Best ever JK Paper Project Report by Nilomadhaba Panda ( International Business, ASBM)

A Project Report On…

Submitted as partial fulfilment ofPost Graduate Programme in International Business inAsian School of Business Management, Bhubaneswar

Submitted By:NILOMADHABA PANDA

Registration No- PGPIB/09-11/28

Under the esteemed guidance of

Mr. Sanjeeb Kumar SamalOfficer HRD, JK Paper Mills

Rayagada, Odisha

&

Prof. Ashish MohantyAsian School of Business Management

Bhubaneswar, Odisha.

CONTENTS

Certificate from Organization Certificate from faculty Guide Declaration Acknowledgement Executive summary

Chapter – I Synopsis & Introduction to the study:- Brief Introduction- Need For the Study- Objective & Limitation of the Study

Chapter – II Profile of Paper Industry & the Unit:- Profile of the Paper Industry- Growth of the Paper Industry- Paper Industry In Global Perspective- Major Players in Paper Industry- Globalization & Its Impact

Profile of JK Paper Mills Ltd.:- Introduction JK Paper Mills Ltd.- Overview of JK Paper Mills Ltd.- Strategic Orientation- Product Profile- Segment Paper

Chapter – III Logistics & Distribution System of JK Paper Mills- Logistics at JK Paper Mills- Order Processing & Execution System- Warehousing & Inventory- Supply of Packing Material- Transportation & Export

Chapter – IV Theoretical Aspect of Inventory Management in JK Paper Mills

Chapter – V Practical Aspect of Inventory Management in JK Paper Mills

Chapter – VI Methodology of the Study, Data Analysis, Interpretation & Data Presentation, Analysis of Questionnaire

- Sample- Procedure- Behavior & Awareness & Comparative study- Field work Detail

Chapter – VII Result & Analysis of the work- Findings- Conclusion- Recommendation & Suggestions- Bibliography

Annexure Questionnaire

JK PAPER MILLS LTD.

JKPUR, RAYAGADA, ORISSA

Certificate from Corporate Guide...

This is to certify that Mr. Nilomadhaba

Panda student of Post Graduate Programme

in International Business from Asian School

of Business Management with Registration

no: PGPIB/09-11/28 has under gone practical

training in our organization for a period of 8

weeks i.e.12-04-2010 to 05-06-2010 as a

unpaid trainee under my guidance.

Signature

Mr. Sanjeeb Kumar Samal (Officer HRD)

Asian School of Business ManagementBHUBANESWAR, Orissa.

Certificate from Faculty Guide...

This is to certify that Mr. Nilomadhaba Panda is a

Student of Post Graduate Program in

International Business, 2009-11, Bearing

Registration No: 28 have been found satisfactory

in undertaking the summer internship project

report, entitled “Logistics & Inventory

Management System of JK Paper Mills Ltd.” for

the requirement of PGPIB course curriculum.

From, ASBM, Orissa for the academic year 2009-

11

Prof. Ashish Mohanty

Professor, ASBM

DECLARATION

I Nilomadhaba Panda do here by solemnly declare that this project

entitled “Logistics & Inventory Management System of JK Paper

Mills Ltd.” is originally done by me is being submitted in fulfilment

of the requirement for the award of a degree of Post Graduate

Program in International Business of Asian School of Business

Management, Bhubaneswar.

This project is my own & is not submitted to any other institution or

published any where before.

Nilomadhaba Panda

ACKNOWLEDGEMENT

I am thankful to the institute for giving me the permission to do my project

work in JK PAPER MILLS LTD.

I have great pleasure in acknowledging my deep sense of heartily gratitude to

Mr. Sanjeeb Kumar Samal (Officer HRD) who has given me an opportunity to

do my summer internship program in JK Paper Mills and helped me by giving

his precious time and guidance to expand my knowledge , and then I am highly

obliged to Mr. Samarendra Nath (Officer-stores), & Mr. M.A.R. Sharma (Asst.

Officer YARD) who has spent their precious time in furnishing me the

necessary information & guidance for the completion of the project and

specially thanks to Mr. Siba Sundar Panigrahy (Quality Control) for giving me

reference & guidance that helped me in knowing the organization.

I express my sincere thanks to the Executives & Managers of J.K. Paper Mills

for providing me the requisite data & information.

I am thankful greatly to all the respondent of my questionnaire for their co-

operation in providing me the necessary information in their replies.

I am also thankful to the esteemed faculty guide Prof. Ashish Mohanty of ASBM, for his great support & encouragement provided during my summer internship training.

I lastly thank my parents, friends and well-wishers for their everlasting support.

With deep gratitude

Nilomadhaba PandaEXECUTIVE SUMMARY

The project is about the “Logistics & Inventory Management System of JK

Paper Mills Ltd.”. The project was completely done by me as directed by my

corporate guide. The process started from learning the industrial objective. A

company like JK Paper Mills Ltd. gives the best quality of paper as the verities

of products are defined further on. As the marketing lines of JKPM “Think

paper think JK” it shows the brand quality of the product. Here the employees

as well as the trainees got a lot of opportunity to learn & expand the knowledge

there of and do their best to improve the quality of the organization.

The objective of this project is to find out the weak links in the inventory

management system and the logistics of JK Paper Mills. This report also

facilitated that how to minimize the cost of production through proper

maintenance of the inventory. I have also given some important information

about the process of optimum utilization of resources of the firm and the

process of input of the raw materials in the firm directly to machines from

logistics i.e. from trucks and racks and not to use unnecessary time and money

for inventory. After the requirement is fulfilled the inventory should maintained.

This will enable the company to take decisions on which mode it should

concentrate more.

The report also gives an idea about the difficulties faced by the employees and

the firm in maintaining inventory & proper logistics channel. I also suggested

some important things where the company should really take some actions on

those issues to facilitate the logistics and inventory system of the mills.

CHAPTER-I

SYNOPSIS

JK PAPER INDUSTRY

INTRODUCTION

The growth of any organization depends on the overall performance such as production, marketing, Human resource and financial performance of the organization. The financial performance of any organization reflects the strength, weakness, opportunities and threats of the organization with respect to profits earned, investments, sales realization, turnover, return on investment, net worth of capital. Efficient managements of financial resources and deliberate analysis of financial results are pre requisite for success of an enterprise. In that working capital management is one of the major and important areas of financial management. Every organization required working capital for day/to/day business transactions. Managing of working capital implies managing of current assets of the company like cash, inventory, accounts receivable, loans and advances and current liabilities like sundry creditors, interest payment and provision.

NEED AND SIGNIFICANCE OF THE STUDY  

The scope of the study is confined to one of the key areas of “FINANCE, OPERATIONS & MARKETING” i.e.  “LOGISTICS & INVENTORY MANAGEMENT” which plays a vital role in the manufacturing organization.  

The study concentrates on the methods and techniques followed by the “JK PAPER MILLS” for its “LOGISTICS & INVENTORY MANAGEMENT” and its relative merits and demerits. 

The present study also concentrates on the importance of the “LOGISTICS & INVENTORY MANAGEMENT SYSTEM” and the study appraises the company success in meeting requirements of the organization.

Finance is so basic that it cannot be considered a separate function. Evaluation of financial performance of an organization is continuous processes for understanding the direction in which the organization is heading so as to plan decide and implement the future course of action with a view to achieve the present objectives in the interest other organization. Logistics is always required for an organization for its distribution channel, so I have selected “logistics & inventory management” as my topic.

The theory of logistics & inventory management helps the management to understand and manage the nature of components i.e., work in progress, finished goods. Raw materials, consumables, stocks & spares, operations & marketing of the organization.

OBJECTIVES OF THE STUDY

THE STUDY IS ORIENTED WITH THE FOLLOWING OBJECTIVES

The primary objective was to compare and analyze the selling and distribution channel of JK paper and to understand the inventory management system of JK PAPER LTD.

To familiarize our self with the marketing department and to know about its selling and distribution function.

To know various steps aspects of the marketing department such as Order Execution System, Dispatching System, Warehousing, Transportation, and Intermediaries in selling and distribution etc.

To study the statutory and non-statutory matters relating to sales and distribution.

To gain the first hand knowledge about the selling and distribution strategy followed by marketing department.

To identify the pre requisites of designing the selling and distribution strategy.

To know the Marketing & operations of JK PAPER LTD.

To know the liquidity position of JK PAPER LTD. To understand the cash management system of JK PAPER LTD. To understand the sales accounting and debtors management system of JK.

PAPER LTD. To know the position of current assets and current liabilities of JK PAPER

LTD. To know the working capital requirement of the firm.

LIMITATIONS More dependence on published data rather actual data, because financial data

are confidential in nature. Major activities like procurement of capital items, “A Class inventory are under

control of Head Office. Working capital budget is prepared only at head office, no activate of mills is

involved in such budget preparation. Less operation in the marketing areas inside the firm as the marketing is totally

done by the head office in Mumbai & New Delhi. Due to the confidential issues the data are not published to anybody.

CHAPTER II

PROFILE OF PAPER INDUSTRY &

PROFILE OF J.K PAPER MILL

PROFILE OF PAPER INDUSTRY

WHAT IS PAPER“Paper” has played a vital role in the development of mankind, since time is immemorial, as a means of communicat5ion, as the most versatile material for packaging of goods, as a medium of preserving knowledge for progeny.Paper is defined as “A mat of cellulose fibers arranged in crisscross fashion with hydrogen bond and other forces.”

INTRODUCTIONPaper is derived from the word “papyrus”. Today, paper includes a wide range of products with very different application: communication, cultural, educational, artistic, hygienic and sanitary as well as storage and transport of all kinds of goods. It’s almost impossible to imagine a life without paper. There is a degree of consensus that the art of making paper was first Discovered in China and its origin in that country is traced back to 2nd century in about A.D 105 Tsai Lun, an official attached to imperial court of china, created a sheet of paper using mulberry and other best fibers along with fishnets, old rags and hemp waste. (2nd

Century B.C). Chinese considered paper a key invention and kept this a closely guarded secret for over Five Centuries until the technology slowly made it way westward. The Arabs captured Chinese city containing a paper mill in the early 700’s and from this started their own paper making industry. (Early 700’s) Invention of printing in 1450’s brought a vastly increased demand for paper. Paper was first made in England in 1496. The first U.S.Mill was built in 1690, the Rittent House Mill, German town, Pennsylvania.

EVOLUTION OF PAPER INDUSTRYA courtier named Ts’ai-Lun, from Lei-Yang in China, was the inventor of paper (not papyrus) circa 105 A.D. However, the word paper is derived from the name of the reedy plant papyrus, which grows abundantly along the Nile River in Egypt. Paper is made of pulped cellulose fibers like wood, cotton or flax. Papyrus is made from the sliced sections of the flower stem of the papyrus plant, pressed together and dried.

EVOLUTION OF PAPER

3000BCOf all the writing and drawing materials that people have employed down the ages, paper is the most widely used around the world. Its name derives from the material used by the ancient Egyptians, Greeks and Romans: papyrus. Papyrus, however, is one of those predecessors of paper produced by beating or pressing. They are known by the generic term “tapa” and are mostly made from the inner bark of paper mulberry.

CLASSIFICATION OF PAPER

TYPE ENDUSE

Cultural paper

Posters Beddi leaves,

Cream wove School books, bank slips etc.

Offset Printing

Duplicating Cyclostyling

Maplitho Photocopying

Super printing Annual reports

Bond paper Letter heads

Art paper Multicolored printing

Chromo paper Labels

Tissue paper Beedi labels, napkins, etc

Ledger paper Accounting Bank

Cartridge Paper Drawing books for artist and

Architects

Packing paper Duplex Board Consumer Goods

Pulp Board /straw board Filter Cigarettes packers etc

Specialty paper

Kraft paper Corrugated packing

Micro Paper Cheque and Drafts

Glamine paper Waxed paper for Biscuits

Cellophane Paper Wrapping (colored)

Grease Proof Wrapping

Vegetable parchment Wrapping for butter

Base Boards Tetra packs

GROWTH OF THE PAPER INDUSTRY:

Paper Industry is one of the oldest industries established in India. Before the advent of machine made paper a sizable hand made paper manufacture flourished in India. The earliest efforts of mechanizing this industry in our country dates back to the beginning of 19 th

century.

In India, the first paper machine was installed in 1812 at Sorampet (west Bengal). Over the decades the there was rapid growth in the number of Pulp & paper mills from 17 in the early 1950’s to 250 Mills in 1980’s. The domestic output of paper and paperboards grew form 1, 35,000mts in 1951 to 15, 00,000mts in 1985. What followed then is a virtual doubling of capacities and production was around 25 lakh tons annum and the no, of mills increased to over 350 in the organized sector.

Figures speak of a production of 28-lakh tons form 375 organized mills. Future projections indicate that by the year 2005 A.D., India requires about 59-lakh

tons per annum of paper and board and there after the growth accelerates. The paper industry in India is more then a century old. The industry is predominately

in the private sector. There are about 406 paper mills in India with a total installed capacity of around 6.2 million tones.

INDIAN PAPER INDUSTRY Indians were using Copper plates, Iron plates and for the purpose of writing, before paper came into existence. Papermaking entered our country through Arbs as an art. This art was

restricted to Muslim families as a secret, at that time, which were mainly based and lived Kashmir & Punjab named Kagazius.

Nothing can be said about the first paper mills in India. But it was said that, William Warvaty, in 1812 started the first paper mills at sarampur, with the help of Kagazius. In 1832 four machines were installed and introduced in India. “Royal Black Paper Mills” stated at Hubli in 1870’s and was merged in Teleghar Paper Mills. Later the remaining Paper Mills are established one by one.

The per Capita Paper Consumption in India is only 3.62; it is inclusive of Newsprint paper consumption. According to this it is clear that, we are much backward in paper consumption that compared to the some developed countries.

Paper Industry supplies various types of Paper, Paper Boards and Specialty Paper to a number of End users, which includes Government, Education, Companies, Packing, Printing, News Paper and Magazines etc. Use of paper and paper product is intimately linked with the cultural and Economic Development of a country. The demand for paper depends on a number of intangible factors such as Population, National Income, Growth of Literacy spread of Education, Standard of Living and Industrial production.

CONSUMPTION OF PAPER IN INDIA:The per capita consumption of paper in India is at an average low level of about 3 kgs at present. This is one of the lowest in Asia, where the average annul consumption is around 18kgs per head. On the assumption, consumption of paper will move up to 5kgs by 2009 AD.

DEMAND FORECAST FOR PAPER & BOARD IN INDIA

1995 2000 2005 2010Population(Million) 901.46 102.36 111.0 119.32Per Capita Consumption(kg) 3.20 4.40 5.20 6.20Paper and Board demand (millions Tones) 2.92 4.50 5.80 7.35SOURCE : In paper International

CAPACITIES AND NUMBER OF PAPER MILLS

CAPACITY NUMBER OF MILLS %upto-5000 140 Small Scale units 34,55001-10000 112 " 27,610001-20000 88 " 21,620001-33000 32 Medium Scale Units 7,933001-50000 19 " 4,750001and Above 15 Large Scale Units 3,7

PAPER INDUSTRY IN THE GLOBAL PERSPECITIVE

India’s per capita consumption per annum as compared to other countries.

COUNTRY CONSUMPTION

USA 334kgJAPAN 224kg

AUSTRALIA 150kgHONG KONG 141kg

TAIWAN 134kgNEW ZEALAND 104kg

SINGAPORE 81kgKOREA 80kg

MALAYSIA 31kgCHINA 12kg

PHILIPPINESS 8.5kgINDIA 2.9kg

MAJOR PLACE IN PAPER INDUSTRY

1. FIVE UNITS OF BALLARPUR INDUSTRIES LTD.

PLACE INSTALLED CAPACITY

i. Illure, Maharastra 40,000 TPA

ii. Ballarpur, Maharastra 1,10,000 TPA

iii. Daulatabad, Orissa 22,000 TPA

iv. Yamuna Nagar 53,868 TPA

v. Gaganpur, Orissa 33,000 TPA

2. Century Paper Mill, Lalkua, Uttar Pradesh

Installed Capacity –1, 20,600 tones per annum

3. N.Ganga Group, Vapi, Gujurat

Installed Capacity –43,500 tones per annum

4. Hindustan News Print Ltd., News Print Nagar, Kerala

Installed Capacity – 1, 00,000 tones per annum

5. Hindustan Paper Corporation ltd., Panchgram, Assam

Installed Capacity –1, 00,000 tones per annum

6. Hindustan Paper Corporation ltd., Nagaon Paper Mills Ltd., Khagajnagar, Assam.

Installed Capacity –1, 00,000 tones per annum

7. ITC Bhadrachalam Paper Board Ltd., Sarapaka, AP.

Installed Capacity – 2, 12,000 tones per annum

8. Nepa Ltd., Nepa Nagar , M.P.

Installed Capacity- 88,000 tones per annum

9. Orient Paper Mills, Amali, M.P.

Installed Capacity- 85,000 tones per annum

10. Pudumjee Pulp and Paper Mills Ltd., Pune, Maharastra.

Installed Capacity – 48,000 tones per annum

11. Satia Paper Mills Ltd., Rupana, Punjab.

Installed Capacity –40,000 tones per annum

12. Sehasayee Paper and Board Ltd., Erode, Tamil Nadu

Installed Capacity – 60,000 tones per annum

13. Star Paper Mills Ltd., Saharanpur, U.P.

Installed Capacity – 1,80,000 tones per annum

14. The Andhra Paper Mills Ltd., Rajahmundry, A.P.

Installed Capacity – 98,500 tones per annum

15. The Mysore Paper Mills Ltd., Karnataka.

Installed Capacity – 1,05,000 tones per annum

16. Titlaghar Paper Mills Ltd., Titlaghar, West Bengal.

Installed Capacity – 66,000 tones per annum

17. The Sirpur Paper Mills Ltd., Sirpur, Kaghaznagar, A.P.

Installed Capacity – 71,000 tones per annum

SORUCE: Indian Press Services News Bulletin.

GLOBALISATION AND ITS IMPACT ON INDIAN PAPER INDUSTRY

India has 16% of the total population but consumes only 1.2% of the total paper produced in the world. Its per capita consumption is very low around 3.7kg head year. The installed capacity of the industry is 4.2 million 9 tones of paper and 6,50,000 tones of newsprint.

Even though there are 380 mills registered, only few mills are large with capacity of 50,000 to 9 tones per year ranging from 100 to 600 tones per day. Indian paper industry has potential

but it cannot meet growth in demand unless constraints are overcome. Demand should reach 8kg per head by 2010.

Several mills have closed down and others are running below the capacity. Most mills are in losses for the year ended march 1998. Since 1995 reduction of import duty on paper, 15% to 20% paper import (especially newsprint) has raised sharply. Frequent industry requests for restoring higher duties and imposition of anti-dumping have not been acted upon.In 1995-96 mills typically kept 6-7 days production on head. Inventories often exceeded 30 days output. In 1998, several small and medium sized milled creased for 3-4 months due to depressed demand. Major Mills like JK Corporations, century, orients and Brajraj Nagar had been closed during November 1998 due to labour problems.

OVERVIEW OF JK ORGRANISATIONJK Organization is an association of Industrial and commercial companies, which was founded in 1918 by late Lala Kamalapatiji Singahania with its headquarters at Kanur (UP). The initials JK are the grouping of the first letters of the name of Juggilal and Kamalaat, father and son. The founder grew u in an atmosphere of nationalist favor and imbibed the sprit of patriotism; he shook off alien dependence in the field of Industrial development of India.

He marshaled all his energies and activities towards the fulfillment of one central object that of industrialization of India capital, Indian management and above all Indian know-how. Equipped with tenacity of purpose, perseverance and foresightedness, he achieved success in his mission and in a short span of time, between 1921 and 1937 a series of Industries with diversified interests were setup by him Kamala Ice Factory, JK Jute Mills co. Ltd., JK Cotton Manufacturers, JK Iron & Steel co. Ltd., against the tough opposition of British Industrialization and an alien Government.

He died at an early age of 53 on 31st May 1973 and left the legacy of his spirit of patriotism, swadeshism, and the aptitude for planning and social service to his three illustrious sons, Sir Padmapatiji Singhania, Lala Kailshpatiji Singhania and Lata Lakshimipatiji Singhania, who along other family members have Contributed the best of their services to the growth of the Organization, in a term spirit. To day JK Organization is engaged in diverse Industries e.g.

Cotton Textiles, Jute Textiles, Woolen Textiles Rayon, Nylon and other synthetic and man-made fibers, Metal engineering, Paper Boards, Sugar, Chemical, Plastic, Cement, Electronics, Tyres & Tubes, Cosmetic and so on. It has its ramification in seven States of India – Uttar Pradesh, Bihar, West Bengal, Orissa, Madhya Pradesh, Maharastra and Rajasthan and has also extended its overseas operations in Indonesia, Mauritius, and Kenya etc.

The Group was pioneer in indigenous manufacture of numerous products. For example, it was first in India to produce Calico Prints(1933), Steel Bailing Hjoojps(1940), Aluminum(1944), Engineering Files(1949), nylon-6 (1962), Sodium Suplhixylate Formaldehyde (1965), TV sets(1968), Acrylic Fibers(1969), DMT Monomer and Polyester Wastage (1976), and Steel Belted Radial Tyres(1977) and the list goes on.

JK Organization is constantly on the move and has ambitious plans of the expansion not only in the existing product lines but also in many other for which there are new opportunities. To those who are working in JK Organization, challenges and opportunities, and meeting challenges is a way of life with them. Excellence in performance is the motto of JK Employees.

JK Organization has provided housing facilities for its employees and established a number of townships at different plants sites. The townships are equipped with modern amen ties including schools, clubs, markets, recreation centers etc. The Organization is also conscious of its social responsibilities and in this connection it has opened schools, Collages, and institutions for higher technical education, modern hospitals etc. In its endeavor to promote research and development and develop indigenous technology, various research institutions have been promoted by the Organization. In the filed of sports and games, many institutions have been established to develop and promote sports.

The Organization is devoted to promoting the religious and ethical values of India and has constructed a number of exquisite temples at various places.

The above- mentioned activities clearly reflect the deep-rooted desire of the organization to actively play its part in the sphere of nation building activities.

With this phenomenal growth, the JK Organization is divided into three zones, viz, Northern zone (Kanpur), Eastern zone (Delhi/Calcutta), and Western zone (Bombay) for administrative convenience. A Central Board with Sri Hari Shankarji Singhania as President Pilots the Organization.

JK ORGANISATION’S EMBLEM

The Hand and Hammer of JK Organization came into use in the beginning of 1943. This symbol was chosen by Late Lala Lakshmipat Singhania, third son of Late Lala Kamlapat Singhania, the founder of JK Organization.

The circle denotes industry. 24 teeth in the circle symbolize round – the – clock activity. The hand and hammer signify labour and tool. The hard grip of the hand stands for the strength and workmanship.

This emblem signifies the strong belief of the organization in the capability of its employees.

GOVERNMENTS HELP TO JK PAPER :

1. Removal of import duty on waste paper.2. Increase of import duty to at least 40% on paper.

3. Duty on IWC to be for the coast of modernization and expansion to Attract fresh investment.

J.K. GROUP OF COMPANIES

BRIEF OVERVIEW OF JK PAPER MILLS

JK Corp Limited (formerly Straw Products Ltd.) belongs to the Eastern Zone and is one of the member-companies of JK Organization. JK Corp limited along with JK Raymond’s, Bombay are regarded as the flagship companies of JK Organization. It is a multi-product and multi-unit company.

JK Paper limited was incorporated in the year 1938 and started its operation with the Board Mill at Bhopal for manufacture of Straw Board. Since then the activities of the Company have been diversified for time to time.

JK Paper Ltd., comprising of two units JK Paper mills at Rayagada, Orissa and Central Pulp Mills at Songarh, Gujarat, is the 2nd largest producer of quality paper with turn over exceeding Rs 650 Crores. Today, JK Paper has total manufacturing output in excess of 1,70,000 TPA pulp and Paper, operating at an average capacity utilization of 115%. In the year 1962, JK Corp Limited set up this integrated Pulp and Paper MILL in the backward district of Rayagada in Orissa with an installed capacity of 18,000 tones per annum. Presently the installed capacity of the Paper Mills and Board Mills Stands at 90,000 tones per annum. Their Papers and Board enjoy high reputation for qualities which are constantly, strive to maintain.

JK Paper Mills was setup with an annual installed capacity of 18,000 tones in 1962, JK Paper Mills has expanded its operations ad now has five Paper Machines with an annul installed capacity of 1,70,000 tones of Writing and Printing Paper of different grades and varieties. Production of Paper and Paper Boards of high quality has been the forte of JK paper mills. This image for quality has sustained the Mills so far and has contributed to its own growth. The Mills works to carve a niche for its especially paper in the market.

PRODUCTION CAPACITY OF JK PAPER MILLS

MACHINE YEAR OF INSTALLATION

INSTALLED CAPACITY, TPA

PAPER MACHINE-I 1962 35,000 TPAPAPER MACHINE-II 1970 4,000 TPAPAPER MACHINE-III 1972 26,000 TPAPAPER MACNINE-IV 1989 8,000 TPAPAPER MACHINE-V 1994 16,000 TPATOTAL 90.000 TPA

MISSIONTo achieve and maintain brand leadership and products and services excellence in the paper and board business through continuous technology up gradation to provide maximum satisfaction to customer enriches employee life and maximize return on investment while fulfilling societal obligations.

QUALITY PROLICY OF JK PAPER MILLSTo provide consistent products & services at optimum cost for customer delight through TQM approach.

CORE VALUES

Caring for people. Integrity including intellectual honesty, openness, fairness & trust. Commitment to excellence.

OBJECTIVES OF JK PAPER MILLS Sustained growth optimizing production potential in least possible time. Leadership in niche market & customer-orientated marketing. Internationalization of business. Cost competitive news with international bench-marketing.

STRATEGIC ORIENTATION OF JK PAPER MILLS Strategic Planning & Strategic Objectives. Quality assurance system. Continuous improvement in Productivity, Quality, Cost Reduction & Customer

service. Technology up gradation. Process 1 system development in all functions such as production, Maintenance. Marketing, Finance Management & inventory Management etc. Adopting modern management practices (TPM, JIT) * People involvement.

ENVIRONMENT POLICY

JK Paper Mills, Jaykaypur, Rayagada and Orissa (India) are committed to: Comply with applicable Environmental Legislations. * Prevention of pollution. Continual improvement in Environmental Performance. Afforestation through Social and farm forestry supported by colonel technology. Cleaner technologies and processes & Conservation of Resources. Reducing pollutants in discharged water * Reducing particulate emissions.

QUALITY ACCREDITATION:First emphasis is quality product manufacturing is assured. All exports are checked of their quality as per specifications laid down. Supplier considers no substandard materials even at discount. J.K.P.M. is the first Indian paper mill to receive the ISO 9001(1994) certification. It also received ISO 14001 for environmental friendly in the year 1998.

ISO –9000 QUALITY SYSTEMJK Paper mills are the first Indian Paper Mills to receive the ISO-9000(1994) certification. The ISO-9000 standards define an effective quality system with reference to Organizational structures and responsibilities, processes and procedures and the documentation and implementation of Quality Policy.

EXPORTExport of selected grades of paper is made to Australia, Malaysia, Singapore, Sri Lanka, Bangladesh, Africa and middle east, UK etc. The company is dispatching its consignment through water transport. Normally the company is dispatching the consignment from its port located at Chennai.

TPM POLICYIn continuous pursuit on organizational excellence by maximizing overall plant effectiveness and achieving total customer satisfaction, the organization is committed to

Achieve zero accidents, zero defects and zero breakdowns. Continuous reduction in cost of production. Involve all employees in systems and process improvement through teamwork.

Create a clean and safe working environment.

PLANT LOCATION- JAYKAYPUR

Jaykaypur is located on the slopes of the Eastern Ghat Plateau in the southern part of Orissa bordering the state of Andhra Pradesh and its geographical position 83-25’ East Longitude and 19-10’ North Latitude. Its average height above the mean sea level is 758 feet.

The township has a population of about 25,000 and has a self-sufficient marketing complex, including Employees Multi-purpose Co-operative society, a sub- post office and Telegraph office, a branch post office, a police outpost and has two banks viz., State Bank of India and Indian overseas Bank.

The township has two schools and places of worship of all major faiths. Singapur Road Railways Station on the Raipur, Walter Section of south eastern Railway station and is at a distance of 2km from the plant and all passenger and express trains halt here.

JK Paper Mills, JAYKAYPUR 765017, DIST Rayagada, Orissa (India)The nearest town is Rayagada, which is the district headquarter and is located at distance of about 10km form the mills.

Rayagada District has a predominance of tribal population. Therefore, the villages in and around the mill are inhabited mostly by the adivasis, who too are assimilating the Industrial culture and thus coming into the national mainstream.

MAJOR DEPARTMENTS IN JK PAPER MILLS

1. Pulp Mill 12. Power House

2. Stock Preparation 13. Civil Department

3. Paper Machine 14. Technology Development

4. Paper Finishing House 15. HRD & Personal

5. Finishing House 16. Township & Transport

6. Soda Recovery 17. Works office

7. Quality control

a) Central laboratory

b) Pulp Paper Laboratory and

Pollution control

18. Accounts

19. Stores & Yard

20. Sales & Stock

8. Mechanical Engineering 21. Security

9. Electrical Engineering 22. Dispensary

10. Instrumentation 23. Safety & Management Services

11. Planning & Designing

JK PAPER MILLS PRODUCT’S RANGE

SURFACE SIZED MAPLITHO AND SURFACED SIZED SUPER HIGH

Super grade of writing & printing paper with high finish and brightness.

A New paper specially developed for Laser Printers called “JK Laser” was introduced for the first time in the Country. Their Mills continue to be the largest manufacture of Copier Paper in India.

JK PAPER MILLS PRODUCT’S

BRIGHT MAPLITHO

JK COPIER A Paper most suited in all Xerox Machines.

SURFACE SIZED PULP BOARD

&SURFACE SIZED SUPER HIGH

BRIGHT PULP BOARD

Super grade of Board for Printing &

Poaching with high finish and brightness.

CHACELLOR BOND A superior variety Bond and Writing.

JK BOND A normal grade of Bond Paper.

WOOD FREE PRINTINGWriting and printing paper with good finish

and brightness meant for export market.

ARIMAILA lower grammar writing & Printing paper

used for Bills Books as well as Airmail.

JK LASER PRINTING Suitable for Laser Printer.

TITANIUM DIOXIDE LOADED TISSUE

PAPERA better grade food packaging paper.

OPAQUE PRINTING PAPER A common food packing

WHITE OFFSET BOARDA high bright board supplied to Cigarette

Industries.

VARNISHABLE MAPLITHCatering labels and quality printing jobs

with varnishing.

YELLOW PRINTING

Used of Yellow Pages in Telephone

Directory as well as for other quality

printing.

WAX MATCH TUSSUE Used for Match Sticks of better quality.

OFFSET PRINTING (NATURAL

SHADE)A paper used for Coating base.

BLACK CENTERED ART BOARD For Playing Cards.

INVORY BOARD A Superior Coated board used for

ENAMEL BOARD A Superior coated board used for Visiting.

CHROMO PAPERA Coated Board used for Printing

Magazine covers.

A LOOK AT SOME OF JK BRANDS

JK PAPER PRODUCTS:

JK Copier

Suitable for any job on Office printers - Inkjet and LaserJet, Photocopiers and Multi-functional Devices. 

JK Easy Copier

Ideal for Photocopying.

  JK Excel Bond

Ideal for Letterheads, Brochures, Certificate, Presentations, Project Reports, Envelopes, Pamphlets, Manuscript writing, Corporate Stationery.

JK Copier Plus

Ideal for Quality Photocopying, Project Reports, Resumes, Inkjet & Laserjet printers, Presentation copies or any aesthetic job.  JK Savannah

Suitable for Corporate Stationery, Reports, Certificates, Presentations, Resumes,InvitationCards, Hotel/Airline Menu Cards, Personal Letterheads. 

Sparkle Copier

Ideal for photocopying & desktop printing.

JK COPIER IS THE STRENGTH OF JK PAPER MILL.

 Details of the Brand Products

JK Easy Copier

The leading economy grade photocopying paper with excellent run ability on all machines.

Features JK Easy Copier improves the efficiency of copier operations. Increasing the drum life of the copier machine. Ensuring smooth flow of paper into the copier machine preventing jamming. Excellent performance on all types of copier machines- high and low speeds,

single path or multi path. Long lasting shade. Good photo imaging. Designed for both single and double sided copying. Cut and packed with automatic machines- ensuring correct sizes and number of

sheets. End uses

Photocopying and desktop publishing

JK COPIER Excellent performance on all types of laser printers.

Features

Designed specially for single and multicolor prints in laser printers. Ensures good picture quality - great for downloading from the net. Crisp print quality Long lasting whiteness.

JK Excel Copier JK Excel Copier is a super White Water mark Bond Paper.

Features Superfine and ultra white 97+ brightness paper. Long lasting whiteness. Excellent whiteness. Ideal for resumes, Inkjet, Laser printing, corporate &

personal letterheads.

End usesPhotocopying and non-touch printing.

JK Copier Plus Super white multi purpose premium grade copier paper

Features Designed specially for high resulance printing.. Ideal for Desk top multi-color printers. Ensure very good crisp print quality. Smooth surface Everlasting Whiteness

QUALITY ASSURANCE

First emphasis on Quality Product manufacturing is assured. All inputs are checked for their quality as per laid down specifications. No sub-standard materials are considered even at discount by supplier. All intermediate products are checked at regular intervals and action is expedited in case of non-conformance. Final product is rigorously inspected / tested to ascertain conformance to Quality Standards.

All the specifications have been evolved from statistical data analysis of actual result and the same is subjected to alterations as per consumer’s end. Any product no conforming to the specifications is liable for rejections. Periodical evaluation of the properties of the product is done in order to verify the process capabilities.

Average Outgoing Quality (AOQ) of the finished products is evaluated based on actual checking and defects generated. This is to quantify inherent defects escaping to the consumers. A regular checking creates an all round alertness amongst the Finishers. For bulk consumers (Reel order) 100% checking is ensured for a better

AOQ.We have 3(three) Laboratories Viz., Central Laboratory, Pulp and Power control Laboratories well equipped with latest testing instruments for controlling the quality of incoming and outgoing products.

CUSTOMERS SERVICERegular feedback for the market is fed to the Mills by the Marketing Department. In case of any problem, technical service is provided to overcome the problem arising at conversion/ consumer’s end. Interaction between the technocrats of the Mills and the Wholesalers/Consumers is the regular feature of their Organization. Arrangements are made fodder the visit of wholesalers, Distributors and Customers to Mills for direct discussion of the problems faced by them for further quality improvement. Technocrats are very often deputed to the converters / consumers/ wholesalers to gain direct knowledge about the problem arising at market. Facilities are open to their bulk consumers to be present at mills during manufacture of their product up to their satisfaction. Interaction is also encouraged for suppliers of the inputs and suggestions from the technocrats of their Mills with regard to quality improvement are made for betterment of the products.

PRODUCT MIX OF JK PAPER MILLS

A Product Mix consists of all the product lines and items that a particular seller offers for sale. J.K.P.M. being a producer of quality papers, offers varieties of papers. Here in the machine itself the various products mixes are made.The product mix of J.K.P.M. is as follows:

VARIETY OF PAPER BUDGETED PRODUCTION (IN A YEAR)

JK COPIER 48176

PULP BOARD 7873

SPARKEL COPIER 2043

JK COPIER PLUS 613

JK EXCEL BOND 1224

SS MAPLITHO(SHB) 25598

JK EVERVITE 3216

POSTERS 5373

JK BOND 1832

JK COPIER PULP BOARD SPARKEL COPIER JK COPIER PLUS

JK EXCEL BOND SS MAPLITHO(SHB) JK EVERVITE POSTERS

JK BOND

JK PAPER LIMITED (Formerly JK Corp Limited)

Formed in 2001 by amalgamating the JK Paper Mills at Rayagada and the Central Pulp Mills at Songarh, Gujarat, to become India’s 2nd largest producer of quality paper with a turn over exceeding Rs. 650 crores.

JK MISSIONTo achieve growth and leadership through the JK brand equity, customer obsession, technology innovation and cost leadership, with a clear focus on environment, while continuously enhancing shareholders value.

JK VISIONTo be a dynamic benchmark and leader in the Indian Paper Industry.

JK QUALITY POLICY“To provide ‘customer Delight’- both internal and external through products and services at lowest cost by continuous Improvement in processes, productivity, quality and management systems”

JK CORE VALUES Integrity Trust Caring for people.

JK PAPER LIMITED

JK PAPER MILLS CENTRAL PULP MILLS

Commitment to excellence

PERFORMANCE REVIEW OF THE J.K. PAPER MILLS LTD 2010.During the year under review, the company achieved a hues turnover then the previous year. The operating profit (PBIDT) increased by 14.8% to Rs.133.39 crores, accompanied by a healthy growth of 42.6% in cash profit at Rs. 97.26 crores. Production of paper of market pulp at 1.71,849 tones (previous year 1, 64,972tones), was the highest ever achieve by the company. The overall capacity utilization improved further to 115%. During the year the company paid interim dividend on preference shares amounting to Rs. 15.59 crores at specified rates.

CHAPTER III

LOGISTICS AND DISTRIBUTION SYSTEM OF J.K.P.M.

INTRODUCTION :

Logistics is the all-important link between a manufacturer and his customer. The concern is for designing a distribution strategy to facilitate the smooth physical flow of products from the manufacturer to the place from the customer can buy them.

Logistics channel of distribution :

( direct ) ( indirect ) ( indirect ) (indirect )

LOGISTICS (SELLING AND DISTRIBUTION) AT J.K.P.M.

Manufacturer Or

Producer

Manufacturer Or

Producer

Manufacturer Or

Producer

Manufacturer Or

Producer

Retail Wholesale Agents

Retailer Wholesaler

Retailer

Consumer Consumer Consumer Consumer

The word with dynamic environment is increasingly depended upon the communication

information, and its transfer. Hence paper play upon a vital role as a media of it. One can

easily imagine what sort of jeopardy this world would have been if by some celestial magic

paper just vanishes.

In present scenario of Market. Selling and Distribution channel has to be given more

importance. It is one of the broad decision areas of the marketing strategy.

Distribution channel is usually understood as the channel in which the title of the goods

(ownership) flows from the manufacturer to the consumer of goods. This is different from

“physical distribution “which signifies the “Physical flow of goods”.

Distribution channel is a set of interdependent organization involved in the process of making

a product or services available for a product or service available for use or consumption by

the consumer or business user. These are the simplest collection of firms tied together by

various flows.

The distribution channel moves the goods and services from producer to consumers. It

overcomes the major time, place, and possession gaps that separate goods and services from

those who would use them.

In J.K.P.M. they don’t have the separate provision for the Marketing department the

functions related to marketing is been taken care by the Sales Department. The following are

the some of the functions of marketing which is been performed or discharge by the Sales

Department.

Receipt of order and execution.

Production programme.

Manufacturing and packaging.

Dispatches.

Arranging for the selling and distribution.

ORDER PROCESSING AND EXECUTION SYSTEM:-

DIRECT INDENT FROM WHOLESALER

DIRECT INDENT FROM WHOLESALER

DIRECT INDENT FROM WHOLESALER

MILL

SCRUTINY AS PER LAID DOWN PROCEDURE

ACCEPTANCE OF ORDER

TO CONSUMER THROUGH BRANCHES AMD CPMSOGMEMT

ORDER CONFIRMATION

TOWHOLESALER

PRODUCTION PROGRAMS

DISPATCHES

MANUFACTURINGAND

DIRECT TO THE CONSUMER

PRODUCTION PROCESS:After the orders are been scrutinized the next step of the process is to issue production letter containing the order’s size, specification etc.

The production department now manufacturers the product as per the specifications by the sales department. The following is the Production Process of the J.K.P.M.

First the raw material (Bamboo and Hardwood ) are introduced in the Chipper Plant. The raw-material are come out in chips of different sizes. The chips are graded into acceptable and unacceptable chips. The unacceptable chips are recycled back to the chipper plant and the acceptable chips are stored in the silos. From the silos chips are introduced to the digester where chips are cooked by addition of chemicals. Here the chips are reduced to raw-pulp which is introduced into the blow tank where the washing, bleaching, screening is done to get the pulp. Then the pulp is sent to the stock preparation where it is refined and desired colors are added to the pulp. Than it is introduced in to the paper machine to get different type of papers.

FLOW DIAGRAM:-

PACKAGING:-Packaging is the activities of designing and producing important tool. Packing is required to protect the products form damages and to place the product in a right and sage condition. It performs many sales task from attracting attention to describing the product, to making better sale of the product. JKPM adopted the following method of packaging for safe delivery of the product.

Raw-materials Chipping

Screening

Washing

Pulp

Bleaching

Digesting Screning

Passed to paper machine

RefinedAddition of Chemical

PACKAGING MATERIAL: Wrapping paper use for Reams packing. Reinforced plastic Fabric pieces used for Bundle packing. Plain HDPE cloth used for Reels and Bundle packing. Laminated wrapping paper used for copier packing Cartoons used for packets of copier packing. Bop tape for cartoon packing.

TYPES OF PACKING :-The types of packing varies according to different variety.

For copier paper 500 sheets are packed by a laminated wrapping paper. JKPM printed (or modi Xerox printed in case of goods going to the modi Xerox company) then packets of 5 or more are again packed in a cartoon according to the size of the cartoon.

For other large size writing, printing and packing paper are primarily packed by a wrapping paper which is called reams. The number of sheets in a ream may be 150/250/400/500. Then number of reams is again packed by a plastic fabric pieces which is called bundle.

But in case of goods going for export, reams are packed into pallets made of wood. Then a polythin cover round the palettes.

In case of Reels they are packed by plain HDPE cloths.

MODE OF PACKING:For packing of paper both the system Manual and Automation are exist in the company. Automation system used for the packing of copier paper. All the reams, Bundles, Reels are packed by manually.

SUPPLY OF PACKING MATERIAL:

Except wrapping paper all the other packing materials are supplied by outside agency on contract basis. Wrapping paper are produced by the company itself.

The information mart on Reams and bundles:

Identification of the mark of mills Commodity name Variety name GSM Size of sheets Date of packing

DISPATCHES:Creating a customer and creating a product do not complete the process of marketing. Delivering the product is an equally important part of the process. Once the paper are ready after packing the next step is to plan for the dispatches as per the specification received at the time of receipts of orders. while planning for dispatches the most important decision is to be considered is the distribution channel.

Logistics & distribution channel are the means and way by which the product moves from the producer to the consumer. The physical distribution system is an important marketing devise which calls for planning, implementing, and controlling the physical flow of goods and services from the points of origin to the points of consumption in order to satisfy the consumer at a profit.

The dispatch planning can be for sale propose or for branch depots transfers. Since paper is a mass consumption item usually mass distribution strategy are employed in paper industry. JKPM has a distribution net work employing 118 odd wholesaler and 5 consignment agents having numerous dealers and retailers under their fold.Depending upon the purchasing pattern consumers are divided into 5 categories.

1. Direct consumer.2. Wholesaler.3. Consignment agent.4. Branch/depots5. Dealers6. Retailers

7. Export Buyers

Transportation :

JKPM follows 3 modes of transportation for shifting of its products to its warehouse.

Rail Road Water(pots)

For delivering goods to branch office consignment agent and wholesaler, company needs transportation facility. Trucks and rail are two way to transportation. Among these two the cost incurred by rail is less than the road transportation. But the process of railway is very lengthy. They take much more time to deliver goods to destination. On the other hand unless and there is a big quantity to export is is meaningless to contact railway. So maximum wholesalers, consignment agent prefers the road transport by trucks.

The water way are used only for the export purpose.

Since the road transportation is the most preferred mechanism for physical distribution any commission and commission on the part of the transporters will have fare reaching consequences. Hence JKPM identifies transporters and enters into formal agreement for ensuring performance guarantees and commitment. For induction as approved transporters the following criteria have to be fulfilled.

Sound financial position Past experience with sister concerns I.B.A approval ( Indian banker association ) Net work of braches Infrastructure facilities at the transshipment points station Execution of bank Guarantee worth 1.5 lakhs retailer deposit of equipment

amount in ash. The transporter have to deposit an amount of Rs. 4,00,000 as security. Which the

transporters will entitled to a interest @ of 8% p.a. ( if transporter deposit the security in cash ).

The transportation agreement apart form selling out the operational norms reflect a carrot and stick approach to ensure better services to out terms and condition.

Evaluation of performance :Performance of transporters are periodically reviewed and they are given business as per the vendor rating given to them. While doing so customer preferences are kept in mind. Occasionally visits to the transshipment point are paid to assess the infrastructure facilities required for safe and damage free delivery of consignment.

SUGGESTIONS :Containerization may be opted as a better option when the quantity or volume of production is too high and at the same time where the time and safety is of utmost important. The other option for transportation is creation of hubs to minimize the transit time. The hubs will also provide the following benefits :

1) Better supervision of material2) Minimization of damages of finished goods3) Improve the customer satisfaction

WAREHOUSING AND INVENTORY

Every company must store its goods while they wait to be sold. The company must decide on the best number of stocking locations. JKPM had 5 branches and 5 consignment agent and they hold stock with them. Company has its own warehouse. These stocking helps JKPM to deliver goods more quickly to customer.

JKPM has the provision of verifying the stock at the end of each day. And the concerned the person is required to check the physical balance in hand with that shown by the books of account and rectify the books of accounts.The documents maintained with regard to the warehousing are :

Stock card / bin card Receipt / godown check Physical verification of the stock Stock account

Whenever any stock is shifted to the warehouse it is to be recorded in the stock care or also called as bin card. Record in the bin cards are made lot wise or size wise. Bin card shows the quantity received dispatched and balance in hand. The stock here refers to the finished production but not the raw- materials nor the work-in-progress. The account book maintained with relation to the warehouse is known as “stock account”, which is to be maintained by the company as per the requirement of the central excise rules.The requirements for a warehouse are:-

It should be properly located. The warehouse must be properly insured. The warehouse must have sufficient fire fighting equipment. Sufficient storage apace. The stocks are need to be properly placed in a proper order.

EXPORT BUYERS :Normally buyers from the outside countries place orders through Head Office, New Delhi. After receiving the dispatch advice the procurement is been send to the overseas buyers from chennai port. JKPM export around 12% to 15% of the total production to other countries. There are almost 20 to 25 countries who purchase paper product from the mill. The number of such parties are : 453. selected parties has to deposit a sum of money as a security in favor of company.

Quantity of Export:-In the financial year 2005-06 JKPM exports 7877 Metric Ton of paper.In the financial year 2006-07 JKPM exports 6329 Metric Ton of paper. In the financial year 2007-08 JKPM exports 8323 Metric Ton of paper. In the financial year 2008-09 JKPM exports 11299 Metric Ton of paper. In the financial year 2009-10 JKPM exports 10296 Metric Ton of paper.The name of the countries who are often buyer of the company are as follows :

SRILANKA, BANGALADESH, JORDAN, MALAYASIA, SOUTH AFRICA, NIGERIA, SUDAN, GERMANY, SPAIN, UAE, EGYPT, KENYA, AUSTRALIA, MALTA, UGANDA, SINGAPORE, NETHERLAND, CYPRUS, YAMEN, TANZANIA, JAPAN, SURIA, GHANA, MORROCO, MORITIOUS.

Abu Dhabi South Africa Australia AustriaBangladesh Brazil Dubai EgyptEthiopia Ghana Iran JordanKenya Lebanon Libya MalaysiaMaldives Mauritius Nepal NigeriaOman Sharja Singapore South KoreaSri Lanka Syria Turkey UgandaYemen

Abu Dhabi South Africa Australia AustriaBangladesh Brazil Dubai EgyptEthiopia Ghana Iran JordanKenya Lebanon Libya MalaysiaMaldives Mauritius Nepal NigeriaOman Sharja Singapore South KoreaSri Lanka Syria Turkey UgandaYemen

THE ABOVE WORLD MAP SHOWS THE COUNTRIES TO WHICH JK PAPER IS EXPORTED.

CHAPTER IV THEORETICAL ASPECT OF INVENTORY MANAGEMENT

INTRODUCTION:

Inventories constitute the most significant part of current Assents of a large majority of companies on India. On an Average Inventories are approximately 60 percent of current Assets in public Ltd. Companies. Because of the large size of the Inventories maintained by the firm it is requested to efficiently & effectively management over Inventories. A ‘Excessive’ Inventory carries a unfavorable impact on a company’s profitability.

NATURE OF INVENTORIES:

The various forms in which Inventories exist in a manufacturing companies. They are: Raw material. Work-in-process. Finished goods. Stores & Spares.

Raw Material: These are the basic inputs that are converted into finished product through the manufacturing process. These are those units which have been purchased and stored for future production.

Work-in-process: These are the semi finished product. They represent theproducts that need more work before they become finished goods.

Finished goods: These are the completely manufactured products which are saleable.

Stores & Spares: These are the material which don’t enter directly in the production but are necessary for the production process. Ex. - Soap, brooms, oil, fuel, jute, bulbs, etc.

NEED TO HOLD INVENTORIES:

Maintaining inventories involves with many costs & also it causes to blocking of

companies fund. So there may be a question arise that why do company hold

inventories?

There are three general motives for holding inventories:

Transactional motive: To facilitate smooth production & sales operation.

Precautionary motive: To guard against the risk of unpredictable changes in demand

and supply forces & other factors.

Speculative motive: Influences the decisions to increase or reduce inventory levels to

take advantage of price fluctuations.

OBJECTIVE OF INVENTORY MANAGEMENT :

The objective inventory management should be to excessive inadequate levels of inventories & to maintain sufficient inventory for the smooth operation of sales & production. So the aim of the inventory management is

To maintain a large size of inventory for efficient & smooth Production & uninterrupted sales operations.

To maintain a minimum investment in inventories to maximize profitability.

An effective inventory management should-

Insure a continuous supply of raw material to facilitate uninterrupted production.

Maintain sufficient stocks of R.M. in period of short supply &anticipate price change.

Maintain sufficient finished good inventory for smooth sales operation & efficient customer service.

Minimizing the carrying cost & time. Control investment in inventories & Keep it at an optimum level.

COST & RISK ASSOCIATED WITH INVENTORIES :

The costs associated with inventories are mainly divided in to 2 costs.

I. Capital cost: maintaining of inventory results the blocking of the financial resources. These resources may be arranged from the own or out side resources. In the case of sawn resources there is an opportunity cost in the axes of out side resources the firm has to pay interest to the outsiders.

II. Storage or handling cost: Cost incurred for manufacture a given level of inventory is called carrying or handling cost.

The storage or handling or carrying cost includes warehousing, handling, clerical, insurance, deterioration and obsolescence.Risks associated with inventories are mainly divided in to 3 risks:

1. Risk of price decline.2. Risk of obsolescence.3. Risk deterioration quantity.

QUESTIONS INVOLVED WITH “TO MANAGE INVENTORIES EFFICIENTLY”.

The two important questions for effective inventory management are-1. How much should be ordered?2. When it should it be ordered?

The 1st question, How much to ordered, relates to the problem of determining economic ordered quantity i.e. EOQ.

The 2nd question, when to ordered, relates to the problem of determining re-ordering point.

SELECTIVE INVENTORY CONTROL:

The inventory of a firm consists of a large number of items of various nature, size & value. It is not possible to exercise the same degree of control over each and every item of inventory. To get optimum benefits for the firm we have to select all the items and to categories them into different classes.

For this purpose, there are different methods of selective control which are enumerated as under:

1) ABC Analysis (Always Better Control Analysis).2) VED Analysis (Vital, Essential & Desirable items Analysis).3) FNSD Analysis (Fast moving, Normal moving, Slow moving &

Dead moving item Analysis)4) HML Analysis (High, Medium, Low volume Analysis)5) SDE Analysis (Scarce, Difficult & Easily available items

Analysis)6) GLF Analysis (Govt., Local or Foreign suppliers Analysis)7) VIR Analysis (Vital, Important, Routine Analysis)8) MTR Analysis (Material, Turn over, Rate Analysis)9) SOS Analysis (Seasonal & Off Seasonal Analysis)

Of the above methods of selective control, the following are the most popular ones, which are explaining as under.

ABC Analysis:

This method of selecting the items of stock for control is known as Always Better Control

method. In this method, various types of goods are classified into three classes.

i.e. ‘A’ class ‘B’ class ‘C’ class

‘A’ class goodsGoods constituting higher percentage of value but lower percentage of items are included in ‘A’ class.

‘B’ class goodsGoods of the medium nature are both the respects of the value & items are grouped under ‘B’ class.

‘C’ class goodsGoods constituting lower percentage of value but higher percentage of items are included in ‘C’ class.

After classification, control is exercised over them. Here ‘A’ class goods find more attention, ‘B’ class goods normal and ‘C’ class goods find attention. By doing so the cost of inventory control is minimized.

Characteristics of different classes:

‘A’ class: It requires strict control. It needs frequent control. It needs frequent review at short interval. It requires very low level of safety stock. It needs centralized purchasing.

‘B’ class: It requires moderate control. It needs moderate lead time. It requires low safety stock. It needs both centralized & decentralized purchasing.

‘C’ class: It deserves loose control. It can manage with long lead time. It requires more amount of safety stock. It needs de centralized purchasing.

VED Analysis:In this method of selective control, inventory items are classified in descending order of their criticality as under-

Vital items. Essential items. Desirable items.

Vital Item:The items, the stock out of which even for a moment hampers production for a considerable and the cost of stock out of which in very high are considered as vital items. Essential item:The items, the shortage of which cannot be managed for more than a day on two & the cost of stock out of which is higher are known as essential item. Desirable item:The items, the absence of which for even a week dose not hamper the production work & and the cost of Stock act is not very much are known as desirable items.

SDF AnalysisWe classified the item in 3 categories.

Scarce or ‘S’ item. Difficult or ‘D’ item. Easily available or ‘E’ item.

In this analysis scarce items need more attention as compared to other two items.

TECHNIQUES OF INVENTORY CONTROL:

After the items are classified into various classed under any of the method of selective control mentioned above, various techniques are applied for proper control of inventories.The techniques are:

Measurement of different levels of the inventory. Inventory turn over ratio. Measures of Economic order quantity i.e. EOQ. Selection of Replenishment system. Codification. Standardization. Simplification or variety reduction. Computerization Theory of probability of demand forecasting. Review of surplus& dead stocks. Reporting. Perpetual inventory system. JIT control system.

MEASURES OF DIFFERENT LEVELS OF INVENTORY:

There are different levels of stocks which are to be carefully ascertained for effective

inventory control under different situation.

Minimum stock level:

It is the level below which the stock of an item should not be allowed to fall. It is minimum quantity of the material which must be kept in store at all time.For determination of the minimum level of stock, the following model is to be applied.

Maximum stock level:

It is the quantity beyond which the stock of particular item should not be allowed to

stand

It is the maximum quantity of an item which be held at store at any time to avoid the over stocking & unnecessary blockage of capital are avoided.

Ordering level: It is the level of stock at which the production cycle is taken to be complete & fresh orders are made for replenishment of the stock for starting with an other production cycle

Re-order level:

It is the level of stock at which an order to be placed when stock reaches a particular level.

Or Danger level:

Minimum stock level = Re-ordering level – (Normal use X normal re-order period)

Maximum stock level = (Re- ordering level + Re-ordering quantity) – (minimum use X minimum re-ordering period)

Ordering level = minimum level + consumption during the lead time

Re-ordering level = maximum consumption X maximum re-order period

Re-ordering level = safety stock + (avg. daily usage X avg. lead time (in days)

This refers to that level of stock at which normal issues of the material to the production center are stopped.

Avg. stock level: It is the level at which the stock of an item ordinarily remains throughout a production cycle.

Safety level:

It is the level of stock at which there will be no danger for the firm an account of sudden rise in the demand for the goods.

INVENTORY TURN OVER RATIO (ITR):

I.T.R. is calculated to indicate whether inventories have been used efficiently or not.I.T.R indicates the No. of times the stock has been turn over during the period & evaluates the efficiency with which a form is able to manage its inventory.

Inventory conversion period is calculated to see avg. time taken for clearing the

stocks.

MEASURES OF ECONOMIC ORDER QUANTITY:

Danger level = avg. consumption X maximum re-ordering period for emergency purchases.

Avg. stock level = minimum level + ½ re-order quantityOr

(Minimum level + maximum level)/2.

Safety level = maximum demand during the maximum lead time – avg. demand during the avg. lead time.

I.T.R. = Cost of goods sold or Net sales a

Avg. inventory at cost Avg. inventory at cost

Inventory period = 365 / ITR

One of the measure problem is “how much inventory should be added?” When inventory is replenished?This problem is called order quantity problem & the task of the firm is to determine the optimum or economy order quantity or economic lot size.Determining an optimum inventory level involves two types of cost i.e.-

Carrying cost. Ordering cost.

Carrying cost:

Costs incurred for maintaining a given level of inventory are carrying cost. This includes: Warehousing Handling Clerical & Staff Insurance Deterioration & Obsolescence.

Carrying costs vary with the inventory size.Order size increases carrying cost increases.

Ordering cost:Costs incurred for acquiring inventory from suppliers are called ordering cost. This includes:-

Requisition Order placing Transportation Receiving, inspecting & storing Clerical & staff

When order size increases the ordering cost decreases.

The economic inventory quantity is that inventory level which minimizes the total of ordering

into carrying cost.

Approaches to determine EOQ

To determine the EOQ we can follow two approaches.

Order formula approach.

Graphical approach.

Order formula approach :

Suppose the ordering cost per order ‘O’ is fixed, ‘A’ be the annual demand and ‘Q’ be

the order size. Then the No. of orders will be A/Q & the total order cost will be

2 X quantity required X ordering cost Carrying cost

TOC = AO/Q

Let us further assume that carrying cost per unit, ‘C’ is constant. the total carrying cost will

be the product of the avg. inventory units & the carrying cost per unit, if ‘Q’ is the order size

the average inventory will be –

Average inventory = Q/2

& total carrying cost will be = Average inventory X per unit carrying cost

T.C.C. = (Q/2) X C

The total inventory cost, then, is the sum of the total carrying & ordering costs:

Total cost = T.C.C + T.O.C

Total cost = ((Q/2) X C) + (AO/Q)

This show, for a large order quantity the carrying cost will increase, but the ordering cost will

decrease on the other hand, the carrying cost will be lower & the order cost higher in the

lower order quantity.

So to obtain a formula for EOQ the total cost equation is differentiated with respect to Q &

setting the derivative equal to zero, we get-

Economic Order Quantity =

i.e EOQ =

Where,

A = Annual demand

O = Ordering cost

C = carrying cost

GRAPHICAL APPROACH :

The EOQ can also be finding out graphically. In the following graph the cost i.e. carrying cost, total cost & ordering cost are floated on vertical axis & horizontal axis are used to represent an order size.We note that total carrying cost increases as the order size increases because a large inventory to be maintained.

2AO C

Costs

Ordering Cost

Carrying Cost

Economic order Quantity Graph

Total Cost

O rder

Size

Q

On the other case the ordering cost curve declines because as the order size increases the No. of order decreases, the total cost curve behave definitely. The total cost declines in the first instance, but they start rising when the ordering cost decreases & the carrying cost increases. So the economic order quantity occurs where the total cost is minimum i.e. Q. The following graph indicates how EOQ is determined by using graph method.

CLASSIFICATION & CODIFICATION OF INVENTORY:

For proper recording & control of inventory proper classification of various items are essential. The inventory should be classified & coded respectively as per there identification. The coding may be done alphabetically or numerically.

COMPUTERIZATION:

A computerized inventory control system enables a company to easily track large items of inventory. It is the automatic system of inventory, recording with drawls & revising the balance. There is in built system of placing order as the computer notices that the re-order point has been reached.

INVENTORY REPORT:

To know the latest stock position of different items, the inventory reports are needed to be producing continuously. This report contains all information on required for management.

PERPETUAL INVENTORY SYSTEM

It is a system maintained by the controlling department, which reflects the physical movement of stock & their current balance. The store ledger & bin cards are helpful in this system because this records help in knowing the movement of store. This facilitates regular checking of stores without closing down the plant.

Advantages: Quick calculations of closing stock. Helpful in formulating purchase policies. Check on stores personal. Helpful in production planning. Investment under check. Errors and shortage daily detected. Increasing efficiency of organization.

JUST IN TIME (JIT):

In JIT system material on manufactured component & parts arrive to the manufacturing sites or stores just before few hours when they are put to use. JIT system helps to save the carrying & other related cost to the manufacturer. The success of the system depends upon how well a company manages its suppliers. The JIT system complements the total quality management (TQM).

DIFFICULTIES BEING FACED IN PRACTICING INVENTORY MANAGEMENT SYSTEM IN J.K.PAPER MILLS:

Demand & lead times are not static & deterministic in most of the actual cases.

RIL policy has not been followed as periodic preview system.

Inventory norms for some of the major items could not be followed mainly raw material, pulp, coal & m/c clothing due to Govt. control & its seasonal availability.

Location disadvantages of J.K.Paper mills forces them to carry large inventories of spare parts.

Most of times user departments don’t realize the cost involve in materials.

CHAPTER V

PRACTICAL ASPECT OF INVENTORY MANAGEMENT IN JK PAPER MILLS.

INTRODUCTION:

Today’s business world is highly competitive to meet the competitiveness & challenges, organizations are forced to practice some of the scientific tools. Material management is one of such areas. The Efficient management over material increases the profit of the organization.

Inventory management is one of the functions of material management. This is widely accepted by most of the Indian business organization. The objective of inventory management is reduction of cost without interrupting the production operation.

The fundamental questions involved with inventory management system are:

a) How much quantity to be ordered.

b) When to place an order.

Both the above questions can be answered by optimizing the two main cost involved i.e.i) inventory carrying cost

ii) Ordering cost.

ASPECT OF STUDY:

Study of inventory management covered the following aspect.

a) Codification, standardization & variety reduction in J.K.Paper

MILLS.

b) ABC Analysis in J.K.Paper MILLS.

c) Usage rate & lead time analysis.

d) Inventory replenishment policy in J.K.Paper mills.

e) Purchase requisition process in J.K.Paper mills.

f) Documentation.

CONTROL FOR PROCUREMENT:For their own convenience the total system of procurement is divided in two parts. We can understand that from the following diagram.

CAPITAL PURCHASE:These purchases are capital in nature.

DEVELOPMENTAL JOBS:When a company undertakes any new projects for its own development, those come under developmental jobs.At J.K. Paper Mills, erection of wills cutters-1 in 1995 is an example of such developmental jobs.

EXPANSION:

Purchase

Capital Purchase

Developmental job

Expansion

Augmentation

Category I

Category II

Category III

Revenue purchase

Annual Indent

IRP Items

Need based Items

Annual based Items

Category IV

Category V

Category IV

Increase in machine capacity, speed, etc comes under expansion activities.

AUGMENTATION:Modifications of machineries, plant, etc. are augmentation activities for a company.

CATEGORY-I, II, III: Category-I, II, III are the equipment and spares which are new, replacement and stand by spares respectively.

REVENUE PURCHASE:These purchases are regular in nature.

ANNUAL INDENT:These are the items purchased annually which are recommended by the user department to the planning cell.

IRP ITEMS:These are the items under direct control of purchase department & there is no need to raise PR for such purchase.

NEED BASED ITEMS:These items are purchased when need for these items arises through raising PR.

ANNUAL SHUT ITEMS:These are the lubricant items which are required at the time of annual lubrication of machineries.

CATEGORY IV, V, VI ITEMS:The items comes under IV, V or VI category if they have life span for ‘above 3 years’, ‘between 1 to 3 years’ & ‘less than 1 year’ respectively.

We will discuss in brief about IRP items and need based items i.e. PR items in next part of this chapter.

CODIFICATION, STANDARDIZATION & VARIETY REDUCTION: During 1973-74 the codification of material was done through ‘9’ digit. But the codification structure has been changed to ‘10’ digits by Harward and Finley management consultants. All materials have been grouped into 65 main groups but now there are 99 main groups. In this codification all materials are grouped into 99 main groups. Each group has sub group & in turn sub-group has sub sub-groups to show the various specifications including dimensions. Verify reduction & standardization is an ingoing process in J.K.Paper Mills & it is being done in regular basis whenever new codes are provided & at the time of inventory replenishment policy formulation.

INVENTORY MANAGEMENT SYSTEM IN J.K.PAPER MILLS:Inventory control system at J.K. Paper Mills Ltd. Is divided into two parts & the technique is used for inventory management is –

PRODUCTION BASED INVENTORY:Inventories which are used in production process, it means without these inventories, production is not possible. J.K. Paper Mills has kept raw material, coal, chemical & cleys under this category.

Raw Material:The raw material for J.K. Paper Mills are-

1. Bamboo2. Wood

There are two types of bamboo used by J.K. Paper Mills –I. Daba

II. Salia And different woods are used by J.K. Paper Mills

1. Casurina.2. DEF-Debarked Eucalyptus Fire wood.3. Accasia.4. Chakunda.5. Popular.6. Cashew.7. SAL FW8. Kaju, etc.

Raw materials consume 49% to 51% of total inventory cost. So proper inventory management is needed over that. They used the material in FIFO (First In First Out) basis for raw material. Stock holding capability for raw material is 80,000 ton. Raw material required per day is 1200 ton. J.K. Paper Mills maintains raw material for 45 days. In the process the minimum stock maintained by J.K. Paper Mills in case of raw material is 1200 ton X 45 days

i.e.54, 000 ton.

Inventory Management System

Production Based Inventory Maintenance Based Inventory.

Coal:Coal is a production based inventory which is a product of OMC or other state govt. product. So the procurement of coal is constant.

Consumption of coal per day is 500 ton to 600 ton & the danger stock level is 9000 ton.To meet the additional requirement of the plant J.K.Paper Mills depends upon Electricity.

MAINTENANCE BASED INVENTORY:These are the inventory items which are not used for production purpose rather they are used to ensure uninterrupted production. These inventories include spare parts, bearings, nuts, bolts, o-rings, valves, lubricants, etc.

SELECTIVE CONTROL USED BY J.K.PAPER MILLS FOR MAINTENANCE BASED INVENTORY:-

ABC Analysis:In order to exercise selective control ABC analysis of all items is done annually & it has started from 1973. This analysis is shows the items which came under ‘A-B’ class contributed about 95% of the total consumption value on the rest 5% is ‘C’ class.

Class Value

‘A’ class 85% of total value

‘B’ class 10% of total value

‘C’ class 5% of total value

Current inventory of regularly consumed ‘C’ class items of about 1900-2000 items and they fall under perpetual review and annual requirements items are 800.

RELEVANT COST OF INVENTORY IN J.K.PAPER MILLS:Two basis cost parameters involve in inventory,

Carrying Cost:At present the inventory carrying charge is 17.64% of unit price.

Ordering Cost:

The inventory ordering cost charge is Rs.203 for imported and Rs.60 for indigenous item.After classify the items through ABC analysis for better inventory management J.K.Paper Mills again classify the item into FOUR categories-

1. IRP item2. PR-Purchase Requisition item3. Insurance items.4. absolute solution moving item

To know about IRP system in J.K.Paper Mills we have to know the uses rate and lead time analysis.

USES RATE AND LEAD TIME ANALYSIS:Consumption/uses rate and lead time are the two important parameters which play vital role in arriving at inventory replacement policy.

During the inventory management study forecasting of future consumption was done based on available past data and subjective opinion from stores, purchase and user department.

Presently the future demand at J.K. Paper Mills is arrived by considering past three year’s consumption and future requirements of departments. In case of chemicals the demand mainly depends on production program.

Lead time analysis is also carried out time to time to formulate inventory replenishment policy on more realistic way.

INVENTORY REPLENISHMENT POLICY (IRP):Regularly consumed materials are categories under IRP based on consumption, usage and lead time. Inclusion of an item as IRP is advised by the user department with due approval to

industrial engineering department.

Industrial engineering department sets the norms or parameters for the IRP item.The norms are:-

Safety stock

Ordering quantity (EOQ)

ROL/RIL

Basically four types of inventory replenishment models were suggested for inventory control system & procurement during the inventory management study (1973-1975). Infact the same models are being followed at present also.

1. Re-Order Level policy (ROL)

2. Replenishment Inventory Level policy (RIL)

3. As and when required policy.

4. Purchase when required policy.

RE-ORDER LEVEL POLICY (ROL):This policy is also called as perpetual review system policy. This policy is followed for items whose usage value is more than Rs.5000.In this policy when the total balances (Quantity on order + cardex balance) reaches reorder level procurement action is initiated. Items for which the lead time is large when compared to replenishment cycle, procurement action is to be taken on the basis of replenishment cycle until the total balance exceeds the reordered level (ROL) Every time the quantity ordered will be equal to the ordering quantity. If by any chance safety stock is reached emergent action is to be taken to replenish stock.

This policy is followed for A-B items.Model

For A-B items the suggested model is-

EOQ =

SS = ((r X n-2)/48) X (Km-KA)

ROL = KA + SS

Where,Ci = Unit price of an Item.

D = Anticipated annual demand.

Cp = ordering cost per order.

I = Annual inventory cost.

r = No. of years in which one risk of run out is permitted i.e.4(general)

Km = normal maximum consumption during normal maximum lead time.

KA = Avg. consumption during Avg. lead time.

N = No. of order per year.

EOQ = economic order quantity.

SS = safety stock.

ROL = Re-order level (Including the quantity in transit & physical stock).

Assumptions for EOQ calculation:

One risk of run out is taken in 4 years.

Variations in daily consumption have been restricted to 10% of

Avg. daily consumption.

The demand of item occurs uniformly over the period of at the

known rate.

The replenishment for stock is instantaneous.

Lead time is zero.

The cost to place an order and process delivery is fixed and dose

not vary with the lot size.

The inventory carrying charges vary with directly and linearly

with the size of the inventory and it is expressed as a percentage

of inventory investment.

The item can procured in the quantities desired, there being no

restriction of any kind.

The item has long self life, there being no fear of deterioration or

spoilage.

Illustration

Calculation of EOQ, ROL, SS for V-Belt having code = 1901041620.

It is given that

D = annual demand = 18 units.

Cp = ordering cost = Rs. 203.00

Ci = unit price = 440

I = Annual inventory carrying cost = Rs. 17.64

r = No. of years of risk i.e. 4

Lead time = 30 to 45

=

ADD

EOQ

18

1.7710.16n = = =

SS =

= 0.805 X 0.74 = 0.60 EA

(((r X n)-2)/48)(Km-KA) (((4 X 10.16)-2)/48)(2.22-1.48)

Tm X D

365

45 X 18

365= = 2.22

TA X D

365

30 X 18

3651.48

(440 X 17.64 X (2.22-1.48)18 (2 X 203) +

24

440 X 17.64

3.161

1.77 EA

KA

Km

=

=

= =

EOQ =

=

=

From the above calculation we reached the conclusion that when the inventory level of V – Belt reaches the ROL level i.e. 2.08 EA an order has to be replaced which has a quantity of 1.77 EA. To meet the annual demand 18 the company has to place 10.16 No. of orders. The safety stock level is 0.60 EA.

2 . Cp . D

Ci . I

Y = TA + K TA

REPLENISHMENT INVENTORY LEVEL POLICY (RIL):

Replenishment inventory level policy is followed by for ‘C’ class items, i.e. items for which annual consumption value is less than 5000. In this policy replenishment cycle time is divided by the No. of orders per year ‘n’ for these items stock position shall be reviewed is normal course as per the cycle time. If the total balance is more than safety stock plus half of the order quantity, then no replenishment action shall be initiated. Some time the SS may be reached earlier to the cycle period due to manual consumption in such cases the procurement action is to be taken for the balance quantity When the level quantity comes down to safety stock or 20% RIL. This policy is also called periodic review policy.

Model For ‘C’ class item the suggested model is –

OQ = SS = da X Y RIL = SS + OQWhere, da = daily Avg. demand.

Tm = maximum lead time TA = Avg. lead time. K = 5 (95% level of significance)

AS & WHEN REQUIRED POLICY:

There is no regular requirement of item but one set of item shall be maintained, when ever an item or one set of item is consumed, procurement action is to be taken to replenish the same. This model is followed for whose consumption is less and sporadic and of cource no availability of these items may create serious problem to plant working.

PURCHASE WHEN REQUIRED POLICY:

Normally no stock of such items shall be maintained. But if the user departments require the items for normal maintenance jobs, they shall inform stores for procurement through a internal departmental memo.

PURCHASE REQUISITION BASED ITEMS (PR):

Stores department(Checking of availability)

User department

Purchase department

Material procured upon as & when required basis fall under this category. Purchase requisitions raised by user and dully approved are routed through stores for availability checking. If the quantity of demanded item is more then the availability then the further processing is done by purchase department.PR based item category doesn’t include raw material & IRP items.

PURCHASE REQUISITION PROCESS

COMPUTERIZATION OF INVENTORY MANAGEMENT SYSTEM AT J.K.PAPER MILLS LTD.:

A store, Industrial engineering & Yard’s accounting system has been computerized during 1984. In 2005 ERP (Edwards 8.0) has implemented. The inventory management is easily done through ERP.Advantages:

Faster input of data. Improvement in quality of work. Reduction in paper work. All services & controllers bill passed through system. Stock availability can be viewed by both user & stock department. Faster & accurate report can be obtained. Continuous data entry is possible.

Raising PRIf demand < Availability

Receiving good received report

These are the advantages of the ERP system observed by JK Paper Mills after installation of ERP on 2005.

CHAPTER VI

RESEARCH METHEDOLOGY,DATA ANALYSIS, INTERPRETATION & ANALYSIS OF QUESTIONNAIRE

REASEARCH METHODOLOGYMethodology is a systematic procedure of collecting information in order to analyze

and verify a phenomenon. The study was designed in such a way so to obtain a desired

objective. From the beginning to end of the project every thing is done on a well planned

format. In the early stage of the project my plan is to get acquainted with the organization

where I am doing the project. After that I search for the best available data in that

organization. On the basis of the available data I choose Inventory management as my topic.

In the third week I started my study on Inventory management by gathering valuable

information form different departments. I had collected information by having valuable

discussion with the managers and officer of the organization. To make my data more

reliable I took the help of direct questionnaires. This is all about the frame work of my study.

The collection of information is done two principle sources, viz

1. Primary data

2. Secondary data

Primary data.

It is the information collected directly without any references. In this study it is

gathered though interviews with concerned officer and staff, either individually or

collectively. Some of the information were verified and supplemented through

personal observation.

The data collection includes:

Conducting personal interviews with the concerned officers of finance Department of

Dredging Corporation of India.

Secondary data:

The secondary data was collected from already published sources such as, pamphlets

of annual reports, returns and internal records.

The data collection is from the following:-

Stores

DATASOURCES

SECONDARYSOURCES

PRIMARYSOURCES

INSIDE THECOMPANY

OUTSIDE THECOMPANYY

MANAGEMENT

RESPONDENTS

ANNUALREORT /

RECORDS

TEST BOOK/JOURNALS/

WEBSITE

PERSONALOBSERVANCE

Stores Manual Annual reports Records Management

The data collection includes:

Collection of required data from annual records of dredging corporation of

India ltd.

Reference from textbooks and journals relating to financial management.

Electronics based data such as internet downloaded data.

Field work detail:

The project is done in the JK Paper mills Ltd a unit of JK organization. The location of JK

Paper mill is in Jaykaypur, Rayagada. All works are done in the office premises with the

guidance of expert officers. Data is collected from different departments situated in JK Paper

mill. They are,

Accounts department

Sales department

Industrial engineering department

Stores and godown department and

Net salesAvg. Inventory

Yard department

DATA ANALYSIS & INTERPRETATIONPerformance appraisal of inventory management through ratio analysis:

INVENTORY TURNOVER RATIO:-

It is the ratio of cost of goods sold and average inventory. It indicates how rapidly the inventory is turning into receivable through sales. A high ratio is an indicator of good inventory management. A low inventory implies excessive inventory level thus warranted by production and sales activity.

Inventory turnover Ratio =

Table 1

YEAR COST OF GOODS SOLD(RS.IN CRORES)

AVERAGE INVENTORY(RS. IN CRORES)

INVENTORY TURNOVER

RATIO(IN TIMES)

2000-2001 483.30 46.26 10.4482001-2002 483.95 65.47 7.3922002-2003 519.33 62.81 8.2682003-2004 477.45 66.98 7.1282004-2005 516.22 68.42 7.5452005-2006 535.86 81.11 6.6072006-2007 601.97 93.01 6.472 2007-2008 692.58 90.09 7.6882008-2009 676.16 85.87 7.8742009-2010 710.67 97.71 7.273

Inventory turnover ratio = Cost of goods sold/ Average inventory at cost&Average inventory at cost = opening inventory + closing inventory

2

365Inventory Turnover ratio

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

0

2

4

6

8

10

12

INVENTORY TURNOVER

ACCOUNTING YEARS

INVE

NTO

RY T

URN

OVE

R RA

TIO

INTERPRETATION:It is observed that in J.K. Paper Mills stock velocity indicates efficient management of inventory; because of more frequently the stocks are sold. Due to installation of coating plant the inventory increased for more productions.

It may also be mentioned that there are no rule of thumbs for interpreting the inventory turnover ratio this ratio may be different for different firm depending upon the nature of the industry.

INVENTORY HOLDING PERIOD:

It is the period for which inventory held by a firm.

Inventory holding period =

The table shows the inventory holding period for the period 2000-2010

Table 2YEAR DAYS INVENTORY

TURNOVER

RATIO

(IN TIMES)

INVENTORYHOLDIN

G PERIOD

(IN DAYS)

2000-2001 365 10.448 35

2001-2002 365 7.392 49

2002-2003 365 8.268 44

2003-2004 366 7.128 51

2004-2005 365 7.545 48

2005-2006 365 6.607 55

2006-2007 365 6.472 56

2007-2008 366 7.688 47

2008-2009 365 7.874 46

2009-2010 365 7.273 50

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-2008

2008-2009

2009-2010

0

10

20

30

40

50

60

INVENTORY HOLDING PERIOD

ACCOUNTING YEAR

DAYS

INTERPRETATION: It can be interpret here that the level of inventory of the JKPM is maintained for 46-48 days averagely, for all items of inventory. However for finished goods the inventory is maintained mostly for 6-8 days for dispatching the items.

Data presentationANALYSIS OF Questionnaire & Interpretation

Employees awareness of the company’s “primary aim”

YES

NO

The result of the study indicates that 96% of the respondents agreed that they are aware of the companies’ primary aim. To a very small extent, 4% of the respondents said that they are not aware. The percentage of respondents, who felt that they are aware, is a parameter of self-satisfaction that the employees know the primary aim of the organization.

Proper maintenance of inventory and logistical activities helps to achieve the primary aim, goal, objectives of the organization?

NO

YES

24%

76%

RESPONDS

From the above data it can be interpreted that more than 76% of the employees agreed the Proper maintenance of inventory and logistical activities helps to achieve the primary aim, goal, objectives of the organization. 26% said that not only this can improve the way to reach the goal of the organization.

Role of inventory is useful in the achievement of logistical objectives?

NO

YES

From the above graph it can be interpreted that about 54% employees have an opinion that the system helps in the achievement of logistical objectives & 46% employees viewed that the system does not help to improve their performance.

Total of respondents 50 100%

YES 48 96%

NO 2 4%

Total of respondents 50 100%

YES 38 76%

NO 12 24%

Total of respondents 50 100%

YES 27 54%

NO 23 46%

The uncertainty in demand and lead time affects the inventory levels.

YES

NO

To the question, all the respondents said equally that it might be affected and may not be whether 2 respondents didn’t answer the question. According to them the system is nothing to do with their inventory as now a days just in time is introduced.

Just in time is whether always helpful for the organization? However we know that is very difficult to implement.

Chart Title

When the employees were asked about JIT function, it is found that around 28% respondents are clear about the question, to a large extent. 34% respondents were clear about their System to a very large extent. Only 18% said that they are clear about the system to a small extent only, where as about 20% Respondents are not at all ready to say that JIT function is really helpful.

Is the organization always thinks about optimum utilization of its resources or inventory

Total of respondents 48 100%

YES 24 50%

NO 44 50%

Total of respondents 50 100%

A.To a very large ext . 17 34%

B.To a large extent 14 28%

C.To a small extent 9 18%

D.Not at al l 10 20%

A B C D

Total of respondents 44 100%

YES 26 59.09%

NO 18 40.90%

YES

NO

From the above graph it is clear that more than ABOUT 60% Respondents are consult that the organization optimum utilizes the recourses available. Only 40 % respondents viewed that they are not being agreed that about the utilization process.

How clear you are about your organization’s priorities in maintaining the inventory

Chart Title

From the above data it can be interpreted that 40% of people saying that they are fully clear about the organizations priorities in maintaining the inventory where as 36% respondents are strongly & 24% are partially clear about this.

How you feel about the inventory management system of your organization

Chart Title

From the above graph it can be interpreted that more than 46% Respondents agreed that the inventory should valued and taken care of. Where as about 30% Respondents

Total of respondents 50 100%

A. Fully clear 20 40%

B. Strongly clear 18 36%

C. Partially clear 12 24%

A B C

Total of respondents 50 100%

A. Feel safe 15 30%

B. Feel valued & taken care of 23 46%

C. Improve loyalty & commitment 12 24%

A B C

viewed that system not at all serves this purpose they feel safe. About 24% have an opinion that improve loyalty as per the need.

CHAPTER VII

RESULT AND ANALYSIS OF THE WORK

FINDINGS CONCLUSION RECOMMENDATION & SUGGESTION BIBILOGRAPHY ANNEXTURE

Questionnaire

FINDINGS:

After the study I have found some critical things in the organization in maintaining the logistics & inventory, supply chain of raw materials and finished goods. As I have done a research of the employees to learn something more provisions of finding the critical things in the organization, I made a questionnaire regarding some questions on logistics and inventory and circulated that among the JKPM employees and found. I have circulated the questionnaires among 50 employees including managers, executives, officers, asst- officers of JKPM, Rayagada and found the critical things from them. I met all of them personally and got the results out from them although it is a very difficult task for me to do but the sincere cooperation of them made my task easier however I have not found any sources from some of the employees of here as they are too busy in their work that they have not given any time for me. Still I found some suggestions out from the rest of them and reached to the conclusion and finding & suggestion part.

Inventory norms for some of the major items could not be followed mainly raw material pulp, coal & m/c clothing due to Govt. control and its seasonal availability.

Most of times user department don’t realize the costs involved in materials. Location disadvantages of J.K.PM forces them to carry large inventories of spare

parts. Demand and lead times are not static and deterministic in most of the actual cases. RIL policy has not been followed as periodic review system. ABC Analysis in not applied for the raw material like Bamboo and Hardwood

CONCLUSION:

This practical study is about the “LOGISTICS & INVENTORY MANAGEMENT”. Its purpose is to present, as clearly and vividly as possible the nature, characteristics of modern day losistics & inventory management techniques. This task poses a major portion of the current assets of any firm. Many appropriate techniques are employed so as to control unnecessary wastage of money in maintaining the inventory of the firm. In spite of variety and the pace of change in the  inventory management techniques proper focus has to be made on the use of appropriate techniques to plan the inventory levels which affecting the production and sales of the firm because the major revenue for any firm is from its sales. The intent of this report is to provide an insight in the application of various inventory management techniques.  It has always been important to identify and apply various appropriate techniques of logistic inventory management. So as to, achieve high performance in sales and thus reduce unnecessary costs. 

The summer internship training was instrumental in acquiring through knowledge about the Logistics channel of distribution and Inventory Management at JKPM. I learnt the applicability of the study and above all I got a chance to test and enhance my knowledge in a new field. 

RECOMMENDATION & SUGGETIONS

In my opinion the company should give more emphasis on backward integration by inducing the local farmers to produce Bamboo and hard wood which helps the company to be independent over inventory in raw materials

Timely connective action to control inventory will definitely yield fruitful results.

Much control should be exercised in procuring spare parts for old equipment due to the fact that remaining life of these equipments will be very less and the same way be replaced by new equipment shortly.

Due to logistics limitation and localization of industry some time the inventory levels effected the organization should be carefully watched.

FIFO system should be implemented & strengthened.

Cost reduction on inventory can achieved to a greater extent if the concerned department like stores, purchase & user departments work in close co-ordination.

The identification & disposal of stocks should be done on top priority basis.

Timely connecting action to control inventory will definitely yield fruitful results.

Much control should be exercised in procuring spare parts for old equipments due to the fact that remaining life of these equipments will be very less & the same way be replaced by new equipment shortly.

Standardization in respect of equipment will greatly help in reducing inventory of spare parts

If ABC analysis s is applied for the materials produced it helps to reduce the unnecessary investment and if applied for raw materials it will reduce the CC and OC.

Perpetual system needs to be strengthened.

Storage area for certain nature of item to be taken care & involved lively.

BIBLIOGRAPHY

BOOKS:

LOGISTICS & SUPPLY CHAIN MANAGEMENT- D K Agarwal, edition-eight imp. 2009,Publisher- Macmillan Publishers India ltd., kolkota

MARKETING MANAGEMENT- Philip Kotlor, edition-twelve edition 2006,Publisher- Prentice Hall of India (p) Ltd, New Delhi Branch

MARKETING MANAGEMENT- Ramaswamy v.s & s. Namakumari, 3rd edition, 2004 Publisher- Macmillan India Ltd, Kolkota

RESEARCH METHODOLOGY- C.R Kothari, edition-2004, reprint 2006Publisher – New Age International (P) Ltd, publishers, Branch New Delhi

FINANCIAL MANAGEMENT- I M Pandey, edition- ninth edition….. 2005,Publisher- Vikash Publishing House (p) Ltd. Noida

MANAGEMENT ACCOUNTING- Sashi K. Gupta, R.K. Sharma. Second revised edition 2009,Publisher- Kalyani Publishers, Delhi

JOURNALS:

HINDUSTAN SURVEY OF INDIAN INDUSTRIES- A Year Book 2000

JOURNAL ON INDIAN PULP & PAPER.- JK PAPER Ltd. 2005

ANNUAL REPORTS ON J.K.PAPER MILLS LTD- JK PAPER Ltd. April 2010

INDUCTION MANUAL OF JK PAPER MILLS- JK PAPER Ltd. 2010

BROCHURES AND BOOKLET OF JK PAPER MILLS- JK PAPER Ltd. 2000-2010

INTERNET SOURCES:

http//: www.jkpaper.com – accessed on 01/06/2010 @ 07:30 PMhttp//: www.wikipedia.org – accessed on 01/06/2010 @ 07:10 PM

Questionnaires

Employees detail

A. Name :

B. Contact : C. Designation :

D. Age :

1. Since when you are working in the organization. More then 10 years More then 5 years More then 1 years Less then 1 year

2. Are you aware of your company’s “primary aim”? Yes No

3. Is proper maintenance of inventory and logistical activities helps to achieve the primary aim, goal, objectives of the organization?

Yes No

4. Is the role of inventory is useful in the achievement of logistical objectives? Yes No

5. Is the uncertainty in demand and lead time effects the inventory levels? Yes No

6. Just in time is whether always helpful for the organization? However we know that is very difficult to implement.

Yes No

7. Is your organization follows the periodic inventory system for all items of raw material?

Yes No

8. Are there any recent changes in the company that might have affected the inventory management system?

Yes No

9. Is the organization follows different types of ordering systems for different kind of raw materials?

Yes No

10. Is the organization always thinks about optimum utilization of its resources or inventory?

Yes No

11. Are employee’s goals and company goals aligned depending upon the inventory? Yes No

12. How clear you are about your organization’s priorities in maintaining the inventory?

Fully clear Strongly clear Partially clear

13. How you feel about the inventory management system of your organization?

Feel safe Feel valued & taken care of Improve loyalty & commitment

14. How involved are the employees in company’s development through proper maintenance of inventory?

Fully involved Strongly involved Partially involved

15. What are the weak links of the current inventory system?

16. Any suggestions from you to improve those?

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