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The purpose of doing this project is to know how effective Inventory Control Management can help in effective functioning of the organization. To assess the companys trends for the last 5 years with regard to Inventory Control Management. To find out how total turnover of Inventory Management can result in improving the profits of the organization.
Secondary information relating to the company is collected from the financial statements and the information Brochures of the organization some of the industrys information is collected through the financial reports and monthly business Magazines and journals.
The Study is conducted within the selected unit of Kesoram Cements Limited Hyderabad.
The study may not fulfill all the requirements of a detailed investigation since it is conducted within a period of one month.
The study was conducted with the data available and the analysis was made accordingly
Modern Cement
Modern hydraulic cements began to be developed from the start of the Industrial Revolution (around 1800), driven by three main needs: Hydraulic renders for finishing brick buildings in wet
climates Hydraulic mortars for masonry construction of harbor works etc, in contact with sea water.
ultimate strength is maintained. Because fly ash addition allows a lower concrete water content, early strength can also be maintained. Where good quality cheap fly ash is available, this can be an economic alternative to ordinary Portland cement. Portland pozzolan cement includes fly ash cement, since fly ash is a pozzolan, but also includes cements made from other natural or artificial pozzolans. In countries where volcanic ashes are available (e.g. Italy, Chile, Mexico, the Philippines) these cements are often the most common form in use. Portland silica fume cement. Addition of silica fume can yield exceptionally high strengths, and cements containing 5-20% silica fume are occasionally produced. However, silica fume is more usually added to Portland cement at the concrete mixer. Masonry cements are used for preparing bricklaying mortars and stuccos, and must not be used in concrete. They are usually complex proprietary formulations containing Portland clinker and a number of other ingredients that may include limestone, hydrated lime, retarders, water proofers and coloring agents. They are formulated to yield workable mortars that allow rapid and consistent masonry work. Subtle variations of Masonry cement in the US are Plastic Cements and Stucco Cements. These are designed to produce controlled bond with masonry blocks. Expansive cements contain, in addition to Portland clinker, expansive clinkers and are designed to offset the effects of drying shrinkage that is normally encountered with hydraulic cements. This allows large floor slabs (up to 60 m square) to be prepared without contraction joints. Very finely ground cements are made from mixtures of cement with sand or with slag or other pozzolan type minerals which are extremely finely ground together. Such cements can have the same physical characteristics as normal cement but with 50% less cement particularly due to their increased surface area for the chemical reaction. Even with intensive grinding they can use up to 50% less energy to fabricate than ordinary Portland cements.
chemist's notation) as a primary phase. They are used in expansive cements, in ultra-high early strength cements, and in "low-energy" cements. Their use as a low-energy alternative to Portland cement has been pioneered in China, where several million tons per year are produced. Energy requirements are lower because of the lower kiln temperatures required for reaction, and the lower amount of limestone (which must be endothermic ally de carbonated) in the mix. In addition, the lower limestone content and lower fuel consumption leads to a CO2 emission around half that associated with Portland clinker.
History
The first unit at Basanthnagar with a capacity of 2.1 lakh tones per annum incorporating humble suspension preheated system was commissioner during the year 1969. The second unit was setup in year 1971 with a capacity of 2.1 lakh tones per annum went on stream in the year 1978. The coal for this company is being supplied from Singereni Collieries and the power is obtained from APSEB. The power demand for the factory is about 21 MW. Kesoram has got 2 DG sets of 4 MW each installed in the year 1987. Kesoram Cement has setup a 15 KW captor power plant to facilitate for uninterrupted power supply for manufacturing of cement at 24th
august 1997 per hour 12 mw, actual power is 15 mw. The Company was incorporated on 18th October, 1919 under the Indian Companies Act, 1913, in the name and style of Kesoram Cotton Mills Ltd. It had a Textile Mill at 42, Garden Reach Road, Calcutta 700 024. The name of the Company was changed to Kesoram Industries & Cotton Mills Ltd. on 30th August, 1961 and the same was further changed to Kesoram Industries Limited on 9th July, 1986. The said Textile Mill at Garden Reach Road was eventually demerged into a separate company. The First Plant for manufacturing of rayon yarn was established at Tribeni, District Hooghly, West Bengal and the same was commissioned in December, 1959 and the second plant was commissioned in the year 1962 enabling it to manufacture 4,635 metric tons per annum (mtpa) of rayon yarn. This Unit has 6,500 metric tons per annum (mtpa) capacity as on 31.3.2009. The Company diversified into manufacturing of cast iron spun pipes and pipe fittings at Bansberia, District Hooghly, West Bengal, with a production capacity of 45,000 metric tons per annum (mtpa) of cast iron spun pipes and pipe fittings in December, 1964. The Company subsequently diversified into the manufacturing of Cement and in 1969 established its first cement plant under the name 'Kesoram Cement' at Basantnagar, Dist. Karimnagar (Andhra Pradesh) and to take advantage of favorable market conditions, in 1986 another cement plant, known as 'Vasavadatta Cement', was commissioned by it at Sedam, Dist. Gulbarga (Karnataka). The cement manufacturing capacities at both the plants were augmented from time to time according to the market conditions and as on 31.3.2009 Kesoram Cement and Vasavadatta Cement have annual cement manufacturing capacities of 1.5 million metric tons and 4.1 million metric tons respectively. The Company in March 1992, commissioned a plant at Balasore known as Birla Tires in Orissa, for manufacturing of 10 lack MT p.a. automotive tires and tubes in the first phase in collaboration with Pirelli Ltd., U.K., a subsidiary company of the world famous Pirelli Group
of Italy - a pioneer in production and development of automotive tires in the world. The Company as on 31.3.2009 had the manufacturing capacities of 3.71 million tires, 2.95 million tubes and 1.53 million flaps per annum in the Plants including at Uttarakhand Plant. It has small manufacturing capacities of various Chemicals at Kharda in the State of West Bengal also. It has the annual manufacturing capacities of 12,410 mtpa of Caustic Soda Lye, 5,045 mtpa of Liquid Chlorine, 6,205 mtpa of Sodium Hypochlorite, 8,200 mtpa of Hydrochloric Acid, 3,200 mtpa of Ferric Alum, 18,700 mtpa of Sulphuric Acid and 1,620,000 m3pa of purified Hydrogen Gas. The Company is a well-diversified entity in the fields of Cement, Tire, Rayon Yarn, Transparent Paper, Spun Pipes and Heavy Chemicals with two core business segments i.e. Cement and Tires. In Spun Pipes & Foundries, a unit of the Company, work suspended from 2nd May, 2008 still commences till further notice. The Company as of now is listed on three major Stock Exchanges in India i.e. Bombay Stock Exchange Ltd., Mumbai, Calcutta Stock Exchange Association Ltd., Kolkata and National Stock Exchange of India Ltd., The commercial production of cement in the aforesaid unit IV has commenced in June 2009. The Board has further approved a Motor Cycle Tire Project of 70 MT per day capacity at the same site involving a capital outlay of Rs.190 crore. The civil construction of both the Projects is in full swing. The commercial production in both the Projects is likely to start by December 2009/ January 2010. Birla Supreme in popular brand of Kesoram cement from its prestigious plant of Basantnagar in AP which has outstanding track record. In performance and productivity serving the nation for the last two and half decades. It has proved its distinction by bagging several national awards. It also has the distinction of achieving optimum capacity utilization. Kesoram offers a choice of top quality portioned cement for light, heavy constructions and allied applications. Quality is built every fact of the operations. The day process technology uses in
the latest computerized monitoring overseas the manufacturing process. Samples are sent regularly to the bureau of Indian standards. National council of construction and building material for certification of derived quality norms. The company has vigorously undertaking different promotional measures for promoting their product through different media, which includes the use of news papers magazine, hoarding etc. Kesoram cement industry
distinguished itself among all the cement factories in Indian by bagging the National Productivity Award consecutively for two years i.e. for the year 1985-1987. The federation of Andhra Pradesh Chamber & Commerce and Industries (FAPCCI) also conferred on Kesoram Cement. An award for the best industrial promotion expansion efforts in the state for the year 1984. Kesoram also bagged FAPCCI awarded for Best Family Planning Effort in the state for the year 1987-1988. Kesoram cement undertaking marketing activities extensively in the state of Andhra Pradesh, Karnataka, Tamilnadu, Kerala, Maharashtra and Gujarat. In A.P. sales Depts., are located in different areas like Karimnagar, Warangal, Nizamabad, Vijayawada and Nellore. In other states it has opened around 10 depot One among the industrial giants in the country today, serving the nation on the industrial front. Kesoram industry ltd., has a checked and eventful history dating back to the twenties when the Industrial House of Birlas acquired it. With only a textile mill under its banner 1924, it grew from strength to strength and spread its activities to newer fields like Rayon, Transparent papers. The market share of Kesoram Cement in AP is 7.05%. The market share of the company in various states is shown as under. STATES Karnataka Tamilnadu MARKET SHARE 4.09% 0.94%
Kerala Maharashtra
0.29% 2.81%
Supreme performance
One of the largest Cement Plants in Andhra Pradesh, the plant corporate the latest technology in Cement - making. It is professionally managed and well established Cement Manufacturing Company enjoying the confidence of the consumers. Kesoram has outstanding track record in performance and productivity with quite a few national and state awards to its credit. BIRLA SUPREME, the 43 Grade Cement, is a widely accepted and popular brand in the market, commanding a premium. However to meet the specific demands of the consumer, Kesoram bought out the 53 grade BIRLA SUPREME GOLD, which has special qualities like higher fineness, quick-setting, high compressive strength and durability.
Supreme Strength
Kesoram Cement has huge captive Limestone Deposits, which make it possible to feed highgrade limestone consistently, Its natural Grey color is anion- born ingredient and gives good shade. Both the products offered by Kesoram, i.e. BIRLA SUPREME-43 Grade and BIRLA SUPREME-GOLD-53 Grade cement are outstanding with much higher compressive strength and durability.
D.C. System:
Clinker making process is a key step in the overall cement making process. In the case of BIRLA SUPREME/GOLD, the clinker-making process is totally computer. control. The Distributed Control System (DCS) constantly monitors the process and ensures operating efficiency. This eliminates variation and ensures consistency in the quality of Clinker.
Supreme Expertise
The Best Technical Team, exclusive to Kesoram, mans the Plant and monitors the process, to blend the cement in just the required proportions, to make BIRLA SUPREME/GOLD OF Rock Strength.
strength at Minimum use of cement with water in the water cement ratio, especially the 53 grade Birlas supreme-gold.
I.S.O. 9002
All quality systems of Kesoram have been certified under I.S.O. 9002/1.S. 4002, which proves the worldwide acceptance of the products. All quality systems in production and marketing of the product have been certified by B.I.S. under ISO 9002/1S 14002. The first unit was installed at Basantnagar with a capacity of 2.5 lakhs TPA (tones per annum) incorporating humble supervision, preheated system, during the year 1969. The second unit followed suit with added a capacity of 2 lakhs TPA in 1971. The plant was further expanded to 9 lakhs by adding 2.5 lakhs tones in august 1978, 1.13 lakhs tones in January 1981 and 0.87 lakhs tones in September 1981.
Power
Singereni collieries make the supply of coal for this industry and the power was obtained from AP TRANSCO. The power demand for the factory is about 21MW. Kesoram has got 2-diesel generator seats of 4 MW each installed in the year 1987. Kesoram cement now has a 15MWcaptive power plant to facilities for uninterrupted power supply for manufacturing of cement.
Performance
The performance of kesoram cement industry has been outstanding achieving over cent percent capacity utilization all through despite many odds like power cuts and which most 40% was wasted due to wagon shortage etc. The company being a continuous process industry works round the clock and has excellent records of performance achieving over 1005 capacity utilization. Kesoram has always combined technical progress with industrial performance. The company had glorious track record for the last 27 years in the industry.
Awards
Kesoram cement bagged many prestigious awards including national awards for productivity, technology, conservation and several state awards since 1984. The following are the some of important awards.
Products Of Te Organization:
3. Theoretical Review
Inventory Management
The investment in inventories constitutes the most significant part of current assets / working capital in most of the undertakings. Thus, it is very essential to have proper control and management of inventories. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment in inventories.
time taken in the manufacturing process. The quantum of work in progress depends upon the time taken in the manufacturing process. The greater the time taken in manufacturing, the more will be the amount of work in progress.
c)
Consumables: These are the materials which are needed to smoother the process of production but they act as catalysts. Consumables may be classified according to their consumption add critically. Generally, consumable stores doe not create any supply problem and firm a small part of production cost. There can be instances where these materials may account for much value than the raw materials. The fuel oil may form a substantial part of cost.
d)
Finished goods: These are the goods, which are ready for the consumers. The stock of finished goods provides a buffer between production and market, the purpose of maintaining inventory is to ensure proper supply of goods to customers.
e)
Spares: The stock policies of spares fifer from industry to industry. Some industries like transport will require more spares than the other concerns. The costly spare parts like engines, maintenance spares etc., are not discarded after use, rather they are kept in ready position for further use. All decisions about spares are based on the financial cost of inventory on such spares and
interrupted production and smooth running of business. In the absence of inventories a firm will have to make purchases as soon as it receives orders. It will mean loss of time and delays in execution of orders which sometimes may cause loss of customers and business. A firm also needs to maintain inventories to reduce ordering cost and avail quantity discounts etc.
1.
Storage and Handling Costs: Holding of inventories also involves costs on storage as well as handing of materials. The storage of costs include the rental of the godown, insurance charges etc.
2.
Risk of Price decline: There is always a risk of reduction in the prices of inventories by the supplies, competition or general depression in the market.
3.
Risk of Obsolescence: The inventories may become absolute due to improved technology, changes in requirements, change in customer tastes etc.
4.
Risk Determination in quality: The quality of materials may also deteriorate while the inventories are kept.
A proper inventory control not only helps in solving the acute problem of liquidity but also increases profit and causes substantial reduction in the working capital of the concern. following are the important tools and techniques of inventory management and control. The
management requires that a firm should maintain an optimum level of inventory where inventory costs are the minimum and at the same time there is no stock out which may result in loss or sale or shortage of production.
A)
required by the supplying firm to execute the order. The time in processing the order and then executing it is known as lead time. Rate of Consumption: It is the average consumption of materials in the factory. The rate of consumption will be decided on the basis of past experience and production plans. Nature of materials: The nature of material also affects the minimum level. If a material is required only against the special orders of the customer then minimum stock will not be required for such material. Minimum stock level can be calculated with the help of following formula. Minimum stock level Re ordering level (Normal consumption x Normal re order period)
B)
Re Ordering Level:
When the quantity of materials reaches at a certain figure then fresh order is sent to get
materials again. The order is sent before the materials reach minimum stock level. Re ordering level is fixed between minimum level maximum level.
C)
Maximum Level:
It is the quantity of materials beyond which a firm should not exceeds its stocks. If the
quantity exceeds maximum level limit then it will be over stocking. Overstocking will mean blocking of more working capital, more space for storing the materials, more wastage of materials and more chances of losses from obsolescence. Maximum stock level Reordering Level + Reorder Quantity (Maximum Consumption x Minimum reorder period)
D)
stock position and urgency of obtaining fresh supply at any cost. Danger Stock level = Average rate of consumption x emergency delivery time.
E)
2)
Safety stock is a buffer to meet some unanticipated increase in usage. The demand for materials may fluctuate and delivery of inventory may also be delayed in such a situation the firm can be facing a problem of stock out. In order to protect against the stock out arising out of usage fluctuations, firms usually maintain some margin of safety stocks. Two costs are involved in the
determination of this stock that is opportunity cost of stock outs and the carrying costs.
If
firm maintains low level of safety frequent stock outs will occur resulting into the larger opportunity costs. On the other hand, the larger quantity of safety stocks involves carrying costs.
3)
The quantity of material to be ordered at one time is known as economic ordering quantity. This quantity is fixed in such a manner as to minimize the cost of ordering and carrying costs. Total cost material = Acquisition Cost + Cost + Carrying Costs + Ordering Cost. Carrying Cost: It is the cost of holding the materials in the store. Ordering Cost: It is the cost of placing orders for the purchase of materials. EOQ can be calculated with the help of the following formula EOQ = 2CO / I Where C = Consumption of the material in units during the year O = Ordering Cost I = Carrying Cost or Interest payment on the capital.
4)
called A category.
covers about 70% of items of materials which contribute only 10% of value of consumption.
5)
The VED analysis is used generally for spare parts. Spare parts 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 E type of spares is also necessary but their stocks may be kept at low figures. The stocking of D type spares may be avoided at times. If the lead time of these spares is less, then stocking of these spares can be avoided.
6)
efficiently or not. The inventory turnover ration also known as stock velocity is normally calculated as sales / average inventory of cost of goods sold / average inventory. Inventory conversion period may also be calculated to find the average time taken for clearing the stocks. Symbolically. Inventory Turnover Ratio = Cost of goods sold __________________________ Average inventory at cost
7)
their identification. The identification of short names are useful for inventory management not only for large concerns but also for small concerns. Lack of proper classification may also lead to reduction in production. Generally, materials are classified accordingly to their nature such as construction materials, consumable stocks, spares, lubricants etc. After classification the materials are given code numbers. The coding may be done alphabetically or numerically. The later method is generally used for coding. The class of materials is assigned two digits and then two or three
digits are assigned to the categories of items divided into 15 groups. Two numbers will be category of materials in that class. The third distinction is needed for the quality of goods and decimals are used to note this factor.
8)
While the overall objective of the inventory system is to minimize the cost to the firm at the risk level acceptable to management, the more proximate criteria for judging the inventory system are: Comprehensibility Adaptability Timeliness
Area Of Improvement:
Inventory management in India can be improved in various ways. Improvements could be affected through.
Effective Computerization:
Computers should not be used merely for accounting purpose but also for improving decision making. Review of Classification: ABC and FSN classification must be periodically reviewed.
Improved Coordination:
Better coordination among purchase, production, marketing and finance departments will be help in achieving greater efficiency in inventory management.
Need Of Inventory:
Inventories are maintained basically for the operational smoothness which they can be affected by uncoupling successive stages of production, whereas the monetary value of the inventory serves as a guide to indicate the size of the investment made to achieve this operational convenience. The materials management departments primary function is to provide this operational convenience with a minimum possible investment in inventories. Materials department is accused of both stock outs as well a large investment in inventories. The solution lies in exercise a selective inventory control and application of inventory control techniques. Inventories build to act as a cushion between supply and demand. It is sufficient to take care of
the requirements of demand till the next supply arrives. It is sufficient to take care of probable delays in supply as well as probable variations in demand. The size of the inventory depends upon the factors such as size of industry internal lead time for purchase, suppliers lead time, vendor relations availability of the materials, annual consumption of the materials. Inventory coat can be controlled by applying Modern Techniques viz., ABC analysis, SDE, ESN, HMC, VED etc. These techniques can be used effectively with the help of computerization.
Basically there are four costs for consideration in developing and inventory model. The cost of placing a replenishment order. The cost of carrying inventory. The cost of under stocking and The cost of over stocking. The cost of ordering and inventory carrying cost are viewed as the supply side costs and help in the determination of the quantity to be ordered for each replenishment.
The under stocking and over stocking costs are viewed as the demand side costs and help in the determination of the amount of variations in demand and the delay in supplies which the inventory should withstand. Whenever an order placed for stock replenishment, certain costs are involved, and, for most practical purpose it can be assumed that the cost per order is constant. The ordering cost may vary depending upon the type of items, for example raw material like steel against production component like castings in steel plants, support materials in the case of Steel industry.
Transport bills and hamali charges. Allowance for deterioration or spoilages. Salaries of stores staff. Obsolescence. The inventory carrying cost varies and a major portion of this is
One can readily visualize the determination of inventory quantities by physical count or by use of perpetual inventory records. When this quantity is determined, it must be multiplied by a unity cost in order to determine the inventory value that is used on financial statements. Trade and quantity discount are to be excluded from unit cost since these discount exist for the purpose of defining the true invoice cost of merchandise. Cash discounts, on the other hand, have been considered as a reward for early payment and as a penalty for late payment. The reward has often been interpreted as a loss rather than as a part of unit cost. Thus it would not be difficult to find difference of opinion as to whether invoice cost includes or excludes cash discount. When the current replaAutomobial cost of material on hand at the close of a year is less than the actual cost, the inventory value is reduced to replaAutomobial cost (current market price). Thus the acceptable basis inventory valuation is the lower of cost or market or more properly the lower of actual cost or replaAutomobial cost. The determination of inventory values is very important from the point of view of the balance sheet and the income statement since costs not included in the inventory (the balance sheet) are considered to be expensive and are thus included in the income statement.
profit. When a method is selected, it must be used consequently and cannot be changed for year to year in order to secure the most favorable profit for each year.
bear an entirely different charge for materials because the first job completely exhausted the supply of materials of the particular lot. The FIFO method of valuation of inventories is particularly suitable in The following circumstances. I. II. III. IV. The materials or goods are of a perishable nature. The frequency of purchases is not large. There are only moderate fluctuations in the prices of materials or goods purchased. Materials are easily identifiable as belonging to a particular purchase lot.
The LIFO method (Last in First Out method) This method is based on the assumption that last item of materials or goods purchased are the first to be issued or sold. Thus, according to this method, inventory consists of items purchased at the earliest cost.
This method is based on the contention that each enterprise maintains at all times a minimum quantity of materials or finished goods in its stock. This quantity is termed as base stock. The base stock is always valued at this price and its carried forward as a fixed asset. Any quantity over and above the base stock is valued in accordance with any other appropriate method. As this method aims at matching current costs to current sales, the LIFO method will be most suitable for valuing stock of materials or finished goods other than the base stock. The base stock method has advantage of charging out material / goods at actual cost. Its other merits or demerits will depend on the method which is used for valuing materials other than the base stock.
As should be quite evident, the different methods of calculating inventory values will all have their impact on the flow of costs through the balance sheet into the income statement. The dollars that are paid to acquire inventory are always divided between the balance sheet (inventories) and the income statement (cost of goods sold), there is not other place to put them. Thus if the different methods of calculating inventory produce differing inventory values, they will also produce differing cost of goods sold figures, and the differing cost of goods sold figures will naturally produce differing profit figures. In order show the impact of inventory valuation on cost flows, the preceding exhibits are summarized. Each method produces a different figure for the transfer of raw materials to work in process. These differences appear small, but the only reason for this is that the dollar amounts have been kept small to make the illustration workable. With the transfer of materials to work in process, the cost flow or transfer with have its impact on the work in process inventory and the transfer of completed merchandise to finished gods. Ultimately when goods are sold; the varying methods of valuing inventories will have their impact on cost of goods sold and these profits. The effects of the cost flows on cost of gods sold and profits can be accentuated further it the differing methods of valuing inventories are applies to work in process and finished goods.
Cost flows and inventory are exactly the some under stable prices. With a falling price level, the LIFO method produces the highest cost flow and the lowest inventory. With a falling price level, the LIFO method produces the lowest cost flow and highest inventory. The cost flow under LIFO follows the price level, LIFO produces larger cost flows when prices are rising and smaller cost flows when prices are falling. A final item to consider is that the average method produces results which fall between the extremes of LIFO and FIFO.
reasonable person would attempt to reduce such deterioration by instituting a physical flow approximating first-in-first-out. The major reason for the use of the average method is something other than the lack of specific physical flow. Ordinarily the LIFO method cannot be justified on the basis of the physical flow of materials. Under conditions of changing prices, the advocate of LIFO says that the only method which matches costs and revenues is the LIFO method. The LIFO method assumes that the latest item is the first item out, and thus the current costs of materials are matched with the other hand, assumes that the first item in is the first item out, and thus the non-current costs of matching current costs with current revenues is the essence of the argument for the LIFO method. As can be seen by the above comments, there is no one best method of valuing inventories. The method chosen should fit the situation. A physical flow pattern comparable to FIFO would force one to consider the FIFO method. The lack of a discernible physical flow pattern would force one to consider the average method. Concentration on cost flows, as distinct from physical flows, would force to consider the LIFO method especially where there appears to be a discernible trend towards rising prices (or falling prices) as has been the case in our economy during recent years.
Order Point: .. Available Date Description On order Received Issued On order On hand
As shown above, there is need only for physical quantities since the inventory values is the physical quantity multiplied by the standard cost. With the cost and value columns disposed off, a perpetual inventory card can include additional data such as quantities on order, quantities reserved, and quantities available. These additional data are very useful for inventory and production control purpose. On the basis of a few calculations concerning into inventories on a FIFO, a LIFO, or an average cost basis.
Inventory of Obsolescence:
Absolvent inventories cannot be used or disposed off at values carried on the books. Frequent reviews should be made of all inventories, and when obsolescence is indicated a request for revaluation should be prepared for approval by management. The difference between original and obsolete value should be recorded by a change to operating account. Inventory obsolescence, and a credit to inventory. If the material is scrapped, this will be for the full inventory value or used in areas where it will be work less than its Original value, the entry would be only for the amount of write down. Some companies carry a solvage inventory and transfer to it materials which may be sold or used at reduced values. Where this is done, the entry would be:
Dr. Solvage inventory Dr. Inventory Obsolescences. Raw Material inventory or Supplies inventory.
Share Capital:
As at 31.03.2009
12,00,00,000
20,00,000 Preference Share of Rs.10/- each Issued And Subscribed & Paid-Up *1,11,52,300 Equity shares of Rs.10/- each Total
2,00,00,000
2,00,00,000
*400 Equity Shares of Rs.10/- each were issued for consideration other than cash
As at 31.03.2009 Rupees
Capital Reserve General Reserve Balance in Profit and Loss Account Share Premium
TOTAL
12,14,11,542 11,63,86,537
As at 31.03.2010 Particulars A. Terms Loans Industrial Development Bank Of India The Industrial Credit and Investment Corporation of India Ltd. Indian Renewable Energy Development Agency Limited (IREDA) State Bank of India 0 0 1,42,78,83 Funded Interest Interest Accrued and Due 1 0 0 4,50,00,00 0 Rupees Rupees
12,67,50,00 0
5,75,00,000
14,000 33,47,225
1,19,09,901
2,32,87,31 Punjab National Bank 9 2,10,07,84 State bank Of India 2 2,35,74,120 11,35,47,09 9,93,54,344 15,86,33,17 TOTAL 5 6 33,50,29,74 5 2,69,90,958
As at 31.03.2010 Particulars From Directors From banks &Others TOTAL Rupees 50,00,000
Schedule E eferred Payment: As at 31.03.2010 Particulars Opening Balance Add: Availed During the year rupees As at 31.03.2009 Rupees
16,06,49,233 18,18,39,980 Less: Paid during the year Closing Balance 12,51,23,672 3,58,82,350 3,55,25,561 14,59,57,630
Schedule G Investments:
As at
As at
31.03.2010 31.03.2009 Particulars 26,000 Equity shares of Rs.10/- each in Panchvati Polyfibres ltd., fully paid-up at cost 500 Equity shares of Rs.10/- each in Kesoram Priya Investments and Finance Ltd. 27,72,430 Equity Shares of Rs.10/- each in Kesoram Power Limited (Previous Year : 27,72,430 Shares) 2 ,77,24,300 2 TOTAL ,79,89,300 2 SCH ,77,24,300 EDU 2 LE ,79,89,300 I 5,000 5,000 2,60,000 2, 60,000 Rupees Rupees
Rupees
Rupees
Rupees
Rupees
CURRENT LIABILITIES Sundry Creditors 1. For Materials 2. For Capital Goods 3. For Expenses 4. For Other Liabilities 2,44,15,272 82,71,577 1,22,88,732 1,80,33,912 6,30,09,494 Interest accrued but not due Deposits/ Advances from Selling Agents, stockiest and others Provisions taxation Dividend TOTAL 30,99,267 1, 27,16,410 12,96,20,400 13,00,61,660 2,01,574 4,97,90,161 3,91,47,108 10,05,068 2,08,69,197 1,58,34,649 2,14,75,707 3,15,05,515 8,96,85,068 10,27,910
As at Particulars 31.03.2010 Rupees Sale of Cement Sale of Cement - Second Sale Sale of Clinker Sale of GCBS TOTAL 70,28,79,691 23,76,99,856 1797,07,789 71,974
112,03,59,310 111,18,31,603
Schedule K
I. Work-in- process Opening stock Less: stock 1,28,19,601 Finished Goods Opening Stock Less: stock 49,77,572 TOTAL 1,77,97,173 38,54,311 (2,11,78,062) Closing 66,05,349 16,27,777 1,04,59,660 66,05,349 (2,50,32,373) 3,28,74,681 78,42,308 32,74,681
Closing 2,00,55,080
Cement is the core industry and the product is the basic requirement for the development of housing and infrastructure. India is the largest producer of cement is Asia after china, with an installed capacity of more than 142 million tons per year. This comprises more than 400 major and mini cement plants. However, more than 53% of the installed capacity is controlled by the 6 top players in India.
Lime stone is a major raw material used by the cement industry and based on its availability, the industry is concentrated in Madhya Pradesh, Andhra Pradesh and Rajasthan. Thus more than 50% of the installed capacity have come up in 7 cluster with plenty of limestone deposits. The public sector accounts for only 8% of the capacity, as against the private sector share of 92% of the installed capacity. The southern region had the highest installed capacity, estimated at around 46 million tons per annum where in Andhra Pradesh alone accounted for about 21 mtpa
Cement is essential and basic input material for the construction activity. The development of infrastructure is on the top of the Government agenda which assures good growth for the cement industry in the coming years. Demand for cement is linked to the economic activity in any country. It can be categorized into demand for housing construction and infrastructure and hence cement demand in developing economies is much higher than any developed countries. The demand for cement is proportionately related to the spending on infrastructure including housing. In India, housing accounts for about 55% of cement consumption. After the decontrolling of cement industry, supply and demand situation has become a sensitive and critical factor in determining the over all profitability of the industry. Any small imbalance in demand and supply of the cement results in disproportionate change in the cement prices. The per capital consumption of cement in India is very low at 99 Kg against the Asian average of 200 Kgs. Over the last 15 years, the consumption of cement by the Governments has fallen drastically from 15% to 50% creating stiff competition between the market players. The trend is likely to be reversed in future as the Governments focused in infrastructure development like express highways and other large projects.
Measures Of Effectiveness:The effectiveness of inventory management it is helpful to look in to the following ratio.
Cost of manufacture
Inventory Turn Over Ratio: SL.NO. YEARS COST OF GOODS SOLD 1 2 3 4 5 2005-06 2006-07 2007-08 2008-09 2009-10 67,66,06,220 75,74,53,452 95,53,18,880 100,73,54,664 81,19,63,689 AVERAGE INVENTORY 6,60,02,620 7,97,18,757 8,62,93,250 8,28,73,616 7,43,38,239 1.25 9.50 11.07 12.15 10.92 RATIO
Interpretation: - The above table reveals that every year the inventory increasing in the above table the year 2009-10 used more inventory than other years.
INVENTORY TURN OVER RATIO
12.15 10.92
2008-09
2009-10
SL.NO.
YEARS
INVENTORY
1 2 3 4 5
Interpretation: - The above table reveals that every year the inventory to the current assets increasing in the above table the year 2005-06 used more inventory to current assets than other years.
2009-10 2008-09 YEARS 2007-08 2006-07 2005-06 0 0.05 0.1 0.15 0.2
RATIOS
Production Of Inventory: Particulars Year 2005-06 Store and spares to inventory Raw materials to inventory Coal inventory Packing materials inventory Work in process to inventory Finished goods 8.47 10.82 6.72 8.08 14.07 9.63 35.87 35.33 24.08 21.74 10.54 25.51 to 1.22 0.84 3.15 2.57 5.36 2.62 to 10.52 11.10 14.87 8.41 8.15 10.61 6.36 5.98 9.01 8.15 8.52 7.60 37.52 Year 2006-07 35.89 Year 2007-08 42.14 Year 2008-09 51.02 Year 2009-10 53.33 43.98 Average
to inventory
Interpretation: - The above table reveals that every year the production
Inventory: Average increasing in the above table the stores and spares average increased.
PRODUCTION OF INVENTORY
45 40 35 30 AVERAGE 25 20 15 10 5 0 2005-06 2006-07 2007-08 YEARS 2008-09 2009-10 7.6 10.61 9.63 25.51 43.98
SL.NO.
YEARS
MATERIAL CONSUMPTION
1 2 3 4 5
Interpretation :- The above table reveals that every year the raw material inventory turn over ratio increasing in the above table the year 2008-09 used more raw material inventory turn over ratio than others years.
17.52
18.7 14.84
18.09 14.66
2005-06
2006-07
2007-08 YEARS
2008-09
2009-10
Cost of manufacture
SL.NO.
YEARS
COST OF MANUFACTURE
1 2 3 4 5
Interpretation :- The above table reveals that every year the work in process inventory turn over ratio increasing in the above table the year 2008-09 used more process inventory turn over ratio than others years.
54.23 49.88
SL.NO.
YEARS
AVERAGE INVENTORY
FINISHED GOODS
1 2 3 4 5
Interpretation :- The above table reveals that every year the finished goods inventory turn over ratio current increasing in the above table the year 2008-09 used more finished goods inventory turn over ratio than others years.
SL.NO.
YEARS
1 2 3 4 5
Interpretation :- The above table reveals that every year the average age of raw material inventory turn over ratio increasing in the above table the year 2000 01 used more average age raw material inventory turn over ratio than others years.
0.7 0.6 0.5 AVERGE AGE OF RAW 0.4 MATERIALS 0.3 INVENTORY 0.2 0.1 0
0.64
Average Age Of Finished Goods Inventory SL.NO. YEARS FINISHED GOODS INVENTORY AT COST 1 2 3 4 5 2005-06 2006-07 2007-08 2008-09 2009-10 55,92,962 86,27,805 58,05,978 67,00,383 1,04,59,661 65,99,09,481 75,21,06,280 91,35,78,281 97,72,90,734 89,00,47,316 COST OF GOODS MANUFACTURED PER DAY AVERAGE AGE OF FINISHED GOODS INVENTORY 0.008 0.011 0.006 0.006 0.011
Interpretation :- The above table reveals that every year the average age of finished goods inventory turnover ratio increasing in the above table the year 200506 and 2009-10 used more average age of finished inventory turnover ratio than others years.
0.012 0.01 0.008 FINISHED GOODS 0.006 INVENTORY RATIO 0.004 0.002 0 2005-06 0.008
0.011
0.011
0.006
0.006
2006-07
2007-08 YEARS
2008-09
2009-10
Inventory
SL.NO. 1 2 3 4 5
Interpretation: - The above table reveals that every year the inventory to fixed asset increasing in the above table the year 2005-06 and 2008-09 used more inventory to fixed assets than other years.
---------------------------------------Average debtors
SL.NO.
YEARS
TOTAL
1 2 3 4 5
SL.NO.
YEARS
NO OF DAYS IN A YEAR
TOTAL
1 2 3 4 5
Interpretation :- The above table reveals that every year the debtors turnover ratio increasing in the above table the year 2009-10 used more debtors turnover ratio than other years.
DEBTOR TURNOVER RATIO 80 70 60 50 TOTAL 40 30 20 10 0 2005-06 2006-07 2007-08 YEARS 2008-09 2009-10 39.93 77.82 7700% 76.68 79.34
Findings
From 2005-2006 there is an increase in the inventory turnover ratio 1.25 to 9.5 and from 2006-07 to 2007-08 inventory turn over ratio increases to 12.5 and decreases to 10.92. But, the inventory turn over Ratio from 2003-04 to 2007-08 was increased 1.25 to 10.92. In the years 2007-08 the inventory to current asset was decreased from 0.29 to 0.26 in Production of Inventory the average ratio of stores & spares was 43.98, Raw Material to inventory was 7.60, Coal to Inventory was 10.61, Packing to Inventory was 2.62, Work in process to inventory was 25.51 & Finished Goods to inventory was 9.63 From 2005-2006 there is an decrease in the Raw material inventory turnover ratio 17.52 to 14.84 and from 2006-07 to 2007-08 current ratio 18.09 decreases to 14.66. But, the Raw Material inventory turn over Ratio from 2003-04 to 2007-08 was decreased 17.52 to 14.66.
From 2005-2006 there is an increase in the WIP inventory turnover ratio 27.86 to 34.11 and from 2006-07 to 2007-08 WIP inventory turnover ratio
increases to 54.23 and decreases to 49.88 But, the WIP inventory turnover Ratio from 2003-04 to 2007-08 was increased 27.86 to 49.88 From 2005-2006 there is an increase in the Finished Goods inventory turnover ratio 12.09 to 16.45 and from 2006-07 to 2007-08 Finished Goods inventory turnover ratio decreases to 15.03 to 7.76 But, the Finished Goods inventory turnover Ratio . 2007-08 was decreased 12.09 to 7.76 The Average Age of inventory was decreased from 0.64 to 0.05 in the year 2007-08. There was no average of inventory for the year 2007-08. The Average Age Finished Goods inventory was increased from 0.008 to 0.01 in the year 2007-08. there was a constant average of finished goods inventory for the year 2007-08 to 2006 2007 In the year 2007-08 the inventory to fixed asset was decreased from 0.18 to 0.12 The Debtors Turnover Ratio has maintained consistency throughout the project. It maintained average of 4.69 to 4.60
Suggestions
In most recent years. Kesoram Cement Limited has worked to its full capacity. This reflects that the efficiency of men and machines in the organization. A company of this nature can multiply its profits by increasing in Inventory Control Management.
The proportion of inventory to the total current assets has not been showing a consistent increase. The size of inventory should be increased so as to meet the demand.
The size of Inventory Control Management, which has shown tremendous increase during first two years, has remained static thereafter. Between the inventories on current assets, is not more profitable.
Thought the sale of Kesoram Cements Limited is showing an increasing trend, the profits have not registered an increasing trend as well. This is due to the increase in the cost of production. Therefore, company should take care of controlling cost of production.
The company must concentrate on new and improved technology to increase production and there by decrease cost of production.
The company should aim at minimizing cost by implementing strict cost control and maintain cost records for each department to identify the risk in controllable costs.
More Innovation techniques are to be introduced to meet an increased demand in the market.
References provided by prospective customers should be consulted and necessary followup action should be taken.
Conclusion
increasing trend throughout the period under study from 2005-06 to 2009-10. The Inventory Control Management indices show a continuous increase.
2. Inventories the major components of raw materials, work in process and finished goods,
3. The percentage of inventory on current assets is increasing in 4.14% in the year 2008-09.
4. In the year 2008-09, there has been an increase in the inventory turnover ratio from
5. There has been a study increase in the inventory turnover ratio of Kesoram Cement
7. The sales of the company have an upward trend. It represents the operational
8. The financial charges of Kesoram Cements Limited are comparatively lower and it has a
9. The average collection period 77 days i.e. just over 2 & half months, which indicates
normal debtors turn over ratio. But, it is maintaining an average collection. Company should try to bring down the collection period to improve liquidity.
10. The company efficiency in turning its inventory is increasing sales is good, the years
BIBILIOGRAPHY
BIBLOGRAPHY
S.P.Jain, K.L.NaraNG, 2003, ADVANCED ACCOUNTANCY, 10th Edition, Kalyani Publishers, Ludhiana. Prasanna Chandra, 2002, FINANCIAL MANAGEMENT, 5th Edition, TATA-McGRAW HILL, New Delhi. I.M. Pandey, 2002, FINANCIAL MANAGEMENT, 8th Edition, Vikas Publishing House Private Limited, New Delhi. R.K.Sharma, Shashi K.Gupta, MANAGEMENT ACCOUNTING, 2nd Edition, Kalyani Publishers, Ludhiana.
JOURNALS:
The ICFAI Journal of Applied Finance Finance India (Indian Institute of Finance) Investment Monitor.