INTRODUCTION Paper is one of the discoveries that turned the history of the world around.

It is difficult to imagine modern life without paper. Paper plays a vital rolling the cultural development of human beings. The ancient Egyptian used papyrus sheet made from the steam tissue of the plant CYPERUS. The Chinese are the first users of paper made from the plant fibers. The use of paper and paperboards is intimately linked with the cultural and economic development of the country. The demand for paper depends on a number of factors such as population, national income, growth of literacy, spread of education, standard of education, standard of living, and industrial production. The paper industry is facing shortage of raw materials, high cost of raw material and, chemicals, unsatisfactory power and coal supply and non-availability of skilled manpower. Paper industry produces a number of varieties of paper and paperboards to the number of end users, which includes government, education, newspaper, magazines etc. It is estimated that by 2001-2002 the demand for industrial paper is grown by 75% as compared to 6% of cultural paper. The per-capita consumption of paper in India is at an extremely low level of about 3 kgs at present. This is one of the lowest in Asia where the average annual consumption are around 18 kgs perhead. It is assumed that the consumption of paper will move up to5 kgsBy 2020 A.D. In view of this tremendous achievement a study of ratio analysis of Delta paper Mills limited, vendra. Is undertaken. The study is mainly based in secondary data that is from the annual reports of the company during the period from 2004-2005 to 2008-2009. Different ratios such have liquidity; solvency, activity and profitability ratios are calculated to point out the strengths and weaknesses of the company.

NEED FOR THE STUDY:

The financial process is the analysis of identifying the financial strengths and weaknesses of the company by establishing relationship between items of the financial statements. The financial statements in their present from are of limited value forward planning. They do not provide the management with all the information the figures whatever necessary for the future estimation.

The ratio analysis helped to overcome the disadvantages of financial statements. Thus ratio analysis helps the management of Delta Paper Mills limited, vendra to take rational decisions in view of the objectives of the company.

The present study helps the company to know the drawbacks of the company resulting in losses. Ratio analysis helps in comparing the present performance of the firm with past performances and industry standards. Thus it enables the company to take corrective action to improve the performances of the company.

OBJECTIVES OF THE STUDY

The main objective of the present study is to analysis the Inventory Management in Working Capital Management with emphasis on Delta Paper Mills Limited. 1. To examine the importance of paper industry in India. 2. To review the Management of Delta Paper Mills Limited. 3. To review the theoretical background of Inventory

Management. 4. To examine the Organizational and managerial aspects in inventory Management at DPM.
5. To analyse the changes in inventory in DPM.

6. To evaluate the performance of the financial and inventory Management in DPM. 7. Finally to make appropriate suggestions for policy makers to ensure Effective inventory control techniques Working Capital Management.

METHODOLOGY OF THE STUDY As the main emphasis of the study is on the inventory management at DPM Limited, VENDRA. When the collection of data from two major sources. I.PRIMARY DATA:First hand information collected through The study was gathered from discussion of various officials, several department heads in the organization.Majority of the Employees have shared their experiences. II.SECONDARY DATA In this data collecting second hand information through Secondary data based material i.e., Collected from published Annual and General reports of the Organization. Primary data was supplemented by the secondary date review.

FRAMEWORK OF THE STUDY The present study is divided into six chapters as described bellow: 1 First chapter consists of Approach to the study, Scope of the study, Objectives of the study, Methodology and Limitationsof the study. 2 Second chapter provides brief overview of the paper extraction in India. 3 Third chapter provides brief overview of the company. 4 Fourth chapter describes about the inventory management- its Components, Techniques of inventory management, importance of inventory management in working capital. 5 Fifth chapter deals with the Data Analysis and Data Interpretation. 6 Last chapter deals with conclusions, suggestions and bibliography..

LIMITATIONS OF THE STUDY The study of inventory management of the company had a few constraints 1 The study was conducted with the data available and the analysis was accordingly. 2 The analysis is made on the basis of secondary data time is the main constraints in completing the study. 3 To the extent that the executives could spare their time, they gave me the information by way of small discussion for the purpose of data collection. 4 Time is the main constraint in completing the study with in the stipulated period allowed. It become difficult to analyze and study the performance of Delta Paper Mills Limited. 5 The availability of data pertaining to 5 years is one of the constraints. So, I had to manage under these limitations which has such did not pose me any problem.

PAPER AND ITS GROWING IMPORTANCE Paper places a vital role in the cultural development of human beings. Increase in literacy growing trend of higher ratios of professional and technical jobs in the work force and the growing economic activities are bound to raise the consumption of paper. The ancient Egyptians used papyrus sheets made from the steam tissue of the plant Cyprus papyrus. The oldest written sheet of papyrus dates back nearly five thousand years. However, the chines work accepted as the first users of paper made from plant fibers. Upto year 150 AD The product paper was not well known and till things were written on tree leaves and bricks and clothes etc. The word paper comes its orison to papyrus. he English word paper itself cones to us from the same papyrus. Arobs learned the art of making paper through the prisoners taken from china in 751 AD. The first ever paper machine was the reseat of experiments then by JOHN GAMBLE HENDRY, Seal four Driver, Dryan Donkin and Hall. Their first machine World at Hertfort shore in 1803 and JOHN DIKENSON pattered a cylinder machine in 1809, which showed better results. the modern paper making in industry is one of the my raid gifts on the industrial revolution of Europe. The modern paper manufactured from a mixer of various fibers such as wood, Bamboorag, Linen, which are mixed which large quantity water. The mixture is then treated with sizing agent and other chemicals to give the desired properties to paper. And finally it emerges from the machine as a beautiful continuous sheet of paper, which is wound into a large roll at for end of the machine.
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GROWTH OF PAPER INDUSTRY IN INDIA: Earliest efforts of developing Indian paper industry where once by Willion Coney in the beginning of 19th century William by started a paper mill in 1812 with the helped of local Kagazis the mill was located at SORAMPUR of west Bengal in 1820 a engine was introduced for operating beaters in 1867 four driving machine was transferred to the Royal paper mills, Calcutta. This mill capacity was 5000 per annum. The upper India paper mill was the third in the series of modern paper mills was started in lcuknow in 1879 and oldest of existing mills During the period 1892-94 another unit by name imperial paper mills was also setup in Poona. At the beginning of 20th century Indias production of paper estimated at 19000 tones. By 1913 as may as seven mills had started production, manufacturing 24000 to 25000 tones paper. The raw material was sabaigrass a appear mill entirely to work bamboo was started in India at 1918. This is Indian paper pulp industry. Paper production stagnated and 25000 tones per annum till about 1923. It is only gradually picked up and reached a level of about 40000 tones per year by 1931.The improvement in production level were further speed up towards 1935 with the setting up of four new mills viz., Rotes industries limited at Dalminanagar, orient paper mills at Bhagranagon, mysore paper mills limited at Bhadrawathi and star paper mills at nagpur. However paper production increased from about 60000 tones in 1938 to over 100000 tones by 1945. The Indian paper industry produces a number of papers & paperboards. This include glassine papers, bond papers, carbon papers, art papers, art card papers and coated boards, triplex board, straw boards, paper boards, airline ticket papers etc.
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CONSUMPTION OF PAPER IN INDIA: The per capita consumption of paper in India is at an abnormally low level of about 3kg at 1997. This is one o the lowest in Asia, where the average annual consumption is around 18kg per head on the consumption of paper move up to 5kg by 2009 AD The planing commission has estimated that the demand for paper will go up to above 32 lakh tones by the year 2009 assuming the capacity utilization of 75% this will call for an installed capacity of 42.5 lakh tones. The following table indicates the consumption of paper in India and also the paper capita consumption of various categories of paper of pulp. Year Total paper Board 2006 2007 2008 2009 1.672 1.748 2.184 2.720 Cultural paper 0.877 0.912 1.103 1.334 Wraping packing Paper 0.465 0.493 0.662 0.887 Paper Boards 0.288 0.303 0.339 0.449 Specially papers 0.372 0.376 0.397 0.430

State wise & capacity wise &installed capacity of paper mills in India Tones per annum State Upto 5000 5001 to 1000 Ap Assam Bihar Gujarat Haryana HP J&K Karnataka MP Maharastra kerala Nagaland Orisa Pondicherry Punjab Rajastan Tamilnadu UP WB Total 9 3 23 8 4 1 5 10 26 2 2 11 7 9 17 3 140 0 3 19 3 4 7 18 1 13 6 29 9 112 10001 20001 30001 Total Installed to to to no. of Units 22 414550 2 20500 4 25000 68 935800 15 149140 6 53200 1 5000 14 345000 21 290650 71 1034050 5 215800 1 33000 9 270850 1 9000 37 375162 7 12195 31 639250 73 870780 18 222600 406 5921527 capacity 20000 30000 Above 6 18 3 1 2 14 3 9 10 18 4 88 1 1 4 1 2 7 1 2 4 2 8 1 32 4 1 4 1 3 2 8 3 2 4 3 1 34

PAPER INDUSTRY IN ANDHRAPRADESH In Andhrapradesh there are 14 paper millsAndhrapradesh occupies 6th position in the countries total paper production. AP paper mills at Rajahmundry is first position in the capacity of paper production. Its installed capacity is 92500 tones. Second position goes to Siripur paper mills at Kagaznagar in capacity 71000 tones, Third comes to ITC, Bhadrachalam paper &
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paperboard capacity is of 65500 tones. And other units charminar mills, costal paper mills at Kajima, Kolluru paper mills at Bommuluru, Telangana paper mills at Khammam Delta paper mills occupies 8th position in the capacity of 1800

Paper production in Andhrapradesh In 1000 lakh Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Production 79.00 113.50 284.70 434.12 623.40

NEWS PRINT: AN OVER VIEW Notably, all the news print units are in the public sector as the return on investment is not attractive enough for the private sector to venture into it. The countries first news print factory at NEPA nagar with a capacity of 30000 tones per annum began production in 1956. After a gap of 26 years two more units. Mysore paper mills in Karnataka & Hindustan News print mills in Kerala with installs capacities of 75000 & 80000 tones per annum respectively, started of operations in 1982 .
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Inspire of the Steadily growing demand which swelled at a compound rate of 9.46 percent in the last decade the import of news print which was 3.18 lakh tones in 1980-86. This is will be illustrated in table. News print demand up to 2000 in lakh tones.

Tones Year 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Demand 7.02 7.45 7.91 8.39 8.90 8.95 8.99 9.03 9.45 9.89

Shows newsprint demand projections of the development council for paper, pulp and Allied industries. The TNPL depend on conventional raw material like Eucalyptus and one consequently facing either scarcity of raw materials like transportation cost. TNPL on the other hand depends on removable inputs like baggage and can rightly claim to be the pride of Indian news print industry.

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PROFILE OF DELTA PAPER MILLS LTD COMPANY PROFILE. The Delta Paper Mills limited was established as a public Limited Company on 23rd May 1975. Late Sri Bh.Kumar Raju and Andhra Pradesh Industrial Development Corporation (APIDC) on 18th September 1975 promoted the Delta Paper Mills Limited; the company started its commercial production on 7th April 1977. The plant is located at Vendra, a village of Palakoderu Mandal, and W.G.Dt. in Andhra Pradesh. The following reasons will explain for selecting the location: For bringing reputation to the native place of the founder. For creating employment to the rural youth. The availability of raw material in surrounding areas, water facility, drainage for disposal of effluents and its proximity to the broad gage Railway Line connecting Chennal and Kolkata. The companies main activity is to produce all varieties writing and printing paper. It is mainly an agro based industry. Its main raw material is paddy straw. In 1976 ICIC along with IDBI, IFCI, LIC and UTI assisted the company for selling up the product Delta Paper Mills Limited commissioned the paper machine for commercial production from July 1978 and pulp mill by November 1973. It earned its profits in the second and third year of operations. Around 2000 families are getting their lively hood from this industry besides; all farmers in and around the Vendra village are benefited from selling their paddy straw to the company.

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Objective of the company: v To carry on the business of manufacturing and dealing in all kinds and classes of paper.

v To manufacture and deal in all material and substances used in the manufactured production or treatment of all kinds and classes of paper. v To buy, sell, import, export, process chemically or otherwise treat and to workout for special purpose of all kinds and classes of paper. v To plant, cultivate, produce, raise, manufacture, purchase, sell, export or otherwise handle or deal in grass timbered, bamboo, straw or other forest products. v To carry on the business as stationers, printers, publishers, lithographers, office printer stereo types photographic printers etc.,

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Types of the products of the company:

1. Cream wove: This types of paper is used for typing notebooks, office books and for Government etc., 2. Azur laid: This type of paper is used for making charts, cards etc., 3. Azurwove: This type of paper is used for typing office work, used usually for rough work. 4. Duplicating Paper: This type of paper is used for stencil work cyclostyling etc., it is used very much for rough works, colour paper, vouchers etc., 5. Colour wove: This type of paper is used for packing bundles, packing and covers manufacturing. 6. Sack Kraft: This type of paper is used for packing bundles, packing, and covers manufacturing. 7. Delta hasthi: Brand name of the books this type of paper is used for notebooks.

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Analysis and Location of the company: The company is situated at Vendra, 8 km from Bhimavaram, West Godavari that come under the well known Krishna Godavari Delta known as rice bowl of India. The companys main raw material is paddy straw, which is available in huge quantities in this area. The other raw materials such as gunny waste, cotton linters and waste paper are procured easily from Rajahmundry, Visakhapatnam, Eluru, Vijayawada and Hyderabad in Andhra Pradesh.

Capacity: In 1978 the initial production capacity was 30 tones per day. In 1986, Delta Paper Mills Limited under taken an expansion project to double its capacity to 60 tones per day. Now the capacity of the plant is 115 tones per day.

Nature of Activity: Delta Paper Mills Limited specialties in making paper alone, and produce primarily only three types of paper. 1. 2. 3. Printing Writing Craft Paper.

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Raw Material: The following types of raw materials are being used in manufacturing the paper in this company are

1 Paddy straw 2 Waste paper 3 Cotton linters 4 Regpulp 5 Wood pulp 6 Bagasse & Chikusa 7 Gunny & Jute waste 8 Bleached pulp 9 Hosiery cutting pulp and others.

Coal: Coal, which is essential to boil pulp solution, is obtained from sniggering calmness, which are in AP tiles. Water Facility: The Delta Paper Mills plant require 30 million gallons of water per day, and that up to 60 million after expansion of the plant. The water supply for the plant is obtained from Godavari canal system. The company was permitted to dispose of its effluents into Godavari river drains, which flows, by the side of the plant.

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Electricity facility: The Andhra Pradesh State Electricity board (APSEB) agree to supply, the required power to the plant and 2500KW, line was laid down from nidadavole electric sub station. Gas and fuel: Delta Paper Mills Limited is the first paper mill in south India to utilize the nature gases as fuel, which is supplied by ONGC. Transportation: The factory has both rail and road transportation facility. Apart from these navigable canal system aids economical transport of paddy straw and other raw materials from all sides. From the above it is the correct place to install a paper mill, which is mainly based on agricultural raw material. The delta paper mills limited enterprise is broadly dividend into two parts. 1. Mills. 2. Administration.

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Mills Part dividend into ten parts: 1) Production. 2) Electrical 3) Mechanical 4) Utilities 5) Stores 6) Quantity 7) Personnel 8) Co-ordinate 10) Finishing house and paper godown.

The administration parts is dividend into four divisions : 1. 2. 3. 4. Administration Accounts Marketing Purchasing

The factory part is kept under the control of a DEPUTY MANAGER for works; to his absence it is under the control of the in charge President of the factory (or) the factory Chief Executive. The administration part is kept under the control of the Executive (Administration), in case of his absence it is under the control of Managing Director.

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Administration of the Organization: The chief Executive who is assisted by eight Heads of department. 1. General manager (Commercial & Administration) 2. Senior Manager (Marketing & Purchases) 3. Manager (Finance & Costing) 4. Manager (Stores) 5. Deputy Manager (Marketing) 6. Deputy Manager (Finance) 7. Deputy Support (Paper Go down)

FINANCIAL POSITION OF THE DPM LTD DPM Ltd. has an authorized equity share capital of RS 4 Crores, 11% of cumulative preference shares of Rs.0.60 lakhs. The stand up share capital remained unchanged to find the financial position of the DPM various financial ratios is calculated. The financial figures are taken from the annual reports of the company

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PROJECT AT GLANCE: SL.NO. 1 2 3 4 PARTICULARS Project At Cost Rs. in lakhs Share capital (Rs in lakhs) Annual Turnover (Rs.in lakhs) Annual Production (Rs.in Metric 5 tones) Employment : Direct Indirect (Dailywages) Contribution to Exchange per Annum (Rs.in 7 8 lakhs) Date of Commencing Main Raw materials CAPACITY UTILIZATION OF DPM: YEAR TOTAL CAPACITY (MT) PRODUCTION (MT) % CAPACITY UTILIZED June 78 Paddy Straw upto 70 % March 88 BEFORE 1986 489.50 160 900 9000 AFTER 2007 2,692.18 330.70 3,858.51 18000

550 1000 35

870 1400 967

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1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

9000 9000 9000 18000 18000 18000 18000 18000 18000 18000 18000 18000 18000 18000 18000

10312 6244 6475 12108 15489 16450 18325 20530 22830 17840 20000 17850 21454 20451 24576

114.6 69.4 36.0 67.3 86.1 96.2 101.8 114.1 126.8 99.1 111.1 99.1 119.1 113.7 136.6

ORGANISATIONAL STRUCTURE OF DPM Chairman

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Managing Director

Commercial

Production

Administrative

Supervisors

Organisational structure It consists of chairman, managing Director. It consistsof departmentalization like commercial department,productiondepartment, administrative department in DELTA PAPER MILLS LTD.

Board of Directors Dr.G.Ganga Raju Mr.G.V.K. Rama raju Mr.G.Rama Raju Mr. G.V.Narasimha Raju Chairman Managing Director Executive Director Director
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Mrs. Bh.K.K.Kasturi Mr.Ananda Varma Mr.M.Subha Raju Mr. A.Narasimha Rao

Director Director Director Director

Departmentalization: Delta Paper Mills ltd. departments are 4 types these parts are a) Administration department b) Accounts department c) Marketing department d) Purchasing department

The factory part is kept under the control of a deputy manager for works to his absence it is under the control of in charge president of the factory (or) the factory chief executive in case of his obscene it is under the control of managing director. The chief executive who is aceisted by six heads of department 1. General manager (Commercial & Administration) 2. Senior Manager (Marketing & Purchases) 3. Manager (Finance & Costing) 4. Deputy Manager (Marketing) 5. Deputy Manager (Finance) 6. Deputy Support (Paper Go down)

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STATEMENT SHOWING THE PERSONNEL DETAILS OF THE DELTA PAPER MILLS LIMITED No. of workers Unskilled Semiskilled Skilled No. Of supervisors: Staff Assistants Sr.Assistants Supervisors/Shift incharges Officers Assistant Officers Officers Managers 23 17 90 9 15 131 246 155

Assistant Managers/Deputy Managers 27 Managers Sr.Managers Management Executive General Managers Chief Executive Managing Director 9 1 1 1 1 1

Contract Labour: 400 (approximately) per day Daily wage employees: 40 members Manpower particulars: The Delta Paper Mills limited has the credit of having a total member of 525 employees, which includes 11 office boys.

The manpower was divided into two categories:

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1. Staff 2. Workmen

1. Staff: Staffs arranged into 1 to 10 grades, of which 1 to 7 grades includes technical (supervision) and non-technical which has strengths of 134 members. 8 to 10 grades include managerial categories, which has strength of 42 members.

2. Work men: The permanent and temporary workers are divided into 3 categories 1. Permanent workers 2. Workers on daily wages 3. Apprenties.

INVENTORY MANAGEMENT The term inventory refers to the stockpile of the product a firm is offering for sale and the components that make up the product. In other words, inventory is composed of assets that will be sold in future in the normal course of business operations. The assets which firms store as inventory in anticipation of need can be classified into
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1 2 3

Raw materials Work in progress Finished goods. Inventory contains items that purchased by the firm form

RAW MATERIALS:others and are converted into finished goods through the main factoring process. They are the important inputs for the final product. WORK IN PROGRESS: Inventory contains of items correctly being used in the production process. They are normally partially or semi finished goods that are at various stages of production in a multi stage production process. FINISHED GOODS: It represents final or completed products, which are available for sale. The inventory of such goods consists of items that have been produced but are yet to be sold. The job of the financial manager is to reconcile the conflicting viewpoints of the various functional areas regarding the appropriate inventory levels in order to fulfill the overall objective of maximizing the owners wealth.

OBJECTIVES OF THE INVENTORY MANAGEMENT: The objective of inventory management consists of two counter balancing parts. a) To minimize the firms investments in inventory b) To meet a demand for the product by efficiently organizing the firms production and sales operations.
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These two conflicting objectives of inventory management can also be expressed in terms of cost and benefits associated with inventory. An optimum level of inventory should be determined on the basis of the trade off between costs and benefits associated with the levels of inventory VALUATION OF COMPONENTS OF INVENTORY: Inventory involves certain value, which every manufacturing firm needs to account for in the financial reports. So various firms follows various methods of inventory valuation methods few are mentions below FOR RAW MATERIALS; FIRST IN FIRST OUT METHOD (FIFO): In this method the raw materials are received first in the stores ledger are issued first. The name of the method it self indicates the materiel first received in is issued first.

LAST IN FIRST OUT (LIFO): In this method is opposites to FIFO. In this method the raw materials received last by the stores are issued first. The name itself indicates the materials, which are received last, are issued first. FOR WORK IN PROGRESS:

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Work-in-progress i.e., intermediate are valued at factory cost basis i.e. the value of raw materials in the process and the costs incurred it that particular point of manufacturing process. FOR FINISHED GOODS: Finished products at factory are valued at factory cost including head office expenses and at warehouse are valued after adding freight to factory cost. COSTS INVOLVED IN INVENTORY: One operating objective of inventory management is to minimize the costs associated with inventory. Excluding the cost of merchandise, the costs associated with inventory fall into two basic categories a) Ordering or acquisition or set-up costs, and b) Carrying costs. These costs are important elements of the optimum level of inventory decisions.

ORDERING COSTS: Such costs are also known as acquisition or set-up costs. This Category of costs is associate with the acquisition or ordering of inventory. Firms have to place orders with suppliers to replenish inventory of raw materials.
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The expenses involved are referred to as ordering costs. Apart from placing orders outside the various departments have to acquire materials from all stores. Ant expenditure involved here a part of the ordering costs. Included in the ordering costs involved in: a) Preparing a purchase order or requisition from and b) Receiving, inspecting, and recording the goods received to ensure both quantity and quality. The cost of acquiring materials consists of clerical costs and costs of stationery. It is therefore called a setup cost. They are generally fined per order placed, or the more frequent the acquisition of inventory made, the higher are such Costs. From a different perspective, ordering costs, the acquisition costs are inversely related to the size of the in venture they decline with the level of inventory thus, placing can, minimize such costs fewer orders for a larger amount. But acquisition maintenance of larger quantity would increase the costs associated with the maintenance of in venture, i.e., carrying costs.

CARRYING COSTS: The second board category of costs associated with the inventory are the carrying costs. They are involved in maintaining or carrying in inventory.
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The cost of bolding inventory may be divided into two categories: Those that arise due to storing the inventory. The main components of this category of carrying costs are: 1) Storage janitorial services. 2) Insurance of inventory against fire and theft, 3) Deterioration in inventory because of pilferage fire technical obsolescence, style obsolescence and price decline . 4) Serving cost, such as labor for handling inventory, clerical and accounting costs The opportunity cost of funds this consists of expenses in raising funds to finance the acquisition of inventory. If funds were not locked up in inventory, they would have earned a return. This is the opportunity cost of funds or the financial cost component of the cost. cost i.e., tax, depreciation,

insurance, maintenance of the building utilities and

The carrying costs and the inventory size are positively related and move in the same direction. If the level of inventory increases, the carrying costs also increased and vices versa.

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The sum of the order and carrying costs reprisals the total cost of inventory. This is compared with the benefits arising out of inventory to determineoptimum level of inventory.

TECHNIQUES OF INVENTORY MANAGEMENT: An optimum level of inventory on the basis of the trade off between cost and benefit to maximize the owners wealth should be aimed many sophisticated mathematical techniques are available to handle inventory management problems. The below mentioned are some of the inventory

management techniques. (1) ECONOMIC Order Quantity (2) ABC Analysis (3) Stock levels

ECONOMIC ORDER QUANTITY: Economic Order Quantity (EOQ) refers to the level of inventory at which the total cost of inventory comprising the acquisition cost, ordering cost and carrying costs are minimal for analyzing the EOQ,
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as .

an

inventory

management

techniques

several

sophisticated

mathematical models are available EOQ is the size of the order that years the optimum total incremental inventory cost during the given period of the time under the assumption that the demand and the rate is constant and known. The concept of EOQ applies to the items, which are replenished periodically into inventory in lots covering several periods needs. FORMULAE: (1) EOQ = Square root of 2A0/c Where, A= Annual demand O = Ordering cost C= Carrying cost (2) Ordering cost = No of orders placed per year ordering cost per order Where no of orders placed = Annual demand / No. of units per each order (3) Carrying Cost :[Order quantity/2] carrying cost per unit

ANNUAL DEMAND: The annual demand of the item depends on the number of items ordered in the year The annual cost of carrying inventory depends on the total size of the inventory in stock.
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ORDERING COST: The cost is associated with the placed of an order for the acquisition of Inventories this is determined on the basis of the expenses incurred in the purchase and finance department. CARRYING COSTS: Carrying cost is defined as the cost of holding the materiel inside and Outside of the stores. It is associated with the level of inventories the greater the order longer is the inventory carried as stock in the stores. OPPORTUNITY COST: The opportunity cost of funds consists of the expenses in raising the funds to finance to acquisition of the inventory. If the funds were not locked up in the form of inventory, they would have earned a return, This is the opportunity cost of the financial cost component the carrying cost and the inventory size are positively related and move in the same direction. If the level of the inventory increase the carrying cost increases and if the level of the inventory decreases the carrying cost also decreases.

ORDER SIZE: How much to order is one of the important questions to be deciding upon in every inventory replenishment situation? Material required must be ordered from some source, the process of ordering
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involves certain costs, the ordering costs, the greater the order, the longer is the is the inventory carried in stores and greater is the annual carrying cost of he inventory. The smaller the quantity, the larger the number of orders placed per year and the larger the ordering cost. ABC ANALYSIS: ABC Analysis is the selective inventory control technique and this is the first step in the inventory control process. This is the process in which thousands of different types of inventories are classified to determine the type and degree of control required for each this technique is based on the assumption that the firm should not exercise the same degree of control on the items of the inventory. On the basis on unit price and consumption, various inventory items are categorized into 3 classes of this analysis 1) A 2) B 3) C A group involves the largest investment and inventory control must be vigorous and intensive and the most sophisticated inventory control technique should be applied to these items. Type A is of higher cost and highly scare resource without which the production process cannot be imagines, which will be very less in quantity wen compared to the investor level. A type of items only about 10% in number, Account for 75% of the annual inventory usage value.
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B group stands mid-way. It deserves less attention than A and more than C employing less sophisticated techniques can also control it type B is of moderate cost and moderately important. These are freely available when compared to type A. B type of item- the next 20% in number, Account for the next 15% of the annual inventory usage value. C group consists of items of inventory which involve relatively small investments although the number of items is fairly large; these items deserve minimum attention, type C is of lowest cost and of less importance when compared to A and B there Levant of these inventories to the main production process is almost negligible, as these type of materials are freely available in the market and can be immediately replaced or purchased. C types of item- the next 70% in number account for only 10% of the annual usage value. The various types of selective controls on the basis of ABC analysis:

Category A: Tight control Assess exact requirement

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frequent reviews quantity control regular and item wise expediting low safety stocks and order point control Reduced and stabilize lea-time Large orders with phased delivery Tight control on scrap Value analysis and standardization Special care in Prevention

Category B:

Moderate control

37

Individual postings Assess frequent reviews Less frequent reviews Quantity Control Item wise Expediting Medium Safety Stock Lead time control Stocked at regional or zonal stores

Category C: Simple Checks Estimate appropriate requirements

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Group Postings Infrequent Reviews Visual control Limited and periodic Expediting Minimum lead-time control Large safety stocks Large order size Minimum control Stocking at point of use. Steps for conducting ABC analysis are:

1. Obtain unit cost of each manufactured or purchase item in inventory. 2. Obtain the usage in units for each item or estimate the usage over a period of time. 3. Obtain the net value of the usage by multiplying the unit cost and the usage. 4. Arrange the items in descending order of the usage value. 5. The number of items and their values are accumulated on a percentage of total bases. 6. Roughly devoid the total list into three groups, normally, A- items of high usage value which accounts for 70-75% of the usage value of

39

inventories, and about 10-15% in number, B- items of medium usage value which accounts for the next 15-20% of the usage value in the inventories, C- items of low usage value, which would be the remaining group of items. While applying the ABC analysis, the following points should be taken into consideration: 1. Although every part of the item is important for the repair of machine, the items with low value can be given a base control. 2. Tighter control of the high value stocks must reduce costs sufficiently to more than offset increased costs caused by lesser controls on the low value items when applying the ABC principle, some high value items, which will not be required due to being in excess should actually be considered for disposal at a worthwhile price. 3. The ABC Analysis invariably involves only moving items since the annual consumption value is based on consumption besides unit cost. The items, which are nonmoving, have also been considered separately for retention or disposal according to their utility.

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STOCK LEVELS:
1. Re-order level:

Re-order level (ROL) refers to the level of inventory, which give an indication that action replenishment and proposals for purchase of a particular item between minimum and maximum levels. ROL= Maximum consumption during the year * maximum period required for delivery.
2. Maximum stock level:

Maximum stock level is also called as safely stock of buffer stock. This represents the lower limit bellow which the stock of any, item should not be normally to non- availability of raw materials. Maximum stock level = ROL- [normal usage* avg. delivery period] 3. Minimum stock level: Minimum stock level is the level, which should not be exceeded or maintained. Minimum stock level = ROL+ ROQ-[minimum usage* minimum delivery period] Where ROQ= Re order Quantity.

41

3. Average stock level:

Avg. stock level lies between the minimum and maximum stock levels, Avg. stock level = minimum stock level + Roq/2 Therefore, ABC analysis helps in categorized the thousands of spare parts in inventory and allots them with 3 difference classes basing on their cost and consumption. EOQ technique helps in determining the order cost and the carrying cost of the order size, through which the right ordering quantities can be fixed and minimize the ordaining and carrying costs of the inventory. Stock levels helps to determine the level of stock to be maintained. It decides the Re- order level and the quantity of the inventory; it forecasts the minimum and maximum levels of inventory to be maintained without any disturbance in the production process. Hence, these are the techniques of inventory management for the effective control of the inventory, which helps to provide a smooth production process without any hindrances.

42

IMPORTANCE OF INVENTORIES IN WORKING CAPITAL MANAGEMENT: Inventory place a leading role in determine liquidity status of the organization from the operating cycle, we can be obtain the number of items the working capital is turned as shown in the operating cycle. The endeavor of an aggressive management will be to reduce this period so that the same quanta of working capital can be turned more number of items. A case in point is of a pan shop selling chewing pans, etc. his turnover of working capital is more than 300 times as he deals with perishable leaves. There is no concept of work-in-progress and he does not allow credit. The clearly brings out importance of inventory control and the benefits it accrues to the organization form the increased profitability view and better return on investment considerations. It should be emphasized that necessary corrections should be applied for any changes in the tax structure. Consequently an efficient management o working capital has become as must for the smooth and successful operation of the business organization price and profits deepened more on the material content and interest burden. The short- term bank borrowing are largely affected by financing and inventories. The interest for servicing the working capital, the major constituent of while is the inventory. Better inventory control is reducing the material cost and the interest burden reflecting in increased profit

43

INVENTORY MANAGEMENT IN DPM

BACK GROUND: DPM is engaged in the manufacturing exporting and sale of cultural paper, structural paper and industrial paper under the brand name of DPM ltd. Raw materiel, stores costs is determined using FIFO method. Cost of work-in-process and finished goods includes appropriate portion of overheads etc. finished goods are valued at lower of the cost or net realized value. By product gunny waste and scrape is valued at net realize value. PURPOSE AND USE OF STORES MANUAL: The purpose is 1. To instruct stores personally in the application standard practices and procedures necessary to effectively carry out an operation. 2. To assist personal engaged in the stores function to attain higher degree of proficiency in operations and monitoring.

44

OBJECTIVES AND KEY CONTROL AREAS: OBJECTIVES: The functionally objective of the stores function of DPM are out lived bellow: a. To ensure adequate stock of stores and spares to prevent stock outs, while maintaining an optimum balance quantity, quality and cost. b. To contribute the maximum corporate profitability and maximizing total inventory costs. KEY CONTROL AREAS: The following are the key controls required in managing stores function the system and procedures designed take into account these key control areas. a. Time taken into complete inspection b. Regularization of PRS for emergency purchases c. Co-ordination with purchase for rejection, OSD etc. d. Material issues on loan/ Repair. e. Control over issues to contractors. f. Collection of segregation of scrape. g. Collection of EMD before release of sale order. h. Main Maintaining a record or scrap sale

45

i. Collection of EMD before release of sale order OVER VIEW OF THE PROPOSED SYSTEMS: Introduction: The different types of materiel stored at DPM can be grouped under the following heads. General stores items and spares Direct charge items(DC) project /capital items Packing materials No Charge (NC)/Field return (Fr) items. Scrap.

Raw materiel such as paddy strap is physically stocked at the plants and is under the direct control of the user departments All materials except raw materials and scrap find place in the books of stores. The project materials are physically stores separately in stores. Packing materials are kept close to the packing plant for easy handling NC/FR items stocked separately in stores, as they are no value items. DC items are also stocked separate from the general stores item.

46

The over view of the proposed system is shown bellow The stores system is broken up into following modules and the overview of each module is explained bellow. Material handling material receipts Rejection of receipts Material issues material returns to stores Inventory control

MATERIAL INDENTING: Materials are indented both by stores as well as the user departments. The stores dept indents all general stores items and spares. The respective user departments indent all other materials. However, all indents raised by the user departments are routed through the stores to ensure that no item is purchased for which stocks exist Whenever a new item is indented, the responsibility of assigning new code lies with the stores department. All DC item indents are uniquely identified and kept in the reservation register. On receipt, the items are issued only to those departments, which raised the indent.

47

MATERIAL RECEIPTS: All materials are received at the stores only against a formal purchase order (P.O). In case of emergency purchases the stores ascertains the genuineness of supply before receiving the same, immediately after the receipt, the package/ materials are checked for their physical condition and quantity as per packing list. Appropriate action is initiated by the stores incase of damage/ shortage with the supplier and /or the transporter. Whenever relevant, action is also initiated for claiming the insurance amount. Receipt acknowledgement (RA) is roused by stores for all receipts, the responsibility of checking the quantity received lies with the stores department for all materials. Stores or user department, depending on the materials checks the quantity of the materials. The quantity received should be only as purchase order. Incase the quantity received is in excess of shipping tolerances action for amending the purchase order is initiated by the stores and only after the approval the excess material is taken into stock. If the amendment is not approved, the excess supplies are return to supplier through the purchase dept. The RA is update with details of accepted quantity, the stock ledger is updated and the materials are physically taken into stock. REJECTION OF RECEIPTS: The material received by stores my be fully or partially rejected. Because of non-conformance to specifications. Stores department intimates purchase department about rejection, which in turn Is communicated to the vender. Based on the adduce received from

48

purchase, the rejected material is sent back to the vendor, by the stores dept. MATERIAL ISSUE: Stores only against stores material requisition (SMR) issue materials. The entire project, DC and shutdown maintenance requirements are issued only as per the reservations. Items reserved by one dept can be issued to the other only after approval. To take into account urgent needs, material can be issued to user departments on receipt but before billing. However the regularization should take place within a day form the date of issue. In case of issue contractors, the concerned project engineer user department should approve the SMR. All material sent out for repairs or on a loan basis are routed through. The stores along with a work order and/or returnable material gate pass (RMPG). On receipt of material, stores informs the user departments and issues after taking acknowledgement on RMPG or work order. If the materials not required by the user department immediately, the same is taken into stock through receipt acknowledgement. No change (NV) and field return items are also issued against SMR. However, the consent of the department to which NC/FR items belongs is taken before the issue.

49

MATERIAL RETURN TO STORES: The material returned to stores is of two types. 1. Excess materials 2. No charge (NC) field return(Fr) The use department returns excess materials through stores materials return (RSMP) indicating the SMR reference into the returned materials are taken into stock ledger is updated. No charge (NC) and field return (F) items are those which have been put to use but still have some life left in than for further use such stand by motors, gear boxed, repaired motored etc. those are not virgin items these items are returned to store either directly or after repair. A separate stock ledger is maintained for NC/FR items the value of these items is zero since they have already been charged once. NC/FR items are returned to stores by the user dept through RSMR. The items are received and the stock ledger is update at the stores. INVENTORY CONTROL: All items of inventory do not need the same degree of attention and control the degree of control depends on the value and criticality of the items to the operations. The high consumption value (a) and vital (v) items required much closer attention by senior management compared to low value and
50

less article items, which can be monitored and controlled by lower level employees. To facilitate selective control, the items are classified under the following. -Bases on value of consumption into: A, B and C categories and - Based on criticality into Vital (V), Essential (E) and desirable (D) categories. ABC classification is carried out once every year based on the previous years annual consumption value of items. Stores in charge is responsible for the ABC classification while carrying out ABC analysis, all non moving and obsolete items are excluded. All items that have not been consumed forever three years are considered non-moving items. Obsolete items are those which will not find usage in the foreseeable futures these are essentially the spares of the equipment, which are abandoned For all A class items recorder level are fixed, on reaching an order is placed for predetermined quantity. Thy ROL depends on the criticality of items to DPM for vital items relatively more inventory is maintained compared to that of desirable. For B and C items, maximum and minimum levels are fixed. As and when inventory levels touches or crosses the minimum level, APR is raised for the recorded quantity maximum level current inventory level orders in pipelines

51

Review of. Both ROL and maximum levels is carried out by a committee consisting of the following persons once in every year for A items and once in two years for B and C items.

Manager purchases Manager- stores User department.

Net assets 1)Inventory Turnover Ratio = Average Inventory

Current Assets 2) Current Ratio = Current Liabilities Net sales 3) Working capital Turnover Ratio = AVG.Net.W.C 365 4) Holding period return = Inventory turn over ratio

Inventory Turnover Ratio:

52

2007= 194447475/86324062.5 2008 = 225387103/24285736 2009 = 315402715/26676139

1) Current Ratio:

=2.25 =9.28 =11.28

2007 = 46520721/14383675 2008 = 53008228/15852545 2009 = 71771758/45892127 2) Working Capital Turnover Ratio: 2007 = 194447475/26853214 2008 = 225387103/34646364364.5 2009 = 315042715/31517657
3) Holding Period Return:

=3.23 = 3.34 =1.56

=7.24 =6.50 =10.00

2007 = 365/2.25 2008 = 365/9.28 2009 = 365/11.28

=162.22 =39.33 =32.35

Percentage proportion of Inventories in Gross Working Capital of the DPM: 2007 = 40.55% 2008 = 50.64% 2009 = 52.32%
53

Ideal Proportion of Inventories in Gross Working Capital is 25% of every company. DPM maintains good proportion of inventories in Gross Working Capital. INVENTORY ANALYSIS OF DELTA PAPER MILLS LTD. TABLE - 5.1, INVENTORY TURNOVER RATIO OF DELTA PAPER MILL DURING THE PERIOD 2005-09 YEAR 2005 2006 2007 2008 2009 NET SALES 43244935 122444745 194447475 225387103 315402715 AVERAGE STOCK 22892152 56824565 86324062 24285736 26676139 INVENTORY TURN OVER RATIO 1.88 2.15 2.25 9.28 11.28

Source:Data compiled from the annual reports of DPMLtd.

CHART 5.1
INVENTORY TURNOVER RATIO 12.00 10.00 8.00
INVENTORY TURNOVER RATIO

11.28 9.28

6.00 4.00 2.00 0.00 1.88 2.15 2.25

2005 2006 2007 2008 2009

Table 5.1 shows that the higher inventory turnover ratio is preferable which means finished goods are soled at faster rates, which increase profits. In general a higher Inventory turnover ratio indicates more sales of the concern and effective Inventory management. The inventory turnover ratio of DPM increases since 2006-07. There is high growth in the year 2008-2009 because of increasing the production

54

TABLE 5.2 HOLDING PERIOD OF DELTA PAPER MILL DURING THE PERIOD 2005-09 YEAR 2005 2006 2007 2008 2009 INVENTORY TURN OVER RATIO 1.88 2.15 2.25 9.28 11.28 HOLDING PERIOD 194.14 169.76 162.22 39.33 32.35

Source :Data compiled from the annual reports from DPM Ltd CHART 5.2

HOLDING PERIOD RETURN 250.00 200.00 150.00 100.00 50.00

194.14 169.76 162.22 HOLDING PERIOD RETURN

39.33

32.35

0.00

2005

2006

2007

2008

2009

Table 5.2 shows that the A higher Holding period return indicates favorable Performance of the inventory holding and a lower holding period Return indicates and unfavorable performance of the inventory holdings. Holdings period Returns the working capital performance of the company. The holding period returns of DPM decreasing trend in the current year 2008-2009.

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TABLE 5.3 INVENTORIES OF DELTA PAPER MILL DURING THE PERIOD 2005-09 Year Stores and Spare parts Raw Materials Work in process Finished Goods Total 2007 4811950 4368952 145455 20398517
29724874

2008 5040092 3230690 0 20573307 28844089

2009 4791427 8492613 0 21055668 34339708

Source: Data compiled from annual reports from DPM Ltd CHART 5.3
RAW MATERIAL 9000000 8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 2005 2006 2007 2008 2009 0 0 4368952 3230690 RAW MATERIAL 8492613

Table 5.3 shows that the raw materials was 2005-2006 is nil and also increased from 2007 again decreased in the year 2008 and then increased in the year 2009.

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TABLE 5.4 RAW MATERIALS OF DELTA PAPER MILL DURING THE PERIOD 2005-09 YEARS 2005 2006 2007 2008 2009 RAW MATERIAL 2869352 3186296 4368952 3230690 8492613

Source :Data compiled from annual reports DPMLtd CHART 5.4

RAW MATERIAL 9000000 8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 2005 2869352 3186296 4368952 3230690 RAW MATERIAL 8492613

2006

2007

2008

2009

Table 5.4 shows that the

Raw material position in DPM was

gradually increased from 2005 to 2007. In 2008 it was decreased. And finally in 2009 it was increased. This is not a sufficient position to maintain the raw materials in a stores. The raw materials were always should be kept in any stores is optimum level why because to meet the demand for the continuous supply of raw materials.

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TABLE 5.5 WORK-IN-PROGRESS OF DELTA PAPER MILL DURING THE PERIOD 2005-09 YEAR WORK IN PROGRESS

2005 123966 2006 131472 2007 145455 2008 0 2009 0 Source :Data compiled from annual reports DPMLtd

CHART 5.5
WORK IN PROGRESS 160000 140000 120000 100000 80000 60000 40000 20000 0 2007 0 2008 0 2009 WORK IN PROGRESS 123966 131472

145455

2005

58

Table 5.5 shows that the The work in progress was also increased from 2005 to 2007 and after towards the position was nil. This also not a good manufacturing process. Whenever the position in the raw materials were available in the stores the work in progress was always to continue. This indicates well work in progress position. Otherwise it lead towards the excess carrying cost.

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TABLE 5.6 FINISHED GOODS OF DELTAPAPER MILL PERIOD 2005-09 YEAR DURING THE

FINISHED GOODS

2005 18962974 2006 17269247 2007 20398517 2008 20573307 2009 21055668 SOURCE:Data compiled from annual reports from DPMLtd CHART 5.6
FINISHED GOODS 25000000 20000000 18962974 15000000 10000000 5000000 0 2005 2006 2007 2008 2009
FINISHED GOODS

203985172057330721055668 17269247

Table 5.6 shows that the position of Finished goods was also continuously increased. The finished goods are ready to sell the product. The finished goods position in the DPM is very good to meet the demand.

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TABLE 5.7 GROUP- A CULTURAL PAPER STOCK OF DELTA PAPER MILL DURING THE PERIOD 2005-09 (In Thounsands) YEAR 2005 2006 2007 2008 2009 OPENING STOCK 1200 1380 0 0 1855 CLOSING STOCK 1380 0 0 1855 47

SOURCE: Data compiled from annual reports from DPMLtd CHART 5.7

2000 1800 1600 1400 1200 1000 800 600 400 200 0 2005 0 2006 0 0 2007 0 1380 1200 1380

1855

1855

OPENING STOCK CLOSING STOCK

47 2009

2008

Table 5.7 shows that the The Cultural paper is one of the important production in the DPM. It plays a vital role in DPM. It denotes in DPM is Group-A . The opening and closing stock levels in the above table was not in a sufficient position between the 2005 and 2006 was no stock.

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Table 5.8 GROUP B STRUCTURAL PAPER STOCK OF DELTA PAPER MILL DURING THE PERIOD 2005-09 (In Thousands) YEAR OPENING STOCK CLOSING STOCK 2005 6214 7150 2006 7150 7412 2007 7412 16737 2008 16737 9819 2009 9819 16702 SOURCE:Data compiled from annual reports from DPMLtd CHART 5.8
18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2005 2006 2007 2008 2009 7412 7412 7150 7150 6214 9819 9819

16737 16737

16702
OPENING STOCK CLOSING STOCK

Table 5.8 shows that the The another important paper in DPM is srructural It denotes in DPM is Group B. The opening and closing stocklevels in above table was indicates a sufficient levels. It is a good position in all the years except in 2007

Table 5.9

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GROUP- C (INDUSTRIAL PAPER) STOCK OF DELTA PAPER MILL DURING THE PERIOD 2005-09 (in thousand) YEAR 2005 2006 2007 2008 2009 OPENING STOCK 1590 1980 2432 3661 8899 CLOSING STOCK 1980 2432 3661 8899 4306

Source :Data compiled from annual reports from DPMLtd CHART 5.9
OPENING STOCK

10000 9000 8000 7000 6000 5000 4000 3000 1000 0 2005 2006 2007 2008 2009 3661 3661 2432 2432 1980 1980 2000 1590 8899 8899

CLOSING STOCK

4306

Table5.9 shows that theThe another important paper in DPM is Industrial paper. It denotes in DPM is Group c. The stock levels in all the years are in a good position. It indicates continuous production in the company. It is a maximum level of stock position in Industrial paper.

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SUMMARY
In the world, that is becoming largely depending on

communicateioninformation and its transfer has consequential role to pay. Paper making canbe traced about to A.D. 105 when TSAILUNE a Chinese scholar, who belongs to impair court of change created a sheet of paper using mulberry and best fibbers among with fishnets, old ranges, and hemp waste. In 793 the first paper was made in Baghdad. During the time of HARUN-ARRASCHID WITH THE GOLDEN age of Islamic culture brought paper making to the fronieters of Europe. Their first machine worked at hurt ford 24shore in 1803 and john Dickinson patented a cylinder machine in 1809,which showed batter results. Paper is the basic material for writing and dissemination of the information. In addition to paperboards provide materials for thousands of users. The word paper is derived from Latin name of the reedy plant papyrus. The sheet so formed dampened and pressed up the drying glue like sap of the plant acting as adhesive,include Government, education, companies, packing, printing, newspaper and magazines e.t.c paperboards is linked with the culture and economic development of country. From then onwards the production of paper has been constantly increasing to meet the ever-increasing demand of paper in country. After India become independent, growth of the paper industry guided by the 5 years plan has been satisfactory. At present about 288 paper mills installed capacity 24.50 lacks tones and huge amount of production capacity 40%. The demand paper and boards is expected to increasing from 14 lack tones in 18-984-85 to 18.10 lack tones by 1989-90. In Andhra pradesh there are 15 mills with a total installed capacity of 370550 metric tones. Out of which major mills will produce 250600
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M.T.The Delta paper mills limited was established as a public Limited Company on 23rd May 1975. Late Sri Bh.Kumar Raju and Andhra Pradesh Industrial Development Corporation (APIDC) on 18th September 1975 promoted the Delta Paper Mills Limited; the company started its commercial production on 7th April 1977. In 1976 ICIC along with IDBI, IFCI, LIC and UTI assisted the company for selling up the product DELTA PAPER MILLS LIMITED commissioned the paper machine for commercial production from July 1978 and pulp mill by November 1973. It earned its profits in the second and third year of operations. The plant is located at Vendra, a village of palakoderu Mandal, W.G.Dt. in Andhra Pradesh. Produce this type of products in delta paper mills limited. The term inventory refers to the stockpile of the product a firm is offering for sale and the components that make up the product. In other words, inventory is composed of assets that will be sold in future in the normal course of business operations. The assets which firms store as inventory in anticipation of need can be classified into 1 Raw materials 2 Work in progress 3 Finished goods.

65

FINDINGS

1 Some of the factors which are effecting working capital like functions in business credit policy business mature, availability of price etc. are effective the company working capital. 2 DPM is maintaining an ideal current ratio from the last 3 years. 3 Companys inventory turnover ratio is increased when compared to the past years. 4 Company is maintaining good proportion of inventories in gross working capital. 5 DPM using (FIFO) first in first out method for raw material.

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SUGGESTIONS

1 The company should maintain optimum level of working capital 2 Periodical stock verification will provide smooth production compared with annual stock verification. 3 The company management should take care for maintaining good performance of company. 4 Company should try to get the loan at low interest. 5 The company should have to maintain a good inventory turnover ratio 6 The company has to maintained inventory to meet the inventory requirements.

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CONCLUSIONS

In the study I try evaluate the inventory management practices of delta paper mill ltd. I used to approaches in this study. They are: 1 Observing, recording and critical examination of the existing inventory management practices. 2 Calculation of financial ratios The observed inventory management practices are found to be satisfactory in delta paper mills ltd. In ratio analysis the inventory turnover ration is studily increasing from the year 2003-06 this is a positive sign; the organizations current assets proportion is decreasing from the year 2003-06. The organization tries to improve the current assets proportion to award the liquidity problem. The working capital turnover and proportion is good in the DPM. The organization has to improve its inventory management practices to meet the global challenges by overcoming the limitations observed in this study.

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BIBILIOGRAPHY

1. Financial Management: 2. Theory and Problems of Financial Management: 3. Financial Management: 4. Annul Reports of DPM Websites: www.dpm.com
www.paperindustry.com

I.M.Panday

Khan & Jain Prasanna chandra

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P & L ADJUSTMENT STATEMENT:

Particulars Sale Income Other Income Profit before Depreciation & Interest Less : depreciation Interest Profit For the Year Provision for taxation Profit after taxation Prior period adjustments Profit available for appropriation

2007 7360.41 60.28 7420.69

2008 7,373.12 77.89 501.73

2009 8,838.55 51.27 875.33

609.46 183.93 158.27 298.52 152.67 6.13 146.54

191.11 282.90 27.76 ----26.50 45.78

207.87 362.60 204.76 ----45.62 302.86

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M/S DELTA PAPER MILLS LIMITED, VENDRA BALANCE SHEETS AS ON 31-3-2005,06,07,08,09

(Rs in lacs)
Particulars shed As on ule 31- As on 31- As on 31- As on 31- As on 3- 2005 313- 2009 3- 2008 3- 2007 3- 2006

Source of Funds a) capital b) Reserves & Surplus Total Loan Funds a) secured Loans b) unsecured Loans Total Application of funds I) Fixed Assets a) Gross block b) less Depreciation c)net block d)capital works in Progress Total II) Investments III) Current assets, Loans & Advances a)Inventories b)Sundry debtors c)cash &bank

1 2

500,7 292,06 792,76

500,7 46,32 547,02

330,7 27,2 357,9

330,7 0,7 331,4 1076,1 813,05 2220,55

330,7 0,7 331,4 715,3 424,47 1471,17

3 4

2593,83 2211,13 1547,14 1113,59 950,07 998,49

4523,8 3708,22 2903,53

5 5019,32 4033,97 3920,35 2610,14 2415,56 2240,37 2409,18 1618,41 1679,98 2671,53 825,38 70,06 2676,71 2443,79 1750,04 3,64 3,64 3045 3102,5 2098,22 1004,28 176,74 2522,35 1993,74 528,61 5594

6 7

1181,02 584,55 0,9 -----

1617,3 1341,73 1026,7 2019,28 1446,53 1332,63 183,25 106,9 117,25

890,32 1365,61 81,88

553,87 962,63 124,95

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balances d)other current assets e)Loans &advances Total less: Current 8 libilities &Provisions Net current assets IV)profit &loss account Total

106,55

142,74

156,79

170,34 131,95 2640,1 1758,9

119,15 138 1898,6 1126,7

200,13 174,82 270,82 4126,51 3212,72 2904,19 2283,06 1959,93 1754,15

1843,45 1260,79 1150,04 --------------

881,2 157,43 2220,55

771,9 114,72 1471,17

4523,8 3708,22 2903,53

72