CONTENTS

TOPICS
1. 2. 3. 4. 5. 6. INTRODUCTION ORGANISATIONAL PROFILE CONCEPTUAL BACKGROUND ANALYSIS AND INTERPRETATION CONCLUSIONS BIBLIOGRAPHY

PAGE NO
1-2 3 - 17 18 -51 52-59 60-6 62

INTRODUCTION

INVENTORY MANAGEMENT
INTRODUCTION:
Every enterprise needs inventory for smooth running of its activities it serves as alike between production and distribution process. There is generally, a time lag between there cognition of need and its fulfillment. The greater the time lag, the higher requirement for inventory. It also provided a cushion for future price fluctuations. In a complex industry like Zuari Cement Industries Limited it studied clearly of how the thing are being performed and what is the real impact of these on industry and how effectively is utilized is interested to be known by researches of its great significance in the research.

NEED OF THE STUDY:

Every industry on average spends 70% on raw materials (inventory). Therefore there is a need to know the raw material cost and also there is a great importance to understand the inventory management system of this industry. The study helps a log to various departments to take steps to control the inventory process.

OBJECTIVE OF THE STUDY:

1) To examine the organization structure of inventory management in the stores of Zuari Cement. 2) To discuss pattern, levels and trends of inventories in Zuari Cements. 3) To understand the various inventory control techniques followed by studied by Zuari Cements. 4) To access the performance of inventory management of the Zuari Cements by selected accounting ratios. 5) To know the inventory control techniques of Zuari Cements.

6)

METHODOLOGY OF THE STUDY:

The study is based on both primary and secondary data. The primary data has been collected through structured questionnaire reflecting inventory management practices of Zuari Cements. The collected through secondary data like annual reports purchase register, storage records of the organization.

LIMITATIONS OF THE STUDY:

1) 2) 3) 4) The study has the following limitations; The study is limited only for a period 5 years i.e., from 1988-99 or 2003-04. The limitations of ratio analysis can be applicable of the study. There may be approximation in calculating ratios and taking the figure from the annual

reports.

HISTORY OF INDIAN CEMENT INDUSTRY

By starting production in 1914 the story of Indian cement is a stage of continuous growth. Cement is derived from the Latin word cement am Egyptian and Romans found the process of manufacturing cement. In England during the first century the hydraulic cement has become more versatile building material. Later on, Portland cement was invented and the invention was usually attributed to Joseph Asp din of England. India is the world 4th largest cement produced after china, Japan and USA the south industries have produced cement for the first time in 1904. The company was setup in Chennai with the installed capacity of 30 tones per day. Since then the cement industry has progressing leaps and 1950-51. The capacity of production was only 3.3 million tones. So for annual production and demand have been growing a pace at roughly 78million tones with an installed capacity of 87 million tones. In the remaining two year of 8th plan an additional capacity of 23 million tones will actually come up. India is will endowed with cement grade limestone (90 billion tones). During the nineties it had a particularly impressive expansion with growth rate of 10percent.

The strength and vitality of Indian cement industry can be gauged by the interest shown and supports give by World Bank. Considering the excellent. Performance of the industry in utilizing the loans and achieving the objectives and targets. The World Bank examining the feasibility of providing a third line of credit for further upgrading the industry in varying areas, which will make it global. With liberalization policies of Indian government. The industry is

posed for a high growth rates in nineties and the installed capacity is expected to cross 100 million tones and production 90 million tones by 2003 AD. The industry has fabulous scope for exporting its product to countries like the USA, UK, Bangladesh Nepal and other several countries. But there are not enough wagons to transport cement for shipment.

CEMENT- the product:

The natural cement is obtained by burning and crushing the stones containing clayey, carbonate of time and some amount of carbonate of magnesia. The natural cement is brown in color and its best variety is known as ROMAN CEMENT. It set very quickly after addition of water. It was in the eighteenth century that the most important advances in the development of cement were which finally led to the invention of Portland cement. In 1756 John Smeation showed that hydraulic lime which can resist of clayey. In 1796. Joseph parker found that module of argillaceous lime stone made excellent hydraulic cement when burned in the usual manner. After burning the Product was reduced to a power. This started the natural cement industry. the action of water can be

obtained not only from hard lime stone but from a lime stone which contain substantial proportion

COMPOSITION OF CEMENT:
The ordinary cement contains two basic ingredients, namely, argillaceous and calcareous. In argillaceous materials the clayey predominates and in calcareous materials the calcium carbonate predominates. A good chemical analysis of ordinary cement along with desired range of ingredients.

Ingredients

Percent

Range

Lime (Cao)

62

62-67

Silica (sio2)

22

17-25

Alumina (A12o3)

3-8

Calcium sulphate (CaSo4)

3-4

Iron Oxide (Fe203)

3-4

Magnesia (MgO)

1-3

Sulphar (S)

1-3

Alkalies

0.2-1

The common variety of artificial cement is known as normal setting cement or ordinary cement. A mason Joseph Aspdn of Leeds of England invented this cement in 1824. he took out a patient for this cement called it PORTLAND CEMENT because it had resemblance in its color after setting to a variety of stand stone, which is found a abundance in Portland England. The manufacture of Portland cement was started in England around 1825 Belgium and Germany started the same 1855. American started the same in 1872 and India started in 1904. The first cement factory installed in Tamilanadu in 1904 by South India limited and then onwards a

number of factories manufacturing cement were started. At present there are more than 150 factories producing different types of cement.

INDUSTRY STRUCTURE AND DEVOLOPMENT:

With capacity of 115 million tones of large cement plant, Indian cement industry is the fourth largest in the world. How ever per capita consumption in our country is still at only 100 kg of develop countries and offers significant potential for growth of cement consumption as well as addition to cement capacity. The recent economic policy announcement by the government in respect of housing, roads, power etc., will increase cement consumption.

OPPORTUNITIES AND THREATS

In view of lower per capita consumption in India, there is a considerable scope for growth in cement consumption and creation of new capacities In coming years. The cement industry does not appear to have adequately exploited cement consumption in rural segment where damaged growth is possible. Landed cost of cement (with import duty) continues to be higher than home market prices but with reduced import duty, increasing imports, may pose a serious threat to the domestic cement industry.

OUT LOOK:
The recent change in the budget 2001-02 relating to fiscal incentives for individual housing and reduction in borrowing cost for this purpose and with the government reaffirmation to accelerate the reform process. Infrastructure development should logically get priority leading to increase in demand of cement in coming years. The addition capacity of cement in the pipeline is limited and therefore the demand and supply situation is expected to be more favorable and cement prices are likely to firm up.

RISK AND CONCERNS:

Slow down of Indian economy or drop in growth rate of agriculture may adversely affect the consumption. The recent increase in railway freight coupled with diesel / petrol price like will increase the cost of production and distribution, as being bulky, cement is freight intensive increase in limestone royalty also adds to the cost of production, which is considerably higher than corresponding costs of many other developing countries. In our country there is need to under take a massive programme of house construction activity into the rural and urban areas. It is impossible to construct a house without cement and steel, in other words, cement is one of the basic construction materials and therefore it is one of the vital elements for the economic development of the nation. India is spite of being the 4th biggest producer of cement in the world has still a very low per capital consumption of cement. Cement companies Cement plant Installed company Total investment (approx) Total man power 51 Nos 99 Nos 64.8 mt Rs.10,000 crore over 1.25 lakh.

Management award of the government of Andhra Pradesh Zuari is also conscious of its social responsibilities. Its rural and community development programmes include of two yearly villages, running and Agricultural Demonstration Farm, a Model Dairy Farm etc., impressed by these activities, FAPCCI

Chose Zuari to confer the Award for Best efforts of an industrial unit in the state to develop rural economy twice, in the year 1994 as well as in 1998. Zuari also has to its credit the National Award (shri. S. R. Rangta Award for social Awareness) for the year 1995-96, for the Best rural Development Efforts made by the company. In the same year Zuari also got the FAPCCI Award for Best workers welfare Zuari got the first prize for mine Environment and pollution control for year 1999 too, for the 3rd year in succession in July, 2001 Zuari annexed the Vana Mithra Award from the government of Andhra Pradesh.

History
Quality conscious and progressive in its out look, ZUARI CEMENT an OHSAS 08001 company and also joined the select brand of ISO 9001-2000 Companies The first unit was installed at Basanth Nagar with a capacity of 2.5 lakh TPA (Tones per annum) incorporating humble supervision, preheated system, during the year 1969. The second unit followed suit with added a capacity of 2 lakh TPA in 1971 The plant was further expanded to 9 lakh by adding 205 lakh tones in August, 1978, 1.13 lakh tones in January, 1987 and 0.87 lakh tones in September, 1981.

POWER
Singareni collories make the supply of coal for this industry and the power was obtained from AP TRASCO. The power demand for the factory is about 21 MW. Zuari has got 2 diesel generator sets of 4 MW each installed in the year 1987. Zuari cement now has a 15 KW capacity plant to facilitate for uninterrupted power supply for manufactured of cement.

ZUARI CEMENT
One among the industrial giants in the country today, serving the nation on the industrial front Zuari industries limited has a chequered d eventful history is dating back to the Twenties when the industrial House and Birla acquired it. With only a textile Mill under it banner in 1924, it grew from strength to strength and spread is its activities to never fields like Rayon, Pulp, transport paper, Spun pipes and refractory types. Oil mill and Refinery Extraction. Looking to the wide gap between demand and supply, of a vital commodity cement, which plays an important role in nation building the Government of India de-licensed the cement

10

industry in the year 1966 with a view to attract private entrepreneurs to augment the cement product Zuari rose to the occasion and decided to set up a few cement plant in the country The first cement plant of Zuari with a capacity of 2.5 lack tones per annum based on dry process, was established in 1969 at Basanth Nagar a back ward area in Karim Nagar District, Andhra Pradesh, and christened in Zuari cement. The second unit followed suit, which added a capacity of 2.00 lakh tones in 1971. The plant was further expanded to 9.00 lack tones in August 1978. 1.14 lakh tones in January, 1981 and 0.87 lakh tones in September, 1981. Zuari cement has outstanding track record of performance and distinguished itself among all the cement factories in India by bagging the coveted National Award for two successive year, i.e., in 1985 and 1936, so also the National Award for mines safety for two year 1985-86 and 1986-87. Zuari also bagged NCBMS (National council for cement and Building materials) National Award for energy conservation for the year 1989.90 Zuari bagged the prestigious Andhra Pradesh state productivit89 also annexed state award for industrial management in 1988-89 and also Best industrial promotion expansion efforts in the estate and Yajamanyza Ratna and baste efforts of an industrial unit in the state to develop rural economy was bagged for it is contribution towards the responsibility of rural and community development programmers of the year 1991.It also bagged the May Day award of the government of Andhra Pradesh for the best management and the pundit Jawaharlal Nehru silver rolling trophy for the industrial productivity efforts in the state of Andhra Pradesh by FAPCCI and also the Indian Gandhi memorial national award for excellence. Best management award of the government of Andhra Pradesh for the year 1993

PERFORMANCE:
The performance of Zuari Cement industry has been outstanding Achieving over cent per cent capacity utilization although despite many odds like power cuts and which most 40% was waste due to wagon shortage etc. The company being a continuous process industry progress with industrial Performance. The company had a glorious track record for the last 27 years in the industry.

TECHNOLOGY:

11

Zuari Cement uses most modern technology and computerized control in the plant. A team of dedicated and well-experienced exports manages the plant. The quality is maintained much above the bureau of Indian Standards. The Raw Materials used for manufacturing cement are: 1 stone. 2 3 4 Bauxite Hematite Gypsum Lime

ENVIRONMENTAL AND SOCIAL OBLIGATIONS

The Environmental Promotion and to keep-up the Ecological balance, this section has undertaken various social welfare programs by adopting ten nearly villages, organizing family welfare camps, surgical camps, children immunization camps, animal health camps, blood donation camps, distribution of fruit bearing trees and seeds,traning for farmers etc.,were arranged.

WELFARE AND RECREATION FACILITIES

For the purpose of Recreation of facility 2 auditoriums were provided for playing indoor games, cultural function and activities like drama, music and dance etc. The industry has provided libraries and reading rooms. About 1000 books are available in the library. All kinds of news paper, magazines are made available. Cantine is provided to cater to the needs to the employees for supply snacks, tea, coffee and meals etc. One English medium and one telugu medium school are provided to meet the educational requirements. The company has provided a dispensary with a qualified medical office and paramedical staff for the benefit of the employees. The employees covered under ESI hospital.

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Competitions in sports and games are conducted every year for august 15 th, Independence Day and January 26th Republic day among the employees.

ELECTRICITY:
The power consumption per ton for cement has come down to 108 units against 113 units last year, due to implementation of various energy saving measures. The performance of captive power plant of this section continues to be satisfactory. Total power generation during the year was 84 million units last year. This captive power plant is playing a major role in keeping power costs with in economic levels. The management has introduced various HRD programs for training and development and has taken various other measures for the betterment of employees efficiency/performance The section has installed adequate air pollution control system and equipment and is ISO 14001 such has environment management system is under implementation.

LIST OF AWARDS BAGGED BY ZUARI CEMENT

Zuari cement distinguished itself among all the cement factories in India bagging a No of awards.

Sl.no.
1 2 3 4 5 6 7

YEAR
1984 1985 1986 1987 1987-88 1988 1988-89

DETAILS
FAPCCI Award for best family planning efforts in states. FAPCCI Award for best Industrial promotion expansion Efforts in the states. Best family planning in the state. National productivity Award. National award for Mines safety. National productivity Award. National award for Mines safety.

13

8 9 10 11 12 13 14 15 16 17 18 19

1989-90 1990-91 1991 1991 1991-92 1993-94 1995 1996 1997 1997-98 1998 1999

Best family planning efforts in states. AP state for the Best Industrial Relation. AP State Yajamanya Ratna And Best management Award. Best family planning Efforts in the State by FAPCCI. NCBMS National Award for Energy performance. Indira Gandhi Memorial national award Excellence in Industry. Best Management award by AP Govt. Mines safety award in AP. Award for Mines Safety in AP. Best Workers Welfare by FAPCCI Company got ISO-9002 certification from bureau of Indian standard. The Best Pay role saving group award among private sector. First prize in the level by International savings Organization, Govt of India. The best efforts in rural development by an industry in the state by the federation of A.P. of commerce & industry (FAPCCI) Mines environment & pollution control-First prize. Award for efforts in environmental protection in the region by the Godavari Pradushana Pariharana.Pariyvana Parieractiona Gavkshamu (GAPPG ).( A voluntary organization for pollution control & environmental protection. First Prize for HORTICULTURE SHOW (for corombola fruit) held at public gardens, Hyderabad being Organized by Director of Horticulture Award for the best environment protection efforts put in by Zuari cement being organized by Godavari Pradushana Pariharana.Pariyvana Parieractiona Gavkshamu (GAPPG ).At Ravindra Bharthi, Hyderabad on the occasion of earth day( On 22-04-2001) The award was presented Honble Minister of

20 21 22

2000-01 2001 2001-02

23

2003

24

2002-03

14

State for urban development Sri Bandaru Dattatreya. 25 26 27 28 2003 July2003 2004 2004-05 Company has got ISO-4001 cetfication environment from burau of Indian standards. Vana Mithra award from the direct collector. Company has got OHSAS-18001 certification from DNV New Delhi. MINES SAFITY WEEK;(24-11-2002) Over all performance Second prize. Operation and maintenance of machines of first prize. Protection equipment vocational and supervision standard 1st prize. Enivronment and pollution control 1st prize. House keeping 2nd Prize. MINES ENVIRONMENT AND MINERAL CONSERVATION WEEK 1) Dump yard management 1st prize 2) A forestation 2nd prize 3) Noise Vibration 2nd prize Air quality and dust suppression. Three first prize in HORTICULTURAL SHOW (for sapota, banana and Caombola fruits)in connection with Shathavahana kalotsavalu. FAPCCI Award for Excellence in industrial productivity on behalf of Zuari cement from the Honble chief minister of Andhra Pradesh,Dr Y.S.Rajashekar reddy.on the 8th June 2007 at Hyderabad. pertaining to

29

2005

30

2006

31

2007

In the mines safety week celebrations, under the auspices of the Director General of mines Safety, Zuari Basantnagar limestone mines won 2 first prizes environment and pollution control and safe drilling and blatting and 14th 2nd prizes for over all performance, productivity, operation and maintenance of machines publicity/propaganda etc. This section also bagged the award for environment protection in the Godavari river belt, sponsored by the Godavari Pradushana Pariharana Paryavarana.

15

PRODUCTION
Last 20 years production of Zuari cements industry, Basanth Nagar. Year 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 Production in Tunes 749797 761581 805921 760708 550254 601453 643307 643663 748258 685596 731177 784555 782383 731049 746474 688305 777092 692424

16

2001-02 2002-03 2005-06 2006-07 2007-08

727447 735012 1046166 1056742 11,99,445

Note: production including internal consumption also cement and clinkerproduction were lower than the previous year mainly because of lower dispatchesof cement due to recession prevailing in cement industry with slow down in demand during the year under review. This section had to curtail production due ton accumulation of large stocks of clinker. However ,sales realization during the second half of the year has improved and it is hoped that prices will stabilize at some reasonable levels.

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DIRECTORS OF ZUARI INDUSTRIES LIMITED

Chairman
1 Syt.B.K.Birla

Directors
2 3 4 5 6 7 8 9 10 11 12 13 Smt. K. G. Maheswari Shri. Pramod Khaitan Shri. B. P. Bajoria Shri. P. K. Chokesy Smt. Neete Mukerji (Nominee of I.C.I.C.I) Shri D. N. Mishra (Nominee of L.I.C) Shri Amitabha Ghosh (Nominee of U.T.I) Shri.P. K. Malik Smt Manjushree Khaitan

Scretary
1 Shri S.K. Parilk

Senior Executives
2 3 4 5 6 Shri K. C. Jain (Manager of the Company) Shri J.D. Poddar Shri O.P. Podar Shri P.K. Goyenka Shri D. Tandon

18

Auditors
1 Messrs Price Waster house

Subsidiary Companies Of Zuari Industries

2 3 4 5 Bharat General & Textile Industries Limited KICM Investment Limited Assam Cotton Mills Limited Softshree Estates Limited

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The investment inventory consisted the most significant part of current assets working capital in most of the undertaking. Thus, it is very essential to have proper control and management inventories. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required and also to minimize investment in inventories.

MEANING AND NATURE OF INVENTOR: RAW MATERIAL:

Raw material from a major input in to the organization. The are required to carry out production activities uninterruptedly. The quantity of raw materials required will be determined by the rate of consumption and the time required for replenishing the supplies. The factors like the availability of raw material and Government regulations etc., too affect the stock of raw materials.

WORK IN PROGRESS:
The work in progress in that stage of stocks which are in between raw material and finished goods. The quantum of work in progress depends upon the taken the in manufacturing process. The quantum of work in progress depends upon the time taken in the manufacturing process. The greater the time taken in manufacturing the more will be the amount of work in progress.

CONSUMABLES:
These are the materials which ae needed to smoother the process of production but they act as catalysts. Consumables may be classified according to their consumption add critically. Generally, consumable stores does not supply problem and firm a small part of production cost. There can be instances where these materials may account for much value than the raw material. The fuel oil they a substantial part of cost.

FINISHED GOODS:

20

These are the goods which are ready for the consumers. The stock of finished goods provides a buffer between production and market, the purpose of maintaining inventory is to ensure proper supply of goods to customers.

SPARES:
The stock policies of spares fifer from industry to industry. Some industries like transport will require more spares than the other concerns. The costly spares parts like engines, maintenance spares etc., are not discarded after use, rather they ae kepy in ready position for father use. All decisions about spares are based on the financial cost of inventory on such spares and the cost that may arise due to their non-availability.

BENEFITS OF HOLDING INVENTORIES

Although holding inventories involves blocking of a firms and the costs of storage and handling, every business enterprises has to be maintain certain level of inventories of facilities un-interrupted production and smooth running of business. In him absence of inventories a firm will have to make purchases as soon as it receives orders. It will mean loss of time and delays in execution of orders which sometimes may cause loss of customers and business. A firm also needs to maintain inventories to reduce ordering cost and avail quantity discounts etc. There are three main purpose of holding inventories. 1. The transaction motive: which facilities continuous production and timely

execution of sales order. 2. The precautionary motive: which necessitates the holding of inventories for

meeting the unpredictable changes in demand and supplies of materials? 3. The speculative motive: which induces to keep inventories for taking advantage

of price fluctuations, saving in re-ordering costs and quantity discounts?

RISK AND COSTS OF HOLDING INVENTORIES:

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The holding of inventories blocking of a firms funds and incurrence of capital and other costs. The various costs and risks involved in holding inventories are; Capital costs; maintaining of inventories results in blocking of the firms financial recourses. The firm has therefore to arrange for additional funds to meet the cost of inventories. The funds may be arranged from own resources or from outsiders. But in both the cased, the firm incurs a cost. In the former case, there is an opportunity cost of investment while in the later case; the firm has to pay interest to the outsiders. 1) materials. The storage of costs include the rental of the go down, insurance charges etc. 2) competition or general depression in the market. 3) requirements, change in customer tastes etc. 4) kept. Risk Risk of Risk of Storage

and handling costs: holding of inventories also involves costs on storage as well as handling of

price decline: there is always a risk of reduction in the prices of inventories by the supplies,

obsolescence: the inventories may become absolute due to improve technology, changes in

determination in quality: the quality of materials may also deteriorate while the inventories are

22

Objectives of Inventory Management :

Definition of inventory management: inventory management is concerned with the determination of optimum level of investment for each components of inventory and the operation of an effective control and review of mechanism. The main objectives of inventory management are operational and financial. The operational objective mean that the materials and spares should be available in sufficient quantity so that work is not disrupted for want of inventory. The financial objectives means that inventory should not remain idle and minimum working capital should be locked in it. The following are the objectives of inventory management 1) any time and the customers demand should also be met. 2) both ever-stocking and under-stocking of inventory. 3) activities. 4) costs. 5) centralizing purchases. 6) minimize loses through deterioration, pilferages, wastages and damages. 7) the stores. To ensure To To To keep To To avoid To ensure

continuous supply of materials spares and finished goods so that production should not suffer at

maintain investment in inventories at the optimum level as required by the operational and sales

material cost under control so that they contribute in educing the cost of production and overall

eliminate duplication in ordering or replenishing stocks. This is possible with the help of

perpetual inventory control so that materials shown in stock ledgers should be actually lying in

23

8)

To ensure

right quality goods at responsible prices. Suitable quality standards will ensure proper quality of stocks. The price analysis, the cost analysis and value-analysis will ensure payment of proper prices. 9) facilities furnishing of data for short-term planning and control of inventory. To

TOOLS

AND

TECHNIQUES

OF

INVENTORY

MANAGEMENT
A proper inventory control not only helps in solving the acute problem of liquidity but also increases profit and cause substantial reduction in the working capital of the concern. The following are the important tools and techniques of inventory management and control. 1.

DETER

MINATION OF STOCK LEVELS:

Carrying of too much and too little of inventory is deter mental to the firm. If the inventory level is too little, the firm will face frequent stock outs involving heavy ordering cost and if the inventory level is too high it will be unnecessary tie up of capital. An efficient inventory management requires that a firm should maintain an optimum level of inventory where inventory costs are the minimum and at the same time there is no stock out which may result in loss or sale or storage of production.

a) UM STOCK LEVEL:

MINIM

It represents the quantity below its stock of any item should not be allowed to fall. Lead time: a purchasing firm requires sometime to process the order and time is also required by the supplying firm to execute the order. The time in processing the order and then executing it is know as lead time

24

RATE OF CONSUMPTION: it is the average consumption of materials in the

factory. The rate of consumption will be decided on the basis of past experience and production plan. Nature of materials: the mature of materials also affect the minimum level. If a material is required only against the special orders of the customer then minimum stock will not be required for such material. Minimum stock level can be calculated with the help of following formula.

Minimum stock level-Re-ordering level - (Normal consumption *Normal re-order period) b) ordering Level
When the quantity of materials reaches at a certain figure the fresh order is sent to get materials again: the order is sent before the materials reach minimum stock level. Re ordering level is fixed between minimum levels.

Re-

c) um level

Maxim

It is the quantity of materials beyond which a firm should not exceeds its stocks. If the quantity exceeds maximum level limit then it will be over-stocking. Overstocking will mean blocking of more working capita,more space for storing the materials, more wastages of materials and more chances of losses from obsolescence.

Maximum stock level-reordering level + reorder quantity (Maximum consumption * Minimum reorder period) d) stock level
It is fixed below minimum stock level. The danger stock level indicates emergencies of stock position and urgency of obtaining fresh supply at any cost.

Danger

25

Danger stock level =average rate of consumption * emergency delivery time e) e stock level:
This stock level indicates the average stock held by the concern.

Averag

2) Determination of safety stocks:

Safety stock is a buffer to meet some unanticipated increase in usages. The demand for materials may fluctuate and delivery of inventory may also be delayed and in such a situation the firm can be face a problem of stock out. In order to protect against the stock out arising out of usage fluctuations, firms usually maintain some margin of safety stocks. Two costs are involved in the determination of this stock that is opportunity cost of stock outs and the carrying costs. If a firm maintains low level of safety frequent stock outs will occur resulting into the larger opportunity costs. On the other hand, the larger quantity of safety stocks involves carrying costs.

3) Economic Order Quantity (EOQ):

The quantity of materials to be ordered at one time is known as economic ordering quantity. The quantity is fixed in such a manner as to minimize the cost of ordering and carrying costs.

Total cost material = Acquisition cost + cost + carrying costs + ordering cost Carrying cost:
It is the cost of holding the materials in the store.

Ordering cost:
It is the cost of placing orders for the purchase of materials.

26

EOQ can be calculated with the help of the following formula. EOQ = 2 co/I Where C=consumption of the material in units during the year O= ordering cost I = carrying cost or interest payment on the capital.

4) Analysis: (Always better control analysis):

A-B-C

Under A-B-C analysis the materials are divided into 3 categories viz.., A, B and C Almost 10% of the items contribute to 70% of value of consumption and this category A category. About 20% of the items contribute about 20% of value of category C covers about 70% of items of materials which contribute only 10% of value of consumption.

5) Analysis: (Vitally Essential Desire)

VED

The VED analysis is used generally for space pats. Spare parts classified as Vital (V), Essential (E), and Desire (D). The vital spares are a must for running the concern smoothly and these must be stored adequately. The E types of spares are also necessary but their stocks may be kept at low figures. The stocking of D type spares may be avoided at times. If the lead time of these spares is less, then stocking of these spares can be avoided

6) ry turnover ratio:

Invento

Inventory turnover ratios are calculated to indicate whether inventories have been used efficiently or not. The inventory turnover ratios also known as stock velocity is normally calculated as sales / average inventory of cost of goods sold/average inventory.

27

Inventory conversion period may also be calculated to find the average time taken foe clearing the stocks. Symbolically.

Cost of good sold Inventory turnover Ratio = ------------------------Average inventory at cost OR Net sales ------------------------Average inventory

Days in a year Inventory conversion period = ------------------------Inventory turnover ratio

7) cation of inventories:

Classifi

The inventories should first be classified can then code number should be assigned for their identification. The identification of short names is useful for inventory management not only for large concerns also for small concerns. Lack of proper classification may also lead to reduction in production. Generally materials are classified accordingly to their nature such as construction materials, consumable stocks, spars; lubricants etc. after classification the material are given code numbers. The coding may be done alphabetically or numerically. The later method is generally used for coding.

28

The class of materials is assigned two digits and then two or three digits are assigned to the categories of items divided into 15 groups. Two numbers will be category of materials in that class. The third distinction is needed for the quality of goods and decimals are used to note this factor.

8) on of inventories-method of valuations:
FIFO method LIFO method Base stock method Weighted average price method

Valuati

CRITERIA FOR JUDGING THE INVENTORY SYSTEM

While the overall objective of the inventory system is to minimize the cost to the firm at the risk level acceptable to management the more proximate criteria for judging the inventory system are: 1 2 3 Comprehensibility Adaptability Timeliness

AREA OF IMPROVEMENT:
Inventory management in India can be improved in various ways. Improvement could be affected through.

Effective computerization: computers should not be used for accounting purpose

but also for improving decision making.

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Review of classification: ABC and FSN classification must be periodically

reviewed.

Improved of coordination: Better coordination among purchase, production,

marketing and finance departments will help in achieving greater efficiency in inventory management.

Development of long term relationship:

Companies should develop long term relationship with vendors. This would help in improving quality and delivery.

Disposal of obsolete / surplus inventories:

Companies for disposing obsolete / surplus inventories must be simplified Adoption of challenging norms: Companies should set benchmarks with global competitors and use ideals like JIT to improve inventory management.

Inventory cost-an overall view Introduction:

In financial parlance, inventory is defined as the sum of the value of the raw material, fuels and lubricants spare parts maintenance consumable, semi-processed materials and finished goods stock at any giving point of time. The operational definition of inventory would be amount of raw material, fuel and lubricants , spare pats and semi-processed material to be stock for the smooth running of the plant/industry.

Need of inventory:
Inventories are maintained basically for the operational smooth less which they can be affected by uncoupling successive stags of production, whereas the monetary value of the inventory serves as a guide to indicate the size of the investment made to achieve this operational convince. The material management department primary function is to provide this operational convenience with a minimum possible investment in inventories. Materials departments is

30

accused of both stock outs as well as large investments in inventories. The solution lies in exercise a selective inventory control and application of inventory control techniques. Inventories build to act as a cushion between supply and demand. It is sufficient to take care of probable delays in supply as well as probable variations in demand. The size of the inventory depends upon the factors such as size of industry internal lead time for purchase, suppliers lead time, vendor relations availability of the materials annual consumption of the materials. Inventory cost can be controlled by applying Modern Techniques viz., ABC analysis, SDE, ESN, HMC, VED etc. these techniques can be used effectively with the help of computerization.

What is meant by inventory cost?

A. value of stores and spares and capital spares. B. transits and under inspection and C. finished products. Stock of Stores in The total

Normally, there are certain problems in maintaining optimum level of inventory. Problems of inventory can be resoled by the cost implications. Costs which are relevant for consideration are discussed in the following lines. Basically there are four costs for consideration in developing and inventory model. 1. The cost of placing a replenishment order. 2. The cost of carrying inventory. 3. The cost of under stocking and 4. The cost of over stocking. The cost of ordering and inventory carrying cost are viewed as the supply side costs and help in the determination of his quantity to be ordered for each replenishment.

31

The under stocking and over stocking costs are viewed as the demand side costs and help in the determination of the amount of variations in demand and the delay in supplies which the inventory should withstand. When ever an order placed for stock replenishment, certain costs are involved. And, for most practical purpose it ca be assumed that the cost for order is constant. The ordering cost may vary depending upon the type of items. For examples raw material like steel against production component like castings in steel plants, support materials in the case if coal industry.

The cost ordering includes:

1. Paper work costs, typing and dispatching an order. 2. Follow up costs the follow up, the telephones, telex and postal bills etc. 3. stores. 4. Any set up cost of machines charged by the suppliers, either directly indicated in Costs involved in receiving of the order, inspection, checking and handling in the

quotations or assessed through quotations if various quantities. 5. The salaries and wages of the purchase department

Cost of inventory carrying:

The cost in measured as of the unit of the item. This measure gives basis for estimating what is actually costs a company to carry stock.

This cost includes:

1. Interest on capital. 2. Insurance and tax charges. 3. Storages costs-labor cost, provision of storage area and facilities like bins racks etc. 4. Transport bills and homely charges. 5. Allowance for deterioration or spoilages. 6. Salaries of stores staff 7. Obsolescence.

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The inventory carrying cost varies and a major portion of this is accounted for by the interest on capital.

Under stocking cost:

This cost is the incurred when an item is out of stock. It includes cost of lost production during the period of stock out and the extra cost per unit which might have to be paid for an emergency purchase.

Over stocking cost:

This cost is the inventory carrying cost (which is calculated per year) for a specific period of time. The time varies in different contexts- it could be the lead time of procurement of entire life time of machine. In the case of one time purchases, over cost would be = purchase price-scrap price.

INVENTORY VALUATION AD COST FLOWS:

What is the cost of inventory?
One can readily visualize the determination of inventory quantities by physical count or by use of perpetual inventory records. When this quantity is determined, it must be multiplied by a unity cost in order to determine the inventory value that is used on financial statement. Trade and quantity discount are to be exclude from unit cost since these discount exist for the purpose of defining the true invoice cost of merchandise. Cash discounts, on the other hand, have been considered as a reward for early payment and as a penalty for late payment. The reward has often been interpreted as a loss rather than as a pat of unit cost. Thus in would not be difficult to find difference of opinion as to whether invoice cost includes or excludes cash discount. When the current replacement cost of material on hand at the close of a year is less than the actual cost, the inventory value is reduced to replacement cost (current market price). Thus the acceptable basis inventory valuation is he lower of cost or markers or more properly the lower of actual cost or replacement cost.

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The determination of inventory values is very important from the point of view of the balances sheet and the income statements since costs not included in the inventory (the balance sheet) are considered to be expensive and are thus included in the income statements.

Valuation of inventories-method of determination:

Although the prime consideration I the valuation of inventories is cost, thee are a number of generally accepted methods of determining the cost of inventories at the close of an accounting period. The most commonly used methods are first in firs out (FIFO) average, and last in fist out (LIFO). The selection of the method for determining cost for inventories valuation is important for its has a direct bearing on the cost of goods sold and consequently on profit. When a method is selected, it must be used consequently and cannot be change year to year in order to secure the most favorable profit for each year.

THE FIFO METHOD (FIRST-IN FIRST-OUT METHOD):

Under this method it is assumed that the materials or goods first received are the first to be issued or sold. Thus, according to this method, the inventory on a particular date is presumed to be composed of the items which were acquired most recently. The value inventory would remain the same even if the perpetual inventory system is followed.

Advantage: The FIFO method has the following advantages.

1. It values stock nearer to current market prices since stock is presumed to be consisting of the most recent purchases. 2. It is based on cost and there fore no unrealized profit enters in the financial accounts of the company. 3. The method is realistic since it takes into account the normal procedure of utilizing or selling those materials or goods which have been longer in stock.

Disadvantages: the method suffers from the following disadvantages.

1. It involves complicated calculations and hence increases the possibility of clerical Eros.

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2. Comparison between jobs, using the same type of material becomes sometimes difficult. A job commenced a few minutes after another job may have to bear an entirely change for materials because the first jobs completely executed the supply of materials of the particulars lot. The FIFO method of valuation of inventories is particularly suitable in the following circumstance. 1. The materials of goods are of perishable nature. 2. The frequency of purchase is not large. 3. There are only moderate fluctuations in the prices of materials or goods purchased. 4. Materials are easily identifiable as belonging to a particular purchase lot.

The LIFO method (last in first out method)

This method is based on the assumption that last item of material or goods purchased are the first to be issued or sold. Thus according to this method, inventory consists of items purchased at the earliest cost.

Advantages: this method has the following advantages.

1) It takes out account the current market conditions while valuing materials issued to different jobs or calculating the cost of goods sold. 2) The method is based on cost and, therefore , no unrealized profit and on-profit or

loss is made on account of use of this method. The method is most suitable for materials which are bulky ad on-perishable type.

Base stock Method:

This method is based on the contention that each enterprise maintenance at all times a minimum quantity of materials or finished goods in its stock. This quantity is termed as base stock. The base stock is always valued at this price and is cried forward as a fixed asset. Ay quantity over and above the base stock is valued in accordance with any other appropriate method. As this method aims at matching current costs to current sales, the LIFO method will be

35

most suitable for valuing stock of material of finished goods other then the base stock. The base stock method has advantage of charging out material/goods at actual cost. Its other merits o demerits will depend on the method which is used for valuing materials other than the base stock.

Weighted average price method:

This method is based on the presumption that once the materials are put into a common bin, they lose their identify. Hence, the inventory consists of no specific batch of goods. The inventory is thus priced o the basis of average priced on the quantity purchased at each price. Weighted average price method is very popular on account of its being based on the total quantity and value of materials purchased besides reducing number of calculations. As a matter of fact the new average price is to be calculated only when a fresh purchase of materials is made in place of calculating it every own then has is the case with FIFO, LIFO method. However in case of these method different prices of materials are charged from production particularly when the frequency of purchase and issues/sales is quite large and the concern is following perceptual inventory system.

Valuation of inventories-impact on the flow of costs:

As should be quite evident, different methods of calculating inventory values will all have their impact on the flow of costs through the balance sheet into the income statements. The dollars that are paid to acquire inventory are always divided between the balance sheet (inventories) and the income statements (cost of goods sold), there is not other place to put them. Thus if the different methods of calculating inventory produce differing inventory values, they will also produce differing cost of goods sold figure, and the differing cost of goods sold will naturally produce differing profit figure. In order show the impact of inventory valuation on cost flows, the preceding exhibits are summarized. Each method produces a different figure for the transfer of raw materials to work in process. The differences appear small, but the only reason for this that the dollar amounts has been kept small to make the illustration workable. With the transfer of materials to work in process, the cost flow or transfer with have its impact on the work in process inventory and the transfer of completed merchandise to finished goods. Ultimately when goods are sold the varying methods of valuing inventories will have their

36

impact on cost of goods sold and these profits. The effects of the cost flows on cost of goods sold and profits can be accentuated further it the differing methods of valuing inventories are applies to work in process and finished goods.

Evaluation of methods-What causes the differences?

The differences in inventory values and flows for each of the method illustrated result from only one factor, that it, changing furshaces prices or unit costs. If purchase prices had remained stable or unchanged, each method would have produced the same inventory value and cost flow. Cost flows and inventory ae exactly the some under stable prices. With a fall in price level, the LIFO method produces the highest cost flow and the lowest inventory. With a falling price level, the LIFO method produces the lowest cost flow and highest inventory. The cost flow under LIFO follows the price level, LIFO produces lager cost flows when prices are rising and smaller cost flows when prices are falling. A final item to consider is that the average method produces results which fall between the extremes of LIFO and FIFO.

Evaluation of methods- can we justify the differences?

The best method of inventory valuation might be specific identification, that is, the units in inventory should be identified with the specific ivoices and thus specific units costs to which they apply. Fortunately, the FIFO method constitute a very useful approximation to the specific identification method if one can reasonably assume that the actual flow of materials is fist-in firstout. This assumption is not unreasonable and thus we have stated the main argument for the FIFO inventory scheme, that is, physical flow of materials would match the flow of costs under the first-in first-out method. When the units in inventory are identical, interchangeable and do not follow any specific pattern of physical flow, the average cost of system would seen to appropriate.

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The primary differences between the FIFO and average methods are entered on the physical flow since both methods could involve identical and interchangeable units. The FIFO methods fit a first-I first-out physical flow. The average methods fits a system which has no specific pattern of physical flow. Finding a situation where thee is no specific pattern of physical flow should be quite difficult because of the fact tha most inventory items are subject to deterioration by instituting a person would attempt to reduce such deterioration and any reasonable person would attempt to reduce such deterioration by instituting a physical flow approximating first-in first-out. The major reason for the use of the average method is something other than the lack of specific physical flow. Ordinary the LIFO method cannot be justified on the basis of the physical flow of materials. Under conditions if changing prices, the advocate of LIFO says that the oly method which matches costs and revenues is the LIFO method. The LIFO method assumes that the latest item is the first item out, and thus the current costs of materials are matched with the other hand, assumes that the first item in is the first item out, and thus the non-current costs of matching currents costs with current revenues is the essence of the argument for the LIFO method. As can be seen by the above comments, there is no one best method of valuing inventories. The method chosen should fir the situation. A physical flow pattern comparable physical flow pattern would force one to consider the average method. Concentration on cost flows, as distinct from physical flows, would force to consider the LIFO method especially where there appears to be a discernible trend towards rising prices for falling prices as has been the case in our economy during recent years.

Inventories valued at standard cost:

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A very useful method of valuing inventories is at standard cost. With a standard cost system is not need for spending a great deal of time and money tracing unit costs perpetual inventory record. PERPETUAL INVENTOTY CARD UNDER A STANADARD COST SYSTEM

Perpetual inventory plant:. .. Location:..

Standard Cost:

Order Quantity Order Point ..

Date

Description On order

Received

Issued

Available On order On hand

As shown above, there is need only for physical quantities since the inventory values is the physical quantity multified by the standard cost. With the cost and value columns disposed off, a perceptual inventory card can include additional data such as quantities on order, quantities reserved, and quantities available. These additional data are very useful FIFO, a LIFO, or an average cost basis. Inventory of obsolescence. Obsolete inventories cannot be used for disposed off at values carried on the books. Frequent reviews should be made of all inventories, and when obsolescence is indicated a request for revaluation should be prepared foe approval by management. The difference between original and obsolete value should be recorded by a change to an operating account. Inventory obsolescence, for inventory and production control purpose. On the basis of a few calculations concerning into inventories on a

39

and a credit to inventory. If the material is scrapped, this will be for the full inventory value or used in area where it will be work less that its original value; the entry would be only for the amount of write down. Some companies carry a salvage inventory and transfer to it materials which may be sold or used at reduced values. Where this is done the entry would be; Dr. Salvage inventory Dr. Inventory obsolescence. Cr. Raw materials inventory or supplies inventory.

Inventories cost in relation Zuari cements shall to classified follows:

Inventory can be classified as capital and revenue certain items through titled as capital in nature. Hence, due care to be take whole drawing the materials. Materials which are to be imported from other countries have to be planned well in advances nearly about 24 months are to initiate the proposals for procurement. Similarly some of the items do not require any lead time some they are available in the local market.

Cement is highly energy intensive industry, the inputs like power and local are the major part of the variable cost since government controls the coal & fuel sector, and increase is rates adversely effects the cement industry. Zuari cement has it own power plant and through which it saves energy consumption. By this the cost since government controls the coal & fuel sector, any increase rates adversely affects the cement industry. Inventory cost of any organization also adversely affects by retaining obsolete/scrap and inventory costs can be educed by management with an advance planning of procurement of materials, periodical reviews of existing spares with references to the fast consumption, ascertaining the information regarding the availability of spares in other areas. Holding of extra inventory will be an additional financial burden to the company due to payment of interest charges on the materials purchased, diminishing value of materials purchased, and diminishing value of materials by keeping them in stores for a long time, handling charges, space rent etc. The inventory of Zuari cement mainly includes limestone, bauxite gypsum, fly ash. Inventory in Zuari cement during 2006-11 are as follows: (unit in mt)

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The values of the above raw materials for the year 2003-08 are as follows: Year 2006-07 2007-08 13853482 27971993 17100574 644473 2007-08 956940 41872 21747 18101 2008-09 157130922 23488745 19699583 2546948 2008-09 968730 431151 23091 33695 2009-10 2010-11

Limestone 13853482 Bauxite 27971993 Gypsum Fly ash Year 17100574 644473 2006-07

243412189 28,59,95,631 38552277 49061196 20223404 2009-10 1239443 64961 38765 159344 5,99,65,669 3,89,40,355 2010-11 28,59,95,631 5,99,65,669 3,89,40,355

Limestone 974490 Bauxite 44256 Gypsum Fly ash 20703 10301

Values of imported and indigenous raw materials, stores, spare parts and component consumed during the year:

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Imported:
Year Raw Material Stores spare 522588043 parts and components 75345209 131624912 42279637 33,96,87,016 2006-07 593002633 2007-08 666190014 2008-09 491339625 2009-10 2010-11

1454235982 1,20,43,390

Indigenous:
Year Raw Material 2006-07 2007-08 2008-09 4117405138 2009-10 7906341716 2010-11 9,57,53,48,408

3995869418 3558875426

Stores spare 981990949 parts and components

189149420

1365664385 3868715827 5,71,76,80,819

CEMENT FACTORY RUNS WITH VARIOUS EQUIPMENT:

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1.TECHNICAL DEPARTMENT
1.MINES 2.MECHANICAL 3.ELECTRICAL 4.CIVIL

1)
1. 2. 3.

COMMERCIAL DEPARTMENT
SRORES PURCHASE ACCOUNTS

To run the plant and maintain equipments departments require spares. For such requirements of spares departments rraise indent and send the indents to purchase departments through stores.

INDENTS:
1) 2) 3) Annual indents for consumable items ( stores items) Regular indents raised by consuming departments. Annual requirements of raw material promop & qc.

ENQUIRIES:
1) Enquires will be sent approved sun contractors.

ORDER PROCESSING FORM:

2) 3) 4) Receiving quotations from sub-contractors. Enter the price detail of enquiry sent in the order processing form. Selection of party on merit basis.

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PURCHASE ORDER:
1) 2) Prepare puchase order on selected party. Send purchase order copies to party, stoes department.

GOODS RECEIPT NOTE:

1) Receiving goods receipt note from stores.

PURCHASE DEPARTMENT:
ACTIVITY RECEIVING INDENTS: FLOW CHART:
1 2 3 4 5 6 Receipt of annual indents for consumable items/stores items form stores department. Checking of indent number an authority of item, delivery time consumption period. In case of any deficiency, send the information to concerned department for clarification. Segregation of indents for attending at C.P.D and Hyderabad office. Sent the Hyderabad indents to Hyderabad office. Enter the indents details in indent register.

URCHASE DEPARTMENT PURCHASE ENQUIRY

Sl.No

Material Code

Department

Quantity

Unit

When required

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ACTIVITY: FLOATING ENQUIES FLOW CHART: Checking indent items and equipment name Taking previous suppliers information form previous supply. If new equipment/item, information to be taken from concerned department or form competitors/journals/yellow pages. Prepare enquiry to approved sub-contractors through enquiry format If emergency requirement, send the enquires through fax/e-mail. Enter the detail of enquires sent in order processing form.

PURCHASE DEPARTMENT ORDER PROCESSING FORM Material Description Size Qty 1 2 3 4 5 6 Remarks code No S.No Indent Ref

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ACTIVITY: PREPARATION OF ORDER PROCESSING FROM FLOW CHART: Receiving quotation against sent. Enter price and other of the quotation received from sub-contractors in the order processing from. Mention the earlier purchase details of indented items against each item in the order processing form if available. Pup up the processing from with enquiry and quotation to head (purchase) Examine orde processing from with decide the sub-contractor to whom purchase order to be placed.

PURCHASE DEPARTMENT

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PURCHASE ODER Sl.No Indent No Item code Description Qty Rate Unit Amount

ACTIVITY: PREPARATION OF ORDER FLOW CHART: Prepare purchase order after financilization of price and other technical terms mentioning the following details.

1. 2. 3. 4. 5. 6.

Material code Indent number Material specification & part number Quantity Rate Payment and other terms &conditions Stipulation of terms of test certificate/ibr/manufactures certificate where applicable. Fill in and attach the purchase order review profama to purchase order. Send the prepaed puchase order to head (purchases) and competent authority for approval. Send the purchase oder to identified approved sun-contractor.

PURCHASE DEPARTMENT
AMENDMENT / CANCELLATION OF ORDER Material Code Material Price/Quantity/as per order Amended price/Quantity

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ACTIVITY: ORDER AMENDMENT, ODER FOLLLOW UP AND INFORM THE SUPPLIER FO THE REJECTIONS / DAMAGES / SHORTAGES: FLOW CHART: 1 2 3 4 5 Issues of amendment in case of modification to purchase order. Review the pending order and follow up the pending order for breakdown requirements. Send regular reminders to suppliers against pending purchase order every month. Receive shortage/ excess/ damages report from stores for the material received. Inform the supplier for the rejections/damages/excess/shortage.

PURCHASE DEPARTMENT ACTIVITY: IMPORTS: FLOW CHART: 1 2 3 4 5 6 Receipt of indents for important items from stores department. Taking previous/ item information to be taken from concerned department or From competitors/ journals / yellow pages. Send enquiry to overseas supplier. Receiving quotations against enquiries sent. Enter price and other terms of the quotation received from oversea supplier in the order

processing form. 7 Examine order processing from and decide the sub-contractor to whom purchase order to

be place.

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Prepare purchase order after financilization of price and other technical terms mentioning

the following details. 1)Material code 2)Indent number 3)Material specification & part number 4)Quantity 5)Rate 6)Payment 5) Insurance and other terms and conditions

Send the prepared purchase order to head purchase and competent authority for approval. Send the purchase order to over as suppliers. Send the purchase order copies to stores and concerned department. Prepare IC documents and submit to bank for onward transmission to overseas supplier. Receive shipping documents from overseas supplier and send name to clearing agents for

collection of the material.

STORES DEPARTMENT ACTIVITY: RECEIPTS AND UNLOADING MATERIAL Receiving of goods through trunk / personnel delivery. Entry of vehicle at gate office. Stamping on dispatch advice with purchase order.

49

Unloading of goods at allocated place or in case of urgency direct at works site. All safety precautions are taken while unloading of material like workers should wear safety shoes, helmets, leather head gloves, noise respirator, nose mask. Training is given to workers for unloading heavy & bulky material by using chain pulley blocks, write rope ceilings, fork lift. After UIL receipt acknowledge given to driver maintaining lorry receipts register.

STORES DEPARTMENT
ACTIVITY: PREPARATION OFRECEIPT AND APPROVAL BOOK FOR GENERAL MATERIAL / D. C ENTER OG BLOCK. EPAIR ANDSTATIONARY MATERIAL MANUALLY IN REGISTER Sorting of delivery challans as bellow: a. General b.Stationary c.Repairs d.Block Checking with P.O and mentioning material code. Party code, indent no. Department name on each & every challans. Creation of D>C entry in system for general materials through system. Preparation of receipts & approval book for general materials. Manual entry of block, stationary, repair materials, Preparation of intimation for block, stationary, repair materials.

STORES DEPARTMENT
ACTIVITY: PHYSICAL VERIFICATION OF GOODS All D.C handed over to store assistant physical verification like measuring, counting and tallying with D.Cs Quantity/ description of materials by the stores assistant. Identification tags to be attached to the verified material. Shortage/ excess / Damages if any found to be noted on challans and inform to section in charge.

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Preparation of shortage / excess/ reports if any sending to parties under copy to purchase / bill sections. STORES DEPARTMENT ACTIVITY: APPROVAL OF MATERIALS AND PREPARATION OF GOODS RECEIPT NOTES: Intimation is being sent to all the concerned departments. Showing material to concern person. Taking approval of the material in receipt & approval book. Preparation general material GRNs through system and stationery/block/repairs GRNs manually. Forwarding true copy to issue section of GRN for general material forwarding true copy to issue section of GRN for general material forwarding true copy of block/repair/ stationary GRN to issue section and copy to purchase department. SORES DEPARTMENT ACTIVITY: REJECTED MATERIALS Rejected materials kept in allocated area of rejected materials. Packing of rejected materials. Preparation of gate passes for rejected materials. Sending back to supplies through our Hyderabad office. Sending consignee copy to party vides Register Letter for booking of Register goods to partys other than.

STORES DEPARTMENT ACTIVITY: EXCISE GATE PASSES Sending duplicate for transport copy of excise invoice from suppliers delivery challans. Mentioning A.B.S 1. No. and named of concerned department. Duplication for transfer copy of excise invoice over to bills section for sending the same to excise department. Corresponding with supplier. If the excise invoice is not found with delivery challans.

51

STORES DEPARTMENT ACTIVITY: RECEIPTS OF MEDICINES Physical verification of medicines as per invoices. Verification of expiry date on medicines. Verification of MRP Sending shortage/ excess note if any found. Taking approval of Medical Officer. Sending rejection notes if any medicines is rejected. Issuing to dispensary. Bills forwarding to Account Department vide for making the payment.

ANALYSIS The investment on raw material over a period of 5 years form 2003 to 2008 preseted in the following table. Investment on Raw materials: Year 2005-2006 2006-2007 Raw material(in lacks) 13386.80 11690.67

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2007-2008 2008-2009 2009-2010 2010-2011

49950.88 42950.66 46087.45 93605.78

Interpretation: 1)Form the above table it can be understood that the inventory of Zuari Cement was recorded at 13,386.80 during the year 2005-06 and it is increased to 93605.78 during the year 2010-11. 2)It shows that there is on increase in the inventory to the more extent of 80218.98 3)The average inventory of Zuari Cement was recorded at Rs.42945.41 4)The highest investment in inventory was recorded I the year 2010-11 2)Trend analysis: Trend analysis technique is applied to know the growth rate in investment of raw material of Zuari Cement over the review period which is shown in the following table.

Trend analysis:

Year 2005-2006 2006-2007 2007-2008

Raw material(in lacks) 13386.80 11690.67 49950.88

Trend(%) 100 87 373

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2008-2009 2009-2010 2010-2011

42950.66 46087.45 93605.78

315 344 699

Interpretation: 1) The investment on investment has increased in the year 2010-11. and the lost yea investment

has declared continuously. The percentage in 2009-10 was 315% as compared to year 2007-08 to 2010-11. 2) The trends in inventories show that inventory have been more in the year 2010-11 and then it has shown a downward trend and again it increased to some extent. 3) The investment I inventories has sown fluctuating trend is initial years and then it raised

699% and again showing fluctuating trend. 3) Inventory Turn over Ratio: This ratio indicates the number of times the stock has been turned over during the period & evaluated the efficiency with which a firm is able to manage its inventory. This ratio is calculated by applying the following formula.

Cost of goods sold Inventory Turn over Ratio = ------------------------------Average inventory Inventory Turn over ratio: Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Cost of goods sold 60150.35 59021.41 121551.71 127533.58 130392.68 211636.92 Avg . inventory 7402.31 37975.30 95065.28 12390.86 13338.01 160035.93 Ratio 8.13 1.55 12.79 10.29 9.78 1.32

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Interpretation: 1) From the above table 2005 it can be observed that (1) inventory turn over ratio is 8.13 during 2005-06 and its gradually decreased to 1.55 during 2006-07. 2) In the year 2006-11 it is clear that the ratio is very less i.e., his stock is not turned in to sales quickly. 3) As compared to all the year the ratio is very less in 2010-11. 4) The average inventory turn over ratio was recorded at 7.3 times during the review period. 4.Inventory Conversion Period: (in corers) Year 2005-2006 2006-2007 2007-2008 2008-2009 Cost of goods Avg . inventory 7402.31 37975.30 95065.28 12390.86 13338.01 160035.93 Ratio 8.13 1.55 12.79 10.29 9.78 1.32 ICP(days) 44 232 28 34 36 272 sold 60150.35 59021.41 121551.71 127533.58

2009-2010 130392.68 2010-2011 211636.92 Interpretation: 1.

Inventory conversion period was 232 days during 2006-07 but it decreased to 204 during

2006-07, which indicates that the stock has been very quickly converted into sales which mean the company is managing the Interpretation: From the above table 2005 it can be observed that (1) inventory turn over ratio is 8.13 during 2003-04 and its gradually decreases to 1.55 during 2006-07. Efficiently. 2. The lowest inventory conversion period was recorded at 28 days in the year 2007-08 and the

highest inventory conversion was recorded at 272 days in the year 2010-11. 2. The

average inventory conversion period was recorded at 107 days during the review period.

5. Percentage of Inventory Turnover Current Assets:

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In order to know the percentage of inventory over current assets the ratio of inventory to current assets is calculated and which is presented in the following table. Inventory turnover current assets ratio = Inventory ------------------- * 100 Current ratio

Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Inventory 13386.80 11690.67 49950.88 42950.66 46087.45 93605.78

Current assets 24172.33 28770.78 53063.75 45598.02 46713.32 86811.49

Ratio(%) 55 40 94 92 92 107

6. Percent of inventory over total current assets & fixed assets: Inventory/current + fixed assets Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Inventory 13386.80 11690.67 49950.88 42950.66 46087.45 93605.78 Current assets 87167.64 87468.76 117985.89 112647.26 112637.07 197330.5 Ratio(%) 15.35 13.36 42.33 37.50 40.91 47.43

Interpretation: 1)During the year 2006-07 the ratio was 15.35% on its declined to 13.36% in the year 2006-07. 2)From the year 2007-08 it is showing fluctuating trend but as compared to above 2 years it is increasing.

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3)The lowest inventory over total assets ratio was recorded at 13.36% during the year 2007-08 and the highest inventory ratio was recorded at 43.43%during the year 2010-11. 3) The average inventory to total assets ratio was recorded at 32.81% during the review period.

7. Percent of Inventory over total current liabilities: In order to know the percentage of inventory over current liabilities the ratio of inventory to current liabilities is calculated and which is presented in the following table. Inventory Percent of inventory over total current liabilities = -------------------------* 100 Current liabilities

7. Percent of Inventory over total current liabilities: In order to know the percentage of inventory over current liabilities the ratio of inventory to current liabilities is calculated and which is presented in the following table. Inventory Percent of inventory over total current liabilities = -------------------------* 100 Current liabilities

Present of inventory over total current liabilities: Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 Inventory 13386.80 11690.67 49950.88 42950.66 46087.45 93605.78 Current assets 7862.11 8042.62 16204.14 14876.45 17728.22 36253.41 Ratio (%) 17 145 308 284 259 258

Interpretation:

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1)

From the above table it can be understand that the 17% of inventory over current liabilities

ration was showing a declining trend for two years 2009-2010. 2) During the year 2010-2011 the ratio was it gradually increased to 145 and there is a net

increase to the extent of 128. 3) 2010. 4) 08. 5) The average inventory to current liabilities ratio was recorded at 211 during the review The highest inventory to current liabilities ratio was recorded at 308 during the year 2007The lowest inventory over total amounts ratio was recorded at 14 during the year 2009-

period. Current Ratio: In order o know the current ratio the percentage of current assets to current liabilities is calculated and which is presented in the following table. Current ratio = Calculation of current ratio: Current assets ---------------------------Current liabilities

Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Current assets 24172.33 28770.78 53063.75 45598.02 49713.32 86811.49

Current liabilities 7862.11 8042.62 16204.14 14876.45 17728.22 36253.41

Ratio (%) 3.07 3.57 3.27 3.06 2.80 2.39

Interpretation:

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1)From the above table it can be interpreted that the 3.07% of current assets over current liabilities ratio i.e., current ratio was showing a decreasing trend from year 2006-07. 2) In the year 2005-06 the ratio was 3.07 and has increased to 3057 in the 2006-07. 3) The lowest current ratio was recorded at 2008-09 which is 2.39% and the highest ratio was recorded at 3.57 during the year 2006-07. 4) The average current ratio was recoded at 3.02 during the review period.

9. Quick ratio: The quick ratio is the relationship between quick to current liabilities quick assets is more rigorous test of liability position of a firm it is computed by applying the following formula. Quick ratio= current assets-current liability Where quick assets = current assets-inventory

Year 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Quick assets 10785 17080 3112 3347 3625 3207

Current liabilities 7862.11 8042.62 16204.14 14876.45 17728.22 36253.41

Ratio(%) 1.37 2.12 0.02 0.22 0.20 0.08

Interpretation:

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1)From the above table it can be understand as that the % of quick assets to current liabilities i.e., the quick ratio 0.002 in 2008-09 and from that year it is showing increasing trend. 2) The highest quick ratio was recorded at 2.12 during the year 2006-07 and the lowest quick ratio was recorded at 0.002 during the year 2007-08. 3) The average quick ratio was recorded at 0.66 during the review period.

CONCLUSION:
1) Over all the inventory of Zuari Cement is up to the mark. 2) The production of clinke4r and cement during 2004-05 was 7,47,436 and 7,77,092 respectively which is higher as compared to 2008-09 which is 6,87,373 and 7,27,447 respectively. 3) Investment on aw material are 93605.78 lakh which very high as compared to 2005-06 which is only 460870.45 lakh. 4) The inventory turn over ratio shows that the stock has been converted into sales is only 1.32 times. 5) In the year 2006-07 the stock was cleared with in 28 days where as it took 232 days in the year 2003-04 which took more days for clearing stock. 6) Year 2005-06 is not showing sample profits. This is because of cement prices have been continuously under pressure due to persistent mismatch between supply and demand. 7) The quantity of limestone in the year 2008-09 is 9,53,940 and its value is 13,85,34,812 but where as in the year 2007-08 the quantity was 9,74,490 and the value is 12,21,61,492.

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8) In this type process, it requires more number of employees and supplier should also wait for until the accounts are matched. 9) This process takes an input, adds value to it and provides an out put to an internal or external customer.

SUGGESTION:
1)Though the production is higher is the year 2007-08 and the sales were very high i.e., as per inventory conversion period it took 272 days. This shows that there is demand for cement and the funds unnecessarily tied up. So, proper demand forecasting should be done and according to that it may be manufactured. 2)The investment on raw material should be made as per the requirement. Unnecessary investment may block up the funds. 3)Neither too high nor too may inventory turnover ratios reduce profit and liquidity positions of the industry. So, proper balance should be made to increase profit and to ensure liquidity. 4)The raw material should be acquired from the right source at right quality and at right cost. 5)The process that was being used by Zuari Cement with the purchasing department should undergo changes, so that, it seeks enhance the celerity of the delivery of a product without compromising its quality by improving the utilization of material, labour and equipment. 6) To reduce the work, the purchasing department may enter the purchasing order into a database and did not send a copy to any one. When the merchandise arrived, the receiving clerk would enter the database and determine whether the order agreed with the electronic purchase order.

If it did, payment was authorized to be made at the appropriate time. If it didnt the order would be retuned until if it is agreed by the Zuari Cement. If it institutes invoice less purchasing where the supplier did not need to send and invoice to be paid.

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This generally simplifies the process for all concerned. As a result it would able to reduce the work of its accounts payable department.

BIBLIOGRAPHY

1) FINANCIAL MANAGEMENT ----By I.M Pandey

2) FINANCIAL MANAGEMENT ---- By Prasanna Chandra 3) TOTAL QUALITY MANAGEMENT ----By k. Shridhara Bai 4) COPANYS STORES MANUAL

5) COMPANYS ANNUAL REPORTS

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MEANS OF COMMUNICATION:
i) FINANCIAL RESULTS & ANNUAL PEPORTS ETC:

The Quarterly Unaudited Financial Results and the Annual Audited Financial Results as taken on recor

record and approved respectively by the Board of Directors of the Company are published in leading

newpaprs,i.e., The Business Standard/Financial Express ( English -all India edition ).Dainik statesmen (Ben

edition )and are also sent immediately to all the Stock Exchanges with the shares of the company are list

results are also posted on Company's web site WWW.kesocrop.com. The official news release and oth

information, if any , are displayed on the aforesaid website of the Company. Whenever any presentation r

the compny's working to analysts/bankers etc., Is made, the same is also displayed on the company's webs when such presented (s) take (s) place. The Quaterly Unnaudited Financial Results and the Annual Finacial Results alongwith the report on segment Revenue,Resulta and Capital Employeed,Balance sheet, Profit and loss account, Directors report, Auditors report, Cashflow staement ,Corporate Govermance Report,Report on maangment Discussion and analysis and Sahre holding Pattern etc., can also be retrived by investors from the Electronic Data Information Fiiling and System set up by the National Informatics Center in association with SEBI. The site can be accessed at http://sebiedifar.nic.in for information required. ii) MANGMENT DISCUSSION AND ANALYSIS REPORT (MD & AR ): The managment Discussion and analysis Report as reviewed by Audit Commitee set out in Annexure"B"forms pat of the Annual Report.

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GENARAL SHARE HOLDER INFORMATION:

i) NEXT ANNUAL GENERAL MEETING:

Date Thursday,26-06-2008 48,Sahkepeare Sarani,Kolkata-700017. ii) FINACIAL YEAR: Compny covers 1st April to 31st March. iii) DATE OF BOOK CLOSURE: 2008 (both days inclusive) iv) DIVIDEND PAYMENT DATE:

Time 11.00a.m

Venue kaka-kunj",

The financial year of the

11th June,2008 to 26th June

On or after 7th July, 2008

v) INFORMATION PERTAINNING TO THE STOCK EXCHANGES: a. Listing on Stock Exchanges The Calcutta Stock Exchange Ltd., Phiroze Jeejeebhoy TowersDalal Street, Mumbai-400 001

National Stock Exchanges of India Ltd, Exchanges Plaza,Bandra-kurla Complex,

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Bandra (E),Mumbai-400 051 Societe la Bourse de Luxembourg Societe Anoyme/R.C.B;B.P.165,L-2011 Luxembourg b.Stock Code for: Bombay Stock Exchange national stock exchange Calcutta Stock Exchange Luxembourg Stock Exchange 502937 ZUARIIND 10000020 492532205

The annual listing of these have been paid by the Company for the year 2007-2008. c.ISIN NO>for the Ordinary Shares in Demat From: INE087A01019 d.Deposited Connectivity:NSDL and CDSL.

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