a project on inventory management

8/13/2019 a project on inventory management

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A STUDY ON INVENTORY MANAGEMENT IN

INSTRUMENTATION LTD, PALAKKAD

SUMMER PLACEMENT PROJECT

submitted by

RAIJA.K. R.

REG. NO: 1235F0256

under the guidance of

Pr!. C.VINOT"A ,M#A, M.P"IL$

in partial fulfillment of the requirements for the award of the Degree of

MASTER OF #USINESS ADMINISTRATION

of the Bharathiar University, Coimbatore

2012 201!

GURUVAYURAPPAN INSTITUTE OF MANAGEMENT

"#ffiliated to Bharathiar University$

COIM#ATORE % 6&1 105

Guruvayurappan Institute of Management1


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DECLARATION

% RAIJA.K.R,student of G'r'()*'r)++) I-/' ! )),Coimbatore, hereby declare that the pro&ect wor' titled (A STUDY ON INVENTORY

MANAGEMENT IN INSTRUMENTATION LTD, PALAKKAD which is

submitted to Bharathiar University in partial fulfillment of the requirements for the

degree of )aster of Business #dministration, is a record of original research wor' done

by me under the guidance of, Pr!. C.VINOT"A, M#A,M.P"ILof *uruvayurappan

%nstitute of )anagement, that this is genuine and has not been submitted elsewhere for

any other degree or diploma

+#C-. /#%#/

D#3- . /-* 45.126780279



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ACKNO4LEDGEMENT

8irst and 8oremost % would li'e to than' the #lmighty, origin of all 'nowledge, forthe abundant blessings he has showered upon me

% would li'e to e:press my sincere gratitude to Dr. VERG"ESE MAT"E4,

#.S E7, M#A, P8.D, DGM Gr)*7 FIIE, Director, *uruvayurappan

%nstitute of )anagement, Coimbatore

Dr. T"OMAS T. T"OMAS, #.S , M#A , PGDPR9J , P8.D, +rincipal,

*uruvayurappan %nstitute 5f )anagement, for their active support and guidance

during the course of my studies in the institute

;ords can


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TA#LE OF CONTENTS

CHAPTER NO DESCRIPTION PAGE NO

1.0 INTRODUCTION 7

1.0.1 INTRODUCTION OF THE STUDY 8

1.0.2 NEED OF THE STUDY 9

1.0.3 SCOPE OF THE STUDY 10

1.0.4 OBJECTIVE OF THE STUDY 10

1.1 INDUSTRY PROFILE 11

1.2 COMPANY PROFILE 14

1.3 THEORETICAL FRAME WOR !0

2.0 REVIEW OF LITERATURE "2

3.0 RESEARCH METHODOLO#Y "8

4.0 DATA ANALYSIS AND INTERPRETATION 71

!.0 FINDIN#S AND RECOMMENTATION 102

".0 CONCLUSION 10!

BIBLIO#RAPHY 10"



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LIST OF TA#LES

LIST OF C"ARTS

Guruvayurappan Institute of Management!

3#B- 45 3%3- +#*- 45

!11

3he percentage of current asset to

inventory of %+ ?9

!12 %nventory 3urnover ratio ??

!16 %nventory @olding +eriod ?A

!1!

/atio 5f )aterial Consumption 3o

3urnover 0

!17 %nventory 3o Current #sset /atio 2

!19 %nventory 3o ;or'ingcapital /atio !

!1? Debtors 3urnover /atio 7

!1 Creditor 3urnover /atio ?

!1A %nput 5utput /atio

!110 ;or'ingcapital 3urnover /atio A0

!21 3rend #naysis 5f ;or'ingcapital A1

!22 3rend #nalysis 5f Cash A6

!26 3rend #nalysis of Debtors A!

!61

/elationship Between %nventory #nd

Current #sset A9

!62

/elationship Betweeen /awmaterial #nd

Current#sset A?

!66

/elationship Between %nventory #nd

/aw material AA


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Guruvayurappan Institute of Management"

3#B- 45 3%3- +#*- 45

121

5rganiation Chart 5f 3he +urchase

Department 26

122 5rganiation Chart 5f >tores Department 2?

126 5rganiation Chart 5f /eceipt >tore 2A

12! 5rganiation Chart 5f Component >tore 62

127 +roducts 5f %+ 66

129 5rganiation Chart 5f ++C Department !2

12?5rganiation Chart uality ControlDepartment !9

!11 %nventory 3urnover ratio ?

!12 %nventory @olding +eriod ?A

!16

/atio 5f )aterial Consumption 3o

3urnover 1

!1! %nventory 3o Current #sset /atio 6

!17 %nventory 3o ;or'ingcapital /atio !

!19 Debtors 3urnover /atio 9

!1? Creditor 3urnover /atio ?

!1 %nput 5utput /atio A

!1A ;or'ingcapital 3urnover /atio A0

!21 3rend #naysis 5f ;or'ingcapital A2

!22 3rend #nalysis 5f Cash A6

!26 3rend #nalysis 5f Debtors A!

!!1 8>4 analysis 106


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DEDICATED

TO GOD ALMIGHTY

MY DEAR PARENTS

AND

FRIENDS

1.0 .1 INTRODUCTION TO T"E STUDY

%nventory is the business largest asset %t is stoc' of item used in business %nventory

represent one of most important asset that most businesses posses, because the

turnover of the inventory represents one of the primary sources of revenue

generation and subsequent earnings for the company


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from piling up inventories and to avoid losses Better said than done, is the word that

suits inventory Control

3he management of inventory is a 'ey concern of all business %f a companyFs

inventory level is too low, it ris's delays in fulfilling itFs customers orders %f the

inventory is too high, it is tying up dollars that can be better used in other areas %t also

ris's obsolescence and spoilage >uccessful businesses 'eep their inventory turns

high, but also 'eep their service level at or above the industry standard

%nventory is a stoc' of goods required by an organiation for its successful operation

%nventory refers to materials procured, stored and used for day to day functioning of

the whole organiation %nventory is directly related to production and mar'etingdepartment, still the finance department has to play a vital role in the management of

inventory 3he purpose of inventory management is to 'eep stoc' in such a way that

there is no overstoc'ing or under stoc'ing

%nventory is one of the most e:pensive assets of many companies representing

as much as 70G of total invested capital %nventory Control relates to a set of policiesand procedure by which an industry determines which materials it will hold in stoc'

and the quality of each that it will carry in stoc'

%nventory is the largest item in the current assets category and must be accurately

counted and valued at the end of each accounting period to determine a companyo the management of inventory is important%nventory management is

the process of efficiently overseeing the constant flow of units into and out of an

e:isting inventory

%nventory management is a very important function that determines the health of the

supply chain as well as the impacts the financial health of balancesheet-very

organiation constantly strives to maintain optimum inventory to meet its

requirements and avoid over or under inventory that can impact the financial figures



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1.0.2 NEED FOR T"E STUDY

%nventories perform certain basic functions which are of crucial importance in the

firm


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1.0.& O#JECTIVE OF T"E STUDY

PRIMARY O#JECTIVES

o 3o study the tools and technique of inventory management adopted

at %nstrumentation imited

SECONDARY O#JECTIVES

o 3o analyse effectiveness of inventory managemento 3o study the inventory Control measures in inventory management

o #nalysis of inventory management by using ratio analysis

o 3o study the inventory management procedure

1.1 INDUSTRY PROFILE

I-r')/ is defined as the art and science of measurement and Control of

process variables within a production or manufacturing area #n instrument is a

device that measures a physical quantity such as flow, temperature, level, distance,

angle, or pressure %nstruments may be as simple as direct reading thermometersor

may be comple: multivariable process analyers

%nstruments are often part of a Control system in refineries, factories, and vehicles

3he Control of processes is one of the main branches of applied instrumentation

%nstrumentation can also refer to hand held devices that measure some desired

variable Diverse handheld instrumentation is common in laboratories, but can be

http://en.wikipedia.org/wiki/Thermometershttp://en.wikipedia.org/wiki/Thermometers


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found in the household as well 8or e:ample, a smo'e detector is a common

instrument found in most western homes

# valve is a device that Controls the flow of a fluid 3oday valve can Control not only

the flow but the rate, the volume, the pressure or the direction of liquids, gases, dry

materials, through a pipeline or similar passage way 3hey can turn on and off,

regulate, modulate, or isolate 3hey can rough in sie from a fiction of an inch to as

large as 60 feet in diameter and can vary in comple:ity from a simple brass value

available at the local hardware stoc' to a precision designed ,highly sophisticated

coolant system Control Halve, made of an e:otic metal alloy in a nuclear reactor

Halves can Control flow of all types from the thinnest gas to highly corrosive,

super heated steam, abrasive sherries, to:ic gases and radioactive materials 3hey can

handle temperature from cryogenic region to molten and pressure from highly

vacuum to thousands of pounds per square inch

3he valve is one of the most basic and indispensable components of our modern

technological society %t is essential to virtually all manufacturing process and very

energy production and supply system, yet it is one of the oldest products 'nown to

man with a history of thousands of years

%nstrumentation can be used to refer to the field in which, instrument technicians and

engineers wor', or can refer to the available methods of measurement and Control and

the instrument, which facilitate them

8or core industries li'e power , oil, gas ,petro chemical equipment which will help

to function and chemical etc 3here is a good need for Control and instrumentation

equipment which will help to function industries smoothly # wide range of

electronics equipment and instruments are needed for Control and measurement of the

flow of gas, oil, valves, pressure, welding valves, etc are used

http://en.wikipedia.org/wiki/Smoke_detectorhttp://en.wikipedia.org/wiki/Smoke_detector


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%t is a very comparative industry where new technological development are concern

which will in function requires heavy instruments in /esearch and Development

"/=D$ facilitate for the companies engaged in this field face high level of

competition But there is good demand for these producers in the global mar'et in the

highly industrialied world

1.1.1 INSTRUMENTATION INDUSTRY IN INDIA

3he %ndian instrumentation industry is in for a sea change 8rom an age where there

was development of analytical instrumentation mainly in the Department of #tomic

-nergy "D#-$ and C>%/ labs due to sanctions, very few of these technologies werecommercialised But with new and emerging trends which are industryspecific

instrumentation li'e trace analysis instruments, fiber opticbased instruments and life

science instruments developing, there is a need for a technology plan which will

foster closer relationship between the industry and academia, felt industry e:perts

# technology plan will help to focus on newer technologies in generating %+/I

playing the role of funding agencies and providing incentives for commercialisation

of indigenously developed technologies >ince instrumentation is multidisciplinary,

there is a vast scope for designrelated activities, especially 5-) manufacturing

8urther, with the laboratories going in for automation, there is a huge potential for

applicationspecific instruments 3he estimated mar'et sie for instrumentation

industry is about /s 700900 crore and %ndian companies have a share of about /s

100 crore and growing at 1017G annually

%n the analytical instrument segment used for chemical analysis li'e liquids, solids

and gases the global mar'et is estimated at around J2! billion, growing at around ?

G and the highest growth has been in the life science sector >ome of the top



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companies contributing include #pplera, 3hermo -lectron, #gilent 3echnologies,

+er'in -lmer, iagen

%ndia stood among the lowest in usage of instrumentation compared to its *D+

"01?G$ in the mid 03/U)-43#3%54 %)%3-D is a public sector unit which was established in the

year 1A9! at ota, /a&asthan as its head quarters 3he company was established for

the manufacture of wide range of electronic and pneumatic instruments in

collaboration with renowned leaders li'e 3oshiba, apan I @=B *ermany

3he second unit of %4>3/U)-43#3%54 3D was set up in +###D in 1A?!

in technical collaboration with the %nternational reputed firm )L> M-)#3--



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@54-M;- C5)+#4M 3D, #+#4 for the manufacture of industrial Control

Halves 3he main products manufactured are global type Control Halves, safety relief

valves, butterfly valves and allied items 3he mar'et served is process industries li'e

refineries, petro chemicals, power plant, fertiliers plant, etc

3he company is a *ovt of %ndia enterprise %t was established to satisfy the

increased demand for a high technology instrumentation schemes 3he company

started with the turnover of about 2crores in 1A1AA %nspite of stiff competition

from about A competitors who have entered the field in the recent past, the company

could achieve a high growth

%, +###D is the first Control Halve manufacture in %ndia to receive %>5

A001 certification and recertified for upgraded 2000 version in 8eb 200!3he

company has adopted latest manufacturing technology of apan 3he valves are

designed and manufactured in conformation with %nternational pressure vessel codes

3he unit has ta'en up development and manufacture of critical components for special

pro&ects for )inistry of Defence as a part of its diversification plan

3o update the technology of design wor', computer aided design system has been

established 3he company has given due importance in /=D right from inspectionstage 3he /=D center have developed a number of products, some of which have

won innovation awards )ain strength of %, +###D was steady and rapid

absorption of technology leading to faster indigeniation Based on the technology

obtained through collaborators, in house developments could ta'e place which in turn

added to product range significantly, such developments served to rapidly reduce

countries dependence on import

3he performance of the unit is e:emplary since its inception 3he unit en&oys

leadership in Control Halve segment of process instrumentation in %ndia 3here is a

separate division for repair of Control Halves of any ma'e 3his is benefited too much

company in avoiding shutting of plant for want of repair 3he manufacturing facility

Guruvayurappan Institute of Management1!


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-:cellence with economy

+roduction and greater productivity of company growth and national

prosperity

3eam wor' and mutual trust

/espect and concern for individuals

1.2.3 O#JECTIVE

3o carry on in india or any other part of the world all 'ind of business of

manufacturing,storing,pac'aging,distribution,transporting,repairing,maintaing,trading

of all 'ind of Control Halves

)anufacturing of all 'ind of low product for dedicated application across wide

ranging related to fluid Control = Control Halve

3esting and calibration of all types of Control Halves and allied products are for

simulation of field parameters >pecial testing li'e dynamic response setting, neliumlea' testing, radio graphic inspection etc are in hitech CBH test laboratory for

importing distinct advantages

1.2.& S4OT A)*-/-

Sr8

o +roduct is of high quality

o )orale of employee is very high



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o 8inancial level of company is good

o /=D is strong

o )onopoly in production of Control Halve

4)


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%4>3/U)-43#3%54 3D, +###D is located in the 4ational @ighway !? at

distance of !0'm west of Coimbatore city in 3amilnadu and 'm east of +ala''ad

city in the state of erala

1.2.6 ISO CERTIFICATION

%nstrumentation imited +ala''ad, is the first Control Halve manufacturer in %ndia to

receive %>5 A001 certification and recertified for upgraded 2000 version in 8ebruary

200!

1.2.= VARIOUS DEPARTMENTS

3he following are the various departments in %

Commercial department

-ngineering department

Design department

+roduction and +lanning department

)aterial management department

#ncillary department +roduction department

+lant maintenance department

uality Control department

%3 department

8inance and accounts department

+ersonnel and administrative department

Civil department

>ecurity department

1.2.> MAJOR CLIENTS

Bharat @eavy -lectricals imited "B@-$



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3#3# Consulting -ngineers

4ational 3hermal +ower Corporation

>teel #uthority of %ndia imited ">#%$

Cochin /efineries

arson and 3ubro

/eliance %ndustries

>tate -lectricity Boards of #ll >tates

erala minerals and metals limited

eltron

*#% %5C

#CC

8-D5

Chemte: engineering

arson = 3ubro

Cochin refineries

1.2.? TRADE UNIONS

3here are two trade unions in the company, they are

%43UC

C%3U



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1.2.10 FACILITIES

1.2.10.1 TEC"NICAL E@PERTISEAFTER SALES SERVICE

Being in the field of Control Halves for the last 60N years, %+ have got the best

manpower trained in the fields of research, design, application engineering,

manufacturing, testing, field claim abatement techniques and these personnel

invariably get together to suggest optimum design features for solving problems faced

during commissioning or normal operation of plants

;e have also a full fledged after sales service department which is adequatelystoc'ed with inventory of spare parts and are in a position to respond to all sorts of

problems with regard to various types of valves within shortest possible timeBesides,

an e:tensive networ' of Branch 5ffices and /egional offices is available to cater to

sales and timely aftersales support

1.2.10.2 CUSTOMER%EDUCATION PROGRAMME

/egular customer education programmes for the benefit of both -:ecutive andsupervisory levels are conducted at +ala''ad %n these programmes, theoretical and

practical 'nowledge is imparted to the participants in order to carry out preventive

maintenance as well as minor modificationsL renovations that might be required at a

later stage

/ecently, %ndian 5il Corporation td has selected our training team to impart training

to customers at 5)#4

1.2.10.3 MANUFACTURING FACILITIES

3he facilities for manufacture and testing of valves Control Halves, Butterfly

Halves, /otary +lug Halves, >afety /elief Halves, +ressure /educing Halves,

Bellows >ealed Halves, -lectrical #ctuators etc established at +ala''ad plant are

one of the best in this part of the world



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%+ is the only company in %ndia to have all inhouse facility to manufacture globe

type Control Halves ranging from OP to 60P sie and rating up to #4>% 2?70 special

class and Butterfly valves up to sie 2!00 4-

# team of -ngineers and 3echnicians trained for the past so many years are available

to bring out the best quality product 3he plant is also equipped with sophisticated

C4C lathes, C4C drilling, machining centre and vertical turret lathe with a swing of

!6 )eter, roller burnishing machine, vertical turret lathes and productivity is of a

very high order ensuring quality and reliability

# Clean room facility is created for manufacturing of Bellows >ealed Halves ;ehave with us special 4C machines which not only ensure very high degree of

accuracy but also repeatability and higher productivity %t is a fact that many leading

valve manufacturers in the world have started buying castings from %ndia

%nstrumentation td,+ala''ad can claim for having developed many of the sources for

supply of castings for Control Halve requirements

%t en&oys a much better rapport with the suppliers to bring out the best quality aspects

to the castings )ore so, because the pro:imity to the supplier is well en&oyed by way

of frequent interaction with the foundries right from the stage of pattern ma'ing

through mould ma'ing and pouring and hence, %+ is fully aware of the actual quality

levels of the castings procured by them which may not be the case of the people who

do not have the facility to 'eep a close watch of such critical castings

1.2.10.& RESEARC" AND DEVELOPMENT

/=D Centre is equipped with the stateoftheart C#DLC#) facilities 3his centresF

wor' stations are supplied by @ewlett +ac'ard loaded on which are the >D/C %deas

>oftware for Design, modelling and 8-) analysis along with F>olid ;or'sF for solid

modelling

3his wor'station is connected to +Cs with #utoC#D 2007 on ;indows 2000

networ' 3his wor'station is directly connected to a C4C machine supplied by



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@-M%*-4>3#-D3, *ermany, for computer aided manufacturingBellows sealed

valves developed through inhouse /=D were awarded the %mport >ubstitution

#ward by the *overnment of %ndia for 1AA0A1

1.2.10.5 TESTING

3he uality #ssurance and %nspection >tandards adopted by %4>3/U)-43#3%54

%)%3-D conform to the latest international standards and all the products moving

out of +ala''ad plant bear a stamp of high degree of quality and reliability -:cellent

test facilities are available where hydrostatic testing of large sie valves can be

conducted with ease

)any of these test facilities include presses, providers apart from variety of fi:tures,

test flanges designed and manufactured over the years >ome of the special tests

conducted by %Lfacilities include dynamic response testing, helium lea' testing,

radiographic inspection, ultrasonic and magnetic particle testing, CH test etc

1.2.10.6 INFORMATION TEC"NOLOGY CENTRE

Complete business application starting from business enquiry, order processing till

after sales service are computerised on the latest state Qof the art technology power

+C rupees 9000 machine supplied by %B), whose bac'bone is the world renowned

/DB)> 5/#C- ?66 and D2 as front end

1.2.10.= PURC"ASE DEPARTMENT

+urchase department is an important function of material management as the moment

an order is placed for the purchase of materials # substantial portion of the

company


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materials, supplies, services, machines and tools at the most favourable terms

consistent with maintaining the desired standard of quality 3he head of this

department is 'nown as the purchase manager

Chart 121.Or)/B)/ 8)r ! 8 +'r8)- ;+)ris as follows

>enior )anager ")aterial$

)anager ")aterial$

-ngineer ")aterial$

O/(- O! P'r8)- D+)r

3o ma'e continuous availability of materials

3o ma'e purchase competitively and wisely at the most economical price

3o purchase proper quality of materials

3o develop good suppliers relationships

3o develop alternate source of supply

3o adopt most advantageous method of purchase to ensure smooth delivery of

materials from suppliers

3o serve as an information centre on the materials, 'nowledge relating to

prices, sources of supply, specification, mode of delivery, etc

R/(/ +'r8)- r'/-//

# purchase requisition is a form used as a formal request to the purchasing

department to purchase materials 3his form is prepared by the store 'eeper for

regular stoc' materials and by the departmental head for special materials not stoc'ed



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at regular items 3he requisition is approved by an e:ecutive, such as the plant

superintendent or wor' manager, in addition to the one originating the requisition

3he purchase requisition is generally prepared in triplicate 3he original copy is sent

to the purchase department 3he duplicate 'ept by the store'eeper or the department

which initiates the requisition and the triplicate is sent to the authoriing

e:ecutive3he purchase requisition initiated by the store'eeper for regular items of

materials is called Eregular< purchase requisition and the purchase requisition prepared

by the departmental head for special materials is 'nown as special or Eoccasionalenior )anager

)anager "purchase$

Deputy )anager ">tore$

>upervisors

>tore 'eeper

>ecurity

TYPES OF STORES

Centralied store

Decentralied store

Centralied store with sub store

Cr)/B; -r



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%n this central store, the materials are received by and issued from one stores

department #ll materials are 'ept at one central store %n this better Control can be

e:ercised over stores because all stores are housed in one department Better layout of

stores is possible ess storage space as stores are 'ept to a minimum ess

botheration is inventory chec's at all the stores located in one place But in this store

there is increases transportation cost because one central store may not be near to

every department of the organiations 3here is a greater ris' in case of fire

brea'down in transport may stop production in departments

D%r)/B; -r-

%n this type of stores, independent stores are situated in various departments @andling

of stores is underta'en by the store 'eeper in each department 3he departments

requiring stores can drawn from this respective store situated in this department 3he

disadvantage of centralied stores can be eliminated if there are decentralied stores

>uch type of stores set up to meet the requirements of materials of each production

because of the heavy e:penditure involved

Cr) -r- /8 -' -r-

%n this organiation, departments are situated at a distance from the central store, so in

order to 'eep the transportation cost and handling charges to minimum, sub stores

should be situated near production departments 8or each item of materials, a quantity

is determined and this should be 'ept in stoc' in sub store at the beginning of any

period

#t the end of the period the store'eeper of each sub store will requisition from the

central store the quantity of the material consumed to bring the stoc' up to the

predetermined quantity

Besides, the department may be divided into si: components and they areI

/eceipt store



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Component store

/aw material store

*eneralL @olding store

uarantine store

3oolLproduction store

C8)r 1.2.3 :Or)/B)/ 8)r%R/+ -r

@ead of the department

5fficer in charge

>upervisor in charge

>upporting staff >upporting staff

receipt group documentation group

1.2.10.? RECEIPT STORE

3he store receives all the materials from the vendors Documents started from this

store

F'/- ! R/+ -rI



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/eceive all incoming products delivered by suppliers L customers

Compare the quantity of materials as vouched by the supplierL customers and

intimate discrepancies, if any to the concerned procurement agency

3o provide intimation to concerned procurements agency in case of e:cess

supply of items

+repare and sent relevant voucher to quality Control for the received products

/eceive vouchers bac' from quality Control department credit accepted

product to /aw material store component store and non accepted product to

quarantine store

3he goods can be received in three waysI

3hrough transport "#rranged by company or supplier$

Courier is by

o Door delivery

o Collect from the office

o +ersonality "hand to hand$

3he payment is made by C5D "cash on delivery$ or on credit

1.2.10.10 COMPONENT STORE

F'/-

3o store fully machined components, sub assemblers and accessories

3o maintain /5 items as per desired items



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3o periodically chec' the condition of shelf life items for deterioration and

ta'e suitable actions

3o insure timely receipt and issue of materials for production

3o increase training is provided to all employees

1.2.10.11 RA4 MATERIAL STORE

3his store is used to store raw materials li'e bar stoc', casting, forging, pipes, etc andsemifinished component used for production

F'/-

3o store raw materials li'e bar stoc'ing, casting, forging, pipes, etc and semi

finished components

3o monitor the stoc' levels as per /5 and raise indents whenever the level

reach /5 as requested by ++C

)CH machined items from sub contractors are credited to the store by )CH

" )echanied Credit Houcher$

1.2.10.12 GENERAL STORE "OLDING STORE

F'/-

3o store tools, production consumables li'e welding rods, paints, etc and

stationery

3o monitor the stoc' level as per the /5 and raise indent whenever the

levels reach /5



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3he materials are issued when );H ")aterial ;ithdrawal Houcher$ is given

to store which contains the code no description units etc 3he inspection of

stoc' is once in si: months

1.2.10.13 HUARANTINE STORE

F'/-

3o receive non accepted materials from receipt store, bill further ordered

3o store non confirming material and prevent any unauthoried use

1.2.10.1& 4ASTE MANAGEMENT

>craps are dumped in the scrap yard by issuing )/H ")aterial /eturn Houcher$ %t

disposes by giving tenders and sale it for a normal value

C8)r 1.2.&:Or)/B)/ 8)r ! C+ -r, r) )r/) -r );

8;/ -r

>enior )anager ")aterial$

>enior -ngineer

Component L /aw material >tore @olding >tore

>enior 8oreman %>5



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5# L +rogress man >L>>) >/

A;())- ! 8)(/ -r ;+)r

Correct 'nowledge of the location of different items

-asy accessibility of the items

-asy measurement and movement of material handling equipments and men

/educe spoilage of material at stores

-nsure proper utiliation of available store

1.2.10.15 PRODUCTION FUNCTION

C8)r 1.2.5: PRODUCTS OF INSTRUMENTATION LTD, PALAKKAD

+/5DUC3 +/58%-

C543/5 H#H- 4UC-#/ H#H- >#8-3M/-%-8 H#H- #%-D+/5DUC3>

*5B- 3M+- H#H-> 85;

45RR-

BU33-/8M H#H-> 5/%8%C- +#3-



36/106

CONTROL VALVES

%t is a valve with pneumatic, hydraulic and electric or other e:ternally powered

actuators that automatically, fully or partially opens or closes the valves to a position

directed by signals transmitted from Controlling instruments # Control Halve plays avery important part in automatic Control of modern plants which depends on the

correct distribution and Control of following liquids or gases

3he Control Halve has got basically two units namely an e:ternal actuators and the

valve body assembly 3he valve shell constitutes still and firm parts 3he materials for

valve bodies are cost iron, carbon steel, charm moly belnum, nic'el steel, stainless

steel, etc

#UTTERFLY VALVES

Butterfly Halve is a Control Halve that utilies a rotatable dis' or a vane as a valve

closure member %t is the most common type of rotary valve used for Control %ts face

to face dimension is less so that it can be installed in a lesser space Butterfly Halvemay be of water type "without flange$ or flange type 3hey are designed based on

#merican water wor's authority "#;;#$ standard Different parts of a valve are

dis' body, shaft seat, etc

3ypes. soft sealed valve with no lea'age metal to metal seals with standard lea'age

SAFETY AND RELIEF VALVES

>afety #nd /elief Halves are designed to protect systems or vessels from e:cessive

pressure 3he relief valves are designed to release e:cessive pressure in systems

containing incompressible fluids where there is no chance of e:plosion under over

pressure >afety Halves are designed to provide immediate relief of over pressure with

any fluid particularly compressible fluids which could cause e:plosion of wor'

-lectrical #ctuators

Guruvayurappan Institute of Management3"


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3ypes. inear and rotary type for 54588 and regulating duty

)anual #ctuators

3ypes. inear and rotary actuators with gearbo: and hand wheel

F -

3ypes. orifice plate, flow nole, virtual tubes

S+/) ()(- ); +r;'-

Below seated valves. %n collaboration with )L> >-*#U-, > # 8rance pressure

rating up to #4>% 2700 19>, Bellows available in materials li'e >>619, @astelloy c,

%nconel, )onel, etc

#ntis urge valves. "H#R$ special high pressure drop valve for gas service in pressure

rating of #4>% 2700 lbs with 5dh trim and class ! lea'age

3eflon valve. 8or e:treme corrosive conditions

@igh pressure drop Halve. 8or liquid application with high pressure drop services

from S inches to 9 inches sie /ating #4>% 170 to #4>% 2700 lbs >pecial anti

cavitations< cascade trim

+ilot operated Halve. 8rom S inches to 9 inches sie pressure rating #4>% 2700 lbs

lea'age class 7

1.2.10.16 MATERIAL "ANDLING

3he system concept in material handling3he system approach to handling is

distinguished by its disregard of the traditional regard boundaries of function and

departments 3hus more detailed investigation and analysis ma'e it easier to

diagnosis, conceptualism design and evaluate comple: columniation of sophisticated

hard wor', organiational inter relationships and infrastructure flow Usually results



38/106

in an integrated composite of facilities, activities and information flow and

encompasses as much of the total problem environment as is feasible and economical

S*- +r;'r

3he procedure for analying a material handling problem from system point of view

is more comprehensive 3he general phases and step involved are as follows.

+roblem %dentification

%dentify the problem

Determine the scope of the problem

Define the problem

-stablish ob&ectives

+roblem %nvestigation

Determine what data to collect

-stablish waste plan and schedule

Collect data

Develop weigh and analysis data

>ystem synthesis

>tructure alternate system

>elect feasible system

>ystem Design

Define proposed system



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Develop and design system components

>ystem %mplementation

+rocedure equipment

3raining of personnel

%nstallation of equipment

Pr- )r/) 8);/ -*--

3he material is bought by truc' and unloaded by using cranes "in heavy bay$ force lift

and also by hand, casting are placed in the yard outside the machine shop where each

suppliers has been allotted separate area @eavy casting are moved by force lift,

&umpos and trolleys

/eceipt store inspect the supplied materials for length, number and quantity, as may

be the case 3hese items are stored in specific locations /ac's are provided for stored

materials are offered to quality Control for inspection Casting is preinspected

4ormal shortage period is about ten days >ome of the components are sent for

rewor'Casting is either given to such contractors done by #ncillatory department or

machine in the shop itself %n the shop casting are given rough machining 3he

handling is done by force lift and crane

1.2.10.1= CODING OF COMPONENTS

Coding is the name of components using some codes 3he ob&ective of coding is to

classify components by their feature and to code these features so that components

having similar code number possess similar feature3hen the spare part is using an

alphabet followed by the drawing number 3hen the item number of products is

written in the code



40/106

8ollowed by the material code and the serial process which is denoted in two spares in

code

%n the total code will have appro:imately si:teen entities "both number and alphabet$

B 01 001 - Drawing 4o 1 990

;here,

B Q -conomic year

01 Q Component number

001 Q >erial number

- Q >pare parts

1 Q %tem number

990 Q )aterial code

!0 Q >pecial process

#fter operation in fabrication shop the parts require finish machining 3his is done on

lathe 3he transportation is done by umbos and 3rolley3he actuators is assembled

separately for different si:es area using -53, -53ome finished components required for assembly are collected by production

planning and Control department "++C$ from the component stores and 'ept bit

mashed in separate bins 8inished goods brought for calibration using -53s3he

calibrated products are ta'en to the painting room 3hese products are hung from the

hoo' provided on a rail /ollers are provided for easy handling

#fter painting products are 'ept on floor #t time of dispatch, the products brought to

pac'ing area -53s are used for all movements and for holding the products while



41/106

pac'ing3he truc's are brought near the pac'aging area and the pac'ed products are

loaded using -53s

1.2.10.1> PRODUCTION PLANNING AND CONTROL

DEPARTMENT

3he ++C department interacts with various departments to plan the production

process and 'eep trac'ing the progress for the timely e:ecution of orders3his

department receives production request from the commercial department %t

immediately prepares the bill of materials and here subsequently material

procurement requisition ")+/$ is being sent to the concerned procurement agencies

;ithout the order from the production planning = Control department no production

is commenced in the production department

FUNCTIONS OF PPC

3o review contracts ant to plan schedule and monitor production

3o coordinate special testing and to give wor' order and drawings to wor's

department

3o provide information and current production status to commercial

department

C8ART 1.2.6: Or)/B)/ ! PPC ;+)r /- )- !

#>>%>3#43 *-4-/# )#4#*-/

>-4%5/ )#4#*-/ ";5/> #4D ++C$

)#4#*-/



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D-+U3M )#4#*-/ "++C$

D-+U3M )#4#*-/ ";5/>$

>-4%5/ -4*%4--/ "#>>-)BM$

-4*%4--/ "#>>-)BM$

1.2.10.1? PRODUCTION DEPARTMENT

%4>3/U)-43#3%54 %)%3-D, +###D is following the traditional method

of manufacturing which is process specification of production %n this type the same

types of machines are grouped together

C8)r 1.2.6:T8 Or)/B)/ 8)r ! Pr;'/ D+)r

>-4%5/ )#4#*-/

)#4#*-/

D-+U3M )#4#*-/ "++C$

D-+U3M )#4#*-/ ";5/>$

>-/H%C- -4*%4--/ "#>>-)BM$



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-4*%4--/ "8#B$

>U+-/H%>5/

;5/-/>

+-/)#4-43 ;5/-/> 3-)+5/#/M ;5/-/>

%n %4>3/U)-43#3%54 %)%3-D, +###D ?7G of total production is

Control Halves and remaining are flow noles, butterfly valves, etc, safety valves,

etc

Control Halves are mainly used for regulating the flow fluids through pipes3he main

wor's of production department is to transform drawings, specifications, materials

and instructions into saleable is products and to do so with the most efficient use of

machines and men available

3he production department mainly divided into two sectionsI

)achine shop

#ssembly shop

MAC"INE S"OP

)achine shop performs the following functionsI

3o receive orders from ++C

3o study drawings and technology sheet

3o get necessary components from raw materials store



44/106

3o load schedule and monitor processing of &obs on machines

3o offer machined components to quality control

)onitor result of inspection

3o return scrapped materials to store

3o store and issue fitting tools, measuring instrument to sub contractors

3o credit accepted components to component store

3he intimate general stores of the tools and consumables to be maintained in

record level

3he machine shop consists of about 2! lathes, ! milling machines, drilling

machines, 9 grading machines and C4Cs #ll the C4Cs are located in the right end of

the machine shop, which is a separate chain

3he capacity and specification of each machine are different Hertical turret lathe are

used for machinery very big components, which cannot be done in ordinary lathes

)achines have provision for holding more than one tool

ASSEM#LY S"OP

F'/-:

3o carry out assembling

3o plan schedule and monitor the assembling of pids

3o offer components to quality Control

3o get the result of various test in final production



45/106

3o identify finished products in unique manner

3o pare, then sent to the assembling sections where they assembled, welded,

painted, etc after collaboration the products are inspected by inspection

manager

3he ob&ections of inspections areI

3o detect and isolate facility material or wor' and so to prevent waste

3o prevent further wor's being done on pieces already specified

3o protect the firm3/U)-43#3%54 %)%3-D, +###D is to supplyquality products as per customer


46/106

@e is not an outside to our premises @e is a part of it

;e are not doing a favour in servicing him @e is doing as favour in giving us an

opportunity to do so

C+)*- );(/ +*- r)r;/ ')/*

Mou are an important person of this organiation Mou are the ma'er of the quality

products

%4>3/U)-43#3%54 3D, +###D, quality policy is to give total satisfaction

to their customers through design, manufacture and supply of products bac'ed by

after sales service and customer


47/106

Coding is the naming of component using some codes 3he ob&ective of coding is to

classify components by their features and to code their features so that components

having similar code number process similar feature

%n total code will have appro:imately si:teen entities "both number and alphabets$

B01001 - "Drawing number$ 1990!0

B 01 001 - Drawing 4o 1

990

;hereI B -conomic year

Component number

001 Qserial number

- >pare parts

1 Qitem number

990material code

!0special process

C8)r 1.2.=: HUALITY CONTROL DEPARTMENT C"ART

>-4%5/ )#4#*-/ "C$

)#4#*-/ "C$

-4*%4--/ "C$

>U+-/H%>5/



48/106

;5/-/> "C$

3he quality assurance and inspection standards adopted by %43/U)-43#3%54

3D, +###D confirm to the latest %nternational standard and all the products

moving out of +###D plant bear a high stamp of degree of quality and

reliability

-:cellent facilities are available where hydrastic testing of large sie valve can be

conducted with care )any of these testing facilities include pressure provided apart

from variety of fi:tures, test flange designed and manufactured over the years

3he main function is to ensure that quality products are supplied

uality Control department function in two areas isI

%nward uality Control

#ssembly uality Control

I)r; H')/* Cr

%t carries out of the testing of incoming items

A--* H')/* Cr

%t carries out testing to finished products3he test may be chemical, or physical,

simple and cheap or comple: and costly uality department follows the norms based

on %>5A001 3his follows the international plant standard li'e #merican >tandards

for )aterial -ngineering "#>)-$, #merican ;ater ;or's #uthority "#;;#$

Dush %nternational >tandard "D%>$

H')/* +r/; -/+

%t includesI



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-ngineering /egister

5rder ac'nowledgement

+roduction request

Delivery chelan

+ac'ing slip

;arranty card

%nvoice

>ervice report

%nternational %nformation request

%nter office )emo

+roduct credit voucher

Customer purchase order file

uality assurance certificate

%4>/U)-43#3%54 imited has achieved a record turnover of /s 100 crore in

200A10 according to a statement by general manager of the unit, >ri 4 >rivastava

3he company has also recorded a provisional profit of /s 22 crore

3he unit in +ala''ad is being e:pended to handle bigger and critical valves weighting

upto 27 tonesDuring the 2001011 fiscal, the unit has manufactured and supplied

200 mm sie butterfly valves for the Hiard >teel +lant and 2! inch Control Halves



50/106

for +ragathi 990 ); power plant in 4ew Delhi 3he turnover and order boo'ing

targets for the 201011 fiscal is /s 120 crore and /s 160 crore respectively

1.3 T"EORETICAL FRAME4ORK

1.3.1 INVENTORY

# physical resource that a firm holds in stoc' with the intent of selling it or

transforming it into a more valuable state3he dictionary meaning of inventory is

(stoc' of goodsK%n accounting language it may mean stoc' of finished goods only%n

manufacturing concern, it may include raw material, wor' in process and stores, etc

%nternational #ccounting >tandard Committee defines (inventory as tangible property

held for sale in the ordinary course of business, in the process of production for such

sale or to be consumed in the process of production of goods or services for saleK 3he

#merican %nstitue 5f Certified +ublic #ccount"#%C+#$ defines (inventory in the

sense of tangible goods,which are held for sale in the process of production and

available for ready consumptionK

Guruvayurappan Institute of Management!0


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3he raw materials, wor'inprocess goods and completely finished goods that are

considered to be the portion of a businessFs assets those are ready or will be ready for

sale %nventory represents one of the most important assets that most businesses

possess, because the turnover of inventory represents one of the primary sources

of revenue generation and subsequent earnings for the companyFs

shareholdersLowners

1.3.2 INVENTORY MANAGEMENT

%nventory is an asset that is owned by a business that has the e:press purpose of

being sold to a customer 3his includes items sold to end customers or distributors %t

includes raw materials, wor' in process, and finished goods 3he management of

inventory is a 'ey concern of all businesses %f a companyFs inventory level is too low,

it ris's delays in fulfilling itFs customers orders

%f the inventory is too high, it is tying up dollars that can be better used in other areas

%t also ris's obsolescence and spoilage >uccessful businesses 'eep their inventory

turns high, but also 'eep their service level at or above the industry standard

%nventory management is a science primarily about specifying the shape and

percentage of stoc'ed goods %t is required at different locations within a facility or

within many locations of a supply networ' to precede the regular and planned course

of production and stoc' of materials

1.3.3 FUNCTIONS OF INVENTORY

%nventory is required to meet the anticipated customer demand Customer

generally does purchasing without any preinformation to the seller or

producer )any times, he is undecided about the model, ma'e or quantity of

the purchase



52/106

@e would li'e to see the performance of all the available models

#fter &udging his need and e:penditure, he would select one piece %t is almost

impossible to 'now how many pieces of a product would be needed each day

3herefore, inventory serves as a buffer to the anticipated demand

%nventory guards against stoc'out situations 3here could be many e:ogenous

factors due to which the arrival of raw material may be delayed %nventory

wor's as the safety stoc' for such situations

%nventory ensures smooth flow of production process >atisfaction of customer

is dependent on the timely availability of finished goods and spareparts

%nventory plays an important role in it

%nventory management is a high priority area in industry or service sector

3his is due to conflicting role of inventory 8or e:ample, the salesman wants

high level of inventory to 'eep the promises and quic' delivery 5n the other

hand, warehousing people of the same industry will prefer lower finishedgoods inventory so that less storage space is needed

5rdering costs, the cost associated with individual order such typing,

approving, mailing, ect Can be reduced, to great e:tent, if the firm places

large orders rather than several small orders

1.3.& INVENTORY CATEGORIES

3he various forms in which inventories e:ist areI

R) )r/)-

/aw material are inventory items that are used in the manufacturer


53/106

such as speed with which raw materials are to be ordered and procured and

uncertainity in the supply of these raw materials

4r


54/106

#'!!r /(r/-

Buffer inventory also called as safety inventory%ts purpose is to compensate for

une:pected fluctuations in supply and demand as well asunpredictable events such as

poor delivery reliability or poor quality of supplier


55/106

#ccording to this s motive, an enterprise maintains inventories to avoid bottlenec's in

its production and sales By maintaining inventories, the business ensures that

production is not interrupted for want of raw materials, on the other hand and sales

also are not affected on account of nonavailability of finished goods, on the other

+recautionary motive

%nventories are also held with a motive to have a cushion against unpredicted

business 3here may be sudden and une:pected spurt in demand for finished goods at

times >imilarly, there may be unforeseen slump in the supply of raw materials at a

time %n both cases, a prudent business world surely li'es to have some cushion to

guard against the ris' for such unpredictable changes

>peculative motive

#n enterprise may also hold inventories to ta'e the advantage of price fluctuation

>uppose, if the prices of raw materials are to increase rather steeply the enterprise

would li'e to hold more inventories than required at lower prices

1.3.= O#JECTIVE OF INVENTORY MANAGEMENT

3he main ob&ective of inventory management is to maintain inventory at

appropriate level so that it is neither e:cessive nor short of requirement 3hus,

management is faced with 2 conflicting ob&ectives

3o 'eep inventory at sufficiently high level to perform production and sales

activities smoothly

3o minimie investment in inventory at minimum level to ma:imie

profitability

Guruvayurappan Institute of Management!!


56/106

Both in adequate = e:cessive quantities of inventory are undesirable for business

3hese mutually conflicting ob&ectives of inventory management can be e:plained is

from of costs associated with inventory and profits accruing from it low quantum of

inventory reduces costs and high level of inventory saves business from being out of

stoc' = helps in running production =sales activities smoothly

3he ob&ectives of inventory management can be e:plained in detail as under.

3o ensure that the supply of raw material = finished goods will remain

continuous so that production process is not halted and demands of customers

are duly met

)inimiing inventory cost such as ordering , handling = carrying cost

3o 'eep investment in inventory at optimum level +roper Control of

inventories help management to procure materials in time in order to run the

plan efficiently

3o reduce the losses of theft, obsolescence = wastage etc

3o ma'e arrangement for sale of slow moving items

3o minimie inventory ordering costs

+romotion of manufacturing efficiency.3he manufacturing efficiency of the

enterprise increases if the right type of raw material are made available to the

production department at the right time

1.3.> FACTORS INFLUENCING INVENTORY

3he inventory management of an organiation has an impact on the whole system

(@ow much to buy at onetimeK and (when to by this quantityK 3his two fundamental

things on which inventory Control depends )any factors govern these fundamental

things 3he prime factors that govern these two fundamental things areI

/equirements

Guruvayurappan Institute of Management!"


57/106

uality in stoc' or on stoc'

ead time

5bsolesce

1.3.? INVENTORY CONTROL TEC"NIHUES

%nventory is being maintained as a cushion in supply of materials for continues

production without causing stoc' out situation 3his cushion should not be suicidal to

any organiation 3he following scientific techniques and methods are being used in

Control of inventory

%nventory management technique

>tandardiation

>elective inventory Control

ust in time

+erpetual inventory system

%nventory turnover

1.3.10 INVENTORY MANAGEMENT TEC"NIHUES

E/ Or;r H')/*

-5 is an important factor in Controlling the inventory%t is a quantity of inventory

which can be reasonably be ordered economically in time%t is also 'nown as

(>tandard order quantityK%n determining this ordering cost = carryong cost are ta'en

into consideration

5rdering costI



58/106

3he term ordering cost is used in case of rawmaterials and includes the entire cost of

acquiring materials %t basically the cost of getting an item of inventory and it

includes the cost of placing the order

Carrying cost

Cost incurred for maintaining a given level of inventory is called carrying cost

Rr;r +/

3he order point is that inventory level at which an order should be placed to replenish

the inventory 3o determine reorder point ead time,the time normally ta'en in

replenishing inventory after the order has been placed and -conomic order quantity

should be 'nown

/eorder evel ead time demand N >afety stoc'

S)!* -


59/106

M//' (

3his is the level below which stoc's should not be fallCarrying of minimum stoc'

avoids a situation of stoc's out resulting in stoppage of production3his stoc' is buffer

stoc' or safety stoc' to be used under abnormal conditions or in emergencies and areta'en care of fluctuations in the lead time

)inimum stoc' levelreorder level "#verage consumption rate V #verage lead time$

D)r L(

Danger level is the level below which actual stoc' of material should not be allowed

to fall under normal situations%f the actual stoc'of material falls below danger level,

there is imminent danger in the stopage of production

Danger evel )inimum ConsumptionV )inimum /eorder +eriod

A(r) -< (

#verage stoc' level indicates the average stoc' held by the enterprise during the year

#verage >toc' evel " )inimum evel N)a:imum evel$L2

1.3.11 STANDARDIATION

>tandardiation is very essential to Control the inventory, as by

standardiation reduction is variety of material is possible #nd because of the

reduction in variety the advantage is low order cost, low inventory, less storage stoc',

conservation of material, variety reduction, less paper wor', easy follow with

suppliers, less number of orders



60/106

3he importance of this field has been recognied since the days of 8;

3aylor who first drew attention to this fundamental need in any organiation ust as

wor' study is necessary preliminary to wor' specification, and the basic technique for

production Control, quality Control, material handling, estimated cost Control, etc

(>tandardiationK preliminary necessity to design a basic technique on build Control

and standardiation procedure+erpectual inventory system is a method of recording

the store balance after every receipt and issue to facilitate a regular chec'ing and to

prevent the closing down for stoc'ta'ing#fter every recipt or issue the entry is made

in the bin card and the balance is ad&usted

1.3.12 SELECTIVE INVENTORY CONTROL

>elective inventory means variation in the methods of inventory Control from items to

item and this differentiation should be on selective basis by classification # company

has to stoc' thousands of items of raw materials, standard parts, stores and spares, sub

contract items, tools, stationary etc to have better Control over the inventory selective

inventory Control technique should used in isolationLor in con&unction

3he selective Control mean selecting the area of Control so that required ob&ective is

achieved as early as possible without any lost of time due to ta'ing care of full area

)inimum lost of energy and efforts

#t minimum cost without loss of time

3he following are the selective Control techniqueI

#BC analysis

8>4 analysis

H-D analysis

A#C ))*-/-

Guruvayurappan Institute of Management"0


61/106

#BC analysis is a selective Control technique which is required to be applied

when we want to Control value of consumption of the items in rupees obviously when

we want to Control value of the consumption of the material we must select those

materials where consumption is very high

%n any company manufacturing, there are number of items which are consumed or

traded it may run into thousands %t is found after number of studies for different

companies .

Halue of consumption of

items "value in /s$

4o of items *rade

?0G of consumption 10G of no of items #

20G of consumption 17G of no of items B

10G of consumption ?7G of no of items C

A /-these are those items which are found hardly 7G 10G but their

consumption may amount ?0G ?7G of total money spend on materials

# /- these are those items which are generally 10G 17G of the total itemsand their consumption amount 10G 17G of total money spend on materials

C /- these are large number of items which are cheap and in e:pensive and

hence in significant 3hey are large in numbers running into hardly 7G 10G of

total money spend on material

FSN ))*-/-

3his type of analysis is more concerned from the point of view of movement of the

item or issue of the item under this type of analysis

F items are those items, which are fast moving iein a given period of time,

say a month or year they have been issued up till number of items #lthough fast

moving does not necessarily mean that these items are consumed in large quantities



62/106

S items are those items which are slow moving in the sense that in the given

period of time they have been issued in a very limited number of time

N non moving items are those, which are not at all issued for a considerable

period of time

3hus, stores department whose concerned with the moving of items would li'e to

'now and classify that the items are storing in the categories 8>4 >o that they can

manage operate and plan stores activity accordingly

VED ))*-/-

H-D analysis is carried out to Control situation, which are critical %dentify materialaccording to their criticality to the production, which means the material, without

which the production will come to stop and so on from this point of view material

classified into three categories

V % Vital categories of the items are those items for the want of which

production will come to stop

E -ssential group of items are those items because of non availability of

which the stoc' out cost is very high

D Desirable group of items are those items because of non availability of

which there is no immediate loss of production and stoc' cost is very less and it may

cause minor disruption in the production for a short time

2.0 REVIE4 OF LITERATURE

>urvey of the available literature relating to his field of study is a must for the

researcher so that he can 'eep himself updated in his field and related areas ;ithout

this it will not be possible for a researcher to ma'e a worthwhile contribution /eview



63/106

of literature in this study deals with the importance and necessity for inventory

management in an organiation

%nventory management can help business to be more profitable by lowering their cost

of goods sold and by increasing sales %nventory management is required at differentlocations of a supply networ' to protect the regular and planned course of production

against the random disturbance of running out of materials or goods 8ollowing

paragraphs review the available literature.

2.1 M)-/ A)r) 20067 in his article A Ir;'/ I(r*

M))said that the primary and foremost step in inventory management is

acquiring accurate information for inbound operations 3he information so gained in

advance can be a crucial factor in improving the inbound productivity >etting up of

an advanced inbound strategy and e:ecution framewor' can be done without too

much of reengineering effort for the supply chain 3he perfect way to commence is

to ma'e the best use of information available and establish a set of rules and

regulations to harness the information efficiently

2.2 S( R-r820057 mentioned in his article I(r* M))

R(/ that, (when having inventory , a company does not ever want to have toomuch of a product, nor does it want to have not enough of that product to meet

demand %nventory management helps to ensure that a proper inventory is maintained

at all timesK >teven also says that a proper inventory management has many benefits

for companies %nventory management can help ma'e it so that a company has the

e:act inventory needed 4o more , no less %nventory management is also an effective

way to 'eep trac' of e:actly what products a company has

2.3 P8//+ S)r200=7in his article "I(r* M)) O S/B D- N

F/ A$ says that (if there is one great myth in inventory management it is that one

single technique will solve all inventory problems 4ot that people believe that one

technique will solve all problems in all situations but that in any given company one

approach is all that is required to manage all inventoryK @e also pointed out that,



64/106

there is a wide range of techniques and approaches that people use to manage

inventory these include %3, #BC and 8>4,H-D analysis, /is' )anagement, safety

stoc' and -5


65/106

>ell the &un' "even if you thin' it A;). J F/in his article #'/;/ ) L) S'++* C8)/,20067said that

(there is a widely held, but inaccurate, perception that new technologies have led

directly to declines in the inventorytosales ratio, an important indicator of (buffer

inventoryK in the supply chain in theory, information technologybased supply chain

practices such as &ustintime"%3$ inventory management, warehouse automation, and

the introduction of bar codes should have allowed companies to improve their

management of orders and stoc'piles of materials

2.? #r' D. C); 200?7has mentioned some benefits of #BC #nalysis in his

article T8 #!/- ! A#C A)*-/- !r I(r* R;'/Using the K#BCK

concept to analye Control inventory investment and turns is the simplest and most

efficient method )ost inventories are made up of hundreds and possibly thousands ofindividual items necessary to manufacture a company


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2.12 J'8/ GB)- in his article I(r* Cr 1???7 says inventory

management is ma'ing sure that items are available when customers call for it, but

not too much stoc' , so that inventory turnover goals are met

2.13 #)r;/) inA'/ A; F/) Fr M))r-1?>>7opines that for afirm to be successful, the proportion of inventory to current asset should be 'ept at the

minimum #lso a high inventory turnover ratio which indicates faster movement of

materials is advantageous to the firms @e also points out that the proportion of

finished L semifinished inventory should be 'ept at minimum

2.1& K8);))1?>5$ on his boo' I(r* M)) A; S< E()')/

revealed that the selected units were found to have recorded slower and declining

rates of transmutation of wor'ing capital 3he main reason responsible for this

situation is the high share of inventories in current assets which ranged between !0G

and ?0G with an increasing trend during the period of study

2.15 J)/ in his boo' T8 4r>7 has

highlighted various facts of wor'ing capital management in the state of /a&asthan @e

opined that the cash position of wor'ing capital should be improved by reducing

inventories and efficient collection of debts

2.16 R)1??07 in E'/() ! I(r* Cr M;- evaluates the

management of wor'ing capital and degree of efficiency of managing inventories in

the manufacturing underta'ings of #ndhra +radesh public sector 3he analysis of the

structure of inventory reveals that there was overstoc'ing with regards to each and

every component overstoc'ing with regards to each and every component of

inventory in the underta'ings selected for study

2.1= M8) R;;* inM)) ! 4r


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2.1> K'r/) J- Ar8)/ / 1???7conducted a study to A)*B 8 E!!//* !

I(r* M)) S*- / KEL, mamala unit 3he study revealed that due

to improved inventory management, the unit enables proper arrival of goods, reducing

leadtime

2.1? Ar/!) T. M8); in his boo'Sr- ); I(r* M))200&7

conducted study on wor'ing capital management, the suggestion made by her was

that the unnecessary inventories should be avoided as it may cause loss to the

concern

2.20 R' M8) P.T 200>7conducted study on -r- /(r* ))at

Carborundum Universal imited 3here should be strict Control over the # class

items as well as the vital items @ighly trained inventory managers and highquality

software will help ma'e inventory management a success 3he /5% of inventory

management will be seen in the forms of increased revenue and profits, positive

employee atmosphere , and an overall increase of customer satisfaction

2.21 M. #))/ ); Y .D)r* IESM, M)* 20057, the literature dealing with

inventory management policies is very rich and has grown fast during the last year,

they classify these policies into 2 approaches according to the type of demandinformation %n the first approach the policies suppose that there is no advancedemand information and the decisions are made in real time using the inventory

depletion

3. 0 RESEARC" MET"ODOLOGY

INTRODUCTION



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/esearch is a systematied effort to gain new 'nowledge/esearch is an art of

scientific investigation #ccording to Clifford woody, /esearch comprises, defining

and redefining problems, formulation hypothesis of suggestion solution, collecting,

organiing and evaluating to determine whether they fit the formulation hypothesis

# research is the systematic investigation into and study of materials and sources in

order to establish facts and reach new conclusion

3.1 RESEARC" DESIGN

3he present pro&ect describes the e:isting inventory system followed at

%nstrumentation imited 3he research design used as analysis in nature of analytical

# research design is the determination and statement of general research approach orstrategy adopted for a particular pro&ect

%t is the heart of planning 3he research design adopted for the study is analytical in

nature%t is the specification of methods and procedures for acquiring the information

needed3he research design used in the study is descriptive research

3.2 DATA COLLECTION

3he source which are used mainly on secondary sources of data which is collected

from the audited boo's of accounts of %+, #nnual reports and financial statements

prepared and published by the concernournals , boo's and websites have been

referred to have an overview about the company

3.3 PERIOD OF STUDY

3he period of study covered from the year from 1st#pril 200? 61stmarch 200 to 1st

#pril 201161stmarch 2012



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3.& TOOLS USED

o 8inancial ratio

o Correlation

o 3rend analysis

o %nventory 3echniques

3.5 LIMITATIONS OF T"E STUDY

3he study is limited for a period of five years @ence result obtained can be

applied for the selected period

3he study is mainly done with the secondary data and figures drawn from

accounting records, this has some limitations and it affects the study also

3he financial ratios imply only the monitory aspects of the functions of the

firm 3he ratios cannot be directly regarded as indicator of good or bad

performance of management

#ccuracy and correctness of tools li'e ratio analysis is depends upon the

accuracy of published accounts

3he time available for the study was the another constraining factor

3he inventory management of %+ is limited to the e:tent of

information made available through published documents and

personnel discussion.

&.0 DATA ANALYSIS AND INTERPRETATION

Ir;'/



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-ffective inventory Controls ensure effective inventory management through which

an organiation can minimie their overall pro&ects and liquidity of the respective

concern %n deals with the analysis of data and their interpretation for understanding

the inventory system followed at instrumentation imited 3he data has been collected

from the secondary sources and the interpretations are done on the basis of theories

INVENTORY CONTROL TEC"NIHUES IN ILP

!" R)/ ))*-/-

Ir;'/:

/atio analysis is an important tool for analying the companyFs financialperformance /atio analysis is defined as the systematic use of accounting ratio


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>U4D/M

D-B35/>

C#>@ #4D

B#4

5#4 #4D

#DH#4C->

200?0 !76! 1?2G

2000A 9620 2!!9G

200A10 966 2!062G

201011 ?22! 26610G

201112 970 19?AAG

200?0 29 10?G

2000A !?! 169G

200A10 ?09 2992G

201011 !6 16G

201112 10 027G

200?0 6 697G

2000A 11!6 !!2AG

200A10 11!2 !2AAG

201011 1627 !2?7G

201112 1696 671G

I!r

3he percentage of sundry debtor to inventory is highest in the year 200200A and

lowest in the year 20112012 where cash and ban' is highest in the year 200A

2010,loan and advances is highest in 200200A and lowest in 20112012

&.1.2 INVENTORY TURNOVER RATIO

%nventory turnover ratio also 'nown as stoc' turnover ratio establishes the

relationship between costs of goods sold and average inventory Besides it helps in

determining the liquidity of a business concern, this ratio indicates how many times

during the period the firm has turned is inventory %t shows the rate at which

inventories are converted into sales and then into cash



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%nventory 3urnover

Cost of *oods >old

#verage %nventory

TA#LE NO:&.1.2 T"E INVENTORY TURNOVER RATIO FOR ILP.

Mear 4et sales"in

a'hs$

#verage inventory

"in a'h$

/atio

200?0 ?76? 2069 6?

2000A A1?! 2!A 69?

200A10 10021 291A 62

201011 101A9 2?? 67!

201112 102! 6!? 2A!

I!r

3he inventory turnover ratio is ma:imum in the year 200A2010 @igher valueindicate better performance3he company was able to sell their inventories quic'ly

3he owest %nventory turnover ratio is in 20112012 # low inventory turnover ratioindicates an inefficient management of inventory

DIAGRAM &.1.1 :T"E INVENTORY TURNOVER RATIO FOR ILP.



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&.1.3 INVENTORY "OLDING PERIOD

%nventoryholding period shows whether the stoc' is fast moving or not %t is

calculated to see the average time ta'en for clearing the stoc' 3he lower material

holding shows whether is any slow moving , fast moving or dormant stoc' %t is the

average time to convert our total inventory into sales 3he lesser inventory conversion

period it is better because more fastly the inventory is converted into sales

)aterial @olding +eriod Days in a year

%nventory turnover ratio

TA#LE NO &.1.3 :T"E INVENTORY "OLDING PERIOD OF ILP.

Mear Days #verage inventory

turnover ratio"in

%nventory @olding

period



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a'h$

200?0 697 6? A9!

2000A 697 69? AA!7

200A10 697 62 A77!

201011 697 67! 10610

201112 697 2A! 12!1!

I!r

3he above table shows that the inventory conversion period for the 7 years

%nventory conversion period is minimum in 200A2010 which indicate the

conversion of inventory to sales is faster )a:imum inventory holding period is in

20112012

DIAGRAM &.1.2 : INVENTORY "OLDING PERIOD FOR ILP.

&.1.& RATIO OF MATERIAL CONSUMPTION TO TURNOVER

/atio of material consumption to turnover measures how frequently inventory ta'en

for production 3his ratio shows the proportion of e:penditure on material



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200A10 2979 10A77 2!2

201011 60AA 11?69 29!

201112 6?! 11AA 627

I!r

3he inventory to current asset ratio in %+ has a increasing trend from 200200A to

20112012%t is ma:imum in the year 2011123he lower the percentage of inventory

to the current assets, the greater the liquidity of current asset and versa ow ratio is

shown in 200A10

DIAGRAM &.1.&:T"E INVENTORY TO CURRENT ASSET RATIO OF ILP

&.1.6 INVENTORY TO 4ORKING CAPITAL

# firm is financially sound if its amount of inventory does not e:ceed the amount of

wor'ing capital 3his ratio is calculated to 'now whether there is any overstoc' in the

firm%t is a wise to reduce the the level of asset tied up in wor'ing capitalsince each

dollar freed is a dollar that can be used to pay down longterm debt,repurchase share

etc



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%nventory to wor'ing capital %nventory

;or'ing Capital

TA#LE NO &.1.6:INVENTORY TO 4ORKING CAPITAL FOR ILP.

Mear %nventory ;or'ing capital /atio

200?0 2!1! 9A!? 6!

2000A 271 ?0A 2A

200A10 2979 A111 2A201011 60AA A!!7 62

201112 6?! 1 !6

I!r

%nventory to wor'ing capital ratio analysis it shows the proportion of inventory is less

when compared to wor'ing capital 3he proportions are high in the year 20112012

and lower in the year 200200A and in 200A2010

DIAGRAM &.1.5: INVENTORY TO 4ORKING CAPITAL FOR

ILP.



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&.1.= DE#TORS TURNOVER RATIO

%t indicates how many times the firm is collecting the cash from its debtors to whom

firm sells in credits 3rade debtors are e:pected to be converted into cash with a short

period Debtors turnover ratio or accounts receivable turnover ratio indicates the

velocity of debt collection of a firm %n simple words it indicates the number of times

average debtors "receivable$ are turned over during a year

Debtors 3urnover /atio 4et Credit >ales

#verage 3rade Debtors

TA#LE NO &.1.=:DE#TORS TURNOVER RATIO FOR ILP.



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%n business operations, a firm has to ma'e credit purchase and incur short term

liabilities >uppliers of goods creditors are li'ely to ta'e in repaying its trade

creditors 8or this purposes, creditors payable turnover ratio is calculated 3he two

components of the ratio are trade creditors and annual purchase

Creditors turn over rationet credit annual purchaseLtrade creditors

TA#LE NO &.1.>:CREDITORS TURNOVER RATIO FOR ILP.

Mear +urchase Creditors /atio

200?0 ?76? ?71 !2!

2000A A1?! 171? 609

200A10 10022 1!2? 692

201011 101A9 1?!A 2?

201112 102! 1?!6 6A

I!r

3he analysis of creditors turnover ratio reflects whether terms of credit allowed by

suppliers are liberal or not Creditors turnover ratio is highest in the year 200?200

which is !2!%n 20112012 %+ has a favourable creditor turnover ratio which is

6ACreditor turnover ratio is lowest in the year 20102011

DIAGRAM &.1.= : CREDITORS TURNOVER RATIO FOR ILP.



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&.1.? INPUT OUTPUT RATIO

%nventory Control can be e:ercised by use of this ratio %nput output ratio is the ratio

of the quantity of input of material to production and the standard material content of

the actual output

TA#LE NO &.1.?:INPUT OUTPUT RATIO FOR ILP.

Mear %nput 5utput /atio

200?0 !907 99A9 9?

2000A 9679 72? ?!7

200A10 ?616 A927 ?7A

201011 ?27! A69A ??!

201112 A!?9 10297 A2

I!r

3he analysis of input output ratio shows that above shows the tendency is fluctuating

year by year 3his is not favorable to the company 3he input output ratio is

increasing from 200?200 to 201120123he ratio is highest in the year 20112012

which is 0A2



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capital"in la'hs$

200?0 ?76? 9A!? 10

2000A A1?! ?0 107

200A10 10022 A0AA 110

201011 101A9 A!!7 10

201112 102! A0 117

I!r

3he above table shows that the wor'ing capital requirements of the firm which is

highest in year 20112012 that is 117 and lowest 107 in the year 200200A

DIAGRAM &.1.?:4ORKING CAPITAL TURNOVER RATIO FOR ILP.

&.2 TREND ANALYSIS

3he financial statement may be analyed by computing trends by series of increase

3his method determines the direction upwards or downwards and involves the

computation of the percentage relationship that each statement item bears to the same



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item in base year 5ne year is ta'en as the base year Usually, the first year is ta'en as

the base year

3rend #nalysis is the practice of collecting information and attempting to spot a

pattern, or trend, in the information #lthough trend analysis is often used to predictfuture events, it could be used to estimate uncertain events in the pas3

3rend percentage current year amountL Base year amountV100

&.2.1 TREND ANALYSIS OF 4ORKING CAPITAL

TA#LE NO &.2.1: 3/-4D #4#M>%> 58 ;5/%4* C#+%3#

Mear ;or'ing capital"%n la'hs$ 3rend percentage

200?0 9A!? 100

2000A ?0 12767

200A10 A0AA 10!!!

201011 A!!7 106?A

201112 A0 A!12

I!r

3he analysis shows that there is an increase in wor'ing capital from 200?200 to

200200A then there is decrease in wor'ing capital from 20102011 to 2011

2012

D/)r) &.2.1: Tr; A)*-/- ! 4r


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&.2.2 TREND ANALYSIS OF CAS"

TA#LE NO &.2.2: 3/-4D #4#M>%> 58 C#>@

Mear Cash" %n la'hs$ 3rend percentage200?0 291 100

2000A !?! 110A

200A10 ?09 1!A!

201011 !2 909

201112 10! 2!2A

I!r

3he trend analysis of cash shows a vast decrease in the year 201020113he trend

percentage on cash has a huge increase on the year 2000A and then decreases

rapidly in 200A2010

D/)r) &.2.2:Tr; A)*-/- ! C)-8



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&.2.3 TREND ANALYSIS OF DE#TORS

TA#LE NO &.2.3: 3/-4D #4#M>%> 58 D-B35/>

Y&'( D&)*$(+ T(&,- &(/&,*'&

200?0 4!.34 100

2