project report on inventory mnagement

7/28/2019 Project Report on Inventory Mnagement

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Industry Overview

Chemical industry is one of Indias oldest industries, contributing significantly towards the

industrial and economic growth of the nation. The Indian Chemical Industry forms the backboneof the industrial and agricultural development of India and provides building blocks for severaldownstream industries. According to the Department of Chemicals and Petrochemicals, the

Indian chemical industry is estimated to be worth approximately US$ 35 bn, which is about 3%of Indias total GDP. The total investment in the Indian chemical industry is approximately US$60 bn and total employment generated was about 1 mn. In terms of volume, it is 12th largest inthe world and 3rd largest in Asia.

Exports of chemicals from India have increased significantly and account for about 14% of totalexports and 9% of total imports of the country. The Indian chemical industry comprises bothsmall and large-scale units. Fiscal concessions granted to the small sector in the mid-eighties ledto the establishment of a large number of units in the Small Scale Industries (SSI) sector.

The major sub segments of this industry include alkali, organic chemicals, inorganic chemicals,pesticides, dyes & dyestuffs and specialty chemicals. The Indian chemical industry deals inproducts like fertilizers, bromine compounds, catalyst, sodium and sodium compounds, dyeintermediates, inks and resins, phosphorous, paint chemicals, coatings, isobutyl, zinc sulphate,zinc chloride, water treatment chemicals, organic surfactants, pigment dispersions, industrialaerosols and many more.

The commodity chemicals are the largest segment in the chemical market. Some of the majormarkets for chemicals are North America, Western Europe, Japan and emerging economies inAsia and Latin America. The Indian chemical industry is matured and is in the midst of a majorrestructuring and consolidation phase. Globalization has opened the doors for this sector tocapture a major part of the global market pie.

The sector has experienced many reforms in India and is expected to grow at 15% p.a. in the nearfuture. The investment in R&D will also play a vital role in this sector. In a nutshell, the Indianchemical industry has a large potential to grow in domestic as well as in export markets. In thecurrent market conditions, with an appreciating rupee, pricing will be a crucial factor whilecompeting with other exporting countries.


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Company Overview

Established in the year 2006 Tridev Resins is an organization situated in Vapi (Gujarat),India, . The company is engaged in the manufacture, sales and exports of various SyntheticResins & Acrylic Emulsions and caters to various industries like the Printing Inks, Ball Point PenInks, Lacquers, Varnishes and Paint Industries.

The factory building is designed in such a way that it can process approx. 3600 tonnes of

Resins in a series of reactors, fully equipped with condensers, receivers, filter machines, boilersto process all kinds of Resins & Acrylic Emulsions.

Tridev Resins Pvt. Ltd products are of international standards to multinational companies, large,medium and small scale Indian industries. It is also engaged in exporting of many products tovarious countries.

Tridev Resins Pvt. Ltd. is equipped with latest Quality Control facilities to test the raw materialsas well as finished products. It also has round the clock working process control laboratory, so asto make the products of consistent quality. Tridev is very keen to update qualities of theirproducts and to develop newer products to keep pace with international range of products, used

with added advantage of better properties at a much competitive price. The efforts of upgradingthe quality of all the existing products is a continuous process of the company, based on thegrowing need of the customers for the higher quality of the products from time to time.

The management and administration of the Tridev Resins flourishes under the flagship of youngand dynamic Mr. Shwetal Sakaria (Marketing Management) and the backbone of technicalexpert Mr. Vinod Oza (B.Sc.) who has tremendous experience on the chemistry of polymers.


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General Information

TRPL runs 24 hours. The number of working days 26 in a month. Number of working hours is 8hours in a day.

TRPL runs 3 shifts in a day. TRPL provide weekly off on Tuesday. CL and PL as per government norms. TRPL manufacture two types of products synthetic resin and acrylic emulsion The TRPL exports 70 percentage of their products in Europe, USA, Gulf and China.

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History Of The Company

Established in the year 2006 Tridev Resins is an organization situated in Vapi (Gujarat), India.The company is engaged in the manufacture, sales and exports of various Synthetic Resins &Acrylic Emulsions and caters to various industries like the Printing Inks, Ball Point Pen Inks,Lacquers, Varnishes and Paint Industries .

BOARD OF DIRECTORS

Name of Person Designation E-mail ID

Shwetal Sakaria Managing Director [email protected]

Vinod Oza Technical Director [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Total Quality Management Principles

We are committed to continually improve in:

Satisfying the customer. Having the minimum practical number of managerial layers management supporting,

coaching, and empowering employees. Performing only value-added activities and rigorously eliminating those which are not. Becoming effective and efficient in the performance of these value-added activities. Maximizing effective teamwork, both multi-functional and within the natural work

group. Measuring our performance, correcting our deficiencies, and applauding our successes. Above all, continuing to learn new techniques, new tools, and new methods to meet the

challenges of the future.

Quality Policy

Tridev is dedicated to providing products and services which consistently meet or exceed the

requirements of our customers. We promote personal involvement, teamwork, continuous

improvement, and proactive problem solving to drive this commitment to quality. In every facet

of our operations we are dedicated to applying these principles while maintaining an equal

commitment to the health and safety of our employees, plant neighbours, customers, and the

environment

Product Stewardship

Tridev Resins is concerned about the health and well-being of our customers, employees, and thecommunity. We are committed to reviewing and improving upon our manufacturing processesand products to minimize any adverse safety, health and environmental impacts.In accordance with this commitment, Tridev will strive to:

Design safe, energy-efficient, and environmentally sound products and processes. Transport products safely in packaging which conserves resources and meets customers

needs. Bring value to our customers by continually improving our products and processes. Enhance partnerships with our customers, suppliers, and the community to fulfil these

responsibilities.


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Company Policy

Remain committed to servicing the industry via a Distribution network.

To build long lasting, profitable business relationships with our Distributors andCustomers. Concentrate on growing globally

Safety Standards

Tridev Resins (I) Pvt. Ltd. is basically a chemical based company. So there were manyhazardous reactions taken place so that safety and health of all the employees and workers is theprior concern for Tridev Resins (I) Pvt. Ltd.

Tridev Resins (I) Pvt. Ltd. takes due care to ensure safety aspects in conformity tovarious applicable low rules there under to offer safe and healthy work culture withinthe plant.

The entire employee in the plant safety measure is must like helmet, goggles, gloves,gum-boot, shoes, mask, etc. as applicable.

Safety, health & Environment policy has been formulated and is integrated in all plantactivated.

Permit to work system strictly followed and job is initiated only after ensuring the safework environment.

Personal protective equipment is must for all plant personnel to prevent exposure/injuryduring course of work.

Adequate application is provided to each plant in ready to use condition. A detailed safety audit is conduction at regular intervals by the expert agency. Safety committee meets on regular basis to review to safety aspect. Practical training regarding accident solution given two or three times in a year. Safe & open place in kept in the company for emergency accident


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Human Resources Department


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Human Resource Management is the staff activity requiring special knowledgeand skill in understanding and predicting individual behaviour, interpersonal

Behaviour, group Behaviour and Organisation Behaviour.

Recruitment Policy

In Recruitment procedure firstly assess the requirement from the plant or at any place in the organizationand check the no. of. Requirement against the work, then only decided the actual no. of Vacancy.

Sources of recruitment:

Advertisement in News papers

Recruitment by Internal Sources

Through Recruitment Agencies

Contractors of Labours

Casual Labours

Minimum Qualification needed for

Plant in charges M.Sc / B.Sc. or B. E with a minimum 5 years of experience.

Chemists BSc. Pass, EngineersB.E./Diploma,

Fitters, Wiremen, WeldersITI Passed Certificate.

General Policy

The staff have compulsory one day off per week. The staffs members are allow having 21 days leave in a years(voluntary) Salary is also given in advance if require by the employee. Med claim for each employee is provided and the employees have to go medical check-up in a

year.

Employees are allowed to come up to 10 minutes late with a genuine reason. Except manufacturing process of Dyes & dye intermediates all the works are done by takingpermission of Environment & Safety Department.


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MAN POWER PLANNING:-

According to the requirement of the personnel for the plant is met with keeping in view offollowing:

Technical concept of plant, Including process control and instrumentation. Smooth and efficient operation of plant. Effective co-ordination between the various departments within the plant. Optimum organization with well designed and judicious job distribution. Optimum utilization of different grades of workmen and supervisory staff members. Maximum capacity utilization of capacity.

Man power planning is done formally by the different departments in charges. The department in chargesends the requirement to the Personal Department.

Man power planning is done generally through workout that are the requirements of different departmentis send to personal department and then further appropriate action is taken. At the time of expansion therequirement of the plant in charge is fulfilled by erector so as to have a full and appropriate utilization ofthe capacity. For Labours Man power planning is done by way as per the present requirement and fulfilled

by Labour Contractor.

RECRUITMENT AND SELECTION PROCESS:-

It is simple terns, recruitment is understand as the process of searching for the and obtaining applicationfor jobs, from among whom the right people can be selected.

The man power requirement is fulfilled by local sources or advertisement in News papers. Beforedeciding above the person to be recruiting, the company takes various criteria into consideration.

Employees physical fitness to the job. The employees health is the most prior thing. Employees Bio-Data. Employees education qualification Employee work experience His image in society Salary and Benefits


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Process for Fulfilling Man Power Requirement

Tridev Resins (I) Pvt. Ltd. has their own way of recruitment of people

For general Labour recruitment:

Labour Contractor

Casual Labours

For staff like chemists, Engineers, in charges, officers follow a particular process.

Step1

The company advertises in News paper or through local sources to make the candidate aware aboutvacancy in the company with qualification and experience required.

Step2

Then the applications fitting the company requirement comes and collect the application forms.

Step3

Then after the forms are filled company takes interview and written test for the assessment of the theoryknowledge.

Step4

The company selects among the candidates, by bifurcating the candidates into two parts (1) whose scorein exam is high and passed the interviews (2) person who has passed interview but scoring is bed.

Step5

The candidates then have to cross practical interview and the one who is found more practical is thenselected.

Step6

The selected candidate is called to fulfill all legal requirements and asked for induction training.


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PERFORMANCE APPRISAL PROCESS:-

1. Employees are evaluated annually and performance appraisal done by hierarchical basis. That iseach Department Head evaluate their subordinates.

2. For workers, technicians, fitter, wiremen, electricians, supervisors, chemists, engineers etc. areevaluated by relative plant in charges and the evaluation of in charges is done by directors.

3. For workers, technicians, fitters, wireman, electricians are evaluate on the basis of attendanceand work-disciplines.

4. For supervisors, chemists, engineers, plant in charge performance appraisal form is preparedand the forms are filled by hierarchical basis.

5. Employees are motivated by awarding annual increment/promotion etc the annual promotion isto be awarded to the individual employees accordingly to their seniority, grades, pay-scale,

performance efficacy, punctuality, attendance.

6. Performance appraisals of marketing agents are done on the basis of monthly performance anddiscipline in payment schedule (within 15 days).

TRAINING AND DEVELOPMENT:-

For all the new employees staff induction training is given in plant new employees had to work in generalshift until plant in charge feel that the new employee is responsible for the night duty.

For all employees monthly related training or lectures are given by the safety executive or by outsidelecturer.

For in charge various training or lectures about maintenance planning, best utilization of workers andmaintenance, cost reduction are give.


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WELFARE ACTIVITIES:-

Tridev Resins (I) Pvt. Ltd provide P.F to those employees whose salary is below Rs. 6500 andabove Rs. 6500. It volunteers for them to cut the P.F. not compulsory.

Group accident policy was done once in year, the beneficiary may be the father, mother andchildren.

Workman compensation policy for employee welfare. Bonus is given in the month of April & October to the entire employee as per percentage

described. Six month salaries provide Bank through foe the employees. Yearly medical check-up is done. In the night-shift company provide two time tea & coffee at free of cost at 1:00, 3:00am. Training is given about safety and pollution control. Celebration of world Environment Day i.e. 5th June. Celebration of National Safety Day i.e. 4th March. Company provide for supervisor for the Housing Facilities. Company provide Schools, Banks, Transport, Game, Club, Cultural Programmers etc, facilities

provide the employees.

HEALTH DEPARTMENT:-

Tridev Resins (I) Pvt. Ltd is very conscious about health and care of the employees andtherefore maintains OHC within the plant premise.

The first aid boxes with necessary medicines are kept by the trained first aids and plant in chargein the plant.

Regular medical check-up of all employees is carried out by the factory medical officer at theinterval of six months and again by external expert agency every year.

Training programmers on first aid is frequently conducted by factory Medical Officer to train thePlant personal.

WAGES & SALARY ADMINISTRATION:-

Wage & Salary administration refers to the establishment and implementation of sound polices andpractices of employee compensation. Generally the wage is the compensation which is given to the

worker categories. In Tridev Resins (I) Pvt. Ltd wage and salary is given in following structure.

For staff it includes:

Basic Salary Medical Allowances Housing Allowances Transportation Allowances


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For workers it includes:

Basic Salary Medical Allowances Overtime

Salary and advance is given regularly to all the workers from the cashier in the company staff

salary was made by cheque of Bank of Baroda, vapi GIDC Branch. Date of salary is fixed i.e.

between 10 to 15& for advance it is 25th of the every month.

Joining module

The company allows the employee to join within a week or according to his convenience

i.e(max.1 month)

Grievances & grievances handling

The disputes or issues in the company are handled by Mr. AMIT KOTHARI ( H.R MANAGER)

Provident fund schemes:

12% P.F is deducted from the salary and 1.75% E.S.I.C of workers and supervisors.

Office Time:

For workers- 2 shift (8:00 am to 8:00 pm)

For employees-9:30 am to 6: pm


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Marketing department


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In Tridev Resins (I) Pvt. Ltd. the marketing of the resins are done by using direct marketing.

Here in companys finished products i.e. resins are used by other company as a raw material . so

customers directly contact to the company & customers place an order to the company directly as

per their requirement. The transaction of the customers are mainly done through the phone & e-

mails with the company. The marketing of the product is done by the company.

Here the local market of the product is managed by mr.vinay ojha & mrs.rupal Mehta. While the

international market is managed by mr.vinod ojha & nr. Swetal sakaria.

Channels of marketing

Internet Seminars

All material is sold through company itself no agent is there. The company is currently supplying

finished RESINS products in countries like , Singapore, Syria, , Nepal, Bangladesh, us. North

America and Hong Kong as well in local market like

Western region-Gujarat& Maharashtra South region-Bangalore, Hyderabad, Chennai North region-Noida, Ghaziabad, Kanpur, Gurgaon, Delhi East region- Kolkata.


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Production Department


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A plant lay-out refers to the arrangement of machinery, equipment and other industrial facility such as

receiving and shipping departments, tool rooms, and maintenance room and employee amenities for

the purpose of achieving the quickest and smoothest production at the least cost.

A plant lay-out is a floor plant for determining and arranging the desired machinery and equipment of a

plant, whether established or contemplated, in the one best place to permit the quickest flow of

material at the lowest cost and with the least amount of handballing in processing the product from the

receipt of the raw material to the shipment of the finished product.

Tridev Resins (I) Pvt. Ltd. has such a wonderful arrangement of their production plant. In all the plant the

starting point of the process is at the top floor and end is at the ground floor and at the basement, here

in the plant all the process is being on the continues basis so the arrangement of wesseles, coupler, etc.

are very crucial.


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Production Process:-

This resin is made through the elimination reaction process between polyvinyl alcohol and

butyraldehyde with acid as a catalyst. It has the fine characteristics of being transparent,

insulating, impacting resistant and highly adhesive to glass, metal, wood, films, ceramics, leather

and fibers etc. The products are non-toxic, odourless, with good adhesion and highly transparent.

Step1- Raw material is taken from the store department. Raw material like cyclohexamount,

formaldehyde, caustic soda plus additives.

Step2In reactor cyclohexamount is formally heated at 50 to 60

C here the heating process isdone for 90 minutes.

Step 3 Than caustic soda is added for reaction purpose including additives & than again it is

heated for 150 min in reactor.

Step 4 Cooling is done at a specific temperature & it is 90 to 95C this process is done for 1

hour.

Step 5Than it is collected in a vessel which is again washed with water & put it in a stream

dryer at 80 to 90C.

Step 6Than the resin is packed in to different packets.


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Product manufactured by the company

Synthetic Resin

Acrylic Emulsion


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Purchase & Stores

Department


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Material receipt procedure

Receiving of MaterialSecurity will verify the challan and entry in gate inward register then they inform in the store

department regarding the material. Then inspection of physical quantity with challan copy and

quality checking are done. If that will ok then material received by store assistance then he

inform to purchase manager.

Storage and MaintenanceFor the storage of materials the FIFO is being followed. For maintenance of material everyday

inspections are done by purchase manager. In store fire extinguishers are provided. Store builder

in such a way that air ventilation will then store keeper will allow to issue of materials.

Issue of MaterialsFor issue of material issue slip should be signed by the required plant in charge and then store

keeper will allow to issue of materials.

Store Manager files various records such as Material issue record Stock register Gate pass register Pending purchase order Purchase indent register


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Classification of inventories

In Tridev Resins (I) Pvt. Ltd premium quality material used to produce resins & Acrylic Emulsions.

All inventories are mainly classified in to two categories i.e. solid & liquid. The classification is

represented graphically as follow.

Inventory

Solid

Resins

coloursilica sand

Adhesionpromoters

Liquid

AqueousAcrylic

EmulsionsAcrylicResin

Solution

overprintVarnishes

Heat SealLacqures

WaxEmulsions


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Material handling systems:-

Material Handling is defined as control movement of material from receipt of material, during

storage and production operation up to the dispatch of finished product. It concern with all type

of material like raw material, work in progress, finished product, scraped and surplus material

and capital equipments. There are mainly two objectives of material handling.

1. Storage of material2. Shifting of material from one location to another within production unite.

It is not concerned with external movement of material. It is covered by separate discipline called

Logistics

Types & classes of material handling equipment:-

In Tridev Resins (I) Pvt. Ltd. Material handling is done by pipelines, trolleys, lifts, drums and

manually also. It is depend up on the form of material. Following table will help in

understanding.

TYPE OF MATERIAL MATERIAL HANDLING EQUIPMENT

Liquid Pipelines

Powder Trolleys, Lifts (With Manual help)

Water Drums (With Manual help)


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Financial Department


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Financial Management is the activity which is concerned with Planning and Controlling of the

firms financial recourse. Finance is regarded as the life blood of business or organization. The

study of finance management related to the process of procuring financial resources and its

judicious utilization with a view of wealth maximizing of owner. Every Business is based on

Finance.

The first and most function of finance department are providing money for the purchase

of raw material for the production department.

Definition

Financial Management means managerial function like Planning, organizing, controlling

and using of funds needs in the business.

OBJECTIVE

To prepare a balance sheet at ever. To Monitor and measure internal customer satisfaction. To maintain working capital at minimum level compound to last year.


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FINANCIAL HIGHLIGHT:-

The year 2011-2012 proved to be improved for the company oaring the year under review

the sales increased from Rs. 217337757.6 RS in the previous year to Rs.269056363 an

increase of 23.79%. However the internal expenses to introduce new product is relate to

expansion and due to heavy the PBT and PAT was effect. The management is taking due

measure to maintain the Profitability of the company.

OPERATION OF FINANCE DEPARTMENT:-

The company has a very effective internal control system covering both accounting and administrative

control. Internal audit by outside agencies has further assisted in the assessment and effectiveness and

also the implementation of the internal control system.

The company has an adequate and proper system of internal control to ensure that all the assets are

safeguarded and protected against loss from unauthorized use or disposition and that all transactions are

authorized, recorded and reported correctly.

Audit committee is constituted in TRPL. The committee members are well versed in finance matters,

accounts, company law and general business practices. The constitution of audit committee also meets the

requirement under section 292A of companies act, 1956.

SOURES & APPLICATION OF FOUND:-

SOURCES OF FUND

1. Sales of material

2. Debt capital

3. loans

APPLICATION OF FUND

1. Fixed assets.2. Investment in different projects.3. Current assets & current liabilities.


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4. ACCOUNTING SYSTEM METHOD:-

1) BASIS OF ACCOUNTING The financial statements have been prepared on the historical cost basis and on the accounting

principle of going concerns.

Accounting principles not specifically referred to are otherwise consistent and in consonancewith generally accepted accounting policies.

2) USE OF ESTIMATES The preparation of financial statement requires estimates and assumptions to be made that

affect the reported amount of assets & liabilities on the date of the financial statement and the

reported amount of revenues & expenses during the reporting periods. Difference between the

actual results & be estimates are recognized in the period in which the results are known /

materialized.

3) FIXED ASSETS Fixed Assets are stated at historical cost of acquisition or construction less accumulated

depreciation /amortization all cost relating to the acquisition & installation of fixed assets are

capitalized the cost excludes the duty benefits are admissible against installation of specific

assets.

Advances paid towards the acquisition or construction of fixed assets & the cost of the assetsnot put to use as at reporting date are disclose under capital work-in progress.

4) DEPRECIATION Depreciation are provided on straight line method as per section 205(2) (b) of the companies

act, 1956 and in the manner so prescribed under schedule XIV to the companies act, 1956.

5) REVENUE RECOGNITION Domestic sales are recognized at the time of dispatch to the customers invoicing being the

conclusive events.

Exports sales are recognized on the basis of dispatch from the factory . the difference in taxinvoice and export commercial invoice recognized as exchange

Interest income is recognized on time proportion bases taking in to account the amountoutstanding & rate applicable


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6) INVESTMENTS Investments are stated at cost.

7) INVENTORIES Raw materials are valued at cost on FIFO basis. Work-in-process is valued at raw material cost. Finished goods are valued at cost or net realizable value whichever is lower.

8) FOREING CURRENCY TRANSACTION Transactions denominated in foreign currencies are recorded at the exchange rate prevailing on

the date of transaction and difference if any on realization payment are adjusted to Profit and

Loss Accounts Current assets & liabilities in foreign currencies as at the Balance Sheet date are

reconverted at the rate prevailing at the year and the resultant net gains and losses are adjusted

in the Profit & Loss Accounted.

9) EXCISE DUTY & SALES TAX / VALUE ADDED TAX Excise duty is accounted on the basis of both, payment made in respect of goods cleared as also

provision made for goods lying in bonded warehouses. sales tax/ value added tax paid is charged

to profit and loss account .

10)RETIREMENT BENEFITS THE COMPANY HAS NOT MADE ANY PROVISION FOR GRATUITY & LEAVE WAGES &THUS AS -15

OF THE ICAI HAS NOT BEEN FOLLOWED.

COMPANYS CONTRIBUTIONS ARE MADE TO PROVIDENT FUND &ESIC & ARE CHARGED TOPROFIT AND LOSS ACCOUNT ON AN ACCRUAL BASIS.


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MISSION OF THE COMPANY

To provide better market to employee with maximum return of them.

To get yield and minimize past problem.

To criminate old technology by bring modernization in chemical and increasing the yield

informing.

To become 100 crores company with in next 3 years

VISSION OF THE COMPANY

The Company's core objective is to provide better value to its customers on the price-quality matrix. At Tirupati Inks, we starve for having customers' success and not onlycustomers' satisfaction.

To consolidate the companys position as a leading supplier of printing inks in nationaland international market, we set forth to become responsive, flexible, innovative andprogressive

To become leading manufacturer internationally


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CORPORATE OBJECTIVE

To Maintain International Quality Standards by embedding the best practices in allsystems and processes.

To develop a special relationship with customers by providing prompt technical support& services.

Continue efforts in developing cost effective, reliable and efficient technologies forIndian and overseas customers.

To develop an agile and effective organization which adopts and adapts to the changesin business environment by continuously assessing the opportunities and encashingthem and evaluating the threats to mitigate them.

We are actively involved in collaborating with our customers, agents, dealers, allies, andindustry stalwarts to ensure that the printing industry continues to excel and grow


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SWOT Analysis

The SWOT analysis is done to know the companys present strength & weakness

and the future opportunities & threat of the company

Strength:

In Tridev Resins (I) Pvt. Ltd strength is their product namely kenotic resin also known as HK-

100. As the company is the no.1 producer of the world.

In Tridev Resins (I) Pvt. Ltd have well qualified & young team to cater their objective

In Tridev Resins (I) Pvt. Ltd have strength of

Water Availability,

Raw material Availability,

Skill labours,

Modern Machinery

Weakness:

In Tridev Resins (I) Pvt. Ltd the main week point is management.

As the company have young team they need more training for upgrading of their knowledge


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Opportunities:

As company is supplying the resins in 29 countries around the world. As in European country &

in North America resins are not available & government of that country also not supporting them

to produce resins. So they are looking to more supply resins in that country in future & capture

more market shares.

Government policy is suitable for growing in international business

Threat:

In India also Tridev wants to expand their business but due to the government policies ,rules &regulation they are not able to expand.

Regulatory board is not co-operating to lead in their product


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Competitors

Company is working on domestic as well as international level.so company is facing competitorsof both levels.

domestic compititors are as follow-Micro Inks,Vapi

-D.R Coats,Palghar

-Polyois Chemicals

-Uniform Synthetic,Vapi

-Bharat Resins

-Suparna Chemicals

Here from the entire above competitor the main one is micro inks & the other is suparna resins.

Turn overs-Micro Inks has turnover of 4000 tunes

- d.r coats has a turnover of 1000-1500 tunes

- Suparna chemicals have a turnover of 1500 tunes

All above are the main competitors of the tridev resins (i) pvt. Ltd from them micro ink is the

tough competitor of TRPL.

- Here as TRPL has a turnover of 2500-3000 units


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CUSTOMER SEGEMTS:-

These resins are the separate raw material suitable for selective ink materials. These resins can also be applies on coating and paint categories. The customers of Tridev Resins (I) Pvt. Ltd can be classifies into following categories:

Coating (roller, paper) ink units (printing ,water based, paper, pen gravure (marker)) painting (paints ) tissue & foils lacquers

Suppliers

GSFC BSF Indula Kanoria GACL WAKER Sakart

Bank Partners

HDFC B.O.B


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ORGANISATIONAL STRUCTURE CHART

WORKMAN

LAB ASSISTANT

TECNICIAN

MANAGER

BOD


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LITERATURE REVIEW

INTRODUCTION

FLOYD D. HEDRICK, library of congress, Washington D.C "Inventory" to many small businessowners is one of the more visible and tangible aspects of doing business. Raw materials, goods inprocess and finished goods all represent various forms of inventory. Each type represents moneytied up until the inventory leaves the company as purchased products. Likewise, merchandisestocks in a retail store contribute to profits only when their sale puts money into the cash register.

In a literal sense, inventory refers to stocks of anything necessary to do business. These stocksrepresent a large portion of the business investment and must be well managed in order tomaximize profits. In fact, many small businesses cannot absorb the types of losses arising frompoor inventory management. Unless inventories are controlled, they are unreliable, inefficientand costly.

SUCCESSFUL INVENTORY MANAGEMENT

Successful inventory management involves balancing the costs of inventory with the benefits ofinventory. Many small business owners fail to appreciate fully the true costs of carryinginventory, which include not only direct costs of storage, insurance and taxes, but also the cost ofmoney tied up in inventory. This fine line between keeping too much inventory and not enoughis not the manager's only concern. Others include:

- Maintaining a wide assortment of stock -- but not spreading the rapidly moving ones too thin;

- Increasing inventory turnover-- but not sacrificing the service level;

- Keeping stock low -- but not sacrificing service or performance.

- Obtaining lower prices by making volume purchases -- but not ending up with slow-movinginventory; and

- Having an adequate inventory on hand -- but not getting caught with obsolete items.

The degree of success in addressing these concerns is easier to gauge for some than for others.For example, computing the inventory turnover ratio is a simple measure of managerialperformance. This value gives a rough guideline by which managers can set goals and evaluateperformance, but it must be realized that the turnover rate varies with the function of inventory,the type of business and how the ratio is calculated (whether on sales or cost of goods sold).Average inventory turnover ratios for individual industries can be obtained from tradeassociations.
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.

DEVELOPMENTS IN INVENTORY MANAGEMENT

In recent years, two approaches have had a major impact on inventory

management: Material Requirements Planning (MRP) and Just-In-Time (JIT and Kanban). Theirapplication is primarily within manufacturing but suppliers might find new requirements placedon them and sometimes buyers of manufactured items will experience a difference in delivery.

Material requirements planningis basically an information system in which sales are converteddirectly into loads on the facility by sub-unit and time period. Materials are scheduled moreclosely, thereby reducing inventories, and delivery times become shorter and more practicalpredictable. Its primary use is with products composed of many components. MRP systems arefor smaller firms. The computer system is only one part of the total project which is usually long-term, taking one to three years to develop.

Just-in-time inventory management is an approach which works to eliminate inventories ratherthan optimize them. The inventory of raw materials and work-in-process falls to that needed in asingle day. This is accomplished by reducing set-up times and lead times so that small lots maybe ordered. Suppliers may have to make several deliveries a day or move close to the user plantsto support this plan.

TIPS FOR BETTER INVENTORY MANAGEMENT

At time of delivery

- Verify count -- Make sure you are receiving as many cartons as are listed on the delivery

receipt.

- Carefully examine each carton for visible damage -- If damage is visible, note it on the deliveryreceipt and have the driver sign your copy.

- After delivery, immediately open all cartons and inspect for merchandise damage.

When damage is discovered

- Retain damaged items -- All damaged materials must be held at the point received.

- Call carrier to report damage and request inspection.

- Confirm call in writing--This is not mandatory but it is one way to protect yourself.

Carrier inspection of damaged items

- Have all damaged items in the receiving area -- Make certain the damaged items have notmoved from the receiving area prior to inspection by carrier.
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Author

:

Brent D. Williams, (Department of Marketing and Logistics, Sam M. Walton College

of Business, University of Arkansas, Fayetteville, Arkansas, USA), Travis Tokar,

(The Ohio State University, Fisher College of Business, Marketing and Logistics,

Columbus, Ohio, USA)

PurposeThe purpose of this paper is to provide a review of inventory management

articles published in major logistics outlets, identify themes from the literature and

provide future direction for inventory management research to be published in logistics

journals.

Design/methodology/approachArticles published in major logistics articles,

beginning in 1976, which contribute to the inventory management literature are

reviewed and cataloged. The articles are segmented based on major themes extracted

from the literature as well as key assumptions made by the particular inventory

management model.

FindingsTwo major themes are found to emerge from logistics research focused on

inventory management. First, logistics researchers have focused considerable attention

on integrating traditional logistics decisions, such as transportation and warehousing,

with inventory management decisions, using traditional inventory control models.

Second, logistics researchers have more recently focused on examining inventory

management through collaborative models.

Originality/valueThis paper catalogs the inventory management articles published in

the major logistics journals, facilitates the awareness and appreciation of such work,

and stands to guide future inventory management research by highlighting gaps and

unexplored topics in the extant literature.
http://www.emeraldinsight.com/search.htm?ct=all&st1=Brent+D.+Williams&fd1=aut&PHPSESSID=h06ae2g8djsv158kglt42gn2m7http://www.emeraldinsight.com/search.htm?ct=all&st1=Travis+Tokar&fd1=aut&PHPSESSID=h06ae2g8djsv158kglt42gn2m7http://www.emeraldinsight.com/search.htm?ct=all&st1=Travis+Tokar&fd1=aut&PHPSESSID=h06ae2g8djsv158kglt42gn2m7http://www.emeraldinsight.com/search.htm?ct=all&st1=Brent+D.+Williams&fd1=aut&PHPSESSID=h06ae2g8djsv158kglt42gn2m7


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Author:

Geoff Buxey

Abstract

PurposeThis paper sets out to discuss practical inventory control systems.

Orthodox theory revolves around the purchaser and balances ordering costs against

charges for carrying goods in stock. However, for any company holding thousands of

different items the directives for constructing the best system(s) are confusing and the

logic seems inconsistent. The research objective is to clarify this hitherto unsatisfactory

situation and to provide robust guidelines for managing such inventories.

Design/methodology/approachA small number of published examples are described in

sufficient detail to reveal what these firms actually do. Each case is dissected to uncover

management's motives, since the original reports were not embellished with useful

analytical comments. The aim is to reconstruct the overall design process.

FindingsThe myopic standpoint of established models neglects the impact of various

ordering policies at the supplier's end, where the promotion of cost-effective and

responsive warehouse and transport operations is paramount. As a rule, both areas benefit

from stable resources planning, based on cyclic orders and delivery schedules along fixed

vehicle routes.

Practical implicationsAn alternative top down approach is proposed. The main

thrust is the efficient deployment of a designated transport fleet. Also, some salient points

are made concerning the relative merits of P- and Q-type stock replenishment modes.

Originality/valueThe paper provides a new perspective on stock control that brings

theory into line with modern supply chain management concepts.


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INVENTORIES

The theoretical background is a ground for the various analyses done in the company. It is the

base on which the statistics and analysis is done. The ground on which the various analyses done are

given below, which is stated as the Theoretical Background.

Let me step inside the theoretical background forThe Role of Finance in the Inventory

Managementby first conveying a small incident which took place in a company.

A journalist once asked a director of a very big company,

Sir how your company is able to increase its profit year after year when other companies find going very

tough?

The director laughed and said, Because we plug our cost-leaks before they become cost-holes.

The reply given by the director is both interesting and true. Small leaks if plugged in time, can contribute

a lot towards profit and hence to the productivity of the company. There are number of areas in which

cost-leaks exist and one of the major ones is in the area of inventory management. That is why inventory

control is considered a gold minefor saving.


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INTRODUCTION

Every one, be it a firm, or an institute or an establishment, or an individual, is familiar with the word

stock because each of these carry some items to meet their requirements. In trade and industry, the word

stock, is called Inventories. Inventories constitute the most significant part of current assets of a largemajority 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 feuds is required to be committed to them. It is therefore, absolutely imperative to

mnage inventories efficiently and efficiently 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 fore a company to reduce its levels of inventories to a 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 excessive inventory carries a favourable impact on a companysprofitability.

MEANING OF INVENTORY

Inventory is the physical stoke of goods maintained in an organization for its smooth sunning. In

accounting language it may mean stock of finished goods only. In a manufacturing concern, it may

includes raw materials, work-in-progress and stores etc. In the form of materials or supplies to be

consumed in the production process or in the rendering of services. In brief, Inventory is unconsumed or

unsold goods purchased or manufactured.

OBJECTIVES OF INVENTORY MANAGEMENT

The basic managerial objectives of inventory control are two-fold; first, the avoidance over-investment or

under-investment in inventories; and second, to provide the right quantity of standard raw material to the

production department at the right time. In brief, the objectives of inventory control may be summarized

as follows:


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A. Operating Objectives:

(1) Ensuring Availability of Materials:

There should be a continuous availability of all types of raw materials in the factory so that the production

may not be help up wants of any material. A minimum quantity of each material should be held in store to

permit production to move on schedule.

(2) Avoidance of Abnormal Wastage:

There should be minimum possible wastage of materials while these are being stored in the go downs or

used in the factory by the workers. Wastage should be allowed up to a certain level known as normal

wastage. To avoid any abnormal wastage, strict control over the inventory should be exercised. Leakage,

theft, embezzlements of raw material and spoilage of material due to rust, bust should be avoided.

(3) Promotion of Manufacturing Efficiency:

If the right type of raw material is available to the manufacturing departments at the right time, their

manufacturing efficiency is also increased. Their motivation level rises and morale is improved.

(4) Avoidance of Out of Stock Danger:

Information about availability of materials should be made continuously available to the management so

that they can do planning for procurement of raw material. It maintains the inventories at the optimum

level keeping in view the operational requirements. It also avoids the out of stock danger.

(5) Better Service to Customers:

Sufficient stock of finished goods must be maintained to match reasonable demand of the customers for

prompt execution of their orders.

(6)Highlighting slow moving and obsolete items of materials.

(7) Designing poorer organization for inventory management:

Clear cut accountability should be fixed at various levels of organization.


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TYPES OF INVENTORIES

A manufacturing firm generally carries following major kinds of inventories:-

1. Raw materials2. Work-in-progress3. Finished goods4. Tools5. Supplies (E.g. Materials used in running the plant or in making companys product like broom,

cotton waste, cloth waste)

6. Machinery spares (Ball bearings, v-belt, oil seals, springs)

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

that make up the product. The various forms in which inventory exist in a manufacturing company are

raw materials, work in progress and finished goods.

RAW MATERIALS:-

Raw materials are those inputs that are converted into finished product though the

manufacturing process. Raw materials inventories are those units which have been purchased and stored

for future productions.

WORK IN PROGRESS:-

These inventories are semi manufactured products. They represent products that need

more work before they become finished products for sales.

FINISHED GOODS:-

Finished goods inventories are those completely manufactured products which are ready

for sale. Stock of raw materials and work in progress facilitate production. While stock of finished goods

is required for smooth marketing operation. Thus, inventories serve as a link between the production and

consumption of goods. The level of three kinds of inventories for a firm depend on the nature of its

business. A manufacturing firm will have substantially high levels of all three kinds of inventories, while

are tail or wholesale firm will have a very high and no raw material and work in progress inventories.

Within manufacturing firms, there will be differences. Large heavy engineering


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Companies produce long production cycle products, therefore they carry large

inventories. On the other hand, inventories of a consumer product company will not be large, because of

short production cycle and fast turn over. Firms also maintain a fourth kind of inventory, supplies or

stores and spares.

SUPPLIES:

It includes office and plant cleaning materials like soap, brooms, oil, fuel, light, bulbs etc. These materials

do not directly enter production, but are necessary for production process. Usually, these supplies are

small part of the total inventory and do not involve significant investment. Therefore, a sophisticated

system of inventory control may not be maintained for them.

MANAGEMENT OF INVENTORY

Inventories constitute the principal item in the working capital of the majority of trading and industrial

companies. In inventory, we include raw materials, finished goods, work-in-progress, supplies and other

accessories. To maintain the continuity in the operations of business enterprise, a minimum stock of

inventory required. However, the physical control of inventory is the operating responsibility of stores

superintendent and financial personnel have nothing to do about it but the financial control of these

inventories in all lines of activity in which they comprise a substantial part of the current assets is a

frequent problem in the management of working capital. Management of inventory is designed to regulatethe volume of investment in goods on hand, the types of goods carried in stock to meet the needs of

production, and sales while at the same time, the investment in them is to be kept at reasonable level.


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economical qualities; 3.Purchases of materials will be made at most favourable prices; 4.Vouchers for the

payments of materials purchased will be approved only if the materials have been received in good

condition;

5. Materials will be protected against loss by proper physical control; 6.Issue of materials will be properly

authorized and accounted for; and 7.All materials, at all times, will be charged, as the responsibility of

some individual. The control of materials, as an element of cost of production, is illustrated with reference

to the purchase and issues procedures, inventory systems, and inventory control techniques.

IMPORTANCE OF INVENTORY CONTROL:

The importance or necessity of inventory control is well explained in the terms of the objects of inventory

control, which are obtained through it. A proper inventory control lowers down the cost of production and

improves profitability of enterprise.

ADVANTAGES OF INVENTORY CONTROL:

(1)Reduction in investment in inventory.(2)Proper and efficient use of raw materials. (3)No bottleneck in

production. (4)Improvement in production and sales.(5)Efficient and optimum use of physical as well as

financial resources.

(6)Ordering cost can be reduced if a firm places a few large orders in place of numerous small orders.

(7)Maintenance of adequate inventories reduces the set-up cost associated with each production run.

Risk and cost Associated with Inventories:

Holding of Inventories expose the firm to a number of risks and costs.

Major risks are:-

(a) Price decline

: They may be due to increase in market supply of the product, introduction of a new competitive product,

price-cut by the competitors etc.

(b) Product deterioration:

This may due to holding a product for too long a period or improper storage conditions.


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(c) Obsolescence:

This may due to change in customers taste, new production technique, improvements in product design,

specifications etc.

The Costs of holding inventories are as follows:

(a) Material Cost:

This includes the cost of purchasing the goods, transportation and handling charges less any discount

allowed by the supplier of goods.

(b) Ordering Cost:

This includes the variables cost associated with placing an order for the goods. The fewer the orders, the

lower will be the ordering costs for the firm.

(c) Carrying Cost:

This includes the expenses for storing and handling the goods. It comprises storage costs, insurance costs,

spoilage costs, cost of funds tied up in inventories etc.

ESSENTIALS OF INVENTORY CONTROL SYSTEM

For an efficient and successful inventory control there are certain important conditions that are a follows:

(1) Classification and Identification of inventories:

The usual inventory of manufacturing firm includes raw-material, stores, work-in-progress and

component etc. To facilitate prompt recording the dealing, each item of the inventory must be assigned a

particular code number and it must be classified in suitable group or sub-divisions. ABC analysis of

material is very helpful in this context.

(2)Standardization and simplification of inventories:

In order to facilitate inventory control, the inventory line should be simplified. It refers to the elimination

of excess types and sizes of items. Simplification leads to reduction in classification of inventories and its

carrying costs. Standardization, on the other hand, refers to the fixation of

Standards of raw material to be purchased and specification of the components and tools to be used.


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(3)Setting the Maximum and Minimum limits for each part of inventory:

The third step in this process is to set the maximum and minimum limits of each item of the inventory. It

avoids the chances of over-investment as well as running a short of any item during the cost of producing.

Reordering point should also be fixed beforehand.

(4)Economic Order Quantity:

It is also a basic inventory problem to determine the quantity as how much to order at a time. In

determining the EOQ, the problem is one to set a balance between two opposite costs, namely, ordering

costs and carrying costs. This quantity should be fixed beforehand.

(5)Adequate storage Facilities:

To make the system of inventory control successful and efficient one, it is also essential to provide the

adequate storage facilities. Sufficient storage area and proper handling facilities should be organized.

(6)Adequate Reports and Records:

Inventory control requires the maintenance of adequate inventory record and reports. Various inventory

records must contain information to meet the needs of purchasing, production, sales and financial staff.

The typical information required about any class of inventory may be relating to quantity on hand,

location, quantities in transit, unit cost, code for each item of inventory, reorder point, safety level etc.

Statements forms and inventory records should be so designed that the clerical cost of maintaining these

records must be kept a minimum.

(7)Intelligent and Experienced Personnel:

An important requirement of successful inventory control system is the appointment of qualified and

experienced staff in purchase and stores department. Mere establishment of procedures and the

maintenance of records would not give the desired results as there is no substitute for sincere and devoted

as well as

Experienced hands. Hence, the whole inventory control structure should be manned with trained,

qualified, experienced and devoted employees.


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(8)Coordination:

There must be proper coordination of all departments involved in the process of inventory control, such as

purchase, finance, receiving, approving, storage and accounting departments. These all departments have

different outlook and objects in inventory management but financial manager has to coordinate them all.

(9)Budgeting:

An efficient budgeting system is also required. Preparation of budgets concerning materials, supplies and

equipment to ensure economy in purchasing and use of material is also necessary.

(10)Internal Check:

Operating of a system of internal check is also vital in inventorymanagement so that all transactions

involving material supplies and equipment purchase are properly approved and automatically checked.

TECHNIQUES OF INVENTORY CONTROL

In managing inventories, the firms objective should be in consonance with the wealth maximization

principle. To achieve this, the firm should determine the optimum level of investment in inventory. To

deal with the problems of inventory management effectively, it becomes necessary to be conversant with

the different techniques of inventory control. Although the concepts involved in inventory managementare production-oriented and are not strictly financial it is important that the financial manager understand

them since they have certain built-in financial costs. The different techniques of inventory control may be

summarized as follows:

(1) Inventory level Technique

The main objective of stock control is to determine and maintain the optimum level of stock so that there

is neither shortage of any material nor unnecessary investment in inventory. For this purpose,

determination of maximum and minimum limits of inventory and ordering level is necessary.

(2) Maximum stock Limit:

This represents the quantity of inventory above which it should not be allowed to be kept. The main

object of fixing this limit is to ensure that unnecessary working capital is not blocked in stores. The

quantity is fixed keeping in view the disadvantages of overstocking.


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The disadvantages of overstocking are:

1. Capital is blocked up unnecessarily in stores so there will be loss of interest.2.More go down space is

needed so more rent will have to be paid.3.There are chances of deterioration in quality because large

stocks will require more time for use is the factory.4.There is the possibility of loss due to

obsolescence.5.There is danger of depreciation in market values.

The maximum stock level is fixed by taking into account the following factors:

(1) Amount of capital available for maintaining stores.(2) Go down space available.(3) Rate of

consumption of the material.(4) The time lag between indenting and receiving of the material.(5) Length

and technical nature of the production process.(6) Possibility of loss in stores by deterioration,

evaporation etc. There are certain stores, which deteriorate in quality if they are stored for longer

period.(7) Cost of maintaining stores.

(8) Likely fluctuation in prices. For instance, if there is a possibility of a substantial increase in prices in

the coming period, a comparatively large maximum stock level will be fixed. On the other hand, if there

is the possibility of decrease in price in the near future, stocks are kept at a much reduced level.(9) The

seasonal nature of supply of material. Certain materials are available only during specific periods of year.

So these have to be stocked heavily during these periods.(10)Restrictions imposed by the government or

local authority in regard to materials which there are inherent risks, e.g. fire and explosion.(11)Risk of

obsolescence, i.e., possibility of change in fashion and habit which will necessitate change in

requirements of materials.

The following formula may be applied to calculate the maximum stock:

(1)Maximum Stock = Minimum Inventory + Lot size (2)Maximum Stock = Reorder Level - Minimum

consumption during Minimum lead time +Lot size

Minimum Stock Limit (Safety or Buffer stock)

This represents the quantity below which stock should not be allowed to fall. It is maintained to save from

the situation of stock out in the event of abnormal increase in material usage rate and/or delivery period.

In fact determination of this quantity is significant because of uncertainty in respect to material usage rate

and delivery period. The main purpose of this level is to ensure that production is not held up due to

shortage of any material. This level is fixed for all items of stores and following factors are taken into

account for the fixation of this level:


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(a) Lead time

i.e. time lag between intending and receiving the material.

(b) Rate of consumption

of the material during the lead time.

(c) Re-order Level

The following formula is applied to calculate Minimum Stock:

Minimum Stock = Re-order Level - Normal usage during Normal Lead time

But if normal usage and normal lead time is not known then average usage will be treated as normal

usage and average re-order will be treated as normal re-order period.

Re-ordering Level (Ordering Level)

It is the point at which if the stock of the material in stores reaches, the storekeeper should initiate the

purchase requisition for fresh supply of material. This level is fixed somewhere between maximum and

minimum level is such a way that the difference of quantity of the material between the reordering level

and the minimum level will be sufficient to meet requirements of production up to the time of fresh

supply of the material. It is fixed after taking into consideration the following factors:

(a) Rate of material usage

: Generally this rate is found out as usage rate per day, pre week or per month. The quantity of production

fluctuates according to demand of the product which results in variation in usage rate.

Hence, the following three factors:

(i) Maximum usage rate:

It implies quantity of material required at maximum capacity production.

(ii) Minimum usage rate:

It implies quantity of material required at capacity production in most unfavourable business conditions.


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(iii) Normal or average Usage Rate:

It implies quantity of material required at capacity production under normal business conditions.

(b) Ordering Period:

The time taken in preparing the order for purchase of material is called ordering period. In some concerns

this period may be significant but in large concerns this

Period is significant because before placing the order the purchase manager has to trace out to best

suppliers, after that only he places the order.

(c) Delivery, Lead or Procurement Time:

The time taken from the date of placing the order to the date of delivery by the suppliers is called

procurement time. The maximum, minimumand average procurement time should also be determined.

(D) Minimum Stock Level:

This is the level of stock below which stocks should normallynot be allowed to fall.

Danger Level

This means a level at which normal issues of the material are stopped and issues made only under specific

instructions. The purchase officer will make special arrangements to procure

The materials reaching at their danger levels so that the production may not stop due to shortage of

materials. It is determined as follows:

Danger level = Average Consumption x Maximum

Re-order period for Emergency Purchase


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7. Moral Check on Stores staff:

Due to continuous checking, this system serves as a moral check on the stores staff. They are discouraged

from committing dishonesty.

8. Loss of stock due to obsolescence:

It is detected at an early stage and so timely action can be taken to prevent recurrence.


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TYPES OF CLASSIFICATION:-

Sr.

No.

Classification Criterion employed

1. ABC analysis Usage Value (consumption per period/price

per unit)

2. HML analysis

(High-Medium-Low)

Unit price (it does not take consumption into

account)

3. VED analysis

(Vital-Essential-Desirable)

Criticality of item (loss of production)

4. SDE analysis

(Scarce-Difficult-Easy)

Procurement difficulties.

5. GOLF analysis

(Government-Ordinary-Local-Foreign)

Source of procurement

6. SOS analysis

(Seasonal-Off seasonal)

Seasonality

7. FSN analysis Issue from stores

8. XYZ analysis Inventory investment.


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The details for the ABC criteria of analysis are given below:

ABC ANALYSIS

Usage Value (consumption per period/price per unit)ABC ANALYSIS

ABC analysis underlines a very important principle Vital few: Trivial many. Statistics reveals that

just a handful of items account for bulk of the annual expenditure on materials. These few items, called

A items, therefore hold the key to the business.

The other item, known as B and C items, are numerous in number but their contribution is less

significant.ABC analysis thus tends to segregate all items into three categories: A, B, C on the basis of

their annual usage. The categorization so made enables one to pay the right amount of attention as merit

by the item.

A- Items: It is usually found that hardly 5-10% of the total items accounts for 70-75% of the totalmoney spent on the materials. These items require detailed and rigid control and need to be

stocked in smaller quantities. These items should be procured frequently. The quantity per

occasion being small.

A healthy approach, however would be to enter into contract with the manufacturers of

these items and have their supply in staggered lots according to the production programme of the

buyer. The inventory can be kept minimum by frequent ordering.

B- Items: These items are generally 1015% of the total items, and represent 10 to 15 % of thetotal expenditure on materials. These are intermediate items. The control on these items need not

be as detailed and as rigid as applied to A items.

C- Items: These are numerous (as many as 7080 % of the total items, inexpensive (representshardly 5-10 % of the total annual expenditure on the materials and hence insignificant (do not

require lose control) items. C items should be procured infrequently and in sufficient quantities.

This avails the buyer to avail price discounts.


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Item A Item B Item C

1. Very strict control Moderate control Loose control

2. No safety stocks Low safety stocks High safety stocks

3. Frequent ordering or weeklydeliveries

Ordering once in three months Bulk ordering, once in sixmonths

4. Weekly control statements Monthly control statements Quarterly reports

5. Maximum follow up and

expending

Periodic follow up Follow up in exceptional cases

6. Accurate forecast Estimates based on past data Rough estimates

7. Maximum efforts to reducelead time

Moderate efforts Minimum efforts

8. To be Handled by seniorofficer

To be handled by middlemanagement

Can be fully delegated

9. Rigorous value analysis Moderate value analysis Minimum value analysis


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ECONOMIC ORDER QUANTITY (EOQ) MODEL

The economic order quantity (EOQ) is that level of inventory order that minimizes the

total costs associated with inventory management. It is the size of quantity to be purchase is one lot so

that the total cost of managing inventory is reduced. In determining this order quantity, it is assumed that

the cost managing and inventory is made up solely of two parts ordering cost and carrying cost. In the

word of EOQ is that order size at which the total of ordering cost and carrying cost is minimum.

Buying in bulk implies higher inventory level involving higher carrying cost but since the

number of order will be less to procure materials during a particular period, he ordering cost will b less.

On the other hand, if we place small orders, the number of orders will go up and so the ordering cost, butcarrying cost of holding inventory will be reduced to a great extent EOQ is the level of order quantity at

which total cost is minimum. The graph showing determination of EOQ is shown below:

ASSUMPTIONS OF EOQ MODEL

EOQ model, as the technique to determine the economic order quantity is based on three

major assumptions

The annual demand or usage for a particular item of inventory is known with certainty.

The rate of usage of inventory is firm.

The order to replenish the inventory of an item is filled instantaneously.

In other word lead time is assumed to be 0.

There is known or constant price per unit, i.e. there are no price discount.


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DETERMINATION OF EOQ

The economic by order quantity n be ascertained using the following formula

Where,

A= Annual usage of inventory

O= Ordering cost per order

C= Annual carrying cost per unit

Objectives

To minimize the average annual variable cost

Problem

To determine when an order should be placed and how much quantity should be order

The annual variable cost for this problem is two type

Ordering or setup cost

Inventory holding cost

As Q is order quantity and D is annual demand the number of order per year will be D/Q. Therefore, the

annual ordering cost will be = A.D/Q


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HML CLASSIFICATION

The high, medium and low (HML) classification follows the same procedure as his

adopted in ABC classification. Only difference is that in HML , The classification unit value is the

criterion and not the annual consumption value. The items of inventory should be listed in the descending

order of unit value and it is up to the management to fix limits for three categories. For example, the

management may decide that all units with unit value of Rs. 2000 and above will be H items, Rs.1000 to

2000 M items and less than Rs.1000 L items.

The HML analysis is useful for keeping control over consumption at

departmental level, for deciding the frequency of physical verification , and for controlling purchases.

SDE CLASSIFICATION

The SDE analysis is based upon the availability of items and is very useful in the

context of scarcity of supply. In this analysis , S refers to Scarce items , generally imported, and those,

which are in short supply. D refers to difficult items, wh ich are available indigenously but are difficult

items to procure. Items, which have to come from distant place or for which reliable suppliers are difficult

to come by , fall into D category. E refers to items which are easy to acquire and which are

available in the local market.

The SDE classification, based on problems faced in procurement, is vital to the lead-

time analysis and in deciding on purchasing strategies.


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FSN ANALYSIS

FSN stands for fast moving slow moving and non- moving. Here, classification is based

on the pattern of issues from stores and is useful in controlling obsolescence.

To carry out an FSN analysis the date of receipt or the last date of issue, whichever is

later, is taken to determine the number of months, which have lapsed since the last transaction. The item

usually grouped in periods of 12 months.

FSN analysis is helpful in identifying active items, which need to be reviewed regularly,

and surplus items, which have to be examined further. Non moving items may be examined further and

their disposal can be considered.

VED CLASSIFICATION

The VED analysis is done to determine the criticality of an item its effect on production d

other services. It is specially used for classification of spares parts. If a part s Vital it is given V

classification, if it is essential, then it is given E classification and if it is not so essential, the part is

given D classification. For V items, a large stock of inventory is generally maintained, while for D

items, minimum stock is enough.

JUST IN TIME

Just-in-time inventory system is designed to ensure that materials or supplies

arrive at a facility just when they are needed so that storage and holding cost are minimised. The just in

time system requires considerable cooperation between the suppliers and the customer. The customer

must specify what will be needed, when, and in what amounts. The supplier must be sure that the right

supplies arrive at the agreed on time and location.

Japanese firms popularized the just in time system in the world. In a JIT system material r

the manufactured components and parts arrive to the manufacturing sites or stores just few hours before


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JUST IN TIME

Just-in-time inventory system is designed to ensure that materials or

supplies arrive at a facility just when they are needed so that storage and holding cost are

minimized. The just in time system requires considerable cooperation between the suppliers and

the customer. The customer must specify what will be needed, when, and in what amounts. The

supplier must be sure that the right supplies arrive at the agreed on time and location.

Japanese firms popularized the just in time system in the world. In a JIT system

material r the manufactured components and parts arrive to the manufacturing sites or stores just

few hours before they are put to use. The delivery of material is synchronized with the

manufacturing cycle and speed. JIT system eliminates the necessity of carrying large system

requires perfect understanding and coordination between the manufacturer and suppliers in terms

of the delivery and quality of the material. Poor quality material or components could halt the

production. The JIT inventory system complements the total quality management (TQM). The

success of the system depends on how well company manages its suppliers. The system puts

tremendous pressure on suppliers.

ADVANTAGES OF JUST IN TIME SYSTEM (JIT)

Lower investment in inventory. Reduce inventory carrying and handling cost. Reduce costs resulting from obsolete inventory. Smaller investment in inventory storage space


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FINANCIAL MANAGERS ROLE IN INVENTORY MANAGEMENT

Inventory represents a large investment by manufacturing concern: therefore, great emphasis must be

placed on its efficient management. Though, the operative responsibility for Inventory management lies

with the inventory manager, the financial manager must also be concerned with all types of inventories-

raw materials, work-in-progress and finished goods. He must monitor Inventory levels and see that only

an optimum amount is invested in Inventory. He should be familiar with the Inventory control techniques

and ensure that Inventory is managed well.

He should try to resolve the conflicting view points of all the departments in order to have efficient

inventory management. He has to act as a careful inspector levels. He should introduce the policies which

reduce the lead time, regulate usage and thus, minimize safety stock. All these techniques of Inventory

management lead to the goal of wealth maximization.

LIMITATION OF INVENTORY MANAGEMENT

From the above discussions, it will be seen that on the one hand inventories are idle and valuable

resource i.e. capital remain locked up in the inventories which can be used for other productive

purpose but on the other hand, they are desirable to satisfy manufacturing, maintenance operation

requirement of the organization. Hence basic problem of the inventory management is to optimize the

stock level of different material so that their stocks are maintained at optimum level without affecting

the production or day to day maintenance. There are three basic problems of stocks are:

When to initiate purchase of the materials. How much quantities are to be purchase at a time and What should be the levels of different items.

For getting answers to these questions, we have to investigate various types of costs related to inventories

management.


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RESEARCH METHODOLOGY

Objectives of the study

The objectives of inventory management are as follows

1.To know, how the various inventory tools & techniques are used in thecompany.2.To understand whether the organization is adopting the best inventorytools and techniques.3.To find out the control over the inventory management by management.

S

ResearchIn common parlance Research means "search for knowledge". Research is an art of scientific

investigation. It is a movement from the unknown to known. Curiosity is the mother of all inventions. It

is an essential natural feeling of every human being, the researcher try to find the meaning and causes of

that fact, which lead to the Research

.

Source of DataThe source of data is primary data and the secondary data.

Primary data

Primary data is those data which is achieved by getting the direct response from the respondents or

from the person concerned. The method for collection of such information is questionnaire, direct

communication, conferencing etc. For the project the researcher used the following tool for the

collection of the primary data.

Formal and informal discussions Consultation with the employees at the site.


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Secondary Data

Secondary data consist of information that is already in existence, and that is collected from the

published sources, books and brouchers, prospectus etc. The secondary data was collected from the

following:-

Annual Reports. Books / Broachers. Published Information. Internet

Tools and Technique for evaluation

ABC Analysis EOQ FIFO Ratios

1.6 LIMITATIONS

The following are the limitations experienced by the researcher during the research in the organisation.

The study was confined to the limitation to the data available according to the companysdisclosure policy.

The study was to be conducted in limited period allotted according to their busy companyschedule.


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FIFO

2009-10

Particulars Kilograms.

Opening stock 13893349

Purchase 117152805

Total 131046154

Cost of good solds 124647136

Closing stock 6399018

2010-11

Particulars Amount


Purchase 155394225

Total 161793243




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2011-12

Particulars Kilograms.


Purchase 189182720

Total 207966807




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EOQ (Economic Order Quantity)

EOQ

A= annual demand/usage=5110 tons unit

O=ordering cost per order=Rs1200

C= carrying cost =20% of inventory value.

P=purchase price per unit=Rs. 881

Here carrying cost/is= Rs. 881 X 20%=Rs.176

EOQ

EOQ 263 tons


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Number of

order

placed

Order

Quantity

Average Stock

Holding(Order

Quantity/2)

Average

inventory

carrying

cost(20 % of

avg stock

value Rs.

Ordering

cost(No. Of

orders * Rs

1200)

Total Cost(Carrying +

Ordering Cost)

1 5110 2555 511 1200 1711

2 2555 1277.5 255.5 2400 2655.5

3 1703.333 851.6667 170.3333 3600 3770.333

4 1277.5 638.75 127.75 4800 4927.75

5 1022 511 102.2 6000 6102.2

6 851.6667 425.8333 85.16667 7200 7285.167

7 730 365 73 8400 8473

8 638.75 319.375 63.875 9600 9663.875

9 567.7778 283.8889 56.77778 10800 10856.78

10 511 255.5 51.1 12000 12051.1


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Graphical Approach of EOQ Model

The economic order quantity can also be found graphically. The figure illustrates the EOQ

function . In the figure cost carrying cost and order cost and total cost are plotted on vertical axis

and horizontal axis is used to represent the order size. We note that the total carrying cost

increases as the order size increase, because on average a large inventory level will be

maintained and ordering cost decline with increase in order size because large order

project report on inventory mnagement

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