final abc inventory

5/28/2018 Final ABC Inventory

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INVENTORY MANAGEMENT ABCTC. LTD.

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1.INTRODUCTION

Coffee is one of the healthy drinks among all the beverages. If we think about

refreshment, coffee is the first thing comes to our mind. In rainy and winter seasons the usage of

coffee is more and it has become a part of human beings life. Caffeine is a substance found in

coffee plants, which stimulates the central nervous system.

Before 1200 A.D., the coffee industry had spread along the red sea to Aden and cargo in

Ethiopia. Then coffee was sold through Mediterranean Sea. Most pilgrims had started to

cultivate coffee in India about 1600 A.D. Large scale coffee cultivation started in Brazil. In 1729

A.D., it produced 200,000 bags and in 1825 A.D., it was 3 million bags. After 80 years, they

started coffee export and reached 4 million bags. Brazil coffee market reached surplus because of

uncontrolled production and cultivation of coffee. In past 20 years coffee trade from Africa hasgrown more rapidly than elsewhere and contributed rapidly to the growing surplus. The Central

American countries have increased their share to world coffee exports from about 5% in 1990

A.D to about 14% in 1970. This growth had occurred with mild coffees, which command and

favorable. The highest consumption of coffee is recorded in the U.S which had about 450 million

consumers and the rest of the world about 2450 million consumers Today 25 million people

worldwide are provided with direct employment in coffee and considering the formers and the

employment effect of coffee related services at least 100 million people depend in coffee as

major source of income.

The world coffee production in 1999-2000 forecast at the rate of a 107.5 million bag and that is

14% above the revised 1998-99 crop and up 3% on the previous record of 1997-98. Brazils

1998-99 products are forecasted at the rate of 35.8 million bags and Columbia at the worlds

production, which is normally 36-37%. North American producing countries including Central

America produces 20% of the worlds coffee production. In 1990, world production was 93

million bags. Where worlds domestic consumption was 21.5 million bags and worlds

exportable production is 71.5 million bags. In 1990 Arabica captures 75.5% of the world

production and rest 24.3% followed by Robusta.

Today coffee grown and exported by own to developing countries in the world. It is estimated

that in 2002, over 95 million bags of coffee were consumed world wide. Of these, 21.5 million

bags were consumed in coffee producing countries themselves while over 73.9 million bags were


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consumed in importing in 2001, which is followed by countries like German, France, Japan,

UAE, and Italy.

Here we have concentrated on coffee, which is considered as traditional drinks especially in

south India. People here start their everyday life with a cup of coffee. Not only in south India butin all parts of the world people are so dependent and addicted to coffee that it acts as a daily

schedule to everybody everywhere. But this coffee is not grown in all parts of the world but is

grown in very few places with right kind or weather, atmosphere and most important of all, the

soil of that region. It is usually grown in hill stations with adequate amount of rainfall and such

places, which are high above sea level. Therefore in India, Karnataka is such a place, especially

South Karnataka that produces the highest amount of coffee in whole India. Most parts of

Karnataka such as Chikmagalur district and many parts in Hassan District, and also Coorg.

So people here feel proud to be citizen of such place where coffee takes its birth. So that

being the main reason, I have concentrated on a organization which has its roots spread very vast

in coffee industry and is a major player in worlds import/export of coffee and deals in coffee

beans curing activities present in Hassan. Indian coffee industry is defiantly a huge sized

industry which plays a very major role in the world market of coffee. India at present is in 8 th

place in its contribution of coffee and its plantation in the whole world and 1stplace being Brazil.

But not all parts of India produce coffee. It is grown mostly in south India and highestpart of its growth from the whole India is in Karnataka that is from districts of Hassan,

Chikmagalur and Coorg. Rest is grown in states of Tamilnada, Andrapradesh, Kerala and other

northern parts such as Sikkim and Nagaland.

So as shown in the next table about the quantity of coffee that is produced in the whole

India we come to know that the whole output of India is 2.88 lack tones coffee per annum, more

than 2 lack tones is grown only in Karnataka and rest in other parts of India as mentioned in the

table below. So among 2.06 lack tones of whole Karnatakas coffee production, ABCTCL has a

huge contribution to coffee exports among the many competitors in the same business


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2. COMPANY PROFILE

Amalgamated Bean Coffee Trading Company Limited is an entrepreneurial venture of its

chairman Mr. V G Siddhartha. His passion with the coffee coupled with the opportunity provided

by the deregulation of the coffee board in 1993 created the perfect timing for the launch of this

company. The visionary chairman Mr. Siddhartha could foresee the demand for Indian coffee

abroad and ABC Trading Company Ltd began exporting coffee to coffee-connoisseurs across

USA, Europe and Japan. The Coffee Day as brand was born in the year 1994. In the year 2000,

coffee day exported more than 27,000 bags of coffee valued at US$60Mn and for second time, in

a short span of 7years, retained its position as the largest coffee exporter of India. In the short

journey of 13 years, the company has grown into six divisions and has overtaken one milestone

after another without looking back. Mr. V G Siddhartha, the chairman has vision to furtherexpand ABC Trading Company Ltd in the domestic and overseas market.

2. a. Background & Inception of the Company:

It is one of the biggest organizations in the coffee industry and getting world-class

recognition now days. ABCTCL was stated in the 1991 year and owned by Mr. B.G Siddhartha.

Registered office of ABCTCL is in Chikmagalur and has its own coffee growing estate which

spreads in an area more than 20000 acres in Chikmagalur district. Amalgamated Bean Coffee

Trading Company Limited is perhaps one of the too fully integrated coffee companies of Asia,

involved in all sectors of Coffee from plantations to retailing to exports.

Amalgamated Bean Coffee Trading Company, better known as "ABC", is one of the

largest exporters of green coffee from India since 1999. ABC's business mission has its roots in

coffee knowledge. This culminates into an incessant effort to adapt to dynamics of the coffee

market resulting onto a leadership role. ABC has invested well into a Research and development

on coffee quality that supports our domestic promotion of various blends of coffee and augments

our export activities. However the corporate office of ABCTCL is situated in Bangalore, which

manages all the activities of ABCTCL all over India.


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2. b. NATURE OF THE BUSSINESS CARRIED

Plantations Caf coffee day Packaging Express Beverages Fresh & grounds Coffee Day Perfect Export

PLANTATION

The management of coffee plantations of ABCTCL. ABC has its seeds sown in the heart

of the coffee cradle of India, Chikmagalur. The region is a world wrapped in primeval innocence,

where panthers, tigers and elephants roam. Their passion for coffee stems from the august

heritage of coffee estates inherited by the promoter's family. What started out with a small group

of family-owned estates gradually grew, as more and more estates were included to finally form

Amalgamated Bean Coffee Trading Co. Ltd.

The plantations nestled in Chikmagalur and Mudigere region of the Western Ghats, are spread

over 20000 acres of well-maintained estates up to 4500ft above sea level. This makes us the

second largest plantation company in the country. Their estates are the first and at present the

only ones in India to be certified by the "Utz Kapeh Foundation" for efficient farm management

and full trace ability. These estates provide a natural habitat for several geneses of flora and

fauna. They are hosts to innumerable herbs, shrubs and trees like jackfruit, areca nut, orange,

pepper, cardamom, etc.

The coffees at estate are grown under the dark shades of various forest trees like silver

oak, Indian Rose wood and various others. The estates share boundaries with some forest

reserves and wild life sanctuaries and hence are also home to a variety of species of wildlife from

birds and hares to deer, elephants, and even tigers! Other than the above procurement and storage


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of coffee beans is done in Hassan and Chikmagalur with huge procurement machine and large

where houses which can store up to 70,000 bags of coffee.

CAF COFFEE DAY

One of the most common names here today is one of the greatest achievements of

ABCTCL.As known to everyone caf coffee day are the caf shops managed by ABCTCL and

present in large number in all parts of India today. The brain behind success of caf coffee day is

one person: Mr. Naresh Malhothra, the president of caf coffee day division. Its because of is

dream to make people all over the world get wide range of coffee product at affordable prices,

we have more than 1174 caf coffee day outlets in India today.

They are also trying to cover the whole world market by establishing more and more retail

coffee day outlets all over the world. The first step in world caf market was taken in the recent

years by establishing the first caf coffee day outlet in Vienna, Austria. The whole caf coffee

day management is done by corporate office of ABCTCL in Bangalore through a wide network

followed by

State Mangers General Mangers City Mangers Caf coffee day outlet Mangers

All these has proven caf coffee day to be the most precious jewel of ABCTCL.

PACKAGING

This is one of the important division or department of ABCTCL. This packaging

department includes the process of converting coffee beans into readily consumable coffee

products and then packing them in to attractive packages with different quantities. This

packaging takes place in a huge plant in Hassan where the head office of ABCTCL is situated.

These packed products of both instant and filter coffee are then supplied to its retailer and its

own fresh and ground outlets. But marketing manager does the marketing of these packed

products from corporate office of ABCTCL, Bangalore. The head office in Hassan produces only

that much quantity which is ordered by the Bangalore office as per the requirement.


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However the packed products are only used and marketed in domestic market and exporting of

these packed products doesnt take place.

EXPRESS

GO AHEAD XPRESS YOURSELF! Coffee Day Express is a unique concept of

convenient cafe, an idea that feeds a world that's continuously in transit. The Coffee Day Express

kiosk is a sanctuary where people can pause for refreshment before getting on with life. Retail

custom-made for the 21st century. Catering to a world that needs coffee on the go! At high-

traffic locations. With hot and cold beverages and a variety of ready-to-eat snacks.

Amalgamated Bean Coffee Trading Company Limited or ABC, as it is better known

is a fully integrated coffee company with a rich heritage that stretches over a century. Its

endeavors find expression from coffee plantations to innovative retail concepts and even exports.

To ensure that it remains a dominant force in the coffee sector, ABC has invested extensively in

Research & Development to ensure quality coffee blends. This division of ABCTCL managers

the small coffee or caf booths which we see these days in all the public places like shopping

malls, bus station, railway station and other places where the general public roam in large

numbers.

The advantage of these express divisions is people can buy different types of hot and cold

coffee in these public places when they hang out there. Apart from that this division manages the

food products and other coffee product, which are available in all the caf coffee outlets these

days. Usually these divisions to various other retailers who prepare these food products

outsource the other food products, which are available in caf coffee day outlets. The rest of the

food products are prepared in caf coffee day outlets by the help of well and experienced people;

BEVERAGES

Beverages in the general sense mean any hot refreshment drinks. So under beverages

department of ABCTCL, it deals with coffee machines, which prepare these beverages such as

black coffee, regular filter coffee, instant coffee etc. These machines are automated and require

some raw materials to be fed in it before the preparation of coffee. After that just by the press of

a button people can get different types of coffee ready to drink.


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So these department is concerned with selling of such coffee machines which are used in

most of the offices and other work places with ready hot coffees for people who work their as

and when they require it. These coffee machines create a huge market for ABCTCL, which help

in spreading coffee products of ABCTCL all over India. So it is a separate department for selling

and maintenance of these coffee machines has managed again with same chain of president and

manager who concentrate only in this division.

FRESH & GROUND

These are retail outlets of coffee day situated in all parts of India mostly in major cities all

over India. These outlets provide customer with wide variety of coffee beans and provides both

instant coffee and filter coffee options to the customer and customers are given choice to select

their favorite variety of coffee beans, which are later, blended and coffee powder is provided to

customer as per their required quantity and according to their requirement.

Usually all the fresh and ground outlets are mange by the corporate office of ABCTCL,

Bangalore.

COFFEE DAY TAKE AWAY

The Coffee Day Take Away initiative is a virtual revolution in dispensing coffee. For the

first time, it makes freshness a part of the vending machine proposition. Only the freshest

ingredients are used and strict control is maintained to ensure that every cup delivers the

satisfaction of a freshly brewed cup of coffee. Being a part of beverages and fresh and ground

division, Coffee Day take away is a brand that has no substitute. Renowned for its aroma &

flavor, Coffee Day has grown to be India's largest selling brand of fresh filter coffee powder.

Amalgamated Bean Coffee Trading Company Ltd., the name behind Coffee Day Take Away, is

one of the largest producers & exporters of coffee in the country. With over 5000 acres of coffee

plantations and state-of-the-art curing capacity of 70,000 tons, it has the distinction of exportingmore than 13% of India's coffee. The company has been responsible for transforming coffee

retailing. With over 300 Coffee Day Fresh 'n' Ground outlets, it caters to over 1, 20,000

customers every week. Taking the filter coffee experience forward. Expanding its beverage

portfolio, the company has also launched superior Assam teas under the Tea Day brand.


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Through its Coffee Day Take Away vending machine initiative, the company will deliver

what the consumer has been missing till now - authentic filter coffee and fine tea made available

conveniently.

COFFEE DAY PERFECT

One of the unique attributes of the product lies in the 57%coffee &43% chicory blend as against

the commonly available 53% coffee 47% chicory blend in the market. The blend has been put

together by our expert blend master.

To provide the consumer a superior coffee chicory blend that he or she has been drinkingtill date.

A superior product than what others have been offering.

To be available in every possible retail outlet which ensure convenience and ease inavailability?

To provide the best quality of coffee chicory blend at value for money prices. Coffee day, rich coffee growing heritage for over 125 years. Superior coffee beans from our own estates in Chickmaglur, Karnataka. The blend has been painstakingly put together by our expert blend master. A unique

secret!

Well equipped roasting &curing unit @ Hassan, one of the largest of its kind in India.

EXPORT

Since it is a export oriented unit, it exports its coffee beans to many parts of the word.

ABCTCL exports has been one of the largest coffee export shipping close to half million bags in

volume. The clients of ABCTCL include worlds biggest and most discerning roasters MNCs,

trading companies and retail chains. But the major market of export of ABCTCL is Europe.

About 98% of the whole export of ABCTCL is done to most of the European countries and in

these European countries some of the biggest customers of ABCTCL are situated. The rest of the

2% of its exports is carried with USA, Japan and Middle east. These countries import coffee

beans from ABCTCL and further process these beans and produce many varieties of coffee for

their market.


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Even under domestic dealings some of the biggest MNCs like NESTLE are the customers

of ABCTCL who create many coffee product and is present in Indian market as well as abroad.

Some of the customer to whom ABCTCL exports its coffee are:

Sadnalji trading company Ltd.- SPAIN Louis dreyfus trading Ltd.- UK Alsroor Jabbar Ltd.Kuwait Bernharad Rothfos GMBH & companyGermany Olan international Ltd.SINGAPORE

The above are some of the customers of ABCTCL abroad and have many other

customers all over the world. As far as imports are concerned, ABCTCL imports special variety

of Arabica coffee from KENYA which is considered as one of the best in the coffee market.

These coffee beans are longer in appearance and have a rich taste. Imports of ABCTCL are very

few and above mentioned type are imported just to provide variety to consumers in India.

2. C.VISION/MISSION AND QUALITY POLICY

Vision is to be present in every space where coffee can be an integral ingredient. We aim

to be one of the top three players, worldwide, in the coffee retail segment. Thats a dream we live

up to, and make real everyday

The mission of Coffee Day is to provide authentic, affordable coffee to our customers.

QUALITY POLICY

We at the ABCTCL engaged in producing white coffee beans. We strive to be at the

forefront of Indian coffee industry by adopting latest technology, disciplined quality

management system and continually improving on product quality.

First consolidated and pure coffee outlet to find its footprint across the globe Backed by ISO 9002 Certification, and a heritage of over 140 year Asias largest integrated coffee company with the second largest network of coffee

estates

One of the top coffee exporters in Indiato United States, Europe and Japan


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First company in India to receive UTZ certification2. d. PRODUCT/ SERVICE PROFILE

Obviously the product is coffee beans and coffee can be mainly divided into 2 types

Robusta ArabicaArabica named for the Arabs, is the better and more expensive of the two. These trees grow

in semitropical climates near the equator, both in the western and eastern hemispheres, at high

altitudes. Because ripe Arabica cherries (unroasted beans) fall to the ground and spoil, they must

be carefully monitored and picked at intervals, which increases production costs.

Robusta trees which are grown exclusively in the eastern hemisphere also thrive in equatorial

climates, but at low altitudes. Their cherries require less care since they remain on the tree after

they ripen. Robusta beans have twice the caffeine of Arabica, but less flavor. Some supermarkets

carry Arabica, but most of their brands are Robusta. Coffee shops generally use Arabica beans,

but because their brews are so strong,

To describe the taste of Arabica is difficult without using trite words like smooth and

mellow. It has a round taste that is both rich and delicate, with good acidity. This does not refer

to an actual degree of acidity, but to the sharp and pleasing taste that is neither sour nor sweet. In

fairness, although most Robusta coffee is of a lower grade and inferior to Arabica, there is a

premium crop that is the top of the line for Robusta beans. Premium Robusta is primarily used in

specialty espresso blends, and is never found in canned coffee. Though it only constitutes 5-15%

of the blend, it is used because these beans add body to the taste and make a nice creama in the

shot of espresso. This additional body distinguishes the blend in a cappuccino or latte. Premium

Robusta should only be used for espresso and not other brewing methods. If the coffee is

Colombian, it will probably be Arabica on the side or back of the package, since this country

produces nothing else. Guatemala, El Salvador, Tanzania and Kenya also produce all Arabica

beans.


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Only these 2 varieties are grown in India because of the soil. But there are various

subdivisions in these two types of coffee beans depending on its size color and shape Again these

two types that is Arabica and Robusta are brought in to ABCTCL by two ways

Parchment Cherry

PARCHMENT

It means bringing the cleaned beans or already separated and dried coffee beans in to

ABCTCL.

Usually this parchment is done by the estate owners through pulper machines which

separate the beans from the cherry which are ripen and the beans are cleanly separated from

cherry and all the remains are eliminated as waste and then these beans are dried and then

transported to ABCTCL where the further processing of the beans is under taken.

CHERRY

As the name indicates, it is the raw cherry which is grown in these 2 types of plants. They

are directly purchased and brought to ABCTCL in a ripe cherry form and even removing the

bean from the cherry is done by ABCTCL, head office, Hassan & Chikmagalur after bringing to

ABCTCL. Here the work will be more to this curing works as it is brought in raw form.

Arabica is grown from December to March and these four months are considered the best

season for growing Arabic and plucking. Most of Arabica beans are exported to USA (New

York) Robusta season is from Feb/Mar to May every year and considered best for these beans

(coffee). Most of Robusta coffee is exported to U.K (London)


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Arabica parchment is plucked in 3 rounds

I Round: - Plucking of coffee from plants when they are fully ripe and ready to

pack.

II Round: - Plucking of half ripe coffee beans

III Round: - Plucking of cherry

Arabica coffee is strong and doesnt fall down form the plant even due to heavy rains. It

has to be plucked. Arabica coffee is more costly than Robusta because of its strong flavors and

taste.

Robusta coffee is lighter in nature and will easily fall off from the plant due to rains. So

more care has to be taken with this breed.

2. e. AREA OF OPERATION

Amalgamated bean coffee trading ltd, is trading over all over the India, national and

international market, major market of export of ABCTL Europe, about 98% of the whole export

of ABCTCL is done most of the European countries. The rest of 2%of its export is carried with

USA, Japan and Middle East. Even under domestic dealing some of the biggest MNC like Nestle

are customer of ABCTL. Some of the other country like Spain, UK,KUWAIT , GERMANY and

SINGAPORE.

2. f. OWNERSHIP PATTERN

Mr. B.G Siddartha is the owner and also the promoter and is the chairmen and managing

director of ABCTCL. He with is own capital started ABCTCL in 1991 and is successfully

managing it today with a wide network of people management.

It is a private ltd. Company and does not issue shares to the general public for raising

capital. Private placement of shares is to be done and 20% of the shares of ABCTCL were issued

to a MNC by Mr. Siddartha


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2. g. COMPETITORS

As every other industry, even the coffee industry has lots of competitors. But the competitors

of ABCTCL are divided into 2 main groups as follows

Competitors in procurement or curing Competitors in domestic market

The competitors in procurement or curing work of coffee beans are many in the field. These

competitors also indulge in import/export of coffee beans as ABCTCL.

Some of the competitors in this field for ABCTCL are:

Allan coffee curing works Jayanthi group General commodities ltd. Nestle company ltd. ITC ltd. Ned commodities ltd.In domestic market there are lots of retailers who compete with ABCTCL in the domestic

market. Even though only 10% of ABCTCLs products are marketed in domestic market, there

are lots of competitors even to compete for this 10% of coffee products of ABCTCL. Some of

these competitors are:

Narsus coffee Hindustan Unilever ltd. (HUL) TATA coffee

2. h INFRASTRUCTURAL FACILITY

1) Availability of adequate water from river Krishna.2) Self contained residential quarters are constructed for officer & worker.3) The workers & their dependents are provided with free medical facilities.4) Good transportation facilities.5) Formed a co-operative consumer society.6) Primary School, high school, hospital, under graduation colleges are run by the factory.


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2. i. ACHIVEMENT AND AWARDS

The success of this organization in its exports is known by the various awards received by

ABCTCL such as:-

YEAR AWARD

1999-2000 Top exporter of green coffee

2000 Top exporter of coffee to the region: U.S.A

2000-2001 Top Exporter Of Coffee To The Region: European Union


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2. j WORK FLOW MODEL

Coffee beans

Weighting of coffee beans

Coffee unloading

Moisture checking

Coffee transfer to hulling machine

Polishing coffee beans

Colour sorting

Roasting

Garning

Beans separated from grade base

Packaging

Dispatch


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2. k FUTURE GROWTH AND PROSPECTS

Indian coffee is exported to all parts of the world. But except in India it is nowhere

called as Indian coffee and doesnt have a name and popularity. So the goal of ABCTCL is to

make the world recognize Indian coffee as Indian coffee and not anything else. So caf coffee

day outlets are being planned to open in all parts of the world such as one present in VIENNA,

Austria and make the Indian coffee popular.


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3. MCKENSYS 7 S FRAME WORK

Mckensys 7S framework provided a useful frame work for analyzing the strategic

attributes of the organization. The Mckensysconsulting firm identified strategy as only one of

seven element established by best-managed companies. Strategy, structure & system can be

considered the hardware of success while skill, style & shared value can be seen as the software.

Companies in which these soft element are present are present are usefully more

successful at the implementation strategy.


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Structure

This defines the basic organization of the company, its departments, reporting lines, areas

of expertise and responsibility. The structure represents the hierarchy of the organization and the

reporting system. The organization structure is the pattern of relationship among various

components or parts of the organization. Structure is thus the basic frame work within which an

organization carries outs its orders, decision and general functioning. It defines the unbroken line

or chain of command and the span of control. The organization structure of ABCTCLas follows.


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CHART SHOWING ORGANISATION HIERARCHY OF ABCTCL HEADS OFFICE OF

HASSAN


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As shown in the chart the organization hierarchy is as follows:

At the top of the company there is Mr. B.G Siddhartha who is the sole chairmen and

managing director of the company .Mr. Siddhartha manages the whole ABCTCL through a

bunch of presidents in all departments and divisions of the company. Here the president of

ABCTCL head office is Mr. Rajeev Guptha who is in charge of all the activities of Hassan head

office. He controls it form corporate office of Bangalore and the senior general managers in

Hassan head office have to act as per the instruction of Mr. Rajeev Guptha.

Under Mr. Rajeev Guptha, Hassan head office is totally manage by two senior general

managers

1. Mr. H.A VINAYSenior General Manager of Public Relations Finance Accounts Procurement

He manages interaction with suppliers or estate owners, all the financial transaction of

ABCTCL by terms of payments and other monetary issues by final checking and passing of

invoices, maintenance of proper books of accounts from time to time and along with it manages

the procurement process of coffee.

Under Mr. H.A Vinay there are 2 assistant general managers:

Assistant General Manager Procurement:He is in charge of the whole procurement process

of coffee after it gets into ABCTCL. He manages executive, superiors and sub-staff who are 10

in number. These people are in charge of agent management of ABCTCL, Hassan and managing

the contractual labour required for procurement process.

Assistant General Manager Accounts: he is in charge of managing the books of account and

preparation of invoices and payment cheques which are to be sending to estate owners who sell

their coffee to ABCTCL and also payment of commission to the agent for convincing estate

owners to sell their coffee beans to ABCTCL. He also manages a sub-staff who are 4 in number

and perform all the accounting work and minor transaction required for accounting.


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Mr. NANJUDAsenior general manager of

Production Maintenance

He manages the production process of coffee, management of garblers (manual labour)

and final dispatch of coffee as per the orders. He manages 1 Assistant General Manager of

Production who supervises the production process which carries on through huge hulling

machines, color sorting machines and roasting machines. This assistant general manager again

manages executives and staff who are 15 in number and looks after each and every process and

manages contractual labour and garblers who indulge in manual separations of coffee beans and

final bagging of coffee and loading it into trucks.

However apart from the finance and production department, there is no marketing

department in Hassan head office of ABCTCL because it is export oriented unit and all the

marketing activities are carried out by marketing managers from Bangalore in corporate office of

ABCTCL.

Even human resource managers of ABCTCL are from Bangalore office and all the

human welfare activities of the employees are carried out from their though regular visits by HR

managers to its various branches.

Skill

A skill is the ability, knowledge, understanding and judgment to accomplish a task.

Skills may be defined as what the company does best; the distinctive capabilities and

competencies that reside in their organization.

The organization selects and assigns personnel performing work affecting product quality

based on appropriate education skills and experience. The organization has also a system to

assess the competence of its personnel on periodic basis to identify gap in the performance, if

any as well as assessing their training needs to bridge the gap.


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Identification of Training Needs

Training needs may be new training or re-training these are identified once in a year by

department heads of their employees through appraisal system. New employees or an employee

who has assigned new jobs are identified and given needed training.

Training needs of their employee through appraisal system. New training needs of their

employees through appraisal system new employees or an employee who has assigned new jobs

are identified for training.

Training needs are considered at 3 levels:-

Individual level Department level Organization level

On the job training:

These are types of training given to the employees at the working hours.

Training regarding grading. Hygiene training.

Assistance by senior employees.Off the job training:

These are types of training given to the employees in the leisure hours.

Speeches Lectures Visuals training


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Style

In ABCTCL most of the decisions are taken by M.D of the firm, they follow Top down

Style. In the absence M.D, Directors incharge of respective department takes decision.

M.D

Directors incharge of departments.

Plant Manager

Product incharge

Supervisors

Workers

In ABCTCL they follow Authoritarian style in decision-making. The major decision

regarding operation of the firms is taken by M.D. Other decisions involving higher cash flows

are participative taken involving partners and other officials.


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Shared values

Shared values guide employees towards desired behavior originally called super ordinate

goals; the guiding concepts and principles of the organization values and aspirations, often

unwrittenthat go beyond the conventional statements of corporate objectives. The fundamental

ideas around which a business is built; the things that influence a group to work together for a

common aim.

Shared values are what engender trust and link an organization together. Shared values

are also the identity by which an organization is known throughout its business areas. These

values must be stated as both corporate objectives and individual values. ABCTCL are providing

financial facilities to the farmers. The others branches of the firm are involved in many social

activities

Staff

People are considered one of the most important assets of ABCTCL. The whole company

is successful through a huge chain of people who mange the functioning of this company. Even

in Hassan head office of ABCTCL people management is done to certain extent. There are about

55 people from top to bottom (permanent and temporary staff) which exclude the contractual

labour who may differ from 130 to 150 or 200 depending on the work in on season and off

season of coffee growth.

Pay for the people may vary from Rs.5000 to Rs.85000 (excluding the contractual labour)

depending on the persons position in the organization. Labourers are paid depending on their

work rate which may also differ seasonally. The recruitment of people until the assistant general

manager post and also the pay to them is done directly by the president and other head

authorities directly from Bangalore office of ABCTCL and the recruitment and pay for the

general staff, sub-staff and the laborers is managed by the senior general managers and assistantgeneral managers in Hassan.

Usually experienced people with high skills are selected and qualification must be

Charted Accountant (CA) and Master of Business Administration (MBA) of the people who get

selected for such high post and HR management is done by HR managers from Bangalore


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throughout the company. Apart from the people within the organization, ABCTCL in Hassan

also manages a chain of agent related to it. These agents are situated in most part of Hassan,

Chikmagalur and Coorg districts.

These agents have the job to convince the estate owners to sell their coffee to ABCTCL

and should keep them inform about the advantages and the prevailing prices of coffee as per the

bag rate in ABCTCL. There are about 60 to 65 agents of ABCTCL head office, Hassan who are

also provided with small warehouses of about 100 baggage capacities and are paid commission

for acting as an attractive link between the estate owners and ABCTCL. And these entire agents

are personally managed by Hassan head office of ABCTCL.

Strategy

The integrated vision & direction of the company, as well as the manner in which it

derives, articulates, communicates & implements that vision & directors.

Its strategy is to expand its installation capacity, achieve end-to-end integration for all its

plants to improve margins & reduce cycling of business, achieving greater raw material security,

increasing its focus of corporation & high value costumer, to expand market for ethanol. The

broad level strategy of the company is to focus towards corporate & industrial buyers. Unlike the

traditional mode, dealing with cooperate & industrial buyers has benefits of committed & timely

off-takes, reduced price risk, reduced working capital & reduce dependence on brokers.

System

The decision-making system within the organization can range from management

institution to structured computer systems to complex expert system & artificial intelligence.

System refers to all the rules, regulation & procedure both formal & informal that

complements the company structures. It includes production planning & control systems, costaccounting procedures, planning, budgeting system, capital budgeting systems etc.


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4. SWOT ANALYSIS

Here is the analysis about the Strengths, Weaknesses, Opportunities and Threats of

ABCTCL.

STRENGTHS:

The biggest strength of ABCTCL is that it is the only company in coffee industry with acomplete chain of coffee operations.

ABCTCL carries its operations right from the growing of coffee to the consumption of

coffee by the final consumer.It grows coffee in its own land, procures it, carries productions,

exports it, produces ready coffee products and has also conquered the domestic market. All its

competitors are indulged only in few activities but ABCTCL manages a complete chain of itsoperation.

Among ABC's biggest strengths are the plantation, located in Chikmagalur and Hassan witha combined installed capacity of 1 million bags.

Having our own curing works aids in enabling complete control over grading standards andflexibility. Thus ensuring quality and efficiency.

A highly disciplined and dedicated network of over 42 agents who operate throughout themajor coffee growing areas of India form the back bone for our coffee procurement chain.

Our vertically integrated infrastructure ensures that the coffees never need to leave the ablehands of ABC until final dispatch/shipment.

Strength may be its size. As it is one of the biggest coffee curing companies, it has even

advantage in price stabilization (volatility).

WEAKNESS

ABCTCL is depend upon more manual labors even though high technology High quality coffee beans cannot be produced in Indian market. They can import the high

quality coffee beans.


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OPPORTUNITIES

The overseas market demand for coffee is one of the biggest opportunities for ABCTCL. The demand by European countries and many other countries of the world for India

coffee has created and also creates huge market in future.

Globalization and liberalization has played a very important role in these overseasdealings of ABCTCL.

THREATS

New entrants in Indian market for coffee is one of the biggest threat for ABCTCL changing quality of coffee and its rates due to natural reasons Change in money value in foreign exchange is also a threat to ABCTCL.


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5. FINANCIAL STATEMENT

Comparative statement

Profit and loss account for the year ended 31-3-2011

Particular Previous year

31-3-2010

(crore in Rs)

Current year

31-3-2011

(crore in Rs)

Increase or

decrease

Percentage

Incomes

Export sales 1620334714 1944401657 324066943 20%

Domestic sales 746817999 911117959 164299960 22%Other incomes 28072809 33968098 5895289 21%

Increase / decrease in

stock

374588044 468235055 93647011 25%

2769813566 3357722769 587909203 22%

Expenditure

Purchasing & direct

expenses

1481336390 1866483851 385147461 26%

Operating and

administration expenses

332043383 408413362 76369979 23%

Financial charges 130754745 164750978 33996233 26%

Depreciation 36590922 46470470 9879548 27%

1980725440 2486118661 505393221 25.51%

Operating profit 789088126 871604108 82515982 11%

Adjustments for

exceptional items

Profit on sale of capital

asset

10856 12484 1628 15%

Prior period adjustment 114032 143680 29648 26%

Profit before taxation 788963238 871447944 82484706 10.45%


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Provision for taxation 6300000 7434000 1134000 18%

Profit after tax 782663238 864013944 81350706 10.39%

1431160830 1681120909 249960079 17%

Balance brought forward 648497592 817106965 168609373 26%

Transferred to general

reserve

90000000 114300000 24300000 27%

Balance carried to

balance sheet

1341160830 1566820909 225660079 16.82%


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BALANCE SHEET

Particulars Previous year 31-3-

2010 (crore inRs)

Current year 31-3-

2011 (crore in Rs)

Increase or

decrease

Percent

age

Share holder fundsShare capital 265740666 332175832 66435166 25%

Reserves and surplus 784847105 973210410 188363305 25%

1050587771 1305386242 254798471 24.25%

Loan fund

Secured loan 1144734685 1396576315 251841630 22%

Unsecured loan 396671952 487906500 91234548 23%

1541406637 1884482815 343076178 22.25%

Total 2591994408 3189869057 597874649 23%Application of funds

Fixed assets

Gross block 461181737 581088988 119907251 26%

Depreciation block 119489423 152946461 33457038 28%

Net fixed asset 341692314 433949238 92256924 27%

Capital WIP 34333401 43260085 8926684 26%

956696875 1211244772 254547897 26.60%

Investments 426698514 541907112 115208598 27%

Current assets loans &

advances

Inventories 436771036 576537767 139766731 32%

Sundry debtors 881680667 1110917640 229236973 26%

Cash & bank balance 81645444 84094807 2449363 3%

Advances & deposits 986559644 1223333958 236774314 24%

2386656791 2994884172 608227381 25%

Less: Current liabilities &

provisions

607461856 741103464 133641608 22%

Net current asset 1779194935 2152825871 373630936 21%

Miscellaneous expenditure 10075244 12392550 2317306 23%

Total 25S91994408 3189869057 597874649 23%


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Interpretation:

1. Income increased in 2011 (Rs 3357722769) as compare to 2010 (Rs 2769813566) ismore than 22% increased

2. Expenditure of the company in 2011 (Rs 2486118661) as compare to 2010 (Rs1980725440) more than 25.51% increased

3. Operating profit of a company in 2011 (Rs 871604108) as compare to 2010 ( Rs789088126) more than 11% increased

4. Profit after tax of the company in 2011 ( Rs 864013944) as compare to 2010 (Rs782663238) more than 10.39% increased

5. Sources of fund of the company in 2011 (Rs 1305386242) as compare to 2010 (Rs1050587771) more than 24.25% increased

6. In fixed asset in a 2011 (Rs 433949238) as compare to 2010 (Rs 341692314) more than27% increased

7. Current asset of the company in 2011 (Rs 2994884172) as compare to 2010 (Rs273353852)is more than 25.48% increased

8. Total profit of the company is also increased 13.45% as compare to 2010


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INTERPRETATION OF RATIOS

CURRENT RATIO-

Current assets

Current ratio= _______________

Current liabilities

Particulars 2009-10 2010-11

Current assets 2386656791 2994884172

Current liabilities 607461856 741103464

Current ratio 3.92 4.04

Current ratio is calculated to establish relationship between the current assets and current

liabilities. It is also called as working capital ratio or bankers ratio. The difference between

current assets and current liabilities is called working capital. It attempts to measure the firms

ability to meet its short term obligation.

In any operating concern, the current ratio should be 2:1 it is called as ideal ratio. In ABCTCL

current ratio is 4.04:1. It shows that the company is performing well as there is a higher current

assets compared to current liabilities.

QUICK RATIO-

Quick Assets

Acid Test Ratio= ________________

Current liabilities


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Quick assets 1949885755 1883966532

Current liabilities 607461856 741103464

Acid Test Ratio 3.20 2.54

Liquid ratio is the ratio of liquid asset to current liabilities. It is the more severe and stringent

test of a firms ability to meet its current obligations. Liquid assets are those assets which are

readily converted into cash. It is wise to keep liquid assets at least equal to current liabilities. The

ideal quick ratio is 1:1 for any business concern but ABCTCL has quick ratio of 2.54:1. Here the

quick assets are more than quick liabilities so this is a favorable condition.

NET PROFIT RATIO

Net profit ratio = PAT x100

Net sales

This ratio establishes relationship between net profit and sales which is generally

expressed as a percentage. It indicates operational efficiency or inefficiency of an enterprise.

High net profit is the index of better operational efficiency. ABCTCL has a net profit of 0.30%


PAT 782663238 864013944

Net sales 2367152713 2855519616

Net profit ratio 0.33 0.30


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DEBT EQUITY RATIO

Long Term Debt

Debt-Equity Ratio= __________________

Shareholders equity

This Ratio shows relative contribution of creditors and owners. It is used to analyze long

term solvency of the firm. Debt equity ratio describes the lenders contribution for each rupee of

the owners contribution. ABCTCLhas a debt equity ratio of 0.57:1

RETURN ON INVESTMENT

ROA = EBDIT x100

Total assets


Long Term Debt 1541406637 1884482815

Shareholders equity 265740666 332175832

Debt-Equity Ratio 0.58 0.57


EBDIT 788963238 871447944

Total assets 2591994408 3189869057

ROA 0.30 0.27


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This ratio is also known as net worth ratio or return on shareholders funds. Return on

investment establishes relationship between after tax and shareholders funds. It is very

significant in measuring the overall profitability or operational efficiency of a company. It

enables management to know whether the basic objective of the business maximization of profits

is achieved or not and the shareholders to decide whether their investment is safe and

remunerative. The ABCTCL has a return on investment of 27.00% which is a favorable

indication for the company


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6. LEARNING EXPERIENCE

It was a great experience working in the ABC Trading company ltd when its a goodopportunities to interact with company experience

The company has given full support for me to learn new things, ignoring my mistake Very happy with the S.G.M for his great support, and the way he thought us In corporate every day is special, no one is perfect because every day is new

opportunities to learn new things.

The first day of my in-plant training began with a brief introduction of ABC Trading Company

Limited history. I started my training under the guidance of Mr. VINAY, he is an Senior General

Manager at ABC Trading Company Ltd. He was given an opportunity to refer the organizations

records, where in I got to know about the documentation procedures involved in that work and

gained a fair idea of the functions in ABC Trading Company Ltd.

In every department may be at lower level or at the lower level the concerned people have given

all the necessary information I required. This is organization study helped me to relate the

theoretical knowledge to the practical experience and I learned how a company work practically.


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1. a. GENERAL INTRODUCTION

Inventories constitute the most significant part of current assets of a large majority of companies

in India. On an average, inventories are approximately 60% of current assets in public limited

companies in India. Because of the large size of inventories maintained by firms, a considerable

amount of funds is required to be committed to them. It is, therefore, absolutely imperative to

manage inventories efficiently and effectively in order to avoid unnecessary investment. A firm

neglecting the management of inventories will be jeopardizing its long-run profitability and may

fail ultimately. It is possible for a company to reduce its levels of inventories to considerable

degree, e.g., 10 to 20 percent, without any adverse effect on production and sales, by using

simple inventory planning and control techniques. The reduction in an excessive inventory

carries a favourable impact on a companysprofitability.

Meaning of Inventories:

An inventory is a stock of goods maintained for the purpose of future production or sales.

Inventory consists of those resources of the organization, which include materials or goods in

any stage of completion, which is referred to as stock. It refers to all materials, parts, supplies;

goods in process or finished products recorded in the books by an organization and kept in its

stocks, warehouse or plant for some period of time. It is a list or schedule of material held onbehalf of an enterprise.

Inventories represent the second largest asset category for companies next only to plant and

equipment. The proportion of inventories to total asset generally varies between 15% to 30%.

Nature of inventories:

Inventories are stock of the product a company is manufacturing for sale and components that

makeup the product. The various forms in which inventories exist in a manufacturing company

are: raw materials, work-in-process and finished goods.

Raw materialsare those basic inputs that are converted into finished product through themanufacturing process. Raw materials inventories are those units which have been purchased

and stored for future productions.


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Work-in-processinventories are semi-manufactured products. They represent products thatneed more work before they become finished products for sale.

Finished goodsinventories are those completely manufactured products which are ready forsale. Stocks of raw materials and work-in-process facilitate production, while stock of finished

goods is required for smooth marketing operations. Thus, inventories serve as a link between the

production and consumption of goods. A fourth kind of inventory, supplies (or stores and

spares), is also maintained by firms.

Inventory management

Inventory Management is very important area of production management and plays a vital role in

the economic operations of a concern. It has been defined a variety of ways and most of the

definition stress the importance of control element in achieving cost effectiveness. Irrespective of

the range of particular discipline which may have to be applied within the functional fields in

meeting the needs of individuals situation.

Management of inventory may be defined as the sum total of those activities necessary for the

acquisition, storage, disposal or use of materials.

Inventory management, impact is an integral part of production, planning and control which,

according to Charles A. Kepke, may be defined as the co-ordination of series of function

according to a plan which will economically utilize plant, facilities and regulate the orderly

movement of goods through their entire manufacturing cycle, from procurement of all materials

to the shipping of finished goods at pre-determined rate.

Purchase, production and sale departments are mainly concern with the management of

inventories. Their officials always try to have large stock of inventories to facilitate production

and marketing of the product. It required large amount of investment in inventories, and shall

increase the cost of the product by the amount of interest payable on such investment. It is the

prime responsibility of the financial executive to have a proper management and control over the

investment in inventories so that it should not be unprofitable for the business. For this purpose,

financial management should take care of the maximum and minimum limits of stock of

inventories in the business to have continuity in production process.


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The scope of inventory management is not restricted to technique of regulating the movement of

inventories and it rather covers the entire range of functions, which affects the flow, conversion,

quality and cost of inventories. Efficient management of inventory reduces the cost of production

and consequently increases the profitability of the enterprise by minimizing the cost associated

with holding inventory.

Objectives of inventory management.

The objectives of inventory management may be discussed under 2 heads

a) Operating Objectives.b) Financial Objectives.Operating Objectives:

1) Availability of material

The first and the foremost objectives of the inventory management is to make all types of

material availability at all times whenever they are included by the production department. It is

necessary to maintain a minimum quantity of all types of material to move on the production

schedule.

2) Promotion of manufacturing efficiency:

The manufacturing efficiency of the enterprise increase if right types of raw material is made

available to the production department at the right time. It reduces wastage and cost of

production and improves the moral of workers.

3) Better service to customer.

In order to meet the demand of the customer, it is the responsibility of the concern to produce

sufficient stock of finished goods to execute the orders received.

4) Control of production level.

The concern may decide to increase or decrease the production level in favorable time and theinventory may be controlled accordingly. Proper control of inventory helps in creating and

maintaining buffer stock to meet any demand. Production varieties can also be avoided through

proper control of inventories.


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5) Optimum level of inventories:

Proper control of inventories helps management to procure material in time in order to run the

plan efficiently. It avoids the out of stock danger.

Financial objectives:1) Economy in purchasing

Proper inventory control brings certain advantages and economics in purchasing the raw

materials.

2) Optimum investment and efficient use of capital:

The prime objective of inventory control from financial point of view is to have an optimum

level of investment in inventories. It is the responsibility of financial management to set up the

maximum and minimum level of stocks to avoid deficiency or surplus stock position.

3) Reasonable price:

Management should ensure the supply of raw materials at a responsibility low price but without

sacrificing the cost of production and the maximum the profits of the concern.

4) Minimizing costs:

Minimizing inventory costs such as handling, ordering cost and carrying costs etc is one of the

main objectives of inventory management. Financial management should help controlling the

inventory cost in a way that reduces the cost per unit of inventory.

Inventory cost is the part of total cost of production can also be minimized by controlling the

inventories costs.

Need for inventory management.

Material control aims achieving saving in material costs improvement in material handling

increased production and larger profit.

Timely availability of right type of material resulting in smooth and conditions flow ofproduction.

Purchase of stores of appropriate Quality at responsible price. Minimum capital investment in the inventory by fixing stock levels and avoiding

overstocking.

Economy in buying and holding expenses by evolving an ideal order quality for each item.


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Minimization of risk due to spoilage, obsolescence, theft pilferage by enforcing stock controlmeasures and physical verification in stock.

Saving in material consumption by receiving and revising product design. Correct measurement of efficiency in material consumption by calculating material turnover

index input output ratios etc.

Maintenance of appropriate stock records which furnish the data relating the stock quicklyand accurately.

The reasons for keeping stock

There are three basic reasons for keeping an inventory:

1. Time - The time lags present in the supply chain, from supplier to user at every stage,requires that you maintain certain amount of inventory to use in this "lead time"

2. Uncertainty- Inventories are maintained as buffers to meet uncertainties in demand, supplyand movements of goods.

3. Economies of scale - Ideal condition of "one unit at a time at a place where user needs it,when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying,

movement and storing brings in economies of scale, thus inventory.

Importance of Inventory management.

Investment in inventory normally accounts for about 1/3 value of the total assets and for an

average manufacturing concern, cost of inventory represents about one half of the product cost.

Because inventory constitutes such a significant part of product cost , since the cost is

controllable, proper planning, purchasing, handling, accounting and control of inventories is of

great significance.

Inventory management is now great significance in a view of imperative need for productivity

growth. Optimal utilization of all available resources and avoidance of all types of waste

especially in case of raw materials is required for an ambitious programmer of economic growth.


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Statement of the problem.

The problem selected for the analysis is to study the effectiveness of Inventory Management at

ABTCL. The effectiveness of the prevailed system is analyzing simultaneously.

The variation of the prices of raw materials are also analyzing with their effects upon the overall

working of the unit. Regarding the purchase procedure and vendor rating procedure also seems

very difficult for the smooth functioning of the company. The system of purchase and vendor

analysis into account for the analysis as these two aspects relates to materials Management.

Objectives of the study

1. To study the inventory management of ABCTCL

2. To know the different levels of inventory

3. To study the carrying cost of inventory

4. To study & identify the investments in inventory

5. To know the inventory turnover ratio

Scope of the study.

The study covers information given by the staff of the company, financial reports and other

publications of the company.

The study confined to Amalgamated Bean Coffee Trading Ltd. only.

Methodology.

This section explains how the data is collected that is either from primary and secondary data. It

explains what method is used to collect the data, which instrument is used for collection in order

to meet the objectives of the project that is studying the inventory management in The

Amalgamated Bean Coffee Trading Company Ltd. I have collected the information through

Primary Data and Secondary Data.


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The preparation of this report involves several phases and they are as follows.

Tools of data collection are as follows

1. Primary data

2 .Secondary data

Primary Data:

Information gathered from company officers, from our guide by personal interview that is face to

face interview.

Secondary Data:

Company annual report Text books Web sites

Limitation of the study.

1. The study is purely conducted upon the reference drawn and data which is available asper financial statement of the company and theoretical conclusions arrived at are basedon the basis information provided by the company.

2. Limited information available for the study.3. The time allotted for completing the whole project was only 10 weeks. Its not

enough for understanding about the organization in detail.

4. The research conducted based on the five years financial statement

Requirements of Inventory Control

Proper co-ordination of all departments includes viz. finance, purchasing, receiving,inspection storage, accounting, and payment.

Determining purchase procedure to see that purchases are made after making suitableenquiries at the must favorable terms of the firm.


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Use standard forms placing the order, receipt of goods, authorizing issue of the materialetc.

Preparation of budgets concerning materials, suppliers and equipments to ensureeconomy in purchasing and use of materials.

Storage of all materials and supplies in a well designed location with Proper safeguard. Operation of a system perpetual inventory together with continuous stock checking so

that it possible to determine at anytime the amount end value of each kind of material in

stock.

NEED TO HOLD THE INVENTORY ABCTCL

Inventories holding involve blocking if firms funds and the cost of storage and handling, but

every business enterprise has to maintain a certain level of inventories to facilitate uninterrupted

production and smooth running of business. In absence of inventories a firm will have to make

purchases as soon as it receives orders. It means loss of time and delays in execution of orders,

which sometimes may cause loss of customers and business (stock outs).

Therefore also the need to maintain inventories to reduce ordering cost and avail quantity

discount etc, . There are three main purposes or motive of holding inventories

Maintaining inventories involves tying up of the companys funds and incurrence of storage and

handling costs. Why ABC hold inventories?

In ABC three general motives for holding inventories,

1. Transactions motive2. Precautionary motive3. Speculative motiveTransactions motive is main aim maintain inventories is a facilitate smooth production and

sales operation. In ABC the hold coffee beans for smooth production coffee .


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In precautionary motive holding of inventories to guard against the risk of unpredictable

changes in demand and supply forces. Coffee beans is available only seasonal time of November

to may, ABC maintain the inventory available coffee beans that time only.

In speculative motive influences the decision to increase or reduce inventory levels to take

advantage of price fluctuations. ABC maintain coffee price market fluctuation, in previous above

coffee price is very low, in this days coffee price very high. In that basic maintain inventory very

sufficient levels.

Objectives of inventory holding in ABCTCL

1. To ensure the timely supply of raw materials finished products and other spares inrequired quantity for production purpose and to meet frequent varying demands of the

customers.

2. To utilize available storage space economically by fixing stock levels.3. To minimize as far as possible, investment into inventories, inventory carrying cost and

likely obsolesce loss.

4. To obtain the economies of large scale buying.5. To achieve wealth maximization objectives.6. To know comparative cost and consumption of materials over different periods.

Classification of Inventory

Inventory can be classified in terms of its different uses. This will enable us to appreciate the

peculiarities and problems in the variety of uses. It also enables us to adopt control techniques to

suit the needs.

Inventory can be segregated according to usage and point of entry in the operations as raw

materials, work-inprogress, finished goods .

Raw materials

Raw materials are the major input into an organization and form the bulk, which gets converted

into finished product. As any break in the supply of raw materials will bring down the entire

process to a halt. There are two important factors, of ABC to maintain inventory One is the

consumption rate and the other is the criticality of the item or lose the weight.


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Work-in- process

Inventories are semi manufactured products. They represent products that need more work

before they become finished product for sale.

Finished GoodsFinished goods act as the buffer between the production department and the marketing

department. The input rate is quite predictable because of the production schedule, but the

consumption of inventory depends on the behavior of the market. The purpose of finished goods

inventory is to assure the market a constant supply in the distribution channel. In majority of the

organizations, the marketing department controls finished goods inventory. Here also, at the

ABC Ltd the supply and distribution department maintains this inventory

Purchasing Process

Material control means purchasing, storing and consumption of materials in a systematic manner.

The main object of cost accounting is to minimize the cost of production. To realize the above

objective, there should be proper control of materials. It is also necessary to eliminate the

absolute stocks. Since that storage space and storage cost are reduced, further control over

material is also necessary to prevent extra expenses on their unnecessary purchase and improper

use of material a regular supply of materials helps greatly the production.

The following steps are necessary to be followed. For efficient and proper control of materials:

Purchasing of materials. Receiving and inspecting of materials. Storing of materials. Issuing of materials. Accounting of materials. Keeping physical and perpetual inventory records.


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1. Purchasing of materials

Each and every organization purchasing materials is most important factor for smooth

production. In ABC also purchasing materials from following sources

Own plantation of ABC

Agent of ABC

Customer of ABC

2. Receiving and inspecting of materials

Materials purchasing from different sources, inspecting materials another most important. ABC

can purchasing materials the inspecting materials from different basic i.e. quality of coffee beans,

different product basics.

3. Storing of materials.

After inspecting the materials, storing materials also important, each manufacturing organization

maintain different storage department for materials. In ABC also maintain different storage

department different product base. In Hassan storage capacity is 70000 tons.

4. Issuing of materials.

Issuing of materials in production department in required quantity for production of the product.

In ABC also issued raw materials required quality for the production.

5. Accounting of materials.

Accounting of materials is important factor, materials is assets of the firm. Each materials value

in the cash.

6. Keeping physical and perpetual inventory records.

Organization maintains a book record of inventory is important, day by day in checking

inventory and record the book. It helps the organization to verify the inventory issue and

received.


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The Costs of Holding Inventories Are As Follows

Material Cost: This include the cost of purchasing the goods, transportation andhandling charges less any discount allowed by the supplier of goods. In ABC also include

material cost include the transportation charge and handling charge etc.

Ordering Cost:This includes the variables cost associated with placing an order for thegoods. The fewer the orders, the lower will be the ordering costs for the firm. ABC

maintains other cost is clerical staff, receiving, inspecting and storing cost.

Carrying Cost:This includes the expenses for storing and handling the goods. In ABCcomprises storage costs, insurance costs, spoilage costs, cost of funds tied up in

inventories etc

Inventory process of ABCTCL

Inventory process of amalgamated bean coffee trading company ltd is maintain good

relationships with their different customer. ABCTCL maintain around 5000 customer, they

maintained all customers directly. The ABC can appoint the agent of different area based. The

Hassan amalgamated bean coffee maintain around 35 agencies. The can maintained small

warehouse department .the storage capacity is 200 bags. The agent can maintain the relationship

with their customer.

The agent can supplied raw coffee beans to head office of Hassan. The agent can maintain two

receipts. There are

1. Sales consignment (store)

2. Purchase invoice (sale)

Sales consignment is storing the coffee beans for particular period of time. The

customer was the high rate of coffee. That purpose they can stored, agent can filled the name of

customer, quantity, type of coffee etc. the storage capacity of Hassan is 70000 tons, adequate

space available.

Purchases invoice issued sale purpose the customer can sell coffee beans. The

agent can filled the purchased invoice the include the information of customer name, agent name,


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quality quantity, and also today rate coffee that all information can filled in the documents. That

based issued the cheque customer which bank proffered in the purchase invoice that bank can

issue cheque. This all process agent received the commission.

PRODUCTION PROCESS

1. The dried coffee is transferred to hulling machines. These CNC machines carry on the process

of DEHASKING, that is removal of the skin from coffee beans and the skin is removed as waste.

These machines are 3 in numbers and 1 is imported from Buler Comp, Germany costing Rs. 40

lacks. Other 2 are Indian made & costs Rs. 25 lacks each.

2. Next polishing of coffee beans takes place to bring the smooth texture and shiny look in

coffee beans.

3. After that these polished coffee beans enter a colour sorting machine which differentiates

green coffee beans from black.

Green coffee is more costly and is considered as proper bread with good quality whereas black

beans are considered as low quality coffee. Colour sorting machines are imported from USA and

are worth Rs.40 lacks.

4. Next the coffee enters the roasting machines and is roasted to get the original look and color ofcoffee. The roasting machine is worth Rs.80 lacks and is imported from Germany. This roasting

process is one of the most important processes in coffee curing where the real color and taste of

coffee is emerged.

5. After roasting, GARNING is done by manual labours and defectives are removed.

6. Grading of coffee is done and are separated according to its size, color and appearance and

are given quality names such as AAA, AA, PB, BB etc

7. Each different type is loaded and packed into bags and rates are based on bag.

The baggage quantities of each bag are as follows.

Unprocessed coffee-50 kgs/bag Processed coffee-75 kgs/bag (domestic dealings)


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Processed coffee-60 kgs/bag (export dealings)Each types of coffee is placed in different places in warehouses and as and when the export

orders are placed in Bangalore, coffee is loaded into containers, weighed to know the

requirement and the trucks are sent to Bangalore which are checked again and further sent to

Chennai port for shipment export etc.

PURPOSE OF INVENTORY MANAGEMENT

Inventory management must tie together the following objectives, to ensure that there is

continuity between functions:

Companys Strategic Goals

Sales Forecasting

Sales & Operations Planning

Production & Materials Requirement Planning.

Inventory Management must be designed to meet the dictates of market place and support the

companys Strategic Plan. The many changes in the market demand, new opportunities due to

worldwide marketing, global sourcing of materials and new manufacturing technology means

many companies need to change their Inventory Management approach and change the process

for Inventory Control.

Inventory Management system provides information to efficiently manage the flow of materials,

effectively utilize people and equipment, coordinate internal activities and communicate with

customers. Inventory Management does not make decisions or manage operations; they provide

the information to managers who make more accurate and timely decisions to manage their

operations.

Special terms used in dealing with inventory

Stock Keeping Unit (SKU) is a unique combination of all the components that areassembled into the purchasable item. Therefore any change in the packaging or product is

a new SKU. This level of detailed specification assists in managing inventory.

Stock out means running out of the inventory of an SKU.


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New old stock" (sometimes abbreviated NOS) is a term used in business to refer tomerchandise being offered for sale which was manufactured long ago but that has never

been used. Such merchandise may not be produced any more, and the new old stock may

represent the only market source of a particular item at the present time.

Inventory management of ABCCL

Inventories constitute the most significant part of current assets of large majority of companies .

The large size of inventories maintained by firm, a considerable amount of funds is required to

be committed them. It is, therefore, absolutely imperative to manage inventories efficiently and

effectively in order to avoid unnecessary investment. A firm neglecting the management of

inventories will be jeopardizing its long-run profitability and may fail ultimately.

In Amalgamated bean coffee they can maintain inventory very sufficient level.

They can by the buy the coffee various agent of ABC, own plantation of ABC and also customer

ABC. In ABC they can buy the four different variety of product. There are

1. Arabica cherry

2. Arabica parchments

3. Robusta cherry

4. Robusta parchment


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Table showing different types & sub divisions of coffee beans.

TypesArabica

parchment

Arabica

Cherry

Robusta

Parchment

Robusta

Cherry

S

U

B

D

I

V

I

S

I

O

N

S

AAA

AA

A

B

C

PB

BB

Bits

EB

AA

A

AB

C

PB

BB

Bits

AA

A

AB

C

PB

BB

Bits

AA

A

AB

C

PB

BB

Bits

AAA = Triple A

AA = Double A

PB = P Berry


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BB = Black Berry

EB = Elephant Berry

This table is showing different varieties of coffee. In this basic they stored different store

sections.

The storage capacity ABC of is 70000 tons. They maintain coffee beans very good quality,

different storekeeper

Functions of inventories in ABCTCLSince inventories exist because of differences in supply and demand process rates, any

meaningful purpose of their existence will be rooted in either the desirability or the necessity that

these two rates differ. Within this general framework, functions of inventory can be defined.

Protection Against Stock outsTo the extent that supply or demand process fluctuates unpredictably there is the risk of

running out of stock and suffering the associated customer strife, disruption of operations,

expediting costs, etc., insurance against such stock outs is provided by so called buffer stocks.

The need for such stocks increases as the time between the occurrence of the random fluctuation

and the consumption for it increases and also of course, as the fluctuations increase.

Operations SmoothingDemand processes are typically subject to foreseeable rate change. This fluctuation is

usually synchronous with the season of the year or with the phenomenon of the business cycle.

Although such fluctuations can be accommodated in other ways, such as changing production

rates, there is usually the alternative of producing and storing in anticipation of peak demand.

Just as with buffer stocks smoothing stocks may also accommodate known fluctuations in

supply.


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Lot Size EconomyEven if it were possible to maintain supply and demand processes which were equal and

time invariant, usually it would not be desirable to do so. This is because of supply of goods at a

constant rate implies a large number of delivers with a small number of items per delivery. Thiswould disregard the economies associated with a small number of deliveries and a large number

of items per delivery. If the supply process involves shipment and receipt of goods from an

outside supplier, the economy basically arises from lower shipping and delivery costs. In some

cases, this may consist of a suppliers offer of a quantity discount on large orders.

Control System EconomyAn often-overlooked purpose for carrying larger inventories is that less control effort is required.

For ex: it may be cheaper to carry larger stocks and review stock levels less frequently.

Market SpeculationPrice fluctuations of supply may dictate premature acquisition. Anticipation of a future increase

in selling price suggests a delay in disposing of stock on hand. Conversely, declining market

price as a motivation for creating a negative inventory. Such market advantages are certainly not

confined to material prices. A pending increase in labor costs may make it advantageous to stock

finished goods

Stores management

Purchase Requisition:

When a different coffee beans need department they should initiate through requisition.

Depending upon the requisition the material is confirmed.

Indenting Of Material:

In case of any items required the concerned department will raise indent (Stock position ofmaterials is available in stores ledger and any interested person can refer to it) through computer

with specified material code, number and description and required quantity. Related clerks will

verify these indents. If the same material is found with the stock, check the same whether these

stock belonging to any other user department. If not it is filled with stock quantity and reduces

the order quantity.


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If material belongs to other user department confirmation is obtained whether stock of material is

required them or not, then forward the indent to store purchase officer.

Goods inward:

Purchased materials which contains the detail of material description purchase order number

along with the Delivery Challan number, bill number, mode of transport, delivery schedule etc

are received in stores.

Inspection and Test Status:

When the materials received the user department arranges for the inspection of that material.

After inspection the user department puts approval or rejected remark and returns to the stores

department. When user department puts approval, bill is passed. If the goods are rejected by the

user department it has specify the reason for rejection and returned to supplier.

As regard to chemical material, chemical analysis report is sent to chemical department for

analysis, if material are as per required standards it is accepted and if not same will retuned.

Weigh Bridge Function:

Bulk material is weighted in companys weigh bridge and weighment slip will be issued. All the

details of delivery, invoice and unloading contractor will appear on weighment slip. Weighment

slip is prepared in triplicate. The first copy will be examined by stores. The second copy will be

attached to lorry receipt which in turn will be hanged over by the driver to the accounts

department. The third copy will be retrained by weigh bridge people. The weighment slips are

done only when essential.

Issue:

Material are to be issued through Material Requisition Slip(MRS). The MRS contains

information such as slip number and date, department, section, purpose where material issued,

material code number with description etc. Requisitions to be signed only by the authorized

thereafter material is issued. All the above details are filled by the user department. The material

issued from stores mainly stores go down. The issue feeding data is done on a day to day basis

for updat

final abc inventory

Documents

bags of coffee

cultivation of coffee

today coffee

cup of coffee

coffee industry

tocultivate coffee

world coffee production

world coffee exports