INTRODUCTION Cement is a building material has been known in one from other since the time of ancient sindhu civilization. The information about preparation and use of cement before 18 th century. Egyptians are known as the users of cement. The Greek civilization used some forms of motor but romans has developed it. The Indian cement industry is the second largest in the world after China in terms of quality, productivity and efficiency. In India it came to be established during the beginning of 20 th centuries. In fact the cement era in India commented with establishment of a smack cement factory at dates “Washer man pet” in Chennai in 1904 by South India industry Limited a company that dates back to 1979.The political capacity of this plant was only 10000 metrictons per annum Zuari cement is a part of the Ital cement group, the fifth largest cement producer in the world and the biggest in the Mediterranean region. Zuari cement ltd is located at Krishnanagar in yerrraguntla, YSR District. Location of the plant at this place having many advantages. Zuari entered the cement business in 1994 to operate the teamaco cement plant. In 1995, teximaco’s plant in yerraguntla was takeover by Zuari and a cement division was formed. The fleding unit came into its own year 2001 when Zuari industries entered into a joint venture with the ital cement group. The fifth largest cement in the world, Zuari cement was born. Today the company is the top most produces in south India. Page | 1
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INTRODUCTIONCement is a building material has been known in one from other since the time of ancient
sindhu civilization. The information about preparation and use of cement before 18 th century.
Egyptians are known as the users of cement. The Greek civilization used some forms of motor
but romans has developed it. The Indian cement industry is the second largest in the world after
China in terms of quality, productivity and efficiency. In India it came to be established during
the beginning of 20th centuries. In fact the cement era in India commented with establishment of
a smack cement factory at dates “Washer man pet” in Chennai in 1904 by South India industry
Limited a company that dates back to 1979.The political capacity of this plant was only 10000
metrictons per annum
Zuari cement is a part of the Ital cement group, the fifth largest cement producer in the
world and the biggest in the Mediterranean region. Zuari cement ltd is located at Krishnanagar in
yerrraguntla, YSR District. Location of the plant at this place having many advantages. Zuari
entered the cement business in 1994 to operate the teamaco cement plant. In 1995, teximaco’s
plant in yerraguntla was takeover by Zuari and a cement division was formed. The fleding unit
came into its own year 2001 when Zuari industries entered into a joint venture with the ital
cement group. The fifth largest cement in the world, Zuari cement was born. Today the company
is the top most produces in south India.
NEED FOR THE STUDYInventory constitutes the most significant part of the current assets of large majority of
companies in India. On an average inventories are approximately 60% of current assets in public
limited companies in India. Because of the large size of inventories are maintained by firms a
considerable amount of funds is required be committed to them. It is therefore absolutely
improved to manage effectively in order to avoid unnecessary investment. Hence an attempt is
made to study the inventory management in Zuari Cement Ltd.
OBJECTIVES OF THE STUDYThe main objectives of the study are
To find out optimum level of investment in inventory.
To analyze the various inventory management control techniques used by the
organization.
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RESEARCH DESIGN The select ZUARI CEMENT LTD is located at Yerraguntla in Y.S.R District.The data
collected through secondary sources and. research design is analytical in nature.
DATA SOURCESIn order to perform the search on’’inventory management’’in zuari cement ltd.,used
secondary data for obtaining information.
Secondary Data
This data is obtained directly from the company’s annual report, production selection,
and spare parts store section, charts, related company websites and other documents.
Period of the study The study period confines 4 years from 2009-10 to 2013-14
Statistical tools for analysisLast in first out(LIFO)&first in first out(FIFO).
Scope and limitations of the study The study covers inventory management techniques in Zuari, yerraguntla branch only.
As of time constraint, the study concentrates on only inventory management techniques
only.
The financial matters are confidential in nature it is high risk to collect the data from the
company.
There is difference between the collected data as of the sources are annual reports and
website of the company.
Chapter layoutThe study is organized into 6 chapters.
Chapter-1 : Introduction
Chapter-2 :Industry profile
Chapter-3 : Zuari cements ltd., A profile
Chapter-4 : Research methodology & design
Chapter-5 : Data analysis & interpretation
Chapter-6 : Findings and recommendations
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FINDINGS OF THE STUDY All the materials are increased from the 2009 to 2012 i.e. Rs 2789.71 to Rs 9245.63
because increased in the production capacity.
Slow moving items are Up and down with marginal different from 2009 to 2012 i.e.
3.86y% to 7.34% and there small decrease in non moving items continuously from 2009
to 2012 from Rs20.38 to Rs7.95.
The components of average are increased in the year 2009 to 2011 i.e. Rs 722.38 to Rs
1517.84, but it was decreased in the year 2012 to 1094.61 because of less inventory.
As, it is observed that value of economic order quantities was continuously increased in
2009 to 2011 i.e. 258.23 units to 462.28 units due to continues increased in the
production capacity , but it was decreased in the year i.e. 434.17.
Implementation of inventory management and control on the cement manufacturing
industry has reduced the average costs of inventories which has lead to reduced carrying
costs.
SUGGESTIONS price are needed, and awareness among initiators is to be increased to control the
generation of slow moving and moving item.
Introducing the new trends like JIT for some slow moving materials will definitely show
a positie impact on the costs and the variations in the average costs.
The production planning and material requirement planning should be informed to the
purchThe company should increase in the days of inventory holding it is well to the
organization.
New ways and means of disposing of scrap, surplus and obsolete items at a reasonable
ase department. So that they can identify number of alternative vendors.
The losses due to non moving items should be informed to corresponding department
initiators. So that the initiator can think economically to reduce the inventory.
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INTRODUCTION The basic responsibility of the financial manager is to make sure the firm cash flows are
managed efficiently. Efficient management of inventory should ultimately result. In the maxima
ion of owners wealth in order to minimize cash requirements inventory should be turned over as
quick as possible. Avoiding stock outs that may result is closing down the production line or lead
to loss of sales. It implies that while the management should try to pursue the financial objective
of turning inventory as quickly as possible. It should at the same time ensure sufficient
inventories to satisfy production and sales demand. In other wards the financial manager has to
reconcile these two conflicting requirements I) to minimize investment in inventory and II) to
meet demand for the product by efficiently organizing the production and sales operation. These
two completing objectives can also be expressed in terms of cost and benefits associated with
inventory.
INVENTORY It is a list of goods and materials, or those goods and materials themselves, held available
in stock by a business. It is also used for a list of the contents of a household and for a list for
testamentary purpose of the possessions of someone who has died. In accounting inventory is
considered an asset business inventory.
REASONS FOR KEEPING STOCK There are three basic reasons for keeping an inventory:
TimeThe time lags present in the supply chain, from supplier to user at every stage, requires
that you maintain certain amount of inventory to use in this “lead time”.
UncertaintyInventories are maintained as buffers to meet in demand, supply and inventories of scale
Economic Of ScaleIdea condition of one unit at a time at place where user needs it. When needs it principle
tends to insure lost costs in terms of logistics so bulk buying movement and strong bring in
economic of scale, thus inventory. All these stock reasons can apply to any owner or product
stage.
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Buffer stock held in individual workstations against the possible that the upstream workstation
may be a little delayed in long setup or change over time. .this stock is then used while that
change over is happening. This stock classification applies along the whole supply chain not
within a facility or plant.
Where this stock contains the same or similar items is often the work practice to hold all
these stock mixed together before or after the sub-process to which they relate. This ‘reduces’
costs. Because they are mixed-up together there is no visual reminder to operators of the adjacent
sub-processes or line management of the stock which is due to a particular cause and should be a
particular individual’s responsibility with inevitable consequences. Some plants have centralized
stock holding across sub-processes which makes the situation even more acute.
SPECIAL TERMS USED IN DEALING WITH INVENTORYStock Keeping Unit (SKU) is a unique combination of all the components that are
assembled into the purchasable item. Therefore any change in the packaging or product is a new
SKU. This level of detailed specification assists in managing inventory.
Stock out means running out of the inventory of an SKU. New old stock ‘’(sometimes
abbreviated NOS) is a term used in business to refer to merchandise being offered for sale which
was manufactured long ago but that has never been used. Such merchandise may not be
produced any more, and the new old stock may represent the only market source of a particular
item at the present time.
Inventory examples While accountants often discuss inventory in terms of goods for sale.Organizations-
manufacturers. Service-providers and not-for-profits-also have Inventories. That they do not
intend to sell. Manufactures’. Distributions’. And wholesalers’. Inventory tends to cluster in
warehouses. Retailers’ inventory may exist in a warehouse or in a shop or store accessible to
customers. Inventories not intended for sale to customers or to clients May be held in any
premises an organization uses. Stock ties up cash and if uncontrolled it will be impossible to
know the actual level of stock ties up cash and if uncontrolled it will be impossible to know the
actual level of stocks and therefore impossible to control them.Whilst the reasons for holding
stock are covered earlier. Most manufacturing organizations usually divide their “goods for sale”
inventory Into Raw materials – materials and components scheduled for use in product
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Transportation The moment of goods between owners. Or between locations of a given owner. The seller
owns goods in transit until the buyer accepts them. Sellers or buyers may transport goods but
most transportation providers act as the agent of the goods.
WholesalingDistributors who bay goods from manufactures and other suppliers for re-sale work in
the whole sale industry. A wholesaler’s inventory consists of products in its warehouse that it has
purchased from manufacturers or supplier’s .A produce–wholesaler (or distributor) may buy
from distributors in other parts of the world
Retailing
A retailer’s inventory of goods for sale consists of all the products on its shelves that it
has purchased from manufacturers or wholesalers. The store attempts to sell its inventory to
consumers.It is a key observation in “lean manufacturing” that it is often the case that more than
90% of a product’s life prior to end user sale is spent in distribution of one form or another. On
the assumption that the time is not itself valuable to the customer this adds enormously to the
working capital tied up in the business as well as the complexity of the supply chain. Reduction
and elimination of these inventory ‘wait’ states is a key concept in Lean.
INVENTORY It is a financial accounting tool for evaluation inventory and it is not necessarily a
management tool. Inventory management should be forward looking. The methodology applied
is based on historical cost of goods sold. The ratio may not be able to reflect the usability of
future production demand as well as customer demand.
BUSINESS MODELSIncluding just in time (JIT) inventory, vendor managed inventory (VMI) and customer
managed inventory (CMI) attempt to minimize on-hand inventory and increase inventory turns.
VMI and CMI have gained considerable attention due to the success of third party vendors who
offer added expertise and knowledge that organizations may not possess.
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ACCOUNTING PERSPECTIVES
The basis of inventory accounting Inventory needs to be accounted where it is held across accounting period `from standard
and theory of constraints-based (throughput) cost accounting perspective follows some examples
and a discussion of inventory from a financial accounting perspective.
The internal costing/valuation of inventory can be complex. Whereas in the past most
enterprises ran simple one process factories, this is quite probably in the minority in the 21 st
century. Where ‘one process’ factories exist then there is a market for the goods created which
establishes an independent market value for the good. Today with multi-stage process companies
there is much inventory that would once have been finished goods which is now held as ‘work-
in-process’ (WIP). This needs to be valued in the accounts but the valuation is a management
decision since there is no market for the partially finished product. This somewhat arbitrary
‘valuation’ of WIP combined with the allocation of overheads to it has led to some unintended
and undesirable results
NATIONAL ACCOUNTS Inventories also play an important role in national accounts and the analysis of the
business cycle. Some short-term macroeconomic fluctuations are attributed to the inventory
cycle.
DISTRESSED INVENTORY
Also known as distressed or expired stock distressed inventory is inventory whose
potential to be sold at a normal cost has or will soon pass. In certain industries it could also mean
that the stock is or will soon be impossible to sell. Examples of distressed inventory include
products that have reached its expiry date or has reached a date in advanced of expiry at which
the planned market will no longer purchase it clothing that is defective or out of fashion and old
newspapers or magazines.
It also includes computer or consumer-electronic equipment that is obsolescent or discontinued
and whose manufacturer is unable to support it.
INVENTORY CREDIT
Inventory credit refers to the use of stock or, inventory, as collateral t o raise finance.
Where banks may be reluctant to accept traditional collateral, for example in developing
countries where land title may be lacking, inventory credit is a potentially important way of
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overcoming financing constraints. This is a new concept archaeological evidence suggests that it
was practiced in Ancient Rome. Obtaining finance against stocks of a wide range of products
held in a bounded warehouse is common in much of the world. Inventory credit on the basis of
stored agricultural produce is Latin American countries and in some Asian countries [5] a
precondition for such credit is that banks must be confident that the stored product will be
available if they need to call on the collateral; this implies the existence of a reliable network of
certified warehouse. Banks also face problems in valuing the inventory. The possibility of
sudden falls in commodity prices means tha5t they are usually reluctant to lend more than about
60% of the value of the inventory at the time of the loan.
TYPES OF INVENTORY Another perspective on inventory is to classify it by how it is created. Where inventory
takes four forms:
Cycle
safety stock
anticipation and
pipeline.
They cannot be identified physically, that is an inventory manager cannot look at a oiled of
widgets and identify which ones are cycle inventory and which ones are pipeline inventory.
CYCLE INVENTORY The proportion of total inventory that varies directly with lot size is called cycle
inventory. Determining how frequently to order and in what quantity is called lot sizing. Two
principles apply.
the lot size varies directly with clasped time (or cycle) between orders if a lot is ordered
The longer the time between orders for a given item, the greater the cycle inventory must be.
At the beginning of the interval. Just before a new lot arrives, cycle inventory drops to its
minimum or 0. the average of these two extremes.
Average cycle inventory = Q+0/2 = Q/2
This formula is exact only when the demand rate is constant and uniform. However,
it does provide a reasonably good estimate even when demand rates are not Constant. Factors
other than the demand rate also may cause estimating errors when this simple formula is used.
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SAFETY STOCK INDUSTRYTo avoid customer service problems and the hidden costs of unavailable components,
companies hold safety stock. Safety stock inventory that protects against uncertainties in demand
lead time and supply changes. Safety stocks are desirable when suppliers fail to deliver either the
desired quantity on the specified date or items of acceptable quality, or when manufactured items
require significant amounts of scrap or rework. Safely stock inventory ensues that operations are
not disrupted when such problems occur allowing subsequent operations to continue. To create
safety stock a firm places an order for delivery earlier than when the item is typically needed.
The replenishment order therefore arrives ahead of time giving a cushion against uncertainty.
ANTICIPATION INVENTORY
Inventory used to absorb uneven rates of demand or supply. Which businesses often face,
is referred to as anticipation inventory. Predicable seasonal demand patterns lend themselves to
the use of anticipation inventory. Uneven demands can motivate a manufacturer to stockpile
anticipation inventory during periods of low demand so that output levels do not have to be
increased much when demand peaks. Anticipation inventory also can help when suppliers are
threatened with a strike or have sever capacity limitations.
PIPELINE INVENTORYInventory moving from point to point in the material flow system is called pipeline
inventory. Materials move from suppliers to a plant, from one operation to the next in the plant,
from the plant to a distribution center or customer, and from to distribution center to a retailer
pipeline inventory consists of orders that have been placed but not yet received.
Pipe line inventory=dl
The lot size can indirectly affect pipeline inventory.
COSTS OF HOLDING INVENTORY One operating objective of inventory management is to minimize cost. Excluding the cost
of merchandise the cost associated with inventory fall into two basic categories (i) ordering or
acquisition or setup costs and (ii) carrying costs.
Ordering Cost This category of associated with the acquisition of ordering of inventory. Firms have to
place the orders with suppliers to replenish inventory of raw materials. The expenses involved as
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referred to as ordering costs. A part from placing order outside the various production
departments have to acquire materials from stores.
Any expenditure involved here also part of the ordering cost. Including in the offering costs or
costs involved in (1) preparing a purchase a purchase order or requisition of form and (2)
receiving. Inspecting and recording the received to ensure both quality and quantity. The cost of
acquiring materials consists to electrical cost and stationary. It is there for, called a set up cost.
They are generally fixed per order placed. Irrespective of the amount of the order. The
acquisition costs are inversely related to the size of inventory they decline with the level of
inventory. But acquisition of large quantity would increase the cost associated with the
maintenance of inventory that is, carrying costs
Carrying Costs The second board category associated with inventory is the carrying costs. They are
involved in maintaining or carrying inventory. The cost of holding inventory may divide in to
two categories.
Those that arise due to the storing of inventory. The main component of this category of carrying
costs are (i) storage cost, that is, tax, depreciation, insurance, maintenance of the building.
Utilities and janitorial services: (ii) insurance of inventory against fire and theft; (iii) detritions
inventory because of pilferage, fire, technical obsolescence and price decline; (iv) serving costs,
such as labor for handling inventory, clerical and accounting costs
The opportunity cost of funds. This consists of expenses in razing funds to finance the
acquisition of inventory. If funds were not locked up in inventory, they would have earned a
return. This is opportunity cost of funds or the financial cost component of the cost.
The carrying costs and the inventory size are positively related and move in the same direction.
If the level of inventory increases, the carrying costs also increases and vice versa.
The sum of the order and carrying costs represent the total cost of inventory. This is
compared with the benefits arising out of inventory to determine the optimum level of inventory.
BENEFITS OF HOLDINGINVENTORY The second element in the optimum inventory decision deals with the benefits associated
with holding inventory. The major benefits of holding inventory are the basic functions of
inventory in other world inventories perform certain basic functions. Which are of crucial
importance in the firm’s production and marketing strategies
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The basic function of inventories is to act as a better to decouple or uncouple the various
activities of a firm so that all do not have to be pursued at exactly the same rate. The key active
are
purchasing
production and
selling.
The term uncoupling means that these interrelated activities of a firm can be caring on
independently. With out inventories, purchase and production would complete controlled by the
sales schedules. If the sale of a firm increase, these to would also increase and vice versa. In
other words, purchase and production function would depends up on the sales. It is, of course
true that in the long run, the purchasing and production activities are and in fact, should be tied to
the sales activity cannot be carried out efficiently. Inventories permit short term relaxation so
that each activity may be pursued efficiently. Stated differently, inventories enable firms in the
short run to produce at a rate grater than purchase of raw materials and vice versa, or to sell at a
rate greater than production and vice versa.
Since inventory enable UN coupling of the key activities of a firm each of then can be
operated at the most efficient rate. This has several beneficial effects on the firms operations. In
other words, three types of inventory, raw materials, work in process and finished goods.
Perform some use full functions. Alternatively, rigid typing of purchase and production to sale
schedules is uncoupling are as follows.
Benefits In PurchasingIf the purchasing of raw materials and other goods is not tied to production and sales,
several advantages would be available. In the first place, a firm can purchase large qualities that
are warranted by usage in production or in sales level. This will enable it to avail discounts that
are available on bulk purchase; moreover, it will thus be a significant in the costs. Second, firms
can purchase goods before anticipated or announced price increase. This will lead to a decline in
the cost of production; inventory thus serves as a hedge against price increase as well as short
ages of raw materials. This is a highly desirable inventory strategy.
Benifits In ProductionFinished goods inventory serves to uncouple production and sale. This enables
production at a rate different from that of sales. That is production can be carried on at a rate
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higher or lower than sales rate. This would be of special advantage to firms with seasonal sales
pattern. In their case, the sales rate will be higher than the production rate during a part of the
year and lower during the off season. The choice before the firm is either to produce at a level to
meet the actual demand that is higher production during peak season and lower production
during off season or produce continuously throughout the year and build up inventory which will
be sold during the period of seasonal demand. The former involves discontinuity in the
production schedule while the latter level production. The level production is more economical
as it allows firm to reduce the cost of discontinuities in the production process process. This is
possible because excess production is kept as inventory to meet future demands. Thus, inventory
helps a firm to coordinate is production scheduling so as to avoid disruptions and the
accompanying expenses. In brief, since inventory permits least cost production scheduling
production can be carried on more efficiently.
Benefits In Work In Process The inventories work in process performs two functions in the first pace, it is necessary
because production process is not instances. The amount of such inventory depends upon
technology and the efficient of production. The larger the stops involved in the production
process. The larger the work in process inventory and vise versa. By shortening the production
time, efficiently of the production process can be improved and size of this type of inventory
reduced. In a multi stage production process. The work in process inventory serves a second
purpose also. It uncouples the various stages of production so that all of them do not have to
perform at the same rate. The stages involving higher set up costs may be most efficiently
performed in the batches with a work in process inventory accumulated during a production run.
Benefit In Sales The maintenance of inventory also helps a firm to enhance its sales efforts. For one thing
if there are no inventories of finished goods, the level of current production. A firm will not be
able to met demand instantaneously. There will be a lag depending upon the production process
if the firm has inventory, actual sales will not have to depend on lengthy manufacturing process.
Thus, inventory serves to bridge the gap between current production and actual sales. A related
aspect is that inventory serves as a competitive marketing tool to meet customer demands. A
basic requirement in firms competitive position is its ability Vis- a- Vis its competitors to supply.
If it is not able to do so, the customers are likely to switch to suppliers who can supply goods at
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short notice. Inventory, thus, ensures a continued patronage of customers. Moreover in the case
of firms having a seasonal pattern of sales, there should be a substantial finished goods inventory
prior to the peak sales season, failure to do so may mean loss of sales during the peak season.
INVENTORY CONTROL TECHNIQUES Inventory control technique are employed by the inventory control organization with in
the framework of one of the basic inventory models, fixed order quantity system, fixed order
period system. Inventory control techniques represent the operational aspect of inventory
management and help realize the objective of the inventory management and control.
Several techniques of inventory control or in use and it depend on the convince of the
firm to adopt any of the techniques. What should be stressed of ever is a need to cover all items
of inventory and all stages of receipt from suppliers to the stage of their use. The techniques most
commonly used are the following.
. Always better control (ABC) classification
. High, medium and low (HML) classification
. Fast moving, slow moving and non moving (FSN
ABC ANALYSIS One of the widely used techniques for control of inventories is the ABC (Always
Better Control) analysis. The objective of ABC control is to vary the expense associated with
maintaining appropriate control according to potential savings associated with a proper level of
such control. The ABC approach is a means of categorizing inventory items into three classes
‘A’, ‘B’ and ‘C’, according to the potential amount to be controlled.
The following procedure is suggested for developing an ABC analysis:
List each items carried in inventory by num or some other designation
Determine the annual volume of usage and rupee value of each item.
Multiply each items annual volume of usage by its rupee and value.
Compute each items percentage of total inventories in terms of annual usage in rupees.
Select the top 10 percent of all items which have the highest rupee percentages and classified
them as ‘A’.
Select the next 20 percent of all items with the next highest rupee percentage and designate
those ‘B’ items.
The next 70 percent of all items with the lowest rupee percentages are ‘C’ items.
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HML CLASSIFICATIONS The High Medium and Low (HML) classification follows the same procedures as is
adopted in ABC classification. Only differences is that in HML in classification unit value is the
criterion and not the annual consumption value. The items inventory should be listed I the
descending order of unit value and it is up to the management to fix limits for three categories.
The HML analysis is useful for keeping control over consumption at departmental levels for
deciding the frequency of physical verification, and for controlling purchases.
FSN ANALYSISFSN stands for Fast Moving slow moving and Non-moving. Here classification is based
on the pattern of issues from stores and is useful in controlling obsolescence.
To carry out an FSN analysis the data of receipt or the date of issue, whichever is later, is
take to determine the number of months. Which have lapsed since the last transaction, the items
are usually grouped in periods of 12 months.
FSN analysis is helpful in identifying active items which need to be reviewed regularly
and surplus items which have to be examined further. Non moving items may be divided further
ad their disposal can be considered.
Material Requirement Planning MRP is a new soluation to an old problem having stock of materials always on hand when
needed with out carrying excess inventory. Highly dependent on computer technology mrp is
most helpful to firms with finished goods are end product. Which are made from a number of
components add which are also subjects to un even or lumpy demand. The technique separates
the vartios components and co ordinates and purchasing delivery with production yhis result in
materials arriving exately when need for production and , at the same time reduce lengeth of the
time when material are held in stock. MRP plans and controls goods on order and generates date
for determining when specific materials will be needed to meet the previously planned
production schedule.
JUST IN TIME(JIT)
Popularly known in its acronym JIT in time is highly discussed in materials management
circles these days. The concept is already known as ZIPS (Zero inventory production system)
MAN( Materials as needed) , NOT (Nick of time), ZIN (Zero inventories).
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As a concept JIT means that virtually no inventories are held at any stage of production and that
the exact numbers of units is brought to each successive of production at the right time.
The JIT concept assumes certain which are found wanting in our industries. What is
required, for ex for it successful implantation us a complete restructuring of the industry, so that
all ancillary industries and suppliers of inventory operate in the vicinity of the main industry to
avoid problems of transportation. If the supplies are located at considerable distance and there is
more is more then one supplier, problem in delivery are bound to rise. There should be one
supplier and products supplied must be of the quality to prevent rejection and consequent delays.
Another pre- requisition for the successful implementation of the ZIN concept is the introduction
of he redesign cooling and auxiliaries to achieve rapid change over set ups in order to reduce
batch sizes.
Methods of valuation of inventories
Specific identification method.
According to this method each item of the inventory identified with its cost. The total of the
various cost to identify constitute the value of inventory. This method is generally used when the
materials or goods or have been purchased for a specific job or customer. Such materials or
customer. Such materials or goods when received are earmarked for the job or customer.
Such materials or goods when received are earmarked for the job or costumer for home they are
purchased and are issued or sold to the particular job or customer whenever demanded.
This technique of inventory valuation came be adapted only by a company which is handling a
small number of items. In case of manufacturing company having a number of inventory items.
It is almost impossible to identify the cost of each individual item of inventory. Thus, this
method is in appropriate in most cases on account of practical considerations. Moreover, the
method opens door to income manipulation when like items is purchased at different prices.
First In First Out method(FIFO)under this method. It is assumed that the materials or goods first received are the first to
be issued or sold. Thus, according to this method, the inventory on a particular date is presumed
to be composed on the items which are acquired most recently.
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AdvantagesThe method has the following advantages
it takes into account the current market conditions while valuing materials issued to different
jobs or calculating the cost of goods sold.
the method is based on cost and therefore , no unrealized profit or is made on account of use
of this method.
the method is most suitable for materials which are of a bulky and non perishable type
Disadvantages it involves complicated calculation and hence increases the possibility of clearical reasons
Comparison between different jobs using this same type of material becomes sometimes
difficult. A job commenced a few minutes after another job may have to bear an entirely
charge for materials of the particular lot.
following circumstances:
The FIFO method of valuation of inventories is particularly suitable in the
The materials or goods are of a perishable nature.
The frequency of ppurchases is not large.
There are only moderate fluctuations in the prices of materials or goods purchased.
Materials are easily identifiable as belonging to a particular purchase lot.
LAST IN LAST OUT METHOD(LIFO)
This method is based on the assumptions that the last item of materials or
goods purchased is the first to be issued or sold. Thus,according to this method, inventiry consist
of items purchased at the earliest cost.
AdvantagesIt takes into account the current market conditions while valuing materials issued todifferent jobs
or calculating the cost of goods sold.
The method is based on cost and therefore,no unrealised profit or is made on account of use
of this method.
materials or goods is recovered from the production or sales at the earlist.however the method
involves too many calculations as in the case of lifo method.the method has therefore.not been
adopted widely.
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ECONOMIC ORDER QUANTITY(EOQ) EOQ or optimum quantity is the order size which the total cost compromising ordering
cost plus carrying cost is the least. EOQ can be calculated with the help of a mathematical
formula.
Following assumptions are implied in the calculations:
1. Demand for the product is constant and uniform throughout the period.
2. Lead time (time from ordering to receipt) is constant.
3. Price per unit of product is constant.
4. Inventory holding cost is based on average inventory.
5. Ordering costs are constant, and
6. All demands for the product will be satisfied(no back orders are allowed)
In constructing any inventory model this first step is to develop a functional relationship between
the variables of interest and the measure of effectiveness. As EOQ is concerned with cost here
the following would pertain:
TC=DC+(D/Q)*S+(Q/2)H
Where TC= total cost
D= annual demand
C= purchase cost per unit
Q= quantity to be ordered (the optimum amount is termed the EQO)
S= cost of placing an order
H= holding cost per unit of average inventory per annum
On the right side of the equation. DC is the annual purchase cost
For then units,(D/Q)*S is the annual ordering cost and (Q/2)*H is the annual holding cost
The second step in the model is to calculate order quantity Q, for which, the total cost is
the minimum. In the basic model, this may be done by simple algebra if we recognize that DC is
not a decision variable and hence not a factor in the ordering decision. Then, total cost is
minimum at the point where, the cost is equal to the cost of carrying, or
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(DS/Q)= (Q/2) H
Which is turned is solved as follows:
EOQ= `\ (2DS)/H
MINIMUM – MAXIMUM TECHNIQUEThe Minimum – Maximum system is often using in connection with manual inventory
control system. The minimum quantity is established in the same way as any re- order point. The
maximum is the minimum quantity plus the optimum lot size. In practice a requisition is initiated
when, a withdrawal reduces the inventory below the minimum level. And the order quantity is
the maximum minus the inventory status after the withdrawal. If the final withdrawal reduces the
stock level substantially below the minimum level the order quantity will be higher than the
calculated EOQ
The effectiveness of a Minimum – Maximum system is parameters are or established. If
this parameter are based upon arbitrary judgment with a limited factual basis. The system will
limited in its effectiveness, if the minimum – maximum are based on an objective rational basis
the system can be vary effective
Understanding inventory
Despite its importance to the supply chain inventory is not universal well understood. It is
variously characterized both positive and negative, as on economic asset to a non income
producing use of capital funds.Only when considered in lite of all quality, clint service and
economic factors from the view of purchasing. Manufacturing , sales and finance does the whole
picture of inventory become clear. No matter the view point, effective inventory management is
essential to supply chain competitiveness.
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INTRODUCTION
Cement is a key infrastructure industry. It has been decontrolled from price and
distribution on 1st march 1989 and deli censed on 25th July 1991. However, the performance of
the industry and prices of cement are monitored regularly. The constraints faced by the industry
are reviewed in the infrastructure co-ordination committee meetings held in the cabinet
secretariat under the chairmanship of (coordination). The cabinet committee on infrastructure
also reviews its performance.
CAPACITY AND PRODUCATION
The cement industry comprises of 125 large cement plants with an installed capacity of
148.28 million tones and more than 300 mini cement plants with and estimated capacity of 11.10
million tons per annum. The cement corporation of India, which is a central public sector
undertaking, has 10 units. There are 10 large cements plants owned by various state
governments. The total installed capacity in the country as a whole is 159.38 million tones.
EXPORTS
Apart from meeting the entire domestic demand, the industry is also exporting cement
and clinker. The export cement during 2004-05 and 2006-07WAS 5.41 million tones and in the
year 2008-2009 were 6.92 million tons respectively. Export during April- may, 06 was 1.35
million tones. Major exporters were Gujarat, Abuja cement ltd and L&T ltd.
HISTORY OF CEMENTS
Invention of cement of JOSEPH ASPARIN. A Leeds builder in bricklayer.
• 21st October, 1824 patented as Portland cement.
• 1904- Irish and American standards of Portland cement.
• 1912- Indian cement company limited established factory at porbandar
• 1951- Indian standards.
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CEMENT MANUFACTURING PROCESS
The cement manufacturing process being when limestone, the basic raw material used to
make cement, is transported by rail to the plant from the limestone quarry.
The limestone is combined with clay, ground a crusher and fed into the additive soils,
sand, iron and bottom ash are then combined with the limestone and clay in a carefully
controlled mixture which is ground into a fine power in a 200hp roller mill.
Next, the fine power is heated as it passes the pre-heater tower into a large kiln, which is over
half length of a football fields and 4.2 meters in diameter. In the kiln, the power is heated to
1500 degrees Celsius. This creates a new product, called clinker which resembles pellets
about the size marbles.
• The clinker is combined with small amounts of gypsum and limestone and finely ground in a
finishing mill. The mill is large revolving cylinder containing 250 tons of steel balls that is
driven by a 4000ph motor. The finished cement is ground so fine that it can pass through a
sieve that will hold water.
• The cement manufacturing process consists of many simulations and continuous operations
using some of the largest moving machinery in manufacturing over 5000 sensors and 50.
• Computers allow the entire operation to be controlled by single operator from a central
control room
DIFFERENT TYPES OF CEMENT
There are varieties of cement based on different compositions according to specific end