it was the need for audited accounts that

sealed the fate of managerial cost accounting. The dominance of financial reporting

accounting over management accounting remains to this day with few exceptions and the

financial reporting definitions of 'cost' have distorted effective management 'cost'

accounting since that time. This is particularly true of inventory. Hence high level

financial inventory has these two basic formulas which relate to the accounting period:

1. Cost of beginning inventory at the start of the period + inventory purchases within the

period + cost of production within the period = cost of goods

2. Cost of goods - cost of ending inventory at the end of the period = cost of goods sold

The benefit of these formulae is that the first absorbs all overheads of production and raw

material costs in to a value of inventory for reporting. The second formula then creates

the new start point for the next period and gives a figure to be subtracted from sales price

to determine some form of sales margin figure.

Manufacturing management is more interested in inventory turnover ratio or average

days to sell inventory since it tells them something about relative inventory levels.

Inventory turn over ratio (also known as inventory turns) = cost of goods sold/average

Inventory=cost of goods sold / ((beginning inventory + ending inventory) and its inverse

Average days to sell inventory=number of days a year/inventory turn over ratio=365

days a year/inventory turn over ratio

This ratio estimates how many times the inventory turns over a year. This number tells us

how much cash/goods are tied up waiting for the process and is a critical measure of

process reliability and effectiveness. So a factory with two inventory turns has six months

stock on hand which generally not a good figure (depending upon industry) whereas a

factory that moves from six turns to twelve turns has probably improved effectiveness by

100%. This improvement will have some negative results in the financial reporting since

the 'value' now stored in the factory as inventory is reduced.

Whilst the simplicity of these accounting measures of inventory is very useful they are in

the end fraught with the danger of their own assumptions. There are in fact so many

things which can vary hidden under this appearance of simplicity that a variety of

'adjusting' assumptions may be used. These include:

• Specific identification

• Weighted average cost

• Moving-average cost

• FIFO, and LIFO.

Inventory turn is a financial accounting tools for evaluating inventory and it is not

necessary a management tool. Inventory management should be forward looking. The

methodology applied is based on historical cost of goods sold. The ratio may not be able

to reflect the usability of future production demand as well as customer demand.

Business models including just in time (JIT) inventory, vendor managed inventory (VMI)

and customer managed inventory (CMI) attempt to minimize on-hand inventory and

increase inventory turns. VMI and CMI have gained considerable attention due to the

success of third party vendors who offer added expertise and knowledge that

organizations may not possess.

Accounting perspectives: the basis of inventory accounting

Inventory needs to be accounted where it is held across accounting period boundaries

since generally expenses should be matched against the results of that expense within the

same period. When processes were simple and short then inventories were small but with

more complex processes then inventories became larger and significant valued items on

the balance sheet. This need to value unsold and incomplete goods has driven much new

behaviour into management practice. Perhaps most significant of these are the

complexities of fixed cost recovery, transfer pricing, and the separation of direct from

indirect costs. This, supposedly, precluded "anticipating income" or "declaring dividends

out of capital". It is one of the intangible benefits of lean and the TPS that process times

shorten and stock levels decline to the point where the importance of this activity is

hugely reduced and therefore effort, especially managerial, to achieve it can be

minimized.

Accounting for inventory

Each country has its own rules about accounting for inventory that fit with their financial

reporting rules. So for example, organizations in the U.S.A define inventory to suit their

needs within us generally accepted accounting practices (GAAP), the rules defined by the

financial accounting standards board (FASB) (and others) and enforced by the U.S.A

securities and exchange commission (sec) and other federal and state agencies. Other

countries often have similar arrangements but with their own GAAP and national

agencies instead.

It is intentional that financial accounting uses standards that allow the public to compare

firms' performance, cost accounting functions internally to an organization and

potentially with much greater flexibility. A discussion of inventory from standard and

theory of constraints-based (throughput) cost accounting perspective follows some

examples and a discussion of inventory from a financial accounting perspective.

The internal costing/valuation of inventory can be complex. Whereas in the past most

enterprises ran simple one process factories, this is quite probably in the minority in the

21st century. Where 'one process' factories exist then there is a market for the goods

created which establishes an independent market value for the good. Today with multi-

stage process companies there is much inventory that would once have been finished

goods which is now held as 'work-in-process' (WIP). This needs to be valued in the

accounts but the valuation is a management decision since there is no market for the

partially finished product. This somewhat arbitrary 'valuation' of WIP combined with the

allocation of overheads to it has led to some unintended and undesirable results.

Financial accounting

An organization's inventory can appear a mixed blessing, since it counts as an asset on

the balance sheet, but it also ties up money that could serve for other purposes and

requires additional expense for its protection. Inventory may also cause significant tax

expenses, depending on particular countries' laws regarding depreciation of inventory, as

in Thor power Tool Company v. Commissioner.

Inventory appears as a [[current asset]] on an organization's balance sheet because the

organization can, in principle, turn it into cash by selling it. Some organizations hold

larger inventories than their operations require in order inflating their apparent asset value

and their perceived profitability.

in addition to the money tied up by acquiring inventory, inventory also brings associated

costs for warehouse space, for utilities, and for insurance to cover staff to handle and

protect it, fire and other disasters, obsolescence, shrinkage (theft and errors), and others.

Such holding costs can mount up: between a third and a half of its acquisition value per

year.

Businesses that stock too little inventory cannot take advantage of large orders from

customers if they cannot deliver. The conflicting objectives of cost control and customer

service often pit an organization's financial and operating managers against its sales and

marketing departments. Sales people, in particular, often receive sales commission

payments, so unavailable goods may reduce their potential personal income. This conflict

can be minimized by reducing production time to being near or less than customer

expected delivery time. This effort, known as "lean production" will significantly reduce

working capital tied up in inventory and reduce manufacturing costs (see the Toyota

production system).

the role of a cost accountant on the 21st-century in a manufacturing organization

by helping the organization to make better decisions, the accountants can help the public

sector to change in a very positive way that delivers increased value for the taxpayer’s

investment. It can also help to incentives progress and to ensure that reforms are

sustainable and effective in the long term, by ensuring that success is appropriately

recognized in both the formal and informal reward systems of the organization.

To say that they have a key role to play is an understatement. Finance is connected to

most, if not all, of the key business processes within the organization. It should be

steering the stewardship and accountability systems that ensure that the organization is

conducting its business in an appropriate, ethical manner. It is critical that these

foundations are firmly laid. So often they are the litmus test by which public confidence

in the institution is either won or lost.

Finance should also be providing the information, analysis and advice to enable the

organizations’ service managers to operate effectively. This goes beyond the traditional

preoccupation with budgets – how much have we spent so far, how much have we left to

spend? It is about helping the organization to better understand its own performance. That

means making the connections and understanding the relationships between given inputs

– the resources brought to bear – and the outputs and outcomes that they achieve. It is

also about understanding and actively managing risks within the organization and its

activities.

FIFO vs. LIFO accounting

When a dealer sells goods from inventory, the value of the inventory is reduced by the

cost of goods sold (cog sold). This is simple where the cog has not varied across those

held in stock; but where it has, then an agreed method must be derived to evaluate it. For

commodity items that one cannot track individually, accountants must choose a method

that fits the nature of the sale. Two popular methods which normally exist are: FIFO and

LIFO accounting (first in - first out, last in - first out). FIFO regards the first unit that

arrived in inventory as the first one sold. LIFO considers the last unit arriving in

inventory as the first one sold. Which method an accountant selects can have a significant

effect on net income and book value and, in turn, on taxation. Using LIFO accounting for

inventory, a company generally reports lower net income and lower book value, due to

the effects of inflation. This generally results in lower taxation. Due to LIFO's potential

to skew inventory value, UK, GAAP and IAS have effectively banned LIFO inventory

accounting.

Standard cost accounting

Standard cost accounting uses ratios called efficiencies that compare the labour and

materials actually used to produce a good with those that the same goods would have

required under "standard" conditions. As long as similar actual and standard conditions

obtain, few problems arise. Unfortunately, standard cost accounting methods developed

about 100 years ago, when labour comprised the most important cost in manufactured

goods. Standard methods continue to emphasize labour efficiency even though that

resource now constitutes a (very) small part of cost in most cases.

Standard cost accounting can hurt managers, workers, and firms in several ways. For

example, a policy decision to increase inventory can harm a manufacturing managers'

performance evaluation. Increasing inventory requires increased production, which

means that processes must operate at higher rates. When (not if) something goes wrong,

the process takes longer and uses more than the standard labour time. The manager

appears responsible for the excess, even though s/he has no control over the production

requirement or the problem.

In adverse economic times, firms use the same efficiencies to downsize, right size, or

otherwise reduce their labour force. Workers laid off under those circumstances have

even less control over excess inventory and cost efficiencies than their managers. Many

financial and cost accountants have agreed for many years on the desirability of replacing

standard cost accounting. They have not, however, found a successor.

Theory of constraints cost accounting

Elijah m. Godard developed the theory of constraints in part to address the cost-

accounting problems in what he calls the "cost world". He offers a substitute, called

throughput accounting, that uses throughput (money for goods sold to customers) in place

of output (goods produced that may sell or may boost inventory) and considers labour as

a fixed rather than as a variable cost. He defines inventory simply as everything the

organization owns that it plans to sell, including buildings, machinery, and many other

things in addition to the categories listed here. Throughput accounting recognizes only

one class of variable costs: the truly variable costs like materials and components that

vary directly with the quantity produced.

Finished goods inventories remain balance-sheet assets, but labour efficiency ratios no

longer evaluate managers and workers. Instead of an incentive to reduce labour cost,

throughput accounting focuses attention on the relationships between throughput

(revenue or income) on one hand and controllable operating expenses and changes in

inventory on the other. Those relationships direct attention to the constraints or

bottlenecks that prevent the system from producing more throughput, rather than to

people - who have little or no control over their situations.

National accounts

Inventories also play an important role in national accounts and the analysis of the

business cycle. Some short-term macroeconomic fluctuations are attributed to the

inventory cycle.

Distressed inventory

also known as distressed or expired stock, distressed inventory is inventory whose

potential to be sold at a normal cost has or will soon pass. In certain industries it could

also mean that the stock is or will soon be impossible to sell. Examples of distressed

inventory include products that have reached its expiry date, or has reached a date in

advance of expiry at which the planned market will no longer purchase it (e.g. 3 months

left to expiry), clothing that is defective or out of fashion, and old newspapers or

magazines. It also includes computer or consumer-electronic equipment that is

obsolescent or discontinued and whose manufacturer is unable to support it.

Economic order quantity

economic order quantity is the level of inventory that minimizes the total inventory

holding costs and ordering costs. The framework used to determine this order quantity is

also known as Wilson EOQ model. The model was developed by f. W. Harris in 1913.

But still r. H. Wilson is given credit for his early in-depth analysis of the model.

Underlying assumptions

1. The ordering cost is constant.

2. The rate of demand is constant

variables

• q = order quantity

• q * = optimal order quantity

• d = annual demand quantity of the product

• p = purchase cost per unit

• c = fixed cost per order (not per unit, in addition to unit cost)

• h = annual holding cost per unit (also known as carrying cost) (warehouse space,

refrigeration, insurance, etc. Usually not related to the unit cost)

the total cost function

the single-item EOQ formula finds the minimum point of the following cost function:

total cost = purchase cost + ordering cost + holding cost

extensions

several extensions can be made to the EOQ model, including backordering costs and

multiple items. Additionally, the economic order interval can be determined from the

EOQ and the economic production quantity model (which determines the optimal

production quantity) can be determined in a similar fashion.

The Importance Of Inventory Management In Hospitality.

Introduction

Inventory to many business owners is one of the more visible and tangible aspects of

business. Raw materials, goods in process and finished goods all represent various forms

of inventory. Each type represents money tied up until the inventory leaves the company

as purchased products. Likewise merchandise stocks in a retail store contribute to profits

only when their sale puts money into the cash register. In a literal sense, inventory refers

to stocks of anything necessary to do business. These stocks represent a large portion of

the business investment and must be well managed n order to maximize profits. Infact

many small businesses cannot absorb the types of losses that arise from poor inventory

management unless inventories are controlled they are unreliable, inefficient and costly.

This is because inventory forms a link between production and sales.

The objectives of inventory management are:

� To ensure that inventories needed to sustain operations are sustainable

� Costs are kept under control

Inventory can be classified into three broad categories:

1. Raw material inventory – they are materials and components that are inputs in

making the final product

2. Work-in-progress – also called as stock-in-progress/ process refers to goods in the

intermediate stage of production

3. Finished goods – consists of final products ready for sale

Inventory in transit i.e. inventory between various stages of production or storage that

permits efficient production scheduling and utilization of resources. The possibility of

resultant delays and idle times gives the firm an incentive to maintain in-transit inventory.

Raw material inventory gives the firm flexibility in purchasing without which the firm

exists on a hand-to-mouth existence of buying raw materials to strictly keep in sync with

production. Finished goods inventory allows the firm flexibility in its production

scheduling and marketing.

Large inventories allow efficient service of customer demand. The unavailability or

temporary stock-out of a product results in the loss of present as well as future sales.

Thus it is learning to maintain all types of inventory stocks. A disadvantage of holding

large inventories is the total cost of holding the inventory inclusive of storage and

handling costs and the required return on capital which get tied up in the inventory. An

additional disadvantage is the danger of obsolescence.

The costs associated with inventory are: ordering costs, carrying costs and stock-out

costs. Ordering costs include the cost of placing an order, receiving the material and

inspecting the quality. It does not change with the increase or decrease in the no. Of units

that have been ordered. Examples are shipping, storage, handling, insurance, property

tax, wastage costs, etc. Ordering costs would be increasing with the frequency of increase

in orders. Ordering a larger quantity of material would reduce costs per order. The second

broad category of costs is the carrying costs. The main component of carrying costs is

storage. Storage costs would include cold storage, warehouse charges, fire or theft

insurance charges, loss due to wastage, pilferage, etc. Carrying costs also include the cost

of funds that are locked inventory. This is called opportunity cost of funds. Carrying costs

increase or decrease with the rise and fall in inventory levels. Stock-out costs is basically

the cost of running short or running out of inventory. Stock-outs result in the loss of sales,

guest goodwill and disturbed production schedules. It is not possible to measure the

impact of stock-out costs as they are short-term and long-term in nature and are

intangible to an extent.

Importance of inventory management

Successful inventory management involves the balancing the costs of inventory with

benefits of inventory. Many business owners fail to appreciate the true costs of carrying

inventory which includes not only the direct costs but also the indirect costs. This fine

line b/w keeping too much inventory or not enough inventories is not the only concern of

a manager.

� Maintaining an assortment of stocks but not spreading the rapidly moving ones

too thin

� Increasing inventory turnover but not sacrificing the service levels

� Keeping stock low but not sacrificing performance

� Obtaining lower prices for volume purchases and not ending up with slow moving

inventory

� Having an adequate inventory on hand but not getting caught with obsolete or

near to obsolete items

One of the most important aspects of inventory is control. Inventory control is to have the

items in stock at the moment they are required. This includes procuring items from the

market early enough to ensure delivery at the proper time. Thus, a sound purchase plan

made in advance determines the inventory requirement for each time period leading to an

execution without delay. Inventory management and control must be designed to meet

the dictum of market and support the company’s strategy plans. Companies will need to

manage their inventory for greater profitability owing to market demand, new

opportunities worldwide marketing, global material sourcing and new technology.

Tools of inventory management: EOQ model

Horne and Wachowicz (2005) fundamentals of financial management, 11th edition,

defines EOQ or economic order quality as “the quantity of an inventory item to order so

that the total inventory costs are minimized over the firm’s planning period.” This model

defines the optimal quantity that minimizes total variable costs required to order and hold

inventory. This model was developed by F.W. Harris in 1913, though R.H.Wilson is

credited for his early in depth analysis of the model. EOQ is an important concept in

purchase of raw materials and the storage of finished goods and of in-transit inventories.

In the analysis the optimal order quantity for a particular item of inventory given its

forecasted use and costs is determined. Ordering can mean either the purchase of the item

or the production of the item. This model helps managers ensure an equilibrium b/w

ordering and carrying costs.

The graph illustrated the behaviour of total carrying costs and the total ordering costs and

the sum of these two. Total carrying costs varies directly with the size of the order and

total ordering costs vary inversely with size. The EOQ occurs when total carrying costs

equals total ordering costs assuming that there is no safety stock. Therefore, EOQ is

given as:

Example:

100 days requirement = 5000 units

Cc = re. 1/unit/100 days

OC = Rs. 100/order

No. Of orders OC Cc TCU

1 100 2500 2600

2 200 1250 1450

5 500 500 1000

10 1000 250 1250

20 2000 125 2125

Thus, by substituting the values in the formula we get the value of 1000. Therefore, the

optimal order quantity that the restaurant must order is 1000 units and this order must be

done five times. We can thus conclude that the restaurant would order five times during

the 100 day cycle.

Assumptions for the EOQ graph:

� The forecast usage is for a given period

� The demand is throughout the period

� Inventory order can be replenished immediately

� The two distinguished costs are carrying and ordering costs

� The cost/order is constant regardless of order size

� The carrying cost is fixed percentage of the avg. Inventory value

Order point: when to order?

The EOQ calculated ignores lead time. Lead time is the length of time b/w order

placement and order receipt. Suppose the demand for the inventory is known but it takes

five days b/w the placement and receipt of orders, the EOQ in the previous example was

1000 units with an order being placed every twentieth day. The firm has a daily usage of

50 units. The units remaining constant the firm needs to order five days in advance. Order

point can be expressed as:

Op= lead time * daily usage

Inference: thus, when the new order is received five days later the firm will have

exhausted its existing stock.

Safety stock

Inventory stock held in reserve as a cushion against the uncertain demand for usage and

replenished lead time. Order point here would become:

Op= (avg. Lead time * avg. Daily usage) +safety stock

Just – in – time: JIT

It refers to the idea that inventories are acquired and put in production at the exact time

they are needed. It is also described as an approach with the objective of producing the

right parts in the right place at the right time. This method reduces costs of moving of the

material, accumulation of materials, or the use of faulty production methods that would

create subsequent product rework. Example: McDonalds

JIT is also called as lean production or stockless production that improves profits and

ROI by reducing inventory levels variability, production and delivery lead times, other

costs like machine setup and breakdown, and increasing inventory turnover rate along

with improvement of product quality. In JIT under utilized excess capacity is used instead

of buffer inventories to hedge against problems that may arise. This process requires a

very accurate production and inventory information system, a highly efficient purchase

system with reliable suppliers and above all an efficient inventory handling system.

JIT may portray the fact that inventories are reduced to bare minimum and that EOQ for

an item might approach one unit. It is not so.

JIT rejects the notion that ordering costs are fixed. JIT drives down cost as:

1. Reduction of setup times

2. Reduction of lot sizes

3. Reduced lead times

4. Preventive maintenance

5. Flexible workforce

6. Requires a supplier quality assurance and implement a zero-defect quality

program

7. Small lot conveyance

By successfully reducing ordering costs firms can flatten the OC curve and can reduce

the EOQ to one. JIT emphasizes inventory as one of the seven wastes and as such its

practice involves the aim of reducing buffer inventory to zero. Zero buffer inventories

means that production is not protected from exogenous i.e. External shocks which will

result in the reduction of the supply of inputs which slow or stop production with

significant negative consequences. As noted by liker (2003) Toyota suffered a major

supplier failure as a result of the 1997 Aisin fire which resulted in one of its suppliers

incapable to fulfill Toyota’s orders. In the United States the 1992 railway strikes resulted

in GM (general motors) having to shut down a 75000 worker plant temporarily as they

had no inputs flowing to the factory.

Food and beverage inventory control is all about decision making. Food & beverage in

hospitality provides highest risk, lowest profit margins and has a success rate that is less

than one in five after five years of operations. This is the main reason for good food &

beverage control. Food & beverage outlets in large hotels and resorts may not provide a

big contribution to the bottom line but they still require strong control because these

places are large in nature, they do not have those many people involved in long-term

potentials and there is even a greater need for strict review and analysis.

In such a situation the entire hierarchy from the top manager to the front line executives

must be responsible for the follow –up of the controls namely viz.

A. Storage and requisitioning of supplies

B. Maintenance of equipment

C. Preparation and service of food & beverage

D. Revenue compilation from cash registers

E. Food inventory

F. Menu and portioning

G. All other kitchen preparations

Food & beverage industry portrays high customer expectation, stiff competition, complex

planning and perishable products. Knowing your customers buying patterns is critical to

maintain adequate levels of the product and sustain profitability from low margin items.

Replenishment of inventory is subjected to seasonal availability, promotions and special

events. Accounting includes regular inventory counts, contracting, purchase procedures,

pricing and reporting on a weekly, fortnightly and monthly basis to make the people

aware of what is in stock, allows problems to be recognized and responded to quickly.

The bottom-line “the better the inventory control, more is our command over prime

costs”.

1.1- NIC

National Informatics Centre (NIC) of the Department of Information Technology is providing

network backbone and e-Governance support to Central Government, State Governments, UT

Administrations, Districts and other Government bodies. It offers a

wide range of ICT services including Nationwide Communication

Network for decentralized planning, improvement in Government

services and wider transparency of national and local Governments.

NIC assists in implementing Information Technology Projects, in

close collaboration with Central and State Governments, in the areas

of (a) Centrally sponsored schemes and Central sector schemes, (b)

State sector and State sponsored projects, and (c) District

Administration sponsored projects. NIC endeavors to ensure that the

latest technology in all areas of IT is available to its users.

NIC Headquarters is based in New Delhi. At NIC

Headquarters, a large number of Application Divisions exist which

provide total Informatics Support to the Ministries and Departments of the Central Government.

NIC computer cells are located in almost all the Ministry Bhawans of the Central Government

and Apex Offices including the Prime Minister’s Office, the Rashtrapati Bhawan and the

Parliament House. Apart from this, NIC has various Resource Divisions at the Headquarters

which specialize into different areas of IT and facilitate the Application Divisions as well as other

NIC Centres in providing state-of-the-art services to the Govt.

At the State level, NICs State/UTs Units provide informatics support to their respective

State Government and at the District level lie the NIC District Infomatics Offices.

NIC has conceptualised, developed and implemented a very large number of projects for

various Central and State Government Ministries, Departments and Organisations. Many of these

projects are continuing projects being carried out by various divisions of NIC at New Delhi

Headquarters and State/District centres throughout the country. Some of the most important note

worthy projects, which offer a glimpse of the multifaceted, diverse activities of NIC, touching

upon all spheres of e-governance and thereby influencing the lives of millions of citizens of India

are given below :

• Agrictural Marketing Information Network (AGMARKNET).

• Central Passport System.

• Community Information Centres (CICs).

• Computerised Rural Information Systems Project (CRISP).

• Court Information System (COURTIS).

• Department of Agriculture Network (DACNET).

• Examination Results Portal.

• India Image.

• Land Records Information System (LRIS).

• National Hazardous Waste Information System (NHWIS).

� Public Grievance Redress and Monitoring System (PGRAMS).

� Spatial Data Infrastructure (SDI).

• Video Conferencing.

Web Site of NIC http://indiaimage.nic.in/

1.2-Organisation

Border Road Organisation (BRO)

The early years post Independence saw India with a 15000 kilometers long border to be secured

and a vast, remote and economically backward North and North Eastern Region, with an

inadequate road communication network, to support its future development.

The 1950’s was one of consolidation and learning, politically and militarily. With the advent of

the Five Year Plans from 1951, the Central and State Government stepped in. With the

Constitution having declared road development as a State subject , the responsibility of road

development continued in the North and North Eastern States to be entrusted to the PWD, even

where defence strategy was involved.

However, what become apparently clear was that, the roads for the Border States were forbidding

challenges, needing dedicated commitment, time and money, to open up the hinterland to the out

side.

Vision

Nation’s most reputed, multifaceted, transnational, modern construction Organisation committed

to meeting the strategic needs of the armed forces with enlightened leadership, a strong, skilled

and committed work force, a well ingrained value system and a strong environment conscience.

Playing a national role in socio economic development through its large-scale contribution to

infrastructure development.

Mission

� To support the armed forces meet their strategic needs by committed, dedicated and cost

effective development and sustenance of the infrastructure.

� To achieve international levels of quality excellence and time consciousness in a

diversified sphere of construction activity in a cost effective manner.

� Optimise potential and expertise through increased involvement in agency, transnational

and national development projects.

� To attain leadership in development, adoption, assimilation and use of state of the art

technology.

� To create the environment for accurate, real time and effective decision making through

optimising use of information technology.

� Through a focus on core competencies; ensure highest level of skill and proficiency in

construction activity.

� To sustain a sense of values in the Organisation that will ensure a high level of self

esteem in each individual and immeasurable synergy in the Organisation.

� To help enrich the quality of life of the community and ensure all rough growth.

Role of the BRO

In Peace

(a)Develop & Maintain The Operational Road Infrastructure Of General Staff In The Border

Areas.

(b) Contribute To The Socio-Economic Development Of The Border States.

In War

(a) To Develop & Maintain Roads To Keep L Of C Through In Original Sectors And Re-

Deployed Sectors .

(b) To Execute Addl Tasks As Laid Down By The Govt Contributing To The War Effort.

Web Site of BRO http://bro.gov.in/

1.3 Introduction To Inventory Management

Inventory Management System deals with the maintainance of equipments. BRO works for many

projects on building roads and bridges for which they have to purchase equipments.

1.3.1 Project Description

The primary role of Border Road Organisaton is to undertake road development departmently in

remote border areas of the Northern & North Eastern reagons of the country.the role envisages

implementation of time bound works plan base on Defence priorities and regional

development.this aim is achieved by co-ordinating the activities of a dedicated General Reserve

Engineers Force comprising of both the GREF and service personnel.the road construction

activites are backed by a mechanized fleet of about 130 different type of vehicles,equipments and

plants.

BRO procure the equipments.The purchase decision of equipments from different firms on the

basis of the Tender Price coated bt resp firms.Then these equipments are used in different projects

of BRO.

For the maintainance of these equipment’s spare parts Inventory Management System is

developed.

Basic Operation performed:

� PRE-SO (Supply Order)

� POST-SO details.

Pre-So is maintained from the starting of the financial year. It is concern to keep the records of

each Supply Order that is received from firm, supplying equipments. These equipments are then

assigned a unique ISG Number given by BRO, further they are supplied to different project

departments of BRO.

After the completion of PRE SO BRO maintains the POST SO worksheet. The supply and

liability to the current year is being prepared in this worksheet. First the details of the supply

order for the current year is prepared at the end of the current year followed by the liability

worksheet that is being carry forward.

At last Guide Sheet is formed that include budget allotted; liabilities of last three year cleared in

current year, liabilities to be carry forward to next year.

1.4 Component Assigned 1.4.1 Goal Of The Proposed System

The goal of the proposed system is to prepare PRE-SO on the basis of order made.

This module contain two stages:

• SO Sheet

• Pre_SO Worksheet

The preliminary stage of this project is to create the SO (Supply Order) sheet for each equipment

order.In this sheet each equipment spare part is assign a unique identifier i.e ISG Num.

SO sheet contains the Rate of each spare part. When the worksheet is being prepare then this rate

acts as the LPP. The reference of Last Purchase Price (LPP) of the equipments corresponding to

the ISG (Initial Stocking Guide) is maintain to form the transaction sheet of the particular

financial year. Each firm specifies their Tender Price (TP) respective to the spare parts. Each

equipment can have multiple spare parts, uniquely identified by their Part No.

Pre-SO worksheet is being prepared approx at the end of each financial year on the basis of SO

transaction sheet and Tender Price coated. In this worksheet basic operation is to get the last

purchase price, and its reference.

1.4.2 Limitation of the Existing System

• Existing system was manual.

• Time consuming as data entry which include calculations took lot of time.

• Searching was very complex as there could be 100’s of entry every year.

• The proposed system is expected to be faster than the existing system.

2. System Analysis System Analysis refers into the process of examining a situation with the intent of improving it

through better procedures and methods. System Analysis is the process of planning a new System

to either replace or complement an existing system. But before any planning is done the old

system must be thoroughly understood and the requirements determined. System Analysis is

therefore, the process of gathering and interpreting facts, diagnosing problems and using the

information to re-comment improvements in the System. Or in other words, System Analysis

means a detailed explanation or description. Before computerized a system under consideration, it

has to be analyzed. We need to study how it functions currently, what are the problems, and what

are the requirements that the proposed system should meet.

System Analysis is conducted with the following objectives in mind:

1. Identify the customer’s need.

2. Evaluate the system concept for feasibility.

3. Perform economic and technical analysis.

4. Allocate functions to hardware, software people, database and other system elements.

5. Establish cost and schedule constraints.

6. Create a system definition that forms the foundation for all the subsequent engineering

work.

2.1 Requirement Analysis/ SRS of the Component

2.1.1 Problem Definition

To provide the basic services related to the Supply of the equipments spare part, to maintain their

PRE-SO (Supply Order) and POST-SO details. The product will take care of all the supply

orders. Pre-So is maintained from the starting of the financial year. It is concern to keep the

records of each Supply Order, which is received, from firm, supplying equipments. These

equipments are then assigned a unique ISG Number given by BRO, further they are supplied to

different project departments of BRO. The reference of Last Purchase Price (LPP) of the

equipments corresponding to the ISG (Initial Stocking Guide) is maintain to form the transaction

sheet of the particular financial year.

2.1.2 Performance Requirements

The following performance characteristics should be taken care of while developing the

system:

User friendliness: The system should be easy to learn and understand so that new user can

also use the system effectively, without any difficulty.

User satisfaction: The system should meet user expectations.

Response time: The response time of all the operations should be low. This can be made

possible by careful programming.

Error handling: Response to user errors and the undesired situations should be taken care of

to ensure that the system operates without halting.

Safety: The system should be able to avoid or tackle catastrophic behavior.

Robustness: The system should recover from undesired events without human

intervention.

2.1.3 System Requirements

SOFTWARE REQUIREMENT

• Visual Studio .Net 2003

• SQL Server 2000

• Windows 2000 Server edition

HARDWARE REQUIREMENT

• Pentium III processor

• 256 MB RAM

• 20GB HARD DISK

2.1.4 Acceptance Criteria:-

The following acceptance criteria were established for the evaluation of the new system:

User friendliness:- The system should meet user needs and should be easy to learn and

use.

Modularity:- The system should have relatively independent and single function parts .

Maintainability:- The system should be such that future maintenance and enhancements

times and efforts are reduced.

Timeliness:- The system should operate well under normal, peak and recovery

conditions.

The system developed should be accurate and hence reliable i.e. The error rate should be

minimized and the outputs should be consistent and correct.

Both the execution time and response time should be negligibly low.

The system should be efficient i.e. the resources utilization should be optimal.

The system should have scope to foresee modifications and enhancements i.e. it should

be able to cope with the changes in future technology.

2.2 FEASIBILITY STUDY :

All projects are feasible given unlimited resources and infinite time. Unfortunately the

development of computer-based system in many cases is more likely to be plagued by scarcity of

resources and delivery date. Hence, we have made use the concept of reusability that is what

Object Oriented Programming (OOPS) is all about.

The feasibility report of the project holds the advantages and flexibility of the project. This is

divided into three sections:

� Economical Feasibility � Technical Feasibility � Behavioural Feasibility

2.2.1 Economic Feasibility:

Economic analysis is the most frequently used method for evaluating the effectiveness of the

candidate system. More commonly known as cost/benefit analysis, the procedure is to be

determining the benefits and savings that are expected from a candidate and compare them with

costs. If benefits outweigh costs, then the decision is made to design and implement the system.

A systems financial benefit must exceed the cost of developing that system. i.e. a new system

being developed should be a good investment for the organization. Economic feasibility considers

the following

i. The cost to conduct a full system investigation.

ii. The cost of hardware and software for the class of application.

iii. The benefits in the form of reduced cost or fewer costly errors.

iv. The cost if nothing changes (i.e. the proposed system is not developed).

The proposed “INVENTORY MANAGMENT” is economically feasible because

i. The system requires very less time factors.

ii. The system will provide fast and efficient automated environment instead

of slow and error prone manual system, thus reducing both time and man

power spent in running the system.

iii. The system will have GUI interface and very less user-training is required

to learn it.

iv. The system will provide service to view various information for proper

managerial decision making.

2.2.2 Technical Feasibility:

Technical feasibility centres around the existing computer system (Hardware and

Software etc) and to what extend it support the proposed addition. For example, if the

current computer is operating at 80 percent capacity - an arbitrary ceiling - then running

another application could overload the system or require additional Hardware. This

involves financial considerations to accommodate technical enhancements. If the budgets

are a serious constraint, then the project is judged not feasible. In this project, all the

necessary cautions have been taken care to make it technically feasible. Using a key the

display of text/object is very fast. Also, the tools, operating system and programming

language used in this localization process is compatible with the existing one.

2.2.3 Behavioural Feasibility:

People are inherently resistant to change, and computers have been known to

facilitate change. An estimate should be made of how strong a reaction the user

staff is likely to have toward the development of a computerized system. Therefore

it is understandable that the introduction of a candidate system requires special

efforts to educate and train the staff. The software that is being developed is user

friendly and easy to learn. In this way, the developed software is truly efficient and

can work on any circumstances, tradition, locales. Behavioural study strives on

ensuring that the equilibrium of the organization and status quo in the organization

neither are nor disturbed and changes are readily accepted by the users.

2.3 Proposed System Functionality

The proposed system will be designed to support the following features:-

• The proposed system has a user friendly Interface for porting of data to server.

• The proposed system provides the facility to pull the data from the server of the specified

Supply order number and get the respective report.

• The proposed system provides the no replication of data.

• User can get the desired output according to their queries .This is an added advantage.

3. System Design

Designing is the most important phase of software development. It requires a careful

planning and thinking on the part of the system designer. Designing software means to plan how

the various parts of the software are going to achieve the desired goal. It should be done with

utmost care because if the phase contains any error then that will affect the performance of the

system, as a result it may take more processing time, more response time, extra coding workload

etc.

Software design sits at the technical kernel of the software engineering process and is

applied regardless of the software process model that is used. After the software requirements

have been analyzed and specified, software design is the first of the three technical activities

Designing, Coding and Testing that are required to build and verify the software. Each activity

transforms information in such a manner that ultimately results in validated computer software.

3.1 DESIGN GOALS

The following goals were kept in mind while designing the system:

Make system user-friendly. This was necessary so that system could be used

efficiently and system could act as catalyst in achieving objectives.

Make system compatible i.e. It should fit in the total integrated system. Future

maintenance and enhancement must be less.

Make the system compatible so that it could integrate other modules of system into

itself.

Make the system reliable, understandable and cost-effective.

3.2 FUNCTIONAL FLOW OF THE SYSTEM

������

���������������

������������ ���������������������������������

������������

�������������

��� �����������

��

�������

����

���!"��� ���� ��������

���������

����

�����

3.3- ENTITY RELATIONSHIP DIAGRAM

BRO

Firm

V/E/P Type

(Equipment)

Supply

Stores

SO Num

Part Num

ISG Num

Nomenclature

Rate

ESD,WSD TP

Price

List

Type

Address

Name

Projects

M

N

1

M

3.4-DATA FLOW DIAGRAM

The Data Flow Diagram shows the flow of data or information. It can be partitioned into

single processes or functions. Data Flow Diagrams can be grouped together or decomposed into

multiple processes.

The DFD is an excellent communication tool for analysts to model processes and

functional requirements. Used effectively, it is a useful and easy to understand modeling tool. It

has broad application and usability across most software development projects. It is easily

integrated with data modeling, workflow modeling tools, and textual specs. Together with these,

it provides analysts and developers with solid models and specs. Alone, however, it has limited

usability. It is simple and easy to understand by users and can be easily extended and refined with

further specification into a physical version for the design and development teams.

The different versions are Context Diagrams (Level 0), Partitioned Diagrams (single process only

-- one level), functionally decomposed, and leveled sets of Data Flow Diagrams.

Data Store

A repository of information. In the physical model, this represents a file, table, etc. In the

logical model, a data store is an object or entity.

Data Flows

DFDs show the flow of data from external entities into the system, showed how the data

moved from one process to another, as well as its logical storage. There are only four symbols:

1. Squares representing external entities, which are sources or destinations of data.

2. Rounded rectangles representing processes, which take data as input, do something to it,

and output it.

3. Arrows representing the data flows, which can either, be electronic data or physical

items.

4. Open-ended rectangles representing data stores

There are several common modeling rules for creating DFDs:

1. All processes must have at least one data flow in and one data flow out.

2. All processes should modify the incoming data, producing new forms of outgoing data.

3. Each data store must be involved with at least one data flow.

4. Each external entity must be involved with at least one data flow.

5. A data flow must be attached to at least one process.

V/E/P Type

CONTEXT- FREE DIAGRAM ( 0-Level DFD)

Data Flow Diagram

2

SO Sheet

3

Work-Sheet

Administrator 1

LOGIN

User Account

RSG WORK-SHEET

Supply Order

ISG

SO Num

V/E/P Type

Firm Name

Part Num

Nomenclature

ESD, WSD

Date

Rate

ESC

Num of Months

Amount on TP

Amount on LPP

Price List

Tender Price (TP)

LPP Ref

UserID

Password

3.5-TABLE DESIGN

i. SO_RECORD

This table contains the information about the various details and rate for each supply

order of the each equipments ad their spare parts.

FIELD NAME

FIELD TYPE SIZE REMARKS

SO Num numeric 9 NOT NULL

Date date time 8 NOT NULL

ISG Num nvarchar 50 NOT NULL

Part Num varchar 50 NOT NULL

Alternate Part Num1 varchar 50

Alternate Part Num2 varchar 50

Offered Part Num varchar 50 NOT NULL

Nomenclature varchar 50 NOT NULL

Nomenclature1 varchar 50

Nomenclature2 varchar 50

A/U varchar 50 NOT NULL

ESD qty numeric 9 NOT NULL

WSD qty numeric 9 NOT NULL

Total qty numeric 9 NOT NULL

Rate float 8 NOT NULL

Amount float 8 NOT NULL

V/E/P Type varchar 50 NOT NULL

Firm Name varchar 50 NOT NULL

ii. Worksheet

This table contains the information about the various supply order made in the current

year including their LPP reference, Tender Price, Price List of respective equipments.

FIELD NAME

FIELD TYPE SIZE REMARKS

Date date time 8 NOT NULL

RSG Num nvarchar 50 NOT NULL

Part Num varchar 50 NOT NULL

Alternate Part Num1 varchar 50

Alternate Part Num2 varchar 50

Offered Part Num varchar 50 NOT NULL

Nomenclature varchar 50 NOT NULL

Nomenclature1 varchar 50

Nomenclature2 varchar 50

A/U varchar 50 NOT NULL

ESD numeric 9 NOT NULL

WSD numeric 9 NOT NULL

Total numeric 9 NOT NULL

Tender Price float 8 NOT NULL

LPP nvarchar 50 NOT NULL

Amount on TP float 8 NOT NULL

Amount on LPP nvarchar 50 NOT NULL

LPP Refuse Num numeric 9

LPP Refuse Date date time 8

Num of Months numeric 9 NOT NULL

Overall ESC nvarchar 50 NOT NULL

Annual ESC nvarchar 50 NOT NULL

Price List nvarchar 50 NOT NULL

Remarks varchar 50

V/E/P Type varchar 50 NOT NULL

3.6 Data Dictionary

Data Dictionary is a simply repositories to store information about all data items. A data

dictionary contains a list of all files in the database, the number of records in each file, and the

names and types of each field. Most database management systems keep the data dictionary

hidden from users to prevent them from accidentally destroying its contents.

User: Administrator

Rite Of Security: Administrator

Data Bases: bro

Tables:

� inv

� rsg

� login

Files:

� front.aspx: Front page of the project

� log.aspx : Loging page

� main.aspx : Menu based form to enter into the different operations.

� Inv.aspx : To insert,update and delete the entries into the SO Sheet.

� Rsg.aspx : To insert,update and delete the entries into the Work-Sheet.

� Invspe.aspx : To query for the SO Num to get its report.

� Rsgspe.aspx : To query for the specific V/E/P Type to get its report.

Data Items:

SO Num

Date

ISG Num

Part Num

Alternate Part Num1

Alternate Part Num2

Offered Part Num

Nomenclature

Nomenclature1

Nomenclature2

A/U

ESD qty

WSD qty

Total qty

Rate

Amount

V/E/P Type

Firm Name

Tender Price

LPP

Amount on TP

Amount on LPP

LPP Ref_SO Num

LPP Ref_SO Date

Num of Months

Overall ESC

Annual ESC

Price List

4.Technologies Used

4.1 Hardware

Processor : Pentium III Processor

RAM : 256 MB

Hard Disk : 20 GB

4.2 Software

• Visual Studio .Net 2003

• Microsoft SQL Server 2000

A Microsoft SQL Server 2000

Features of SQL Server 2000

• Internet Integration.

The SQL Server 2000 database engine includes integrated XML support. It also has the

scalability, availability, and security features required to operate as the data storage

component of the largest Web sites. The SQL Server 2000 programming model is

integrated with the Windows DNA architecture for developing Web applications, and

SQL Server 2000 supports features such as English Query and the Microsoft Search

Service to incorporate user-friendly queries and powerful search capabilities in Web

applications.

• Scalability and Availability.

The same database engine can be used across platforms ranging from laptop computers

running Microsoft Windows® 98 through large, multiprocessor servers running

Microsoft Windows 2000 Data Center Edition. SQL Server 2000 Enterprise Edition

supports features such as federated servers, indexed views, and large memory support

that allow it to scale to the performance levels required by the largest Web sites.

• Enterprise-Level Database Features.

The SQL Server 2000 relational database engine supports the features required to support

demanding data processing environments. The database engine protects data integrity

while minimizing the overhead of managing thousands of users concurrently modifying

the database. SQL Server 2000 distributed queries allow you to reference data from

multiple sources as if it were a part of a SQL Server 2000 database, while at the same

time, the distributed transaction support protects the integrity of any updates of the

distributed data. Replication allows you to also maintain multiple copies of data, while

ensuring that the separate copies remain synchronized. You can replicate a set of data to

multiple, mobile, disconnected users, have them work autonomously, and then merge

their modifications back to the publisher.

• Ease of installation, deployment, and use.

SQL Server 2000 includes a set of administrative and development tools that improve

upon the process of installing, deploying, managing, and using SQL Server across several

sites. SQL Server 2000 also supports a standards-based programming model integrated

with the Windows DNA, making the use of SQL Server databases and data warehouses a

seamless part of building powerful and scalable systems. These features allow you to

rapidly deliver SQL Server applications that customers can implement with a minimum

of installation and administrative overhead.

• Data warehousing.

SQL Server 2000 includes tools for extracting and analyzing summary data for online

analytical processing. SQL Server also includes tools for visually designing databases

and analyzing data using English-based questions.

SQL Server Enterprise Manager

Microsoft Management Console (MMC) is a tool that presents a common interface for

managing different server applications in a Microsoft Windows network. Server

applications provide a component called an MMC snap-in that presents MMC users with

a user interface for managing the server application. SQL Server Enterprise Manager is

the Microsoft SQL Server™ MMC snap-in.

SQL Server Enterprise Manager is the primary administrative tool for SQL Server and

provides an MMC-compliant user interface that allows users to:

• Define groups of SQL Server instances.

• Register individual servers in a group.

• Configure all SQL Server options for each registered server.

• Create and administer all SQL Server databases, objects, logins, users, and

permissions in each registered server.

• Define and execute all SQL Server administrative tasks on each registered server.

• Design and test SQL statements, batches, and scripts interactively by invoking

SQL Query Analyzer.

• Invoke the various wizards defined for SQL Server.

Overview of the SQL Server Tools

Microsoft SQL Server 2000 includes many graphical and command prompt utilities that

allow users, programmers, and administrators to:

• Administer and configure SQL Server.

• Determine the catalog information in a copy of SQL Server.

• Design and test queries for retrieving data.

• Copy, import, export, and transform data.

• Provide diagnostic information.

• Start and stop SQL Server.

In addition to these utilities, SQL Server contains several wizards to walk administrators

and programmers through the steps needed to perform more complex administrative

tasks.

b.Vb.Net

Introduction on .NET Framework

.NET is the framework for which we develop applications. It sits in between our

application programs and operating system. Applications developed for .NET run inside

.NET and are controlled by .NET. It supports both Windows and web applications.

.NET provides an object oriented environment. It ensures safe execution of the code by

performing required runtime validations. For example, it is never possible to access an

element of an array outside the boundary. Similarly, it is not possible to a program to

write into another programs area, etc. The runtime validations performed by .NET makes

the entire environment robust.

Components of .NET

.NET framework has two main components. They are:

1. Common Language Runtime

2. .NET class library

Common Language Runtime

The Common Language Runtime (CLR) is the environment where all programs in .NET

are run. It provides various services, like memory management and thread management.

Programs that run in the CLR need not manage memory, as it is completely taken care of

by the CLR. For example, when a program needs a block of memory, CLR provides the

block and releases the block when program is done with the block.

All programs targeted to .NET are converted to MSIL (Microsoft Intermediate

Language). MSIL is the output of language compilers in .NET . MSIL is then converted

to native code by JIT (Just-in Time Compiler) of the CLR and then native code is run by

CLR.

As every program is ultimately converted to MSIL in .NET, the choice of language is

pure personal. A program written in VB.NET and a program written in C# are both

converted to MSIL. Then MSIL is converted to native code and run. So, whether you

write program in C# or VB.NET at the end it is MSIL all that you get.

MSIL in .NET is same as Bytecode in concept. CLR is same as JVM (Java virtual

machine that .

.NET Class Library

.NET comes with thousands of classes to perform all important and not-so-important

operations. Its library is completely object oriented, providing around 5000 classes to

perform just about everything.

Visual Basic .NET (VB.NET) is an object-oriented computer language that can be

viewed as an evolution of Microsoft's Visual Basic (VB) implemented on the Microsoft

.NET framework. The great majority of VB.NET developers use Visual Studio .NET as

their integrated development environment (IDE).

Visual Basic .NET provides the easiest, most productive language and tool for rapidly

building Windows and Web applications. Visual Basic .NET comes with enhanced visual

designers, increased application performance, and a powerful integrated development

environment (IDE). It also supports creation of applications for wireless, Internet-enabled

hand-held devices. The following are the features of Visual Basic .NET with .NET

Framework 1.0 and Visual Basic .NET 2003 with .NET Framework 1.1.

Some Features of Vb.net:

Powerful Windows-based Applications

Visual Basic .NET comes with features such as a powerful new forms designer, an in-

place menu editor, and automatic control anchoring and docking. Visual Basic .NET

delivers new productivity features for building more robust applications easily and

quickly. With an improved integrated development environment (IDE) and a significantly

reduced start up time, Visual Basic .NET offers fast, automatic formatting of code as you

type, improved IntelliSense, an enhanced object browser and XML designer, and much

more.

Building Web-based Applications

With Visual Basic .NET we can create Web applications using the shared Web Forms

Designer and the familiar "drag and drop" feature. You can double-click and write code

to respond to events. Visual Basic .NET 2003 comes with an enhanced HTML Editor for

working with complex Web pages. We can also use IntelliSense technology and tag

completion, or choose the WYSIWYG editor for visual authoring of interactive Web

applications.

Simplified Deployment

With Visual Basic .NET we can build applications more rapidly and deploy and maintain

them with efficiency.

Powerful, Flexible, Simplified Data Access

You can tackle any data access scenario easily with ADO.NET and ADO data access.

The flexibility of ADO.NET enables data binding to any database, as well as classes,

collections, and arrays, and provides true XML representation of data. Seamless access to

ADO enables simple data access for connected data binding scenarios. Using ADO.NET,

Visual Basic .NET can gain high-speed access to MS SQL Server, Oracle, DB2,

Microsoft Access, and more.

Improved Coding

You can code faster and more effectively. A multitude of enhancements to the code

editor, including enhanced IntelliSense, smart listing of code for greater readability and a

background compiler for real-time notification of syntax errors transforms into a rapid

application development (RAD) coding machine.

Direct Access to the Platform

Visual Basic developers can have full access to the capabilities available in .NET

Framework 1.1. Developers can easily program system services including the event log,

performance counters and file system. The new Windows Service project template

enables to build real Microsoft Windows NT Services. Programming against Windows

Services and creating new Windows Services is not available in Visual Basic .NET

Standard, it requires Visual Studio 2003 Professional, or higher.

Full Object-Oriented Constructs

You can create reusable, enterprise-class code using full object-oriented constructs.

Language features include full implementation inheritance, encapsulation, and

polymorphism. Structured exception handling provides a global error handler and

eliminates spaghetti code.

�

�

�

�

5. Testing and Debugging

Software testing is a critical element of the ultimate review of specification design and coding.

Testing of software leads to the uncovering of errors in the software functional and performance

requirements are met .Testing also provides a good indication of software reliability and software

quality as a whole. The result of different phases of testing are evaluated and then compared with

the expected results. If the errors are uncovered they are debugged and corrected. A strategy

approach to software testing has the generic characteristics:

� Testing begins at the module level and works “outwards” towards the integration of the

entire computer based system.

� Different testing techniques are appropriate at different points of time.

� Testing and debugging are different activities, but debugging must be accommodated in

the testing strategy

5.1 Goals and Objectives

“Testing is a process of executing a program with the intent of finding an error”. A good test

case is one that has a probability of finding an as yet undiscovered error. A successful test is one

that uncovers an as yet undiscovered error. Our Objective is to design test processes that

systematically uncover different classes of errors and do so with minimum amount of time and

effort.

5.2 Statement of scope

A description of the scope of the software testing is developed. All the features to be tested are

noted as follows. The basic principles that guides software testing are,

� All test cases should be traceable top customer requirements. The most severe defects

from the customer’s point of view are those that cause the program to fail to meet its

requirements.

� Test case should be planned long before testing begins. Testing plan can begin as soon as

the requirement model is complete. Detailed definition of the test cases can begin as soon

as the design is solidified. Therefore, the entire test can be planned before any code has

been generated.

� Testing should begin “in the small” and progress towards “in the large”. The first

test planned and executed generally focus on the individual modules. As testing

progresses testing shifts focus in an attempt to find errors in integrating clusters of

modules and ultimately in the entire system

5.3. Test Case

Before the project is released, it has to have passed through a test cases suit, so that the

required functionality is met and previous functionality of the system is also not broken

to do this, there is an existing test cases which checks for the previous functionality. New

test cases are prepared and added to this existing test suit to check for the added

functionality.

A test case describes an input description and compares the observed output with

expected output to know the outcome of the test case. If it is different, then, there is a

failure and it must be identified.

A pictorial representation of this can be shown as follows.

5.4Testing Process The testing process can be shown as:

Result Of Testing

Comparator

Existing Test Case

New Test Case

Software

Under Testing

Output

Levels of testing Test Plan Test Procedures

Test Report

Test Case Execution

Test Case

Specification

Test Case Analysis Is Error

Uncovered?

No

Yes

Following types of testing are done on the System.

a) Unit Testing

The module interface is tested to ensure that information properly flows into and out of the

program unit under test. The unit testing is normally considered as an adjunct step to coding step.

Because modules are not a standalone program, drivers and/or stubs software must be developed

for each unit. A driver is nothing more than a “main program” that accepts test cases data and

passes it to the module. A stub serves to replace the modules that are subordinate to the modules

to be tested. A stub may do minimal data manipulation, prints verification of entry and returns.

Approaches used for Unit Testing were:

Functional Test: Each part of the code was tested individually and the panels were tested

individually on all platforms to see if they are working properly.

Performance Test: These determined the amount of execution time spent on various parts of units

and the resulting throughput, response time given by the module.

Stress Test: A lot of test files were made to work at the same time in order to check how much

workloads can the unit bear.

Structure Test: These tests were made to check the internal logic of the program and traversing

particular execution paths.

b) Integration Testing

“If they all work individually, they should work when we put them together.” The problem of

course is “putting them together “. This can be done in two ways:

Top down integration: Modules are integrated by moving downwards through the control

hierarchy, beginning with main control module are incorporated into the structure in either a

depth first or breadth first manner.

Bottom up integration: It begins with construction and testing with atomic modules i.e. modules

at the lowest level of the program structure. Because modules are integrated from the bottom up,

processing required for the modules subordinate to a given level is always available and the need

of stubs is eliminated.

• Testing includes

� Verification and Validation

� Verification:-is a process of confirming that software meets its

specification.

� Validation:- is the process of confirming that software meets the

customer’s requirements.

c) Validation Testing

Validation succeeds when software functions in a manner that can be reasonably expected by the

customer. It covers the following :-

Validation test criteria: Performance, functional characteristics and uncovered deviation from

specification

Configuration review: Ensures that all the elements of software configuration have been

properly developed catalogued and have support for the maintenance phase of software life cycle

Alpha Beta testing: Alpha test is conducted by developer’s site by customer. Beta test is

conducted at one or more customer site by software end user

Modular integration testing:

Modular integration testing is done to ensure that the module is working independently. The

inputs as required by the module are given as required and the output is tested as per the

specifications

5.5 Debugging

Debugging occurs as a consequence of successful testing i.e. when a test case uncovers an error,

debugging is the process that results in identifying the location of error ad the removal of error.

The poorly understood mental process that connects a symptom to cause is debugging. This

process will always have one of the two outcomes:

� The cause will be found, corrected and then removed or

� The cause will not be found. In the latter case the person performing debugging may suspect a

cause, design a test case to help validate his suspicion, and then work towards the correction

of errors in the interactive fashion.

Following three approaches of debugging were used:

� Debugging by Induction

� Debugging by Deduction

� Backtracking

6. Implementation

Once the system was tested, the implementation phase started. A crucial phase in the

system development life cycle is successful implementation of new system design.

Implementations simply mean converting new system design into operation. This is the

moment of truth the first question that strikes in every one’s mind that whether the

system will be able to give all the desires results as expected from system. The

implementation phase is concerned with user training and file conversion.

The term implementation has different meanings, ranging from the conversion of a basic

application to a complete replacement of computer system Implementation is used here to mean

the process of converting a new or revised system design into an operational one. Conversion is

one aspect of implementation. The other aspects are the post implementation review and software

maintenance. There are three types of implementation:

� Implementation of a computer system to replace a manual system

� Implementation of a new computer system to replace an existing one.

� Implementation of a modified application to replace an existing one.

6.1 Conversion

Conversion means changing from one system to another. The objective is to put the tested

system into operation while holding costs, risks and personnel irritation to a minimum. It

involves creating computer compatible files; training the operational staff; installing

terminals and hardware. A critical aspect of conversion is not disrupting the functioning of

organization.

6.2 Direct Implementation

In direct implementation; the previous system is stopped and new system is started

up coincidentally. Here there is a direct change over from manual system to computer-based

system. In direct change over implementation; employees can face the problems. Suppose our

software is not working much efficiently as manual one then we can’t find the defects in our

software. It will not be beneficial in finding errors.

• The proposed system “Inventory Management” is fully implemented using

Direct Implementation.

6.3. Module Diagram

Inventory Management System Enter

Deliver

Repots

Pre-SO

Supply Order Sheet

Rate List

Send ISG Num LPP Reference

Work Sheet

BRO Database

Generate Report

Administrator

7. Scope and Limitation

Scope of the proposed System:

The proposed system provides the automated generation of LPP reference that includes

the LPP Rate and the reference date. LPP is used at the time of Worksheet preparation

along with the tender price, which helps to obtain the overall and annual escalation.

Escalation is related to the number of months, calculated by the LPP reference date and

the worksheet preparation date of the particular financial year.

The “Inventory Management System” software is being developed as an accurate

and efficient system for the user. In this system the record of the each request details are

preserved along with their transaction related to them. The system is also made secured

as all the updating and transaction can be done by the authorized person.

Limitation of the Proposed System:

• Database used is SQL Server and every database have a stack limit.

• Manual Errors at the time of entering the data can’t be check, only the validation required

w.r.t proposed system is checked.

8. Conclusion The objective of this project was to build a program for maintaining the details of all

Supply Order .The system developed is able to meet all the basic requirements. It will provide the

facility to the user so that they can keep tracks of all the equipments being supplied. The

management of the Inventory will be also benefited by the proposed system, as it will automate

the whole supply procedure, which will reduce the workload. The security of the system is also

one of the prime concerns.

There is always a room for improvement in any software, however efficient the system may be.

The important thing is that the system should be flexible enough for future modifications. The

system has been factored into different modules to make system adapt to the further changes.

Every effort has been made to cover all user requirements and make it user friendly.

� Goal achieved: The System is able provide the interface to the user so that he can

replicate his desired data. .

� User friendliness: Though the most part of the system is supposed to act in the

background, efforts have been made to make the foreground interaction with user as

smooth as possible. Also the integration of the system with Inventory Management

project has been kept in mind throughout the development phase.

9. User Manual & Screen Shots

9.1. User Manual In the system there are mainly one user interface using which a user is able to

� Store

� Update/Delete

� Search

� View

System contains various forms for different Interfaces:

LOGIN:

This allows the user to enter into the system. User has to enter User ID and Password. If

invalid then User ID or Password is entered then alert message of invalid data is flashed.

MENU INTERFACE:

If User ID and Password both are correct then user enters into Menu Interface.

This Interface contains Menus for various operations to be performed on Basic Processes

of Pre-SO.

These processes are:

• Supply Order:- for preparing SO-Sheet.

• RSG: - For preparing Worksheet.

• Report:- To view the Output.

These menus have submenus to perform operations like: Insert, Update, Delete.

SubMenu of Supply Order:

Insert

• Insert Interface: Enter Data to prepare SO-Sheet.

Steps:

1) Enter V/E/P Type (vehicle/equipment/part type)

2) Enter firm Name from where V/E/P Type is procured.

3) Enter SO-Num i.e. The Supply Order Number of V/E/P type of the

current Financial Year.

4) Select Date of the Supply Order of the current Financial Year.

5) Enter ISG Num i.e. a unique identification number of spare parts given

by BRO.

6) Enter Part Numbers of the equipments assigned by firm.

7) Enter Nomenclature i.e. name of the equipments.

8) Enter the quantity for ESD and WSD.

9) Enter the Rate of the parts.

10) Click on Submit to save these data or Reset to clear entries.

Update:

This has some Submenus that are:

Update Data – To alter the data entered in the Specified SO-Num and ISG

Num.

Data Interface: To alter records

Steps:

Select SO-Num.

Select required ISG Num.

Alter the entries.

Click Update Button to reflect these changes.

Date- To change the Supply Order Date.

Date Interface:

Steps:

1) Enter the SO Number whose Date is to be change.

2) Select the new Date.

3) Click on Ok button to reflect these changes.

SO-Num - To change the Supply Order number.

SO Interface:

Steps:

1) Enter the SO Number to be change.

2) Enter the new SO Num.

3) Click on Ok button to reflect these changes.

Delete To delete the Specific record.

Steps:

Select SO-Num.

Select required ISG Num.

Click Delete Button to delete the record.

SubMenu of RSG:

Insert

• Insert Interface: Enter Data to prepare Work-Sheet.

Steps:

1) Select V/E/P Type (vehicle/equipment/part type).

2) Enter RSG-Num/Part Num to retrieve the respective LPP Reference.

3) Select Date of the Work-Sheet of the current Financial Year.

4) Enter the quantity for ESD and WSD.

5) Enter the Tender Price of the parts.

6) Enter the Price List.

7) Click on Submit to save these data or Reset to clear entries.

Update:

Update Data – To alter the data entered in the Specified RSG-Num.

Update Interface: To alter records

Steps:

Select V/E/P Type.

Select required RSG Num.

Alter the entries.

Click Update Button to reflect these changes.

Delete To delete the Specific record.

Steps:

Select V/E/P Type.

Select required RSG Num.

Click Delete Button to delete the record.

SubMenu of Report:

I. Supply Order:

Steps:

1) Select SO-Num.

2) Click OK Button to view the Supply Order Report.

3) To print this report click on the printer button on bar of the report.

II. RSG:

Steps:

1) Select V/E/P Type.

2) Select Date.

3) Click OK Button to view Report.

4) To print this report click on the printer button on bar of the report.

Terminology Used:

This section enlists the terminology and conventions adopted throughout the document.

ESD East Stock Division.

ISG Initial Stock Guide.

LPP Last Purchase Price.

Nomenclature Name/Description of the V/E/P Type.

RSG Revised Stock Guide.

SO-Num Supply Order Number.

TP Tender Price.

V/E/P Type Vehicle/Equipment/Plant Type.

WSD West Stock Division.

10 . Annexure

10.2 Bibliography

Books Referred

� “Microsoft Learning Vb.Net ”

� “Teach Yourself VB.NET in 21 Days”- Sams Pearson Education [Lowell Mauer]

� “Professional ASP.NET 2.0” –Wrox [Evajen,Hanselma,Muhammad,Sivakumar,Rader]

� “ASP.NET 2.0 Uleashed”-Sams Pearson Education [Stephen Walther]

� “Software Engineering” [Pankaj Jalote]

� “Software Engineering” [K.K. Aggarwal & Yogesh Sighn]

Sites Referred

� www.w3schools.com

� http://bro.gov.in

� www.aspalliace.com

� www.vbforums.com/showthread.php?p=2686697