A STUDY ON INVENTORY MANAGEMENT IN CHETTINAD CEMENT

CORPORATION LIMITED, KARUR

CHAPTER-I

INRODUCTION

1.1 ABOUT THE STUDY

Inventory management is primarily about specifying the size and placement of

stocked goods. Inventory management is recurred at different locations within a facility or
within multiple locations of a supply or network to protect the regular and planned course of
production against the random disturbance of running out of materials or goods. The scope of
Inventory management also concerns the fine lines between replenishment lead time, carrying
costs of inventory, asset management, Inventory forecasting, physical inventory, available
physical space for Inventory, quality management, returns and defective goods and demand
and forecasting.

Types of inventory

Normally the inventory has divided into two types. These,

1. Merchandising inventory,

2. Manufacturing inventory.

The manufacturing inventory has been subdivided into three types. These,

1. Raw materials,

2. Work in process,

3. Finished goods.

Raw materials: Everything the crafter buys to make the product is classified as raw
materials. That includes leather, dyes, snaps and grommets. The raw material
inventory only includes items that have not yet been put into the production process.
 Work in process: This includes all the leather raw materials that are in various stages
of development. For the leather crafting business, it would include leather pieces cut
and in the process of being sewn together and the leather belts and purse etc. that are
partially constructed.

In addition to the raw materials, the work in process inventory includes the cost of the
labor directly doing the work and manufacturing overhead. Manufacturing overhead
is a catchall phrase for any other expenses the leather crafting business has that
indirectly relate to making the products. A good example is depreciation of leather
making fixed assets.

Finished goods: When the leather items are completely ready to sell at craft shows or
other venues, they are finished goods. The finished goods inventory also consists of
the cost of raw materials, labor and manufacturing overhead, now for the entire
product.

1.2 SCOPE OF THE STUDY

The study helps the management to improve its profitability through a reduction in
non- moving inventory.

It develops the policies for both continuous review of inventory management system.

The study helps to show the level of the inventory in the organization. The company
will make the proper inventory methods from the suggestions of the study.

1.3 STATEMENT OF THE PROBLEM

There are a number of problems that can cause havoc with inventory management.
Some happen more frequently than others. Here are some of the more common problems
with inventory systems.

Unqualified employees in charge of inventory, Using a measure of performance for

their business that is too narrow, Not identifying shortages ahead of time, Bottlenecks and
weak points can interfere with on-time product delivery, Too much distressed stock in
inventory, Excessive inventory in stock and unable to move it quickly enough, Computer
assessment of inventory items for sale is inaccurate, Computer inventory systems are too
complicated, Items in-stock gets misplaced, Not keeping up with the rising price of raw
materials.

1.4 OBJECTIVES OF THE STUDY

To analyze the inventory those are sufficient to perform production and sales
activities smoothly.

To study the inventory management followed in chettinad cement.

To identify the existing inventory management and its effectiveness.

To calculate analysis for their performance in inventory management.

1.5 RESEARCH METHODOLOGY

Research Design

The Descriptive type of research has been applied in the study . This research the
researcher has no control over the variables. Only reports what has happened or what is
happening. The research can only discover causes but cannot control the variables.

Data collection

This study purely based on secondary sources of information. The necessary data
calculated from annual report, books, journals and websites.

Period of study

This study covers a period of five years from 2006 2007 to 2010 2011. The
accounting year commenced from April and ending with March of the next year.

Area of study

This study was conducted in Chettinad cement corporation limited, Puliyur, Karur
District
Tools for analysis

The following tools have been applied in the present study.

They are listed below

Ration analysis (inventory) and

EOQ analysis

Ratio Analysis (Inventory)

The percentage of a mutual fund or other investment vehicle's holdings that have
been "turned over" or replaced with other holdings in a given year. The type of mutual fund,
its investment objective and/or the portfolio manager's investing style will play an important
role in determining its turnover ratio.

Economic Order Quantity (EOQ)

Economic order quantity is that level of inventory that minimizes the total of
inventory holding cost and ordering cost. The framework used to determine this order
quantity is also known as Wilson EOQ Model. The model was developed by F. W. Harris in
1913.The most economical quantity of a product that should be purchased at one time. The
EOQ is based on all associated costs for ordering and maintaining the product. EOQ refers to
the size of the order which gives maximum economy in punches of materials.

EOQ=
2 Ao
C1
Where
A= Annual usage unit
O=Ordering cost
C 1=Carriying cost