Inventory management of Ranbaxy Laboratories Ltd


This paper discusses the importance of inventory management in a company and explains the cost of inventory such as storage, insurance and taxes. The paper explains the importance of understanding these costs and successful inventory management in order not to incur losses. The paper lists several methods of inventory control such as purchasing plans, and controlling the inventory on order and the inventory in stock. In closing, the paper stresses that successful inventory management involves a manager's ability to balance, and that this is only achievable with a manager who is well educated in inventory management.

Executive Summary:-

Nowadays its very important for organizations to achieve corporate excellence.Every business concern irrespective of its size,nature needs funds to manage the business operations.Every business has to do day to day expenses like purchase of raw material ,payment of wages etc.Business has to keep proper level of inventory.Inventory management becomes an important part of business.Inventory management is the life blood of business because no business can achieve optimum sales without inventory management.

Effectiveness of an organization depends on the strength of inventory management.Inventory management is the core to whole system.Inventory management of India`s Pharmaceutical industries holds a greater importance because it has become more crucial for achieving rapid economic growth of the country.In this term paper attempt is made to examine the inventory management practices in Ranbaxy Laboratories.


  1. To find out the efficiency of inventory management in Ranbaxy Laboratories.
  2. To study the purchasing plan of stock.
  3. To have knowledge of control of inventory.


I had used secondary data like:-

  • Internet.
  • Reports of Ranbaxy Laboratories.
  • Magazines.
  • Pharmaceutical industry reports.

I have made the phone call to company officials to get the better response.


The Indian Pharmaceutical Industry today is in the front rank of India's science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology. A highly organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks very high in the third world, in terms of technology, quality and range of medicines manufactured. From simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now made indigenously.

Playing a key role in promoting and sustaining development in the vital field of medicines, Indian Pharma Industry boasts of quality producers and many units approved by regulatory authorities in USA and UK. International companies associated with this sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years and helped to put India on the pharmaceutical map of the world.

It has expanded drastically in the last two decades. The leading 250 pharmaceutical companies control 70% of the market with market leader holding nearly 7% of the market share. It is an extremely fragmented market with severe price competition and government price control.

The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles. There are about 250 large units and about 8000 Small Scale Units, which form the core of the pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical formulations.

Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the drugs and pharmaceutical products has been done away with. Manufacturers are free to produce any drug duly approved by the Drug Control Authority. The Pharmaceutical Industry, with its rich scientific talents and research capabilities, supported by Intellectual Property Protection regime is well set to take on the international market.

The pharmaceutical and healthcare industry is hugely complex because it involves so many markets, products, processes and intermediaries. It is also heavily regulated, global, and used by everyone at some stage in their life.

In 2006, India ranked 12th in the global pharmaceutical market in dollar terms with a market share of 1.27% globally. It was estimated that India's pharmaceutical industry is worth USD 8.8 billion in 2005. Indian companies continue to dominate the generic market with a total market share of 70% in 2006. Meanwhile, India's pharmaceutical industry accounted for approximately 21% of the global DMFs. India has 75 US FDA approved plants, the highest number of US FDA approved plants outside US.

Major players are:-

  • Ranbaxy Laboratories
  • Dr Reddey`s Laboratories
  • Cipla
  • Nicholas Piramal
  • Aurobindo Pharma
  • GlaxoSmithKline
  • Lupin Laboratories
  • Sun Pharmaceutical Industries
  • Cadila Healthcare
  • Wockhardt


Ranbaxy Laboratories Limited is India's largest pharmaceutical company.Incorporated in 1961, Ranbaxy exports its products to 125 countries with ground operations in 46 and manufacturing facilities in seven countries. The company went public in 1973. Ranbaxy is one of the leading pharmaceutical Companies in India commanding a market share of around 5%. The Company has clocked sales of USD 299 Mn(2008). Growing ahead of the market, the Company has enhanced its competitive position in the domestic market through its focused approach. The Company's business has been realigned to its customer groups and investments have been made in high growth segments. These efforts have resulted in strengthening its Chronic franchise (Life Style led) as well as has reinforced its leading position in the Acute segment.

Ranbaxy is a strong player in the Novel Drug Delivery System (NDDS) segment. Its product portfolio spans across Acute & Chronic Business covering Anti-infectives, Nutritionals, Gastro-intestinals, Pain Management (Acute) Cardiovasculars, Dermatologicals, Central Nervous Systems (Chronic) segments.

Company's India operations are a dominant force in a number of participating therapeutic segments, for example Anti-infectives, Statins, Dermatology and Pain Management. A publicly listed company, Ranbaxy India is also a member of IPA (Indian Pharmaceutical Alliance) & OPPI (Organization of Pharmaceutical Producers of India).

Major Achievements of Ranbaxy:-

  • India's largest pharmaceutical company.
  • Received The Economic Times Award for Corporate Excellence for 'The Company of the Year 2002-2003'.
  • Ranbaxy is among the elite club of Million Dollar Companies.
  • Ranbaxy received India's first approval from USFDA for an Anti Retroviral (ARV) drug under the U.S. President's Emergency Plan for AIDS Relief.


Inventory is a list for goods and materials or those goods and materials themselves, held available in stock by a business. In accounting inventory is considered an asset.

Inventory management is primarily about specifying the size and placement of stocked goods. Inventory management is required at different locations within a facility or within multiple locations of a supply network to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time, carrying costs of inventory, asset management, inventory forecasting, inventory valuation, inventory visibility, future inventory price forecasting, physical inventory, available physical space for inventory, quality management, replenishment, returns and defective goods and demand forecasting

Successful Inventory management in ranbaxy:-

At Ranbaxy, successful inventory management involves balancing the cost of inventory with benefits of inventory.They undertake following steps:-

  • Maintaining a wide assortment of stock-but not spreading the rapidly moving ones too thin.
  • Increasing inventory turnover-but not sacrificing the service level.
  • Keeping stock low-but not sacrificing the service or performance.
  • Obtaining lower prices by making volume purchases- but not ending up with slow moving inventory.
  • Having an adequate inventory on land- but not getting caught with obsolete items.

The purchasing plan:-

One of the most important aspects of inventory control is to have the items in stock at the moment they are needed.Buying requires advance planning to determine inventory needs for each time period and then making the commitments without procrastination.Thus purchasing plan should includes:-

  • When commitments should be placed.
  • When the first delivery should be received.
  • When the inventory should be peaked.
  • When reorders should no longer be placed.
  • When the item should no longer be in stock.

Ranbaxy has well planned purchasing plan so it affects its price,delivery and availability of product for sale.

Controlling the inventory:-

As Ranbaxy has huge number of business operations so there is a need of sophisticated and technical form of inventory control.Use of computer for inventory control is very feasible.There are various methods of inventory control like Visual control,Tickler control,Click sheet control and Stub control. Ranbaxy uses:-

  • Point of sale terminals relay information on each item used or sold .The manager receives information printouts at regular intervals for review and action.
  • Off line point of sale terminals relay information directly to the suppliers computers who uses the information to ship additional items automatically to buyer/inventory manager.

Ranbaxy also uses another method of inventory management by outside agency.


  • Ranbaxy inventory system is able to track inventory,forecast needs and generate reorders to maintain adequate inventory.It involves pharmacist,Technicians and sales associates(OTC manager,cashiers.)
  • Ranbaxy follows Perpetual Inventory system-it maintains a continuous record of every item in inventory.

Ins = Outs

  • Turnover-The rate at which inventory is used.
  • In Ranbaxy it is expressed in number of days.
  • Point of sales is another system used by Ranbaxy in which item is deducted from inventory as it is sold
  • Reorder points-Minimum and maximum stock levels which determine when a reorder is placed and for how much.
  • Ranbaxy uses Computers for inventory management for following purposes:-
  1. Continous picture of inventory.
  2. Automatically adjust inventory.
  3. Generate orders.

Order details of Ranbaxy:-

  1. Material safety data sheets(MSDS):-chemotherapeutic agents,refrigeration.
  2. Shipping.
  3. Credit and returns.
  4. Receiving the orders.

Receiving the order:-

  1. Checking in the order.
  2. Compare the invoice with products.
  3. Right drug,strength,size,quantity,in date?
  4. Pharamacist will check in controlled drugs.
  5. Report any discrepancies.
  6. Sticker and price items.
  7. Resolve shorts and out -of- stocks.
  8. Process invoice.


  1. Online ordering screen:-verify accurate,make corrections,note confirmation number(purchase order number)
  2. Confirmation print out:-Hard copy of what was transmitted.
  3. Shipping invoice.
  4. Return forms:-original P.O number,item number, quantity,reason for return.

Stocking and storing:-

  • Ranbaxy stores drugs according to manufacturer`s specifications ,noted on package label.
  • Room temperature:-59-86F
  • Refrigeration:-40-42
  • Physical organization:-Varies with location.
  • Rotation of stock important ,oldest product in front (called Facing.)

Drug pricing:-


  1. AWP:-Average wholesale price- an average from around the country of what that drugs wholesale price is.
  2. Acquisition cost:-

The actual price that Ranbaxy is paying for drug.

Contract price:-Price paid by the Ranbaxy for a drug based on a contract with a drug manufacturer or a buying group.


  1. Dispensing fee:-A fee above and beyond the cost of the drug that is remuneration for the pharmacy services provided.
  2. MAC:-Maximum allowable cost.

Maximum price allowed to charge by the pharmacy to federally funded prescription programs.

  1. Cognitive service fee:-A fee provided to a pharmacy/pharmacist for services they provide other than dispensing.
  2. Selling price:-The selling price is 100% of the amount you will receive for the sale of an item.
  3. Mark up:-Defined as the difference between your cost for a product and its actual selling price.
  4. Selling price= Cost + Mark up.


The most obvious method for inventory management is to establish good training for employees. Teaching those who will be in charge of inventory the methods and processes already in place is the best way to ensure that everyone is "on the same page" as far as how your inventory is kept track of. A good idea is to test your employees from time to time to be sure that they know the correct procedures for managing the inventory. If they make mistakes, meet with them individually to go over corrective measures to ensure accuracy in the future. Decide which computer program or style you want to use to manage the inventory. You can choose from something as simple as a spreadsheet, to as complex as an entire software package that tracks everything almost automatically. When shopping for software, look for products that offer barcode reading, tracking counts, returns processing, cycling, and more all in one package. This will help you avoid any confusion and prevent you from needing to add another program into the mix later.

With the combination of proper tools like barcodes and scanners, thorough employee training, and an accurate, comprehensive database, you should be able to ensure that your inventory remains in stock when needed and that you will have a good handle on what is available and what is needed. Putting good methods in place is a surefire way to manage inventory effectively and with little to no errors, which can help your business run smoothly and protect the bottom line. Be sure to plan your strategy ahead of time, and your inventory control will run easily and smoothly.

  • Developing new sources of supply.
  • Subsitution of less costly materials without imparing required quality.
  • Application of new purchasing techniques.
  • Initating make or buy studies.



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