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JUNE 2012
PAAVAI ENGINEERING COLLEGE DEPARTMENT OF MANAGEMENT STUDIES PROJECT REPORT JUNE 2012
This is to certify that the project A STUDY ON INVENTORY MANAGEMENT IN CHETTINAD CEMENT CORPORATION LIMITED, KARUR Is the bonafied record of project done by
--------------------------Project Guide
------------------------HOD
----------------------------Internal Examiner
-------------------------External Examiner
I affirm that the project work entitled A STUDY ON INVENTORY MANAGEMENT IN CHETTINAD CEMENT CORPORATION LIMITTED, KARUR being submitted in partial fulfillment for the award of Master of Business Administration (MBA) is the original work carried out by me. It has not formed the part of any other project work submitted for award of any degree or diploma, either in this or any other University.
I would like to express my gratitude to Shri.CA. N. V. Natarajan, B.Com., FCA., Chairman and Smt. Mangai Natarajan, M.Sc., Correspondent, Paavai Institutions, Namakkal for giving me an opportunity and facility to complete this project. I wish to place my deep sense of gratitude to
Dr. K. K. Ramaswamy, M.E., Ph.D., Director Admin. Paavai institutions and I would like to express my gratitude to Dr. C. Jegadheesan, M.E., MS., Ph.D., Principal, Paavai
Engineering College, Namakkal. I offer my profound gratitude to Dr.G.Gopalakrishnan, M.B.A, M.Phil, Ph.D Head, Department of Management Studies, Paavai Engineering College, Namakkal, for his entire support to complete this project report. I owe my boundless gratitude to my faculty guide, Dr.A.Arumugam.M.Com, M.Phil, M.B.A., Ph.D Professor of MBA Department, for his guidance and supervise of this project for successful completion. I sincerely thank to Mr.Thirunavukarasu, HR manager, Chettinad Cement Corporation limited, Karur for giving me permission to do this project at their concern. I express my sincere thanks to my beloved parents, friends and the staff member for and those who are encouraged and supported for completion and this project report.
S.GOKUL
CHAPTER NO
LIST OF TABLES LIST OF CHARTS ABSTRACT
DESCRIPTION
PAGE NO
II
III
INTRODUCTION 1.1 About the study 1.2 Scope of the study 1.3 Statement of the problem 1.4 Objectives of the study 1.5 Research methodology INDUSTRY AND COMPANY PROFILE 2.1 Industry profile 2.1.1 Cement industry in Global 2.1.2 Cement industry in India 2.1.3 Cement industry in Tamilnadu 2.1.4 Cement company in Karur 2.2 Company profile CONCEPTUAL AND THEORETICAL FRAME WORK 3.1 Conceptual and theoretical frame work of inventory management 3.2 Review of literature ANALYSIS OF INVENTORY MANAGEMENT 4.1 Analysis Part-1 Ratio Analysis(Inventory) 4.2 Analysis Part-2 EOQ Analysis SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION 5.1 Findings 5.2 Suggestions 5.3 Conclusion BIBLIOGRAPHY
IV
Description
Page No.
LIST OF CHARTS
Chart No.
4.1.1 4.1.2 4.1.3 4.2.1 4.2.2 4.2.3 4.2.4 4.2.5 Level of inventory
Description
Page No.
Inventory turnover ratio Inventory conversion period EOQ analysis for the year 2006-07 EOQ analysis for the year 2007-08 EOQ analysis for the year 2008-09 EOQ analysis for the year 2009-10 EOQ analysis for the year 2010-11
ABSTRACT
The purpose of inventory management is to ensure availability of raw material in sufficient qualities as and when required and also minimize investment in inventories. There is an essential to manage inventories efficiently and effectively in order to avoid excess investment. It is possible for a company to reduce the level of inventories to a considerable extent without any adverse effect on production and sales by using simple inventory planning and control techniques. The reduction of excessive inventories will create a favorable impact on the company profitability. Inventory turnover ratio, inventory conversion period are very helpful to know how effectively plays and control in the organization EOQ analysis will enables the organization to use of EOQ analysis is very effective and useful tool for classifying, monitoring and control of inventories.
CHAPTER-I INRODUCTION
Types of inventory
Normally the inventory has divided into two types. These, 1. 2. Merchandising inventory, Manufacturing inventory.
The manufacturing inventory has been subdivided into three types. These, 1. 2. 3. Raw materials, Work in process, Finished goods. Raw materials: Everything the crafter buys to make the product is classified as raw materials. That includes leather, dyes, snaps and grommets. The raw material inventory only includes items that have not yet been put into the production process. Work in process: This includes all the leather raw materials that are in various stages of development. For the leather crafting business, it would include leather pieces cut and in the process of being sewn together and the leather belts and purse etc. that are partially constructed.
Data collection
This study purely based on secondary sources of information. The necessary data calculated from annual report, books, journals and websites.
Period of study
This study covers a period of five years from 2006 2007 to 2010 2011. The accounting year commenced from April and ending with March of the next year.
Area of study
This study was conducted in Chettinad cement corporation limited, Puliyur, Karur District.
Modern cement
Modern hydraulic cement began to be developed from the start of the industrial Revolution (around 1800) ,driven by three main needs: Hydraulic renders for finishing brick buildings in wet climates Hydraulic mortars for masonry construction of harbor works etc , in contact with sea water.
Demand
World cement demand was 2,283MT in 2005, with China accounting for 1,064MT (47% of total). The expected demand for 2010 is estimated at 2,836 MT. China will increase its demand by 250MT during the period, an increase higher than the total yearly European demand.
2005
2010
Growth rate
North America
170
200
2.9%
Western Europe
208
236
2.2%
Asia/Pacific
1500
1900
5.2%
Other regions
405
500
4.7%
2283
2836
4.7%
Cement industry in India Source: www.google.com, www.ask.com, www.linkedin.com, en.wikipedia.com Chettinad Cement Corporation Limited
Year of establishment 4. Barak Valley Cements Ltd Head quarters Web site
Year of establishment 6. Binani Cement Ltd Head quarters Web site Year of establishment 7. Birla Corporation Limited Head quarters Web site Year of establishment 8. Burnpur Cement Ltd Head quarters Web site Year of establishment 9. Chettinad Cement Corporation Limited Head quarters Web site Year of establishment 10. Dalmia Cement (Bharat) Limited Head quarters Web site
1996 West Bengal www.binani.com 1919 West Bengal www.grasim.com 1986 West Bengal www.burnpurcement.com 1962 Tamil Nadu www.chettinadcement.com 1951 Tamil Nadu www.dalmiacement.com
Year of establishment 36. Shree Digvijay Cement Company Ltd Head quarters Web site
Year of establishment Head quarters 37. Somani Cement Company Ltd Web site Year of establishment 38. Sri Vasavi Inds. Ltd Head quarters Web site Year of establishment 39. Sri Chakra Cements Ltd Head quarters Web site Year of establishment 40. Stresscrete India Ltd Head quarters Web site Year of establishment 41. The India cements Ltd Head quarters Web site
1983 Andhra Pradesh www.anjanicement.com 1985 Andhra Pradesh www.srivasavi.com 1981 Andhra Pradesh www.chakracement.com 1983 Maharashtra www.stresscrete.com 1946 Tamil Nadu www.ramcocement.in
Year of establishment 43. UltraTech Cement Limited Head quarters Web site
Year of establishment 45. Visaka industries Ltd Head quarters Web site Year of establishment 46. Zuari cement corporation Ltd Head quarters Web site Source: www.google.com, info.shine.com, www.indiacatalog.com
S.No
Details
Year of establishment 1962
Corporate office Chennai. 2 The India cements Ltd Plant Places Ramanathapuram, Sangakiri, Ariyalur. Sankar cement, Coromandel cement.
Brand name
1950
Corporate office Chennai. Plant place Brand name Year of establishment Ariyalur. Ram co cement. 1979
Corporate office Madurai. 5 Janathacem industries limited Plant place Brand name Rajapalayam,madurai. Janatha cement, agsar cement.
generation, plantation, farms, logistics. Education, sports management, literature, art and music fields have also been contributed vastly. It is a matter of great pride and satisfaction that the group finds worldwide patronage and earns precious foreign exchange for the country. The group aims to broaden its horizons and reach and the zenith in this millennium under the yond, dynamic, enthusiastic, able leadership of Mr. MAMR Muthiah. The future of the companies in the house of chettinad is based on the time tested and proved guidelines of total customer orientation, technology in the service of man and business as an instrument of social service. To these timeless truths, we remain stead fast forever.
MISSION
To achieve & sustain cost leadership in the cement market. The harness technology to its full potential in a safe & clear environment in the entire business cycle & integrate quality with continuous improvement. To became a vibrant learning organization by building skills and competitiveness of employees for growth. To be the best and most respectable corporate citizen.
Chairman
Managing Director
Board of directors
President
Vice president
Senior Manger
Supervisor
Sales Officer
Vigilance Officer
Accounts Officer
Junior Officers
Mines-Karikkali works
Limestone Mines are located at about 3 kms. from the factory. The mines are fully mechanized and have also a terminator for mechanized breaking of individual boulders. The Crusher is located at Mines and crushed limestone is transported by long belt conveyors to factory.
Kiln-Puliyur Works
The finely grounded blended raw material is sent to a five stage kiln. Kiln is a key process in the manufacture of cement where the calcinations & chemical reaction take place. Coal fired burner (Controlled through latest solid & low feeder) is used to heat the air to 1400c and is fed from one end of the kiln. The data accusation and control center meticulously monitor the entire process including the temperature.
Calcareous Material
Argilseeous
Limestone
Material Clay
Crushing
Water Washing
Storage Tank
Storage Tank
Slurry Formation
Correction Basin
Pumping
Rotary Kiln
Coal Dust
Formation Of Clinker
Clinker Cooler
Gyp sum
Storage In silos
Distribution
Calcareous Material
Argilseeous
Limestone
Material Clay
Crushing
Crushin g Grinding
Grinding
Storag e
Storage
Coal Dust
Rotary Kiln
Formation of Clinker
Clinker Cooler
Gyp sum
Storage in Silos
Distribution
YEAR
1976 1977 1972 1978
Best Best Second Best National Safety Award (Mines)-(for lowest injury frequency rate Metal Mines Mechanized Open Cast).
Longest Accident Free Period. Best performance of the year. Conservationist of the year (for outstanding progress in the field of
Conservation of Energy, Metal Components & Machinery) NCBM National Awards (Improvement in Energy Performance). Second Best
Best Best TNEB Energy Conservation Award - (One among the 15 Energy Efficient
8 9
H.T. Industries of 2000 KVA) NCBM National Award Second Best for Energy Efficiency Performance
1998
1998
MILESTONES
0.4 MTPA cement production capacity with wet process plant installed at Puliyur. Modernized into dry process plant to a capacity of 0.8 MTPA with a kiln
YEAR
1967
capacity of 2000 TPD commissioned with modern vertical roller mills for fuel & limestone grinding.
1989
3 4 5 6 7 8
2 Nos. of 5.4 MVA Capacity WARTSILA DG set installed. 66 Nos. of wind electric Generator of total capacity 17.3 Mw installed at Poolavadi Udumaplet Taluk. ISO 9002 Certificate received. Stacker & Re-claimer for Limestone installed. Belt Elevator for Raw mill and Kiln feed installed. A) Impact Crusher for lime stone crushing at mines installed. B) Bag filter for coal mill grinding system. Vertical roller mill for cement grinding installed. Additional ESP installed for Kiln/ Raw mill to handle excess process gases. CIS/CFG Cooler installed. Low pressure cyclone installed.
1998
10
Latest Technology LV-Tech classifier installed in Raw Mill. The plant capacity increased to 1.2 MTPA cement.
2000
11 12 13 14 15 16
Green field Cement plant with capacity of 0.9 MTPA was commissioned at Karikkali. Rock breaker (Terminator) installed in mines. ISO 14001:2004 is implemented. Environment Management Service Certificate option. 1 No. 15MW Coal based Captive Power Plant commissioned in 12 Months at Karikkali. Fly Ash Silo construction work completed at Puliyur and Karikkali.
19
2007
20
2007
21
2007
24
2008
25
2008
26
2008
27
2008
28
2008
30
Brown field Cement plant with capacity 2.75 MTPA was commissioned at Ariyalur during October-2009. Coal based 1 x 15 MW capacity CPP was commissioned during Jan2010 Erection and Commissioning of 2 Cement Plants in World Record time at ariyalur 30 months from Bhoomi Pooja to commissioning highest
2009
31
production capacity for cement in a single location at Ariyalur Three No. 15 MW coal based captive power plants commissioned in 18 months at Ariyalur Chettinad Cement Technical team rated No1 by FLS Denmark at Ariyalur.
2010
32
Roller press with ball mill for cement grinding with capacity 0.5 million commissioned during February -2010 at Puliyur. Brown field Cement Plant with capacity of 2.5 MTPA was commissioned
2010
33
at Karikkali in March 2011 along with coal based 30MW captive power plant within the same premises Work is under progress for a new Green field production line of 2.5 MTPA
2011
34
cement with 1 No. of 30MW Coal based captive power plant in Kallur Village, Chincholi Taluk and Gulburga Dist of Karnataka state and expected to be commissioned in year 2012.
2011
Paavai Engineering College 3.1. CONCEPTUAL AND THEORITICAL FRAME WORK OF INVENTORY MANAGMENT
Inventory management is a process of evaluating and controlling method for inventory or stock level of the company. The purpose of inventory management is to diagnose the information contained in the stock book of the company, so as to judge the stock level and control methods of the firm. The analysis and interpretation of inventory management is essential to bring out the stock needed. The inventory management is an attempt to determine the stock and meaning of the stock book statement data so that forecast may be made of the future cost control of the company. The stock evaluation helps to understand how best the organization is functioning with good stock control. The analytical tools generally available to an analyst for this purpose are as follows, Inventory turnover analysis EOQ analysis
OBJECTIVES OF INVENTORY TURNOVER ANALYSIS, EOQ ANALYSIS The objectives of inventory turnover analysis EOQ analysis is to provide information about the stock level and control when purchase of raw materials of an enterprise that is useful to a wide range of purchasing power of raw materials. We have discussed in the previous paragraphs the utility of the components of inventory turnover and EOQ. Later we will us discussing how they are made use of by stock department o To study the stock book of the company o To evaluate the stock position of the company. o To find out the efficiency in utilization of stock materials to produce the goods.
USES OF INVENTORY TURNOVER ANALYSIS, EOQ ANALYSIS It is helpful in assessing the stock position and productivity position of a concern. The main objectives of a inventory turnover analysis are to assess The present and future stock capacity of a concern. To give corrective solution for the inventory problem. To differentiates the investment with EOQ and invest without EOQ for purchasing of the raw material INVENTORY TURNOVER RATIOS
.Bharathi pathak, Finance India Dec 2003 R. Hamsalakshmi-M.Manicham, Finance India Sep2 2009 Dr R.Dharmaraj Indian journal of finance volume4 Allen and Carolinian (2003)
Dr Sushil kumar Mehta, Indian Journal of inventory vol: 4 No: 2 Feb, 2010 Monika uppal, Indian Journal of inventory vol: 5 No: 1 Jan 2011
1387.83
2154.11
3496.76
4629.10
4693.96
The inventory level was found to be increased trend from 2006-2007 to 2010-2011. The overall inventory level position for the five years is satisfactory.
20000
15000
10000
5000
Work in process
1 2 3 4 5
5.46 per cent 5.65 per cent 3.78 per cent 4.24 per cent 5.50 per cent
Source: Annual reports of Chettinad Cement Corporation Limited The inventory turnover ratio was high in the year 2006-07 after that 2007-08 the inventory turnover ratio was decreased. The present value of inventory turnover ratio is good.
4.241793818 4 3.77696404
S.No 1 2 3 4 5
Inventory turnover ratio 5.46 per cent 5.65 per cent 3.78 per cent 4.24 per cent 5.50 per cent
Source: Annual reports of Chettinad Cement Corporation Limited The inventory conversion period is normally indicates the wealth of the company. The company wants to concentrates with its inventory conversion period.
120
100
96 86
80
66 60
64
65
40
20
Paavai Engineering College TABLE-4.2.1 EOQ ANALYSIS FOR THE YEAR 2006-07
Item
Annual requirement
EOQ
36 40 42 34.5 35 36.5
Source: Annual report of Chettinad Cement Corporation Limited The companys annual requirement for the year 2006-07 is 101000 tons of raw materials. They using investment with EOQ spent ` 787168. When the same in without investing EOQ is
` 882551. So the company saved ` 169432 in the year 2006-07.
120000
111982
110801
60000
40000
20000
Item
Annual requirement
EOQ
Iron Ore
33500
35
1.5
75
1250
95626
169675
74049
41 55 35 36 37
Source: Annual report of Chettinad Cement Corporation Limited The companys annual requirement for the year 2007-08 is 103700 tons of raw materials. They using investment with EOQ spent ` 590000. When the same in without investing EOQ is
` 921215. So the company saved ` 195739 in the year 2007-08.
180000
169675
171050
171050
153304
153304
120000 95626
100000
92787
80000
60000
40000
20000
TABLE-4.2.3
EOQ ANALYSIS FOR THE YEAR 2008-09
Item
Annual requirement
EOQ
13500 13500
34 36
1.5 1.5
65 167
1260 805
83789 135642
153905 151515
7046 15873
38 37 35
The companys annual requirement for the year 2008-09 is 98500 tons of raw materials. They using investment with EOQ spent ` 68646. When the same in without investing EOQ is 800543. So the company saved ` 114076 in the year 2008-09.
`
CHART-4.2.3
EOQ ANALYSIS FOR THE YEAR 2008-09
180000 160000 140000 120000 100000 83789 80000 60000 40000 20000 0 Iron Ore Lime Stones 153905 151515 135642
166775
Clay Ash
Sulphur
Gypsum
Bauxite
TABLE-4.2.4
EOQ ANALYSIS FOR THE YEAR 2009-10
Item
Annual requirement
EOQ
Iron Ore
34000
36
1.5
95
1271
123231
217605
94374
Lime Stones
12500
37
727
127770
146226
18456
Clay Ash
14000
40
175
864
152496
164575
12079
38 36 37
Source: Annual report of Chettinad Cement Corporation Limited The companys annual requirement for the year 2009-10 is 111500 tons of raw materials. They using investment with EOQ spent `875092. When the same in without investing EOQ is
`1132819. So the company saved `2577276 in the year 2009-10.
146575 121938
100000
50000
Item
Annual requirement
EOQ
Iron Ore
38000
37
1.75 105
1268
135358
268736
133378
Lime Stones
13500
35
1.25 185
869
161852
167588
5736
Clay Ash
12000
38
195
551
109099
157770
48671
Sulphur
15000
40
3.25 185
608
114455
187225
72770
Gypsum
17000
40
1.25 194
1043
203646
221110
17464
Bauxite
18000
39
2.75 200
715
144965
242235
97270
157770 144965
50000
5.1 FINDINGS
RATIO ANALYSIS (INVENTORY)
Paavai Engineering College In inventory level of the company, the in inventory level has been increased year
by yea. There is no problem in the inventory level of the Chettinad Cement Corporation Limited. In inventory turnover ratio the ratios of the year has been finded as low in the years of 2008-09 and 2009-10. After those periods the inventory turnover ratio has slightly increased in the year 2010-11. Even though that level is quite low when compare with 2007-08. In inventory conversion period is finded as good level. Even though they wants to keep the inventory conversion period as low.
EOQ ANALYSIS
In EOQ analysis for the year 2006-07 to 2010-11 is good. For this year they followed EOQ with investment for purchase of goods.
In EOQ analysis for the year 2007-08 to 2010-11 is good. For this year they followed EOQ with investment for purchase of goods.
In EOQ analysis for the year 2008-09 to 2010-11 is good. For this year they followed EOQ with investment for purchase of goods.
In EOQ analysis for the year 2009-10 to 2010-11 is good. In this year the EOQ with investment and EOQ without investment are same.
In EOQ analysis for the year 2010-11 to 2010-11 is good. All years of EOQ is followed only investment with EOQ.
5.2 SUGGESTION
RATIO ANALYSIS (INVENTORY)
In EOQ analysis there is no problems finded in findings for the Chettinad Cement Corporation Limited. Even though they want to keep that situation in upcoming years also. Then only they can retain position.
In EOQ analysis there is no problems finded in findings for the Chettinad Cement Corporation Limited. Even though they want to keep that situation in upcoming years also. Then only they can retain position.
In EOQ analysis there is no problems finded in findings for the Chettinad Cement Corporation Limited. Even though they want to keep that situation in upcoming years also. Then only they can retain position.
In EOQ analysis there is no problems finded in findings for the Chettinad Cement Corporation Limited. The EOQ was finded as same in the concept of EOQ with
5.3 CONCLUSION
BIBLIOGRAPHY
WEBSITES en.wikipedia.com Info.shine.com www.ask.com www.chettinad.com www.google.com www.indiacatalog.com www.inventoryquzz.com www.reportjunction.com www.scribed.com www.yahoo.com