Final Project

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CHAPTER I
1.1 INTRODUCTION
The term inventory refers to the goods or materials used by a firm for the purpose of
production and sales. It also includes the items, which are used as supportive materials to
facilitate production.
There are three basic types of inventory: Raw material, Work-in-progress, finished goods.
Raw material is the items purchased by firm for the use in production of finished products.
Work-in-progress consists of all items currently in the process of production. These are actually
partly manufactured products. Finished goods consist of those items, which have already been
produced but not yet sold.
Inventory constitutes of the important items of current assets, which permits smooth
operation of production and sales process of a firm. Inventory management is that aspect of
current asset management, which is concerned in maintain optimum investment in inventory and
applying effective control system so as to minimize the total inventory cost.
MEANING OF INVENTORY MANAGEMENT

Inventory management in the process of efficient overseeing the constant flow of units
into and out of existing inventories. This process usually involve controlling the transfer unit in
order to prevent the inventory from becoming too high, or dwindling to the levels that could put
the operation of the company into jeopardy.
NATURE OF INVENTORIES
Inventories are stock of the product a company is manufacturing for sale and
components that make up the product. The various forms in which inventory exist in a
manufacturing company are raw materials, work in progress and finished goods.
RAW MATERIALS:Raw materials are those inputs that are converted into finished product though the
manufacturing process. Raw materials inventories are those units which have been purchased
1
and stored for future productions.

WORK IN PROGRESS:These inventories are semi manufactured products. They represent products that need
more work before they become finished products for sales.
PACKAGING MATERIAL:Packaging material includes those items which are used for packaging of perfumery
product i.e. cap of the bottle, pump, collier, liver, box etc.
FINISHED GOODS:Finished goods inventories are those completely manufactured products which are ready
for sale. Stock of raw materials and work in progress facilitate production. While stock of
finished goods is required for smooth marketing operation. Thus, inventories serve as a link
between the production and consumption of goods.
The levels of four kinds of inventories for a firm depend on the nature of its business. A
manufacturing firm will have substantially high levels of all three kinds of inventories, while a
retail or wholesale firm will have a very high and no raw material and work in progress
inventories. Within manufacturing firms, there will be differences. Large heavy engineering
companies produce long production cycle products, therefore they carry large inventories. On
the other hand, inventories of a consumer product company will not be large, because of short
production cycle and fast turn over.
SUPPLIES
The short inventory may be defined as the material, which are either saleable in the
market or usable directly or indirectly in the manufacturing process. It also includes the items
which are ready for making finished goods in some other process or by comparing them either by
the concern itself and/or by outside parties. In other words, the term inventory means the
material having any one of the following characteristics. It may be
Saleable in the market,
Directly saleable in the manufacturing process of the business,
Usable directly in the manufacturing process of the undertaking, and
Ready to send to the outside parties for making usable and saleable productions out of it.
In the present study raw materials, stores and spare parts, finished goods and work-in-
process have been included inventories. Firm also manufactures inventory to supplies.
Supplies included office and plant cleaning materials (soap, brooms etc. oil, fuel, light
bulbs and the likes). These materials do not directly enter into the production process, but are
necessary for production process. Inventory constitutes the most significant part of current assets
of a large majority of companies in India. For example, on an average inventories are more than
57 per cent of current assets in public limited companies and about 60.5per cent in government
companies in India. Therefore it is absolutely imperative to manage inventories efficiently and
effectively in order to avoid unnecessary investment in them. An undertaking neglecting the
management of inventories will be jeopardizing its long run profitability and may fail ultimately.
It is possible for a company to reduce its level of inventories to a considerable degree e.g. 10 to
20 per cent without any adverse effect on production and sales.
MANAGEMENT OF INVENTORIES
The maintenance of inventory means blocking of funds and so it involves the interest and
opportunity cost to the firm. In many countries especially in Japan great emphasis is placed on
inventory management. Efforts are made to minimize the stock of inputs and outputs by proper
planning and forecasting of demand of various inputs and producing only that much quantity
which can be sold in the market.
The inventory cost is not only interest on stocks but also cost of store building for
storage, insurance and obsolesce and movement of inputs from place of storage to the factory
where the materials have to be finally used to convert them into finished goods. In Japan
industries have adopted concept of JIT (Just in Time) and components, materials are received
when required for which detailed instructions are given to suppliers. There are many engineering
companies who receive components directly at assembly point and that too only for 3-4 hours
requirements at a time. Even in case of bulk materials like iron ore, which is imported from
abroad, the minimum possible inventory is kept.
As against this by and large in India the inventory of coal, raw materials and packing
materials is very high and many items become junk or obsolete causing heavy loss to the
enterprise. Lack of inventory planning in India has been pointed out by various committees but
due to uncertainties in supplies, problem of timely receipt of railway wagons, lack of planning
and unreliable suppliers the investment in inventories is quite high. The fluctuation in demand
affects inventory of finished product of which cement industry has been a victim many times.
The situation in cement industry has been analyzed in this chapter after studying the
principles of inventory control and relating it with cement industry.
In case of raw materials the first requirement is to study lead time between the date of
order and receipt in the factory and same is applicable in case of coal.
In case of cement industry the basic raw material i.e. lime stone is not purchased from the market
but form ones own queries which are within 10 to 15 Km distance from factory and only in few
cases distance is more up to 50 Km. It is transported to cursing mills by trucks, rail or overhead
ropeways to the factory.
The only uncertainty is with regard to problem of quarrying in quarries, which may be
affected due to labour problem, problem in supplies of electricity or explosives. But in spite of
these factors industry feels that 3-4 days of stock of raw material is enough.
This, from any standard is on the high side when self-produced raw material is used.
Actually for ideal situation there should be stock for a few hours, requirement and at the most for
one day need. The industry is keeping larger stocks of limestone because of uncertainties in
quarrying and transportation.
INVENTORIES AND FINANCIAL STATEMENTS

Inventories are usually the larger current asset of a business, and proper management of
them is necessary to assure accurate financial statements. If the inventory is not properly
measured, expenses and revenue cannot properly matched. When ending inventory is incorrect,
the following balances of the balance sheet will also be incorrect as a result; merchandise
inventory, total assets, and owners equity. When ending inventory is incorrect, the cost of
merchandise sold and net income will also be incorrect on the income statement.
INVENTORY ACCOUNTING SYSTEMS

4
The two most widely used inventory accounting systems are the periodic and the
perpetual. The perpetual inventory system requires accounting records to show the amount of
inventory on hand at all times. It maintains a separate account in the subsidiary ledger for each
good in stock, and the account is updated each time a quantity is added or taken out. In the
periodic inventory system, sales are recorded as they occur but the inventory is not updated.
A physical inventory must be taken at the end of the year to determine the cost of goods
sold. Regardless of what inventory accounting system is used, it is good practice to perform a
physical inventory at least once a year.
DETERMINING INVENTORY QUANTITIES

All goods owned by a business (whether or not physically present on the business
premises),are included in inventory when an inventory is taken. This requires that all shipping
documents be examined, and all merchandise out on consignment be identified. Determining the
quantity of goods on hand should be performed by at least two individuals, and third should
verify accuracy of the count (especially if the goods have a high monetary value).When
determining the cost of goods, all expenses incurred to acquire them are included in the purchase
price.
INVENTORY COSTING METHODS

The periodic system records only revenue each time a sale is made.Inorder to determine
the cost of goods sold, a physical inventory must be taken. The most commonly used
inventory costing method under a periodic systems are
First-in first-out(FIFO) method,
Last-in first-out(LIFO) method and
Average cost or weighted average cost method.
Standard price Method
Current Price Method
1. First-in first-out method
Materials received first will be issued first. The price of the earliest consignment is taken
first and when that consignment is exhausted the price of the next consignment is adopted and so
on. This method is suitable in times of falling prices, because the material charge to production
will be high while the replacement cost of materials will be low.
2.
Last-in first-out method

Materials received last will be issued first. The price of the last consignment is taken
first and when that consignment is exhausted the price of the second last consignment is adopted
and so on. In timing of rising prices this method will show a charge to production, which is
closely related to current price levels provided that the last purchase is made recently.
3. Weighted average method
Under this method, material issued is priced at the weighted average cost of material in
stock:
WAC = Value of material in stock/Quantity in stock.
4. Standard price method
Under this method a standard price is predetermined. The price of issues predetermined
for a stated period taken into account all the factors affecting price such as anticipated market
trends, transportation charges, and normal quantity of purchase. Standard prices are determined
for each material and material requisition are priced at standards irrespective of the actual
purchase price. Any difference between the standard and actual price results in materials price
variance.
5. Current price
According to this method, material issued is priced at their replacement or realizable
price at the time of issue. So the cost at which identical material could be purchased from the
market should be ascertained and used for valuing material issues.
These methods produce different results because their flow of cost is based upon different
assumptions. The FIFO method based on its cost flow on the chronological purchases is made,
while the LIFO method based on its cost flow in a reverse chronological order. The average cost
method produces a cost flow based on a weighted average of unit costs.
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INVENTORY COSTING METHODS-PERPETUAL

The perpetual inventory system requires that a separate inventory ledger be
maintained for each good. Inventory ledger provide detailed information on purchases, cost of
goods sold, and inventory on hand. Each column gives information on quantity, unit cost, and
total cost. When the average cost method is used, an average unit cost of each good is calculated
each time a purchase is made. The advantage of perpetual inventory system is a high degree of
control, it aids in the management of proper inventory levels, and physical inventories can be
easily compared. Whenever a shortage (i.e. a missing or stolen good) is discovered, the Inventory
shortages account should be debited.
METHODS USED TO ESTIMATE INVENTORY COST

In certain business operation, taking a physical inventory is possible or
impractical. In such a situation, it is necessary to estimate the inventory cost. Two very popular
methods used to estimate inventory cost are
Retail Inventory method,
Gross Profit method.

The retail inventory method uses a cost to retail price ratio. The physical inventory
is valued at retail, and it is multiplied by the cost ratio (or percentage) to determine the estimated
cost of ending inventory.
The gross profit method uses the previous years average gross profit margin (i.e.
sales minus cost of goods sold divided by sales). Current year gross profit is estimated by
multiplying current year sales by that gross profit margin, the current year cost of goods sold is
estimated by subtracting the gross profit from the sales, and the ending inventory is estimated by
adding cost of goods sold to goods available for sales.
MEASURE OF EFFECTIVENESS OF INVENTORY MANAGEMENT
Size of Inventory = Total inventory/Total Current assets
Size of Raw material Inventory = Raw material inventory/Total inventory
Size of Work in Process Inventory = Work in process Inventory/Total Inventory
Size of Stores and Spares parts Inventory = Stores and Spares parts inventory/Total
Inventory
Size of Finished Goods Inventory = Finished goods inventory/Total inventory
Overall inventory turn over ratio = Cost of goods sold/average total inventories at cost
Raw material inventory turnover ratio = Annual consumption of Raw material / Average
Raw material inventory
Work-in-process inventory turnover ratio = Cost of manufacture/average work-in-process

inventory at cost
Finished Goods inventory turnover ratio = Cost of goods sold / Average finished stock
Stores and spare parts inventory turnover ratio = Stores and Spares consumed/Average
stock of stores and spares
Age of Finished Goods inventory = 365/Finished Goods inventory turnover ratio

Average age of raw material inventory = 365/Raw material inventory turnover ratio
Average age of Work-in-Process inventory = 365/Work-in-Process inventory turnover
ratio
Age of Stores and spare parts inventory = 365/Stores and spare parts inventory turnover
ratio
Inventory holding period = 365/Inventory turnover ratio
INVENTORY CONTROL
Inventory control is concerned with the acquisition, storage, handling and
use of inventories so as to ensure the availability of inventory whenever needed, providing
adequate provision for contingencies, deriving maximum economy and minimizing wastage and
losses.
Hence Inventory control refers to a system, which ensures the supply of required
quantity and quality of inventory at the required time and at the same time prevent unnecessary
investment in inventories.
It is one of the most vital phase of material management. Reducing inventories without
impairing operating efficiency frees working capital that can be effectively employed elsewhere.
Inventory control can make or break a company. This explains the usual saying that inventories
are the graveyard of a business.
Designing a sound inventory control system is in a large measure for balancing operations.
It is the focal point of many seemingly conflicting interests and considerations both short range
and long range.
The aim of a sound inventory control system is to secure the best balance between too
much and too little. Too much inventory carries financial rises and too little reacts adversely on
continuity of productions and competitive dynamics. The real problem is not the reduction of the
size of the inventory as a whole but to secure a scientifically determined balance between several
items that make up the inventory.
The efficiency of inventory control affects the flexibility of the firm. Insufficient
procedures may result in an unbalanced inventory. Some items out of stock, other overstocked,
necessitating excessive investment. These inefficiencies ultimately will have adverse effects
upon profits. Turning the situation round, difference in the efficiency of the inventory control for
a given level of flexibility affects the level of investment required in inventory. The less efficient
is the inventory control, the greater is the investment required. Excessive investment in
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inventories increase cost and reduce profits, thus, the effects of inventory control of flexibility
and on level of investment required in inventories represent two sides of the same coin.
1.2 INDUSTRY PROFILE

INDUSTRIAL REVOLUTION:
The Industrial Revolution was the transition to new manufacturing processes in the
period from about 1760 to sometime between 1820 and 1840. This transition included going
from hand production methods to machines, new chemical manufacturing and iron production
processes, improved efficiency of water power, the increasing use of steam power, and the
development of machine tools. It also included the change from wood and other bio-fuels to coal.
Textiles were the dominant industry of the Industrial Revolution in terms of employment, value
of output and capital invested; the textile industry was also the first to use modern production
process.
The Industrial Revolution marks a major turning point in history; almost every aspect of
daily life was influenced in some way. In particular, average income and population began to
exhibit unprecedented sustained growth. Some economists say that the major impact of the
Industrial Revolution was that the standard of living for the general population began to increase
consistently for the first time in history, although others have said that it did not begin to
meaningfully improve until the late 19th and 20th centuries.
The Industrial Revolution began in Great Britain, and spread to Western Europe and
North America within a few decades. The precise start and end of the Industrial Revolution is
still debated among historians, as is the pace of economic and social changes. GDP per capita
was broadly stable before the Industrial Revolution and the emergence of the modern capitalist
economy, while the Industrial Revolution began an era of per-capita economic growth in
capitalist economies. Economic historians are in agreement that the onset of the Industrial
Revolution is the most important event in the history of humanity since the domestication of
animals, plants and fire.
The First Industrial Revolution evolved into the Second Industrial Revolution in the
transition years between 1840 and 1870.
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REVOLUTION IN MACHINE PARTS:

The Industrial Revolution created a demand for metal parts used in machinery. This led
to the development of several machine tools for cutting metal parts. They have their origins in
the tools developed in the 18th century by makers of clocks and watches and scientific
instrument makers to enable them to batch-produce small mechanisms.
Before the advent of machine tools, metal was worked manually using the basic hand
tools of hammers, files, scrapers, saws and chisels. Consequently, the use of metal was kept to a
minimum. Wooden components had the disadvantage of changing dimensions with temperature
and humidity, and the various joints tended to rack (work loose) over time. As the Industrial
Revolution progressed, machines with metal parts and frames became more common. Hand
methods of production were very laborious and costly and precision was difficult to achieve. But
the modern industrial revolution overcomes all the hurdles that was faced before industrial
revolution.
Social effects due to industrial revolution:
Standards of living
Food and nutrition
Housing
TRANSITION IN INDIAN AUTOMOBILE INDUSTRY:
In 1990, India and China had almost the same GDP per capita. Since then, driven by
its manufacturing sector, Chinas economy has grown much faster than has Indias and its GDP
perception on a PPP basis is 90% higher than Indias GDP per capita. To achieve faster rates of
economic growth India urgently needs to strengthen its own manufacturing sector. The growth in
manufacturing sector is dependent on the investment climate. The structural reforms since 1990s
have made some progress.
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Despite recent setbacks, it is universally acknowledged that the reforms process in India
cannot be reversed and sooner or later these reforms will be implemented. However, the long
term competitive ability of Indian firms would depend on production efficiency. Production
efficiency, in turn, is dependent on ability to develop, import and adapt new technologies among
other factors
INDIAN MANUFACTURING INDUSTRY PROFILE
The Indian economy is firmly on the path of steady growth. Even during the last decade
when other countries were in the grip of a massive slowdown, India continued to enjoy
comfortable economic position. This recent spurt in growth is propelled by radical reforms such
as the removal of restrictions on foreign investment and industrial de-licensing. Tailoring the
EXIM policy to promote exports and aligning the import duties to meet WTO commitments
further contributed to this development. This trend is expected to continue over the next five
years, driven by a favorable business policy environment in terms of tax cuts, broadening tax
base, and reduced interest rates.
The liberalization of the economy has opened new windows of opportunity for
manufacturing sector. Increasingly the success of manufacturing industries is dependent on
innovations, research and development. It is critical not only to remain competitive but also,
significant advantages can be gained by developing and commercializing new technologies
ABOUT MANUFACTURING COMPANY:
In manufacturing plants that own a large number of equipment, managing the spare parts
properly and in a timely manner is a challenging task. Usually, spare parts are categorized into
two main groups:
Fast Moving
Slow Moving Parts.
Fast moving spares are those that are very often required, and slow moving spares are
those that are rarely required. The managers find it difficult to keep track of the spare parts used
and determine future demand manually. In every spare part manufacturing industry is to build a
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database management system that will help the managers with the process of managing spare
parts.
In particular, the system should do the following:

Keep record of the spare parts required for a particular type of maintenance.
Keep record of the spare parts received and used in the past.
Schedule forthcoming major maintenance services.
Keep record of spare parts vendors.
Forecast future demand for fast moving spare parts based on past consumptions etc.
In this model we assume that lead-time for all spare parts is one week.
The following are other functionalities of this database:
Generating weekly order reports for each spare part. These reports will be mailed to
vendors.
Providing weekly feedback to managers to enable decisions about expenditures on
equipment maintenance.
Providing information about economic viability of an equipment.
Often, the slow moving items get piled up in the inventory and managers lose track of
them. The system should generate reports of on-hand inventory of all spare parts and onhand inventory of spare parts that have been in the inventory for more than three months.
When maintenance is performed on equipments, the following information is recorded:
maintenance date and time, amount of time to repair the equipment, amount of time the
equipment is down, name of the major spare part used, cost of maintenance, description
of the process, etc.
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Spare parts are part of equipments. The company uses spares to replace damaged parts of
equipments. When a spare part is used, the following information is recorded:
replacement date, man-hours used, number of spare parts used, etc.
When parts are bought from a vendor, the following information is recorded: transaction
number, order releasing date, order receiving date, quantity purchased, unit price, total
amount paid, payment due date, etc.
DATABASE DESIGN
Equipment: The main attributes are identification number, name, description, location, purchase
price, purchase date, estimated cost of a breakdown, average man-hours required for a shutdown
maintenance, expected lifetime, etc.
Maintenance: The main attributes are identification number, name, type (shutdown or
breakdown), description, total man-hours required, etc.
Vendor: The main attributes are identification number, name, address, name and telephone
number of the contact person, etc.
Spare part: The main attributes are identification number, name, type (slow or fast moving
part), purchase date, expected lifetime, inventory level, unit cost, name of the company that
produces this component as well as the name and telephone of the contact person, etc
SOME OF THE TOP SPARE PARTS MANUFACTURING COMPANIES IN INDIA:

Maruti auto spares parts pvt. Ltd.
Ashok Leyland Pvt Ltd:
Bajaj Auto Spares:
Bharat Seats Ltd
Hindustan Motor limited
COMPANY DETAILS
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1) GABRIEL INDIA LIMITED

Date of Establishment 1971
LOCATION
Himachal Pradesh
Chairperson -
Rajiv Aggarwal
COMPANY HISTORY
Gujarat Automotive Gears (GAGL) was established in 1973 at Baroda, India for the
manufacture of auto and tractor components. Marketed under the brand names of KAP and
KAG, these components serve the aftermarket and OEMs in India. Two decades of experience,
an established network and a synergistic approach to design and execution, ensures quality
products and components from concept to completion.
GAGL caters to both the auto and tractor OEM and aftermarket in India. Technology is
constantly upgraded to bring out products that meet global standards. Further, close customer
interaction has made GAGL a competent partner to leaders in the industry.
GAGL is supported by well-qualified, experienced and a quality conscious workforce - a
further testimony to quality production.
Product manufactured by the company:
The primary products of GAGL are transmission gears, axle shafts, propeller shaft
components, king pin units, wheel spanners, tractor components, etc.
2) ASHOK LEYLAND PVT LTD:

Date of Establishment
07-09 1948
Location
Hosur
Chairperson -
Dheeraj G Hinduja
15
Financials Total Income -
Rs. 100099.474 Million (year ending Mar 2014)
COMPANY HISTORY:
The origin of Ashok Leyland, a Hinduja group company can be traced to the urge for selfreliance, felt by independent India. Pandit Jawaharlal Nehru, India's first Prime Minister
persuaded Raghunandan Saran, an industrialist, to enter automotive manufacture. In 1948, Ashok
Motors was set up in what was then Madras, for the assembly of Austin Cars. The Company's
destiny and name changed soon with equity participation by British Leyland and Ashok Leyland
commenced manufacture of commercial vehicles in 1955.
Since then Ashok Leyland has been a major presence in India's commercial vehicle
industry with a tradition of technological leadership, achieved through tie-ups with international
technology leaders and through vigorous in-house R&D. Access to international technology
enabled the Company to set a tradition to be first with technology. Be it full air brakes, power
steering or rear engine busses, Ashok Leyland pioneered all these concepts. Responding to the
operating conditions and practices in the country, the Company made its vehicles strong, overengineering them with extra metallic muscles. '
AWARDS/ACHIEVEMENTS
In the journey towards global standards of quality, Ashok Leyland reached a major
milestone in 1993 when it became the first in India's automobile history to win the ISO 9002
certification. The more comprehensive ISO 9001 certification came in 1994, QS 9000 in 1998
and ISO 14001 certification for all vehicle manufacturing units in 2002.
3)BAJAJ AUTO SPARES:
16
30-04 2007
Location
Maharashtra
Chairperson
Rahul Bajaj
Financials Total Income Rs. 208888.8 Million (year ending Mar 2014)
COMPANY HISTORY
In India, Bajaj Auto has a distribution network of 485 dealers and over 1,600 authorized
services centers. It has 171 dealers exclusive for the three-wheeler segment .It has total 3750
rural outlets in rural areas.
The company has opened 11 retail stores for bikes across the country, exclusive for highend and performance bikes. It has opened these stores under the name Bajaj Probiking in areas
like Pune, Nashik, Ahmedabad, Chennai, Hyderabad, Kolkata, Navi Mumbai, Chandigarh, New
Delhi, Faridabad and Mangalore.
Bajaj Auto is largest exporter of three-wheelers. It has a distribution network in 50
countries with a dominant presence in Sri Lanka, Colombia, Bangladesh, Mexico, Central
America, Peru and Egypt.
AWARDS
Bajaj Autos Bajaj Pulsar DTS-Fi won bike of the year in 2007 by CNBC-TV18 Autocar
Auto Awards.BajajPlatina 100 cc won bike of the year 2007 by NDTV Profit Bike India.Bajaj
Autos Chakan Plant won Super Platinum Award For manufacturing Excellance in 2006-07 by
Frost and Sullivan.Bajaj CT 100 bagged Motorcycle Total Customer Satisfaction Study in 2005
by TNS Automotive.
4) BHARAT SEATS LTD
1986
Location
New Delhi
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Chairperson
N D Relan
Financials Total Income -
Rs. 5602.788713 Million (year ending Mar 2014)
COMPANY HISTORY
Bharat Seats (BSL) incorporated in 1986, is a joint venture of Suzuki Motor Corporation,
Japan, Maruti Suzuki India and the Relans. The company is in the business of manufacturing
complete seating systems and interior components for the automotive and surface
transport.Company has received technical guidance by Houwa Kogyo Co., a leading producer of
hi-tech seating system for the automobile industry in Japan, and the main suppliers to Suzuki
Motor Corporation.
The factory in Gurgaon houses Polyurethane moulding, seat frame manufacture, final seat
assembly and head rest moulding and assembly.Bharat Seats has set up a manufacturing unit for
PU Headrests within its existing plant with a capacity to produce 4 lakh sets per annum. It started
commercial production of headrest of international standards of quality commenced in May
1999.
The company also operates research & development centre which handles projects from
the concept stage through modelling, designing prototyping to testing and validation for the final
product. The centre has received approval from Ministry of Science and Technology Department
of Scientific and Industrial Research.
AWARD/RECOGNITION
BSL has already received the ISO 9002 and QS 9000 revised version quality systems.
5)HINDUSTAN MOTOR LIMITED

18
11-02 1942
Location
West Bengal
Chairperson -
A.Shankaranarayanan
COMPANY HISTORY
Hindustan Motors (HML) is an automobile manufacturing company incorporated in the
year 1942. It is Flagship Company of the CK Birla Group.
The company started operations in a small assembly unit in Port Okha near Gujarat, which was
later shifted to Uttarpara, West Bengal in 1948.
In 1948 the company began its production of the Ambassador car, which became first
Indian car. Currently, it owns three manufacturing facilities located in Tiruvallur (Chennai),
Uttarpara (Kolkata) and Pithampur (Indore).In the year 1987, the company commenced
production of petrol engines and transmissions at Pithampur, Madhya Pradesh, in collaboration
with Isuzu Motor Company of Japan.HML manufactures passenger cars like Ambassador,
Lancer, Lancer Cedia, Montero, Pajero and RTV.
The company has entered in technical collaboration with Mitsubishi Motors, Japan for
production of Lancer. Hindustan Motors' brand 'RTV', a multi utility vehicle, is manufactured in
technical collaboration with OKA Motor Company, Australia. Hindustan Motors Exports is a
wholly owned subsidiary of HML. It exports all products manufactured by the company.
OUTLOOK
Hindustan Motors, in collaboration with a Chinese company Shandong Shifeng, has
launched a mini-truck that will compete directly with the Tata Ace. This mini truck will be
named Winner. The truck will be built at HMLs Uttarpara plant. The company will manufacture
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around 1,000 units of the Winner 2.3 tons mini-truck per month, which will be introduced by
March 2009.
1.3 COMPANY PROFILE

INTRODUCTION
Upasana Engineering Ltd, part of the US$ 5.5 billion TVS Group was established in
Chennai in 1985 as a manufacturer of spokes and nipples for all the major OEMs in India.
Upasana Engineering Limited is a wholly owned subsidiary of Sundram Fasteners Ltd. Upasana
has two manufacturing locations at Chennai and Hosur and these units are certified for ISO
9001:2008 for non-automotive applications and also certified for ISO:TS 16949 by Intertek /
BVCI. The major strength of Upasana Engineering Limited lies in it having lean & dedicated
multiskilled teams.
FIGURE 1.3.1: LAYOUT OF INDUSTRY

LIST OF PRODUCTS MANUFACTURED IN INDUSTRY
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FIGURE 1.3.2: MANUFACTURING PRODUCTS

List of products are;
1. Spokes and Nipples
2. Automobile Kits
3. Tools
4. Dowel Pins
5. Cold Extruded Parts
6. Small Screws
PRODUCT DETAILS
1) Spokes & Nipples:
Upasana Spokes & Nipples are manufactured using the best quality raw materials from
reputed manufacturers. All materials are inspected for chemical and mechanical properties to
ensure quality and strength.
Parts are formed without break in grain flow, ensuring structural strength. Close tolerances
are maintained to ensure that every component meets international standards. Critical dimensions
are checked with sophisticated measuring instruments. Parts for the retail market conform to the
same specifications and quality as is required by OE Customers.
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FIGURE 1.3.3: SPOKES AND NIPPLES
Product
Spokes
Nipples
Needles
Flat TIP
Needles
Flat TIP
Diameter
2.88 mm
3.14 mm
3.54 mm
3.94 mm
5.25 mm
5.75 --6.50 mm
5.75 --6.50 mm
7.50 mm
2 mm
3 mm
4 mm
3 mm
4 mm
Gauge
11 SWG
10 SWG
09 SWG
08 SWG
11 SWG
10 SWG
09 SWG
08 SWG
Length
150 mm -220 mm
150 mm -220 mm
100 mm -220 mm
100 mm -220 mm
15 mm
15 mm -19 mm
19 mm
20 mm
160 mm -220 mm
160 mm -220 mm
160 mm -220 mm
160 mm -220 mm
160 mm -220 mm
TABLE 1.3.1: MEASUREMENT OF SPOKES AND NIPPLES

2) Automobile kits
Automobile kits are specifically aimed at the repair and maintenance segments (transport
undertakings, workshops and garages) where the practice of replacing total assemblies (Instead
of individual components) is fast gaining acceptance. These kits are supplied in convenient
corrugated carton / plastic containers / plastic boxes.
22
FIGURE 1.3.4: AUTOMOBILE KITS
Product
Category
Surface finish
Customers
Logistics
Steering column assembly Kits

Chassis Kits
Gear Box transmission Kits
ZF Steering kits
Gear Box cup Kits
Front fork springs for Mopeds
Heavy Commercial Vehicles
Medium commercial Vehicles
Phosphate & oiled
Ground & oiled
Plated
Exports to Srilanka& Nepal
After market through Distributors
Well established supply chain through Transporters
Supplying through our distributors vastly across the country
23
TABLE 1.3.2: MEASUREMENT OF AUTOMOBILE KITS

3) TOOLS
Established in 2004, we specialize in the manufacturing of carbide die assemblies,
trimming tools and quills for the fastener industry
FIGURE 1.3.5: TOOLS
Product
Carbides
Trim Dies
Diameter
3 mm - 24 mm
Length
Type
20 mm -100 mm Round
Segmental
Special forms
M 6 - M 24
20 mm - 60 mm Round
Hex
Bi-Hex
Special forms
TABLE1.3.3 MEASUREMENT OF TOOLS
4) Dowel Pins
24
Upasana manufacture and export precision ground dowel Pins for USA, EUROPE, ASIAPACIFIC region and for domestic customers.
Heads and Threads International, USA
Anixter Fasteners USA
Endries International, USA
Non Standard Socket Screws Limited, U.K
DC Products Limited, Australia
Brighton Best , USA
FIGURE 1.3.6: DOWEL PINS
5) Cold Extruded Parts

25
Upasana is a one-stop-shop for auto electrical and hydrostatic steering components for
the automobile and agriculture industry.OurHosur plant employs state-of-the-art machines
including fully and semi-automatic forging presses of 110T to 1600T capacity, CNC turning and
CNC grinding machines, double disc grinding and lapping machines. We have our own state of
art Sealed Quench furnaces for high quality heat treatment. The gear tooth profiles are
manufactured to exact specifications and close tolerances. The heat treatment is carried out to
achieve the desired mechanical properties.
FIGURE1.3.7: COLD EXTRUDED PARTS
Surface finish
Customers
Delivery & Logistics
Awards
As heat treated and fully finished parts for

ready to assemble condition
Sundram Fasteners - India
Lucas TVS - India
Comstar - India
Sauer Danfoss - INDIA, DENMARK, USA
VALEO - INDIA,FRANCE & POLAND
Supply availability thro well established CFA's and freight
forwarders to USA26
& EUROPE
Well established supply chain through Transporters
TS 16949 :2009CERTIFIED BY BVQI
ZERO PPM STATUS AT SAUER DANFOSS
TABLE 1.3.4: DETAILS OF COLD EXTRUDED PARTS

6) Small Screws
Upasana small screws division caters to the major auto makers in India. Our range
includes Philips /star pan head, truss head and countersunk head machine and self-tapping
screws. These screws are made of carbon and boron steel and plated according to customer
specifications.
FIGURE 1.3.8: SMALL SCREW
WE SUPPLY PRODUCTS TO MARKET LEADERS IN GLOBAL AUTOMOTIVE AND

ENGINEERING INDUSTRY.
Anixter Fasterners, USA
Bajaj Auto Limited
Comstar India Ltd
Cyberdyne Technologies
DC Proucts Ltd, Australia
Heads & Threads International, USA
IMPAL
27
Lucas TVS Ltd

Madras Auto Services
Mahavir Traders, Nepal
Partap Singh & Sons
Peiner, Germany
Royal Enfield
Sandhar Technologies
Sauer Danfoss India, Denmark, USA
Sundram Fasteners Ltd
Sundram Motors
TVS Auto Parts, Srilanka
TVS Motor Company Ltd
TVS & SONS Ltd
VALEO -India, France, Poland
CUSTOMER SERVICE
Regardless of the field they work in, TVS companies are known for their
Unwavering commitment to quality. Most group companies have adopted Total Quality
Management as a way of life. Robust processes and stringent controls underlie every activity,
delivering tangible benefits to all stakeholders from customer to employee. While each company
in the group has achieved significant milestones on its quality path, five companies have won the
coveted Deming Award instituted by the Union of Japanese Scientists and Engineers.
PEOPLE FOCUS
28
The people that make up the TVS Group work in an environment of shared ideas, efforts
and responsibilities. The groups history, marked by long-standing relationships, is testimony to
the fact that people have found careers with it and not just jobs. Recognized for its excellent
human resource practices, the group addresses each individuals need to grow professionally and
personally. Strong emphasis on employee welfare and systems for continuous training have
allowed different businesses to attract, retain and develop outstanding talent.
UNCOMPARING ETHICS
The TVS Groups reputation for honesty and reliable business conduct is one of its
greatest assets. Built by many people over many years, the group has a strong legacy of
accountability, integrity and transparency. Its commitment to competitive excellence is combined
with total, uncompromising integrity. Responsibility towards society and the environment has
always been a strong force at the TVS Group. This is manifested in the form of diverse
community partnerships. From schools and hospitals to initiatives for drinking water and
electrification, companies contribute actively to the development of the society in which their
people live and work.
SOME OF THE TVS COMPANY
TVS MOTOR COMPANY LIMITED
TVS Motor Company, the flagship company of the 100 year old, TVS Group, is a
leading two and three-wheeler manufacturer in India with state-of-the-art manufacturing
facilities at Hosur in Tamilnadu, Mysore in Karnataka, Nalagarh in Himachal Pradesh and
Karawang in Indonesia. Driven by technology and innovation at the helm, TVS Motor Company
boasts of a rich talent pool. It was the first Indian company to deploy a catalytic converter in a
100 cc motorcycle and to indigenously produce a four stroke 150 cc motorcycle. It is also the
first Indian manufacturer to launch the country's first auto-clutch motorcycle and introduce ABS
(Antilock Braking System) technology on a motorcycle in India.
TVS SUPPLY CHAIN SOLUTIONS

29
TVS Supply Chain Solutions are specialists in providing cutting edge, end-to-end supply
chain services to the automotive, beverage, power generation and defense markets. Operating
from six bespoke centers across the UK including an impressive 250,000 sq.ft.head office and
distribution center in Chorley, Lancashire the company also has a global reach assisted by
strategic facilities in Spain, Germany and the USA. TVS SCS is owned by parent company TVS
Logistics Investment; an Indian-based logistics operator with ambitious plans for worldwide
expansion.
SUNDRAM FASTENERS LIMITED
Established in 1966, Sundaram Fasteners limited (SFL) is today the largest manufacturer
and exporter of high tensile fasteners. The product range includes High tensile fasteners, Powder
metal parts, Cold extruded parts, Iron powder, Radiator caps, Gear shifters, water, Oil & Fuel
pumps, Rocker Lever assemblies, Cam followers, Valve tappets, Rocker Shafts, Bearing Housing
Belt Tensioners and Ferrous, Non-ferrous components and assemblies. The first Indian company
to get the ISO 9000 certification, today all the divisions' of SFL are certified for ISO/TS 16949
and ISO 14000.
AWARDS
1.3.9 FIGURE OF AWARDS

AWARDS
ISO 9001:2008Chennai
TS 16949:2009 Chennai plant in 2005-INTERTEK
Hosur plant in 2008-BVCI.
Best supplier award from Sundram Fasteners
Achieved Zero PPM status at Sauer Danfoss
1.4 OBJECTIVES OF THE STUDY

30
To analyze the supply of raw material for the purpose of production.
To identify the stock level for various components at Upasana Engineering Limited.
To predict inventory requirement for various component at Upasana Engineering Limited.
To study the relationship between inventories and current liabilities of the company.
To study the relationship between inventories and reserves and surplus of the company.
To study the relationship between inventories and fixed assets of the company.
To analyze the investment made in inventories and its effective utilization of resource.
1.5 SCOPE OF THE STUDY

31
This study is to find the facts and opinions of inventory management a Upasana
Engineering Limited. It accordance with the present trends it aims mainly in finding out the
inventory management producers at Upasana Engineering Limited. This study gives the brief
information about the inventory management of Upasana Engineering Limited. The study was
done using annual report inventory manual
1.6 LIMITATION OF THE STUDY

32
Detailed study about the material was not possible because of time limit.
Some of the information was kept confidential by the department.
Study was confined only to the selected component in the store department.
The study takes into the account only the quantitative data and qualitative aspects were
not taken into account.

The company is refusal to disclose several material facts because they want to keep it
very confidential
CHAPTER II
2.LITERATURE REVIEW
33
INTRODUCTION
Success of any industrial undertaking depends upon the 6 ms 1) Money
2) Manpower 3) Machine 4) Market 5) Material 6) Management
Materials are pivotal importance not less than any other Ms. Problems have their root in material
affects the efficiency of all men, machine, money & marketing decisions of the firms and thus
become the grave concern of management at all levels. If there were too much of material
problems like ideal funds lied up in excessive inventory storage and obsolesces difficulties
market pressure would arise. Thus the importance of inventory management is realized. A
number of studies have been done in the field of inventory management by various researchers.
Some of them are given below;
1. Author:- Bern at de William year 2008
This study tells that the main focus of inventory management is on transportation and
warehousing. The decision taken by management depend s on the traditional method of
inventory control models. The traditional method of inventory management is how much useful
in these days the author tell about it. He is also saying that the traditional method is not a cost
reducing, it is so much expensive. But the managing the inventory is most important work for
any manufacturing unit.
2. Author: - Jon Schreibfeder 1992
He said that it is easy to turn cash into inventory, the challenge is to turn inventory back
into cash. In early 1990s many distributor recognize that they needed help controlling and
managing their largest asset inventory. In response to this need several companies developed
comprehensive inventory management modules and systems. These new package include many
new features designed to help distributors effectively managed warehouse stock. But after
implementing this many distributors do not feel that they have gained control of their inventory.
3. Author:-Wolf Bagby, Managing inventory
In this study Mr. W.Bagby explains that by managing the inventory it becomes easier for
the organization to meet the profit goals, shorter the cash cycle, avoid inventory shortage, avoid
excessive carrying costs for unused inventory, and improve profitability by decreasing cash
conversion and adopt JIT system. According to this study companies need to get smart about
inventory. Boosting financial performance is another benefit that comes from better inventory
management. Infect large number of manufacturers enjoy savings and better performance by
choosing the approach of inventory reduction.
4. Author: - Asfaque Ahmed October 12, 2004
He said that most of the manufacturing company vendors have planning and scheduling
product which assume either infinite production capacity for calculating quantities of row
material and work in progress (WIP) requirements or infinite quantities of raw material and WIP
34
materials for calculating production capacity. There are many problems with this approach and
how to avoid these by making sure that the product you are buying indeed takes into account
finite quantities of required materials as well as finite capacities of work centers in your
manufacturing facilities.
5. Author:- D.Hoopman April 7, 2003
In this article he said that inventory optimization recognize that different industry have
different inventory profiles and requirements. Research has indicated that solutions are priced in
a large range from tens of thousands of dollars to millions of dollars. In this niche market sector
price is definitely not an indicator of the quality of solution, ROI and usability are paramount.
6. Author:-Silver, Edward A Dec22, 2002
This article considers the context of a population of items for which the assumption
underlying the EOQ derivation holds reasonably well. However as is frequently the cash in
practices there is an aggregate constraint that applies to the population as a whole. Two common
forms of constraints are: 1) the existence of budget to be allocated among the stocks of the items
and 2) a purchasing production facility having the capability to process at most a certain number
of replenishment per year. Because of the constraint the individual replenishment quantities
cannot be selected independently.
7. Author:- Charles Atkinson
In the study by Mr. Charles Atkinson, he explained the inventory management and
assessment of inventory levels. As per this study inventory management need to address two
issue Part I. How to optimize average inventory levels. Part II. How to assess (evaluate)
inventory levels. This study tells about what the manager should do and not to do, and how much
amount should be order in one placed orders. Average inventory can be calculated by simplistic
method.
CHEAPTER III
3.1RESEARCH METHODOLOGY
35
Research methodology is way of systematically to solve a problem. The methodology

adopted in this study discussed below
Research refers to a search for knowledge, research can be defined as a scientific search
on a specific topic in other words research is art of scientific investigation.
Research methodology is way to solve problem. Research is a process that achieves
systematically and with the support of data and answer the question or gather to understanding of
a phenomenon the process which is frequently called research methodology.
3.2 RESEARCH DESIGN

Research design specifies the procedure for conducting the research projects. The
research design in this project is analytical in nature the procedure using which research was to
use facts of information already available of analyze these to more additional evaluation of
performance.
Research design is an analytical research the researcher has to use facts or information.
This is the case of JSW Steel Limited with the particular reference to inventory management for
projection of the study secondary data.
3.3 DATA FOR COLLECTION

Data collection methods are an integral part of research design. There are several data
collection method each has its own advantages and disadvantages. Problems researched with use
of appropriate method s greatly enhance the value of the research data can be collected in the
variety of ways, in different setting field or lab and form different source data are obtained from
secondary data.
SECONDARY DATA
Secondary data can be obtained from secondary sources as for examples Company
records so a researcher is said to make use of secondary data. If a person make use of data
already complied by some other person, secondary data are usually in the shape of raw material.
36
Collection of secondary data has a advantage of being less expensive and less time consuming.
Secondary data are collected through the annual report of the company published articles and inhouse documents. The available data is compared with computer value. The data is collected for
five years 2010-2015
3.4 TOOLS AND TECHNIQUES

Effective and efficient inventory management requires an effective control system over
inventories. Inventory control means a system which assures regular supply of raw material to
the production process at the required time and also minimizes excessive investment in
inventories.
RATIO ANALYSIS
COPARITIVE BALANCE SHEET
TREND ANALYSIS
RATIO ANALYSIS
Ratio analysis a tool used by an individual to conduct a quantitative analysis of
information in companies financial statement. Ratios are calculated from current year number
and or then compared to previous year with the other companies or the industry or even the
economy to judge the performance of the company.
Ratio analysis perhaps the first financial tool developed to analyze and interpret the
financial statement and still used widely for this purpose. Ratio analysis is defined as a
systematic use of accounting ratios in order to weigh and evaluate operating performance of a
firm. It is the process of determining and interpreting various ratios for helping in making certain
decision.
Ratio is simply a number expressed in terms of another number. It refers to numerical
relationship between two figures, it is obtained by dividing one number to another number.
Accounting ratios are relationship expressed in mathematical terms between related figures in the
financial statements.
37
After classification, the items are ranked by their value and then the cumulative percentage
of total value against the percentage of item are noted. A detailed analysis of inventory may
indicate above figure that only 10 per cent of item may account for 75 per cent of the value,
another 10 per cent of item may account for 15 per cent of the value and remaining percentage
items may account for 10 per cent of the value. The importance of this tool lies in the fact that it
directs attention to the key items.
CHAPTER IV
DATA ANALYSIS AND INTERPRETATION
CURRENT RATIO
38
This ratio is most commonly used to perform the short-term financial analysis. Also
known as the working capital ratio, this ratio matches the current assets of the firm to its current
liability.
Current Ratio = Current Assets/Current Liabilities
TABLE NO .1.1
CURRENT RATIO
(Rs. In Lakhs)
Year
Current assets
Current liabilities
Current ratio
2009-2010
1572.44
742.21
2.12
2010-2011
2004.18
855.47
2.34
2011-2012
79320.01
66994.00
1.18
2012-2013
92125.24
82719.10
1.11
2013-2014
94537.25
76965.10
1.23
Sources: Annual Report

Interpretation
The current ratio is in order to measure the short- term liquidity or solvency of a concern,
i.e. The ability to meet its current obligations. From the above table shows that the current ratio
for the year 2009-2010 is 2.12. In the year 2010-2011 it increase to 2.34. In the year 2011-2012 it
decrease to 1.18 and it continuously decrease in the year 2012-2013.after that in the year 20132014 it increase to 1.23. It should be improve this position in future.
CHART NO.1.6
CURRENT RATIO
39
CURRENT RATIO
2.12
2.34
1.18
2009-2010
2010-2011
1.11
2011-2012
INVENTORY TURNOVER RATIO
40
2012-2013
1.23
2012-2013
Inventory turnover ratio is the relationship between the cost of goods sold and the capital
employed.
Inventory Turnover Ratio = Cost Of Goods Sold/ Average Inventory
TABLE NO .1.2
(Rs. In Lakhs)
Year
Cost of goods
sold
Average
Stock
Inventory turnover ratio
2009-2010
3217.42
343.26
9.37
2010-2011
3976.1
504.61
7.88
2011-2012
181072
32397.7
5.59
2012-2013
214664
28693.1
7.48
2013-2014
206942
32118.2
6.44

Interpretation
The inventory or stock turnover ratio is calculated to ascertain the efficiency of inventory
management in terms of capital investment. It shows the inventory level of the company. The
cost of goods sold is continuously increasing as well as average stock level. In the year 2013 and
2014 the inventory turnover ratio is decrease because the cost of goods is decrease therefore it
should improve this position in future.
CHART NO.1.2
INVENRORY STOCK TURNOVER RATIO
41

10
8
RATIO
6
4
2
0
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

YERA
WORKING CAPITAL TURNOVER RATIO

42
This ratio indicates the efficiency or inefficiency in the utilization of working capital in
making sales. The term net working capital means current assets minus current liabilities.
Working Capital Turnover Ratio = Sales or Cost of Sales / Net Working Capital
TABLE NO.1.3
(Rs. In Lakhs)
Year
Cost of goods sold
Net working capital
Working capital turnover ratio
2009-2010
3217.42
830.24
3.88
2010-2011
3976.10
1148.71
3.46
2011-2012
181071.66
9406.14
19.25
2012-2013
214663.52
12325.99
17.42
2013-2014
206941.67
17581.21
11.77

Interpretation
The working capital ratio shows the effective utilization of working capital. It also
measures the smooth running of business. The above table shows in the year 2011 and 2012 high
level of working capital ratio . The higher ratio is the indication of lower investment of working
capital and more profit.
CHART NO.1.3
43
19.25
17.42
3.88
2009-2010
11.77
3.46
2010-2011
2011-2012
44
2012-2013
2013-2014
Fixed Assets Turnover Ratio

The fixed-asset turnover ratio measures a companys ability to generate net sales from
fixed asset investments-specifically property, plant and equipment- net of depreciation. A higher
fixed-asset turnover ratio shows that the company has been more effective in using the
investment in fixed asset to generate revenues.
Fixed Asset Turnover Ratio= Net Sales/ Fixed Asset
TABLE NO.1.4
FIXED ASSETS TURNOVER RATIO
Year
Cost of goods sold
Net fixed asset
(Rs. In Lakhs)
Fixed assets turnover
ratio
2009-2010
3217.42
2389.82
1.35
2010-2011
3976.10
2236.57
1.78
2011-2012
181071.66
80916.61
2.24
2012-2013
214663.52
88812.81
2.42
2013-2014
206941.67
89992.91
2.30

Interpretation
This ratio shows efficiency of utilization of fixed assets and profitability of business. In
the year 2012-2013 the fixed assets turnover ratio is high i.e.2.42 as compare with past year in
this year utilization of fixed assets is more. In the year 2013 and 2014 it reduce to 2.30. A lower
ratio is the indication of under utilization of fixed assets.
45
CHART NO.1.4
FIXED ASSETS RATIO
FIXED ASSETS RATIO
3
2.5
2.24
2
1.5
2.42
1.78
2.3
FIXED ASSETS RATIO
1.35
1
0.5
0
46
CAPITAL TURNOVER RATIO

Managerial efficiency is also calculated by establishing the relationship between cost of
sales or sales with the amount of capital invested in the business.
capital turnover ratio = cost of goods sold/ capital employed
TABLE NO.1.5
(Rs. In Lakhs)
Year
Cost of goods sold
Capital employed
Capital turnover ratio
2009-2010
3217.42
3266.34
0.99
2010-2011
3976.10
3437.96
1.16
2011-2012
181071.66
93242.60
1.94
2012-2013
214663.52
98218.95
2.19
2013-2014
206941.67
107564.81
1.92

Interpretation
From the above table shows that the capital turnover ratio for the year 2009-2010 is 0.99.
In the year 2010-2011 it increase to 1.16. In the year 2011-2012 it increase to 1.94. In the year
2012-2013 it increase to2.19 and in the year 2013-2014 it decrease to 1.92. Here higher ratio
indicates higher efficiency and lower ratio indicates inefficiency usage of capital.
CHART NO.1.5
47
23%
12%
2009-2010
14%
2010-2011
2011-2012
27%
2012-2013
24%
48
2013-2014
LIQUID RATIO
This ratio is also known as acid test ratio or liquid ratio. It is a more severe test of
liquidity of liquidity of a company. It shows the ability of a business to meet its immediate
financial commitments. It is used to supplement the information given by the current ratio
Quick ratio =
Quick Assets (or) Liquid Assets / Current Liabilities

TABLE NO.1.6
LIQUID RATIO
(Rs. In Lakhs)
Liquid
ratio
Year
Quick ratio
Current liabilities
2009-2010
1229.17
742.21
1.66
2010-2011
1499.57
855.47
1.75
2011-2012
50626.90
66994.00
0.76
2012-2013
59727.55
82719.10
0.72
2013-2014
62419.03
76965.10
0.81

Interpretation
A Quick Ratio of 1:1 is considered satisfactory as a firm can easily meet all its current
liabilities. If the ratio is less than 1:1, then the financial position of the firm shall be deemed to be
unsound. In the year 2009 -2010 and 2010-2011 the liquid ratio is greater than one after that
liquid ratio is less than one. It shows that the solvency position of the firm is dissatisfactory
level. The firm should improve this position in future.
CHART NO.1.6
49
LIQUID RATIO
2
1.8
1.6
1.4
1.2
1
0.8
1.66
1.75
0.6
0.4
0.76
0.72
0.81
2011-2012
2012-2013
2013-2014
0.2
0
2009-2010
2010-2011
50
Table No.2.1
COMPARATIVE BALANCE SHEET AS AT 1-04-2009 TO 31.3.2010

(Rs. In Lakhs)
Comparative Balance Sheet as on 31 st March 2009-2010
31-Mar
Increase or Decrease
Particulars
As At
2009
As At 2010
Absolute
%
Equity and Liabilities
Shareholders Funds
1. Share Capital
2. Reserves and Surplus
Non-current liabilities
1. Long term borrowings
2. Deferred tax liabilities
3. Long term provisions
Current Liabilities
1. Short term borrowing
2. Trade payables
3. Other current liabilities
4. Short term provisions
5. current liabilities & provisions
TOTAL LIABILITIES
ASSETS
Non-Current Assets
a. Fixed Assets
1. Tangible assets
2. Intangible assets
3. Capital work-in-progress
b. Long Term Loans and Advances
Current Assets
1. current investment
2. Inventories
3. Trade receivables
4. Cash and bank balances
5. Short term loans and advances
2101.28
0.00
2101.28
2101.28
0.00
2101.28
314.45
46.29
1885.31
2246.05
145.10
52.69
2235.30
2433.09
742.21
742.21
5089.54
855.47
855.47
5389.84
2247.99
2225.17
130.48
2378.47
2225.17
11.35
343.26
687.52
5.39
536.25
11.39
504.61
990.35
4.08
505.14
51
0.00
0.00
0.00
0.00
-169.35
6.40
349.99
187.04
0.00
0.00
0.00
0.00
0.00
113.26
113.26
300.30
0.00
0.00
0.00
-22.82
0.00
-130.48
0.00
-153.30
0.00
0.04
161.35
302.83
-1.31
-31.11
0.00
0.00
-53.86
13.82
18.56
8.33
15.26
15.26
5.90
-1.02
-100.00
0.00
-6.45
0.35
47.01
44.05
-24.30
-5.80
6. other current assets

7. profit & loss account
TOTAL ASSETS
123.38
1707.15
4085.62
132.40
2147.97
4373.14
0.00
9.02
440.82
287.52
7.31
25.82
7.04
INTERPRETATION
On comparing the balance sheet of Upasana Engineering Limited for the year ending
2009-2010 current asset have been increased to 25.82%, total asset have been increased by
7.04%, the current liabilities increased 15.26% and the total liabilities and capital have been
raised to 5.90%.
52
Table No.2.2

(Rs. In Lakhs)
31-Mar
Particulars
As At 2010 As At 2011
Absolute
%
Shareholders Funds
1. Share Capital
2101.28
2101.28
0.00
0.00
0.00
53393.68
53393.68
0.00
2101.28
55494.96
53393.68
0.00
145.10
28714.35
28569.25
99.49
52.69
8633.08
8580.39
99.39
2235.30
400.21
-1835.09
-458.53
2433.09
37747.64
35314.55
93.55
Current Liabilities
35640.59
35640.59
0.00
2. Trade payables
13647.18
13647.18
0.00
15881.54
15881.54
0.00
1824.71
1824.71
0.00
855.47
0.00
-855.47
-100.00
855.47
66994.02
66138.55
98.72
TOTAL LIABILITIES
5389.84
160236.62
154846.78
96.64
ASSETS
Non-Current Assets
a. Fixed Assets
1. Tangible assets
2225.17
60505.30
58280.13
96.32
274.62
274.62
100.00
3175.36
3175.36
100.00
4. Non-current Investment
14236.74
14236.74
100.00
5. other non-current assets
45.78
45.78
100.00
2677.81
2677.81
100.00
Current Assets
2. Inventories
2225.17
66678.87
64453.70
96.66
11.39
504.61
990.35
4.08
0.00
28693.11
36454.53
813.11
-11.39
28188.50
35464.18
809.03
-100.00
98.24
97.28
99.50
53

TOTAL ASSETS
505.14
132.40
2147.97
4373.14
13352.39
6.87
0.00
79320.01
145998.88
12847.25
6.87
-132.40
77172.04
141625.74
96.22
0.00
-100.00
97.29
97.00
INTERPRETATION
2010-2011 current asset have been increased to 97.29%, total asset have been increased by 97%,
the current liabilities increased 98.72% the total reserve & surplus have been raised to 41.78%,
and the total liabilities and capital have been raised to 96.64%.
Table No.2.3
54

(Rs. In Lakhs)
31-Mar
Particulars
As At 2011 As At 2012
Absolute
%
Shareholders Funds
1. Share Capital
2101.28
2101.28
0.00
0.00
53393.68
61244.70
7851.02
14.70
55494.96
63345.98
7851.02
14.15
28714.35
25591.43
-3122.92
-10.88
8633.08
8931.01
297.93
3.45
400.21
350.53
-49.68
-12.41
37747.64
34872.97
-2874.67
-7.62
Current Liabilities
35640.59
43995.72
8355.13
23.44
2. Trade payables
13647.18
16389.67
2742.49
20.10
15881.54
19541.75
3660.21
23.05
1824.71
2791.96
967.25
53.01
0.00
0.00
0.00
66994.02
82719.10
15725.08
23.47
TOTAL LIABILITIES
160236.62
180938.05
20701.43
12.92
ASSETS
Non-Current Assets
a. Fixed Assets
1. Tangible assets
60505.30
67115.73
6610.43
10.93
274.62
163.57
-111.05
-40.44
3175.36
4009.09
833.73
26.26
14236.74
14157.96
-78.78
-0.55
45.78
45.78
0.00
0.00
2677.81
3320.68
642.87
24.01
66678.87
88812.81
22133.94
33.19
Current Assets
0.00
105.00
105.00
2. Inventories
28693.11
32397.69
3704.58
12.91
36454.53
43352.09
6897.56
18.92
813.11
671.31
-141.80
-17.44
13352.39
15543.83
2191.44
16.41
6.87
55.32
48.45
705.24
55

TOTAL ASSETS
0.00
79320.01
145998.88
0.00
92125.24
180938.05
0.00
12805.23
34939.17
0.00
16.14
23.93
INTERPRETATION
23.93%, the current liabilities increased 23.47% the total reserve & surplus have been raised to
14.15%, and the total liabilities and capital have been raised to 12.92%.
Table No.2.4

56
(Rs. In Lakhs)
31-Mar
Particulars
As At 2012
As At 2013
Absolute
%
Shareholders Funds
1. Share Capital
2101.28
2101.28
0.00
0.00
61244.70
67327.52
6082.82
9.93
63345.98
69428.80
6082.82
9.60
25591.43
28815.06
3223.63
12.60
8931.01
9034.31
103.30
1.16
350.53
286.86
-63.67
-18.16
34872.97
38136.23
3263.26
9.36
Current Liabilities
43995.72
42105.29
-1890.43
-4.30
2. Trade payables
16389.67
17256.61
866.94
5.29
19541.75
14537.94
-5003.81
-25.61
2791.96
3065.29
273.33
9.79
0.00
0.00
0.00
0.00
82719.10
76965.13
-5753.97
-6.96
TOTAL LIABILITIES
180938.05
184530.16
3592.11
1.99
ASSETS
Non-Current Assets
a. Fixed Assets
1. Tangible assets
67115.73
70710.42
3594.69
5.36
163.57
52.52
-111.05
-67.89
4009.09
2140.59
-1868.50
-46.61
14157.96
13202.02
-955.94
-6.75
45.78
46.73
0.95
2.08
b. Long Term Loans and
Advances
3320.68
9840.63
6519.95
196.34
88812.81
95992.91
7180.10
8.08
Current Assets
105.00
0.00
-105.00
-100.00
2. Inventories
32397.69
32118.22
-279.47
-0.86
43352.09
43292.13
-59.96
-0.14
671.31
1058.81
387.50
57.72
15543.83
17869.64
2325.81
14.96
55.32
198.45
143.13
258.73
0.00
0.00
0.00
0.00
57
TOTAL ASSETS
92125.24
180938.05
94537.25
190530.16
2412.01
9592.11
2.62
5.30
INTERPRETATION
2012-2013 current asset have been increased to 2.62%, total asset have been increased by 5.30%,
the current liabilities decreased 6.96% the total reserve & surplus have been raised to 9.60%, and
the total liabilities and capital have been raised to 1.99%.
Table No.2.5
(Rs. In Lakhs)
58
Particulars
Shareholders Funds
1. Share Capital
1. Long term borrowing
Current Liabilities
2. Trade payables
TOTAL LIABILITIES
ASSETS
Non-Current Assets
a. Fixed Assets
1. Tangible assets
b. Long Term Loans and
Advances
Current Assets
2. Inventories
TOTAL ASSETS
31-Mar
As At 2013 As At 2014
Absolute
%
2101.28
67327.52
69428.80
2101.28
75463.00
77564.28
0.00
8135.48
8135.48
0.00
12.08
11.72
28815.06
9034.31
286.86
38136.23
22896.51
9100.88
283.00
32280.39
-5918.55
66.57
-3.86
-5855.84
-20.54
0.74
-1.35
-15.36
42105.29
17256.61
14537.94
3065.29
0.00
76965.13
184530.16
36902.17
21576.37
12832.85
3757.40
0.00
75068.79
184913.46
-5203.12
4319.76
-1705.09
692.11
0.00
-1896.34
383.30
-12.36
25.03
-11.73
22.58
70710.42
52.52
2140.59
13202.02
46.73
78246.60
0.00
2052.97
12316.42
33.57
7536.18
-52.52
-87.62
-885.60
-13.16
10.66
-100.00
-4.09
-6.71
-28.16
9840.63
95992.91
3474.24
96123.80
-6366.39
130.89
-64.69
0.14
0.00
32118.22
43292.13
1058.81
17869.64
198.45
0.00
94537.25
190530.16
0.00
29018.16
40576.56
920.55
17826.77
447.62
0.00
88789.66
184913.46
0.00
-3100.06
-2715.57
-138.26
-42.87
249.17
0.00
-5747.59
-5616.70
59
-2.46
0.21
-9.65
-6.27
-13.06
-0.24
125.56
-6.08
-2.95
INTERPRETATION
2011-2014 current asset have been decreased to 6.08%, total asset have been decreased by
2.95%, the current liabilities decreased 2.46% the total reserve & surplus have been raised to
11.92%, and the total liabilities and capital have been raised to 0.21%.
3. TREND ANALYSIS
Importance of Trend Analysis
Identifying or determining the various forces or influences whose interaction
produces the variations in the time series.
60
It enables us to study the past behavior of the sale under consideration to

determine the type and nature of the variations in the data.
The segregation and study of the various components is of paramount importance
to a businessman in the planning of future operations and in the formulation of
executive and policy decisions.
It helps to compare the actual current performance or accomplishments with the
expected ones (on the basis of the past performance) and analyses the causes of
such variations, if any.
It enables us to predict or estimate or forecast the behavior of the phenomenon in
future which is very essential for business planning.
It helps us to compare the changes in the values of different phenomena at
different time or places, etc.
Trend Analysis of Sales

Table No 3.1
TREND ANALYSIS OF SALES
(Rs. In Lakhs)
YEAR
SALES
Trend Percentage
61
2009-2010
3217.42
100.00
2010-2011
3976.10
123.58
2011-2012
181072.00
5627.86
2012-2013
214664.00
6671.93
2013-2014
206942.00
6431.92
INTERPRETATION
The Trend analysis of sales shows continuously growth in trend during the study period.
The sales was grew by 100% or/and more over the five year after the base year.
Chart No.3.1
TREND ANALYSIS OF SALES
8000
7000
6000
5000
TREND VALUE 4000

3000
2000
1000
0
2009-20102010-2011 2011-2012 2012-2013 2013-2014
YEAR
METHOD OF LEAST SQUARES TREND

SALES FORECASTING OF NEEL AUTO PRIVATE LIMITED
FOR 2015-2019
Table No.3.2
62
Time Deviation
Year
from the Mid-
Square of
Year (X) M/Y
Deviation (X2)
3217.42
3976.10
181072
214664
206942
2012
-2
-1
0
1
2
4
1
0
1
4
-6434.80
-3976.10
0
214664
413884
XY=
Y=609871.52
X=0
X2=10
618137.10
Sales(Y)
2010
2011
2012
2013
2014
N=5
XY
Trend Value
(Yc)
10590.78
61219.64
111848.50
162477.36
213106.22
STRAIGHT LINE TREND OF SALES (AMOUNT IN LAKHS )

Chart No.3.2
STRAIGHT LINE TREND OF SALES
700.00
600.00
466.25
500.00
400.00
Trend value 300.00
213.11
200.00
100.00
0.00
2010
2011
2012
Solving Steps:
The equation of straight line is Yc = a+ bx

Two normal equations are
Y = Na + bX
XY= aX+bX2
Substituting the values given in the table, we get

609871.52 = 5a+0b
1
63
2013
2014
618137.10 = 0a+10b
From solving the above equations we get a = 111848.50 b = 50628.86

The straight line trend is Y= 21545.51+3649.76X
3
Table No 3.3
ESTIMATED SALES FOR 2015-2019 (AMOUNT IN LAKHS)
YEAR
2015
2016
2017
2018
2019
ESTIMATED SALEA
263735.08
314363.94
364992.80
415621.66
466250.52
64
INTERPRETATION
From the above table it is inferred that the estimated sales in the year 2015 is 263735.08 lakhs, in
the year 2016 it will be 314363.94 lakhs , it is 364992.80 lakhs in the year 2017 and it will be
415621.66 lakhs and 466250.52 lakhs in the year 2018 & 2019 respectively. The estimated sales
show an increasing trend from the year 2015-2019.
Chart No.3.3
ESTIMATED SALES FOR 2015-2019
500000
466250.52
450000
400000
350000
300000
Trend value 250000
200000
150000
100000
50000
0
2015
2016
2017
2018
2019
Trend Analysis of Working Capital

Table No.3.4
TREND ANALYSIS OF WORKING CAPITAL
(Rs. In Lakhs)
YEAR
WORKING CAPITAL
65
TREND PERCENTAGE
2009-2010
830.24
100.00
2010-2011
1148.71
138.36
2011-2012
9406.14
1132.94
2012-2013
12325.99
1484.63
2013-2014
17581.21
2117.61
INTERPRETATION
The Trend analysis is shows continuously increase in the Working Capital from 20092014. The working capital was grew by 100% or/and more over the five year after the base year.
Chart No.3.4
TREND ANALYSIS OF WORKING CAPITAL
2500.00
2117.61
2000.00
1500.00
Trend percentage
1000.00
500.00
0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014
CHAPTER V
5.1 FINDINGS
The current ratio shows in the year 2010-2011 was increase when compare to the
previous year 2009-2010. In the year 2011-2013 current ratio is decrease again in the year
2013-2014 the current ratio is increase.
66
The result shows the inventory turnover ratio was decrease when compare to the previous
year 2009-2014.
The working capital turnover ratio was increase when compare to the previous year 20092014. Due to increasing of cost of goods sold.
The fixed assets turnover ratio was increase when compare with previous year 20092010. It shows the companies utilization of fixed assets is more.
The result shows capital turnover ratio is going on increase in the year 2009-2013. It
indicates higher efficiency usage of capital. In the year 2013-2014 it was decrease.
As per the result liquid ratio was decrease when compare to the previous year 2009-2014.
2009-2010current asset have been increased to 25.82%, total asset have been increased
by 7.04%.
2010-2011 current asset have been increased to 97.29%, total asset have been increased
by 97%.
2011-2012 current asset have been increased to 16.14%, total asset have been increased
by 23.93%.
5.30%.
2013-2014 current asset have been decreased to 6.08%, total asset have been decreased
by 2.95%.
The Trend analysis of sales shows continuously growth in trend during the study period.
The sales was grew by 100% or/and more over the five year after the base year.
The Trend analysis is shows continuously increase in the Working Capital from 20092014. The working capital was grew by 100% or/and more over the five year after the
base year.
5.2 SUGGESTIONS
Suggestions are based on the findings that got from the analysis. Suggestions shows below are
used on the analysis is to find out the inventory management in upasana Engineering Limited.
The following are suggestions from the study are as follows: Turnover ratio generally indicates the turnover position of the company. Here the ratio
reflects high turnover on the basis of the five years is good.
The company should be avoid wastages.
67
There should be proper co-ordination between the inventory department and production
department.
The company should take necessary actions for increasing the profitability position.
Through an effective marketing of products in the world market.
The company should order the raw materials according to the lead time.
Company should increase the investment to make a profit for utilizing accumulated
reserves.
The inventory department should be proper analysis of requirement of raw materials.
The company should provide adequate information and support to the Inventory Control
Management by the organisation it helps avoiding wastage.
Reduction in loan and advance, current liabilities, scrap values and other expenses will
increase the cash balance which can used for purchasing materials and other needs.
Use new techniques for analyzing financial information by using various techniques to
more accuracy can be maintain and more time can be saved.
Increasing in inventory which will leads to the company can holding the Money to lock
up.
5.3 CONCLUSION
The successful management of inventory in any concern will ensure the success of a business. In
the analysis of inventory management, the management of inventory as well as financial position
of the company is good.
According to the Upasana Engineering Limited, the inventory management is good condition.
The level of profit is increase in nature. However to show better business result, the management
may concentrate on keeping the inventory is more sufficient.
68
The better co-ordination between the each department is very important. Such as (sales,
production, purchase and inventory) because it helps to avoid the credit risk and it decrease the
debts collection days of the company.
BIBLIOGRAPHY
Dr.
VARMA AGARWAL, Financial Management, Published by educational
publishers1998, 2nd edition

T.S. REDDY, Y.HARI PRASAD REDDY, cost and management accounting, margham
publication, Chennai,2007.
Dr.S.N.MAHESWARI, Principles of Management Accounting, Sultan Chand & sons,

New Delhi,2005.
PRASANNA CHANDRA, Financial Management Theory and Practice, Tata McGraw
Hill Publication, New Delhi,1997.
69
WEB SITES
www.uel.in
www.sciencedirect.com
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MEANING OF INVENTORY MANAGEMENT

and stored for future productions.

Saleable in the market,

Directly saleable in the manufacturing process of the business,

Usable directly in the manufacturing process of the undertaking, and

INVENTORIES AND FINANCIAL STATEMENTS

INVENTORY ACCOUNTING SYSTEMS

DETERMINING INVENTORY QUANTITIES

INVENTORY COSTING METHODS

First-in first-out(FIFO) method,

Last-in first-out(LIFO) method and

Average cost or weighted average cost method.

Standard price Method

Current Price Method

1. First-in first-out method

Last-in first-out method

INVENTORY COSTING METHODS-PERPETUAL

METHODS USED TO ESTIMATE INVENTORY COST

Retail Inventory method,

Gross Profit method.

MEASURE OF EFFECTIVENESS OF INVENTORY MANAGEMENT

Size of Inventory = Total inventory/Total Current assets

Size of Raw material Inventory = Raw material inventory/Total inventory

Size of Work in Process Inventory = Work in process Inventory/Total Inventory

Size of Finished Goods Inventory = Finished goods inventory/Total inventory

Work-in-process inventory turnover ratio = Cost of manufacture/average work-in-process

Age of Finished Goods inventory = 365/Finished Goods inventory turnover ratio

1.2 INDUSTRY PROFILE

REVOLUTION IN MACHINE PARTS:

In particular, the system should do the following:

SOME OF THE TOP SPARE PARTS MANUFACTURING COMPANIES IN INDIA:

Hindustan Motor limited

1) GABRIEL INDIA LIMITED

2) ASHOK LEYLAND PVT LTD:

Financials Total Income -

Rs. 100099.474 Million (year ending Mar 2014)

Financials Total Income -

Rs. 5602.788713 Million (year ending Mar 2014)

5)HINDUSTAN MOTOR LIMITED

1.3 COMPANY PROFILE

FIGURE 1.3.1: LAYOUT OF INDUSTRY

FIGURE 1.3.2: MANUFACTURING PRODUCTS

FIGURE 1.3.3: SPOKES AND NIPPLES

TABLE 1.3.1: MEASUREMENT OF SPOKES AND NIPPLES

FIGURE 1.3.4: AUTOMOBILE KITS

Steering column assembly Kits

TABLE 1.3.2: MEASUREMENT OF AUTOMOBILE KITS

FIGURE 1.3.5: TOOLS

Heads and Threads International, USA

Anixter Fasteners USA

Endries International, USA

Non Standard Socket Screws Limited, U.K

DC Products Limited, Australia

Brighton Best , USA

FIGURE 1.3.6: DOWEL PINS

5) Cold Extruded Parts

FIGURE1.3.7: COLD EXTRUDED PARTS

Delivery & Logistics

As heat treated and fully finished parts for

TABLE 1.3.4: DETAILS OF COLD EXTRUDED PARTS

FIGURE 1.3.8: SMALL SCREW

WE SUPPLY PRODUCTS TO MARKET LEADERS IN GLOBAL AUTOMOTIVE AND