Project On Inventory Mgt.

SMIORE LTD DEOGIRI INVENTORY MANAGEMENT
Acknowledgement
I would complete my project as my level best. This
project are the encouraging response from all the respondents
who spread their valuable time to provide me with information
to them, I express sincere heart full thanks. I am grateful to
“SANDUR MANGANESE IRON ORE LTD.” for giving me this
opportunity for doing project.
First of all would like to express my sincerer thanks to

the Dr. P.C. Nagnur, Chairman of commerce dept and internal
guide Dr. A.P. Hosmani, P.G. Centre, dept. of commerce,
Nandihalli, Sandur.
I am highly indebted to C.R. Gopal (AGM),HRD Dept.
For granting permission to undergo summer project in SMIORE

Ltd.
I extent my sincere thanks to T. Panduranga(DGM) &

Ajith Kumar .S(Accounts Manager) for valuable guidance and
support for preparing this report. He has enriched me at every
stage of my project works with is his academic and
humanitarian approach.
Last but not the least I am grateful to my parents.

Lectures and all my friends who helped me in bringing and this
project report.
1
DEPT OF COMMERCE , P.G. CENTRE,NANDIHALLI, SANDUR
Meera Bai .G
Declaration
I, the undersigned a student of GUPG Centre Nandihalli.
Here by declare to fullest of my knowledge and belief that the project presented is
solemnly done by me for SMIORE. The project work entitled “INVENTORY
MANAGEMENT IN SMIORE LTD.” For partial fulfillment of M.com IV Semester.
Place: Nandihalli
Date;
MEERA BAI. G
2
INDEX
CHAPTER TITLE
1 Research Design
➢ Introduction
➢ Statement of the problem
➢ Objective of study
➢ Scope of study
➢ Methodology
➢ Limitation of study
2 Company Profile
➢ Introduction
➢ Nature of the business
➢ Vision and mission
➢ Major customers
➢ Social service
➢ Board of director
➢ Various dept
➢ EPS
➢ Ownership pattern
3 Theoretical framework with introduction of
inventory management
4 Data analysis and interpretation
➢ Ratios
➢ Balance sheet
➢ Profit and loss a/c
5 Findings and conclusions
➢ Findings
1
➢ Conclusion
➢ bibliography
Chapter-1
RESERCH DESIGN
 Introduction
 Statement of the problem
 Objective of the study
 Methodology
 Limitation of the study
1
General Introduction:
Working Capital is the process of planning and controlling

the level of mix of the current asset of the firm as well as
financing these assets. Specially, working capital management
requires financial manager to decide what quantity of cash, other
liquid asset, debtors and inventors of the firm will hold at any
point of time, in addition, the finance manager must decide how
these current assets are to be financed. Financing choices
includes the mix of current assets as long term liabilities.
Inventory is a major component of current assets; differ from

other current assets because finance alone is not involved.
Rather, all the functional areas Finance, Marketing and Purchasing
are involved. The view concerning the appropriate inventory
levels of inventory would differ among the different functional
area. The job of the financial manager is to reconcile the
conflicting view points of various functional areas regarding the
appropriate inventory levels in order to fulfill the overall objective
1
of maximizing the owner’s wealth. Thus inventory management of

other current assets should be related to the overall objectives of
the firm.
The finance manager has to analysis decision such as-
How much inventory should the firm keep?
Statement of Problem:
Financial statement can provide valuable insights into a firm

performance. Analysis of financial statement is useful for the
company to evaluate its own performance. Users of financial
statement are Lenders, Investors, Security analysis, Manager,
Government and others. Financial statement analysis may be
done for a verity of purposes, which may range from a simple
analysis of the short-term liquidity position of the firm n various
areas. It is helpful in assessing corporate excellence, judging
credit worthiness, forecasting bond ratings, predicting bankruptcy
and assessing market risk.
To evaluate the effectiveness of operations and to determine it

success an analyst has to combine quantitative results with
qualitative factors. For instance a company’s current profitability
2
may be low. However, because of action initiated by the

management may lead to better performance of the future.
Objectives of the study:
The study on inventory management in SMIORE Ltd. has

following objectives:
➢ To study requirement of inventory of SMIORE Ltd.

➢ To study the inventory method and procedure adopted by
SMIORE Ltd.
➢ To study and analysis various ratios like inventory ratio to
working capital.
➢ To study of inventory system of SMIORE Ltd.
➢ To get exposed to all department of the access
➢ To know the financial position of the company.
➢ To assess the financial strength and weakness of the firm to
give valuable suggestion to attain operational excellence.
2
Scope of the study:
The study covers all the components of inventory

management & materials management. The study of inventory is
limited to single mining organization only SMIORE. The study is
based on past and present trends but it does not take into
consideration future trends, which is out of the scope.
Methodology of data collection :
Research methodology:
Research methodology is a systematic way for solving any

research problem. It is science of analyzing how research is done
scientifically. It studies the various steps that generally adopted
by researcher in studying the research problem.
Sources of data:
2
To compile the required information; secondary data had been

collected for this project using the financial data directly drawn
from company annual reports. Other books of accounts
maintained by the company news Bulletins, Magazines and
industrial data are collected by interaction with employee of the
corporation.
Limitation of study :
These are some limitations of the study; which are listed below:-
The study is limited to five year only. So it may not reveal
long term position of the company.
Time is major constraint which limited the extent of study.
1
The study included collection of data through interaction
with official and the finding are based on the premise that
the respondents have given correct information.
The study is limited only to the published annual reports.
1
Chapter-2
COMPANY
PROFILE
 Introduction
 Nature of the business
 Vision and Mission
 Major customers
 Social service
 Board of Directors
 Various depts.
 Eps
 Ownership pattern
1
CHAPTER – 2
COMPANY PROFILE
INTRODUCTION:
The general mining company (a Belgium Company) acquired

the mining visits in 1907 from M/s Jobson (jambon) and company
Ltd., and exploited manganese till 1953. The present Sandur
Manganese And Iron Ores ltd., was established by highness Late
Shrimanta Yeswantha Rao Hindu Rao Ghorpade in 1954. In the
year 1964 he converted the co., as private limited. The total lease
area is 4715 hectares out of which Deogiri lease in 1886 hectares.
SMIORE is situated in the historic valley of Sandur in Bellary

district, Karnataka state.
The valley height is 430 mt from sandur Town SMIORE mining is

divided in 3 groups.
 Deogiri Group
 S.B.Halli Group
 Ramagad Group
1
The company has got a very good reputation of engineering

skills in creation and maintains of mining machineries for the past
70 years the same skills are mentioned till date. However during
earlier year the of machinery were entirely different presently
mining machineries consists of heavy earth moving equipments
like hydraulic excavators, front end loaders, portable air
compressor
Mobile creshars and screen plants etc,
SMIORE Company’s main motive is to extract manganese ore and

iron ore from the mines. It also has hydel project in Hassan.
In the year 2009 and 2010 the production was
Manganese Ore : 225756 tonnes

Iron Ore : 1813188 tonnes
The corporate office of the company is situated in Bangalore.
1
NATURE OF THE BUSINESS
A success of a firm is largely depends on how

effectively and efficiently it utilize the available resources. In
modern business world it is not only important to carry out the
business of the firm effectively but the firm should also focus on
innovation of new types of product. Mineral Manganese and IRON
ORE being the most abundant metal in the world. Its usage in
many forms has been found since many years. So the very first of
extracting iron from its ore plays a crucial aspect.
SMIORE (the Sandur Manganese and Iron Ore ltd )

formed for exploration and exploitation of mineral resources.
VISION and MISSION
Vision : SMIORE trust on the conduct of its business

activities and enhance the all those who are associated with the
company viz., Shareholders, Customers, suppliers, Government,
Creditors, Dept of public enterprises and Society at large.
Mission: To emerge as global mining organization

with international standard of excellence, rendering optimum
satisfaction to all its stake holders.
QUALITY POLICY
1
SMIORE Ltd is committed to achieve sustained

consistency in quality of IRON ORE mined, processed and
produced by adopting continuously improving scientific quality
management system though achieve involvement of all the
employees to ensure optimum satisfaction of all the stakeholders.
MAJOR CUSTOMERS OF SMIORE ARE:-
1) Bhilai Steel Plant : Orissa
2) Tata International Ltd., : Chennai
3) Nava Bharat Ferro Alloys: Andhra Pradesh
4) Indsil Electro Smelts Ltd: Kerala
5) Maithan Alloys Ltd.,: West Bengal
6) Jindal South West : Karnataka
It also Manganese to the following country:-
1) China
2) Japan
2
PRODUCTION AND SALES FIGURES OF SMIORE:
MANGANESE ORE: for the past 5 years
Year Production Sales

2005-06 2095017 215154
2006-07 181555 233041
2007-08 259228 243617
2008-09 240826 295434
2009-10 225756 283445
Source: Annual reports of SMIORE Ltd.,
1
IRON ORE
Production and Sales of IRON ORE for the past 5 years
Year Production Sales
2005-06 652300 652300
2006-07 736528 736528
2007-08 1158315 1158315
2008-09 1505674 1448817
2009-10 1813188 1535929
Source: Annual reports of SMIORE Ltd.,
Different Types of Grades of Manganese Ore:-
SUPER GRADE
Fm Grade
A Grade
C Grade
SOCIAL SERVICES OF SMIORE:-
 Construction of Adarsha community Hall
1
 Construction of School and Colleges
 Construction of Arogya Hospital in Sandur
 Providing bus facilities for students
 Visits of doctors and health camps near by villages.
AWARDS:
 National safety awards in lowest injury frequency rates
 First prize zonal level competition is best female worker in
2004
 Anully Safety week awards .
1
 COMPANY WON STATE LEVEL AWARDS:-
 Over all performance
 Afforestation
 Waste sump Management
 Top soil Management
BOARD OF DIRECTORS
M. Y. Ghorpade : Chairman Emeritus
S. Y. Ghorpade : Chairman and Managing Director
P.K. Devanathan : Director (upto 6 jan 2010 )
Nazim sheikh : Executive Director
S. H. Mohan : Technical Director
Syed Abdul Aleem : Director
M. S. Ramarao : Director
E. B. Desai : Director
Sushiladevi Ghorpade : Director( june 29/2010)
S. R. Sridhar : Director (mines)
N. C. Vishwanathan : Director
R. Subramanian : Director
1
VARIOUS DEPARTMENTS
For administrative and functional convenience the following

departments are working on the company. Each of these
departments is having their own duties and responsibilities.
 Personnel and Welfare

 Finance department
 Mining department
 Civil department
 Mechanical and electrical department
 Quality control department
 EPS [Environment Planning Survey]
 Purchase department
 Sales department
 Stores department.
PERSONNEL & WELFARE DEPARTMENT:
This department job is not only to take care of the employees

law R to R that is recruitment to recruitment but also after leaving
service on superannuating by extending the facilities like pension,
post retirement, medical aid etc., the functions are:-
1
➢ To recruit promote qualified personnel against recruitment

based on appropriate education experience and training.
➢ To carry out the activities related to administration.
➢ To maintain harmonious industrial relations in the company.
➢ New welfare schemes verified and added.
➢ Maintenance of records of workers, preparation of wage
sheet etc.,
FINANCE DEPARTMENT
Finance department is the main department. This department is

lifeblood such as capital expenditure sales realization etc., the
functions are
➢ Financial accounting banking and related financial activities

➢ To ensure that the accounts are maintained properly
➢ Effective utilization of funds
MINING DEPARTMENT:
This is one of the department is SMIORE the function of this

department is:
➢ To co-ordinate with senior mechanical department for proper

availability of required mining machinery for extracting
minerals from the mines by using the explosives and
1
blasting, drilling, from extracting minerals by using the

explosives and blasting & drilling.
2
MECHANICAL AND ELECTRICAL DEPARTMENT:
This Department Function is To:-
➢ Maintenance of jeeps, trucks, buses and other equipments to

facilitate proper and timely movement of men and materials
➢ Maintain and operate electrical substation in the mine and
township.
CIVIL DEPARTMENT:
This department deals with all civil works of the project. This
includes construction of building and houses for the employees,
provision of water, repair and maintenance of building and
maintenance of the environment by plantation.
STORES DEPARTMENT:
The main function of this department is to maintain the

consumable stores required for production and maintaining
without any shortcomings.
QUALITY CONTROL DEPARTMENT:
This department function is:
○ To check the quality of the ore Manganese and Iron.

According to quality of the ore.
1
○ To correctly ascertain the requirement of specified type of

one as per customer contract.
○ Follw up the rules and regulation of the 1962 act of qulity
control.
1
PURCHASE DEPARTMENT:
This department collects requisitions and indents from all

the departments who require materials like explosives and other
related required for productions department, printing and
stationary to administrative department, civil materials to civil
department after collecting requisition purchase department
sends enquiry to the market and collects quotation and then
finalize from whom the purchase should be made on price, quality
terms of payment etc.,
SALES DEPARTMENT:
Company is producing manganese and iron ore to sell in the

domestic and export material since 1954 and even prior to that
the one so produced is sold to all Ferro alloy plant and steel
plants. This department is stationed at Sandur and Bangalore
Major quantities are sold to Maharasthra, Karnataka, Andhra
Pradesh and Kerala and also to the states the Gujart west Bengal,
Orissa etc., this is the main department in a company on which
entire company’s progress is depended.
1
EPS (ENVIRONMENTAL PLANNING & SURVEY):-
EPS stands for Environmental Planning and Survey. Three

sections are grouped into one department in environment
plantation work is done. Green belt is developed check dames are
built to avoid pollution. All official work concerned with Karnataka
state pollution control board is done regarding taking permission
for various jobs regarding mining. In survey and planning survey
is carried out for regular mining surveying is done within the lease
areas. Plans are done after survey of lease area.
WELFARE AMENITIES
Non-Statutory welfare amenities:-
The company is providing a good number of welfare

schemes to its employees which are unique form any
organization.
a) SUBSIDIZED RATION SCHEME:-

The Policy of the company is to ensure that essential
commodities made available to all the employee is given a ration
card, which entitles him to get subsidized ration worth of Rs.850 ti
1000/-
1
b) SUBSIDIZED L.P.G. CYLINDER:

With a view to prevent cutting of trees by the employees for
fuel, the management has introduced supply of L.P.G. to the
employee half of the amount is paid by the company and
remaining half amount is paid by the employees.
c) DEPARTMENT STORES:
Essential items like detergents, cosmetic, stationary and other
house hold commodities are supplied through the departmental
store run by SMIORE employees co-operative society.
d) RECREATION CLUB/ LIBRARY

Recreation club at Deogiri and at S.B.Halli campus are
provided with indoor games, outdoor games, reading room with
leading newspaper, books periodicals in Kannada, English
Languages.
e) TRANSPORT FACILITIES:-
The company has provided convenience to the employees
and the children who are studying in schools/colleges at sandur or
Yeshwanthnagar.
1
Free transportation facility is been provided to the staff who

travel from Sandur to Deogiri and from Deogiri to Sandur.
f) FESTIVAL GIFT/ ADVANCE:-

Festival gift is given on two festivals occasions viz Deepawali
and Ugadi apart from which interest free interest free festival
advance is paid to all employees.
g) MEDICAL REIMBURSEMENT:
Apart from the free medical checkup and treatments in
company’s dispensaries, the management sanctions the medical
reimbursement to meet out the medical expenses at outstation
hospital to the employees as per the scheme.
h) COMPANY PENSION SCHEME:

SMIORE has introduced the company’s pension scheme with
effect from 01.01.1992 where in every employee on completion of
a minimum of 20 years of service in the company’s eligible for
company’s pension apart from employees provident fund. In case
of death/ medically unfit of an employee, the minimum service for
pension is 10 years.
2
i) COMPANY SCHOLARSHIPS:
The company sanctions scholarships to the meritorious
children of its employees to encourage and pursue their
education. The employees children who score 50% and above are
eligible for scholarship.
j) AROGYA:
The arogya health center run by the company at Sandur is a
full-fledged health unit managed by the experienced doctors. The
unit is equipped with two mobile ambulance vans with latest
medicals surgical instruments and catering to the medical needs
of the residents of Sandur and near by villages irrespective of
whether they are the company’s employees or not.
k) Adarsha community hall :

Sandur was lacking a community hall. Keeping this in view
“Adarsha community hall” was constructed in 1991. This
community hall is used for various social and other functions.
1
SATUTORY WELFARE AMENITIES
CANTEEN: Two well equipped canteens are provided. One

each at Deogiri and S.B.Halli.The food items are supplied at the
subsidized rates to the employees.
SAFETY ITEMS:
Safety items such as shoes, uniform and rain coats are been
provided to employees who are working in mines.
MEDICAL EXAMINATION
As per the rule 29(b) of mines rules 1955, initial and

periodically medical examination of mining personnel are
undertaken by the management for detection and prevention of
diseases connected with mining activity.
HOUSING:
781 quarters having amentias such as free electricity, water

etc., are provided to employees who reside in Deogiri or S.B.Halli
campus. The remaining workmen come from nearby villages to
whom H.R.H is being paid.
1
GRATUITY:
The Company pays gratuity to its employees as per the

payment of gratuity act,
MEDICAL FACILITIES:
Two hospital are managed by the qualified doctors and

medical staffs are functioning.
PROVIDENT FUND SCHEME:
The employees provided fund scheme is in existence with

12% of wages/ salary contribution by the employees and equal
share by the employer.
MATERNITY BENEFIT:
Maternity benefit is provided as per maternity benefit act

1965.
1
Shareholders pattern as on 31/march/2010
Categories No of % to total
shares
Promoters, Directors and 6506450 74.36

their
Relatives and their

associates
Banks and Financial 129028 1.47

institutions
Mutual Funds 2650 0.03
Insurance Companies 100000 1.14
Foreign Institutional 5350 0.06

investors
1
Other bodies corporate 490971 5.61
Public 1515551 17.33
Total 8750000 100
1
Chapter-3
THEORETICAL FRAMEWORK WITH

INTRODUCTION OF INVENTORY
MANAGEMENT
➢ Introduction
➢ Meaning
➢ Motives for holding
➢ Kinds of inventory
➢ Tools and Techniques of inventory
management
➢ Inventory valuation method –periodic
➢ Why firm holding inventories
➢ Risks
➢ Scope of inventory
➢ Objectives
➢ ABC Analyses
➢ Modules of inventory management system
2
2
Inventory Management
Introduction:
Financial Management is closely related to various discipline and

field study namely Economics, Accounting, Marketing, Production
and Quantitative method. Financial Management if thus an
integral part of the overall management and is not totally
independent area.
Finance is closely related to both Macro and Micro Economics.

This provides an understanding of the institutional and business
environment which the firm operates e.g. Banking System, Money
and Capital Markets etc., theory of firm? a financial manager uses
these to run the firm efficient and profitably similarly he depends
on the accounting as sources of information data related to the
past present and future financial position of the firm,
Inventories are usually the largest current asset of a business and

proper measurement of them is necessary to assure accurate
financial position of the firm.
1
If Inventory is not properly measured and Revenues cannot be

properly matched. When ending Inventory is incorrect, the
following balances of the Balance sheet will also be incorrect as a
result: merchandise Inventory, total asset and owner’s equity.
When ending Inventory is incorrect, the cost of merchandise sold
and net income will also be incorrect on the income statement.
Inventory Management:
Inventories are the stock of the product that a company is

manufacturing for sale and the components that makes up the
product. They may be in the form of
◊ Raw materials
◊ Work-in-progress
◊ Finished goods
◊ Inventories of supplies viz. Spares and Consumables etc.
Inventories constitute the most significant part of Current assets

of a large majority of companies in India. On an example
Inventories constitutes 57% of current assets in the
manufacturing public limited companies.
2
The need for holding such a large % of inventories arises from the
fact that almost always production and delivery of goods are not
instantaneous and thee for it is necessary to hold stock of Raw
materials, Work-in-progress, R and M spares, industrial
consumable & finished goods to meet the fluctuation in the
demand and production desired quantity of sale.
Motives for Holdings :
 Transaction Motive :
It emphasizes the need to realization of inventories to facilitate

smooth production and sales operation.
 Precautionary Motive :
It emphasizes the need to hold the inventories against the risk of

unpredictable changes in demand and supply of ever and other
factors.
 Speculative motive:
It influences the decision to increase or the inventory levels so as

to take advantage of price fluctuations.
2
The three motives are to be balance properly to arrive at the

optimum level of inventory in order to effective control.
Kinds of Inventory
♦ Raw materials.
♦ Goods-in-progress.
♦ Finished goods.
Tools and Techniques of Inventory

Management
Effective Inventory Management requires an effective control system for

Inventories. The following are the important Tool and Techniques of Inventory
Management.
 Determining of stock level like Minimum level, Max. level, Recorder level.
 Classification and codification of Inventory.
 Determining of safety stock.
 Selecting a proper system of ordering for Inventory.
 Determining Economic order quantity (EOQ).
 Perpetual Inventory system.
 Always better control analysis.
 Vital essential and desirable (VED) analysis.
2
 Inventory turnover ratio.

 Aging schedule of Inventories.
 Preparation of Inventory reports.
INVENTORY VALUATION METHODS-PERIODIC

The periodic system records only revenue each time a sale is made.
In order to determine the cost of goods sold, a physical inventory must be taken.
The most commonly used inventory valuation methods under a periodic system
are
1) First-in First out Method (FIFO).
2) Last-in First out Method (LIFO).
3) Weighted average cost Method.
These methods produce different results because their flows of costs are based
upon different assumption.
The FIFO Method basis its cost flow on the chronological order purchase are
made, while the LIFO method bases it cost flow in a reverse chronological order.
The average cost method produces a cost flow based on weighted average of unit
costs.
Why firm hold inventories:
Firm hold inventories for
Purchasing Production Selling
Which Helps in
♦ Gain quantity
1
♦ Avoid losses on sales

♦ Reduce order discounts
♦ Achieve efficient Production
♦ For Preventive maintenance of plant and machineries
Although the inventory management usually is not the direct operating

responsibility of the Finance Manager; the investment of funds in investment of
funds in inventory is an important aspect of the financial management. The
Finance Manager is concerned with the risks involved in carrying inventory.
The Risks are :
 The market value of specific inventories may be less than the value at which
they were acquired.
 Inventory obsolescence in the form of technology.
 High cost of holding inventory e.g. holding in stores and related expenses
Inventory Management Provides :
➢ Up-to-date information about data processing resources through the creation

and archiving of record in a centralized repository.
➢ Financial records specific to a single component or groups of components.
➢ Component status indicators to identify a component as Active (A),
Redeployed (R), Donated (D) of Terminated (T).
➢ Component Criticality definition (1-5, with 1 being most critical).
➢ Service records for all components in the inventory.
1
➢ Date used to support configuration diagrams of the hardware and software

components contained within specific location of the entire date processing
environment.
➢ Reports can be generated from the Inventory and Asset Management System
that would project the amount of revenue that can be generated through the
sale of surplus equipment or to define the number of components that have a
critically rating of ‘I’ so that you can project the costs associated with
maintaining duplicates of critical equipment at recovery sites. Combining
the two reports would allow you to reroute equipment being scheduled for
termination to the Recovery Facility and eliminate the additional costs
associated with purchasing duplicate equipment in support of recovery
needs.
Scope of Inventory
The Inventory Management discipline encompasses all system and data network
elements from the mainframe to the server level throughout the enterprise.
All mainframe and data network based hardware and software assets must be
identified and entered into the Inventory System. Any changes to these
environments must be reflected in the Inventory System.
Financial and Technical product information must be available through the

Inventory System, as needed to support the functional responsibilities of personnel
within the finance and contracts management departments.
1
Asset critically must be included with asset descriptive and financial information,
so that the Recovery Management department is supplied with the information it
requires. Recovery actions must be implemented to safeguard critical assets.
Asset status must be included in the Inventory Management System, so that the
component(s) can be served in adherence to Legal, Environmental, Business and
Industry requirements. This process should be used to drive the facilities
management department via form routing when components change status from
active to Redeploy, Donate and Terminate of scrap. An audit trail of activities
associated actions must be maintained to certify actions and eliminate legal and
civil exposures.
The Standards and Procedures Manual section relating to Inventory Management

must be created and published. This section must descriptive the process by which
assets are identified, entered into the Inventory Management System, Tracked and
finally deleted. All information needed by personnel to perform inventory
management must be clearly described within this S&P Manual section.
Objectives
The objectives of Inventory Management is to manage the physical and logical
properties of I/S resources and their relationship, while ensuring that services level
commitments are achieved. This process will:
 Ensure efficient and timely identification of vital corporate assets.

 Assist in managing the enterprise-with inventory.
 To identify and track all data processing assets in an Inventory System
repository.
1
 To define the process by which assets are identified and maintained in the
Inventory System.
 To provide Inventory System access to all necessary personnel (data entry,
update and deletion).
 To provide a full range of reports that will satisfy informational
requirements.
 To document the Inventory Management System within the standards and
procedures manual.
 To provide training to personnel responsible for supporting the Inventory
Management System.
The following analysis would be conducted in this regard:

a) Standardization and variety reduction.
b) Codification
c) Non-moving analysis.
d) ABC analysis.
e) High value holding analysis (XYZ).
f) Review of slow moving items.
g) Insurance item.
h) Indigenous development.
i) Review of pending orders and indents.
j) Monthly receipt of items having value Rs. 50,000 and above & the action
plan of drawl consumption.
k) Depot Inventory analysis.
l) Inventory analysis monthly coded Group Wise
For purpose of planning, it is necessary to classify the materials. Materials are
classified into three basic categories.
1
I. Spares
II. Stores other than spares
III. Construction stores
These are also classified and reviewed as Fast moving, Slow moving, Non
moving and Insurance items.
A Fast Moving Items: It is an item which has moved at least once in five years.
Slow Moving Items: It is an item which has not moved at least once in five
years.
Non Moving Items: These items are that items which has not moved for the
last five years.
Insurance item is normally never required. This is neither fast moving nor slow
moving item. Its consumption pattern is not known. Normally, this is expensive
item with long lead time. Its possession and consequent cost insurance against rare
failure which the project could ill afford. The guidelines for declaring the insurance
items are to be followed per annexure 2-1.
Slow moving items of unit value of Rs. 50,000/- or more would be known as high
value slow moving items.
All slow moving items of unit value between Rs. 10,000/- and Rs. 50,000/- would
be known as medium value moving items.
2
All slow moving items of unit value lower than Rs. 10,000/- would be know as low
value moving items.
ABC ANALYSIS
All spares and be subjected to consumption stores means for specific construction
activities should be subjected to consumption analysis covering specific periods.
Items constituting 70% of the total annual consumption by value will be classified
as ‘A’ class items. Only about 20% items by number would normally come under
this category.
Items constituting the next 20% of annual consumption will be classified as ‘B’
class items. About 20% items by number would fall under this classification.
The remaining moving items constituting 10% consumption value would be

classified as ‘C’ class items. Very large number of items number would be
comparatively very low.
Table below suggests the approach for both ABC analysis and non-vital divisions:
Vital Non-vital
A&B items are Have with care Have very few
Expansive
C items are heap Have plenty Have necessary
quantities.
All issues must be accurately recorded in the stores. All concerned technical
managers should that the items drawn are consumed in a normal time and not
allowed to remain in sub-store.
1
LEAD TIME
First two months of the review cycle quarter should be utilized for reviewing and
raising indents.
Normal lead time should be taken into account to know as to when the expect
deliveries.
It is desirable to restrict the internal lead time to 5 months. Roughly 2 months will
be devoted to finalise PR sheets and raising indents and 3 months for placing
purchase orders. Lead time of different items groups may be indicated as proforma.
CONSUMPTION NORMS
With regard to General Stores, Realistic, Practical norms would be laid against
which consumption would consumption would be compared and investments
made.
In case the physical stock figures and those on computer print outs do not tally,
urgent action would be taken and special efforts would be taken and special efforts
would be made to reconcile the figures, otherwise this would interface with
forecasting and availability of items.
STANDARDISATION AND VARIETY REDUCTION

General Stores under different subgroups like Fasters, Paints, Electrodes,
Lamps, Pipe fittings, Wire ropes upholsteries items etc. should be subjected to
critical scrutiny for standardization the size etc. this will help in reducing the
number of items required to be held under these sub-group and ensuring better part
1
numbers for different Equipments, but on a detailed analysis of certain categories

of items like Oil seals, Bearings, ‘O’ rings, Hoses, Grease fittings, Washers, ‘V’
belts, Filter elements etc. could be listed under different sizes and number and the
same should be provisioned according to the size rather than part numbers.
CODIFICATION
In order to avid holding identical items under different nomenclatures, it is

necessary to identical items through a common system basing on Specification,
Sizes, Materials, Appearance etc. this is achieved by codifying the items through a
Alpha Numeric etc. system. Corporation has adopted a nine digit code for
specifying the stores and spares under different groups.
INENTORIES :
Items of Inventories as certified by the management are valued on the basis

mentioned below :
○ Finished Goods: At cost OR Net Realizable value whichever is lower.

○ Work-in-progress: At cost OR Net Realizable value whichever if lower.
○ Work-in-progress-Consultancy Contract job: At Cost.
○ Stores & Spares not moved for 5 years and above identified as obsolete by
technical assessment: Re. 1 per unit.
○ Stores-in-Transit: At cost.
○ Loose tools & Implements: At cost on weighted average method.
○ No credit is taken in the Accounts in respect of :
2
○ Stock of run of mine ore, embedded ore, low grade ore of Kumaraswamy
mine and slimes in case of iron ore.
○ Stock of run of mine ore generated during construction period pending
assessment of quantity and salability.
Modules of IMS
Inventory Management System developed in oracle 7.3 under GUI environment

dividend into 6 modules
Indenting
Purchasing
Issues
Receipts
Finance
Masters
Reports
Queries
Indenting :
Indenting Module covers user Indent, Material Indent, Purchase Indent, ARS
Indent, Indent Direct Entry and Indent Amendment etc.
Purchasing :
Purchase Module covers Raise an Enquiry, Prepare quotations received from
Vendors, CST generation, Vendor selection and Purchase order preparation.
1
Receipts :
Receipt Module contains SIT preparation, DMR Entry, Invoice preparation, RV
Inspection, Accepted by custodian and Store Return Notes, Transfer in etc.
Issues :
Issues Modules covers Raise a MRN by user, Authorized by store in charge,
Prepare an issue voucher by custodian and Transfer outs etc.
Finance :
This Module contains user Indent, Purchase Indent, ARS Indent Generation,
Indent Direct Entry, Indent Amendment, User Purchase Indent Cancellation etc.
Finance Module covers Allocation Budget, Reallocation Budget, plus/minus
Adjustments and Adjustment against RV etc.
Masters :
Masters contains Item Master, Vendor Master, Vendor Master, GL Master, CC,
Equipment Master, Terms & Values Master; User & User privileges Master,
Profit Master etc.
2
Chapter-4
DATA ANALYSES AND

INTERPRETATION
◊ Working capital statement

◊ Ratio of inventory to working capital
◊ Inventory Turn Over Ratio
◊ Inventory holding
◊ Current Ratio
◊ Quick Ratio
2
ANALYISIS & INTERPRETATION SECONDARY

DATA
Working capital statement from 2005-06 to 2009-2010
2005- 2006- 2007- 2008- 2009-

Current assets
06 07 08 09 10
1326.2 1112.4 4333.1 1236.9
Inventories 861.77
6 3 5 9
3879.7 3750.3 3212.1 4364.8 5572.2
Sundry Debtors
4 4 5 0 1
Cash & Bank 1951.1 2085.0 3136.4 3532.2
442.17
balance 7 6 4 1
1645.7 1759.2 3187.5 7297.4
Loans & Advances 894.78
7 5 6 2
7293.9 7457.3 8168.8 15021. 17638.
TOTAL (A)
4 6 9 95 83
Less: Current
Liabilities &
Provisions
Current
1
Liabilities
2297.4 14065. 6563.2 10860. 13018.
Liabilities
7 25 5 66 16
767.77 1102.4 1950.2 2695.7 2795.1
Provisions
2 7 0 0
3065.2 15167. 8513.5 13556. 15813.
TOTAL (B)
4 70 2 36 26
Net working 4228.7 (7710.3 (344.6 1465.5 1825.5
capital (A-B) 0 4) 3) 9 7
Ratio of Inventory to working capital
In order to ascertain that there is no over stocking, the ratio

of inventory to working capital should be judged. It is worked out
as follows.
Inventory
Working Capital
Working Capital is the excess of Current Assets over Current

Liabilities. Increase in volume of sales, requires increase in size of
Inventory but from a sound financial point of view, Inventory
2
should not exceed amount of working capital. The desirable ratio

is 1:1.
Table No.1
Ratio of Inventory to Working Capital of NMDC from 2004

to 2009
(Rs. In Crores)
Working Ratio of (2) to

Year Inventory
Capital (3)
1 2 3 4
2006 13.26 42.28 0.31
2007 8.61 -77.10 -0.11
2008 11.12 -3.44 -3.23
2009 44.33 14.65 3.02
2010 12.36 18.25 0.67
Interpretation:-
By analyzing the ratio, it is that standard norm is
nearly achieved in the year 2010 and the inventory range
1
is exceeded in the past year of 2008 and 2009 that is
-3.23 and 3.02 and in the balancing year that is in
2006,2007 the inventory is not equal to half of working
capital and in the recent year 2010 the inventory is 0.67
it is normal.
2
INVENTORY TURN OVER RATIO
It is relationship between sales to inventory. Both sales and

inventory are interdependent.
Cost of goods sold

Average inventory
Table .2
Table shows the Inventory to Turn over ratio

(Rs in crores)
Particulars 05-06 06-07 07-08 08-09 09-10
Cost of goods 9018.8 9719.67 19478. 20277. 24445.

sold 3 74 93 97
/ Average 1174.4 1090.01 987.1 2722.7 2785.0

inventory 1 9 7
Ratio 7.67 8.91 19.73 7.44 8.77
1
Interpretation:
The turnover ratio of SMIORE has been varying during
the period covered under the study. It was 7.67 and 8.91 in year
2006 and 2007 it increased by 19.73 in the2008 and it shows the
turnover is moving fast and its idle stock may not be their, and it
again decrease 7.44 and 8.77 in the 2009 and 2010 years.
1
Table No. 3
Table shows the inventories holding in the SMIORE

Ltd.
(As valued and certified by the management)
Year 2006 2007 2008 2009 2010
Stores 44.53 61.53 90.74 85.63 75.09
Raw material 15.38 - - 39.07 1.31
Finished 1266.35 800.24 1021.69 4208.45 1160.59
goods
Total 1326.26 861.77 1112.43 4333.15 1236.90
Inventory holding
Interpretation :
In the SMIORE company inventory item includes consumable
stores and spares and finished goods. The inventory holding is
1326.26 lack in the 2005-2006 and 4333.15 in the 2008-09 it
1
shows the sales and production demand increased and in 2006-07
and 2007-08 the inventory holding decreases 800.24 and 1112.43
again it increased to 1236.90 same way volume of production has
also increased.
CURRENT RATIo
Current ratio may be defined as the relationship between
current assets and current liability. This ratio also known as
working capital ratio is a measure of general liquidity and is most
widely used to make the analysis of a short term financial position
or liquidity of firm. The ideal ratio of current ratio is 2:1
Current assets
Current ratio =
Current liability
Table NO.4
Table shows the current ratio of SMIORE Ltd.
Year Current Current Liabilities Ratio
1
Assets
2006 7293.94 3065.24 2.37
2007 7432.06 15167.70 0.49
2008 8168.89 8513.52 0.96
2009 15021.95 13556.36 1.10
2010 17638.83 15813.26 1.11
interpretation:
The status working capital position of the company during
2005-06 was more than require which means it maintain
sufficient margin to pay back all its current liability out of its
current assets.
However the liquidity position of the company slipped down

during 2006-07 as its current ratio is not adequate. The company
has try and maintain good liquidity position at present.
QUICK RATIO
This is the ratio of liquid assets to liquid liabilities. 1:1 ratio is
considered ideal ratio for a concern because it is wise to keep the
liquid assets at least equal to the liquid liabilities at all times.
1
Liquid assets are these are assets which are readily converted
into cash and it includes cash balance, bills receivable, sundry
debtor and short term investors.
Quick ratio = Quick asset
Current liability
Year Quick assets Current Ratio
liabilities
2005-06 5967.68 3065.24 1.94
2006-07 6566.29 15167.70 0.43
2007-08 7056.46 8513.52 0.82
2008-09 10688.8 13556.36 0.79
2009-10 16401.84 15813.26 1.03
2
interpretation:
The company had sufficient margin to payback its all current
liability during 2005-06. It appears that in 2006-07 the capacity of
the company to meet its current liability went down. However the
company has straight and maintain its liquidity position in 2009-
10. The present liquidity position of the company is very good
because it has maintained ideal quick ratio.
1
PROFIT AND LOSS A/C FOR THE YEAR ENDING 31/3/2010
particulars Schedule 2009-10 2008-09

Rs in Rs in
Lakh Lakh
INCOME
Gross sales & services 28837.14 42781.78
Less: Excise duty 90.07 __
Net sales & services 28747.07 42781.78
Other Income 7 1542.82 286.9

30289.89 43068.68
EXPENDITURE
Mining, Manucturing & Other 8 24793.21 19574.35
Expenditure
Depriciation/Amortisation 3 1042.12 988.51
Intrest __ __
Others 153.53 1.97
25988.86 20564.83
Profit / Loss before tax 4301.03 22503.85
Taxes:
Current taxes 1900 8825
Deferred tax -516 -1096
Fringe Benefit Tax __ 21.8
1384 7750.8
Net Profit / (Loss) 2917.03 14747.05

Profit /Loss B/F 14641.05 1743.66
17558.08 16490.71
Less: Appropriation
Dividend & Equity Share
Interim __ 131.25
Final 262.5 131.25
Dividend on prefrence Sharre __ 13.7
Tax on Devidend 43.6 46.94
Transfer to Capital Redumption __ 51.4
reserve
Transfer to general reserve 292 1475
598.1 1849.54
Carried to Balance Sheet 16960.08 14641.15
Earning per share 9 33.34 168.35
1
BALANCE SHEET AS AT 31 MARCH 2010

31/3/20 31/3/20
PARTICULARS SCHEDULE 10 09
Rs.in Rs.in
lakh lakh
I Sources of fund
1. Share holders fund
(a) Share capital 1 875 874.99
(b) Reserves and 20515. 17904.4
surplus 2 34 1
21390.3
4 18779.4
2. Deffered tax liability __ 29
21390. 18808.
(Net) 34 4
II. Application of
funds
1. Fixed Assets 3
15788. 15561.6
(a) Gross block 07 2
8534.9
(b) Less: Depreciation 4 7528.17
7253.1
(c ) Net block 3 8033.45
(d) Capital work in
progress 679.09 396.97
7932.22 8430.42
11145.5
2.Investment 4 5 8912.39
3.Deffered tax asstes 487 __
4.Current assets,Loans
and 5
advances
1236.9
(a) Inventories 9 4333.15
5572.2
(b) Sundry debtors 1 4364.8
(c ) Cash and bank 3532.2
balance 1 3136.44
7297.4
(d) Loans and Advances 2 3187.56
1
17638. 15021.9
83 5
Less:
5. Current liabilities and 6
Provisions
13018. 10860.6
(a)Liability 16 6
(b)Provision 2795.1 2695.7
15813. 13556.3
26 6
Net current assets 1825.57 1465.59

(CA-CL)
21390. 18808.
34 4
Chapter-5
FINDINGS AND
CONCLUSIONS
✔ Findings
✔ Conclusions
2
✔ Bibliography
1
FINDINGS
➢ The company follows weighted average method of

inventory management.
➢ By analyzing the ratio it is that standard norm is

achieved only in the year 2010, however the rang of
inventory extended in the past year that is -3.23,
3.05 in the year 2008 and 2009
➢ The context of inventory is very less in the current

assets it is a good sign, the company is not
maintaining heavy inventory
➢ The stores item includes all department, these are

increasing year by year it was 44.53,61.53 in the
year 2006 and 2007 and in the year 2008 and 2009
incrases from 90.74 to 85.63.
1
CONCLUSION
After, thorough study of Inventory Management in
the SMIORE Ltd. In brief, we may conclude this
The movement of inventory is large with lots of

procedures and approvals. The company is
maintaining least possible minimum and maximum
level of Inventory which is practicable. They are
practicing best possible Inventory Management
System to reduce Inventory cost. The main thing is
that the Inventory is not relating to production
means they are not purchasing any raw materials as
this is a Iron Ore Mine, So Iron Ore is gifted by the
nature. Material manual of the company’s
comprehensive and appreciable is followed nicely.
1
Bibliography
Author Name Book

Name
✔ Khan and Jain Financial
Management
✔ I.M. pandey Financial
Management
✔ Prasanna Chandra Financial
Management
Website: smiore.ltd.com
1

Project On Inventory Mgt.

Enviado por

Dados do documento

Descrição original:

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Project On Inventory Mgt.

Enviado por

Direitos autorais:

Formatos disponíveis

SMIORE LTD DEOGIRI INVENTORY MANAGEMENT

First of all would like to express my sincerer thanks to

I am highly indebted to C.R. Gopal (AGM),HRD Dept.

For granting permission to undergo summer project in SMIORE

I extent my sincere thanks to T. Panduranga(DGM) &

Last but not the least I am grateful to my parents.

I, the undersigned a student of GUPG Centre Nandihalli.

solemnly done by me for SMIORE. The project work entitled “INVENTORY

MANAGEMENT IN SMIORE LTD.” For partial fulfillment of M.com IV Semester.

 Statement of the problem

 Objective of the study

 Limitation of the study

Working Capital is the process of planning and controlling

Inventory is a major component of current assets; differ from

of maximizing the owner’s wealth. Thus inventory management of

The finance manager has to analysis decision such as-

How much inventory should the firm keep?

Financial statement can provide valuable insights into a firm

To evaluate the effectiveness of operations and to determine it

may be low. However, because of action initiated by the

Objectives of the study:

The study on inventory management in SMIORE Ltd. has

➢ To study requirement of inventory of SMIORE Ltd.

Scope of the study:

The study covers all the components of inventory

Methodology of data collection :

Research methodology is a systematic way for solving any

To compile the required information; secondary data had been

The study is limited to five year only. So it may not reveal

long term position of the company.

Time is major constraint which limited the extent of study.

The study included collection of data through interaction

the respondents have given correct information.

The study is limited only to the published annual reports.

The general mining company (a Belgium Company) acquired

SMIORE is situated in the historic valley of Sandur in Bellary

The valley height is 430 mt from sandur Town SMIORE mining is

The company has got a very good reputation of engineering

Mobile creshars and screen plants etc,

SMIORE Company’s main motive is to extract manganese ore and

In the year 2009 and 2010 the production was

Manganese Ore : 225756 tonnes

The corporate office of the company is situated in Bangalore.

NATURE OF THE BUSINESS

A success of a firm is largely depends on how

SMIORE (the Sandur Manganese and Iron Ore ltd )

VISION and MISSION

Vision : SMIORE trust on the conduct of its business

Mission: To emerge as global mining organization

SMIORE Ltd is committed to achieve sustained

MAJOR CUSTOMERS OF SMIORE ARE:-

1) Bhilai Steel Plant : Orissa

2) Tata International Ltd., : Chennai

3) Nava Bharat Ferro Alloys: Andhra Pradesh

4) Indsil Electro Smelts Ltd: Kerala

5) Maithan Alloys Ltd.,: West Bengal

6) Jindal South West : Karnataka

It also Manganese to the following country:-

PRODUCTION AND SALES FIGURES OF SMIORE:

MANGANESE ORE: for the past 5 years

Year Production Sales

Source: Annual reports of SMIORE Ltd.,