Inventory Management

INTRODUCTION
Management must be concerned with all aspects of the firms operations including production of goods, delivery of services, sales, marketing activities and supporting functions, such as personal training and data processing to handle these responsibilities most firms make extensive use of financial data and reports. As businesses become larger and more complex finance assumed the responsibility of dealing with problems and decisions associate with managing firms assets. Inventory in wider sense, is defined as any idle resource of an enterprise. It is a physical stock of goods kept dept for the purpose of future affairs. The term is generally used to indicate raw materials in process, finished products, packing, spares and others stocked in order to meet expected demand or distribution in the future. Though inventory of materials is an idle resource it is not meant for immediate use it is almost essential to maintain some inventories for the smooth functioning of an enterprise. Inventories constitute the ma!or element in the working capital of many business enterprises. Inventories constitute the most significant part of current assets of large ma!ority of companies in India. "n an average, inventories are approximately #$ % of current assets in public limited companies in India. &ecause of the large si'e of inventories maintained by firms, a considerable amount of funds is re(uired to be committed to them. It is impossible for a company reduces its levels of inventories to a considerable degree, e.g., )$* +$ %, without any adverse effect on production and sales, by using simple inventory planning and control techni(ues. The reduction in excessive inventories carries a favorable impact on a companys profitability.

Meaning of Inventory
Inventory is a tangible property held for sale, or materials used in a production process to make a product. The dictionary meaning of inventory is ,stock of goods or a list of goods.

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Meaning of Inventory Management

Inventory management involves the control of assets being produced for the purpose of sale in the normal course of the companys operations.

Nature of Inventories
Inventories are stock of the product a company is manufacturing for sale and components that make a product. The various forms in which inventories exist in a manufacturing company are Raw Materials .aw materials are those basic inputs that are converted into finished product through the manufacturing process. .aw materials inventories are those units which have been purchased and stored for future productions. Work*in*Process /ork*in*process inventories are semi*manufactured products. They represent products that need more work before they become finished products for sale. Finis e! "oo!s 0inished goods inventories are those completely manufactured products which are ready for sale. 1tocks of raw materials and work*in*process facility production, while stock of finished goods is re(uired for smooth marketing operations. Thus, inventories serve as a link between the production and consumption of goods. .aw materials /ork in process 0inished goods

Im#ortance of Inventory
1ufficient inventory for production sale process. 2roper determination of profit True financial position Page +

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Inventory Management Met o!s of Inventory $aluation * * * * * * * * 0I0" 3I0" 4I0" &ase 1tock Method Inflated 2rice Method 1pecific Identification Method Average 5ost Market 2rice

Inventory Management Tec ni%ues

In managing inventories, the firms ob!ective should be in consonance with

the shareholders wealth maximi'ation principle. To achieve this, the firm should determine the optimum level of inventory. 6fficiently controlled inventories make the firm flexible. Inefficient inventory control results in unbalanced inventory and inflexibility the firm may sometimes run out of stock and sometimes may pile up unnecessary stocks. This increases the level of investment and makes the firm unprofitable. 1ome of the techni(ues are as follows &O' (&conomic or!er %uantity) The economic order (uantity is that inventory level, which minimi'es the total of ordering costs and carrying costs. It is the (uestion, how much to order the (uantity when inventory is replenished. If the firm buying raw materials, this is to purchase the (uantity of each replacement and if it has to plan for production run, it is how much production to schedule. It may be solved through 6"7EOQ = 2AO / C /here, A 8 7uantity re(uired " 8 "rdering cost 5 8 5arrying cost

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Inventory Management *+C *nalysis (*lways +etter Control) This is one of the widely used techni(ues to identify various items of inventory for the purpose of inventory control. It is very effective and useful tool for classifying monitoring and control of inventories a firm should not keep same degree of control on all the items of inventories. It is based on parietals law. It is also known as selectivity inventory control. The firm should put maximum control on those items whose value is the highest with the comparison of other two items the techni(ue concentrated on important items and is also known as control by importance and exception. :nder A&5 analysis the materials are divided into three categories A, &, 5. 2ast experience have shown that ); % of the items contributes to <$ % of value of consumption and this category is called *. About 9$ % of the items to contribute to +$ % of value of consumption and this category are called +. 5ategory C covers about ;; % of items materials which contribute only )$ % of value of consumption.

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INDU,TR- PROFI.&
Intro!uction to +attery Manufacturing Process
The manufacturing process involved in production of maintenance free valve regulated lead acid storage batteries is explained below. a. >rid 5asting b. 2late 2roduction c. 2asting d. Assembling e. 0ormation f. ?ispatch a/ "ri! Casting 2ositive and negative grids re(uired for batteries are made from different alloys. &esides providing the necessary support to hold the active material together, the grids serve as a conductor of current re(uired for the electro chemical reaction that takes place at the active material@electrolyte interface in the battery. >rids are obtained by pouring molten lead alloy in to special water cooled grid moulds. 5asting is done on sophisticated automatic casting machines which control the parameters within narrow tolerance to produce consistently good (uality grids. 0/ Plate Pro!uction The lead oxide produced by the &arton process is mixed with water, sulphuric acid and special additives like synthetic flock and expanders. The paste mixing is done in a tub mixture. ?ry lead oxide along with the additives is added to the tub. ?istilled water is first dispensed into the tub when it is in rotation. After a fixed (uantity of water addition, sulphuric acid is slowly dispensed into the tub at a slower rate to avoid temperature rise in the mixer.

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Inventory Management c/ *ssem0ling The process of assembly is different for power plus and power stack. 2lates are first stacked into groups with the negative and positive plates alternating with the glass absorbent separator interspersed between the plates. These separators are wrapped around individual plates. !/ Formation The assembled batteries are filled with a specified grades and (uantity of sulphuric acid and left on stand to enable the absorbent separators to soak. Then electricity is passed through the grids for formation. ?uring the formation, the active material on the positive plate is converted into lead oxide and is converted into spongy lead on the negative plate. Time of formation and charging current depends on the si'e and the number of the plates. e/ Dis#atc After completing the battery manufacturing, packed and labeled to that battery and transport to the various places. f/ Pasting Among all the stages, we are mainly concentrating on the 2A1TIA> of the plates. In pasting process we have some stages-

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Inventory Management The main aim of this process is to improve the life, performance and storage capacity of the battery. /e achieve this by doing the process of curing and drying of the plates at some constant temperature. Curing Process1 T6M26.A.:6 4:MI?ITD ?:.ATI"A =#C5 )$$% )#hrs

0or curing the plates, we need to maintain the 5onstant Temperature and 4umidity at some set value for some duration of time. Interme!iate Drying Process1

T6M26.AT:.6 4:MI?ITD ?:.ATI"A Dry Cycling1

=BC5 ;$% Ehrs

This is the final process where we maintain $% 4umidity and E$C5 temperature to eliminate the moisture. 2ow +attery Works1 /hen your place the in your cars ignition and turn the ignition switch F"AG a signal sent to the battery. :pon receiving the signal, the battery takes energy that it has been strong in chemicals form and releases it as electricity power is used in crank the engine. The batteries also release energy to power the cars light and other V.C.R. Institute of Management Studies Page <

Inventory Management accessories. It is the only device, which can store electrical energy in the form of chemical energy, and science it is called as a storage battery.

,eale! Maintenance Free (,MF) +attery

1ealed maintenance free H1M0I batteries technology is leading the battery industry in the recent years in automobile industry and battery sector around the globe. 1M0 batteries come under the rechargeable battery category so it can be used a number of times the life of a battery. 1M0 batteries are more compact then the wet type batteries. It can be at any position, these batteries are very popular for portable power re(uirements and space constraint applications. The replacement market, on the other hand, is much longer. The replacement market is characteri'ed by the presence of large unorgani'ed sector, which constitutes around ;;*#$% of the total replacement market. This is possible due to low capital entry barrier. These players have the advantage of inapplicability of exercise duties and sales tax.

In!ustrial +atteries
Industrial batteries can be basically classified into main categories *utomotive +atteries ,tationary +atteries The automotive batteries are used in electric vehicles and forklifts. The stationary batteries used in Telecom, .ailway and power industries have registered a growth in excess of +$% and this trend in likely to be continuing in the next ; years. The industrial segment is highly technology is an important factor land is vital for brand reference. The total demand for the industrial battery segment is met by indigenous production with a small saves of about )$% of by imports. The demand for industries has grown slowly J steadily.

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Recycling of +atteries
&attery acid is recycled neutrali'ing it into water of converting it to sodium soleplate for laundry manufacturing. 5leaning the battery cases, melting the plastics and reforming it into pellets recycle plastic. 3ead, which makes up ;$% of every battery, is melted, poured into slabs and purified. Pros#ectus of ,MF3$R.* +atteries in In!ia1 The following factors are influencing demand of K.3A Technology batteries 6ntry of multinationals in telecom industry. ?"T1 policy decision to upgrade the overall technology base. 5onstraints in the use of conventional battery in radio paging and cellular segments. Telecom The government policy to increase the capacity from )$ million lines by +$$# increased the demand for storage batteries considerably. The value added services like radio paging and cellular will increase the demand for storage batteries in future considerably. Railway In railways, the estimated demand is based on the annual post production which comes to +;$$ numbers by railways itself and )$$$ numbers more by various other segments, plus replacements demand and annual re(uirements for railway electrification. Power ,ector In power sector the estimated B$ private power pro!ects which are expected to produce =$$$$ MK with approximate capital outlay of .s.), =$, $$$ cores would keep the industry figured brighter in the coming years. The demand for K.3A batteries is in creased due to its performance over the conventional batteries. 1o it is more acceptable to the consumers.

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$alue Regulator .ea! *ci! +atteries

In the recent years in automobiles industry and battery sector around the globe K.3A batteries have become the preferred choice in various applications such as uninterrupted power supply, emergency lights, security systems and weighting scales. K.3A batteries are leak*proof, explosion resistant and having life duration of );*+$ years. These batteries with stand the environment conditions due to high technology, in built in the batteries. 6ach cell is housed in power coated steel tray making them convenient to transport and installation. 1o transits damages are minimi'ed in case of these batteries.

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COMP*N- PROFI.&
Amara .a!a &atteries 3imited HA.&3I incorporated under the companies act, )B;# in )9th 0ebruary )BE;, and converted into 2ublic 3imited 5ompany on # th 1eptember )BB$. The technocrat entrepreneur 1ri .ama 5handra Aaidu >alla is the chairman and managing director of the company. A.&3 is the first company in India which manufactures Kalue .egulated 3ead Acid HK.3AI &atteries. The main ob!ective of the company is manufacturing of good (uality of F1ealed Maintenance 0ree H1M0IG acid batteries. the company is setting up to .s. ),B+$ lakhs plant is in )E acres in Larakambadi village .enigunta mandal. The pro!ect site is notified under F&G category. The company has the clear cut policy of direct selling without any intermediate. 1o they have set up six branches and are operated by corporate operations office located in 5hennai. The company has virtual monopoly in higher A.4.HAmp 4ourI rating market its product K.3A. It is also having the facility for industrial and automotive batteries. Amara .a!a is a ; ,1 company and its aim is to improve the work place environment by using ; 1 techni(ue which is). 16I.I +. 16IT"A 9. 16I1" * 1ort "ut. * 1ystematic Arrangement * 1pic and 1pan

=. 16IL6T1: * 1tandardi'ation ;. 14IT1:LI * 1elf discipline

They propose to accomplish this by V.C.R. Institute of Management Studies Page )+

Inventory Management Training the people and creating awareness on ; ,1 Motivating and changing the behaviour patterns of the people 6stablishing standards for the implementation of element of ; ,1.

They believe that effective implementation of ; 1 techni(ue s will result in Colla0orators Amara .a!a has a strategic tie*up with Mohnson 5ontrols Incorporation of :1A. Amara .a!a and Mohnson 5ontrols Inc. both are having a +#% each share in A.&3 and the remaining is on public share. Amara .a!a is a company with commitment to achieve excellence in all its activities. The company is currently poised on a healthy growth rate of +.;% per annum and the present turnover of around +<$ crores. Ma!or customers rae &1A3, K1A3, 1I6M6A1, and &463 etc. Amara .a!a is the largest manufacturer of Maintenance 0ree Kalue 5onsistent and better (uality product 4igher productivity 3esser accidents 4igher employee morale

.egulated lead acid batteries HM0*K.3AI batteries in the Indian "cean rim and Mohnson 5ontrols is the largest manufacturer of 3ead Acid batteries in Aorth America and a leading global supplier to ma!or automobile manufacturers and industrial customers. The synergy of Amara .a!a and Mohnson 5ontrols compliments the strengths of both product design and market presence. This !oint venture meets the re(uirements for a global source for International (uality batteries and support services for both Auto and Industrial applications in this region. &y employing latest generation technology and with a clear understanding of current power back*up re(uirements, Amara .a!a has become the benchmark in the manufacture of Industrial batteries. In a brief span of ; years since commencing commercial operations, A.&3

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Inventory Management has emerged as a largest manufacturer of standby K.3A batteries in the Indian "cean rim comprising the area ranging from Africa and the Middle 6ast to 1outh 6ast Asia.

*war!s for *mara Ra4a +atteries .t!

5T e ,#irit of &6cellence7 awarded by Academy of 0ine Arts, Tirupati. awarded by 4yderabad 5+est &ntre#reneur of t e -ear8 9::;7 Management Association, 4yderabad. 5In!ustrial &conomist +usiness &6cellence *war!7 * in )BB) awarded by the Industrial 6conomists, 5hennai. 5&6cellence *war!7 * by the Institution of 6conomic 1tudies, Aew ?elhi. 5U!yog Rattan *war!7 ?elhi. 5&6cellence in &nvironmental Management7 for the year +$$)*$+ from the Andhra 2radesh 1tate 2ollution 5ontrol &oard. by the Institution of 6conomic 1tudies, Aew

Milestones of *R+. -ear

)BB< )BB< )BBE

Milestone
)$$ crore turnover I1"*B$$) accreditation 71*B$$$ accreditation

Man#ower Details of *R+. &6ecutives

1taff Trainees

< =>? mem0ers

* =+$ members * <$ members

?irect J Indirect Manpower * #+$ members Total Manpower is * )9#$ members

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*mara Ra4a@s ,trengt s

2roven technology from >A& and being a pioneer 1trong and well organi'ed customer base 0ull organi'ed infra structure in place Manufacturing facilities perceived as a benchmark in India. 5omplete range of K.3A batteries 2roven field performance in all user segments Approved vendor status in ma!or user segment

Culture an! &nvironment

Amara .a!a is putting a number of 4.? initiatives to foster a spirit of togetherness and a culture of meritocracy. Involving employees at all levels in building organi'ational support plans and in evolving our vision for the "rgani'ation. A.&3 encourages initiative and growth of young talent allows the organi'ation to develop innovative solutions and ideas. &enchmark pollution control measures, energy conservation measures, waste reduction schemes, massive greenbelt development programs. Amara .a!a has now targeted to secure the I1"*)=$$) certification in the next year.

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'uality Policy
A.&3s main policy is to achieve customer satisfaction through the collective commitment of employees in design, manufacture and marketing of reliable power systems, batteries, allied products and services. To accomplish the above, A.&3 focus on 6stablishing superior specifications for our products and processes 6mploying state*of*the*art technologies and robust design principles. 1triving for continuous improvements in process and product (uality Implementing methods and techni(ues to monitor (uality levels. 2roviding prompt after*sales services. Amara .a!a will train, motivate and involve employees at every level to achieve their aim. *R+.@, FUTUR& P.*N, Maximi'e export of its batteries. 6merge itself as a global player 5onstant upgradiation of products 1tream of new models 5onstant stress of improving productivity.

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*mara Ra4a "rou# Com#rises Of Following Com#anies

). Amara .a!a &atteries 3imited HA.&3I, Larakambadi, Tirupati. +. Amara .a!a 2ower 1ystems 3td.HA.213I, Larakambadi, Tirupati 9. 4arsha 6lectronics 3td.H4623I, Larakambadi, Tirupati. =. Mangal 6lectro 1ystems 3td.HM6123I, 2etamitta, 5hittoor ?ist. ;. Amara .a!a 6lectronics 3td.HA.623I, ?ighavamagham, 5hittoor ?ist #. Amara .a!a infra 3td Larakambadi, 5hittoor <. Amara .a!a Industrial service 3td Larakambadi 5hittoor

*M*R* R*A* +*TT&RI&, .IMIT&D

Amara .a!a &atteries 3imited was established in the year )BE; and then converted into limited in the year )BB$. Amara .a!a has a strategic tie*up with Mohnson 5ontrols Inc. of the :1A. Amara .a!a has demonstrated its commitment to offer optimum system solutions of the highest (uality and has become the largest supplier of standby power systems to core Indian utilities such as the Indian .ailways, ?epartment of Telecommunications, 6lectricity &oards and ma!or power generation companies. 6xtensive plans have been charted out for the future, wherein the company undertakes to become the most preferred supplier for power back*up systems. Amara .a!a has offered time tested world*class technology and processes developed on International standards be it high integrity K.3A systems like 2ower 1tack and 2ower 2lus or the recently launched high performance :21 battery L"M&AT J Amaron 4i*life automotive batteries that are the products of the collaborative batteries efforts of engineers at Mohnson 5ontrols Inc. and Amara .a!a.

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Inventory Management A.&3 comprises of two ma!or divisions vi'., Industrial &attery ?ivision and Automotive battery division. Total strength of A.&3 comes around )9;$. *R+.

Industrial &attery ?ivision HI&?I ). .ailway 5oaches +. Telecom 9. :21

Automotive &attery ?ivision HA&?I ). Two wheelers +. 0our wheelers 9. 4eavy vehicles

In!ustrial +attery Division (I+D)

Amara .a!a has become the benchmark in the manufacture of Industrial batteries. India is one of the largest and fastest growing markets for industrial batteries in the world and Amara .a!a is leading in the front, with an E$% market share for standby K.3A batteries. It is also having the facility for producing plastic components re(uired for Industrial batteries. A.&3 is the first company in India to manufacture K.3A batteries H1.M.0.I. The company has set*up .s.)B+$ 3akhs plant in )E acres in Larakambadi village, .enigunta Mandal. The pro!ect site is notified under ,& category. Ca#acity The actual installed capacity of I&? is = 3akh cells per annum and utili'ation capacity is reached to 9,+;,$$$ cells per annum. Pro!ucts Types of K.3A batteries manufactured in I&? are ). 2ower 1tack +. Lombat H:21 &atteryI

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Inventory Management 9. &rute =. >enpro Customers Amara .a!a being the first entrant in this industry had the privilege of pioneering K.3A technology in India. Amara .a!a has established itself as a reliable supplier of high*(uality products to ma!or segments like Telecom, .ailways and 2ower. Com#etitors The ma!or competitors for Amara .a!a &atteries products are 6xide Industries 3td., 4yderabad &atteries 3td., and >A&.

*utomotive +attery Division (*+D)

A.&3 has inaugurated its new automotive plant at Larakambadi in Tirupati on 1eptember +=th, +$$). This plant is part of the most completely integrated battery manufacturing facility in India with all critical components, including plastics sourced in*house from existing facilities on*site. In this pro!ect, Amara .a!as strategic alliance partners Mohnson 5ontrols, :1A have closely worked with their Indian counterparts to put together the latest advances in manufacturing technology and plant engineering. It is also having the facility for producing plastic components re(uired for automotive batteries. Ca#acity /ith an existing production capacity of ; 3akh units of automotive batteries, the new >reenfield plant will now be able to produce ) million batteries per annum. This is the first phase in the enhancement of Amara .a!as production capacity in which the company has invested .s.=; crores. In the next phase, at an additional cost of .s.+; crores, production capacity will increase to + million units estimated to complete around 9 years. After that A.&3 will become the single largest facility for battery manufacture in Asia.

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Inventory Management Pro!ucts The products of A&? are ). Amaron 4i*/ay +. Amaron 4arvest 9. Amaron 1hield =. Amaron 4ighlife The plastic products of A&? are Mars and Mar 5overs. Customers A.&3 has prestigious "6M Horiginal e(uipment manufactureI clients like 0".?, >eneral Motors, ?aewoo Motors, Mercedes &en', ?aimler 5hrysler, Maruti :dyog 3td., 2remier Auto 3td., and recently ac(uired a preferential supplier alliance with Ashok 3eyland, 4industan Motors, Telco, Mahindra J Mahindra and 1wara! Ma'da. Com#etitors 6xide, 2restolite and AM5".

*mara Ra4a Power ,ystems .t!/

Amara .a!a 2ower 1ystems 2vt. 3td. was incorporated in )BE= and was co* promoted by A.2. 6365T."AI5 ?6K63"2M6AT 5".2".ATI"A HA26?5I. &y virtues of A26?5s e(uity participation, A.213 has become a deemed public limited company as per section =9 HAI of The 5ompanies Act. A.213 is engaged in the manufacture of :ninterrupted 2ower 1ystems H:21I &attery 5hargers H&5I and inverters. The company had a technical collaboration with 4.?... 2ower 1ystems Inc. :1A. The company has entered into a new collaboration with M@s. .ectifier Technologies, Australia for manufacturing the advanced 1witch Mode 2ower 1upply units N1M21O for battery charging purpose. The present credit rating of the company is FAG. Total strength of A.21 H2I 3 comes around +#;.

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Pro!ucts
The products of A.213 are ). +. 9. 5onventional chargers 1witch Mode .ectifiersN1M.O Integrated 2ower 1upply 1ystems HIpsI.

Customers

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Mangal Precision Pro!ucts .t! <I

It was incorporated in )BB$ for manufacture of M1 cabinets, trays and racks for batteries, :21, battery charges, Inverters, etc., and to manufacture small battery parts. It was registered as an ancillary unit to A.&3 J A.213. The operations of the company are brisk and satisfactory. It is having all the sheet metal processing machinery starting from sheet fitting to final painting with punching, bending, welding, phosphate and powder coating process and total strength of 4623 comes around )B9.

Mangal Precision Pro!ucts .t! <II

It was started in the year )BB#*B< at pentamitta village, 5hittoor ?ist. It produces battery components like copper connectors, copper inserts, hardware re(uired by A.&3 JA.213. The unit is having re(uired machinery and e(uipment like power press break, mechanical press, could forging machine, thread forming machine, lathe, drilling, trapping machine etc., to produce the above components These components are 6lectro*plated and dispatched to A.&3 J A.213.

*mara Ra4a &lectronics .t!/ (*R&.)

It was recently established in +$$$. it produces electronic card and power distribution boards for :21 and inverters. Pro!uct Profile Type of K.3A batteries manufactured in the industial battery division ). 2ower 1tack +. LombatH:21 batteryI 9. &rute =. >enpro

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"alla Foo!s .imite! ("F.)

>03 was incorporated in ))th March +$$= and having its registered office at .angampet, 2uthalapattu Mandal, 5hittoor district, Andhra 2radesh. It is in the process of setting up a world class 0ood 2rocessing :nit on par with the international standards for extracting natural fruit concentrates from tropical fruits and export to :1A, 6urope and other advanced International markets. The company belongs to the Amara .a!a group, which is a pioneer in industrial and automotive batteries in India.

PRODUCT PROFI.&
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Inventory Management ,l/No/ PRODUCT N*M& ) Amaron 4arvest F&*TUR&, 4igh 2erformance, Totally Maintenance free, 4igh 2ower 5harge + 9 Amaron 1hield Amaron 4i*3ife &atteries = Lombat Acceptance. .eady to fit, long life low maintenance higher cranking power. 3ong life maintenance free, fully scaled and tested, Ao leakage@improved safety. 4igh discharge, 4igh 2erformance batteries, which are compact light, weight factory charge, explosion resistant and environment friendly. ; Amarara!a H2ower 1tack IndustriesI 3ight weight, study weather proof and long lasting, 4igh integrity, 4igh energy density. 0or Inverters 5ar, :tility Kehicles, Tractors, 45K1, >ensets J 35K1 :21, 62&P, 6ngine starting, 6merging lighting, 12&, 2ortable power, 0ire alarm security systems. Industrial applications, power plants, .ailways, ?efence, Telecommunications, process and service Industry, motive, power solar photo voltaic, 6lectric vehicle, #. Amara .a!a >enpro Qero maintenance, Ao specific gravity checks, and no water tapping up re(uired long life, ideal si'e factory chargedR therefore ready to use assured < E Amaron 4i*/ay &atteries 7uanta H:ninterrupted 3ifeI starting and service. 3ong 3ife, :ltra 3ow Maintenance .eady To 0it, 4igher cranking power. * 0or Trucks :21 batters 6mergency lighting. 0or >enerators *PP.IC*TION 0or Tractors

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Inventory Management B &rute HThe Motive 2ower 4ouseI Qero maintenance, Ao lifetime, Ao leaks, 4igh energy density, Ao sulphation of plates, Kalue .egulated, 1afe and expansion proof. 0actory vehicles like forklifts, pal lot trucks, stackers and platform trucks.

R&$I&W OF .IT&R*TUR&
Intro!uction

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Inventory Management Inventories constitute the ma!or element in the working capital of many business enterprises. Inventories constitute the most significant part of current assets of large ma!ority of companies in India. Definition of Inventory The term inventory has been defined by FThe American institute of AccountantsG. * FAs the aggregate of those items of tangible personal property which are held for sale in the ordinary course of business, process of production for sales control currently consumed in the production of goods or service to be available for sale.G Inventory Management The amount of investment is sometimes more in inventory than in other assets. About B$% part of working capital invested in inventories. A proper planning of purchasing, handling, storing and accounting should form a part of inventory management. An efficient system of inventory management will determine, /hat to purchase 4ow much to purchase 0rom where to purchase, and /here to store.

Com#onents of Inventory 5omponents of inventory

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.aw materials

/ork in progress

0inished products

1tores and spares

Raw Materials .aw materials are those inputs that are converted into finished goods through

a manufacturing or conversion process. These form a ma!or input for manufacturing a product. Work In Progress /ork in progress is a stage of stocks between raw materials and finished goods. /ork in progress inventories are semi*finished products. They represent products that need to under go some other process to become finished goods. Finis e! Pro!ucts 0inished products are those products, which are completely manufactured and ready for sale. The stock of finished goods provides a buffer between production and market. ,tores *n! ,#ares 1tores and spares inventory are purchased and stored for the purpose of maintenance of machinery.

Nee! to 2ol! Inventories

They are three general motives for holding inventories. Transaction Motive

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Inventory Management Transaction motive includes production of goods and sale of goods. Transaction motives facilities uninterrupted production and delivery of order at a given time.

Precautionary Motive
This motive necessitates the holding of inventories for unexpected changes in demand and supply factors.

,#eculative Motive
This compels to hold some inventories to take the advantage of changes in

prices and getting (uantity discounts.

Im#ortance Of Inventory Management

o Inventory helps in smooth and efficient running of business. o Inventories provide service to the customers immediately. o ?ue to absence of stock, the company may have to pay high prices because of piece*wise purchasing. Maintaining of inventory may earn price discount because of bulk purchasing. o Inventory also acts as buffer stock when raw materials are received late and so many sales orders are likely to be re!ected. o Inventory also reduces product costs because there is an additional advantage of batching and long smooth running production runs.

Ty#es of Inventory
o Movement inventories o &uffer inventories V.C.R. Institute of Management Studies Page +E

Inventory Management o Anticipation inventories o ?ecoupling inventories o 5yclic inventories

Movement Inventories
Movement inventories are also called transit HorI pipeline inventories. Their existence owes to the fact that transportation time is involved n transferring substantial amount of resources. An industrial town by trains, Then the coal, while in the transit cannot provide any service to the customers for power generation. +uffer Inventories &uffer inventories are held to protect against the uncertainties of demand and supply. An organi'ation generally knows the average demand for various items that it needs. The actual demand may not exactly match the average and could hell exceed it. To meet with this kind of situation inventories may be held in excess of the average for expected demand. 1imilarly the average delivery time may be known. &ut unpredictable events could cause the actual delivery time to be more than the average. Thus excess stock might be kept in order to meet demand during the time for which the delivery is delayed. These inventories which are in excess of those necessary !ust to meet the average demand, held for protecting against the fluctuations in demand and lead*time are known as Fsafety stocksG.

*ntici#ation Inventories
Anticipation inventories are held for the reason that a future demand for the product is anticipated. 2roduction of speciali'ed crackers well before ?ewily, :mbrellas and raincoats before rains, fans while summers are approaching.

Decou#ling Inventories

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Inventory Management The ?ecoupling inventory is to be decoupled HorI disengage, different parts of the production system. ?ifferent machines and people normally work at different rates some slower and faster. A machine, for example might be producing half the output of the machine on which the item being handled is to be processed. The next inventories in between the various machines are held in order to disengage the processing on those machines in the absence of such inventories, different machines and people cannot work simultaneously on a continuous basis. /hen such inventories are held, then even if a machine breakdowns, the work on others would not stop. Cycle Inventories 5ycle inventories are held for the reason that purchases are usually made in lots rater than for the exact amounts which may be needed at a point of time. If purchase is made exactly as and when the item is re(uired, there would be no cycle inventories. &ut practically, purchases are made in lots, the reason being that if purchases are made fre(uently and in small numbers then the cost involved in obtaining the items would be very large. Meaning of Inventory Control Inventory control is a system, which ensures the provisions of the re(uired (uality of inventories of re(uired (uality at the re(uired time with the minimum amount investment. Thus the function of inventory control is to obtain the maximum inventory turn over with sufficient stock to meet all re(uirements.

Pur#ose of Inventory Control

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Inventory Management The need of controlling inventory is expressed as below. To improve customer services. 2ermits purchase and transaction economics. Transportation economics. 4edge against price fluctuations. 2roduction economics. 4edge against demand uncertainties. 2rotects against demand and lead time uncertainties.

Factors Influencing Inventory Control To control the Inventory 4ow much to buy at one timeS /hen top buy this (uantityS

Following four fun!amentals factors govern for t ese %uestions .e(uirements break down time wise. 7uantity in stock or on order. 2rocurement time or lead time. "bsolescence Factors to 0e consi!ere! w en esta0lis ing t e Control .evels Average consumption or production re(uirements .eordering periods*the time between raising an order and receiving delivery of goods. 1torage space available Market conditions 3ikely life of stock*bearing in mind the possibility of loss through determination or obsolescence and The cost of placing orders including generating and checking the necessary paper work as well as physical checking and handling procures.

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Inventory Management The key issue for a business is to identify the fast and slow movers with the ob!ectives of establishing optimum stock levels for each category and, therefore minimi'e the cash tied up in stocks. 5ontrol policies should include designating responsibility for raising and authori'ing orders, signing delivery notes and authori'ing payment of invoices.

,tores (or Material) Recor!s

The bin cards an the stores ledger are the two important stores records that are generally kept for making a record of the various items of stores. a) +in Car!/ A bin card makes a recode of the receipt and issue of material and is kept for each item of stores carried. 7uantity of stores received is entered in the receipt column and the (uantity of stores issued is recorded in the issue column of the bin card and a balance of the (uantity of stores is taken after every receipt or issue, so that the balance at any time can readily seen. These cards are maintained by the storekeeper and the storekeeper is answerable for any difference between the physical stock and the balance shown in the bin card. These cards are used not only for recording receipts and issues of stores but also assist the storekeeper to control the stock. 0or each item of stores, minimum (uantity, maximum (uantity and ordering (uantity are stated on the card. &y seeing the bin card, the storekeeper can send the material re(uisition for the purchase of material in time. A bin card is also known a bin tag or stock card and is usually hung up or placed in shelf, rack or bin where the material has been kept. &in cards can also be in the form of loose sheets which can be maintained in a ledger kept in the stores. 0) Dou0le +in ,ystem/ 1ome concerns divide the bin, rack or shelf Hwhere material has been keptI in two parts, namely, the smaller part to store the (uantity e(ual to the minimum (uality and the other part to store the remaining (uantity. The (uantity in the smaller part is not issued so long as the (uantity is available in the other part. This system helps in exercising stores control in an effective way as it facilitates physical verification and V.C.R. Institute of Management Studies Page 9+

Inventory Management services as a signal when it becomes necessary to use the (uantity kept in the smaller part. c) ,tores .e!ge This ledger is kept in the costing department and is identical /ith the bin card except that receipts, issues and balances are shown along with their money values. This contains an account for every item of stores and makes a record of the receipts, issues and the balances, both in (uantity and value. +in Car! vs/ ,tores .e!ger/ The difference between a bin card and the stores ledger can be summari'ed as follows+in Car! )I A record of (uantities only. +I Maintained by the storekeeper. 9I Aormally posted !ust before the transaction takes place. =I 6ach transaction is individually posted. ,tores .e!ger )I A record of both (uantities values. +I Maintained by the 5osting department. 9I Always posted after the transaction takes place. =I Transactions may be summari'ed

and

Ot er Factors Involve! In Inventory *nalysis

Deman! ?emand is the number of units re(uired per period and may be either known exactly or known exactly or known in terms of probabilities or be completely unknown. 0urther if the demand is known, it may be either fixed or variable per unit time. 2roblems in which demand is known and fixed are called deterministic problems whereas those problems in which demand is assumed to be random variables are called stochastic or probabilistic problems.

.ea! Time

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Inventory Management The time gap between placing of an order and its actual arrival in the inventory of an item demands upon the length of its lead time. The longer the lead time the higher is the average inventory. 3ead time has two components namely. Administrative lead time*from initiation of procurement action until the placing of an order. ?elivery leads time*placing of an order until the delivery of the ordered materials. Or!er Cycle1 The time period between placements of two successive orders is referred to an order cycle. They may be placed on the basis of the following two types of inventory review systems.

.&$&., OF IN$&NTOR Danger .evel1 It is that level below which stock not be allowed to except under emergency conditions. /hen stock reaches this level urgent action for purchases is initiated. ?anger level 8 Average consumption TMaximum re*order period for emergency purchases. ?anger level is below the minimum level. &ut some firms prefer to fix the danger level above the minimum level and below the re*order level. 4owever fixing danger level below the minimum level is meant for taking corrective action where as fixing it above the minimum level is for preventive action. T e formula for com#uting ma6imum level is follows1 Maximum level8 .e*order level U .e*order (uantity*HMinimum 5onsumptionT Minimum re*order periodI

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Inventory Management Minimum .evel The minimum level is that level of stock below it should be normally be allowed to fall. This is essentially a safety stock and will not normally be touched. In case of nay item falling below this level, there is danger of stoppage in production and, therefore, management should give top priority to the ac(uisition of new supplies. This level is fixed after the consideration if the following factors. .ate of consumption, and The time re(uired under top priority to ac(uire enough supplies to avoid a stoppage in production. Minimum 3evel 8 .e*order level Re<or!er .evel1 This is that level of materials at which a new order for materials is to be placed. In other words this is the level at which a purchase re(uisition is made out. This level will be fixed somewhere between maximum and minimum levels. &y re* ordering when stocks fall to this level, then in the normal course of events new supplies will be received !ust before the minimum level is reached. It is fixed after the consideration of the following factors. .ate of consumption. Minimum level. ?elivery time. Kariation in delivery time. HAormal 5onsumptionT Aormal reorder periodI.

.e*order level 8 HMaximum 5onsumption T Maximum re*order periodI. *verage ,tock .evel Average stock level 8 Minimum level U H)@+ of .e*order (uantityI. Average stock level 8 H)@+I T HMinimum level U Maximum levelI. V.C.R. Institute of Management Studies Page 9;

Inventory Management

Met o!s of Materials Issue

First In First Out (FIFO) The materials which are received first are issued first and therefore there flow of cost of materials should also be in the same order. Issues are priced at the same basis until the first batch received is used up after which the price of the next batch received becomes the issue price. :pon this batches being fully used for pricing and so on. In other words, the materials issued are priced at the oldest cost price listed in the store ledge account and conse(uently the materials in hand are valued at the price of the latest purchase. In Amara .a!a batteries they are 0irst in 0irst "ut method for issuing of raw materials from stores to the production@manufacturing unit. .ast In First Out (.IFO) The latest receipts of materials are issued first for production and the earlier receipts are issued last. It uses the price of the last batch received for al the issues until all units from this batch have been issued after witch the price of the previous batch received becomes the issue price. :sually however, a new delivery is received before the first batch in fully used, in which case the new delivery price becomes the last in price and is used for pricing issues until either the batch exhausted or a new delivery is received. 2ig est In First Out (2IFO) In this method, issues are always valued at the highest price of the receipt. This rate continues either until the material at that high price is exhausted, after which the next highest price is used a until a new batch of materials is received at a rate which is higher than the previous high rate. 5losing stock under this method airwaves remains at the minimum cost. This method however has not been widely adopted. Tools an! Tec ni%ues 3 Controls of Inventory Management 0inancial manager should aim at determination of optimum inventory level based on costs and benefits to maximi'e shareholders wealth.

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Inventory Management Inventory management problems can be handling by mathematical techni(ues. The ma!or problem areas are, classification problem to determine the type of control re(uired, order (uantity problem, and order point problem, determination of safety stocks. &ut these are more suitable parts of production and operation management. 0inancial manager needs to be familiar with these techni(ues because of inventory management involves financial costs use of particular techni(ue depends on the convenience of the company. These inventory control techni(ues may be used by to provide maximum customer service at a minimum cost. 1ome fo inventory control techni(ues are A&5 Analysis 6"7 01A .atio analysis

*+C *nalysis
A&5 Analysis is an important factor in controlling the inventory. It is very effective and useful tool for classifying monitoring and control of inventories. The firm should not keep same degree of control on all the items of inventory. It is based on paretols lawR It is also known as selective inventory control. The firm should put maximum control on those items whose value is the highest, with the comparison of the other two items. The techni(ue concentrates on important items and also known as control by importance and exception usually a firm has to maintain several types of inventories for proper control of they firm should have to classify inventories in the instance of their relative value. 4ence it is also known as Fproportional value analysisG. :nder A&5 Analysis the materials are divided into three categories like A,&,5 )$% of the items contributes to <$% of value consumption this category is called FAG 5ategory. About +$% of the items contribute to +$% of value of consumption this is known as category F&G materials category F5G 5overs about <$% of items of materials which contribute only )$% of value of consumption. V.C.R. Institute of Management Studies Page 9<

Inventory Management A*&*5 Analysis helps to concentrate more efforts on category FAG. An attention should be paid in estimating re(uirements purchasing, maintaining safety stock and properly storing of FAG category materials. These items are kept under a constant review so that a substantial material cost may be controlled. The control of F5G items may be relaxed and these stocks be purchased for the year. A little more attention should be given towards F&G 5ategory items and their purchase should be undertaken at (uarterly HorI half yearly.

Classification of *8 + BC items
Class A & 5 &conomic Or!er 'uantity 6"7 is an important factor in controlling the inventory. It is a (uantity of inventory which can reasonably be ordered economically at a time. It is also known as Fstandard order (uantity. "rdering cost, and carrying costs are taken in to consideration ordering cost are basically the cost of getting an item of inventory and it includes the cost of placing an order carrying includes cost of storage facilities. No/ of items )$ +$ <$ $alue of items (6) <$ +$ )$

Meaning Of &O'
6conomic "rder 7uantity refers to that level of inventory at which the total cost of inventory is minimum. The total inventory cost comprising ordering and carrying cost. 1hortage costs are excluded in adding total cost of inventory due to the difficulty in computation of shortage cost 6"7 also known as economic lot si'e.

*ssum#tions
?emand for the product is constant and uniform throughout the period. V.C.R. Institute of Management Studies Page 9E

Inventory Management 4ead time is constant 2rice per unit of product is constant Inventory holding cost is based on average inventory "rdering costs are constant and all demands for the product will be satisfied. 6"7 can be obtained by adopting two methods Trail and error approach 1imple mathematical formula.

EOQ formula 6"7 8 V+A" 5 /here A 5 " 8 Annual usage 8 5arrying cost per unit 8 "rdering cost per unit The above formula will not be sufficient to determine 6"7 when more complex cost e(uations are involved. 6"7 applicable both the single items and to any group of stock items with similar holding and ordering costs. Its use causes the sum of the two costs to be lower than under any other system of replenishment.

F,N Classification

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Inventory Management :nder this techni(ue inventory is classified based on movement of inventories from stores. 01A stands for fast moving H0I, slow movingH1I, and Aon*moving HAI. This techni(ue particularly involved in inventory useful for avoiding obsolescence. /hether a particular inventory is fast moving or not the date of receipt or last date of issue, whichever is later, is taken, which have lapsed since the last transaction. The items are usually grouped in periods of )+ months. Active moving inventory need to be reviewed regularly and surplus items. /hich have to be examined further Aon*moving items may be examined further and their disposal can be considered. Ratio *nalysis The ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios. It is with the help of ratios that the inventory management can be analy'ed. More clearly and decision made from such analysis. 0ollowing ratios are used in the study. ). Inventory Turnover .atio aI .aw Materials Turnover .atio bI /ork*In*2rogress Turnover .atio cI 0inished >oods Turnover .atio dI Inventory 5onversion 2eriod +. .aw Material 4olding 2eriod 9. /ork*In*2rogress 4olding 2eriod =. 0inished >oods 4olding 2eriod ;. Inventory 4olding 2eriod

9/ Inventory Turnover Ratio

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Inventory Management Inventory turnover ratio is a ratio that establishes the relationship between cost of sales and average inventory. It indicates whether the investment in inventory is within proper limit or not. 1ales HorI 5ost of goods sold Inventory Turnover .atio 8 ***************************************** Average inventory "pening stock U 5losing stock Average inventory 8 ********************************************* + a) Raw Materials Turnover Ratio .aw Materials 5onsumed .aw Materials Turnover .atio 8 ****************************************** Average stock of raw materials

0) Work In Progress Turnover Ratio 5ost of goods manufacture /ork In 2rogress Turnover .atio 8 *************************************************** Average stock of work in progress

c) Finis e! "oo!s Turnover Ratio 5ost of goods sold 0inished >oods Turnover .atio 8 ***************************************** Average finished goods

!) Inventory Conversion Perio!

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Inventory Management Inventory conversion period may be interest to see time to taken for clearing the goods. ?ays in a year Inventory 5onversion 2eriod 8 ************************************** Inventory Turnover .atio

=/ Raw Materials 2ol!ing Perio!

?ays in a year .aw Materials 4olding 2eriod 8 ******************************************** .aw Material Turnover .atio

C/ Work<in<Progress 2ol!ing Perio!

?ays in a year /ork*in*2rogress 4olding 2eriod 8 ******************************************** /ork*In*2rogress Turnover .atio

D/ Finis e! "oo!s 2ol!ing Perio!

?ays in a year 0inished >oods 4olding 2eriod 8 *********************************************** 0inished >oods Turnover .atio

>/ Inventory 2ol!ing Perio!

?ays in year Inventory 4olding 2eriod 8 ************************************** Inventory Turnover .atio

N&&D FOR T2& ,TUD-

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Inventory Management 6very organi'ation needs inventory for smooth running of its activities. It serves as a link between production and distribution processes. The investment in inventories constitutes the most significant part of current assets or working capital in most of the organi'ations. The purpose of inventory management is to ensure availability of materials in sufficient (uantity as and when re(uired and also to minimi'e investment on inventories. 1o, in order to understand the nature of inventory management of the organi'ation.

,COP& OF T2& ,TUDV.C.R. Institute of Management Studies Page =9

Inventory Management Inventory management can be measured with different techni(ues proper purchase procedure, proper storage perpetual inventory system and established of a system budgets reviews slow and non moving items. It is useful for deciding operating policy and volume of inventory. It helps to develop the policies for the executives in inventory. It helps the company what items are categori'ed. 2ro!ect helps to deal with forecasting in inventory.

O+A&CTI$&, OF T2& ,TUDV.C.R. Institute of Management Studies Page ==

Inventory Management To know the financial performance of inventory of "rgani'ation. To calculate 6"7 for most important raw materials of "rgani'ation. To know the inventory turnover of the "rgani'ation. To classify the various components based on its value. To maintain raw material classification for better control. To suggest a better inventory maintain cost.

.IMIT*TION, OF T2& ,TUD-

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Inventory Management The information used is primarily from historical annual reports to the public and the same does not indicate the current situation of the firm. ?etailed analysis could not be carried for the pro!ect work because of the limited time span. 1ince financial matters are sensitive in nature the same could not be ac(uired easily. ?oes not support future

R&,&*RC2 M&T2OD.O"-

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Inventory Management The study was conducted to know the position of inventory management. In every enterprise needs inventory for smooth running of its activities. Its served as a like between production and distribution process. There is a time leg between the recognition of need and its fulfillment. The greater the time lags the time lag, the higher the re(uirements. The present study is based on both * * Primary !ata 0irst hand information was collected from experts of finance department on their course of actions towards collections. ,econ!ary !ata The second hand information was collected from annual reports, schedules, stores ledgers, budgets and purchase orders. 2rimary data 1econdary data

D*T* *N*.-,I, B INT&RPR&T*TION

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Inventory Management 9/ *+C *nalysis1 (a) *+C Classification Of -ear (=??E<=??;) Class A & 5 Total $alue (Rs/) )#E$9);+ E<E;;); ;+<#$;$ C?;GDE9E F of $alue ;= +B )< Cumulative F ;= E9 )$$ Items )$+ );) 9+<

Inter#retation1 In the year +$$<*$E , there are )$+ items which constitutes their value of ;=%, in the total value which comes under FAGcategory.);) items which constitutes +B% in the total value which comes under F&G category and 9+< items which constitutes )<% in the total value which comes under F5G category. (0) *+C Classification of -ear (=??;<?:)

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Inventory Management

Class A & 5 Total

$alue (Rs/) +$9<$<)9 )$)E;9;< 99B;))B 99B;))EB

F of $alue #$ 9$ )$

Cumulative F #$ B$ )$$

Items ))+ )## 9#$

Inter#retation1 In the year +$$E*$B , there are ))+, items which constitutes their value of #$%, in the total value which comes under FAGcategory.)## items which constitutes V.C.R. Institute of Management Studies Page =B

Inventory Management 9$% in the total value which comes under F&G category and 9#$ items which constitutes )$% in the total value which comes under F5G category.

(c) *+C Classification Of -ear (=??:<=?9?)

Class A & 5 Total

$alue +9);=<)) )$E9$=+B 99#))#E 9<9=#9$E

F of $alue #+ +B B

Cumulative F #+ B) )$$

Items )+9 )E+ 9B#

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Inventory Management

Inter#retation In the year +$$B*)$ , there are )+9 items which constitutes their value of #+%, in the total value which comes under FAGcategory.)E+ items which constitutes +B% in the total value which comes under F&G category and 9B# items which constitutes B% in the total value which comes under F5G category.

(!) *+C Classification Of -ear (=?9?<99)

Class A & 5 Total

$alue +E<;##;# E+)#)EE =)$E$B9 =)$E$B9E

F of $alue <$ +$ )$

Cumulative F <$ B$ )$$

Items )9; +$$ =9#

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Inventory Management

Inter#retation In the year +$)$*)), there are )9; items which constitutes their value of <$%, in the total value which comes under FAG category. +$$ items which constitutes +$% in the total value which comes under F&G category and =9# items which constitutes )$% in the total value which comes under F5G category.

(e) *+C Classification Of -ear (=?99<9=)

Class A & 5 Total

$alue 9#);)++# #<<E9;= ++;B=;+ =)$E$B9E

F of $alue E$ ); ;

Cumulative F E$ B; )$$

Items )=E ++$ =E$

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Inventory Management

Inter#retation In the year +$))*)+, there are )=E items which constitutes their value of E$% in the total value which comes under FAG category. ++$ items which constitutes );% in the total value which comes under F&G category and =E$ items which constitutes ;% in the total value which comes under F5G category.

=/ R*TIO *N*.-,I, a/ R*W M*T&RI*. TURNO$&R R*TIO

Perio! +$$<*+$$E +$$E*+$$B +$$B*+$)$ +$)$*+$)) +$))*+$)+

Raw Material Consume!(cr) 9B9<E)+=;= <<B=<B=#<; E=;9$;;+#9 BE#+;EB<; )$BE9=;BE9=

*verage Raw Material(cr) ++#999)=# =##+<$$<; =<;B9=9+= ;+9)+B=EE ;#B);=EE)E

Ratio $alue )<.9B )#.<) )<.<# )E.E; )B.9$

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Inventory Management

Inter#retation In the above data indicates that raw material turnover ratio is )<.9B times in the year +$$<*$E and it is decreased )#.<) in the year +$$E*$B. Then it is increase to )<.<# in the year +$$B*)$, again it is increased to )E.E; in the year +$)$*)) again it is increased to )B.9$ in the year +$))*)+. It can be conclude that raw material turnover ratio has improved even with increased re(uirement of raw material and business volatilities. 0/ WORH<IN<PROC&,, TURNO$&R R*TIO Perio! +$$<*+$$E +$$E*+$$B +$$B*+$)$ +$)$*+$)) +$))*+$)+ Cost of "oo!s ,ol! (Cr) =<E$#)<E<) B+9#B;#$;E BB+E))9E;= )$E<E#;=9B) )+#;#EB+;#+ *verage Finis e! "oo!s (Cr) +;9)$9BE; =<E)+)+=+ ;E)+$E+;) #+99+E;#<< #<;E+9#;)= Ratio $alue )E.EB )B.9+ )<.$E )<.=; )E.<9

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Inventory Management

Inter#retation In the above data indicates that work*in*process ratio is )E.EB times in the year +$$<*$E and it is increased )B.9+ in the year +$$E*$B.then it is decreased to )<.$E in the year +$$B*+$)$, again it is increased to )<.=; in the year +$)$*)) again it is increased to )E.<9 in the year +$))*)+. It can be conclude that raw material turnover ratio has improved even with increased re(uirement of raw material and business volatilities. c. 0IAI146? >""?1 T:.A"K6. .ATI"

Perio! +$$<*+$$E +$$E*+$$B +$$B*+$)$ +$)$*+$)) +$))*+$)+

Cost of "oo!s ,ol! (Cr) ;B;E$)#=$= )$E99+;#B$= )9)<<+9$$=< )9B=;+#E<)+ )=+;#9B=E<=

*verage Finis e! "oo!s(Cr) )+$E;B9BE +<<<B<<+# 9EB$=9;#9 9EB$=)9;#9 9B;#EB<=)+

Ratio $alue =B.+B 9E.BB 99.E< 9;.E; 9#.$9

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Inventory Management

Inter#retation In the above data indicates that finished goods turnover ratio is =B.+B times in the year +$$<*$E and it is decreased 9E.BB in the year +$$E*+$$B. Then it is decrease to 99.E< in the year +$$B*)$, again it is increased to 9;.E; in the year +$)$*)), again it is increased to 9#.$9 in the year +$))*)+. It can be conclude that finished goods turnover ratio has improved even with increased re(uirement of finished goods and business volatilities. d. IAK6AT".D T:.A"K6. .ATI"

Perio! +$$<*+$$E +$$E*+$$B +$$B*+$)$ +$)$*+$)) +$))*+$)+

Net ,ales (Cr) ;B;E$)#=$= )$E99+;#B$= )9)<<+9$$=< <9;= B+)B

*verage Inventory (Cr) <=#E9<E)E )=9+;+=;#$ )<<;E$+)EB #$9.+)B <)E.#<+

Ratio $alue <.B< <.;# <.=+ )+.)B )+.E+

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Inventory Management

Inter#retation In the above data indicates that inventory turnover ratio is <.B< times in the year +$$<*$E and it is decreased <.;# in the year +$$E*$B. Then it is decrease to <.=+ in the year +$$B*)$, again it is increased to )+.)B in the year +$)$*+$)) again it is increased to )+.E+ in the year +$))*)+. It can be conclude that inventory turnover ratio has improved even with increased re(uirement of inventory and business volatilities. Com#arison Of Turnover Ratio Turnover Ratio .aw Material /ork*In* 2rocess 0inised >oods Inventory =??E<=??; )<.9B )E.EB =B.+B <.B< =??;<=??: )#.<) )B.9+ 9E.BB <.;# =??:<=?9? )<.<# )<.$E 99.E< <.=+ =?9?<=?99 )E.E; )<.=; 9;.E; )+.)B =?99<=?9= )B.9$ )E.<9 9#.$9 )+.E+

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Inventory Management

Inter#retation In the above data indicates that inventory turnover ratio is =B.+B times in the year +$$<*$E and decreased 9E.BB in the year +$$E*$B again it is decreased to 99.E< in the year +$$B*)$ then it is increased to 9;.E; in the year +$)$*)) and again it is increased to 9#.$9 in the +$))*)+. Inventory turnover ratio is declined for year by year. That is company production is also declined subse(uently sales are also declined. Raw Materials 2ol!ing Perio! 2ol!ing Perio! (In Days) +$.BE +).E= +$.;; )B.9# )E.B)

Perio! +$$<*+$$E +$$E*+$$B +$$B*+$)$ +$)$*+$)) +$))*+$)+

No/ Of Days 9#; 9#; 9#; 9#; 9#;

Raw Material Turnover Ratio )<.9B )#.<) )<.<# )E.E; )B.9$

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Inventory Management

Inter#retation The above table indicates that the raw material holding period for the financial year +$$<*$E is +) days, for +$$E*$B is ++ days for +$$B*)$ is +) days for +$)$*)) is )B days and the financial year +$))*)+ is )B days. Work<In<Process 2ol!ing Perio!

Perio! +$$<*+$$E +$$E*+$$B +$$B*+$)$ +$)$*+$)) +$))*+$)+

No/ Of Days 9#; 9#; 9#; 9#; 9#;

Finis e! "oo!s Turnover Ratio )E.EB )B.9+ )<.$E )<.=; )E.<9

2ol!ing Perio! )B.9+ )E.EB +).9< +$.B) )B.=E

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Inventory Management

Inter#retation The above table indicates that the work*in*process holding period for the financial year +$$<*$E is )B.9+ days, for +$$E*$B is )E.EB days for +$$B*)$ is +).9< days ,for +$)$*)) is +$.B) days and the financial year +$))*)+ is )B.=E days.

Finis e! "oo!s 2ol!ing Perio!

Perio! +$$<*+$$E +$$E*+$$B +$$B*+$)$ +$)$*+$)) +$))*+$)+

No/ Of Days 9#; 9#; 9#; 9#; 9#;

Finis e! "oo!s Turnover Ratio =B.+B 9;.BB 99.E< 9;.E; 99.$9

2ol!ing Perio! <.=$ )$.)= )$.<< )$.)E )).$;

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Inventory Management

Inter#retation The above table indicates that the finished goods holding period for the financial year +$$<*$E is <.= days, for +$$E*$B is )$.)= days for +$$B*)$ is )$.<< days for +$)$*)) is )$.)E days and the financial year +$))*)+ is )).$; days.

Inventory 2ol!ing Perio!

Perio! +$$<*+$$E +$$E*+$$B +$$B*+$)$ +$)$*+$)) +$))*+$)+

No/ Of Days 9#; 9#; 9#; 9#; 9#;

Inventory Turnover Ratio <.B< <.;# <.=+ )+.)B )+.E+

2ol!ing Perio! =;.<B =E.+E =B.)B +B.B= +E.=<

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Inventory Management

Inter#retation The above table indicates that the Inventory holding period for the financial year +$$<*$E is =;.<B days, for +$$E*$B is =E.+E days, for +$$B*)$ is =B.)B days, for +$)$*)) is +B.B= days and the financial year +$))*)+ is +E.=< days.

Com#arison Of 2ol!ing Perio!

2ol!ing Perio! .aw Material /ork*In* 2rocess 0inished >oods Inventory

=??E<=??; +$.BE )B.9+ <.=$ <.B<

=??;<=??: +).E= )E.EB )$.)= <.;#

=??:<=?9? +$.;; +).9< )$.<< <.=+

=?9?<=?99 )B.9# +$.B) )$.)E )+.)B

=?99<=?9= )E.B) )B.=E )).$; )+.E+

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Inter#retation The above table indicates the raw material, work*in*process, finished goods and inventory holding period is little change to year by year like +$$<*$E,+$$E*$B, +$$B*)$, +$)$*)) and +$))*)+ respectively. &O' *nalysis1

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Inventory Management &conomic Or!er 'uantity On -ear (=??E<=??;)

Descri#tion B$<;*#cl /indow >rey Tray 0rppcpv$ ?ark >rey 5olour )<<;*#cl /indow >rey Tray 2ressure .elief Kalve Kent 1ealH2sI 1ulphuric AcidH5pI).+=; W+< ?eg.5 +#Ah 2252 1ilver 5over =+Ah 2252 1ilver 5over .ubber 1leeve 0or +$x+mm 5onnector &lack Master &atch &arium 1ulphate 2K5 1him .oll )<;H/I P $.9HTI

*nnual Consum#tion <#,+)#,9+$ <;,9B),=#9 )B,))E,)#$ )),+#<,9<#

Total Or!ering Cost +#E$$ ++$$$ +#E$$ +$+$$

Carrying Cost )).<E )$.$)+ )+.#; B.;#

&O' ;EEEEB.= ;<;#$E.+= +E=#)#.;< +)E+$B.+9

)$,EEB,B9=

+E#$$

#.;

9$B;##.;

B,<#<,9#9 <,#+<,B;; ;,#=#,#+$ 9,)#B,#9# +,+B),;9; +,)#),B#=

)$#$$ )$#$$ B;+$ ++#$$ )#$$$ )B#$$

).$E +.<E 9.;# )$.=; =.;# +.+

)9E=#E.9B +=))E=.#) )<9<E).)E ))<$EE.B) )+#E)$.#< )B#+<$.B

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Inventory Management

&conomic Or!er 'uantity On -ear (=??E<=??;)

Inter#retation In the year +$$<*$E indigeneous items like windows grey trey, dark grey color are increased a lot such that sulphuric acid.was slightly increased. 1o that you can see that 6"7 has increased a lot.

&conomic Or!er 'uantity On -ear (=??;<=??:) V.C.R. Institute of Management Studies Page #;

Inventory Management Consum#tion $alue )$,;9),=+=.$$ E,==),=B+.E< ;,#+E,=E$.$$ ),#=#,=BB.)$ Total Or!ering Cost (Rs) +=$$$ +$$$$ ++#$$ )BE$$ Carrying Cost )).<E )$.$) )+.#; B.;# #.;$ ),9)9,E<;.B) +;=$$ )$),999.99

Descri#tion

&O'

B$<;*#cl /indow >rey Tray 0rppcpv$ ?ark >rey 5olour )<<;*#cl /indow >rey Tray 1ulphuric AcidH5pI).+=; W+< ?eg.5 2ressure .elief Kalve Kent 1ealH2sI =+Ah 2252 1I3K6. 5"K6. 2K5 1him .oll )<;H/I P $.9HTI +#Ah 2252 1I3K6. 5"K6. &lack Master &atch &arium 1ulphate .ubber sleeve for +$P+mm connector

+$#,B<#.$9 )E9,##9.9E )=),E)=.)9 E+,;E=.##

#BB,+)#.B# ;#+,B;#.9$ =<E.$$ +,$=+.=< )$,9#=.)) 9,$#+.$$

B+$$ E=$$ <#;$ +$)$$ )9$$$ );$$$

).$E +.<E 9.;# )$.=; =.;# +.+$

)$B,)==.<B ;E,9+#.B< ),=99.+B +,E$9.$# <,#E<.+9 #,=#).<<

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Inventory Management &conomic Or!er 'uantity On -ear (=??;<=??:)

Inter#retation In the yeaar +$$E*$B graph you can see that window grey trey, suphuric acid, were used in a lot as compred to +$$<*$E the window grey trey carring cost was as same. /here it shows effect on increase in consumpation of rawmaterial, this inturn rusults in increase in 6"7. Total inventory cost will be increased.

&conomic Or!er 'uantity On -ear (=??:<=?9?)

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Inventory Management Descri#tion 0rppacpv$ ?ark >rey 5olour )<<;*#cl /indow >rey Tray B$<;*#cl /indow >rey Tray 2ressure .elief Kalue Kent 1ealH2sI +#ahppcp 1I3K6. 5"K6. 2vc 1him .oll )<;H/I P $.9HTI &arium 1ulphaaate &lack Master &atch 1ulphuric AcidH5pI ).+=;W+<deg.5 )$,<);,#E9.+B +;,$$$.$$ )).<E +)9+##.9 *nnual Consum#tion Or!ering Cost(Rs) Carrying Cost(Rs) &O'

)$,+)B,$E#.#E

)E,$$$.$$

)$.$)

)B)<$E

#,E)),$E).=<

+),+$$.$$

)+.#;

);)$B9.;

),)9),#B;.)$

)E,$$$.$$

B.;#

#;+E).$9

#9#,=)$.)E

+),=$$.$$

#.;$

#=<9=.)B

#)#,;$#.9E

<,;$$.$$

+.<E

;<#<;.;E

;$;,9;$.<E +;$,))).+9

E,;$$.$$ )B,$$$.$$

9.;# )$.=;

=B)+=.+) 9$);<.E+

)9<,+B=.<<

);,$$$.$$

=.;#

9$$;=.)

&conomic Or!er 'uantity On -ear (=??:<=?9?)

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Inventory Management

Inter#retation In the year +$$B*)$ graph you can see that window grey trey, sulphuric aacide, were same in a lot as comparedto +$$E*$B the window grey trey was as asme as there was no change in consumption value, and ordering cost, there is no change in 6"7 value. The effect of 6"7 is same as +$$B*)$

&conomic Or!er 'uantity On -ear (=?9?<=?99)

Descri#tion

*nnual Consum#tion

Or!ering Cost(Rs)

Carrying Cost

&O'

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Inventory Management )<<;*#cl /indow >rey Tray B$<;*#cl /indow >rey Tray 0rppcpv$ ?ark >rey 5olour 2ressure .elief Kalve Kent 1ealH2sI +#Ah 2252 1ilver 5over =+Ah 2252 1ilver 5over 2K5 1him .oll )<;H/I P $.9HTI &arium 1ulphate &lack Master &atch 1ulphuric AcidH5pI).+=; W+< ?eg.5 ))#;+EB) )$+;#9#; EE))$;+ ++;$#;9 E9<;+$ <+;#+9 #BE=;+ ;E+#B; 9#;E=$ +E;$$ +)#$$ ++;$$ +$)=; +9+)+ B#$$ E#;= B+$$ ++=;$ )+.;# )).+; )9.; B.#; <.;; +.$; +.E+ 9.+; )$.E; ++BB#9.<E#) )BE=;;.)9<; )<)9<<.+E9# B#B9#.B+<$ <)<#+.)=+; E+=9E.999; #;=<9.<=9= ;<=9#.=EE$ 9EB$B.9=+E

)+;#)+

)#+;$

;.;

+<+==.9);;

&conomic Or!er %uantity On -ear (=?9?<=?99)

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INT&RPR&T*TION

In the year +$)$*)) indigeneous items like windows grey trey, dark grey color are increased a lot such that sulphuric acid.was slightly increased. As the usage of raw material increase, consumption value will automatically increase, all this will show effect on increase in 6"7 value, 1o that inventory cost will increases.

&CONOMIC ORD&R 'U*NTIT- ON -&*R (=?99<=?9=)

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Inventory Management Descri#tion 0rppcpv$ ?ark >rey 5olour 2ressure .elief Kalve Kent 1ealH2sI )<<;*#cl /indow >rey Tray B$<;*#cl /indow >rey Tray =+Ah 2252 1ilver 5over +#Ah 2252 1ilver 5over &arium 1ulphate &lack Master &atch 2K5 1him .oll )<;H/I P $.9HTI 1ulphuric AcidH5pI).+=; W+< ?eg.5 *nnual Consum#tion )+;#+9E; )$#9+;=# B;#9+;) E;#9=+) B;#=+; B)+9#+ #;9+=; =#;+)9 <+;EB# Or!ering Cost Carrying Cost )=.+; )$.; )9.; )+.)+ =.$; E.#; =.E; )).E; 9.B# &O'

+9;#$ +);=; +B;$$ +9;#$ )+9#; +$=;$ )$+9# +);#$ B;#$

+$)$)).$+;$ +$EEE<.9B== +$==9E.)+B# )E+=#9.$<$= <#=+$.;+9) #;#E$.#)+# ;+;)$.#=$9 =))=9.B#9) ;B+$).#)=E

++;#9)

);#9$

#.;;

9+E);.$#)=

&conomic Or!er 'uantity On -ear (=?99<=?9=)

V.C.R. Institute of Management Studies

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Inventory Management

Interpretation In the year +$))*)+ indigeneous items like windows grey trey, frppcpvo dark gray colour are increased a lot such that sulphuric acid was slightly increased. 1o$ that you can see that 6"7 has increased a lot. It shows effect on inctease in consumption value, where it increses inventory cost of raw marerials.

Com#aring t e &O' of all t e years1

?escription

+$$<*$E

+$$E*$B

+$$B*)$

+$)$*))

+$))*+$)+

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Inventory Management B$<;*#cl /indow >rey Tray 0rppcpv$ ?ark >rey 5olour )<<;*#cl /indow >rey Tray 2ressure .elief Kalve Kent 1ealH2sI 1ulphuric AcidH5pI).+=; W+< ?eg.5 +#Ah 2252 1ilver 5over =+Ah 2252 1ilver 5over .ubber 1leeve 0or +$x+mm 5onnector &lack Master &atch &arium 1ulphate 2K5 1him .oll )<;H/I x $.9HTI 9$B;##.; )$),999.99 #=<9=.)E +<+==.9);; 9+E);.$#)= ;EEEEB.= ;<;#$E.+= +E=#)#.;< +$#,B<#.$9 )E9,##9.9E )=),E)=.)9 +)9+##.9 )B)<$E );)$B9.; )BE=;;.)9 )<)9<<.+E ++BB#9.<E#) )E+=#9.$<$= +$)$)).$+;$ +$==9E.)+B#

+)E+$B.+9

E+,;E=.##

#;+E).$9

B#B9#.B+<$

+$EEE<.9B==

)9E=#E.9B +=))E=.#)

)$B,)==.<B ;E,9+#.B<

BB$#).+< ;<#<;.;E

<)<#+.)=+; E+=9E.999;

#;#E$.#)+# <#=+$.;+9)

)<9<E).)E

),=99.+B

=B)+=.+)

))<$EE.B) )+#E)$.#< )B#+<$.B

+,E$9.$# <,#E<.+9 #,=#).<<

9$);<.E+ );##9.BE

9EB$B.9=+E ;<=9#.=EE$ #;=<9.<=9=

=))=9.B#9) ;+;)$.#=$9 ;B+$).#)=E

Com#aring T e &O' Of *ll T e -ears

V.C.R. Institute of Management Studies

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Inventory Management

Inter#retetion If you see the comparison of all the years you can find that window grey trey was imported a lot from out and the cost we spent on that particular item was more than any other item

FINDIN",
In the year +$))*)+ ,& );% and ,5 ;% class items are decreased than +$)$*)) where the value also increased a lot. V.C.R. Institute of Management Studies Page <;

Inventory Management The ,A class items in +$))*)+, HE$%I where eventually increased compare to the year +$$B*+$)$ H#+I %. The inventory turnover ratio was increased to )+.E+ times in the year +$))*+$)+ compare to the year +$$<*+$$E i.e., <.B< times. As the procurement of the orders is against the forecast, particularly A class items as these items re(uire minimum of =; ?ays lead time. The company is planning the raw material based on the 1ales plan for customer orders. 0re(uent changes in sales plan leads to more revisions in order planning which effects inventory. 4ave not been implementing any evolved techni(ue in material or stores management like two bin system or !ust*in*time.

,U""&,TION,
The company has to eliminate dead inventory as depreciation is charged even on the dead inventory and this has resulted in decrease profits.

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Inventory Management 5ompany should strive for Fgetting the right goods to the right places at the right time for the least costG. 5ompany has to position inventory items according to risk and opportunity. 5ompany has to distinguish between bottleneck items, critical items Hhigh risk, high opportunityI. 5an be negotiated with vendors to reduce lead time for A class material so as to reduce inventory levels. If sale can provide firm plan for )I) months the revisions can be reduced and inventories can come down. Two bin system and !ust*in*time can be implemented to control inventory.

CONC.U,ION
&y following the Inventory Management Techni(ue like M:1T IA TIM6 HMITI, the company can reduce it cost and supplies to finish the goods at reasonable prices to the customer. V.C.R. Institute of Management Studies Page <<

Inventory Management The company by strictly following management techni(ues like 6"7, A&5 Analysis can increase its profits. The company can reduce ordering cost by the following proper Inventory Management techni(ues like M:1. IA TIM6 HMITI.

+I+.IO"R*P2-

I M 2andeyR F0inancial Management F, Ainth 6dition*+$$=, Kikas 2ublishing 4ouse 2vt 3td, Aew ?elhi.

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Inventory Management ?r. 2radip Lumar 1inhaR F0inancial ManagementG* Tools and Techni(ues, 6P563 &""L1, Aew ?elhi. 1 A Maheswari J 1 L Maheswari R F0inancial Accounting , 0ourth .evised J 6nlarged 6dition +$$;, Kikas 2ublishing 4ouse 2vt 3td, Aew ?elhi. M D Lhan J 2 L MainR F0inancial ManagementG*Text problems and 5ases, 0ifth 6dition, Tata Mc>raw*hill 2ublishing 5ompany 3imited, Aew ?elhi. 1udhindra &hatR F0inancial ManagementG, 1econd 6dition, 6P563 &""L1, Aew ?elhi.

/ebsite 1ources www.google.com www.scribd.com www.moneycontrol.com www.amarara!a.co.in.

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