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INTRODUCTION
INTRODUCTION OF INVENTORY
Inventories constitute the most significant part of current assets of a large majority of companies
in India. On an average, inventories are approximately 60% of current assets in public limited
companies in India. Because of the large size of inventories maintained by firms, a considerable
amount of feuds is required to be committed to them. It is therefore, absolutely imperative to
ménage inventories efficiently and efficiently in order to avoid unnecessary investment. A firm
neglecting the management of inventories will be jeopardizing its long run profitability and may
fail ultimately. It is possible for fore a company to reduce its levels of inventories to a
considerable degree e.g. 10 to 20 percent, without any adverse effect on production and sales, by
using simple inventory planning and control techniques. The reduction in excessive inventory
carries a favourable impact on a company’s profitability.
MEANING OF INVENTORY
Inventory is the physical stoke of goods maintained in an organization for its smooth sunning. In
accounting language it may mean stock of finished goods only. In a manufacturing concern, it
may includes raw materials, work-in-progress and stores etc. In the form of materials or supplies
to be consumed in the production process or in the rendering of services. In brief, Inventory is
unconsumed or unsold goods purchased or manufactured. “Adequate inventories facilitates
production activities and help to customers satisfaction by providing good service.” The basic
financial aim of an enterprise is maximization of its value. At the same time, a large both
theoretical and practical meaning has the research for determinants increasing the firm value.
Most financial literature contains information about numerous factors influencing the value.
Among those factors is the net working capital and elements creating it, such as the level of cash
tied in accounts receivable, inventories and operational cash balances. A large majority of classic
financial models proposals, relating to the optimum current assets management, were constructed
with net profit maximization in view. In order to make these models more suitable for firms,
which want to maximize their value, some of them must be reconstructed. In the sphere of
inventory management, the estimation of the influence of changes in a firm’s decisions is a
compromise between limiting risk by having greater inventory and limiting the costs of
inventory. It is the essential problem of the corporate financial management.
The basic financial inventory management aim is holding the inventory to a minimally
acceptable level in relation to its costs. Holding inventory means using capital to finance
inventory and links with inventory storage, insurance, transport, obsolescence, wasting and
spoilage costs. However, maintaining a low inventory level can, in turn, lead to other
problems with regard to meeting supply demands. The inventory management policy
decisions, create the new inventory level in a firm. It has the influence on the firm value. It is
the result of opportunity costs of money tied in with inventory and generally of costs of
inventory managing. Both the first and the second involve modification of future free cash
flows, and in consequence the firm value changes.
Inventory changes (resulting from changes in inventory management policy of the firm)
affect the net working capital level and the level of operating costs of inventory management
in a firm as well. These operating costs are result of storage, insurance, transport,
obsolescence, wasting and spoilage of inventory.
Maximization of the owners’ wealth is the basic financial goal in enterprise management.
Inventory management techniques must contribute to this goal. The modifications to both the
value-based EOQ model and value-based POQ model may be seen in this article. Inventory
management decisions are complex. Excess cash tied up in inventory burdens the enterprise
with high costs of inventory service and opportunity costs. By contrast, higher inventory
stock helps increase income from sales because customers have greater flexibility in making
purchasing decisions and the firm decrease risk of unplanned break of production. Although
problems connected with optimal economic order quantity and production order quantity
remain, we conclude that value-based modifications implied by these two models will help
managers make better value-creating decisions in inventory management.
NATURE OF INVENTORIES
Inventories are stock of the product a company is manufacturing for sale and components
that make up the product. The various forms in which inventory exist in a manufacturing
company are raw materials, work in progress and finished goods.
INVENTORY MANAGEMENT
As the cost of logistics increases the manufacturers are looking to inventory management as a
way to control costs. Inventory is a term used to describe unsold goods held for sale or raw
materials awaiting manufacture. These items may be on the shelves of a store, in the
backroom or in a warehouse mile away from the point of sale. In the case of manufacturing,
they are typically kept at the factory. Any goods needed to keep things running beyond the
next few hours are considered inventory.
"Inventory" to many small business owners is one of the more visible and tangible aspects of
doing business. Raw materials, goods in process and finished goods all represent various
forms of inventory. Each type represents money tied up until the inventory leaves the
company as purchased products. Likewise, merchandise stocks in a retail store contribute to
profits only when their sale puts money into the cash register.
Inventory management simply means the methods you use to organize, store and replace
inventory, to keep an adequate supply of goods while minimizing costs. Each location where
goods are kept will require different methods of inventory management. Keeping an
inventory, or stock of goods, is a necessity in retail. Customers often prefer to physically
touch what they are considering purchasing, so you must have items on hand. In addition,
most customers prefer to have it now, rather than wait for something to be ordered from a
distributor. Every minute that is spent down because the supply of raw materials was
interrupted costs the company unplanned expenses
3. Handles all functions related to the tracking and management of material. This would
include the monitoring of material moved into and out of stockroom locations and the
reconciling of the inventory balances. Also may include ABC analysis, lot tracking,
cycle counting support etc.
DEFINITIONS OF INVENTORY
1. Inventory”: goods that businesses intend to sell to their customers or raw materials or
in-process items that will be converted into salable goods
2. “Inventory is the stock of idle resources which has economic value and is
maintained to fulfill the present and future needs of an organization”
IMPORTANCE OF INVENTORY
Inventory represents one of the most important assets that most businesses possess, because
the turnover of inventory represents one of the primary sources of revenue generation and
subsequent earnings for the company's shareholders/owners.
The word 'inventory' can refer to both the total amount of goods and the act of
counting them. Many companies take an inventory of their supplies on a regular basis in
order to avoid running out of popular items. Others take an inventory to insure the number of
items ordered matches the actual number of items counted physically. Shortages or overages
after an inventory can indicate a problem with theft or inaccurate accounting practices.
Possessing a high amount of inventory for long periods of time is not usually good
for a business because of inventory storage, obsolescence and spoilage costs. However,
possessing too little inventory isn't good either, because the business runs the risk of losing
out on potential sales and potential market share as well.
VARIOUS TYPES OF COSTS
INVENTORY COSTS
There are three main types of cost in inventory. There are the costs to carry standard
inventories and safety stock. Ordering and setup costs come into play as well. Finally, there
are shortfall costs. A good inventory control system will balance carrying costs against
shortfall costs.
SAFETY STOCK
Safety stock is comprised of the goods needed to be kept on hand to satisfy consumer
demand. Because demand is constantly in flux, optimizing the Safety Stock levels is a
challenge. However, demand fluctuations do not wholly dictate a company’s ability to keep
the right supply on hand most of the time. Companies can use statistical calculations to
determine probabilities in demand.
ORDERING COSTS
Ordering costs have to do with placing orders, receiving and stowage. Transportation and
invoice processing are also included. Information technology has proven itself useful in
reducing these costs in many industries. If the business is in manufacturing, then to
production setup costs are considered instead.
Stock out or shortfall costs represent lost sales due to lack of supply for consumers. Sales
departments prefer these numbers be kept low so that an ample stock will always be kept.
Logistics managers prefer to err on the side of caution to reduce warehousing costs.
Shortfall costs are avoided by keeping an ample safety stock on hand. This practice also
increases customer satisfaction. However, this must be balanced with the cost to carry goods.
The best way to manage stock out is to determine the acceptable level of customer service for
the business. One can then balance the need for high satisfaction with the need to reduce
inventory costs. Customer satisfaction must always be considered ahead of storage costs.
CYCLICAL COUNTING
Many companies prefer to count inventory on a cyclical basis to avoid the need for shutting
down operations while stock is counted. This means that a particular section of the warehouse
or plant is counted physically at particular times, rather than counting all inventory at once.
While this method may be less accurate than counting the whole, it is much more cost
effective.
Cyclical counting is preferred because it allows for operations to continue while inventory is
taken. If not for this practice, a business would have to shut down while counts were taken,
often requiring the hire of a third party or use of overtime employees. Cyclical counting
usually utilizes the ABC rule, but there are other variations of this method that can be used.
The ABC rule specifies that tracking 20 percent of inventory will control 80 percent of the
cost to store the goods. Therefore, businesses concentrate more on the top 20 percent and
counter other goods less frequently. Items are categorized based on three levels:
Warehouse staff can now schedule counting of inventories based on these categories. The
“A” category is counted on a regular basis while “B” and “C” categories are counted only
once a month or once a quarter.
The methods a company uses to value the costs of inventory have a direct effect on the
business balance sheets, income statements and cash flows. Three methods are widely used to
value such costs. They are First-In, First-Out (FIFO), Last-In First-Out (LIFO) and Average
Cost. Inventory can be calculated based on the lesser of cost or market value. It can be
applied to each item, each category or on a total basis.
FIFO
FIFO operates under the assumption that the first product that is put into inventory is also the
first sold. An example of this in action can be made when we assume that a widget seller
acquires 200 units on Monday for Rs.1.00 per unit. The next day, he spots a good deal and
gets 500 more for Rs.75 per unit. When valuing inventory under the FIFO method, the sale of
300 units on Wednesday would create a cost of goods sold of Rs.275. That is, 200 units at
Rs1.00 each and 100 units at Rs.75 each. In this way, the first 200 units on the income
statement were valued higher. The remaining 400 widgets would be valued at Rs.75 each on
the balance sheet in ending inventory.
LIFO
LIFO assumes instead that the last unit to reach inventory is the first sold. Using the same
example, the income statement and balance sheet would instead show a cost of goods sold of
Rs.225 for the 300 units sold. The ending inventory on the balance sheet would be valued at
Rs.350 in assets. When this method is used on older inventories, the company’s balance sheet
can be greatly skewed. Consider the company that carries a large quantity of merchandise
over a period of 10 years. This accounting method is now using 10-year-old information to
value its assets.
WEIGHTED AVERAGE
Average Cost works out a weighted average for the cost of goods sold. It takes an average
cost for all units available for sale during the accounting period and uses that as a basis for
the cost of goods sold. To site our example again, we would calculate the cost of goods sold
at [(200 x Rs.1) + (500 x Rs.75)]/700, or Rs.821 each. The remaining 400 units would also be
valued at this rate on the balance sheet in ending inventory.
India cements limited at Sankarnagar is Purchasing raw materials from private as well
as public sector. Major portion of limestone are purchased in local areas. Some of them are
brought in its own mines division. The coal and other costlier equipments are imported from
other countries like Japan, U.S.A, Germany etc. The company is sending their requirements
to the head office. According to their costlier items, The Head Office is purchasing the Raw
Materials for them for raw materials accounting they are maintaining the records.
The purchase section is adopted the materials requisition competitive bids, finalizing
the offer then only is to be purchased. The company efforts its purchasing in two ways, viz,
regularly and emergency purchases. Department wise requisitions are given to the purchase
section.
The company is purchasing regular stores and spares items by the way of calling
quotation. The company is calling for quotation and the parties are sending their quotations to
them. From that the company is deciding the parties on the basis of lowest quotations. After
deciding the parties company issues order to them. When the order reaches the parties they
are sending the materials, to the company. After receiving the material, they are making
payment only after inspecting the materials and approving the quality. Sometimes to avoid
machine stoppages they are purchasing the material on emergency basis, directly from the
open market without calling quotations.
USER
The Users are the workers and technicians. They are the “end users”. The users
prepare the “material Requisition” and send it to stores. The user directly goes to the store
and gets the materials required,
If the materials they require is not available in the store, then they raise the “materials
requisition”
Only after the user raises the MR, the store can take any step to purchase goods.
PURCHASE
In the purchase department, the officer (purchase) prepares an enquiry to the supplier
for the materials asked in the materials requisition slip. After receiving the quotation from the
supplier the officer (purchase) prepares the purchase order.
STORE
The officer (Stores) is the head of the stores department. He is assisted by two Person.
One takes charge of the “Receipt” section and other “issue” section.
In the “Receipt” section a separate account for all the incoming spare parts is
maintained the information‘s are entered in a computer.
In the “issue” section “Bin Cards” for the maintenance of the stock are maintained.
The officer (stores) handles the materials requisition ledger. He checks the stock and
forwards the material requisition slip to the purchase department.
STORES
1. RECEIPT SECTION
a. Lorry Way Bill Clearance
Lorry receipts will be recorded in computer and will be cleared from transport
on daily basis.
b. i) Inward
Inward for the material received will be recorded in the computer and goods
receipt number is prepared.
ii) Quantitative Checks
Materials and the quality will be checked with purchase order/invoice
d. Modvat
As per inward/GRN the modvat (Duplicate for transporter copy of invoice) will
be collected by accounts departments for further action, If any discrepancy after
inspection appropriate action will be taken by accounts department. If transporter
copy of invoice not received it will be followed up with supplier/transporter for
the same.
e. Inspection
Inward intimation to user department for inspection will be forwarded and will
arranged for inspection. General items/standard items like oils and lubricants and
industrial gases will be certified by stores department itself.
f. GRN/STOCK Updating
If there is no discrepancy is noticed on inspection, the material will be accepted
and certified and the stock will be updated in the computer.
g. Discrepancy /Rejection/Return
Any discrepancy noticed on inspection, the same will be informed to the
supplier under intimation to the purchase department/Accounts department/Head
office for further action.
h. Transit insurance
Monthly receipt statement will be forwarded to accounts department, for
arranging transit insurance purpose
i. Clay
If any damages/shortages, claim will lodged on Supplier/Transported/insurance
company under intimation to accounts department for further action.
j. Storing
The accepted materials will be handed over to issue section for proper/ safe
custody and to store/ stack properly.
2. ISSUE SECTION
a. Issue Slip
Issue slips will be drawn by the user department and the materials will be
issued after verifying the authorization limit.
b. Return Slip
Excess drawn by user department and any indent to be sent for repair
will be returned to stores and the same will be updated in the computer.
c. Direct Debit
Non – standard and one time purchase items are called direct debit.
Direct debit items will be not be stored and the stock will be maintained at
stores. It will be issued to the user department as per receipt.
d. Loan records
A permanent loan register for tools and a temporary loan register for
tarpaulins are maintained.
e. Stock Transfers
Raw materials (limestone/ Clinker) stock transferred through DC.
Spares are transferred either directly from stores by posting issue slips (or) if
sent from departments by posting return slips and making issue slips at stores.
After that it will be sent to other units.
f. Authorisation Limits
An authorisation limit for drawing the materials by user department is
recorded and maintained while issuing the materials.
j. Methods
Fist in first out methods (FIFO) is followed.
3. STOCK MAINTAINED
a. Maintenance of MIN/EOQ
General/fast moving items – minimum stock is maintained for
maintaining uninterrupted.
c. Stock Verification
A periodical stock verification will be done.
d. Adjustment Slip
Any discrepancy in stock is noticed, the reason/ cause will be
ascertained and the stock will be adjusted through adjustment slips after getting
approval from general manager.
e. Stock Ledger
Monthly stock ledger for the items transacted during the month is
maintained.
a. Generation
Scrap materials will be received from user department through return
slip/ scrap tickets and stacked in the scrap card group wise.
b. Segregation and Stacking
The scrap materials will be separated material category wise and
stacked properly for easy disposal.
c. Disposal
Scrap will be disposed by inviting sealed tenders and sale orders will
be released based on competitive rates.
ACCOUNTS
1. Method Of Inward
2. Method Of Issue
3. Method Of Return
As for the second aspects, it is necessary all the time to ensure that all materials that have
been received, issued, returned have been accounted for.
COMPANY BACKGROUND
The company was incorporated on 21st February 1946 under the Indian companies Act 1913.
TALAIYUTHU which was a small village in the forties blossomed into importance with
the advent of the India cements ltd, a major cement industry, just adjacent to the Talaiyuthu
Railway Station.
It wears only due to the vision and foresight of the Sri. S.N.N. SANKARLINGA
IYER the Founder director that this institution came into being in this area. The locality has
rapidly grown after this establishment came into existence, and with progressive expansion
the entire area around Talaiyuthu has far outgrown its original stature and is now the centre
of an industrial compels with Industrial Chemicals Limited, Agriculture Farms Limited etc
Situated in the area , The population has increased and industrial colonies have sprung up.
The entire area has developed into a flourishing Township known as Sankarnagar
Township. Schools, Polytechnic, Hospitals, Hostel etc., have come into being the old branch
post office has been converted into a sub-post office with Telegraph Facilities. A police
Station and circle office are now functioning here.
The importance of the area has increased in view of the huge expansion of or plant in
1969.Officials and non-officials visit the area every day both on business and on sightseeing
and the place has become a centre of tourist attraction in this district. Besides officials &
tourists, Students, General Public etc., come on an excursion vision almost every day.
DIFFERENT TYPES OF CEMENT
80%clinker+15% gypsum
GROWTH
The initial annual capacity of the one lakh tonnes was increased gradually by the
expansion and modernization activities that took place in Sankarnagar plant. In mid-60’s the
company built two thither wet process bins at Sankarnagar, which increased the annual
capacity to 913000 tones. In august 1990, the wet process technique was converted to dry
process now production capacity reaches one million tonnes per annum.
PRODUCT RANGE
The company offers a wide range of products like Ordinary Portland Cement (OPC)
and Portland Pozzalana Cement, which are manufactured regularly but other verities like
White oil well Cement, Low Heat content. Sulphate resistance cement, Railway Sleeper
Cement, Slag Cement., are manufactured on demand.
There are about 900 employees employed both in factory and mines. The company spends
4.29 cores for employees and their families every year.
FACTORIES AT
HEAD OFFICE
QUALITY STANDARD
The India Cements ltd is producing three types of Cements. They are
1. Portland cements
2. Pozzalona cements
3. Low C3A Cements.
Recently the plant was modernized from wet process to dry process. All the three units of
manufacturing cements have a turnover of 478 cores.
ICL Ranked 42nd in Business India Super 100 List of India’s most outstanding private
sector companies. It is the only company among the top 10 winners on the every account
(Sales, Profit, Market value, and Asserts and productivity growth). ICL has Launched Real
Estate and property development division in June 1990.The division also planned to built a
large residential complex in Ernakulam
ICL has launched into shipping august 1991.It is hopeful of typing up the necessary
foreign exchange resources for the purpose in the very near future. The ICL today has
emerged as a fast growing multifaceted organisation due to the dedicated efforts of its
employees. It will forge ahead into new vistas of growth and development in the year to
come.ICL cases ISI and Production is carried out on this bias recently has gained ISO 9002
for the period of 16th April 1994 to 15 April 1997 from the director General Bureau of Indian
standards. This also has the MRTP registration number 599 dated 12-11-1970.
➢ Manufacture Cements in best quality and maintain the standard of the company.
➢ Existing profit making company.
➢ Promoters experienced in manufacturing cements for the past fifty years.
➢ Listing at Chennai, Mumbai and National Stock Exchange.
STATEMENT OF PROBLEM
The current system in the company under inventory management system which doesn’t
specify the safety stock which leads to scare for stocks at emergency. The data are not
properly updated at the end of each day’s work. Proper data security system is not provided.
Annual maintenance contract is not provided. Records are not maintained properly.
MAIN OBJECTIVES OF THE COMPANY
The basic managerial objectives of inventory control are two-fold; first, the avoidance over-
investment or under-investment in inventories; and second, to provide the right quantity of
standard raw material to the production department at the right time. In brief, the objectives
of inventory control may be summarized as follows
A. Operating Objectives
(3) Promotion of Manufacturing Efficiency: If the right type of raw material is available to
the manufacturing departments at the right time, their manufacturing efficiency is also
increased. Their motivation level rises and morale is improved.
(4) Avoidance of Out of Stock Danger: Information about availability of materials should
be made continuously available to the management so that they can do planning for
procurement of raw material. It maintains the inventories at the optimum level keeping in
view the operational requirements. It also avoids the out of stock danger.
(5) Better Service to Customers: Sufficient stock of finished goods must be maintained to
match reasonable demand of the customers for prompt execution of their orders.
(6) Designing poorer organization for inventory management: Clear cut accountability
should be fixed at various levels of organization.
B. Financial Objectives
(1) Economy in purchasing: A proper inventory control brings certain advantages and
economies in purchasing also. Every attempt has to make to effect economy in purchasing
through quantity and taking advantage to favorable markets.
(2) Reasonable Price: While purchasing materials, it is to be seen that right quality of
material is purchased at reasonably low price. Quality is not to be sacrificed at the cost of
lower price. The material purchased should be of the quality alone which is needed.
(3)Optimum Investing and Efficient Use of capital: The basic aim of inventory control
from the financial point of view is the optimum level of investment in inventories. There
should be no excessive investment in stock, etc. Investment in inventories must not tie up
funds that could be used in other activities. The determination of maximum and minimum
level of stock attempt in this direction.
Inventories are important to the management of an enterprise primarily because of the direct
impact which they have up on profits. Profits are affected by inventory in several ways.
The scope is to drive meaningful application of theory for actual implementation. As the
study is focusing on identifying the present potential of the company’s inventory methods
and aims, we identify best set of inventory method to be carried to improve the company’s
policy to determine their inventory.
This study provides insight to the management of high value item and low value items. This
study also gives the idea about industrial focus and addressable towards maintaining
inventory
LIMITATION OF STUDY
1. It consumes more time and requires lots of expenditure. More time is needed to do
this study.
LITERATURE REVIEW
This study tells that the main focus of inventory management is on transportation
and warehousing. The decision taken by management depend s on the traditional method of
inventory control models. The traditional method of inventory management is how much
useful in these days the author tell about it. He is also saying that the traditional method is
not a cost reducing, it is so much expensive. But the managing the inventory is most
important work for any manufacturing unit.
Magazine articles
This article considers the context of a population of items for which the assumption
underlying the EOQ derivation holds reasonably well. However as is frequently the cash in
practices there is an aggregate constraint that applies to the population as a whole. Two
common forms of constraints are:
1) the existence of budget to be allocated among the stocks of the items and
2) A purchasing production facility having the capability to process at most a certain
number of replenishment per year. Because of the constraint the individual
replenishment quantities cannot be selected independently.
Information from web
In the study by Mr. Charles Atkinson, he explained the inventory management and
assessment of inventory levels. As per this study inventory management need to address two
issue
Part I. How to optimize average inventory levels.
This study tells about what the manager should do and not to do, and how
much amount should be order in one placed orders. Average inventory can be calculated by
simplistic method.
CHAPTER 3
RESEARCH METHODOGY
Working hypothesis of the objective is that inventories are the stock piles of goods in an
organization. ICL invests about 40% of total assets inventory should be analyzed their
records.
The analysis of inventory according to their data is available in the company. The data
collection of inventory for analysis is by the direct store department. I went to the all
inventories as raw material, work in progress inventory, finished goods inventory by the
proper observation of data’s of the company.
The particular method for data collection used direct interview with assistants and
telephone interview with friends to known about annual investment of inventories and
other important data.
Area
Sankar Nagar-627357,
Tieunelveli District,
Tamil Nadu.
Time Span
Sample Size:
The Customers, to whom INDIA CEMENTS LTD. provides service is taken into
consideration. The sample size is 100.
SAMPLING PROCEDURE:
Sample design is a definite plan for obtaining a sample from a given population. It refers to
the technique or the procedure the researcher would adopt in selecting items for samples.
Samples are studied for the population who are the customers of INDIA CEMENTS LTD.,
Research design is needed because it facilitates the smooth railing of the various research
operations thereby making research as effective as possible yielding maximal information
with minimal expenditure of effort, time and money.
In analysis of inventory of ICL, We collect the data by the different sources. We collect
the primary and secondary data.
CLASSFICATION
SECONDARY DATA
PRIMARY DATA
➢ SECONDARY DATA
The secondary data are those data that are already in presence for specific
purpose, we use the secondary data about inventory to look old records of the company
.For the daily information about the items are show the MRN, ledger register and daily
issue slip of materials, the purchase register and other documentary evidence used for the
findings.
In the analysis of inventory, the secondary data provided is not sufficient then we
collected primary data.
➢ PRIMARY DATA
Primary data or fresh data are those data that are originated very first time
with the help of primary data we formulated the research objectives. Primary data are the
accurate, attainable, reliable and useful data.
Survey Research
Survey research as name suggests, is distinguished by the facts that the data are collected
from the people who are thought to have the desired information, through questionnaire.
➢ Percentage method
CHAPTER 4
DATA ANALYSIS AND FINDINGS
Response Percentage
yes 72
no 20
do not know/ cannot
say 8
Table No: 1
FIGURE NO:1
Interpretation:
The company officials are aware about their company having an inventory management
system. 72 per cent of the respondents do have this awareness as against 20 per cent+08 per
cent of the respondents who are either not aware or not able to provide any information in
this regard.
Table No: 2
percentag
Response e
Agree 68
Dis agree 12
do not know/
cannot say 20
Figure No: 2
Interpretation:
According to the response to the above question, it appears that every company/organisation
control?
Table No: 3
Percentag
Response e
To smoothen operational
requirement 27
To save time 22
To maintain accountability and
transparency 30
Other reasons 15
Do not know/ Can not say 6
Figure No:3
Interpretation:
To everyone’s surprise, 30 per cent of the respondents feel that it is for ccountability and
transparency pupose that inventory records are maintained and hence the need for an
inventory management system. This is followed by the need for saving time and the
4. Do you agree that the inventory management control in your company has
Table No: 4
Response Percentage
Strongly Agree 20
Agree 47
Disagree 15
Strongly Disagree 7
Do not know/ Can
not say 11
Figure No: 4
Interpretation:
From the above response, it appears that the inventory management system has more or less
achieved its objectives for which it was in place. This is evident from the 67 per cent of the
respondents’ opinion who have either agreed or strongly agreed in favour of this proposition.
However the response of 22 per cent of the respondents who think otherwise also speaks
something.
5. What according to you is the major benefit of going for an inventory management
Table No: 5
Response Percentage
It has made storage and retrieval of material
easier 37
Improved Sales Effectiveness 26
Reduced Operational Cost 18
Other Benifits 10
Do not know/ Can not say 9
Figure No: 5
Interpretation:
As regards the benefits of having an inventory management system by the company, the
respondents are of the opinion that the major benefits lies in relaxation in terms of storage
and retrieval of material. This is followed by increasing sales effectiveness and reduction in
operational cost. However, all these benefits are interlinked and the separion between them is
Table No: 6
Percentag
Response e
Yes 48
No 30
Do not know/Can
Not say 22
Figure No: 6
Interpretation:
technology, particularly in chemicals and paint industry is a concern for the company as it
Table No: 7
Response Percentage
Skilled and trained 32
Only skilled but not trained 16
Non skilled but trained professionals 20
Non skilled and non trained
professionals 25
Others 7
Figure No: 7
Interpretation:
As already stated above in the earlier question, availability of trained and skilled
8. Do you agree that your company gives more emphasis on software than skilled
Table No: 8
Response Percentage
Strongly Agree 18
Agree 52
Disagree 15
Strongly Disagree 7
Do not know/ Can
Not say 8
Figure No: 8
Interpretation:
The above response gives an impression that the company puts greater emphasis on software
9. Do you think that the software used by your company is according to the design
Table No: 9
Response Percentage
Yes 86
No 10
Do not know/Can
Not say 4
Figure No: 9
Interpretation:
The company appears to be using the software according to the system requirement and
10. What is the prime challenge before your company with rehard to inventory
Response Percentage
Lack of trained professionls 42
Maintenance cost 21
Changing requirements of
customers 27
Other problems 6
Do not know/ Can not say 4
Figure No: 10
Interpretation:
Lack of availability of trained professionls coupled with maintenance cost and changing
needs of the customers are perceived to be the inventory challenges before the company.
Table No: 11
Response Percentage
Will continue as a successful
mechanism 43
May change according to time 33
Shall collapse 12
Do not know/ Can not say 12
Figure No: 11
Interpretation:
The future of inventory management control at ICL appear to pretty good, going by the
12. What quality measures you suggest for your company is adapting?
Table No: 12
Percentag
Response e
Kanban 23
JIT 54
EOQ 15
ITR 8
Any other- 0
None of the above 0
Figure No: 12
Interpretation:
It indicates that JIT is the most expected quality measure which prefer to be use in this India
Cements Ltd.
13. Do you feel quality control measures help it higher productivity and efficiently in an
organisation?
Table No: 13
Percentag
Response e
Strongly Agree 92
Agree 8
Cannot say 0
Dis Agree 0
Strongly Disagree 0
Figure No: 13
Interpretation:
Most of the respondents strongly agreed that quality control measures help it higher productivity
and efficiently in an organisation.
14. Do you have periodic review of Inventory Control procedures in your office?
Table No: 14
Percentag
Response e
Strongly Agree 83
Agree 17
Cannot say 0
Dis Agree 0
Strongly Disagree 0
Figure No: 14
From the above observation we have analysis that 83% of the respondent are strongly agree
with inventory control procedure and remaining 17% of the respondent are agree with the
inventory control procedure,
15. Is your team leader empowered by the organisation to take independent decision on
Inventory Control?
Table No: 15
Response Percentsge
Strongly Agree 63
Agree 32
Cannot say 0
Dis Agree 5
Strongly Disagree 0
Figure No: 15
From this observation we have analysis that 63% of the respondent are strongly agree with
the empowerment of the work. And remaining 32% of the respondent are agree with the
empowerment of the work.
DATA INTERPRETATION
In managing inventories, the firm’s objective should be in consonance with the wealth
maximization principle. To achieve this, the firm should determine the optimum level of
investment in inventory. To deal with the problems of inventory management effectively, it
becomes necessary to be conversant with the different techniques of inventory control.
Although the concepts involved in inventory management are production-oriented and are not
strictly financial it is important that the financial manager understand them since they have
certain built-in financial costs. The different techniques of inventory control may be
summarized as follows:
This represents the quantity of inventory above which it should not be allowed to be kept.
The main object of fixing this limit is to ensure that unnecessary working capital is not
blocked in stores. The quantity is fixed keeping in view the disadvantages of
overstocking.
It is the point at which if the stock of the material in stores reaches, the storekeeper should
initiate the purchase requisition for fresh supply of material. This level is fixed
somewhere between maximum and minimum level is such a way that the difference of
quantity of the material between the reordering level and the minimum level will be
sufficient to meet requirements of production up to the time of fresh supply of the
material. It is fixed after taking into consideration the following factors:
ABC ANALYSIS:
1. Through usually the inventory items are classified into three categories viz AB and C
only, but nothing prohihibits a firm to undertake the analysis on the basis of a larger
catagorisization.
2. It is necessary for an effective ABC analysis that all the items should be included for
the Classification.
3. Through according to ABC Analysis category C gets only a simple attention, the
management should nevertheless have to be vigilant in its approach. For example an
items may be of small value but may be critical in the sense that its non-availability
hampers the production process and its supply is irregular. The management has to be
extra careful about its inventory, even though the items figures in the category C.
Thus the ABC analysis not the ultimate exercise in inventory management, it needs
supplementing with detailed knowledge and monitoring.
4. Price of the items and their physical quantities shouldn’t be made the basis of ABC
analysis. It is rather the usage value of the items which must be used for the purpose
of classification.
One of the major inventory management problems to be resolved is how much inventory should
be added when inventory is replenished. If the firm is buying raw materials, it has to decide lost
in which it has to be purchased on replenishment. If the firm is planning a production run, the
issue is how much production to schedule (or how much to make). These problems are called
order quantity problems, and the task of the firm is to determine the optimum or economic
order quantity (or economic lot size). Determining an optimum inventory level involves two type
of costs: (a) ordering costs and (b) carrying costs: The economic order quantity is that inventory
level that minimize the total of ordering and carrying costs.
VED ANALYSIS
The VED analysis is used generally for spare parts. The requirement and urgency of spare parts
is different from that of materials. A-B-C analysis may not be properly used for spare parts. The
demand for spares depends upon the performance of the plant and machinery. Spare parts are
classified as: Vital (V), Essential (E) and Desirable (D). The vital spares are a must for running
the concern smoothly and these must be stored adequately. The non-availability of vital spares
will cause havoc in the concern. The E types of spares are also necessary but their stocks may be
kept at low figures. The stocking of D types of spares may be avoided at times. If the lead time of
these spares is less, then stocking of these spares can be avoided.
Japanese firms popularized the just-in-time (JIT) system in the world. In a JIT system material
or the manufactured components and part arrive to the manufacturing sites or stores just few
hours before they are put to use. The delivery of material is synchronized with the manufacturing
cycle and speed. JIT system eliminates the necessity of carrying large inventories, and thus, saves
carrying and other related costs of manufacturer. The system requires perfect understanding and
coordination between the manufacturer and supplier in terms of the timing of delivery and quality
of the material. Poor quality material or complements could halt the production. The JIT
inventory system complements the total quality management (TQM). The success of the
system depends on how well a company manages its suppliers. The system puts tremendous
pressure on suppliers. They will have to develop adequate system and procedures to satisfactory
meet the needs of manufacturers
INVENTORY TURNOVER RATIO: (ITR)
In accounting, the Inventory turnover is an equation that measures the number of times
inventory is sold or used over in a period such as a year. The equation 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.
MAJOR FINDINGS
10. There is good relationship between company and their distributors, vendors and sales
executives.
CHAPTER 6
SUGGESTIONS
1. There can be a system where in periodical review (twice in a month) of inventory could
be carried out so that the inventory can be kept under control.
2. There should be periodical review of movement of items so that any non moving items
can be identified and suitable action can be done.
3. At present the company is maintaining zero safety stock for all items, if the safety stock
is maintained for important items, delay in production can be eliminated and orders
can be supplied in time which will result in a better credibility in both international and
domestic market.
4. It has been predicted that if company is planning to achieve more sale it may require
huge amount of inventory in future. So the company has to arrange capital to meet
future requirement.
5. It is suggested that they can have close monitoring of receipts and issue for A class
items in order to have control of inventory.
6. To increase the inventory turnover ratio by increasing the sales level and maintaining
the required level of inventory.
7. To maintain the Re-order level, Min-stock level and Economic order quantity company
should consider the demand of the product.
8. There should be proper communication between purchase and production department.
9. There is no communication from dispatch section to store department, about quantity
wasted. Feedback about the quantity wasted will help the store department to forecast
future requirements and to focus on minimum possible waste.
10. Improve the minimum value of product C up to 5%-8% in total sale value by increasing
market level of these products. It helps to get min return on investment in these products
as soon as possible.
11. There is one warehouse for keeping the finished good and packaging material and
packaging material are not arranged in good manner so it should be in order wise.
CONCLUSION
“Inventory control is exercise when you order an item. If you do a poor job then everything
after is inventory correction”
GORDON GRAHAM
Inventory is the physical asset of a company that can create problem if there is shortage,
while in production and also if it’s in excess even after production. Inventory is constantly
changing as quantities are sold and replenished.
Hence it can be understood that efficient inventory management can take the company to new
heights and inefficient inventory management can ruin the company.
Company is highly concentrated on domestic market, it increase the market level of company
because trend of domestic market is changing.
The study on Inventory management in India cements Pvt. Ltd about ABC analysis for items
is predicting future inventory requirements etc.
From the study it is predicted that future sales have to be achieved and inventory level have
to be maintained.
ABC Analysis was carried out to identify the fast moving and important items.
The company has to periodically review the inventory to avoid production loss.
The results of the study can be further extended for future research.
QUESTIONNAIRE
control?
Yes ----------------------------------------------
No ------------------------------------------------
Agree ------------------------------------------------
Disagree ---------------------------------------------
management control?
To smoothen operational requirement ---------------------
Agree -------------------------------------------------
Disagree -----------------------------------------------
management?
Yes -----------------------------------------------
No -------------------------------------------------
Others ---------------------------------------------------
Agree -------------------------------------------------
Disagree -----------------------------------------------
10. Do you think that the software used by your company is according
Yes --------------------------------------------------
No ----------------------------------------------------
11. What is the prime challenge before your company with rehard to
inventory management?
company?
Will continue as a successful mechanism ---------------------
13. What quality measures you suggest for your company is adapting?
Kanban--------------------------------------
JIT--------------------------------------
EOQ--------------------------------------
ITR--------------------------------------
Any other--------------------------------------
None of the above--------------------------------------
14. Do you feel quality control measures help it higher productivity and
efficiently in an organisation?
Agree -------------------------------------------------
Disagree -----------------------------------------------
15. Do you have periodic review of Inventory Control procedures in your office?
Agree -------------------------------------------------
Disagree -----------------------------------------------
Agree -------------------------------------------------
Disagree -----------------------------------------------
17. What suggestions do you have for your management to improve standards in
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