Inventory turnover optimization criteria of efficiency (With special reference to FMCG sector in India)
Dr. Richa Singhal, Dr. Varsha Tiwari Vyas
Study of the Inventory management is very crucial for all the firms. Unless the working capital is planned, managed and monitored effectively, company cannot earn profits and increase its turnover, Also, it helps in removing bottlenecks. Although very studies have been conducted on analyzing the working capital management of Indian companies but very few studies have measured the inventory management of top FMCG companies of last decade. This study bridges the gap and highlights the current status of inventory turnover management of selected five FMCG companies in India. More companies go under because of cash flow issues, rather than declining profitability. Hence traditional prudence always suggests that a firm should have sufficient cash to cover its immediate liabilities. However there is a growing breed of FMCG companies that claim otherwise. Unlike most other industries, the turnover of a FMCG company is not limited by its ability to produce, but its ability to sell. They can generate cash so quickly they actually have a negative working capital. This happens because customers pay upfront and so rapidly, the business has no problem raising cash (like Nestle, Britannia). In these companies products are delivered and sold to the customer before the company even pays for them. A negative working capital is a sign of managerial efficiency in a business with low inventory and accounts receivables (which means it operates on an almost strictly cash basis). In other situation, it is a sign a company may be facing bankruptcy or serious financial trouble. The current study has tried to examine the sources used by the companies to finance their working capital requirements and to analyze and evaluate the Inventory management. The present work therefore is a modest attempt in this direction by undertaking a study of Inventory management. With this end an efforts has been made in this article entitled as study of FMCG in respects of performance and its inventory management. The finding of the study not only throw light on technical weakness in the managerial activities of the companies, but it may also help scholars and researchers to develop new ideas, techniques and methods in respects of the management of inventory.
Dr. Richa Singhal, Dr. Varsha Tiwari Vyas. Inventory turnover optimization criteria of efficiency (With special reference to FMCG sector in India). International Journal of Academic Research and Development, Volume 2, Issue 6, 2017, Pages 588-592