1

Chapter 1

EXECUTIVE SUMMARY

Initially I was introduced with each and every P&L (procurement & logistics)

department heads and I was asked to go through the production process (Beer

Manufacturing Process) because without knowing the production process I

would have not understand the different logistical activities carried on by the

logistics team of UBL, Kalyani. It was a very different experience for me. I

went through the different phases of Beer Manufacturing. I found the Bottling

and Packaging process of Beer very interesting.

Next I was assigned to different Department one by one like Procurement

Department, Store & Logistics Department and Excise & Despatch Department

to understand the different activities they do. I learnt about UB’s (Kalyani plant)

material handling and storage system (warehousing)

, transportation modes they engage for despatching the Finished Goods.

As my project area was Outbound Logistics I went through the different

activities of Excise & Despatch Department. The warehouse of UBL is under

state Excise (Bonded Warehouse), so I got the opportunity to know the different

taxation levied on alcohol product. I learnt the documentation procedure for

despatching the Finished Goods from the plant to different bonders. I analysed

their production and sales growth with the present increasing rate of

consumption of Beer in West Bengal.

I tried to find the different problem areas of UBL, Kalyani, accordingly

analysed them and suggested related recommendations.

2

Chapter 2

COMPANY BACKGROUND

United Breweries Group or UB Group is an Indian conglomerate company

based in Bangalore, India. The company chairman is Vijay Mallya who had

been a member of the Indian Parliament.

The beginning of what is today The UB Group is rooted in the flagship

company, United Breweries Limited, (UBL) also referred to as the Beer

Division of the UB Group. Led by Mr. Kalyan Ganguly, President & Managing

Director, it is the market leader for Beers in India.

United Breweries, Kalyani plant established in the year 1965. It is the most

successful manufacturing plant amongst the other plant of UB. Since the time it

established it never have to look back. With strong logistics/ supply chain

management this plant is running successfully with 41 officers and nearly 280

contractual and 110 permanent labours.

CSR activity:

As a part of CSR, UB Kalyani is associated with ANNE SULIVAN

INSTITUTE for sightless, Kalyani which is situated within 2 km from the plant.

The company is very much concerned and firmly committed to ensuring the

safety of each and every employee, contractor and visitors in the operation

across the country.

Company provides training and internal communication to educate, enable and

motivate their employees and contractors in a conduct of activities in a safe and

responsible manner.

The company also provide a frame work for measuring performance and

ensuring continuous improvements by setting, auditing, and reviewing

objectives, targets, and performance at defined interval of times.

3

Chapter 3

OBJECTIVE OF THE STUDY

As a student of Transportation and logistics management of MPSM in

I.I.S.W.B.M, I was provided all the opportunities to learn the various aspects of

logistical management in UNITED BREWERIES, KALYANI which is a Beer

manufacturing company. My project area is concerned with “THE STUDY OF

ALL THE LOGISTICS ACTIVITIES FOCUSING ON OUTBOUND

LOGISTICS OF UB, KALYANI”.

A business implies “transfer of products and/or services from seller to buyer”.

This movement becomes complicated especially when seller and buyer are

physically situated far apart from each other. The outbound logistics bridges the

gap between the seller and the buyer. UNITED BREWERIES of KALYANI

successfully bridges the gap with an effective logistics system which comprises

of inbound logistics, Work in process and outbound logistics.

This dissertation examines how UBL, Kalyani unit deals with various logistics

activities, how they constantly tries to improve their efficiency. The Outbound

Logistics is the main focus area of this dissertation.

The ultimate aim of this research is outlined below:

Studying the entire logistics activities of UB, Kalyani

Analysing the production process and Bottling& Packaging procedure.

Analysis of the key outbound logistics activities in details

Studying the warehousing practices being followed at UBL, Kalyani

incorporates.

To study the Transportation mode they engage for distribution of

Finished Goods

Analysing the production and sales volume growth with reference to

the present demand pattern.

Finding out the key problem areas and suggesting proposals and

recommendations.

4

Chapter 4

REVIEW OF LITERATURE

‘Logistics Management’ by V.V. Sople highlights the information related to

different logistics activities like Procurement, production and distribution,

warehousing, Material Handling systems, logistics design for distribution

systems etc with lot of case studies.

‘Modern concepts of Materials Management’ by S. C. Bhattacharya gives

detailed information of material management, different inventory control

systems. This book gives the relation between different departments involve in

Procurement and logistics activities.

Different distribution strategies are discussed in “the handbook of logistics and

distribution management” by Peter Baker. Logistics activities are well defined

in this book.

5

Chapter 5

METHODOLOGY

Apart from keen observation of the various processes and practices carried out

in the firm, various methods of data collections were also adopted to get true

and detailed findings. The data collection process were mainly based on the

consultation with respective authorised department heads, but some journals,

websites were also helped to get information on the study area of my project.

Primary data collection

Data regarded the study is collected first hand from the respective

authorised persons like Commercial manager, Logistics head, purchase

officer, Store manager, Warehouse staffs etc.

Secondary data collection

Different websites, journals and books were viewed on Beer

manufacturing and its distribution network.

Analysis of the data

For analysis of data, consultation with respective persons concerned with

the total logistics activities were carried on.

Presentation of data

Bar diagrams, tables, line charts, clustered column charts are used to

present the data collected from different sources of UBL, Kalyani.

Findings the problem areas

Proposals and recommendations

6

Chapter 6

GENERAL OVERVIEW

Logistics is a process of movement of goods across the supply chain of a

company. However, this process consists of various functions that have to be

properly managed to bring effectiveness and efficiency to the supply chain of

the organisation.

Logistical competency is achieved by coordinating its pillars which are:

Order processing

Inventory control

Warehousing

Transportation

Material Handling and storage

Logistical Packaging

Information

All this above activities in logistics needs to be integrated to accomplish the

objective of making the right product at the right place and the right time. For

the focused attention, logistics activities can broadly be divided into three

areas of business operation wherein the logistics needs are quite different.

They are shown in the figure below:

MATERIAL FLOW

INFORMATION FLOW

INBOUND

LOGISTICS

WORK IN

PROCESS

OUTBOUND

LOGISTICS

7

An effective distribution system or outbound logistics covers all of the above

functions ensuring a systematic flow. As my project is focused on the logistics

activities and distribution system of United Breweries, Kalyani plant, I have

divided my study area as follows:

6.1 logistics activity

6.1.1 Departmental Hierarchy

6.1.2 Logistics Network

6.1.3 Material Handling & Storage

6.1.4 Transportation

6.2 Production Process

6.3 Bottling& Packaging

6.4 Outbound logistics

6.4.1 Warehouse

6.4.2 Taxation

6.4.3 Distribution

6.4.4 Production & sales analysis

6.1 LOGISTICS ACTIVITY

The logistics activities of United Breweries are very efficient. An integrated

material management approach is one of the causes behind UB’s success. Each

and every department are well integrated. Recent implementation of SAP makes

them more coordinated and operations become smoother than before. In this

section I would like to discuss about UB’s departmental hierarchy and functions

of different departments.

The logistical activities like Material Handling and their storage system,

transportation modes UB engage for inbound and outbound logistical are also

highlighted in this section.

8

6.1.1 DEPARTMENTAL HIERARCHY

Junior officer

Procurement

Sr. assistant

despatch

Head

brewer

Manager-

QA

Shift

engineer

Executive

instrumenta

tion

Officer

Procurement

Officer-Store

& logistics

Executive-

purchase

Ex despatch

& Excise

Sr. manager-

asset care

Manager

commercial

Manager

HSE

General Manager

Utility

engineer

Chemist

JMC-2

Office QA

Trainee

chemist

Shift brewer

Assistant

brewer

Assistant-

Procurement

Sr. assistant

despatch

Assistant

despatch

Sr. assistant

accounts

Officer-

finance

Manager

production

Manager

finance

Shift

engineer

production

Shift

engineer

production

Sr. manager

HR

Maintenanc

e engineer

Executive

personnel

Officer

personnel

Procurement & logistics department

9

6.1.2 LOGISTICAL NETWORK

The different functions like purchasing, Store keeping, production, finance etc

are the part of material management, and a manufacturing unit should always

follow an integrated approach to material management. Te hierarchy of UB,

Kalyani shown in the figure is an example of integrated material management in

which all the activities concerning materials comes under one head as an

integrated body.

The Procurement and logistics department (P&L) includes:

Procurement and purchase department

Store

Excise & Despatch department

Others are accounts, finance, production, engineer, HR etc. Here the functions

of the departments under P&L and their relationship with other department are

being discussed.

Function of Procurement department:

First PGP (Permit Generation Plan) for the production of coming month comes

from the Corporate Head Office, Bangalore of United Breweries at the start of

every month to the unit head of every unit. According to the PGP, a meeting is

with all the heads of the concerned Department as per the hierarchy mentioned

above to fix:

The production plan SKU wise (No. of Brew per day, Types of brand per

brew)

The amount of Raw material required for production

The amount of Raw materials to be purchased for the following month’s

production.

Material availability

To order required materials as required from PGP

10

Enquiry

Receipt of requisition

Making comparison sheet

Placement of orders

Follow up the orders

PROCUREMENT FUNCTION IN FLOW CHART (1):

Permit Generation Plan

(PGP) from Head Office

start of every month

Meeting held with

heads of concerned

dept.

Make Production plan

SKU wise

Raw materials required

for production

Raw materials to be

purchased for production

No. of Brew per day

Types of brand per

brew

11

Function of Store:

The Stores function is a vital limb of many of the organisations and industrial

concerns of various departments.

The function of the Stores can be divided into two, namely:

1. Primary functions:

Receiving raw materials and engineering parts.

To collect the Samples of raw materials for quality check.

Maintaining Inward register of materials.

To make available a balanced flow of raw materials, components, tools,

equipment etc.

To receive and issue materials after physical inspection and proper

identification.

Invoice generation

Issuing GRN (good receipt note)

2. Secondary functions:

Standardization and codification of different materials

Store accounting

Stock control

To arrange for collection, acceptance of scrap & other discarded

materials for disposal.

Value added services like Spare parts assembling as per requirement of

engineering departments

12

FUNCTION OF THE STORE IN FLOW CHART (2):

Goods received at

the gate

Store person collects

the sample

Sample taken to QC

department

Sample is

accepted

or not?

Rejected and

returned

Receiving of materials

at Store

Entry in Material

inward register

Placing the materials in

respective bins/racks

Entry in Bin Card

13

FUNCTION OF EXCISE AND DESPATCH DEPARTMENT IN FLOW

CHART (3):

Checking the stock of

Finished Goods

Received despatch

order from Kolkata

office

Sent to accounts dept.

for clearance

Despatch Sheet and

D.O sent to packing

section for clearance

Gate Pass

Invoice

Excise department for

Excise pass

Gate Pass, Invoice and

Excise Pass sent to

Packaging Department

Despatch

14

6.1.3 MATERIAL HANDLING & STORAGE SYSTEM

The speed of inventory movement across the supply chain depends on the

Material Handling methods. An improper method of Material Handling will add

to product damage, and delays in deliveries and there by incidental overheads.

Mechanisation and automation in Material Handling enhances the logistics

system productivity.

Raw Material:

Handling: Raw materials like malt, rice, sugar are come by road. The

vehicles used vary from 9 MT to 21 MT. The unloading process is fully

manual for both weight based and counting based raw materials and

unloading time for a 20 ton vehicle (truck) takes around 45 minutes.

Company is shortly going for Mechanical Handling to put the Raw

Materials directly into Silos.

Storage: raw materials like rice, malt are Stored manually directly to the

silos. Sugar is Stored in sugar hopper. There is no such storage house for

this raw materials but for some special Brand like for Kingfisher Blue a

special type of malt is procured from Argentina , this special malt are

Stored in a storage house in a small amount as required

Finished Goods:

Handling: The packaged Finished Goods are first stacked on the pallet

manually. Then they are taken to Warehouse by using fork lift. At the

time of despatching also the loading procedure is partially done by fork

lift and partially it is done manually, that is the placement of Finished

Goods near the vehicles are done by fork lift and loading from that point

on the vehicles is done manually.

Storage: the packaged FG is placed vertically up to triple stack. A very

little percentage of damages happen during Material Handling both for

raw materials and Finished Goods.

Raw material storage capacity (TABLE 1):

Raw materials

Water Malt Rice Sugar Chemicals Hops Yeast

capacity 540

HL/tank

400

MT

100

MT

30MT 2 MT 1 MT 3MT

15

6.1.4 TRANSPORTATION

For transportation of goods from the supplier to the buyer, transportation is the

most fundamental and important component of logistics. After the order is placed

the transaction is not complete till the goods are physically moved to the

customer’s place. The physical movement of goods is done through various

transportation modes. For low unit value products the transportation cost

component is 20% of the product cost. In logistics costs its share varies up to 65-

70% in case of mass consumed low unit priced products.

Depending on the infrastructure of the transportation in the country or region,

firms choose the mode of transportation. Cost is the most important transportation

in selection of a particular transport mode. However, sometimes urgency for the

goods at customers’ end overrides the cost consideration and the goods are sent

through the fastest mode, which is an expensive alternative.

The following modes of transportation are used generally for cargo movement in

India, rail, road, water and air.

In case of UBL, Kalyani, for Raw materials they use the following modes of

transportation:

TABLE 2: FOR RAW MATERIALS

RAW

MATERIALS

SUPPLIER'S LOCATION TRANPORTATION

MODES

TRANSIT TIME

MALT KASHIPUR/RAJASTHAN ROAD 5 DAYS

RICE RAIPUR/JHARKHAND ROAD 3/1 DAYS

SUGAR KOLKATA ROAD 1 DAY

HOPS MUMBAI RAIL 12-15 DAYS

YEAST BANGALORE AIR 2 DAYS

CHEMICALS ROAD 10 DAYS

16

TABLE 3: For Bottling and Packaging raw materials

RAW MATERIALS FOR

BOTTLING

SUPPLIER'S

LOCATION

TRANPORTATION

MODES

TRANSIT TIME

NEW BOTTLE

RISHRA/

RISHIKESH

ROAD 1/7 DAYS

OLD BIOTTLE JHARKHAND/

LOCAL

ROAD 2/1 DAYS

CROWN NOIDA ROAD 5 DAYS

LABEL FARIDABAD RAIL 7-8 DAYS

CHEMICALS

SAT LUBE HIMACHAL

PRADESH

ROAD 10 DAYS

CARTON HYDERABAD/

LOCAL

ROAD 5/1 DAYS

For transportation of Finished Goods UBL, Kalyani uses only Road as their

mode of transportation. They won’t have their own fleet and they go in for

outsourcing.

Why not Rail Transport mode is used?

As United Breweries, Kalyani plant does not have dedicated Rail corridor so

Procurement of raw materials or despatching Finished Goods would become

costly affair. As it involves:

Cost for Unloading from (loading onto) Rake

17

Cost for Loading on (unloading from) the vehicles

Cost incurred in the transit of loaded (unloaded) vehicles

Not only that, it also increases damages as multiple handling is involved. And

as the Finished Goods are Excisable UB, Kalyani unit avoid Rail transport

mode to avoid any kind of Risk.

Freight rate involved in transportation (outbound logistics)

The freight rate cannot be fixed for a long times because of different factors.

Calculation of this freight rate for despatching Finished Goods is done taking

into account all the factors involved in it.

The factors involves in the calculation of the freight rate are as follows:

Fuel price

Distance

Capacity

Load size

18

6.2 PRODUCTION PROCESS

Introduction: Beer is the worlds most widely consumed alcoholic beverage; it

is the third-most popular drink overall, after water and tea. It is thought by some

to be the oldest fermented beverage. Beer began to be exported to India in the

early days of the British Empire.

The Indian Beer industry has been witnessing steady growth of 10%–17% per year over the last ten years. The rate of growth has increased in recent years,

with volumes passing 170 million cases during the 2008-2009 financial years. With the average age of the population on the decrease and income levels on the

increase, the popularity of Beer in the country continues to rise.

The Indian Beer industry is quite large at around 65 million cases (12 bottles of 650 ml each) and, in the last three years, has grown at 14% annum in the

unrestricted markets. Beer manufacturing requires a license from the centre, which is ratified by the respective state. Till 1989 licensing was restricted; in

1989, the central government relaxed the policy and accepted 460 applications for new projects. Only a few were cleared and fewer still have come on ground

on account of the low and uneconomical capacity of 5,000 kilolitres per annum licensed by the government. However, the capacity is released to 15,000

kilolitres per annum for NRI proposals with 100% foreign equity.

Beer types: There are two types of Beer, Ale Beer and Lager Beer. All Beers,

no matter how great or small, is made from a basic combination of water, malts, hops, and yeast. The difference between the above two types of

Beer is in terms of yeast.

Ales - Ales are brewed with top-fermenting yeast that thrives at mid-range room

temperatures. For this reason, ales are typically stored between 60° and 75° Fahrenheit during the fermentation stage. This type of yeast and the fermentation temperature tend to give ales a fruitier and spicier flavour than

Lagers. In general, ales are more robust and complex.

Lagers - By contrast, Lagers are made with bottom-fermenting yeast that works

best at cooler temperatures, between 35° and 55° Fahrenheit. Fermentation happens more slowly and the Beer is more stable, so it can be stored for longer

than ales. This yeast tends to have less presence in the finished Beer. As compared to ale, Lagers have a cleaner and crisper quality with emphasis on the

hops and malt flavours.

Kalyani United Breweries manufacture Lager Beer only.

19

Raw material used in the Beer production:

Water

Malt

Cereal adjuncts (broken rice/rice flake)

Hops

Sugar

Yeast

Chemicals used in different stages of brewing:

Lactic acid

Gypsum

Calcium chloride

Whirl flock (enzyme)

Ultra flow max (enzyme)

Caramel (enzyme)

Znso4 etc.

TABLE 4: CONSUMPTION PATTERN OF RAW MATERIALS

INGREDIENTS(RAW

MATERIALS)

RAW MATERIAL CONSUMPTION*

PER BREW PER BATCH**

PER

MONTH

WATER 260 HL 3380 HL 101400 HL

MALT 3 MT 39 MT 1170 MT

RICE 1.8 MT 23 MT 690 MT

SUGAR 0.5 MT 6.5 MT 195 MT

HOPS 4.5 KG 58.5 KG 1755 KG

YEAST 0.4 MT 1.6 MT 48 MT

CHEMICALS 8 KG 104 KG 3120 KG

20

Brands Kalyani United Breweries manufactures:

Kalyani Black Lebel

Kalyani Black Lebel Strong

Kingfisher Premium Lager

Kingfisher Premium Strong

Kingfisher Blue

Kingfisher Blue

Kingfisher Supreme

Kingfisher Special

Brewing process:

There are two brew houses in Kalyani United Breweries, one is old and another

is new. The brewing process includes 4 essential steps:

1. Brew house operation 2. Fermentation and laggering

3. Filtration 4. Bottling and Packaging

The Wort processing or the brew house operation, fermentation & laggering and

the filtration processes are shown in flow diagrams.

The total brewing process of one brew take approximately 8 to 9 hours where Mashing takes almost 3 hours which is profile depended, loitering takes 21/2

hours to 3 hours, wort processing takes maximum 90 minutes & minimum 70 minutes and whirlpool takes 11/2 hours.

The maximum efficiency of the brew house is to produce 14 brews per day.

21

1. FLOW DIAGRAM (1) OF WORT PROCESSING:

Sugar

silo

Broken

rice silo

Sugar hopper Rice silo Sugar hopper

Hot

water Rice

cooker

Cold

water

Chilled

water

Mash

kettle

Mash

kettle

Wort

kettle

Wort

kettle

Lauter tun

Wort

holding

tank

Wort

holding

tank

Lauter tun

Unit tank Unit tank Unit tank

Plate heat

exchanger

Grist

case

Malt

silo Malt

silo

Grinder

22

2. FERMENTATION AND 3.FILTRATION PROCESS IN FLOW

DIAGRAM (2):

Unit tank/

Fermenter

Unit tank/

Fermenter

Unit tank/

Fermenter

Lab scale

yeast

culture

Small

propagator

Small

propagator

Small

propagator

Yeast storage

tank

Yeast pitching

tank

Filtration

Buffer

tank

BBT

23

6.3 BOTTLINGAND PACKAGING:

After removing the residual yeast and protein through filtration the Beer becomes clear bright Beer. The bright Beer transfers to bright Beer tank and it’s

ready for Bottling and Packaging.

TABLE 5: The raw materials that are needed in Bottling and Packaging

process are shown below:

RAW MATERIALS

FOR BOTTLING

SUPPLIER'S

LOCATION

TRANSIT

TIME

SAFETY STOCK

NEW BOTTLE

Rishra/

Rishikesh

1/7 days 2 lacks (330ml)

20 lacks (650ml)

OLD BIOTTLE Jharkhand/

local

2/1 days 20 lacks

CROWN Noida 5 days 35000 crowns

LABEL Faridabad 7-8 days 5000 THO

CHEMICALS

SAT LUBE Himachal

Pradesh

10 days 1000 kg

CARTON Hyderabad/

local

5/1 days 4 lacks

Different machines are used in this Bottling and Packaging process of Beer with

different capacities.

All the machines are connected with conveyor belt through which the bottles are

passed from one machine to another. In terms of bottle the conveyor belt takes the minimum speed of any of the machine as its actual speed. Maximum

conveyor speed is about 58 meter per minute.

24

The Wash Machine is used to wash the new as well as the old bottles automatically to remove all the impurities or heavy dust, keeping the bottles in

different temperature zone. This is done with phases like prewash, caustic zone wash, pre final wash and final wash. Each phase has different temperature.

Capacity of this machine is about 26000 bottles per hour.

After washing the bottles come to the EBI machine. EBI stands for ELECTRONIC BOTTLE INSPECTION. This is a fully automatic machine

which checks the bottles for examining the bottles that are broken, spotty, cracked and bottles which are not as per the set norms. The flaws have to

be found at a very early stage and it is here that the glass bottle inspection machines are employed in detecting glass faults. This machine has a conveyor belt installed, where the bottles are placed and then inspected. The bottles are

then moved with the aid of the belt on to the inspection chamber. The inspection chamber is laden with cameras in addition to electronic components for

complete inspection of the bottles. These machines are set with an inbuilt rejection system, which gets rid of the bottles not adhering to the set standards

from the conveyor belt. The capacity of this machine is about 30000 bottles per hour.

The bottles are checked to detect the base defects, inner side wall defects, neck finishing defects, cap-neck finishing defects etc. the dispute bottles are either

rejected or get wasted.

Now after the inspection process is done, the bottles are come to Filler Machine. Capacity of this machine is 25000 bottles per hour. The filling machine has 50%

of CO2 and rest 50% is Beer. It’s a double evacuation counter pressure filling machine. There should not have any presence of air in the Beer bottle so in the

first phase the present air in the bottle is vacuumed and in the second phase CO2

pressure is given to vacuum the rest of the air in the bottle. The CO2 pressure is

about 2kg /cm2. After evacuating all the air the bottles are filled with Beer and are sealed with crown. This filling and sealing (capping) procedure looks like the diagram shown below:

25

After filling the bottles come into pasteurize machine. In between the filling and pasteurization a manual checking is done to check the crowns, level of the

Beer etc. after filling the Beer still contains with some amount of air which grows Bacteria. To inactive this bacteria the bottles are passed through high

temperature. Where the bottles are filled at 20 centigrade, in this phase they are passed through at about 600 centigrade with the help of water and steam as

bacteria becomes inactive in high temperature. The bottles are kept in that of the above temperature about 10 minutes but not more than that because above this

the Beer would have a cooked flavour which is not at all desired. The capacity of this pasteurisation machine is 24000 bottles per hour. Then again a

manual checking is done.

Now the filled and sealed bottles come to label machine where the bottles are

labelled date wise (if the Beer brewed on 22/03/13 then it will be written as A/22 where A is fixed for all production from the very first day), tank wise (like

if it has matured in unit tank no. 11 then in the label it will be written as T11), and district wise (like if it for BIHAR then it will be written as ‘BHR’. The

capacity of this label machine is 28000 bottles per hour. After labelling the bottles are again checked manually on the line to detect any further defects.

Now the bottles are sent to be packed into the carton and sealed automatically. One packed carton is called one case. One case contains 12 650ml bottle and if

it is 330ml or pint then one case contains 24 bottles of 330ml. This packing process is automatic for 650ml bottle but manual for 330ml (pint) bottle.

Monthly 1 or 2 times UB’s this Kalyani plant has pint production, mostly it produces 650ml of Beer bottle.

There are two carton former machine each having capacity of forming

15000 carton per hour.

26

BOTTLING & PACKAGING PROCEDURE IN FLOW DIAGRAM (3):

Filtered clear bright Beer

New and old bottle washed bottles

Wash

machine

EBI

Fillers

Pasteurisation

at 650 C Labelling

machine

Storing at

Warehouse

manually

Carton

sealers

Auto

packers

BBT

Manual

checking

(sighter)

Manual

checking

(sighter)

Manual

checking

(sighter)

Carton former 1

Carton former 2

Conveyor belt

New and old

bottles

27

Logistical Packaging

Logistical or industrial Packaging is a critical element in the physical

distribution of a product, which influences the efficiency of the logistical

system. It differs from product Packaging, which is based on marketing

objectives. However, logistical Packaging plays an important role in damage

protection, ease in Material Handling, and storage space economy.

The unitisation of load has a major bearing on logistical Packaging with regard

to the Packaging cost. The load unitization method in UB is done by

palletization. Depending on the method of storage the pallet used in UB is two-

way entry pallet. These pallets are handled by forklift from two sides.

In UB the Packaging material (carton) used for FG are marked by instruction

which protect the FG from damage. Like on the side walls of the carton it is

written that how should be the way of placing the carton (“UP SIDE DOWN”).

UB follows a proper procedure of placing the cartons in the despatching

vehicles so that there is no chance of breakage or damages of the Finished

Goods which is an advantage of this procedure. They maintained a layout like

how many rows, how much the height, how many columns of the FG should be

in the vehicle. They maintained a document called CHECKING/DDESPATCH

SHEET (attached in the Annexure) where the checked the layout and approved

it after which the vehicle gets ready to despatch. Even there is a place of

recording the breakage material also in that document.

Another advantage of this layout is to reduce the mistakes that can happen

during counting of cartons loading on the vehicle.

28

6.4 OUTBOUND LOGISTICS

6.4.1 WAREHOUSING

Warehouse:

Warehouses are used to Store goods, for varying amount of time, during their

journeys between point of production and to distribution centres. In logistics

and supply chain perspective, Warehouse performs the storing function, where

goods are Stored in bulk quantities and from there, a new and different small

assortment of goods is selected and moved forward to be dispersed to the new

level. Kalyani Breweries has their Warehouse in-plant where the Finished

Goods are Stored till they are transported to the distribution centres.

Bonded Warehouse:

A Bonded Warehouse is building or other secured areas in which dutiable goods may be Stored, manipulated, or undergoes manufacturing operations without

payment of duty. It may be managed by the state or by private enterprise. In the latter case accustoms bond must be posted with the government. This system

exists in all developed countries of the world.

Upon entry of goods into the Warehouse, the importer and Warehouse

proprietor incur liability under a bond. This liability is generally cancelled when the goods are: exported; or deemed exported;

withdrawn for supplies to a vessel or aircraft in international traffic;

destroyed under Customs supervision; or

Withdrawn for consumption domestically after payment of duty.

While the goods are in the Bonded Warehouse, they may, under supervision by

the customs authority, be manipulated by cleaning, sorting, repacking, or otherwise changing their condition by processes that do not amount to

manufacturing. After manipulation, and within the warehousing period, the goods may be exported without the payment of duty, or they may be withdrawn for consumption upon payment of duty at the rate applicable to the goods in

their manipulated condition at the time of withdrawal. In the United States, goods may remain in the Bonded Warehouse up to five years from the date of

importation. Bonded Warehouses provide specialized storage services such as deep freeze or bulk liquid storage, commodity processing, and coordination

with transportation, and are an integral part of the global supply chain.

The Bonded Warehouse of Kalyani United Breweries is under state excise. UB

has to pay an excise duty before exporting or despatching Finished Goods.

29

Depending on the despatching amount of Finished Goods UB pays the excise duty online in advance.

Warehouse specifications of Kalyani United Breweries:

The capacity of the Warehouse in terms of storing Finished Goods varies

from 1.20 lacks to 1.60 lacks.

The desirable stack height is triple stack but sometimes more than three stacks are manageable.

For 650 bottles there are 85 bottles on one pallet and 60 bottles for 330ml

bottles on one pallet. Each case contains 7.8 litres of Beer and weight of each case is about 13Kg.

The total space of the Warehouse is 2000 sq meter in which 20-25% is engaged for human and equipment moving. There are three forklifts in

the Warehouse of United Breweries, Kalyani each having 1 Ton capacity.

Daily about 50-55 vehicles are engaged for despatching the Finished

Goods. The vehicles are mostly of two types, one is of 9 ton and the other

type is of 16 ton.

One 9 ton vehicle or truck can accommodate 700 cases or cartons of Beer

whereas in 16 ton truck it is about 1200 cases or cartons.

TABLE 6: SKU (STOCK KEEPING UNIT)

Sl. No. BRAND NAME VOLUME

1 Kingfisher Premium Lager Beer 650ml 330ml

2 Kingfisher Strong Premium Beer 650ml 330ml

3 Kalyani Black Label Premium Lager

Beer

650ml 330ml

4 Kalyani Black Label Strong Premium

Beer

650ml

5 Kingfisher Blue Premium Beer 650ml 330ml

6 Kingfisher Draught Lager Beer 50 litres 30 litres

7 Kingfisher Supreme Strong Beer 650ml 330ml

8 Kingfisher Special Lager Beer 650ml

9 Kingfisher Blue Extra Premium Beer 650ml 330ml

30

Loading time for one truck is near about 45 minutes. Minimum two

forklifts are used for loading operation.

Each fork lift is capable of taking 1 ton Finished Goods. That is one

pallet consisting of 85 cases (85 cases*13 KG=1105 KG).

Kalyani United Breweries cater 6 states including WEST BENGAL.

The other states are BIHAR, JHARKHAND, ASSAM, NAGALAND, and MEGHALAYA.

Finished Goods despatching system:

FIFO System: FIFO is an acronym for First In, First Out, which is an abstraction related to ways of organizing and manipulation of data relative to time and prioritization. This expression

describes the principle of a queue processing technique or servicing conflicting demands by ordering process by first-

come, first-served (FCFS) behaviour: where the persons leave the queue in the order they arrive, or waiting one's turn at a

traffic control signal.

UB follows the same system defining it by a different name. They called it

GOBY system where G stands for Green, O for Orange, and B for Blue and Y for Yellow. The stock which comes first at Warehouse should be out first as it is

the oldest stock and this oldest stock is defined by a green card hanging from that particular pallet. Likewise the other colours that are orange, blue and

yellow are arranged according to their production timing priorities. The Yellow card is hanged from the pallet of Finished Goods which comes at the last.

Depending on the colour of the cards the Finished Goods are despatched.

The Warehouse management in United Breweries, Kalyani plant follows

perpetual inventory management system.

Perpetual inventory: Perpetual inventory or continuous inventory describes systems of inventory where information on inventory quantity and availability is

updated on a continuous basis as a function of doing business. Generally this is accomplished by connecting the inventory system with order entry and in retail

the point of sale system.

Perpetual inventory system implies maintenance of up-to-date stock records and

in its broad sense it covers both continuous stock taking as well as up-to-date recording Stores books. According to Weldon, It may be

defined as “a method of recording Stores balances after every receipt and issue to facilitate regular checking and to obviate closing down

31

for sock-taking”. The basic object of this system is to make available details about the quantity and value of stock of each item at all times. The

system thus provides a rigid control over stock of each item of Store can regularly be verified with the stock records in the bin cards kept in

the Stores and Stores ledger maintained in cost office.

Advantages of Perpetual Inventory system:

Saving in time: The long and costly work of stock taking is

avoided. Henc e, interim and final financ ial ac c o unts c an b e p rep ared with greater convenience.

Arrangement of proper verification: In this system a detailed and

more reliable checking of the Store is exercised because of the continuous and random checking.

Verification of Errors: Erro rs are eas ily lo c ated and rectified.

This gives an opportunity for preventing a recurrence in many cases.

Double control: Due to separate records in Bin card and Stores

ledger, double control is maintained.

Optimum size of material: Overstocking and under stocking can

be avoided because perpetual inventory system covers verification of

stock with regards to maximum, minimum and other levels.

Lack of misuse of Material: Under this system, effective control on issue of material is possible, thus misuse of material can be avoided.

Loss of stock due to obsolescence: It is detected at an early stage and

so timely action can be taken to prevent recurrence.

32

6.4.2 TAXATION

EXCISE: An excise or excise tax (sometimes called a duty of excise

special tax) is an inland tax on the sale, or production for sale, of

specific goods or a tax on a good produced for sale, or sold, within a country or licenses for specific activities. Excises are distinguished from

customs duties, which are taxes on importation. Excises are inland taxes, whereas customs duties are border taxes.

There are three excise levies on Beer production and despatching.

1) Storage fee: This has to pay for all the production weather it is

exported within or outside of the state. This is fixed at 7.80 Rs per case.

2) Privilege fee: This fee has to pay for export production and for Draught Beer production.

For export production the privilege fee is Rs 0.60 per bottle and for Draught Beer it is 1.50 Rs per B/L.

3) Excise duty: This is applied on the MRP of each bottle ready for despatching. 21% of the MRP has to be paid for one bottle.

AN EXAMPLE:

For example if the price of a Beer bottle suppose 70 Rupees. Then the Excise Duty on that Beer bottle will be 21% of the MRP that is 70 Rupees.

Therefore it comes,

70.00 × 0.21 = 14.70 Rupees

Now if there is 700 cases of 650 bottle of 70 Rupees the total numbers of bottles

will be,

700 × 12 = 8400

Then the excise duty is,

8400 × 14.70 = 123480 Rupees

A note on Draught Beer: Draught Beer, also spelt draft, is Beer served

from a cask or keg rather than from a bottle or can. It is unpasteurised

Beer and it should be consumed within 48 hours.

Draught Beer mainly supplied in Bars, Hotels and Restaurants only in

Kegs.

The Keg volume is mainly 50 litres and 30 litres.

The Warehouse management in Kalyani Breweries follows perpetual inventory

management system.

33

6.4.3 DISTRIBUTION

Distribution refers to the development of arrangement necessary to transfer

ownership of a product and its transportation from where it is produced to

where it is finally consumed.

The distribution function involves two broad aspects:

Marketing channel management: Distribution channel can be defined as a set

of people and firms involved in the transfer of the title to a product as it moves

from producer to the ultimate customer or business user, Whereas marketing

channels are defined as sets of interdependent organisations involved in the

process of making a product or service available for consumption or use.

The marketing channel management involves many enterprises- primary

channel participants and specialised channel members .

Primary channel participants are the management intermediaries such as

distributor, wholesaler, agents, brokers, and retailers. They form a vital link

between the firm and the final user.

Specialised channel members include functional service providers. They are

generally the transport organisations who ship products from supplier to

customers of two different locations for a specific fee.

Outbound Logistics management: Outbound logistics management deals with

the last point of production to the point of consumption. It includes several

functions such as transportation, order processing, warehousing, protective

Packaging, inventory management, and related information and services.

Distribution strategy

Marketing channel

management

Outbound Logistics

management

34

The distribution channel In Kalyani United Breweries follows the same

management style as mentioned above. They engage transport organisation to

distribute the Finished Goods to the distributor Warehouse in different places.

Here distributors are the primary channel partners whereas the transport

organisation is the functional service providers.

Despatching Documentation:

Inform authorised transporters for placement of trucks for different

bonders for next day morning

Transporters bring the DO to the logistics department. A specimen of the

DO or Delivery Note is shown below.

FORMAT OF A DELIVERY NOTE:

Sl. no. 123 Delivery Order Date ……………………………

ABC GOODS CARRIERS PVT. LTD. 9, XYZ road, Kolkata – 123, (W.B.) INDIA

FAX: 123456 MOBILE: ……………………..

TO

United Breweries Ltd.

Kalyani, Nadia

Sir,

We are sending a vehicle no……………………………………………………… at your end.

Kindly supply us the followings:-

1. KBL Beer………………………. Cases

2. KFL Beer………………………. Cases

3. KFS Beer………………………. Cases

4. KBL (P) Beer………………….. Cases

5. KFL (P) Beer………………….. Cases

6. ………………………………………..

7. ………………………………………..

Yours Faithfully,

ABC GOODS CARRIERS PVT. LTD.

35

Logistics department attach Beer despatch sheet and vehicle inspection

check list mentioning SKU wise/Brand wise quantity to be loaded in the

DO to the specific bonder.

After loading the truck the FG department sends one loading slip

mentioning quantity loaded along with batch number to the logistics

department. A specimen of Beer Despatch Sheet and one Vehicle Inspection Check

List are shown below.

FORMAT OF A BEER DESPATCH SHEET

BEER DESPATCH SHEET UNITED BREWERIES LTD.

KALYANI UNIT DATE………………

NAME OF THE PARTY TRUCK NO. DESTINATION

BRAND QTY. BATCH NO. QTY MFD

Security In charge Packing In charge

36

FORMAT OF A VEHICLE INSPECTION CHECK LIST

UNITED BREWERIES LIMITED Vehicle Inspection Check List

SL. NO.: PLANT NAME: ____________________

Date: _________________________ Vehicle No: ________________________

Vehicle In Time & Date: ___________ Transporter: ________________________ Vehicle Capacity: ________________ Vehicle out Time & Date: ____________

Vehicle Type: (Open Body/Container) _______ Vehicle Indented For (Destination): _____

__________________________________

Inspection of Physical condition of the vehicle

1. Cleanness of the vehicle: clean/Dirty (please tick) 2. No. of tarpaulins in the vehicle: _______________ Nos. 3. Any bad odour from the vehicle: yes/no (please tick) 4. Insects/pest found on the vehicle: yes/no (please tick) 5. Floor/wall of the vehicle in the perfect shape: yes/no (please tick) 6. Rust/condense water on the floor & wall of the

Vehicle: yes/no (please tick)

7. wooden angles available with the vehicle: yes/no (please tick)

Remarks (if any):

________________________________________________________________________________________________________

Documents carried by the vehicle

1. Vehicle registration certificate: yes/no (no. __________)

2. Cross verification of vehicle chassis no. : yes/no (no.__________)

3. Verification of driving license: yes/no (no.__________)

4. Verification of vehicle pollution certificate yes/no (no. __________)

Remarks (if any):

______________________________________________________________________________________

______________________________________________________________________________________

Authorized signatory authorising signatory

Dated: SECURITY

37

Logistics department makes an invoice slip and gate pass on the basis of

the loading slip and sends it to the excise department.

FORMAT OF AN INVOICE SLIP

United Breweries Ltd. – Kalyani Vittal Mallya Road, Plot No:18, ‘D’ Block Kalyani, Nadia, WB, Kalyani – 741235

Regd. Office : UB Tower, Level 3,4 & 5Ub city, 24 Vittal Mallya Road, Bangalore-560001

Customer Name & Address No:

Lst/Tin No. & Dt Gate Pass No. & Dt:

Cst no. & Dt: Transporter:

Import Permit No: vehicle No:

Export permit No: Transport Permit No:

Excise Leaf No: LR/GC/LWB Note No. & Dt:

SL No. Item Description Unit Unit Rate Qty (Unites) Qty (litres) Amount(RS)

Amount in Words

We hereby certify that goods mentioned in this invoice are warranted to the off the nature and the

quantity, which they purport to be

For united Breweries ltd – Kalyani

Authorised Signatory

38

FORMAT OF A GATE PASS

On receipt of the Invoice excise department issues Transport pass

On completion of the documentation process, transporter goes to the FG

supervisor for scrutiny

After clearance of gate pass, security personnel allow the loaded truck to

release.

This is the total documentation procedure of despatching the Finished Goods.

United Breweries Ltd., Kalyani caters the eastern zone of India to fulfil their

demand. The states UBL, Kalyani serves including WEST BENGAL are

BIHAR, JHARKHAND, ASSAM, NAGALAND, and MEGHALAYA.

GATE PASS

PK OF 19

UNITED BREWERIES LIMITED

KALYANI DATE…………………

Please allow……………………………………………………………………………………………

Address…………………………………………………………………………………………………..

to take the following goods

Description of the Materials Invoice No Date Vehicle no Leaving Time

Signature

39

6.4.4 PRODUCTION AND SALES ANALYSIS

DEMAND ANALYSIS:

The consumption pattern of Beer in India has experienced a sharp increase. If w

the consumption pattern of Beer in West Bengal can be analyse the

consumption of Beer in India can be well assumed.

TABLE 7: DISTRICT WISE CONSUMPTION OF BEER (IN LAKH BL)

DISTRICT 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Bankura 7.25 8.23 13.449 15.415 14.484

Bhirbhum 5.83 7.63 13.218 16.342 16.713

Burdwan (East) 8.4 9.39 16.09 21.12 21.88

Burdwan (west) 28.1 35.11 52.291 52.185 40.688

cooch Behar 3.106 3.83 6.519 8.269 11.923

Dakshin Dinajpur 1.936 2.08 4.264 4.767 5.007

Darjeeling 16.86 21.3 35.616 35.737 44.234

Hooghly 22.99 22.99 42.926 49.469 52.658

Howrah 27.334 30.05 43.247 52.04 57.111

Jalpaiguri 7.07 9.8 16.94 18.983 27.526

Kolkata (North) 28.76 30.08 39.839 43.192 46.684

Kolkata (south) 38.72 39.54 47.121 51.706 51.227

Malda 5.39 7.62 13.281 17.324 21.002

Murshidabad 5.76 8.83 16.187 20.936 24.008

Nadia 10.451 13.09 23.902 28.662 32.177

North 24-Parganas 34.96 39.68 62.807 78.369 81.799

Purba Medinipur 19.52 23.88 38.705 51.389 58.749

Paschim Medinipur 19.086 21.13 33.73 39.819 42.556

purulia 6.874 7.72 11.444 16.527 13.642

South 24-Parganas 31.19 41.1 61.921 80.347 87.747

Uttar Dinajpur 4.883 6.49 10.64 11.795 14.674

TOTAL 334.47 389.57 604.137 714.393 766.489

SOURCE: UBL, KALYANI

40

LINE CHART (1) SHOWING CONSUMPTION PATTERN OF BEER IN

WEST BENGAL DURING THE PERIOD OF 2007 TO 2012

Demand analysis is basically the Study of sales generated by a good

or service to determine the reasons for its success or failure, and how its

sales performance can be improved.

Here the demand of Finished Goods is being represented graphically for a

particular year. By this the particular growth pattern of the demand of the

Finished Goods can be well observed.

The demand analysis was found from the PGP that is the Production generation

plan given the data for the year 2012-2013 from the month April’12 to

March’13. It is already been discussed that the PGP for any particular month is

sent by the corporate office at the end of every previous month so that the

material and production planning can be done smoothly. The PGP contains

brand wise, SKU wise and month wise demand pattern.

Due to space constraints the demand pattern of Finished Goods from different

states including West Bengal is attached up to the month August’12.

0

100

200

300

400

500

600

700

800

900

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

TOTAL

41

TABLE 8: YEAR WISE PRODUCTION AND DESPATCH SINCE LAST

9 YEARS

YEAR PRODUCTION DESPATCH

2003-2004 1833096 1855450

2004-2005 2005644 1994962

2005-2006 2158115 2144599

2006-2007 2169567 2106685

2007-2008 2455489 2460482

20038-2009 3576442 3612932

20039-2010 4620464 4606873

2010-2011 5430807 5435171

2011-2012 5071008 5064926

2012-2013 6188062 6117340

LINE CHART (2): GROWTH IN PRODUCTION AND DESPATCH

SINCE LAST 9 YEARS:

The growth pattern of production and despatch shows a steady growth over a

period of time. Earlier the growth in consumption of Beer in West Bengal has

shown. If we compare these two graphs then it is found that UB, Kalyani is

successful in fulfilling the demand growth.

UB, Kalyani has already made a new Brew House to increase the production

and to fulfil the increasing rate of consumption pattern. UB’s Beer production

has increased from 5 Lakh cases/ Month to 9 lakh cases/ Month approximately.

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

DESPATCH

PRODUCTION

42

TABLE 9: THE PGP IS ATTACHED BELOW

BRAND STATE APRIL MAY JUNE JULY AUGUST

KBL W.B. 3500 4500 4200 4200 4100

KBLP (330 ml.) W.B. 6600 8300 7600 6100 4500

KBLS W.B. 141000 173000 139000 107000 63000

KFL W.B. 10200 8900 9000 7900 5600

KFLP (330 ml.) W.B. 2400 2600 2400 2800 2500

KFS W.B. 269100 401000 375000 313000 272000

KFSP (330 ml.) W.B. 600 900 900 1000 600

KF BLUE W.B. 5100 5500 5000 4400 6400

KF BLUE (330ml.) W.B. 300 300 300 300 200

KFL (WB-BSF)

KFL C.S.D.(W.B.) 22000 24900 19300 20000 11200

SPL C.S.D.(W.B.)

KFS C.S.D.(W.B.) 4200 9100 6000 6300 3900

KF SUPREME BIHAR 140000 100000 225000

KFSUPREME(330ml) BIHAR 1000 2100

KF SPECIAL BIHAR 12200

KF SPECIAL (300ml) BIHAR

KBLS BIHAR 30000 25000

KFS BIHAR

KFL C.S.D.(BIHAR)

KFS C.S.D.(BIHAR)

KFS JHARKHAND

KFL JHARKHAND

KFS C.S.D.(JHARK'ND)

KFL C.S.D(J'KND-BSF)

KF BLUE ASSAM 3400 4400

KF BLUEP (330 ml.) ASSAM 100 200

KFS C.S.D.(ASSAM)

KF BLUE MEG'LAYA

KF BLUEP (330 ml.) MEG'LAYA

KFS C.S.D.(N'LAND)

KFL C.S.D.(N'LAND)

KF SUPREME JHARKHAND 30000 25000

KF SPECIAL JHARKHAND 2100

KF SPECIAL (300ml) JHARKHAND 400

KFSUPREME(330ml) JHARKHAND

KF BLUE BIHAR

KF BLUEP (330 ml.) BIHAR

KF BLUE ARUNACHAL

KF BLUEP (330 ml.) ARUNACHAL

KFDRT W.B. 600 600 600 600 500

TOTAL

6,40,100

6,44,200

5,69,300

6,03,600

6,68,400

Source: UB, KALYANI

43

Apart from other states if West Bengal is taken, then the percentage of demand

out of the total can be observed. Minimum 50 % of the total demand is coming

from West Bengal and there is a rule given by West Bengal excise that demand

of West Bengal must be fulfilled before fulfilling the demand of other states.

COLUMN DIAGRAM (1): THE DEMAND FROM WEST BENGAL IS

SHOWN GRAPHICALLY:

LINE CHART (3): GRAPHICAL REPRESENTATION OF DEMAND

ANALYSIS:

0

200000

400000

600000

800000

1000000

1200000

1 2 3 4 5 6 7 8 9 10 11 12

DEM

AN

D

total WB

TOTAL

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

De

man

d (

Cas

es)

44

From the above graph the seasonal effect can be analysed. The Beer

consumption pattern changes during summer and winter. In summer the

consumption of Beer increases. In the summer period that is from the month

April to the month June the graph shows the maximum demand level of Beer.

During monsoon (June to September) the demand level is moderate whereas it

falls sharply during winter (November to January).

This seasonal fluctuation has a very important role in logistics activities. Lot of

logistical challenges come with these fluctuations, and it is the role of the

logistics manager to maintain the stock and maintain the production process

during this period.

Challenges due to seasonal variability:

Raw material Procurement planning: This planning is very important as

there is no exact trend of demand. Demand fluctuates, so as the

Procurement planning. During peak season the Procurement of raw

materials should be well planned so that there is no stock out situation

came at the time of peak demand or stock surplus during off peak season.

So this is a challenge of the logistics department to plan the Procurement

amount of raw materials.

Even before the PGP comes in their hand if they can speculate the

demand of the coming period through the past demand trend analysis, the

situation can be well handled.

Maximum utilisation of resources: The utilisation of resources like

storage space, production house, manpower is one of the major

challenges during peak and off peak season. During peak season the

production house need to run at its full capacity whereas during off peak

season production becomes less. So then it’s a challenge to run the

production at its full capacity. The manpower which is one of the main

recourse of any organisation has to utilise at its fullest capacity.

Place utilization at Warehouse: The Warehouse of United Breweries,

Kalyani is a Bonded Warehouse. It has taken as a lease under West

Bengal excise. So an amount has to be paid under this scheme. So space

utilisation is an utmost challenge during peak and off peak season.

45

Vehicle scheduling: United Breweries, Kalyani plant does not possess

transports at their own. They engage transporters for distribution of

Finished Goods.

So a prior notification to the transporters about the coming demand

pattern is a good practice to avoid vehicle shortages.

Financial challenges: during off season the maximum Finished Goods

stock remains in the Warehouse, which involves cost (of the Finished

Goods), as the sale becomes less .

The Finished Goods have a specific shelf life (6 months), so if it is not

sold within a specific time period it can be spoiled.

INVENTORY MANAGEMENT

Inventories represent the aggregate of those items which are either, yet to be utilised/

consumed in the production of goods and services or held in the ordinary course of

business or in the process of production for sale (i.e. work-in-progress).

The principle items of inventories are as follows:

a) Raw Materials: These are those materials which have undergone no conversion whatsoever since their receipt from the suppliers. These items

include barley malt, sugar, hops, rice flakes etc.

b) Finished Parts/Packaging Materials: They may either be bought-out-parts

or piece parts.

Bought-out-parts are those finished sub-assemblies, or assemblies which are

purchased from the outside suppliers (for example Beer bottles). These

include standard parts as well as parts produced by the suppliers to the buyer’s

design (for example cartons, labels etc).

Piece-parts (work made part) are those parts which are manufactured at the

company’s own plant from the basic raw material.

c) Work-in-progress: They comprise of the item or materials in partially

completed condition of manufacture. Raw material becomes work-in-progress

46

after the first operation. Once the raw materials like malt, rice, sugar hops etc

enter the brew house for boiling they become work-in-progress material. Work-

in-progress material can also be found in the chilling silos, filling lines etc.

d) Finished Product: They are the final products ready to be shipped. Products

leave the work-in-progress classification and enter into the classification of

Finished Goods at the point of final inspection when they are ready for delivery

to the customer or to the Finished Goods Store. Beer enters the finished product

stage after the completion of the fermentation process and when desired quality

checks are done. After the fermentation process they are passed to the chilling

section, this is where a work-in-progress converts into Beer ready to be issued for

bottling.

Inventory turnover ratio:

In accounting, the Inventory turnover is a measure of the number of times

inventory is sold or used in a time period such as a year. The equation for

inventory turnover equals the Cost of goods sold divided by the average

inventory. Inventory turnover is also known as inventory turns, stock turn, stock

turns, turns, and stock turnover

The formula for inventory turnover:

The formula for average inventory:

The average days to sell the inventory are calculated as follows:

47

TABLE 10: PRODUCTION/ DESPATCH & STOCK DETAILS

(2012-2013):

[FIGURES IN CASSES]

MONTH OPENING STOCK PRODUCTION DESPATCH CLOSING STOCK

APRIL 20868 601816 607066 15555

MAY 15555 586389 600669 1127

JUNE 1127 606050 587599 19442

JULY 19442 601604 524479 96506

AUGUST 96506 536071 529582 102906

SEPTEMBER 102906 559910 564194 983897

OCTOBER 983897 497075 555054 40356

NOVEMBER 40356 459260 364831 134689

DECEMBER 134689 163415 142642 155375

JANUARY 155375 107993 175867 87368

FEBRUARY 87368 601662 557347 131584

MARCH 131584 866818 908010 89722

TOTAL

6188063 6117340

The price of the Finished Goods involves many factors. Like the cost involved

in production of that Finished Goods, cost involved in total Logistical

Activities, etc. apart from this there is Excise Duty that has to be paid to the

Government, Delivery charges, bottle Deposits, sales tax, etc.

But as price is not shared by UBL, KALYANI it has been assumed. Let the

price of a case is X including all the above mentioned costs. Now it becomes

easy to calculate the Average Inventory, Inventory turnover ratio and Average

Days to Sell the Inventory.

Inventory turnover ratio is used to measure the inventory management

efficiency of a business. In general, a higher value of inventory turnover

indicates better performance and lower value means inefficiency in controlling

inventory levels. A lower inventory turnover ratio may be an indication of over-

stocking which may pose risk of obsolescence and increased inventory holding

48

costs. However, a very high value of this ratio may be accompanied by loss of

sales due to inventory shortage.

TABLE 11: THE ITOR CALCULATION IS SHOWN IN A TABLE

BELOW:

MONTH AVERAGE INVENTORY INVENTORY TURN OVER RATIO

APRIL 182115 3.33

MAY 8341 72.01

JUNE 10285 57.13

JULY 57974 9.04

AUGUST 99706 5.31

SEPTEMBER 543401 1.04

OCTOBER 512126 1.08

NOVEMBER 87523 4.17

DECEMBER 145032 0.98

JANUARY 121372 1.45

FEBRUARY 109476 5.09

MARCH 110653 8.2

TOTAL

Inventory Turnover Ratio measures company's efficiency in turning its

inventory into sales. Its purpose is to measure the liquidity of the inventory. Inventory Turnover Ratio is figured as "turnover times". Average inventory

should be used for inventory level to minimize the effect of seasonality. This ratio should be compared against industry averages.

A low inventory turnover ratio is a signal of inefficiency, since inventory usually has a rate of return of zero. It also implies either poor sales or

excess inventory. A low turnover rate can indicate poor liquidity, possible overstocking, and obsolescence, but it may also reflect a planned inventory

build up in the case of material shortages or in anticipation of rapidly rising prices.

A high inventory turnover ratio implies either strong sales or ineffective buying (the company buys too often in small quantities, therefore the

49

buying price is higher).A high inventory turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate inventory levels,

which may lead to a loss in business. From the above table it is found that during the month December the sale

became very less so as the inventory turnover ratio, again it was high enough in the month of May and June due to low average inventory which was a good

sign. But sometimes high inventory levels are unhealthy because they

represent an investment with a rate of return of zero. It also opens the company up to trouble if the prices begin to fall.

This are all the analysis that can be done based on the Data provided by UB,

Kalyani Plant.

50

Chapter 7

ANALYSIS & RECOMMMEDATIONS

After analysing the logistics activities, there are few problem areas especially in

the outbound logistics were found. If the problems can be solved then the efficiency can further be improved.

Bottlenecks in Warehouse:

There are three forklifts in the warehouse each having capacity of 1 ton. Minimum two forklifts are engaged for loading the Finished Goods on

the vehicles depending on the requirements. One engaged for stacking the finished goods after Packaging to the warehouse.

If any of the Forklift breaks down then the efficiency of the despatching

activity also goes down.

The floor is uneven. For that there is a chance of falling the cartons which

increases the damages.

Even due to this uneven floor and multiple handling of cartons rattling

happens which can increase the pressure of co2 in the bottle and the bottle can break.

Vehicle availability is a problem as UB doesn’t have their own

transportation system.

The excise pass is a hand written document which is very lengthy.

Recommendation:

Use of Forklift having capacity of 2 Ton, so that it can take two stacks at

a time.

Floor should be even.

Dedicated transporter is a solution of the above problem. Depending on

the demand frequency, load size if specific routes can be dedicated to

specific transporters then vehicle availability becomes smoother.

If the Excise pass can be generated through system instead of hand

written then it becomes a smooth and short process.

Store should be more organised.

Non moving particles should be cleared timely to prevent the space

wastage.

51

Chapter 8

CONCLUSION

I hope that organisation pay attention to various proposals and

recommendations suggested in the project.

By adopting some of these proposals the organisation may manage its

departmental activities in more efficient way.

52

BIBLIOGRAPHY

BOOKS:

“LOGISTICS MANAGEMENT”, 2ND EDITION BY V. V. SOPLE (PAGE 13

TO PAGE 16)

“MODERN CONCEPTS OF MATERIALS MANAGEMENT” BY S. C.

BHATTACHARYA (PAGE)

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http://www.scribd.com/doc/23322561/Final-Report-of-Inventory-Management-

111 (ACCESSED ON 2nd MAY, 2013)

http://en.wikipedia.org/wiki/Bonded_warehouse (ACCESSED ON 27th APRIL,

2013)

http://en.wikipedia.org/wiki/Customs (ACCESSED ON 27TH APRIL, 2013)

http://en.wikipedia.org/wiki/Brewing (ACCESSED ON 3rd APRIL, 2013)

http://maltingandbrewing.com (ACCESSED ON 3rd APRIL, 2013)

http://en.wikipedia.org/wiki/Bonded_warehouse (ACCESSED ON 27th APRIL,

2013)

http://www.ccdconsultants.com/documentation/financial-ratios/inventory-

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http://accountingexplained.com/financial/inventories/perpetual-journal-entries

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